ECONOMIC

may be as low as 10 percent. Thus the funding for the other 90 percentof the jobs becomes essentially a form of Federal revenue sharing with Stateand local governments. Then the job-creating impact of a PSE program islittle different from an expansion in revenue sharing.Persons with prospects of finding a regular job in the private sector duringthe expansion in economic activity might be less inclined to search for aregular job if they are in a PSE job. On the other hand, adults with longtermunemployment problems are the ones who would appear to be the mostsuitable candidates for the more than 300,000 public service employment jobslots currently funded by the Government.Several factors make it difficult to target PSE programs toward personswith long-term employment problems. For example, State and local governmentstend to hire the more able among the unemployed for federally fundedPSE jobs. As a result, PSE participants are more likely to be persons in theprime age groups and to have more schooling than the average unemployedworker. This has the advantage of maintaining the current employmentpractices of State and local governments. Yet persons with these characteristicsare also those who have the least difficulty in finding a job in the privatesector. There is therefore a tradeoff between attempting to maintain Stateand local government employment practices and inducing these governmentsto hire persons with difficulty in finding a job.The relatively high wages in PSE jobs also attract persons who are employablein the private sector. In 1976, for example, the average annualFederal contribution to wages and benefits in a PSE job was about $7,700(some localities supplement the Federal contribution), over 50 percentmore than a worker could receive in wages and benefits for full-timefull-year employment at the minimum wage. It has therefore been suggestedthat these jobs be limited to persons with long-term unemployment, such asthose who have exhausted their unemployment compensation entitlement,and that they be paid only the minimum wage or the subminimum permittedunder Department of Labor exemptions (generally 85 percent of the applicableminimum wage). While the 1976 amendment to the temporary employmentassistance program addresses in part the long-term unemploymentaspect of these suggestions, it retains the requirement that the PSE jobs paythe prevailing wage. The need to keep wages low has been subject to somecriticism. The payment of such low wages may adversely affect the efficiencyof workers holding these jobs. Some are also concerned that a family couldnot be adequately supported on such low wages. However, the regular incomemaintenance system (AFDC, food stamps, medicaid) would providesupplementary support to low-income families which include a participantin a PSE program. In addition, a low PSE salary would permit a programwith a larger number of participants for the same budget cost; as a result,more workers would gain job experience and fewer workers would be discouragedfrom taking a private sector job when employment opportunitiesimprove. Indeed this approach would make it more explicit that creating143