AREA REDEVELOPMENT FRIDAY, JANUARY 6, 1956 UNITED STATES SENATE, COMMITTEE ON LABOR AND PUBLIC WELFARE, Washington, D. C. The subcommittee met, pursuant to call, at 10 a. m., in room P-63, United States Capitol, Senator Paul H. Douglas (chairman of the subcommittee) presiding. Present: Senators Douglas, Lehman, and Purtell. Also present: Stewart E. McClure, staff director; Roy E. James, minority staff director; John Forsythe, general counsel to the committee; Frank Cantwell and Michael Bernstein, professional staff members; and James J. McTigue, consultant. Senator DOUGLAS. The meeting will come to order. The first witness this morning is our esteemed colleague, Senator John Sparkman, of Alabama, who appears as chairman of the Subcommittee on Low-Income Families. He produced a very able report a few weeks ago. Senator Sparkman, we are very glad to have you with us. STATEMENT OF HON. JOHN SPARKMAN, A UNITED STATES SENATOR FROM THE STATE OF ALABAMA Senator SPARKMAN. Thank you, Mr. Chairman. I am delighted that you are having these hearings so early in the session, and I certainly hope that they may culminate into action on the legislation which you are supporting. Mr. Chairman, I have a prepared statement which is not very long. I will read the statement in order to save time. I appreciate the opportunity to appear before this committee and discuss the problems of underemployment in depressed industrial areas. Of course, depressed industrial and depressed agricultural areas have many common problems, and for many years I have been interested in helping to solve these problems. You will recall that during the last session I introduced S. 1199, which deals with problems of low-income farm people. As you know, the Joint Economic Committee, operating under the provisions of the Employment Act of 1946, has a continuing interest in ways and means of promoting maximum employment, production, and purchasing power. As long as there is a significant number of families and individuals in our Nation living at permanently depressed, substandard levels of living, it is obvious the goals set by the Employment Act of 1946 are not being met. Accordingly, the Joint Economic Committee, under Senator Douglas' chairmanship, reconstituted the Subcommittee on Low-Income Families in 1955. Senator Flanders and Representative Kelley serve with me on this subcommittee. I understand that you wish me to testify today as chairman of that subcommittee. On October 30, 1955, the subcommittee issued a staff report entitled "Characteristics of the Low-Income Population and Related Federal Programs." During the period November 18-23, hearings were held on a number of topics related to problems of low income, including those associated with chronic unemployment and underemployment in depressed areas. These hearings were published on December 20. Just this week, on January 2, the subcommittee released its report on last year's studies, which contains its unanimous findings and recommendations. It is entitled "A Program for the Low-Income Population at Substandard Levels of Living." This report was approved for transmission to the Congress by the full committee, and I understand, Mr. Chairman, you presented it to the Senate on January 5. It is now Senate Report 1311, 84th Congress, second session. I have brought along for your use copies of the documents to which I have just referred. I believe they have already been distributed to you. I will not take the time to present the factual material we assembled. Suffice to say, perhaps, for the purpose of this discussion, that in September 1955 there were 552,900 unemployed workers in the 120 major and smaller areas listed by the Bureau of Employment Security as having a substantial labor surplus. The problems presented by areas of chronic underemployment, although numerous and complex, are not insurmountable. We have the wealth, the human and material resources, the skills, and the free institutions to solve them. We can solve them if we possess the will and the desire to put forth the necessary effort. As we also stated in our report, measures directed toward alleviation and prevention of low income arising from causes associated with the individual will aid families in depressed areas. Other programs are needed, however, to take account of causes of low income associated with the economy as a whole. I would like to discuss briefly our subcommittee's findings and recommendations concerning the latter type of causes of low income. The existence of areas of low economic activity-both industrial and agricultural-seriously retards the rate of our national growth, and is in itself a significant cause of the self-perpetuation of lowincome, underemployed groups. The goal of achieving full utilization of our national resourcesland, labor, and capital-will never be attained, as our report states, as long as these geographic pockets of continuing economic depression persist. I commend your committee for its study of this problem, and I feel sure that a constructive and positive program will be developed. As brought out in our subcommittee's hearings, depressed industrial areas have come into being in the past, and will continue to arise in the future, unless preventive action is taken, for the following reasons: 1. Decrease or depletion of natural resources in the area. 2. Technological advances which outmode a particular industry, such as the effect on Altoona, Pa., of dieselization of engines. This is especially true of one-industry towns; when the major industry closes down, the community is hard hit. 3. Shifts in demand for products, which cause some industries to decline while others expand. 4. Migration of industry, reflecting, among other things, changes in the location of markets and sources of supplies. 5. Geographic isolation; this factor, in some cases, however, may now become an advantage because of the needs of particular defense industries. Equally important are the reasons why some areas, once depressed, tend to stay that way: 1. Unfavorable labor-management history; perhaps a reputation for poor relations was handed down from earlier times. The situation no longer may be true today. 2. Relative immobility of displaced or unemployed workers, especially the older age groups. As several witnesses stated, "It is easier to move capital than people." 3. Gradual decline in adequacy of community facilities and services; it is increasingly true that most modern communities depend upon local industrial activity as a major source of taxes to run the community. As the tax revenues of the community decline, the resulting impairment in public services is an obstacle to the attraction of new industry and to the retention of the younger and the more able workers. It was emphasized during our hearings that expansion of economic activity provides the only long-run solution to the problems of industrial areas with a chronic labor surplus. This goal cannot be reached overnight; it will require constructive cooperation between all levels of government, business, industry and labor, and local groups. And perhaps most important of all, the depressed areas and communities themselves must provide the will and the sustained interest in improving their economic status. Without this, help provided from without cannot provide a lasting cure. Our subcommittee believes, however, that the responsibility for adapting to economic change cannot and should not rest entirely upon the local community; business, labor, the State government, and the Federal Government, we believe, all have a positive role to play. I would like to read to you some of the specific recommendations included in the report of the Subcommittee on Low-Income Families which relate to the problem of depressed industrial areas. We recommend: (1) Substantial expansion of existing programs of technical assistance to depressed industrial areas and to small producers within the area. (2) Credit aids be extended, when such assistance is economically desirable, to existing local industries and to approved local groups engaged in planning and constructing "ever-available" plants for the purpose of attracting diversified and expanding industries. Credit aid may possible take the form of loan guaranties designed to promote maximum stimulus to private investment. (3) That the Federal Government share in planning and conducting appropriate economic surveys to determine the scope of current and potential local resources. (4) Expansion of the small-business program, with particular emphasis on aid to depressed areas, and coordinated with a strengthened program of decentralization of defense contracts. (5) Extension of vocational counseling, job information, and placement services of the Federal-State employment services so that workers in depressed areas will be aware of job opportunities in other communities. In addition, these agencies should expand their function of alerting employers outside of depressed areas, as well as within, to the types of skills currently, available in depressed areas. (6) That financial assistance should be provided to unemployed workers willing to undertake the approved retraining programs, and to those willing to migrate to areas of labor shortage. You will note, of course, that our evaluation of the appropriate role of the Federal Government includes, in more general terms, many of the proposals included in S. 2663. I would like to emphasize that there was substantial agreement among those who submitted statements to our subcommittee on the most essential needs of depressed areas; additional credit and technical assistance were considered especially important. William Batt, Jr., for example, stated: The greatest single aid that the Federal Government could give toward the solution of area unemployment would be to assist these areas technically and financially in initiating ever-available plant programs in each such community. Included in the hearings which we had made available to you is a list of those who submitted statements on problems of depressed industrial areas, as well as the set of illustrative questions that contributors to this session were asked to consider. In addition, panelists at our opening session, in discussing the role of the Federal Government in assisting low-income families to increase their productive capacity, devoted some attention to the general problems of economically disadvantaged areas. In closing, let me state that we feel most strongly that there are many problems common to depressed industrial and agricultural areas. We warned that in its concern to alleviate stress in areas currently depressed, either industrial or agricultural, the Federal Government should not adopt measures which are merely palliative in their total effect. It is economically wasteful to embark on an emergency program which attempts merely to deal with spot problems of economically disadvantaged areas. Nor is any useful purpose served if the level of economic activity is raised in one area at the cost of creating new depressed areas elsewhere. We believe that measures to aid particular areas or communities are economically justifiable only if their total effect is to promote the economic growth and stability of the economy. Hence, our subcommittee further recommended: That there be established in the executive branch of the Federal Government a central group charged with the responsibility of preparing a coordinated, comprehensive program aiding currently depressed industrial and rural areas. Such a program must assist in maintaining the economic climate necessary to promote maximum economic growth of the economy as a whole. I may add that I believe that is a part of the proposal of S. 2663. Senator DOUGLAS. Thank you very much, Senator Sparkman. As you say, in section 8 (a) (4) of S. 2663, page 5, it is stated that the loans which are authorized for construction of a plant or facility in a depressed area should not result in attracting to the depressed area an industry which is presently located in a depressed area or in an area which would become a depressed area if the industry were induced to |