The Post's March 19 editorial ["Job Action"] pointing to alleged inadequacies of public service employment (PSE) as a counter-cyclical tool contained serious errors of fact and interpretation. Contrary to The Post's views, our actual experience with PSE since the Carter administration took office is that it has been the most effective and least inflationary way to create jobs, particularly during a recession. In addition, the counter-cyclical jobs program has been highly effective in targeting those jobs to the poorest and most disadvantaged workers, and the participants have benefited considerably from their PSE experience.
When Jimmy Carter was elected, unemployment was 7.9 percent. A substantial buildup of counter-cyclical PSE was completed in 10 months, almost exactly at the same time that unemployment fell to 6.2 percent, a level that has essentially remained constant for the past two years. This rapid buildup was accomplished on the exact timetable that we promised, with approximately 50,000 positions being added each month.
The subsequent reduction of PSE enrollments demonstrated that PSE is much more flexible in terms of timing and reversibility than is any other anti-recession policy instrument. Even in the case of a tax cut, for example, there is a substantial time lapse between a proposal and its ultimate effect on employment levels. Very few tax cuts, moreover, are reversible.
Any other counter-cyclical program, whether revenue sharing or local public works, also would have taken much longer.
The rapid buildup in the number of PSE enrollments was accomplished in conjunction with a substantial increase in the proportion of PSE jobs held by disadvantaged workers. While amendments in 1978 tightened CETA eligibility still further, the program was very highly targeted during the PSE buildup in 1977. In the fiscal year 1978, 81 percent of all enrollees in counter-cyclical PSE (Title VI) were disadvantaged (income of less than 70 percent of the Bureau of Labor Statistics lower living standard), compared with 67 percent in 1971.
In the first six months of 1979, a National Academy of Sciences survey found that new enrollees included significant representation from groups with labor market problems. Specifically, 50 percent were black or Hispanic, 24 percent had less than 12 years of education, 26 percent received public assistance or Aid to Families With Dependent Children, and 91 percent were economically disadvantaged.
Increased PSE is much less inflationary than other alternatives because it does not employ those with scarce skills but rather concentrates on labor markets that have excess supply.
Because PSE creates jobs at a lower cost than do other measures, less federal funding is required. We estimate that each new job created through PSE costs the U.S. Treasury $7,630, compared with a net cost of $18,739 per job created through revenue sharing, $22,650 per job created by local public works or $20,230 per job resulting from a tax cut. The average annual wage is currently constrained to be no more than about $7,650 nationally, and a maximum of 20 percent of the PSE funds can be used for overhead costs.
The Post editorial contained other factual errors. For instance, it stated that local authorities have responded to the availability of CETA funds by firing large segments of their work force and hiring them as PSE workers with federal funds (a practice known as substitution), thereby reducing pressure on their own budgets cut creating no new jobs on balance.
This statement is completely at odds with an impressive body of careful research on the issue. A recently completed study by The Brookings Institution using the field-observer method has estimated that substitution is in the neighborhood of 20 percent for regular PSE positions, and 9 percent for special projects positions. Other studies completed this year place the rate of substitution in the 30 percent range after one year. Thus, although some substitution undoubtedly occurs, it is far from the massive firing and rehiring suggested by the editorial.
Finally, The Post suggested that PSE is not an effective bridge for bringing the hard-to-employ into regular jobs. A national survey of a sample of CETA enrollees -- the Continuous Longitudinal Manpower Survey, conducted by the Census Bureau -- documents that CETA PSE enrollees earn substantially more after leaving the program than before joining it. Moreover, the gains are highest for those workers with the lowest preprogram earnings. Minority-group participants, who tended to have more limited earnings and work experience, achieved substantially greater average net gains than did white participants. Women, who are relatively disadvantaged, had much better net gains than did men.
In sum, the facts portray a markedly more effective targeted CETA program than the editorial would have its readers believe. Not only is PSE an efficient and effective counter-cyclical tool, but it is heavily targeted on the poorest and most needy workers and has had a demonstrable impact on bringing them out of poverty and into regular employment.