bookkeeping duties have been reduced to clerical tasks in many large offices, and bookkeeping probably will not survive in its present form; principles will largely take precedence over practice in bookkeeping classrooms. Typists will be upgraded and they will assume duties of stenographers; shorthand will decline as a vocational use subject. Typists will *** type from information that has been dictated to a transcription machine * * * all business courses will be affected by electronic data processing to some extent, and both teachers and students should probably familiarize themselves with the principles that are basic to electronic data processing. Training in fundamentals *** is going to be the best kind of training for the workers in a mechanized office. Students are going to have to be more responsible, able to think for themselves, and have a more solid foundation in logic and mathematics.

D. The need for retraining

One of the solutions most frequently mentioned in alleviating the problem of unemployment is retraining. However, there are many problems and factors to consider in determining whether a person is retrainable and for what type of job he should be trained. Prof. John T. Dunlop said that

it is important to explore the relations between the old skills and the acquiring of new skills. The gaps between the old and the new may be more than skill in the ordinary sense; there may be differences growing out of educational levels, age, [and] sex. *** Many of the workers on the old processes may not be adaptable to the demands of the new *** while in other cases the experience on the old may contribute to mastery of the new.

Inadequate education is a key factor limiting retraining possibilities. Professors Shultz and Baldwin summarized the importance of education when they said that automation will cut out dull and routine jobs and create others requiring greater education and skill. Professor Ginzberg believes that workers should have a "sound basic education and training which would contribute to the future flexibility of members of the labor force by enabling them to shift more readily to new types of work."

In discussing the importance of education in the training of workers in a technological age, Roger W. Bolz, publisher-editor of Automation magazine, states that:

Understanding the rudiments of science and technology is imperative if one is to adapt himself easily to the times. ** ** The primary emphasis will be on what has been termed "conceptual" skills rather than present "perceptual" kinds. As operations become more and more automated, personnel requirements move up the scale toward the management end. On-the-line production skills of machinelike varieties gradually disappear and higher levels take their place. * * *

These statements indicate that in a society experiencing advanced technological change, workers must be well educated and flexible enough to perform a variety of jobs and to move to places where new job opportunities are being created.

Some warnings have been uttered about the limitations of retraining. Denise has stated that

retraining is not a panacea for unemploymepnt. If jobs are not available, retraining cannot possibly serve to reduce unemployment. *** Recent reports on existing retraining programs have not been encouraging. They suggest that most of the unemployed-particularly the older unemployed-have little interest in retraining; that a high proportion of those who have completed retraining programs have not been able to find work in that field for which they have been trained; that a substantial proportion of the chronically unemployed lack the necessary background and ability to absorb meaningful training, and that jobs they can fill require little, if any, formal training.

In addition to suggestions for strengthening the program of vocational training for the untrained and for retraining those whose original skills are no longer needed, other recommendations have been made to help the unemployed. In order to provide better information about job opportunities in an area, State, or in the country, and as a guide for vocational guidance personnel, both Walter Reuther, president, United Automobile Workers, and Professor Faunce believe that agencies responsible for training and placement of workers should receive from employers a list of all openings available. Others have recommended more effective career guidance for young people and better education of the public on evils of racial and age discrimination. *.

F. Foreign experience

Introduction of automation has proceeded at a somewhat slower rate in foreign countries than in the United States. However, attention has long been given to effects of technological change in general, and national outlooks toward automation have been determined largely by previous approaches to technological change. This approach is greatly influenced by the national level of industrial development and the employment-manpower situation.

Those countries with chronic unemployment difficulties may resist an influx of labor displacing technology whereas areas with manpower shortages will be indifferent to, or openly advocate, its introduction. India, with a sizable surplus labor force, has tried to discourage the rationalization of production until greater employment opportunities are created in the same or allied industries. Sectors of their textile industry have, for many years, been denied licenses to import automatic looms on the grounds that displaced labor could not be reabsorbed by the economy. Conversely, the Australian Ministry of Labor has stated, in a report on automation, that

As long as our economy is expanding, there seems no need to fear that technological change must cause serious unemployment *. The development of "automation" need not necessarily be the most important technical influence: the emergence of effective substitutes for wool could be, for Australia, a factor with more far-reaching consequences.

The industrial nations of Western Europe believe a rapid adoption of automation and other technological advances to be necessary for economic survival. At the same time, the possibility of a harmful impact upon various groups of workers is recognized, and measures to ease this impact have been taken. Transfer and resettlement subsidies are provided to increase worker mobility. In some cases, unemployed workers may receive additional benefits if their displacement has resulted from technological change. These safeguards appear in contracts and laws concerning dismissal provisions. Unemployment which stems from technical change also satisfies eligibility requirements for the receipt of special assistance under many national programs. Accelerated vocational training courses are open to workers having to change occupation because of technological

evolution.

Until 1958, a readaptation program by the European Coal and Steel Community authorized assistance only "if the introduction of technical processes or new equipment *** should lead to an exceptionally large reduction in labor requirements in the coal and steel

industry, making it especially difficult in one or more areas to reemploy the workers discharged." This program, which was inaugurated in 1954, provided workers with waiting allowances, retraining, and assistance in relocation. By February 1958, 18,560 workers had received aid. Following a broadening of the program's coverage, 110,000 workers had applied for readaptation through their governments by February 1960.

The European example seems to demonstrate that neither the shortnor the long-run problems associated with automation's introduction are insurmountable when economic conditions are favorable, and proper measures are taken. Measures to increase mobility have decreased frictional unemployment, and retraining programs have placed up to 95 percent of graduates in the vocation for which they were trained. When labor shortages exist, it has been possible to arrange for future placement of a majority of the trainees while they are still in training.

In a report dealing comprehensively with technical trends related to automation developments and their impact on labor and management, the British Department of Scientific and Industrial Research attempts to evaluate automation's impact upon future industrial life. It is concluded that management's responsibility for planning and control will increase. This will stem from greater technical complexity of industry, integration of production flow, and higher capitalization requirements. Increased difficulties will arise in the recruitment of engineering and technical personnel. Finally, it is noted that little labor displacement from individual firms had been noted at that time. Prevailing economic conditions and a management policy to find alternative employment for displaced workers were considered as the reason for this ***.

[Paper prepared for the Senate Subcommittee on Employment and Manpower, Dec. 27, 1963]

FACTORS INFLUENCING EMPLOYMENT AND SOME SPECIFIC MEASURES TO COMBAT UNEMPLOYMENT

(By Phillip S. Babb, director, McKinsey & Co., Inc.*)

The Subcommittee on Employment and Manpower has heard testimony from many citizens who have given thought to the growing problems of unemployment that plague our increasingly well-to-do country. Most men, when they think about unemployment, are baffled by the incongruity of our great resources, responsive democratic form of government, able management, and work force, and fabulous technology on the one hand, and on the other our apparent inability to do anything about our persistent, growing army of unemployed and the underdeveloped areas within the country that fall further behind as the material well being of the majority increases.

Keynes shook many established beliefs when he told us in the thirties that the economy could stabilize at less than full employment and that government could and should do something about it. Many years of growth and prosperity accompanied by stable or growing unem

*This is a personal statement and does not represent the opinions of the firm of McKinsey & Co., Inc.

ployment have demonstrated that the faith (publicly professed by many businessmen and politicians) that the system will be self-correcting if we just stimulate total demand is ill founded.

I do not argue here that we should not stimulate aggregate demand (by such measures as the proposed tax cut, for example) but that without other fundamental measures, such stimulation is a temporary palliative. My belief is that we are drifting into a crisis period as serious as the great depression, but obviously different in kind. With our greater enlightenment, political, managerial, and technical skills, we should be able to break this problem into manageable pieces, study them, and take corrective action.

The number of unemployed seems to persits at the 4-million-plus level despite improvement in business conditions and continued. growth in our gross national product. Various reasons are advanced for this:

1. Aggregate demand is not growing fast enough to provide the number of jobs required by the predictable increase in the available work force in addition to the steadily increasing number thrown out of work by automation or other forces that are increasing our productivity.

2. Different growth and decline rates in important sectors of our economy increases the number of people who are out of work for periods of less than 15 weeks. Although many find jobs in growing sectors, the pool of short-term unemployed is kept fully by those laid off in declining sectors.

3. The less educated groups in the total work force find the hiring criteria for available jobs more and more difficult to meet. Particularly as they grow older, they tend to join the ranks of the permanently unemployed.

4. The underdeveloped sections of the country do not respond significantly to generally improved economic conditions and drop further behind the more prosperous sections of the country. The proportion of unemployed in these areas is much higher and tends to grow higher.

Clearly all of these are interrelated and important. However, I shall not attempt to discuss measures to increase aggregate demand except as it is contributed to by measures dealing with the other related areas of the total employment problem. Because of limitations in my own background and knowledge, my comments will be directed only at certain aspects of productivity, frictional and structural unemployment, and underdeveloped areas of the country.

PRODUCTIVITY

Many people express the belief that there has been a sharp change in the rate at which productivity is increasing. Did we cross some dividing line sometime between the late forties and middle fifties after which increased productivity began to bite into the rate at which new jobs were created by growth in our gross national product? A number of people feel this has occurred and I share their view-but on the surface, the data does not seem to validate this conclusion. For example, both Leon Greenberg1 and A.J. Jaffe 2 in their testimony

1 Leon Greenberg, U.S. Department of Labor, p. 33, testimony before Senate subcon mittee, Sept. 26, 1963.

2 A. J. Jaffe, Columbia University, Sept. 26, 1963.

before this committee demonstrated that changes in the rates of growth of various sectors of the economy in recent years did not exceed by any significant margin (and are often exceeded by) growth rates of earlier periods.

However, these percentages are constantly applied to a larger base so that 4 percent in 1962 is a tremendously greater absolute increase that 4 percent in 1947.

3

Leon Greenberg's analysis clearly demonstrates the pitfalls of taking comfort from constant percentages. An excerpt from his indexes of output per person is shown below:

For example, in the nonagricultural sectors, a 4-percent increase in productivity in 1962 displaced 71 percent more people than a 4-percent increase would have in 1947; or from another viewpoint, to hold employment constant, each percentage point increase in productivity requires the creation of 71 percent more new jobs in 1962 than it did in

1947.

Net additions to the work force between 1962 and 1970 are projected at about 11 million, and the proportion of work force under 25 years of age will rise from 13.7 million in 1960 to about 19.9 million in 1970 (18.7 to 23 percent of the total work force). There will be a large increase in the proportion of the work force 45 years of age and over (1960, 27.5 million; 1970, 32.6 million, or from 37.6 to 38.1 percent of the total work force). The numbers in the 26- to 45-year age bracket will remain about constant. The need for accelerating growth to create jobs becomes immense and compelling.

While the average GNP per employee was about $8,800 in 1962 according to Walter Heller in his testimony before the committee on October 28, 1963, the GNP per additional nonfarm job might run $17,000 to $18,000 after allowing for the effect of increased productivity. The $11 billion tax cut is hoped to have the effect of creating about 1.3 to 2 million jobs plus the hope that it will stimulate the whole economy to surge forward at a higher rate.

The addition of greater proportions of young and middle-aged workers complicates the task of keeping ahead of the great quantitative increases in productivity mentioned earlier. The young, although better educated (the high school graduate proportion will be 60 versus 50 percent in 1960 and college graduate proportion will increase from about 12 to 14 percent according to Harold Goldstein) have little or no experience. If unemployment rates in 1970 are at present levels or higher, this younger group of high school graduates especially is

Op. cit. p. 32, table 1.

Data in this paragraph are from table 6 of Harold Goldstein's U.S. Department of Labor testimony before the Senate subcommittee, Sept. 26, 1963. Walter Heller, pp. 43-44.