<DOC>
[DOCID: f:erp_c3._]
Economic Report of the President - - - - - - - - - - - - H. Doc. 106-002
[From the online service of the U.S. Government Printing Office]
[wais.access.gpo.gov]


 
                                CHAPTER 3
                    Benefits of a Strong Labor Market

    The Nation's labor market is performing at record levels: the number 
of workers employed is at an all-time high, the unemployment rate is at 
a 30-year low, and real (inflation-adjusted) wages are increasing after 
years of stagnation. Groups whose economic status has not improved in 
the past decades are now experiencing progress. The real wages of blacks 
and Hispanics have risen rapidly in the past 2 to 3 years, and their 
unemployment rates are at long-time lows; employment among male high 
school dropouts, single women with children, and immigrants, as well as 
among blacks and Hispanics, has increased; and the gap in earnings 
between immigrant and native workers is narrowing.
    The most recent data also show that the employment relationship is 
strong. Job displacement--job losses due to layoffs, plant closures, and 
the like--has declined substantially since the 1993-95 period, and among 
those who have been displaced, the share that have found new work has 
increased. These reemployed workers still typically earn less on the new 
job than at the job they lost, but these wage losses are at record lows. 
Moreover, the popular assertion that secure lifetime jobs are 
disappearing appears to be overstated. This is not to suggest that the 
picture is entirely benign: some groups have experienced declines in job 
tenure since the 1980s, and the rate of job displacement remains 
relatively high given the current strength of the labor market. To 
address these and other problems, this Administration has undertaken a 
number of measures to strengthen education and job training and to 
promote lifelong learning.
    Besides spreading the benefits of economic growth more widely, the 
robust labor market has generated other, less obvious benefits. It has 
contributed to a decrease in welfare case loads, allowing States and 
localities to focus increased resources on designing and implementing 
welfare reform. In addition, low unemployment and, especially, the rise 
in average wages may have contributed to a reduction in crime. Several 
studies have demonstrated an inverse relationship between labor market 
opportunities and criminal behavior: the better the options in legal 
employment, the less likely are potential criminals to commit crimes.
    The chapter begins by documenting economy-wide developments in the 
labor market in the past few years within the context of longer run 
changes. It then focuses on recent improvements experienced by workers

[[Page 100]]

who have traditionally not fared as well in the labor market, including 
high school dropouts, blacks, Hispanics, youth, immigrants, and single 
mothers. The chapter then goes on to examine some important but less 
obvious side benefits of the tight labor market. This is followed by a 
discussion of evidence on changes in the relationship between workers 
and employers, including job displacement, job tenure, and the 
contingent work force. Finally, the chapter reviews recent policy 
developments to promote job training and lifelong learning.

              ECONOMY-WIDE DEVELOPMENTS IN THE LABOR MARKET

EMPLOYMENT

    The usual indicators of labor market progress--employment, 
unemployment, and wages--show that working men and women continue to 
benefit from the ongoing economic expansion. Employment is at an all-
time high, with 133 million Americans at work in December 1998, and only 
4.3 percent of the labor force unemployed. Having fallen from 7.3 
percent in January 1993, the unemployment rate is at its lowest level 
since February 1970 (Chart 3-1).[GRAPHIC] [TIFF OMITTED]
    Data on discouraged workers provide further evidence of a strong 
labor market. The number of discouraged workers--workers who are not 
employed and who have not looked for work in the past 4 weeks

[[Page 101]]

because they did not think they could find a job--has shrunk by one-
third since 1994, the earliest year for which comparable data are 
available. Discouraged workers are not counted in the labor force and 
therefore are not captured in the official unemployment rate. However, 
because there are so few discouraged workers, redefining the 
unemployment rate to include them as unemployed increases the 
unemployment rate by no more than 0.4 percentage point (see Chart 3-1).
    Much of the growth in employment reflects an increase in the share 
of women looking for and finding jobs. More women than ever before have 
joined the labor force: among women aged 25-64, 72.4 percent were 
working or seeking work in 1998, up from 70.2 percent in 1993 and 33.1 
percent in 1948. The labor force participation rate among men aged 25-64 
gradually declined during the 1960s and early 1970s, but it has remained 
steady at about 88 percent ever since.
    A tight labor market in a high-employment economy means that more 
men and women who are looking for jobs are finding them, and finding 
them faster. Those unemployed in 1998 had been searching for work an 
average of 14.5 weeks, down from 18.8 weeks in 1994, the earliest year 
with comparable data. The average length of a spell of unemployment is 
sensitive to the number of those undergoing long spells. In 1998, 14.1 
percent of the unemployed had been searching for a job for over 27 
weeks, far below the 1994 figure of 20.3 percent. By contrast, the share 
of those unemployed for less than 15 weeks rose from 64.2 percent to 
73.6 percent during the same period.

WAGES

    One of the best documented labor market trends of the past few 
decades has been the decline in real wages among men. According to the 
Current Population Survey (CPS; see Box 3-1 for a description of

Box 3-1.--Sources of Wage Data

      This chapter uses several different sources of data on wages. The 
Bureau of Labor Statistics (BLS) of the Department of Labor publishes 
estimates derived from monthly surveys of both households and 
establishments: the CPS, which surveys about 50,000 households, and 
payroll records reported by about 390,000 establishments representing 
the nonfarm sector. Earnings data tabulated by the BLS from the 
household data usually describe the median weekly earnings of full-time 
workers aged 16 and over. However, because significant portions of the 
populations of interest in much of this chapter often do not work full 
time, in many cases the Council of Economic Advisers has made special 
tabulations of wages including all workers aged 16 and over--part-time

[[Page 102]]



Box 3-1.--continued

    as well as full-time--in the CPS data. Unless otherwise specified, 
this is the population referred to in this chapter.
      All of the Council's tabulations use the merged Outgoing Rotation 
Group (ORG) files of the CPS, which include a subset (25 percent) of the 
full CPS sample who are asked about their earnings and hours on their 
current job each month. In the ORG data, hourly wages are measured by 
dividing usual weekly earnings by usual weekly hours, both as measured 
on the individual's main job. All wage data are presented in real 1997 
dollars, adjusted for inflation using the CPI-U-X1 (the urban consumer 
price index with rental equivalence).
      This chapter also uses BLS establishment data, collected from 
businesses and State and local governments. From these data are derived 
estimates of average weekly earnings and hours worked for production and 
nonsupervisory workers. In addition, the employment cost index (ECI), 
also constructed from establishment data, measures total compensation 
paid to workers, including both wages and salaries and the cost of 
benefits such as health plans. Fixed industry weights are used to ensure 
that the ECI reflects only changes in compensation, not shifts in 
employment across industries and occupations. The CPS wage data and 
average weekly earnings of production and nonsupervisory workers do 
reflect these shifts, as well as wage trends within industries and 
occupations.
the data), between 1979 and 1993 the median real wage for men fell by 
11.1 percent (Chart 3-2). However, progress has been made since 1996: 
the median real wage for men rose 1.7 percent in 1997 and 2.3 percent in 
1998. Women experienced slightly stronger real wage growth in 1997 of 
1.9 percent, but their wages were flat in 1998. Other measures of 
compensation show similar increases. Data reported by establishments 
(businesses and government agencies; the CPS data cited above are from 
surveys of households) show that, after stabilizing in the early 1990s, 
real hourly earnings of production and nonsupervisory workers have risen 
by 5.4 percent since 1993. The employment cost index (see Box 3-1) shows 
that total compensation (wages and salaries plus benefits) per worker 
increased by 2.2 percent in real terms from the third quarter of 1997 to 
the third quarter of 1998. Employers' wage and salary costs in that 
period rose by 2.7 percent and benefit costs (health insurance, paid 
leave, supplemental pay, retirement benefits, and the like) by 1.2 
percent. Establishment data also show that the average workweek for 
production and nonsupervisory workers continued to hover between 34.4 
and 34.8 hours, as it has since the mid-1980s.

[[Page 103]]

[GRAPHIC] [TIFF OMITTED]

                          DISADVANTAGED GROUPS

    A strong labor market is particularly important to less advantaged 
groups in the labor market, such as workers with less education, younger 
workers, racial and ethnic minorities, and immigrants. The unemployment 
rates of these groups typically swing up and down more than the average 
during expansions and recessions. When employers find it hard to fill 
vacancies, they are more willing to hire and train workers whom they 
might pass over when they have fewer openings and an abundance of 
applicants.
    For the same reason, a tight labor market can also pull up wages for 
disadvantaged workers. When labor is scarce, these workers can command 
better pay than at other times. The current expansion is especially 
important for disadvantaged workers given their experience from the late 
1970s to the early 1990s, when wage inequality grew and less skilled 
groups faced persistently declining wages, on average.
    The reasons for these wage declines and the rise in inequality that 
accompanied them were discussed in the 1997 Economic Report of the 
President and are still being debated, but it seems clear that demand 
for highly skilled workers has been expanding faster than supply, 
whereas demand for less skilled workers has declined even faster than 
supply. Even though the fraction of the population without a high school 
diploma has shrunk, as older, less educated cohorts have retired

[[Page 104]]

and been replaced by younger, more educated ones, the number of jobs 
available to high school dropouts shrank even faster from the late 1970s 
to the early 1990s. An important explanation is technological change in 
manufacturing, as a result of which the manufacturing sector requires 
fewer workers to produce more output than in the past. Competition from 
lower wage, low-skilled labor in other countries may also have been a 
factor, although most studies find that technological change is more 
important than increased international trade in explaining the declining 
demand in the United States for workers with no more than a high school 
diploma. Meanwhile, employment has expanded dramatically in the 
financial, professional, and business services industries, where most 
jobs require a college education or beyond.
    Unions have historically helped less educated workers obtain higher 
wages than they could get otherwise. As employment in the highly 
unionized goods-producing, transport, and utilities industries has 
declined as a share of the work force since the 1950s, however, so has 
union membership. Like the American economy in general, the labor market 
has become more competitive in recent decades, with compensation and job 
security more often determined by market forces than before. This has 
benefited many American workers who were in a position to take advantage 
of the new job opportunities, but it has been hard on less skilled 
workers at the lower end of the wage distribution.
    The Administration's efforts to keep the economy expanding and to 
make work pay have been particularly important to these workers. Not 
only is the overall labor market performing at record levels, but 
several groups of workers who had been experiencing low employment 
rates, declining wages, and high rates of unemployment have begun to 
show marked improvements. These groups include low-wage workers, workers 
with less than a college education, blacks and Hispanics, immigrants, 
and single mothers.

LOW-WAGE WORKERS

    It is well established that workers at the lower end of the wage 
distribution have not fared well in recent decades: from the late 1970s 
through the early 1990s, the purchasing power of their wages declined. 
Between 1979 and 1993 the real hourly wages of male and female workers 
(including part-timers) at the 10th percentile of the wage distribution 
fell by 14.8 percent and 15.8 percent, respectively (Chart 3-3). More 
recently, however, these lowest paid workers have seen significant 
gains. Real hourly wages for men 16 and older at the 10th and 20th 
percentiles have increased by about 6 percent since 1993, with 
especially large gains in the past 2 years. One might expect the 
earnings of low-wage women to have declined in recent years as supply 
expanded when a large number of them left welfare and entered the labor 
force. But on the contrary, wage increases for women were

[[Page 105]]

[GRAPHICS] [TIFF OMITTED]
significant, with wages for those at the 20th percentile increasing by 
4.7 percent since 1993.
    These gains have not been confined to the lower end of the wage 
distribution. Real hourly earnings of the median male worker have 
increased by 3.6 percent since 1993, while those of the highest earning 
men and women (measured at the 90th percentile; these data are not shown 
in the chart) have increased by 6.4 percent and 6.2 percent, 
respectively.

LESS EDUCATED WORKERS

    Education is a key determinant of labor market success, and much of 
the decrease in real wages for low-wage workers over the past two 
decades may be due to changes in the economy that have placed increasing 
value on skilled labor. The shift from goods-producing industries to 
services and to a more technology-intensive workplace has increased the 
premium on education, and particularly on workers who have at least a 
bachelor's degree. In this new economic environment it is important to 
monitor the progress of those with less education, who risk missing out 
on gains in the economy as a whole. During the current economic 
expansion, however, those with less education appear to be sharing in 
the benefits of the tight labor market in a number of ways.
    Since 1993 the strong labor market has sharply reduced unemployment 
rates for workers at all levels of educational attainment.

[[Page 106]]

Particularly interesting, however, are changes in the employment-to-
population ratio for people with different levels of attainment. As 
Chart 3-4 shows, high school dropouts have experienced a much larger 
relative increase in their employment rate than have workers with more 
education. This increase is the joint result of increased labor force 
participation among dropouts and decreased unemployment among those 
dropouts who are in the labor force. The economy created enough low-
skilled jobs to employ a larger share of the dropout population, which 
is shrinking as more-educated younger cohorts replace older ones. Chart 
3-4 shows the results for men and women combined, but looking at men and 
women separately yields the same qualitative result.[GRAPHIC] [TIFF 
OMITTED]
    Workers with less education are not only experiencing employment 
gains; they are also beginning to share in wage gains. From 1993 to 
1998, male high school graduates aged 20 and over without any college 
attendance experienced a real increase in their median wage of 2.8 
percent. Although small, this was an improvement over their experience 
from 1979 to 1993, when their median wage fell by 21.8 percent. In 1998 
the median real wage of male high school dropouts aged 20 and over 
finally increased, for the first time since at least 1979, by 7.0 
percent.
    Although, as these numbers show, both the employment and the 
earnings of workers with less education have been improving, education 
remains a key determinant of labor market outcomes. The fiscal 1999 
budget passed by the Congress contained a down payment for the

[[Page 107]]

Administration's initiatives to reduce class size by hiring 100,000 new 
teachers. The Administration has also encouraged both young people and 
adults to pursue further education and job training. The new GEAR UP 
program, for example, provides mentors to disadvantaged students 
preparing for college, and the new HOPE Scholarship tax credit provides 
up to $1,500 for the first 2 years of college or vocational school. 
Also, in 1998 the Administration obtained an increase both in total 
funding for Pell grants, to $7.7 billion, and in the maximum grant, from 
$3,000 to $3,125. These grants provide financial aid to undergraduates 
on the basis of need.
    For fiscal 2000 the Administration is proposing substantial changes 
to America's schools. Measures in the President's budget will hold 
teachers, schools, and students more accountable for educational 
outcomes; will reduce class size; will provide for building and 
renovating public schools; and will recruit outstanding new teachers. 
The President has asked the Congress to expand on the $1.2 billion down 
payment made last year to reduce class size in the first three grades to 
a national average of 18. The Administration has proposed new Federal 
tax credits as incentives to help States and school districts build new 
public schools and renovate existing ones. The President's budget 
contains a series of new initiatives and funding increases to help 
recruit well-prepared people to teach where they are most needed, in 
high-poverty urban and rural communities. In addition, the President is 
proposing to help the more than 44 million adults who perform at the 
lowest level of literacy to acquire reading and writing skills. His 
budget would, among other things, establish a 10 percent tax credit for 
employers who provide workplace education programs for their employees 
who lack basic skills.

BLACKS AND HISPANICS

    After years of decline, the real wages of black men began to 
increase in 1993; they have risen by 5.8 percent since 1996 alone. Black 
women and Hispanic men and women have also experienced recent gains 
(Charts 3-5 and 3-6). Because blacks and Hispanics are 
disproportionately represented in the lower end of the wage 
distribution, the long-run trends in their wages are similar to those 
for low-wage workers generally. Both of these minority groups have less 
education on average than the rest of the work force, and Hispanics are 
younger on average. When the real wages of workers without a college 
education started declining in the 1970s, the median real wages of black 
and Hispanic men started declining as well. In the last few years, 
however, their wages have been rising.
    Employment opportunities are also expanding for minorities. The 
unemployment rates for blacks and Hispanics in 1998 were the lowest ever 
recorded, and were 4.1 and 3.6 percentage points lower, respectively, 
than in 1993. But minority unemployment is still unacceptably

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[GRAPHIC] [TIFF OMITTED]

[[Page 109]]

high, at 8.9 percent for blacks and 7.2 percent for Hispanics in 1998, 
compared with 3.9 percent for whites.
    The tight labor market of the 1990s appears to be helping even young 
minority workers, who suffered greater wage declines than others in the 
1980s and who typically have extraordinarily high unemployment rates. By 
1998 the unemployment rate among black youth aged 16-24 was 20.7 
percent, lower than in any year since the data series began in 1973. And 
the unemployment rate among young Hispanics aged 16-24 dropped 3.7 
percentage points between 1993 and 1998 (Chart 3-7). Moreover, the 
median real wages of young black males aged 16-24 rose by 6.2 percent in 
1998 alone.[GRAPHIC] [TIFF OMITTED]

IMMIGRANTS

    Foreign-born workers often face challenges in the labor market that 
native-born workers do not: weaker English skills, a lack of networks 
for finding jobs, and unfamiliarity with American institutions and 
workplace culture sometimes create barriers to their obtaining good 
jobs. Foreign-born workers, including those from Mexico and Central 
America (who account for about 30 percent of new immigrants since 1980), 
are less likely to have completed high school than are American-born 
workers. However, there is wider variation in educational attainment 
among immigrants than among natives; whereas many immigrants have 
minimal schooling, many others have completed college.

[[Page 110]]

In fact, in 1990 immigrants and natives were equally likely to have a 
college degree.
    A worrisome trend has been the decline in relative educational 
attainment and wages of successive cohorts of immigrants over the past 
few decades. Although educational levels have risen across successive 
cohorts since 1960, they have not kept up with the educational 
attainment of natives. Immigrants who entered in the late 1980s are much 
more likely to lack a high school diploma than persons born in the 
United States. However, during the past 4 years, immigrants have clearly 
been sharing in the labor market benefits of the economic expansion, 
particularly through reduced unemployment rates. (Comparable data are 
not available for earlier years of the CPS because the CPS did not 
collect data on country of birth until 1994.)
    Unemployment rates decreased from 1994 to 1998 throughout the 
working population, but immigrants have experienced especially large 
declines (Chart 3-8). Particularly striking is the narrowing of the gap 
in unemployment rates between native-born workers and those born in 
Mexico and Central America. This trend has been coupled with steady 
[GRAPHIC] [TIFF OMITTED]
levels of labor force participation for men in this group and a small 
increase among women. As a result, employment rates for both males and 
females from Mexico and Central America have increased. A rising share 
of these workers are also working full time.

[[Page 111]]

    Certain groups of immigrants are also earning more. Since 1995 the 
median real wage of Mexican- and Central American-born immigrants has 
risen, by a total of 6.8 percent for men and 3.8 percent for women. This 
is particularly encouraging because one might expect the continuing 
addition of low-wage new entrants to the population of Mexican- and 
Central American-born immigrants to depress the group's median wage, 
even though individual immigrants' wages tend to increase with time in 
the United States. In fact, because entrants since 1995 are likely to 
have below-median wages and are included in the pool used to calculate 
the median wage in 1998, wages for Mexican- and Central American-born 
immigrants already employed in the United States in 1995 have probably 
risen by even more than the median for the group overall. The increases 
in the minimum wage in 1996 and 1997, as well as the President's 
proposed $1-per-hour increase over the next 2 years (Box 3-2), are 
especially important for large numbers of these immigrants, whose wages 
are at or near the minimum.

Box 3-2.--Increasing the Minimum Wage

      On October 1, 1996, the minimum wage was raised from $4.25 to 
$4.75 an hour. It was again increased to $5.15 an hour on September 1, 
1997. These were the first increases in the minimum wage in 5 years, 
during which its real value had fallen by 15 percent. The President has 
proposed to increase the minimum wage further, by $1 per hour over the 
next 2 years.
      As Chart 3-3 shows, the wages of low-wage workers have increased 
markedly since 1996, and the recent increases in the minimum wage are 
likely to explain some of this rise. It has been estimated that almost 
10 million workers benefited from the recent minimum wage hikes. Some 
have suggested that much of the benefit from a higher minimum wage goes 
to teenagers from well-off families, but in fact most minimum wage 
workers are adults from lower income families, and their wages are a 
major source of their families' earnings. Among workers who were earning 
between $4.25 and $5.15 an hour just prior to the 1996 increase, 71 
percent were aged 20 or older, 58 percent were women, and one-third were 
black or Hispanic. Almost half (46 percent) of the affected workers 
worked full time, and most lived in low-income households. Over half the 
benefits from the higher minimum wage went to households in the bottom 
40 percent of the income distribution. In 1997 the earnings of the 
average minimum wage worker accounted for 54 percent of his or her 
family's total earnings.
      A potential side effect of increasing the minimum wage is a 
reduction in employment: with low-wage labor more expensive,

[[Page 112]]



Box 3-2.--continued

    some firms may hire fewer workers. Many studies have examined this 
issue, and the weight of the evidence suggests that modest increases in 
the minimum wage have had very little or no effect on employment. In 
fact, a recent study of the 1996 and 1997 increases, using several 
different methods, found that the employment effects were statistically 
insignificant. Moreover, the unemployment rates of black teenagers and 
high school dropouts--two groups of workers most likely to be affected 
by the wage hike--are lower today than they were just prior to the 
increases.
      Increases in the minimum wage and expansions in the earned income 
tax credit reinforce each other. Among low-wage workers, the joint 
effect of these changes has been a substantial increase in income. 
Between 1993 and 1997 the inflation-adjusted minimum wage rose by 9 
percent, while the maximum payment under the earned income tax credit 
rose by 38 percent for one-child families (116 percent for two-child 
families). For families with one earner working full time at the minimum 
wage, the combination of higher earnings and a larger tax refund would 
have raised total income by 14 percent if the family had one child, and 
by 27 percent for a family with two or more children. As a result of 
these policy changes, one- and two-child families with a single full-
time minimum wage worker now earn enough to escape poverty.

SINGLE MOTHERS

    The percentage of children living in single-parent families, usually 
with a single mother, has risen sharply over the past few decades. The 
share of all families (defined as households in which one or more 
persons live with children of their own under age 18) that were headed 
by a single parent increased from 13 percent in 1970 to 32 percent in 
1998. The majority of these families rely heavily on the mother's labor 
earnings; therefore, the labor market opportunities available to these 
mothers are critical for their families' economic well-being.
    The labor force participation rate of single mothers aged 16-45 has 
been climbing since 1993, after remaining essentially flat for many 
years (Chart 3-9). In just the 4 years from 1993 to 1997, their 
participation rate increased by 8.7 percentage points, from 75.5 percent 
to 84.2 percent.
    What caused this unusually large rise? The expansion of the earned 
income tax credit (EITC; Box 3-3) seems to have contributed. During the 
same 4 years the real value of the maximum EITC payment increased by 38 
percent for workers with one child, including single mothers, and by 116 
percent for those with two or more children. In contrast, the proportion 
of single women without children who

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[GRAPHIC] [TIFF OMITTED]
participated in the labor market--who became eligible for only a very 
small credit in 1994, if their earnings were very low--did not change 
over this period. As Chart 3-9 shows, the difference in labor force 
participation rates of single women with and without children has 
closely tracked growth in maximum EITC benefits.
    One recent study concluded that as much as 60 percent of the 
increase in employment of single mothers since 1984 was attributable to 
expansions in the EITC. For the period between 1992 and 1996 the EITC 
explains 33 percent of the increase in annual employment among

Box 3-3.--The Earned Income Tax Credit

      The EITC is a tax credit for low-income workers designed to reduce 
their overall tax burden. The credit is refundable; that is, workers can 
receive the full amount to which they are entitled even if it exceeds 
the income tax they owe. Workers apply directly to the Internal Revenue 
Service for the EITC and generally receive the credit as part of their 
tax refund.
      Only families with a working member are eligible for the EITC, and 
the amount depends on the family's labor market earnings. For example, a 
worker with one child will receive a credit of 34 cents per dollar of 
1998 earnings, up to a maximum of $2,271. A family with two or more 
children gets 40 cents per dollar up to a

[[Page 114]]



Box 3-3.--continued

    maximum of $3,756 (Chart 3-10). Childless workers aged 25-64 with 
earnings under $10,030 are eligible for a much smaller credit of less 
than 8 cents per dollar up to a maximum of $341. For all eligible 
workers the credit remains at the maximum over a range of earnings and 
then is gradually phased out.
      The EITC was significantly expanded under the Omnibus Budget 
Reconciliation Act (OBRA) of 1993. Before the 1993 law was passed, 
eligible working parents received just 19 to 20 cents for each dollar 
earned up to the maximum. OBRA 1993 increased the maximum credit for 
families with two or more children by over $1,500 (in 1998 dollars) and 
extended eligibility to families with incomes up to $30,095--about 
$3,600 more than under previous law. These expansions have resulted in 
significant increases in the labor force participation of single 
mothers.
      A large proportion of families eligible for the EITC--81 to 86 
percent in 1990--have claimed the credit. About 19.8 million workers are 
expected to claim the credit in tax year 1998, receiving an average of 
$1,584. About 16.4 million of these claims will be for workers living 
with children; these families will receive an average credit of $1,870.
      The EITC is targeted to families living in poverty, with the goal 
of lifting their income above the poverty line. The latest estimate from 
the Bureau of the Census shows that the EITC lifted 4.3 million 
persons--workers themselves and their family members--out of poverty in 
1997, more than twice as many as in 1993. Just over half (2.2 million) 
of these were under the age of 18, and 1.8 million were living in 
families headed by unmarried women. Updates by the Council of Economic 
Advisers of analyses reported in the 1998 Economic Report of the 
President find that over half the decline in child poverty between 1993 
and 1997 can be explained by changes in taxes, most importantly in the 
EITC. The EITC enabled about 1.1 million blacks and nearly 1.2 million 
Hispanics to escape poverty in 1997. These statistics make it clear that 
the EITC has become a major weapon in the fight against poverty.
this group. A second study examined the 1986 EITC expansion, which was 
more modest than the 1993 expansion, and found that it, too, 
significantly increased labor force participation among single mothers, 
especially those with less education. Still another study, looking at 
the effects of the EITC on all eligible families, found that the 1993 
expansion could account for an increase in labor supply of 19.9 million 
hours by 1996 and induced an estimated 516,000 families to move from 
welfare into the work force.

[[Page 115]]

[GRAPHIC] [TIFF OMITTED]
    Other factors also contributed to the increase in labor force 
participation among single mothers. Changes in the welfare system, 
culminating in the enactment of the Personal Responsibility and Work 
Opportunity Reconciliation Act (PRWORA) in 1996, were very important. 
PRWORA replaced the Aid to Families with Dependent Children (AFDC) 
program with Temporary Assistance for Needy Families (TANF), which made 
most Federal welfare assistance dependent on work effort and limited the 
lifetime duration of assistance. Before PRWORA was passed, States had 
been experimenting with work requirements and time limits under waivers 
of the Federal rules governing AFDC since the early 1990s. Even before 
that, States had been changing their formulas for calculating AFDC 
benefits in ways that made it more worthwhile for low-income single 
mothers to work. It has been estimated that changes in the welfare 
system account for about 30 percent of the increase in employment of 
single mothers between 1984 and 1996, and at least 20 percent of the 
increase between 1992 and 1996. PRWORA is discussed further below.
    Expansions of Medicaid coverage to low-income children who were not 
eligible for AFDC removed another disincentive to their mothers' 
working. Expansions of training and child care programs for low-income 
workers also encouraged these women to work. These factors played a much 
smaller role than did the EITC and welfare reform, however. Finally, the 
tighter labor market has made employers more

[[Page 116]]

willing to hire welfare recipients and has made it easier for all single 
mothers to find jobs in recent years.

OVERCOMING DISADVANTAGES IN THE LABOR MARKET

    The last several years have seen the gains from the ongoing economic 
expansion distributed throughout the population, reaching groups that 
had previously been left out. Low-wage workers, high school dropouts, 
blacks, Hispanics, immigrants, younger workers, and single mothers have 
all enjoyed better labor market outcomes. Administration policies, most 
importantly the expansion of the EITC and the increases in the minimum 
wage, along with efforts to keep the overall economy growing, have 
played a central role in achieving these successes.
    However, members of these disadvantaged groups are still much more 
likely than other workers to be unemployed, and when they do find a job, 
they still earn lower wages than other groups. A competitive labor 
market is a two-edged sword. Although competition is the most efficient 
way to allocate labor and get goods produced at lower cost, it may 
result for some in wages that fail to ensure an adequate income. 
Competitive market forces produced an increasingly unequal distribution 
of earnings from the late 1970s into the early 1990s, so that some 
people found it difficult, even by working hard, to support their 
families.
    Government can mitigate these undesirable side effects of labor 
market competition. Beyond its emphasis on education, this 
Administration has responded to the problem of low wages for the less 
skilled by expanding the EITC and raising the minimum wage, as described 
in Boxes 3-2 and 3-3. The Administration will continue to address this 
concern by designing policies that make work pay, improve education, and 
expand opportunities for education and job training, as described 
previously in this chapter. Moreover, the President's fiscal 2000 budget 
proposes an $84 million increase in funding for civil rights 
enforcement, including $14 million for an Equal Pay Initiative at the 
Equal Employment Opportunity Commission and the Department of Labor.

BENEFITS TO SOCIETY OF A STRONG LABOR MARKET

    Better employment opportunities and higher wages are obviously good 
for workers individually. But today's strong labor market is enhancing 
the well-being of the whole of American society in ways that are less 
obvious. One way is by easing the implementation of the 1996 welfare 
reform act; another is by reducing crime.

WELFARE REFORM

    It has been 2H years since the President signed the Personal 
Responsibility and Work Opportunity Reconciliation Act into law,

[[Page 117]]

initiating dramatic changes in the Nation's welfare system. Welfare 
assistance is now work-focused and time-limited: with few exceptions, 
Federal welfare assistance is strongly linked to the recipient's efforts 
to find a job. Adults cannot receive aid for more than a total of 5 
years during their lifetime, and in some States the maximum is even 
less. PRWORA shifted greater responsibility for welfare management to 
States and localities, many of which have responded quickly by 
redesigning and implementing their own welfare programs. In most States 
this effort builds on reforms initiated under waivers approved by this 
Administration before PRWORA was passed.
    Welfare case loads have fallen dramatically since PRWORA was enacted 
in August 1996 (Chart 3-11). Moreover, this reduction has been 
experienced nationwide, with every State except Hawaii and Rhode Island 
posting double-digit percentage reductions in case loads. The national 
case load peaked in 1994, and since that time it has declined by 42 
percent; in 17 States the case load in September 1998 was less than half 
what it had been in March 1994.[GRAPHIC] [TIFF OMITTED]
    What caused this unprecedented case load reduction? Case loads 
normally fluctuate with the business cycle, rising in periods of high 
unemployment and declining when unemployment is low, as it is today. 
Chart 3-11 illustrates the relationship between labor market 
opportunities and welfare participation over the past three decades. 
When unemployment increased in the early 1970s, so, too, did welfare

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participation. The renewed increase in welfare participation in the late 
1980s and early 1990s, as well as the decline that began in 1994, also 
corresponded with changes in employment opportunities during these 
periods.
    Other evidence suggests that in the current expansion many 
businesses are coming to see welfare recipients as an untapped source of 
employees. In a 1998 survey of 400 businesses that are members of the 
Welfare to Work Partnership (Box 3-4), 71 percent stated that they or 
their industry faced a labor shortage, and that the tight labor market 
was one of the main reasons they were hiring welfare recipients. More

Box 3-4.--The Welfare to Work Partnership

      At the President's urging, the Welfare to Work Partnership was 
launched in May 1997 to lead the national effort to encourage businesses 
to hire people from the welfare rolls. Founded with five participating 
businesses, the partnership grew to include 5,000 businesses within 1 
year; it currently has a membership of 10,000. In 1997 the 3,200 
businesses then participating hired an estimated 135,000 welfare 
recipients.
      An important goal of the partnership is to increase awareness 
within the business community that welfare recipients are productive 
potential employees. A survey of Michigan firms suggests that lack of 
such awareness may be an important barrier to some businesses: among 
firms that said they had been contacted by the Michigan employment 
agency and informed about the advantages of hiring from the welfare 
rolls, the majority had subsequently hired at least one welfare 
recipient. To overcome the awareness barrier, the partnership provides 
outreach, technical assistance, and support for hiring welfare 
recipients through a variety of channels, including a toll-free number, 
a World Wide Web site, a ``Blueprint for Business'' manual, and a guide 
to retaining welfare workers.
      Many firms realize that welfare recipients are a pool of good 
potential workers, and the partnership has helped firms learn how to 
locate and identify them. In fact, in a survey of partnership firms who 
have hired former welfare recipients, 76 percent reported that these 
workers were ``good, productive employees.'' The tight labor market has 
motivated many firms to consider hiring welfare recipients, but the hope 
is that the efforts of the partnership and the employment emphasis of 
PRWORA have built a relationship between employers and welfare offices 
that will endure into leaner times. If so, firms will continue to tap 
into the pool of reliable employees on the welfare rolls even after 
their hiring pressures ease.

[[Page 119]]


over, the tight labor market is most likely causing employers to expand 
efforts to invest in and retain current workers, including former 
welfare recipients. The skills and job experience that former welfare 
recipients are accumulating during this expansion may be a lasting 
benefit.
    However, the trend in welfare participation does not always match 
that in unemployment, most notably when other important changes are 
taking place, including changes in welfare benefits and in family 
structure, as well as policy reforms. Indeed, welfare participation did 
not increase during the recession of the early 1980s. It is difficult to 
determine how much each of several factors--the economy, program 
reforms, and other factors--has contributed to the recent case load 
decline. An analysis by the Council of Economic Advisers that examines 
these competing factors finds that a 1-percentage-point decline in the 
unemployment rate in each of 2 successive years is associated with 
roughly a 4 percent decline in the case load in the second year. Other 
studies have corroborated this finding. Applying this estimate to the 
change in the unemployment rate between 1994 and 1998 indicates that the 
improvement in the labor market can explain an 8.3 percent drop in 
welfare case loads. Given that the national welfare case load actually 
fell by 42.3 percent during this period, it appears that improved labor 
market conditions were responsible for roughly one-fifth of that 
decline. Similar analyses indicate that the share of the decline since 
1996 that can be explained by the strength of the economy is much 
smaller, reflecting the importance of other changes, especially welfare 
reform. This result builds on the Council's analyses, which show that 
welfare reform achieved through State waivers played an important role 
in the case load reductions of the mid-1990s.
    The case load reduction, combined with fixed block grant funding 
under PRWORA, has translated into greater resources for States and 
localities. The amount of the Federal welfare grant given to each State 
is now fixed (with some exceptions) and guaranteed, typically at the 
level of funding that the State received in 1994. As a result, States 
receive more Federal assistance today than they would have under the 
AFDC program, under which Federal transfers decreased as the case load 
fell. It has been estimated that, in 1997, 46 States had more welfare 
resources at their disposal--State and Federal dollars combined--under 
PRWORA than they would have had if the old system had been maintained. 
The difference nationwide was $4.7 billion, with a median difference 
across all States of $44 million, or 22 percent.
    States are using these expanded resources in a variety of ways. Some 
have enhanced investment in services such as child care, transportation, 
and substance abuse treatment for those who remain on welfare, many of 
whom face multiple barriers to employment. Other States are expanding 
support for welfare recipients who have gone to work. In part because 
States have been unable to forecast case load levels with any degree of 
accuracy, some States have a portion of their

[[Page 120]]

TANF grants in reserve at the Treasury. These States will be able to 
draw upon these reserves should case loads once again increase or should 
those remaining on assistance need more intensive and costly services. 
Many States are responding by reducing their own contribution to welfare 
funding (but can do so by no more than the Federal maintenance-of-effort 
requirement allows).
    Although the additional resources have thus allowed States to 
concentrate on designing and implementing welfare reform, the expanded 
resources come with greater responsibility and accountability. States 
and localities now have many more decisions to make regarding their 
welfare programs. Moreover, because the Federal block grant is fixed, 
States bear most of the risk associated with a future rise in the case 
load.
    Since PRWORA's enactment, this Administration has pursued various 
initiatives to enhance the welfare reform effort. The $3 billion Welfare 
to Work Grants Program targets long-term, hard-to-employ welfare 
recipients and noncustodial parents, helping them move into lasting, 
unsubsidized employment. These resources can be used for job creation, 
job placement, and job retention efforts. Most of the resources are 
given directly to localities through private industry councils or local 
work force boards. The Administration has proposed an additional $1 
billion for the Welfare to Work Grants Program in fiscal 2000. The 
welfare-to-work tax credit is a credit to employers to encourage them to 
hire and retain long-term welfare recipients. The credit for each 
eligible worker hired is equal to 35 percent of the first $10,000 in 
wages during the first year of employment, and 50 percent of the first 
$10,000 in the second year.
    The Congress fully funded (at $283 million) the President's proposal 
for welfare-to-work housing vouchers for fiscal 1999. The vouchers may 
be used by welfare families to reduce a long commute or to secure more 
stable housing to eliminate emergencies that keep them from getting to 
work every day on time. Another important barrier facing people who want 
to move from welfare to work--in cities and in rural areas--is lack of 
transportation to jobs, training programs, and child care centers. With 
the President's leadership, the Transportation Equity Act for the 21st 
Century authorized $750 million over 5 years to address this problem.

CRIME

    The incidence of crime can be related to many factors, both in the 
individual and in the policy environment, but clearly one determinant is 
conditions in the legal labor market. A person who has a good job 
usually finds his or her time better spent in legitimate activities than 
in committing crimes, and risks losing more income from incarceration 
than does someone who is unemployed or earning low wages. Statistics

[[Page 121]]

show that crime rates have in fact been dropping since the current 
economic expansion began: between 1991 and 1997, property crimes and 
violent crimes per capita fell 16 percent and 19 percent, respectively, 
and the total crime index dropped 17 percent.
    Studies have found that unemployment is related to crime rates, but 
that the effect tends to be modest and insufficient to explain changes 
in crime rates over periods longer than the business cycle. New studies 
suggest, however, that crime may be more strongly correlated with wages 
than with unemployment. These studies find that potential criminals are 
more likely to be influenced by longer term prospects in the mainstream 
economy than by shorter term conditions, and that wages are a better 
measure of these longer term prospects than is the unemployment rate.
    The new research shows that young men--the demographic group most 
likely to commit crimes--respond to wage incentives. Declining real 
wages during the 1980s and early 1990s appear to have influenced the 
rise in crime rates. In particular, the decline in wages of less skilled 
men between 1979 and 1995 is estimated to have increased property crimes 
by 10 to 13 percent and violent crimes by about half that amount. These 
findings are consistent with the idea that economic incentives play a 
greater role in economically motivated crimes such as burglary and 
robbery. In addition, because blacks have lower wages on average than 
whites, about one-quarter of the racial difference in the probability of 
committing a crime can be explained by the wage gap between the races.
    Falling wages therefore provide at least a partial explanation for 
why property crimes did not fall much over the 1980s and early 1990s as 
the proportion of 18- to 24-year-olds in the population declined. Of 
course, other factors such as policing and sentencing practices also 
affect crime rates. But the correlation between wages and crime suggests 
that the current strong labor market and wage growth among young men 
have helped reduce crime rates.

         JOB DISPLACEMENT, TENURE, AND THE CONTINGENT WORK FORCE

    Popular accounts sometimes suggest that the relationship between 
workers and firms is undergoing profound change. The contemporary work 
environment, in this view, is characterized by more frequent corporate 
downsizings and other job displacements, the disappearance of lifetime 
employment, and the rapid growth of a ``contingent work force'' that can 
no longer count on high and rising earnings and job security. However, a 
growing body of research using nationally representative data calls this 
picture into question.

[[Page 122]]

JOB DISPLACEMENT

    Workers are considered displaced if they leave their jobs 
involuntarily, because of a plant closing, insufficient or slack work, 
abolition of their position or shift, or some other, similar reason. 
Since 1984 the Bureau of Labor Statistics (BLS) has conducted a 
biennial, nationally representative survey of workers who have been 
displaced from their jobs sometime in the 3 years prior to the survey 
(in the early years of the survey the period was 5 years). Data from the 
1996 survey showed job displacement to be unusually high given the 
overall strength of the economy. Extrapolation of the survey's findings 
indicated that about 15 percent of the work force had been displaced at 
some time between 1993 and 1995. This figure was up from 12.8 percent in 
1991-93, despite a drop in the overall unemployment rate from 7.5 
percent in 1992 to 6.1 percent in 1994 (Chart 3-12). This rise in job 
displacement led some analysts to argue that the employer-employee 
relationship had changed and that displacement was on a rising 
trend.[GRAPHIC] [TIFF OMITTED]
    Results from the 1998 survey, however, suggest that this 
interpretation may have been premature: that survey showed a substantial 
decline in job displacement, to 12.0 percent for the 1995-97 period. All 
major groups of workers experienced improvements: men and women, younger 
and older workers, high school dropouts and college-educated workers, 
and workers in manufacturing as well as those in professional services. 
Nevertheless, the rate of job displacement in 1995-97 was still

[[Page 123]]

one-third higher than it had been in 1987-89, when the unemployment rate 
was at a similar level.
    Historically, between 30 and 42 percent of displaced workers were 
not employed 1 to 3 years after losing their jobs. Thus it is 
encouraging that this rate has fallen to 24 percent in the latest survey 
(Chart 3-13). [GRAPHIC] [TIFF OMITTED]
In addition, reemployed workers typically earn less than they did in 
their previous jobs. For example, one study of workers in the 1970s and 
1980s who had at least some earnings in the years after displacement 
finds an average earnings decline of 29 percent in the year of 
displacement, which subsequently shrinks to 10 percent. Here again the 
latest data are encouraging: the reduction in weekly earnings among 
those reemployed was only 5.7 percent in 1995-97, a record low, and 
earnings losses were at or near record lows for workers of all levels of 
education.

JOB TENURE

    Trends in average job tenure--the length of time a person stays with 
the same employer--are often confused with trends in downsizing and job 
displacement. In fact these trends may be quite different: because many 
workers leave their jobs voluntarily, statistics on job tenure may not 
accurately reflect rates of displacement. Yet much media attention has 
focused on a purported disappearance of lifetime jobs, suggesting that 
workers are holding jobs for shorter periods, and often implying that 
these job terminations are more frequently involuntary. The

[[Page 124]]

evidence finds that the percentage of workers with long job tenure (10 
or more years) has declined somewhat. The share of workers aged 35-64 
who have long job tenure fell by about 5 percentage points between 1979 
and 1996 but remains substantial at roughly 35 percent. The decline in 
the percentage of long-tenured workers has occurred across many segments 
of the population. Workers at all levels of educational attainment have 
experienced similar rates of tenure decline, and declines have occurred 
across industries and occupations, narrowing gaps in average tenure that 
formerly prevailed between occupations. The trends differ for men and 
women, however, and the aggregate decline in the percentage of long-
tenured workers masks an increase among women. Accounting for part of 
the overall decline since 1979 in the percentage of long-tenured workers 
are shifts in the demographic, industrial, and occupational composition 
of the labor force. Some of the decline is also due to the large number 
of new workers that firms have hired during the current expansion. 
Obviously, the addition of many workers with short job tenure by itself 
lowers the median tenure in the work force.
    Retention rates, which give the likelihood that a given worker will 
remain with the same employer in the next year, are not complicated by 
the changing rate at which new workers are hired. Analysis of retention 
rates complements findings on the cross-sectional distribution of tenure 
over all workers. Workers with less than 2 years of tenure had 
moderately higher retention rates in the mid-1990s than in the late 
1980s. On the other hand, retention rates appear to have decreased among 
workers with longer tenure. Again, however, some of these changes may be 
due to voluntary separation.

THE CONTINGENT WORK FORCE

    Contingent employment is defined by the BLS as employment without an 
implicit or explicit long-term contract. The BLS has conducted two 
surveys of such employment. The first, in 1995, found that contingent 
employment made up a relatively small share of total employment. The 
second, in 1997, found that that share was not increasing. Using the 
BLS's ``middle'' definition of contingency, about 2.4 percent of the 
labor force (3 million workers) identified themselves as contingent 
workers in February 1997, a slightly smaller share than in February 
1995. This definition includes workers who say they expect to work (and 
have worked) under their current arrangements for 1 year or less, 
whether they are wage and salary workers, self-employed persons, or 
independent contractors. In addition, it includes temporary help and 
contract company workers if they have worked and expect to work for the 
customer to whom they were assigned for 1 year or less.
    Forty percent of contingent workers in 1997 were in so-called 
alternative work arrangements. They included independent contractors, 
on-call workers, temporary help agency workers, and workers provided

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by contract firms; the remaining 60 percent were in ``traditional'' 
jobs. None of these categories of contingent workers comprised more than 
0.5 percent of the labor force.
    Contingent and noncontingent workers were strikingly similar in 
terms of educational attainment and race (Chart 3-14). Also, contingent 
workers were employed in a wide variety of occupations, belying the view 
that all contingent jobs are low-skilled jobs. However, contingent 
workers include a relatively large proportion of very young workers: 37 
percent of contingent workers, but only 13 percent of noncontingent 
workers, were less than 25 years old.[GRAPAHIC] [TIFF OMITTED]
    Forty-five percent of contingent workers were employed part time, 
compared with only 18 percent of noncontingent workers. Contingent 
workers also earned less: their median weekly earnings were only 53 
percent of that of noncontingent workers, although differences in age 
and hours worked appear to account for much of the earnings gap. 
Regardless of age, however, contingent workers were less likely to be 
offered health insurance or a pension plan by their employer.
    Data from 1997 show that nearly half of all contingent workers 
accepted their contingent jobs for personal reasons: because they wanted 
a flexible work schedule, for example, or because they were in school or 
in training. Thus, although contingent work is not a matter of choice 
for many people, it may allow others to balance their work and

[[Page 126]]

their non-labor market activities. In fact, although 57 percent of 
contingent workers stated that they would prefer a noncontingent job, 36 
percent said they preferred contingency.
    For contingent work to become widespread, of course, it must also 
meet the needs of employers. Accordingly, a 1996 survey asked employers 
their reasons for using flexible staffing arrangements. (These 
arrangements, which included hiring from temporary agencies, short-term 
hires, regular part-time work, on-call arrangements, and contract work, 
were most likely not all contingent jobs as defined above. But most were 
probably either contingent jobs or alternative work arrangements.) The 
most commonly cited reasons were fluctuations in workload and the need 
to cover absences of regular staff. Many employers also said they hired 
from temporary agencies or took on part-time workers as a means of 
screening candidates for regular jobs: 21 percent of those using agency 
temporaries and 15 percent of those using regular part-time workers 
cited this reason as important. Savings on wage and benefit costs were 
cited as important by only 12 percent of employers using agency 
temporaries, by 21 percent of those using regular part-time workers, and 
by 10 percent of those using short-term hires and on-call workers. Even 
so, the survey found that the hourly costs of workers in flexible 
staffing arrangements were lower than those of regular workers in 
similar arrangements, and that the savings were primarily due to lower 
benefit costs.

MYTHS AND REALITIES

    Nationally representative data on the employer-employee relationship 
thus run counter to much current conventional wisdom. The last several 
years have seen both a decline in job displacement and, for those who 
are displaced, shorter spells of joblessness and a smaller loss of 
earnings upon finding a new job. The disappearing lifetime job of 
popular mythology is not to be found in the data, which instead show 
only modest declines in job tenure. Moreover, contingent workers are not 
disproportionately workers with little education, the wages they earn 
are similar to those of noncontingent workers of the same age, and 
contingent work has not become more prevalent in recent years. In 
addition, the flexibility of the contingent arrangement appears to be a 
significant benefit to many workers as well as to their employers. On 
the other hand, job displacement remains relatively high given today's 
low unemployment rates, and contingent workers are much less likely to 
receive pension or health benefits than are noncontingent workers. These 
developments are part of the reason why this Administration has expanded 
and redesigned Federal policies and programs of job training, education, 
lifelong learning, and assistance to dislocated workers--initiatives 
discussed in the next section.

[[Page 127]]

         NEW DEVELOPMENTS IN JOB TRAINING AND LIFELONG LEARNING

    The Federal Government and the governments of the States provide 
assistance to workers through a number of channels. Unemployment 
insurance, job training, and reemployment services are cornerstones of 
the worker support network, helping workers to identify job 
opportunities and to retool, and providing financial support until they 
find their next job.
    In the face of a rapidly changing global economy and the increased 
rewards to more highly skilled workers, this Administration has sought 
to strengthen America's work force development system and to promote 
lifelong learning. In August 1998 the President signed the Workforce 
Investment Act (WIA), which gives workers greater control over their 
training, streamlines public employment and training services, and makes 
all training providers more accountable for their services. WIA 
establishes Individual Training Accounts, self-directed accounts that 
allow workers more choice over their own training or retraining. To help 
workers make informed decisions about which training program is best for 
them, WIA also requires that training providers report the performance 
of their graduates in terms of job placement, earnings, and job 
retention. In addition, WIA establishes universal access to core 
employment services, such as skills assessment, career counseling, 
information about vacancies, job search assistance, and follow-up 
services to assist in job retention.
    WIA streamlines employment services through consolidation. The 
Federal Government has set up partnerships with 48 States to build 
systems of one-stop career centers, which provide convenient access to a 
variety of training and employment programs under one roof. The act 
requires each local area to have at least one one-stop center providing 
job training, employment service activities, unemployment insurance, 
vocational rehabilitation, adult education, and other assistance. More 
than 800 such centers are already in operation.
    WIA also strengthens accountability for States, localities, and 
training providers. States and localities will have to meet performance 
goals for job placement, earnings of placed workers, and retention, or 
else face sanctions. But if they exceed their goals, localities qualify 
to receive State incentive grants. To become eligible for funds under 
WIA, training providers must be certified under the Higher Education 
Act, the National Apprenticeship Act, or the State procedure used by the 
local Workforce Investment Board. To retain eligibility, each provider 
must meet performance standards established by the local board. The 
information that training providers must report on the performance of 
their graduates will be available at the one-stop centers, allowing 
potential trainees to make an informed choice among programs. This in 
turn will make providers more responsive to trainees' needs.

[[Page 128]]

    The Administration is especially concerned about those whose careers 
are interrupted by corporate restructuring, changes in government 
policies, or turbulence in global markets. The Administration has pushed 
to expand assistance programs for these dislocated workers, helping to 
nearly triple funding for these programs to $1.4 billion between 1993 
and 1999. Under the Economic Dislocation and Worker Adjustment 
Assistance Act (EDWAA), one of the funding streams consolidated under 
the WIA, the Administration provides grants to State and local programs. 
They in turn decide who most needs assistance and how best to provide 
services, which can include on-site rapid response for announced plant 
closings, job search counseling and support, literacy courses, 
vocational education, and financial assistance during training. In 
addition, the Trade Adjustment Assistance (TAA) program, including a 
special transitional adjustment assistance provision under the 
legislation implementing the North American Free Trade Agreement (NAFTA-
TAA), continues to help those workers whose jobs may be affected by 
competition from imports.
    Workers are considered dislocated if they have lost their jobs and 
are unlikely to return to their previous industries or occupations. 
Included are those who have lost their jobs as a result of massive 
layoffs, plant closure, natural disaster, or Federal action. Farmers and 
ranchers hurt by general economic conditions, as well as the long-term 
unemployed with limited opportunities in their original occupations, may 
also qualify. (Note that the definition of ``dislocated'' is more narrow 
than that of ``displaced'' workers, discussed above.) In program year 
1998, over 600,000 of these dislocated workers will have participated in 
the EDWAA program. In the program year that ended in June 1997, 71 
percent of dislocated workers leaving the program were employed and had 
earnings, on average, of $10.39 per hour, or 94 percent of their 
previous wages. The Administration's strong and continued support for 
this program has also generated new funding for assisting trade-impacted 
workers not formerly covered by TAA or NAFTA-TAA and for buttressing the 
training system with innovative approaches for targeted groups.
    The lifetime learning tax credit, enacted in 1997, targets adults 
who want to go back to school, change careers, or take a course or two 
to upgrade their skills, as well as college juniors and seniors and 
graduate and professional degree students. The 20 percent credit applies 
to the first $5,000 of a family's qualified education expenses through 
2002, and to the first $10,000 thereafter.
    Information about job openings and potential workers is especially 
important in a rapidly changing economy. America's Labor Market 
Information System, an Internet-based system that shares data on 
available jobs (America's Job Bank) and workers (America's Talent Bank), 
has been designed to meet this need. America's Job Bank (located on the 
World Wide Web at http://www.ajb.dni.us/) posts roughly 700,000 jobs on

[[Page 129]]

any given day and received over 6 million ``hits'' (individual job 
searches) in July 1998 alone. America's Talent Bank (http://www.atb.org) 
was fully integrated with the job bank in May 1998, and as of July a 
total of 112,000 r<greek-l>sum<greek-l>s had been posted with the 
service. In addition, workers and employers can obtain information about 
the wages and employment prospects of certain occupations across the 
country using America's Career InfoNet (http://www.acinet.org/acinet/).
    These policies help ensure that all workers can find employment 
following a job loss, or improve their training and skills in order to 
move up in the labor market. This Administration is committed to making 
sure that the labor market benefits all workers, and that the benefits 
of the current economic expansion are enjoyed by all.