PUBLIC SERVICE EMPLOYMENT

Mr. STOKES. Thank you, Mr. Chairman.

Mr. Secretary, let me first make reference to the statement that you made this morning, which appears on page 4 of the printed copy of your prepared testimony, paragraph 2 or page 4, and I want to cite for the record the precise reference that I have. You said:

While we recognize the value of public service employment as a means of providing quick and productive responses to unemployment, we also recognize its limitations. The principal means for reversing unemployment trends must be through expansion in the private sector. Continued and prolonged massive public employment programs can only lead to a generalized revenue-sharing whereby Federal funds displace depleting state and local resources.

Now, with reference to this statement, and I am going to ask you to expand upon it, but before doing so, let me just cite what I understand are the latest figures released by your Department.

Mr. Quinlan made reference to a report just released by the Labor Department this morning, since you have been here testifying, and though I have not seen that report, I have this demographic data from that report, and you may correct me if I am wrong at any point.

I understand that the latest figures that you have released on unemployment in America is that our unemployment rate is now 8.9 percent, up from 8.7 percent 30 days ago; that this figure represents double the amount of unemployment in October of 1973; that it is the highest unemployment since 1941; that we now have 8.2 million people unemployed, which is an increase of 200,000 in the last 30 days; that since August of 1974, unemployment has risen by 3.3 million people; statistically there are 8.1 percent with reference to whites who are unemployed; blacks and other minorities are 14.6 percent, teenagers nationally are 20.4 percent, and black teenagers are 40.2 percent.

I would just like, in light of those kinds of statistics, for you to amplify upon your statement with reference to the fact that we must expand in the private sector in light of the fact that under these circumstances it just cannot be done.

Mr. KOLBERG. Mr. Stokes, as best I could tell from listening to your recitation of the facts as portrayed in the release put out by BLS and the tables, you are correct.

COPING WITH UNEMPLOYMENT

Let me speak for a minute about what my intentions were with these words in my statement.

The 85 percent of the employment in the country continues to be private employment, so clearly the first order of business in order to turn the country around and get unemployment rates down is to generate new private jobs.

I think the Congress is essentially agreeing with the President that that is the first order of business, and passed even a larger tax cut and other related measures to stimulate the private economy, and this is just the beginning.

I think the Secretary said yesterday, and it is my impression that generally economists seem to feel that the turnaround in the general

economy will begin to be felt later on this calendar year and in 1976 will continue to get better as we go along.

Second, then, let me say in terms of public policy, the first cushion to unemployment has, and I think ought to remain the unemployment insurance system, and we asked for and the Congress agrees that that system essentially for this emergency ought to be made universal so it isn't just people who have been covered heretofore. All farmworkers, domestic laborers, and State and local government employees are also covered. So we have universal coverage under the unemployment insurance system. The Congress has extended the number of weeks of payment out to 65 and the President has recommended to the Congress that that be continued out through 1976 on a triggered-out basis if employment lowers significantly. We are going to pay out something like $17 billion to $20 billion of unemployment insurance payments this year to the unemployed as a cushion to help people over the hump until the private economy comes back.

That really ought to be our first line of defense against the situation we find ourselves in, and I think both the executive branch and the Congress are cooperating, and have acted speedily to make sure that every worker who has had an attachment to the labor force is eligible for unemployment insurance, and we have about 62 million people right today drawing unemployment insurance payments in order to help them over this hump.

That finally gets me back to the role of public service employment. What I was attempting to suggest here is the problem that we found and continue to find as public service employment stays as a program in a community over an extended period of time-we call it the substitution effect-there are all kinds of ways for local officials to begin to draw out their own funds, local funds or State funds, away from services that were being provided regularly by those funds and substituting public service employees, or if you will, thereby substituting Federal funds.

Now that, therefore, does not generate any net new jobs at all. It merely is a substitution effect. Our studies indicate that this substitution effect probably starts in a big way the second year, thereabouts. In other words, as the budget cycles turn around, there are all kinds of ways to begin to substitute and that after the program has been in place, we suspect for a long period of time it becomes almost like general revenue-sharing.

It doesn't result in more jobs being created in that community for unemployment people. It really is merely substituting Federal funds for jobs that had already been there. And that is really what I was trying to get to in my statement.

PUBLIC SERVICE JOBS GOALS

Mr. STOKES. Well, in light of that, is the goal you set of 310,000 jobs really a very realistic figure, particularly if you are talking about the last 30 days; we have had 200,000 unemployed people added to the rolls?

Mr. KOLBERG. Well, let me repeat, what I think is a response. The chairman asked the Secretary yesterday whether the program was big enough and how did we know whether it was too big or too small,

and I think his answer, and I would echo it, is I don't think we have a good answer to that. I don't think we know how big it should be. It is a very expensive program. These people are paid at prevailing rates, and so for every 100,000 public service jobs, it costs about a billion dollars; so if you want to increase the program to a million jobs, you are talking about a $10 billion annual expenditure. So it is a terribly expensive response to unemployment.

Our view is that among all the various things we are doing, or that Congress is considering and we have talked yesterday and today about a lot of the problems concerned with this particular program— it is our considered judgment that the 310,000 level is the proper

response.

Now, we ought to add on to that that this isn't the only manpower program going on; that we have registered under our title I program about 500,000 people; that this summer if the Congress goes along with the funds that the President has aked for, we will have somewhere between 700,000 and 1 million young people in summer youth jobs. So the manpower programs in total, if you want to count up just those three, are going to accommodate something like a million and a half people over the coming year for the $4.9 billion or $5 billion that we have been talking about. I think that is a significant response.

I don't know whether it is enough or not, Mr Stokes, considering all the other things the Government is trying to do, and the tremendous size of the deficit that I know this body debated long and hard yesterday over, and it is our judgment that this is the proper response at this time.

SUMMER YOUTH EMPLOYMENT

Mr. STOKES. What about our summer youth employment in light of your statistics, 20.4 nationally; 40.2 for black youth? How do we get the young people off the streets this summer?

Mr. KOLBERG. Mr. Stokes, implicit in your question is the very reason that we asked the President and he agreed to send up an urgent supplemental request for $412 million for summer youth programs.

Last year, we asked for $380 million, which the Congress granted, and that is already in the base that each prime sponsor has. So in total, if each prime sponsor were to spend out of their title I funds the same amount they spent last year on summer youth programs, as well as the $412 million, we would have well over a million young people in jobs this summer; in other words, probably a third to a half again more than we had last year, and that was the purpose for the supplemental request that came to the Congress.

Mr. STOKES. To what degree, then, Mr. Secretary, do we reduce these figures of 20.4 and 40.2 percent by summer youth employment programs?

Mr. KOLBERG. I don't know. I would have to calculate that out, Mr. Stokes. We will try to do that, based upon some assumptions. I think we would like to assume that prime sponsors are going to see the problem the way obviously you see it, and that they are going to use some or a substantial amount of their title I funds as well as the supplemental that we hope the Congress will be making available for summer youths.

Let us run that calculation through; if we had a million summer jobs, how much would it reduce this unemployment rate?

[The information follows:]

If we can make the assumption that the 1 million summer youth jobs will be shared by white and black youth, in the same proportion as their representation in previous summer programs, we can expect that the anticipated unemployment rate of 20.4 percent for white youth will be reduced to approximately 17.1 percent, and the anticipated unemployment rate of 40.2 percent for black youth will be reduced to 11.6 percent during the calendar year 1975 program.

Mr. STOKES. It is going to take quite a bit to make a significant impact upon those figures, isn't it?

Mr. HEWITT. No, sir. The release for April, from the figures that you were quoting, indicates that the unemployment of teenagers of both sexes, all races, 16 to 19 years old, was 1,778,000 in April. Now, we know that a lot of kids don't come into the labor force until June, so that there will be a large influx. The number wouldn't go out of sight more than that, and that is not the total number that would be available for these summer jobs. It goes up through age 21, so there are a couple of years on this. But a million point one, or whatever the number would be, would be a very significant volume of summer jobs in comparison with the youths that would be available.

Our estimates which are in the President's manpower report, the estimate of summer youth jobs, is that there probably would be over the whole age spectrum about 3.1 million youths that would be eligible within the normal summer youth guidelines, and just about a third could get summer jobs if we had funding from prime sponsors to go along with what the administration has requested in the urgent supplemental.

Mr. STOKES. In essence, your reply is that you think it will make a significant impact?

Mr. HEWITT. Yes, sir.

PUBLIC WORKS PROGRAM

Mr. STOKES. In terms of the public works type of program, Mr. Secretary, what ought we to be doing in that respect to try to supplement public service employment and private sector jobs?

Mr. KOLBERG. I think my response would reflect, I think, the view of the President and the view of the administration on public works programs. I think the President has taken the attitude that because of the tremendous deficit we already have in the Federal budget, and secondly, because of the long leadtime in order to really get public works underway and a lot of people employed, that generally that should not be a response, and as I am sure you know, the administration has not proposed and, as a matter of fact, I believe the President has said he is generally opposed to a public works response.

I think, as I have read and listened to a number of eminent economists, many of them seem to be saying that the kinds of public works programs that are being seriously considered in the Congress now may well be on the boards at the time when the economy is already well on the way to recovery and therefore add to the inflationary pressures that we may well experience.

VIETNAM REFUGEES

Mr. STOKES. A little while ago, Mr. Michel asked you some questions regarding the Vietnamese evacuees, and I understood your reply was that you have to study the situation, and so forth. But I think even in the absence of a study we know this: that a large number, significant number, or a major portion of these evacuees are highly unskilled people that we are adding to our labor market here. We know that without preliminary surveys, wouldn't we?

Mr. KOLBERG. My impression, Mr. Stokes, is not that. I don't have any evidence that I could offer you. Our people in the employment service who have been working with this problem-I spoke with them this morning before I came up here-have the impression that as with the Cuban refugees, that there are a number of skilled people here who are arriving with skills. As with the Cubans, there are a number of very well educated people in the professional classes that can be easily assimilated into our economy and society. And they tell me that it is a wrong impression to assume that the vast majority are typically unskilled people.

Mr. STOKES. Well, you do have some data with reference to the Cubans who settled in Florida, don't you?

Mr. KOLBERG. We do have. I don't have it with me.

Mr. STOKES. As to whether they were skilled and unskilled and how many became dependent on the welfare roles, et cetera. Is that part of the study you are going to provide for our record?

Mr. KOLBERG. We will do that. We will expand it so it shows the kind of people who came in from Cuba at that time.

Mr. STOKES. At any rate, for any area such as a depressed area, already depressed area, any significant influx of additional persons for the labor market has to in some degree exacerbate that depressed area, doesn't it?

Mr. KOLBERG. The answer certainly is yes; there is no question about it. But I think we ought to keep in mind, Mr. Stokes-perhaps I don't need to say this, but let me say it-we have a labor force of almost 90 million people and the 60,000 to 70,000 to 80,000 people we are talking about, probably no more than half of those are going to be in the labor force.

That count of Vietnamese refugees includes all humans and a lot of them are young people who will not be a part of the labor force. I don't think we know yet how many are wanting to be in the labor force, but let's say it is 50,000 who finally arrive as adults looking for work. I think we should be careful to try to spread them out so that one small town in Arkansas, or one small town in California doesn't catch the influx, but I think our society, as large as it is, is certainly capable of assimilating 50,000 people into its labor force without any real dislocation in any one labor market.

I think I would add that humanitarian-wise I don't believe we have any choice at all. I think it is the thing we must do as a people.

PRIME SPONSORS

Mr. STOKES. Let me ask you this: Are there any prime sponsors that are not for profit, grassroots organizations in any of the long-term economically depressed areas around the country?