LIBRARY OF THE UNIVERSITY OF ILLINOIS AT URBANA-CHAMPAIGN I£63c vx>.\l-ZO gfgfffEeftSfr AUG 51976 The person charging this material is re- sponsible for its return to the library from which it was withdrawn on or before the Latest Date stamped below. Theft, mutilation, and underlining of books are reasons for disciplinary action and may result in dismissal from the University. UNIVERSITY OF ILLINOIS, LIBRARY AT (JftBA*JA£HAMPAIGN Ma i 5 MiG.2 3 TO/ a ftfC> V m L161 — O-1096 ENGINEERING LIBRARy UNIVERSITY OF ILLINOIS U8BANA, ILLINOIS enter for Advanced Computation UNIVERSITY OF ILLINOIS AT URBANA-CHAMPAIGN URBANA, ILLINOIS 61801 CAC Document No. 16 ECONOMIC RESEARCH GROUP WORKING PAPER NO. 6 Simulating the Employment Impacts of the Urban Coalition's Count erbudget By Roger H. Bezdek James G. Scoville Digitized by the Internet Archive in 2012 with funding from University of Illinois Urbana-Champaign http://archive.org/details/simulatingemployOObezd CAC Document No. 16 ECONOMIC RESEARCH GROUP WORKING PAPER NO. 6 SIMULATING THE EMPLOYMENT IMPACTS OF THE URBAN COALITION'S COUNTERBUDGET By Roger H. Bezdek James G. Scoville Center for Advanced Computation University of Illinois at Urbana-Champaign Urbana, Illinois 6l801 October 15, 1971 This work was supported in part by the Advanced Research Projects Agency of the Department of Defense and was monitored by the U.S. Army Research Office-Durham under Contract No. DAHCOU 72-C-0001. Approved for public release; distribution unlimited. NGINEER1HG U»W" ABSTRACT This paper describes a large scale computer simulation conducted to determine the detailed manpower effects which may be generated by imple- menting the Urban Coalition's recommended reorderings of national priorities and Federal expenditures in the period 1972-1976- The procedures followed in each stage of the analysis are specified in detail. The economic model employed is an expanded open input-output model transformed into labor units and integrated with industrial and occupational manpower data. Simu- lations are run to determine the differential employment impacts which would be caused by the Urban Coalition's budget priorities as opposed to the anti- cipated expenditure distributions being forecast for the near future. The findings indicate that the Urban Coalition's Count erbudget may cause such drastic dislocations in the labor market that its implementation may be infeasible. ACKNOWLEDGEMENT The authors would like to express their appreciation to Ann Bezdek for administrative and research assistance and to R. Michael Lefler for performing the programming work involved here. The opinions expressed here as well as any errors remain the sole responsibility of the authors. This work was supported in part "by a grant from the National Urban Coalition and in part by the Advanced Research Projects Agency of the Department of Defense under Contract No. DAHC04 72-C-0001 to the Center for Advanced Computation, University of Illinois at Urbana- Champaign. TABLE OF CONTENTS PAGE I. TOWARDS A MANPOWER ASSESSMENT OF REORDERED PRIORITIES .... 1 II. NATIONAL PRIORITIES AND MANPOWER REQUIREMENTS k A. Manpower Impacts of Changing National Priorities: A Brief Survey 5 B. Available Alternate Methodologies 9 C. Description of the Methodology Employed 10 III. DEVELOPMENT OF THE ACTIVITY AND EXPENDITURE COMPONENTS OF THE MODEL 15 A. Specification of Forecast Target Years and Development of Activity-Expenditure Categories 15 B. Development and Deflation of Consistent Expenditure Totals 30 C. The Complete Activity-Industry Matrix and the Alternate Expenditure Vectors 38 IV. DEVELOPMENT OF THE MANPOWER COMPONENTS OF THE MODEL k3 A. From Direct Industrial Output Demands to Interindustry- Employment Requirements k3 B. From Interindustry-Employment Demands to Occupation Manpower Requirements h6 C. The Complete, Consistent Empirical Manpower Demand Generating Model 57 V. THE MANPOWER IMPACTS OF COUNTERBUDGET 58 A. Derivation of Control Data 58 B. Simulating the Manpower Impacts 6l VI. INTERPRETATION OF THE RESULTS 73 A. Short-run Shifts in 1972 73 B. Longer-run Shifts to 1976 75 C. The Changing Importance and Impact of Federally Generated Employment 79 D. Overview 80 BIBLIOGRAPHY Qk LIST OF TABLES TABLE PAGE 3-1 Summary of Budget Outlays 16 3-2 Relationship Between Activity Categories and Urban Coalition Budget Categories 20 3-3 Economic Activities Categories Considered for Analysis . . 2k 3-k Industry Numbering for Recent Input-Output Studies by the U.S. Office of Business Economics 26 3-5 Federal Government Activity Expenditures: 1972 and 1976 . 32 3-6 Deflated Net Activity Expenditures 39 k-1 Specification of Reconciled Industry Categories U9 k-2 Occupational Employment: i960 and Projected 1975 52 5-1 Economic Assumptions 59 5-2 Generated Occupational Manpower Demands for Professional and Technical Occupations 62 5-3 Differences in Generated Demands for 67 5-U Percent of Total Professional and Technical Manpower Demands Generated by Federal Expenditures 70 6-1 Differential Impact of Counterbudget on Selected Critical Occupations 76 6-2 The Top Twelve Federally-Generated Occupations , 1972 and 1976 81 CHAPTER I. TOWARDS A MANPOWER ASSESSMENT OF REORDERED PRIORITIES A century ago, Leon Walras in his celebrated Elements of Pure Economics took the first steps toward specifying the types of equations which form the system by which our economy is held together. Over the past quarter- century, great progress has been made in estimating the empirical coefficients which, in input-output analysis, form the heart of a linear approximation to that underlying system. The paper summarizes an attempt to extend further that line of development in the service of improved public policy. Its core is the central relationship of the modern input -output approach- -the relationship between the final bill of goods available for public or private consumption and the total outputs which every sector must generate. The first improvement developed in this study builds on earlier work by Bezdek in which more detailed and accurate industry demand estimates were generated from narrowly defined government programs. The second improvement lies in tying detailed industry output forecasts to detailed manpower demands. Together, the model presents a unified picture of the process by which patterns of final demand for output are translated into configurations of demand for manpower of various skills and abilities. Conceptually, the model is straightforward. The major difficulties are empirical, particularly in the area of reconciling the industrial and occupational classifications so that the separate components of the model will fit together as neatly in practice as they do in theory. The development of this extended system is of considerable impor- •1- tance for public policy analysis. Using its relationships, a variety of pro- posed or projected distributions of final output among competing public and private uses can be examined to assess the differing impacts on labor markets. The dislocations involved can then be judged and the feasibility and internal consistency of major shifts such as those proposed by the Urban Coalition can be appraised. When, in the future, this can be done swiftly and cheaply, the empirical model will represent a major step forward in the tools available for policy analysis. Of course, such a sweeping claim is premature at this point. Sub- sequent chapters show that available data and classification schemes make the empirical application of the model only approximate and often at much higher levels of aggregation than would be desirable. Despite the tentative nature of some of the results, the importance of this extension of the traditional interindustry model can be measured by the noticeable increase in analytical power from that described in Chapter 22 of C ount e rbudge t to that of the pres- ent report. Detailed projections can now be made for specific employment categories at the industry level, the short-run implications of dropping the Administration's budget in favor of the Urban Coalition's 1972 budget can be evaluated and the longer-run effects to 1976 can be assessed. The authors are indebted to the Urban Coalition for its interest in and support of this project. Not least among their contributions was an alternative budget which could be subjected to the scrutiny of our model. In addition to our primary goal of evaluating the manpower effects of Counter - budget , the established feasibility and utility of the extended analytical technique must be considered as important as the estimated detailed impacts of the Urban Coalition's proposals. Our findings should contribute simultan- -2- eously to public discussion of Counterbudget and to the development of improved methods for analyzing social programs. -3- CHAPTER II. NATIONAL PRIORITIES AND MANPOWER REQUIREMENTS An important issue to be considered in any reorientation of national goals and priorities is the manpower demands which may he generated by pro- posed priority shifts. If industrial and occupational manpower requirements are relatively unaffected by .marked changes in national priorities, then the Urban Coalition's budget recommendations may have only minimal impact. In such a case, the levels and structure of labor skills available now and in the near future will not be a major constraint on reordering priorities. If, on the other hand, the demands for certain categories of manpower resources are sensitive to shifts in expenditures, both the direct and indirect effects on the labor market structure become very important issues in priority reori- entation. This chapter first presents a brief review of recent evidence which indicates that employment demands may be very sensitive to shifting national goals and expenditure programs. It is this and related evidence which pro- vide much of the rationale for an expanded analysis of the Urban Coalition's Count erbudget. Secondly, several alternate methodologies which were avail- able for investigating the comprehensive and detailed manpower impacts of the Urban Coalition's priority changes are examined. Finally, the methodology relied upon in this report is reviewed and the approach itself is justified in view of the task at hand. -k- A. Manpower Impacts of Changing National Priorities: A Brief Survey- In the past decade a number of independent studies have indicated marked differences in direct and indirect employment effects as a result of shifts in national priorities and expenditure programs. In two articles published in the early 1960's Wassily Leontief used large scale economic input-output models to study detailed economic and employment effects resul- ting (in the United States) from an arms cut and the consequent reallocation of expenditures in favor of nonmilitary programs. In "The Economic Effects of Disarmament" Leontief and Marvin Hoffenberg investigated the likely impact of a 20°J reduction in arms expenditures reallocated proportionately to com- 2 peting civilian expenditure categories. Significantly, the authors reported that compensating reductions in arms expenditures could have a very large employment impact depending upon which expenditure programs were to benefit from the defense cutbacks. Further, the authors demonstrated that while the overall employment effects would be distributed throughout the economy, individual economic sectors could be affected very unevenly. In a later article entitled "The Economic Impact—Industrial and Regional--of an Arms Cut" Leontief extended this analysis by disaggregating the national effects 3 of disarmament into detailed industrial and regional estimates. Here Leon- tief developed his national and regional analyses in more rigorous detail and attempted to determine the compensating increases in nonmilitary expenditures required to maintain a given level of employment in the face of specified reductions in military expenditures. Leontief emphasized that regional employment impacts of arms cuts may often be more significant than national industrial or occupational manpower effects. See Leontief and Hoffenberg [31] and Leontief, et. al. [32]. 2 Leontief and Hoffenberg [31]. ^Leontief, et. al. [32]. -5- In recent years the National Planning Association has sponsored a number of studies dealing with the economic and manpower effects generated by national goals and priorities. In The Dollar Cost of Our National Goals , Leonard Lecht "priced out" the resource costs of achieving a broad set of national goals and in Goals, Priorities, and Dollars he indicated more pre- cisely what it would cost the United States to attain each of its separate goals. In Manpower Needs for National Goals in the 1970's Lecht extended previous work by investigating the manpower implications of an effort to achieve national objectives within the next decade. He concluded that an attempt to reach all national goals by 1975 would imply a severe labor shor- tage of nearly ten million workers distributed unevenly among occupations and industries. Therefore, Lecht concluded that some hard choices would have to be made concerning the priorities and goals to be emphasized. In Manpower Implications of Alternate Priorities for Coping with Poverty Norman Frumkin of the National Planning Association carried Lecht 's work one step further by focusing on the manpower implications associated with implementing one goal-- •7 the elimination of poverty. Frumkin examined several poverty programs, with- in a comprehensive economic framework taking account of expenditure levels in other goal areas. Frumkin stressed the fact that the economic and manpower effects resulting from the pursuit of any single set of economic programs will be influenced further by expenditures in other priority areas. Thus, any investigation of the effects of implementing a particular program must be con- ducted within a broad framework embracing the effects of all other programs. -, Lecht [2k]. 5 Lecht [25]. ^Lecht [26]. 7 'Frumkin [17] . -6- The Bureau of Labor Statistics has conducted important research in O this area in cooperation with the Interagency Economic Growth Project. In Projections 1970' Interindustry Relationships, Potential Demand, Employment , the Bureau of Labor Statistics attempted to make consistent conditional pro- jections from 1965 to 1970 of the detailed economic and manpower effects which 9 would result from several national expenditure compositions in 1970. This bulletin contained four projections for 1970 which were based on different assumptions about the structure of 1970 final demand. The projections indica- ted that a significant effect on the level and structure of manpower require- ments can result from alternate distributions of government expenditures and total final demand. In two recently published studies the Bureau of Labor Statistics has extended this research to include projections to 198O. In Patterns of U.S. Economic Growth the Bureau of Labor Statistics updated the analysis contained in Projections 1970 "by examining the implications of eco- nomic growth in the coming decade for particular problem areas, notably man- power utilization. In The U.S. Economy in I98O the Bureau of Labor Statis- tics disaggregated the overall manpower effects into demands for selected occupational manpower categories. Further, in Tomorrow ' s Manpower Needs the Bureau of Labor Statistics forecast likely manpower requirements in 1975 for 160 industries and 185 occupations. A methodology was also suggested for dis- Q The Interagency Economic Growth Project was begun in the late 1960's by the U.S. Department of Labor in cooperation with other government agencies and private research organizations. It represented an effort to develop a more comprehensive and integrated framework for analyzing the implications of long-term economic growth for a number of problem areas, particularly prob- lems of manpower utilization. 9 U.S. Department of Labor, Bureau of Labor Statistics [69]- U.S. Department of Labor, Bureau of Labor Statistics [78]- U.S. Department of Labor, Bureau of Labor Statistics [79]- -7- aggregating these national manpower demands into regional and state manpower requirements. Finally, the most recent and relevant research in this area has been conducted by Roger Bezdek. In Manpower Implications of Alternate Pat - terns of Demand for Goods and Services Bezdek developed a model of the United States economy in the early 1960's which was capable of generating detailed industrial and occupational manpower requirements from a wide range of nation- al expenditure distributions reflecting alternate national goals and priori- 13 ties. This work was uniquely suited to the problem presently under consi- deration. To begin with, the model was completely general and capable of efficiently analyzing many types of priority-expenditure distributions. Secondly, the model was comprehensive in the sense that it accounted for total gross national product, total industrial output, and total industrial and occupational employment, while systematically generating occupational manpower requirements from interindustry employment demands. As a preliminary test of the model, detailed manpower effects of several types of priority reorientation were simulated and analyzed. From these simulations several important conclusions were derived: l) in general, U.S. industrial and occupational manpower demands are highly sensitive to even limited shifts in the distribution of national expenditures; 2) due to the variability of the manpower impacts and to the indeterminacy of future national objectives, reliable and accurate manpower forecasting is currently impossible; 12 Unfortunately, in this study the Bureau of Labor Statistics considered only one economic future and did not generate results on the basis of alternate assumptions; see U.S. Department of Labor, Bureau of Labor Statistics [73]* 13 These results are reported in Bezdek [5], [6], and [7]- -8- and 3) the demand structures of categories of manpower resources are quite different, some generated interdependently by a wide variety of factors throughout the economy, and others tied strongly to particular programs and Ik activities. The original system developed for i960 by Bezdek is the proto- type of models used here to investigate manpower effects of the Urban Coali- tion's proposed reordering of national priorities. Thus, ample evidence exists which indicates that the structure and level of manpower requirements in the United States are influenced by nation- al priorities and resulting expenditure programs. It is appropriate and necessary therefore, to scrutinize the manpower impacts generated directly and indirectly by the Urban Coalition's proposal. B. Available Alternate Methodologies Determining the direct and indirect manpower requirements which result from reordering national goals and priorities, is an extremely complex task. One method of generating the large amount of required data would employ a large scale structural equation model based upon classical statistical prin- ciples. However, the difficultly of constructing a model of this type large enough to be useful within the time constraint as well as the insufficient number of observations on relevant variables, and the relative absence of supportive work in this area preclude reliance upon this general approach. Instead, a comprehensive input-output model tied to the necessary manpower subcomponents was used. Within an interindustry framework, however, there are various ways m For a complete discussion of these and other findings see Chapter 11 of Bezdek [5] . -9- to proceed. One of these, the "goals analysis approach, " has been developed by the National Planning Association and used with some success to investigate problems of the type being considered here. Essentially, this approach con- sists of defining a number of broad goal areas, determining the costs of imple- menting these goals simultaneously in the near future, and then analyzing the 15 overall economic and manpower consequences implied by pursuit of these goals. jjTaking the conclusions of the Eisenhower Commission on National Goals, the National Planning Association developed a number of general goal areas in terms of specific goals and individual economic programs. However, due to the unavoidably ambiguous nature of most goal areas, individual economic prog- rams were often included in more than one goal area. The goals analysis ap- proach thus results in a large amount of overlapping and double counting. Furthermore, in most instances this approach does not permit precise identi- fication of the manpower requirements generated by distinct expenditure prog- rams and economic activities. For these and other reasons the goals analysis approach has been rejected here; instead, expenditures for distinct programs and activities are used to generate economic and manpower effects. This approach is specified in greater detail below. C. Description of the Methodology Employed The model used here to simulate the manpower effects generated by the Count erbudget priority reorderings is basically a large-scale input-output model, transformed into labor units and augmented with supplemental industrial For further discussion of the goals analysis approach see Lecht [2k] and [25]- The National Planning Association considered 16 broad national goal areas: 15 of these were derived from the report of the Eisenhower Commission and the 16th, space, was added in 196l. -10- and occupational information. A rigorous statement of the formal theoretical model is available elsewhere; here the model shall be described in simpler 17 and more general terms. This system envisions U.S. industrial and occupa- tional manpower requirements as being determined simultaneously by the level of aggregate demand, the existing state of technology, and the functional economic uses to which available resources are devoted. For a given time period--for our purposes, a specified year--the state of technology may be considered constant. Since the Urban Coalition's priority reordering largely involve the redistribution of a given level of total output to different func- tional uses, the level of aggregate demand shall be assumed fixed for each 18 year considered. Primary consideration will be given to the Urban Coali- tion's suggested variations in the distribution of fixed national output among competing economic activities and the detailed manpower effects which these budget redistributions may generate. In the manpower demand generating system used here, industrial and occupational manpower requirements are determined in the following sequence: 1) A political decision is made concerning the goals and objectives which are to be pursued, here the decision is assumed to be in favor of the Urban Coalition's recommended objectives. 2) This goal decision is translated into specific expenditure pat- terns, in this case the Federal budget expenditures specified in Counterbudget . 3) Each category of activity has unique requirements for the output of each industry in the economy; the sums of all these output requirements IT For a rigorous development of the model utilized here see Bezdek [5] and [7] -] o This assumption is not necessary to maintain the validity of the model and shall be dropped in future research conducted with the system. -11- comprise the direct output requirements associated with a specific set of national priorities. h) Due to an industry's need for another industry's output as its input, the total output requirements from any single industry are consider- ably larger than those created directly, and total economic output is the sum of the direct and the indirect output requirements from every industry. 5) Assuming that employment requirements in every industry are proportional to output requirements, each distinct level of industrial out- put generates an associated level of employment within that industry. 6) Finally, each industry generates distinct occupational employ- ment requirements via industry employment-occupation ratios. This flow of causation from national priority choices through output requirements to indus- trial and occupational employment demands is illustrated in Figure 1. In the model itself there are three main components: an activity-industry matrix, an interindustry-employment matrix, and an industry-occupation matrix. The first component of the system, the activity-industry matrix, translates ex- penditures on functional economic activities into direct output demands from every industry in the economy. The second major component of the system is the interindustry- employment matrix which shows the direct and indirect employment demands generated by the activity of particular industry in every 19 industry in the economy, including itself. The third major component of the empirical model is the industry-occupation matrix which translates interindus- try-employment requirements into occupational manpower demands. From this matrix and the defined levels of employment in each industry are derived the 19 The interindustry- employment matrix is discussed in further detail in Alter- man [2], Projections 1970 [69L and in Chapters 3 and 6 of Bezdek [5]. -12- total occupational employment requirements generated by a specified distri- bution of national expenditures reflecting a particular priority choice on the part of the nation. -13- Figure 1 Schematic Representation of the Manpower Demand Generating Mechanism National Priority Consensus Allocation of Resources Direct Industry Output Requirements V v Total l £y] Industry Output Requirements -i*J Industry Employment Requirements Occupational Employment Requirements -Ik- CHAPTER III. DEVELOPMENT OF THE ACTIVITY AND EXPENDITURE COMPONENTS OF THE MODEL In this chapter, construction of the interindustry manpower model used to simulate the employment effects of the Counterbudget is specified in detail. An appreciation of the operation of this model and the conventions followed in its development is necessary for a proper understanding of the conclusions reported in this study. A. Specification of Forecast Target Years and Development of Activity- Expenditure Categories In an economic sense changes in national goals and priorities refer to a redistribution of expenditures away from certain programs and activities toward those economic activities which contribute to the fulfillment of the goals and objectives being stressed. Working largely with Federal budget out- lays the Urban Coalition in Counterbudget developed comprehensive alternate expenditure recommendations for the years 1972 through 1976- A summary of these recommended budget outlays is presented in Table 3-1 • The problem which concerns us here is twofold: determining the manpower requirements likely to be generated in the near future by this recommended reordering of national priorities, and determining the difference between the manpower impact of the Urban Coalition's expenditure recommendations and that of expenditures "nor- mally" expected to occur. In principle, the manpower demands generated each year from 1972 through 1976 by the Urban Coalition expenditure distributions could be simu- lated and analyzed. 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O •H M43 to H P OQ rH O 0) P> o cp O (U o id o •H J> 0) n3 co id CD rH T3 ro CD •H ■P •H > •H -P O < P> ON UN H CO I UN UN I ir— o lr— vo i o H CO I UN OO co UN CO CM CO t-^ CM CO co O CO CO CM -J" CM CM -d- CM CO o CO CM o H no UN i VO H a.) H -* tr- •s. »N CM 1 i CM CO CM ON CM CM UN UN IT- ?f CM a3 P 02 o w CD O EH -IT- to the variables in question prevented the generation of manpower demands for all five years in question. It was decided instead to analyze the overall and the differential manpower impact of the Urban Coalition's programs for 1972 and for 1976 • 1972 is the first year for which the Urban Coalition has devel- oped alternate budget recommendations. These can be compared directly with the administration's projected budget outlays for the same year. Over the period of the subsequent four years, the Urban Coalition's federal budgets increasingly reflect the Counterbudget priority reorderings, culminating in 1976. It is to be expected, then, that the differential manpower effects would be relatively slight the first year but would grow increasingly impor- tant as the years went by. Analyzing probable manpower impacts for 1972 yields insight into the differing general manpower profiles of the two sets of prior- ities. By analyzing the manpower implications of the Urban Coalition's budget reallocations in 1976 a measure of the total changeover effect is gained. In the empirical model, changes in national priorities enter as re- distributions of expenditures among the elements of the activity- expenditure vector. This redistribution generates direct industrial output requirements through the columns of the activity-industry matrix. The first problem encoun- tered is insuring that expenditure categories among which budget outlays are reallocated by the Urban Coalition relate consistently to activity category columns in the activity-industry matrix. One of the most serious problems encountered in the development of the empirical model, this warrants closer examiniation. As indicated in the previous chapter, the activity-industry matrix transforms expenditures for specific economic programs and activities into direct output requirements for every industry in the economy. Each column of -18- this matrix is a 'bill of goods" or "input" vector showing in percentage terms the manner in which expenditures for a certain program or activity are distri- buted as purchases of goods and services for every industry in the economy. Ideally, a separate input vector would exist for each budget category consid- ered by the Urban Coalition for 1972 and 1976. Unfortunately, data relating to the industrial distribution of budget and final demand expenditures in detail are extremely difficult to obtain for any time period, and are especial- ly difficult to obtain for future time periods. The development of the acti- vity input vectors was extremely difficult and required a great deal of time and effort. Essentially, as many detailed and specialized activity vectors relating to the time periods in question are developed and used to reconcile the Urban Coalition's budget categories. In all, thirty-one input vectors relating to expenditure categories within the Federal budget were developed for use in this report. The activity categories which generate direct industrial output requirements in the model employed here and the relationship of these categories to those of the Urban Coalition's budget categories are presented below in Table 3-2. As indicated, the approach followed here is comprehensive, accounting for total gross national product and total industrial output. While Federal expenditures are a large and strategic component of total national expenditures they do compose only a fraction of the total. It is a basic contention of this study that the overall manpower impacts of the type of budget realloca- tions suggested in Counterbudget can be validly analyzed only by incorporating them within a comprehensive economic model which also considers all the other For selected categories of manpower resources, however, Federal expenditures may have a very disproportionate demand generating effect. For a recent investigation of this see Aronson [ 3] • -19- Table 3-2 Relationship Between Activity Categories and Urban Coalition Budget Categories Activity Category Titles Corresponding Urban Coalition Federal Programs Federal Government Expenditures, Total National Defense Intelligence and Communications Airlift and Sealift Research and Development Operations, Maintenance, and Administration Other National Defense Health Health Facilities National Health Insurance Other Health Refers primarily to direct and indirect purchases of goods and services induced by Federal government Expenditures. Detailed specifications are given for the appropriate activity categories. Corresponds to all of the Urban Coali- tion's national defense categories ex- cept foreign military support and assistance programs. Intelligence and Communications Airlift and Sealift Military Research and Development Central Supply and Maintenance Training, Medical, and Other Personal Activities Administration and Associated Activities Strategic Forces General Purpose Forces Guard and Reserve Forces Corresponds to all of the Urban Coali- tion's Health categories except Manpower Training and Education and Biomedical Research Construction of Health Facilities and a portion of Community Health Centers and Other Resource Distribution Programs National Health Insurance, Medicare and Medicaid, and a portion of community health care services Disease Prevention and Control, Other Health, and a portion of care for Veter- ans, Indians, and Other Special Groups ■20- Table 3-2 (cont'd) Transportation Highways Railroad and Mass Transit New Facilities Improvement of Existing Facilities Supersonic Transport and Civil Aviation Merchant Marine Inland Navigation Social Welfare Law Enforcement, Criminal Justice, and Civilian Safety- Education, Arts, and Humanities Educational and Cultural Facilities Other Educational, Arts, and Humanities Environment, Natural Resources, and Sanitation Water and Sewer Facilities Flood Control and Irrigation Waste Treatment Facilities Other Environment, Natural Resources, and Sanitation Corresponds to most of the Urban Coali- tion's Transportation categories Highways Includes the following two categories: Construction of new rail and mass tran- sit systems Improvement, extension, and maintenance of existing rail and transit facilities Supersonic Transport, Civil Aviation Merchant Marine Inland Navigation (Army Corps of Engin- eers) Social Insurance, Income Support Law Enforcement and Criminal Justice Includes the following two categories: Construction of educational and cultur- al facilities All other educational, arts, and human- ities Includes Environment and Natural Re- sources and a portion of Metropolitan Development Water and Sewer Facilities, Grants (Metropolitan Development) Public Works: Flood Control and Irri- gation Waste Treatment Facilities, Solid Waste Noise, Land Use and Recreation, Oceans -21- Table 3-2 (cont'd) Metropolitan Development and Housing Urban Renewal and Housing Housing Subsidies Foreign Economic and Military Assistance Research and Development National Aeronautics and Space Admini s trat ion Atomic Energy Commission Fiscal Relief to State and Local Governments Includes Housing and most of Metropoli- tan Development Model Cities, Urban Renewal, Urban Recreation, Supplementary Public Facil- ity Grants Federal Housing Subsidies Military Support of Other Nations, Military Assistance Program, Foreign Bilateral and Multilateral Economic Assistance Includes all research and development listed under specific programs except Military Research and Development, Atomic Energy Commission, and National Aeronautics and Space Administration National Aeronautics and Space Admin- istration Atomic Energy Commission Fiscal Relief to States and Localities Educational Grants General Aid to Education Revenue Sharing and Interest Revenue Sharing, Interest Subsidy for Subsidies State and Local Securities Other Federal Includes all programs and portions of programs not included elsewhere •22- components of gross national product: personal consumption expenditures, investment, exports and imports, and state and local government expenditures. Therefore, it was necessary to develop input vectors for each of these addi- tional economic activities and incorporate them into the activity-industry matrix along with the vectors for Federal budget expenditures. Problems similar to those encountered in the development of the Federal budget input vectors were also encountered in the derivation of these bills of goods vec- tors relating to the other componenets of gross national product. Eventually, though, 26 bills of goods vectors relating to these other expenditure cate- gories were developed and a complete set of 58 activity categories was com- prised. These are listed in Table 3-3- Each of the public and private expenditure categories listed in Table 3-3 corresponds to a column vector in the activity- industry matrix and indi- cates how expenditures devoted to that activity are distributed as purchases of goods and services from every industry in the year in question. The indus- try classification scheme used here corresponds very closely to the 80-order industry classification used by the U.S. Office of Business Economics in their 2 recent interindustry studies. The industry numbering, industry titles, and corresponding Standard Industrial Classification codes used by the Office of Business Economics are presented in Table 3-^-« T ne minor modifications made in this classification scheme relate here to special handling of several indus- tries and expenditure categories and other necessary adjustments. In all, 89 separate industries are included in the activity-industry matrix used in this study. 2 The 1958 Office of Business Economics interindustry study is discussed in Goldman, Marimont and Vaccara [20]; the 1963 Office of Business Economics interindustry study is discussed in U.S. Department of Commerce, Office of Business Economics [65] • -23- Table 3-3 Economic Activity Categories Considered for Analysis I. Personal Consumption Expenditures, Total 1. Food and tobacco 2. Clothing, accessories, and jewelry 3- Personal care k. Housing 5 • Household operation 6. Medical care and death expenses 7« Personal business 8- Transportation 9. Recreation 10. Private education and research 11. Religious and welfare activities 12. Foreign travel and remittances, net II. Gross Private Domestic Investment, Total 13. Plant and equipment construction ik. Residential 15. Private Nonresidential 16. Net Inventory Change III. 17. Exports 18. Imports IV. Federal Government Expenditures, Total National Defense 19. Intelligence and communications 20. Airlift and sealift 21. Research and development 22. Operation, maintenance and administration 23- Other national defense ■ Health 2k. Health facilities 25- National Health Insurance 26. Other Health Transportation 27- Highways Railroad and mass transit 28. New facilities 29' Improvement of existing facilities 30. .Supersonic transport and civil aviation 31. Merchant marine 32. Inland navigation ■2k- Table 3-3 (cont'd) 33- Social welfare 3^. Law enforcement^ criminal justice and civilian safety Eudcation, Arts, and Humanities 35- Education and cultural facilities 36. Other educational, arts and humanities Environment, Natural Resources, and Sanitation 37- Water and sewer facilities 38. Flood control and irrigation 39- Waste treatment facilities kO. Other environment, natural resources, and sanitation Metropolitan Development and Housing kl. Urban renewal and housing k-2. Housing subsidies k3> Foreign economic and military assistance y+. Research and development U5. National Aeronautics and Space Administration k6. Atomic Energy Commission Fiscal Relief to State and Local Governments ^7- Educational grants k8. Revenue sharing and interest subsidies k-9- Other Federal V. State and Local Government Expenditures, Total 50. Education 51. Health, welfare, and sanitation 52. Civilian safety 53- Highways 5h. 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S p> ft CD Q CO !3 CD O d o CO -29- For the purposes of this report, two 89-by-58 activity-industry matrices have been constructed- -one for 1972 and the other pertaining to I976-- and each of these transforms public and private expenditures for 58 different types of output into direct demands for the outputs of 89 industries. The 58 expenditure categories account for total gross national product and the 89 industries account for total net national industrial output. In addition, there is no double counting or overlapping contained in either the activity categories or the industry categories. Since each input column vector had to be derived independently, the activity vectors are of differing and indeterminate degrees of accuracy. Some distortion of expenditure patterns and output requirement undoubtedly results. Nevertheless, it is believed that the activity-industry matrices utilized here do contain generally reliable information on the industrial composition of dif- ferent types of public and private economic activities and that they yield results sufficiently accurate for analyzing the Urban Coalition's proposals. B. Development and Deflation of Consistent Expenditure Totals A major step in our approach is the assigning of specific levels of expenditures to each specific program and activity. This is not by any means as simple or straightforward a task as it may seem initially. Expenditures for many types of programs (for instance, interest payments, veterans benefits, and social security payments) are often determined by outside or historical factors and cannot be readily reduced by the government. Expenditures for some types of programs are interdependent for economic, political, or admin- istrative reasons and cannot easily be changed individually. Special attention must be paid to recent economic and political trends so that any expenditure The concept of the activity-industry matrix was introduced in Bezdek [6] Further research into this concept is in progress. -30- redistribution or program reorientations hypothesized are not totally unbe- lt lievable and infeasible. In Counterbudget the Urban Coalition has produced a comprehensive and exhaustive study of the possibilities and potential for reordering national priorities. The problems mentioned above were considered realistically by the Urban Coalition in formulating their budget recommendations. Different aspects of their suggested priority reorderings were analyzed in Counterbudget : the sources and uses of the budget outlays were carefully indicated, and the tax proposals necessary to obtain additional revenues were identified. Finally, the Urban Coalition recognized the balance between objective social realities and their subjective value judgments throughout the volume. Since the sole purpose of our research was to analyze the potential manpower impacts which affect the possibility of Counterbudget , the suggested budget outlays were accepted here without comment or modification. The major tasks of examining and reallocating activity expenditures for the years in question were not necessary for our study, but the Urban Coalition recommenda- tions had to be translated into a format suitable for use in the empirical model. The first step in the development of the desired expenditure esti- mates was the reconciliation of the expenditures in the Urban Coalition's bud- get categories with the activity categories contained in the activity-industry matrix. These expenditure totals for 1972 and 1976 are presented in Table 3-5 • In this table, the two to four billion dollars of duplications shown in Table 3-1 have been sorted out and, in some cases, expenditures have been transferred from certain functional categories to others where it was deemed 5 An interesting study of the economic and political factors present in the determination of national priorities is presented by Charles Schultze in [U8]. -31- Table 3-5 Federal Government Activity Expenditures: 1972 and 1976 (in millions of current dollars) Activity Category Title and Number 1972 1976 Administration Proposed Urban Coalition Recommended Urban Coalition Recommended IV. Federal Government Expenditures, Total National Defense 19- Intelligence and Communications 20. Airlift and Sea- lift 21. Research and Development 22. Operations. Main- tenance and Ad- ministration 23. Other National Defense 2k . Health Facili- ties 25. National Health Insurance 26. Other Health Transportation 27. Highways Railroad and Mass Transit 28. New Facilities 29. Improvement of Ex- isting Facilities 30. Supersonic Trans- port and Civil Aviation 31. Merchant Marine 32. Inland Navigation 33. Social Welfare 3U. Law Enforcement, Criminal Justice, and Civilian Safety 229,232 72,575 5,600 1,100 5,500 25,300 35,075 16,766 559 15,095 1,112 7,652 ^,923 1,831+ U67 lj-28 6U,519 1,285 230,821* 57,030 5,185 1,1+80 l+,585 17,525 28,255 17,330 497 15,' 1,153 7,33*+ If, 100 673 333 2k0 1,860 315 386 76,1+88 1,799 353,1+85 1+7,830 5,265 1,1+1+5 5,1+1+0 13,020 22,660 65,863 523 61+, 600 7U0 8,259 3,070 1,885 1,610 275 3,010 125 169 123,230 3,811 -32- Table 3-5 (cont'd) Activity Category 1972 1976 Title and Number Admini st rat ion Urban Coalition Urban Coalition Proposed Recommended Recommended Education, Arts and Humanities 10,273 11,082 21,105 35 • Educational and Cultural Facili- ties 1,521 1,61+1 3,126 36. Other Education, Arts, and Humani- ties 8,752 9,1+1+1 17,979 Environment, Natural Resources, and Sanita- tion l+,0l+2 i+,l6l 6,393 3T« Water and Sewer Facilities 281+ 500 1,615 38. Flood Control and Irrigation 1+60 1+60 363 39- Waste Treatment Facilities 1,000 612 1,301+ 1+0. Other Environment, Natural Resources, and Sanitation 2,218 2,589 3,111 Metropolitan Development and Housing 3,700 5,W 8,036 1+1. Urban Renewal and Housing 1,752 3,^20 M83 1+2. Housing Subsidies 1,9^8 2,071+ 3,653 1+3- Foreign Economic and Military 6,665 6,710 10,01+0 Assistance 1+1+ . Research and Devel- opment ^,973 5,220 7,801 1+5- National Aero- nautics and Space Administration 3,151 3,100 3,800 1+6. Atomic Energy Commission 630 555 705 Fiscal Relief to State and Local Governments 3,750 5,100 9,^25 1+7. Educational Grants -- 1,000 l+,000 1+8. Revenue Sharing and Interest Subsidies 3,750 1+,100 5,1+25 1+9. Other Federal 29,251 29,516 37,187 Source: Counterbudget [1+]. -33- they more properly belong. For example, Research and Development activities listed separately ■under each program were grouped together and considered separately, expenditures for water and sewer facilities were removed from metropolitan development programs and included as a separate activity, and the manpower training and education expenditures listed under the health ob- jective were transferred to the education function. Ordinarily only a small portion of the expenditures listed in the Federal "administrative budget" are included in the Federal government cate- gory in the national income accounts. In the interindustry tables only the government's direct purchases of goods and services enter the accounting sys- tem as expenditures; the largest portion of the expenditures consists of trans- fer payments, special types of compensation, etc. which are recorded for input- output purposes as expenditures or purchases made by the economic sector actu- ally receiving the transfer or subsidy- Although this conventional definition of expenditures might have been used here, it was considered more advisable to combine the administrative and interindustry definitions of expenditures and to include most Federal expend! tures--purchases, subsidies, compensation, and transfers--in the relevant budget categories. The aim of the Urban Coalition was to determine the total manpower impact of their recommendations, including the effects of other types of government expenditures as well as direct pur- chases. While this method yields a more complete picture of the direct and indirect economic and manpower impacts of Federal activities, it also makes the A discussion of some ways in which the handling of input-output and related data could be improved in the national economic accounts is contained in Ruggles and Ruggles [^-3]> ■3h- proper interpretation of the Urban Coalition's budget reorderings and recom- mendations considerably more difficult. For example, Table 3-5 shows that between 1972 and 1976 the Urban Coalition has recommended more than a tri- pling of Federal expenditures in health care programs with most of the increase used to institute a comprehensive system of national health insurance. However, the amounts involved represent only a modest increase in levels of total spen- ding on health care, for the Urban Coalition's recommended National Health Insurance program would largely supplant existing private health care and 6 health insurance programs. The change in the amounts involved appears decep- tively large because in 197^> according to the Urban Coalition scenario, the Federal government would institute National Health Insurance which would sup- plant most private health plans. In an economic sense it makes little differ- ence whether these transactions are recorded as expenditures allocated to the private sector or as expenditures allocated to the Federal government for, distributional questions aside, they satisfy the same economic and social needs. Similarly, the activity category "Social Welfare Payments" consists largely of transfers from the government to private sectors, and its distribution depends largely on the consumption expenditure patterns of selected low income and 7 aged consumers. In traditional national income and interindustry accounts these transactions are recorded as purchases by the private sector; here they are recorded as purchases induced by a specific type of government program. After the preliminary gross expenditure estimates recommended by the Urban Coalition were grouped into the desired activity-expenditure categories, the totals in each category were adjusted to take account of a number of fac- See Chapter 5 of Counterbudget [ k~\ . 7 The methodology involved in developing an input vector for social welfare payments is discussed in depth in Bezdek [5]. -35- tors: duplicate coverage contained in the original Urban Coalition suggested budget outlays was removed, additional selected types of transfers, compensa- tion, interest subsidies, etc. were transferred from Federal budget categories to appropriate public and private economic activity categories, and, most im- portant, expenditures in each category were deflated to constant base year prices. As indicated in Table 3-1 the original Urban Coalition budget recom- mendations contained about 1% duplicate coverage, which had to be removed. In addition, numerous transfers and subsidies in the original budget were trans- ferred to appropriate public and private economic sectors. While in most in- stances they comprised only a small fraction of the individual expenditure category totals, in the aggregate they represented a sum too large to ignore. When duplications had been eliminated and various expenditures trans- ferred to more appropriate categories, estimates of recommended net expendi- tures were obtained for each Federal budget category. However, these esti- mates were stated in terms of current (1972 or 1976) dollars. The estimates had to be deflated to constant base year (1958) dollars to be used in the empirical model employed. It was thus necessary to deflate the net expendi- ture estimates for all 58 activity categories from 1972 prices and 1976 prices to 1958 prices. The process of deflating expenditures in each public and private economic activity category to 1958 prices was an involved and complex task. In general, attempts to deflate expenditures stated in dollars of one time period to price levels of another time period nearly two decades earlier presented a number of difficult problems: changes in the quality of products, changes in the product mix, introduction of new products and the elimination of other •36- products. Problems arose because the programs and activities involved utilized different types of products and services, placed disproportionate demand upon the output of certain industries, and often had a direct influence on the costs of those services. The prices of public and private economic activities con- sidered here rose at widely differing rates in the past and may be expected to continue to do so in the future. For this reason it would have been grossly inaccurate to apply a single general price deflator to every expenditure cate- gory; a separate deflator had to be derived for each specific category for 1972 and 1976. The difficulty of developing individual price deflators varied great- ly depending upon the specific category being considered. For some categories, such as personal consumption, price indexes for the past several decades had been consistently developed and projected for the coming decade. Similar indexes existed for some other types of public and private expenditure cate- gories, and deflating expenditures for these was also relatively easy. But even in the cases where published figures were available, much of these data-- especially for the projected series--was often contradictory. Some of this was due to the unexpectedly rapid rate of inflation in the period 1968-1971;- in other cases the reasons for the disagreement were not immediately clear. For a considerable number of activities, the exact type of desired information did not exist and a variety of ad hoc methods had to be devised to develop approximate price deflators. For example, since the expenditures in- cluded in the Federal social welfare category were composed very largely of purchases by low income and aged consumers, the deflators for this category were computed by taking weighted averages of the deflators for appropriate Personal Consumption Expenditures (PCE) categories and for government social •37- service categories. Similarly, for government programs functionally similar to private economic activity, deflators were derived for each economic acti- vity category for 1972 and 1976- Expenditures in current dollars were trans- o lated into (real) deflated expenditures stated in terms of 1958 dollars. The expenditures on each of the 58 activity categories proposed "by the admin- istration for 1972, recommended by the Urban Coalition for 1972, and recommen- ded by the Urban Coalition for' 1976 stated in terms of 1958 dollars, are given in Table 3-6. C. The Complete Activity- Industry Matrix and the Alternate Expenditure Vectors The deflation of expenditure estimates for the 1970' s to 1958 price levels marked the completion of the development of the first component of the manpower demand generating model. This component consisted of two matrices and three vectors. The two matrices involved were activity- industry matrices whose column vector coefficients indicated the direct output demands generated by expenditures on 58 types of economic activities in 1972 and in 1976- The vectors indicated, in constant base year prices, the distribution of total national expenditures among the 57 activity categories proposed by the admin- istration in 1972 and recommended by the Urban Coalition in 1972 and in 1976. This part of the chain is complete: the Urban Coalition's priority reorderings have determined the specified distribution of national expenditures among the 58 categories and the activity-industry matrices have transformed these prior- ity-expenditure distributions, for the appropriate year, into direct require- ments for goods and services from 89 all-inclusive industries. 8 The specific price deflators used here were included as an appendix in Bezdek and Scoville [8] . -38- Table 3-6 Deflated Net Activity Expenditures (in millions of 1958 dollars) Activity Category 1972 1976 Title and Number Admini st ration Urban Coalition Urban Coalition Proposed Recommended Recommended I. Personal Consumption Expenditures, Total 1+57,199 ^,376 536,1+90 1. Food and tobacco 103,351 102,929 1^5,761 2. Clothing, accessor- ies, and jewelry >+8, 160 1+8,006 56,230 3- Personal care 8,099 7,808 7,938 h. Housing 75^06 7^,717 7^,592 5- Household operation 72,091+ 71,755 83,559 6. Medical care and death expenses 21,283 20,922 23,21+1 7- Personal business 2^,001 23,932 18,7^2 8. Transportation 67,069 66,33^ 76,61+7 9- Recreation 20, 66*+ 20,635 35,^51 10. Private education and research 6,^02 6,7^7 ^,319 11. Religious and Welfare research 7,083 7,0lU 5,886 12. Foreign travel and remittances, net 3,587 3,577 k,12.k II. Gross Private Domestic Investment, Total 121, 592 122,055 1^3,^38 13- Plant and Equipment 62,80U 62,1+06 7h, 300 Construction 53,2^2 53,7^3 62,881 ll+. Residential 25,79^ 26,069 31,075 15. Private Nonresi- dential 27,^8 27,61+7 31, 806 16. Net Inventory Change 5,906 5,906 6,257 III. 17. Exports l+,607 l+,602 6,911 18. Imports 6,1+31+ 6,1+51 7,813 IV. Federal Government Expenditures, Total 122,933 126,909 179,153 National Defense 1+2, 10*+ 33,^ 25, ^90 19. Intelligence and Communi- cations 3,906 3,631 3,228 20. Airlift and Sealift 797 1,090 92l+ 21. Research and Development 3,83l+ 3,202 3,325 •39- Table 3-6 (cont'd) Activ] _ty Category and Number 197 1 1976 Title Admini st rat ion Urban Coalition Urban Coalition Proposed Recommended Recommended 22. Operation, Maintenance and Adminis- tration 14,176 9,717 6,545 23- Other Nat'l Defense 19,391 15,794 11,468 Health 9,959 10,297 35,210 24. Health Facil- ities 3U7 309 287 25. Nat'l Health Insurance 9,299 9,659 34,690 26. Other Health 313 329 233 Transportation 2,802 3,193 5,007 27. Highways 2,802 2,333 1,586 Railroad and Mass Transit __ 430 1,286 28. New Facili- ties -- 250 1,102 29* Improvement of Existing Facil- ities -- 180 184 30. Supersonic 1 Transport and Civil Aviation 1,378 1,397 1,962 31- Merchant Mar- ine 370 250 82 32. Inland Navi- gation 290 263 91 33* Social Welfare ^1,937 49,717 72,706 34. Law Enforcement, Criminal Justice and Civilian Safety 706 996 1,919 Education, Arts, and Humanities 5,188 5,566 9,542 35- Education and Cultural Facilities 907 976 1,636 36. Other Educa- tional, Arts and Humanities 4,281 4,590 7,906 Environment, Natural Resources and Sanita- 2,692 2,757 3,330 tion 37- Water and Sew- er Facilities 173 304 810 -4o- Table 3-6 (cont'd) Activity Category 1972 1976 Title and Number Administration {Urban Coalition l Jrban Coalition Proposed Recommended Recommended 38. Flood Control and Irrigation 301+ 30l+ 191 39. Waste Treat- ment Facili- ties 667 1+0 5 678 1+0. Other Envir- onment, Na- tural Re- sources, and Sanitation 1,5^ 1,71+1+ 1,651 Metropolitan Develop- ment and Housing 1,881 2,81+1 3,787 1+1. Urban Renewal and Model Cities 879 1,782 2,066 1+2. Housing subsi- dies 1,002 1,059 1,721 1+3- Foreign Eco- nomic and Military As- sistance 3,009 2,988 If, 062 1+1+ . Research and Development 3,^08 3,5^9 l+,688 1+5. Nat'l Aero- natucis and Space Admin- istration 2,250 2,213 2,375 1+6. Atomic Energy Commission ^39 388 1+28 Fiscal Relief to State and Local Government 1,W 2,099 3,659 1+7- Educational Grants -- 1+61+ 1,568 1+8. Revenue Shar- ing and Inter- est Subsidies iMk 1,635 2,091 1+9. Other Federal 5,081+ 6,052 6,950 V. State and Local Govern- ment Expenditures, Total 73,096 73,1^8 96,690 50. Education 32,1+80 32,1+80 37,750 51. Health, Welfare and Sanitation 9,112 9,112 15,137 52. Civilian Safety 5,092 5,092 6,755 53- Highways 6,821+ 6,821+ 10,11+0 5k. Transit 687 691 901 -1+1- Table 3-6 (cont'd) Activity Category 1972 1976 Title and Number Administration Urban Coalition Urban Coalition Proposed Recommended Recommended Public Utilities 1,805 1,812 1,967 55- Electric Utilities 770 77^ 959 56. Water and Gas Utilities 1,035 1,038 1,008 57- Conservation and Development , U,68l l+,720 k,6l2 58. Other State and Local 12,1+15 12,Ul7 19,1+28 Total National Expenditures 772,993 773,801+ 95M52 Source: See this chapter. -1+2- CHAPTER IV. DEVELOPMENT OF THE MANPOWER COMPONENTS OF THE MODEL A. From Direct Industrial Output Demands to Interindustry-Employment Require- ments The development of the alternate deflated expenditure vectors and the activity-industry matrices made it possible to generate direct industrial out- put demands from different distributions of national expenditures. The next step was to develop a set of industry- employment matrices for 1972 and for 1976 which would translate the generated output requirements into direct and indi- rect industry employment demands. The first step in developing an interindustry- employment matrix (or employment inverse matrix) is to construct an input-output transaction matrix for the time period in question. This matrix shows the purchases per unit of output made directly by every industry from all the industries in the economy: the rows of this matrix illustrate the distribution of an industry's output among other industries and the columns reflect the input structure of a par- ticular industry. From the transaction matrix what is known as the Leontief inverse matrix can be derived. This matrix shows the total (direct and indi- rect) output demands generated per unit of delivery to final demand by every industry. The interindustry-employment matrix is essentially the Leontief in- verse matrix transformed into labor units. This transformation is accomplished by applying employment -output ratios (indicating the total employment generated in a specific' industry per unit of output) to every row of Leontief inverse. See Goldman, Marimont, and Vaccara [20] -^3- Reading down a column of this matrix indicates the manner in which the employ- ment generated by a specific industry is distributed among all industries; reading across a row of this matrix shows how the employment in a specific industry is generated by activity within every industry. The row sums of this matrix give the total employment generated in a certain industry and the column sums of this matrix give the total employment generated by a certain industry. Thus, by using the interindustry- employment matrix it is possible to determine the total employment requirements which would be generated by a particular 2 distribution of direct output requirements. Fortunately, a number of Leontief inverse matrices and interindustry- employment matrices have already been published for the United States economy, so that this estimation was not necessary. In projecting an input-output inverse matrix, a number of factors had to be taken into account which may have altered the coefficients of the matrix: changing technology and productivity, changes in product mix, product substitution, changing relative price levels, changes in product design, shifts in intermediate and intraplant transactions, and so forth. A large volume of literature has been written concerning the projection of input-output relationships and coefficients: any detailed 3 analysis or description of these problems is outside the scope of this report. Nevertheless, several points are in order here. First of all, despite the many complex problems involved in projecting interindustry relationships, a number of methods of input-output forecasting have been devised which do yield reasonably accurate results. One of these is the "best practice" technique. Operations of the most efficient and pros- p The interindustry-employment matrix is discussed in Alterman [2] and in Chapters 3 and 6 of Bezdek [5]. 3 See Almon [1] and Carter [9]. ■kk- perous firms are ob served to obtain insight into the direction in which other k firms may be moving in the near future. Second, many interindustry relation- ships change very gradually: these may often be considered constant or at least predictable within a sufficiently small margin of error. Further, to the degree that the errors in the coefficient matrices are offsetting or dampening, small errors in a large number of coefficients may cancel each other out in the aggregate. Finally, the derived interindustry projections can be checked at every stage in the analysis against outside, independent forecasts to prevent errors from getting completely out of hand. Thus, the problem was essentially one of obtaining inverse matrices which would represent the U.S. economic structure in 1972 and in 1976. Avail- able matrices pertaining to the late 1960's were projected to 1972 and 1976. The basic data relied upon for the development of these matrices was provided by the Interagency Economic Growth Project. In projecting these matrices, trends in the coefficients over the past two decades were taken into account, the most accurate and recently available interindustry data were considered, and several industries and sectors were handled separately and projected inde- pendently. The result was two interindustry- employment matrices, one for 1972 and one for 1976. The accuracy and reliability of these matrices are indeter- minate at the present time. However, simulations and tests conducted with the derived matrices indicate that for the time periods in question they do generate comprehensible results and believeable employment requirements. The matrices used here are considered to be accurate enough for evaluation of manpower im- £ See Almon [ 1] . 45- pacts when these have been reaggregated to occupation level. Nevertheless, the testing, modification, and improving of this component of the manpower model are long-range tasks and areas for continuing investigation. With the development of the forecast 1972 and 1976 employment inverse matrices it was possible to simulate one type of manpower impact recommended by the Urban Coalition's budget: the effects of budget reallocations upon total employment. More valuable information comes from an examination of the occupational manpower impacts which might result from the Urban Coalition's recommended priority reorderings, an examination which required disaggregation of interindustry- employment requirements into occupational manpower demands by each industry. B. From Interindustry- Employment Demands to Occupation Manpower Requirements The third basic component of the empirical model, the industry-occu- pation matrix, translates total interindustry employment demands into occupa- tional manpower requirements. The rows of this matrix represent industries, the columns of this matrix represent occupations, and a coefficient of this matrix indicates for the year in question the percentage of the total employ- ment in the industry in each census occupation. Industry-occupation matrices have been developed by the Bureau of Labor Statistics from decennial population census data for i960 and data pro- 7 jected for 1975. The Bureau of Labor Statistics industry-occupation matrix 5 Continuing research on this and other components of the model is being con- ducted by the Economic Research Group of the Center for Advanced Computation, University of Illinois at Urb ana- Champaign. 6 This matrix is discussed further in Chapters 3 and 7 of Bezdek [5]« 7 'See U.S. Department of Commerce, Bureau of the Census [57L and U.S. Depart- ment of Labor, Bureau of Labor Statistics [73] • -1+6- for 1975 was the basic source of data used to construct the industry-occupa- tion matrix utilized in our estimates for 1976. Implicitly involved was the assumption that the occupational composition of industrial employment changes very little in the course of one year- All available evidence strongly indi- cates that this assumption is reasonable and valid. Development of an industry-occupation matrix for 1972 presented a greater problem. While the matrix derived for 1975/76 could also have been used for 1972, this seemed unwise. Even though most industry-occupation coefficients may be assumed to be relatively stable over a three or four year period, suf- ficient variation may take place in some of these coefficients—especially in selected critical industries advancing rapidly--to distort the results gener- ated here. So, instead, a separate industry-occupation matrix was derived for 1972 by taking into account the trends of the past decade (as reported by census and the Bureau of Labor Statistics) and by adjusting for more recent trends in- o dicated by contemporary data. After the industry-occupation matrices for 1972 and 1976 had been created there remained one last obstacle to the completion of the manpower de- mand generating system. A lack of compatibility remained between the industry categories for which employment demands are generated in the interindustry- employment matrix and the industries for which occupational coefficients were available in the industry-occupation matrix. This was due to a number of fac- tors: disagreement between the industry specifications in terms of Standard Industrial Classification Codes, different activity and output concepts, dis- similar employment coverage, unique handling of special sectors, and so forth. The underlying productivity indices are given in Appendix II of Bezdek and Scoville [8]. -hi- These difficulties are discussed more fully by Bezdek in Manpower Implications 9 of Alternate Patterns of Demands for Goods and Services . The industry clas- sification scheme developed in that study has been used here in modified form to reconcile the industry categories of the two matrices. The numbers and titles of these "reconciled" industry categories and their specification in terms of the Standard Industrial Classification Codes are given in Table k-1. The industry classifications listed in this table form the link between cate- gories of the interindustry-employment matrix and those of the industry-occu- pation matrix, permitting the closing of the entire system. With dissimilar industries in the two matrices reconciled, interindus- try-employment demands could be disaggregated into occupational manpower re- quirements. For our study overall employment demands were translated into de- mands for 185 occupational categories which, with their employment in i960 and Bureau of Labor Statistics projection for 1975, are given in Table U-2. A note of caution should be interjected with regard to the meaning and nature of the occupational classifications employed. The occupational data themselves are subject to a number of possible response errors, as they are based on household responses taken by the census. More important, the classi- fication scheme is neither in concept nor in practice exactly congruent with our needs. The conceptual basis for the classification is "social-economic status, " which is only roughly linked to the job performed by the individual and to the requisite skills. In practice, particularly at the intermediate level, each of the 185 occupations contains a variety of jobs performed that are heterogeneous. This further weakens the link between changing employment See Chapters 6 and 11 of Bezdek [5]. -48- Table k-1 Specification of Reconciled Industry Categories Reconciled Industry Category Title and Number Related SIC Codes ^ 1. Agriculture, forestry and fisheries 2. Agricultural products 3. Agricultural services, forestry and fisheries A: 01, 02, 07, 08, 09; except 0722 01, 02 07, except 0722, 08, 09 k. Mining 5- Metal Mining 6. Coal Mining 7. Crude petroleum and natural gas 8. Quarrying and nonmetallic mining B: 10, 11, 12, 13, lk; except 138 10 11, 12 131, 132 11+ 9- Construction C: 15, 16, 17, and 138 10. Manufacturing D: 19-39 11. Food and kindred products 20 12. Tobacco manufactures 21 13- Textile mill products lk. Broad and narrow fabrics, yarn and thread mills 15. Miscellaneous textile goods and floor coverings 22, except 225 221, 222, 223, 22U, 226, 228 227, 229 16. Apparel and related products 17 • Apparel 23, 225, 239, 3992 23 (except 239), 225, 3992 18. Miscellaneous fabricated textile products 19. Lumber and wood products, except furniture 20. Furniture and fixtures 21. Paper and allied products 22. Paperboard containers and boxes 23' All other paper products 2k. Printing and publishing 25. Chemicals and allied products 26. Chemicals, plastics, and drugs 27- Paints and allied products 28. Petroleum refining and related industries 29' Rubber and miscellaneous plastic products 30. Leather and leather products 239 2k 25 26 265 261, 27 28 ( 281 286, 285 29 30 31 262, 263, 264, 266 except 28195) (except 28195), 282, 283, 284 287, 289 -49- Table k-1 (cont'd) Reconciled Industry Category Title and Number a Related SIC Codes b 31- 3^. 35- 36. 37- 38. 1+2. hi. 1+8. 55- 56. Stone, clay, and glass products 32. Glass and glass products 33- Stone and clay products Primary metals industries Primary iron and steel manufacturing Primary nonferrous metal manufac- turing Fabricated metal products and ordnance Machinery, except electrial 39- Farm machinery and equipment 1+0. Office computing and accounting machines 1+1. Miscellaneous nonelectrical machinery Electrical machinery, equipment, and supplies Transportation equipment 1+1+ . Motor vehicles and equipment 1+5- Aircraft and parts 1+6. Other transporation equipment Professional, scientific, control- ling, optical, opthalmic, and photographic equipment and supplies Miscellaneous manufacturing Transportation, communication and public utilities 50. Transportation and warehousing 51. Communications 52. Radio and television broadcasting 53- Other communications 5l+. Electric, gas, water, and sanitary services Wholesale and retail trade Finance, insurance, and real estate 57. Services, except private household 32 321, 322, 323 321+-329 33, 38195 331, 332, 3391, 3399 28195, 333-336, 3392 19, 3^ 35 352 357 351, 353-356, 358, 359 36 37 371 372 373, 37^, 375, 379 38 39 (except 3992) E: 1+0-1+9 1+0, 1+1, 1+2, 1+1+-I+7 1+8 ^83 1+81, 1+82, 1+89 h9 50, 52-59, and part of 7399 G: 6O-67 (except 65I+I and part of 6561) (Consolidation of SIC groupings contained in next 5 industrial categories) -50- Table k-1 (cont'd) Reconciled Industry Category Title Related SIC Codes b and Number a 58. Hotels and lodging places, personal and repair services, except automobile repair TO, 72, 76 (except 769^, 7699) 59- Business services 65^1, 73 (except 7361 and part of 7399), 769^, 7699, 81, 89 (except 8921) 60. Automobile repair and services 75 61. Amusements 78, 79 62. Medical and educational services and nonprofit organizations 0722, 7361, 80, 82, Qk, 66, 8921 63- Private household services 88 6^. Government J: 91-93 65. Federal government enterprises and administration 91 66. State and local government enterprises and administration 92, 93 a Refers to titles and numbers of the industry categories used to reconcile the interindustry-employment industries with those contained in the industry- occupation matrix. Standard Industrial Classification Codes, 1957 Edition. Source: Manpower Implications of Alternate Patterns of Demand for Goods and Services [5] • -51- Table k-2 Occupational Employment: i960 and Projected 1975 Occupation Title and Number Employment ( in thousands) I960 1975 1. Professional Technical, Kindred 7,^75 12,92U 2. Engineers, Technical 810 1,^50 3. Engineers, Aeronautical k6 69 k. Engineers, Chemical ko 62 5- Engineers, Civil ike 2kQ 6. Engineers, Electrical 175 320 7. Engineers, Industrial 83 170 8. Engineers, Mechanical 15 1 * 255 9- Engineers, Metallurgical, etc. 20 33 10. Engineers, Mining Ik 15 11. Other Engineers, Technical 133 279 12. Natural Scientists 236 i+65 13. Chemists 91 175 ik. Agricultural Scientists 30 53 15. Biological Scientists 30 6k 16. Geologists, Geophysicists 18 29 17. Mathematicians 21 51 18. Physicists 2k 58 19. Other Natural Scientists 22 35 20. Technicians, except Medical and Dental 731 1,1*18 21. Draftsmen 233 375 22. Surveyors kk 82 23- Air Traffic Controllers 12 13 2k. Radio Operators 17 27 25. Technicians, Other k25 920 26. Medical, Other Health Workers 1,321 2,2^0 27. Dentists 87 125 28. Dietitians, Nutritionists 27 37 29. Nurses, Professional U96 860 30. Optometrists 17 20 31- Osteopaths 13 16 32. Pharmacists nh 126 33- Physicians and Surgeons 221 31k 3^. Psychologists 17 ko 35. Technicians, Medical and Dental 1U1 393 36. Veterinarians 19 26 37- Other Medical, Health Workers 171 223 38. Teachers 1,9^5 3,063 39- Teachers, Elementary 978 1,233 1+0. Teachers, Secondary 603 1,100 kl. Teachers, College 206 ^55 k2. Teachers, Other 158 275 ^3- Social Scientists U6 79 kk. Economists 17 31 k5. Statisticians and Actuaries 23 36 -52- Table k-2 (cont'd) (in thousands)" Occupation Title and Number Employment I960 1975 61. 68. 81. 82. k6. Other Social Scientists k'J . Other Professional, Technical, and Kindred kQ. Accountants and Auditors h-9. Airplane Pilots, Navigators 50. Architects 51. Workers in Arts and Entertainment 52. Clergymen 53« Designers, except Design Draft 5I+. Editors and Reporters 55- Lawyers and Judges 56. Librarians 57- Personnel and Labor Relations Workers 58. Photographers 59* Social and Welfare Workers 60. Professional, Technical, and Kin- dred, Not elsewhere classified Managers, Officials, Proprietors 62. Conductors, Railroad 63 • Creditmen 6k. Officers, Pilots, Engineers — Ship 65. Postmasters and Assistants 66. Purchasing Agents 67. Managers, Office, Proprietors, Not else- where classified Clerical and Kindred Workers 69. Stenographers, Typists, Secretaries 70. Office Machine Operators 71. Other Clerical, Kindred Workers 72. Accounting Clerks 73* Bookkeepers, Hand "jk. Bank Tellers 75- Cashiers 76. Mail Carriers 77. Postal Clerks 78. Shipping, Receiving Clerks 79- Telephone Operators 80. Clerical and Kindred, Not elsewhere classified Sales Workers Craftsmen, Foremen and Kindred 83. Construction Craftsmen 8^. Carpenters 85. Brickmasons and Tile Setters 6 2,386 h2S 29 30 U70 200 66 100 225 12 if, 210 660 55 77k 2^0 116 128 320 130 100 191 51 57 105 218 502 1,276 7,067 9,035 ^3 hk 50 89 35 36 39 3^ 115 16k 6,785 8,667 9,783 li+,762 2,386 3,900 375 700 7,022 10,162 383 U70 667 900 127 263 ^79 973 206 290 2I4-3 3^0 325 365 355 U52 M38 6,109 U,Uoi 5,906 8,560 11, 357 2,55^ 3,102 832 900 186 228 -53- Table 4-2 (cont'd) Occupation Title and Number Employment (in thousands I960 1975 106. 86. Cement, Conrete Finishers 87. Electricians 88. Excavating, Grading Machine Operators 89« Painters and Paperhangers 90. Plasterers 91. Plumbers and Pipefitters 92. Roofers and Slaters 93* Structural Metal-workers 94. Foremen, Not elsewhere classified 95. Metalworking Crafts, except Mechanics 96. Machinists and Related Occupations Blacksmiths, Forgemen, Hammermen Boilermakers Heat Treaters, Annealers Millwrights Molders, Metal, except Core- makers Patternmakers, Metal, Wood Rollers and Roll Hands Sheet Metal Workers Toolmakers and Diemakers Printing Trades Craftsmen 107. Compositors, Typesetters Electrotypers, Stereotypers Engravers except Photoengravers Photoengravers, Lithographers Pressmen, Plate Printers 112. Transport and Public Utilities Crafts- men 113. Linemen and Servicemen 11*+. Locomotive Engineers 115. Locomotive Firemen ll6. Mechanics and Repairmen 117. Airplane Mechanics and Repairmen 118. Motor Vehicle Mechanics 119. Office Machine Mechanics 120. Radio and Television Mechanics 121. Railroad and Car Shop Mechanics 122. Other Mechanics and Repair 123. Other Craftsmen and Kindred 124. Bakers 12 5 • C ab ine tmake r s 126. Crane, Derrick, Hoist Men 127. Glaziers 97. 98. 99- 100. 101. 102. 103. 104. 105. 108. 109. 110. 111. 46 360 245 4l6 50 304 50 65 1,137 1,081 75 450 335 455 61 425 69 105 1,605 1,208 491 504 34 24 24 27 20 22 69 88 54 56 4o 49 32 34 137 183 180 221 302 330 183 155 9 5 11 15 24 55 75 100 374 457 286 4oo 47 50 42 7 2,017 3,174 112 139 679 940 51 io4 103 i4o 39 41 1,033 1,810 1,096 1,436 103 97 66 75 124 172 16 30 -54- Table k-2 (cont'd) Occupation Title and Number * Employment ( in thousands) I960 1975 128. Jewelers and Watchmakers 37 39 129- Loom Fixers 25 2k 130. Opticians, Lens Grinders 20 25 131. Inspectors, Log and Lumber 20 25 132. Inspectors, Other 96 llH 133. Upholsterers 59 78 13^. Craftsmen and Kindred, Not elsewhere classified 531 730 135- Operators and Kindred Workers 11, 986 Ik, 806 136. Drivers and Deliverymen 2,375 3,332 137. Drivers, Bus, Truck, Tractor 1,77^ 2,325 138. Deliverymen and Routemen 601 8^5 139. Trans ■portation and Public Utility Operators 156 162 ll+O. Brakemen and Switchmen-Railroad 103 111 Ikl. Power Station Operators 21 2k ikz. Sailors and Deckhands 32 27 1^3. Semiskilled Metalworking 1,^53 1,828 ikk. Furnacemen, Smeltmen, Poyers 52 56 1^5. Heaters, Metal 7 9 ll*6. Welders and Flame-Cutters 355 575 1U7. Assemblers, Metalworking, Class A 101 11+0 ikd. Assemblers, Metalworking, Class B U68 5^5 1U9 • Inspectors, Metalworking, Class B 179 210 150. Machine Tool Operators, Class B 259 256 151. Ele ctroplater s 12 15 152. Electroplaters Helpers 20 22 153. Semiskilled Textile Occupations 780 939 15h. Knitters, Loopers, Toppers kk kk 155. Spinners, Textile 50 31 156. Weavers, Textile 61 i+1 157- Sewers and Stitchers, Manufac- turing 625 82U, 158. Other Operatives and Kindred 7,222 8,707 159. Absbestos, Insulation Workers 20 29 160. Attendants, Auto Service, Par- king 380 520 161. Blasters and Powdermen 5 6 162. Laundry, Dry Cleaning Opera- tives 392 U50 163. Meat Cutters, except Meat Packing 190 223 l£k. Mine Operators, Laborers, Not included elsewhere 281 200 -55- Table k-2 (cont'd) Occupation Title and Number * Employment ( in thousands) I960 1975 165. Operatives and Kindred, Not included elsewhere 5,95^ 7,280 166. Service Workers 8,3^9 12,7^0 I67. Private Household Workers 2,216 2,700 168. Protective Service Workers 766 1,183 I69. Firemen 11*8 250 170. Guards, Watchmen, Doorkeepers 331 1+15 171. Police, Other Law Enforcement Officers 287 518 172. Pood Service Workers 1,737 2,638 173. Bartenders 172 233 Ijk. Cooks, Except Private House- hold 557 860 175. Counter and Fountain Workers 158 320 176. Waiters and Waitresses 850 1,225 177. Other Service Workers 3,630 6,219 178. Airline, Stewards, Stewar- desses 13 32 179. Attendants, Hospital, Other Institutional 1+50 1,083 180. Charwomen and Cleaners 200 372 181. Janitors and Sextons 625 980 182. Nurses, Practical 225 1*65 183. Service Workers, Not included elsewhere 2,117 3,287 181+ . Labo] rers, Except Farm and Mine 3,665 3,778 185. Farmers and Farm Workers 5,395 3,352 Total , All Occupations 66,681 88,660 Occupations for which manpower demands are generated in this report. Source: U.S. Department of Labor, Bureau of Labor Statistics [72], [73], and [71*]. -56- patterns and the implied need for changes in the patterns of education, training, and acquisition of skills. C. The Complete, Consistent Empirical Manpower Demand Generating Model With the development and integration of the industry occupation matrices the construction of the empirical manpower model was complete. Two distinct sets of the needed matrices were developed: one for 1972 and one for 1976- For the appropriate year, each set generates direct industrial output demands from specified distributions of economic expenditures corresponding to differ- ent national priorities, transforms direct output requirements into direct and indirect interindustry-employment demands, and then disaggregates interindustry- employment demands into demands for specific occupations. The models are general, comprehensive, and consistent and contain no double-counting or over- lapping. They account for total gross national product and national expendi- tures, total net (and gross) industrial output, and total industrial and occupational employment . For a discussion of difficulties with the occupational information, see Scoville [50]. A conceptual framework more closely aligned with these needs is proposed in [51]. ■57- CHAPTER V. THE MANPOWER IMPACTS OF COUNTERBUDGET A. Derivation of Control Data After the basic componenets of the models for 1972 and 1976 had been formulated and the appropriate expenditure estimates for those years had been derived and deflated the manpower effects of the Urban Coalition's reorderings could be simulated and analyzed. In the process of generating these results, however, it was important that the intermediate results generated at each stage of the analysis be checked against control data obtained from outside sources. This would indicate the overall accuracy of each component of the system and any serious errors in dividual coefficients or parameter estimates. Of course, many types of control information were included in the original development of the systems: most of the coefficients for each com- ponent of the models were derived from independent sources, as were the expen- diture and price deflator estimates. Nevertheless, it was necessary to adhere to additional control information as well. The general economic framework with- in which the manpower models for 1972 and 1976 were developed consists of pro- jections of broad economic aggregates for the period 1971-1976 followed by the Urban Coalition's development of their counterbudget . The projected estimates of gross national product, personal income, corporate profits, employment, and other economic variables used by the Urban Coalition are presented in Table 5-1 ■ The information given in this table while useful in indicating the level of performance of the economy assumed by the Urban Coalition, is not de- tailed enough to be a useful control. The first detailed estimates generated -58- Table 5-1 Economic Assumptions 1971 1972 1973 197^ 1975 1976 Gross National Product in billions GNP Price Deflator GNP Real Growth Rate Personal Income, exclu- ding Transfers, in billions Corporate Profits, Before Taxes, in billions Number Employed, in millions ^ Number Unemployed, in millions c Unemployment Rate Consumer Price Index Wholesale Price Index Population, in millions, as of July 1 207 209 211 213 215 218 These are the basic economic assumptions which guided the development of the Urban Coalition's estimates of outlays and revenues and its estimates of the economic impact of government activities. In general, these are Urban Coali- tion staff estimates based upon official projections, such as those issued by the Council of Economic Advisers, the Bureau of Labor Statistics, the Bureau of the Census, and other accepted economic experts. Excluding members of the Armed Forces. c The unemployment projections take into consideration the impact of the Urban Coalition's recommended public- service employment program described in Chap- ter 2 of Counterbudget [ h] . 1,004 1,09*+ 1,190 1,288 1,388 1,489 100.0 103.3 106.5 109.7 113-0 116.4 5 .6% 5. ■ 5% 5 • 0% h.-ji k. ■3% 737 801 870 9U0 1,012 1,085 80 88 107 129 114-6 156 86.5 88.6 91-1 93-3 9 J +-7 96.3 h.3 3.8 3.5 3-3 3-3 3-4 5-6$ 5.0$ k.0% 3.5$ 3.5$ 3-5$ 100.0 10U.1 108.2 112.3 116.6 121.0 100.0 102.3 10U.3 106.2 108.1 110.1 -59- directly by the manpower models from alternate expenditure distributions are for total final demand in 1972 and 1976. However, comparison of these total direct output requirements generated by the models for 1972 and 1976 was, for most purposes, made impossible by the combination of two factors: the number of special conventions followed in the development of the activity and expendi- ture categories used here, and the unavailability of alternate projected total final demand distributions based on the same economic assumptions. Thus, while comparison of the total final demand estimates generated here with those avail- able from outside sources did support the general validity of our approach, more detailed or significant conclusions could not be drawn from this comparison, The second major set of estimates generated by the manpower models employed here is total employment by industry. Industrial employment estimates in the desired 80-order industry detail are available from the Bureau of Labor Statistics for recent years and have been projected by the Bureau of Labor Statistics to 1980. However, detailed industry employment projections for 1972 and 1976 are not readily available and had to be derived for this study other data. Essentially, industry employment projections for these two years were approximated by taking into account each industry ' s employment trends for the past decade, projected rate of change in employment for the coming decade, the total employment projections developed by the Bureau for 1980, the most recent data indicating the behavior of employment in these industries, and several other factors. In general, the employment estimates for 1972 and 1976 were developed to be consistent with the Bureau of Labor Statistics projections; however, where appropriate adjustments were made in the projected employment These interpolated Bureau of Labor Statistics' industry employment estimates are given in Bezdek and Scoville [8]. -60- trends for individual industries. In this study, the employment estimates were used as controls against which to compare the employment estimates initially simulated here, and the employment estimates for 1972 and 1976 were used as well to generate occupational employment for these two years. B. Simulating the Manpower Impacts Derivation of the control data made possible the comparison of in- tial output estimates generated by our model to those available from outside sources and permitted the final adjustment of selected coefficients within our models. When this had been accomplished it was possible to simulate in a completely straightforward manner the manpower effects for 1972 and 1976 of the Urban Coalition's recommended national priority reordering. Four sets of occupational manpower demands for 1972 were generated for comparison and analysis here. The demands generated for professional and technical occupations are given in Table 5-2. In Table 5-2 two sets of occu- pational manpower requirements were generated directly from industry employment demands --these are the occupational employment requirements given in columns one and five and these are the occupational manpower demands implied by the industry employment totals for 1972 and 1976 derived from actual and projected Bureau of Labor Statistics industry employment estimates. The manpower demands shown in columns two and three of Table 5-2 are the total professional and tech- nical manpower requirements which would be generated by national expenditures distributed according to the Urban Coalition's recommendations and, alternately, by the administration's proposed budget recommendations. 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These estimates for 1972 for the administration's proposed outlays are given in column four of Table 5-2. Finally, columns six and seven indicate the occupational distribution stemming from total GNP and from Federal outlays in 1976, assuming adoption of Counterbudget . By analyzing and interpreting the results presented in Table 5-2, the absolute and percentage differences in requirements for detailed occupa- tional categories can be derived. This information is presented in Table 5-3 where the differences in requirements which would result from each distinct set of assumptions used here are given: three alternate sets of occupational employment requirements are given for 1972, and one set is given for 1976. Finally, the percentage of total professional and technical manpower demands generated directly and indirectly by alternate Federal government expenditures in 1972 and 1976 is presented in Table 5-1+ . Several explanatory observations may clarify the contents of the tables. In the first place, both the Urban Coalition budget and the Admin- istration budget yield overall levels of employment about 5% greater than for our Bureau of Labor Statistics simulation for 1972. This difference stems in part from the procedures used to interpolate the Bureau of Labor Statistic projections to fit 1972 and 1976, which makes both the Urban Coalition and the Administration more "optimistic" about the total level of economic acti- vity and of employment. Thus, the principal comparison of interest for 1972 is that between the simulations of the Administration budget and those of Counterbudget . Second, a note must be attached to the interpretation of the levels of employment generated by Federal expenditures, shown in Tables 5-2 and 5-^- -66- -p pi LfN On LfN LfN LT\ t— OJ -^ J-HOJrlm t-O CO OJ LfN LfN H o-vo _=t- H oo co_=|- CO ON B CD o Pi On H co_=r- OHO O H ON OO VO -=i- LfNCO ONCOr) O OJ VOJ" H ON ltnvq D--CO OJ VO O ^7^1 O O rH --J- OrlH^DJ- CD H I 1 l • — It l 1 i H l l H rH Tj ft y£) Pi 0- d onj- vo vo oj co on on roj- CO OJ H ONOO C— OJ o -^f H OJ t— CO _=1- o\ VO 00 O ft c-VO ft CO CO LfN O H f- VO D— ONVO ON co OJ O -d" CO CO H CO ONVO roj- OJ LfN OJ VO OJ LfN -* -=r 1 O V0 VO H LfN H ON H 0J CO O h^ »\ ^\ «\ *\ »\ «\ *\ «s -\ *\ •N »\ •N »\ ^ 1 1 •\ *\ »\ «S *N pq H a5 •P O EH O H f— CO J" 1 ft -3- oj cooo co ir\ i i mai i H i i 0J rH LfNVO OJ ONVO CO rH C— C— O J" 1 H pi -P o PI 0O H O VO o c— -4- VO ON LfN VO OJ CO CVJ r-\ t-CO ON CO -d" C— ON LfN _=f •H CD CO LfN LT\ ft CO ON CO O ONO WHO r-\ LfN O J" ON 0J rH OJ CO OJ 0O -PTJ O oj Pi O O OJ O O O O rH O O o o o o o o o o o O O O OJ O Pi O a; I II III I 1 1 1 1 1 1 1 -P D w •H -Cf Ph H on h co ltnvq o oj o J" ON i-H VO H ON t— CO LfN CO ON 0O CO OJ co j- pi a aj CO co tr— onvo oj o co ON LfN O OJ VO VO OJ O CO LfN VD i>-V0 O CO •H aj -P J- o VO 1 OJ CO CO LT\ OJ VO LfN H OJ OJ CO 1 OJ ON D— CO OJ ■i O EH ON t^ H OJ OJ ft OJ 1 1 1 1 •N 1 1 - ON O ON CO o ON f— LTN t— OJ VO H fO ON CO VO ONVO ON •H O D— O t— OJ -=J- CO ONVO co co CO OA 0J O H CO H OJ O rH ir— coco vo +3 Pi t5 aj H rH O VO ft O OJ OO H D— O CTmHcOCOj cooo CO OJ c- LfN LTN VO r- ON VO D— O LfN OJ OJ H ^ Pi aj H rH co co OJ CO H CO LfN LfNVO CO OJ OJ OJ OJ VO OJ PQ -H -p •N *\ •\ »\ *\ *\ »\ •V •\ »\ «\ *\ *\ ■V »\ *\ •N •\ »\ *N »\ £ O _=T J" 0O 0J OJ O LfNCO ON ON t- OJ OJ H H H rH OJ CO CO r-\ ^ EH VO LfN ft ft r-\ LTN r-\ < -P PI LfN a> 0J ro O O H f— OJ ON VO LfN H O -^ O VO CO O O -cr COOO H O D— P o Pi a; t— LfN ft ft COCO O LfN CO CO VO rH CO OJ VO ONVO fO OO O -J" CO LfN LTN O LTN CO 0J LfN LfN OJ CO OJ r-\ _Hr CO LfN LTN LfN LfN J" CO CO -=1- J" CO LfN OJ LfN D Ph >d CO i>- rH H ON OJ LfNCO O H CO LfN_d" J" LTN O O CO no COVO J" O D— PI a\ en J- ft 0O H H _=r J- ON CO CO o\ OJ OJ ON C-CO O O OJ H OJ LfN aj H _H- ft COCO CO O LTN ON LfNCO LfN CO OJ ON CO LTNJ- O OJ O OJ roroj- aj *S *N «\ «\ *v *\ »\ «\ »\ *s »\ •\ »-. •N *\ *\ •\ *\ »\ »\ »s CQ +3 LfN t— H OJ J" CO J" LTN coot- OJ OJ H r-i rH , ^ W aj O Pi -P Pi H bD (D -P ^i H P Pi •H r-\ -P W d H PI *\ •H PI Ph aj (D H O g -H O 2 & a3 tH w O CD O H oj Pi a> i> t3 o -P Pi u 00 -H CD ra •H H ^ o CD l| >H H f| J) (U >H CD w O o P rH TJ O ft -H -H O O H H S s s 0) -P H CO aj aj CD P S 3 Pi w aj •s •H P S -P •s •H -H P r-{ w o w pi w Pi w •H O w W W CO W w w w bOH -P pi aj -P •rH -P +3 -P -P OP P! 2 j ^| H PI Pi P P -P CD EH O -P O -H 3 aj -H •H •H (3D •■ •H aj p p -ri EH w 'd fl m -cj- LfNVO 0- CO ON O H aj co_=f- LfNVO t—CO ON O P pi -H aj w a) w H H S H H H H rH H H •rH H Ph CO 03 ft •h "-d H ONOJVQr-||>-OJOOOOOJ-=f- 0OVO LTNOOHVO OOOOLTNLTN [—J- OJ -=r its 0- 00 1 O LTN [— -J- VO OJ OJ d d cd t— ONVQ CO H C— ONOOCOO 0O0O 00 00 0O_=f vO co 00 ON •H Oj -P O EH OJ OJ ON £— VO LfN OO t— OO • VO OO •>, -N *\. »\ -\ *\ LP\ *N i-H ON OJ ON OJ CO 00 OHHOMAI4H •\ «\ »\ *\ »\ *s LT\ ON ON_H" H -d" H 0- J- 00 H OJ OOCO ON LfN o -P d 0) 1 _4 H VO OJ OJ H 00 o oO_4ooOvOL"-VQOCOvO OO t-_4 VO H VO OJ ON_h- VO OJ 00 J- LTN O J- VO •H -P T3 co o CD oooj_4ojoooj-4ojooco _4 _4 COJ- J" V0 4 OOLTN-Hr LTN O vo 00 O ON 00-4 -J-Lr\Lr\LTNLr\Lr\LrN_HrLrN-Hr ltnltn LT\ LT\ LTN LTN LTN LTN J" J- -4 LTN J- J- LfN OO -H- LfN d 1m Ph C\J cd -P D— w LfNLfNOOOCO.-4 00[^-OON VO H VO H H OJ ON £•— VO LTN ON t- vo vo VO OO -£}" LfN vO OO S — "s ON CO -H H VO CO OJ H oo oo_4 H vO t>- CO O -4 h-rOH ONOJOVO 00 vo J" O-VO ■d H l-H id cd OM^-LINCO ONOCO H OJ J- OOO VO CO t~-CO H H ON 00 ONVO LTN OO -3- c— VO VO - m -h -P -P -3 O CO OJ VO H-4 H UNONH OH H-=j- OJ LTN-4-H- OOH H H OJ OJ H LfN OJ d EH (OH J- H OJ H LTNVO LfN OJ H 00 00 00 H o o -L"-0-4b-LrN L^ ON t~-00 ON H O O t--^ 00 00 LTNOO OO LfN H O -4 C— l>- i>- c— tr- oo vo t- vo t—vo [— ir— d— 00 00 t— -4 -4 -H- LfN LXN_4 LfN J" VO CO CD H D Pm ,Q t3 VO O- vQ-4vOVOVOOOJO -4 t— 0-40JVOOJOHO ON CVJ vo 00 O ON CO H CO d CO t^OO OMAH OOO J-CO D--CO OJ H LTNONLTNO-H-VO OO L^ ON ON H OO LfN VO EH 3 H cd -P VOO-4-LfNLr\LT\OJONVOCN l"~ VO t>- 00 0O_4 vo O 00 vo LTN O VO O O LfN CO OJ OJ 0NOJJ- H H [>- t— H CO H \£)4- H O lACOJ- H OJ LTN VO OJ OJ LfN CO l-H O oovo VO OJ OJ H OJ ON CO OO H H OO -4 H pq EH H OJ OJ W p> H W U w w w Ctf ^H 1 0) H a -p 1 !m ^ £ O -s ^ w •H P> -H CD fn O H CD H -P >> •H a -H t> -p O -H cd bO cd H u >> -p ,C Td CO d U IS -P d ^ cd c6 !m s d s W tJJ -HO d -H 0) p a5 (U -d CD CD < ^ ^ ?H -H CO T3 k f! 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Tj CO p CO o D ^ p T3 p CD P r o H Ph •H Pi Pi < P > >. w CD •H CD rQ CD a CD P TJ -P P o P cO cO 'P cO p S ^— •. a CD a p CD •H w •H Ti •H CO P TJ P> •H +1 CD CD ra O CO > W 4^ Pi W o W •H W CO EH bD — ' T3 a 13 -69- Table 5-U Percent of Total Professional and Technical Manpower Demands Generated by Federal Expenditures 1972 1976 Occupation Title and Number — — H r Admin. D U.C, 1. Professional Technical, Kindred 20.00 29- 1+8 2. Engineers, Technical 3. Engineers, Aeronautical k. Engineers, Chemical 5. Engineers, Civil 6. Engineers, Electrical 7. Engineers, Industrial 8. Engineers, Mechanical 9- Engineers, Metallurgical 10. Engineers, Mining 11. Other Engineers, Technical 12. Natural Scientists 13. Chemists ll+. Agricultural Scientists 15- Biological Scientists 16. Geologists, Geophysicists 17- Mathematicians 18. Physicists 19. Other Natural Scientists 20. Technicians, Except Medical, Dental 21. Draftsmen 22. Surveyors 23. Air Traffic Controllers 2k. Radio Operators 25- Technicians, Other 26. Medical, Other Health Workers 27. Dentists 28. Dieticians, Nutritionists 29- Nurses, Professional 30. Optometrists 31. Osteopaths 32. Pharmacists 33- Physicians and Surgeons 3I+. Psychologists 35. Technicians, Medical, Dental 36. Veterinarians 37. Other Medical, Health Workers 38. Teachers 39- Teachers, Elementary 1+0. Teachers, Secondary 1+1. Teachers, College 21.57 22.36 1+0.51 ko.ko 16.82 20.86 15.32 16.79 21+.55 25.29 20. 0k 20.08 22.79 23.09 20.16 19.73 15.85 17.00 21.65 23.88 23.18 28.1+3 18.25 23.79 214.88 25.28 22.17 27.1+8 19.78 21.05 27-57 29.29 33.07 35.86 30.55 36.80 20.21 21. U9 18.26 19.38 13.1^ 11+.62 76.1U 77.82 10.99 12.07 21.58 21+.06 23.76 ^3.75 25.06 ^7.73 2U.35 1+1+.71 2k. 1Q 1+6.02 2k. % 1+5.68 25.09 1+8.1+9 21.62 27.36 2U.U7 1+6.09 16.13 27.80 25.08 1+7.15 22.56 1+3.01 23.93 1+6.15 2U.8U 1+7.10 25.06 1+8.1+0 25.23 1+8.52 25.09 1+8.1+9 -70- Table 5-U (cont'd; 1972 1976 Occupation Title and Number 42. Teachers, Other 43- Social Scientists kh. Economists 45- Statisticians and Actuaries 46. Other Social Scientist 47 • Other Professional, Technical, and Kindred 48. Accountants and Auditors 49- Airplane Pilots, Navigators 50. Architects 51. Workers in Arts, Entertainment 52. Clergymen 53- Designers, Except Design Draft 54. Editors and Reporters 55* Lawyers and Judges 56. Librarians 57- Personnel and Labor Relations Workers 58. Photographers 59- Social and Welfare Workers 60. Professional, Technical, Kindred, Not elsewhere classified 19-50 26-77 These results for all 185 occupational manpower categories may be found in Bezdek and Scoville [8]. Percent of total manpower requirements within specified occupational cate- gory generated by Federal expenditures distributed in the manner proposed by the administration. c Percent of total manpower requirements within specified occupational cate- gory generated by Federal expenditures distributed according to the Urban Coalition's recommendations. Admin. b U.C. c 22.78 36.67 25-55 28.50 27-30 29.75 21.91 28.99 30.89 34. ^3 16.28 22.12 17-60 20.43 16-59 19-15 17-33 22.1+7 17-79 27.91 25-09 29.57 16.18 18.5*4 15.30 17.03 14.58 17.46 25-07 45.26 14. U6 16.10 15.56 19.35 6.06 9-61 ■71- In this context, Federal expenditures are considerably broader than the cus- tomary "purchases of goods and services. " As was explained in Chapter 3> most transfer payments are included in Federal spending; for example, some personal consumption expenditures attributable to the receipt of social welfare pay- ments are counted as producing federally generated employment. As noted there, only by a convention such as this can a true measure of the whole impact of Federal outlays be obtained. -72- CHAPTER VI. INTERPRETATION OF THE RESULTS A. Short -run Shifts in 1972 Most of the immediate impacts of Counterbudget in 1972 would be rela- tively modest, as is best indicated by references to columns 5 and 6 of Table 5-3- In those columns are shown the differences between the job distribution generated by the Administration budget and that resulting from the proposals for 1972 contained in Counterbudget . The positive effects--from the point of view of those employed—can be quickly summarized. Overall, the Urban Coalition budget creates more jobs than does the Administration proposal; in short, the areas of suggested expan- sion cost less per job generated than do the areas of contraction (defense in particular). On balance, these reallocations would cause employment to expand by eight tenths of one percent. Stated in this fashion, the effect seems modest enough; but when placed against an unemployment rate likely to be in the vicin- ity of six percent, it is clear that such additional job creation would be welcome . This impact would be even slightly larger among the groups which have been harder hit by recent unemployment. Employment of laborers (farm and non- farm) would rise by almost 1%; most service and sales occupations would exper- ience an expansion of 2.yj . This is all to the good. Some markets which are not so loose would also be tightened. Demand for workers in the health area, professionals as well as paraprofessionals and technicians, would increase across the board by 2°] or better. All but a few of the building trades would show increased demand by roughly 1$. It is likely -73- that these effects would intensify current inflationary pressures in those markets. As the reader of Count erbudget will have guessed, the burdens of the reallocation will fall most heavily on those whose jobs are linked to military and quasi-military expenditures. Overall, Counterbudget would reduce the need for engineers by .5% in 1972, with greater effects on aeronautical (2.5% loss) and electrical and mechanical (l%) engineers. Mathematicians (off .5%) and physicists (off l°/ ) would also be hit. The effects extend further down into the labor force. Skilled workers, machinists (1.3%) and tool and die makers (1.6%) would experience significant contractions of demand. Other metal working occu- pations, both skilled and semi-skilled, would suffer an employment loss of from one to two percent. Airplane mechanics would share that fate as well. The most important conclusion to be drawn about the immediate impact of Counterbudget for 1972 is probably not economic, but political in nature. Although one is predisposed to regard unemployment among the skilled or profes- sionals as being less onerous, injurious and socially undesirably than further increases in unemployment among the poor, unskilled and the minorities, the group that would be afflicated most by Counterbudget may be powerful enough to pose an obstacle to its adoption. In large part, their power stems from the regional and industrial concentration of present unemployment. Significant in- creases in the difficulties encountered by workers in these occupations, as implied in the Urban Coalition proposals, would increase the intensity of their opposition. There will clearly be a problem in selling Counterbudget , when its severest consequences are concentrated in a group which is experiencing pre- viously unknown difficulties and which has powerful friends in Congress. ■lh- B. Longer-run Shifts to 1976 Because of the differences in the degree of optimism about the econ- omy built into the Urban Coalition budget and into our simulations of an inter- polated Bureau of Labor Statistics bill of national output, it is somewhat mis- leading to compare the two directly. Nevertheless, given that the Count erbudget would generate total employment 5-09^ higher than our Bureau of Labor Statistics simulation, the figures in columns 5 and 6 of Table 5-2 and columns 7 and 8 of Table 5-3> can be used to indicate differences in the levels of occupational demand implied by the two levels and distributions of national output. An alternative approach may give a better idea of the relationship be- tween supply and demand for various types of manpower. If the Bureau of Labor Statistics forecasts of the U.S. economy to 1980 are considered to be based on changes which are "normal" and within the adaptive capacity of the economy, their estimated manpower implications can be used as rough indicators of the kinds of supply changes expected in various occupational categories. By comparison with this measure, some of the particular strains imposed by Count erbudget can be identified. Table 6-1 below shows estimates of this difference between normal or trend changes implicit in the Bureau of Labor Statistics forecasts (as interpo- lated) and the simulations of the Counterbudget proposals for a number of selec- ted occupations. Column 1 shows the immediate shift in 1972 from adoption of the Urban Coalition priorities. Column 2 of the table presents estimates of the changes involved in progressive implementation of Counterbudget to 1976. In column k the estimated "Bureau of Labor Statistics normal" change in employment is given. Column 5 summaries the differential impact of Counterbudget on these selected occupations. It should be noted that these estimates refer to total -75- Table 6- •1 Differential Impact of Count ertmdget on Selected Crit ical Occupations (in percent of employment in 1972) Count ■erbudget Impact "BL S Normal" Net Impact Occupation Immediate 1972 1972-76 Total (1) (2) (3) (k) (3) - (k) Engineers -0.5 2.5 2.0 8.1+ -6.1+ Aeronautical -2.5 -k.2 -6-7 k.9 -11.6 Chemical -0.2 -3.6 -3-8 6.0 -9.8 Civil 0.8 17-1 17-9 ll.l 6.8 Electrical -1.0 -k.Q -5.8 8.2 -ll+.O Industrial -0.8 -0.5 -1.3 7-3 -8.6 Mechanical -1.1 -8.1+ -9-5 7.2 -16.7 Metallurgical -1.0 -5.1 -6.1 k.5 -10.6 Natural Scientists 0.1 8.5 8.6 8.5 0.1 Agricultural 0.1 17.0 17.1 7-1 10.0 Biological 0.5 17.2 17.7 10.1+ 7-3 Chemists 0.1 1.1+ 1.5 6.9 -5-k Geological 0.1 10.5 10.6 k.3 6.3 Mathematicians -0.5 5-0 1+.5 9-3 -k.Q Physicists -1.0 3-5 2.5 8.8 -6.3 Technicians, non- medical -0.1 5-8 5.7 9.3 -3-6 Health Workers 2.2 28.0 30.2 11+.1+ 15.8 Dentists 2.1+ 32.1+ 3I+.8 15-5 19-3 Nurses 2.2 31.0 33-2 15.0 18.2 Physicians 2.2 31-0 33-2 15.7 17.5 Technicians 2.2 31-3 33-5 15-3 18.2 Attendants, Hos- pital 2-3 32.0 3^-3 15.3 19.0 Teachers 2.1+ 32.0 3I+.I+ 15.3 19.1 Social Scientists 0.2 10.6 10.8 9-6 1.2 Social Workers 1.3 30.5 31-8 1^.3 17.5 Craftsmen 0.14 k.9 5.3 7.1 -1.8 Construction 0.8 10.2 11.0 8.0 3.0 Metalworking -l.l -k.k -5-5 5.9 -11.1+ Transport 0.1+ -9.2 -8.8 k.3 -13.1 Mechanics 0.7 9-5 10.2 7-8 2.1+ Semiskilled Metal- working Occupations ■1.6 -6.8 -8.1+ 6.0 -1I+.1+ -76- employment --in order to assess the net effects on dis employment or new entry figures on expected attrition through death, reitrement, etc. would be needed. The first ohvious manpower impact of Count erbudget is seen in the troublesome area of the engineering occcupations. Among the groups shown, only civil engineers experience an increase in employment and outstrip the implicit Bureau of Labor Statistics trend. Other engineering specialties suffer losses, some of them quite substantial. There is net growth of 2% for all engineers, but this is far less than the amount expected from longer term trends. Thus, the problems of labor market adjustment which confronted this set of occupations in the short run is even more pronounced over the four year span to 1976- These figures strongly suggest that, if Count erbudget were adopted, one of the imme- diate priorities would be the dissuasion of new entries to these fields (except for civil engineers). Under Counterbudget , natural scientists as a group would fare as well as the Bureau of Labor Statistics simulations would predict. Various speciali- zations would be affected differently, however. Three of those shown would have greatly increased growth rates, while three would grow much less than previously projected. Craftsmen would experience similarly diverse impacts, although growing as a whole only slightly less than Bureau of Labor Statistics simulations would suggest. Demand for the inflation-prone construction trades would rise from a normal 8% rise to 11%, and demand for mechanics and repairmen would behave similarly. Transport and metalworking trades, in company with other defense- oriented sectors of the labor market would go from positive to negative growth rates. This effect would be strongly felt by semi-skilled operations in metalworking. -77- There are three broad areas of work in which the adoption of the Urban Coalition proposals would put a reverse strain on the labor market. Demand for health workers, teachers and social workers could be expected to outrun normal expansion by between 15 and 20% of total 1972 employment. All these occupa- tions would have to expand by over 30% in the next four years. While the mar- ket for teachers is undoubtedly loose today, it seems unlikely that there is so much excess supply as to permit this rate of expansion. The same comment, per- haps slightly stronger, could be applied to social workers. But the clearest and most stringent bind will surely be in the implied needs for all classes of health workers, unless we find an alternative solution to the provision of med- ical services through technological change. Certainly in the case of medicine, and most probably for teachers and social workers, the goals of Count erbudget are unattainable with technologies largely similar to those we have used for our projections, which are not radi- cally different from the technologies in use today. Our simulation indicates that the productivity of the established medical trades shown in Table 5-6 will have to be substantially increased, most likely through increased utilization of paraprofessionals, rationalization of the use of time by professionals, and the substitution of lower skilled workers for the more routine tasks. Despite cur- rent forecasts of widespread unemployment among college graduates of no parti- cular specialty, it is likely that the same diagnosis must be applied to the professions of teaching and social work. "...medical occupations would, on the whole, experience an increase in require- ments of about 1.5% for all occupational groups. This is clearly an under- estimate of the changes in demand that implementation of the Counterbudget would bring, since the report reallocates considerably more resources to the medical areas than Bezdek's example does." (Counterbudget [^3L P a S e 307- ) -78- If such reorganizations, rationalization, and new inputs are not developed, then the market will find a way to defeat these particular goals of the Urban Coalition. The real impact and benefit of the shift of Federal ex- penditures into health care, for example, will be sharply reduced by rising wages and prices in a market as tight as the one we have simulated. Without careful restructuring of that sector before massive infusions of cash, the probably end results would be these: an increase in the provision of health services which would be quite modest in comparison with Count erbudget goals, accompanied by a redistribution of income to the producers in the sector occasioned by the rising level of wages and prices. Finally, if Congress held to the health care goals as measured in real terms, and attempted to offset these effects through appropriation of more funds, the result would be an enor- mously increased dollar cost of attaining the Counterbudget proposals. C. The Changing Importance and Impact of Federally Generated Employment The estimates shown in Table ^-h above indicate the relative impor- tance of Federal spending (and Federal transfers which go from the recipient's pocket into personal consumption) in the generation of employment in specific occupations. As can be seen, the importance of Federal outlays is very differ- ent: for some groups it is negligible, for others practically a mainstay of their existence. With the relative expansion of the Federal budget proposed by the Urban Coalition, the overall share of employment which is directly or indi- rectly generated by Federal spending will rise from 16-5 to 21.0$ between 1972 and 1976. The impacts on various occupations are much more dramatic. The share of Federally generated jobs in medicine and teaching will roughly double as a ■79- result of increased expenditures and the assumption of some costs presently borne directly by the consumer. The importance of these effects can be seen in Table 6-2, which shows the top twelve occupations in terms of importance of Fed- eral money under the Administration budget for 1972 and Counterbudget for 1976. D. Overview In general, the results of a detailed simulation of Counterbudget , in contrast with other allocations of output, indicate that certain areas of the labor market would be subjected to severe strain. While the immediate effects are generally quite small (despite the concentrated impact on engineering and related employment) and in some cases beneficial, some serious dislocations are implied by full implementation of the Urban Coalition's proposals in 1976- The authors cannot be as optimistic about the manpower impacts as their findings in Chapter 22 of Counterbudget would have suggested. A full analysis of the pro- posed Federal activities, taking particular account of those areas which were expanded more rapidly than assumed in Bezdek's 1970 paper suggests a need for some caution and for the development of programs to alleviate the most critical problems . The most serious area in which altered spending patterns, in conjunc- tion with a relatively stable technology, would give rise to unattainable man- power needs is clearly in health services, whether rationalization of the use of doctors' time and substantial changes in the technology of health care de- livery (particularly through greatly expanded use of paramedical workers) can be pursued to an extent necessary to meet the need by 1976 is open to consider- able doubt. Although health services is one area where manpower input coeffi- cients might be changed most readily by public policy, it is unlikely that the -80- Table 6-2 The Top Twelve Federally-Generated Occupations, 1972 and 1976 1972 1. Air Traffic Controller 2. Postal officials and workers 3. Aeronautical Engineers k. Airplane mechanics 5- Physicists 6. Social scientists, except statisticians and economists 7- Miscellaneous natural scientists 8. Economists 9- Mathematicians 10. Osteopaths 11. Teachers 12. Medical and dental technicians 1976 Air Traffic Controllers Postal officials and workers Osteopaths Dentists Medical and dental technicians Teachers Miscellaneous medical workers Physicians and surgeons Nurses Optometrists Librarians Dieticians -81- manpower resources, training facilities, and legal and institutional arrange- ments can be rearranged swiftly enough to make the Coalition's goals feasible within the allotted time span. Similar comments apply to the areas of education and social work which would also be in exceedingly short supply. In these areas, there is certainly greater labor market looseness today (perhaps even more to come), the training lead times are generally shorter, and the flexibility for changing inputs is not as encumbered by rules of good practice, liability laws and consumer reluctance as in medicine. These areas do not pose insuperable obstacles to the attain- ment of Counterbudget ' s goals. One final area in which the Coalition's proposals continue to put pressure on already aggravated labor market problems is construction. The impact of program expansions and cutbacks is nearly balanced in Counterbudget , but there would be a modest increase in demand. This increase would increase employment expansion in these trades by roughly half again that implicit in interpolated Bureau of Labor Statistics trends. Although the inflationary impact of this increase may not be precisely predicted, it is certain that an expansion of de- mand, no matter how small, will not help in current attempts to bring those mar- kets under control. Nevertheless, deseasonalization alone should produce the needed additional manhours without any expansion in the labor force. This is a modest hurdle compared to health care problems. Finally, the full simulation of Counterbudget indicates that there is a network of jobs, loosely identified as engineering and related occupations, where the proposed new efforts and budget cutbacks do not wash out on balance. From mathematicians to engineers, to technicians, to skilled and semi-skilled workers, a series of negative employment effects is found. Although some other ■82- occupations in the same general areas (e.g., civil engineers) will expand as a result of new programs, the negative effects are strong enough to keep total engineer demand almost unchanged. It is significant that such static markets do not encourage or facilitate the movement of the disemployed to other related occupations. These estimates lend further urgency to the Coalition's porposals for aid to former defense workers in retraining and relocation. Unless such proposals are rapidly developed and implemented, concentration of the short-run impacts of Counterbudget in this already distressed market may prove politically- fatal to adoption of the program. ■83- BIBLIOGRAPHY [1] Almon, Clopper. The American Economy to 1975 - New York, I966. [2] Alterman, Jack. "Interindustry Employment Requirements," Monthly Labor Review . Volume 88 (July 1965), pp. 8UI-85O. [3] Aronson, Robert L. Federal Spending and Scientist and Engineer '-.mploy- ment . Bureau of Labor Statistics Bulletin 1663- 1970. [h] Benson, Robert S. , and Wolman, Harold, eds. Counterbudget: A Blueprint for Changing National Priorities, 1971-197%" ! New York, 1971. [5] Bezdek, Roger H. Manpower Implications of Alternate Patterns of Demand for Goods and Services . Report prepared for the Manpower Administra- tion of the U.S. Department of Labor, 1971- [6] . 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REPORT SECURITY CLASSIFICATION UNCLASSIFIED 2b. a ROUP REPORT TITLE ECONOMIC RESEARCH GROUP WORKING PAPER NO. 6 Simulating the Employment Ispacts of the Urban Coalition's Counterbudget descriptive notes (Type of rmpmrt anal htalaalwe datea) Research Report authorisi (Flrat naate. mfiBBe Initial, laat namte) Roger H. Bezdek and James G. Scoville REPORT DATE October 15. 1971 I. CONTRACT OR GRANT NO. DAHC01+ 72-C-OOOl k. PROJECT NO. ARPA Order No. 1899 D. DISTRIBUTION STATEMENT 7a. TOTAL NO. OF PACES -95. 76. NO. OP REPS 80 ••. ORIOINATOR'S REPORT NUMBER(S) CAC Document No. 16 •b. OTHER REPORT NOISI (Any other nuntwrt that may ba eaaljned thla report) Copies may be obtained from the address given in (l) above. I. SUPPLEMENTARY NOTES None 12- SPONSORING MILITARY ACTIVITY U.S. Army Research Office-Durham Duke Station, Durham, North Carolina I. ABSTRACT This paper describes a large scale computer simulation conducted to determine the detailed manpower effects which may be generated by implementing the Urban Coalition's recommended reorderings of national priorities and Federal expenditures in the period 1972-1976. The procedures followed in each stage of the analysis are specified in detail. The economic model employed is an expanded open input-output model transformed into labor units and integrated with industrial and occupational manpower data. Simulations are run to determine the differential employment impacts which would be caused by the Urban Coalition's budget priorities as opposed to the anticipated expenditure distributions being forecast for the near future. The findings indicate that the Urban Coalition's Counterbudget may cause such drastic dislocations in the labor market that its implementation may be infeasible. )D , F ™..1473 UNCLASSIFIED Security Classification UNCLASSIFIED Security Classification KEY WOROS Economics Applications Social and Behaviorial Sciences Education and Welfare UNCLASSIFIED Security Classification w4