Economic Report of the President

that these measures may have caused the postponement of as muchas $22 billion in total government spending.Crowding Out of Private Sector EmploymentAnother reason for discounting the efficacy of public works measuresis their adverse side effects on private employment. If publicworks outlays are financed by additional taxes, the income andspending of consumers are reduced, decreasing the number of jobsin the private economy. Alternatively, insofar as public works outlaysare financed by borrowing from the public, interest rates are raised,crowding out some forms of private spending and reducing privateemployment. The higher interest rates resulting from increased Federalborrowing also discourage capital investments that help createfuture employment.Benefits to WorkersAn additional reason to discount the efficacy of accelerated publicworks projects is their limited value to participants. Most jobs incountercyclical public works projects are of extremely short durationand are unlikely to provide participants with lasting job skills. Underthe Public Works Impact Program, initiated in fiscal year 1972, theaverage duration of employment amounted to only 4.1 weeks. Almost60 percent of all employees worked 2 weeks or less. Data for thelocal public works programs initiated in 1976 and 1977 and describedabove, indicate that the average job lasted only 3.5 weeks.Although public works programs are motivated by a desire to providejobs for the unemployed, very few jobs are actually filled by unemployedworkers. Under the Public Works Impact Program, only 27percent of all jobs were filled by the previously unemployed. Underthe more recent public works programs of 1976 and 1977, it hasbeen estimated that only 12 percent of all jobs were filled by previouslyunemployed workers.COMBATING STRUCTURAL UNEMPLOYMENTThe preceding analysis suggests that it would be imprudent to usemacroeconomic policies to reduce the unemployment rate below itsinflation threshold level of 6 to 7 percent. Such an effort would increaseinflation, and ultimately prove counterproductive as increasedinflation was followed by recession. This does not mean that unemploymentrates in the 6 to 7 percent range are either inevitable ordesirable. The inflation threshold level of unemployment can be reducedby policies that consider the special problems of two groups ofworkers: (1) young people, and (2) adults experiencing long-term unemployment.It can also be reduced by reforms of the unemployment41