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So that in advance this screening committee has determined that this boy is employable and we have also saved the Government some wasted money in terms of schooling, where the dropout rate in many normal institutional programs is absolutely fabulous, where in our program the dropout rate is a very small percentage.

And I might say that one of the main problems we are facing is draft. We wish there was some policy that—this is the main source of our dropout rate and we feel that in the national interest there should be some synchronization here.

We know that at the end of the year we could have a boy from a disadvantaged background be equal to a specialist in cooking in any of the services and we think that some recognition should be made in that area and I understand Mr. Dewhurst's problem is even more acute in terms of the tool and diemakers.

But getting back to the question—I think I have answered it.

Senator Prouty. You are able to employ people who have dropped out of school? They do not have to have a high school education in order to qualify?

Mr. ISENBERG. 60 percent of our program–60 percent of our particular program happens to be high school dropouts.

Now, it can vary from place to place. We make a very strong bid for boys with disadvantaged backgrounds, because we find that under our instructor-coach system, our instructor becomes almost a father figure to these boys and we have had unusually fine results with some basic attitudes and basic intelligence to develop men into real worthwhile citizens.

Senator PROUTY. Both you and Mr. Dewhurst seem to feel that adequate funds under Manpower Development and Training Act, with the on-the-job training, have been increasing; is that correct?

Mr. ISENBERG. Yes, sir.

Mr. DEWHURST. Correct. I believe that one of the better things that could be done would be to upset this approximately 85 percent institutional to 15 percent on-the-job training relationship and get that more into a reasonable set of circumstances, along with reducing the administrative burden that is imposed.

Senator PROUTY. What has been your experience with respect to those who have had institutional training? Are they as well qualified as the people where you do the training yourself?

Mr. Dewhurst. We have hired many of these people in our own company because we are short handed, and we have really tried to use them, and we have in most cases had to let them go, or else if they were oriented properly to begin with, then we still had to go into a serious training job with them.

In our case it is not as bad. We are training oriented; we have people that are skilled in doing this; although we are only a small company, we spend a lot of time and attention on this kind of thing.

In other companies that are using these institutionally trained people, where they brought them in and they do not have the training structure that we have, almost without exception I know of no cases where they have been able to retain them at the level of the job for which they were hired. In some cases they retained them in lower levels of jobs.

of the program.

Senator PROUTY. What is the weakness, in your judgment, in the institutional training program?

Mr. DEWHURST. It is the fact that it is not a true-to-life situation. They are not working for a living, they are going to school, and there is a big difference between a fellow going to school and the amount of effort he is going to put into it, and when he has to work for a living and punch a timeclock and get his pay at the end of the week, which he has worked, there is a tremendous difference.

Nr. ISENBERG. I also think you would add to the instructors. Our instructors are chosen from industry. We have to fulfill the school's requirements of high school diploma or equivalency. I just got a bill through our legislature that waived the citizenship requirement, because we had to use foreign-born chefs who had recently applied for citizenship. We follow all of the school's requirements and we try rery hard to get our instructors accepted in the institutional phase

That is the secret and key of the programing, because even though the boys are in school, he is able to communicate this real life situation coming from industry and being a successful figure in industry, he does an excellent job of projecting this situation, even in the preschool period that we have prior to the apprenticeship.

Senator Prouty. Do you feel that if what you might consider an adequate tax credit came into being, that that would stimulate the program on the part of private industry?

Vr. Dewitrst. It would stimulate this on the part of private industry provided that industry groups who were interested in this type of thing such as the tool and die association, as the restaurant association, who are training oriented-if they got in and started to develop plans of training to develop the training structure in the

It is not going to happen by itself. The individual companies would not be able to do this by themselves, I do not believe. To really get the full encouragement- just because the dollars are there does not tell them how to do it.

There are a lot of millionaires in the world and there are a lot of guys that are not, and yet they have read all their books, and yet they do not know how to become millionaires. That same kind of a situation.

I believe it is going to take more than just the tax credits. I think it is going to take å sincere effort under an agency, probably the Department of Labor, probably the Department of Labor's Bureau of Apprenticeship and Training, to be given the task of showing industry

Right now the Bureau's task is mostly-it was historically promoting apprenticeship, promoting numbers of apprentices. "That has changed about somewhat in the last couple of years. They are now doing some other things, and their historical job is going by the board, but the Bureau, for instance, under the concept of someone, some agency being responsible to show how, the how-to of the situation, it could well be the Bureau who did it, and, first, they would have to learn how, because they do not really know how.

industry.

how to train.

You say, "Well, we hired some boys and put them on and you dump them in the shop," and pretty soon the boy gets discouraged. The shop foreman is discouraged. He is not interested in wasting a lot of time on these greenhorns, so that is why it becomes most important to have that training structure, the methods, the training tools, the trainers; the journeymen are the skilled people who have been taught how to instruct and then, further, to get both management—both labor and unions-oriented to thinking this way.

It is just a simple problem of saying, “We have to find a way," and we know how to do that if we can get the dough to do it.

Senator PROUTY. Are you speaking now of relatively small business?

Mr. DEWHURST. I am speaking mainly of_small business, because that is where the majority of the jobs are. Even large business, big business, does not really know how to do it well.

We know of many big businesses across the United States, in our former position as president of the tool and die manufacturers association, we have visited literally scores of these companies and observed their training methods and their training structures, and many of them really do not know how, although they have spent a lot of money in providing staff and facilities.

Now, it is part of the how-to, and that gets us around to this point of researching this thing and writing it in English, not governmentwise, if you will pardon the expression.

Senator PROUTY. That will appeal to me.

Mr. DEWHURST. I have trouble reading and understanding most of this stuff that comes out.

Senator PROUTY. I do not want to take much time. I would like to give you one example of my proposal for a 7-percent tax credit. I will not ask you to comment on it, because you would probably want to take time to think about it.

Under my proposal, the maximum amount of credit that a taxpayer may claim for i taxable year is $25,000 plus 25 percent of his tax liability in excess of $25,000. Let me give you an example:

Suppose a taxpayer has a tax liability to the Federal Government of $425,000 for a tax year. The maximum amount of credit that he could claim under the act is $25,000 plus 25 percent of the tax liability in excess of $25,000. The tax liability in excess of $25,000 is $400,000 $425,000 minus $25,000; 25 percent of this $400,000 is $100,000. The maximum that could be claimed is thus $25,000 plus $100,000, or $125,000.

The taxpayer then adds up his allowable employee training expenses. Case A: Suppose this figure amounts to $2 million. Seven percent of $2 million is $140.000. Since this is in excess of the maximum al. lowable_$125,000—the most the taxpayer could claim would be $125,000.

Case B: Suppose the figure for allowable training expenses is $1 million. Seven percent of $1 million is $70,000. Since this figure is less than the maximum allowable, the taxpayer would claim the full $70.000.

However, it is important to note that in both the above cases the total employee training figure_$2 million in case A and $1 million in case B—-continues to be deductible as a business expense.

I just call that to your attention. If you care to comment, I would be glad to have you do so.

Mr. DEWHURST. I would like to comment. I understand the limits and the limits are most generous. The problem is that the majority of the companies in the United States would not be in a position to spend that kind of money for training. The majority of the companies do not do that kind of business gross, so that if you start from the end of where you are making out your tax form and you take a figure of $1,000 or even if you went to, say, $25,000, of cost and take 7 percent of those figures. You are suddenly down, after all your tax calculations you are down to a very small figure, and the illustration is used earlier, a small company with a thousand dollars of training costs, and he had $50,000 profit and it is admittedly not a great illustration, but that is the one it is. He ends up with $70. Seventy dollars is not very much. It is really not worth fooling with.

The administration of the paperwork would cost more than the return.

There are some other advantages very quickly and I have to break out of here. There is one other advantage to a tax credit approach to incentives.

Historically the financial people, the treasurers and comptrollers and accountants in industry have been the ones who have militated strongly against training efforts going on in the industry,

They point out to the cost of the training programs. They fail to halance the other side of the ledger and show the results of the training programs and fail to take account of what would happen if the training programs were not put into effect.

By a tax credit device that offers something that is worth while in return to companies, you suddenly get the accountants and the fiscal people interested in finding ways to improve their companies' total carnings and you have then another set of people that are interested in promoting training and thereby providing additional job development.

Senator PROUTY. Do you think it would be possible to come up with a graduated scale so that those in the lower brackets would receive more?

Mr. DEWHURST. I think that is the approach that should be taken. I think graduated brackets along with total limits. You would use the limit of 7 percent, for instance, of the first $25,000 and this type of thing. I think these are the paths that have to be examined. Senator PROUTY. Thank you very much. Senator KENNEDY of Massachusetts. I want to thank both of you very much for appearing before the committee and your responses to the questions which were very, very helpful. Mr. Dewhurst. We appreciate it very much. Senator Prouty. Mr. Chairman, I am sorry to say I have some people I am supposed to meet in my office at the present time. I am Sorry I cannot hear the other witnesses, but I certainly will read their testimony with a great deal of interest. Senator Kennedy of Massachusetts. Our next witness will be Mr. William Caples, vice president of industrial and public relations, Inland Steel Co. of Chicago.

STATEMENT OF WILLIAM G. CAPLES, VICE PRESIDENT OF INDUS

TRIAL AND PUBLIC RELATIONS, INLAND STEEL CO., CHICAGO, ILL.

Mr. Carles. Senator, it is my understanding with a statement on file that if I would highlight what I am trying to say in a longer form in the statement, that would be satisfactory to the committee.

Senator KENNEDY of Massachusetts. Your statement in its entirety will be included in the record. If you want to summarize the high points of it, that would be fine, Mr. Caples.

(The prepared statement of Mr. Caples follows:) PREPARED STATEMENT OF WILLIAM G. CAPLES, VICE PRESIDENT OF INDUSTRIAL AND

PUBLIC RELATIONS, INLAND STEEL Co., CHICAGO, ILL. My name is William G. Caples. I am vice president of industrial and public relations of the Inland Steel Co. of Chicago, Ill. I am pleased to have this opportunity to express my views and those of my company with respect to on-thejob training and the contributions that it can make toward supplying needed skilled manpower and eliminating unemployment.

As a member of the National Manpower Advisory Committee and chairman of its subcommittee on training, I have been concerned for some time with improving the effectiveness of both the on-the-job training and the institutional training progranis administered under the Manpower Development and Training Act. However, in my remarks today I should like to discuss the on-the-job program as it affects my own company, because I think our experienme may be typical and useful to your committee as it considers expansion and improvement of the on-the-job training approach.

Inland Steel has over 30,000 employees and operates in 36 States and Canada. We conduct extensive employee training programs at our larger operations, in particular, at our Indiana Harbor works, which is our basic steelmaking plant. And we are acutely conscious of the importance of an adequately trained workforce to efficient and profitable operation.

At Indiana Harbor, which employs about 22,000 persons, our training director reported that for the year 1964 there were 14,309 persons in training programs of various kinds. These programs ranged from advanced management programs to short-term safety and first-aid programs. By far the largest number of employees in training were those in our production and maintenance group who were learning specific production jobs. In the natural course of events many of our production employees receive their training on the next higher job in their sequence by filling in for employees who are ill or on vacation. We also have about 100 apprentices in the skilled trades. The apprenticeship programs range from 3 to 5 years in length. In addition, in cooperation with Purdue University we sponsor a 2-year program, conducted by Purdue, in which college level training in mechanical, electrical, and steelmaking fields is made available. In 1964, 388 employees participated in the Purdue-Inland program, for which Inland pays the full cost.

For the past year or longer we have been operating in a tight labor market and have experienced severe shortages of labor. These shortages are of three types: First, because of the high level of steel production, we have been confronted by a shortage of qualified young people for our basic labor entry jobs. These jobs require no training but they do require a good elementary and secondary school education. The second area of shortage has been in the professional and scientific occupations, and the third in the skilled trades. You will note that the vast majority of our occupations, most of which are unique to the steel industry and which are of a semiskilled level and require 6 months to 1 year training on the job, are filled by promotion from within and the company provides the necessary training.

It is my feeling that this situation is typical of many larger employers and that no Federal program of either institutional or on-the-job training can possibly replace the extensive training programs which large employers like Inland find it desirable to conduct.

Most of the occupations for which we at Inland have been experiencing shortages do not readily lend themselves to this type of approach. One exception

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