ECONOMIC POLICY-MAKERS are now caught between the desire to decrease unemployment and the fear that stimulative policies will reignite inflation. In seeking to find its way out of this economic bind, the administration has paid scant attention to labor market policies. Such policies, by encouraging companies and workers to restrain wage and price demands or by improving the match between employer needs and worker skills, might allow more expansive monetary and fiscal policies to be pursued without restimulating inflation.
One reason for this neglect may be that the current leadership at the Labor Department -- the place where such things are normally considered -- operates in almost complete isolation from both the mainstream of the nation's labor movement and the realities of the labor market. Bureaucratic inertia within large segments of the department has reached new heights--or perhaps depths is the better word. Management's primary preoccupations seem to be stifling the flow of information to the outside world--including other government agencies--and pursuing ancient audit discrepancies in the accounts of state and local governments.
Meanwhile, research managers are busy dismantling much of the information base that has been developed over the years about how labor markets work and what can be done to make them work better. One recent, but not unique, example is the decision to terminate a four-year study of a $280 million youth employment program before results of the research had been harvested.
The study has already demonstrated that if low- wage, part-time jobs are made available, school dropout rates and unemployment go down markedly among minority youths -- a group of primary concern in efforts to reduce hard-core unemployment. What is not yet known is whether the jobs program will sufficiently improve the youth's subsequent employability to justify its substantial cost. Because the Labor Department has cut off the relatively small amount of money earmarked for the final research, no one will ever know.
This is not just a waste of millions of dollars. It's also a disturbing indication that some top administration officials either think they know everything worth knowing about the labor market or are afraid that something they find out will be uncomfortably incongruent with their preconceptions. Either way, it suggests that the administration will not be able to count on its labor advisers for the kind of help it sorely needs.