This year, the Congress is considering basic reforms of the nation's welfare system that would require all ablebodied adults to work or to undergo job training with the aim of making them self-supporting. The number of individuals eligible for manpower assistance would be more than double the present number of enrollees in federal manpower programs. If the program is to work and the disadvantaged are to be given meaningful jobs that will enable them to become self-supporting, the manpower aspects of the reform must be delivered through a viable, effective system. The Secretary of Labor has indicated that he intends to rely on the Employment Service. Once again, the nation is presented with an opportunity to reform the Employment Service, an opportunity that if missed will lead to hardship for millions of people. This report seeks to provide the basic information needed to make an informed decision about the direction that reform should take. Early History The Wagner-Peyser Act of 1933 was a direct response to the unemployment caused by the depression. It mandated the creation of a national system of employment offices to be administered by the United States Employment Service, (USES) a new division of the Department of Labor.1/ The division was to make grants to agencies which the states would create to carry out the purposes of the Act. The agencies were to serve all unemployed persons "legally qualified to engage in gainful occupations." The Service was to find jobs and match skilled workers to those jobs.2/ Special services were to be provided to the handicapped, veterans, and farm workers. There were no provisions for the disadvantaged or those who had never developed skills. However, Congressional debate on the Act indicated some expectation that the system would "not only seek to find jobs for men, but . . will collect statistics and facts about the causes of unemployment, so that we may take steps to remedy the evil."3/ The Wagner-Peyser Act provided for federal leadership and the establishment of federal standards;4financial support came from both the states and the federal government on a 50-50 matching grant basis. The United States Employment Service was vested with full power to compel the state agencies to operate as a national system to maintain high quality services. As a pre-condition to funding, all state agencies were required to submit annual plans and to report periodically on the operations of the service. The Director of USES was authorized to withhold payments to any state agency that had not properly expended the moneys paid to it in accordance with its approved plan. (As of March, 1971, DOL had withheld funding only once, to Arizona in 1940 because of corruption and mismanagement. The Arizona agency was run by the BES for a time.) Two years later, Congress passed the Social Security Act of 1935, providing unemployment insurance, raised from a federal payroll tax on employers, to all workers who found themselves jobless through no fault of their own. Taxes collected from employers were to be placed in a Treasury Department trust fund for distribution as needed. Distribution of insurance payments was routed through the state employment service network, which was also given the responsibility for finding jobs for the UI recipients. In 1969 trust fund reserves reached $12 billion, 1.5 times the annual cost of the UI program. Suggestions that the funds should be invested in training programs rather than left in nonnegotiable Treasury bills have been strongly resisted, although there is no statutory impediment. (Ruttenberg & Gutchess, The Federal-State Employment Service, p. 18.) - During the Second World War, the entire ES system was operated and funded by the federal government to meet war demands. In 1946, administrative responsibility was returned to the states. In 1949, the Wagner-Peyser Act was amended to retain 100% federal financing. The amendments replaced general revenue funding with financing out of the unemployment insurance trust fund. This shift in funding resulted in two attitudes toward the Service that were to hamper later reform efforts: state agency officials as well as some BES administrators argued that because employers pay for the service, the ES must meet their needs first. They also argued that because the money in the trust fund is earmarked in advance for the states it, in effect, belongs to the states and cannot be withheld or reduced by DOL as a means of insuring compliance with federal standards. To the extent that this attitude has prevailed in the Labor Department, it has militated against strong federal leadership.5/ - In the 10-12 years between the 1949 amendments and the manpower programs of the '60's, BES progressively lost direction of the ES network, failing to exercise even rudimentary supervisory controls. The ES evolved into an agency for meeting job orders of a limited segment of the business community. It dealt primarily with temporarily jobless individuals who were registered for unemployment insurance. In the depression years, the job-ready had needed assistance in finding employment. In the war years, the federal government had needed assistance in amassing workers for the war effort. In the 1950's, however, needs were routine. The ES was a public service for which there was no special public need. A Labor Department evaluation of the system, completed in August, 1958,6/ described the Service as having been through "eleven years of stalemate, if not progressive decline." The Report concluded that the system had access to only a small segment of the labor market. It was found to place fewer people in jobs in 1958 than it had in 1947, despite a national increase of 21% in nonagricultural employment during the same period. Looking at the quality of the placements made, the Report showed that short-term placements "of limited value to the worker involved" had doubled over the eleven-year period. Sixty-four percent of the placements were in service and unskilled labor positions. The Service, according to the Report, suffered from a general lack of accountability for program results. It had declined to the point where there was a serious question whether it was "worth the administrative effort and the money required to maintain it." Major blame was put on the BES for failing to evaluate state programs in a meaningful manner. It not only failed to require the data needed for a realistic evaluation, but it did not even check the information it did receive. The evaluators found many states had sent in padded placement figures, which served as the basis for the size of their appropriation. 7/ The BES did not attempt to enforce federal standards. As the evaluator put it: "(T) he Bureau has operated under a policy of The report also scored the DOL for two major failings in its approach to the local offices that were to plague subsequent reform efforts: The communication of conflicting, often contradictory program goals and an unrealistic assessment of the true capacities of the local offices, with a consequent imposition on them of programs they lacked the capacity to absorb. In the decade of the '60's, the Congress passed a series of new laws that radically expanded the federal manpower effort and resulted in entirely new responsibilities for the ES network. (See Table A for a description of the manpower programs of the '60's.) The first, the Manpower Development and Training Act, was passed in 1962. It introduced a new concept into federal efforts to help those without jobs, providing $70 million (FY 1963) in federal funds to support institutional and on-the-job training. Congressional debate on the Act showed that its sponsors saw it as a program to retrain workers whose skills had become outmoded or replaced by automation, to channel them into emerging fields where appropriate skilled labor was scarce.8/ It did not originally contemplate assistance to those who never possessed any skills. The MDTA was amended continuously from 1963 to 1968, as it became clear that its initial focus was inadequate. The amendments expanded program coverage to unemployed, disadvantaged youth and older workers; provided for experimental and demonstration projects; liberalized payments; authorized some supportive programs, and authorized a labor market information and job-matching program.9/ Except for experimental projects which were run directly out |