THE UNEMPLOYMENT IMPACT OF THE VIETNAM WAR Dissertation for the Degree of Ph. D. MICHIGAN STATE UNIVERSITY CHRISTOPHER TERRELL KING 1976 IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII I 3 1293 10371 9385 ; This is to certify that the thesis entitled THE UNEMPLOYMENT IMPACT OF THE VIETNAM WAR presented by Christopher Terrell King has been accepted towards fulfillment of the requirements for Ph.D. degree in Economics ,x‘ri, " ,7 . f) , if” ,- A . ,K 1 LL J); d‘CJCU r KLL‘L %L:fi‘ade"{ ’LtZ\ Major professor < Date May 19‘, 1976 07639 ITEM a 2005 1‘2 1‘2; ‘06 APR '3 7 2016 ABSTRACT THE UNEMPLOYMENT IMPACT OF THE VIETNAM WAR By Christopher Terrell King The Vietnam War and its concomitants-—changes in the level and composition of defense employment, changes in the size and composition of the Armed Forces, deferment policy, and interactions of all of these factors-—had a substantial impact on the civilian labor ferce in the United States during the period from fiscal year 1965 to fiscal year l97L In this paper we have estimated the unemployment impact of the War, both in the aggregate and by level of education, by comparing actual events during this period with a hypothetical set of labor force developments which would probably have occurred in the absence of the War. With a few important exceptions the data were readily available from the Bureau of Labor Statistics. We made frequent use of the regu- larly published series on employment and unemployment, as well as the irregularly published figures on defense-related employment. Several of the data series were only available in unpublished form. The Department of Defense eventually provided figures on the fellowing: the Armed Forces, by enlistment status, level of education, and date of separation; and defense expenditures and obligations. The Selective Service System supplied the data on deferments granted during the period. The results of this study run counter to the conventional views on the labor force impact of the War in several respects. First, we Christopher Terrell King estimate that these War-related events were responsible for at least one- half of the decline in the civilian unemployment rate from fiscal year 1965 to fiscal year 1969, and at least one-fourth of the increase from fiscal year l969 to fiscal year l97l. Most of the unemployment decrease has generally been attributed to nondefense factors, such as the effec- tive manipulation of fiscal and monetary policies, while it has been acceptable to blame the unemployment increase on the Nar's decline. Second, we estimate that these war-related developments in the buildup phase disproportionately favored those workers with less than a high school education. Counter-trend employment increases occurred and new job vacancies appeared for them as better-educated workers left the labor force in response to "the draft" and the availability of college student deferments. Workers with just a high school diploma also enjoyed unemployment reductions on balance. Only workers with 13 or more years of education encountered rates of unemployment higher than those that would have occurred without the War. All groups had increased unemploy- ment rates because of the Har's decline, but those at the bottom of the educational ladder suffered most. These results suggest the need for increased emphasis on labor market policies in addition to the more aggregate fiscal and monetary policies which are generally relied upon to attain full employment. THE UNEMPLOYMENT IMPACT OF THE VIETNAM WAR By Christopher Terrell King A DISSERTATION Submitted to Michigan State University in partial fulfillment of the requirements for the degree of DOCTOR OF PHILOSOPHY Department of Economics 1976 (C) Copyright by CHRISTOPHER TERRELL KING l976 ACKNOWLEDGMENTS A doctoral dissertation cannot be written without the help of many individuals behind the scenes. Countless hours of assistance were cheer- fully provided by Eleanor Boyle and her staff in the Documents Section of the Michigan State University Library. The following dissertation necessarily relied upon the use of unpublished materials which were primarily in the domain of the U. S. Department of Defense. An anonymous individual only temporarily assigned to the Manpower Division of the Department sent most of the data con- tained herein after my requests had been denied or ignored repeatedly by his superiors. Gratitude is also extended to former U. S. Representative Charles Chamberlain (Rep.-—Michigan), who not only obtained the rest of the needed data from the Department after further delays and denials, but also voted consistently in favor of the appropriations which made the Vietnam War possible. Professor Garth Mangum, Human Resources Institute, University of Utah, gave financial assistance for a trip to East Lansing for my final defense. Professor Bob Edminster and the Department of Economics, University of Utah, allowed me to lighten my teaching load from time to time for work on the dissertation. While Pam Japinga remained my essential link with the Department of Economics at Michigan State, numerous secretaries and typists converted illegible scrawl into printed ivord. Halli Kunze typed most of an earlier draft. Judie Turner iii demonstrated utmost patience, typing the final draft under adverse conditions. Two members of my committee merit special thanks. Professor Dan Saks provided me with lengthy and detailed criticisms which resulted in a much improved final product. Professor Charles C. Killingsworthi served in many capacities during my graduate studies. As everything from academic advisor and teacher to dissertation supervisor and friend, he cracked the proverbial whip and wielded a truly ferocious red pen but always expressed the encouragement needed to keep going. Without his help this would not have been possible. Finally, there are the friends and family whose contribution is invaluable. Chris, Erik, Pete and June, Phil, and Ed all gave at home, the office, or both. My parents, Judy and Carey, offered me their emotional and financial support when it was needed. My wife, Linda, and my children, Carolyn and Victoria, endured this project neither patiently nor quietly, yet they never questioned the ultimate wisdom of my chosen form of insanity. iv TABLE OF CONTENTS LIST OF TABLES LIST OF FIGURES Chapter ONE. WAR, THE ECONOMY, AND THE LABOR FORCE Introduction . Reasons for the Study Views on the Economic Impact .of the War Conventional Views . Not-So-Conventional Views . Radical/Marxist Views Economic Controversies . The Labor Force in Wartime . Employment Patterns in Wartime . Two Defense Industry Examples Armed Forces Comparisons Unemployment Behavior in Wartime Summary . . The Approach . The Armed Forces Deferment Policy Defense- Generated Employment Other Vietnam- Related Forces The Hypothesis Overview . Notes and References-—Chapter One TWO. VIETNAM-RELATED EMPLOYMENT The Pre- Vietnam Period. Department of Defense Expenditures and Obligations . Defense Industry Employment Summary . Defense- Related Employment Developments in the Vietnam Period, l965- l97l Department of Defense Expenditures and Obligations . Defense Industry Employment Summary . viii xi Defense-Generated Employment, l965-197l Defense- Generated Employment, 1965-1971: By Occupation and Education . Defense- Generated Employment, By Occupation Defense- Generated Employment, By Education The Labor Force Impact of Defense Employment Shifts, l965— l97l . . . Hypothetical Employment Patterns The Unemployment Impact Summary. Notes and References-—Chapter Two THREE. LABOR FORCE IMPACT OF THE ARMED FORCES Introduction . . Accessions to the Armed Forces Total Accessions Accessions by Level of Education Labor Force Status of Accessions Separations from the Armed Forces Total Separations Separations, by Level of Education Labor Force Status of Separations Net Effect of the Armed Forces on the Civilian Labor Force . Stock/Flow Analysis Direct and Indirect Impact The Direct Labor Force Impact Summary Notes and References—~Chapter Three FOUR. THE LABOR FORCE IMPACT OF DEFERMENT POLICY Deferment Policy in the United States, 1960-l973 The Labor Force Impact of Deferment Policy . Full-Time College Enrollments, 1965-1971 . Student Labor Force Dropouts The Direct Labor Force Impact Summary. . . . . . Deferment Policy: A Chronology, 1951-1973 . Notes and References-—Chapter Four FIVE. THE INDIRECT LABOR FORCE IMPACT OF THE VIETNAM WAR The Analytical Framework . A Simple Vacancy-—Hiring Chain . Some Limiting Cases . A Hypothetical Example . Qualifications: A More Realistic Process Implications: The Vacancy-—Hiring Process Reconsidered . vi 135 135 140 146 I46 149 150 155 156 160 160 167 168 173 178 181 182 184 188 189 189 190 192 I93 200 Assumptions . . . . . . . Findings: The Indirect Unemployment Impact Notes and References-—Chapter Five . SIX. CONCLUSIONS AND POLICY IMPLICATIONS Unemployment Impact of the Vietnam War The Buildup Phase of the War . The Declining Phase of the War . Significance . . . Economic Controversies Implications for Public Policy Suggested Future Research Defense Employment Survey . Deferment Policy Effects Internal Labor Markets . The 1965 Definition Changes Imperialism Data Needs . Defense- Related Employment Armed Forces Notes and References-—Chapter Six Appendices A. DEFENSE EMPLOYMENT ESTIMATES Notes and References-—Appendix A . B. THE DERIVATION OF DEFENSE EMPLOYMENT ESTIMATES BY LEVEL OF EDUCATION . . . Notes and References-—Appendix B . C. THE EMPLOYMENT IMPACT OF MANPOWER PROGRAMS Notes and References-—Appendix C . BIBLIOGRAPHY . vii 201 207 213 215 215 215 219 221 225 231 234 234 235 235 235 235 236 236 236 237 240 244 245 249 250 252 253 LIST OF TABLES Unemployment Rates for the Civilian Labor Force, 16 Years Old and Over, 1948-1971 . Employment in Durable Goods Manufacturing, in Thousands and as a Percent of Civilian Employment, Selected Periods Production Worker Employment in Durable Goods Manufacturing, in Thousands and as a Percent of Civilian Employment, Selected Periods Production Worker Employment on Private Nonagricultural Payrolls, in Thousands and as a Percent of Civilian Employment, Selected Periods Employment in the Ordnance and Accessories Industry: Total, Production Workers and Percent Production Workers; Selected Periods Employment in the Aircraft and Parts Industry: Total, Production Workers and Percent Production Workers; Selected Periods Total Active Duty Military Personnel, 1940—1971 Civilian Labor Force, Employment, and Unemployment, June of Each Year, Seasonally Adjusted, Selected Periods . Total Department of Defense Expenditures and Obligations for Military Functions and Mutual Defense Assistance Programs, Fiscal Years 1951-1971 . Total Military Procurement, Expenditures and Obligations, by Category, Fiscal Years 1951-1971 . . Employees in Five Defense-Related Industries, Annual Averages, 1958-1971 Production Workers as a Percent of A11 Employees in the Defense-Related Industries, 1958-1971 viii 10 16 18 20 23 26 29 30 55 60 65 67 2.5. 2.6. 2.7. 2.8. 2.9. 2.11. 2.13. 2.14. 3.1. 3.2. 3.3. Total Defense-Generated Employment, by Sector and Occupation Group, Fiscal Years 1965-1971 Changes in Total Defense-Generated Employment by Sector and Occupation Group, Absolute Change Civilian Labor Force, Employment, and Unemployment, Fiscal Year Averages, 1965-1971 . Changes in Civilian Employment and Nondefense Employment Total and by Occupation Group, Absolute Change . Year-to-Year Changes in Civilian Employment, by Occupa- tion, Fiscal Years 1959-1971: Absolute Change, and Group Change as a Percent of the Total Year-to-Year Change Defense-Generated Employment, by Level of Education, Absolute and Percent Distribution, Fiscal Years 1965, 1967, 1968, 1970 . . Nondefense Employment, by Level of Education, Absolute and Percent Distribution, Fiscal Years 1965, 1967, 1968, 1970 . Civilian Employment, by Level of Education,Absolute and Percent Distributions, Fiscal Years 1965-1971 Absolute (and Percent) Change in Defense, Nondefense, and Civilian Employment, by Level of Education, for Selected Periods, Fiscal Years l965-l97O Employment Resulting from Federal Manpower Programs, Absolute and Percent Distributions, by Level of Education, Fiscal Years l965-l97O Civilian Unemployment Estimates, by Level of Education, Absolute Levels and Rates, Fiscal Years 1965-1971 Total Enlisted Accessions to the Armed Forces, by Level of Education, Fiscal Years 1959-1971 . Absolute and Percent Changes, Total Enlisted Accessions to the Armed Forces, by Level of Education, Fiscal Years 1959-1971 . . Male, 18-24 Years Old, Civilian Noninstitutional Popula- tion Distribution, by Level of Education, in March of Each Year, 1957-1971 . ix 73 74 75 77 82 89 90 91 92 102 105 121 122 124 3.4. 3.5. 3.6. 3.7. 3.8. 3.9. 3.11. 4.1. 4.2. 4.3. 4.4. 5.1. 5.2. 6.1. Median Age of Enlistees and Inductees, Fiscal Years 1959-1970 Percent of Enlistees and Inductees 24 Years of Age or Less, Fiscal Years 1959-1970 . Service Entry Reasons of Enlisted Volunteers, by Level of Education Total Enlisted Accessions to the Armed Forces, by Level of Education and Estimated Prior Civilian Labor Force Status, Fiscal Years 1966-1971 Separations from the Armed Forces, by Level of Education at Date of Separation, Fiscal Years 1965-1971 Average Months of Service in the Armed Forces, Vietnam Era Veterans, by Year of Separation, Fiscal Years 1965—1971 Separations from the Armed Forces, by Level of Education and Estimated Subsequent Civilian Labor Force Status, Fiscal Years 1966-1971 Separations Less Accessions, by Level of Education and Estimated Civilian Labor Force Status, Fiscal Years 1966-1971 . . . "Adjusted" Civilian Unemployment Rates, by Level of Education, Fiscal Years 1966- 1971 . Total Registered 11- S Deferments, December 31 of Each Year, 1959- 1971 . . . Full -Time College Enrollments, by Sex, 18- 24 Years of Age, Actual and Projected Rates (as a Percent of the Civilian NoninstitutiOnal Population), 1959-1971 Males, 18-24 Years of Age, Not in the Labor Force, in School, Fiscal Years 1960-1971 . . Direct Labor Force Impact of Deferment Policy, by Level of Education, Fiscal Years 1966-1969 . Job Vacancies Initially Created Due to Armed Forces and Deferment Effects, Fiscal Years 1966-1971 Indirect Unemployment Change Due to Armed Forces and Deferment Effects, Fiscal Years 1966-1971 The Unemployment Impact of the Vietnam War, by Level of Education, Direct and Indirect Effects, Selected Periods, Fiscal Years 1965-1971 . X 125 126 131 133 136 137 145 151 152 163 170 174 180 203 208 216 1.1 2.1 22.2 LIST OF FIGURES Total Active Duty Military Personnel, 1940-1971 Total Department of Defense Expenditures and Obligations for Military Functions and Military Assistance Programs, Fiscal Years 1951-1971 Conventional Military Procurement as a Percent of the Total, Expenditures and Obligations, Fiscal Years 1951-1971 . . . Research and Development as a Percent of Total Department of Defense Expenditures, Fiscal Years 1951-1971 Armed Forces and Labor Force Flows Male, 18- 24 Years Old, Full -Time College Enrollment Rates, 1959-1971 . xi 40 58 61 63 148 I71 CHAPTER ONE WAR, THE ECONOMY, AND THE LABOR FORCE Introduction The impact of the Vietnam War on American life was undeniably pervasive, affecting virtually every field of human endeavor. Develop- ments in areas as diverse as medicine and politics, biological systems and social relations, and certainly the nation's economy were altered by the War. In this paper we have analyzed the effect of the War and its many concomitants-—such as "the draft," deferment policy, and defense expenditures-—on the civilian labor force. We have estimated the impact of the Vietnam War on both the overall civilian unemployment rate and the rates by level of education for the period from fiscal year 1965 to fiscal year 1971. This period includes the pronounced buildup phase of the War through fiscal year 1968, as well as the period from fiscal years 1969 to 1971' when, ”in terms of American manpower and (expenditures, the War was essentially winding down. A preferred time penfiod for the analysis would have included fiscal year 1972 since by ‘the end of that year American involvement had virtually ceased. How- ever, several of the necessary data series do not extent beyond fiscal Year 1971. We have had to accept the limitation to a shorter time span. Reasons for the Study There are several major reasons for undertaking this study. One is the desire to provide more complete information with which to sort through the many different views concerning the effects of war in general-—and this war in particular-—on the economy and the civilian labor force. The other is to investigate the relationship between the War's impact and some of the economic controversies brewing in the 1960's and 1970's, as well as to pursue the policy implications which follow from the results of the investigation. Views on the Economic Impact of the War There is and 'has been a wide divergence of views concerning the economic impact of the Vietnam War and of war in general. Some of these views are quite elaborate and sophisticated; others are less well for- mulated. We have separated these views into three general categories, primarily because doing so serves our purposes best. Other classifica- tion schemes are certainly possible, and perhaps desireable. Conventional Views. The first category pertains to what can be called the more "conventional" views on the impact of the War. These views are conventional in the sense that they qualify for a berth along- side other views in what Galbraith refers to as the "conventional wis- dom:" "ideas which are esteemed at any time for their acceptability," and which are also "highly predictable." 1 Over thirty years ago Mitchell provided a capsulized economic picture of a nation at war. Nations engaged in fighting but not phys- ically disrupted by war, as well as neutral countries supplying war materiel, he said, "...have a season of hectic activity, resembling in its mecha- nism an intensified cyclical expansion. The economist's ideal of full employment of resources is approximated; production expands to the limits set by physical factors; commodity prices and wage rates rise rapidly; national income estimated in cur- rent dollars reaches its highest levels. While a nation is bending its energies toward destruction, it enjoys a specious prosperity." 2 The decision to make or not to make war is viewed as being made inde- pendent of the state of the economy. War and the gearing up and down for war are not seen as integral parts of the economic system, but rather as events resulting from decisions made in the political sphere. Entering a war is a primary decision, and the resulting economic impact is secondary to that decision. But in examining the writings of other economists in the "Our Economy and War" series of the National Bureau of Economic Research- Clarence Long,3 Geoffrey Moore,“ Bert Hickman,5 and others-—as well as those of more recent Councils of Economic Advisors6 and their former members,7 we find that there exists in this conventional view a very curious asymmetry. On the one hand, war, it seems, is not necessary for economic expansion. The positive aspects of wartime economic expan- sion-—increased production and incomes, and decreased unemployment-—are the result of consciously-directed fiscal and monetary policies on the part of the government. 0n the other hand, the negative aspects of 1~artime economic events-—rapidly rising prices and increased unemploy- ment as the war comes to an end—are generally attributed to the effects (If the war and not to mistakes of policy makers. Thus, a wartime economic expansion is very similar to a business expansion more gener- ally;, but with most of its beneficial aspects derived from conscious 4 acts of public policy, and most of its negative aspects derived from uncontrollable war-related events. The prevailing view of the Vietnam War in relation to the economy is consonant with this conventional view. According to the Council's Report, "[dJefense spending was clearly not the fuel that was propelling the economy toward full employment." 3 The reductions in unemployment were in response to carefully monitored fiscal and monetary policies, and were shared by nearly all groups. Nonwhites, teenagers, and low-skilled and low-educated workers evidenced high rates because they occupied positions near the end of the "queue" in the labor market.9 The price stabilization problems were the result of the sudden, sharp war buildup.1° By the 1972 report of the Council, both the increases in unemployment and the increases in prices were blamed on war-related events.11 Economic developments during wartime in the conventional view are ascribed to rational policy decisions if they are good and to uncon- trollable ebbs and flows of war if they are bad. This view is accept- able in that it presents a picture which reflects what the public would like to believe. It is much more comforting to think that the U. S. economy does not have an inherent need for war, that unpleasant develop- ments are also uncontrollable, and that fortuitous events are the result of planning. The conventional view is predictable in that those respon- sible for public policymaking have a vested interest in carrying this particular message to the public. Not-So-Conventional Views. While these views possess certain 5 elements of predictability, they undoubtedly fail to meet the Galbraith- ian test of acceptability. They lack widespread currency both within the economics profeSsion, as well as with the public at large. They stop far short of being "radical“ ideas, yet they are certainly absent from any notion of the ”conventional wisdom." Those writers adhering to these less conventional views share a common ground in at least one major respect. Both groups view the war- making decision as an event largely exogenous to the economic system. The politicians bear the responsibility for the decision to enter into a war, while the cadre of economic advisers have the task of minimizing the problems associated with the economic adjustment to war production through the choice of the "proper" policy mix. The views of this group lack the peculiar asymmetry which we found to be a definite characteristic of the first group's outlook. Wartime economic expansions exhibit similarities to economic expansions in general, yet they also give rise to developments which are not char- acteristic of all economic expansions. As Weidenbaum points out, the mix of defense expenditures changes markedly during wartime, leading to effects on the overall composition of demand in the economy.12 Mincer suggests that war results in distortions in the supply response of the labor force, as in the early years of the Vietnam buildup when male labor force growth was reduced to zero.13 Both Gilpatrick‘“ and Kill- ingsworth15 go even further, asserting that war-—the Vietnam War in Particular, and war in general-—tends to call'on an unusual mix of Industwfies and workers and to induce abnormal flows into and out of the c'IVT'I‘ian labor force, such that the economic benefits of wartime economic expansion result. in disproportionate benefits for declining industries and certain disadvantaged groups in the labor force includ- ing low-skilled and educated workers. Those writers with less conventional views on war and the economy tend to take an approach involving more disaggregative analysis and placing less emphasis on the price distortions during war. Economic expansions during wartime periods are seen as having different charac- teristics from those during non-wartime periods. Additionally, their views are symmetrical: benefits accrue to the disadvantaged groups and sectors—-many manufacturing industries and low-skilled and low-educated workers-—during mobilization and, in part, because of it; and, in like fashion, costs are inflicted on these groups as the demobilization phase ensues. War is seen as a contributing factor to the economic advance- ment of these groups (not to mention others, such as the defense contrac- tors), but certainly not as the sine qua non of that advancement. Radical/Marxist Views. The Marxist, or so-called "radical" views on war and the economy are markedly different from the other views dis- cussed above, in large measure because they are predicated upon an entirely different theory of the advanced capitalist economy in opera- tion. This theory is, at once, explicitly political, sociological, and economic in nature, although here we are concerned with only the economic aspects.16 'An integral part of Marx's system of ideas was the theory of economic imperialism.17 This theory states that as a country reaches the more advanced stages of capitalist development, the opportunities for exploitation within the country will diminish, the rate of profit 7 will fall, and conditions of insufficient demand will develop. In order to remedy this problem of falling profits and rising surplus, the home country will turn to less developed, and less powerful, countries for new exploitative opportunities. This new exploitation can take on several forms. First, the busi- nesses in the capitalist country may invest directly in new plant and equipment in the lesser-developed country, making use of abundant natu- ral resources (such as fuel and metals), cheap labor, and additional tax concessions at home and abroad for their efforts. Employment, wages, and salaries increase in the country generating new consumer demand for the products of the capitalist businesses. Thus, when economic imperi- alisnl takes the form of direct capital investment in lesser-developed countries, profits increase, demand is boosted, and the surplus is absorbed. Making war abroad can also fulfill these goals of economic imperi- alism in a more indirect fashion, providing additional benefits as well. Whereas in the first instance the capitalists sought direct investment in new plant and equipment abroad in order to make use of abundant resources and cheap labor, in this case the capitalist country, while possibly also seeking access to some needed natural resources, mainly seeks an expanded demand for its products. The continuous consumption of planes, bombs,nfissiles,and other materiel which results from either actively engaging in war abroad or supporting others involved in such a war, requires continuous production of these goods at home, often in "cost-plus" contractual arrangements. Not only is a certain rate of profit all but guaranteed in many cases, but a continuous flow of new r'fi demand for the products is generated as well. A side benefit of this indirect exploitation is the creation of large numbers of jobs for those with low skills and educational levels who frequently find themselves among the "reserve army of the unemployed." Social tensions, thus, tend to be even partially attenuated. It follows that the primary departure of the "radical" or Marxist view from either the conventional or not-so-conventional views is the belief that war is essential to the economic (and social) well being of the advanced capitalist nation. As Reich states, "[t]he growth and persistence of a high level of military spending is a natural outcome in an advanced capitalist society that both suffers from the problem of inadequate pri- vate aggregate demand and plays a leading role in the pres- ervation and expansion of the international capitalist system." 1° Or as Baran and Sweezy express a similar sentiment, "[t]he truth would seem to be that except in war and periods of war-related prosperity, stagnation is now the normal state of the United States economy." ‘9 War meets several very significant economic and social needs for the advanced capitalist nation, including surplus absorption, the protection of profit making opportunities (investment) abroad, as well as placating demands of the masses for increased job opportunities.2° It should be noted that civilian spending cannot provide the same advantages for several reasons.21 First, only military spending results in a long-range, continuing increase in aggregate demand since the war production is in constant need of replacement. Second, only military spending has broad enough support in society-—due to its profitability, its supplementary nature with respect to other forms of spending, and the lack of organized interest group opposition-—to fulfill the neces- sary role. And finally, other government expenditures for socially use- .ful needs onea comparable scale would interfere with existing social relations by undermining profitability, inhibiting work incentives, and so on. Thus, war in this view is taken to be an integral part of advanced capitalist systems of which the United States is a prime example. But does the war in Vietnam fit into this particular mold? Suffice it to simply offer the following quotation from Arthur MacEwan in answer to this question: "The intervention in Vietnam is unusual only in that it has Sexeloged into a full scale war that the U. S. is unable to Economic Controversies There was a lengthy debate which began in the late 1950's and continued through the 1960's and early 1970's, both in and out of the professional literature, concerning the causes behind the higher pros- perity unemployment rates experienced in the post-World War II era. (See Table 1.1.) Clarence Long, looking at the 1947-1960 period, made the following assessment: "The recent problem of unemployment has been not recession unemployment, but the upward creep of prosperity unemploy- ment." 3 In the search for answers to this problem the degate began to take shape with sides cast along the lines of "structuralist" and "aggregate df-‘llliind" proponents . 2" 10 TABLE 1.1 UNEMPLOYMENT RATES FOR THE CIVILIAN LABOR FORCE, 16 YEARS OLD AND OVER, 1948-1971 N cu c-r (D Year 1948 1949 1950 1951 I952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 mmmmm mow-54:4: U‘INOJOOU'I U10» 1965 1966 1967 1968 1969 1970 1971 \OLD mmoooow NVU1VU1 meow—t4: 01000000 LOCO (11-h1 000000009 SOURCE: TabIe A-I, p. 57, Manpower Report of’the President, 1972. 11 The structuralists asserted that the reason for the poor unemploy- ment performance in the postwar years was that structural changes had taken place in the economy making the full employment goal of30r‘4percent unemployment more difficult to attain without the use of much larger 25 Keynes laid out an entire economic sys- labor market policy efforts. tem upon a basic "structure" whose elements he took as "given" at least in the short run. These elements included the following, among others: "[T]he existing skill and quantity of available labor, the existing quality and quantity of available equipment, the existing technique, [and] the tastes and habits of the consumer...." 25 The structuralist position was that certain changes had occurred in the postwar period—-a revolution in agricultural technology, automation in manufacturing, a shift from goods to service production, and a change in geographical employment patterns-—which affected these structural ele- ments. Furthermore, they stated that the changes in the structure of the economy had an independent effect on employment and unemployment levels. Thus, while in the structuralist view there was some portion of the unemployment rate which would respond “U3 aggregate demand stimula- tion, there was also a growing portion which resulted from changes in the structure of the economy and which would only respond to expanded labor market policy efforts. The "aggregate demand" proponents, on the other hand, argued that the real culprit behind the secular rise in unemployment rates was "fis- cal <1rag"-—the propensity of our tax system to automatically generate larger and larger tax revenues as full employment levels were approached, 12 stifling the expansion before full employment could be attained.27 Struc- tural changes, they argued, were nothing new. If aggregate demand levels were high enough, the labor market would solve any problems created. Thus, primary reliance on tax cuts as a cure for the unemployment ills was urged. The advent of the Vietnam War during this debate only served to mUddle the issues further. On the one hand, structuralists claimed that the economic impact of the War temporarily "arrested" the effects of the longer-range structural changes, resulting in a considerable improvement in the unemployment situation unrelated to the effects of fiscal and monetary policies.28 On the other hand, the aggregate demand group stressed the contributions made by fiscal and monetary policies toward lowering unemployment, and minimized the impact of the War.29 This investigation of the economic impact of the Vietnam War will provide, if not a resolution to the controversy, at least information with which to make a better evaluation of it. Another little-noticed controversy, closely related to the struc- turalist position discussed above, stems from the "labor market twist" hypothesis. Professor Killingsworth has been the main proponent of this hypothesis, having developed it in a series of articles, monographs, and congressional testimonies since the early l960's.3° The "twist” hypothesis states that since the early 1950's struc- tural changes in the economy have caused a long-run decline in the demand for low-skilled and poorly-educated workers, and a long-run rise in the demand for highly-skilled and well-educated workers. Furthermore, it asserts that these changes in demand have proceeded farther and faster than adjustments in the supply of labor, causing a growing 13 imbalance in the labor market.31 So far, however, all of the articles have merely provided specula- tion as to the effects of the Vietnam War on this "labor market twist." Killingsworth, focusing on the much larger percentage of blue-collar hires in defense industries in the early years of the buildup-—6O per- cent versus only 40 percent in the civilian economy in recent years-felt that the "twist" had continued in spite of the beneficial effects of defense spending, draft patterns, and other forces on the position of the less-educated workers.32 Johnston, on the other hand, having ear- lier confirmed Killingworth's findings in a 1968 article,33 later con- cluded that the "boom" in the 1964-1969 period, including the impact of the Vietnam buildup upon which he did not elaborate, had halted the "twist" in the demand for labor although it had not reversed it.3“ Most writers have typically asserted or assumed that the defense-generated employment associated with the Vietnam buildup contained a much higher proportion of skilled workers and well-educated workers than non-defense employment.35 This investigation will contribute more direct figures with which to evaluate this controversy as well. There are indications that the tyDical assumptions are not fully supported by the facts. To the extent ‘that economic policies are based upon assumptions, explicit or implicit, about the causes of unemployment and the factors affecting the level and composition of employment, the information forthcoming from this analy- sis <:an also facilitate more rational policymaking. 14 The Labor Force in Wartime There is a strong presumption implicit in parts of the above dis- cussion that wartime economic activity has certain distinctive and pre- dictable effects on the civilian labor force. This idea has received a degree of attention both in past periods of military activity, as well as in the most recent one, and it deserves more detailed treatment here. In this section we consider some of the developments which appear to be similar in past periods of military activity, pointing out the reasons for expecting parallel effects on employment and unemployment in this most recent period. We also examine the differences in the various war- time periods and some of the problems which they present for making generalized assertions about the nature of war and its impact on the civilian labor force. To give a proper basis for comparison we deal with the behavior of the same series of figures in several peacetime periods. Employment Patterns in Wartime. One reason for asserting that the labor force is affected in similar fashion during periods of wartime, as opposed to peacetime, economic activity is that the provision of war materiel leads to a different market basket of goods and services from that which is demanded during peacetime periods. A nation which is motfilizing for a war effort requires the production of large quantities of weapons, ammunition, bombers and fighter planes, uniforms, etc., goods which come from a mix of industries that is different in impor- tant: respects from the industries most affected by peacetime expansion. To the extent that different types of industries are affected, different tJ/Pes of workers are affected as well. 15 One of the primary distinguishing characteristics of employment patterns in wartime is the shift in favor of durable goods manufacturing. As the figures in Table 1.2 show, during World War II employment in dur- able goods manufacturinq jumped from only 10.3 percent of civilian employment (including agricultural employment) in 1939 to 20.3 percent in the peak war production year of 1943. A similar, although much smaller movement, took place in the Korean War period: durable goods employment stood at 13.0 percent of civilian employment in 1949, but by 1953 had risen to 16.5 percent. In the Vietnam buildup the changes have not been as striking partially due to the fact that the War-related buildup followed on the heels of a moderate expansion in durable goods employment: in 1964 durable goods employment already constituted 14.2 percent of the total, rose to a peak of 15.5 percent in 1966, after which it declined slightly, remaining at 15.3 percent through 1969. In each wartime period, there was a marked falling off of this percentage accounted for by durable goods employment after the buildup phase, to 14.0 percent in 1946, 14.7 percent in 1954, and 13.4 percent in 1971. By way of contrast, in the two peacetime economic expansions, very different patterns were exhibited. The 1955-1957 expansion can be char- acterized as primarily an investment boom in which producers attempted to make up for lost time, modernizing the plant and equipment which could not be tended to adequately during World War II and the Korean War.36 Thus, from a 1954 low of 14.7 percent durable goods employment rose to a peak contribution of 15.7 percent in 1957. In the 1961-1964 economfic expansion just preceding the Vietnam War, however, investment exPenditures were not the driving force; even though expenditures on 16 TABLE 1.2 EMPLOYMENT IN DURABLE GOODS MANUFACTURING, IN THOUSANDS AND AS A. PERCENT OF CIVILIAN EMPLOYMENT, SELECTED PERIODS Calendar Wartime Peacetime Year Thousands (Percent)a Thousands (Percent)a 1939 4,715 (10.3 1940 5.363 (11.3 1941 6,968 (13.8; 1942 8.823 16.4 1943 11,084 (20.3) 1944 10,856 (20.1) 1945 9,074 (17.2) 1945 7.742 (14.0) 1949 7,489 (13.0) 1950 8,094 (13.7) 1951 9,089 15.2) 1952 9,349 15.5 1953 10,110 (16.5) 1954 9,129 14 7) 1955 9.541 (15.3) 1956 9,834 (15.4) 1957 9.856 (15.4) ‘958 8.830 (14 0) 1961 9,070 (13.8) 1962 9.480 14.2) 1953 9.616 (14.2) 1954 9,816 14.2 1965 10,406 (14.6 1966 11,284 (15.5) 1967 11.439 (15.4) 1968 11.626 15.3 1959 11.895 15.3 1970 11,195 14.2 1971 10.565 (13.4) SOURCE: Durable goods employment figures from Table 38, p. 80, Hancflaook of Labor Statistics, 1971, B.L.S. : Civilian empIOyment base for Percent calculations from Table 8-22, p. 220, Economic Report of the President, 1972. NOTE: Data include Alaska and Hawaii beginning in 1961. 1970 Benchmarks. , aBefore 1949 civilian employment base includes 14-15 year olds. After 1949 the base includes only workers 16 years of age or older. 17 durable goods expanded at a rapid rate, in real terms, business plant and equipment expenditures as a whole did not even reach the 1956-57 high until 1964.37 Durable goods employment as a percent of total civilian employment rose from 13.8 percent in 1960 to only 14.2 percent in 1964. Part of this increase may be accounted for by the fact that, although we have characterized this period as primarily peacetime in nature, there were several very brief periods of military activity-—in response to the Berlin Crisis in August, 1961, and the Cuban Missile Crisis in the fall of l962-—during which military procurement expendi- tures shifted towards more conventional war materiel. In addition to the effects on durable goods employment in wartime versus peacetime periods of economic expansion there are even more iden- tifiable related changes taking place in the types of workers employed. In the wartime economic expansions there is typically a much larger increase in both the absolute number and percentage contribution of durable goods production workers and of production workers generally. During World War II, production workers in durable goods manufacturing more than doubled both in absolute terms and as a percentage of total civilian employment, rising to a peak of 9.5 million (17.5 percent) by 1943 and falling off again sharply with demobilization (Table 1.3). In both the Korean War and the Vietnam War periods there were similar, but much smaller, movements. In the Korean period production worker employ- ment; in durable goods manufacturing expanded by roughly one-third from 7949-1953, reaching a peak of almost 8.2 million. Expressed in per- centage terms the peak level was much less than that reached in World War $11, but still rose to 13.3 percent. In the Vietnam mobilization the 18 TABLE 1.3 PRODUCTION WORKER EMPLOYMENT IN DURABLE GOODS MANUFACTURING, IN THOUSANDS AND AS A PERCENT OF CIVILIAN EMPLOYMENT, SELECTED PERIODS Calendar Wartime Peacetime Year Thousands (Percent)a Thousands (Percent)a 1939 3,895 ( 8.5) 1940 4,477 ( 9.4) 1941 5.947 (11.8) 1942 7.589 (14.1) 1943 9.548 (17.5) 1944 9,197 (17.0) 1945 7.541 (14.3) 1946 6.412 (11.6) 1949 6.122 (10.6) 1950 6,705 (11.4 1951 7.480 (12.5) 1952 7.550 (12.5) 1953 8.154 (13.3) 1954 7,194 (12.0) 1955 7,548 (12.1) 1956 7,669 (12.0) 1957 7.550 (11.8) ‘958 . 6.579 (10.4) 195‘ 6.618 (10.1) 1962 6,935 (10.4) 1953 7,027 (10.4) 1964 7,213 (10 4) 1965 7.715 (10.9) 1966 8,370 (11.5) 1967 8,364 (11.2) 1968 8.457 (11 1) 1969 8,651 (11.1) 1970 8.042 10.2) 1971 7,598 9.6) SOURCE: Production workers figures from Table 40, p. 83, Handbook of'Labor Statistics, 1971, B. L. S. and from EMpZoyment and Earnings, (January 1973). Civilian employment base for percent calculations from Tab1e B-22, p. 220, Ebonomic Report of the President, 1972. NOTE: Data include Alaska and Hawaii after 1961. 1970 Benchmarks. . aBefore 1949 civilian employment base includes 14-15 year olds. After 1949 the base includes only workers 16 years of age or older. lIIIIII ,,__ 19 increase was even smaller absolutely, and the maximum percentage contri- bution reached was only 11.5 percent in 1966. Again part of the reason for the smaller response in the Vietnam period must be found in the expansion immediately preceding the War buildup, although the level attained percentage-wise was still considerably less than in the other wartime periods. A related explanation fer this smaller response is the shift from goods to service production over the intervening period.38 The absolute and percentage contribution of production workers in dur- able goods manufacturing fell off sharply during demobilization in all three periods. During the peacetime expansion in the mid-1950's production worker employment in durable goods manufacturing increased by less than 0.5 million, and the percentage share of civilian employment fell to 11.8 percent in 1957 and 10.4 percent in 1958. In the 1961-1964 expansion, the absolute rise was on about the same scale with the mid-1950's increase, and the percentage share rose to only 10.4 percent. The response of production worker employment in this sector does not seem to be nearly as great in the peacetime as it does in wartime economic expansions. 1 While there are no figures available on the total number of pro- duction workers in the World War II period, the data are available for the other two mobilization periods. During the Korean and Vietnam periods, the movements in the number and percent of productMN1workers show very strong similarities (Table 1.4). Although the absolute increase in the number of production workers in the Vietnam buildup was much larger than in the Korean War, in both cases the movements of the 20 TABLE 1.4 PRODUCTION WORKER EMPLOYMENT ON PRIVATE NONAGRICULTURAL PAYROLLS, IN THOUSANDS AND AS A PERCENT OF CIVILIAN EMPLOYMENT, SELECTED PERIODS Calendar Wartime Peacetime Year Thousands (Percent) Thousands (Percent) 1949 33,159 (57.5) 1950 34,349 (58.3) 1951 36,225 (60.4) 1952 36,643 (60.8) 1953 37,694 (61.6) 1954 36,276 (60.3) 1955 37,500 (60.3; 1956 38,495 60.3 1957 38,384 (59.9; 1958 36,608 58.1 1961 37,989 (57.8) 1962 38,979 (58.4) 1963 39,553 (58.4) 1964 40,589 (58.6) 1965 42,309 (59.5) 1966 44,281 (60.7) 1967 45,169 (60.7) 1968 46,475 (61.2) 1969 48,105 (61.8) 1970 47,934 (58.0) 1971 47,732 (56.7) SOURCE: Production worker figures from Table 40, p. 83, Handbook of'Labor Statistics, 1971, B. L. S., and from EMpZoyment and Earnings, (January, 1973). Civilian employment base for percent calculations from Tab1e B-22, p. 220, Ebonomic Report of’the President, 1972. NOTE: Data include Alaska and Hawaii beginning in 1961. 1970 Benchmarks. 21 percentage share of production workers was strikingly similar: produc- tion workers constituted 57.5 percent of employment in 1949, rising to a peak of 61.6 percent in 1953; in the Vietnam period the pre-War low was 58.6 percent, and the peak of 61.8 percent came in 1969. The fall in the percent figure was much more abrupt in the Vietnam period. During peacetime expansions the pattern is different. The abso- lute expansion in the number of production workers was smaller than in either of the wartime periods, and while the percentage share did rise slightly from 1961-1964, it merely held its own in 1955-1956, falling to 58.1 percent in 1958. Thus, it appears that there are differences in the employment patterns of wartime as opposed to peacetime economic expansions, and apparently these differences are more distinct, the larger and the more intense is the mobilization effort. Durable goods employment has a tendency to rise much more during wartime periods. Also, there is a pronounced rise in the number of production workers, particularly in durable goods manufacturing which encompasses most of the war materiel producers. At the same time that the absolute numbers of production workers are rising, the percentage contribution to civilian employment goes up as well: for World War II the rise in the percent share of pro- duction workers in durable goods manufacturing was much larger than in the other wartime periods, yet even in the other periods, the share increased in a manner uncharacteristic of peacetime economic expansions; the total production worker share movements in the two wartime periods for-inhich data exist are very nearly parallel. There are indications, therwefore, that distinct differences accompany the patterns of employment 22 during wartime periods of economic expansion, and that, furthermore, these patterns tend to favor workers in production-type jobs. To the extent that this characteristic wartime shift in employment patterns in ’favor of production jobs tends to benefit workers with lower—than-aver- age skill and education levels, we would expect the employment and unem- ployment situation of the lower-educated workers in the labor force to improve more during wartime periods, such as the Vietnam War period, than during a purely peacetime expansion. Two Defense Industry Examples. Before moving on to examine simi- larities in the three wartime periods with respect to Armed Forces devel- opments and other war-related variables, let us look at the changes in the level and composition of employment in two of the so-called "defense industries," i.e., those industries in which a substantial portion of the work performed is under defense prime contracts or for defense pur- poses. Both the Ordnance and Accessories industry (src 19) and the Aircraft and Parts industry (SIC 372) fall within the durable goods manu- facturing subsector, and both have a large percent of their total pro- duction and employment dependent on defense orders. Although there are different estimates available concerning the dependency of these indus- tries on defense work, all of them indicate a substantial degree of dependence. In fiscal 1967 it was estimated that 74.4 percent of the employment in the Ordnance industry and 63.9 percent of the employment in the Aircraft industry was for defense work.39 Employment in the Ordnance industry has risen very sharply in all Of the wartime periods, including the most recent one (Table 1.5). The inC1~ease for the Vietnam buildup was the smallest of the three, mainly 23 TABLE 1.5 EMPLOYMENT IN THE ORDNANCE AND ACCESSORIES INDUSTRY (SIC 19): TOTAL, PRODUCTION WORKERS AND PERCENT PRODUCTION WORKERS; SELECTED PERIODS Wartime Peacetime Calendar . Percent . Percent Year Totala Product1gn Production Totala Product1aon Production Workers Workers Workers Workers 1939 11.0 9.0 81.8 1940 22.0 17.0 77.3 1941 71.0 55.0 77.5 1942 329.0 274.0 83.3 1943 486.0 412.0 84.8 1944 368.0 309.0 84.0 1945 245.0 202.0 82.4 1946 30.0 23.0 76.7 1949 26.0 20.0 76.9 1950 30.0 23.0 76.7 1951 77.0 59.3 77.0 1952 178.7 130.2 72.9 1953 1 234.3 173.6 74.1 1954 , 163.3 113.1 69.3 1955 141.2 91.7 64.9 1956 138.5 84.9 61.3 1957 140.2 80.4 57.3 1958 158.1 82.4 52.1 1961 244.2 110.6 45.3 1962 264.4 119.3 45.1 1963 265.5 115.2 43.4 1964 243.9 104.1 42.7 1965 225.8 96.1 42.6 1966 260.9 127.3 48.7 1967 317.2 174.1 54.9 1968 338.0 191.7 56.7 1969 316.2 181.8 57.5 1970 241.9 131.5 54.4 1971 192.1 96.3 50.1 . SOURCE: Tables 39 and 40, pages 81-84, Handbook of'Labor.Statis- “08, 1.971 and from Employment and Earnings, (January, 1973). NOTE: 1970 Benchmarks. aIn thousands. 24 because, not only was the level of employment maintained at a higher level after the Korean War than was the case in the earlier periods, but also increases in employment had occurred in 1961 and 1962 in response to the two crises mentioned above. Following each of the mobilization periods, however, employment in the Ordnance industry posted large declines. During the 1955-1957 expansion employment in the Ordnance industry declined slightly. With respect to the composition of employment the trend in the Ordnance industry since 1939 has been towards increasing use of nonpro- duction workers, indicating automation or mechanization of former pro- duction line jobs: production worker employment as a percent of total employment in the industry has fallen from 81.8 percent in 1939 to only 50.1 percent in 1971 (Table 1.5). However, the long-run trend masks the fact that during periods of military expansion the composition of employ- ment in this industry has typically shifted in favor of production workers, returning to the long-run declining trend in demobilization periods. During the peacetime expansions the pattern is towards a declining share of production workers, with the rate of decline being less in the 1961-1964 period as might be expected given the response to the events of the early 1960's. Thus, the Ordnance industry would seem to exemplify the distinctive wartime patterns very well: during periods of wartime economic activity employment increases much more than in peacetime periods; in addition, despite a long-run trend away from production worker employment in this l'fldustry, during the buildup periods production worker employment ex- PaDCls more rapidly than overall industry employment so that the 25 production worker share of the total increases; and in the peacetime periods overall employment generally falls while the share of nonpro- duction worker employment increases. The employment pattern in the Aircraft and Parts industry has not been as typical of the wartime pattern as the Ordnance industry. In part, this is due to the fact that the share of defense employment in the industry has been declining as the demand from the private sector has increased.“° Employment in this industry expanded sharply during the Korean buildup, and after slight declines, continued to expand right through the 1955-1957 boom (Table 1.6). (Figures before 1951 are not available so that we cannot make comparisons with the World War II period. During the 1940's, the percent of commercial production would have been very low anyway.) Employment fell until 1962-1963 when small increases were posted, again partly in response to military pressures. Finally, during the Vietnam buildup overall employment increased by almost a quarter of a million although some of this increase was due to increased private demands for commercial uses."1 . The pattern for production worker employment comes much closer to the expected wartime patterns discussed above. The percentage of pro- duction workers in the Aircraft industry fell only slightly during the Korean War period, remaining at roughly 74 percent. In the Vietnam buildup the proportion increased to a 1967 peak of 60.2 percent after falling fairly consistently through the peacetime expansions. Thus, the picture which we get from the employment patterns in the entire economy as well as in these two defense industry examples fr‘Om durable goods manufacturing would seem to indicate that during 26 TABLE 1.6 EMPLOYMENT IN THE AIRCRAFT AND PARTS INDUSTRY (SIC 372): TOTAL, PRODUCTION WORKERS AND PERCENT PRODUCTION WORKERS; SELECTED PERIODS # Wartime Peacetime Calendar 1 . Percent . Percent Year I Totala P;gd:::;gn Production Totala Pfigflfi§§;g" Production r Workers Workers 1951 467.8 348.3 74.5 1952 670.6 495.4 73.9 1953 795.5 586.2 73.7 1954 782.9 560.2 71.6 1955 761.3 525.5 69.0 1956 837.3 561.0 67.0 1957 895.8 591.4 66.0 1958 771.0 491.9 63.8 1961 609.7 347.7 57.0 1962 638.4 349.1 54.7 1963 639.2 350.8 54.9 1964 . 605.4 338.6 55.9 1965 624.2 356.3 57.1 1966 753.3 446.4 59.3 1967 833.6 501.5 60.2 1968 852.0 505.5 59.3 1969 804.4 464.0 57.7 1970 689.9 380.4 55.1 1971 538.1 287.8 53.5 SOURCE: Tables 39 and 40, pages 81-84, Handbook of'Labor Statis- tics, 1971 and EMpZoyment and Earnings, (Januray, 1973). NOTE: 1970 Benchmarks. aIn thousands. 27 periods of wartime, as opposed to peacetime, economic expansion there isa difference "in employment patterns: not only is the durable goods manufac- turing subsector favored, but production workers within that subsector are favored as well. Other things being equal, then, that is, with an employment expansion of roughly the same magnitude, we would expect a wartime expansion to provide more opportunities for lower-skilled and less-educated workers than a peacetime expansion. The employment patterns during the recent Vietnam buildup seem to parallel those of the earlier wartime economic expansions, so we would expect that the lessv-educated portion of the labor force would receive disproportionate benefits in terms of employment and unemployment developments relative to other peacetime periods of expansion and also relative to the higher- educated workers. Armed Forces Comparisons. Another set of forces with distinctive effects on civilian labor force in periods of wartime economic activity involves the size and rate of change of the Armed Forces. An economy with an incipient expansion faces very different conditions if the country has a small military force which must be increased manyfold in a very short time span from those that prevail if the country has instead cnuawhich is stable or declining. , Increases in the Armed Forces can only come from three groups: the employed, the unemployed, and those not in the civilian labor force. However, the greater part of Armed Forces accessions generally come from the civilian labor force in Periods of rapid military expansion, since these are typically the more able-bodied citizens. A very large expansion in the size of the Armed Forces can, thus, “bring about sizeable and rapid reductions in the 28 number of unemployed, and even in the number of employed as occurred in the later years of World War II. A rapid demobilization and decline in the Armed Forces, on the other hand, can very quickly swell the ranks of the unemployed without adding any new employment opportunities. In June 1940, the Armed Forces had an active duty strength of less than 500,000, most of them men (Table 1.7). But a little less than five years later, it had reached a peak World War II strength of 12.1 million -—an increase of over 11.5 million persons.“2 Then, over the next thir- teen months, over 9 million men (and women) were discharged from the services for a one-year decline of 75 percent. If we express these fig- ures as a percent of the civilian labor force, we see that the ratio of the Armed Forces to the civilian labor force was less than one percent in 1940, but rose to 22.5 percent in 1945. The large increase in this ratio over the five-year period is partly explained by the decrease in the civilian labor force from its wartime peak in 1942 to a wartime low of 53.9 million in 1945 (Table 1.8); however, the massive increase in the Armed Forces was in large part responsible for this decline in the civilian labor force, and thus, the increase in the ratio itself. The ratio dropped back to less than 3.0.percent in the late 1940's. In the Korean War the military buildup was also dramatic, but not anywhere near the magnitude of the World War II buildup. The Armed Forces more than doubled from June 1950 to June 1951, reaching a peak active duty strength of 3.7 million in April, 1952. However, this buildup began when the Armed Forces were much larger than had been the case prior to World War II, both in absolute and in relative terms——l.5 million in June 1950 versus 500,000 in June 1940, and 2.3 percent in 29 TABLE 1.7 TOTAL ACTIVE DUTY MILITARY PERSONNEL, 1940-1971a (thousands) Absolute Percent Year Level Change Change AF/CLF 1940 458 - - 0.8 1941 1,801 + 1,343 + 293.2 3.2 1942 3,859 + 2,058 + 114.3 6.8 1943 9,045 + 5,186 + 134.4 16.3 1944 11,452 + 2,407 + 26.6 21.0 1945 12,123 + 671 + 5.9 22.5 1946 3,030 - 9,093 - 75.0 5.3 1947 1,583 - 1,447 - 47.8 2.7 1948 1,446 - 137 - 8.7 2.4 1949 1,615 + 169 + 11.7 2.6 1950 1,460 - 155 - 9.6 2.3 1951 3,249 + 1,789 + 122.5 5.2 1952 3,636 + 387 + 11.9 5.9 1953 3,555 - 81 - 2.2 5.6 1954 3,302 - 253 - 7.1 5.2 1955 2,935 - 367 - 11.1 4.5 1956 2,806 - 129 - 4.4 4.2 1957 2,796 - 10 - 0.4 4.2 1958 2,601 - 195 - 7.0 3.8 1959 2,504 - 97 - 3.7 3.7 1960 2,476 - 28 - 1.1 3.6 1961 2,484 + 8 + 0.3 3.5 1962 2,808 + 324 + 13.0 4.0 1963 2,700 - 108 - 3.8 3.8 1964 2,687 - 13 - 0.5 3.7 1965 2,655 - 32 - 1.2 3.6 1966 3,094 + 439 + 16.5 4.1 1967 3,377 + 283 + 9.1 4.4 1968 3.548 + 171 + 5.1 4.5 1969 3,460 - 88 - 2.5 4.3 1970 3,066 - 394 11.4 3.7 1971 2,816 - 250 - 8.2 3.3 SOURCE: Selected Manpower Statistics, (0.0.D.), April 15, 1971, p. 19. NOTE: WWII peak: 31 May 1945 12,124,418 Post-WWII low: 31 Mar 1948 1,398,726 Korean peak: 30 Apr 1952 3,685,054 Post-Korean low: 31 May 1960 2,465,065 Vietnam peak: 30 June 1968 3,547,902 aJune 30th of each year. 30 TABLE 1.8 CIVILIAN LABOR FORCE, EMPLOYMENT, AND UNEMPLOYMENT, JUNE OF EACH YEAR (thousands), SEASONALLY ADJUSTED, SELECTED PERIODS 4—‘_‘ L Civilian . . . . . Unemployment C1v11ian C1v1l1an Year #352; Employment Unemployment 56;? 1940 57,330 49,020 8,310 14.5 1941' 55,970 50,310 5,660 10.1 1942 58,340 55,450 2,890 5.0 1943 57,580 56,280 1,300 2.3 1944 56,640 55,760 880 1.6 1945 55,350 54,400 950 1.7 1946 58,930 56,360 2,570 4.4 1949 60,948 57,172 3,776 6.2 1950 62,419 59,052 3,367 5.4 1951 61,615 59,620 1,995 3.2 1952 62,103 60,219 1,884 3.0 1953 63,063 61,456 1,607 2.5 1954 63,343 59,792 3.551 5.6 1955 64,482 61,781 2,701 4.2 1956 66,702 63,820 2,882 4.3 1957 67,052 64,196 2,856 4.3 1958 67,674 62,730 4,944 7.3 1961 70,878 65,993 4,885 6.9 1962 70,514 66,670 3,844 5.5 1963 71,626 67,649 3,977 5.6 1964 73,032 69,218 3,814 5.2 1965 74,412 71,025 3,387 4.6 1966 75,647 72,775 2,872 3.8 1967 77,309 74,317 2,992 3.9 1968 79,161 76,225 2,936 3.7 1969 80,751 77,938 2,813 3.5 1970 82,474 78,467 4,007 4.9 1971 83,498 78,653 4,845 5.8 SOURCE: 1940-1946, Table 1, pp. 11-17, Current Population Reports, Series P-50, No. 2; 1949-1971, EMpZoyment and Earnings, (February, 1973). 31 relation to the civilian labor force in 1950 as opposed to only 0.8 per- cent in 1940. At the peak of the Korean buildup the ratio of the Armed Forces to the civilian labor force was only a fraction of the World War II peak-—5.9 percent in 1952 as opposed to 22.5 percent in 1945. The Korean buildup began from a much more advantageous position just preceding the War in terms of military manpower, and it took place on a much smaller scale, so that the impact on the civilian labor force, although similar in some respects was much less than in the earlier period. In addition, since there were fewer military personnel to be discharged after Korea, the return to civilian life was much easier than after World War II. After both wars, the Armed Forces/civilian labor force ratio fell to approximately the same level. The military buildup for Vietnam presents a different pattern. The Armed Forces in June, 1965, were much larger, absolutely and rela- tive to the civilian labor force, than had been the case immediately before either of the previous buildups, so that the impact on the civilian labor force of increases in the size of the Armed Forces was much smaller. During the years following the Korean War, the Armed Forces had been maintained at a much higher active duty strength due to fears generated by the Cold War tensions; and, in addition, in 1965 the size of the military was higher than it might have been due to increases in 1961 and 1962 in response to the two crises. The first-year increase in the Armed Forces was much smaller than in the other buildups, and the peak active duty strength of 3.5 million, while comparable absolutely with the Korean peak, was much less than in World War II, and was only 4.5 percent in relation to the civilian labor force, a much smaller 32 figure than the previous peak ratios. This discussion is not meant to minimize the impact of the Armed Forces increases on the civilian labor force during the buildup for the Vietnam War; rather it is intended to place it in historical perspective. While the magnitude of theimpact may not have been as large as in Korea, or certainly World War II, the increase from mid-1965 to mid-1968 still _ constituted almost one million men-—or roughly one-quarter of the civil- ian labor force growth over this period. Indeed, as we noted before, Mincer found that the increase in the size of the military during calen- dar 1966 reduced the growth in the male civilian labor force from 0.5 million in 1965 to zero in 1966.“3 The reduction of the Armed Forces from the 1968 peak resembled the Korean pattern and not that set in World War II. There were gradual reductions in both the Korean War and the Vietnam War in the first year after the peak,followed by larger declines in the next two years. By June, 1971, the Armed Forces had declined by over 700,000, and the ratio of the armed Forces to the Civilian labor force was 3.3 percent compared with 4.5 percent in 1955. It would seem, then, that the most difficult military buildup to contend with in terms of civilian labor force impact was quite obviously World War 11, followed by Korea and Vietnam in that order. In terms of the military demobilizations, how- ever, given that after Vietnam the decline produced a small ratio of Armed Forces to the Civilian labor force, the order would become World War 11, Vietnam, and Korea. Before making definitive statements on these issues, we first have to examine the capacity of the civilian labor force to absorb these increases in the size of the Armed Forces. 33 Unemployment Behavior in Wartime. Turning our attention now to the behavior of civilian unemployment during the wartime periods, we find similarities of both magnitude and direction of movement between the Vietnam and Korean patterns, and at least a remote family resemblance of these two to the World War II pattern. Until the outbreak of World War II, the U. S. economy had not fully recovered from the Great Depres- sion, so that in 1939, the average rate of unemployment was 17.2 per- cent, indicating vastly underutilized human resources.““ In June, 1940, a little over a month after partial mobilization had begun, yet over a year before direct U. S. involvement in the hostilities, the unemploy- ment rate (seasonally adjusted) was 14.5 percent, representing some 8.3 million people out of work-—many of whom could be immediately available for military service (Table 1.8). The rate declined sharply during the next three years as both the Armed Forces and civilian employment ex- panded. From, June 1943 to June 1944, however, the civilian labor force declined even as employment expanded so that Armed Forces increases as well as employment increases resulted in even lower rates of unemploy- ment. The rate was 1.6 percent in June 1944, but the annual average for 1944 was even lower at 1.2 percent. Over the next year the movements between the series altered: the Armed Forces continued to rise, and the civilian labor force continued its decline, but employment declined as well, so that unemployment rose moderately, remaining under 2.0 percent on an annual basis. Apparently some workers drifted out of employment into unemployment, while others moved out of the civilian labor force altogether either into the Armed Forces, school enrollment, or complete inactivity. (It was after 1944 that many of the firms began cutting 34 back on employment, especially among women who either found themselves out of a job, or working the same job for lower pay.“5) Then, from June 1945 to June 1946, the Armed Forces declined by over 9 million men (and women), swelling the civilian labor force by 3.6 million-the largest single-year (June to June) increase in the entire period up to 1971. Employment did expand, but by less than a million with the result that the rate of unemployment jumped to 4.4 percent in June 1946. In the early years of World War II the existence of a large num- ber of unemployed permitted both employment and the Armed Forces to expand considerably with very little immediate drain on our human pro- ductive capacity. Unemployment fell as people were drawn into new jobs or military service. At the peak of the War, however, reductions in the ranks of the unemployed resulted primarily from increases in the Armed Forces, since civilian employment actually declined. In the final phase of the War, even as employment expanded, reductions in the size of the Armed Forces led to increases in the number of unemployed. Before the Korean outbreak, the economic situation was much dif- ferent. The U. S. had recently undergone a mild recession to be sure, and one year prior to our direct involvement in the War in June 1949, the unemployment rate stood at 6.2 percent, but by June 1950, a vigorous recovery had been underway for about 9 months, leading one writer to describe the level of economic activity at this time as "high and ris- ing.""‘6 In mid-1950 the unemployment rate was 5.4 percent, represent- ing about 3.4 million unemployed or less than 40 percent of the number unemployed at the beginning of World War II. From June 1950 to June 1951, the pattern was remarkably similar to that of the early World War 35 II expansion: the Armed Forces posted its largest increase, 1.8 mil- lion, at the same time that the civilian labor force declined and em- ployment increased, resulting in a large drop in unemployment. During the middle years of the War the labor force and employment continued to increase while the military either increased or declined very slightly, so that unemployment continued to fall to a low of 2.5 percent in June, 1953. In the following year, h0wever, declines in both the Armed Forces and employment occurred while the civilian labor force increased, so that both the numbertyfunemDIOVEd.as well as the rate, more than doubled. (We should note here that while we have not dealt at length with movements of prices and various subcomponents of GNP, there were differ- ent patterns in each wartime period. For example, Hickman has noted that in an 8-month period following the outbreak of the Korean War, consumer expenditures, rather than federal government defense expendi- tures, fueled the expansion as consumers engaged in large-scale buying in anticipation of wartime shortages of various goods.“7 As the short- ages failed to materialize, consumer buying fell off, and this allowed defense expenditures to increase without substantial inflationary pres- sures. This pattern of anticipatory buying and a low rate of price changes obviously did not hold during the most recent Vietnam period.) Just prior to the start of the U. 5. direct involvement (on a large scale) in Vietnam the economy had been expanding for over four years, and the official rate of unemployment had dropped from 6. 9 percent in June, 1961 to 4.6 percent in June, 1965. The country was entering into a military conflict in mid-1965 with a much higher percentage of its 36 available human resources being utilized than in the previous wars: the employment rate-—the percent of the civilian labor force which was em- ployed-—was 0.8 percentage points greater than in the Korean War and 9.9 percentage points greater than in World War II. The number of unemployed was only slightly greater than in June, 1950. From mid-1965 to mid-1966, employment expanded by much more than the labor force while the Armed Forces had a net increase of 439,000, leading to a reduction of over 0.5 million in the number of unemployed persons. Unemployment rose slightly by mid-1967 as employment and the labor force increased by roughly the same amount, and the growth of the Armed Forces slowed; however, unemploy- ment continued to fall in 1968 and 1969 as increases in employment exceeded increases in the labor force while the Armed Forces edged up, then declined slightly. In mid-1971, after two years of slowed employment growth and large declines in the size of the Armed Forces, the rate of unemployment was 5.8 percent, or just under 5 million workers. Unlike the two previous periods of wartime activity, at no time during the expansion or decline of the war effort did the civilian labor force or employment decline. Yet it is not difficult to see how the Armed Forces increases during the buildup period, coupled with more rapid increases in employment than in the labor force, led to reductions in the number of unemployed. Also, in the period in which the war was tapering off it is apparent that the large reductions in the military, together with greatly slowed employment growth and an expanding labor force, contrib- uted to the large increase in the number unemployed. Summa y. Several researchers urged the Joint Economic Committee not to put too much faith in inter—war economic comparisons during the 1967 hearings on Vietnam, typically pointing to several key points: 37 first, that the magnitude of the effort was much smaller relative to the other two in terms of national defense dollars expended; second, that, unlike the previous mobilizations, the one for Vietnam had begun with an already large military establishment on hand; and, third, the Vietnam War had begun at a high point in the business cycle with very high uti- lization rates of its physical and human resources, also unlike the earlier periods."B Yet, in spite of the problems involved in making inter-war comparisons, there are certain basic patterns which emerge during periods of wartime economic activity, whether the war effort is very large as in World War II, or on a smaller scale as in Korea and Vietnam. War and its concomitants appear to induce certain structural changes in the economy which are not forthcoming typically in periods of strictly peacetime economic expansion, and these structural changes have a distinctive impact on employment and unemployment patterns. There is a strong prima facie case for asserting that, due to these patterns accompanying wartime economic activity, the less-educated and lower- skilled workers benefit disproportionately during the buildup phase, and are penalized disproportionately during demobilization. The Approach In spite of the fact that in recent years more elaborate methods have been used increasingly in analyzing the operation of labor markets, in this analysis much simpler tools are emwfloyed. This is not to deny the utility ofgthe more econometrically-oriented methods or their aPPI"0priateness under certain conditions, but merely to indicate that in this ‘instance a simpler approach seems to be called for. There are a number of technical problems which preclude the use of mostof the 38 econometric approaches to the topic area. For the most part, the diffi- culties in each case revolve around the incompleteness of several of the requisite data series-—particu1arly those on defense-generated em- ployment-—and the general scarcity of observations with respect to em- ployment and unemployment by level of education. Thus, we have concentrated less on the use of elaborate econo- metric techniques and more on the application of simple trends to esti- mate the effects of the Vietnam War on the demand for and supply of labor, and unemployment rates in the period. Our ultimate aim has been the estimation of the War's effects both on the overall civilian unemployment rate and on the rates by level of education. (Originally our intention had been to analyze both the over- all rate and the rates by level of education for the various age, sex, and race groups. However, the form which the data are in made this virtually impossible without the use of extremely arbitrary assump- tions.“9) The crux of the method is as follows: we have constructed the trends in a number of designated relevant variables as they would have existed without the War; next, we have analyzed the same variables as they actually developed with the War; finally, we have compared the two sets of figures, attributing at least part of the difference between them to the effects of the Vietnam War. It is apparent from the outset that we have had to make a number of crucial assumptions in order to establish the trends as they would have existed in the absence of the War. When such assumptions have been required, they have been spelled out as explicitly as possible, and their implications explored. This was especially important in the case of such variables as nondefense 39 related employment levels which involved assumptions regarding the government's actions (or inaction) with respect to stabilization policy. In this study we have identified as far as possible those events bearing on the civilian labor force in the 1965-1971 period which resulted from the U. S. military buildup in or withdrawal from Vietnam. The list of Vietnam-related variables includes the following on the supply side: The Armed Forces. From about 1958 to 1965 the Armed Forces were in a near "steady state" condition, such that roughly the same number of men were discharged from the services into the civilian non-institu- tional population as were taken from it into the services in the period (Table 1.7). (Figure 1.1 shows the changing size of the Armed Forces graphically since 1940.) Presumably this means that roughly the same number of men were being discharged from the Armed Forces into the civilian labor force as were being taken from it during the period. Beginning in 1965-1966 increases in both enlistments and the monthly draft calls, primarily drawing on 18-26 year old males, led to an increase in the size of the Armed Forces. Using unpublished Department of Defense figures we have estimated the direct effect of this growth in the Armed Forces-—including both greater-than-normal draft calls and enlistment rates-—in reducing the rate of growth of the supply of labor. In particular, we have analyzed the trends in total accessions, inductions, and enlistments, by age and education, before and after 1965. We have also examined the changing composition of the Armed Forces by age and education before and after 1965. MILLIONS OF PERSONNEL 40 13.0 12.0 11.6 10.0 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 41 43 45 47 49 51 53 55 57 59 61 63 65 67 69 71 O 42 44 46 48 50 52 54 56 58 6O 62 64 66 68 7O YEAR Fig. 1.1. Total active duty military personnel, 1940-1971. Derived from Table 1.7. 41 Deferment Policy. Deferments are a necessary complement to a con- scription system in which not all serve. Of those deferments which had the potential for affecting males' labor force participation decisions, such as the apprenticeship (II-A) deferments, college deferments (II-S) were the largest in number in the pre-lotteryera.5° The availability of this II-S deferment may have caused some males who would typically have entered the labor force either to drop out or to refrain from entering at all. This was particularly true of the 18-26 year old group which was most vulnerable to the draft.51 Thus, using a number of data series generated by the Bureau of the Census to ascertain the number of "reluctant students" in the period, we have estimated the numbercnimales, 18-24 (as the largest affected group coinciding with the B. L. 5. age breakdowns), who would not typically have chosen to go to college but for the encouragement provided by the availability of the II-S defer- ments and the potential alternative of a tour in Vietnam.52 On the demand side we have examined one variable of prime impor- tance: Defense-Generated Employment. ~We have analyzed the increased employment-—total and by level of education-which resulted from the higher levels of defense purchases in the period. Estimates developed by several divisions within the Bureau of Labor Statistics have been relied on for this purpose, in large part because they are the only con- sistent and detailed estimates available.53 These estimates, in con- junction with a series of Special Labor Force Reports on the "Educational Attainment of Workers“ enabled us to develop the desired employment estimates by level of education for the period with the use of some 42 auxiliary assumptions.5“ Although these estimates include not only the direct employment in defense work, but also the employment in supportive industries, they do not include employment resulting from the operation of the "multiplier" or "accelerator" effects on the economy. None of the prior studies included these effects, and a brief review of the literature indicates that there are ample reasons for this omission. Thus, our study has also excluded them. Before going any further, we should note that our main concern in the study is with the analysis of changes in the composition of employ- ment (and unemployment) which the War may have caused. Employment levels may or may not have been very different in the absence of the War. To open the discussion up to consider what those levels might have been would throw upon us questions concerning the government's commitment to price stabilization, to certain specified full employment-—unemp1oyment goals, and so on. There is very little in the way of consensus on most of these questions, so we have chosen to proceed as follows: we have calculated the magnitude of the defense-related employment contribution and the changes in educational composition induced by differences in employment patterns in the defense rather than the nondefense sector; but in postulating levels of employment in the absence of the War, we have simply assumed that they would have been unchanged from the wartime levels. (This entire issue is discussed at length in Chapter Two.) Finally, there are a number of effects which cross over the supply and demand classification, effects due to the operation of Vietnam- related forces on both the supply and demand sides. We can place them 43 under the fellowing heading: Other Vietnam-Related Forces. In addition to the other factors considered we have examined another set of forces which affected the rate of unemployment in an indirect fashion and which resulted from the interaction of all the others taken together. Increased Vietnam-related defense expenditures led to the creation of many new jobs and helped to maintain rising levels of aggregate demand in the continuing general economic expansion during the mid-1960's. Large increases in the size of the Armed Forces and above-trend college enrollments among young males in response to the availability II-S deferments may have reduced the rate of growth in the supply of labor by either compelling or induc- ing males to leave their jobs or to refrain from entering employment at all. To the extent that these affected males vacated jobs which required filling due to the continued expansion of aggregate demand, further reductions in the rate of unemployment were facilitated: vacated job slots could be filled at some point by persons from the ranks of the unemployed. We have estimated the reduction in unemployment in the 1965-1969 period, and the increase in the 1969—1971 period, which resulted from the interaction of all the other Vietnam-related forces, using assump- tions concerning the previous and predicted labor force participation rate and employment/unemployment experience of various age groups in the civilian population developed from B. L. S. figures. In both time periods we have analyzed the effects on overall unemployment, as well as on the rates by level of educational attainment. 44 The Hypothesis Since we are actually looking at the labor force impact of the Vietnam War from two perspectives, we have specified two distinct hypoth- eses to be examined. The first relates to the effects of the War and its concomitants on the overall civilian unemployment rate. Some writ- ers have asserted that all of the unemployment reduction in the mid- 1960's resulted from aggregate demand stimulation via the operation of fiscal and monetary policies.55 Our hypothesis is that events related to the U. S. involvement in Vietnam did indeed make a contribution to lowering the overall rate of unemployment for the civilian labor force in the 1965-1969 period, and also toward raising it substantially from 1969-1971. Since we are assuming unchanged aggregate levels of employ- ment in the absence of the War, any effects on the overall rate will necessarily have to derive from changes in the composition of employment, changes in the size and composition of the Armed Forces, alterations in deferment policy, or interactions of these factors. The second hypothesis we are examining is as follows: events related to the War disporportionately benefited those workers with less than 12 years of education in terms of both employment and unemployment in the 1965-1969 period, and disproportionately penalized them in the 1969-1971 period. The a priori reasons for formalizing this hypothesis surface from a brief look at our War-related variables. The increase in the Armed Forces was supplied disproportionately from those possessing a high school degree and no further education-men with 4 years of edu- cation at the high school level made up 62.1 percent of the total acces- sions to the Armed Forces in fiscal 1966, but constituted only 44.3 45 percent of the 18 to 24 year old, male civilian labor force.56 There was a bias away from taking those with little education due to the existence of the AFQT (Armed Forces Qualifications Test), and a bias away from taking those with college training due to the deferment arrangements. Given the similarities between the employment patterns during past periods of wartime activity and the most recent one, there is reason to believe that employment generated due to the War buildup favored those with less than a high school education. However, even if the increased War-related employment were spread proportionately over the civilian labor force, the result of the other forces-—the Armed Forces and deferment patterns-—would be to create benefits in terms of unemployment reductions disproportionately favorable to the less-educated groups. Overview In Chapter Two we examine the employment resulting from defense expenditures for the Vietnam War. In addition to analyzing the aggre- gate developments in defense employment, we look carefully at the chang- ing mix of employment-—by industry, occupation, and education. Obliga- tions and expenditure patterns for the Department of Defense are also examined for complementary evidence using figures from the Monthly Report on the Status of'Funds (D. O. 0.). In Chapter Three we shift our attention to the supply of labor, analyzing the effects of the Armed Forces buildup on the civilian labor force. In Chapter Four we deal with the effects of Deferment Policy on the labor force. Chapter Five examines the combined effects of the Armed Forces buildup and Deferment Policy in reducing unemployment indirectly through the opening of job 46 vacancies which would not have existed in the absence of the War. Fin- ally, Chapter Six presents the combined effects of all the War-related forces on the civilian labor force and suggests policy implications which fellow from those results. 10. 11. 47 Notes and References-Chapter One Galbraith, John Kenneth, The Afyluent Society, Boston: Houghton Mifflin Company, Second Edition, Revised, 1969, p. 8. Mitchell, Wesley C. , Wartime 'Prosperity' and the Future, Occa- sional Paper No. 9, "Our Economy and War" Series, New York: National Bureau of Economic Research, Inc., March, 1943, p. 1. Long, Clarence 0., The Labor Force in wartime America, Occasional Paper No. 14, "Our Economy and War" Series, New York: National Bureau of Economic Research, Inc., March, 1944; and The Labor Force in War and Transition: Four Countries, Occasional Paper No. 36, "Our Economy and War" Series, New York: National Bureau of Economic Research, Inc., 1952. Moore, Geoffrey H. , The Production of Industrial Materials in world wars I and II, Occasional Paper No. 18, "Our Economy and War" Series, New York: National Bureau of Economic Research, Inc., March, 1944. Hickman, Bert G. , The Korean War and United States Economic Activ- ity, 1950-1952, Occasional Paper No. 49, "Our Economy and War" Series, New York: National Bureau of Economic Research, Inc., 1955. Economic Report of the President, Together with the Annual Report of the Council of Economic Advisers, Washington, D. C.: U. 5. Government Printing Office, especially the 1967, 1968, and 1972 reports. In particular, see: Okun..- Arthur .14., The Political Economy of Prosperity, New York: W. W. Norton, 1970, especially Chapter 3, "The Challenges of Defense and High Employment." Economic Report of the President, 1967, p. 46. Ibid., p. 40. Economic Report of the President, 1968, p. 89. Economic Report of the President, 1.97.2, p. 21. A large number of statements echoing similar messages to those in these paragraphs are to be found in the following: (i) Convertibility of Space and Defense Resources to Civilian Needs: A Search for New Employment Potentials, Selected Readings in Employment and Manpower, Volume 2, Subcommittee on Employment and Manpower, Committee on Labor and Public Welfare, U. S. Senate, Washington, D. C.: Government Print- ing Office, 1964, hereafter referred to as Readings, 1964; and (ii) Economic Effect of Vietnam Spending, Hearings before the Joint Economic Committee, Volumes I and II, U. S. Congress, Washington, 12. 13. I4. 15. 16. 17. 18. 19. 20. 48 D. C.: Government Printing Office, 1967, hereafter referred to as Hearings, 1967. Weidenbaum, Murray L., "Impact of the Vietnam War on the American Economy," p. 215 in Hearings, 1967. Also, see: Greenberg, Edward, "Employment Impact of Defense Expenditures and Obligations," pp. 662-678 in Hearings, 1967. Mincer, Jacob, "The Short-Run Elasticity of Labor Supply," Pro- ceedings of’the 19th Annual Winter Meeting of the Industrial Rela- tions Research Association, 1966, pp. 219-229. Gilpatrick, Eleanor 6., Structural Unemployment and Aggregate Demand: A Study of'EMployment and unemployment in the United States, 1948-1964, Baltimore: The Johns Hopkins Press, 1966, p. 218. Killingsworth, Charles C., "Structural Unemployment in the United States," pp. 129-143 in Steiber, Jack, editor, Employment Problems of’Automation and Advanced Technology: An International Perspec- tive, London: Macmillan and Company, Ltd., 1966; and "Full Employ- ment and the New Economics," Sbottish Journal of’Political Economy, February, 1969, pp. 12-13. This section does not intend to provide a complete overview of the elaborate economic system constructed by Marx and elaborated on by his followers but only to indicate some of the key premises per- tinent to our discussion. The exposition which follows draws heavioy on several sources: Blaug, Mark, Eeonomic Theory in Retrospect, Homewood, Illinois: Richard D. Irwin, Inc., 1968, especially pp. 264-273 in Chapter 7, "Marxian Economics;" and Baran, Paul A. and Sweezy, Paul M., Monopoly Capital: An Essay on the American Economic and Social Order, New York: Monthly Review Press, 1966, especially Chapters 3, 6, and 7. . Reich, Michael, "Does the U. 5. Economy Require Military Spending?" Papers and Proceedings of’the American Economic Association, May 1972, p. 296. Baran and Sweezy, op. cit., p. 76. Indeed, Baran and Sweezy indicate a rationale for engaging in a "conventional" war like Vietnam, rather than for continuing on a course emphasizing the production of highly complex weaponry as in the 1955-1965 period: while such expenditures for the advanced weapons are undoubtedly highly profitable, the impact on invest- ment generally and on employment is much smaller than expenditures on conventional arms. Ibid., pp. 214-217. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 49 On these points, see: Baran and Sweezy, ibid., pp. 161-175; and Reich, op. cit., pp. 297-298. MacEwan, Arthur, "Capitalist Expansion, Ideology, and Interven- tion," p. 410 in Edwards, Richard C., Reich, Michael, and Weiss- kopf, Thomas E., editors, The capitalist system: A Radical Analy- sis of'American Society, Englewood Cliffs, N. J.: Prentice-Hall, Inc., 1972. Long, Clarence 0., “A Theory of Creeping Unemployment and Labor Force Replacement," Address to the Catholic Economic Association Annual Meeting, St. Louis, 1960, reprinted in Marshall, Ray and Perlman, Richard, editors, An Anthology of'Labor Economics: Read; ings and Commentary, New York: John Wiley and Sons, Inc., 1972, p. 324. For a balanced treatment of this controversy, see: Lipsey, Richard 6., "Structural and Deficient-Demand Unemployment Recon- sidered," pp. 210-255 in Ross, Arthur M., editor, Employment Policy and the Labor Market, Berkeley: University of California Press, 1965; and Gilpatrick, op. cit. In addition, for a good coverage of views from both sides, see Chapter 7,"Unemployment: The Inadequate Demand-—Structural Controversy," containing papers by Musgrave, Heller, R. A. Gordon, Solow, Killingsworth, and Long: Marshall and Perlman, op. cit., pp. 267-339. Killingsworth, "Structural Unemployment...," op. cit., p. 129. One of the most concise statements of the "structural hypothesis" is to be found in : Killingsworth, "Full Employment...," op. cit., pp. 7-9. Keynes, John Maynard, The General Theory of’EMployment, Interest, and Mbney, New York: Harcourt, Brace, and World, Inc.,l965,p.245. Heller, Walter W., "The Administration's Fiscal Policy," p. 171 in Ross, Arthur M., editor, Unemployment and the American Economy, New York: John Wiley and Sons, Inc., 1964. Gilpatrick, op. cit., p. 218; and Killingsworth, "Full Employ- ment...," op. cit., pp. 12-13. One writer went so far as to make the following statement: "The history of the 1960's demonstrated that the American economy can reach unemployment rates of close to 3 percent through the use of simple fiscal and monetary policies." See: Thurow, Lester C., "Redistributional Aspects of Manpower Training Programs,: p. 84 in Ulman, L10yd, editor, Manpower Programs in the Policy Mix, Balti- more: Johns Hopkins University Press, 1973). Killingsworth, "Structural Unemployment...," op. cit., and "The Continuing Labor Market Twist," Mbnthly Labor Review, September, 31. 32. 33. 34. 35. 36. 37. 38. 39. 40. 41. 42. 50 1968, pp. 12-17. Also, see: Johnston, Denis F., "Education and the Labor Force," Mbnthly Labor Review, September, 1968, pp. 1-11. The recent work on "dual labor markets" and "labor Market segmentation" is in many ways related to this earlier analysis; see: Gordon, David M., Theories of'Poverty and Underemployment: Orthodox, Radical, and Dual Labor Market Perspectives, Lexington, Mass.: 0. C. Heath and Co., 1972, for a summary of the work by Harrison, Vietorisz, Piore and Doerringer, and others-—especially Chapter 4, pp. 43-49. Killingsworth, "Structural Unemployment...," op. cit., pp. 129-' 143. Gilpatrick.op. cit., uses a similar line of reasoning and provides much detail on the adaptive mechanisms of the supply of labor. Killingsworth, "Full Employment...," op.cit., pp. 12-13. Johnston, op. cit., p. 11. Johnston, Denis F., "The Labor Market 'Twist,‘ 1964-1969," Monthly Labor Review, July, 1971, pp. 26-36. The only mention of Vietnam is on page 26 of the article where he considers aggregate changes in employment and unemployment. For example, Rutzick, Max A., "Worker Skills in Current Defense Employment," Mbnthly Labor Review, September, 1967, p. 17; and Melman, Seymour, "Ten Propositions on the War Economy," Papers and Proceedings of'the American Economic Association, May, 1972, p. 312. Gordon, R. A., "The Current Business Expansion in Perspective," p. 19 in Gordon, R. A., and Gordon, M. S., editors, Prosperity and unemployment, New York: John Wiley and Sons, Inc., 1966. Ibid. , p. 25. On the subject of the goods-to-services shift in the United States see: Fuchs, Victor R., The service Economy, New York: National Bureau of Economic Research, 1968; and Gilpatrick, op. cit., especially Chapter 5. Oliver, Richard P., "Increases in Defense-Related Employment," Monthly Labor Review, February, 1970, pp. 4-5. Oliver, Richard P., "The Employment Impact of Defense Expendi- tures," Monthly Labor Review, September, 1967, p. 11. Ibid. We should note that this total at the peak includes roughly a quarter of a million women. The number of women in both Korea and 43. 44. 45. 46. 47. 48. 49. 50. 51. 52. 53. 54. 51 Vietnam never reached 50,000. Selected Manpower Statistics, Department of Defense, April 15, 1971, p. 43. Mincer, op. cit., p. 220. Economic Report of’the President, 1972, Table B-22, p. 220. Tobias, Sheila, and Anderson, Lisa, "Whatever Happened to Rosie the Riveter?" Me. Magazine, June 1973, p. 93. Hickman, op. cit., p. 5. Ibid., pp. 2-3. Schultze, Charles L., Director, Bureau of the Budget, "Statement," pp. 31-32; and Weidenbaum, Murray M., "The Impact of the Vietnam War on the American Economy," pp. 202—203 in Hearings, 1967. For example, defense-related employment estimates by sex do not exist, and we decided against trying to develop a distribution by sex since there appeared to be no logical basis for establishing such a breakdown; however, we have developed a breakdown of this employment by education since there are good reasons for believing that the occupational estimates provide a logical basis for this distribution. Bradford, David, F., Deferment Policy in selective service, Prince- ton, New Jersey: Industrial Relations Section, Princeton Univer- sity, 1969, p. 11. Rosenfield, Carl and Cover, Kathryn R., "Employment of School Age Youth," Special Labor Force Report, No. 147, Washington, D. C.: Bureau of Labor Statistics, October, 1971, p. 25. U. S. Bureau of the Census, Current Pepulation Report, Series P—ZO, No. 206, "School Enrollment; October, 1969," Washington, D. C.: U. S. Government Printing Office, 1970. For a brief description of these series, see: Projections of the Pest—Vietnam Economy, 1975, Bulletin No. 1733, Washington, D. C.: Bureau of Labor Statistics, 1972. Special Labor Farce Reports, NOS. 1, 30, 53, 65, 83, 92, 103, 125, 140, and 148, Washington, D. C.: Bureau of Labor Statistics. An earlier report in the series was prior to the publication of the Special Labor Force Reports: U. S. Bureau of the Census, Current Population Report-—Labor Force, Series P-50, No. 78, "Educational Attainment of Workers, 1957," Washington, D. C.: U. 5. Government Printing Office, 1957. 52 55. Thurow, op. cit.arL.84; and Okun, op. cit., especially Chapter 3. 56. From unpublished Department of Defense figures and Special Labor Force Report, No. 83, op. cit. CHAPTER TWO VIETNAM-RELATED EMPLOYMENT In this chapter we have analyzed the employment developments in the 1965-1971 period which were related to the Vietnam War. In order to provide a more satisfactory perspective on these events, we have also outlined the defense-related employment developments in the immediate pre-Vietnam period. In later sections considerable attention has been given to what the composition of employment might have been in the absence of the distortions resulting from War-related expenditures. The Pre-Vietnam Period During the ten years preceding the Vietnam War as well as most of the post-1945 period, defense developments were guided by Cold War fears. No major military interventions took place between 1955 and 1965. Instead, this period was characterized by increased emphasis on the development of better and more sophisticated weaponry to remain in ac- tive competition with the Soviets. It is not surprising that this shift from actually engaging in war to the development of new weapons systems affected the structure of defense demand in a significant way. It is unfortunate that the figures documenting defense-related employment developments in the years prior to the direct U. S. involve- ment in Vietnam are fragmentary, providing at best only partial glimpses of the entire picture. No real attempts to give adequate coverage of 53 54 defense-related employment developments were made until the early 1960's.1 Those estimates which did attempt a more comprehensive coverage are generally not comparable with the figures available in the post-1965 period, either because of significant differences in inclusion or exclu- sion, or because of differences in the method of estimation. Past analyses of defense-related employment have relied on a variety of data sources for their inferences due to these problems, so we begin our examination of the pre-Vietnam period by drawing on some of the sources most commonly used. Department of Defense Expenditures and Obligations. Although the figures do not yield direct indications of the changes in defense employment, we can obtain insights not available elsewhere by examining figures on Total Department of Defense Expenditures and Obligations for Military Functions and Mutual Defense Assistance Programs in the imme- diate pre-Vietnam period (Table 2.1). Total 000 obligations indicate the amount of "new obligational authority" granted to 000 in a given fiscal year; that is, these figures represent the amount of money (in millions of 1958 dollars) which Con- gress has authorized 000 to spend during the year. This "new obliga- tional authority" empowers DOD I'(l) to place orders, enter into con- tracts, or otherwise commit or 'obligate' the Government to make expend- itures in the future, and (2) to make the expenditures required by such obligations."2 The total of funds available for obligation in any given fiscal year is made up of "new obligational authority" plus any amount of unobligated balances remaining in 000's hands at the end of the previ- ous fiscal year. The figures in Table 2.1 represent "new obligational authority," not the total of funds available for obligation and not 55 TABLE 2.1 TOTAL DEPARTMENT OF DEFENSE EXPENDITURES AND OBLIGATIONS FOR MILITARY FUNCTIONS'ANII MUTUAL DEFENSE ASSISTANCE PROGRAMS, FISCAL YEARS 1951-1971 (in millions of 1958 dollars) Fiscal Year Expenditures Obligations 1951 S 25,243 5 57,647 1952 47,810 70,033 1953 53,701 56,186 1954 48,484 33,481 1955 43,295 40,593 1956 41,604 44,129 1957 42,573 44,194 1958 41,249 45,165 1959 43,503 46,649 1960 41,097 42,254 1961 42,469 44,932 1962 45,649 50,324 1963 46,271 49,983 1964 45,673 49,186 1965 41,040 47,038 1966 46,614 56,747 1967 56,409 64,369 1968 61,769 65,652 1969 58,532 63,065 1970 52,413 67,939 1971 46,981 61,928 SOURCE: Department of Defense, 1951-54,- and Monthly Report on Status of Funds, 1955-1972. Index from Table B-3, p. Annual Report on Status of Funds, Deflator 199 Economic Report of the President, 1972. 56 "obligations incurred." Total 000 expenditures, on the other hand, represent the actual payment made by 000 for goods and services deliv- ered. The expenditure of 000 funds constitutes the final stage in the Governmental spending process. We are analyzing both obligations and expenditures here because, while the expenditure figures give an indi- cation of the timing of the delivery of goods and services, the obliga- tions figures more nearly show the timing of the production and employ- ment impact on the economy, particularly for items which have long production lags.3 The actual timing of the major production and employment impact of 000 procurement falls somewhere between the movements in these two series in what is known as the "obligations incurred" stage. Following the granting of "new obligational authority" and the apportioning of the exact rate at which this amount is to be obligated over the fiscal year, 000 may incur obligations, that is, place orders with or award contracts to private firms. Often production under such contracts is conducted with the assistance of advance payments to the firm through a variety of devices, such as direct advances from the Treasury Department; however, no actual DOD expenditures are recorded at this stage even though con- siderable new production and employment may have been generated.“ Thus, obligations figures, representing the "new obligational authority" granted by Congress, are "lead" indicators of economic activity related to 000, while expenditure figures are typically "lagged" indicators: the actual production and employment impact resulting from 000 economic activity generally follows the increase in obligations, but precedes the increase in expenditures. The nature of the lead-1ag relationship has 57 been carefully discussed elsewhere, so we have not attempted to cover it at length here.5 The essential point for our purposes, however, is that the employment impact of DOD-related activity rests somewhere between the timing indicated by these two series. (Since we have used only fis- cal year averages, rather than the monthly or quarterly averages, differ- ences in the timing of changes in the two series are not so noticeable as they might otherwise have been.) If we focus our attention on the fiscal 1955-1965 period (Figure 2.1), we can see that the DOD expenditure curve shows almost no trend after abstracting from the increases which occurred in the early 1960's in response to the Berlin Crisis (summer, 1961) and the Cuban Missile Crisis (fall, 1962). From1955 to 1961 000 total expenditures moved closely about the $42 billion mark, eventually seeking out that level again by fiscal 1965. The 000 total obligations figures exhibited a pattern only slightly different from the expenditure pattern. We can see the effects of the large cutbacks in obligations for military construction in fiscal 1960, and of the large overall increases in fiscal 1961-1962 in response to the Crises. Even omitting these, we are still left with a very slight upward trend.6 If we can safely assume that the overall employment impact of DOD-related activities falls somewhere between these two sets 0f figures on expenditures and obligations with respect to its timing, then, aside from the events of the early 1960's, there would appear to be little reason for increases in the impact of 000 employment on the economy. If anything, given the lack of a strong upward trend for elther DOD obligations or expenditures in the period, since output per 58 70 60 N OBLIGATIONS 50 U) a: c: j o 0 2'5 40 W Z O :3 .—I 23 30 FTTTTT“EXPENDITURES 20 51 53 55 57 59 61 63 65 67 69 71 52 54 56 58 60 62 64 66 68 70 FISCAL YEAR Fig. 2.1. Total Department of Defense expenditures and obliga- tions for military functions and military assistance programs, fiscal years 1951-1971 (in billions of 1958 dollars). Derived from 0.0.0., Annual Report on Status of'Funds, 1951-54; Monthly Report on Status of Funds, 1955-1971. 59 man-hour in the private economy rose throughout the 1955-1965 period and made particularly large gains in the 1961-1965 period, we would expect DOD-related employment to be either falling, or at most, con- stant.7 The main impact of DOD-related activity in this immediate pre- Vietnam period was to be found, not in the changes of the overall level of 000 activity, but in changes in the composition of that activity. The most direct impact of 000 spending on the private economy comes via the inquion of funds for "Military Procurement.“ Expenditures in this area of the 000 budget have contributed roughly one-third of the total in recent decades.8 Weidenbaum has divided the various categories of Procurement into two types-sophisticated and conventional.9 Sophis- ticated procurement consists of the following categories: "Aircraft," Missiles," and "Electronics and Communications." Conventional procure- ment contains: "Ships," "Ordnance," "Combat Vehicles," and the "Other" categories. Table 2.2 shows Total Military Procurement, Expenditures and Obligations, by Category, Fiscal Years 1951-1971, in terms of the percentage of the total going to either SOphisticated of Conventional items. Figure 2.2 shows Conventional Procurement as a Percent of Total Military Procurement, Expenditures and Obligations, Fiscal Years 1951- 1971. For both expenditures and obligations the pattern is very similar: in the Korean War years conventional items made up over 50 percent of the total, while in the Cold War years the percentage leveled Off at roughly 23 percent for obligations and 18-20 percent for expenditures, I again abstracting from the increases in the conventional share in both series in the early 1960's. The salient point to be made here concerning 60 TABLE 2.2 TOTAL MILITARY PROCUREMENT, EXPENDITURES AND OBLIGATIONS, BY CATEGORY,a FISCAL YEARS. 1951-1971 (percent) Expenditures Obligations Fiscal T t 1 Conven- Sophis- T t 1 Conven- Sophis- gear 0 a tional ticated O a tional ticated 1951 100.0 33.9 66.0 100.0 50.8 49.2 1952 100.0 50.7 49.3 100.0 48.4 51.6 1953 100.0 49.1 50.9 100.0 31.3 68.7 1954 100.0 39.4 60.6 100.0 27.0 73.0 1955 100.0 28.9 71.1 100.0 34.4 65.6 1956 100.0 25.4 74.6 100.0 24.5 75.5 1957 100.0 19.7 80.3 100.0 22.1 77.9 1958 100.0 17.8 82.2 100.0 20.6 79.4 1959 100.0 18.8 81.2 100.0 22.7 77.3 1960 100.0 17.5 82.5 ' 100.0 21.2 78.8 1961 100.0 20.7 79.3 100.0 25.0 75.0 1962 100.0 22.2 77.8 100.0 29.5 70.5 1963 100.0 30.4 69.6 100.0 32.3 67.7 1964 100.0 29.0 71.0 100.0 29.0 71.0 1965 100.0 30.8 69.2 100.0 34.8 65.2 1966 100.0 32.4 67.6 100.0 43.8 56.2 1967 100.0 38.9 61.1 100.0 41.5 58.5 1968 100.0 42.8 57.2 100.0 47.0 53.0 1969 100.0 45.4 54.6 100.0 50.0 50.0 1970 100.0 44.3 55.7 100.0 47.6 52.5 1971 100.0 43.1 56.9 100.0 43.9 56.1 SOURCE: Derived from Mbnthly Report on Status of'Funds, D. O. D. a"Aircraft," "Missiles," and "Electronics and Communications" are defined as sophisticated procurement. "Ships," "Ordnance," "Combat Vehigles," and "other" are defined as conventional. (From M. Weiden- baum . 61 6O 50 S 40 OBLIGATION PERCENT 30 . P n ITURES 20 10 51 53 55 57 59 61 63 65 67 69 71 52 54 56 58 6O 62 64 66 68 .70 FISCAL YEAR Fig. 2.2. Conventional military procurement as a percent of the total, expenditures and obligations, fiscal years 1951-1971. Derived from D.O.D., Annual Report on Status of'Funds, 1951-1954; Monthly Report on Status of'Funds, 1955-1971. 62 the divergence between the percentage contribution made by Conventional Procurement to the Total between the War and the Cold War years is that the skill mix of the employment generated by each type of procurement tends to vary in a pronounced fashion. Fulton, in his analysis of the employment impact of defense spending in the Cold War years, statedf "Shifts in the mix of defense products in recent years have markedly changed manufacturing processes, and the numbers and kinds of workers needed in defense work.. Higher proportions of defense outlays are now devoted to missile and space vehi- cle items..., and lower proportions to the more traditional types of war material.... Increasing proportions of defense workers are engineers, scientists, technicians, and highly- skilled craftsmen, and decreasing proportions are production line workers." 1° Thus, the greater the percentage of the Military Procurement Total going to more conventional types of armaments, the greater the number of jobs created which are repetitive, production-line jobs. It follows, then, that many more jobs for low-skilled and low-educated workers are likely to be created in times of war-related buildup, and just the reverse is true during periods such as the Cold War years from 1955 to l965...Also, DOD Expenditures for Research and Development increased as a percent of Total DOD Expenditures during the Cold War period, and this shifted employment benefits from the lower-skilled and lower-educated to the very highly skilled and educated workers, since Research and Development, by it very nature, carries with it demands for the most highly-educated workers available (Figure 2.3). Defense Industry Employment. The figures on defense-related indus- try employment, another widely used source, support the picture outlined above. The industries typically included under this heading are the following: Aircraft and Parts (SIC 372), Communications Equipment 63 18 16 14 12 10 PERCENT 51 53 55 57 59 61 63 65 67 69 71 52 54 56 58 60 62 64 66 68 70 FISCAL YEAR Fig. 2.3. Research and development as a percent of total Depart- ment of Defense expenditures, fiscal years 1951-1971. Derived from 0.0.0. Annual Report on Status of'Funds, 1951-1954; Monthly Report on Status of'Funds, 1955-1971. 64 (SIC 366), Electronics Components (SIC 367), Ordnance and Accessories (SIC l9), and Ship and Boat Building and Repairing (SIC 372). There are different estimates as to the degree of dependency on defense work in these industries, but all indicate a substantial dependency, especially in Aircraft and in Ordnance. One writer estimated that defense-related employment as a percentage of the total was as follows in 1967:11 Ordnance 74.4 % Aircraft 63.9 % Communications 34.8 % Electronics 28.5 % Other Transportation 25.5 % (mainly Ship and boat) Tabe 2.3 gives the figures on Employees in Five Defense-Related Indus- tries for the 1958-1971 period. Unfortunately, the breakdown of employ— ment in both Communications and Electronics, the second and third largest industries in the group, is not available before 1958. The employment figures for the defense-related industries follow a pattern similar to that indicated by the expenditures and obligations figures in the immediate pre-Vietnam period: the defense-related indus- tries lost relative to all other nonagricultural industries, and within the total for the defense-related industries, a shift was (apparently taking place in favor of the industries engaged in the production of highly sophisticated materials and away from the more "conventional" wartime industries. From 1958 to 1965 total employment in all non- agricultural industries increased from l8.4 percent while employment in the defense-related industries rose by only ll.8 percent.12 Electronics and Communications, however, posted gains of 7l.7 percent and 40.8 per- cent respectively. At the same time, Ordnance and Accessories increased by 42.8 percent. The Ship industry increased by less than 'the 65 TABLE 2.3 EMPLOYEES “VFIVE DEFENSE-RELATED INDUSTRIES,ANNUAL AVERAGES, 1958-1971 (thousands)a W C +4 W o 'U M'U «"3 '5 01/1 33 85 Year S— m 164-, ou-H .,.. a: 44 434-, U: C: 035- 'UU": m ‘F L -P g o m c1c> czc-P (U: U N E'I—D UQN CC," QF‘ 40m «PH S-‘UN E'JSO NED 'UUO 'l-‘F' QR 12m 25:3 833 [.388 $2: fiégfll 1958 1,551.0 771.0 296.1 178.9 158.1 146.9 1959 1,623.6 720.6 339.7 213.3 203.5 146.5 1960 1,604.9 627.9 382.3 233.5 220.0 141.2 1961 1,643.2 609.7 404.7 243.0 244.2 141.6 1962 1,754.5 638.4 444.9 266.1 264.4 140.7 1963 1,745.4 639.2 435.8 262.5 265.5 142.4 1964 1,667.8 605.4 408.6 264.8 243.9 145.1 1965 1,734.1 624.2 416.3 307.1 225.3 160.2 1966 2,048.8 753.3 467.7 388.6 260.9 178.3 1967 2,222.8 833.6 510.9 384.9 317.2 176.2 1968 2,275.5 852.0 522.5 381.4 338.0 181.6 1969 2,229.6 804.4 526.3 394.0 316.2 188.7 1970 1,954.1 689.9 494.7 351.5 248.7 169.3 1971 1,669.0 538.1 440.1 332.6 193.0 165.2 SOURCE: 1958-1969 averages, EMpZoyment and Earnings, United States, 1909-1971, (B.L.S. Bu11etin, No. 1312-8, 1972); 1970-1971 averages, EMpZoyment and Earnings. NOTE: Data are revised to the 1970 Benchmarks. aData include all wage and salary employees in the five industries engaged in defense as well as non-defense work; proprietors, self- employed, and unpaid family workers are excluded. 66 nonagricultural industry average, and Aircraft actually declined by almost 20 percent. Aside from Ordnance, then, the largest increases in this period took place in the more sophisticated industries-—in all likelihood, those industries requiring a greater percentage of highly educated workers than those defense industries oriented toward the pro- duction of more conventional wartime materials. The figures on Production Workers as a Percent of All Employees in the Defense-Related Industries (Table 2.4) give a rather mixed picture with respect to the highly skilled nature of some of the more sophisti- cated industries. Electronic Components, which had the largest increase in total employment from 1958-1965, turns out to be second only to the Ship industry in the percentage of production workers for all years, while Ordnance,which we would have expected to be one of the more mass production oriented industries, actually has the lowest percentage of production workers for most years up to 1967. Communications is typi- cally the next lowest in the percentage of production workers. The ques- tion, then, is why do some of the industries which we might expect to have very low percentages of production workers actually have very high percentages and vice versa? In all but the Electronics and Ship industries, there has been a trend toward a falling proportion of production workers, some industries having more rapid declining trends than others.13 It may well be that the Electronics industry is simply not as susceptible to the automation or mechanization of mass production techniques, so that more production workers are required percentage-wise. On the other hand, Communications and certainly Ordnance may be quite susceptible to automated or PRODUCTION WORKERS AS A PERCENT OF ALL EMPLOYEES IN THE 67 TABLE 2.4 DEFENSE-RELATED INDUSTRIES, 1958-1971 2 .. O '0 mt: .,— EU) 0: U) H 001 (U.Q) me “a 3 83 82 '22 m: an? L '4-5- '1-0) 00 OD CC"- +3 MM CE L: cm M'I-S- PU) LELA 30." 440" €601 6"“ (U 3 U N E'F’LO U (3.5 CG," .D-r— (UM 4-1‘0 SUN 3&0 wESO 'UUO‘ FPO." 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During the mid—to-late 1960's the economic environment was unus- ually favorable for the low-skilled and less-educated workers due in large measure to the direct and indirect effects of the Vietnam War. Yet, even in such favorable circumstances, and following large cuts in both personal and corporate income taxes, labor force participation rates for these workers continued to fall, and their unemployment rates remained high.27 Continued economic growth is a necessary but not sufficient condition for the economic advancement of those workers with low levels of skill and education. A strong labor market policy is equally important to the prOper functioning of the U. S. labor market, particularly for the economically disadvantaged. Some of the components of a comprehensive labor market policy in general terms are: 1. Government Expenditures. Where possible the Federal Govern- ment's expenditures should be directed to those industries and areas in which there exists a surplus of labor, in particular labor with low levels of skill and education. Potential examples are numerous, but mass transit is an obvious one. With sagging automobile produc- tion, high fuel prices, and the potential demand for large numbers of low-skilled, production-line jobs, this area is a good illustra- tion of the benefits to be gained from consciously-directed govern- ment spending. 2. Education. As always, increased educational opportunity for 233 the population is an integral part of an overall policy. While the benefits to be gained may not necessarily be immediate, in the long- run both society and the individual tend to be better off the higher the educational levels achieved.28 3. Training. Manpower training programs of varying types have been shown to be beneficial in many respects, not the least of which is in providing opportunities for those with obsolete or low-level skills to acquire new or better ones enabling them to qualify for better jobs.29 Workers with higher levels of skills and educational attainment find similar avenues for enhancement through the use of existing centers of higher education. Attention to these should not be neglected. 4. Public Service Employment. The use of some type of public service employment is one of the more direct ways to see that jobs find their way to those workers with low skills and educational levels. The recognition that such programs are sorely needed seems to have been growing over the past few years, such that the question now becomes, not whether or not to have such a program, but rather what form it will take. There is a place for long-range public works programs providing work as a viable alternative to a deficient private sector, rather than simply under the concept of the govern- ment as an "employer of last resort." There is also room for pro- grams to be triggered when the rate of unemployment reaches some predetermined level.30 There are other policy components which are important in an 234 integrated approacp, not the least of which is a firm commitment on the part of the Administration to achieving low levels of unemployment as one of the implicit goals in the Employment Act of 1946.31 Implementa- tion of all of the necessary elements of a comprehensive economic policy requires long-range planning with deliberately chosen goals in mind. The alternatives may include periodic flirtations with war as the more radi- cal theorists suggest, or other equally repugnant possibilities. It would be much better to choose our goals and plan our policies wisely, such that the need for the unpleasant alternatives never arises. Suggested Future Research Several research projects of importance are suggested by this work. Some of these projects would be useful in patching up holes which for the time being have been filled with assumptions rather than direct statistical support. Others follow from ideas which have only been given the briefest mention here. Defense Employment Survey. Much of our knowledge on war's employ- ment impact comes from analysis of defense industry figures or of the more recent data from the Bureau of Labor Statistics. Better informa- tion could be obtained from an elaborate suvery-through written and in—person interviews-—of many of the major defense contractors in a sampling of defense—related industries. The actual effects of wartime production depends on employment requirements by occupation and education, the rate and nature of technological change, and the operation of the "internal labor markets." At the least a great deal could be learned about the impact of the Vietnam War. 235 Deferment Policy Effects. Further research should be done with respect to the labor force impact of deferment policy-—the II-S deferment in particular-—during the 1960's and the post-World War II period in general. Here we have used a very simple trend procedure supplemented with some ad hoc reasoning and knowledge concerning the related effects of the 1965 definition changes. Rather than using this method, multiple regression techniques could be employed with the addition of other rele- vant variables, such as proxies for the cost of education, changes in social attitudes toward education, unemployment of college graduates, and others. Internal Labor Markets. Further research into the response of employers in internal labor markets to the appearance of job vacancies is also needed. It would help to know more about the placement of the ports of entry and exit in various industries with respect to the level of education and training. The 1965 Definition Changes. At several points in this work the changes in the definition of employment and unemployment which were made in 1965 became crucial. Only a few attempts at estimating the impact of these changes on employment and unemployment rates have been made. Esti- mates of the impact of these changes would be interesting for purely academic reasons. In addition, millions of dollars are allocated by states and the federal government according to formulas based upon unem- ployment rate levels. (The Comprehensive Employment and Training Act allocations and the extended Unemployment Compensation payments are relevant here.) Imperialism. An extensive investigation into the interrelationships 236 between the conclusions of this study and the Marxian, or "radical" theories, in particular the concept of "imperialism," would also be worthwhile. While a great deal has been written on the subject, much of the existing literature currently getting attention is highly politi- cal in nature. A new infusion of factual material would be helpful. Data Needs In addition to these suggested research projects there are a few changes in and additions to the existing data series which would have greatly facilitated work on this topic, and which would also provide information necessary both for wartime manpower allocation and for peacetime policy making. Defense-related Emplpyment. At present figures on defense employ- ment are collected only on an ad hoc basis. It would be very useful for many reasons to have a continuing series-—whether it be on a quarterly or annual basis-—indicating the occupational, industrial, and educational composition of both indirect and direct defense-related employment. Armed Forces. It would also be useful to have figures which indi- cated the prior labor force status of accessions to the Armed Forces, as well as the subsequent labor force status of separations from the Armed Forces, disaggregated by various age and education categories. 10. 237 Notes and References-Chapter Six It should be kept in mind that we have assumed in Chapter Two that employment levels would have been unchanged in the absence of the War. Thus, the figures here do not include any reduction in unemployment because of increased levels of defense employ- ment. The only effects are by way of changes in the composition of employment. For the comparison figures on unemployment, the reference through- out this section is to Table 2.15. _!.£" ‘c‘ia-‘fl I...I_.!_ 1 The explanation for this phenomenon is contained in the preceding section. For statements on the nature of wartime economic expansions in # general, see: Mitchell, Wesley C., wartime 'Prosperity' and the Future, Occasional Paper No. 8, ''Our Economy and War" series, New York: National Bureau of Economic Research, Inc., March, 1943, p. 1. Parallel views on the Vietnam War expansion are to be found in the following: Okun, Arthur M., The Political Economy of'Prosperity, New York: W. W. Norton, 1970, especially Chapter 3, "The Challenges of Defense and High Employment." For example: Rutzick, Max A., "Worker Skills in Current Defense Employment," Mbnthly Labor Review, September, 1967, p. 17; and Melman, Seymour, "Ten Propositions on the War Economy," Papers and Proceedings of the American Economic Association, May, 1972, p. 312. Economic Effect of Vietnam Spending, Hearings before the Joint Economic Committee, Vols. I and 11, U. 5. Congress. Washington, D. C.: Government Printing Poffice, 1967, hereafter referred to as Hearings, 1967. For a summary of these trends, see: Gilpatrick, Eleanor 6., Structural Unemployment and Aggregate Demand: A Study of Employ- ment and Unemployment in the United States, 1948-1964, Baltimore: Johns Hopkins Press, 1966, especially Chapter 4, "Changes in Employment Requirements," pp. 70-92. Ibid., p. 218. Killingsworth, Charles C., ”Structural Unemployment in the United States," pp. 129-143, in Steiber, Jack, editor, Employment Prob- lems of Automation and Advanced Technology: An International Perspective, London: Macmillan and Company, Ltd., 1966. Gilpatrick, op. cit., uses a similar line of reasoning and goes into much detail on the adaptive mechanisms of the supply of labor. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 238 Ibid., p. 218. Ibid., and Johnston, Denis F., "The Labor Market 'Twist'," 1964- 1969," Monthly Labor Review, July, 1971, pp. 26-36. "Defense Industry Adapting to Peace," New York Times, December 3, 1972, Section 3, p. 1. Ibid Many examples of such needs are contained in: convertibility of F‘ space and Defense Resources to Civilian Needs: A Search for New Employment Potentials, Selected Readings in Employment and Man- power, Volume 2, Subcommittee on Employment and Manpower, Commit- tee on Labor and Public Welfare, U. S. Senate, Washington, D. C.: Government Printing Office, 1964, hereafter referred to as Read- I ings, 1964. Okun, op. cit., especially Chapter 3, "The Challenges of Defense and High Employment;" and Economic Report of'the President, 1967, Washington, D. C.: Government Printing Office, 1967, pp. 46-47. In the section entitled "Structural Unemployment," pp. 107-108, no mention is made of War-related forces. Economic Report of’the President, 1971, Washington, D. C.: Gov- ernment Printing Office, 1971, pp. 42-48. Killingsworth, Charles C., "Full Employment and the New Economics," scottish Journal of’Political Economy, February, 1969, pp. 11-14. Another significant development was the continuing decline in labor force participation rates among the lower-educated workers. Killingsworth, Charles C., "Unemployment: A Fresh Perspective," pp. 190-191, in Current Labor Market Developments, Hearings before the Joint Economic Committee, Part 1, Washington, D. C.: Govern- ment Printing Office, 1972. Thurow, Lester C., "Redistributional Aspects of Manpower Training Programs," in Ulman, Lloyd, editor, Manpower Programs in the Policy Mix, Baltimore: Johns Hopkins University Press, 1973, p. 84. Okun, op. cit. Ackley, Gardner, address at Southern Illinois University, October 26, 1966 (mimeographed). Heller, op. cit., p. 64. Gilpatrick, op. cit., p. 218. 25. 26. 27. 28. 29. 30. 31. 239 "Employment in Perspective: Job 1055 and other factors behind the recent increase in unemployment" Bureau of’Labor Statistics, Report No. 466, June, 1975, p. 1. New York Times, March 2, 1975, Section 4, p. 1. For more on this issue, see: Lando, Mordechai E., "Comment," scottish Journal of’Pclitical Economy, February, 1970; and Kill- ingsworth, Charles C., "Fact and Fallacy in Labour Market Analy- sis: A Reply to Mr. Lando," scottish Journal of'Political Econ-‘ omy, February, 1970, especially pp. 102-104. See: Denison, Edward F., The Sources of’Economic Growth and The Alternatives Before Us, New York: Committee for Economic Develop- ment, 1962, especially Chapter 7, pp. 67-79; also, Killingsworth, Charles C., Jabs and Incomes for Negroes, Ann Arbor: Institute for Labor and Industrial Relations, University of Michigan-—Wayne State University, 1968 for a discussion of the differences in the black and white experience with increasing levels of educational attainment. For a good survey of the benefits and costs of manpower programs, see: Barsby, Steve L., Cost-Benefit Analysis and Manpower Programs, Lexington, Mass.: Heath and Co., 1972. For discussions of the problems and prospects offered by such programs, see: Levitan, Sar A., and Taggert, Robert, editors, The Emergency Employment Act: The PEP Generation, Salt Lake City: Olympus Press, 1974; and Sheppard, Harold L., Harrison, Bennett, and Spring, William J., editors, The Political Economy of'Public Service Employment, Lexington, Mass.: Heath and Co., 1972. For a discussion of some of the problems invovled in the full em- ployment goal, see: Gordon, R. A., "Full Employment as a Policy Goal," pp. 25-55 in Ross, Arthur M., editor, Employment Policy and the Labor Market, Berkeley: University of California Press, 1967. APPENDICES APPENDIX A DEFENSE EMPLOYMENT ESTIMATES The Bureau of Labor Statistics estimates of defense-generated Li] employment were only one by-product of a longer-range interindustry study of the economy known as the Interagency Growth Project.1 The estimates were derived in three stages: first, 000 Expenditures for Military I Functions and Military Assistance Programs were examined to identify those goods and services actually purchased; second, the purchases from stage one, in dollar figures, were processed through an interindustry model of the economy—-in the form of an input-output table specifying chains of input from one industry to another required to produce a given output for the entire economy-—to determine total production in each industry; finally, the industry production levels were converted to employment estimates after allowing for changes in productivity levels between industries. The figures for defense purchases which were used in generating these employment estimates were derived from the same 000 expenditure series for which only the totals are given in Table 2.1.2 However, after adjusting the figures to 1958 prices and distributing them over the relevant 4-digit industry categories, the figures were examined closely . in comparison with both the Bureau of the Census Survey, (MA-175), "Ship- ments of Defense-Oriented Industries" and the DOD obligations series in order to place them on a current-production basis. That is, as we 240 241 pointed out above, 000 expenditure figures often follow the actual pro- duction and employment impact of 000 purchases of goods because of lags in production and delivery time, and the fact that full payment is generally made only upon final delivery; on the other hand, DOD obliga- tions figures represent "new obligational authority" and, thus, do not necessarily indicate whether production was actually undertaken (i.e., obligations actually ”incurred"). The BLS staff has approximated, as closely as possible, the current production and employment phase of ; defense-related work by adjusting the defense purchases figures to a current payments basis.3 (We must note here that the figures for "defense purchases" are not taken solely from the DOD expenditure figures, but also include defense-related purchases of agencies such as the Atomic Energy Commis- sion. Items which are purchases for nondefense purposes in either the AEC or 000 have been specifically excluded, so that the resulting employment estimates reflect just the effect of "defense purchases" more narrowly defined.) The basic interindustry model used in the calculations was devel- oped by the Office of Business Economics of the Department of Commerce in 1958 with adjustments made in the input-output coefficients to account for changes in technology in the period since 1958.“ The model essen- tially consists of a table specifying the interindustry relationships of 86 fOur—digit SIC industries: each entry in the table represents the amount of output (direct and indirect) required from the industry named at the beginning of the row, for each dollar of delivery to final demand by the industry named at the head of the column.5 Thus, once the defense 242 purchase figures (in 1958 producer's prices) are allocated among the par- ticular industries, the quantity of production forthcoming from each industry can be determined according to the technical relationships specified in the table. In the last stage the production estimates for each industry re- sulting from defense purchases are translated into employment estimates using (BLS) unpublished unit employment requirements for each industry. Adjustments in these unit employment requirements in the post-1958 period serve to account for increases or decreases in productivitylevels ' for each industry over time. Thus, the defense-generated employment estimates-—total and by industry-which derive from this method repre- sent the employment requirements, adjusted for changes in technology, changes in the productivity of labor, and changes in the price level, created by defense purchases of goods and services in each fiscal year. The estimates are much more precise than any cited from the past or current period in that they reflect to a large extent only that employ- ment directly stemming from defense purchases. In addition, they pro- .vide an adequate basis for comparisons over time since the concepts used in developing them have been retained with considerable consistency. The estimates are not without their limitations of course, and these have been noted carefully in many of the published reports.6 They invOlve such matters as the possibility of inaccurately calculating the rate of change of technology or labor productivity from one year to the ' next, and thus either over- or under—estimating the employment generated. Also, for changes in final demand, as opposed to changes in initial sector demand which are the raw inputs into the interindustry model, the 243 table basically assumed proportionate increases in employment levels. If overall productivity or technology changes make for less-than-pro- portionate increases with changes in the final demand levels, the esti- mates will be on the high side. 244 Notes and References-Appendix A For this discussion we have relied upon: Alterman, Jack, "Inter- industry Employment Requirements, Monthly Labor Review, July, 1965,.pp. 841-850; and Oliver, Richard P., "The Employment Effects of Defense Expenditures," Monthly Labor Review, September, 1967, pp. 9-16. Monthly Report on Status of'Funds, (Department of Defense). Oliver, op. cit., pp. 13-15. The original presentation of the 1958 interindustry structure was: Goldman, Morris R., Marimont, Martin L., and Vaccara, Beatrice N., "The Interindustry Structure of the United States, A Report on the 1958 Input-Output Study," survey of’Current Business, November, 1964, pp. 10-29. For a listing of the industries included, see: Alterman, op. cit., p. 847. Ibid.; and Oliver, op. cit., and others. APPENDIX B THE DERIVATION OF DEFENSE EMPLOYMENT ESTIMATES BY LEVEL OF EDUCATION F31 Each March a set of supplementary questions is attached to the Monthly Household Survey conducted by the Bureau of the Census to obtain information about the educational attainment of the population and the ' labor force. The results which pertain to the civilian labor force are tabulated by the Bureau of Labor Statistics of the U. S. Department of Labor and are published in the Special Labor Force Report series entitled "Educational Attainment of Workers." 1 The resulting figures are obser- vations of the civilian noninstitutional population and labor force in March of each year and are not seasonally adjusted. We have made use of an occupation-education matrix contained in these reports-—Table I, entitled I'Occupation of employed persons, by sex and years of school completed"-—to derive defense-generated employ- ment estimates by level of education. The occupations covered include the following White Collar categories: Professional, Technical and Kindred; Managers, Officials, and Proprietors, except Farm; Clerical and Kindred; and Salesworkers. The Blue Collar categories include: Crafts- men, Foremen, and Kindred; Operatives and Kindred; Private Household; Service, except Private Household; Farmers, Farm Managers, Laborers, and Foremen; and Laborers, except Farm and Mine.2 The coverage in the original defense-generated employment estimates by occupation differs 245 246 somewhat from the above groups. The defense coverage omits Private Household workers since they were found to be insignificant in number.3 In addition, the data on defense employment by occupation includes the category Laborers and Farm Workers which covers two of the categories in the civilian employment table. Thus, in order to obtain an occupational coverage comparable with the raw defense occupational estimates we have ’1' combined the Farmers, Farm Managers, Laborers, and Foremen and the Laborers, except Farm and Mine groups; that is, we calculated the abso- lute numbers in each education group for both occupation groups, summed £1“ across education groups, then, recomputed the percentage distribution for the new combined Laborers and Farm Workers group. The occupation- education matrix of civilian employment which we have constructed for March of each year from 1965 to 1971 contains eight occupations and the following educational categories: 0-8, 9-11, 12, and 13+ years of school completed. (We have compressed the educational categories into four rather than the usual eight or nine because much of the rest of the data exists only for the smaller number of groups.) To derive the defense emplOyment estimates by level of education, we have had to assume that the percentage distribution of each occupa- tional category by level of education was the same in the defense-re-; lated occupations as in the corresponding occupations in overall civil- ian (defense plus nondefense) employment in each year. Given the lack of raw defense-generated employment estimates by levelcnieducation, this appears to have been the only reasonable choice. The alternative would have been simply to apply the educational distribution of overall civil- ian employment to the defense-generated employment totals. This 247 procedure would ignore the relevant information on differences in occupational patterns in defense as opposed to civilian employment and the fact that median educational attainment differs by occupation. The median educational attainment for the various occupational groups ranged from a low of 8.8 years for Farmers and Farm Managers to a high of 16.3 years for Professional, Technical, and Kindred Workers in (March) 1965.“ . Another assumption which we had to make was that the educational distribution of employment by occupation was either constant or rela- tively slow to change throughout the year. The reason for this assump- tion is that we are applying the educational distribution of employment by occupation as of March of each year to estimates of defense employment by occupation for the entire fiscal year. The most dramatic alterations in employment patterns over the year should be reflected in the occupa- tional and industrial employment figures, but not in the figures for the educational composition of a particular occupational group. Thus, this would seem to be a fairly reasonable assumption. The actual derivation of the defense-generated employment estimates by level of education is very straight-forward. We begin with the BLS estimates of defense employment by occupation which we have obtained from various Department of Labor publications.5 Multiplications of the employ- ment in each particular defense occupational group by the percentage of the corresponding civilian occupational categories for the same year in the various educational subgroups-0-8, 9-11, 12, and 13+ -yields the estimates of defense-generated employment by level of education for each occupational group. Simple summation of the numbers in each educational 248 subgroup across the eight occupational groups gives the overall distri- bution of defense-generated employment by level of education. To Obtain the percentage distribution by level of education we divide the number in each of the subgroups by the defense employment total and multiply by 100, of course. 249 Notes and References-Appendix B Special Labor Force Reports, Nos. 1 (1959), 30 (1962), 53 (1964), 65 (1965), 83 (1966), 92 (1967), 103 (1968), 125 (1969 and 1970), and 140 (1971). Before 1959 the data was published by the Depart- ment of Commerce. For example: current Population Reports-—Labor Force, Educational Attainment of'Workers, 1957, Series P-SO, No. 78. special Labor Force Report, No. 125, p. A-15. Fm} Rutzick, Max A., "Worker Skills in Current Defense Employment," Monthly Labor Review, September, 1967, p. 18. Table I, p. A-13, Special Labor Force Report, No. 65. Derived from BLS defense employment estimates: 1967 figures, pp. Ii 3, 12, Monthly Labor Review, February, 1970; 1965, 1968-1970 fig- - ures, pp. 4, 13, Monthly Labor Review, December, 1971; 1971 fig- ures, p. 10, Projections of'the Post-Vietnam Economy, 1975 BLS Bulletin No. 1733, 1972. 1969-1971 figures are subject to revi- Sion. APPENDIX C THE EMPLOYMENT IMPACT OF MANPOWER PROGRAMS Beginning in l965 enrollees in many of the federal manpower pro- Efi‘ grams were counted as "employed" rather than "unemployed" in the monthly Current Population Survey, leading to an increase in the employment count. These men and women—NYC, OJT-MDTA, College Work-Study, Paid y Nonprofessionals in CAP, Operation Mainstream, JOBS, and New Careers enrollees-—in programs which under the old definitions would have been part of the unemployed count were now added to the official employment tally. Thus, those enrollees who had been unemployed or not-in-the- labor force prior to entering the various manpower programs would consti- tute an increase in the employment count over the earlier figures. To estimate the employment impact of this definition change and the ensuing growth in the program enrollments, several steps were necessary. First, we obtained a count of enrollees in these various manpower programs for each fiscal year from 1965-1970.1 (Only the last half of fiscal 1965 was affected by the change in definition.) The 1965 to 1967 figures come from an article by Professor Cohen,2 and the more recent figures from materials collected for Professor Killingsworth by Miss June Mueller from program sources. The second step involved estimating the employment/unemployment (and not-in-the-labor force) experience of the enrollees in the various programs. Here again, we relied primarily on Cohen's assumptions 250 251 concerning prior labor force status for all but the Operation Mainstream and the JOBS programs for which Mueller's estimates were used.3 Finally, we had to develop a distribution of enrollees by educa- tional level. For this step we used-the breakdowns provided in the Manpower Report of'the President, 1971, Tables F-7, F-lO, F-ll, and F-13. The total employment increase resulting from the inclusion of previously unemployed and not-in-the-labor force enrollees in the employ- ment count was assUmed to be distributed in proportion to the education . distribution by program. The resulting absolute and percentage distributions of the manpower program-related employment increases, by level of education, are given in the text Table 2.14. 252 Notes and References-:Appendix C The New Careers enrollees have been omitted here fOr two reasons: first, the small size of the program; and second the lack of reliable information concerning the employment/unemployment experience and the educational background of the enrollees. Cohen, Malcolm S., "The Direct Effects of Federal Manpower Pro- grams in Reducing Unemployment," Journal of’Human Resources, Fall, 1969, Table 2, p. 501. E; For Cohen's assumptions, see: Ibid., pp. 497-499. 1d BIBLIOGRAPHY 253 BIBLIOGRAPHY Books and Monogppphs Allen, R. G. D. Macroeconomic Theory: A Mathematical Treatment. New York: St. Martin's Press, 1968. Bailey, Martin J. National Income and the Price Level: A Study in Macrotheory. New York: McGraw-Hill, 1962. Baran, Paul A., and Sweezy, Paul M. 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Report of'Availability and Summary of'Classification. Fiscal Years 1959-1971. M MICHIGAN STATE UNIV. LIBRARIES 1111111111111111|"111111111111111111111111111 31293103719385