Economic Report of the President

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disproportionately among youths with the fewest labor market skills.Thus, although the stated purpose of the minimum wage is to reducepoverty, experience suggests that it may actually decrease the lifetimeearnings of some of the poor and thereby increase income inequality.POLICIES TO REDUCE YOUTH UNEMPLOYMENTAlmost all observers agree that mitigating the problems of instabilityand high unemployment in the youth labor market requires increasingthe availability of career-oriented employment and training.This can be accomplished through public support of training, minimumwage reforms, and employment tax credits.The Job Training Partnership ActThe Job Training Partnership Act (JTPA) of 1982 represents amajor Federal initiative to reduce structural unemployment amongyouth and adults. The JTPA departs from previous Federal employmenttraining programs by establishing a formal partnership betweenprivate industry, the public sector, and vocational training institutionsfor the purposes of planning, designing, and providing federally financedtraining. Federal resources are targeted to individuals identifiedas most in need: economically disadvantaged youth, low-skilledand chronically unemployed adults, and skilled workers who have lostjobs in declining industries and regions. The problems faced by thelatter group are discussed more fully later in this chapter.The JTPA is intended to fill an important niche in the national employmentand training system by serving individuals who are unableto make use of job training provided by more traditional institutions:high schools, vocational-technical schools, community colleges, universities,and employers. Federally funded training programs such asJTPA provide a second chance to youth and adults experiencingtrouble in the labor market. The JTPA is administered at the Stateand local level. This allows training programs to be tailored to theparticular needs of workers and employers in local labor markets.Minimum Wage ReformsThe Administration will propose a summertime differential minimumwage for young people under the age of 22. Between May 1and September 30 of each year the minimum wage for this groupwould be reduced to $2.50 from $3.35. This measure would encouragefirms to hire young people, just out of school, and give them theexperience needed to compete effectively in the labor market. It willalso encourage employers to provide youth who remain in schoolwith valuable work experience during the summer months.The Targeted Jobs Tax CreditAn alternative policy avenue for encouraging employment andtraining of young people is to provide tax credits or wage subsidies44
to employers who hire youths. Tax credits are currently provided tofirms that employ economically disadvantaged youths, aged 18 to 24,under the Targeted Jobs Tax Credit program. The credits are alsotargeted to welfare recipients, and economically disadvantaged Vietnamveterans, cooperative education students, handicapped persons,and ex-convicts.The tax credit lasts for up to 2 full years. In the first year it isequal to 50 percent of an individual's earnings, up to a maximumcredit of $3,000. In the second year it is equal to 25 percent of earnings,up to a maximum credit of $1,500. Participation in the programhas been limited since its inception in 1979. This is an apparent consequenceof administrative problems encountered by the agencies responsiblefor determining program eligibility (especially the Job Service),reluctance on the part of eligible recipients to use the tax creditas a self-marketing tool, and employers' reluctance to let governmentprograms influence hiring decisions.Recent legislation added a second component to the tax credit programby providing a tax credit for summer employment targeted ateconomically disadvantaged youths aged 16 and 17. The tax creditfor this group is quite large, equaling 85 percent of wages, up to atotal summer income of $3,000. The summer Targeted Jobs TaxCredit program, in effect, allows employers to hire eligible youths,who are paid the minimum wage for a net cost to the firms of 50cents an hour. The program will be in place for the first time duringthe summer of 1983.A virtue of measures which subsidize employment and on-the-jobtraining for youth is that they counteract the large bias toward formalschooling over on-the-job training inherent in current policies. Inpart because of large public subsidies to higher education during thelast two decades, the percentage of young people, aged 18 to 24, enrolledin higher education rose very sharply from 26 percent in 1963to 41 percent in 1975. This shift toward increased formal schoolingwas accompanied by a decline in the relative wages of college graduatesand high school graduates. The ratio of the average annual incomesof college graduates to that of high school graduates, aged 25and over, fell from 1.53 in 1968 to 1.38 in 1978.LONG-TERM UNEMPLOYMENT AND STRUCTURAL CHANGEAn especially visible and serious component of the unemploymentproblem is composed of adults suffering protracted unemployment.At present, most long-term unemployment is a consequence of therecession and the resulting reduction in the demand for labor. But asdiscussed earlier in the chapter, long-term unemployment will remaina significant problem even after the economy recovers.45
Page 5: CONTENTSPageECONOMIC REPORT OF THE
Page 9 and 10: ECONOMIC REPORT OF THE PRESIDENTTo
Page 11 and 12: Monetary policy will play a critica
Page 13 and 14: Interest Rates and the U.S. Trade D
Page 15: THE ANNUAL REPORTOF THECOUNCIL OF E
Page 19 and 20: CONTENTSPageCHAPTER 1. FROM RECESSI
Page 21 and 22: PageConclusions 122CHAPTER 6. REVIE
Page 23 and 24: CHAPTER 1From Recession to Recovery
Page 25 and 26: slowed somewhat in the 1970s regard
Page 27 and 28: nal GNP growth is reflected in a sl
Page 29 and 30: inflation. More specifically, the A
Page 31 and 32: inflation rate, or with a 12 percen
Page 33 and 34: 1988, an increase of about one-four
Page 35 and 36: CHAPTER 2The Dual Problems of Struc
Page 37 and 38: frequently associated with poor hea
Page 39 and 40: Chart 2-2Distribution of Unemployme
Page 41 and 42: Chart 2-4Distribution of Unemployme
Page 43 and 44: These findings suggest several conc
Page 45 and 46: Wage RigidityA number of studies sh
Page 47 and 48: that these measures may have caused
Page 49: Most young people find jobs or leav
Page 53 and 54: defined broadly to include individu
Page 55 and 56: ship between incomplete experience
Page 57 and 58: CHAPTER 3The United States in the W
Page 59 and 60: with 2.6 percent in the other Organ
Page 61 and 62: TABLE 3-1 .—Structure ofthe U.S.
Page 63 and 64: TABLE 3-2.—Trade balances by comm
Page 65 and 66: concentrate on doing what it does r
Page 67 and 68: the United States will depress pric
Page 69 and 70: Chart 3-3Real Exchange Rates Of Maj
Page 71 and 72: AN UNDERVALUED YEN?The explanations
Page 73 and 74: arily reduced the international com
Page 75 and 76: nancial markets. These transactions
Page 77 and 78: TABLE 3-6.—Economic performance b
Page 79 and 80: were undoubtedly a highly favorable
Page 81 and 82: of lenders that some debtors will n
Page 83 and 84: CHAPTER 4Increasing Capital Formati
Page 85 and 86: ate of net investment was required,
Page 87 and 88: able share in Japan and 56 percent
Page 89 and 90: During the 1970s, productivity grow
Page 91 and 92: MEASURING NATIONAL SAVINGDomestic s
Page 93 and 94: TAX RULES AND PERSONAL SAVINGMany e
Page 95 and 96: on consumption taxation might also
Page 97 and 98: Nevertheless, a number of economic
Page 99 and 100: tion permitted businesses to deprec
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A final problem under current tax l
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fleeted efforts to deal with proble
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egulation was probably not applicab
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Aeronautics Board, for example, the
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system resulted. Price controls, wh
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NGPA, both controlled and decontrol
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Price and allocation controls only
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nications industries through the re
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Several major pieces of legislation
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tempt to set cartel rates would be
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computer information and advertisin
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of computer technology to the payme
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trend by widening the sources and u
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changes. That is, members can arbit
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ceived to be a consequence of exces
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lowest point in the post-World War
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ing. Partly in response to the drop
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Chart 6-3Ratio of Consumer Installm
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Chart 6-4RATIO1.85Real Inventory/Sa
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percent increase in real defense pu
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8.8 percent in 1981. These declines
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housing. Borrowing by the nonfinanc
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orous competitor for credit as usur
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1982 their share had risen to over
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TABLE 6-9.—Economic outlook for 1
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A critical element in achieving hea
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LETTER OF TRANSMITTALCOUNCIL OF ECO
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Report to the President on the Acti
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ety of interagency and internationa
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ence J. Kotlikoff (Yale University)
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CONTENTSNATIONAL INCOME OR EXPENDIT
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B-70. Mortgage debt outstanding by
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NATIONAL INCOME OR EXPENDITURETABLE
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TABLE B-2.—Gross national product
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19291933193919401941194219431944194
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TABLE B-5.—Changes in GNP and GNP
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TABLE B-ll.—Gross national produc
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TABLE B-13.—Output, costs, and pr
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TABLE B-14.—Personal consumption
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TABLE B-16.—Gross and net private
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TABLE B-18.—Inventories and final
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TABLE B-20.—Relation of national
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TABLE B-21.—National income by ty
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TABLE B-22.—Sources of personal i
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TABLE B-24.—Total and per capita
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Year or quarterTotalTotalTABLE B-26
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POPULATION, EMPLOYMENT, WAGES, AND
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TABLE B-29.—Noninstitutional popu
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TABLE B-31.—Selected employment a
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TABLE B-33.—Civilian unemployment
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TABLE B-35.—Unemployment by reaso
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TABLE B-37.— Wage and salary work
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TABLE B-39.—Average weekly earnin
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TABLE B-41.—Changes in productivi
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TABLE B-43-—Industrial production
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TABLE B-45.—Capacity utilization
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TABLE B-46.—New construction acti
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TABLE B-48.—Nonfarm business expe
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TABLE B-50.—Manufacturers' shipme
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Year or monthAllitemsPRICESTABLE B-
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TABLE B-53.—Consumer price indexe
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TABLE B-55.—Changes in consumer p
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TABLE B-57.—Producer price indexe
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MONEY STOCK, CREDIT, AND FINANCETAB
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TABLE B-63.—Commercial bank loans
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TABLE B-64.—Total funds raised in
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TABLE B-66.—Aggregate reserves of
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TABLE B-67 .—Bond yields and inte
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TABLE B-69.—Consumer installment
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TABLE B-71-—Mortgage debt outstan
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TABLE B-72.—Federal budget receip
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TABLE B-74.—Relation of Federal G
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TABLE B-76.—Federal Government re
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TABLE B-78.—State and local gover
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TABLE B-80.—Estimated ownership o
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CORPORATE PROFITS AND FINANCETABLE
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Year or quarterTABLE B-84.—Corpor
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TABLE B-86.—Relation of profits a
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TABLE B-88.—Determinants of busin
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TABLE B-9Q.~Current assets and liab
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TABLE B-92.—Common stock prices a
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AGRICULTURETABLE B-94.—Farm incom
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TABLE B-96.—Farm input use, selec
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TABLE B-98.—U.S. exports and impo
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INTERNATIONAL STATISTICSTABLE B-100
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TABLE B-101.—U.S. international t
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TABLE B-103.—U.S. merchandise exp
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TABLE B-105.—International invest
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TABLE B-107.— World trade balance
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TABLE B-109.—Growth rates in real
Page 293:
TABLE B-lll.—Unemployment rate, a
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