Battling an Epidemic

The real economic issue this election year will be the unemployment issue. While nearly every other indicator of economic well-being continues to improve, a stubborn strain of joblessness hangs on like a debilitating flu. President Nixon declared last week that unemployment remains the economy's "great problem," and he vowed to reduce it "significantly" this year. He is trying a number of remedies, but because of big and basic changes in the labor force and a reluctance to act decisively against unemployment until recently, these may bring little more than mild relief.

Unemployment is entering its second year of hovering around 6%. The figure is so sticky that the Council of Economic Advisers, in its report out last week, talks of the traditional 4%-unemployment goal as if it were Utopian. Treasury Secretary John Connally has said that 5% "is probably the best we can do this year without further throwing the economy out of kilter." At present, 5,000,000 Americans are officially listed as without jobs, the largest epidemic of idleness since the early '60s. Another 770,000 are unemployed but not counted in the 6% rate because they have become too discouraged to look for work. Unemployment is now 8.1% among Viet Nam-era veterans, 10% among blacks, and 17.5% among teenagers. Normally secure professional and technical workers have a jobless rate of 3%--the highest since the Labor Department started keeping figures on them in 1948.

The job picture has failed to improve along with the rest of the economy, Administration officials believe, because the age and sex composition of the labor force has changed. Women and teen-agers are looking for full-time work in larger numbers than ever, pumping up the jobless rolls. Last year the civilian work force increased by 1,400,000, while the number of new jobs was only 490,000. In manufacturing, employment actually dropped 761,000 last year and 798,000 the year before. Government and service jobs made up for part of the shortfall, but job growth in these sectors is also beginning to slow.

Making Work. The Administration is fighting unemployment with two major weapons. The President's fiscal '72 budget, with its $38.8 billion deficit, aims to create more jobs by stimulating the economy. But Brookings Institution Economist George Perry insists that the growing labor force will require a 71% real G.N.P. increase to hold unemployment below 5% by the end of the year. "It would take something that simply is not feasible--like a new war," Perry said.

The other weapon is direct spending for job creation and manpower training. The fiscal 1973 budget calls for a 16% increase, to $3.9 billion, in funding for job programs. The new Public Employment Program should provide 150,000 public service jobs with state and local governments this year. The jobs are for sanitation men, hospital workers, highway employees and the like. Results so far are mixed. Illinois is giving priority to welfare recipients in filling new jobs; but in San Antonio, retired Army officers have been taking many of the new positions. At most, the 150,000 jobs this year could bring down the unemployment rate by less than one-fifth of a percentage point. President Nixon resisted the principle of Government-created jobs until unemployment peaked at 6.2% last year. Though admirable in design, PEP is clearly too little too late. For about $1 billion more, the program could be doubled.

The Administration could do still more. Its new investment tax credit encourages businesses to buy labor-saving equipment, but there is no comparable tax-credit program to encourage creating new jobs. The Labor Department gives direct payments to companies that train certain low-income workers, but these incentives could well be expanded to include more workers. Many job-training programs will be increased under the fiscal 1973 budget, but the number of new enrollments will actually decline this year and next year. Important manpower programs like Job Opportunities in the Business Sector (JOBS) will unfortunately have their funding cut in the coming fiscal year.

President Nixon apparently feels that the unemployment problem has become too serious to wait for slow-acting manpower training. Instead, he is opting for what he admits is the "addictive medicine" of deficit and defense spending. As his own economists concede, such a move carries little promise of chopping more than one percentage point off the jobless rate this year. But one point means work for 800,000 persons--or more than the margin of votes that decided the last presidential election.

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