THE ROLE AND MISSION OF THE FEDERALSTATE EMPLOYMENT SERVICE IN THE AMERICAN ECONOMY I. INTRODUCTION AND SUMMARY The United States today has no domestic problem which is more urgent than that of conserving, improving, and fully using the Nation's human resources. If poverty is ever to be eliminated in America, and if our pace of economic progress is not to fall behind that of other industrialized countries, we must commit ourselves to maintaining an active, positive manpower policy. This policy will be designed to assure that American workers are soundly trained in the complex skills required by a modern society, that they are retrained as rapidly changing technology creates demand for new skills and shrinks demand for old, and that they are placed in productive work in an economy operating at a level of full employment. As the Nation moves vigorously to attack its manpower problems, it must rely-first and foremost-upon the Federal-State employment service system as an agency which will press this attack at the operating level of the local community. Programs that are broadly framed by Congress have to be carried out through day-to-day activity in cities and towns throughout the country. The Federal-State employment service, with its present network of approximately 2,000 local employment offices, is clearly the chief instrument through which national manpower policy decisions can be rapidly and efficiently translated into operational reality. It was appropriate, accordingly, for the Select Subcommittee on Labor to undertake a wide-ranging study of the public employment service. Through this study, the subcommittee's intention was to shed light upon these urgent questions: What are the responsibilities that the employment service should bear in carrying out its important role in the Nation's effort to maintain an adequate manpower policy? What are the resources that the employment service must be given, if it is to be able to meet these responsibilities? What are the most important problems that may presently restrict the employment service's ability to fill its assigned role with maximum effectiveness? To develop answers to these questions, the subcommittee held extensive hearings during July and August of 1964 the first such congressional hearings, for more than 30 years, that have been directed specifically toward employment service issues. Many of the country's leading authorities on employment and manpower problems presented their testimony. On the opening day of the hearings, the subcommittee benefited from a roundtable symposium discussion by a group of notably distinguished labor economists: Profs. E. Wight Bakke, of Yale University; George Shultz and Arnold Weber, of the Graduate School of Business, University of Chicago; John Dunlop, of Harvard University; Arthur Ross, of the University of California; and Richard Lester, of Princeton University. The symposium afforded the members of the subcommittee an exceptional opportunity to receive a variety of expert views on the employment service, and observe these views being tested and analyzed in face-to-face discussion among the participating economists. In following days of hearings, the subcommittee heard testimony from other outstanding university scholars, as well as from leading Federal and State employment security agency officials, business executives, labor representatives, and others. The views presented by the witnesses who appeared personally were supplemented by additional statements gathered by the subcommittee staff from a large number of individuals well qualified to offer insights into employment service problems. Experts in such areas as counseling and vocational guidance, rehabilitation of the physically and mentally disabled, manpower training, youth employment problems, and vocational education submitted written statements for the subcommittee's printed record. From this study of the employment service, the most comprehensive that has yet been undertaken by a congressional committee, a number of problem areas have been identified. Each of these is discussed in detail in the following pages of this report. The conclusions reached will be briefly summarized here. 1. Since 1933, the Federal-State employment service system has operated under the authority of the Wagner-Peyser Act. Broad and flexible though this act has proven to be, it does not adequately identify the employment service as a manpower agency which must carry out many important functions other than direct placement service to workers seeking jobs and employers seeking workers. The active manpower policy which has evolved in the United States since 1961 calls for the employment service to receive a new legislative charter, or mandate, which clearly indicates the wide range of responsibilities that the Congress is assigning to the service. 2. Acute present and prospective shortages of capable trained personnel, particularly in such professional occupations as counseling, labor market analysis, and occupational analysis, threaten to damage the employment service's capacity for discharging its responsibilities as a manpower agency. Legislation specifically directed toward alleviating these personnel shortages requires consideration by the Congress. 3. The problems of inadequate salaries in the State employment services, large discrepancies in salary levels for the same class of employee from one State to another, and marked differences among the States in minimum standards of qualification for professional employment service positions call for further study by the Congress, through its appropriate committees. Serious difficulties in recruiting and retaining competent staffs appear certain to continue to harass the Federal-State employment service, if imaginative and effective steps are not eventually taken to bring about more adequate and uniform levels of salaries and standards of qualification in the State agencies. 4. The public employment service, particularly through the initiative exercised by the U.S. Bureau of Employment Security with the encouragement of the Kennedy-Johnson administration, has made significant progress in recent years toward erasing its image as a system of "unemployment offices," whose primary purpose is to distribute unemployment compensation benefit checks. One of the most important and effective steps taken toward eliminating this unwarranted image has been that of physically separating unemployment insurance and employment service offices in the Nation's larger metropolitan areas, as well as establishing specialized employment offices for the more efficient placement of professional, clerical, and other separately identifiable occupational categories of workers. The employment service's efforts to remove the "unemployment office" image should enable it to be more effective in meeting the manpower responsibilities Congress has assigned to it. 5. A major responsibility of the Federal-State employment service is the provision of special services to inexperienced youth, the physically handicapped, members of racial minority groups, and other disadvantaged workers who have particularly difficult employment problems. These essential services, which are directed specifically at reclaiming significant segments of the Nation's manpower, are relatively costly by comparison with standard job placement services for the majority of workers. Serious consideration should be given to the desirability of supporting these special services to the disadvantaged, as well as other employment service activities that are only indirectly related to the unemployment insurance program, out of general Federal revenues rather than out of the Federal unemployment insurance tax. 6. The interstate clearance process of the Federal-State employment service, whereby jobs and workers are matched across State lines, can and should be of great value in fostering geographical mobility in the American labor market, alleviating local labor market shortages and surpluses, and generally improving the utilization of the Nation's manpower. To date, however, the interstate clearance process has not been developed to an adequate level of effectiveness. It appears clearly desirable to consider legislative steps which would assign primary responsibility for this process to the U.S. Employment Service, in order to assure a nationally coordinated, centrally directed attack on the technical difficulties involved in the interstate clearance of jobs and workers. 7. In dealing with the problem of shortages of capable employment service personnel, the Congress should consider taking action to enable experienced staff members of the various State employment security agencies to transfer from one State to another, and between State agencies and the U.S. Bureau of Employment Security, without loss of job status, seniority, and accumulated benefits. Such freedom of transfer will help prevent the loss, to the national system as a whole, of capable personnel who have gained experience in one State, but who are unwilling upon moving to another State-to reenter the employment service at usual entry levels of salary and responsibility. II. THE NEED FOR STUDY OF THE FEDERAL-STATE EMPLOYMENT SERVICE This study of the Federal-State employment service system is a logical sequel to the subcommittee's previous activity. This subcommittee is the successor to the former Subcommittee on Unemployment and the Impact of Automation, of the House Committee on Education and Labor. That subcommittee, also under the chairmanship of Representative Elmer J. Holland, held extensive hearings in 1961 on the Nation's manpower problems, placing particular emphasis on the difficulties facing workers with skills rendered obsolete by technological change. From these hearings, and related hearings in the Senate, there emerged the Manpower Development and Training Act of 1962-a major legislative act which broke new ground in this Nation's present movement toward proper conservation and utilization of its manpower resources. During 1963, the Select Subcommittee on Labor held additional hearings which led to a number of important amendments to the act. These amendments were enacted into law in December 1963. The relevance of this previous legislative activity to the public employment services lies in the fact that the Manpower Development and Training Act of 1962, as amended, makes the employment service the key operating agency charged with carrying out the purposes of the act. It is the public employment service which bears the primary responsibility, under this act, for identifying those occupations in which workers shall be trained or retrained, with reasonable expectations of training-related employment. It is the employment service which has been given the duties of selecting those who are to be trained in these occupations, of referring them to approved training facilities, and of helping them to find employment which utilizes the training they have received. Not only the Manpower Development and Training Act but, also, other recent legislation of the Congress, brought the employment service into the spotlight as a critical agency for carrying out national manpower policy. There has been, in fact, a strong new surge of interest in manpower problems-in academic, educational, management, and labor circles, and in the Congress-which has been increasingly evident since 1957. In 1957, the Soviet Union launched its first space satellite, just as the United States slipped into its third postwar recession. That recession, though short lived in itself, left the Nation with an unemployment rate that has stubbornly remained at 5 percent or higher, in virtually every single month of the past 7 years. Both the evidence of Soviet progress in enlarging its supply of first-rate scientists and highly skilled technicians, and our own persistent inability to reach full utilization of our human resources, led to a marked increase in concern over manpower. The first major legislative result of this con |