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HEARING

BEFORE THE

TASK FORCE ON HUMAN RESOURCES

OF THE

COMMITTEE ON THE BUDGET

a- HOUSE OF REPRESENTATIVES

NINETY-FIFTH CONGRESS

SECOND SESSION

FEBRUARY 14, 1978

Printed for the use of the Committee on the Budget

U.S. GOVERNMENT PRINTING OFFICE

24-081 WASHINGTON : 1978 TF-6-95-26
COMMITTEE ON THE BUDGET

ROBERT N. GIAIMO, Connecticut, Chairman

JIM WRIGHT, Texas

THOMAS L. ASHLEY, Ohio

ROBERT L. LEGGETT, California

PARREN J. MITCHELL, Maryland

OMAR BURLESON, Texas

LOUIS STOKES, Ohio

ELIZABETH HOLTZMAN, New York

BUTLER DERRICK, South Carolina

OTIS G. PIKE, New York

DONALD FRASER, Minnesota

DAVID R. OBEY, Wisconsin

WILLIAM LEHMAN, Florida

PAUL SIMON, Illinois

JOSEPH L. FISHER, Virginia

NORMAN Y. MINETA, California

JIM MATTOX, Texas

DELBERT L. LATTA, Ohio

JAMES T. BROYEIILL, North Carolina

BARBER B. CONABLE, JR., New York

MARJORIE S. HOLT, Maryland

JOHN H. ROUSSELOT, California

JOHN J. DUNCAN, Tennessee

CLAIR W. BURGENER, California

RALPH S. RE GULA, Ohio

GEORGE GROSS, Executive Director

BRUCE MEREDITH, Assistant Director, Budget Priorities

NANCY TEETERS, Assistant Director, Economic Analysis

WENDELL BELEW, Chief Counsel

WILLIAM LILLEY III, Minority Staff Director

TASK FORCE ON HUMAN RESOURCES

PARREN J. MITCHELL, Maryland, Chairman

LOUIS STOKES, Ohio CLAIR W. BUR GENE R, California

OTIS G. PIKE, New York

DAVID R. OBEY, Wisconsin

PAUL SIMON, Illinois

NATHANIEL THOMAS, Administrator

ALAIR TOWNSEND, Senior Analyst

NICHOLAS A. MASTERS, Director, Majority Associate Staff
CONTENTS

Page

statement of Robert J. Brown, Under Secretary of Labor, accompanied by

Charles Pugh, Office of Administration; Donald Michols, Deputy

Assistant Secretary, Economic Policy and Research 2

HIGHLIGHTS

Improving the Quality of Work 6

1979 Budget Compared to Previous Years 4

1979 Budget Summary 4

Other Budget Proposals 7

Private Sector Initiative 5

Public Service Employment 5

Welfare Reform 6

THE EMPLOYMENT ASPECTS OF THE PRESIDENT'S

BUDGET PROPOSALS FOR FISCAL YEAR 1979

TUESDAY, FEBRUARY 14, 1978

HOUSE OF REPRESENTATIVES,

TASK FORCE ON HUMAN RESOURCES,

COMMLTPEE OF TT-I-VI BUDGET,

Washington, D.C.

The task force met at 10 a.m., pursuant to notice, in room 210 Cannon House Office Building, Hon. Parren J. Mitchell, chairman of the

task force, presiding.

Mr. MITCHELL. This hearing will now come to order.

Mr. Brown, it was totally unnecessary that you apologize for being

late. We just urge that you continue to work with parties involved

in the coal strike to avoid imminent disaster.

Clearly, I understand why Secretary Marshall could not be here.

You are undoubtedly aware that we suffer from the same difficulty in

the House. We had approximately 11 Members who had indicated

that they would be here. I assume some will be late. They are busy on

emergency measures. I hope that some of these Members will be joining us during the course of the hearing.

This is the second in a series of Human Resources Task Force hearings on the President's budget for fiscal year 1979.

During the last 10 years, the American labor force grew at an annual

rate of approximately 2.6 percent. To a great degree, the levels of

female and youth participation in the labor force account for this

rapid growth.

With the increase in the labor force, there has been concomitant

pressure on the economy to produce greater employment opportunities. Unfortunately, we have not been able to fulfill the aspirations of

many of the new entrants to the labor force, especially black youth,

women, and other minorities.

Heretofore, we have relied heavily on aggregate economic policies,

which have not been successful in meeting the needs of these persons.

In fact, the President's economic strategy relied almost exclusively on

tax policy for economic stimulus and new job creation in the fiscal year

1979.

The President's budget proposal for fiscal year 1979 will generally

continue employment and training programs at their projected economic stimulus levels. Outlays for CETA programs are estimated at

$11.4 billion for fiscal year 1979, a 19-percent increase over the fiscal

year 1978 estimate.

This increase, however, does not represent higher program levels but

rather the amount of spending that would be needed to sustain the

( 1 )
2

level of services projected in the fiscal year 1978 appropriations. Accordingly, the purpose of today's hearing is to examine the implications of the employment aspects of the President's budget proposal

for fiscal year 1979.

Therefore, I am delighted that you could participate in today's

Human Resources Task Force hearing on employment programs in the

President's budget for fiscal year 1979, thus concluding a 2-day inquiry on employment.

We have with us today Robert J. Brown, Under Secretary of Labor,

and I am delighted. I don't know the gentleman seated next to you,

but I assume he will be introduced.

Mr. BROWN. Yes. This is Charles Pugh from our Office of Administration in the Department of Labor.

Mr. MITCHELL. I am also delighted to have you participate in today's

hearing.

We have a copy of the Secretary's statement. I would assume that

is what you would want to present to us. You may present it in total or

in part, but the entire statement will be entered in the official record.

STATEMENT OF ROBERT J. BROWN, UNDER SECRETARY OF LABOR,

ACCOMPANIED BY CHARLES PUGH, OFFICE OF ADMINISTRATION;

DONALD MICHOLS, DEPUTY ASSISTANT SECRETARY, ECONOMIC

POLICY AND RESEARCH

Mr. BROWN. Mr. Chairman, if it pleases the chairman, I would like

to read through it. I think it would be helpful to have it by way of

background.

It is a pleasure, of course, to be here today to provide you with an

overview of the Department of Labor's appropriation request for fiscal

year 1979. Before we examine some of the individual items contained

in this request, I think it is important to lay out where we have been

and where we would like to go.

When this administration took office last year, we were immediately

confronted with a 7.4-percent unemployment rate. As a matter of fact,,

if you go back to December, it was 7.8 percent; in November, a year

ago, it was 8.1 percent. This recessionary level was totally unacceptable

to both the administration and the Congress. Both the Congress and the

administration were and are cognizant of the enormous economic and

social costs associated with unemployment rates of such magnitude.

Working together, we took appropriate fiscal policy actions such as

the expansion of the countercyclical component of CETA, the expansion of the emergency local public works program, an enlargement of

countercyclical revenue sharing, and the employment tax credit.

It is due largely to such stimulative policies that we have succeeded

in reducing the national unemployment rate by more than 1 full percentage point from 7.4 percent in January 1977 to 6.3 percent in

January 1978. During this period of time, not only has the actual'

number of unemployed decreased by over 800,000, but the economy

has absorbed an additional 3.2 million persons. The net effect of these

two factors is that more than 4 million more persons are employed'

today than a year ago.

While our overall record of performance has been acceptable, there

are segments of our society, such as minorities and young workers, who.
3

have not shared equally in this recovery and who have historically

suffered disproportionately during cyclical swings. Current figures bear

out these historical trends. During the past year, the unemployment

rate for nonwhites has remained at about 12.7 percent, while the rate

for whites dropped from 6.7 to 5.5 percent. Teenagers of all races are

experiencing unemployment rates of 16.0 percent with the nonwhite

rate at a totally unacceptable level of 38.7 percent. Unemployment iR

particularly high in a large number of urban and remote rural communities. For these localities, lack of adequate job opportunities has,

a permanent, structural character which persists in both good times,

and bad. It is clear that macroeconomic policies—the use of fiscal and

monetary instruments to influence the level of aggregate demand are

not, by themselves, sufficiently precise to solve these specific labor

market problems without causing unacceptable inflationary side effects..

Selective labor market policies, on the other hand, are more flexible..

They make possible the targeting of resources on those groups with,

the most serious labor market problems. They can address specific,.

barriers to the matching of workers and jobs such as the lack of training and inadequate job market information, which are relatively unaffected by changes in the level of economic activity. Selective measures

are also more cost-effective than macroeconomic policies in solving

structural problems. They provide an opportunity for lowerisg the

unemployment rate by helping to match workers with existing job

opportunities. When special job creation policies are needed during

recessionary periods, there is evidence—according to the Congressional

Budget Office—that countercyclical public service employment programs have relatively greater employment impact, at a given level of

expenditures, than tax cuts, Government purchases, or other fiscal

measures.

The administration's economic stimulus program emphasizes both

fiscal and structural labor market measures in order to achieve strong•

economic growth. As the administration moves forward in implement,

ing its overally full employment policy, the burden of stimulating the,

economy will be carried by fiscal and monetary policies. However. thern

administration's full-employment strategy provides that these macro,_

economic policies must be supplemented by selective measures if un

employment is to be reduced to acceptable levels. This policy is consistent with the explicit provisions in the proposed Full Employment

and Balanced Growth Act.

Since the overwhelming majority of Americans experience stable,

employment, the thrust of our labor market policies will be to enhance

the employability and make job opportunities available to those work,

ers who experience special difficulties in the labor market. If the Fed,

eral 'Government is to effectively carry out this strategy, it is also essential that the Government delivery system for these services be significantly improved. In addition, other employment dimensions must be

considered. For example, the quality of employment, whether measured

in terms of adequacy of incomes, the safety of the work environment,,

or the full utilization of a worker's potential, remains a challenge to

public policy. Therefore, related program efforts will concentrate on

improving the conditions of work for all Americans.

Thus, the labor market policies of this administration will be guided

by five basic objectives over the next 3 years: To reduce the severe,
4

structural elements of general unemployment, with particular emphasis

on the problems of youth, minorities, the elderly, and urban and depressed rural areas; to address other labor market factors that impede

the achievement of full employment; to provide a mechanism for the

employment of the long-term unemployed; to build a stronger employment/training delivery system; and to improve the quality of working

conditions.

1979 BUDGET SUMMARY

To begin the discussion in a summary way, the 1979 budget proposal

reflects that selective labor market measures have become a permanent—and important—part of the administration's strategy for fighting unemployment. The projection of a 4-percent unemployment rate

by the final quarter of 1983 reflects President Carter's support for the

Humphrey-Hawkins bill.

The 1979 appropriation request for the Department of Labor totals

$15 billion in new budget authority, including $238 million for the

Labor Department's portion of the work incentive program—WIN—

for which the appropriation is made to the Department of Health,

Education, and Welfare. Outlays, which are the real measure of program levels, will total $15.5 billion, exclusive of the UT Trust Fund

but including $950 million for Federal unemployment benefits and

allowances.

1979 BUDGET COMPARED TO PREVIOUS YEARS

By immediate comparison, our 1979 request for Department of

Labor operating programs represents an increase of $7.6 billion in

budget authority and 82 billion in outlays over 1978. Compared to

1976, however, our request for Labor Department operating programs

calls for an increase of $7.2 billion in outlays which represents a

doubling of actual program operating levels since 1976.

A dramatic increase from 1976 to 1979 has been in the size of employment and training programs. In 1976, $5 billion was spent on.

CETA programs, including public service employment and youth

programs. In 1979, outlays for these programs will total $11.4 billion,

an increase of almost 130 percent. More importantly, the number of

enrollment opportunities in these programs will have doubled to over

1.5 million.

In addition, the summer youth employment program has already

expanded from 888,000 to 1 million jobs and the older Americans program will have more than tripled from 15,000 to 47,500 part-time

community service jobs.

YOUTH PROGRAMS

Youth—persons 16 to 24—account for approximately one-half of

total unemployment. Teenage rates average over three times those for

adults. Of particular policy concern are those disadvantaged youth

whose problems portend chronic unemployment during the remainder

of their working lives.

As Assistant Secretary Green indicated to you yesterday, our budget

proposals will provide over 1.2 million jobs and training opportunities

for young people through the programs which serve youth exclusively,

the Job Corps, the four programs under the Youth Employment and

Demonstration Projects Act, and the summer youth employment pro-
5

gram. Outlays for these programs will be approximately $2.3 billion,

an increase of $700 million-47 percent—over 1978 and $1.7 billion260 percent—over 1976. In addition to the jobs and training opportunities provided for youth through these programs, approximately

365,000 jobs and training opportunities for youth under 21 will be

provided in other Department of Labor programs.

PRIVATE SECTOR INITIATIVE

The private sector of our economy—where four out of five jobs are

located—has achieved an impressive record of employment expansion

during this period of economic recovery. In 1977 alone, more than 3

million additional jobs were created in private industry. However, the

employment status of disadvantaged workers has been largely untouched by this growth in private sector jobs. In addition to direct

employment, private employers also have a key role to play in assisting Government in providing the training and related services for disadvantaged workers who are needed to enhance employability.

As I indicated, achieving full employment is the key concern of the

Department and the administration. In addition to targeting our employment and training programs more directly to those most in need,

we are proposing a major new initiative to build linkages between the

public sector and the private sector for planning and developing employment and training programs. This new private sector initiative,

for which we are requesting an additional S400 million—$250 million

in outlays—will attempt to involve the private sector more effectively

in the creation of training opportunities and jobs. We are very enthusiastic about this program, and we think this enthusiasm is well

justified by the discussions we have had with private employers.

PUBLIC SERVICE EMPLOYMENT

The public service jobs program will be continued at the 725,000

level through 1979. This program was expanded from 300,000 to 725,-

000 jobs as a part of the 1977-78 economic stimulus program. We expect that the goal of 725,000 jobs will be reached next month. Outlays

for these public service jobs are expected to total $6.3 billion in 1979,

an increase of over 150 percent from the 1976 level of $2.5 billion.

I should note that significant advances have been made in targeting

this program to those most in need. In fiscal year 1976 only 43.8 percent of title VI enrollees were disadvantaged. However, of the 235,000

people who entered the program between April 1 and September 30,

1977, more than 86 percent were disadvantaged. Our title I program

has consistently had an enrollment which has been more than 75-percent disadvantaged. Furthermore, I feel that actions we plan to take

next year will provide for even'greater targeting for these groups.

Although the effectiveness of public service employment as a response to recession-induced unemployment is generally accepted, its

implementation has tended to lag consistently behind the initial rise

in unemployment. Although Congress has demonstrated that it can

enact legislation quickly and the executive branch has shown that it

can implement programs expeditiously. the economy can be several

months into a recession before new countercyclical public service Pm24-081-78-2
6

ployment legislation takes effect. There is a clear need for an automatic triggering provision to assure that public service jobs become

available when unemployment is at peak levels. As part of the CETA

reauthorization legislation, we are proposing that future appropriations requests for public service jobs be at levels reflecting projected

economic conditions.

WELFARE REFORM

In terms of the number of persons involved, unemployment among

family heads is our most serious unemployment problem. Along with

establishing a minimum income guarantee for all Americans, a basic

provision of the administration's welfare reform proposal is the creation of up to 1.4 million public service jobs for the primary earners

in families with children. This mixed strategy of income maintenance

and public service employment for low-income parents is intended to

provide immediate economic relief for these individuals and, at the

same time, improve their qualifications for eventual unsubsidized competitive employment.

Since the proposed legislation would not be effective until 1981

and will be subject to extensive congressional review, we propose to

undertake a systematic effort, in the interim to test some of the basic

features of a jobs entitlement program for heads of low-income

families.

Accordingly, we are requesting $200 million—$125 million in outlays—to set up demonstration projects relating to the jobs component of the President's welfare reform proposal. Under these projects,

we want to test—in a limited number of sites and under various circumstances—the various methods of providing intensive job search

assistance and related services to low-income family heads with children. If no private sector jobs can be found, they will be provided

subsidized jobs through the existing system of CETA prime sponsors.

The demonstration projects will provide an estimated 50,000 public

service jobs. They will be used to test alternative methods of job creation, measure regional variations in the number and types of clients

served, and to try out various management systems which might be

used under welfare reform.

Advance planning for the permanent welfare reform program is

critical. Therefore, fter the Better Jobs and Income Act is passed, the

President will submit a request for an additional $50 million to assist

CBTA prime sponsors nationwide in their advance planning for welfare reform.

IMPROVING THE QUALITY OF WORK

As I indicated previously, the Department's concern for workers is

not limited to the unemployed. While our first priority is to assure

that jobs are available to those who wish to work, we must also assure

that work is performed under decent conditions. Although it rep-.

resents only a small proportion of the Labor Department's budget in

terms of dollars, one of the most important mandates of the Department is to improve the quality of work through the enforcement of

protective legislation. The Occupational Safety and Health Administration has the overall responsibility for protecting workers from

occupational diseases and other hazards. The Labor Management
•

Services Administration has the responsibility under the Employee

Retirement Income Security Act for safeguarding employee pension

plans. The Employment Standards Administration upholds labor

regulations, operates the Office of Federal Contract Compliance Programs and several workers' compensation programs. These and other

programs of the Department of Labor are a central part of our

mission today.

The role of the Labor Department in protecting the rights of workers will be further strengthened by the transfer of the Mine Safety

and Health Administration from the Department of the Interior.

Spending for the Mine Safety and Health Administration will be

$124 million in 1979. This represents a $12 million increase, 13 percent,

over the combined Interior and Labor Department expenditures for

this program in 1978. There is also a 1978 supplemental appropriation

for this program upon which we urge early congressional action.

The 1979 request for the Occupational Safety and Health Administration will enable us to strengthen and improve the initiatives begun

during the past year. We have laid out a very effective strategy for

enforcement, focusing OSHA's resources upon those workplaces posing the most serious threats to workers' lives. We have also recognized

that we cannot inspect each of the 5 million workplaces covered by the

OSH Act. This has led to a concentration on dangerous industries and

the development of targeting models for the identification of severe

safety and health problems.

The budget proposal also reflects our belief that the overwhelming

majority of employers want to cooperate with us in providing safe

'and healthful workplaces for their employees. I believe that voluntary

compliance with the act is essential if the occupational safety and

health program is to be effective. To assist employers, especially small

businesses, in their voluntary efforts, our budget proposal includes an

expansion of free onsite consultation services to be available in all

States and an expansion of education and training for employers and

employees.

OTHER BUDGET PROPOSALS

Other major budget proposals include: The establishment of voluntary tripartite construction industry coordinating committees in three

cities, Chicago, Kansas City, and San Francisco, by the Labor-Management Services Administration to help solve problems of industry

instability, to coordinate the timing of public construction projects,

and to recommend changes in those Federal regulations which affect

the cost of public construction.

Additional staff for the Employment Standards Administration for

handling of workloads relating to the new minimum wage legislation

and the Federal Employees' Compensation Act program.

Additional funds and staff- for the Bureau of Labor Statistics to

continue the multiyear revision of the industrial price series, and to

improve local area unemployment statistics.

Increased staff in the Department management appropriation to

support audit and adjudicatory functions, the trade adjustment 'assistance program, and the full range of legal services -provided to the

Department of the Office of the Solicitor.
8

Mr. Chairman, that concludes may prepared remarks. I would be

happy to respond to any questions you may have.

Mr. MITCHELL. Thank you very much for your presentation. Most

economists are predicting that the momentum that caused the economy

to begin to recover will continue through the first two quarters of this

year.

While most economists are indicating that they would except a

slowdown or some fallback during the third and fourth quarter, others

who are not economists, members of the loyal opposition, or spokesmen for the loyal opposition, have indicated that a recession is in the

offing.

If economists' projections are true, and if we do anticipate further problems with the recovery rate of our economy, it would seem to

me that you would want to keep a permanent countercyclical program

in effect.

As I understand it, however, the program will end very shortly. In

essence, by keeping it in effect, you will have a mechanism to deal with

any recessionary trends that take place. Second, by keeping it in effect,

you will have a mechanism by means of which you could continue to

address structural unemployment rather than the cyclical unemployment. What is the Department's reasoning as to why it does not want

a permanent countercyclical program ?

Mr. BROWN. Mr. Chairman, let me start by giving you Secretary

Marshall's definition of economists. He is an economist, so I feel as

though I could use it.

Mr. MITCHELL. Of another breed.

Mr. BROWN. He said there are two kinds of economists: Those that

don't know and those that don't know they don't know.

It is a tough business, whether you are an economist or you are just

a labor, employment, and training fellow like I am. I think the President believes that the latter part of the year is the time we are going

to been some stimulus and, of course, that is when his tax cut would

be coming.

Mr. MITCHELL. As I recall, the President had alluded to some recessionary trends in the third and fourth quarters and I know he is a

physicist or engineer and chief executive, but I don't think he is an

economist.

Mr. BROWN. I think that is right, Mr. Chairman. He indicated that

he anticipated some slowdown and that is, of course, when the tax cut

would become effective. But to get to your basic point—the issue of a

permanent countercyclical mechanism—I think that is specifically

what the Department is going to propose in its CETA reauthorization

program.

As I alluded to in my statement, unless we have a trigger mechanism

related to the level of unemployment, there is bound to be a lag between getting legislation and between implementation. As fast as the

Congress and the administration are, there is still going to be a lag

unless we have a permanent trigger mechanism. I think we are committed to that I think you will see it in the final CETA proposal that

we bring up here.

Mr. MITCHELL. Could you clarify the nature of your trigger mechanism? Would it take affect at a 5-percent unemployment rate?
9

Mr. BROWN. I guess it is fair to say we are still debating that issue

within the administration, but clearly there will be a trigger related

to the level of unemployment that ranges between 4 and 6 percent. It

would be somewhat unfair for me to try to say that it will finally be.

Mr. MITCHELL. Between 4 and 6 percent?

Mr. BROWN. It will be some place between 4 and 6 percent.

Mr. MITCHELL. Since I do not really see the Department getting it

down below 6 percent, I can relax. We are safe on that score.

Mr. BROWN. Mr. Chairman, we really think it is going to get down

to 4 percent in terms of the Humphrey-Hawkins goals, and I am

sure the chairman does, too. You are talking about the forthcoming

year.

Mr. MITCHELL. I would like to see that happen but I am trying to be

realistic in terms of the size of the stimulus. Unfortunately, the rate

of the recovery escalation factors does not cause to be quite as

optimistic as you are.

I am very pleased about the summer youth job programs. As you

know, it was the action of this Budget Committee and the Congress

that raised the Mitchell amendment, causing a furor on the floor of the

House. However, it was essential that the number of summer youth

jobs be raised to 1 million. Moreover, that was not a sufficient number.

What is your opinion since we are going to continue the 1 million

jobs this summer? Do you think that 1 million summer youth jobs

is a sufficient number to deal with the problem?

Mr. BROWN. Mr. Chairman, obviously the administration has proposed what it believes to be the adequate number taking everything

into consideration, including the entire budget, as a whole. I think that

in looking at summer programs it is important to also look at the

youth activities that we are trying to move up their year. Most of us

like to look at youth. programs that the Congress passed last year as

being up and running the day that the President announced the idea,

which was back last spring. It wasn't until August 6, of last summer

that the President actually signed that bill. It wasn't until late fall,

and now in early winter that the implementation of that program is

beginning to take effect. By the end of this fiscal year, we expect that

all youth programs will have increased by 455,000 enrollees over the

year.

Mr. MITCHELL. What aggregate figures would we reach?

Mr. BROWN. That would be an aggregate of 2,261,800 over the entire

fiscal year 1978 period. That includes all of the new programs under

the new youth initiatives.

Mr. MITCHELL. I don't like to interrupt, but we have the aggregate

figure of approximately 2,600,000 slots. What is your estimate as to the

number of youth, who could participate in a summer youth program?

What is your estimate as to the need in numbers, 6 million; 4 million?

Mr. BROWN. If you take the entire unemployment of youth between

16 and 19 it would be about 1,499,000. What it will be in June or July

is difficult to estimate at this point in time. If you take minority youth

as a part of that, there are about 385,000 black and other minority

youth who are unemployed as a part of that group. •

It is our belief that that target number ought to really represent

a challenge to us. It is a double job with selective employment policy.
10

This is so important in terms of the Secretary's perception and this

administration's perception of what we ought to do with the employment program. This is portrayed in the public mind as an insoluable

problem. We simply do not believe that this is an insoluable problem.

We believe that by targeting these programs we can begin to make

significant differences in terms of the unemployment rate. We have not

done very well over the year, but these youth programs really are just

starting to get off the ground now. We are very hopeful that they will

make a difference.

Mr. MITCHELL. I am encouraged by the administration's efforts.

However, I would like to infer from your response that the Labor

Department will not vigorously oppose me if I offered an amendment

in the Budget Committee to increase the summer youth jobs by another

half million.

One last question. I have heard a lot about the new private sector

initiative of $400 million. I must confess to you that I do not have a

grasp as to how it would work. How would the funds be allocated?

Are they going into advisory councils or training subsidies? Interestingly, one or two witnesses we have heard from believe that it is virtually impossible to expect that the private sector will do very much

in absorbing the unemployed, even if incentives are offered.

For example it was pointed out by one witness that the only time

the private sector hires the structurally unemployed is when we have

had a period of rapid economic expansion. Would you help me get a

hold on what this private sector initiative is all about and comment

generally on the efficacy of this kind of approach?

Mr. BROWN. First, with regard to the private sector initiative, as I

indicated, we anticipate some $400 million for budget authority and

about $250 million for outlays.

This would operate utilizing the CETA prime sponsors. Prime sponsors would be asked to set up industry councils, employers and unions,

to assist in the development of private sector on-the-job-training opportunities. These dollars would not be subsidy dollars, but dollars

to pay for real training programs for youth to provide them skills on

the job, and off the job. For additional training that might be necessary off the job funds would also be available.

But this is primarily an effort to try to get the private sector back in the business with us as they used to be some 10 or 12 years ago;

with 'the view that four out of five jobs are in the private sector. It makes all kinds of good sense to get employers back working with us

so as to expand the occupational opportunity for people.

Let me just spend a couple of minutes on why that is important. If

you talk about institutional or classroom training programs, you are

dealing with institutional mechanisms, and chances are very good that

you are going to limit the occupational span that you can provide in

terms of dollars or in terms of the institution itself. In other words,

if you are going to provide training for welders, you are going to set

up a classroom, you are going to buy a certain amount of equipment,

and you are going to train welders. You are going to have lots of

welders trained.

There is certain inflexibility that is built into that welding class.

There is a welding instructor, there are machines that have to be paid

for, there is an institution that tends to want to go on whether you
11

need welders or not. There is also a limiting factor. You can only set

up so many classroom-size arrangements. The range of occupations

gets to be 20 to 40, or even 50, or even 100. When you get to 100, you

are about at the limit of institutional classroom training availability

demonstrated throughout the entire history of manpower programs.

But there are 40,000 occupations in the Dictionary of Occupational

Titles.

If we constrain ourselves to institutional training, we have reduced

the occupational opportunity of people. If we can conduct on-the-job

training, opportunities to train people in hundreds of different occupations, one at a time with private employers, we have significantly

changed the dimension of our employment training mechanism.

Mr. MITCHELL. Before you continue, you have triggered one other

question, if I may. The approach is great. It sounds good. I am one

of those who believes in the private sector putting people to work,

and I would hope that it would. After listening very carefully to what

you said, I am still not clear how this differs from the approach used

by the National Alliance of Businessmen some years ago when they

recruited people and 

'e

ouve them on-the-job training. This was a totally

voluntary effort with no moneys involved for setting councils. Therefore, how does the administration's approach differ from the programs that were developed using the combined organized labor/management approach?

Again, no public funds were involved, but it was designed to do

specifically what you are suggesting. I am still not clear on the administration's approach to this policy.

Mr. BROWN. Let me just tell you frankly and honestly, Mr. Chairman, that there is not that much difference, except where we are going

to administer the program. You will recall that the national alliance

of businessmen's program was operated at the national level. There

was a freebie and a contract side in the NAB program. I know, I was

there the first day.

The program was a national program. The contracts were sent to

the regional office and were signed at the regional office or at the

Washington office. The companies were really dealing with the Federal bureaucracy, and a very awkward kind of redtape arrangement.

Here the new element is the local participation of local industry,

relating to local needs and to that extent we think it is an important

and essential ingredient.

But the same mechanism in terms of training is probably going to

occur. It is a matter of trying to make it more realistic.

Mr. MITCHELL. Perhaps I have been on the Budget Committee too

long. I am becoming so conservative. If we did that in the past with

no outlay of Federal funds—my colleague said, My God, what must

have he been like before?

But if we did that in the past without any significant outlay of

Federal funds, what is the rationale? I will not push it. I just cannot

ferret out in my own mind what the rationale is for $400 million, if

it is essentially the same approach. 

Mr. BROWN. It is to expand the approach. It is just no question

that we want employers to do as much as they can without charging

the Federal Government anything. Many employers will continue to

do that. The national alliance of businessmen program will continue
12

and will be accelerated. There is no question in my mind that that is

terribly important, but there are special problems. For example, disadvantaged workers, especially these young workers who have special

problems. To expect an employer to set up offsite training for English

as a second language, for example, is perhaps to expect too much. To

expect them to put additional staff on for training in an on-the-job

setting may be to expect too much. We want to encourage this and

to expand this.

In connection with the question of whether or not you can make a

difference in the youth population, as we have looked at it, it has been

next to impossible through the years. If you look at how the age of

our labor market has changed, you will see that it has changed fairly

significantly and is going to change in the future. We tend always to

assume that the future is pretty much going to be what has happened

in the past. The age group 16 to 19 has expanded from 6 to 7 million

over a 15-year period.

The war baby boom was upon us and we have 16 million or so in the

16 to 19 age group in terms of total population.

Your joint committee of Congress just released a report that I think

it is very interesting and very enlightening. If you look at what is

gaing to happen to that age group, over the next 7 years it is going to

go crown by 21/2 million. I am persuaded that one of the reasons the

Humphrey-Hawkins is really a possibility, those goals are realistic,

is that the labor market is significantly changing, and perhaps the

problem of the future is that we are going to face a labor shortage.

That is essentially where that report comes out. So we need to adjust our thinking in terms of what the possibilities are. We are encouraged. We think the possibilities are great.

Mr. MITCHELL. Thank you very much. Mr. Burgener.

Mr. BURGENER. Thank you, Mr. Chairman, and thank you, Mr.

Secretary, and I apologize for coming in late.

There are some very positive things here. As I read your testimony

which I didn't hear earlier, it sounds like we have 4 million more people at work now than a year ago. That is very commendable, and

whatever caused it, perhaps a lot of things, but even so, I read further

that the nonwhite youth unemployment still remains probably the

most critical one of all, at 34.7 percent. Was it about that a year ago,

or do you recall—the nonwhite unemployment?

Mr. BROWN. I think in terms of percentage, it is very close to that.

Mr. BURGENER. In other words, no matter how many more people

are employed we are still not getting that—

Mr. BROWN. It has actually gone up over the year.

Mr. BURGENER. We are not touching that one much, are we?

Mr. BROWN. Let me just comment on that, because I think as you

look through the years, it is terribly important. It was 36 percent, and

it went up to 40 percent in the summer. The stimulus program started

in the spring. I believe May was when we got the appropriation for

the full stimulus package and the youth bill passed. It was signed

on August 5.

Mr. BURGENER. August 5 of last year?

Mr. BROWN. Yes. If you look at the effectiveness of targeting, I

think you need to look at what has happened since September of last

year. There have been some fairly dramatic changes in terms of the
13

unemployment rate and the unemployment numbers of some of these

targets over the last few months.

They are not enough. We are a long way from being where we ought

to be. Let me take two examples. That rate has come down from 40

percent to 37 percent. Three full percentage points, but it is not great.

It is not (good enough. As you recall, Vietnam era veterans were the

President's first priority. The President announced that in terms of

public service employment, we are going to try to zero in on the young

Vietnam era veteran.

That rate was 18-plus percent in August of last year. It was down

to about 12 percent this month.

Mr. BURGENER. Speaking of the Vietnam veteran now?

Mr. BROWN. Yes; a 50-percent decrease. That tends to jump around'

a little bit, but the numbers are about 180,000 to 190,000. There is a

very significant lesson to be learned here. If we can somehow target

our resources we can make a difference. We believe that with the

mounting of the youth training programs this year, with the addition

in fiscal year 1978 of some 455,000 training and employment opportunities for youth:we can make a difference in that rate.

We are not going to solve that problem in 1 year by a long shot.

That unemployment rate has been with us for many, many years. It

is going to be tough, but I believe we can make a difference.

Mr. BURGENER. Thank you. I think no one would question the value

economically and socially of the minimum wage legislation. We differ

a great deal about how much, how soon, about youth differentials

and that sort of business, but last year Congress worked its will, and

made a pretty heavy increase in minimum wage, I think from $2.25

up to $3 by 1981, $3.25 or 35 cents thereabouts. That is about, I think,

a 35- or 40-percent increase, and I think almost every economist I

heard of every stripe—admittedly it is not a science, I guess—said

that while there were beneficial things to come from increasing the

minimum wage, every time it did cause an increase in unemployment

of marginally skilled people, even though maybe there were greater

benefits to be gained overall for the society.

Do we know—what is the current minimum wage for 1978—$2.65?

Mr. BROWN. $2.65; it goes to $3.90.

Mr. B URGENER. A lot of these structurally unemployed don't have a

lot of skills, I assume, and not enough education. How much effect do

you think, either now or for the record, that the minimum wage legislation has or had or is having on that?

Mr. BROWN. Congressman, there are two ways to look at it. The

economists have indicated there is some effect by way of looking at

economic models. But if you look at what has happened in history—

we are required to do that—under the Fair Labor Standards Act both

in terms of jobs and in terms of the inflationary impact, every single

increase in the past has shown no demonstrated effect on employment

or inflation. I know that theoretical economists say that there is bound

to be an effect but that what happened in those years is that other

events took over. They were more important, and therefore you

couldn't see it. But empirically, economists cannot demonstrate that

the Fair Labor Standards Act we have today has had any measurable

effect on employment or on the inflation rate.
14

We need to see what is going to happen with this one. We are going

to study it. We are going to try to determine what the effect is, if any.

I know that theoretically economists will say you have to, on the one

hand, assume that, and on the other hand, assume this. Harry Truman

used to say if I only had a one-handed economist I could figure out

where to go. We will look at it.

We are going to, of course, study it. We have the unemployment or

the Minimum Wage Commission, which as you know was set up by the

new amendments. Of course, that entire question needs to be looked at.

Mr. BURGENER. Searching around for the reason why with 4 million

new jobs these people didn't get their share. That is what I am after.

They didn't get their share for some reason.

Mr. BROWN. First of all, we have, as you know, the propensity of

callback. As employers go into a recession, they lay off skilled workers.

On the upswing, they like to hire workers that have more education,

that have more maturity. It is a natural propensity.

Mr. BURGENER. You are suggesting we have not yet run out of trained or skilled people.

Mr. BROWN. That is correct.

Mr. Bl7RGENER. Let's talk for a moment about our relationship with

local government. I am not suggesting we declare war on local government. We have to make a partnership that works better than it does

now.

I read recently that local governments last year completed their

year with a surplus of some $30 billion all over the country. In California alone we have a State surplus of $4 billion—$4 billion. Yet, we

have what they call a taxpayer revolt going on at the same time. We

have an initiative on the ballot signed by 11/2 million people, more

than three times the required number, to cut property taxes in half,

from 2 percent of selling price to roughly 1 percent, with no provision

about what to do with the $7 or $8 billion lost revenue. It is a very,

very serious problem. I am wondering if we are really making sure that

all this money that goes to local governments, CETA—is that part of

revenue sharing?

Mr. BROWN. No. That is separate.

Mr. BURGENER. Revenue sharing, as I understand the philosophy,

leaves no strings attached, so to speak. I wonder if we have enough

strings on CETA. We know it is 47 percent, I think that is the figure,

that are just plain used to hire people that they would have otherwise..

Are we being tough enough without the heavy hand of the Feds that

we all complain about, to make sure that CETA money trains people,

not just hires them, trains them, not just hires somebody that was maybe let out the front door and hired in the back door sort of business?

How short are we?

Mr. BROWN. Congressman, there is no question but in the early years

of CETA there was substitution. Congressional studies and our studies

indicated that there was a significant substitution effect. The amendments that the Congress passed, about 11/2 years ago really tried to deal

with this problem and I think did so very effectively.

You will recall that Congress decided that the new entry requirements would provide that you would have to first of all be unemployed—in the lion's share of title VI, 50 percent. New title VI

enrollees would have to be unemployed for at least 15 weeks to avoid
15

the substitution problem. 'So you couldn't just lay off your workers and

then rehire them and simply substitute CETA money for regular

money. In addition, also there was a requirement for projects. Specific

projects were required at the local 'area, not just routine, on going city

business that substituted CETA money for local funds.

Therefore, the project requirements, the requirement for being unemployed 15 weeks or more 'and the disadvantaged criteria has significantly changed the representation, and the client characteristics in

CETA. We think you have dealt with that very effectively.

Mr. BURGENER. I have a note here that gives some rather staggering

figures about emergency public works. Do you deal with that? We

passed a monster in size, I think 84 billion, and I am informed that

some $400 million which is a small part of that, 10 percent, I guess,

was 'actually spent in 1977. Is this in your mix?

Mr. BROWN. That is over with the Department of Commerce and the

Economic Development Administration.

Mr. BURGENER. They administer it. How about its job effect? Do you

get involved in the job effect indirectly?

Mr. BROWN. Of course, in terms of providing trained applicants to

those contractors, there is an interchange at the local level. But, in the

main, it is Department of Commerce activity.

Mr. BURGENER. I think we, ought to ask them sometime Mr

Chairman.

As I recall all those projects had to be started in 90 days

'

had to be

ready to go, 'and if so, after all that happened, why did it not happen?

In every one of our communities we have people coming in and complaining that they didn't get funded.

Mr. MITCHELL. Would the gentleman yield for just a moment?

Mr. BURGENER. Indeed.

Mr. MITCHELL. Recently the Department of Commerce put out its,

report on the public works program, and I think the figures differ

significantly from your note.

Mr. BURGENER. I hope SO.

Mr. MITCHELL. As I recall it, I think it said they were at about a

$2 billion level spent, which was roughly 50 percent of What was

contained.

Mr. BURGENER. You don't think that was an estimate for 1978; you

think that was the past, or may be fiscal year 1978, the year we are in?

MT. MITCHELL. That is right.

Mr. BURGENER. It might be very valuable to get them in here one of

these days 'and find out who got hired, what got spent, why not and

why so.

Thank you, Mr. Secretary.

Mr. BROWN. Congressman, thank you.

Mr. MITCHELL. I know what the emergency is insofar as the mineworkers are concerned, and believe me, we wish you great success.

There are two last pressing questions that I would like to address to

you, and then we will submit the others for your written reply.

I just regret that I am not a semanticist. Senator Hayakawa is the

semanticist in the Senate, and I do not think we have one in the House,

and I wish I were one.

There is something that really disturbs me. In the President's budget

he says unemployment is near 4.9 percent, the overall rate of unem-
41111.11111,

16

ployment. Yet, at the same time he is supporting the HumphreyHawkins full employment bill, and we are grateful for his support,

and we know he is going to support it vigorously, which has an interim

unemployment goal of 4 percent as the overall.

Mr. BROWN. Let me try to clear that up.

Mr. MITCHELL. I wish you would.

Mr. BROWN. The President is saying without targeted programs

we think with macroeconomic policy by 1985, we can get the 4.7 percent.With targeted programs, we believe we can get to 4 percent. The

President's goal is 4 percent. He anticipates moving ahead and continuing these countercyclical and structural employment programs.

Mr. MITCHELL. I thank you for that clarification, because that semantic misunderstanding caused great difficulty. I just could not

relate 4.9 percent with 4 percent.

Mr. BROWN. I have trouble doing that.

Mr. MITCHELL. The last question is, it has become clear that the

budget authority ceiling under the second resolution for fiscal year

1978 is going to be very tight.

Do you intend to ask for the $3.8 billion forward funding of the

public service employment jobs that this Budget Committee and the

Congress anticipated in budget resolution totals?

Mr. BROWN. Forward funding into 1980?

Mr. MITCHELL. In 1979. The Congress had anticipated forward funding of public service jobs to the tune of $3.8 billion for fiscal year 1979.

Was some of it in 1978? All 1979. My specific question is, Does the

administration intend to ask for that forward funding?

Mr. BROWN. I am troubled with semantics. If we are not, in terms

of forward funding, we are not going beyond fiscal year 1979, if we

talk about fiscal year 1980, from my understanding of forward funding, that would be forward funding. We don't intend, we haven't in

this budget anticipated any funding into fiscal year 1980.

Mr. PUGH. You are speaking in terms of whether we have any intentions of coming up for a 1978 supplemental?

Mr. MITCHELL. That is right.

Mr. BROWN. No.

Mr. MITCHELL. That is absolutely contrary to what the Budget

Committee sought to do. In fact we sought in the second budget resolution for fiscal year 1978 to forward funds for public service programs

to the tune of $3.8 billion for fiscal year 1979, which would require a

supplemental, and there you are saying you do not anticipate doing

that?

Mr. BROWN. This budget does not anticipate that, Mr. Chairman.

Mr. PUGH. A big difference in the circumstances, Mr. Chairman, was

that when the economic stimulus proposals were submitted, the public

service employment program was envisioned as a one-time shot in

which case we were contemplating extending the program only

through about half of 1979. The difference here is that for 1979 we are

proposing to finance the program at the full level throughout the year

of 729,000.

Mr. BROWN. That is included in the fiscal year 1980 budget.
17

Mr. Mrrcn-ELL. I understand that. But that still does not come out

to the $3.8 billion that we built in for forward funding if you continue

your PSE program at the same level.

Mr. BROWN. That is correct.

Mr. P-crcurr. The $3.8 billion would only finance the program for

approximately 6 months, as I understand it.

Mr. Muc-FTELL. Gentlemen, thank you very much. Good luck to you

in your endeavors with both parties concerned in this major fight.

Mr. BROWN. Thank you very much, Mr. Chairman, and we will

need it.

Mr. MITCHELL. Thank you.

[Whereupon, , at 11 :10 a.m., the task force adjourned.]

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