1 Mr. SHEFFIELD. No. I don't think you can assume that they will do this if they are going to lose money. Senator MONDALE. So if we want the disadvantaged hired, someone has to help pick up part of the cost, is that right? Mr. SHEFFIELD. I am suggesting how we use tax money. Senator MONDALE. You prefer a tax cut to a direct subsidy? Mr. SHEFFIELD. How about a tax incentive for business? Have we explored that enough? Senator MONDALE. That's what I mean. In other words, rather than pay them money through a check, we will let them deduct it on their taxes. Mr. SHEFFIELD. How about a program which would do a bigger job of encouraging businessmen and firms of medium size to employ unskilled people and offset some of their training costs? When you really are talking about a job at hand, and when you are training a person for that job, which he is on or about to be on, I think we have all seen in our exposure to training projects, there is a substantial difference in the level of retention of the training information as well as the success of the training effort as opposed to a training program that goes on for a job that may or may not exist at the end of the line. Senator MONDALE. One final question. I am chairman of the Migratory Labor Subcommittee in the Senate and we are deeply concerned about the tragic circumstances of migratory farmworkers throughout this country as well as in southern Florida and southern Texas and southern California; and the unemployment rates, the tragic unemployment compensation schedules where they cannot find employment; the fact that there appear to be almost unlimited possibilities for impoverished, unskilled Mexicans to cross the border and depress working conditions; to take jobs, break strikes and the rest. What is the policy in your department toward that problem and what are you doing to try to deal with it? Mr. SHEFFIELD. In California it is a real serious problem. The HRD Act of 1968, however, addresses itself very clearly and specifically to the urban situation. While we have HRD centers in economically disadvantaged areas in the central valley of California, the intent I believe, in 1968 in that legislation was to deal certainly with the problem of the cities. I think we are going to have to take a look, both at the State and Federal level very carefully at the balance-of-manpower services that we are providing the cities verus what we are providing in the rural areas. We are engaged in some MDTA training activities in the rural areas now. We are deeply engaged in trying to involve the private sector in upgrading the skills of farmworkers. We are engaged in the migrant housing plan, but I do agree with you Senator, this is a significant problem in certainly California and I would imagine in the country. Senator MONDALE. Do any of the other panelists wish to respond? Mr. JOHNSON. May I give you the unemployment rate for Los Angeles County? In December it was 4.1-rather 4.2; 0.1 up from November and 0.3 up from December of 1968. Senator MONDALE. Thank you. I will ask counsel for the committee, Mr. Spring, to ask a couple of questions. Mr. SPRING. Mr. Johnson, we are sorry that Mr. Morgan, who as you know has had vast experience in the Los Angeles manpower program and wasn't able to make it because he was ill, there were a series of questions we were hoping to ask him and probably the No. 1 expert countywide experience. We are particularly intrigued by the figures which you quote in your testimony here that was in your report, that there is a universal need of something like 784,000 people needing manpower services and that a generous estimate of how many are served if any one at all, is about 100,000. We were looking forward to questioning him about that and asking questions about how many people over the last 4 or 5 years have been trained and has not been placed in permanent employment. We were wondering if it would be all right for us to submit questions to him in writing and to include those in the record? Mr. JOHNSON. We would be very happy for you to submit any questions that you would like and we would be glad to take care of it and send it to you at your earliest convenience. Mr. SPRING. We would also like to ask your professional judgment on which programs have been most promising and precisely why and look forward to finding out this information. Thank you. Senator MONDALE. Thank you very much. We will recess until 1:45 this afternoon. (The Senate subcommittee recessed at 12 p.m., to reconvene at 1:45 p.m., the same day.) AFTERNOON SESSION Senator MONDALE. The subcommittee will come to order. The first witness this afternoon will be a distinguished Congressman from this community, The Honorable George Brown from the 29th Congressional District. I am delighted to have you here with us today and we look forward to your testimony. Ever since that Viking game, Los Angeles has been slow; Senator Cranston isn't here yet, but I will try to remember what you say and pass it along. STATEMENT OF HON. GEORGE BROWN, U.S. CONGRESSMAN, 29TH DISTRICT, LOS ANGELES, CALIF. Mr. BROWN. Thank you, Mr. Chairman. I have a prepared statement which is fairly brief and I believe copies of it have been made available. Senator MONDALE. Yes, we have a copy of it. Mr. BROWN. If I may, because it is fairly brief, with your indulgence I will read the statement and perhaps emphasize what I think are the highlights of it and then if you have any questions at the end I will be more than happy to respond. Mr. Chairman, thank you for the opportunity of appearing here today. I know that those who are involved in the efforts to create jobs in Los Angeles appreciate your concern and the concern of the subcommittee. First, I want to include in the record, a copy of a letter which Senator Cranston and I recently sent to Secretary Shultz relating to the special impact program in general, and more specifically, to that part of the program which the Labor Department is administering in Los Angeles County. Senator MONDALE. Without objection it will be included at this point. (The letter subsequently supplied follows:) CONGRESS OF THE UNITED STATES, Hon. GEORGE P. SHULTZ, U.S. Department of Labor, DEAR MR. SECRETARY: The December 10 news release related to the Labor Department's dissatisfaction with the results achieved by existing Special Impact projects was extremely disappointing to us. It leaves many questions unanswered, and is especially inadequate in light of the current dispute regarding the Lincoln Heights program in Los Angeles. It is our understanding that this news release, accompanied by a 5-page status report, reflects a portion of a more complete study of the Speical Impact program status which Department officials have indicated would not be made public. We believe that the full report should be released, and are hereby asking that you do so. The report indicates that only four of the 22 contractors appear to have shown adequate progress toward fulfilling their contract, and that only 1,010 of the planned 6,720 expected new jobs have materialized to date. Since these four companies are expected to hire a total of 1,310 unemployed persons, and three of them are within six months of the end of the 24-month contract period, we are assuming that their results would represent the bulk of new employees hired throughout the nation. This would mean that the hiring record of the other 18 plants would be much worse than the figures shown for the entire group of 22 firms. We believe that the public has a right to have the full picture of these figures showing the hiring record to date of each company. The Los Angeles Times (12/4/69) carried some of these figures and the accuracy of this report should be documented by the Department. The report also indicates that payment of Special Impact funds is made in four sequential steps. The fact that it appears that these steps have not been followed in the Lincoln Heights situation is unexplained by the report. The major questions persist in relation to the unemployed who were supposed to be hired under these projects. Why are the companies apparently unable to produce? The December 10 report does not touch on this area at all. The Department is dissatisfied and the Department intends to protect the government's interest-either by enforcing the terms of the contract or through liquidated damage provisions. If the "handwriting is on the wall" and the companies, for the most part, cannot deliver, then who is going to protect the community's interest? Are there roadblocks preventing the companies from fulfilling their pledges, and are these roadblocks which the Labor Department can help to remove? Does the full report which is being withheld evaluate these problems and recommend solutions? If, as one news story indicates, manpower agencies are not providing the manpower, can this problem be solved? If the companies are offering wages that are too low, is this in harmony with the provisions of the contracts and does the financial assistance received by the companies dictate that more adequate wages be paid-morally, if not legally? Does the Labor Department have to wait until the expiration date of the contract before any enforcement steps can be taken steps which would, at that late date, probably not be in the best interests of the government, the company, or the community. We would like to have copies of the contracts between the Department and the three Los Angeles companies-Sacoma, Monarch Electric, and Lady Fair Kitchens-to help us understand the position of both sides. Another question which comes to mind, magnified by the Lincoln Heights situation, concerns the locations of the plants involved. Obviously, the three companies mentioned above are not physically located at the site which the contract calls for. It is our understanding, however, that other projects, designed to aid East Los Angeles, have been allowed to locate in the City of Industrypresumably because this was the nearest available suitable site. If no closer sites were available, we tend to feel that we would have advised the Department that a site 15 miles away probably would not be suitable, given the public transportation situation in Los Angeles County. What guidelines are used by the Department in giving permission to locate outside the area to be served? Additionally, does not the California state law relating to state employment agencies prevent these plants from drawing unemployed persons from East Los Angeles until the West Covina office has exhausted its supply of qualified unemployed? Is the bus service supplied by the Transportation-Employment Project adequate for the needs? Has the granting of permission to locate this far away from the area to be served not only failed to fulfill the East Los Angeles community's needs, but has it not also contributed to the inability of the companies to fulfill their part of the bargain? In this respect, we would like to have a complete description of the area intended to be served by each Special Impact project in Los Angeles County, as well as the actual site location where the production is being carried out. According to the summary report, the Labor Department has $5.2 million yet to be distributed under existing Special Impact contracts. Will we be "throwing good money after bad" if corrective measures are not taken before further distribution rather than after the companies have failed? In conclusion, we feel that the Department should move quickly to protect the community's interests. We have no desire to see any of the companies driven into bankruptcy. We want to see them succeed in their goal, and do not believe that threats will necessarily bring this about. There may very sell be other steps the Labor Department should be taking. If it now appears to be certain that some of the companies will fail to deliver, the remaining funds in these cases should be made available for projects that would benefit the community. We do not want the Labor Department to shoulder all of the blame-just its appropriate share. If any company has not acted in good faith, damages should be sought. We have never seen an adequate explanation of the Department's reasoning in approving a $110,000 consultant's fee in the Lincoln Heights matter. This should be fully explained, and a full justification for the size of the fee should be obtained from the consulting firm. With these thoughts in mind, we feel that you should make all possible information available in order that the community can be advised as to just where the problems lie. Your prompt cooperation and consideration of this request will be most appreciated. Sincerely, Mr. BROWN. I am also submitting a copy of the response which we have received from the Department of Labor in this regard. Senator MONDALE. That will be included also. RESPONSES TO POINTS RAISED IN LETTER TO THE SECRETARY OF LABOR GEORGE The letter of December 17, 1969, from Senator Alan Cranston and Congressman George E. Brown Jr., to the Secretary of Labor raised nine questions about the Special Impact Program as administered by the Department of Labor. The following are responses to each of the points raised in that letter: 1. Request for Release of Department of Labor Review of Special Impact Program The Department of Labor is releasing to you, for your information, its status report, current to September 30, 1969, on the Special Impact Program. A total of 22 contracts were approved by the Department under this program during late December 1967, 1968, and the first half of Jaunary 1969. On July 1, 1969, the Labor Department ended its authority to enter into new Special Impact Program contracts. The Office of Economic Opportunity is now the prime agency responsible for funding such programs. This report was prepared as an in-house working paper for Labor Department staff concerned with the Special Impact Program and was intended for their use as a starting point from which to further assess the program and to begin to develop and implement appropriate remedial steps. 2. Payment of Special Impact Funds to Contractors Involved in the Development of the Lincoln Heights Jail The four contractors who had designated in their SIP contracts Lincoln Heights Jail as the site for contract performance have received payments for those sequential performance steps that they have achieved. They have received total payments of $1,432,300 out of the $3,340,000 provided for in the contracts. Under the terms of the contract, these payments were primarily based on their acquisition and renovation of property for use as a production site, including the approved supplemental locations to the Lincoln Heights Jail. Under their contracts with the Department of Labor, each of the contractors receives percentage payments for performance steps achieved as follows: 5 percent at execution of contract; 25 percent upon acquisition of stipulated property; 25 percent upon renovation of property; 20 percent upon completion of construction and start of hiring of hardcore; 15 percent when 40 percent of contract number of new hires on board; and 10 percent upon completion of contract. Socoma has received 75 percent of its contract money; the remaining three companies involved with Lincoln Heights Jail (Barrier, Lady Fair and Monarch) have received 30 percent of their contract funds. No payments since September 1969. 3. Factors Affecting Ability of SIP Contractors to Meet Contractual Obligations in Los Angeles The companies holding contracts with the Department of Labor under the Special Impact Program have shown only minimal program performance of their contractual obligations. Four factors appear to have contributed to the slow progress being made by the companies in achieving contract performance. First, four firms in Los Angeles have been involved in a dispute with the City of Los Angeles over gaining possession and use of the site designated by their contracts (i.e., Lincoln Heights Jail). This situation has been reviewed, and the site issue appears one primarily between the city and the contractors. Second, the companies participating in the Special Impact Program generally were new or small firms trying to open new business ventures and, at the same time, to absorb hard-core unemployed as their workforce. This task was complicated by the general inexperience of these firms in handling hard-core and the competitive nature of the market for their particular product. Third, some of the firms in Los Angeles from the outset of their contracts were permitted to locate at plant sites not readily accessible by transportation to the target areas from which new hires were to be drawn. Fourth, the employment opportunities at these firms for the hard-core do not appear to have been highly attractive to the disadvantaged, given the types of jobs and wages. Indications are that all the companies paid at least the wage rates called for in their contsact. The payment of higher wages to the employees than what is called for in the contract would be most welcome to the DOL; however, we are not in a position to demand that wage increases be given nor is there any indication that such increases would in any real sense enhance the ability of the contractor to perform. 4. Remedies Available to the Department of Labor Prior to the Expiration Date of the Contract Under the terms of the contract as drawn, the Department of Labor is limited in. actions that it can take before the conclusion of the contract. Prime reliance has had to be placed on the liquidated damages provision, which is enforceable at the expiration of the contract. Intensive monitoring and assistance to the contractors, where possible, is being carried out by Department staff. The contractors are allowed up to the end of the contract period to hire the number of hard-core unemployed from the East Los Angeles Community as specified in their contracts. If at that time they have not hired the number specified in the contract, the Department will take the necessary and appropriate legal and administrative actions, including enforcement of liquidated damage provisions. The contract documents along with modifications and support material are somewhat bulky and the files maintained in Washington are incomplete. However, the files are open and each contract can be reviewed at the address given below: |