ment programs. The environment of business decisions must be changed sufficiently to permit further involvement by firms in essentially social programs, unaccompanied by higher competitive risks.

Few skirmishes against poverty can be won through the "services alone" approach of the war on poverty. Jobs-as well as job opportunities through training-must be expanded for the disadvantaged. This requires a national commitment to maximum employment, and a significantly larger role for government at all levels in the placement of marginal workers.

The SCRC endorses the notion that Government should serve as an "employer of last resort." Dedicating the Government to such a role would permit useful community enterprises which only Government can undertake, now neglected. to be operated properly. It represents a strategic halfway house between fruitless dependence upon private labor markets to absorb all the disadvantaged, and exclusive dependence upon public assistance programs to meet their considerable needs.

The prospects for large numbers of new job opportunities for the poor opening up in ghetto areas are limited. The prospects of such opportunities developing in minority-owned and operated industries are even more so. Ghetto autarchy is impossible. Any large-scale increase in minority employment by minority enter prises will have to come through successful competition with white-owned enterprises for markets outside the ghetto, and such competitive success is likely to develop slowly.

"Gilding" the ghetto is self-defeating in the long run. Rather, a longer term strategy of ghetto dispersal is needed. The poor eventually must move from the center of metropolitan areas like Los Angeles outward to suburban communities offering greater opportunity socially and economically.

The key to implementing a ghetto dispersal strategy is housing policy. The SCRC recommends that as significantly larger share of public outlays for lowincome housing be earmarked for suburban rather than central city areas.

The awesome problems of poverty cannot be solved without the commitment. both public and private, of greatly increased levels of resources. Current levels of spending to abate poverty are wholly inadequate. Outlays should be more than doubled.

(The complete report referred to appears in the subcommittee files.) Mr. DANIELS. All right, Dr. Douglass, you may proceed.

Dr. DOUGLASS. Thank you.

Last Tuesday, as Representative Hawkins indicated, the 17th annual report of the Southern California Research Council was released to the public.

Its subject is: "Poverty in Southern California," and its concern is with righting the rightable wrongs of poverty. A copy of this 100page report is in your hands.

Congressman Hawkins, on your behalf, has asked me to review the report's findings as they pertain to manpower policies of the Federal Government, and to answer your questions about them.

Thank you very much for inviting me to do this.

Mr. DANIELS. Do you want to elaborate upon your report to any extent? It might be well for the record if you would summarize it as briefly as you can.

Dr. DOUGLASS. I will be happy to.

First, let me describe briefly for you what the Southern California Research Council is, so you will be able to put this report into context for yourself.

This is an independent organization of academic economists and business executives which is sponsored jointly by two of the distinguished private liberal arts colleges in Southern California: Pomona College and Occidental College.

It receives its support from approximately 50 large corporations whose headquarters, or major activities, are in the Southern California area, and from the John Randolph and Dora Haynes Foundation.

It was established almost 20 years ago, on the urging of the Committee for Economic Development, as one of several regional research centers that were being set up under their recommendations and report around the country.

This is the 17th report that you have in your hand. The purpose of the Southern California Research Council is to address itself to particular social-economic problems of southern California, make recommendations concerning them, and do what it can to make familiar to yourselves and other public and private agencies these recommendations in the hope that these recommendations may have some influence on public and private policy.

The end of SCRC, of course, is to essentially contribute to the dialog about public and private policy revisions.

The report, as you can see, is approximately 100 pages long. I can only highlight for you its principal themes and recommendations. The principal theme of the report is simple and disturbing. It is that the poor are in trouble, and so, too, are all Americans therefore.

The second chapter of the report, following the recommendations and conclusions, deals factually with the nature of poverty, both in southern California and in the Nation as a whole. It suggests, for example, that in southern California there are approximately 1,200,000 poor people in the official sense of that word. I am using now Federal Government poverty benchmarks.

And that means that this 1,200,000 people are members of approximately a quarter of a milllion families."

On the average, these families' annual income falls short of the poverty line defined by the Federal Government by approximately $800 per year.

Of these 1,200,000 poor people, approximately 40 percent are children 18 or younger. Approximately 20 percent are senior citizens, 65 or older. So that the majority, one might say, are in the nonproductive age groups.

Of the families headed by parents within the productive age range, the vast majority are headed by a working head. More than 65 percent are so headed.

We know also from our research that the poor families tend to cluster together in southern California. We know that this is particularly true in the district represented by Representative Hawkins and other Congressmen representing the east Los Angeles area.

There are also so-called pockets of poverty around the remainder of the 15 counties comprising southern California.

The main point of these remarks is to suggest that poverty is still very much in evidence. It represents at least 9 percent of the families in southern California. It is heavily concentrated in the young and the old. It is heavily concentrated in the ethnic minorities-those poorly educated, those who are handicapped, and that it is concentrated especially in particular neighborhoods.

Chapter 3 of the report talks some about the economics of poverty and identifies particularly the kind of mass poverty which comes from

experiences like the 1930's, where aggregate demand is low. It talks about insular poverty, like Appalachia, where the economic base of the region has disappeared for one reason or another, and the resources formerly employed in that area-in that disappearing economic base— do not wish to move away.

The remedy for the first kind of poverty is essentially the monetary and fiscal policies of the Federal Government. The remedy for the second kind, which is quite different, is either out-migration of the resources, or economic development programs to create a new economic base in the area.

The third kind of poverty is generally what is called case poverty, which derives from a variety of causes some specific to the individual, some specific to the society itself.

Because of this wide spectrum of causes, case poverty has to be dealt with in a variety of ways. And I take it that your hearings today are concerned primarily with this third kind of poverty, and particularly with the solutions to it, that impact on those who are able to work.

The fourth chapter turns its attention to the welfare program at all levels of government. For those who are unable to earn their way out of poverty, the Nation, SCRC believes, desperately needs an equitable and simple way to transfer income to the poor-we believe all the poor.

Those then who are now approved and now receive assistance-and only half of them receive assistance in amounts which raise them above the poverty line.

Under existing income maintenance programs, assistance is reserved primarily for the aged, the disabled, the blind veterans, and mothers.

It is denied to poor households who have working heads, for the most part.

The adminisration proposal, the family security program introduced last fall in the Congress and recently ordered out of the Ways and Means Committee, would double coverage. But it would still deny coverage to approximately one-third of the poor.

It would compel work and we believe it would improve administrative efficiency relatively little.

The Southern California Research Council prefers more conclusive coverage, higher benefits, voluntary work incentives and lower administrative costs.

The proposal of the present Commission on Income Maintenance Programs, headed by Ben Hineman, meets these tests, we believe, and the SCRC in its report endorses the kind of a proposal that is applicable.

Chapter 5 deals with the particular concerns you have today with jobs and job training. For those able to work, jobs and job training must be provided in larger measure, and more imaginatively than previously.

Federally assisted manpower programs, though enormously helpful to some, have reached meaningfully no more than 1 in 12 of the chronically poor people for whom employment could be an escape route from poverty.

Private sector participation in such programs is still regarded mostly as experimental by the firms engaged in it, and still involve small numbers of on-the-job trainees compared with total employment. To stimulate further participation in private, on-the-job training programs, SCRC endorses an incentive tax credit system to supplement the contract approach now being administered by the Labor Depart

ment.

And further changes in the environment of business decisions to permit firms to become more highly involved in essentially social programs, and accompanied by higher competitive risks. Jobs, too, must be expanded. This requires a national commitment to full employment, as your opening remarks implied, Mr. Chairman, and a new role for government as an employer of last resort.

Chapter 6 deals with the problems of creating and helping to create minority capitalism ventures. It endorses programs to stimulate development of minority-owned and managed businesses, but it regards such ventures as a relatively minor source of new job opportunities for the poor in ghetto areas.

In the short run, ghetto autarchy, SCRC believes, is impossible. Any large-scale increase in minority enterprises will have to come through successful competition with white-owned enterprises for markets outside the ghetto. And such competitive success is likely to develop relatively slowly.

Chapter 7 speaks to the question of the trade-off's between what has come to be called gilding the ghetto and dispersing the ghetto. The SCRC is persuaded that the longer term strategy of ghetto dispersal, rather than ghetto gilding, is desirable.

The temptation to gild is very high, but the costs are extremely high, also.

Ghettos affect the whole metropolis, aggravating central city finances, metropolitan transportation problems, and raising housing costs. Costs are high to ghetto residents personally, as well.

In short, programs which concentrate on beautifying a fundamentally ugly structure within the metropolis, we believe, are doomed to failure. Dispersal is better for several reasons. First, because jobs demonstrably are moving to the suburbs, secondly, because most of the sociological and educational evidence suggests that integrated education is better, and because transportation costs could be minimized through dispersal of these concentrations.

Housing costs could be minimized and housing quality could be improved through reordering the priorities, particularly of Federal housing systems.

Housing for poor families in the suburbs, and the implicit assumption in programs to improve central city housing, is creation of large numbers of new units on vacant land in the suburbs.

Finally, chapter 8 asks the question: "Can All This Be Financed?" Current levels of spending to evade poverty, SCRC believes, are totally inadequate. By 1975, based on calculations of the National Planning Association, the costs, nationwide, of financing a true war on poverty should approximate $75 billion, or about 22 percent of anticipated government outlays at all levels.

Can we afford so much? The SCRC thinks we probably can, espe cially with the help of accelerated progress toward instituting revenue sharing, and perhaps the development of Urban Development Banks, which can serve as an additional source of funding for capital improvements in local and State government, and divert and release funds for program purposes which are now tied up in those programs.

Let me conclude, Mr. Chairman, by making a few comments-not just by describing what the report says, but by trying to relate what some of the recommendations in the report say to the particular legislation which is under consideration by your subcommittee.

The chapters on jobs and job training, chapter 5, speaks in the general way about certain features of the three proposals now under consideration by this subcommittee.

First, SCRC does agree with the premise of all three bills, that there is now improper and there is excessive fragmentation of manpower programs, and that there is considerable need for centralization of the planning and coordination.

Secondly, SCRC endorses the notion of the Federal Government serving as an employer of last resort. This particular recommendation of SCRC is found in the O'Hara bill that is under your consideration.

On the other hand, SCRC endorses the notion that local manpower systems and local leadership of them should be encouraged. And we hazard the guess, on pages 60 and 61 in the report that this goal is probably found most prominently in the administration bill.

Finally, SCRC believes that greater incentive is required to induce private sector participation in on-the-job training. Whether or not this follows the route of an enlargement of the incentives under the existing kinds of contract programs with the Labor Department, or whether it follows the route suggested in our report of an incentive tax credit approach, I think is a debatable issue.

́Î would regard these two approaches as complements, and not substitutes. But in our experience in developing this report, it is our strong impression, because we are so close to many business firms, that under the present contract systems there are insufficient incentives for firms to make a full commitment to on-the-job training for disadvantaged people.

Until those commitments can be embraced in some way, it is foolhardy to expect as I think the "War on Poverty" has expectedhistorically, for the private sector alone to absorb all newly-trained people coming out of federally supported manpower programs. Thank you very much, Mr. Chairman.

Mr. DANIELS. Dr. Douglass, I want to compliment you on a very fine statement. I am quite sure that this report will be of great interest to the members of our committee, as well as the Congress of the United States.

In analyzing the three bills before us, the O'Hara bill, the administration bill, and the bill sponsored by Congressman Steiger, do you support the notion of the Federal Government maintaining its jurisdiction over the subject matter of manpower, or the idead proposed in the administration bill of decentralization-urging the States to create an agency on manpower, subject to certain criteria of the