BUDGET OPTIONS FOR THE

YOUTH EMPLOYMENT PROBLEM

The Congress of the United States

Congressional Budget Office

For sale by the Superintendent of Documents, U.S. Government Printing Office Washington, D.C. 20402 - Price $1.10

PREFACE

In 1977, the Members of the 95th Congress have the

opportunity to consider a wide range of programs designed

to enhance the employment of youth. In reaching the budget,

authorizations, and appropriations decisions that will

determine the federal role in employment, training, and

education policy for youth, the Congress will consider the

effects of current federal policy, as well as the effects of

alternative programs. This analysis is one of several

prepared by the Congressional Budget Office that focus on

the structural elements of the current employment situation.

Other papers in this series include The Unemployment of

Nonwhite Americans: The Effects of Alternative Policies

TJu1y 1976), Policy Options for the Teenage Unemployment

Problem (September 1976Kan d Public Employment and Training Assistance: Alternative Federal Approaches(February

1977).

The report was prepared by Alan Fein of the Human

Resource s and Community Development Divisio n of the

Congressiona l Budget Office , under the direction of

David S. Mundel and C. William Fischer. The author wishes

to acknowledge the invaluable assistance of Richard A. Hobbie

and Betty J. Ingram, both of the Human Resources and

Community Development Division. The manuscript was edited

by Mary Richardson Boo, under the supervision of Johanna

Zacharias. In accordance with CBO' s mandate to provide

objective and impartial analyses of budget issues, the report

contains no recommendations.

Alice M. Rivl in

Di rector

March 1977

i i i

TABLE OF CONTENTS

Preface i i i

Summary i x

Chapter I. The Youth Employment Problem 1

Chapter II. Current Federal Programs and

Policies to Alleviate Youth

Unemployment 6

Chapter III. Costs and Effects of Federal

Programs 12

Chapter IV. Characteristics of the Participants

in Youth Employment Programs and of

Unemployed Youth 25

Chapter V. Budget Options 29

"HIT"

LIST OF TABLES

Page

1. Patterns of Youth Unemployment,

Ages 16-24, October 1975 3

2. Federal Outlays for Major Programs

Affecting the Employment of 16-21 Year Olds,

Fiscal Year 1976 10

3. Participation of Youth in Federal Programs

Affecting the Employment of Youth,

Fiscal Year 1976 11

4. Cost of Training Components of Major Federal

Employment and Training Programs 14

5. Costs of Job-Creating Components of Major

Federal Employment and Training Programs,

Fiscal Year 1976 16

6. Unemployment Rates and Income by Educational

Attainment, March 1975 20

7. Unemployment of In-School and Out-of-School

Youth, Ages 16-24, October 1975 21

8. Jobs Created by Federal Direct Job-Creation

Programs, 12 Months After Creation, Per $1

Bi 11 ion in Out!ays 23

9. Characteristics of Unemployed Youth and of

Participants in Employment, Training, and

Education Programs 28

10. Costs and Effects of Fiscal Year 1978

Budget Options 35

TUT"
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SUMMARY

THE PROBLEM

The employment problems of young people differ from

those of older workers both in nature and magnitude. In

1976, the unemployment rate for workers aged 16 to 24 was

14.7, while for workers over 24 it was 5.5. Youth represented 24 percent of the labor force but 46 percent of the

unemployed. Of those workers who had dropped out of the

labor force because they thought they could not get jobs, 29

percent were under age 24; 39 percent of those working

part-time but seeking full-time jobs were youth. !_/

Youth suffer from both current and future employment

problems. In the short run the income loss due to unemployment, underemployment, and low-paying jobs may prevent them

from contributing to their family's income, from establishing independence from their parents, or from financing a

college education. In the long run the lack of work experience inhibits them from developing skills, good work

attitudes and habits, as well as favorable employment

records.

All youth suffer, to some extent, from what are known

as structural labor market problems -- that is, lack of

education, skills, experience, lack of proximity to available

jobs, and discrimination. Certain groups of youth, however,

suffer disproportionately from these problems. While the

universe of youth is often referred to as all 16-24 year old

I/ For another discussion of the nature of youth employment problems and its causes, see Policy Options for the

Teenage Unemployment Problem, CBO, Background Paper No.

13, September 1976. See also, The Teenage Unemployment

Problem: What Are The Options? CBO, October 14, 1976."

84-828 O - 77 - 2
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persons, groups within that population suffer from very

different kinds of labor market problems. One way of delineating the particular problems that each group has is to

define the groups by their educational attainment.

Dropouts. In 1975, 14 percent of all persons between

the ages of 16 and 24 were high school dropouts. These

dropouts had an unemployment rate of 25.3 percent. This

represented almost 23 percent of all youth unemployment at

the time. The long-run effects of unemployment may be

particularly severe for this group because of their lack of

education, skills, and experience. Nonwhites, who make up

14 percent of the total 16-24 year old population, account

for 28 percent of this group.

High School Graduates Who Have Not Completed and Are

Not Attending A Four-Year College. In 1975, 38 percent of

all 16 to 24 year olds had graduated from high school but

had not attended or not completed a four-year college.

Their unemployment rate was 12.9. Forty-three percent of

unemployed youth were in this group. Some had completed

two-year colleges or technical schools after high school.

This group is composed of youth who are experiencing severe

structural problems, as well as those who are having difficulty making a successful transition from school to work.

Those with transition problems may simply be having difficulty settling into a stable work environment, deciding

what type of career they wish to pursue, or where they want

to live. In 1975, 20 percent of this group was nonwhite.

College Graduates. Four percent of all 16 to 24

year olds had graduated from college in 1975. The unemployment rate for these college graduates was 8.3 percent.

Only 3 percent of unemployed youth were in this group. To

the extent that college graduates can anticipate higher

earnings and better employment records because of their

greater level of educational attainment, the long-run

effects of unemployment are not as severe for them. Nonwhites represent about 5 percent of this group.

Those Enrolled in School. The last group of unemployed youth are those currently enrolled in school. In

1975, 44 percent of all 16 to 24 year olds were in this
group. Their unemployment rate was 15.0. Thirty-one

percent of unemployed youth were in this group. Again, with

better education records, this group may not suffer great

employment problems in the long run, but to the extent that

they need income to finance their education, the short- and

long-run effects of their unemployment are greater. Fifteen

percent of this group are nonwhite.

SUMMARY TABLE. EMPLOYMENT EXPERIENCES OF YOUTH (16-24 years old)

BY EDUCATIONAL ATTAINMENT, OCTOBER 1975 (Numbers In Thousands)

Group by

Educational

Attainment

Not Enrolled in

School

Attended Less

than 12 years

12-15 years

16 or more years

Enrolled in School

Total

Civilian

tutional

Number

4,824

13,201

1,373

15,284

34,700

NoninstiPopulation

Percent

14

38

4

44

100

Civilian Labor Force

Number

2,969

10,844

1,290

6^730

21,833

Percent

14

50

6

3J_

100

Unemployed

Population

Number

750

1,399

107

1 ,012

3,268

Percent

23

43

3

11

100

Unemployment Rate

Percent

25.3

12.9

8.3

15.0

15.0

CURRENT FEDERAL PROGRAMS

The federal government funds three types of programs

aimed at enhancing the employment opportunities of young

people: education, training, and direct job-creation programs. These programs impact in different ways and to

different degrees on the different groups of youth.

TIITI
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Federal student assistance programs are directed

toward discouraging youth from dropping out of high school

and encouraging high school graduates to continue their

education as well as helping those already in postsecondary

school to finance their education. In fiscal year 1975,

for those student assistance programs for which racial data

are available, 39 percent of recipients were nonwhite.

Thirty-two percent of recipients (excluding those independent from their parents) came from families with incomes

under $10,000. The short-run effect of these programs on

employment is to increase enrollment opportunities, thereby

reducing the likelihood of unemployment. In the long run,

greater educational attainment is associated with less

unemployment and higher earnings.

Federal training programs enrolled approximately

1.2 million youth in fiscal year 1976. Approximately 55

percent of those trained in the Comprehensive Employment and

Training (CETA) and Work Incentive (WIN) programs had not

graduated from high school, 57 percent were nonwhite, and 77

percent were low-income. The best estimates of the effects

of these programs indicate that the earnings of participants

might increase, on average, by about $400 in the first year

after participation. Over a five-year period, however, this

increase in earnings seems to diminish to zero.

Federal direct job-creation programs enrolled about

1.1 million youth in fiscal year 1976. Approximately 63

percent of all participants had not graduated from high

school, 48 percent were nonwhite, and 75 percent were

low-income.

BUDGET OPTIONS FOR FISCAL YEAR 1978

In considering how best to deal with the employment

problems of young people, the Congress can choose to emphasize the creation of jobs, increased training opportunities,

greater targeting of student assistance programs, or various

combinations of these activities. In addition, there are

new programs, with different costs and effects, that could

supply these activities. The options that may be considered

involve programs that are exclusive to youth as well as

those that affect all workers.

X II
Eight budget options are presented below to illustrate

the range of possible programs that are available. It

should be noted that these options are not mutually exclusive. The Congress may choose to combine a training

option with a job option, or one kind of job program with

another. In addition, the funding levels of these options

can be raised or lowered, as the Congress chooses.

Option I adds $1 billion to CETA Title VI. This would

fund an additional 120,000 public service jobs, about 27,000

of which might be expected to go to youth.

Option II adds $1 billion to CETA Title I. This could

fund as many as 220,000 training slots if all of the funds

were spent on training (currently only 46 percent of Title I

funds are spent on training, with most of the rest going to

"work experience" programs, which are primarily part-time

jobs). Approximately 125,000 of the new participants might

be youth.

Option III increases expenditures for the Job Corps by

$200 million, approximately double the current level of

outlays for the program. Because of the relatively higher

cost of training provided by the Job Corps compared to

other federal training programs, this option funds only an

additional 20,000 training slots. The Job Corps provides

training in residential settings, and additional expenditures would probably be necessary to renovate old facilities

or build new ones.

Option IV increases the targeting of student assistance programs on low-income persons. The total cost of

this option is $531 million, about $300 million of which

would go to students in families with annual incomes under

$10,000, and to self-supporting students.

Option V creates a new public service employment

program exclusive to youth. This program could be run

through the CETA prime sponsor system, 2/ and might create

approximately 170,000 jobs at the minimum wage per $1

billion in outlays.

21 A prime sponsor is a unit of general local government in

which there are at least 100,000 residents.

xm
Option VI creates a young adult conservation corps,

a program of employment for 19 to 23 year olds in federal

and state parks and forests on conservation projects.

This program might create 87,000 jobs per $1 billion in

outlays.

Option VII creates a training program similar to

Title I of CETA, but exclusive to youth. Per $1 billion in

outlays, 250,000 training slots might be created. Since

almost 60 percent of current Title I participants are under

age 22, there would have to be some coordination between the

two programs, but a new program might have more success in

insuring that training, rather than work experience, was

actually funded.

Option VIII would create a new high school work-study

program. Currently some high school work-study is provided

through Title I of CETA, but the precise amount is unknown.

If this program subsidized part-time jobs at the minimum wage

for high school students, over 400,000 years of service 3_/

could be funded per $1 billion in outlays.

^/ A service year is equivalent to a "person-year."

xiv
SUMMARY TABLE. COSTS AND EFFECTS OF BUDGET OPTIONS FOR FISCAL YEAR 1978

x

<

Options

Outlays

($ in Millions)

Cost Per

Year of

Service

Dollars

Years of Service Funded

Jobs Training

(Thousands)

Option I - Increase CETA

PSE

Option II - Increased CETA

Title I

Option III - Increased Job

Corps

Option IV - Student Assistance Targeting

Option V - PSE for Youth

Option VI - Young Adult

Conservation

Corps

Option VII - Training for

Youth

Option VIII - High School

Work-Study

1,000

1,000

200

531

1,000

1,000

1,000

1,000

8,300

4,525

10,000

NA

6,000

11,500

4,000

2,650

27 a/

0

0

NA

170

87

0

377

0

126 a/

20

NA

0

0

250

0

Participants

Jobs Training

(Thousands)

50 a/ 0

0 360 a/

0 44

NA

340

116

0

572

NA

0

0

714

0

jj/ Youth jobs or training funded. Jobs or training for older workers would also be funded.

CHAPTER I THE YOUTH EMPLOYMENT PROBLEM

The high unemployment rate and low earnings of youth

continue to be a national concern. In 1976, the unemployment rate !_/ for the 16-2 4 year old population was 14.7

whil e the unemployment rate for all workers was 7.7. Youth

represented 24 percent of the labor force, but 46 percent of

the unemployed population. In addition to the 3.4 millio n

unemployed youth, 0.262 millio n were not participating in the

labor force because they believed they couldn't fin d jobs,

and 1.387 millio n wished to work full time but could find

only part-time employment. 2/

The unemployment rates of youth rise more quickly during

recessions and fall more slowly during recoveries than the

national aggregate rate. Because of their limited skills and

experience, youth are often the most marginal employees and

are in a position of being the last hired and first fired.

Unemploymen t presents youth wit h both current and

future, or short- and long-term, problems. It prevents them

from contributing to their families' income, from establishing their own families, and from earning enough to stay in

school. In addition, unemployment limits the future employability of youth because it hinders their capacity to acquire

and develop skills, to establish satisfactory employment

records, and to develop helpful work attitudes and habits.

I/ The unemployment rate measures the percent of the civilian labor force that is out of work, and looking for

work.

2/ For another discussion of the nature of youth employment

problems and its causes, see Policy Options for the

Teenage Unemployment Problem, CBO, Background Paper No.

13, September 1976. See also, The Teenage Unemployment

Problem: What Are The Options? CBO, Conference Report,

October 1976.

84-828 O - 77 - i
Employment and training policy for youth can be directed

at ameliorating their current or future problems, or both.

Solutions to the short-run problems emphasize the creation of

jobs that provide income to satisfy the immediate needs of

the unemployed. Solutions to the longer-run problems emphasize education and training programs in order to provide

youth with the necessary skills to compete in the labor

market. Current federal policy employs a continuum of

activities aimed at ameliorating all of the problems.

Within the 16-24 year old population, employment problems differ for different groups of youth, and the unemployment rate for all youth masks the differences among the

employment experiences of these groups. For purposes of

classifying employment problems, the youth population can be

divided into four major categories:

o High school dropouts,

o High school graduates who have not completed

and are not attending a four-year college,

o College graduates, many of whom are making a

permanent transition from school to work, and

o Those whose major activity is attending school.

Almost 14 percent of all 16 to 24 year olds are high

school dropouts. These individuals often can't find jobs

because they lack got the necessary skills or background.

This group represents about 23 percent of all unemployed

youth and is composed disproportionately of nonwhite youth

from economically disadvantaged homes in urban areas.

The second group of youth are those who have graduated

from high school but have not gone on to, or have not completed and are not attending, a four-year college. About 43

percent of all unemployed youth are in this group. Included
are those who are experiencing unemployment because of one or

more structural problems -- that is, lack of necessary skills

or education, lack of proximity to availabl e jobs, and

discrimination -- and there are those who are experiencing

unemployment because they are having difficulty making the

transition from school to work. These youth may not have

severe structural problems but may simply be having difficulty settling into a stable work environment, deciding

what kind of a career they wish to pursue, or where they want

to live. Both those whose employment problems are primarily

structural and those whose problems are primarily transitional may suffer from a lack of information and counseling

about the job market in general.

The third group of youth experiencing unemployment is

that making the transition from college to work. The individuals in this group are relatively more skilled and better

educated than the average unemployed youth. This group

comprises about 3 percent of youth unemployment.

The final group of unemployed youth are those currently

enrolled in school. This group represents 31 percent of all

unemployed youth. The unemployment rate for 16-24 year old

students was 15.0 in 1975. While most unemployed students

were looking for part-time and summer jobs to earn pocket,

money or to help finance a college education, almost 20

percent were looking for full-time positions.

TABLE 1. PATTERNS OF YOUTH UNEMPLOYMENT, AGES 16-24,

OCTOBER 1975

Percent of Number of Number in

Unemployment Total Youth Unemployed in Civilian

Groups Rate Unemployment Youth Labor Force

(in thousands) (in thousands)

High School

Dropouts 25.3 22.9 750 2,969

High School

Graduates Not

Attending College 12.9 42.8

College Graduates 8.3 3.3

Those in School 15.0 31.0

Total 15.0 100.0

HIT
The personal costs of unemployment for these four groups

are very different. The long-run costs of unemployment are

less severe for those who are enrolled in school. While the

income from the jobs they seek may be all but necessary for

meeting tuition and other expenses associated with school, in

the long run this temporary loss of income may be offset by

the increased earnings associated with higher levels of

educational attainment. To the extent that the jobs are

necessary in order to stay in school, the costs of unemployment to this group are greater.

In the short run, the costs to an individual of employment problems experienced while making the transition from

school to work may be great. The number of people experiencing these problems grows markedly during a recession such as

the recent one. In the long run, however, this group of

youth can anticipate a better employment record and higher

earnings than those youth who have more structural problems.

This is especially true for those who are college graduates.

The youths with the most severe labor market problems

are those who are dropouts and those who have other structural labor market problems. Not only do these individuals

experience greater unemployment during their youth, but their

prospects for employment when they become adults are not

good. They have less education and skill training, and fewer

employment experiences than their contemporaries. The costs

associated with unemployment for this group are large and are

incurred not only by the individual , but by the federal

government as well. To the extent that poor early labor

market experiences and lack of education or training hamper

subsequent labor market experiences, this group will suffer

greater unemployment and be forced to rely disproportionately

on unemployment compensation and other public income assistance programs.

In order to become more competitive in the labor market,

these structurally-disadvantaged youth need to acquire

additional training, greater access to jobs, and freedom from

discriminatory barriers. Additional schooling may be a

successful instrument in lowering unemployment and increasing
earnings for some of these youth, but for those who do

not aspire to white-collar employment, higher education may

not be as helpful as training in technical skills.

This paper will discuss the current federal effort aimed

at all aspects of the youth employment problem. It will also

discuss the impact of eight budget options, which provide

various current and alternative programs that attempt to

enhance the employment opportunities of young people.

HIT
IJIH

CHAPTER II CURRENT FEDERAL PROGRAMS AND POLICIES TO

ALLEVIATE YOUTH UNEMPLOYMENT

The federal government uses five major approaches to

deal with unemployment and employment problems:

o Direct job creation and targeted tax programs

aimed at increasing public and private employment,

o Programs to train and educate potential

workers,

o Programs and policie s that regulate and

facilitate the functioning of the labor market,

o Stimulativ e fiscal and monetary policy i n

times of high unemployment, and

o Direct cash assistance to reduce the financial

burdens of the unemployed.

Some of these approaches affect youth unemployment more

directly than others, and some can be targeted to youth in

general, and certain groups of youth in particular. This

paper will analyze two of the approaches that can be targeted:

direct job creation, and education and training programs.

The third approach listed above, market facilitation and

regulation activities, can also, in some instances, be

targeted to youth. For example, a special branch of the

employment service could be assigned to provide intensive

job placement assistance to youth.

Market Facilitation and Regulation

Policies that facilitate and regulate the labor market

include antidiscrimination efforts, employment counseling,

job placement, and the lower minimum wage for students. The
degree to which these programs and policies are directed

toward youth varies and, in some cases, is difficult to

estimate. In 1975 approximately 515,000 students received

part-time jobs at less than the minimum wage. Forty percent

of those persons placed by the U.S. Employment Service were

under age 22 in fiscal year 1975. The effect of federal

antidiscrimination activities on youth is unknown.

Macroeconomic Policy

Macroeconomic approaches to stimulating employment

cannot be specifically targeted to youth in general, or

groups in particular. Fiscal policy will, however, reduce

unemployment, and youth will benefit from that reduction. It

is likely that, in fiscal year 1977, the percentage of new

jobs created through fiscal and monetary measures which will

be held by youth, is greater than the percentage of the labor

force currently composed of youth. I/

Unemployment Compensation

Unemployment compensation does not impact on youth to a

great extent because most young workers have not had enough

employment experience to qualify for benefits. In 1975,

youth represented 33 percent of the unemployed, but collected

only 10.8 percent of unemployment compensation benefits. 2/

I/ Ralph Smith, "The Teenage Unemployment Problem- How

Much Will Macro Policies Matter?" in The Teenage Unemployment Problem: What are the Options?, CBO, Conference

Report, October 1976

2/ This does not include the Federal Supplemental Benefits

or Special Unemployment Assistance programs for which

data are not available. For a more complete discussion

of the unemployment compensation system see, Unemployment

Compensation: A Background Report, CBO, December 1976.

"H1TT
Direct Job Creation

Direct job-creating programs and programs to educate

and train potential workers can be targeted on the youth

population. Currently, there are two direct job-creating

programs designed exclusively for youth. The summer youth

program, authorized as part of CETA Title III, provides

part-time summer jobs at the minimum wage to approximately

900,000 disadvantaged youth between the ages of 14 and 21.

The Youth Conservation Corps provides approximately 26,000

summer jobs at the minimum wage for youth 15 to 18 years old.

Other direct job-creating programs provide a more limited

percentage of their funds to youth. While only twenty-two

percent of CETA Titles II and VI jobs (about 66,000 in fiscal

year 1976) go to youth, more funding flows to youth through

these titles than through the youth programs because they

have much larger budgets.

Training

One federal training program is targeted exclusively on

youth. The Job Corps, Title IV of CETA, provides approximately 20,000 training years of service for 44,000 disadvantaged youth 14 to 21 years old in residential settings.

Other training programs provide from 17 percent (WIN) to 57

percent (CETA Title I) of their funds to youth. Again, a

program not specifically targeted to youth, CETA Title I,

provides a larger total amount of dollars to youth than the

youth-specific Job Corps because it is a much larger program.

About 731,000 youth receive training or work experience

through CETA Title I.

The GI Bill, which provides both training and education

benefits to veterans, also supports youth. In 1976, however,

only 7 percent of the recipients of these benefits (209,000

persons) were under age 25. In the next few years it is

likely that the GI Bill will support even fewer youth as the

average age of eligible veterans increases.

Education

Almost all federal higher education funds are spent on

youth. These programs, as well as vocational education

8
support, provide financial assistance to both students and

institutions, in an attempt to encourage the enrollment of

low- and moderate-income students, ease the financing burden

of middle-income students, and strengthen the financial

capacities of educational institutions. The effect of these

programs on the youth employment problem is primarily through

the first outcome -- enrollment changes.

Size Of The Federal Effort Toward

Youth Employment Problems

In fiscal year 1976, the federal government spent

$13 billion on programs and policies intended to directly

affect the employment and unemployment problems of the

general population. Of this amount, $5.4 billion, or 41

percent, was spent on youth.3/ Of the expenditures for youth,

$1 billion, or 19 percent, was spent on direct job creating

programs, $2.7 billion, or 51 percent, on education programs,

and $1.6 billion, or 30 percent, on training programs. In

addition, there were $2.2 billion in revenue losses to the

federal government as a result of tax expenditures intended

to stimulate employment and education activities. These tax

expenditures include the WIN tax credits; tax deductions for

child care and child care facilities, which are not to a

large extent oriented to youth; higher education tax expenditures, almost all of which applied to youth; and exclusion of

GI bil l education benefits. Almost three-fourths of these tax

expenditures might be said to have favored youth. Table 2

shows total federal outlays for programs aimed at unemployment, and the percentage and dollar amounts of funds going

to youth.

Just as the level of support varies greatly for each

program, so does the number of youth supported by the various

programs. Table 3 shows the number of youth served by each

program.

3/ This assumes no difference in cost per participant

based on age.

4-828 O - 77 - 4

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TABLE 2. FEDERAL OUTLAYS FOR MAJOR PROGRAMS AFFECTING THE EMPLOYMENT

OF 14-21 YEARS OLD, FISCAL YEAR 1976

Total

Outlays

(Millions

of Dollars)

Percent

to

Youth

Outlays

to Youth

(Millions

of Dollars)

EDUCATION

Guaranteed Student Loan (GSL) 297

National Direct

Student Loan (NDSL) 301

Supplemental Education

Opportunity Grants (SEOG) 268

College Work-Study (CWS) 362

Basic Education

Opportunity Grant (BEOG)

Vocational Education

Subtotal Education

TRAININ G

CETA Title I 1,698

CETA Title III

(other than Summer Youth)

CETA Title IV (Job Corps)

Work Incentive Program (WIN )

Veterans Readjustment

Benefits b/

Subtotal Training

JOB CREATING

CETA Title II 544

CETA Title VI 1,872

CETA Title III (Summer Youth) 459

Youth Conservation Corps 35_ c/

Subtotal Job Creating 2,910

TOTAL 13,020

100% a/

100

100

100

100

100

100

57

47

100

17

_7

22

22

22

100

100

35

41

297

301

268

362

905

586

2,719

968

59

181

52

356

1,616

5,361

a/ For purposes of this analysis it was assumed that 100 percent of

student assistance funds went to youth. It is likely that a

small percentage goes to older students, but there is no program

data from which to make an accurate estimate.

t>/ Also supports education activities.

£/ Half of these outlays were actually made during the transition

quarter.

10
TABLE 3. PARTICIPATION OF YOUTH IN FEDERAL PROGRAMS AFFECTING

THE EMPLOYMENT OF YOUTH, FISCAL YEAR 1976

Number of Percent of

Youth Enrol lees Who

Served Are Youth

(Thousands) a/

Education

Guaranteed Student

Loan (GSL) 923 100 b/

National Direct

Student Loan (NDSL) 799 100

Supplemental Education

Opportunity Grants

(SEOG) 447 100

College WorkStudy (CWS) 973 100

Basic Education

Opportunity Grant

(BEOG) 1,268 100

Vocational Education NA 100

Training c_/

CETA Title I 905 57

CETA Title III

(other than

Summer Youth) 20 47

CETA Title IV

(Job Corps) 44 100

Work Incentive

Program (WIN) 3 17

Veterans Readjustment Benefits A/ 209 7

Job Creating £/

CETA Title II 55 22

CETA Title VI 110 22

CETA Title III

(Summer Youth) 888 100

Youth Conservation

Corps 20 100

a/ It is not possible to calculate the number of youth served

by all of the programs because some individuals may receive

support from more than one program.

t>/ For purposes of this analysis it was assumed that 100 percent of student assistance funds went to youth. It is

likely that a small percentage goes to older students, but

there is no program data from which to make an accurate

estimate.

£/ Number and percentage of youth for these programs are "new

participants."

d/ Also supports education activities.

11

HIT
CHAPTER III COSTS AND EFFECTS OF FEDERAL PROGRAMS

COSTS

The federal costs of programs to enhance youth employment vary among the different broad approaches, depending on

two major factors:

o The cost of providing the services, and

o The proportion of the services financed by the

federal government versus that financed by other

sources.

Various activities that attempt to enhance the employment of youth are funded not only by the federal government

but by other sources as well. Federal aid to higher education, for instance, represents about 30 percent of total

higher education expenditures. Federal student assistance

outlays represent only about 8 percent of total tuition and

room and board payments. In the training area, there is a

large market of vocational training schools and programs

outside the public sector. Some of these schools and programs receive federal funding, and some of the students in

them receive federal student assistance.

Training Programs: Costs associated with each training

program are the sum of administrative and materials costs

plus training costs and are usually measured by cost per

participant and cost per service year. ]_/ The variation in

costs among the programs is due primarily to differences in

types of training, differences in administrative and

materials costs, and differences in the characteristics of

the clients served.

I/ A service year is a person-year.

12
The CETA Title I training program provides classroom

and on-the-job instruction that attempts to enhance work

skills. The cost per participant for the training components

of Title I was $1,420 in fiscal year 1976, while the cost per

service year was $4,050.

The Job Corps program offers on-the-job and classroom

training often in skilled professions. Trainees are generally

younger than those enrolled in Title I. They are housed and

trained in residential facilities away from their home

environment. The use of these facilities is reflected in

the relatively high cost per participant of $4,156, and cost

per service year of $9,231.

The WIN program also offers training though not in

residential settings. There is a somewhat greater emphasis

on placement than on skill development. The cost per participant is about $2,330 and the cost per service year about

$6,760. The average length of stay in the program for Job

Corps participants was about six weeks longer than for the

two other programs. 2/

The cost per participant of veterans' readjustment

benefits was almost $1,800 in fiscal year 1976. The costs,

which seem to be slightly higher for the younger recipients,

cover both training and education activities, and it is not

possible to separate the two.

Education: The size of the grants and loans made by

federal student assistance programs varies as a result of

differences in the eligible population, differences in the

size of appropriations, and the availability of guaranteed

loans from banks. The Basic Grants program has an average

award of $848 and the Guaranteed Student Loan program an

average loan of $1,210. The three other major federal student

2/ For additional information on the costs and effects

of employment and training programs, see Public Employment and Training Assistance: Alternative Federal'

Approaches. CBO, Budget Issue Paper, February 1977."

13

~irnr
assistance programs have much smaller average awards. The

Supplemental Educational Opportunity Grants award an average

of $508, the National Direct Student Loans $664, and the

College Work-Study program $525. 3_/

TABLE 4. COST OF TRAINING COMPONENTS OF MAJOR FEDERAL

EMPLOYMENT AND TRAINING PROGRAMS, IN DOLLARS

Cost Per Service YearCos t Per Participant

On-the-Job Classroom On-the-Job Classroom

Training Training Training Training

CETA

Title I

Title II

4,209

1,821

4,005

1,771

1,471

889

1,408

797

Title III

Migrants and

Farmworkers 2,184 4,428

Native Americans 4,000 4,172

Summer Youth 0 0

Title IV

Job Corps 0 9,231

Title VI and II a/ 2,736 1,316

Work Incentive

Program 11,000 3,700

328

947

0

0

2,660

3,900

664

960

0

4,156

181

1,200

a/ An emergency supplemental appropriation merged Titles II

and VI of CETA for the purpose of extending Title VI positions

beyond the expiration date of December 31, 1975.

3/ For a more detailed discussion of these programs see

Postsecondary Education: The Current Federal Role and

Alternative Approaches,

1977.

CBO, Budget Issue Paper, January

14
Job Creating Programs: As shown in Table 5, the costs

of job-creating programs vary widely because of differences

in salaries paid and administrative expenses incurred. The

federal government operates three types of direct job creating programs: work experience, public service employment,

and natural resource programs.

Work experience programs are characterized by part-time,

entry-level positions designed to introduce participants,

often youth, to work experiences. Salaries paid for this

type of job are typically minimum wages. Jobs in this

classification are summer youth jobs, jobs funded through

CETA Title I, and about 15 percent of the CETA Titles II and

VI jobs. The summer youth program had a cost per participant

of $595 and a cost per service year of $2,380 in fiscal year

1976. Title I work experience cost $1,084 per participant

and $3,299 per service year.

the second form of federal direct job creation is public

service employment. These jobs are full-time positions,

primarily funded by CETA Titles II and VI. Typical salaries

for public service employment jobs are $8,000 per year. The

cost per participant for Title II was $2,275, with a cost per

service year of $7,389. For Title VI the cost per participant was $4,060 and the cost per service year $8,675. 4_/

The third category of federal direct job-creating

programs is that characterized by the Youth Conservation

Corps. These jobs are funded to get specific conservation

work done and require large administrative and materials

costs. The cost per participant of the YCC was $1,400 in

fiscal year 1976, and the cost per service year $10,000.

4/ It is probable that the costs of these programs are

somewhat lower for youth participants because youth wages

are lower, but there are no precise figures to verify

this.

15

"CT1T
TABLE 5. COSTS OF JOB CREATING COMPONENTS OF MAJOR FEDERAL EMPLOYMENT AND TRAINING PROGRAMS,

FISCAL YEAR 1976

CETA

Work

Youth

Title I

Title II

Title III

Migrants and Farmworkers

Native Americans

Summer Youth

Title IV: Job Corps

Titles VI and II a/

Incentive Program

Conservation Corps

Cost Per

Work

Experience

3,299

3,675

6,869

4,232

2,380

0

6,378

3,800

—

Service Year

Public

Service

Employment

8,236

7,389

0

4,083

0

0

8,675

16,900

--

(Dollars)

Natural

Resource

Employment

—

--

--

--

--

--

10,000

Cost Per

Work

Experience

1,084

1,184

1,030

964

595

0

3,101

700

--

Participant

Public

Service

Employment

3,664

2,275

0

980

0

0

4,060

10,900

--

(Dollars)

Natural

Resource

Employment

--

--

--

--

--

--

1,400

a/ An emergency supplemental appropriation merged Titles II and VI of CETA for the purpose of extending

Title VI positions beyond the expiration date of December 31, 1975.
EFFECTS

Two major factors influence the effectiveness of

programs and policies attempting to enhance the employability

of young people: the extent to which programs change the

characteristics (for example, skills, attitudes, and credentials) of participants, and the extent to which the programs

either provide or induce additional jobs, training, or

education over what would otherwise have been provided. If

expenditures for these programs simply replace funds that

would have been provided by other sources, the net effects

wil l be minimal. On the other hand, to the extent that

federal outlays induce additional outlays from other sources

the net employment effects will increase. If enrol lees who

have completed a program simply displace other job holders,

the net employment effect will be reduced.

Training

Federal training programs enrolled 740,000 people in

fiscal year 1976. About 55 percent of the enrollees were

youth. The average length of stay in the programs was four

months. It is reported that for various federal training

programs in the late 1960s and early 1970s, youth had shorter

durations of participation because of higher dropout rates,

but there is no evidence to confirm or deny this phenomenon

for current programs. 5_/ High dropout rates, it should be

noted, are not necessarily a bad sign for training programs,

especially when they apply to youth. Many training programs

do not have set starting and finishing dates. Participants

5/ Robert Taggert reports in "Employment and Training

Programs for Youth," in From School to Work, that under

the Manpower Development and Training Act -- Institutional Program, 35 percent of fiscal year 1974 trainees

under age 19 dropped out, compared to 25 percent of those

aged 19 to 21 and 20 percent of those aged 22 to 44.

Only 39 percent of the 1972 Job Opportunities in the

Business Sector program (Jobs) trainees under age 19

completed their period of on-the-job training, compared

with 46 percent of those aged 19 to 21 and 53 percent of

those aged 22 to 44. The current CETA programs do not

collect as detailed information.

17

"PIT
may enroll when they wish and leave as soon as they have

acquired the particular skills they are interested in. Youth

may leave to take jobs or they may drop out to return to

school.

Effects of training programs can be measured in part by

the participants' increased earnings, increased employment, and increased labor force participation. The best

estimate of increases in earnings for participants over

nonparticipants range from $0-800 a year, with the midpoint

of $400 perhaps the most likely amount. b_l There is,

however, evidence that these increased earnings may not

persist over time. One recent study suggests that while

earnings gains averaged $380 a year over the course of five

years, the increases tended to decline after the first year.

l_l There is evidence that females tend to gain more than

males, and that black males tend to gain more than white

males.

There is very limited evidence of the earnings and

employment gains specific to youth who participate in training programs. A longitudinal study of 1964 and 1968 Manpower

Development and Training Assistance (MDTA) and Job Opportunities in the Business Sector (JOBS) participants found that

enrollees under age 20 improved their earnings significantly

6_/ These figures are reported in several studies, including: Orley Ashenfelter "The Effect of Manpower Training

on Earnings: Preliminary Results," (Princeton, N.J.:

Industrial Relations Section, Princeton University), and

Thomas F. Cooley, Timothy W. McGuire, and Edward C.

Prescott, "The Impact of Manpower Training an Earnings:

An Econometric Analysis," (Pittsburgh, Pennsylvania

1975).

7/ Orley Ashenfelter "The Effect of Manpower Training

on Earnings: Preliminary Results," (Princeton, N.J.:

Industrial Relations Section, Princeton University),

page 258 (reprint).

18
more than older enrol lees. The increase for male and female

enrol lees under 20 in the JOBS program may have been as much

as $400 greater than the increase for older enrollees.

The increase for 20-24 year old females in this program may

have been even greater. The MDTA increases were smaller, but

exhibited similar trends. 8/ Although there is no evidence

as yet that the results reported by these studies are

applicable to current CETA programs, it should be noted that

many of the specific programs financed by CETA funds were

developed under MDTA.

Most of the reported increases in earnings for youth

resulted from increased employment rather than higher wage

rates, indicating that while the training programs might

have fostered good work attitudes, they did not necessarily

raise skill levels. The results may indicate that the

piacement component of these programs was as important to

the participating youth as the training component.

Evidence on the Job Corps, which offers remedial and

skill training for youth who are severely disadvantaged

educationally as well as economically, is mixed. The program

reports that over 85 percent of all trainees in fiscal year

1974 either found employment or went back to school or into

the military. On the other hand, other studies report that

earnings increases due to participation in the program were

no greater than those for other training programs. 9_/

Education

Federal postsecondary education programs attempt to

increase enrollment in universities, four-year colleges,

two-year colleges, and vocational-technical schools. The

best estimates of the effects of additional expenditures on

8/ Reported by Taggert in From School To Work.

9_/ See Nicholas M. Kiefer, The Economic Benefits of

Four Manpower Training Programs,May1976Tprocessed) .

19

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1JILIJL

enrollment show that enrollment increases between 0.04 and

1.25 percent for every $100 reduction in tuition. 10/ Given

the current level of federal student assistance of about

$2,133 million and current enrollment levels of about 8.5

million students, federal outlays are responsible for between

8,500 and 267,000 additional enrol lees.

In the short run, educational enrollment lessens the

chances that enrol lees will be unemployed. While it is true

that students have higher unemployment rates than non-students, it is also true that their labor force participation

is much lower, and that the chances that they will be unemployed are much less, as shown in Table 7.

TABLE 6: UNEMPLOYMENT RATES AND INCOME BY

EDUCATIONAL ATTAINMENT, MARCH 1975

Years of

School

Less than 12

12

13-15

More than 16

Unemployment

Rates

(percent)

13.8

9.1

6.9

2.9

Mean

Income a/

(dollars)

9,773

12,068

14,284

18,856

a/ Over age 25 population.

10/ For a review of several of the most recent studies,

see Jackson and Weathersby, "Individual Demand for

Highe r Education," Journal of Higher Education,

November/December 1975.

20
TABLE 7. UNEMPLOYMENT OF IN-SCHOOL AND OUT-OF-SCHOOL

YOUTH, .AGES 16-24, OCTOBER 1975

Civilian Non- Labor Force Unemployed

institutional Participation Unemploy- As Percent of

Population Rate Unemployed ment Rate Population

(Thousands) (Percent) (Thousands) (Percent) (Percent)

In School

Out of School

15,284

19,416

44.0

77.8

1,012

2,256

15.0

14.9

6.6

11.6

SOURCE: Bureau of Labor Statistics, Special Labor Force Report 191, June 1976.

Job Creation

The number of jobs created by federal job creation programs

depends primarily on:

o the level of funding,

o the wage rate,

o the proportion of funds going to

administrative and materials cost, and

o the rate of fiscal substitution (that is,

the rate at which federal funds simply

replace funds that would have been

spent by other sources).

21
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The effects of current federal job-creation programs

differ. CETA Titles II and VI fund very similar types

of jobs. Salaries are generally $8,000, and fiscal substitution might be as high as 50 percent in the first year, and 90

percent thereafter, liy A general assumption is that

administrative costs are about 10 percent of total costs.

Per $1 billion then, 120,000 jobs are created directly, but

the net number of jobs funded might be 60,000 in the first

year.

The summer youth program provides salaries of $550 for

part-time, part-year work; this would be $2,200 if the jobs

were full-year. Administrative costs are 10 percent, and

fiscal substitution is assumed to be 10 percent. Thus,

430,000 full-year jobs would be created per $1 billion of

expenditures, but the net number of jobs created might be

just under 400,000.

The Youth Conservation Corps provides summer jobs at a

salary of about $1,250 ($5,000 if the jobs were full-year),

fiscal substitution is zero, but administrative and materials

costs are about 50 percent.

The degree to which the jobs funded by these programs go

to youth varies. Title I provides 57 percent of its jobs to

the under 22 population, Titles II and VI both provide 22

percent, and summer youth and Youth Conservation Corps, 100

percent. Table 8 shows total jobs directly created by these

programs, the percentage of jobs held by youth, and the

absolute number of youth-held jobs.

Information on the exact level of fiscal substitution

is very incomplete. The rate of substitution will

probably decrease if jobs are targeted on those who are

not otherwise likely to be hired by local governments.

22
TABLE 8. JOBS CREATED BY FEDERAL DIRECT JOB-CREATION

PROGRAMS, 12 MONTHS AFTER CREATION, PER

$1 BILLION IN OUTLAYS

Total

Jobs Created

(1,000s)

Percent

Filled

By Youth

Number Filled

By Youth

(Thousands)

CETA Title I a/

CETA Title II

CETA Title VI

CETA Title III

Summer Youth a/

Youth Conservation Corps

300

135

115

420

100

57

22

22

100

100

173

30

25

420

100

a/ Part-time jobs; annualized figure used for comparison purposes for summer youth.

There is no solid evidence on the effect of job-creation

programs on the long-term employability of enrol lees. 1_2/

Several studies report that large numbers of participants in

the Public Employment Program (PEP) were rehired by the

governments they worked for after their participation in the

program. However, there are also reports that the PEP program

tended to hire those whose employment experiences would have

been quite good in any event. The employability effects are

dependent on the degree to which workers develop favorable

employment attitudes and on the extent of on-the-job and

other training received through the program.

12/ The available evidence is also

ment and Training Programs, CBO,

May 1976.

summarized in EmployStaff Working Paper,

23
One would expect work experience programs to have less

effects on employability than public service employment

because work experience jobs are generally less skilled,

lower paying, part-time, and of shorter duration. The

average duration for work experience jobs was less than three

months in 1976, while for public service employment it was

just over six months. The amount of training varies just as

the jobs themselves do, but it is not believed to be very

high.

24
CHAPTER IV CHARACTERISTICS OF THE PARTICIPANTS IN YOUTH

EMPLOYMENT PROGRAMS AND OF UNEMPLOYED YOUTH

Currently, federal programs are directed in varying

degrees toward each of the four groups of unemployed youth.

It is not possible to categorize each program by the group it

is intended to aid because each program impacts on more than

one group. Nor is it possible to measure precisely the

proportion of aid from each program going to each group.

Student assistance programs, for instance, are intended to

aid high school graduates by providing them with the financial ability to enroll in college, and the in-school population by providing them with the funds to stay in school.

Training programs impact on college-educated youth, as well

as on high school graduates and dropouts, while job-creating

programs can aid all four groups of youth. It is possible,

however, to look at some characteristics of the participants

in each of these programs, and to try to match the characteristics with those of the four groups of unemployed youth. !_/

PARTICIPANTS IN YOUTH EMPLOYMENT PROGRAMS

Training Programs

In 1976, 57 percent of CETA Title I participants were

nonwhite, 76 percent came from low-income families, and

]_/ Unfortunately there is not enough information collected

by some of the programs to determine characteristics of

the youth participants as opposed to all participants.

In those cases youth must be assumed to have characteristics similar to other participants.

25
54 percent had not graduated from high school. 27 Of the

Job Corps participants, 73 percent were nonwhite , 100

percent were low-income, and 100 percent had not completed

high school. WIN recipients were 44 percent nonwhite and

100 percent low-income; 60 percent had not completed high

school.

Education Programs

The degree of targeting among education programs varies

significantly. It is estimated that in fiscal year 1977 the

BEOG program wil l supply 41 percent of its funds to those

coming from families with under $7,500. Z_l The SEOG program

wil l provide 39 percent of its funds to persons from such

families. Of the NDSL recipients, twenty-two percent will

come from familie s with incomes under $7,500. In the College

Work-Study program, 31 percent of recipients will come from

familie s with under $7,500 in income. 4/ Twenty-six percent

of Guaranteed Student Loan recipients will be from familie s

with incomes under $7,500.

2/ Low-income is defined as the officia l Burea u of the

Census poverty index.

3/ Estimates of the distribution of awards come from

Postsecondary Education : The Current Federal Role and

Alternativ e Approaches, CBO , February 1977, p. 56.

4/ The income figures here are for students who are not

independent from their parents. In addition, 30 percent

of BEOG dollars, 22 percent of SEOG dollars, 24 percent

of NDSL dollars, and 20 percent of College Work-Study

funds went to students who were independent of their

parents. In most cases these students probabl y had

very little income.

26
In fiscal year 1975, nonwhites represented 52 percent

of SEOG recipients, 37 percent of NDSL recipients, and 41

percent of College Work-Study recipients. In fiscal year

1973, about 30 percent of Guaranteed Student Loan recipients

were nonwhite.

Direct Job Creation

Public service employment programs are not as well

targeted on those with structural employment problems

as training programs. In 1976, only 44 percent of Title II

and 36 percent of Title VI participants were nonwhite; 47

percent of Title II and 44 percent of Title VI participants

were low-income, and 26 percent in each program had not

finished high school. The summer youth program, on the

other hand, was 55 percent nonwhite and 100 percent lowincome. Ninety-four percent had not completed high school,

but many of these were probably still enrolled during

the school year. In the Youth Conservation Corps in 1974, 18

percent were nonwhite, 38 percent came from families with

under $10,000 income, and virtually all were still enrolled

in high school.

UNEMPLOYED YOUTH

High School Dropouts. In 1975, 28 percent of unemployed

high school dropouts below the age of 24 were nonwhite.

High School Graduates Not Attending College. Of those

under age 24 and unemployed in this group, 20 percent were

nonwhite.

College Graduates. Of all unemployed college graduates

under the age of 24, 5 percent were nonwhite.

In School. Of those in-school youth who were reported

as unemployed, 15 percent were nonwhite.

27
TABLE 9. CHARACTERISTICS OF UNEMPLOYED YOUTH AND OF

PARTICIPANTS IN EMPLOYMENT, TRAINING, AND

EDUCATION PROGRAMS

Percent

Percent Percent Less Than

Low Minority High School

Income Groups Graduates

Groups of Unemployed Youth a/

High School Dropouts

High School Graduates,

No College

College Graduates

In School

Employment Programs b/

CETA Title II

CETA Title VI and II

CETA Title Ill-Summer

Youth

Youth Conservation

Corps c/

Training Programs b/

CETA Title I

CETA Title IV-Job Corps

WIN

Education Programs d/

Guaranteed Student Loan

Basic Education

Opportunity Grant e/

Supp. Education

Opportunity Grant e/

National Direct

Student Loan e/

College Work -Study e/

NA

NA

NA

NA

47

44

100

38

76

100

100

26

41

39

22

31

28

20

5

15

44

36

55

18

57

73

44

30

NA

68

39

41

100

0

0

0

26

26

94

100

54

100

60

0

0

0

0

0

a/ October, 1975.

]>/ Fiscal year 1976, low-income defined as the official

Bureau of the Census poverty index.

£/ Fiscal year 1974.

d/ Low-income defined as under $7,500, CBO fiscal year 1977

estimates; minority group figures are fiscal year 1975

except Guaranteed Student Loan which is fiscal year

1973.

e/ Dependent recipients only.

28
CHAPTER V BUDGET OPTIONS

Fiscal year 1978 budget options for youth employment

programs can involve programs devoted exclusively to youth,

or they can involve programs that significantly impact on

youth but are not exclusive to them. In addition to the

programs currently in operation, the Congress will be asked

to consider numerous new proposals intended to enhance the

employment opportunities of young people.

It is possible that these fiscal year 1978 budget

options could be implemented in fiscal year 1977. Indeed,

it is likely that supplemental appropriation action for

employment and training programs taken in fiscal year 1977

will include a youth specific component. If the Congress

chooses to consider these options for fiscal year 1977, the

relative program effects will be essentially the same as

those discussed here for fiscal year 1978.

NON-YOUTH SPECIFIC OPTIONS

Option I: Increased Employment

The increased employment option adds $1 billion to

Title VI of CETA which would fund at least an additional

120,000 jobs. It would also reduce unemployment compensation

(UC) outlays by about $240 million because Title VI jobs are

targeted to UC recipients who have been unemployed at least

15 weeks. These jobs could also be funded under Title II of

CETA, but Title II is not targeted on income assistance

recipients, so the resulting unemployment compensation

savings would probably be significantly lower. The 120,000

additional years of service implies that 222,000 more

persons would participate in Title VI and about 200,000

fewer workers would receive unemployment compensation.

However, Title VI is not well targeted on youth because it is

designed to reach the long-term unemployed, and youth, on

average, are not unemployed as long as older workers.

Fifty thousand youth might be expected to benefit directly

from this $1 billion increase.

29

ir
JILL

Option II: Increased CETA Title I

This increased training option adds $1 billiion to CETA

Title I. The additional expenditures could fund as much as

221,000 years of training and train nearly 632,000 participants. However, if the current distribution of activities

continues, only 46 percent of the increased Title I funds

would be devoted to training, while the remaining 54 percent

would be spent on work experience and public service employment. This would yield 102,000 years of training for about

291,000 participants. More training could be obtained by

earmarking the appropriations for training, but in response

CETA prime sponsors might shift the current policy base away

from training. This problem could be lessened by a federal

categorical program (but the substitution may still occur

after a few years) or by legislative changes in the CETA

authorizations restricting the range of activities that can

be supported by Title I funds.

YOUTH SPECIFIC OPTIONS

Option III: Increased Job Corps

This option raises outlays for the Job Corps by $200

million, approximately double the current level. These

outlays would provide an additional 20,000 years of service

and serve about 48,000 participants. The Job Corps is

currently the only training program targeted completely

on youth (although it might be possible to establish a

youth training program through Title III of CETA without

reauthorization). There may be potential for expansion in the

Job Corps, since it served twice as many persons in 1967 as

it currently does. However, some reports indicate that a

number of the facilities used by the Job Corps in the late

1960s are now outdated and in disrepair and would require

major capital outlays to become operable. Also, evidence on

the success of the Job Corps is mixed. Although the posttraining placement rates are high, there doesn't seem to be

an annual earnings gain sufficiently greater than those

associated with other training programs, to offset the higher

cost of the Job Corps program.

30
Option IV: Student Assistance Targeting

One option the Congress may wish to consider would

increase outlays to those student assistance programs that

are targeted on low-income persons. This might be done by

increasing expenditures above fiscal year 1978 current policy

levels for Basic Grants by $241 million, for Supplemental

Grants by $186 million, for College Work-Study by $62

million, and for National Direct Student Loans by $42

million. ]_/ The total cost of this option, above current

policy, would be $531 million, about $301 million of which

would go to students in families with incomes under $10,000

and to self-supporting students. Presumably, making additional grant and loan money available to the low-income

population would encourage enrollments from that group of

youth most likely to suffer from severe unemployment problems.

If the $531 million increases enrollment levels by 1.25

percent for every $100 reduction in tuition per enrol lee,

about 66,000 persons should be induced to enroll in college.

About 37,000 of these students might come from families

with incomes under $10,000 or be self-supporting. 2/

ALTERNATIVE PROGRAMS

In addition to options within the current program

framework, the Congress will consider a variety of alternative programs. The Congress may choose to emphasize the

creation of jobs, the expansion of training, or intensive

]_/ These changes result from an increase in Basic Grants

to the level necessary to fund a $1,400 maximum award,

and funding of the other programs up to or near their

maximum authorized levels. For a more complete discussion of this and other higher education options, see

Postsecondary Education: The Current Federal Role and

Alternative Approaches, CBO, Budget Issue Paper, January

1977.

2/ See p. 23 for a more complete explanation of induced

enrollment effects.

31
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counseling and placement activities. The proposals outlined

below are meant to be illustrative of the various types of

programs that will be introduced as legislation in the 95th

Congress.

Option V: Public Service Employment for Youth

This option would create a public service employment

(PSE) program targeted specifically at youth. The program

could be operated through the CETA prime sponsor system,

eliminating the necessity for the creation of a new administrative mechanism. Proposals for PSE for youth have

emphasized that the work performed by the employees be urban

community service projects. If the program were run through

CETA and participants were paid minimum wages, it might be

expected to cost about $6,000 per service year. If funded at

$1 billion, it might thus provide almost 170,000 service

years. Assuming the average length of stay in the program to

be about six months (approximately that of the current PSE

programs), about 340,000 persons would receive jobs.

There may be reason to believe, however, that youth would

have greater turnover rates and shorter durations in the

program than older workers in the other PSE programs. If

this were the case, prohibitively large numbers of youth

might be required to keep all of the slots filled during the

year at high levels of expenditures.

It should be remembered that the effects of PSE on the

participants' future employability are almost negligible.

On the other hand, PSE programs have in the past been used

as temporary, countercyclical tools and the employability

effects might change if the projects were well designed to

deal with structural problems.

The rate of fiscal substitution can be expected to be

lower, at least in the short run, for a youth program than

for an untargeted PSE program because youth are less skilled

than regular employees of state and local governments. If

this program were targeted on the economically disadvantaged,

as has been suggested, the rate of fiscal substitution might

be reduced even further. It might also be possible to

reduce expenditures for the current summer youth program

because some of the youth ordinarily enrolled in that program

would probably be hired into the PSE program.

32
Option VI: Young Adult Conservation Corps

This proposal has its genesis in the current Youth

Conservation Corps. It would serve 19-23 year olds with

full-time jobs on conservation projects in federal and state

parks and forests. The projects would involve such activities as reforestation, trail and campground improvement,

forest fire fighting, and control of soil erosion. Because

of the need for supervisory and skilled personnel and the

extensive use of materials necessary for the projects, the

cost per year of service would be relatively high, probably

about $13,000 in the first year and about $11-12,000 in

subsequent years (half of which would be wages at the minimum

wage). There is no solid evidence on which to base an

estimate of length of stay in the program for participants,

but if, on average, participation lasted nine months, 116,000

persons would be served for each $1 billion after start-up

costs. Fiscal substitution might be minimal for this program

because most of the activities would not otherwise be funded.

So far, proposed legislation has not called for the program

to be targeted on the economically disadvantaged, but

participants may be required to reside in areas in which

unemployment exceeds a particular level.

The employability effects of a young adult conservation

program are difficult to estimate. They may be less than

those of a PSE program because the skills learned on a

conservation project may not be transferable to other jobs

for those youth who are returning to urban areas. On the

other hand, proponents of the program claim that the valuable

nature of the work accomplished would enhance the self-esteem

of participants, and thus make them more desirable employees

in the future.

Option VII: Training for Youth

This option would create a training program similar

to Title I of CETA, but specifically for youth. Again, it

would probably be easier and quicker to use the already

existing network of CETA prime sponsors to run such a program. Since Title I is already about 60 percent youth, there

would have to be coordination between the two programs, or

funds for the new program might simply replace those of

33
Title I. A new program might have more success in insuring

that training as opposed to work experience, was funded.

(This assumes it is more desirable to fund training; it may

be that for many youth work experience is more desirable.

If this program resembled the training component of Title I,

the cost per year of service might be about $4,000, and the

cost per participant $1,400. Thus if the program were

funded at $1 billion, over 700,000 persons would participate

in 250,000 years of service.

Option VIII: High School Uork-Study

This program would provide students with part-time

jobs of not more than 20 hours a week. It would offer

students an introduction to various vocations, enabling them

to get a better idea of what careers they wish to pursue, so

they could structure their education to prepare for that

career. The Neighborhood Youth Corps-In School program

served these purposes through 1975. Much of the activity

supported by that program is now funded through CETA Title I,

but it is difficult to estimate the precise extent. The

costs to the federal government for a program such as this

would be the wages of the part-time jobs, plus administrative costs. If a minimum wage were paid for twenty hours

of work a week, and the administrative cost were 10 percent,

the cost per service year might be about $2,650. 3_/ Since

the jobs probably would not continue beyond the school

year, the length of stay in such a program might approximate

eight months. Thus, if the program were funded at a $1

billion level, the number of participants might be approximately 572,000 and the number of service years a little under

400,000.

A program such as this could be targeted on high unemployment areas, or it could be made more generally available.

It would, of course, not be of much service to those who

have already dropped out of school or to those who have

graduated from high school but still lack job skills and

experience. It might, however, be a powerful mechanism

in encouraging youth to stay in school, in eliminating some

of the severe structural problems of certain youth, and in

easing the transition from school to work for others.

3/ Because of the differential minimum wage for students,

wages below the minimum wage could be paid.

34
TABLE 10. COSTS AND EFFECTS OF FISCAL YEAR

1978 BUDGET OPTIONS

Number Number of

Cost of Jobs Training

Per Cost Funded Slots

Service Per Per $1 Funded Per

Year Participant Billion $1 Billion

(Dollars) (Dollars) (Thousands) (Thousands)

Option I-Increase

Current CETA PSE

Activities

Option II-Increase

CETA - Title I

Option Ill-Increase

Job Corps

Option IV-Student

Assistance

Targeting

Option V-PSE for

Youth

Option VI-Young

Adult Con8,300

4,525

10,000

4,565

1,585

4,200

NA

6,000

NA

3,000

27 a/

0 a/

0

NA

170

0 a/

126 a/

20 b/

NA

0

servation Corps c/

Option VII- CETA

Training for Youth

Option VI 1 1 -High

School Work-Study

11,500

4,000

2,650

8,625

1,400

1 ,750

87

0

377

0

250

0

a/ Youth jobs and training slots created. Jobs and training slots

for older workers would also be funded.

b/ Option III increases the Job Corps by $200 million. The figure

here represents the training slots created by that increase.

A $1 billion increase for the Job Corps is unfeasible.

c/ Figures are for period after extra start-up costs are incurred.

35

O
JILL