core unemployment. We have the high unemployment because this amount of recovery measured against the moving away from the full employment trend line for 9 years will give you this amount of unemployment. I projected it 8 years ago. It has nothing to do with hard core. It is a chronic problem.

Sometimes we ought to remember that a man may have a type of illness, if his pulse is too low one day and too high the next day, a wise doctor may be just as concerned when he finds it too high as when it is too low and may not say it is "improving." It must be looked at in the content of long-term development.

This shows that, basically, the unemployment is not structural, it is not hard core, it is not special. Here is the total unemployed for 1961, with 16 percent in wholesale and retail trade. How long ago since the economists were telling us we did not have to worry because all the people who are going to be unemployed because of the technological trend in manufacturing would get jobs in the soft goods industries? They said we did not have to worry.

A little before that, they were telling us that all the people who ought to be leaving the farm could get jobs in manufacturing, so we did not have to worry. Let me tell you this technological thing is moving everywhere, on the farm, in the factory, and in the offices, too. Pretty soon the offices are going to be more automated than the factories.

Here you have 1612 percent unemployment in wholesale and retail trade, 17 percent in durable goods, not much difference actually between the two. You have 14 percent in the service industries. We all heard that the service industries were going to absorb all these people.

You have 11 percent in construction, actually not one of the highest. Here is nondurable goods, transport, public utilities. It is low in agriculture. Why? Because most of the people unemployed in agriculture are on the farm and are not counted as unemployed. They are just there with not enough to do. I do not mean they are not working hard, but I mean there is not a product need for them. They are underemployed rather than unemployed. The unemployment figure is low. It is a tremendous waste of manpower.

Let us move on to the next chart. These are some other aspects of the unemployment problem. These are nonagricultural employment trends. Coming down here, this shows, comparing 1947-53 with 1953-60, in order to get a long enough period of years, both with recession in them, the amazing difference in growth of employment between those two periods. For example, the total wage and salary workers between 1947 and 1953, and 1953 was a recession year-I am not taking an arbitrary end year, 1953 was just as much a recession year as 1960-1947-53 your total wage and salary employment went up 14 percent. Your total salary and wage employment 1953-60 went up only 612 percent, less than half as much, with a faster growing labor force.

This is all the way through. In manufacturing it went up 12.7 percent, as contrasted with going down 5.2 percent, showing the perfectly fantastic technological changes in manufacturing.

In mining it went down in both periods, as we all know. Contract construction, 32 percent up in the first period-and, mind you,

1947-53 is only 6 years, and 1953-60 is 7 years. So this is a little longer period of time, these are not annual averages but over the whole period. Whereas, in the 6 years contract construction went up 32, and in these 7 later years only went up 5. And so all the way across. With employment growing slowly too, unemployment rises with the growing labor force, and this translates to an unemployment rate trend for agriculture and all others showing how much faster the unemployment rate trends have been from 1953–60 than from 1947-53. This shows the impact of technological progress on the unemployment trend.

This long red line is the unemployment trend in manufacturing as a percentage of national product. Then it is shown as a percentage of industrial production. In other words, this yellow line represents the declining ratio of manufacturing employment to manufacturing production. The other lines show it for production workers. Just looking at it broadly, these lines sweeping down show the decrease in employment per unit of product turned out by those employed people, which is the striking manifestation of the rate of technological change.

The next chart gives my whole estimate, over the years, of how this $350 billion short fall in total demand and 22.5 million man-years of total employment has been made up of the components of the economy, one part is the private consumption, another part here is business investment, and another part is Government outlays. The great bulk of the deficiency has been in private consumption. That is the kind of economy we are. Some of the deficiency has been in public outlays, which have been too small. I happen to think the deficiency of business investment has been a byproduct of the other two deficiencies. In other words, it resulted because you did not have the demand to call forth the higher level of business investment. Funds were there, profits were there, during the boom periods. In every boom periodI could show this more in detail, this is relevant to the tax bonanzain every boom period, the prices and profits and private investment raced forward about four times as fast as ultimate demand and, therefore, you got tremendous overcapacity, and then they cut back very, very sharply, being prudent businessmen, and this cutback, combined with the deficiency in ultimate demand, produced the stagnation and recession.

Then some people look backward, and average the ups and downs of business investment, and say that the average over the whole period was not too high and, therefore, you need to stimulate it. That is just like the man who eats and drinks too much, then goes to the hospital, where he is put on a starvation diet, then you take the average of what he ate and drank before he went to the hospital and what he ate and drank while in the hospital, and you say that the average is too low and that, therefore, he should start eating and drinking more after he gets out than he did before he went in. There is a little fallacy in that logic somewhere.

There is the same fallacy in this 8-percent tax bonanza. The American economy generates enough funds and incentives, including retained earnings, to take care of investment if the buyer is there, and if the buyer is not there, no amount of tax bonanza is going to take care of investment.

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In any event, whether you agree with me or not on this, policies have to be coordinated. In other words, your works program, your tax program, your money program, your education program-how are we going to decide, as a great nation, over the next 5 years how much the Federal Government ought to put into capital improvements of the public works type, as against how much it should put into aid to education or roads or aid to hospitals, et cetera, airports, transportation, national defense for that matter? It is all one ball of wax. It is no answer to say it is too difficult. If it is difficult to put it together, it is certainly dangerous to leave it apart. That is all I am talking about when I say that these sporadic, off-and-on, day-and-night, inand-out programs, one day a $500 million transportation program, the next day $200 million this, the next day a $300 million that, everybody in the country feels you are doing something, this is not good enough for me.

This chart shows the difference in the results between the high and low growth rate program over the years ahead. I will not go into that in detail, except to show you how it works out. The difference of employment opportunities is about 18 million man-years over the period 1962-65. The difference in 1965 alone is about 6 million. In other words, I estimate that, if we repeat that poor economic performance, as I think we will unless we get into the ball game, we will have about 6 million more, this is full-time unemployment, in 1965 than we would have with the high growth rate.

Allowing for frictional unemployment of about 3 million, measured against the labor force, add the 6 million to frictional unemployment, I get 8 or 9 million full-time unemployed by 1965, not taking account of the full-time equivalent of part-time unemployment or the suppres sion in growth of labor force which results from lack of job opportunities. This chart also shows, for all the other sectors of the economy, just what the stakes in the game are.

This chart is specifically on the basis of employment and unemployment rates. For example, in manufacturing, employment goes up only about 10 percent over a 4-year period, if you have a high growth rate. With a low growth rate, it will go down. If you had the right kind of planning, what would you quickly discover? You would quickly discover that the technological change in automobiles, steel, and some other industries, is so great that, even if you had also in railroads-even if you had a maximum rate of overall economic growth, you are still not going to have much more employment in those industries. But you are not going to have as much unemployment in those industries as you would have with the low growth rate. The real point is that with the high growth rate, the disemployment in those industries will be manageable in other industries, because they will be employing a lot more people. If you have the low growth rate, the technological advanced industries will be disemploying a tremendous number of people, and you will not have the other industries expanding rapidly enough. Therefore, the real question, instead of just talking generally about training people-I am not looking for a job, but if I were made head of this retraining business, I would not know where to go to train whom for what. If I wanted to go to Detroit, I would not know exactly what to train the 200,000 or 300,000 people who have been unemployed in Michigan for years. For the

steel industry? For the service industries? To be teachers? You always have a retraining problem. There are some people to retrain. What I am getting at is that, if you have a nationwide realistic program of creating jobs and creating a full-blown economic environment, the training problem, the maladjustment problem of individual workers, is reduced to manageable proportions.

We learned during World War II that boys could come off the farm who had never done more than push a plow. How long did it take them to train to be steelworkers? How long did it take to train young boys to run airplanes, which is a pretty complicated proposition? We should put up a sign to this effect: You talk about people not having jobs because they are untrained. How many are untrained because they do not have jobs? The most horrible plight in many cities is the number of young people who are going out of school, going on the streets, becoming delinquents because they never have a chance to be trained. All the social agencies and all the coordinating agencies cannot train them, because there is nothing to train them for. This is a basic nationwide problem.

We should start out now-the Government should start out now, and the Government has to do this-start out now in terms of its own programs to say, where is the technology most rampant, where is the greatest amount of unemployment occurring, where do we want to put these people to work-not just in terms of the kind of projects that will give the work fastest, though that is important, too, but in terms of relative national utility of the projects themselves because, after all, the ultimate purpose of jobs is products for the consumer.

If we made this kind of examination, we would soon conclude that towering above all the other methods of equating job opportunities with the national priorities of need is this problem of our citizens, our cities, our suburban areas, and the housing that goes with them. Therefore, we would be planning and preparing and projecting, private and public-I am not talking just about public or mainly about public-we would be projecting a housing program of proper dimensions. We hear about the automobile industry, what it did in the twenties. Where is the new industry of the sixties? Here it is. Who is talking about it? Who is thinking of it?

If it is not housing, it is something else, but it is something. A program of public works, lest you think I am against this program of public works, a program of public works larger, I mean this 600 million thing is peanuts for a year and a half, a program of public works at the $2 billion figure which I suggest putting into the immediate legislation rather than a standby legislation would form a normal minimum complement, on a long-range basis, to these other things I am talking about, regardless of the size of the housing program or the education program.

So it would be a safe and prudent step to going ahead with this known aspect of the problem even while we are setting up the planning operation to deal with the other aspects of the problem. I want to make it perfectly clear that I am for moving ahead on this front, on a bigger scale than is being proposed on a more immediate basis, on a more generalized basis, because of the nature of the economic situation. We should not throw to the dogs all that is not fit for the gods. Then, we should start an immediate planning operation, which

would help projects to be improved over the years, not on a false thesis that the problem will disappear a year from now, or that a year from now we will not need public works, or that in these areas we will not need them in connection with the unemployment problem. We will be able gradually to improve the program in terms of broader perspectives, and we will have these broader perspectives in motion, so we will be able to take account more effectively of the wider range of our economic problems without which any public works program, however effective, is a mere shot in the dark.

Mr. BLATNIK. Mr. Keyserling, you certainly have impressed us. We thank you for a very informative, stimulating, and perhaps even provocative statement, a sober statement, which will give us a lot to consider in trying to come to a more accurate and realistic understanding of the sector, the rather limited sector of public works and capital improvements, the part they can play and ought to play in the overall economic situation as it now confronts us with the trends that are now in progress. Are there any questions from my colleagues on my right? On my left?

Mr. SCHERER. Mr. Keyserling, you said at the outset of your remarks this morning that this problem which you discussed was not as complex as some economists make it and that there was a comparatively simple explanation.

Do I gather from what you said that we have an excess of perhaps consumer goods due to automation and other factors in this country and that the real key to the solution of the unemployment problem or to the reduction of unemployment is to create the demand for these consumer goods?

Mr. KEYSERLING. We do not for long

Mr. SCHERER. Is that what you said?

Mr. KEYSERLING. Not exactly. We do not for long have an excess of goods exept in agriculture, where the farmer cannot turn off his production. We do not for long have an excess of goods, because when productive capacity at full use exceeds effective demand, the factories turn off the lights and turn off the workers and create an excess or "surplus" of manpower and plant. The production adjusts to the demand. Even during the depression it was that way.

Now, this may be similar to what you are saying. I say that the effective market demand of the economy as a whole, which would go into rising living standards, into the removal of poverty, into needed public services, the effective market demand breaks down into two parts, what I call private consumption expenditures by American families, and what I have coined the phrase to describe as public consumption, such as a publicly supported school, whether Federal, State, or local. A family sends a child to a private school, that is private consumption; to a public school, public consumption. Both are consumption, not production.

Mr. SCHERER. Would you mind an interruption?

Mr. KEYSERLING. Not at all.

Mr. SCHERER. Do I understand you to say if that private consumption was high enough at all times, then we would not have this unemployment problem?

Mr. KEYSERLING. If total consumption was high enough, that is right, but it would have to be private and public because, manifestly.