THE ADMINISTRATION has reached an agreement with Sen. Dan Quayle, chairman of the subcommittee on employment and productivity, that it hopes will stir further action on its plan to convert the locally run CETA job and training programs into block grants to states.

The administration's plan must still compete with congressional proposals--Sen. Edward Kennedy had cosponsored a bipartisan measure with Sen. Quayle, and Reps. Augustus Hawkins and James Jeffords each have a version before the House. There is common ground among the plans: a stronger say for private business in designing and running programs, the holding of administrators accountable for how well their programs work and a concentration on low-income youth.

The sharpest disagreement is over money. The administration wants to cut grants to $1.8 billion That's not much money--CETA once spent $9 billion--for tackling one of the most difficult problems facing the nation over the next decade. The job market is changing very rapidly, and millions of workers are finding their skills outmoded. Minority unemployment rates are already disastrously high.

To make the money go as far as possible the administration's plan provided training--not jobs or financial support--only to jobless low-income youth and welfare recipients. The Quayle compromise would give states some leeway to serve other unemployed people and to provide modest amounts of pocket money and of help to people who couldn't afford to take training otherwise. It would not deal with either the fact that many of these people learn best when training is mixed with useful work, or the fact that recent changes in welfare law make it uneconomical for many recipients to work.

Without much money to spend, the administration wants to give state governors the main say in how to spend what there is. But local officials generally know more about local labor markets, and the most successful CETA programs--such as Baltimore's--were put together by strong mayors with good ties to local business. Getting business more involved in job programs is an uncontroversial idea --every president since Lyndon Johnson has tried --but no one has yet come up with a way to get serious business involvement on more than a token scale.

There is also the generally neglected matter of building closer ties with the education system. With money as scarce as it is, there is no excuse for continuing separate federal aid to the heavily state-financed vocational education system, which, with a few notable exceptions, has a generally undistinguished record for serving the hard-to-employ. Money planned for vocational education grants could be much better used as leverage to get state education agencies cooperating in special programs for young people who have dropped out of school or are about to.

The administration has started a useful discussion. Congress should broaden it.