Policy Review

1983 Spring

SECTION: No. 24; Pg. 87

LENGTH: 6576 words

HEADLINE: Busy Doing Nothing: The Story of Government Job Creation


JAMES BOVARD is an investigative journalist and has been published in The
New York Times, Chicago Tribune, Washington Monthly, and Inquiry.

In 1961, when the unemployment rate was 5 1/2 percent and skill shortages
existed in a handful of fields, the federal government committed itself to
pursuing a comprehensive manpower policy to train and employ the toiling masses.
Twenty-two years later, the unemployment rate is almost twice as high, skill
shortages still abound, and roughly five times as many workers are
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"structurally" or "long-term" unemployed. Yet, President Reagan recently signed
another job training bill, and Congress is discussing proposals to put hundreds
of thousands back to work doing nothing or a reasonable facsimile of same.

A 1979 Washington Post series concluded, "Incredibly, the government has kept
no meaningful statistics on the effectiveness of these training programs --
making the past 15 years' effort almost worthless in terms of learning what
works." n1 Since 1964, the General Accounting Office (GAO) has almost annually
revealed that government manpower programs reported successes are vastly
exaggerated and that the use of dishonest statistical methods is camouflaging

n1 Washington Post, April 24, 1979.

Government manpower efforts gave us Job Corps centers, which mainly
redistributed crime to other neighborhoods; youth employment projects, which
only taught kids how to nap; and CETA projects, which included building an
artificial rock in Oregon, counting cats and dogs in California, and recruiting
food stamp recipients in Florida. Politicians have been proclaiming their
commitment to training workers for the private sector since 1961. Yet,
bureaucrats have been perennially incapable of adjusting to private demand or
meeting private standards.
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Though training and job creation programs have often been separated in the
statute books, Congress repeatedly blends the two, paying training allowances as
high as regular salaries, and commanding make-work programs to prepare paycheck
recipients for real work. The two facets have nicely complemented one another:
as training programs failed, government created make-work job to busy the
unemployed, and, as more people came to rely on a government paycheck in lieu of
work, skills shortages multiplied, increasing the demand for government training

The Birth of a Bad Idea

In 1933, Franklin D. Roosevelt decided that the best way to end the
Depression was to raise taxes and pay the unemployed for attendance at public
works projects. The government jobs program began comparatively slowly until,
one afternoon in November 1933, Harry Hopkins suggested to FDR the idea of
putting all the unemployed on the government payroll. The next morning, FDR
announced plans to hire en masse, and within two weeks a million men were on the
payroll. n2 The Civil Works Administration -- essentially politicians banging on
an economic tin pan -- had four million workers by mid-January 1934; but FDR
quickly became disillusioned with the high cost of the program and abolished it
on March 31, 1934. n3 Government job creation programs were comparatively
dormant the rest of the year, even though the unemployment rate was still over
Policy Review 1983 Spring

20 percent.

n2 H. L. Mencken, Chrestomathy, p. 424.

n3 Leuchtenberg, Franklin D. Roosevelt and the New Deal.

In 1935, FDR began priming for the 1936 election and launched the Works
Progress Administration (WPA), which paid over four million people in 1935. The
WPA, popularly known as "We Poke Along," was exactly like CETA (Comprehensive
Employment Training Act) in that the goal was to hire as many people as quickly
as possible, resulting in projects like art classes for the insane. The WPA's
main accomplishment was to give leaf raking a bad name. Despite billions of
dollars of pump priming and millions of paycheck recipients, the economy
remained depressed until World War II. There were more enrollees in federal
work relief programs in 1938 than in any other year of the Depression.
Unemployment was still at 17.2 percent in 1939 -- higher than it was in 1931,
two years after the stock market crash.

The modern era of manpower law opened with the Area Redevelopment Act of
1961, a law based on the right of geographical areas to equal economic
development, in spite of themselves. Critics reviled the law as a program to
revive ghost towns. n4 The Area Redevelopment Administration (ARA) was
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established to direct federal money and training funds to depressed areas, and
was expected to play a serious role in achieving full employment. An early
problem was lack of interest by the unemployed -- many were not anxious to learn
a new trade. Despite much ballyhoo, only 4,400 people had enrolled in ARA
training programs by February 1962, n5 and enrollment never exceeded 12,000 a
year -- despite the fact that over five million were reported unemployed at the
time the bill passed.

n4 Oscar W. Cooley, Paying Men Not to Work, p. 23.

n5 Wall Street Journal, February 16, 1964.

The Area Redevelopment Administration's goal was to "create jobs" and give
training; but the GAO found that the agency typically overreported the number of
jobs created by 128 percent, n6 did not use available information to evaluate
the number of new jobs supposedly created, n7 and routinely gave millions of
dollars to locales that no longer had high unemployment. n8 The ARA and its
training program has no effect on reviving depressed areas. By 1965, the agency
had so sufficiently defamed itself that its name was changed to the Economic
Development Administration.
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n6 GAO, B-146910, June 3, 1964, p. i.

n7 GAO, B-153449, May 3, 1965, p. i.

n8 GAO, B-153449, June 25, 1964, p. i.

The 1961 Youth Employment Opportunities Act, the first of many congressional
tributes to the effect of the minimum wage in disemploying young people, offered
jobs to 21,800 youth in response to the "crisis" proportion of teenage
unemployment (16.8 percent -- compared to 24.5 percent in December 1982). This
was followed by the Public Works Acceleration Act of 1962, which aimed to
increase federal spending in depressed areas and to create more jobs for the
unemployed. The Joint Economic Committee released a study on the new act,
concluding ". . . our studies have led us to share the general view that such
programs are likely to be too slow in starting and too late in ending." n9
Despite the program's ineffectiveness, Congress continually reauthorized the
Public Works Acceleration Act, mainly because it was an excellent pork barrel.

n9 Economic Report of the President, 1962, p. 92.

In 1962, Congress passed the Manpower Development and Training Act (MDTA) to
provide training for workers who lost their jobs due to automation and other
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technological developments. Like the Area Redevelopment Act, the MDTA was
propelled not by any evidence of federal competence in training, but by the
moral conviction that "government must do something now." In 1963, the program
was expanded to offer training for youth and other officially certified
disadvantaged people. Among occupations targeted for training were waiter,
waitress, and dishwasher.

The MDTA was originally scheduled to be federally funded the first two years,
with expenses split fifty-fifty with the states thereafter. But, by August
1963, only four states had offered to divvy up their share, so Congress
postponed the matching requirement. In 1965, Congress reduced the matching
costs to 10 percent of training costs, and postponed its imposition until 1967.
It is significant that, at a time when state and local governments were paying
95 percent of education costs, they refused to pay even 50 percent of manpower
training costs.

The MDTA failed to help the disadvantaged significantly. In 1964, the GAO
revealed that the Manpower Development and Training Administration was counting
as permanently employed any trainee who was able to hold any job for a single
day. n10 A 1978 Congressional Budget Office report on MDTA concluded, ". . . the
impact of training on wage rates has been minimal: the wage rate increases of
participants are not substantially different from those of nonparticipants."
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n11 One widely quoted study revealed that subsequent earnings declined the
longer a person stayed in an MDTA training program. n12 A 1967 poll by Manpower
Research Council found that 80 percent of the members of the American Society
for Personnel Administration said, "The Federal government's manpower and
training administration has not helped them find qualified employees; and the
largest percent of this group said this was because training was given in the
wrong skills." n13 A 1972 study funded by the Department of Labor concluded,
"that at least for the period of time encompassed by the study, no significant
impact upon skill shortages can be identified" from government training
programs. n14

n10 GAO, B-146879, April 30, 1964, p. i.

n11 Congressional Budget Office, CETA Reauthorization Issues, p. 15.

n12 Quoted in Dave O'Neill, Federal Government and Manpower.

n13 Congressional Record, 1967, p. 25242.

n14 O'Neill, p. 24.

The Job Corps
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In 1964, in response to pressing political needs, Lyndon Johnson launched the
War on Poverty, with the Job Corps as centerpiece. The Job Corps was intended
to give poor youth the skills to raise themselves up to the middle class. LBJ
proudly proclaimed, "The days of the dole are numbered." But most of the youths
recruited for the Job Corps dropped out before their training was completed, and
many of those who "graduated" gained little or nothing from their experience.
Crime was rampant at Job Corps centers. Officials made little effort to
discipline recruits, because of fear that they would quit and make the program
look bad. In Kalamazoo, Michigan, Job Corps trainees rioted and damaged
fourteen buildings; at Camp Atterbury, Indiana, seven boys were arrested for
forced sodomy; at another camp, corps girls pelted police with bottles. Many
localities tried to evict the training centers because of the increase in crime
and violence that often accompanied them. n15 But leniency backfired: one of the
four main reasons enlistees gave for quitting was "fear of bodily harm" from
other Job Corps members.

n15 Congressional Record, 1966, p. 25123 +.

In a major 1969 study, the GAO concluded, "Post Job Corps employment
experience . . . has been disappointing." n16 Job Corps terminees did not do
materially better than other eligible youth who had applied to enter the program
and then chose not to participate. In FY 1968, the average cost per man-year
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of training was $8,300 -- roughly twice the tuition and living costs of a year
at Harvard. Despite a big advertising campaign and kickbacks to recruiters, the
Job Corps could not meet its 1968 recruitment goals. And of those who were
enrolled, the GAO found that 22 percent were ineligible for one reason or
another. Its results were no more impressive. Of 362 Corps members who left
the program in 1967 and were reported to be employed immediately thereafter, a
GAO survey one year after of reported employers found that 22 percent indicated
that the Job Corps terminee had never worked for them. Of the remaining 282,
211, or 75 percent, had left their jobs. Only 71 of the 362 reported employed
were still working at their first job. And only 25 percent of employed
terminees were working in areas in which they had received training. The GAO
found that one Job Corps center listed its terminees as employed solely by
confirming that they had a job interview scheduled.

n16 GAO, Review of Economic Opportunity Programs, March 18, 1969 p. 8 +.

In 1979, the GAO reported that the Job Corps was still failing, and still
masking its failure with statistical buncombe. n17 For the mid-1970s, the Corps
claimed a placement rate of 90 percent of terminees; but the GAO found that, for
1975, "only 36% of those youths who had been in Job Corps at least 30 days were
placed." For 1972 Job Corps participants, those who dropped out after thirty
days or less earned more on the average in 1976 ($2.027) than those who stayed
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in between one and six months ($1,896).

n17 GAO, Job Corps Should Strengthen Eligibility Requirements and Fully
Disclose Performance, 1979, p. 3 +.

The Job Corps is a typical government training program, in that it selects
training on the basis of ease of administration, rather than the enrollee's
aptitudes and interests or the demands of the labor market. At rural centers,
job training is often subordinated to the government's desire to have menial
conservation work performed. The GAO observed in 1979, "Assignment of a center
is mainly based on center openings and proximity to the youth's home . . . at a
minimum, youth's interest should be considered in making assignments." n18

n18 Ibid., p. 17.

The Neighborhood Youth Corps was begun in 1965 to give poor urban kids
"meaningful" work experience and to encourage them not to drop out of school.
But as the GAO reported time and time again, n19 the program had had no effect
on dropout rates and has not prevented a vast increase in youth crime rates.
Nor has the program provided much experience of the type commonly associated
with the word "work." As columnist William Raspberry commented, ". . . we are
raising a generation of kids who don't know what work is." n20 Mr. Raspberry
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blamed government summer job programs as a major source of the kids' illusions.
A 1977 GAO report concluded that at 20 to 75 percent of the work stations in
four cities, young people had nothing to do, were simply playing games, or were
absent. Yet, workers who did not show were paid the same as those who did.

n19 GAO, Review of Economic Opportunity Programs, 1969; Effectiveness and
Management of the Neighborhood Youth Corps Summer Program in the Washington
Metropolitan Areas, and Federal Manpower Training Programs -- GAO Conclusions
and Observations, 1972; Information on the Summer Youth Program 1977.

n20 Washington Post, December 2, 1977.

The Washington, D.C. Summer Jobs Program is a typical program and has
provides sustenance for many investigative journalists over the years. In 1979,
the program was launched with the usual fanfare and great expectations. But the
city government could not get coordinated: some companies that requested 24
workers were only sent 2, and another organization that had not requested any
was sent 140 teenagers. Many workers were not paid on time, and many were paid
the wrong amount. "Asked what job skills and work habits he is developing this
summer at the Banneker Center, Robert Williams, 16, of Southeast, said, 'Nothing
but how to make a dollar.'" n21
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n21 Ibid., July 29, 1979.

By July 31, 1979, the Washington Post, the biggest promoter of the program
early in the summer, conceded: "After all the high-level, hurry-up help that
went into Mayor Barry's ambitious effort to find summer jobs for youth of this
city, the program is in shambles. . . . Kids' . . . perception of the workplace
can be needlessly warped by sloppy management -- it sets a terrible example."
n22 And on October 18, in an obituary, the Post concluded, "The lesson they
[teenagers] have taken away from the summer jobs program cannot be anything but
negative." n23 (The 1980 D.C. Summer Jobs Program was again characterized by
bureaucratic foul-ups, no-show workers, and late pay. But it also had good
intentions.) Of those programs in 1979, Senator Lawton Chiles complained that
youth "get such a strong message of cynicism and corruption that it cannot fail
to carry over into their attitudes about work, crime, and society." n24 And,
while the Labor Department ran several programs to bribe youth to stay in
school, the Job Corps openly enticed them to quit and get job training and a
General Equivalency Degree at government expense -- and with an allowance. n25

n22 Ibid., July 31, 1979.

n23 Ibid., October 18, 1979.
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n24 Fortune, April 1979.

n25 GAO, Job Corps Should Strengthen Eligibility Requirements and Fully
Disclose Performance, p. 16.

The Emergency Employment Act (EEA) of 1971 sought to reduce unemployment by
increasing the number of local and state government employees. The EEA program,
which consumed $3 to 4 billion before it ended in 1974, was created in response
to the unacceptable high unemployment rate of 6 percent, and was also designed
to relieve hard-pressed local and state governments. But by the time the
program got rolling in 1972, the economy was booming, and local and state
governments had a $12-billion revenue surplus. In some places, such as New York
City, EEA created no new jobs, as the city government simply rehired laid-off
employees. Overall, only 24 percent of people hired under this program were
permanently retained. n26

n26 GAO, Public Employment Programs in Selected Rural and Urban Areas, p. 34.

The Inherent Goodness of Government Spending

Finally, in 1973, in response to a confusing hodgepodge of training and
employment programs, Congress passed the Comprehensive Employment and Training
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Act. In the preface to the new law, Congress conceded, "It has been impossible
to develop rational priorities" in job training. This was borne out by
experience. CETA spent over $60 billion training and employing over 6 million
people; but the unemployment rate is higher than when it started.

CETA began as both a training and employment program, but the job creation
aspect became dominant during the 1974-76 recession. Jimmy Carter came into
office in 1977, and, though the recession was over, he ordered the creation of
350,000 additional public service jobs by year's end. Local government
officials complained to Congress that the Labor Department was pressuring them
to hire more people than they wanted to or could; Labor Department officials
threatened to withdraw all funds if localities did not spend "another million by
Friday." CETA was justified solely by faith in the inherent goodness of
government spending.

CETA spent $30,000 to build an artificial rock for rock climbers to practice
on and $640,000 to provide education about gay lifestyles; CETA gave $500 a
month to a communist agitator in Atlanta, in his words, to "organize for
demonstration and confrontation"; and CETA paid for a nude sculpture class in
Miami where aspiring artists practiced braille reading on each other. n27
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n27 Reader's Digest, "CETA: $11 Billion Boondoggle," August 1978, pp. 72-76.

Waste, fraud, and political patronage abounded. In Philadelphia,
thirty-three Democratic Party committeemen or their relatives were put on the
payroll; "an unemployed person living in a pro-[Mayor] Rizzo ward had 'almost
twice as good a chance' to get a CTA job as a resident of an anti-Rizzo ward,"
according to the Washington Post. n28 In Chicago, the Daley machine required
CETA job applicants to have referral letters from their ward committeemen, and
left applications without such referrals piled under tables in unopened mail
sacks. n29 In Washington, D.C., almost half of the city council staff was on the
CETA rolls.

n28 Washington Post, July 1, 1975.

n29 Congressional Record, 1978, p. 24816.

Though CETA was intended to create new jobs, many cities simply laid off and
rehired their old employees. The city of East St. Louis had almost two-thirds
of its work force on the CETA payroll; n30 San Diego and Miami had 47 percent of
its work force on the CETA rolls; and nationwide, 16 percent of the average
municipality's work force were on the CETA rolls in 1978. n31
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n30 Reader's Digest, August 1978, pp. 72-76.

n31 Inquiry, "Tales From the CETA Crypt," August 3, 197,, pp. 8+.

In Arizona, CETA paid college students to train for a track meet; in Bath
County, Virginia, CETA paid county employees to attend dance classes; and in
Chicago, a CETA worker reported that she was paid for "playing checkers" with
other employees. In Brooklyn, CETA workers used a printing apprentice program
to open a $5 and $10 bill business; but the poor quality of their work soon had
them training on license plates instead. n32

n32 Ibid.

CETA was used to increase demand for government services. In Florida, CETA
recruits went door-to-door trying to persuade people to sign up for food stamps.
In Maryland, CETA workers offered free rides to the welfare office. In New
York, CETA workers ran a phone service to inform people what unemployment
compensation benefits they were entitled to. n33

n33 Ibid.
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At one point, CETA was paying over 10,000 artists and spent over $175 million
on art projects. This was not because CETA expected a big jump in the number of
artists demanded by the market or because any inadequacy was identified in
existing methods of artist training. CETA spent millions on the arts simply
because it thought the arts were a nice thing, and people should have more of
them, whether they liked it or not. In Montgomery County, Maryland, the richest
county in the country, CETA paid nine women $145 a week to attend ballet school.
In Poughskeepsie, New York, CETA workers busied themselves attaching fake doors
to old buildings to beautify the city. n34 In Seattle, CETA paid fourteen
homosexuals and lesbians to produce a play entitled "Lavender Horizons." n35

n34 Ibid.

n35 Conservative Digest, "Angry Al," November 1982.

The Least Service at the Greatest Cost

CETA showed a genius for providing the least service at the greatest cost.
In many places, CETA workers maintained vegetable gardens for the elderly --
thus achieving about 2 percent of the labor productivity of a real farmer in
Kansas. Other cities used CETA funds to hire "phone pals" for the elderly, thus
federally subsidizing idle gossip.
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CETA allowed local governments to subsidize CETA wages so that many
"trainees" were being paid $20,000 per year. James Kilpatrick reported that
fifty-six CETA recruits "averaged $18,000 a year for jobs that paid only $8,751
in other government agencies." n36 By paying high wages for easy work, CETA
caused an artificial shortage of low-wage labor in many cities and artificially
inflated wage levels in other places. As Dr. James Howell, chief economist for
the First National Bank of Boston said, "The CETA program is actually making it
more difficult than ever for business to operate in the central city." n37

n36 Washington Star, August 8, 1978.

n37 Congressional Record, 1978, p. 27043.

CETA's training element was largely lost in the mad rush to dent the
unemployment rate. But even here CETA failed. CETA "created" 425,000 jobs in
1977; but at least half of those were simply "displacements" -- positions that
state and local governments would have funded anyway. By contrast, in November
1977 alone, the private sector created 440,000 real jobs -- and would have
created even more if taxes had not been so high to support make-work
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In 1978, Congress amended CETA to place more stress on the employability of
CETA "graduates" in unsubsidized work. The result: from 1978 to 1980, CETA's
placement rate in unsubsidized work fell from 42 percent to 37 percent. n38 In
1982, when CETA was winding down, the GAO found that 50 percent of laid-off CETA
workers were unemployed, and 55 percent of those were receiving one or more
forms of government handouts. Only 25 percent had permanent, full-time jobs,
subsidized or otherwise. n39 Overall, only 14 percent of CETA recruits were able
to find unsubsidized work in the private sector. The amazing thing about CETA's
dismal placement rate is that 75 percent of its recruits were high school or
college graduates, and thus could have been expected to do much better on their
own in the labor market.

n38 GAO, Labor Should Make Sure CETA Programs Have Effective Employability
Development Systems, p. 11.

n39 GAO, Implementation of the Phaseout of CETA Public Service Jobs, p. 1.

In 1978, the GAO reported that many CETA participants "received training for
which they were neither academically nor physically prepared, received training
in low-demand occupations and received jobs which labor market surveys
forecasted as surplus or low demand occupations, and received training that did
not provide them with skills needed to do the job." n40 In 1979, GAO did a
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follow-up report and found that many CETA trainees "remained in their
'temporary' Public Service Employment jobs for several years, and . . . received
no formal training either related or unrelated to their jobs." n41 The
Commission on Federal Paperwork reported that "the choice of job categories for
which training is provided often is haphazard. People are trained for job
opportunities that do not exist. . . ." n42

n40 GAO, Job Training Programs Need More Effective Management, p. 41.

n41 GAO, Moving Participants from Public Service Employment Programs into
Unsubsidized Jobs Needs More Attention, p. ii.

n42 Commission on Federal Paperwork, Employment and Training Programs, p. 26.

Federal employment and training programs have been perpetually unmanageable.
In 1967, over thirty different programs existed, and Congress attempted to
resolve the confusion by creating the Concentrated Employment Program -- to no
avail. A 1973 GAO report on the District of Columbia manpower program found
seventeen different agencies with ninety-one different programs, with no
coordination. The GAO concluded that "no one knows how many people are being
trained, for what occupations they are being trained, or the impact of training
on the demand for skilled workers." n43 The National Council on Employment
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Policy did a follow-up study and found, "It was impossible to track individual
trainees through the system; information on the potentian labor market was
inadequate; the management system was 'bloated' with salaried staff." n44
Congress passed CETA to end the chaos. But a 1979 GAO report found forty-four
different employment and training programs in the Tidewater Virginia area with
extensive duplication and competition. The GAO observed that "the proliferation
of programs in the Tidewater area makes evaluating the overall results of
federally assisted efforts very difficult, if not impossible." n45 The GAO found
that only 22 percent of those hired from the Tidewater programs managed to
retain their jobs.

n43 GAO, Study in Federal Programs for Manpower Services for the
Disadvantaged in the District of Columbia, January 30, 1973.

n44 Washington Post, June 3, 1977.

n45 GAO, Federally Assisted Employment and Training: A Myriad of Programs
Should Be Simplified, p. i.-iii.

The federal government currently has twenty-two different training programs,
with varying degrees of failure and notoriety. About the only kind of training
program that has not completely shamed itself is on-the-job training. And,
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even here, 62 percent of OTJ trainees were no longer working with the employer
they trained under six months after training ended in 1978. n46 The Federal
government has paid many companies to provide OTJ training which they intended
to provide regardless. A recent study by the American Enterprise Institute
found that the "1967 revisions of the minimum wage law reduced the value of OTJ
training for young white males by some 26 percent to 31 percent, reflected as
reduced earning power in 1969" n47 The higher the minimum wage is set, the less
employers can afford to offer training and still make a profit. If not for the
minimum wage, workers could exchange less pay for more training, and the process
would be far more efficient and cheaper without government intervention or

n46 GAO, Job Training Programs Need More Effective Management, p. 23.

n47 Masanori Hashimoto, Minimum Wages and On the Job Training, p. 52.

Federal job training has either tended to be unsuccessful or unnecessary --
either failing to achieve its ends or paying to have done what would have been
done without a subsidy. As the government share of job training costs
increases, job training will become more what government wants and less what
businesses and individuals need.
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Job Creation in Theory

At best, government can, through taxation, transfer jobs from the private to
the public sector. If CETA had not been devouring $10 billion a year in the
late 1970s, up to a million additional entry level jobs could have been created
in the private sector. And these jobs would have produced enough to perpetuate
themselves, rather than being perpetually dependent on the latest continuing
resolution. If CETA had never existed, more Americans would be employed today,
and our standard of living would be higher. Economist George E. Johnson,
writing in the Brookings Institute study Creating Jobs, estimated that the Gross
National Product lost 34 cents in the long term for every dollar spent on public
service employment job creation. n48

n48 Creating Jobs, ed. by John L. Palmer, pp. 135-144.

It is almost never a simple choice of paying people unemployment compensation
or hiring them as public service employees. The difference is one of getting no
value at a low price or getting minimal or no value at a high price. Congress
usually insists on "prevailing wage" for make-work positions -- but this
actually works out to be much more than private compensation because the
government employees do not work nearly as hard. With unemployment
compensation, recipients were limited to twenty-six weeks; with CETA, a
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two-year hitch was common, often followed by an indefinite period on other
doles. Liberals say that anything is better than unemployment; but if the
"solution" is something that delays the person's return to a productive job,
then society loses doubly -- first by having to pay for an unproductive worker,
and again by being denied potential productivity.

Every public job creation program either forces minimum wage workers in the
private sector to subsidize high-paying, make-work positions or offers a subsidy
for low-skill or unskilled labor. Insofar as government subsidizes unskilled
labor, it increases the demand for it, which results in an increase in the
number of unskilled laborers and a decrease in the number of people who invest
the time, effort, and money to become skilled. By constantly raising the
minimum wage, government has continually narrowed the differential between
skilled and unskilled labor, thus discouraging people from investing in
themselves. Government is willing to do everything to encourage people to
become skilled, except allow them a decent incentive.

Job creation and training programs have also fared badly overseas. A recent
survey by the Economist found that 74 percent of Britain's unemployed felt that
government training programs had done them little or no good. n49 Britain began
a Job Creation Program (JCP) in 1975 to reduce unemployment and increase
training; but, after leaving the program, only one-third of the workers got
Policy Review 1983 Spring

jobs, and 56 percent registered as unemployed. n50

n49 Economist, December 4, 1982.

n50 Organization for Economic Cooperation and Development, Direct Job
Creation in the Public Sector, p. 21.

Many Western countries began public job programs during the 1974-76
recession, but nowhere have the programs made a decisive impact on unemployment.
In Canada, two programs created roughly 100,000 jobs, but this still left
800,000 others out of work. In Denmark, the Public Employment Program created
2,800 jobs in 1976-77, but this helped only 3 percent of the unemployed. In
Britain, the JCP had 49,000 job positions, equivalent to about 4 percent of the
country's unemployed. n51 CETA, even at its most overfed state, never exceeded
more than 10 percent of the number of unemployed. FDR's gargantuan payroll
creation campaigns never accounted for more than a third of the unemployed
during the Great Depression.

n51 Ibid., p. 15.

Job creation programs never do more than make a small dent in unemployment
rates at great cost. Even the claims for the number of jobs created are
Policy Review 1983 Spring

illusory. Economist Alan Fechter estimated in 1975 that, in the long run,
between 60 and 90 percent of PSC positions simply displaced positions that would
have been created or maintained by state or local governments. n52

n52 Alan Fechter, Public Employment Programs, p. 19.

Public job creation is firmly based on Keynesian economics -- on the theory
that government can spend the people rich. During the 1930s, administrators
competed to see who could hire the most people to do the least work. A Labor
Department publication suggested using CETA workers for "labor intensive snow
removal," Peking style. Liberals routinely justify job creation by claiming
that it will increase purchasing power; but to take a dollar from a private
pocket and put it in a public pocket does not increase purchasing power -- it
only increases the chances of the dollar being misspent.

The Grand Illusion

The illusion underlying faith in government job creation is that it only
counts -- or is somehow better -- if government does it. Chief economic adviser
Martin Feldstein explained to a congressional committee that the recently
increased gas tax would destroy more jobs than it created, because it would take
money out of the private sector and give it to high paid union construction
Policy Review 1983 Spring

employees. Yet, the nation's press for the most part refused to recognize this
elementary fact, and continued praising Congress for "doing something" about

Government can create a job only be destroying the private sector's ability
to create jobs. There is a finite amount of capital, and what government uses
to endow leaf-rakers cannot be used by businessmen to hire productive workers.
Government job creation almost always assumes that the wages for the make-work
positions will come out of thin air -- that government can increase taxes by
five billion dollars or depreciate the currency with no effect on the private
sector. But as long as one remembers that taxes and inflation have effects,
faith in government job creation is impossible.

President Reagan, when he recently signed the $3 billion Job Training
Partnership Act (JTPA), promised the new program would not be a "make-work,
dead-end, bureaucratic boondoggle." But a close look at the new law shows that
it is firmly in the tradition of federal manpower follies. The JTPA perpetuates
the Job Corps, despite that program's remorseful history. The JTPA authorizes
the continuation of summer youth employment programs, perhaps the deadliest
enemy of teenagers' work ethic. In the remaining hodgepodge, the JTPA even
authorizes a special program to help federal contractors meet affirmative action
requirements. JTPA requires local programs to spend at least 40 percent of
Policy Review 1983 Spring

their funds on persons aged 16-21; this is a measly consolation for the Reagan
administration's failure of nerve in pushing for a subminimum wage for youth.

The Chamber of Commerce, National Association of Manufacturers, and National
Alliance of Business are promoting JTPA as a "great partnership." But the main
reason business lobbies are keen on the new bill is that it is largely a subsidy
for business. JTPA will allow local Private Industry Councils (PIC) -- which
are required to have a majority membership of businessmen -- to use federal
money to pay for training in council members' firms, thus saving them millions
of dollars they would otherwise have to spend. The PICs will likely be composed
of established businessmen from larger businesses, who will use the training
subsidies to gain an additional edge over small, struggling businesses. If the
law actually sought to maximize benefits to the unskilled, it would provide
vouchers to individuals, rather than unlimited discretion to businesses.

Many, if not most, of the poor, disadvantaged, and college graduate trainees
and make-work paycheck recipients would be better off now if the federal
programs had never existed. Aside from the wate of scores of billions of
dollars, government manpower programs distorted people's lives and careers by
making false promises, leading them to believe that a year or two in this or
that program was the key to the future. Especially with CETA, people spent
valuable time in positions that gave them nothing more than a paycheck, while
Policy Review 1983 Spring

they could have been developing real skills in private jobs with a future. A
mistrained person is worse off than an untrained person who knows he still must
acquire a skill.

If the goal is to create jobs, the most expedient policy would be to require
government welfare recipients to work in return for their benefits -- what is
sometimes called workfare. If unemployment compensation recipients were
required to work twenty hours a week for the government, the nation could create
over four million jobs overnight, and repair an awful lot of railroad beds. Or
if Congress refuses to do that, the least it could do, it could change the name
of unemployment compensation to government employee training stipend, and order
all recipients to stay at home twiddling their thumbs eight hours a day.

The answer to unemployment and low skills is not to camouflage the problem
and reduce investment, which every job creation program proposes, but to reduce
the government-imposed impediments and disincentives to the development and
exchange of labor. Government restrictions on hiring youth and paying minimum
wages make it unprofitable for business to hire millions of low-skilled people.
Government economic policies that disrupt the economy with inflation and credit
squeezes prevent the accumulation of capital necessary to start or expand
businesses. Government payments of high welfare, food stamp, and unemployment
compensation benefits make it more profitable for many people to go on the
Policy Review 1983 Spring

dole, rather than accept low-paying work. And government-incited trade wars
with foreign countries, such as the bill to require domestic content in American
automobiles, are guaranteed to decrease the total amount of trade, and thus
reduce the total number of jobs. If government had not first crippled the labor
market, it is unlikely that government make-work and training programs would
ever have received widespread support. The answer is not for government to
spend another $50 billion futilely attempting to cure a problem it caused, but
to stop causing the problem in the first place.

In short, there is no substitute for prosperity. Any government scheme to
train or employ the masses must first be measured by the question: What effect
will the increased taxation necessary to finance the program have on the economy
-- on the total number of productive, self-supporting jobs? Where there is a
real job, there is a real incentive to train someone for the job. In the long
run, every make-work program destroys more jobs than it creates, because it
squanders the capital that is necessary to support all jobs.





Policy Review

1983 Summer


LENGTH: 1262 words

HEADLINE: Government Job Creation

BYLINE: Senator Orrin G. Hatch, United States Senate, Washington, D.C.

Dear Sir:

Mr. Bovard's fears concerning the Job Training Partnership Act of 1982 (JTPA)
are understandable given the dismal track record of previous federal attempts in
employment and training. But he makes several judgments against the new program
based primarily on assumptions which are no longer true.
Policy Review 1983 Summer

First, he gives no credit to the Reagan administration for its resolve to
fairly and effectively administer programs like the Job Corps and the summer
youth employment program. Extensive administrative checks against waste and
abuse have already been initiated. If Mr. Bovard were to read a yet unwritten
audit by the GAO, his verdict may be different. His criticisms of these
programs are based on poor past management, not on a poor concept, or lack of
need. I do not disagree that there is room for improvement in these programs,
and, in fact, I am pursuing the development of legislation to reform the Job
Corps. The fact that the Job Corps can be a useful tool for rehabilitating
hard-core disadvantaged youth who would otherwise draw a lifetime of welfare
benefits should not be discounted.

Second, the provision regarding affirmative action must have been
misinterpreted. Mr. Bovard, I should think, would support the idea that if
business puts up its own funds to train women and minorities who are
economically disadvantaged and successfully places them in unsubsidized jobs,
certainly business should be relieved of some of the onerous federal
requirements of Executive Order 11246. This is strictly a voluntary provision,
but one which has the potential of drawing private funds into training, of
placing women and minorities in jobs, and of reducing federal paperwork. If
there is a choice between business spending their resources on complex
affirmative action plans and compliance costs, or on training, does it not
Policy Review 1983 Summer

make more sense to encourage them to spend it on training?

Third, the 40% youth service requirement exists for the same reason that the
Job Corps exists -- that it may be possible to prevent disillusioned youth, for
whom the school systems, families, or churches have failed, from becoming wards
of society for their lifetimes. I believe Mr. Bovard would agree that youth is
the hope of our free enterprise system -- and if it fails, we all fail.

This is why I hold that as the butterfly replaced the caterpillar, the CETA
program evolved into the Job Training Partnership Act. This programmatic
transformation included five rather fundamental changes:

First of all, the JTPA is a training program. It is not an anti-poverty
program, a civil rights program, a government procurement program, a
counter-cyclical economic stimulus program, or a public service jobs program.
The JTPA has been blessed by its Congressional sponsors with a singular purpose,
that of training people for jobs. Even Senator Edward Kennedy, during debate on
the measure in the Senate, conceded that "this legislation is not a jobs program
. . . I think that we also need a jobs program . . . But that is not what we
are considering today. We are considering a training program." Unencumbered
with all of CETA's conflicting goals and purposes, JTPA is already in a better
position to succeed.
Policy Review 1983 Summer

Adherence to this policy is mandated by a strict prohibition on funds which
can be spent for non-training purposes, i.e., income support and administration.
Mr. Bovard accurately points out that CETA funds were being spent on wages,
stipend, or allowances; 80 percent, in fact, of the CETA dollar was spent for
purposes other than direct training. The JTPA limits funds for non-training
expenses to 30 percent of the service delivery area's allocation and a full 70
percent must be spent on training. This provision will prevent the payment of
income support in all but the most necessary instances and, even then, such
support cannot be of such an amount that it would make the JTPA program an
attractive alternative to a job.

Irrespective of the view taken by Mr. Bovard that business supported this
legislation because it meant subsidies to them, business must be involved in the
training program. Business has the best concept of what occupations are in
demand in the labor market area and what industries are growing or declining.
The private sector has the best vantage point from which to judge the quality of
training curricula, therefore, helping to dissolve the possibility that
individuals might be trained below the levels required by employers. If we
discount business from this role because they may reap some benefit, what other
institution is there in each labor market around the nation that is as
responsive to market conditions and that will voluntarily devote its time and
expertise to planning a local training program?
Policy Review 1983 Summer

Third, to further enforce the training initiative's new market-oriented
approach, performance standards, not process, will prove the program's success
or failure. For the first time, adequate statistics on placement in
unsubsidized jobs, other positive placements (such as enlistment in the military
and enrollment in an advanced trade school) earnings gains, and welfare
reductions must be accumulated. The JTPA contains both incentives to exceed
performance standards and sanctions for falling short. If such standards are to
be met, training must serve a real, not an imaginary, labor market.

Fourth, substantial program authority was given to substate "service delivery
areas" which have been designated by governors taking into account the state's
labor markets, economic activity, and boundaries for other federal programs.
While CETA was administered on the basis of geography exclusively, JTPA's
service units will not be as arbitrary. Governors will assume the role of chief
monitor and auditor. One major failing of CETA, indicated by Mr. Bovard, was
inadequate oversight. It will be far more efficient for governors to track the
expenditures for the service areas in their states than for the federal
Department of Labor to do so for more than 450 prime sponsors under CETA.
States will be accountable to the federal government. This federalism approach
will assure a better system of checks and balances on the expenditure of
taxpayer-contributed training dollars.
Policy Review 1983 Summer

Finally, the important relationship between the training system and the
referral and placement system has been solidified by means of the incorporation
of amendments to the Wagner-Peyser Act in JTPA. These amendments will tie the
purposes of the United States Employment Service together with the new training
system so that planning for each function can be both concurrent and
complementary. Perhaps, because of these amendments, we will be able to refrain
from reinventing the wheel.

Mr. Bovard does a great service in providing this history of federal
employment and training efforts. His analysis is largely correct. I only take
issue with what I read to be his cynicism about the future. While the new Job
Training Partnership Act is not perfect, from anyone's point of view, it is the
least imperfect compromise Congress is ever likely to enact. Given the citizens
and organizations that have developed a stake in such programs and are not
likely to let them expire, we had all better be positive that the private-public
partnership guiding the Job Training Partnership Act is successful.

Nothing written here is to be construed as necessarily reflecting the views
of The Heritage Foundation or as an attempt to aid or hinder the passage of any
bill before Congress.
Policy Review 1983 Summer


James Bovard replies:

The JTPA is far better designed than the public service employment CETA
[Comprehensive Employment and Training Act] program, and for that achievement
Senator Hatch should be congratulated. No one will accuse the JTPA of being,
like CETA, a Full Employment for Investigative Journalists Act. The Reagan
administration wisely changed the emphasis from make-work to job training. But
the question remains whether government is competent to oversee and direct job
training. JTPA is better than CETA because it is better to waste a small amount
of money than a large amount. But it would still be best not to waste any

The JTPA represents "pork-barrel job training," a little something for
business, a little something for state and local governments, and so on down the
line. If Congress really wanted to serve the unskilled, a voucher plan along
the lines of GI bill veterans' benefits would probably be the most effective and
least wasteful method.

The JTPA looks to have many safeguards to ensure sober operation. But, CETA
had a bushel of such regulations. To no avail. The best laid plans of
Policy Review 1983 Summer

Capitol Hill easily sink into the labyrinth of the Labor Department.

The private sector alone, with no labor restrictions and a sane tax level,
could far outperform any government effort. People -- even poor people --
managed to learn skills before 1961 without government intervention, and there
is no reason why they cannot again do so. The goal should be to reprivatize job
training. The government is as incompetent at telling people what skills they
should have as it would be at telling businesses what products they should
market. The worst thing about the JTPA is that it makes it look like government
is in the job-training business to stay -- despite a twenty-year record of

Representative Simon says we have a choice "to pay people for doing nothing,
or pay them for doing something." I agree that people who are getting government
handouts should, if at all able, have to work them off. I would support
requiring unemployment compensation recipients, after the first month of
benefits, to work ten or twenty hours a week for a local government. I also
favor putting teeth into work requirements for food stamps and Aid to Families
with Dependent Children. The goal of such programs should be to make the dole
less costly to taxpayers and less attractive to potential recipients.
Policy Review 1983 Summer

But as for Mr. Simon's faith in public works . . . I lived in the
congressman's district in southern Illinois in 1979-80 in a little city
appropriately named Carbondale. Now, they had a big snowstorm, and the city
required all residents and businesses to shovel the snow on their sidewalks
within twenty-four or forty-eight hours. Who should get a ticket for failure to
clear the sidewalk but . . . the local Public Works Agency. Need I say more?




Policy Review

1984 Winter


LENGTH: 437 words

HEADLINE: Selective Reporting

BYLINE: Albert Angrisani, Assistant Secretary for Employment and Training,
Department of Labor, Washington, D.C.

Dear Sir:

James Bovard's ambitious article, "Busy Doing Nothing" (Spring 1983),
presents the sorry history of the federal government's job creation and training
efforts for the past 22 years. But I must take total exception to his
uninformed, shooting-from-the-hip characterization of this administration's
job-training program, yet to be launched, as more of the same. Without a
Policy Review 1984 Winter

single fact to back his contentions that the Job Training Partnership Act is
going to be just another federal boondoggle, he applied a smear of innuendo by
ignoring some vast differences in JTPA for all previous government efforts.

He ignored the obvious fact that public service employment is not a part of
JTPA. He ignored the obvious fact that costly and useless training allowances
and stipends have been severely curtailed under JTPA. He ignored the obvious
fact that stringent performance standards have been established to prevent
misuse and abuse of JTPA funds. And he ignored the obvious fact that the
American people cannot hope to raise the employability level of vast numbers of
ill-prepared and economically disadvantaged workers without some help from an
administration that seeks to improve the economic status of all Americans.

Far more devastating is Mr. Bovard's callously cynical concept of the
American free enterprise system as represented by the private sector, which he
labeled as simply moneygrubbers eager to line their pockets with a few paltry
dollars cadged from JTPA funds.

But having said these things, I refer you to The Heritage Foundation's views
on federal government training efforts, published in Issue Bulletin No. 88 last
fall. In referring to the Senate bill, which was the version that was
eventually enacted, the bulletin said the "bill is a long-overdue first step
Policy Review 1984 Winter

in reforming CETA. By creating a concrete training program, it prepares its
participants for existing private sector positions rather than acting as a
temporary income maintenance scheme as in the past. In particular, the
increased participation of the private sector should enhance the program's
chances of success. Because business leaders would play a much greater role,
training programs would be geared to the skills most in need."

The bulletin says much more, but the plain fact of the matter is that Mr.
Bovard was determined to disparage all government efforts without giving
President Reagan's reforms a chance.