[Williams] Youth and Minority Unemployment

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YOUTH ND MINORITY UN MPLOYM NT

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The author of this study, Dr. Walter E Williams, is Associate Professor ofEconomics at Temple University. In the summer of 1976 while Dr.Williams was on leave from Temple as a National Fellow at the HooverInstitution at Stanford University, he prepared a study for use by the JointEconomic Committee of the United States Congress on Youth andMinority Unemployment. e hegan the study at the Hoover Institutionand completed it at Temple University in the autumn of 1976. t wa


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YOUTH AND MINORITYUNEMPLOYMENT

Walter E Williams

Hoover Institution PressStanford University Stanford alifornia

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heHoover Insti tution on War Revolution and Peace founded atStanford University in 1919 by the late President Herbert Hoovers an interdisciplinary research center for advanced study ondomestic and international aflairs in the twentieth century.he views expressed in its publications are entirely those ofthe authors and do not necessarily reflect the views of the staff

officers or Board of Overseers of the Hoover Institution .

Hoover Institution Studies Series 6 97 7 by the Board of Trustees of theLeland Stanford Junior UniversityAll rights reservedInternational Standard Book Number : 0 8179 3602 5Library of Congress Catalog ard Number: 77 89190Printed in the United States of AmericaCopyright is not claimed on materialcontained herein published by theJoint Economic Committee

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Primum non nocereOf sentences that stir my bileOf phrases I detestThere's one beyond all others vile:

He did t for the best.James Kenneth Stephen,

he Malefactor s Plea

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ONTENTS

Preface ixIntroduction x

1 Scope and Character of the Problem2 Cause


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PREFACE

This study was commissioned by the Joint Economic Committeeof the Congress of the United States on July 3 1976, while I wasa national fell ow at the Hoover Institution. The purpose of thestudy was to analyze the causes of youth unemployment, particu-larly m nor ty youth unemployment, and to make recommenda-tions to solve the problem. While the study does reflect my ownviews, the views expressed herein do not necessarily reflect thoseof the Joint Economic Committee nor those of my colleagues atTemple University or at the Hoover Institution.A first draft of the study was submitted to the Joint EconomicCommittee on September 30, 1976, to meet the contract deadline.Immediately the study encountered difficulties. These difficultieswere related to several of its findings and to all of its policy recom-mendations. Because it was not possible to resolve these difficulties,a meeting was arranged in Washington, D.C., in December 1976to discuss them. t this meeting, it was suggested that sensitivematerial concerning labor unions and discrimination, amongother things, be deleted. I conceded to several of the suggestionsin hope that at least some of the ideas would get out to lawmakers.However, my editing proved insufficient in the view of the study scritics. The matter rested there. t was only through the extra-ordinary efforts of the study s four sponsors on the Joint EconomicCommittee, that it was finally published on July 6 1977.

The study published here contains, in substance, the materialpublished by the Joint Economic Committee. t also, however,contains material deleted at the request of the committee and,in addition, minor expansion of some topics.Hopefully, this study represents a balanced discussion of some

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of the problems that restrict economic opportumt1es for youthand minorities. To the trained economist, this study contains nonew revelations. This study was not written for economists. Itwas written for lawmakers as well as for laymen as a contributionto a continuing discussion of problems of fundamental importanceto the nation.

f ignorance, indeed, accounts for the numerous laws andinstitutions that impede the socioeconomic progress of today sminorities, I am optimistic that this study will have its intendedimpact. However, if it is vested interests that cause these barriersto be erected, I am pessimistic. No amount of scientific evidencecan change the minds of those, who through the political mechanism, subvert the operation of free markets to further what theyperceive as their own self-interest.Finally, labor market restrictions not only impose costs onminorities, but impose costs on Americans in general. Americanfirms, due to labor market restrictions, experience higher production costs; this means that consumers pay higher product prices.Furthermore, labor market restrictions reduce job opportunities.Therefore, Americans pay again through higher taxes to supportincreasingly larger welfare and income maintenance programs.w LTER E WILLI MS

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INTRODUCTION

Persistently high rates of unemployment in several segments ofthe United States labor force is one of the most difficult unsolvedsocioeconomic problems of the post-World War II era. The segments of the labor force that seemingly produce the most intractable problem, in terms of finding a solution, are its youth andminority members. These segments of the labor force pose anespecially perplexing problem because they face high rates ofunemployment v n when the labor force as a whole experiencesrelatively low rates of unemployment. This study will focus especially on the problem of youth unemployment, with particularemphasis on minority youth, hoping to: 1 ) understand the scopeand character of the problem, 2) analyze possible causes of theproblem, 3) comment on the effectiveness of past and proposedpolicy, and 4 make some of its own policy recommendations.

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SCOPE AND CHARACTEROF THE PROBLEMIn 1947 the male teenage ( 16-19) unemployment rate stood at10.9 percent compared to the overall rate among all males of 4percent.1 Female teenage unemployment in 1947 was 7.8 percentwhile the overall unemployment rate among their older counterparts was 3.7 percent. 2 By midyear 1975, teenage unemploymentreached 21.2 for males and 19.6 for females. 3 n no year during1948-76 did male or female teenage unemployment rates ever fallbelow the 7 percent level, which was approachd in 1953. Thesefigures are shown in table 1During this postwar period, youths age 20-24 fared better inthe labor market than did their younger counterparts but compared poorly to their older counterparts (the general labor force) .In 194 7 males 20-24 had an unemployment rate of 8.5 percentwhile females in the same age group experienced an unemployment rate of 4.6 percent. By midyear 1975, these figures for malesand females respectively had risen to 15 1 percent and 12.8 percent.4 Generally, in recent years, teenage unemployment has averaged 5 times that of the civilian labor force over 25 years of age,while youths 20-24 have experienced an unemployment ratewhich has averaged 2 5 times that of the general civilian laborforce. The unemployment rate for youths is cast in even dimmerlight when we consider that while youths ( 16-24) comprise 25percent (22 million) of the labor force, they represent 50 percentof total unemployment.I. U.S. Department of Labor, Bureau of Labor Statistics, Handbook of Labor Statistics1975-Reference Edition (Washington, D.C.: U.S Government Printing Office,

1973),p. 148.2 Ibid., p. 149.3 U.S. Department of Labor, Bureau of Labor Statistics, Youth Unemployment in1974-75 Recession. Monthly abor Review January 1976), p. 52.4 Ibid., ''Youth Unemployment, p. 52.

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TABLE 1.-UNEMPLOYMENT RATES BY SEX AND AGE 1948-76Fem11ts

Tolll TatllY111 161nd over 16-19 20-24 16 tnd over 16-19 20-241948_______ ------ - - 3.6 9. 8 6. 9 4.1 8. 3 4. 91949 ___ ________ ---- -- -- 5.9 14. 2 10;4 li . O 12 . 3 7. 31950_____ _ - - ------- - - - 5.1 12 . 7 8.1 5. 7 11.4 6. 91951.________ ----- - -- - - 2. 8 8.1 3. 9 4. 4 8.3 4. 41952____ ____ --- - -- -- -- - 2.8 8.9 4.6 3. 6 8.0 4. 51953__ ____ ------------ - 2. 8 7.9 5.0 3. 3 7.2 4.31954______ _______ ___ -- - 5.3 13. 5 10. 7 6. 0 11. 4 7.31955________ ----. - -- -- - 4. 2 11. 6 7. 7 4.9 10. 2 6. 11956__ ______ ---- ------- 3.8 11. 1 6. 9 4. 8 u.2 6. 31957------ ---- - ----- -- - 4.1 12.4 7.8 4.7 10. 6 6.01958________ ---- ------ - 6.8 17. 1 12. 7 6. 8 14.3 8. 91959, . . -- - - ---- - 5.3 15.3 8.7 5.9 13. 5 8.1980____________ _______ 5.4 15. 3 8. 9 5. 9 13. 9 8. 31:i:::::::::::::::::::: 6.4 17.2 10.7 7.2 16.3 9. 85. 2 14. 7 8. 9 6. 2 14.6 9. 11963______ --- - -------- - 5.2 17.2 8.8 6. 5 17. 2 8. 91964 - - -- - - 4. 6 15. 8 8.1 6.2 16. 7 8. 61965 -- --- -- - - - --- -- 4. 0 14. 1 6.3 5.5 15. 7 7. 3t966___ -- ----- --- 3.2 11. 7 4. 6 4.8 14.1 6.31967------ --------- -- - 3. 1 12.3 4. 7 5. 2 13. 5 7. 01968 ------ ---- - 2.9 11.6 5.1 4.8 14. 0 6.71969______ ----- - -- ----- 2.8 11.4 5. 1 4. 7 13. 3 6.31970________ ______ __ -- 4. 4 15. 0 8.4 5. 9 15.6 7.91911-- --- - -- ----- -- - 5. 3 16.6 10. 3 6. 9 17. 2 9.61972 _____ _ _ - ------ - - -- - 5.9 15. 9 9. 2 6.6 16. 7 9.31973 -- -- ---- ------- 4.1 13.9 7. 3 6.0 15. 2 a 41974__ ____ _ ------ - - -- - 4. 8 15.5 8.7 6. 7 16.5 9. 51975______ ------ ------- 6. 3 21. 2 15.1 7. 3 19. 6 12 . 81976___________ ------- 7.3 19.1 12. 9 8. 6 18.9 11. 9

Sources: U.S. Departmentof L1bor Bureau of Llbor Statistics, H1ndbook of L1borStatlstlcs 197r-Reference Edition'..Youth Unemployment In the 1974-75 Rects1ion, Monthly Labor Review, January 1976 ; and The EmploymentSituition,1April 1977.

Statistical measures of youth unemployment disaggregated bysex and age show only one part of the picture. f we analyze theracial composition of youth unemployment, another part of theproblem stands out in stark relief. Negro youths constitute a littleover 11.5 percent of the age 16-24 civilian labor force. While theunemployment rate for the entire 16-24 youth population in 1975was about 17 percent, black youth unemployment was over 28percent. About 365,000 Negro teenagers ( 16-19) or nearly 40percent of the black labor force of that age are jobless. Unemployed Negroes age 20-24 totaled 375,000 or 23 percent of theblack labor force of that age. Among black youth, in both agegroups, unemployment is distributed nearly equally by sex. Statistics on black youth unemployment do not, themselves, give thefull story for at least two reasons: ( 1 ) we have not discussed thediscouraged worker, one who would prefer to be employed buthas withdrawn from the labor market out of frustration, andhence would not be included in unemployment statistics; and( 2) the statistics that we have cited are national statistics and2

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TABLE 2.-UNEMPLOYMENT RATES FOR SELECTED GROUPS IN POVERTY AND NONPOVERTY AREASTotal United Stites Metropolitan llMS Nonmetropolltan 11111

Povtrty Nonpoverty Povtrty Nonpoverty Poverty Nonpoverty... . .. . .. . .. . ... . ..Sex, 1 e, 1nd color 1975 1976 1975 1976 1975 1976 1975 1976 1975 1976 1975 1976

TOTALBoth sexes, 16 yllrs ind over 11 . 2 10.6 8. 7 8.1 13.5 14.2 8.6 8.1 9.7 8.2 8.9 8.1

Miies, 20[irs 1nd over----------- 9. 7 9.0 7.2 6.7 12. 6 13.8 7.2 6.7 7.9 6.1 7. 2 6.8Fem1les, O i 1nd over--------- 10. 2 9.3 8.0 7.5 10.3 11 . l 7.7 7.5 10. l 8.0 9.1 7.6Both mes, 6-19 yeers 25. 5 25. 9 20.2 19.6 33.1 31.6 20. 6 20.2 20.4 22.3 18. 7 17. 9WHITE

Both sexes, 16 yllrs 1nd over 9.2 8. 5 8.3 7.7 10.5 11. 2 8.3 7.7 8. 6 7. 4 8.5 7.8Miles , 20/i rs1nd over............. 7. 9 7.0 6.9 6.4 9.8 10.4 6.9 6.3 7.2 5.6 6.9 6.6Femi es, O i 1nd over 9.0 7.9 7.8 7.1 8. 5 9. 7 7.5 7.1 9.2 7.1 8. 7 7.4Both sexes, 6-19 y11rs 18. 6 20.9 19.0 18. 6 23.4 24.0 19.3 18.9 16.5 19. 7 17. 9 17.6BLACK AND OTHlR

Both sexes, 16 y11rs 1nd over.. 16. 4 16. 0 12. 5 12. 5 16. 9 17. 6 11. 7 12.4 15.5 12. 9 17. 8 13.3Males(, 20/c11rund over 14.8 15.0 10. 9 10. 9 16. l 18. 3 10. 2 10. 7 12. 5 9. 2 16.1 12. 5Femi es, Oie1rs and over 12. 8 12. 4 10. 2 10. 9 12.2 12. 4 9. 3 10.8 14. l 12.3 15.8 11 . 9Both sexes, 6-19 y11rs 41. o 38.2 38.2 34.0 43.2 39. 2 37.6 35. 7 37. l 36.2 42.4 24.9

Source: U.S. Department of Llbor, Olllce of lnformltlon, News R1l11se, Apr. 12, 1976,,they tell us nothing about regional differences in youth unemployment, which has been estimated to be as high as 60 percent amongblacks 16-19 in some urban areas. Composite statistics for thenation as a whole on the basis of poverty and nonpoverty areasare shown in table 2.These statistics produce the unchallengeable fact that theyouth sector of the labor market experiences the highest rate ofunemployment. The nation's youth face a rate of unemploymentwhich even in the best of times often remains three and a halftimes that of the labor force as a whole.High youth unemployment would not be such a critical problem i f youth employment was considered only as a means to supplement family income or to earn spending change. The absenceor presence of early work experiences have effects which may spellthe difference between a successful or unsuccessful future workcareer. The period 16 to 24 years of age, and perhaps even earlier,can be looked upon as one of transition-from-school-to-work. Earlywork experiences, even in the most menial of tasks, aid the individual in the acquisition of skills and attitudes that will make hima more valuable employee in the future. Early work experiences( 1) teach individuals effective job search techniques; ( 2) teach

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effective work habits such as promptness and respect for superiors;( 3) provide self-respect and confidence that come from beingfinancially independent or semi-independent; ( 4) provide thevaluable opportunity to make mistakes at a time when mistakesare not as likely to be as costly as they would be when the workerhas dependents counting on him for a continuous source ofincome.

The failure to acquire these labor market skills, that economists summarize as investment in human capital, is not the onlyeffect of high youth unemployment. Inadequate work opportunities may also act as disincentive for many youths to continue theirformal training. Inadequate youth employment options may alsocontribute significantly to criminal activity and other antisocialbehavior.High youth unemployment has these effects which are undesirable from both an individual and social point of view. Quitenaturally, at least two questions arise: ( 1 why are youths, particularly minority youths, so disproportionately represented onunemployment rolls; ( 2) what set of policies might remedy thissituation? The first question is essentially a question of cause andeffect. Economic theory, like other theoretical frameworks, canreadily answer this kind of question. By contrast, asking whatgovernment should do about teenage unemployment opens upthe potential for unending debate. This is because no theory,including economic theory, can answer questions that are essentially normative. That is, while economic theory can definitelysay who bears what burden of a particular policy, it cannot in anymoral sense justify a policy or its distribution of the costs andbenefits.Economic theory can say this policy (law or program) produces that result. Thus, the following will constitute an analysisof youth unemployment, emphasizing causal factors.5. Many would argue that dead-end jobs deny the individual career related skills.However, skills such as those listed are missing in many of our disadvantaged youth

and can be obtained in any job. Moreover, the whole notion of dead-end jobs ismeaningless if it means a job without prospects for advancement. Most people experience career advancement across jobs as opposed to within a particular job. Moreover,to label certain jobs as dead-end is unfortunate because it often creates false andunrealistic labor market expectations among our youth.

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CAUSES OF YOUTH ANDMINORITY UNEMPLOYMENTBefore discussing factors having a direct bearing on youth unemployment some brief comments about the demand for, and supplyof, labor in general may be helpful.Whatever the emotional value of the phrase, Labor is not acommodity, the cry of many labor organizations, labor servicesare exchanged on the market and conform to the same laws of themarketplace as do commodities. Namely, the higher the wage forlabor, the lower the demand for labor; and the higher the wagefor labor, the greater the amount of labor offered. The trulyunique aspect of the labor market is that people are not sold; onlytheir labor services are sold.When the wages for labor services rise relative to productivity,it does not necessarily follow that people will do without the service in question. On the contrary, people will seek substitutes forthat resource whose price has risen. There is a vast array of substitutes. Some concrete examples with which we all are familiarwill make this point clear.Suppose the wage rate of labor producing shoes rises relativeto its productivity. Shoe manufacturers can respond by: substituting machines for the labor (automation) ; substituting foreign fordomestic labor by moving to countries where the labor is cheaper.

et another response, that by consumers, is to substitute foreignproduced shoes for American-produced shoes. These responseshave the net effect of reducing the demand for American laborthat produces shoes.Another example of responses to an increase in the wages oflabor, say in the construction industry, is to substitute on-site construction with off-site construction. n other words, more preassembled construction materials are used. A response to anincrease in the wages of skilled craftsmen is an increase in the

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number of people that undertake do-it-yourself type projects. Aresponse to increases in the wage rates of elevator operators is thesubstitution of automatically operated elevators for those that aremanually operated a transition that has become nearly fullycomplete). Obviously, an infinite variety of examples can be givenof responses to changes in the price of labor. The crucial pointthat needs to be understood is that people do respond to changesin the price of resources in a way so as to economize on the usageof the resource whose price has risen.While many people are familiar with these examples, thesubstitution effects underlying the laws of supply and demandare not fully appreciated in many policy discussions. In the nextsection I will present a theoretical discussion of labor marketfactors that affect youth unemployment with particular emphasison labor market restrictions, followed y statistical evidence ofthese restrictions.

inimum Wage Laws

Federal and state minimum wage laws are an act of governmental intervention in the labor market that is intended to produce a pattern of events other than that produced in a free market.In practice minimum wage laws specify a legal minimum hourlywage to be paid. Certain industries and worker classes are exempted from the law. Among the major exceptions are highly seasonalamusement area workers, restaurant employees who receive partof their wages in gratuities, employees in small firms (less than$500,000 in annual sales), wme agricultural employees, and college students doing summer work.

The debate over the desirability of the minimum wage law6. t is interesting to note that labor organizations as well as others have investedresources in political action to subvert the operation of the free market by attemptingto reduce the number of substitutes available. For example, they lobby for tariffs andimport quotas on shoes, building codes which limit the amount of off-site construction,

and limit the amount of do-it-yourself projects through codes requiring that, forexample, certain types of house wiring be done by licensed electricians. The statedreasons given for these efforts are those of high social objectives such as: protectingAmerican labor from sweat shops abroad, guaranteeing high quality workmanship,guaranteeing public safety, etc. Regardless of reasons given by such action, one effectcommon to all of them is to reduce the number of substitutes, reduce the level ofcompetition, and raise product prices.

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has continued for well over 50 years, producing little agreementbetween advocates and opponents. However, most economistsagree on a number of issues concerning wage rates in generalwhich can be helpful in evaluating the effects (not desirability)of governmental intervention in the labor market.he minimum wage law raises the wage to a level higher thanthat which would have occurred with uncontrolled economicforces. Legislative bodies have the power to legislate a wageincrease; this much is clear. But when they legislated a wageincrease, have they also legislated a worker productivity increase?hat is entirely unlikely. o the extent that the minimum wagelaw raises the pay level to that which may exceed some worker'sproductivity, employers will make adjustments in their use oflabor. Such an adjustment by employers will produce gains forsome groups of workers at the expense of other groups. Thoseworkers who retain their jobs and receive a higher wage clearlygain. he most adverse employment effects fall upon tho:;e workers who are most disadvantaged in terms of marketable skills,who lose their jobs and their income. 7 This effect is more clearly

seen if we put ourselves in the place of an employer and ask thequestion: f a wage of 2.30 per hour must be paid no matterwho is hired, who does it pay the firm to hire? Clearly the answer,in terms of economic efficiency, is to hire the worker whose productivity is the closest to 2 .30 per hour. f such workers are available, it clearly does not pay the firm to hire those whose output is,say, 1.50 per hour. Even if the employer were willing to trainsuch a worker, the fact that the worker has to be legally paid morethan his output is worth, plus training costs incurred, makes onthe-job training an unattractive proposition.

he impact of legislated minimum wages can be brought intosharper focus if we ask the distributional question: Who bears theburden of legislated minima? As we said earlier, workers who arethe most disadvantaged by minimum wage legislation are thosethat are the most marginal. These are workers whose employersperceive them as being less productive or more costly to hire, insome sense, than other workers. n the U.S. labor force, there are7. Edmund S. Phelps, nflation Policy and Unemployment heory (New York: W. W.Norton and Co, Inc., 1972) , pp. 64-66.

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at least two segments that share the marginal worker characteristic to a greater extent than do other segments of the labor force.The first group consists of youths. They are low-skilled mostlybecause of their age, immaturity, and lack of work experience.The second group, which contains members of the first group, aresome ethnic groups such as Negroes, who as a result of racial discrimination and a number of other socioeconomic factors are disproportionately found among marginal workers. Others segmentsof the labor force represented among marginal workers in disproportionate numbers are women, the uneducated, and the physically handicapped. Unemployment statistics showing a comparison of teenage and general employment rates for the period 1948to 1975 are presented in table 3.Columns 1 and 2 show the unemployment rates for the generallabor force and the teenage labor force. Column 3 expresses

TABLE 3.-COMPARISON OF TEENAGE AND GENERAL UNEMPLOYMENT RATESUnemployment rates

both sexesYur General 16-19(1) 2)

1948_. ___ ------ ------ 3. 8 9.Z1949_______ -- -- 5. 9 13. 41950_______ -- -- ---- ------------ 5. 3 12.21951_ __________ -- -- ---------- 3. 3 8.Z1952_______ ---- ---- ------------------ 3. 0 8.51953_____ -- -- -------- z 9 7.61954_________ ---------- ------ ---------- ---- 5. 5 12.61955_____ -- ------ ------ 4. 4 11.01956_____ ------ -- 4.1 11. l1957 _______________________________ -- 4. 3 11.61958_______ ---------- ---- 6. 8 15.91959_____ -- -- 5. 5 14.61960_____ -- ---- 5. 5 14. 716.814. 7961_ ______ -- -- 6. 71962_______ ---- ---- 5. 51963___________ 5. 7 17.21964_________ ------ ------ 5. 2 16. z1965_____ ------ -- -- 4. 5 14.81966_____ 3. 8 lZ.81967 3. 8 12.91968_____ ---------- 3. 6 12. 71969_______ -- 3. 5 lZ.Z1970_______ ---- ---- 4. 9 15.Z1971_ ______ -- 6. 9 16.91972_____ -- 5. 6 16.21973___________ -- 4. 9 14.51974 ___________________________________ ---- 5. 6 16.01975_______________ ------ -- 8. l 21.91976_______ -- 7. 8 19.0

1 Yu s when there were chanps In either the amountor coveraae of the Flderal minimum W1P llw,

R1tlo teen1111aenera3)

Z.4ZZ.2712.30Z.482.832.622.292.0512. 702.70Z.342.652.67I Z.502.6713.023.lZ3.283.3713.3913.533.493.102.86Z.892.9612.8612.68

12. 66

Source: U.S. Department of Labor, Bureau of Labor Statistics, Handbook of Labor Statlstlc:a 1975-Reflrtnct Edltloa,p. 145.8

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teenage unemployment as a ratio of the general labor force'sunemployment rate.Table 3 shows that with increases in the federal minimumwage the teenage unemployment rate relative to adult unemployment usually rises, i.e., the ratio increased (with the exception of1956, 1968, and 1973). In each year, except 1956, 1968, and 1973,adult unemployment declined relative to that of teenagers following an increase in the federal minimum. Arthur F. Bums, in astudy of the impact of legislated federal minimum wages, said:During the postwar period the ratio of unemployment rate of teen

agers to that of male adults was invariably higher during the 6 monthsfollowing an increase of the minimum wage than it was in the precedinghalf year. The ratio of the unemployment rate of female adults to thatof male adults has behaved similarly. Of course, the unemployment ofteenagers and women depends on a variety of factors-certainly on business conditions as well as on minimum wage. I have tried to allow forthis in a more refined analysis. t appears whether we consider theunemployment rates of teenagers or that of women, that its primarydeterminants are, first, the general state of the economy as indicated bythe unemployment rate of adult males, second, the ratio of the minimum wage to the average in manufacturing. The influence in the wageratio turns out to be particularly strong in the case of nonwhite teenagers.

While most studies agree on the effect of the minimum wagelaw on youth unemployment, there is some disagreement on themagnitude of the effect. The U.S. Department of Labor conducted an investigation of the impact of the minimum wage lawon youth unemployment. 10 t reached the conclusion that:Increases in the level and coverage of the Federal minimum wagemay have contributed to the employment problems of teenagers, but it

is difficult to disentangle such effects from numerous other influences. . . The long run rise in the unemployment rate of teenagers relative tothat of adults-especially marked since 1962 appears to have been associated with many factors. Compounding problems have been the increase

8. For example, if such a ratio was 1 the two unemployment rates would be equal. fthe ratio is 2, this means that teenage unemployment is twice is high as that of thegeneral labor force.9. Arthur F. Burns, The anagement of rosperity (New York: Columbia UniversityPress, 1966), pp . 47-48.10. U.S. Department of Labor, Bureau of Labor Statistics, Youth Unemployment andMinimum Wages (Washington, D.C.: U.S. Government Printing Office, 1970).

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in the relative size of the teenage population the increase in the proportion of youth enrolled in school and the shift of employment out ofagriculture.One response to an increase in the minimum wage law is notto hire fewer teenagers but to hire teenagers with higher productivity.TheBureau of Labor Statistics found some evidence that thiswas occurring. They found that whenever an employer raised age

or education requirements for any group the most common reasongiven was increased costs of training and hiring and the secondmost common reason was the minimum wage. 2Perhaps in recognition of the adverse effects of the minimumwage legislation on youth employment most states have established differential wage minima for youth based on age education or work experience. Most have a youth minimum rangingfrom 75 to 85 percent of the adult minima. The Bureau of LaborStatistics findings are mixed on the impact of youth wage differentials on youth unemployment. Some of the states surveyed reportthat the youth differential is irrelevant to hiring decisions whileothers thought that youth unemployment would be higher without the differential.Other factors play a role in reducing job opportunities foryouth. These include child labor laws which restrict hours ofwork 3 the tedious process of employers and employees to getwork certificates and the attitudes and conduct of some youth. tatistical tudies of the inimum Wage

A number of other important studies have tried to evaluatethe effect of legislated wage minima on unemployment. The conclusions of some representative samples of these studies will besummarized in this section.David E. Kaun using census data found that statutory wage11. Ibid. p. 187.12. Ibid. p. 71. Perhaps one question that can be asked of advocates of the minimumwage law is that if it is such a good law why permit exceptions?13. Years ago child labor laws prevented youth from working in dangerous mines and

factories. Now these same laws prevent them from working in plush air-conditionedbuildings.14. The Department of Labor study reports that some youths have unrealistic wageexpectations in view of their productivity and would not even accept employmentat the then federal minimum of 1 .60 per hour.

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minimums caused plant closures and the replacement of labor byother productive inputs.15 Also, the most adverse effects of statutory minimums were concentrated among minorities, teenagersand females.Yale Brozen in two studies discusses the impact of the minimum wage law.16 First he shows that the ratio of teenage unemployment to that of the general rate of unemployment rose andthe ratio of nonwhite to white teenage unemployment rose following increases in the federal statutory minimum wage. n anotherstudy he concluded that workers adversely affected by the statutory minimum crowd into uncovered areas, such as domestichousehold work, increasing employment and depressing wages inthe uncovered areas. See appendix tables at the end .of the studyfor data supporting Brozen's conclusions.Kosters and Welch conclude that the minimum wage has hadthe effect of reducing job opportunities for teenagers duringperiods of normal employment growth and making their jobs lesssecure during short-term changes in the business cycle.17 Theygo on to conclude that a disproportionate share of cyclical vulnerability is borne by nonwhite teenagers and the primary beneficiaries of shifts in employment patterns are white adult males.

That increases in statutory legal minimum wages reduce employment opportunities for youth is not without dissenters.Hugh Folk, using Department of Labor data, statistically analyzes the impact of minimum wages on youth unemployment andyouth labor market participation rates.1 8 The study concludes thatin no instance was the minimum wage variable statistically signi

ficant in explaining either teenage unemployment or labor marketparticipation rates. Folk's study, however, finds a significant rela-15. David E. Kaun, Minimum Wages, Factor Substitution, and the Marginal Pro

ducer, Quarterly Journal of conomics (August 1965), pp. 478-486.16. Yale Brozen, The Effect of Statutory Minimum Wages on Teenage Employment,Journal of Law and conomics (April 1969), pp. 109- 122; Yale Brozen, MinimumWage Rates and Household Workers, Journal of Law and conomics (October1962), pp. 103-109.

17. Marvin Kosters and Finis Welch, The Effects of Minimum Wages on the Distribution of Changes in Aggregate Employment, merican conomic Review (June1972),pp.323-332.

18. Hugh Folk, The Problem of Youth Unemployment, in The Transition from Schoolto Work (Princeton: Princeton University Press, 1969), pp. 187-205.

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tionship between the overall trend of teenage unemployment andthe minimum wage law.Michael C. Lovell, in an analysis of the minimum wage lawand teenage unemployment, stresses the importance of the size ofthe teenage labor force, which grew as a share of the total laborforce by over 50 percent between 1954 and 1968, as a cause ofhigh teenage unemployment. 19 Lovell feels that since teenagersare not perfect substitutes for adult workers, the increase in theteenage population would have pushed unemployment rates up inthe absence of any change in the minimum wage.Thomas G Moore's study shows that changes in the minimumwage relative to average hourly non-farm earnings have, in part,a delayed effect as employers gain time to adjust. 20 With the passage of time employers respond to the higher minimum wagethrough the substitution of capital for labor and the substitutionof high skill labor for low skill labor. Moore shows that the mostadverse effects of the minimum wage law are felt by non-whiteteenagers, with females 16-19 being more adversely affected thanmales. Moore also argues that statistical evidence may significantly understate the true impact of the minimum wage because:Higher unemployment may lead to workers or potential workerswithdrawing from the labor force Since 1961, when the minimum wages were increased significantly, the [labor force] participation rate for non-white teenagers has dropped markedly. Whilethe rate for white teenagers declined slightly after 1961, it recovered by 1966 to the previous level. 21Bowen and Finegan,22 in a statistical study of the one hundredlargest metropolitan areas, report:To state the most important conclusion first: Metropolitan areas

with high wage levels for teenage males tended to have relatively lowactivity rates for all three groups, although the coefficient for males20-24 is small and just shy of significance at the 10 percent level. These

19 . Michael C. Lovell, The Minimum Wage, Teenage Unemployment and the BusinessCycle, Western conomic Journal (December 1972), pp . 414-427.20. Thomas G. Moore, The Effect of Minimum Wages on Teenage UnemploymentRates, Journal of Political conomy (July/August, 1971), pp. 897-902.21. Ibid., p. 900.The preceding paragraph was added by the author following publication of themanuscript by the Joint Economic Committee.22. William G. Bowen and T. Aldrich Finegan, The conomics of Labor Force Partici-pation (Princeton: Princeton University Press, 1969).12

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are important findings because they provide strong support for thehypothesis that a generally high level of wages deters participation viaa reduction in employment opportunities. 3

In addition to the finding that low labor market participationrates are associated with high teenage wage levels, this study alsofinds that the intercity differences in teenage unemployment isassociated with artificially high wage levels. 4 The study points outthat wage level differentials are not caused by strictly marketforces such as systematic productivity differences or high demandfor teenagers. The differences are more likely to be associated withinstitutional forces such as legislated wages, community and unionpressures.The weight of academic research s that unemployment forsome population groups s directly related to statutory wageminima s mentioned earlier, the debate on the effects and theextent of those effects continues without full consensus. However,a consensus reached implicitly in all minimum wage studies, thoseof opponents and supporters, is that increases in statutory minimado not increase job opportunities for the marginal or disadvantaged segments of the labor force.inimum Wage and Negro Youth

So far we have discussed youth unemployment in general.Now let us discuss and compare black youth unemployment andlabor force participation rates relative to those of their whitecounterparts. Table 4 shows shows male youth unemployment byrace and general unemployment. Tables 5 and 6 give civilianlabor force participation rates by race and age for males andfemales respectively.

The most obvious observation from the tables is that blackteenage 16-17) unemployment during earlier periods, 1948-54except 1949), was lower than white unemployment for the sameage group. For black 18-19-year-olds, the unemployment ratesfor the same period were higher than those of their white counterparts, but never more than 50 percent higher. For blacks 20-24,23. Ibid., pp . 451-452. The authors define activity rate as the proportion of a populationgroup who are enrolled in school, in the labor force, or both.24. Ibid., pp . 456-457.

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TABLE 4. COMPARISON OF MALE YOUTH AND GENER L UNEMPLOYMENT BY R CEBlack/ Black/ Black/

V: 1\91 ~ t white, White. Black, white, White. Black, white.Yar General rlliO 18-19 18-19 ratio 20-24 20-24 rltio1948 3. 8 10. 2 9. 4 0. 92 9.4 10.5 1.11 6.4 11. 7 1.831949_____ 5.9 13. 4 15.8 1.18 14.2 17.1 1. 20 9. 8 15. 8 1.611950 5.3 13.4 12.1 .90 11. 7 17. 7 I. 51 7.7 12.6 1.641951-. 3.3 9.S 8. 7 .92 6. 7 9. 6 1. 43 3.6 6. 7 1.861952-. 3.0 10.9 8. 0 .73 7.0 10.0 1.43 4.3 7.9 1.841953-. 2.9 8.9 8. 3 .93 7.1 8.1 1.14 4. S 8.1 1.801954-. 5. 5 14. 0 13.4 .96 13.0 14. 7 1.13 9.8 16.9 1. 721955_____ 4. 4 12.2 14.8 1.21 10.4 12.9 1. 24 7. 0 12.4 1.771956_____ 4.1 11. 2 15. 1.40 9.7 14.9 1.54 6.1 12.0 1.971957_____ 4. 3 11. 9 16.3 1.37 11.2 20.0 1. 79 7.1 12.7 1. 791958_____ 6.8 14.9 27. 1 1.81 16.5 26. 1.62 11. 7 19. 5 1.661959-. 5. 5 15.0 22. 3 1.48 13.0 27.2 2.09 7.5 16. 3 2.171960 S. 5 14. 6 22. 1. 55 13.5 25.1 1.86 8.3 13.1 1.581961_____ 6.7 16. 5 31. 0 1.89 IS. I 23.9 1.58 10.0 15.3 1. 531962.. 5. S 15. 1 21. 9 1.45 12. 21.8 1. 72 8. 0 14. 6 1.831963----- 5. 7 17.8 27.0 1.52 14. 2 27.4 1.93 7.8 15. 5 1.991964_____ S.2 16.1 25.9 1. 61 13. 4 23. 1 1.72 7.4 12.6 1. 701965_____

4.S 14. 27 . 1 1.84 11.4 20. 2 1. 77 5.9 9.3 1.581966-. 3.8 12.5 22.5 1.80 8. 9 20.5 2.30 4.1 7.9 1.931967-. 3.8 12. 28.9 2.26 9.0 20 . 1 2.23 4.2 8. 0 1.901968_____ 3.6 12.3 26 . 6 2. 16 8. 2 19. 0 2. 31 4.6 8.3 1.801969. ____ 3.5 12. 5 24. 7 1. 98 7.9 19. 0 2.40 4. 6 8.4 1.831970_____ 4. 9 15. 7 27.8 1. 77 12. 0 23.1 1.93 7.8 12.6 1.62197L 5. 9 17.1 33.4 1. 95 13. 5 26.0 1. 93 9.4 16.2 1. 721972__ ___ S.6 16. 4 35. 1 2.14 12.4 26.2 2. 11 8.5 14. 7 1. 731973-. 4.9 15.1 34. 4 2.28 10.0 22. 1 2.21 6.5 12. 6 1.941974_____ 5. 6 16.2 39.0 2. 41 11. 5 26.6 2. 31 7.8 15. 4 1.971975_____ 8.1 19. 45. 2 2. 29 14.0 30. l 2.15 11.3 23.5 2.081976 .. 7.9 19. 7 40. 6 2.06 15. s 35.S 2. 29 10.9 22.4 2. 05Source: Adapted from e ~ a r t m e n t of Laborp Burau of Labor Statistics, Handbook of Labor Statistics 197S-RefertnceEdition (Washin&ton, D.C. : U.S. Government rintin1 Ollice.1975). pp.153-155.

their unemployment rate relative to that of whites has not changedsignificantly (only minor fluctuations) during the period 1948-1975.Turning to tables 5 and 6, labor force participation rates, wemake the remarkable find that black youth 16-17, 18-19, and20-24 had a higher rate of labor force participation during earliertimes. n fact, the labor force participation rates were higher thanlabor force participation of white youths. For example, in 1955,in age group 16-17 the labor force participation rates of blackmales and white males were the same. In 1974 the labor forceparticipation rates of blacks age 16-17 were only 65 percent of

that of whites age 16--17. In the case of black males 18-24, theirlabor force participation rates in 1955 were higher than those ofwhites. Now it is lower.Jacob Mincer, in an important econometric study of minimumwage laws, reports:

14

The net minimum wage effects on labor force participation appearto be negative for most of the groups. The largest negative effects areobserved for nonwhite teenagers, followed by nonwhite males (20-24 ,

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TABLE 5.-MALE CIVILIAN LABOR FORCE PARTICIPATION RATIO BY RACE, AGE

1 per hour:1954 ... . . .. . . . . 1955... . . . . . . . . . . . . . . . . .1956 . . . . . -- ... .... .... . .1957. . . . ... . . . . . . . . . . . . . . . . . . . . . . . .1958 . . . . . . . . . . . . . . . . . . . . .1959 .. . . . . . . . . . . . . . . . . . . . . . .1960. . . . . . . . . . . . . . . . . . . . . . .s u ~ C L ~ ~ ~ ~ : ..... ____ . ________ .. ____ .... ._

1962 . . . . . . . . . . . . . . . . . . . 1963. . . . . . . . . . . . . . . . . . . . . . . . --1964... . . . ... . . . . . . . . . . . . . .s 1 . 2 ~ C 6 ~ ~ ~ ~ ~ : .... __________ . _..... ____ ....._

1966 . . . . . - -- 1.40 per hour: 1967 . . . . . . . . . . . . . . . . . . . . . . . . . .1.60 per hour:1968. . . . . . . . . . . . . . - 1969_________ . . . . . . . . . . . . . . . . . . . . . . . . . .1970___________ . . . . . . . . . . . . . . . . . . . . . . . . . . .1971. . . . .__________________________________ _1972. . . . . . . . . . . . . . . . . . . . . . . . . . .1973 . .'. . . . . . . .2.00 per hour: 1974. . . . . . . . . . . . . . . . . . . . . . .. . . . . .2 .10 per hour: 1975 . . . . . . . . . . . . . . . . . . . . . . . . . .2.30 per hour: 1976. . . . . . . . . . . . __ . . . . . . . . . . . . . . . . . .

16-17

0. 991.00. 96. 95. 96. 92. 99. 96. 93. 87. 85. 88. 87. 86. 79 77 7. 65. 68. 6365. 57. 57

Black/white males18-19 20-24

1.11 1.051.01 1.051.06 1.011.01 I. 031.03 1.021.02 I. 041.03 I. 03l.C6 1.02I. 04 I. 03I 02 I. 03I. 01 I. 041.01 1.05. 97 1.06. 95 1.04. 96 I 03. 95 1.02. 92 1.00. 87 . 98.85 . 97.85 . 95.85 . 95. 79 . 92. 77 . 91

16 and over

1.001.00.99.991.001.00I 00.99.98.98. 99. 99. 98. 97 97.96.96. 94. 93. 93. 92. 91. 90

Sources: Computed from U.S. Oepartment of Labor, Bureau of Labor Statistics, Handbook of Labor Statistics 1975 and1976 Reference Editions (Washington, D.C.: U.S. Government Printing Office, 1975), pp. 36-37.

TABLE &.-FEMALE CIVILIAN LABOR FORCE PARTICIPATION RATIO BY RACE, AGE

Year1 per hour :1954 1955 19561957 _____________ _

1958 956 __________________________________________ _1960..... -- 1 . 1 \ f l { . ~ ~ ~ - - - - 1962. 1963 _____ _1964

1 . 2 \ t r s . ~ ~ ~ ~ .................................... -1966fl 40 per hour: 1967 l . 6 ~ l l 8 ~ ~ : . _19691970 197 1 . 19721973

2.00 per hOur: 1974 2.10 per hOur: 1975_ - 2.30per hour: 1976.-

16-17

0.84.76.84.81.69.74.7375.77.68 71.747171.69.66.60.54.58.56.60.55

Black/white females18-19 20-24 16 and over

n l.12 1.38.13 1. 02 l.34.84 .97 1.32.81 1.02 1.32.79 1.05 1.32.71 1.10 1.33.85 1.07 1. 32.86 1.02 l.31. 88 1.03 1. 31.88 1.04 1.29.94 1. 10 l.29.79 1.12 1.27.83 1. 07 l.26.92 1. 03 l.23.88 1.08 1. 21.83 1. 04 l.19.81 1.00 l.16.75 . 97 1.15.76 .95 1.13.77 . 93 l.11.74 .91 l.08.74 .86 1. 08.70 .86 1.07

Sources: Com ted from U.S. Oepartment of Labor, Bureau of Labor Statistial Handbook of labor Statlstia 1975 and1976 Reference Editions (Waahinston, D.C.: U.S. Government Printlna Oflict, 975), pp. 36-37.15

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white males (20-24), white teenagers, and nonwhite males (25-64).The net employment effects are negative with the exception of non

white females (20 plus), for whom the positive coefficient is statisticallyinsignificant. The largest disemployment effects are observed for nonwhite teenagers, followed by nonwhite males (20-24), white teenagers,and white males (20-24) .25

Professor Mincer's study points out that the official unemploymentrate is likely to understate the disemployment effects of the minimum wage law. He states, No more than a third of the employment loss in the covered sector appears as unemployment, whilethe bulk withdraws from the labor force. Incentives to drop outof the labor market and to become permanently unemployed areno doubt increased by the availability of alternative sources ofincome such as welfare, enrollment in training programs whichprovide a stipend, and criminal activity as a form of earning aliving.These findings are consistent with and offer additional supportto the theoretical proposition that statutory legal minimum wagesreduce employment opportunities for disadvantaged or marginalworkers. They are also consistent with Professor Arthur Burns'searlier study which shows that an increase of 25 cents in the statutory legal minima is associated with a rise of 8 percentage pointsin nonwhite unemployment.Youth Employment n Other Countries

Relevant to the analysis of youth unemployment in the UnitedStates is the comparison of youth unemployment records in otherindustrialized countries. In the United Kingdom, unemploymentrates of both adults and youths ran about 2.5 percent as of January1969. As shown in the following tables 7 8, and 9, West Germany,The Netherlands, Sweden, Belgium, and Japan experienced relatively low rates of youth unemployment. t is probably no coincidence that countries experiencing low rates of youth unemployment are countries with relatively large wage differentials betweenthe legal minima for youths and adults.25. Jacob Mincer, Unemployment Effects of Minimum Wages, Journal of Political

conomy (August 1976), pp. 87-10526. Op . cit., Arthur F. Burns, The Management of Prosperity p. 48.16

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TABLE 7.-UNEMPLOYMENT RATES IN THE UNITED KINGDOMUnemployment rite

D1te All aces 15 to 19 251nd over Youth-adultratioApril 1961. ...... -------- .. -----Do - -- -- -- - -- - --

i\t;=\=:\:==\:\:\::\::=:::: :::::::::::=January 1969.

1 71.31.12. 22.02. 62.22. 5

2.3.91. 12.62.22.62.02.3

1 61.41.12. 12. 02.52.22.5

1.44. 641.001.241.101.0491.92Source: Data for table 7 was obtained from the US. Department of Labor, Bureau of Labor Statistics , Youth Unemploymentand Minimum Waces. (Washincton, D.C.: US. Government Printin& Office, 1970).

TABLE 8.-UNEMPLOYMENT RATES AND THE YOUTH-ADULT UNEMPLOYMENT RATIO FOR SELECTED COUNTRIES

CountryGtrmanr l 9 6 H i 7 ~ - - - - Cln1da (1962-66 .Netherlands (1960 United Kin1dom ( 9 6 1 ~ 7 . .Sweden 1 ~ 7 ) .. .Frara (1960L .. ..Btl&ium (196 0). - ---- - - _ltllY 1 9 6 1 ~ 7 ) - --- -- - -- -Unit.ii States (1960-68) ..

Unemployment rate,all a&tS1960-64 1967-68

0. 3 1. 16.9 4. 0 9 1. 3 2.0I . 7 ----- --1. 7 2.62.1 -- ---2. 5 ------3.4 3. 55.5 3.6

Youth unemploymentrate1960-64 1967-68

0.3 l . l14. 4 9.7l . 4 . . 9 2.2 2. 3 3. 9 6.16.6 . . . . . . . . . . .4. 0 . 9. 3 . .4 14. 7 112. 7

Youthadultunemployment ratio 11960-64 1967-68

1. 0 1.02.4 2.61.8 .6 1 . l 1.4 2.6 2. 94. 4 1. 7 4 9 5. 73. 3 5.5 Ratio of youth unemployment rate to adult unemployment rate for adults 25 and over. Dita from labor force surveysercept as noted. Data not strictly compar1ble amon1 countries. Census data for 1961. Outry, Sylvi1, unemployment In Canada, 1968, males only, ratio : youth/all a1es. Labor Ministry data from unemployment Insurance records.Youth unemployment data relate to 16- to 19-year-olds.Source: Data for table 8 WIS obtained from the US. Department of a b o ~ Bureau of Labor Statistics, Youth Unemploymentand Minimum Wa191. (W11hin&ton, DC.: U.S. Government Println1uftice,1970).

TABLE 9.-EMPLOYMENT STATUS OF TOTAL LABOR FORCE AND YOUTH IN JAPAN, 1 9 6 1 ~ 7tin thousandsl

Labor force Employed UnemployedTotal 15 to 19 yem15 to 19 15to19Years Total YHll Total years Number Percent Number Percent

1961 45,620 4,250 45, 180 4,200 440 1.0 60 1. 41962 46 140 4,260 45, 740 4,200 400 . 9 60 1.41963 46: 520 4, 080 46, 130 4, 020 400 . 8 60 1. 51964 47, 100 3,820 46, 730 3, 770 370 . 8 40 I. 01965 47, 870 3,920 47,480 3,860 390 .8 60 1. 51966 48,910 4,360 48,470 4,300 440 .9 60 l . 41967 49, 780 4,510 49, 350 4, 150 440 .9 --

Source: Data for table 9 Wis obtained from th U.S. Department of Labor, Bureau of Labor Statistics, Youth Unemploymentand Minimum Wa111. ' (Washin&ton, D.C.: US.Government Prlntin1Oftice , 1970).17

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For example, in the United Kingdom, teenagers enter employ-ment at about 30 percent of the adult wage and in steps reach theadult level when they are 21. n West Germany youths enteremployment at wages ranging from 60 to 90 percent of the adultrate. In The Netherlands, the wage rates for youth normally beginat 25 to 30 percent of the adult wage rate, reaching 100 percentof the adult rate by the age 20 to 23. In France and Canada, thereis only a 20 to 30 percent reduction for young workers and theduration of the reduction for the individual is only a year or soAnother important feature of those countries experiencingvery low rates of teenage unemployment, as reported in theDepartment of Labor study, was that there were good counselingservices available for youth, large apprenticeship programs andgood placement services. These factors reinforce the beneficialeffects of the youth differential by making the young person aneven more attractive candidate for employment.

nionsGovernmental market intervention through the mm1mum

wage law is not the only form of restrictive practice which limitsjob opportunities. The Congress through the Wagner Act of 1935and its subsequent modifications conferred upon unions extensivelabor market monopoly powers. Methods of market control usedby unions are similar to those used by a group of firms that attemptto monopolize a market, i.e., that of price fixing. The most impor-tant difference is that price fixing, collusion and restriction ofcompetition by firms is illegal, while price fixing, collusion andrestriction of competition by unions is protected by the law andis l e g a l ~

Unions have enormous power over many aspects of the labormarket. Part of this power lies in their ability to influence wagesand negotiate other aspects of the labor contract in their role ofbeing labor s exclusive bargaining agent. A cursory review of thelabor movement in the United States would reveal how organizedlabor, with but a few exceptions, sought to exclude Negroes and27. For an analysis of union collusive practices, see G. Warren Nutter, Limits of UnionPower in he Public Stake in Union Power Philip Bradley, ed., (Charlottesville:University of Virginia Press, 1959), pp. 284-300.8

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other minorities from many job markets.: s Exclusionary deviceshave ranged from union charter provisions that restrict membership to "white only," to requirements restricting membership tosons and/or relatives of union members, or job referral based onseniority rights. Today, union exclusionary techniques are not asflagrant, but strong exclusionary techniques do exist, as will bediscussed.Trade unions advance the economic interests of their membersby negotiating agreements referring to the terms and the conditions of work. Their overall goal is to obtain higher wages for theirmembers. To the extent that union activity can increase wages toa level higher than that dictated by the market, economic reasoning suggests that unions will be concerned with maintaining theirrelative advantage. Tactics to maintain their relative advantageconsist of the following activities: ( 1 ) restricting the supply oflabor; ( 2) increasing the demand for the product its membersproduce; ( 3) the elimination of substitutes for its labor. "9There are several important ways that unions can controlentry. 30 One way is through worker training. Since training is

necessary for some skilled jobs, unions can regulate access to someprograms that it manages. In most cases, however, unions cannotfully control the number of persons who learn a particular skill,but they can control the number of workers who are admitted tothe union. Such a restriction is very effective if the union has anagreement with the employer, which most craft unions do, to hireworkers who are referred by the union or hire workers who areacceptable to the union. Other union techniques to limit access tofull membership status and apprenticeship programs are: ( 1 ) ageand citizenship requirements; ( 2) lengthy apprenticeship pro-28. For extensive documentary, see Ray Marshall , The Negro and Organized Labor

(New York : John Wiley Sons, Inc ., 1965) : Sterling D. Spero and Abram Harris,The Black Worker (New York : Columbia University Press, 1931): Herbert R. North-rup, Organized Labor and the Negro (New York : Kraus Reprint Co., 1971) : GunnarMyrdal, n merican Dilemma (New York: McGraw Hill Book Co ., 1964) .29. For this paper we are mostly concerned with labor supply restrictions. Examples ofthe last two union strategies are: union support for tariffs and quotas on cheaperforeign imports, support for building code restrictions on the use of off-site buildingassembly, and featherbedding . See Richard A. Posner, Economic Analysis of Law(Boston : Little, Brown Co ., 1972), pp. 133-138.

30 . See Armen A Alchian and Reuben A. Kessel, Competition, Monopoly, and thePursuit of Pecuniary Gain, in Aspects of Labor Economics H . Gregg Lewis, ed .(Princeton: Princeton University Press, 1962), pp. 172-175.

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grams; ( 3) use of probationary union membership status andwork permits for seasonal and temporary jobs to protect seniormembers in slack periods from job competition; ( 4) nepotic ruleswhereby preference is given to relatives of union members; ( 5)member sponsorship requirement in some unions; (6) workercompetency requirements; and ( 7) racial discrimination. Theseexclusionary techniques are most often used in the craft unions(particularly the building craft unions), but they are not completely absent in the industrial unions. 31None of my arguments should be construed as antiunion statements, nor is it implied that unions serve no useful social purpose.Whatever the stated purpose of union practices, one effect is torestrict entry to the craft. I might add that though unions todaydo not use explicit racial criteria for entry, per se the widelyaccepted entry rules have a racial effect as suggested by the smallnumbers of minorities in many unions, particularly the craftunions.32Given the history of labor union collusive activity againstblacks and other minorities, a plausible argument can be producedwhich suggests racial intent as a motivating force behind unionactivity. Such an argument can follow if we ask the question: whyis it that labor unions, whose members earn far in excess of theminimum wage, are the strongest advocates of increases in theamount and coverage of the minimum wage? Do they have a realconcern for the disadvantaged? Insights may be gained if we lookat labor union activity elsewhere.

The New York Times November 28 1972, reports the follow-ing on labor unions in South Africa:Right wing white unionists in the building trades have complained tothe South African Government that laws reserving skilled jobs for

whites have broken down and should be abandoned in favor of equalpay for equal work. . . . The conservative building trades unions made31. See John Landon and William Peirce, Discrimination, Monopsony, and UnionPower in the Building Trades, Monthly Labor Review (April 1972), pp. 24-26.See also, Herbert Hammerman, Minority Workers in Construction ReferralUnions, Monthly Labor Review (May 1972), pp. 17-26.32. Gary S. Becker, in Union Restrictions on Entry, in Public Stake in UnionPower Philip D. Bradley, ed. (Charlottesville: University of Virginia Press, 1959),

pp . 209-224, reports: Discrimination against minorities and nepotism towardsrelatives also appear to be greater in craft unions and the greatest in the strongestcraft unions.

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it clear they were not motivated by concern for black workers but hadcome to feel that legal job reservation had become so eroded by Government exemption that t no longer protected the white worker.It is easy to understand how the job reservation laws becameeroded and violated by contractors when supplied with the factthat skilled blacks were receiving wages 25 percent of whites.Obviously, equal-pay-for-equal-work laws (and what amounts tothe same thing, minimum wage laws) reduces employer incentiveto consider only economic factors when hiring. That is if employers have a personal preference for white workers, equal pay andminimum wage laws permit them to indulge their preference at alower cost.*Another argument, for selfish reasons, as the motivation forunion advocacy of increases in and extended coverage of theminimum wage law, is seen when we recognize, as economists do,that for many activities low-skilled labor is a substitute for highskilled labor. Thus the market power of a high-skilled worker isinfluenced by the availability of substitute labor. f high-skilledworkers can reduce or eliminate substitutes for their services,ceteris paribus they can command higher wages. The followingnumerical example will make this argument more concrete.Suppose a fence can be produced by using one high-skilledworker or by using three low-skilled workers. f the wage of highskilled workers is $38.00 per day and that of low-skilled workersis $13.00 per day, the firm will employ the high-skilled workerbecause the cost would be less ($38.00 versus $39.00). The highskilled worker would soon recognize that one of the ways toincrease his wages is to advocate a minimum wage of, say, $20.00per day in the fencing industry. The arguments that the highskilled worker would use to gain political support are those thatwe typically hear : to raise the standard of living, to preventworker exploitation, fair pay for fair work, etc. Since theenactment of the minimum wage law, the high-skilled worker cannow demand any wage up to $60.00 per day and retain employment.33 Prior to the enactment of the minimum wage law of

The preceding four paragraphs were not contained in the manuscript published bythe Joint Economic Committee on July 6, 1977.33. The effectiveness of the wage demand also depends upon the elasticity of substitutionof capital for labor.21

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$20.00 per day, such a demand would have cost the high-skilledworker his job. Thus the effect of the minimum wage is to pricethe low-skilled worker out of the market, which improves theposition of the high-skilled worker.Whether the examples here accurately describe the motivesof labor unions is not necessarily at issue. Effects of behavior do notnecessarily depend on motivation. However it is worth noting thatthe restrictive activities supported by unions o reduce employment opportunities and therefore the income of those forced outof the labor market. This fact suggests that as a part of unionrestrictive strategy there must also be support for an incomepolicy. The reason is that large numbers of people without jobs

and income would present a potentially dangerous political powder keg. Thus it is very probable that unions will lead the supportfor income subsidy programs such as: Aid to Families with Dependent Children, Food Stamp Program, Job Corps, public serviceemployment, etc. All of these forms of income maintenance programs represent a redistribution of income from society at largeto those who have had job opportunities eliminated, which ineffect constitutes a subsidy to those who face restricted markets.These programs isguise the true effects of labor market restric-tions by casting a few crumbs to those denied jobs in order tokeep them quiet, thereby creating a permanent welfare class.*

The Davis-Bacon ActAnother kind of market entry restriction is the Davis-Bacon

Act. This law was enacted on March 31, 1931, for the purpose ofprotecting local wage rates on federal construction from competition with lower wage nonlocal labor. The requirements of theact were that all workers on federal construction projects were tobe paid the prevailing local wages, usually interpreted as beingprevailing union wages. The proponents of the Davis-Bacon Actwere concerned about the tendency for nonunion and nonlocalcontractors to underbid contractors in high wage and highlyunionized areas. The proponents of the Davis-Bacon Act argued

The preceding three paragraphs were added by the author following publication ofthe manuscript by the oint Economic Cmmittee.22

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that successful bidders often imported labor from the South andother low wage areas, thereby producing unemployment andlower wages in high wage areas. 4One effect, relevant to the present discussion, of the DavisBacon Act, was that it discouraged nonunion contractors frombidding on government construction jobs, mainly because to doso would disrupt a company's work force through problems thatwould arise from some of its workers receiving higher wages thanthose on private jobs and the morale problems caused when workerwages were reduced when the government construction job wascompleted.35 To the extent that nonunion contractors are discouraged from competition on a substantial part of the construction market, it has economic consequences for minority workersand young workers who are more likely to work in the nonunionized sector of the construction industry. 6 Furthermore, ProfessorYale Brozen37 argues that the high apprenticeship wage ratesrequired by the Davis-Bacon Act discourage the use of apprentices on federal construction jobs, which acts to counter the fede-ral government's efforts to train youth and minorities through itsvarious m'anpower training programs. RThe racial effects of the Davis-Bacon Act were anticipated byits designers. Allusions to racial bigotry were made in manyspeeches during the House debate. Congressman Allgood wasquite specific :34. The Legislative History of the Davis-Bacon Act (Washington, D.C. : U.S. Govern

ment Printing Office, 1962), p. I35. General Accounting Office report to Congress, The Need for More Realistic Minimum Rate Determinations for Certain Federally Financed Housing in WashingtonMetropolitan Area (Washington, D.C .: U.S Government Printing Office, 1968);see also, R ichard L. Rowan and Lester Rubin, Opening the Skilled ConstructionTrades to Blacks (Philadelphia : University of Pennsylvania Press, 1972), p 93.36. The 1967 Survey of Economic Opportunity shows that only 27 percent of nonwhite craftsmen and 35 percent of nonwhite laborers in construction reported unionmembership.37. Yale Brozen, The Davis-Bacon Act: How to Load the Dice Against Yourself(unpublished manuscript), University of Chicago, 1971. Professor Brozen points toanother undesirable consequence of the Davis-Bacon Act on minorities, though notan employment question. That is, the act hampers government efforts to stimulateproduction of low and moderate housing through its extension providing coveragefor federally assisted housing. That is, the higher labor costs on federally assistedhousing often offset the interest subsidy granted by the federal government.38. For an interesting summary of the effects of the Davis-Bacon Act, see John P. Gould,Davis Bacon ct : The Economics of Prevailing Wage Laws (Washington, D.C.:American Enterprise Insti tute, 1972).

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That contractor has cheap colored labor that he transports, and he putsthem in cabins, and it is labor of that sort that is in competition withwhite labor throughout the country.39

Therefore, at least one of the intents of the Davis-Bacon Act wasto prevent black construction workers from competing with whiteconstruction workers on remunerative federal construction projects. Today, while supporters of the Davis-Bacon Act, mainlyorganized labor, may have different intentions, the result ofthe Davis-Bacon Act is that of reducing job opportunities forminorities.

DiscriminationDiscrimination in the labor market is one of the most frequently cited causes of black/white differentials in terms of laborforce participation, rates of unemployment, and wages. No doubt,racial discrimination does play a part in explaining such differentials. However, there are many factors that influence labor market

activity. Many of these factors are conceptually and or statistically elusive which makes it very difficult to determine how muchof observed differences between black/white labor market activityis due to racial discrimination.For example, as shown in previous tables, black/white differences in labor force participation rates and unemployment rates,particularly those of teenagers, are greater in the 1970s than theywere in the 1940s. No matter what answer we give to explain thistrend, the one that we cannot give is one that asserts that societyin general has become more racially discriminatory over thisperiod. n fact, a general consensus would reveal that the oppositeis the case. The reason must lie elsewhere.

It is always quite difficult to discern, with complete confidence,whether a particular act or phenomenon in the labor market iscaused by discriminatory motives. That is the absence of minorities in some jobs may reflect real or imagined productivity differ-39. U.S. Congress, House, Congressional Record 71st Congress, 3rd session, 1931,p. 6513.

The material in the preceding three paragraphs, with the exception of the quotation,was added following publication of the manuscript by the Joint Economic Committee.24

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ences. More reliable evidence for the possibility of inequality ofjob opportunity is whether there are institutional mechanisms thatfacilitate the indulgence in racial or sexual biases held by employers and preferred workers. In other words, my argument shallbe that government efforts to promote job opportunity withoutregard to race or sex should be directed towards elimination ofinstitutional mechanisms that promote (lower the cost of) indulgence in racial and sexual bias. What are the institutions that tendto produce this effect? The answer in general is that wheneverthere is an institutional provision that requires as one of the conditions of exchange that the terms of the exchange be sanctioned bya third party, there is an increased likelihood of some form ofmarket-irrelevant discrimination to exist. Evidence that this is thecase is found in the answer to the question-why is it that raciallydiscriminatory union membership policy adversely affects jobopportunities for minorities? Clearly, if workers could obtainemployment without joining the union, then whether the unionpracticed racially discriminatory membership policies or notwould be irrelevant to minority job opportunities. But in manyareas of the labor market unions control access to jobs and undersuch a condition union membership policy affects job opportunities for minorities.

LicensureEntry into certain occupations is regulated by law. Licensing

laws and certification requirements, though having some socialmerit, limit entry into trades and hence reduce employment opportunities. Licensing laws have another important effect: to theextent that it limits entry, licensure makes the incumbent practitioners' incomes higher than they would be in the absence oflicensure. This helps us understand why many trade associations,using the powers of the state, seek to restrict entry. 40 Often thesetrade associations have real enforcement power in that members40. See Simon Rottenberg, The Economics of Occupational Licensing, in Aspectso Labor Economics H. Gregg Lewis, ed., (Princeton: Princeton University Press,1962), pp. 3-30. Also Walter Gellhorn, Individual Freedom and GovernmentalRestraints (Louisiana : Louisiana State University Press, 1956).

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of licensing boards are most often incumbent practitioners.The relevance of licensure to this discussion is that it is anotherform of labor market restriction that produces adverse effects thatare mostly borne by youth, minorities, and other disadvantaged

people. For example, the taxicab business is one in which there arelow skill and low capital requirements for entry. It is also onewhere there can be gainful employment and a lucrative incomecan be earned. But participation by many would-be entrants isforeclosed by the high entry costs in most cities. Some cities, likeLos Angeles, have granted exclusive taxicab monopolies to companies such as Yellow Cab. In other words, under the pain ofpunishment no other company can operate within th Los Angelescity limits. Some cities require a medallion for each vehicle. InNew York City medallions cost between 26,000 and 28,000. nother cities such as Chicago and Baltimore, the fee varies from14,000 to 18,000. There is no social justification for such a highentry fee; the sole purpose is to restrict entry, thereby keeping cabrates high and incomes high for the incumbent practitioners.41There are a number of licensed occupations, ranging frombarbers and beauticians to tree surgeons, having age and otherrestrictions that reduce employment opportunities that wouldotherwise be open for youth and many disadvantaged membersof our population.4 2

EducationIn a world of increasing credentialism and increasing skilllevel requirements, formal education tends to be correlated with

41. t is interesting to note that in New York, and elsewhere, gypsy cabs (illegal practitioners) flourish . But they operate in areas of the city where the legal cab companiesrefuse to operate because of the high crime rate (Spanish Harlem and Harlem . Theauthorities tum their faces away from the practice. I would speculate that shouldthe gypsy cabs operate in the lower crime rate, more remunerative areas, legalcompanies would compel the authorities to curtail their operation.42. See Benjamin Shimberg, et al., Occupational Licensing Practices and Policies(Washington, D.C., Public Affairs Press, 1973) . Licensing laws can be used to the

detriment of minorities in other ways. t is interesting to note that during the 1930.an amendment requiring U.S. citizenship was added to most occupational licensurelaws. This time period happened to coincide with the large migration of skilled Jewsto the United States as a result of the hostilities in Europe . The reader is left todecide whether these were unrelated events.6

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TABLE 10.-EMPLOYMENT STATUS OF PERSONS 16 TO 24 YR OLD BY SCHOOL ENROLLMENT STATUS EDUCATIONAL ATTAINMENT SEX AND RACE OCTOBER 1974 AND 1975[Numbers In thoussndsl

Civilian labor fon:eClvili1nnoninstitution1I Pen:ent of Pen:ent ofpopulation Number population Employed Number l1bor ton:eCh1r1Cteristics 1974 1975 1974 1975 1974 1975 1974 1975 1974 1975 1974 1975

Tot1I 16 to 24 yr old.. 33 968 34 700 21 818 21 833 64.2 62. 9 19 306 18 564 2 514 3 268 11.5 15.0Enrolled In IChool. - - 14 482 15 284 6 562 6 730 45.3 44.0 5 702 5 716 862 1 012 13. l 15.0

16 to 19 yr.. 10 666 11 163 4 434 4 551 41.6 40.8 3 750 3 772 684 778 15.4 17.120 to 24 yr 3 816 4 121 2 128 2 179 55.8 52 9 1 952 1 944 178 234 8.4 10. 7White_----. --- -- -- -- 12 405 13 077 5 912 6 m 47. 7 46.6 5 236 5 241 677 855 11. 5 14. 0Blac:k ind other -- - -- - 2:011 2 207 651 31.3 28. 7 469 478 182 156 28.0 24.6Elementary and hleh school._-- 7 862 8 063 3 311 3 279 42.1 40.6 2 759 2 641 552 636 16. 7 19.4White ____________________________ 6 549 6 710 2 972 2 997 45.4 44. 7 2 538 2 450 434 546 14.6 18. 2Blac:k ind other.. 1 313 1 350 339 283 25.8 21. 0 221 192 118 92 34.8 32.5

Not enrolled In school. - -- 19 486 19 416 15 256 15 103 78.2 77.8 13 604 12 848 1 652 2 256 10.8 14. 9Hip school erade no colle11. - - 10 350 10 366 8 371 8 379 80.9 80.8 7 553 7 238 818 1 141 9.8 13.6White ... 9 078 9 124 7 354 7 417 81. 0 81. 3 6 717 6 508 637 909 8 1 12.3Blac:k ind other_ ...... 1 270 1 242 1 014 962 79.8 77. 5 835 730 179 232 17. 7 24.1High school dropouts ... 4 847 4 824 3 108 2 969 64.1 61. 5 2 514 2 219 594 750 19. I 25.316 to 19 yr. 2 079 2 001 1 380 1 230 66.4 61. 5 1 042 862 338 368 24. 5 29.90 20 to 24 yr...... 2 769 2 822 1 728 1 740 62. 4 61. 7 1 472 1 358 256 382 14. 8 22.0cO;= White ____ . ----- -- -- 3 742 2 525 2 382 65.3 63. 7 2 115 1 840 410 542 16.2 22.8( ]) Black and other . 1 082 582 588 59.3 54.3 398 380 184 208 31.6 35.4_

(J< Coll11e 1r1dU1tes . ---- 1 452 I 373 1 339 I 290 92. 2 94.0 1 272 1 183 67 107 5.0 8. 3;) White -- - __ -- -- ----- 1 313 1 275 1.m 1 208 92.8 94. 7 1 167 l 107 52 101 4.3 8. 40 Blac:k ind other.------------ 140 99 81 86.4 81. 8 105 76 16 5 13.2 6.2~ Collel. 1 to 3 yr------ 2 837 2 851 2 438 2 465 85.9 86.5 2 265 2 707 173 258 7.1 10.5White.. --------- 2 537 2 527 2 195 2 209 86.5 87. 4 2 055 2 003 140 206 6.4 9.3i) Blac:k 1nd other. 300 324 244 256 81.3 79.0 210 204 34 52 13.9 20.3

Soun:e: U.S. Oeputment of Labor Burau o labor Statistics Summ1ry Special Labor Fon:e Report M1n:h 1976


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job stability and employment. Department of Labor data showthis correlation in table 10The youth group most adversely affected by unemployment,as would be expected, are those men and women who are high

school dropouts. Their overall unemployment rate in October of1975 was 25.3 percent compared to an overall unemployment ratefor high school graduates of 13.6. For black youths who droppedout of high school, the unemployment rate was 35.4 percent.Perhaps more illuminating of the sad state of affairs for blackyouth is that the unemployment rate for black high school gradu-ates was higher than the unemployment rate for white high schooldropouts, 24 1 and 22.8 respectively.There are a number of possibly appealing explanations for thislatter aspect of black/white employment differences. But surelynot to be excluded from those explanations is the poor highschool education that many blacks receive. This is testified to bythe fact that manpower programs have found that even the blackparticipants with high school diplomas are deficient in readingand mathematical skills. ' Whites also are faced with some dete-rioration in the quality of schooling in the United States. But poor

quality education has a differential impact on blacks who not onlycome from families with low socioeconomic status, but also mustfight the legacy of racial discrimination and racial stereotypes.Indeed, the differential impact of inferior black education is seenin many labor market differences between blacks and whites.

43. See Charles Perry, Bernard E. Anderson, Richard L. Rowan, and Herbert R. North-rup, The Impact of overnment Manpower rograms (Philadelphia: University ofPennsylvania Press, 1975 .28

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3 EFFECTS OF PAST MANPOWERPOLICIESPublic concern with poverty and unemployment during the relatively prosperous times of the 1960s led to the formulation ofadditional manpower policy. Much of this concern was expressedin the Manpower Development and Training Act of 1962MDTA) . This act authorized the Department of Labor DOL)and the Department of Health, Education and Welfare HEW)to develop programs which would have the overall objectives ofincreasing the competitive position of the disadvantaged through :improving education and skills; raising the level of job marketinformation; counseling and changing work attitudes. The Neighborhood Youth Corps (NYC) was established under the EconomicOpportunity Act EOA) of 1964. This program, targeted towardyouths, provides training and employment for high school dropouts, part-time job-school programs, and summer employmentopportunities. Both the MDTA and EOA, through the desireto decentralize and give states and local jurisdictions a greaterrole, have been superseded by the Comprehensive Employmentand Training Act of 1973 CETA). Since the original MDTA,a number of federally financed programs have been added to ourmanpower programs such as : Operation Mainstream, PublicService Careers, Special Impact Concentrated Employment Program, Job Opportunities in Business, Work Incentive Program,Job Corps, and Public Employment Program. As shown in table11, the cumulative enrollment opportunities from 1967 through1974 under the federal manpower programs, were over 9 million,at a cost of over 14 billion.

There are many plausible objectives of U.S. manpower programs. However, in terms of stated program objectives, w mustask at least two general questions in determining their overallefficacy: ( 1 ) have the programs enhanced the labor market com-29

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0JOBS F e d e ~ l l f i n a n c e d ) ~ - - - - - - - - 361. 8.4 60.1 .2Work incentive program . ___ ... ______ . __ 384. 8 -- - . -- 99.0 65. 7 60.7Job Corps_. __________ . __ -------- ____ ------ 110. 6 ---------------- 21. 7 22.4Public employees pro11r1m____________________ 192. 7 ------------------------------------

Enrollment opportunities are the number of positions authorized each fiscll year. The numbershown by fiscal year includes only those newly authorized in that year, althouah actual enrollmentopportunities from previous years, ii not filled, may still be available. Cumulatlv-inception of p r o ~ r a m throu11h 1974.Program became operational 1n 1963. Beainnina fiscll 1971, includes the JOBS-optional procram (JOBS) and the MOTA on-the-job(OJT) program which ended in fiscal 1970 except for national contracts. Also includes constructionoutreach. Beafnnlna with fiscal year 1972, institutional tralnina: includes part time and other trainine.

6 0 ~ U) 1,097 78 114 188 167 155 13033.1 2 4 848 24 161 149 169 73149. 5 ---------------- 886 -------- 101 79 64 175 20924.0 17. 7 20. 9 875 ---------------- 170 160 202 193192. 7 ---------------- 2, 482 -------------------------------- 962 1, 239 Less than $500,000.Proa:r1m became operational In 1965.Data not available for Neia:hborhood Youth Corps components prior to fiscal year 1967. Proa:r1m became operl ional in 1967, includina the new caretrs proa:ram.

14664250150281

11 Program became operational in 1968.n Data not meaninaful because 1n individu1I m1y be enrolled In 1 or more proa:r1m components11 Job opportunities in the business sector. Proaram became operational in 1969.Proa:ram became operational in 1969.Source: U.S. Dep1rtm1nt of Labor, Manpower Admlnistr1tion.


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petitiveness of those individuals participating in them, and ( 2)have the programs changed institutional labor market barriersfaced by program participants and nonparticipants? Evaluativestudies of U.S. manpower policy have produced mixed answerson results.4 Some evidence suggests that some manpower trainingprograms are little more than expensive income transfer (welfare)schemes. In fact an official government report recognized thata man may enroll in one of the training programs which paystipends, in order to get funds to tide him over a lean period. 45Levitan and Taggert, in a study of the Neighborhood YouthCorps, reported: A comprehensive follow-up of enrollees leavingthe program between January and September 1966 found that40 weeks after termination, less than two-fifths were employed[and] more than a fourth were not in the labor force. ' 6Granted the inherent problems in evaluating the cost-effectiveness of manpower training programs and granted the mixed findings of researchers, one undeniable fact remains. The segment ofthe population initially targeted for assistance through many manpower programs, such as the hard-core unemployed, teenagers,and minorities, are just as bad off (in some cases worse off) thanthey were at the inception of these programs. The deteriorationthat has taken place is obvious when we look at labor force participation rates for Negro male youth. Labor force participation forNegro youths in 1962 for those 16-17, 18-19, 20-24 were 40.2,68.8, and 89.3 respectively while in 1974 the labor force participation rates had dropped to 34.6, 62.4, and 82.1 respectively. Theunemployment rates for the same groups show the other part ofthe deterioration that has taken place. In 1962 Negro male youths16-17, 18-19, 20-24, were unemployed at a rate of 30, 21 15percent respectively while in 1974 the unemployment rates respectively were 39, 27 and 16 percent. For the same period white maleyouth labor force participation in each age group rose and in eachage group unemployment fell, except for the 16 17 age groupwhich rose from 15.1 to 16.2.44. Op. cit., he Impact of Government Manpower Programs pp. 92-93.45. U.S. Department of Labor, 1970 Manpower Report of the President (Washington,D.C.: U.S. Government Printing Office, 1970) .46. Sar Levitan and Robert Taggert III, Employment of Black Youth in Urban Ghettos(New York: Twentieth Century Fund, 1971 ), p. 101.

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Thus, in terms of impact on job market conditions and opportunities for specifically targeted disadvantaged youth, past andpresent manpower policy has not solved youth unemployment.

Public Service Employment(Emergency Employment Act of 1971)

Recently, public service employment has attracted the attention of many as the solution to unemployment. Some of the factorswhich have brought attention to the public sector are the relatively high wages, e.g., few public sector employees earn less thanwhat are considered poverty wages, and the level of job stabilityin the public sector, e.g., total state and local government rate ofturnover averages 19 percent compared to 60 percent in manufacturing. Additional sources of current appeal of public serviceemployment as a manpower policy include the recognition of wide,unmet, public needs such as: basic community services, transportation services, educational services, health, recreational andcultural services, etc. Many argue that the present level of servicesin all these categories is inadequate to meet public needs and anexpansion of these services would provide more jobs. Such a manpower policy which makes the government the employer of lastresort is often talked about in high places today.More specifically, this manpower proposal was formulated inthe Humphrey-Hawkins Bill where Hawkins, the co-author, takesthe position:

It is not a matter of whether the private sector can or will provide thejobs in sufficient number and of the quality to achieve true full employment. Certainly it should be encouraged to do so But in addition, thefederal government should ensure that all who are willing and able aregiven the opportunity to fully achieve their potential.

The author later modifies his position:The jobs in the public sector should be filled not because the hardcoreor minorities need employment but because people need services related

47. Augustus F. Hawkins, Equality of Sacrifice or Opportunity? in Public ServiceEmployment: n Analysis of Its History Problems and Prospects Alan Gartner et al.ed. (New York: Praeger Publishers, 1973), p. 89.32

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to general welfare: in health, education, community improvement,environmental control, etc. ; and since at the same time certain groupsare unemployed because of government policies, it is sensible and moralthat they be matched with jobs.*

Several issues arise in connection with the public service em-ployment concept. Proponents of public service employment s amanpower policy always point to the need for additional publicservices to improve societal welfare. Needs as a justification forfederal expenditures can serve any purpose any time because it isinconceivable that human needs or wants for public services canever be fully met. n other words, argument can always be madefor more waterways, cleaner streets, increased medical care, etc.On the other hand, in the discussion of public service employment,very little attention is paid to bread and butter issues such aswho should pay how much for these services? Neither is the ques-tion raised regarding the change from private spending to publicspending as will surely be the case when government takes a largershare of worker earnings to finance increased provision of publicservices.

Turning to another issue, will public service employment pro-duce the results stated by its proponents? Will public serviceprojects such as those suggested by the proponents have a signifi-cant impact on those segments of the labor force commonlyreferred to as disadvantaged? There is some doubt about this. Onereport concludes that no more than 30 percent of the first peoplehired under the Emergency Employment Act were poor. Another question that has not been answered satisfactorily is:if the absence of marketable skills is the reason that many of thedisadvantaged unemployed are unable to compete for jobs in theprivate sector, is there any reason to expect that they will be ableto perform adequately in the public sector? The answer to thisquestion, as seen by proponents of public service employment asmanpower policy, is revealed, in part, by the nature of the attackon current civil service hiring procedures. For example:

Even if the premise of a positive average relationship betweenThe preceding three paragraphs were not contained in the manuscript published bythe Joint Economic Committee on July 6, 1977.48. Sheppard, Harrison and Spring, he Political conomy of Public S

[Williams] Youth and Minority Unemployment

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