very informative story about the amount of government services presently being provided by State and local government. The mythology of it is that it is all Federal. But, in fact, the Council of Economic Development, the businessmen's organization, through Mr. Cisleono, the former Under Secretary of Labor of the Eisenhower administration and the Assistant Secretary in the Nixon administration, who wrote the article, brings to our attention that 90 percent of all of the services are carried out by local and State governments. And the report indicated that you cannot burden them any more; that they are already overloaded and there are certain services they cannot take care of. But, we will get into that as we go along.

Mr. Killingsworth, you may proceed.

STATEMENT OF CHARLES C. KILLINGSWORTH, PROFESSOR OF ECONOMICS AND LABOR AND INDUSTRIAL RELATIONS, MICHIGAN STATE UNIVERSITY, AND CHAIRMAN, NATIONAL COUNCIL ON

EMPLOYMENT POLICIES

Mr. KILLINGSWORTH. Thank you, Mr. Chairman.

I call to the attention of the committee a problem which, in my judgment, has been neglected. I think it was neglected in the Economic Report. I have seen relatively little attention given to it in the press and in discussions of our economic problems of 1976. I refer to the prospect that a great many people, who are now depending upon unemployment compensation benefits to keep them out of poverty, are going to run out of eligibility for those benefits during 1976. And given the trends that seem to be well established, and in the absence of major new legislative authorizations, Mr. Chairman, it seems perfectly clear we are going to have very substantial numbers of people who will simply have nowhere to go.

Chairman HUMPHREY. That has been relatively obscured.

Mr. KILLINGSWORTH. I believe that is right. I think that it is important to emphasize certain points.

I have a prepared statement, which I submitted to the committee for the record. I am simply going to summarize some of the principal points in that.

As you know, around 6 million, something in excess of 6 million workers are now receiving unemployment benefits under various programs. It is very hard to get any estimates of the rate or number of exhaustions. I am told that the best you can do is to look at what is the program of last resort, which is Federal supplementary benefits. Now, if you take that number-and it is probably an understatement of the exhaustion numbers, but at least this gives us a bottom figure that we can work with-we see during 1975 the exhaustions under the FSB program came to 1.1 million. And the estimate for 1976 is 1.8 million workers.

As I say, these figures are probably an understatement.

It is interesting, and I think quite important, to try to trace through what happens to people who exhaust their unemployment compensation benefits. There were some studies of that made back in the 1950's when we had a fairly high level of unemployment, although noth

ing comparable to what we have now. Very little work has been done on this and

Chairman HUMPHREY. I lost track of your comment.

Mr. KILLINGSWORTH. It was on what happens to people who exhaust their unemployment benefits.

Chairman HUMPHREY. Yes; where do they go?

Mr. KILLINGSWORTH. The Department of Labor has been foresighted enough-well, in one case it was with a nudge from the Congress and in the other case it was on their own initiative. The Department of Labor is undertaking to make a longitudinal study, a study over a period of time of a group of exhaustees and to find out what does happen to them and what their characteristics are and what their fortunes are in the labor market. I think that the findings, necessarily preliminary, of one of these studies-and that has now become available—are of considerable interest. I think they should be called to the attention of the committee. And I have tried to summarize them briefly in this statement.

Now this is based on a sample study. It is a random sample of 2,000 individuals, drawn from four large cities across the country: Baltimore, Chicago, Atlanta, and Seattle. They are a little older than the average unemployed person-Ms. Bergmann will be interested to know this-that there is a larger percentage of females than males among the exhaustees.

To me, one of the most interesting and significant findings is that these exhaustees appear to have regular work histories and a firm attachment to the labor force-90 percent of these people had not received any unemployment benefits in the 3 years immediately prior to the time that they lost their last job, which did land them on the unemployment benefit rolls. At the time that their benefits ran out, 46 percent of the exhaustees dropped below the poverty line. When they had the benefits, only 15 percent were below the poverty line. This, I think, is an indication

Chairman HUMPHREY. That is a very revealing figure.

Mr. KILLINGSWORTH. I think it is an indication of the contribution unemployment benefits have made to preventing the further development of poverty in this country as the result of the recession.

Chairman HUMPHREY. I don't think anybody has really made a calculation, Mr. Killingsworth, as to what the so-called "stabilizators" have meant to domestic tranquility, so to speak, if you would imagine what would happen in this country without food stamps, without unemployment compensation, without extended welfare benefits, and what would be happening in some of our major cities, well, I predict without those there would be open violence. These economic and social stabilizers have not only provided a modicum of assistance so that people can live and have some clothing and have some food and some medical care and so forth; but in a real sense, they have tempered the emotions. They have calmed people down somewhat. But, when they run out of these benefits-and I gather you feel the figure to be substantially larger than what was projected in the President's reportbut when they run out, then I think you are looking forward to some real not only heartache and suffering, but some potentially dangerous problems, particularly with the administration's plan to end the sum

mer youth employment program. For the life of me, I cannot understand why they would be doing something like that at a time when there is so much unemployment in our core cities. Go ahead.

Mr. KILLINGSWORTH. There is a suggestion, I think, in one section of the economic report, Mr. Chairman, that a great deal of unemployment is voluntary and is prolonged by unemployment compensation benefits. I think some light was thrown on that by this study that I am quoting from. There was a set of interviews made 4 months after the exhaustion of the benefits of these people and only 25 percent of them 4 months after exhaustion had become reemployed. Fourteen percent had dropped out of the labor force. Sixty-one percent were still unemployed 4 months after they ran out of benefits. The most important factor in determining whether or not these people got jobs was not how much effort they put forth, according to this study, but rather the state of the labor market in which they found themselves; in those areas in which there were more jobs available, they had a better chance. It is a perfectly obvious point, but I think it is one that needs reemphasis in view of this implication that so much unemployment today is voluntary.

Now, data have just become available this week about interviews that were made 1 full year after the exhaustion of benefits. And by the great courtesy of the Department of Labor, I am permitted to cite some of these figures today.

Now, this is significant, I think, because some of these people were picked up under the new programs that were enacted at the end of 1974 and early 1975. But, by October and November of 1975, these people would have exhausted any benefits under these new programs and would have been without benefits for some time.

It is interesting to consider the numbers that have qualified for welfare payments by this time of October or November. And I think the figures are surprising. I was quite surprised. Only 7 percent of the whites and 24 percent of the blacks were receiving food stamps under which the eligibility is probably the most generous. Two percent of the whites and 9 percent of the blacks were on the AFDC rolls. Two percent of the whites and 8 percent of the blacks were on general assistance payments. A negligible number, something under 2 percent, were receiving the SSI benefits.

There is also some interesting data concerning the loss of health insurance, which was a big subject of discussion last year. I have the figures in my prepared statement. I am just going to limit myself, Mr. Chairman, to the most significant human aspect of this loss of health insurance. Forty percent of the people in this sample had totally lacked health insurance coverage for more than 40 weeks during their period of unemployment.

Chairman HUMPHREY. And those are the people that had had health insurance prior to that?

Mr. KILLINGSWORTH. That is right. And in those families 24 percent of those who had lacked a health insurance plan for some time, in 24 percent of those families, some family member had postponed medical care or had gone without medical care that otherwise would have been obtained.

Now, the point that I try to make is that we speak of unemployment compensation as the first line of defense against unemployment. And

I raise the question: Where is the second line? What is the second line? If the second line is welfare, then it seems to me that these figures show there is a big no-man's land between that first line and the second line.

And the reason for that, I believe, is that in order to be eligible for welfare, you have to be destitute in most States. If you have a little savings account, if you have a car, if you have an equity in a home, if you have some kind of asset or something that can be converted into a liquid asset, then in a great many States you simply cannot get on welfare. So what we are likely to see with a great many of these exhaustees is a process by which they fall farther and farther into the state of destitution. Many of them are below the poverty line, as is shown, but they are not poor enough. They have to be really poor.

Chairman HUMPHREY. And some of them just do not want to apply. Mr. KILLINGSWORTH. Yes, it is a matter of pride. But pride will not stand up forever when the children are hungry, to put it in somewhat emotional terms. So there will be increasing reliance on welfare, but only obviously at the cost of large numbers of people being pushed down into destitution.

Now, these numbers will be larger than the number of the exhaustees. That number indicates, of course, the wage earners and usually principal wage earners, though not exclusively.

If you count in the members of families that will be affected by this process, then you come up with several million people that we are condemning to destitution by the economic policies that we are following in the year 1976.

I am not going to try to give you a long list of recommendations. You have had some excellent recommendations already in this hearing and others. I would like to put in a little plug for a report which has been put out by an organization that I am connected with, the National Council on Employment Policy.

Chairman HUMPHREY. Do we have that report?

Mr. KILLINGSWORTH. I would be very glad to submit a copy of it for the committee's consideration.

Chairman HUMPHREY. Yes, I would like to have it for the committee. If you have two, I would like one for the chairman, because I find one of the real problems in Government is being able to get anything out of the record, once we get it in there.

Well, you give us that one and I will see that I get ahold of it. Mr. KILLINGSWORTH. I can provide copies this afternoon from our office.

Chairman HUMPHREY. Thank you, I would appreciate that. I would like to see that each member of the committee gets a copy, if you have some copies. Will the staff see to it that each member gets one?

I have heard so much about your report. It is new. And I want to say that we welcome it. It is a most timely report. We are just now going to move into our 30th anniversary conference. We are looking at the whole employment problem and the unemployment problem and all the relevant facts to it. So, this will be very helpful.

Mr. KILLINGSWORTH. I am very flattered by your interest and you can be sure you will be flooded with copies by this afternoon. I want to add just one final personal thought. This document was prepared in a way to represent a consensus of a number of members of that

group. And speaking solely for myself-well, there are some other members who agree with me, but I am not speaking for this Council on Employment Policy-let me say that I am looking forward very much to seeing the revised version of the Humphrey-Hawkins full employment bill.

Chairman HUMPHREY. You are going to like it.

Mr. KILLINGSWORTH. Mr. Chairman, I had some real reservations initially about any attempt to guarantee full employment. But, as I have seen what has been happening, and as I have thought about various alternatives, I have become convinced that the Humphrey-Hawkins bill represents what I call the straight line between two points. And it is my feeling about that bill, that that approach would have a large direct affect and also a large indirect affect. I think it would stimulate many efforts, a multiplicity of efforts on the part of government and the private sector as well. And I think that your bill would give us, as I say here, a fairer society and a more compassionate society and a sounder society and a more prosperous society.

I thank you very much.

Chairman HUMPHREY. Well, thank you. That is a splendid endorsement. We are going to unveil the revised bill here very shortly, and I think that it will project a formulation of policy on the part of government that will have substantial benefits.

Mr. KILLINGSWORTH. Needless to say, if that bill were in effect, this would solve the problem I have spoken about; namely, the problem of exhaustion of unemployment benefits. It is too much to hope that it is going to be in effect instantly, so I think we still have that problem for the year 1976.

Chairman HUMPHREY. We will have that problem for a couple of years or more, I am sure.

As I say, your prepared statement will be printed in the record. [The prepared statement of Mr. Killingsworth follows:]

PREPARED STATEMENT OF CHARLES C. KILLINGSWORTH

UNEMPLOYMENT IN 1976

1

I wish to thank the Joint Economic Committee for the invitation to present my views on some aspects of the Economic Report of 1976.

What is left unsaid in this Report is in some respects more significant than what is said. I see one major gap, in the form of a question which is not even asked: What is going to happen this year to the millions of unemployed workers who will exhaust their eligibility for unemployment benefits and will still be unable to find jobs?

The Report recognizes-as everyone must-that the chief means of alleviating some of the financial hardships of unemployment in this recession has been unemployment compensation. During most of calendar 1975, between six and seven million unemployed workers were drawing benefits. As of the first week in February (1976), 6.2 million workers were still receiving benefits under seven major programs, the Department of Labor reported.

The Economic Report emphasizes that recovery from the recession will be gradual, and it recites many reasons why the Council of Economic Advisors regards such gradualism as desirable, perhaps the most important one being the perceived need to avoid any revival of inflationary expectations. The immediate consequence of slow recovery is prolonged high unemployment, and the CEA forecast is that the national unemployment rate will still be approximately 7.5 percent at the end of 1976. The large reported drop in the national unemployment rate from December to January (from 8.3 percent to 7.8 percent) and

1 University Professor of Economics and Labor and Industrial Relations, Michigan State Tniversity; Chairman, National Council on Employment Policy.