Since it is 6.1, the same 10th of a point difference, but in an upward direction, I suspect the Secretary would not have much to say. Representative BROWN. And the Congress is the Mr. GORDON. And with the opposition it would have been the opposite; yes. Representative BROWN. Yes. Thank you. With reference to the productivity now in our society, can you give me some idea-and pick any period that you like if we had retained the same rate of productivity that we had, say, 18 months ago, 2 years ago, what the current employment rate Mr. GORDON. Better go back a little earlier. Representative BROWN. Well, you pick the time? I will let you do that, sir. Could you give me some idea what our employment rate would be on the basis of productivity difference? Mr. GORDON. If we had the same Representative BROWN. Pick 2 years ago, if you will. Mr. GORDON. If we had the same level of aggregate demand as we now have, and the rate of productivity increase over the last 2 years, 1969 and 1970, had been on its past long-run trend, the rate of unemployment today would be significantly higher than it now is. I would have to go home and run through the numbers. Representative BROWN. Let's look at the change, the significant change, in productivity that has occurred just in the last few months go back to the period of time prior to that when we had no productivity change, as a matter of fact, very low rate and Mr. GORDON. I can't Representative BROWN. We have had, have we not, a productivity increase in the last 3 months? Mr. GORDON. Yes. No. Not in the last 3 months. I am sorry. You are now talking about the first quarter of 1971. Yes. The figures for the last five quarters run approximately as follows: No increase in productivity in the last quarter of 1970, substantial increases in productivity in the second and third quarters, leading to high hopes for a continued accelerated rate of increase in productivity, and as an offset against wage increases, a drop in productivity again in the fourth quarter associated with the General Motors strike, and then an increase in productivity again in the first quarter. I cannot cite the precise figure to the decimal point. It has been always-I think I am safe in saying-it has been always true that the largest increases in productivity have occurred in the early stages of a cyclical recovery and we are hoping for the same thing to happen in 1971. Representative BROWN. Now, the question was if one relates the productivity changes to the unemployment figures, in other words, if we had the same low level of productivity that we had in 1968 and 1969, let us say, currently, where would our employment figures be? Mr. GORDON. Well, you said low level of productivity. Representative BROWN. Relatively low. Mr. GORDON. Let us distinguish between levels of productivity and rates of increase in productivity. Representative BROWN. Yes; the increase. Mr. GORDON. The level of productivity is now, I presume, higher than it was in the first or second half of 1969, but if, as I said, the rate of productivity——— Representative BROWN. As I understand, so we can maybe get on the same wavelength here, productivity increase in 1970 was averaged out at 3.3 percent. Is that Mr. GORDON. I would be surprised if it were as high as that. Mr. GORDON. No. I think that is too high. The productivity increase in 1970 was entirely concentrated in the second and the third quarters of the year and that would have meant, to average out at more than 3 percent, that it averaged at an annual rate better than 6 percent in the second and third quarters, and I can't believe it was that high. Representative BROWN. Well, since we can't agree on the base. then we can't agree, I suppose, on any assumption about where the figure on unemployment would be. Can you give me some idea of the direction we might have Mr. GORDON. As I said, if the rate of productivity increase had maintained its long-run trend through 1969 and 1970, and we had no higher level of aggregate demand than we have today, the unemployment rate would be significantly higher than 6 percent. Representative BROWN. Well, you answered the question what might happen, but you haven't particularly answered the question I asked. Apparently we can't get together on Mr. GORDON. You asked me--I am sorry. I didn't understand the question, I guess. Representative BROWN. Apparently not. Can you give me some intimation of what goes into the unemployment figure? Are there, for instance, in that figure included women seeking temporary employment, young people looking for part-time work? How is that reflected in the unemployment statistics? Mr. GORDON. The unemployment figures that were released this morning are based on household survey of 52,000 families from a scientifically selected sample covering all persons age 16 or over in each of the 52,000-odd households. And the same questions were asked each person age 16 and over, male and female. Was that person working last week? If not, was that person seeking employment? And if so, what was that person doing to seek employment? The last question, a check on what the person was doing to seek employment, is in response to a recommendation of the so-called Gordon committee. Before our report, indeed before the 1967 revision, if the lady of the house who usually answered the door when the census interviewer came around replied that the husband, the daughter, or a son age 16 or over was looking for work last week, that person was recorded as unemployed without any check on what the person had done to look for a job. That is no longer the case. I think you are quite right Representative BROWN. I am making no exceptions, sir. I just asked the question. Mr. GORDON. You asked, did it include teenagers, married women, and so forth. Yes. It includes everyone in the family covered, male and female, age 16 and over, whether in school or not. Say the teenager is in school, is doing nothing to look for a job, then he is simply out of the labor force, not in the figures. If he is reported as having looked for work, such as answering job ads, or checking at the employment office, or whatever, he may be in school and looking only for a part-time job, but he is one of the bodies in the total of unemployment, and the same for the married woman who has looked for a job. It happens to be true for both groups, married women and teenagers, that they move in and out of the labor force without the intermediate status of being unemployed much more than is true for prime age adults, particularly age 25 and over, even 20 and over. By that I mean this, that a married woman may not report herself as looking for a job. If she is not working but has an interest in working and she hears of a job and it is readily available, she will take it; and then if she is later let off, she will retire from the labor force and not report herself as unemployed until another job becomes available. That is not true of all married women nor of all teenagers, but it is more characteristic of them than it is of adult men. That is why I made the comment that, as in previous cyclical expansions, as hope for recovery takes place in 1971 we will not only see those presently recorded as unemployed going back to work but will see substantial additions to the labor force from these sources that I just described, so that employment will go up more than unemployment goes down. Representative BROWN. Now, if we can-my time is up but I would like to continue and conclude on that thought, if I might, with a question. What happens on a unit basis, the family basis, with reference to people seeking employment when either the husband is laid off from a regular job or his hours decrease or his paycheck may decrease because he is no longer getting overtime? Do we have, during such a period, a rather sharp increase in the number of women seeking work on a part-time basis or the number of youngsters who might be looking for part-time work in order to supplement the family income? In other words, is there an increase in the number of people who would seek employment through the agencies that tick off the statistical increase in unemployment figures? Is there a multiplier effect, is the question? Mr. GORDON. I understand. There has been a great deal of research done on precisely this question. There are two conflicting tendencies at work with respect to what is called the secondary labor force, the married women, the young people in school, and so on. In some cases, and this happens particularly in poor families, very poor families, when the husband is laid off the wife has to go to work, and in the Representative BROWN. So that they are both seeking employment, is that correct? Mr. GORDON. Yes. Representative BROWN. In other words, he is unemployed and she, then, if she wants to find a job, becomes Mr. GORDON. Frequently she finds a job and this happens particularly with poor black families where the husband is likely to be among the first laid off and the wife can always find a job as a domestic 60-174-71-pt. 1—6 servant, so she moves from outside the labor force into the category of employed. She may also be for some period unemployed while she is looking for a job. But there is a contrary trend, that married women will look for jobs when jobs are availale. So you have two conflicting tendencies. They stop looking for jobs when unemployment rises and jobs are less generally available. The evidence is overwhelming, let me repeat, overwhelming, that the second tendency strongly outweighs the first, so that, if you take the figure called the labor force participation ratethe percentage of all women, let us say, aged 16 and over, aged 20 and over, aged 25 and over, you name it, the percentage of the population of that age-sex group who try to be in the labor force-falls when unemployment rises, and rises when unemployment falls. Representative BROWN. This also is true of teenagers and other members of the family? Mr. GORDON. Yes; the discouraged worker effect is more important than the contrary effect of the need to support a family. Representative BROWN. So you are telling me that when there is an increase in unemployment, the number of people seeking employment actually drops percentagewise? Mr. GORDON. Right; and this is you can see it in last year's figures on the labor force. The rate of increase in the labor force was below the trend that one might have expected from the demographic factors, the increase in the various age-sex groups, and the long-run trend in the labor force participation of men and women. Representative BROWN. So that 6 percent is a percentage of a smaller figure. Is that what you are saying? Mr. GORDON. Yes; the 6-percent figure is 6 percent of a smaller figure than we would have had had unemployment been 4 percent. Representative BROWN. Thank you. Chairman PROXMIRE. Senator Sparkman. Senator SPARKMAN. Thank you, Mr. Chairman. Mr. Gordon, I have enjoyed your testimony throughout. I think you have given us a very fine statement and I think you have given us some revealing thoughts. I do not care to go into it in greater detail but I want to say just this: I have listened to hearings, facts, figures, that have been presented to us since January, dealing with the economic situation, and I remember Mr. McCracken, the chairman of the President's economic advisers, testifying before us, laying before us what was called the full-employment budget plan. My recollection is that he said that that was estimated to bring the unemployment down to 5 percent by the end of 1971. Then I asked him this question, if he would call 5 percent unemployment a full employment. How would you answer that question? Mr. GORDON. I was guilty of writing a book with the title of "The Goal of Full Employment," so you are prodding me where I am strongly tempted to a longer answer than you wish. Five percent is completely unacceptable; a completely unacceptable goal for full employment, to me, personally, for the United States. I will be brief. Senator SPARKMAN. Well, it did disturb me to feel that we were purposely planning a $30-billion deficit over the next 2 fiscal years in order to obtain full employment and yet, as was and I certainly thought all three of the goals they were aiming at were good, that is, to step up the production, cut down unemployment, and beat down inflation. But the thing that did disturb me was the ability to do that with the plan that they were putting into effect. Then on top of that, at a time when we are talking about cutting down unemployment, and I suppose that is just the same way as saying increasing employment, the President has impounded over $12 billion of money made available by Congress, and by the way, I, for one, have not questioned the constitutionality of his doing that, certainly in case of emergency, but I have felt that it ought to be used only in the case of emergency and that those funds ought to be released as soon as possible after that emergency, released selectively so that those activities that are tied up, those funds provided for, which create jobs, may get moving again. Now, I have been particularly concerned about funds impounded covering certain housing, home construction programs, that we have passed. In the last Congress, the last session of Congress, we appropriated I believe it was $3.4 billion, if I remember correctly, for all of those housing and urban programs, and the President impounded $1.3 billion, I think it was, an unusually heavy percentage, in a field that in an activity that produces jobs, perhaps more generally, all over the country and in different lines of activity than almost any other program that we have. Public works were held up. I remember Senator Aiken called attention one day in the Foreign Relations Committee to the fact that the establishment of water and sewer systems has been held up. The building of rural electric lines has been held up. So many things that produce jobs-I just cannot reconcile a program of holding up all of those funds, and I am not saying that all of them should be released at once, but certainly those that would help achieve the objective of cutting down unemployment, it seems to me, ought to be released. Otherwise, it seems to me they are running counter-the two programs are running counter to each other. You may comment on that if you wish. I don't particularly ask you to, but it would be good to know what your thinking is. Mr. GORDON. Well, I already expressed my view that we need a more expansive fiscal policy in 1971 than the administration is apparently thus far planning, and obviously a release of funds already authorized by the Congress with the necessary appropriations which are currently being encountered would increase Government expenditures, and to that extent be expansive. I cannot, from my personal knowledge, speak about the merits on other grounds of particular parts of those total expenditures that are currently being held up. If I may, I would like to elaborate, however, on one point when I was asked about what is an appropriate goal of full employment. I should like to emphasize that I place no confidence in any single figure as a goal of full employment, whether it is 5 percent, or 4 percent, or 3 percent. And I urgently call to the committee's attention something that I said in my prepared statement, and that is that the black |