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CONSUMER PRICE PROGRAM
A number of factors point to a need for initiating a program for revising the Consumer Price Index to adjust to changes in the pattern of consumer expenditures.
The index is based upon a "market basket” of goods and services bought by moderate income families and measures the changes in the prices of the goods and services that make up that market basket. The composition of the market basket was last fixed on the basis of family spending patterns in 1950. This market basket is now fast becoming out of date.
Spending patterns have changed over the last decade in several ways:
(1) Families are larger. There are more old people and more children. Family needs have changed, with larger families spending more of their income for food and less for other things.
(2) The population has shifted geographically from its 1950 locations. As a whole, the population is 15 percent more than it was in 1950, but some regions have increased 30 percent, and others less than 5 percent.
A higher proportion of our families live in the Southwest and West. Their needs are different from the needs of those living in the North.
(3) Families are moving to the suburbs and are spending less on dress clothes and outside entertainment, and more on houses and gardens.
(4) Family incomes are higher. Even when account is taken of higher prices, real income in 1957 was about one-fourth higher than in 1950. Higher incomes are used to buy more TV's, more cars, more travel, more education, and more medical care.
The smaller proportion of income is spent on food, but food expenditures are themselves going more heavily to frozen foods, meats, and fresh fruits.
EXPENDITURE SURVEY REQUIRED To bring the market basket up to date, a new family expenditure survey is required. The survey proposed is similar in scope and character to that carried out from 1950 to 1952, which provided the items and quantities for the market basket which currently underlies the CPI.
The revision program would be carried on over a period of 5 years starting with initial planning work in July 1959 and ending with publication of the new index with new weights in January 1964.
The 1950 revision required overall appropriations of over $1 million. Since that time, of course, there have been sizable increases in personnel costs, transportation costs, and other expenses.
Our tentative estimate is that the new program over the 5-year period will cost about $4,600,000, on the basis of current costs. The last revision, if conducted at present-day costs, would be considerably more than $4,600,000.
It is our hope, however, that by utilizing the experience gained during the last survey, and by careful planning, we can keep the cost well below the updated cost of the earlier survey.
IMPROVEMENT OF CURRENT INDEX
In the meantime, it is most desirable that we take measures to improve the current index. Some of the factors which point to such a conclusion are:
The list of 300 commodities and services now priced for the index has remained virtually unchanged for the past decade. In the meantime, the number and variety of goods available in the consumer market has increased greatly.
The creation of new kinds of stores-discount houses and suburban stores-has resulted in a sizable expansion in the numbers and types of sources from which consumers buy.
Since price trends in these outlets are not uniformly reflected by price trends of large department stores and shops in the central cities, it is important that the new outlets be included in the pricing program.
There is greater month to month change in the prices of many commodities than was the case several years ago.
At the present, the Bureau of Labor Statistics collects prices monthly in all the 46 Consumer Price Index cities only for food and fuels. Other commodities are priced largely on a quarterly basis. More pricing should be done on a monthly basis.
LABOR FORCE STATISTICS
It has long been considered unsound to have the responsibility for the employment and unemployment statistics of the Government divided between the Commerce and Labor Departments. There are three major types of government data in the employment, unemployment, and labor force field.
Employment by industry and area have been collected from establishments by the Department of Labor, directly and through the States, under a cooperative program. Unemployment compensation claims are collected from the States by the Department of Labor.
On the other hand, the figures on total unemployment, total employment and labor force contained in the monthly report on the labor force, are collected from households by the Department of Commerce.
As it became obvious that coordination of these programs was essential to make the statistics more useful to the public, a combined release on employment and unemployment was developed by the Departments of Commerce and Labor. The Secretary of Commerce and I have now become convinced that even greater coordination and centralization will be in the public interest.
We, therefore, have reached an agreement, with the concurrence of the Director of the Bureau of the Budget, to give the Department of Labor the full responsibility for planning, administration, and publication of labor force, employment, unemployment statistics, including those obtained from the current population survey.
This arrangement, when confirmed, by appropriation action of the congress, will provide current comprehensive labor force, employment, and unemployment information from a single source, the Department of Labor. The Department will contract with the Census Bureau to collect and tabulate as agent of the Department of Labor, labor force statistics from its current population survey sample of households.
The agreement with the Department of Commerce is consistent with the recommendation of the Commission on Organization of the Executive Branch of the Government in its report to the Congress in 1949.
The centralization of these three types of data in the Department of Labor will provide better integration of the results of the labor force, employment, and unemployment surveys; facilitate analyses which will throw more light on current employment and unemployment problems, and give the public a single point of contact with respect to these data. These new arrangements do not involve any increase in funds for the Government, as a whole.
As a part of the agreement discussed above, the collection and dissemination of construction statistics will be consolidated in the Department of Commerce. All work done by the Department of Labor in this will be transferred to the Department of Commerce.
Senator HAYDEN. Let me ask you with respect to this arrangement about the construction program. Could that be done by the President, or would you submit it as a kind of Hoover Commission program?
Secretary MITCHELL. It can be done administratively within the executive branch.
Regardless of what the executive branch may do, Senator, the Congress would have to take some of the appropriation that is now given to the Department of Commerce and place it in the Department of Labor. This is what we are requesting.
As far as the executive branch is concerned, the matter has been decided upon and when Congress confirms the appropriation, the change will be put into effect.
Senator HILL. In other words, you are asking now that these funds be carried in this bill for the Department of Labor ?
Secretary MITCHELL. That is right.
Senator HILL. Rather than put in the Department of Commerce bill for the Department of Commerce?
Secretary MITCHELL. Exactly.
Senator Hill. This plan having been agreed upon and approved by the President, the Chief Executive?
Secretary MITCHELL. Yes, sir.
CHANGE IN FINANCING MEXICAN FARM COMPLIANCE PROGRAM For 1959, the Congress appropriated $480,000 for the "compliance activities” of the Mexican farm labor program. Currently, the total cost of promoting compliance and enforcing compliance is financed from two sources:
(a) Partly by direct appropriation; and
(6) Partly out of the revolving fund. It is not practicable to continue this divided financing of this function. Field people working on this phase of the program must perform the variety of functions which are specified on pages 125, 126, of volume 2 of the budget justifications, some of which are promotion functions, some enforcement functions.
For 1960 we are proposing that the total combined function of promoting compliance, investigation for compliance and enforcement, be financed from a single source, by direct appropriation. This would be in keeping with the principle expressed by the House Appropriation Committee in last year's report.
Senator Hill. Speaking of that now, you have funds in the revolving fund?
Secretary MITCHELL. Yes, sir.
DISPOSITION OF REVOLVING FUND
Senator HILL. What would you do with them if you are going to have it all out of appropriations?
Secretary MITCHELL. Mr. Dodson.
Mr. Dodson. The revolving fund is created by the amount we charge the growers for bringing in the Mexican workers. If this expense is defrayed from regular appropriated funds, it would be less of a drain on the revolving fund.
Then if the revolving fund account should show a growth to the point that we can reduce the rate of cost of bringing in Mexican workers, why, that is what we would do. This is a particular administrative type of job that we are doing here, one dealing with compliance work, and it has been the general expression from most people that it should be financed by the Federal Government.
Secretary MITCHELL. I think the point here, Senator, and I think there was some mention of it last year by the House Appropriations Committee, is that it was unfair to ask the farmer to pay for enforcement activities of the Federal Government; that it was fairer to have that out of direct appropriations.
Senator HAYDEN. On the other hand, the farmer does pay for recruiting and bringing them into the country?
Secretary MITCHELL. Yes, sir.
As Mr. Dodson points out, if the revolving fund is relieved of any part of its current expenses and any excess develops then the fund is reduced by lowering the payment that the farmer makes.
Senator HILL. In other words, the Federal Government should only pay for the enforcement of what we might even call policing of the program?
Secretary MITCHELL. That is right.
STATE EMPLOYMENT SECURITY PROGRAM
GRANTS TO STATES
There are two major changes with respect to this program. One, previously referred to, involves an increase for such items as salary increases for State employees, higher rental costs, and increasing coverage.
The other change involves a decrease of approximately $10 million to reflect a reduction in claims activities workload due to an improvement in the economic outlook for 1960.
Insured unemployment is estimated to average 2.1 million a week in 1960, as compared to 2.3 million for 1959 and 2.2 for 1958.
We estimate that 2,130,000 employers will be covered in 1960 as compared to 2,068,000'in 1958 because of expanding coverage.
It is anticipated that the states will service 9,500,000 applicants for employment and make 5,493,000 nonagricultural placements.
The statement made to this point was developed several months ago when the estimates were prepared. Since that time there has been improvement in the employment picture and change of activity to some degree in the employment security administration. As the claim load has decreased, employment service activity has increased.
Small amounts have been included in the estimate to cover:
(a) The Department's participation in the activities of the Career Executive Board.
(6) Cost of entertaining foreign visitors.
(c) Expanded activities of the President's Committee on Physically Handicapped.
(d) More complete union financial reporting under the TaftHartley Act, with the necessity to handle periodic peakloads of reports received.
(e) To include Alaska on a comparable basis with other States in the Bureau of Labor Statistics statistical program.
WELFARE AND PENSION PLANS As you know, Congress enacted in the final days of the last session the Welfare and Pension Plans Disclosure Act, Public Law 85-836. This legislation is of far reaching significance. It affects many thousands of employers and the welfare and pension plans covered by the law provide benefits for millions of workers.
The law became effective January 1, 1959. To discharge our responsibilities promptly and effectively requires supplemental funds for the present fiscal year as well as funds for next year.
A supplemental estimate for 1959 of $450,000 was included in the President's budget for later submission. The estimate for 1960 will place this program on an annual basis.
The total annual cost for this new legislation is estimated at $895,000.
Briefly, administrators of pension plans and of welfare plans, which include plans providing life insurance, hospitalization, surgical, sickness, accident, unemployment and similar benefits, must file two copies of a description of their plans with the Department of Labor. This must be done by April 1 of this year.
In addition, an annual report covering primarily the financial operations of each plan must be filed within 120 days after the end of the fiscal year of the plan.
When I testified before the Congress on proposed legislation in this area, I indicated that an estimated 250,000 plans would be affected. Our budget estimates are based on this minimum figure.
Much depends upon the manner in which plan administrators elect to file their reports. Many employers have several plans providing different kinds of benefits or covering different groups of employees such as their salaried or hourly rated workers.