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President Kennedy in 1961 on the 7-percent investment credit. Originally that notion was to pinpoint tax credit for new investment, not credit for investments that are continually ongoing. Thes Congress was faced with this very difficult problem of deciding what should be the basis-what is the level of ongoing investment that you will not grant credit for-over and above which you would then apply the credit. The inability to determine what that basis was led to a program of an across-the-board 7-percent investment credit for everything, even on investments that are already contemplated and already agreed upon by the companies.
So, it seemed to me, that it is the most fundamental problem involved, and if it is the wisdom of the Congress to go the across-theboard route and give the tax credit regardless of the kind of training program and the individuals involved, then that is a decision that one has to recognize as being valid. But my own personal feeling is that there is certain kinds of training that need to be done, there are certain kinds of individuals that ought to be receive the training that are not getting it, and one ought to try to pinpoint and direct the training at those individuals and at those skills and at those occupations in certain specific geographical areas around the country.
Now, if you do that, if you then have the choice of doing it through an investment credit bill which would require somebody in Government to decide what the standards will be to pinpoint the investment credit
, then it is my own personal opinion and conclusion that, until you can work that problem out, I think it is an almost insurmountable administrative problem. Let me add, however, that I have always followed the policy that if the program is good, nothing is administratively impossible.
You could find ways of doing it, but it would be exceedingly difficult administratively. Therefore, it seems to me the present procedure of on-the-job training and an extension of the concepts that we have been trying to develop within the last few months where we have moved the program from the 1-in-35 ratio to the 1-in-4 ratio in the past fiscal year, and where we intend to move it to a 60–40 ratio in the coming year, lends itself to pinpointing the on-the-job training program to the geographical area you want it in, to the skill level you want it, and to the type of individual, whether he is hardcore unemployed, partially employed, or underemployed. These are decisions that have to be made.
I think with that, Senator Kennedy, I would conclude my own presentation.
Senator Murphy. Senator Kennedy, is not basically the purpose
Mr. RUTTENBERG. You see, Senator Murphy, that is really my point.
problem, because that is clearly one beside the other, but there are many gray areas
Senator MURPHY. I am amazed that anybody would even begin to concede that they could take an executive in the company and train the executive and expect a tax credit for that. I do not think this was ever part of the conception of the original plan.
Mr. RUTTENBERG. There have been various proposals talked about that have gone that far. Now, let us assume you do not go that far. I think they have been presented in various papers, academic people have talked about it, various Member of the Congress have talked about it.
Granted, the only point I was trying to make with the example is that the moment you exclude that group and then come down the line and exclude foreman training, would you exclude or include that?
That is more of a gray area of deciding what it is. My only point is that once you say it is not going to be across the board and it is going to apply specifically to certain kinds of training, then you are injecting into that an administrative decision that has to be made by somebody, whether it is the Internal Revenue Act in the field, whether it is the Treasury Department, or whether it becomes an approvable training program as was proposed in one of the bills introduced—a program approved by the Secretary of Labor—and if you get to that kind of decisionmaking, then I am saying that I think, in my judgment, you can accomplish just as much by having that decisionmaking process go through the on-the-job training route of the Manpower Development and Training Act.
Senator MURPHY. In the bill that Senator Javits proposed it enumerates for national defense to replace skills of individuals receiving training which have become obsolete because of advances in trade, business, industry. In other words, it gets back to the basis of actually being nonproductive during the time that the training is taking place.
Therefore, the reason for the tax credit-if it is productive, then there should be no tax credit. It is treated as an ordinary circumstance. What is your reaction to this?
Mr. RUTTENBERG. Let us just take the defense, the first point, the training for defense skills.
There as many high-level scientists and engineers who in certain parts—in your own State of California—who were being phased out of the piston-driven aircraft industry into missiles and space vehicles. The kinds of skill required of an engineer and a scientist in that background is considerably different than that which was needed in the piston-engine aircraft.
Consequently, certain of those engineers became unemploved. Now, if an employer rehires a highly skilled engineer who, let us say, has been earning $15,000 to $20,000 a year, who has a Ph. D. degree, even though that individual needs to be reoriented to a new type engineering function, is that the kind of activity which ought to be given an investment credit as against the need to help the individual who is displaced by a machine way down at the unskilled level who
has been earning $5,000 or $6,000 a year, who probably only has an eighth grade education? That is my only point.
If it is decided you want to go across the board and take everybody in, that is fine, but those are decisions that have to be made. It does not resolve the problem of who is going to make the determination as to what defense skills, at what level, with what employers, and in what geographical areas.
Senator MURPHY. Would the Labor Department object to making the determination? That is Senator Javits' suggestion.
Mr. RUTTENBERG. As I said earlier, Senator Murphy, the administration has not taken a position on any of these bills. What I am really saying about the investment credit bills are only my own personal views.
Senator KENNEDY of Massachusetts. Could we identify, for example, school dropouts or characterize and define this somewhat further so you do not run into the problem that you have mentioned ? Probably one of the most obvious areas where national policy has been enunciated has been in helping to assist school dropouts.
Would it be possible to tailor such legislation to be directed just toward this particular group and provide such training?
Mr. RUTTENBERG. I think, Senator Kennedy, it is quite possible you could draft specific language that would restrict the training to the individual who has dropped out of school, who needs additional training, who needs encouragement to get back into some skilled training occupation which would be better than the employers gives him—than he would get if he want back to
Senator KENNEDY of Massachusetts. Obviously you do not want to encourage young people to drop out of school, but if you will fill the other requirements which are provided for in legislation now, a certain period of time, and the other requirements, could we not draft legislation which at least would attack or concern itself with an area of public policy in which the administration has demonstrated concern?
Mr. RUTTENBERG. Frankly, I believe that private industry and private employers should do far more training than they are now doing and if an investment credit, a tax credit, is the mechanism through which to do it, I really feel that that is just as advantageous as a regular Manpower Development and Training Act on-the-job training contract, currently. It might even be more advantageous if you could really define the areas that you want to apply it to.
My real concern is that I do not think we ought to perpetuate and continue with just the on-the-job type training we are going under Manpower Development and Training Act now. I do not think that is enough. I do not think we could nearly, with the money appropriated by Congress, ever hope to do the overall job that needs to be done. Therefore, I think if we could get at some kind of incentive program that could be pinpointed where we were clear on who was to he trained, and the kinds of individuals and geographical areas and the skills involved, I think that would be very advantageous.
I look to Manpower Development and Training Act and on-the-job training as really only a supplement to what really needs to be done in private industry.
I would add one word, if I might, Senator. I think the 7-percent credit is not nearly enough of a carrot to get private industry to do the job in training.
Senator MURPHY. If I may say, private industry is doing a lot of it now without the 7 percent.
Mr. RUTTENBERG. Senator Murphy, if you take a look at my prepared statement, we sort of put this in perspective. I was dealing with This before you arrived, but we did a survey in 1962 in the Department of Labor that covered 37 million workers and of 700,000 firms, and of those 37 million workers only 2.7 million of them were getting any training at all, and of the 2.7 million more than half of them were involved in safety programs.
As you can see in point No. 5 fewer than 400,000 were being trained in the specific highly skilled trades that were necessary. So it is being done, yes, but not nearly as extensively as it needs to be done, and that is the real problem. And that is why I say that with an investment credit concept, a tax credit concept, you are going to reward the individuals who are already doing it and not giving enough incentive to those that are not doing it, whom you really want to encourage to get involved.
That is the heart of the problem. Frankly, I do not have any
Senator MURPHY. You might say, you are making it possible for them to afford to do it.
Mr. RUTTENBERG. Yes, if the credit was sufficient.
Senator MURPHY. Everybody has to be productive, otherwise you cannot afford to stay in business.
Mr. RUTTENBERG. Under the on-the-job training contracts under Manpower Development and Training Act we do just that. We do subsidize their training costs in order to train on-the-job, but we make a very clear distinction. We say we will not engage in an onthe-job training contract unless the employer continues to do the same amount of training he has always done, we will not support an on-thejob training program which substitutes for any on-going training program that the employer is engaged in.
Senator KENNEDY of Massachusetts. I want to thank you, Mr. Ruttenberg, for your appearance here this morning and for your helpful testimony. I know you have appeared many times before this subcommittee in the past and you have always brought a background and experience that is extremely helpful to us.
Mr. RUTTENBERG. Thank you very much, Senator.
Senator KENNEDY of Massachusetts. Our next witnesses are to appear in the form of a panel. It will be made up of Prof. Gerald Somers of the University of Wisconsin, Madison, Wis.; Prof. David P. Taylor of the Massachusetts Institute of Technology, Cambridge, Mass.; and Prof. Walter Franke of the University of Illinois, Urbana, Ill.
If they would be kind enough to take the seats at the table, we will proceed.
Gentlemen, we have your statements which are extremely helpful and comprehensive and I will include them in their entirety in the record, and if you would care to summarize your statements, I think it would be extremely helpful and we might start in with the dialog and questions.
(The prepared statements of Professors Taylor and Franke follow :)
PREPARED STATEMENT OF DAVID P. TAYLOR, ASSISTANT PROFESSOR OF INDUSTRIAL
RELATIONS, SLOAN SCHOOL OF MANAGEMENT, MASSACHUSETTS INSTITUTE OF TECHNOLOGY
Mr. Chairman and members of the subcommittee, I welcome this opportunity to appear before your subcommittee and participate in these hearings on the important topic of on-the-job training.
INTRODUCTION In any discussion of the development of job skills in the American labor force, it is probably difficult to overestimate the impact of on-the-job training; that is, the training people pick up on their own or receive informally by working with experienced employees. This is the case when considering the training not only of assemblers, welders, and maintenance workers but also of electronic technicians, doctors, and particularly teachers. One indication of this importance is the apparent lack of formal training programs in American industry. A Department of Labor survey of over 8,000 firms in 1962 found that only 1 out of 5 establishments was conducting any formal training. Moreover, the large majority of those establishments with formal programs were providing only orientation and safety instruction to their employees. Of course, work habits and training are acquired in vocational schools, both public and private, and with the implementation of recently enacted legislation these schools will be making more significant contributions. But the fact remains that on-the-job training is undoubtedly the major source of job skills in American industry.
THE TRAINING OF TECHNICIANS
Because of the concentration of electronics and other research oriented firms in the Boston area, an important occupation in our local labor market is that of technician or technical assistant. These people work along with scientists and engineers and relieve them of the more routine duties in the laboratory or in the design department. As background, let me discuss for a moment a study conducted by Lynn A. Emerson for the Office of Education, which concluded that this occupation is going to be expanding substantially in the years ahead. Our current ratio of technicians to scientists and engineers is estimated at about 0.7 to 1. Meanwhile, frequent statements are made expressing a desirable ratio of 3 to 1. In the Soviet Union this ratio is around 2.5 to 1, and in some of their light industries it is as high as 8 to 1. Thus, as the scientific and engineering fields increase in importance in this country, it is clear that the technician occupation will be expanding at an even greater rate.
Technicians, of course, develop job skills in a variety of ways; in military service, in vocational schools, in junior colleges, on-the-job, etc. According to the Emerson study, which reviews the sources of training of some 6,000 technicians, on-the-job training and upgrading provided the chief source of training in the following technical fields: chemical laboratory technician, draftsmen, radio-TV technician, industrial engineering aid, metallurgical technician, and physical laboratory technician.
The results of that investigation were supported by a recent survey of Boston area employers. Eleven firms with research facilities were included in the study and of these, only one had a formal training program for its technicians. (We defined a technician as a nondegree, nonexempt worker performing scientific and engineering functions, either idividually or as a assistant to a more highly trained, professional employee.) That is, 10 of the 11 firms surveyed performed all the in-plant training of these workers on-the-job.
Two of these companies, however, had added some formal aspects to what is basically an informal program. One requires the trainee to spend a given amount of time working with each of several professionals before assuming his own specific job. The other involves a similar rotation program.
As we would expect, the firm with the formal program was among the largest in the sample. The small firms had not even considered alternatives to on-thejob training while some of the intermediate sized companies had begun tentatively to investigate formal training programs.