women have always been in the labor force to a much greater extent than white women. A real improvement in the economic status of Negro men and in the stability of Negro families would probably lead to a reduction in labor force participation by Negro women. But for teenagers, participation rates for Negroes are not as high as for whites, and for women 20 to 24 they are about the same. These relatively low rates are undoubtedly due less to voluntary choice than to the same lack of job opportunities that produces phenomenally high unemployment rates for young Negro women.

Duration of unemployment

In a tight labor market, such unemployment as does exist is likely to be of short duration. Short-term unemployment is less damaging to the economic welfare of the unemployed. More of them will have earned and fewer will have exhausted private and public unemployment benefits. In 1953 when the overall unemployment rate was 210 percent, only 4 percent of the unemployed were out of work for longer than 26 weeks and only 11 percent for longer than 15 weeks. In contrast, the unemployment rate in 1961 was 60 percent; and of the unemployed in that year, 7 percent were out of work for longer than 26 weeks and 32 percent for longer than 15 weeks. Between the first quarter of 1964 and the first quarter of 1965, overall unemployment fell 11 percent, while unemployment extending beyond half a year was lowered by 22 percent.

As Rashi Fein points out elsewhere in this volume, one more dimension of society's inequity to the Negro is that an unemployed Negro is more likely to stay unemployed than an unemployed white. But his figures also show that Negroes share in the reduction of long-term unemployment accompanying economic expansion.

Migration from agriculture

A tight labor market draws the surplus rural population to higher paying nonagricultural jobs. Southern Negroes are a large part of this surplus rural population. Migration is the only hope for improving their lot, or their children's. In spite of the vast migration of past decades, there are still some 775,000 Negroes, 11 percent of the Negro labor force of the country, who depend on the land for their living and that of their families." Almost a half million live in the South, and almost all of them are poor.

Migration from agriculture and from the South is the Negroes' historic path toward economic improvement and equality. It is a smooth path for Negroes and for the urban communities to which they move only if there is a strong demand for labor in towns and cities North and South. In the 1940's the number of Negro farmers and farm laborers in the Nation fell by 450,000, and one and a half million Negroes (net) left the South. This was the great decade of Negro economic advance. In the 1950's the same occupational and geographical migration continued undiminished. The movement to higher income occupations and locations should have raised the relative economic status of Negroes. But in the 1950's Negroes were moving into increasingly weak job markets. Too often disguised unemployment in the countryside was simply transformed into enumerated unemployment, and rural poverty into urban poverty.13 Quality of jobs

In a slack labor market, employers can pick and choose, both in recruiting and in promoting. They exaggerate the skill, education, and experience requirements of their jobs. They use diplomas, or color, or personal histories as convenient. screening devices. In a tight market, they are forced to be realistic, to tailor job specifications to the available supply, and to give on-the-job training. They recruit and train applicants whom they would otherwise screen out, and they upgrade employees whom they would in slack times consign to low-wage, lowskill, and part-time jobs.

Wartime and other experience shows that job requirements are adjustable and that men and women are trainable. It is only in slack times that people worry about a mismatch between supposedly rigid occupational requirements and supposedly unchangeable qualifications of the labor force. As already noted, the relative status of Negroes improves in a tight labor market, not only in respect to unemployment but in respect to wages and occupations.

Hiestand, op. cit., table I, pp. 7-9.

13 Batchelder, op. cit., shows that the incomes of Negro men declined relative to those of white men in every region of the country. For the country as a whole, nevertheless, the median income of Negro men stayed close to half that of white men. The reason is that migration from the South, where the Negro-white income ratio is particularly low, just offset the declines in the regional ratios.

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Cyclical fluctuation

Sustaining a high demand for labor is important. The in-and-out status of the Negro in the business cycle damages his longrun position, because periodic unemployment robs him of experience and seniority.

Restrictive practices

A slack labor market probably accentuates the discriminatory and protectionist proclivities of certain crafts and unions. When jobs are scarce, opening the door to Negroes is a real threat. Of course prosperity will not automatically dissolve the barriers, but it will make it more difficult to oppose efforts to do so. I conclude that the single most important thing the Nation could do to improve the economic position of the Negro is to operate the economy steadily at a low rate of unemployment. We cannot expect to restore the labor market conditions of the Second World War, and we do not need to. In the years 1951-53, unemployment was roughly 3 percent, teenage unemployment around 7 percent, Negro unemployment about 41⁄2 percent, long-term unemployment negligible. In the years 1955-57, general unemployment was roughly 4 percent, and the other measures correspondingly higher. Four percent is the official target of the administration. It has not been achieved since 1957. Reaching and maintaining 4 percent would be a tremendous improvement over the performance of the last 8 years. But we should not stop there; the society and the Negro can benefit immensely from tightening the labor market further, to 3% or 3 percent unemployment. The administration itself has never defined 4 percent as anything other than an "interim" target.

2. WHY DON'T WE HAVE A TIGHT LABOR MARKET?

We know how to operate the economy so as to have a tight labor market. By fiscal and monetary measures the Federal Government can control aggregate spending in the economy. The Government could choose to control it so that unemployment averaged 3% or 3 percent instead of staying above 4%1⁄2 percent except at occasional business cycle peaks. Moreover, recent experience here and abroad shows that we can probably narrow the amplitude of fluctuations around whatever average we take as a target.

Some observers have cynically concluded that a society like ours can achieve full employment only in wartime. But aside from conscription into the armed services, Government action creates jobs in wartime by exactly the same mechanism as in peacetime-the Government spends more money and stimulates private firms and citizens to spend more too. It is the amount of spending, not its purpose, that does the trick. Public or private spending to go to the moon, build schools, or conquer poverty can be just as effective in reducing unemployment as spending to build airplanes and submarines, if there is enough of it. There may be more political constraints and ideological inhibitions in peacetime, but the same techniques of economic policy are available if we want badly enough to use them.

The two main reasons we don't take this relatively simple way out are two obsessive fears: of inflation and of the balance of payments.

Running the economy with a tight labor market would mean a higher rate of upward creep in the price level. The disadvantages of this are, in my view, exaggerated, and are scarcely commensurable with the real economic and social gains of higher output and employment. Moreover, there are ways of protecting "widows and orphans" against erosion in the purchasing power of their savings. But fear of inflation is strong both in the U.S. financial establishment and in the public at large. The vast comfortable white middle class who are never touched by unemployment prefer to safeguard the purchasing power of their life insurance and pension rights than to expand opportunities for the disadvantaged and unemployed.

The fear of inflation would operate anyway, but it is accentuated by U.S. difficulties with its international balance of payments. These difficulties have seriously constrainted and hampered U.S. fiscal and monetary policy in recent years. Any rise in prices might worsen the deficit. An aggressively expansionary monetary policy, lowering interest rates, might push money out of the country.

In the fiscal analysis what we fear is that we might not be able to defend the parity of the dollar with gold; that is, to sell gold at $35 an ounce to any government that wants to buy. So great is the gold mystique that this objective has come to occupy a niche in the hierarchy of U.S. goals second only to the military

defense of the country, and not always to that. It is not fanciful to link the plight of Negro teenagers in Harlem to the monetary whims of General de Gaulle. But it is only our own attachment to "the dollar" as an abstraction which makes us cringe before the European appetite for gold.

This topic is too charged with technical complexities, real and imagined, and with confused emotions to discuss adequately here. I will confine myself to three points.

First, the United States is the last country in the world which needs to hold back its own economy to balance its international accounts. To let the tail wag the dog is not in the interests of the rest of the world, so much of which depends on us for trade and capital, any more than in our own.

Second, forces are at work to restore the U.S. international accounts to balance the increased competitiveness of our exports, and the income from the large investments our firms and citizens have made overseas since the war. Meanwhile we can finance deficits by gold reserve and lines of credit at the International Monetary Fund and at foreign central banks. Ultimately we have one foolproof line of defense letting the dollar depreciate relative to foreign currencies. The world would not end. The sun would rise the next day. American products would be more competitive in world markets. Neither God nor the Constitution fixed the gold value of the dollar. The United States would not be the first country to let its currency depreciate. Nor would it be the first time for the United States-not until we stopped "saving" the dollar and the gold standard in 1933 did our recovery from the great depression begin.

Third, those who oppose taking such risks argue that the dollar today occupies a unique position as international money, that the world as a whole has an interest, which we cannot ignore in the stability of the gold value of the dollar. If so, we can reasonably ask the rest of the world, especially our European friends, to share the burdens which guaranteeing this stability imposes upon us.

This has been an excursion into general economic policy. But the connection between gold and the plight of the Negro is no less real for being subtle. We are paying much too high a social price for avoiding creeping inflation and for protecting our gold stock and "the dollar." But it will not be easy to alter these national priorities. The interests of the unemployed, the poor, and the Negroes are underrepresented in the comfortable consensus which supports and confines current policy.

Another approach, which can be pursued simultaneously, is to diminish the conflicts among these competing objectives, in particular to reduce the degree of inflation associated with low levels of unemployment. This can be done in two ways. One way is to improve the mobility of labor and other resources to occupations, locations, and industries where bottlenecks would otherwise lead to wage and price increases. This is where many specific programs, manpower training and retraining, and policies to improve the technical functioning of labor markets, come into their own.

A second task is to break down the barriers to competition which now restrict the entry of labor and enterprise into certain occupations and industries. These lead to wage- and price-increasing bottlenecks even when resources are not really short. Many barriers are created by public policy itself, in response to the vested interests concerned. Many reflect concentration of economic power in unions and in industry. These barriers represent another way in which the advantaged and the employed purchase their standards of living and their security at the expense of unprivileged minorities.

In the best of circumstances, structural reforms of these kinds will be slow and gradual. They will encounter determined economic and political resistance from special interests which are powerful in Congress and State legislatures. Moreover, Congressmen and legislators represent places rather than people and are likely to oppose, rather than facilitate, the increased geographical mobility which is required. It is no accident that our manpower programs do not include relocation allowances.

3. INCREASING THE EARNING CAPACITY OF NEGROES

Given the proper overall economic climate, in particular a steadily tight labor market, the Negro's economic condition can be expected to improve, indeed to improve dramatically. But not fast enough. Not as fast as his aspirations, or as the aspriations he has taught the rest of us to have for him. What else can be done? This question is being answered in detail by experts elsewhere in this volume. I will confine myself to a few scattered comments and suggestions that occur to a general economist.

Even in a tight labor market, the Negro's relative status will suffer both from current discrimination and from his lower earning capacity, due to inferior acquired skills. In a real sense both factors reflect discrimination, since the Negro's handicaps in earning capacity are the residue of decades of discrimination in education and employment. Nevertheless for both analysis

and policy it is useful to distinguish the two.

Discrimination means that the Negro is denied access to certain markets where he might sell his labor, and to certain markets where he might purchase goods and services. Elementary application of "supply and demand" makes it clear that these restrictions are bound to result in his selling his labor for less and buying his livelihood for more than if these barriers did not exist. If Negro women can only be clerks in certain stores, those storekeepers will not need to pay them so much. If Negroes can only live in certain houses, the prices and rents they have to pay will be high for the quality of accommodation provided. Successful elimination of discrimination is not only important in itself but will have substantial economic benefits. Since residential segregation is the key to so much else and so difficult to eliminate just by legal fiat, the power of the purse should be unstintingly used. I see no reason why the expenditure of funds for this purpose should be confined to new construction. Why not establish private or semipublic revolving funds to purchase, for resale or rental on a desegregated basis, strategically located existing structures as they become available?

The effects of past discrimination will take much longer to eradicate. The sins against the fathers are visited on the children. They are deprived of the intellectual and social capital which in our society is supposed to be transmitted in the family and the home. We have only begun to realize how difficult it is to make up for this deprivation by formal schooling, even when we try. And we have only begun to try, after accepting all too long the notion that schools should acquiesce in, even reinforce, inequalities in home backgrounds rather than overcome them.

Upgrading the earning capacity of Negroes will be difficult, but the economic effects are easy to analyze. Economists have long held that the way to reduce disparities in earned incomes is to eliminate disparities in earning capacities. If college-trained people earn more money than those who left school after 8 years, the remedy is to send a larger proportion of young people through college. If machine operators earn more than ditchdiggers, the remedy is to give more people the capacity and opportunity to be machine operators. These changes in relative supplies reduce the disparity both by competing down the pay in the favored line of work and by raising the pay in the less remunerative line. When there are only a few people left in the population whose capacities are confined to garbage collecting, it will be a high-paid calling. The same is true of domestic service and all kinds of menial work.

This classical economic strategy will be hampered if discrimination, union barriers, and so on stand in the way. It will not help to increase the supply of Negro plumbers if the local unions and contractors won't let them in. But experience also shows that barriers give way more easily when the pressures of unsatisfied demand and supply upon them pile up.

We

It should therefore be the task of educational and manpower policy to engineer over the next two decades a massive change in the relative supplies of people of different educational and professional attainments and degrees of skill and training. It must be a more rapid change than has occurred in the past two decades, because that has not been fast enough to alter income differentials. should try particularly to increase supplies in those fields where salaries and wages are already high and rising. In this process we should be very skeptical of self-serving arguments and calculations-that an increase in supply in this or that profession would be bound to reduce quality, or that there are some mechanical relations of "need" to population or to gross national product that cannot be exceeded.

Such a policy would be appropriate to the "war on poverty" even if there were no racial problem. Indeed, our objective is to raise the earning capacities of lowincome whites as well as of Negroes. But Negroes have the most to gain, and even those who because of age or irreversible environmental handicaps must inevitably be left behind will benefit by reduction in the numbers of whites and other Negroes who are competing with them.

4. ASSURING LIVING STANDARDS IN THE ABSENCE OF EARNING CAPACITY

The reduction of inequality in earning capacity is the fundamental solution, and in a sense anything else is stopgap. Some stopgaps are useless and even counterproductive. People who lack the capacity to earn a decent living need to be helped, but they will not be helped by minimum wage laws, trade union wage pressures, or other devices which seek to compel employers to pay them more than their work is worth. The more likely outcome of such regulations is that the intended beneficiaries are not employed at all.

A far better approach is to supplement earnings from the public fisc. But assistance can and should be given in a way that does not force the recipients out of the labor force or give them incentive to withdraw. Our present system of welfare payments does just that, causing needless waste and demoralization. This application of the means test is bad economics as well as bad sociology. It is almost as if our present programs of public assistance had been consciously contrived to perpetuate the conditions they are supposed to alleviate.

These programs apply a strict means test. The amount of assistance is an estimate of minimal needs, less the resources of the family from earnings. The purpose of the means test seems innocuous enough. It is to avoid wasting taxpayers' money for people who do not really need help. But another way to describe the means test is to note that it taxes earnings at a rate of 100 percent. A person on public assistance cannot add to his family's standard of living by working. Of course, the means test provides a certain incentive to work in order to get off public assistance altogether. But in many cases, especially where there is only one adult to provide for and take care of several children, the adult simply does not have enough time and earning opportunities to get by without financial help. He, or more likely she, is essentially forced to be both idle and on a dole. The means test also involves limitations on property holdings which deprive anyone who is or expects to be on public assistance of incentive to save. In a society which prizes incentives for work and thrift, these are surprising regulations. They deprive the country of useful productive services, but that economic loss is minor in the present context. They deprive individual sand families both of work experience which could teach them skills, habits, and self-discipline of future value and of the self-respect and satisfaction which comes from improving their own lot by their own efforts.

I'ublic assistance encourages the disintegration of the family, the key to so many of the economic and social problems of the American Negro. The main assistance program, aid for dependent children, is not available if there is an able-bodied workingman in the house. In most States it is not available if there is an able-bodied man in the house, even if he is not working. In all too many cases it is necessary for the father to leave his children so that they can eat. It is bad enough to provide incentives for idleness but even worse to legislate incentives for desertion."

The bureaucratic surveillance and guidance to which recipients of public assistance are subject undermine both their self-respect and their capacity to manage their own affairs. In the administration of assistance there is much concern to detect "cheating" against the means tests, and to insure approved prudent use of the public's money. Caseloads are frequently too great and administrative regulations too confining to permit the talents of social workers to treat the roots rather than the symptoms of the social maladies of their clients. The time of the clients is considered a free good, and much of it must be spent in seeking or awaiting the attention of the officials on whom their livelihood depends.

The defects of present categorical assistance programs could be, in my opinion, greatly reduced by adopting a system of basic income allowances, integrated with and administered in conjunction with the Federal income tax. In a sense the proposal is to make the income tax symmetrical. At present the Federal Government takes a share of family income in excess of a certain amount (for example, a married couple with three children pays no tax unless their income

14 The official Advisory Council on Public Assistance recommended in 1960 that children be aided even if there are two parents or relatives in loco parentis in their household, but Congress has ignored this proposal. "Public Assistance: A Report of the Findings and Recommendations of the Advisory Council on Public Assistance," Department of Health, Education, and Welfare, January 1960. The Advisory Council also wrestled somewhat inconclusively with the problem of the means test and suggested that States be allowed to experiment with dropping or modifying it for 5 years. This suggestion too has been ignored.