cooperative arrangements with 40 States and the District of Columbia. In Maine the three offices communicate directly with the Federal service without the cooperation of the State. In Virginia one municipal office is cooperating with the Federal service. In Nevada, Utah, and Wyoming only one Federal office is maintained in each, and no Federal or cooperating offices exist in Idaho, New Mexico, Tennessee, and Vermont. Cooperative arrangements are in progress of completion in Delaware and New Hampshire. Altogether the Federal service has 227 local employment exchanges.

In most States where active public systems are in operation there is little difficulty in securing cooperation in the regular reporting of work done. In some States, where means are lacking, the Federal service makes small monthly allotments to assist in paying for necessary statistical work and the compilation of reports. In other States certain private organizations cooperate with the Federal authorities in maintaining the exchanges. Among such organizations are the community service, groups of business interests, chambers of commerce, the Young Men's Christian Association, the Red Cross, and the American Legion. The State representatives and directors are merely channels of communication through which the State and municipal offices report. The local offices report their surplus of registrations or help-wanted calls to the State director or Federal representative and these are matched against each other, so that through the State director or representative there is presumably maintained a system of clearance between the local offices. The problem now before the service is to establish a more effective system of interstate clearance.

In its circular of March 8, 1920, the Employment Service took the first step toward a system of zone clearance for matching the surplus of labor in one State against the deficit in another. The country has been divided into 13 labor clearance zones corresponding generally with the Federal Reserve bank districts. As soon as funds are made

available for the purpose it is proposed to establish in each of the labor clearance zones a zone clearance office under a paid zone clearance officer.

QUESTIONS

1. What advantages has the public employment agency over private agencies?

2. What right has a state to set up public employment agencies?

3. Has a state the power to refuse to permit its employment agency to be used by employers who have a strike in process in their establishment? 4. To what limitations are the state agencies subject?

5. What advantages and what disadvantages would a nation-wide employment agency system have?

6. Outline a plan for public employment agencies to adequately cover the country.

7. Has your state a system of public employment offices? If such a system exists, is it adequately and efficiently maintained?

B. PREVENTION OF PERIODIC CRISES OF UNEMPLOYMENT

I. SYSTEMATIC DISTRIBUTION OF PUBLIC WORK

A

REPORT OF COMMITTEE ON PUBLIC WORKS

When public works are done in greatest volume during periods of active industry the same men and material are being competed for by both public and private employers. The inevitable result is to raise the height of the crest of the wave of cyclical business inflation and to cause a greater crash when the heightened wave breaks, as it always does.

In a growing country like the United States the aggregate volume of public works of cities, counties, States, and of the Federal Government is so great that if a larger proportion were executed in years of depression than in years of active industry a powerful stabilizing influence would be exerted. In the past, however, public works officials have felt poor when business was depressed around them and conversely have often executed their chief undertakings when the contagious enthusiasm of captains of industry and of the general public has hailed a period of prosperity at hand. This tendency, although a natural one for an individual, does not accord with true economy for the city or with a sound national policy.

A large percentage of all public work is done out of the proceeds of bond issues to be paid off out of annual taxes received during subsequent decades. The credit of a well-managed city or State, as evidenced by the interest rate on long-time bonds, is less affected by a business depression than the credit of private corporations. Indeed, the supply of loanable credit for investment in municipal bonds is often greatest when industrial and railroad corporations are unable to obtain credit at maximum rates. This tendency, although accentuated by the present income-tax exemption on municipal bonds, has been 5 Report of the President's Conference on Unemployment, 1921, pp. 96-100.

true before the income tax was created. Not only can municipalities borrow more favorably than private borrowers in bad times, but by timing their public work during periods of inactive business and relative unemployment they can also secure a more plentiful and regular supply of materials and labor as an important economy in construction. When, in addition to these already cogent reasons, it is remembered that municipalities and their constituent citizens do in fact assume and bear the cost of destitution within their gates any measure which tends to steady employment of their citizens in bad times and good will be sound policy from whatever point of view considered.

The leadership of the Federal Government in expanding its public works during periods of depression and contracting execution in periods of active industry requires no great change from existing procedure. Already the executing agency enjoys great latitude as to the period in which the appropriations may be spent. The remaining step is to choose the period of intensive execution to synchronize with major periods of industrial depression.

Certain works of the Federal Government, such as reclamation, flood prevention, river and harbor work, roads and public buildings, are peculiarly suited for consideration as large undertakings covering a long period and capable of elasticity of execution to synchronize with cycles of business depression.

The machinery legislated by the States of Pennsylvania and California to plan in advance for the expansion of public works during periods of depression are examples of present tendencies. Available estimates show that if 20 per cent of ordinary necessary public works were deferred each year and the accumulation executed in a year of depression occurring once in 10 years the lifting power of public works would be at least one-third the dead weight of such a depression as the present.

....

RECOMMENDATIONS

1. That the Chairman of the Conference be requested to consider the advisability of appointing a committee to study methods and make recommendations for utilizing a percentage of the ordinary necessary public works of the Federal, State, and city Governments as a reserve against future periods of unemployment and industrial depression.

2. That the studies of this committee should include the relation of the cities and States to any Federal policy which may be suggested

and be published as part of the proceedings of the Unemployment Conference.

EXCERPTS FROM REPORT OF THE ECONOMIC ADVISORY COMMITTEE ON LONG-RANGE PLANNING OF PUBLIC WORKS, SEPTEMBER 26, 1921,

AS SUBMITTED TO THE COMMITTEE ON PUBLIC WORKS

PURPOSES

Public works-municipal, State, and Federal-should be contracted in years of industrial activity and expanded in years of depression to accomplish the following purposes:

1. To revive private industry and to check industrial depression and unemployment.

2. To prevent the demand of public works for materials and labor from conflicting with the needs of private industry.

3. In general, to stabilize industry and employment.

METHODS FOR EXPANDING AND CONTRACTING

Defer at least 10 per cent of the average annual public-works expenditures of Federal, State, and municipal agencies. Execute the deferred accumulations in the year of depression which occurs once in about 10 years.

This does not mean, however, that any specific piece of public works will be deferred more than two years-in most cases only one year. In order that plans may be quickly available when needed, do not defer appropriation for planning and engineering of any work authorized.

Consider the effect of a Federal bond issue as a loan in aid of municipal public works in years of depression, such loans to be made only (a) upon proof of national unemployment and industrial depression, as shown by industrial and unemployment statistics; (b) upon proof of the soundness and utility of specific public works proposed; (c) loan to be made to municipalities at a rate of interest not less than that paid by the Federal Government (note British policy); (d) advance preparation of engineering plans, which must be thought out and periodically revised in order to be ready for execution when the period of depression arrives (see practice of Indian Government), otherwise great waste will result; and (e) work to be executed upon a "commercial" basis and not a "relief" basis.

MACHINERY RECOMMENDED

FEDERAL

1. Fortify the United States Employment Service to enable it to obtain regular unemployment index figures, so that knowledge may be had when public work should be stimulated or retarded, based upon reliable and complete employment statistics.

2. Formulation by the Director of the Budget of a change in method in making appropriations by Congress for roads, rivers and harbors, public buildings, and other public works, so that the percentage of the total authorized appropriation to be expended in any one year may be determined by Executive order, based upon the condition of private industry and employment; in years of normal industry a minimum program, in a year of depression a maximum program of public works resulting from previous accumulations being thus effected.

3. Application of the same policy to the public works of States, municipalities, counties, etc., the aggregate of which is about six times the volume of Federal public works. This can be best secured through suggestions from a central Federal agency.

4. Incorporate this central Federal agency as a part of whatever department may in future be charged with the duty of executing public works (Department of Public Works or Interior Department). Pending such legislation the central Federal agency should be immediately formed and temporarily located wherever the President may suggest.

5. Functions of central Federal agency: (a) To advise the President when Federal public works should be expanded or contracted, based upon its studies from statistics collected by other Governmental agencies (Bureau of Labor Statistics, Bureau of Mines, United States Employment Service, Department of Commerce, etc.); (b) to advise the President when the expansion or contraction of local public works would serve a national policy of reviving private industry and checking unemployment or of preventing interference with private industry during periods of normal business; and (c) to suggest methods of synchronizing local with Federal public works for the same purposes.

STATE AND CITY MACHINERY

State and city agencies are recommended in order to apply the same principles of expansion and contraction to their public works.