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been established and monitoring policies developed which provide adequate time periods for meeting baseline youth services.

In terms of aggregate participant totals, the reductions in youth service levels appear to be modest, with an offset of only one-tenth of the impact of YETP and YCCIP enrollments in 1978 and one-fifth in 1979.

The YEDPA programs significantly increased the resources for youth at a time when adult program (PSE) resources were greatly reduced. In order to definitively assess and define the specific impact of substitution, independent of the impact caused by program design changes or increased program costs, would require significantly detailed CETA program data and participant information which analyzes the impact of youth funding over an extended period of time.

Question 26. Under the 1978 CETA amendments, DOL is required to report to Congress on its recommendations, including legislation for improving the Employment Service. Why has this report which was due on February 1, 1979 not been submitted?

Answer. The Department has spent many months studying ways the Employment Service (ES) can be improved and consulting with concerned public interest groups in order to obtain their views and suggestions. We have decided not to recommend legislation at this time.

We do, however, expect to look into possible amendments to the WagnerPeyser Act in conjunction with CETA reauthorization in 1982. These two laws, which together form the basis of the nation's employment and training system, should be considered in tandem, particularly if we are to deal with issues relating to coordinating the two systems.

In the meantime, however, the Department will take a number of administrative steps which we think will improve ES operations. These will be outlined in the Report to be submitted to Congress.

Question 27. While the number of young people registering with the Employment Service has increased each year, the Employment Service has remained static at 30,000 positions for nearly a decade. What recommendation did the Department make to OMB for fiscal year 1980 Employment Service funding? Answer. The Department recommended 30,000 positions for the Employment Service in both the fiscal year 1980 and 1981 requests to OMB.

Question 28.-Funding allocation for the Employment Service places a premium on placement. This encourages services to youth and other hard to place individuals and, as well, discourages employment services which do not result in Employment Service placement such as self-placement efforts, job search workshops, etc. Why hasn't the Department of Labor moved to replace the allocation formula with one which would encourage greater service to the hard to place?

Answer. While it is true that the ES Grants allocation system from Fiscal Years 1975 through 1979 placed a premium on placements, there is not conclusive evidence that it constituted a disincentive for the delivery of appropriate services to youth and other hard-to-place individuals. During this period under the Balanced Placement Formula and later the Resource Allocation Formula, productivity of individuals placed per staff-year worked increased 51 percent. Equally important, as the total number of job placements increased, placements of individuals in target groups (including youth) also increased. In almost all instances, these increases were at a rate equal to or greater than the overall rate.

Although the formula seems to have served the intended purpose of encouraging increased productivity, it was complex and vulnerable to criticism. As a result, the Department of Labor has set aside this largely performance-oriented allocation system for fiscal year 1980. The allocation for fiscal year 1980 is based primarily on the application of a needs-based methodology utilizing the prior year base staffing level.

Preliminary research has been completed on a new allocation methodology for possible application in fiscal year 1982. Four factors, among others, figured prominently in the potential distribution of resources based on needs:

Civilian labor force, employment, low income adults, and unemployed persons. These factor, if used for a distribution of Employment Service resources, should adequately represent the needs of youth since they form a significant proportion of the labor force, the unemployed, and low income persons.

Question 29.-Should special Employment Service resources be set aside to deal with youth employment problems, and particularly for hard-to-employ

youth? What should be used as the basis (funding formula) for these supplemental services?

Answer. Youth now constitute one of the major clientele groups served by the Employment Service. For example, youth constitute 40 percent of the individuals placed by the Employment Service. We do not think it is realistic, given existing staffing and funding constraints, to set aside staff or funds for youth. This would also remove some of the flexibility of the Employment Service to respond to changing priorities.

The Administration's youth proposal would permit CETA prime sponsors to subcontract with the Employment Service (as they do now) to provide supplemental services to youth (over and above what can be provided out of regular ES funding).

Question 30. To what extent have the partnership programs funded under section 307 of CETA provided for coordinated delivery of ES and CETA services to youth? To what extent will funds under section 307 be available for such services in fiscal year 1981? What is the Department's program for encouraging and rewarding inter-agency coordination among employment and training service providers?

Answer. The Department is committed to furthering the coordination and linkages between CETA and the Employment Service (and other service providers). This is evidenced by a number of recent actions, including: steps to encourage coordination between the two planning systems, including the recent requirement that cooperative agreements be developed; clear definition of the responsibilities of both systems for the Targeted Jobs Tax Credit to ensure that the activities of each complements the other and duplication is avoided; and the recent identification of the integration of the two systems as a goal for the Department. It is our fiscal year 1981 plan to begin the implementation of administrative steps which can be taken under current legislation to further promote linkages and to develop a coordinated legislative strategy to achieve integration at the time CETA and the Wagner-Peyser Act are under consideration.

The Department did not provide funding under section 307 in fiscal year 1980. This was not a lack of commitment, but rather a recognition of other priorities. The quetsion of future funding under section 307 will be addressed in the process of developing an overall strategy to further integration of the two programs. Question 31. Currently, less than 10% of the Job Corps enrollees are nonresidential. Would it not be possible to provide a substantial expansion of Job Corps services by increasing nonresidential opportunities?

Answer. We would support an expansion in the number of remedial education and skills training opportunities available to severely disadvantaged young people. Over the years Job Corps has been demonstrated to be one of the most effective training programs for disadvantaged young people. Recent independent studies of the program demonstrate conclusively that this continues to be true. However, for a number of reasons, we would prefer that a substantial increase in nonresidential skills training opportunities be made available through title I of the Administration's proposed Youth Employment and Training Act rather than in Job Corps.

First, Job Corps is primarily a residential program. We feel that the unique residential focus of the program contributes to its success. Second, an increase in the nonresidential component of the program would require a substantial amount of construction outlays to expand the classroom and vocational facilities at Job Corp centers. During the recent expansion of the program, most existing centers were increased in size. To increase them further would require the construction of new facilities. Third, we would prefer that any expansion of Job Corps, either residential or nonresidential, be deferred until new centers under the current expansion be given time to reach steady state operation. We project that this will occur during fiscal year 1982. Fourth, the current allowance structure in Job Corps (with a maximum living allowance of $100 per month) limits our ability to recruit and retain nonresidential youth unless they are receiving public assistance or have some other source of income.

There is no question that an expansion of skill training opportunities is needed for disadvantaged young people. However, this goal could be achieved much more easily and quickly through local CETA programs for youth under the President's Youth Initiative.

Question 32. Does the Administration's bill eliminate the current provision for a disregard of income earned by participants in a CETA youth program?

Answer. Yes, in order to be consistent with the definition of income contained in the Administration's proposed welfare reform bill and to improve incentives for transition to private sector employment, we would eliminate the current disregard provision.

Question 33. How will prime sponsors reconcile the conflicts contained in the Administration's bill as to who is to be served by CETA youth programs? Specifically, while DOL has stated that the CETA title is intended primarily for out-of-school youth, and while section 402 (c) requires priority service to youth who are "experiencing the most severe handicaps in obtaining employment", section 412 (e) states that primes are to provide "adequate part-time work experience opportunities for students of target schools". Will prime sponsors have discretion to determine priorities for service among the various groups of needy youth?

Answer. Our legislative proposal emphasizes local flexibility in determining mix of services. Allocations will go to prime sponsors for use as general purpose grants. Primes will be able to use funds for such activities as work experience, skill training, on-the-job training and community improvement projects. In addition to the basic grants, there will also be incentives for serving certain priority categories of youth, most of whom are out-of-school. Our projection of anticipated service levels are estimates, based on extensive consultations, of how we expect Primes will opt to use funds. In general, this proposal emphasizes the discretion of Prime Sponsors in making decisions about service.

Question 34. Why has the Department chosen to eliminate the requirement that each prime sponsor set aside 22 percent of its basic grant for programs developed cooperatively with the local education agency? Would not the proposed competitive program tend to channel funds to areas where such cooperation has reached a rather high level, rather than encouraging it where it has not developed sufficiently? (There is evidence that the 22 percent requirement has led to new levels of cooperation between primes and LEAS).

Answer. In general the Administration's bill uses the incentive approach rather than a series of special setasides because we feel that such an approach is a more effective way to carry out national objectives. Of the funds available for incentive grants, a separate category has been established for Education Cooperation Incentive Grants. (38 percent of the amount allotted for incentives). These grants would be allocated on a formula basis so that they would not be concentrated in high performance areas. To receive these fixed allocations a prime sponsor need only submit a joint plan for cooperation with local educational agencies for the specified purposes. No competition among prime sponsors would occur.

Question 35. Regarding the Youth Opportunity Council-way doesn't the bill specify the sectors of the employment and training community to be represented, as the current law does? Specifically, youth-serving agencies and the local community are not mentioned.

Answer. The Youth Opportunity Council will supplement and be formed in addition to the existing Prime Sponsor's Planning Council. Since the Planning Council is required to include youth-serving agencies and the local community it was not felt necessary to add additional representatives of such groups.

Question 36. Regarding the Targeted Jobs Tax Credit-it appears that more than half of the tax credit vouchers issued to youth (especially to those youth employed in the fast-food industry) have been "retroactive" certifications-i.e., the youth were already employed when the voucher was issued. Some employers are even giving eligible youth a day off from work, and a bonus for making application for a tax credit voucher. Wouldn't you say that such a practice indicates that to a substantial degree the TJTC produces additional profit for these employers-rather than constituting an incentive for the hiring of youthsince the youth were already hired anyway?

Answer. Before responding to the specific question, let me first point out reliable data on retroactive certifications do not currently exist. The indications of retroactive certifications are based only on general responses from State officials involved in the administration of TJTC.

Let us now turn to your questions about the implications of retroactive certifications. In general, it is correct to say that hires which took place before workers were certified are not likely to have been influenced by the TJTC. However, the TJTC may still have a positive impact even on these target group workers since the availability of the tax credit might encourage firms to retain these workers longer than would have been the case in the absence of the credit.

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A second point to remembers is that the TJTC may be a sound, cost-effective job creating device even if much of the credit always go to pay for workers who would have been hired without the credit. Our original estimates were that only 1 of 5 workers claimed under the credit would represent net new jobs for target group workers. Were this ratio to prevail, the cost per job of the TJTC induced employment would be reasonable in comparison to other job creating mechanisms.

Finally, we must remember that retroactive certifications are one way to elicit active participation by employers in the future. Unless employers see some benefit to their business, they will not alter their recruitment practices to increase their hiring of target group workers. The use of retroactive certifications is one way to make employers aware of the program and to see that the target group workers who need jobs are not so unlike many existing workers ordinarily hired by the firm. In some cases, retroactive certifications have helped improve the relationship between the Job Service and the employer.

As the credit program begins to mature, we expect to see a decrease in retroactive certifications and an increase in net employment effects generated by the TJTC.

Question 37. Regarding sub-minimum wage-it also appears that many of the employers who now receive waivers under the Fair Labor Standards Act allowing them to employ young students at 85% of the minimum wage are also fast-food outlets (and other low-wage/high turnover employers who make up the so-called secondary labor market). Doesn't your current experience with the 85% waivers show that, again, such sub-minimum provisions actually result in extra profits for industries who normally hire youth anyway-rather than resulting in increased opportunities for youth in career-ladder jobs in the pri mary labor market.

Answer. When restaurants were included in the minimum wage provisions of the Act. Section 14 was amended to specify that full-time student employment at subminimum wages be limited to the number of full-time students who were employed at less than $1 an hour during the twelve-month period immediately prior to the effective date of the amendment. Thus, the certificate program merely permits a continuation of an established practice in the industry. In addition, certificates authorizing the employment of 6 or less students can be issued to an employer without regard to prior employment history. The legislative history and statutory language do not suggest that Section 14(b) was intended to increase opportunities for youth in career-ladder jobs. As you point out, fast food establishments do take part in the full-time student program, and the Department of Labor views such employment as one of a number of ways to bring students into the workforce. These jobs provide essential experience in developing an attachment to work, in developing good work habits and discipline and offer full-time students some means of continuing their education while working part-time.

YOUTH EMPLOYMENT ACT OF 1979

Part 4

TUESDAY, MARCH 25, 1980

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON EMPLOYMENT OPPORTUNITIES

COMMITTEE ON EDUCATION AND LABOR,

Washington, D.C.

The subcommittee met at 10:05 a.m., pursuant to call, in room 2175, Rayburn House Office Building, Hon. Augustus F. Hawkins (chairman of the subcommittee) presiding.

Members present: Representatives Hawkins, Weiss, Petri, and Tauke.

Staff present: Susan Grayson, staff director; Carol Schanzer, administrative assistant; Nat Semple, minority senior legislative associate; Stephen Juntila, legislative associate.

Mr. HAWKINS. The subcommittee is called to order.

The hearing this morning is a continuing of the hearings on Youth Employment and Training Proposals, and this specific hearing is on title VII of the Comprehensive Employment and Training Act.

The first witness this morning is Mr. Markley Robert, economist for the AFL-CIO.

Mr. Robert, we welcome you to the hearing. Your prepared statement in its entirety will be entered in the record at this point. You may proceed to deal with it as you so desire.

[Prepared statement of Markley Robert follows:]

PREPARED STATEMENT OF MARKLEY ROBERT, ECONOMIST, AMERICAN FEDERATION OF LABOR AND CONGRESS OF INDUSTRIAL ORGANIZATIONS

Mr. Chairman, we appreciate this opportunity to express some of the concerns of the AFL-CIO about youth legislation currently under consideration by this Subcommittee.

We recognize that the Administration and many members of Congress are supporting extremely restrictive federal budget policies which discourage even modest improvements in employment and training programs and threaten to cut back existing programs for young people and adult workers.

Therefore, we commend you and the members of this Subcommittee for your continuing concern for improvement and expansion of employment and training opportunities. The AFL-CIO will continue to work with you in protecting and improving these programs.

We have considerable concern that expectations for new youth programs and congressional action on new youth legislation may result in diminished support for current CETA and YEDPA youth jobs and training programs, because of the current misguided budget-cutting climate. For example, we note that the Administration's youth initiative proposal calls for only $50 million in planning money for fiscal 1981 and that the program would not go into effect until fiscal 1982.

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