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OSEC Congressional Testimony

Statement of Robert B. Reich Secretary of Labor before the Subcommittee on Labor, HHS, Education Committee on Appropriations United States House of Representatives [03/08/94]

Mr. Chairman and Members of the Subcommittee:

I appreciate this opportunity to appear before you today to discuss the Department of Labor's FY 1995 budget proposals, and to discuss the major investments in the Department's FY 1995 budget and how these investments contribute to the President's overall plan for long-term economic growth.

Our budget proposals build on the foundation for long-term growth and prosperity that was laid last year. You will recall that when I appeared before this committee almost a year ago, I emphasized the central need for workforce investment as a strategy for economic recovery. A year ago, our Nation's economic picture was cloudy, with escalating budget deficits, a lingering recession, and a stagnated economy.

Today, the picture is significantly brighter. Nearly two million jobs were created in the first year of the Clinton presidency. Some 1.7 million were in the private sector, about 70 percent more than in the years 1989 to 1992. The economy grew at a rate of 2.9 percent during 1993.

During 1989-1992, it grew at a rate of 1.4 percent, and inflation increased at the lowest rate since 1986 -- this means that we have laid the groundwork for a strong, steady recovery. And there is a clear downward trend in budget deficits.

But serious social and economic challenges remain. I want to begin by setting the specific -- and difficult -- choices this budget represents in the larger context.

Even as overall unemployment is down, the problem of long-term unemployment remains acute. The average length of unemployment spells in the 1990's is higher than it was the previous four decades. Despite the recovery, the average length of a jobless spell hit their third highest annual levels since the end of World War II. In 1993, less than twenty-five percent of persons who had lost their jobs expected to be called back to their old jobs after a period of lay-off. For the other seventy-five percent of those who had lost their jobs, no recall to their old job was expected -- representing the highest percentage of permanent job loss ever registered.

The increasing challenges of a global economy, defense downsizing, technological advances, and corporate restructuring all add fuel to anxieties about job security. It is more critical than ever that we maintain our commitment to building a national workforce strategy that includes all our citizens. Increasingly, workers without skills will find their options shrinking, as more and more old jobs become imperiled by global economic integration and technological change. Fewer Americans can count on holding a single job throughout their careers and the unskilled face worsening odds for sustainable prosperity.

The challenge this Administration and this Congress face is to attack our most pressing problems within the context of a vigorous budget -- and to fund what works. The proposed budget request for the Department of Labor in FY 1995 is $36 billion in budget authority and $34 billion in outlays. The amount now before this committee includes $10.1 billion in Federal funds and an additional $3.7 billion in trust fund limitations. A total of 17,910 full-time equivalent (FTE) staff is requested for accounts which provide staffing for employment and training, worker protection, labor, pensions and employment standards, and statistics programs.

This Administration is committed to investing in America's workers. In total, the Department's share of the Administration's human resources investment program has increased $1.0 billion -- from $5.5 billion to $6.5 billion. Investing wisely means investing in what works -- and it means the courage to look candidly at what doesn't work and to invest elsewhere. We need to keep asking these difficult questions. And as the answers come, we need to have the discipline to act on them. We must provide our young people with the necessary skills to obtain good first jobs, and we must ease the transition of displaced workers quickly into new jobs, and finally create better jobs over time for all Americans through new initiatives to enforce workplace safety and health and other labor laws. The Department will continue to follow this three-pronged workforce investment strategy.

First Jobs -- For young people, preparation for their first full-time job can be critical. It can mean the difference between a career that holds promise of growth and increased earnings, or a job with uncertain opportunities and income growth. Under the first job component of the Department's workforce investment strategy, the Administration proposed the School-to-Work Opportunities Act, which has now passed both the House and Senate, to provide a national framework for allowing states to create programs to smooth the transition from the educational system to the working world, including curriculum reform and on-the-job experience. The required training and work experience will lead to a high school diploma and, for many, a certificate of successful completion of at least one year of post-secondary education, and an industry-recognized credential. Currently, unlike young people in Japan or Germany, for example, young Americans entering the workforce after high school make their way into their first jobs with little guidance, direction, or support. We know that people learn better when they see the connection between what they are learning and why they need to learn it. People learn better when they can work closely with an expert, ask questions and apply the academic lessons. The Department's FY 1995 request for this important new program is $150 million with an equal amount requested by the Department of Education. This amount represents a significant increase from the $50 million provided in FY 1994. These funds will be used to build on effective approaches already underway at State and local levels to ease the transition from school to work for three-fourths of American youth who enter the workforce without four-year college degrees.

The first jobs component also includes increases for Job Corps programs and summer employment and training. We continue to believe that young people whose needs may be the greatest should be among the first to receive assistance.

Our investment proposals under first jobs calls for an additional expansion of one of our most effective programs -- the Job Corps. Our FY 1995 budget request includes an increase of $117 million for a proven winner for disadvantaged youth. These funds will provide for six (6) new centers and the completion of the eight (8) centers that will begin in 1994. When the current expansion is complete in 2004, the program will have increased from 112 to 162 centers, and from 42,500 slots to 62,500 slots. This comprehensive residential training and education program for severely disadvantaged youth has been successful in increasing earnings, employment, and educational achievement, while decreasing welfare dependency. There is no doubt that Job Corps is expensive. There is also no doubt that it works and it is well worth what is costs.

Our FY 1995 budget request for first jobs also proposes $1.1 billion for the Summer Youth Employment and Training Program. This amount includes $184.8 million for summer jobs in addition to the $682.3 million currently available for calendar year 1995, and $871.5 million for calendar year 1996. The increased funding will allow maintenance of the 1994 participant level of 623,000 in calendar years 1994-1996. Reviews of last summer's program indicate that the young people involved were well supervised, performed real and useful work for the community, and often received substantial education benefits.

Also, included in the FY 1995 budget request is $598.7 million for youth training grants to support 322,000 economically disadvantaged participants both in-school and out-of-school. A recent study confirmed mounting signals that conventional short-term training programs for disadvantaged youth fail to have any positive impact on their job prospects or earnings. So our FY 1995 budget pares back youth training grants by 9 percent (or $60 million) while we develop new, more effective approaches. We have requested $25 million for the Youth Fair Chance Program, which concentrates a diversity of services in specific economically depressed areas to help reduce the high school dropout rate, crime, and teenage pregnancy. The FY 1995 budget request, along with funds previously appropriated, will support grants to 21 economically disadvantaged areas.

New Jobs -- Each year about 27 percent of our Nation's workers move to new jobs, whether to advance careers or rebound from a job loss. The new jobs component of our workforce investment strategy will help experienced workers move from one job to the next and ease fears about job change particularly for those who lose their jobs through no fault of their own. Reemployment, not unemployment, will be the centerpiece of our economic renewal.

In order to improve the current dislocated worker assistance effort, which is rigid, ineffective, and serves only a small percentage of the 2 million workers in a categorical fashion, the Administration will soon propose the Reemployment Act of 1994, which is founded on sturdy evidence about what works. Our current unemployment insurance (UI) system no longer delivers what American workers need. Today, UI still helps millions of workers through short-term income support, but the current system simply is not set up to help workers build new skills and find new jobs. The proposed legislation will consolidate, expand, and improve this patchwork of categorical programs which targets a subset of the dislocated worker population, such as workers displaced by trade, defense downsizing, or environmental initiatives. Our FY 1995 budget request of $1.5 billion for worker readjustment will emphasize services with proven effectiveness and will serve approximately 750,000 workers in 1995, building to 1.3 million upon full implementation in FY 2000. This represents an increase of $347 million or 31% over the FY 1994 level.

The proposed Reemployment Act of 1994 will have six basic components:

First, there will be early outreach and information to provide rapid response and referral of UI applicants who have been identified as at-risk of long-term unemployment through worker profiling to re-employment services. We are requesting $9 million in FY 1995 for automation support for the profiling initiatives.

Second, quality re-employment services will be provided for all dislocated workers, including eligibility review and referral to appropriate programs, individual assessment, counseling, and job search assistance. Most dislocated workers just need some basic help in assessing their skills and in planning and conducting their job search.

Third, and closely related to the second component, is quality labor market information. Information is a key component of any re-employment effort. The labor-market information component will expand access to good data on where the jobs are -- and which skills these jobs require.

Fourth, One-Stop Career Centers will provide a single point of entry into the employment and training system. Our resources will act as seed money to help States plan and implement programs that streamline access to the full-range of these services. Our FY 1995 budget request is $250 million for this initiative, an increase of $150 million over the FY 1994 level.

The fifth component of the Reemployment Act of 1994 will be long-term retraining, including basic skills, classroom, and on-the-job training for eligible participants who need it to get a new job. The evidence shows that short-term training programs do not work for dislocated workers. The proposed legislation will offer workers who need long-term training programs with up to a year and a half of income support and support services to enable workers to complete training and launch new careers.

And the sixth component is accountability. Programs that work are customer-driven -- they offer customized service, quality information, and meaningful customer choice. Programs that work are obsessive about accountability and results.

In addition, the new jobs category also includes $12.4 million for the new Skills Standards Board, as authorized by the Administration's Goals 2000: Educate America Act, to spur the development of a national network of voluntary skill standards.

The New Jobs category includes $1.1 billion for JTPA Adult training grants to increase the earnings and employability of economically disadvantaged adults and, ultimately, to reduce welfare dependency. This request is expected to result in service to an estimated 480,000 participants in 1995. For the Older Americans Community Service Employment Act, we are requesting $396 million to provide part-time work opportunities for an estimated 91,200 unemployed, low income individuals aged 55 and over. The New Jobs category also includes $918.3 million for the Employment Services, a nationwide system of over 1,700 state offices providing no-fee services to individuals seeking employment and to employers seeking workers.

The Department total in the First and New Jobs categories for programs for the disadvantaged totals $4.1 billion for both youth and adults. This represents an increase of $467 million or 13 percent above the FY 1994 level.

Preparing young people for their first job and experienced workers for new jobs is necessary to restore America's promise of prosperity, but again it is not enough. The third component of our three-pronged workforce investment strategy includes initiatives to promote better jobs.

Better Jobs -- Overall, the Administration is pursuing three goals which support better jobs. The first focuses on the economy as a whole and includes stimulating investments, investments in new technologies, expanding retraining programs, and opening global markets to American made products. The second and third focus is on the job site by promoting the high performance workplace and enhancing enforcement of workplace laws. With respect to promoting high performance workplace practices, I have established a new organization, which is the Office of the American Workplace. This Office will conduct research and carry out initiatives designed to promote increased competitiveness of American industry through a more effective partnership between management and workers and in many other ways to enhance productivity and quality.

An essential component of the strategy for better jobs is blocking the "low road" to competitive advantage -- a road paved with substandard wages, discrimination, health and safety violations, to name just a few -- through energetic and strategically targeted enforcement of key labor and employment laws. To achieve the third goal under the better jobs component, we have requested $66.7 million and 355 FTE to finance an enforcement initiative to better meet the Department's responsibilities to enforce workplace rules. These additional resources would enable the Department to address responsibilities under new regulations and recent laws, such as the Family and Medical Leave Act. Also included are increased inspections of small mines and enforcement of mine health issues, review of the periodic roll in the Federal Employees Compensation Act program, and a program of coordinated, high profile interventions that focus on repeated and egregious violations of key labor laws.

Our enforcement initiative will provide resources for more compliance staff and investigations; but, going one step further, we will reinvent and restructure enforcement activities within the Department. Our reinvention efforts are based on recommendations of the Vice President's National Performance Review. Major components in this area include expanding the use of modern information technology -- putting more computers into the hands of front-line workers and economizing on scarce litigation resources by expanding the use of Alternative Dispute Resolution. There are many other activities planned to improve compliance, fortify respect for labor laws, and shift the cost of compliance.

One area of enforcement that deserves special attention is occupational safety and health. Our FY 1995 request for the enforcement initiative includes $18 million and 132 FTE for improved oversight of occupational safety and health. This request will provide a modest enhancement for a program which is severely underfunded and operating under a legislative mandate that is more than twenty years out of date. Also, the Administration will work with Congress to improve occupational safety and health through legislative action to reform the Occupational Safety and Health Act.

The Department is also taking measures to ensure that hard-earned pension benefits of America's workers and retirees are safe and secure. The proposed Retirement Protection Act of 1993 would increase the pension security of workers and retirees by requiring faster funding of underfunded pension plans and giving the Pension Benefit Guaranty Corporation (PBGC) more compliance authority. The bill would require underfunded plans to give participants better information on plan underfunding and PBGC guarantees. The bill also would require the worse-funded plans to pay a greater share of premiums by lifting the cap on the variable rate premium.

While my three-pronged workforce investment strategy does not specifically mention all of the Department's very important programs, please be assured of my deep commitment to all of those programs as well, most of which fall within the better jobs component. For example, our request for $5.2 million and 29 FTE for the multi-year Consumer Price Index (CPI) Revision project. When completed, this project will provide new market baskets of goods and services as well as improvements in collecting and processing data for the CPI and for surveys which support the CPI.

I mentioned last year that I was committed to improve upon all of the Department's important programs by launching my own program to reinvent the Department. To date, considerable progress has been made, such as the efforts that are underway in the enforcement area. But there is still much work to be done. We are committed to the principles outlined in the Vice President's National Performance Review. Among other things, we have established a strong management/union partnership to guide our reinvention efforts to improve customer service to the American worker. We will be reducing supervisory/staff ratios, empowering front-line workers, and we will be taking an objective look at how we perform our work in all programs to seek more efficiency and economy to enable us to work more effectively within existing employment ceilings and budget constraints.

To support this massive undertaking, we have requested $25 million for a Reinvention Investment Fund to finance reinvention proposals and other capital investments aimed at achieving savings from streamlining work processes. This fund will be self-sustaining because the funds will be paid back by the agencies with interest from the savings generated. We look forward to sharing our reinvention success, from projects and savings financed through this, in the future.

The Department's budget signals a major shift in policy from simply seeking to ease the pain of unemployment to actively promoting new and better jobs for the working men and women who are the backbone of our economy. This budget reflects the President's commitment to fiscal discipline in discretionary spending while recognizing the paramount importance of investing in working people in ways that boost their productivity and prepares them to adjust to economic change and compete successfully in global markets.

Once again, I am aware of the pressure on the Appropriations Committee due to the discretionary spending caps, particularly in this subcommittee. The President has made some hard and difficult choices to stay within these spending caps by generating the savings to finance his investment program, much of which falls within the jurisdiction of this subcommittee. With the President's strong commitment to his investment agenda and with Congressional support, I remain confident that we can find a way to accomplish these long-term public investments to improve American productivity and competitiveness.

Mr. Chairman, we at the Department believe that our investment proposals support the President's overall plan for economic growth. Along with the other priorities reflected in our FY 1995 budget request, these proposals will enable us to increase the productivity of American workers and businesses and will make a positive difference in the lives and well being of America's working men and women. Only if we invest prudently in the American workforce can we strengthen our position in the world economy.

This concludes my prepared statement, Mr. Chairman. I would certainly be happy to answer any questions that you or other members of the Subcommittee may have.

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