The Department of Labor (DoL) has become one of the most
pervasive regulatory agencies in the federal government. Created in
1913, DoL is currently responsible for the administration and
enforcement of over 180 federal statutes. This proliferating body
of legislation and regulation covers a wide range of workplace
activities for nearly 10 million employers and well over 100
million workers, presenting a barrier to the formation of firms and
their ability to create jobs.1
The 104th Congress has a rare opportunity to initiate
fundamental reforms in the administration and enforcement of
America's labor laws. If implemented, such reforms could save
America's taxpayers $10.5 billion from 1996 to the year 2000 alone.
The primary objectives of this effort should be to:
- Reduce excessive burdens on businesses and job creation while
maintaining workplace health and safety;
- Improve labor market flexibility while maintaining basic
The best way to achieve these objectives is by closing this
Cabinet-level department and moving certain of its key national
functions into sub-Cabinet agencies or other departments. Other
functions that are not national in scope should be devolved to the
states, or in some cases to the private sector. Obsolete,
ineffective, and wasteful rules and programs should be repealed or
The Department of Labor's programs are organized into seven main
1) Unemployment Insurance (UI) and Employment Services (ES),
2) Job Training Programs,
3) Workplace Health and Safety,
4) Private Pension Protection,
5) Employment Standards,
6) Economic Statistics, and
7) Labor Union Oversight.
UI and ES form the largest functional area, accounting for
around 75 percent of DoL's budget (set at $25.5 billion for FY
1995). The next largest budget function, Job Training Programs,
accounts for around 20 percent.
Examining these seven areas reveals that the administration and
enforcement of American labor laws can and should be reformed, both
to achieve the department's underlying objectives of workforce
protection, including workplace health and safety, and to reduce
the job-killing cost and complexity of today's labor regulations.
To do this, Congress should take the following steps:
- Devolve financing and funding for the Unemployment Insurance
and Employment Services to the states. This would enable states
to decrease the duration of unemployment, reduce payroll taxes, and
increase jobs. Devolution should include the Veterans Employment
Service, labor market information projects, the one-stop career
system concept, and the administration of unemployment insurance.
Congress also should repeal the Federal Extended Benefit program
and provide incentives for states to overhaul and integrate their
employment services with a view to reducing the duration of
unemployment payments by moving the unemployed into new jobs more
quickly. States also should have the option to begin exploring
privatized unemployment insurance. Any remaining federal
administrative functions should be transferred to the Treasury
- Consolidate all job training programs for the economically
disadvantaged into a state block grant. Congress should combine
these programs, including the Job Corps, Senior Community Service
Employment Program, Migrant and Seasonal Farm Workers Training,
Indian and Native American Employment and Training, and Youth Fair
Chance, into a block grant attached to the new welfare block grant
recently passed by Congress. This would eliminate a maze of
categorical programs and provide states the flexibility they need
to develop programs that effectively reduce welfare dependency.
States should be required only to focus these resources on
means-tested job placement assistance and conduct control group
evaluations of their effectiveness. Federal target and categorical
requirements should be removed. The minimal federal oversight
functions for this block grant should be transferred to the
Department of Health and Human Services.
- Consolidate all other job training programs into a state
workforce development block grant. This new block grant for job
placement assistance and training would include such things as
dislocated worker programs, School-to-Work programs, and Adult
Technology Learning programs. Even the Department of Labor
recognizes that a block grant would eliminate conflicting rules and
administrative structures, remove bureaucracy at every level, and
end the wasting of tax dollars.2 The
determination of target groups should be left to the discretion of
the states. Because the effectiveness of today's training programs
is questionable,3 total funding for
this block grant should be cut by 50 percent and frozen until
scientific studies can prove they are effective. In carrying out
these studies, states should be required to have at least one
ongoing control group evaluation on programs funded from the block
grant. The minimal federal oversight functions for this block grant
should be transferred to the Department of Health and Human
- Reform the Occupational Safety and Health Administration
(OSHA) and combine it with the Mine Safety and Health
Administration (MSHA). This reform is needed to "refocus the
[federal] responsibility for ensuring worksite safety and health on
the workplace."4 Merging MSHA with a
reformed OSHA is a sensible first step toward improving workplace
health and safety, limiting unnecessary government intervention,
and reducing inefficient, wasteful government spending.5 Businesses already have much stronger
financial incentives than OSHA penalties, such as the costs of lost
productivity, workers' compensation, and liability claims,6 to maintain and continually improve workplace
safety. Thus, the role of the federal government should be
redefined from that of heavy-handed regulator to one of cooperative
partner. Congress also should spin off the "new" OSHA as a separate
sub-Cabinet agency, similar to the Federal Reserve Board of
Governors. An independent governing and standards-setting board
should be established. National workplace health and safety
standards are too important to be determined by a department
subject to political influence.
- Transfer the Pension and Welfare Benefit Administration to
the Social Security Administration. Responsibility for the
oversight of public and private retirement programs currently is
spread across three departments.7
Combining the agencies responsible for this oversight would lead to
more efficient research and retirement policy coordination. In
addition, Congress should spin off the Pension Benefit Guaranty
Corporation as an independent sub-Cabinet agency, fund the PBGC
separately, and begin exploring ways to privatize pension
- Repeal and nullify outdated labor laws, executive orders,
and regulations. Congress should streamline labor regulation by
eliminating the heavy burden of outdated or restrictive rules. This
means, for example, nullifying Executive Order 11246 and related
affirmative action regulations affecting federal contractors and
subcontractors; eliminating the Office of Federal Contract
Compliance Programs (OFCCP); repealing the Davis-Bacon Act and
Service Contract Act, as well as Section 13(c) of the Urban Mass
Transportation Act of 1964; reforming the Fair Labor Standards Act;
and strengthening the Portal to Portal Act of 1947. Congress then
should transfer all remaining functions of the Wage and Hour
Division to the Justice Department.
- Combine the Bureau of Labor Statistics and the Census Bureau
within a newly created sub-Cabinet agency, the Bureau of National
Statistics. A new Bureau of National Statistics (BNS) would
make it possible to develop and carry out a comprehensive,
systematic effort to combine surveys and develop economies of
scale. It also would be in a better position to undertake the
careful evaluation and research needed to make decisions about more
efficient survey design and ways to eliminate duplication and
reduce paperwork and data collection burdens. Statistical functions
of other departments also should be housed within the new bureau to
ensure that the government's data collection efforts are insulated
- Close down the Office of the American Workplace and nullify
Executive Order 12954 (Striker Replacement). Government
promotion of high-performance workplaces actually serves only as
corporate welfare and a training subsidy for unions. These
activities already are conducted in the private sector through
business associations and unions. Congress should transfer labor
union oversight and investigative functions, including those in the
Office of the Inspector General, to the Justice Department.
The 104th Congress has held a number of hearings and introduced
a variety of bills to reform and update America's labor laws, and
it continues to reassess dozens of labor policy issues that have
been neglected for years.9 This year's
budget process also has provided Congress with a vehicle for
reform. Aside from reforming and consolidating job training
programs, the Administration's proposed budget did little to
"reinvent" DoL. President Clinton proposed to raise the
department's budget authority by over 14 percent and its full-time
staff by 304.11 Congress appropriately
rejected the President's budget and is proceeding with its own plan
to reform the administration of federal labor policy through the
The House recently voted to reduce FY 1996 DoL discretionary
spending by 13.8 percent. It also instituted several important
reforms. For example, the House budget prohibits funding for
implementation of President Clinton's executive order concerning
the permanent replacement of striking workers by federal
contractors, prohibits the issuance of two unnecessarily burdensome
OSHA regulations on ergonomics and fall protection, and bars DoL
from promoting "economically targeted investments" (ETIs) by
private pension plans. The House also is planning to repeal the
Davis-Bacon and Service Contract Acts as part of the budget
The Senate Appropriations Committee recently voted to reduce DoL
discretionary spending for FY 1996 by 12.6 percent. Although the
Senate's DoL budget prohibits implementation of the striker
replacement executive order, it does not contain the House's OSHA
regulatory provisions or the prohibition on promoting ETIs.
Differences between the House and Senate versions will have to be
worked out in conference committee.
As the following study demonstrates, the U.S. Department of
Labor has gone far beyond its original mandate to become a
burdensome and feared regulatory agency that presents significant
barriers to creating jobs and increasing real wages. The
proliferation of mandated benefits and workplace requirements makes
most small businesses think very carefully before hiring additional
workers. Overzealous enforcement has made DoL the enemy of American
business. Congress should do what the Clinton Administration
promised but failed to do -- reform this overgrown and intrusive
How the Department Has Grown
The Department of Labor was created by Congress in 1913 in
response to pressure from organized labor. Its goals, according to
the statute, were to "foster, promote and develop the welfare of
wage-earners, to improve their working conditions, and to advance
their opportunities for profitable employment." Initially, DoL
consisted of four bureaus transferred from the old Department of
Commerce and Labor: the Bureau of Labor Statistics (formerly the
Bureau of Labor), the Bureau of Immigration, the Bureau of
Naturalization, and the Children's Bureau. These bureaus reflected
the department's original focus: collecting information and
publishing reports on employment, wages, and working conditions;
reviewing the effects of immigration on the job market; and
monitoring the use of child labor.
In 1918, during World War I, Congress established the War Labor
Administration (WLA) to insure adequate industrial production and
foster labor peace in defense production industries. The WLA set
policies on wages, hours, and working conditions. It recruited
women and minorities to work in defense industries. It also sought
to encourage better workplace race relations, promote worker safety
and health, and address other employment-related problems that
might hinder war production. Although Congress moved quickly after
the Armistice to end its activities, the WLA's initiatives embodied
ideas of the Progressive movement that later would spawn the New
Deal, Fair Deal, New Frontier, and War on Poverty.
What began as primarily an advocacy, educational, and
administrative department over time became a regulatory and
enforcement agency. Since 1918 Congress has expanded DoL's
regulatory functions considerably, often because of political
pressure from social reform movements or organized labor. For
During the 1920s, in response to the women's suffrage
movement, the Women's Bureau was added to promote the status of and
job opportunities for women. DoL also implemented the Immigration
Acts of 1921 and 1924 that ended U.S. free immigration policy by
imposing a quota system.
Confronted with the depression of the 1930s, Congress passed
several laws to protect workers from economic change. The
Davis-Bacon Act was enacted explicitly to protect white unionized
workers on federal construction sites from competition by
low-skilled nonunion workers, chiefly blacks and Hispanics. The
Wagner-Peyser Act established the U.S. Employment Service, and the
Social Security Act established the Unemployment Insurance system.
The Fair Labor Standards Act mandated a minimum wage, overtime
requirements, and child labor restrictions.
In the late 1940s, DoL underwent many organizational changes.
Its immigration responsibilities were transferred to the Department
of Justice to consolidate federal immigration functions in the
Immigration and Naturalization Service. In the postwar years, the
failure of DoL to mediate a wave of strikes prompted Congress to
transfer the department's labor conciliation functions to the
independent Federal Mediation and Conciliation Service, and
veterans' reemployment rights became DoL's responsibility as the
Defense Department was scaled back. In 1959, concern over the
influence of organized crime and other union abuses led Congress to
pass the Labor-Management Reporting and Disclosure Act to oversee
the financial integrity and internal democracy of American labor
In the early 1960s, unfounded concern about the impact of
technology on the labor force, combined with the War on Poverty,
resulted in passage of the Manpower Development and Training Act of
1962. Ten years later, spending on federal job training programs
was increased significantly by the Comprehensive Employment and
Training Act (CETA) of 1973. The Job Training Partnership Act
(JTPA) of 1982 reduced the enormous cost of CETA but did not
improve the effectiveness of federal job training programs.
Since the 1960s, pressure from the civil rights movement has led
to a variety of equal employment opportunity laws and redundant
presidential executive orders to protect certain groups of
individuals -- women, minorities, the disabled, the elderly -- such
as the Equal Pay Act of 1963, Title VII of the Civil Rights Act of
1964, the Age Discrimination in Employment Act of 1967, the
Rehabilitation Act of 1973, the Americans with Disabilities Act of
1990, and Executive Order 11246 as amended.11
In the 1970s, DoL's regulatory and enforcement role expanded
dramatically with passage of the landmark Occupational Health and
Safety Act and again when responsibility for mine safety and health
was transferred from the Department of the Interior.
Concern over the negative impact of federal trade policies on
workers prompted Congress to pass the Trade Adjustment Assistance
Act in 1974. The Worker Adjustment and Retraining Notification Act
was enacted in 1988 to provide advance notice of plant closings and
mass layoffs to workers and their communities.
During the 1980s and 1990s, Congress has enacted various
employee benefits and protections, such as the Employee Polygraph
Protection Act of 1988 and the Family and Medical Leave Act of
Since 1960, the expansion of federally mandated benefits and
worker protections has begun to take its toll on business formation
and job creation.12 In 1994, according
to the Bureau of Labor Statistics, legally required benefits
accounted for 32 percent of all benefits paid to workers on an
hourly basis.13 Studies also show that
changes in legally mandated benefits are shifted largely to workers
in the form of lower real wages.14
Further, the increase in mandated benefits does not include the
cost to businesses of complying with workplace safety and health
regulations.15 Although well
intentioned, these requirements add to the cost of hiring and
managing workers and directly affect an employer's decisions about
whether and when to hire a worker, which worker to hire, and how
long to retain that worker. The rise in nonwage labor costs is
important because it is one of the forces leading employers to lay
off workers, as well as to utilize part-time, temporary, and
Ironically, organized labor has been so successful in persuading
Congress to legislate matters that once were the province of
collective bargaining that they have nearly driven themselves out
of business. And with each Congress, Washington has placed more and
more requirements and restrictions on employers and the labor
market.17 This growing regulatory
burden has made DoL inspectors as feared as IRS auditors and most
small businesses very cautious about hiring additional workers.
Today's labor market conditions and labor-management relations
have changed since most of America's major labor laws were passed.
Workers are demanding more flexible hours, working conditions, and
compensation packages than current laws and regulations allow. It
is time for Congress to reform the administration and enforcement
of America's labor laws. Only a fundamental rethinking of DoL and
its functions can lead to the formulation of a proper and truly
effective federal labor policy. The primary objectives of this
reform should be to reduce excessive burdens on businesses and job
creation while maintaining workplace health and safety and to
improve labor market flexibility while maintaining basic employment
The best way to achieve these objectives is by eliminating the
DoL as a Cabinet department. Certain key national functions should
be carried out by sub-Cabinet agencies or transferred to other
departments. Other functions that are not national in scope should
be devolved to the states, or in some cases to the private sector.
Obsolete, ineffective, and wasteful rules and programs should be
repealed or closed down.
I. Reform Unemployment Insurance and
the Employment Service
Over two-thirds of DoL's budget is consumed by the Unemployment
Compensation (UC) Program.18 This
program has two main objectives: to provide temporary and partial
wage replacement to recently unemployed workers, and help stabilize
the economy during recessions. The UC program is financed by a
Federal Unemployment Tax (FUTA) of 0.8 percent19 of the first $7,000 in wages and state
unemployment insurance taxes that average 0.9 percent of total
wages. The revenue raised by FUTA is used to administer
Unemployment Insurance (UI) and maintain a system of Employment
Service (ES) offices. Portions of FUTA revenues also fund the
federal half of the Extended Benefits Program and federal loans to
depleted state accounts. State UI tax revenues fund state UI
benefit payments and the state half of the Extended Benefits
Program. At the end of fiscal 1995, state accounts in the UI Trust
Fund had a balance of $35.6 billion. Like the Social Security Trust
Fund, any positive balance in the UI Trust Fund is used to fund
other federal programs. General revenues are used to fund federal
unemployment benefit programs and allowances such as Trade
Adjustment Assistance and NAFTA Transitional Adjustment
When the UC program was enacted in 1935, Congress intended that
it be a federal-state partnership. The federal government was to
set broad parameters, provide adequate and equitable funding for
state administration, and oversee state law and operations to
ensure compliance and conformity. The states were to be responsible
for carrying out the program while complying with all federal laws
and regulations, as well as their own state requirements. However,
the federal government has used the state conformity process to
convert the basic program philosophy into a more acceptable
ideology and frequently upsets the balance of administrative
funding and workloads by dictating that states absorb the costs of
administering additional programs.20
Over the past decade, federal budget constraints have had a
detrimental effect on services provided to unemployed workers by
the state UI system and ES offices. Even though FUTA revenues
collected for UI and ES administration have been more than
sufficient, Congress continues to extend the 0.2 percent FUTA
surtax on jobs and limit UI and ES administration
appropriations.211 This masks the true
size of the federal deficit. The federal government actually uses
the UI system to fund programs that lead to longer periods of
unemployment for workers22 and
unnecessarily high payroll taxes. This is contrary to the primary
purpose of the UI system23 and reduces
The UC program should be reformed to limit the federal role, as
Congress originally intended, and to restore responsibility and
accountability to the states. Studies show that states can decrease
the duration of unemployment and thereby reduce payroll taxes and
What Congress Should Do:
Devolve financing and funding for the
UI system and Employment Service to the states.
Congress should repeal the temporary 0.2 percent FUTA surtax and
increase the FUTA offset26 from the
current 90 percent to 100 percent if a state conforms with federal
law. States should be allowed to collect one UI tax for
administration and benefits. Each state would be responsible, and
accountable, to employers for UI payroll tax dollars and for the
administration and effectiveness of the UI/ES system. Receipts from
the single state UI tax should be deposited into each state's UI
account, maintained by the Department of the Treasury. States also
should have the option to begin exploring privatized unemployment
Repeal the Wagner-Peyser Act and amend
FUTA to require states to establish public employment offices in
labor market areas designated by state legislatures.
Each state should have the flexibility to deliver job placement
assistance in ways that meet the needs of its employers and job
seekers. However, states should be required to ensure reasonable
access to services for workers and to register for work all
eligible claimants who are not temporarily laid off. Reform must
provide incentives for states to explore ways to integrate
employment services and reduce the duration of unemployment
payments by moving the unemployed into new jobs more quickly. These
incentives should include opening up the job placement assistance
offered through the state ES offices to private competition and
other UI experiments.
Eliminate the federal extended benefit
program and the federal extended unemployment compensation account
Funds in the EUCA should be transferred to state UI accounts
based upon each state's relative share of covered employment. The
1992 amendments that made it easier for states to trigger extended
benefits (EB)27 should be repealed.
The 1992 change made it easier for states to qualify for extended
benefits and encouraged individuals to stay on unemployment
benefits even when jobs were available. By basing the trigger for
extended benefits on a state's total unemployment rate rather than
its insured unemployment rate, Congress also broadened considerably
the number of those who can qualify for extended benefits. Those
who argued for this change claimed that basing benefits on the
insured rate meant that many of the unemployed were not receiving
benefits and that the program therefore was not working as
intended. But, as pointed out at the time by Labor Department
officials, this gap between the number of people who were
unemployed and the number collecting benefits is normal and is an
intended purpose of the program.28
Eliminate the Federal Unemployment
Account (FUA), which is used to loan money to insolvent state UI
Funds in the FUA come from a portion of the FUTA payroll tax on
jobs.29 The federal government uses
the FUA to provide loans to states that have depleted their UI
accounts during severe recessions. When the FUA is not being used
for state loans, the surplus that builds up is used to fund other
government programs and amounts to a tax on jobs to reduce the
deficit. At the end of September 1995, there will be a $7.4 billion
surplus in the FUA. The FUA should be eliminated and its funds
transferred to state UI accounts. States that deplete their UI
accounts should be able to borrow directly from the U.S. Treasury
rather than from a surplus account maintained to offset the federal
Repeal the Disabled Veterans Outreach
Program and the Local Veteran Employment Representative Program and
amend FUTA to incorporate the veteran preferences already in Title
38 of the U.S. Code (Veterans Benefits).
The administrative efficiency of ES offices could be improved
significantly by repealing barriers to the integration of veterans'
services with other employment services. As the Vice President's
National Performance Review noted in calling for the removal of
barriers,30 DoL's Veterans' Employment
and Training Service provides for state-employed, federally funded
employment specialists to serve veterans in local state employment
service offices. However, staff are legally prohibited from helping
non-veterans. "So, if a local office is crowded with non-veterans,"
points out the NPR, "these specialists cannot help out -- even if
they have no veterans to serve." Employment Service staff would be
used more efficiently and the public better served by eliminating
Eliminate Trade Adjustment
This program funds payments for unemployment benefits,
allowances, and training costs to workers affected by foreign trade
imports under the Trade Adjustment Assistance Act (TAA). In
addition, the TAA provides for payment of similar benefits to
workers adversely affected by NAFTA. As well intentioned as this
may be, workers who can prove they lost their jobs because of
foreign competition or NAFTA should not receive government benefits
that exceed the assistance available to those laid off due to
domestic competition.31 In any case,
the department's own auditors have concluded that the TAA has not
worked as intended, and the new NAFTA-TAA program likely will meet
the same outcome: Instead of providing retraining help, the TAA
program has turned into a compensation program.32 Funding for these ineffective programs
should be eliminated.
Permit state legislators to determine
ES administrative budgets, payroll taxes, and UI benefits under
limited federal guidelines.
The UI system is an experience-rated and employer-paid payroll
tax. It was set up with specific objectives and a designated tax as
its funding source. Federal proposals to combine the funding
sources for the ES program and job training programs are unwise.
Job placement services have different goals, populations, and
outcomes from those of training programs. ES offices are supposed
to get unemployment claimants back to work quickly, thereby
ensuring that employer taxes are as low as possible. Job training
programs often do not share that objective. Suggesting that FUTA
payroll tax funds be used for anything other than paying
unemployment benefits and funding state job placement assistance is
merely a backdoor way to introduce a payroll tax for training.
Devolving ES funding removes the potential for Congress to dilute
the mission of the system and divert funding for other purposes.
The limited federal guidelines should include the following:
- The single state UI tax for both administration and benefits
should be experience rated.
- Funds should be used only for program administration and weekly
benefits and should be capped at levels necessary for proper and
efficient administration during periods of high unemployment.
- States should be required to continue cooperative and financial
contracts to administer the interstate benefit program.
- Federal funding for the administration and payment of federal
employee UI benefits, military separations, and disaster
unemployment programs should be deposited in state UI accounts as
- Federal oversight should be limited to determining whether
state laws conform with federal requirements.
II. Consolidate Job Training Programs
into Block Grants
The current maze of discretionary job training programs accounts
for another substantial portion of DoL's budget. Many DoL programs
overlap programs in other departments. The General Accounting
Office has identified 163 employment training assistance programs
across the federal government, spending about $20 billion per
year.33 Moreover, "this fragmented
system wastes resources and confuses and frustrates clients,
employers, and administrators." For FY 1995, thirty of these
programs, totaling $5.8 billion, were funded through DoL.34 The Employment and Training Administration,
the primary DoL agency responsible for job training programs, is
run by 1,529 employees and accounts for 50 percent of DoL's
President Clinton, as part of his "Middle Class Bill of Rights"
initiative, has proposed significant funding increases in his FY
1996 budget.36 For example, DoL
proposed to increase funding for the School-to-Work program by 63
percent and funding for the One-Stop Career Center program by 100
percent. But the Clinton Administration also agrees that federal
job training programs are fragmented, overlapping, and lack
accountability. Part of the President's initiative is to
consolidate and reform 70 job training programs.
Because statistics indicate that more education leads to better
paying jobs, Congress and others assume that job training programs
work. Unfortunately they don't. Rather than focusing on who should
have responsibility for job training programs, Congress must first
ask itself a fundamental question: Why should we continue to spend
taxpayer money on programs that don't work?37
Job training programs, although well intentioned, have not
raised the long-term hourly earnings of participants. They do not
achieve this primary goal because there is little, if anything, the
government can do to alter what happens when individuals neglect
their first 12 years of primary education.38 The billions of dollars spent on government
job training and public assistance programs are too much too late.
What is needed are more fundamental changes aimed at improving
basic education through school choice, strengthening curricula, and
completing high school. Reform that focuses on these goals will
reduce the demand for government job training programs that do not
Bills have been introduced in both the House and the Senate to
reform federal job training programs. The House recently passed the
Consolidated and Reformed Education, Employment, and Rehabilitation
Systems Act (H.R. 1617), introduced by Representative Howard McKeon
(R-CA). The Senate also recently passed the Workforce Development
Act of 1995 (S. 143), introduced by Senator Nancy Kassebaum (R-KS).
Although both bills improve current law by consolidating some of
the federal job training programs into state block grants and
increasing accountability, major changes need to be made in
What Congress Should Do:
Consolidate more programs into the
S. 143 consolidates only around 80 of the 163 federal employment
and training programs and reduces spending by 15 percent. H.R. 1617
consolidates even fewer programs. H.R. 1617 does not include Job
Corps, the most expensive federal job training program, or
vocational rehabilitation programs. S. 143 marginally reforms Job
Corps, but does not consolidate it in the state block grant.
However, S. 143 does include vocational rehabilitation
Congress can improve both bills by consolidating the Job Corps,
vocational rehabilitation, and the Senior Community Service
Employment program into the state block grant.
Provide maximum flexibility to the
states in designing their programs.
Overly prescriptive federal requirements should be removed.
State and local elected officials are in the best position to
allocate block grant funds. There is tremendous diversity among and
within the states. What Washington prescribes as the solution for
problems in urban areas often does not fit well in places like Utah
or Vermont. Prescriptive solutions and fixed allocations of funds
will work in some places, but will also be the worst possible
solution in many others.39 State and
local workforce development boards should be optional, not
mandatory. Continuing School-to-Work activities also should be
optional and not mandatory.
Further, states should have the discretion to transfer funds
between the welfare and job training block grants for the purpose
of implementing work requirements and job placement assistance
programs. This would provide additional flexibility to states and
eliminate micromanagement by the federal government.
Strengthen accountability with control
Each state should have at least one control group evaluation of
its job training programs ongoing at any given time. Such
scientific evaluation should be conducted by using experimental and
control groups chosen by scientific random assignment and, at a
minimum, should determine whether job training and job placement
programs effectively raise the hourly wage rates of individuals
receiving training through such programs. Each state should report
annually on the status and results of its control group
The addition of state control group evaluations would quickly
build a body of evidence on the true effectiveness of job training
programs. Few job training programs have ever been subject to
rigorous evaluation.40 As a report
from the Secretary of Labor points out, "there are many areas where
little thorough and reliable evaluation evidence is
available."41 The few solid studies
that have been conducted generally fail to show any significant
increase in the hourly earnings of participants directly related to
job training. Historically, performance measures and benchmarks
have been the more common but unsatisfactory means of determining
whether or not these programs work. The findings from performance
measure methods, particularly the negative ones, have been easily
manipulated and explained way. Without a requirement for rigorous,
control group studies, American taxpayers will never know whether
they are funding effective programs or just throwing good money
Scale back the labor market
Initial labor market information system (LMIS) activities should
be restricted to conducting a feasibility study, developing LMIS
options, and estimating the cost of those options. The current LMIS
provisions in both H.R. 1617 and S. 143 immediately plunge the
federal and state governments down an untested and expensive path
that may not be feasible. Further, mandating states to create a
LMIS at the substate level for which no data current exist will be
extremely expensive. The initial information for the labor market
information system should be restricted to data readily available
from the Census Bureau and other federal and state agencies.
Further, employers should not be mandated to provide any
information. All employer provided information on job openings,
application procedures, employment requirements, wages, benefits,
and hiring patterns should be strictly voluntary. Any information
supplied by either individuals or employers should also be immune
from the legal process and should not, without the consent of the
individual or employer, be used for any judicial or administrative
III. Reform and Restructure Workplace Health and
Although Congress intended that the Occupational Safety and
Health Administration (OSHA) and Mine Safety and Health
Administration (MSHA) assure all workers safe and healthy working
conditions, the effectiveness of these agencies in carrying out
their missions is questionable. From rulemaking to enforcement, the
regulatory nightmare that businesses face has made OSHA inspectors
as feared as IRS auditors.43 Although
most employers maintain relatively safe and healthy workplaces,
OSHA maintains an adversarial approach to setting and enforcing
standards.44 Significant reform is
required to redefine the federal government's role in workplace
safety and health and "refocus the responsibility for ensuring
worksite safety and health on the workplace."45 Vice President Gore's National Performance
Review correctly recognized that an army of OSHA inspectors is
neither necessary nor likely, given the federal budget situation. A
new approach is required to increase workplace health and safety
and balance the budget. Merging MSHA with a reformed OSHA is a
sensible first step toward improving workplace health and safety,
limiting unnecessary government intervention, and reducing
inefficient, wasteful government spending.
A number of bills have been introduced in the House and Senate
to reform workplace health and safety programs. The leading bill in
the House is H.R. 1834, the Safety and Health Improvement and
Regulatory Reform Act of 1995, introduced by Representative Cass
Ballenger (R-NC). In the Senate, Judd Gregg (R-NH) has introduced
the Occupational Safety and Health Amendments of 1995 (S. 526), and
Kay Bailey Hutchison (R-TX) has introduced the Occupational Safety
and Health Reform Act of 1995 (S. 592). Of these three bills, H.R.
1834 represents the most comprehensive OSHA reform. It also is the
only bill that consolidates administrative overhead and ends
duplicative costs by merging OSHA and MSHA.
Legislative changes are necessary to enable MSHA to allocate
resources more efficiently and OSHA to work cooperatively with
businesses -- for example, by making compliance assistance a
permanent, central part of its program and mission. Efforts to
reprioritize agency spending or administratively reinvent the
agencies would change their bureaucratic culture only marginally
and do little to consolidate administrative overhead and eliminate
duplicative activities. President Clinton offered to reinvent OSHA
after the 104th Congress announced its intention to create a more
effective and efficient OSHA.46 In
addition, President Clinton's proposed FY 1996 budget increased
funding for OSHA compliance assistance by 23 percent while
increasing overall OSHA and MSHA spending by 8.9 percent. The House
recently voted to increase funding for OSHA compliance assistance
by 19.2 percent while reducing overall OSHA and MSHA spending for
FY 1996 by 12.5 percent. The Senate Appropriations Committee
recently approved a 5.0 percent funding decrease for OSHA
compliance assistance and a 3.1 percent overall reduction. However,
Congress can accomplish much more by fundamentally redefining the
role of the federal government so that it recognizes and more
effectively uses the incentives businesses already have to improve
workplace health and safety.
What Congress Should Do:
Significantly reform OSHA.
Although executive branch initiatives to reinvent workplace
health and safety are welcome, statutory changes are required to
redefine the federal government's role and ensure that
congressional intent is implemented. Specifically,
Merge the Mine Safety and Health Administration with a reformed
- Reform OSHA's regulatory process.
Because OSHA's bureaucratic culture and lawyers have put the
search for completely risk-free workplaces and ease of prosecution
above common sense, it can take ten or more years to complete a
rule.47 OSHA's regulatory process
would be more timely and less burdensome if focused initially on
hazards that pose the greatest risk to the most workers.
Development of compliance directives should be made part of the
rulemaking process and tied directly to economic analysis. Far too
often, compliance directives are more burdensome than the rules
themselves. OSHA also should be required to reassess the actual
costs and benefits of its regulations after five years.
- Enhance and expand compliance assistance.
Translating OSHA's confusing jumble of regulations into safer
workplaces is difficult at best. Most employers want safe and
healthy workplaces, but the Department of Labor is more concerned
with prosecuting employers than with providing accurate, reliable
compliance information. Explicitly redefining OSHA's mission
towards compliance assistance will leverage employers' desire for
safety and dramatically improve workplace safety and health.
- Give first instance warnings for hazards that do not pose an
OSHA continues its adversarial approach to standard setting and
enforcement. Many employers are reluctant to call OSHA for
assistance in making their workplaces safer for fear of triggering
punitive inspections. First instance warnings will remove a major
barrier to voluntary compliance.
- Require OSHA inspectors to have some expertise in the industry
they are inspecting.
OSHA inspectors are called upon to inspect a variety of workplaces,
many of which, like mining, involve complex operations.48 Employers and employees deserve to have
their workplaces inspected by qualified persons.
Although OSHA and the MSHA were created separately, workplace
injury and illness data no longer justify maintaining these
agencies as separate entities with practically the same level of
resources.49 Merging MSHA with a
reformed OSHA and reallocating federal resources will accomplish
two important objectives: It will eliminate administrative overhead
and duplicative costs and increase workplace health and safety in
- Reforming the Mine Act to require only one inspection per year
will enable MSHA to shift its inspection resources from mine
operators with exemplary safety records to operators with poor
safety records. By focusing on the "bad players," OSHA's new Mine
Office will improve mine safety where it is needed most. Mine
operators with good safety records will continue to have incentives
to remain safe, in addition to fewer inspections and lower workers'
compensation costs, and the new Mine Office will be able to use its
resources more efficiently to focus on the "bad players." Further,
merging the two agencies will settle jurisdictional questions about
enforcement and eliminate the memoranda of understanding that
currently exist between OSHA and MSHA. Mine workers and taxpayers
will get more mine safety for their hard-earned dollars.
- The Heritage Foundation estimates that consolidating MSHA and
OSHA could save up to $510 million over five years.50 Merging MSHA and OSHA would eliminate the
need to write two separate health regulations for the same
workplace hazard, one for mining and one for everybody else. For
example, there is no reason to have two separate Hazard
Communication Standards, and noise protection for miners is no
different from noise protection for other workers. Regional and
administrative offices would be combined, and MSHA's Office of
Information and Public Affairs could be eliminated.
Merging MSHA with a reformed OSHA will not reduce workplace health
and safety. No MSHA safety or health regulations would be
Each underground mine
will be inspected thoroughly at least once a year by qualified
inspectors, and all workers will be able to request federal
inspections if employers ignore their concerns about unsafe
conditions. MSHA's imminent danger closure rule will be maintained,
and mine workers finally will be covered by OSHA's health
regulations. Focusing resources on compliance assistance will
improve the ability of "good players" to translate OSHA and MSHA
regulations into safer workplaces. Most important, by requiring
only one mandatory inspection per year instead of four, a new
OSHA/MSHA will be able to reallocate its resources to focus on
improving the "bad players" instead of inspecting mines with good
Establish the "new" OSHA as a separate
sub-Cabinet agency that functions as a national safety and health
Establishing health and safety compliance programs can be
extremely costly and complicated. For employers operating in
multiple states, where requirements vary from state to state,
developing compliance programs can be almost impossible. There is
no justification for different requirements in different states.
The risk posed by certain hazards may vary from industry to
industry and workplace to workplace, but not from state to state.
Therefore, different states do not need different requirements.
National workplace health and safety standards should be developed
exclusively at the federal level.
National workplace health and safety standards are too important
to be determined in a department that has been, and continues too
be, subject to political influence. Independence and objectivity
are crucial. The potential costs and benefits are too high for
politics to play any role. The "new" OSHA should be a separate
sub-Cabinet agency, similar to the Federal Reserve Board of
Governors. An independent governing and standards-setting board
should be established. Its members would be appointed by the
President and confirmed by the Senate for staggered six-year terms.
The board would be responsible for standards promulgation,
oversight of a peer-review process, and issuance of compliance
directives. It also would report its activities to Congress twice a
year and be subject to congressional oversight hearings.
IV. Reform Private Pension
The Employee Retirement Income Security Act (ERISA) was enacted
in 1974 to protect the assets in employee pension plans that
provide workers with retirement benefits promised by their
employers. The Pension and Welfare Benefits Administration (PWBA)
is the DoL agency that administers and enforces ERISA. ERISA
protects the integrity of assets by requiring administrators of
private pension and welfare plans52 to
comply with strict fiduciary responsibility standards.53 It also requires administrators to provide
participants with easily understood summaries of their plans, to
file those summaries with PWBA, and to report annually on the
financial operation of plans and the bonding of persons charged
with handling funds and assets. Jurisdiction is shared by the PWBA,
the Internal Revenue Service (IRS), and the Pension Benefit
Guaranty Corporation (PBGC). Generally, PWBA has authority over
Title I of ERISA,54 the IRS has
authority over Title II,55 and PBGC
has authority over Title IV.56
PWBA is responsible for overseeing 720,000 pension plans and 4.5
million health and welfare plans in the private sector.
ERISA-covered private pension plans cover over 88 million working
Americans and their dependents and hold approximately $2 trillion
in assets. Over 100 million workers are covered by
employer-sponsored health and welfare plans. Three-quarters of
PWBA's $65 million budget and 582 FTEs (full-time equivalent
employees) is dedicated to enforcement focused on compliance with
fiduciary responsibility provisions of ERISA. PWBA audits plans and
conducts criminal and civil investigations. In 1993, the government
carried out 6,033 investigations.
President Clinton proposed to increase PWBA's budget by 17.1
percent. The House recently voted to reduce PWBA's FY 1996 spending
by 7.5 percent and the Senate Appropriations Committee approved a
5.2 percent reduction. The House budget bill also prohibits the
Department of Labor from promoting economically targeted
investments with respect to private pension plans covered by ERISA.
It specifically prohibits both the implementation of last year's
PWBA Interpretive Bulletin and the funding of any Economically
Targeted Investment Clearinghouse. The Senate Appropriations
Committee deleted this House provision.
The primary focus of ERISA legislation this year is health
insurance reform. In the House, Representative Harris Fawell (R-IL)
has introduced the ERISA Targeted Health Insurance Reform Act of
1995 (H.R. 995), which would provide for health insurance
portability, increased participation, improved plan solvency, and
other consumer protections for workers. Senator Kassebaum has
introduced the Health Insurance Reform Act of 1995 (S. 1028), the
provisions of which are a subset of H.R. 995. S. 1028 was approved
by the Senate Labor Committee.
A few bills reforming ERISA's pension provisions have been
introduced in Congress. The most comprehensive bill, the Pension
Simplification Act of 1995 (H.R. 2037 and S. 1006), has been
introduced by Representative Rob Portman (R-OH) and Senator David
Pryor (D-AR). These identical bills would create alternative
methods for satisfying nondiscrimination provisions, repeal the
family aggregation provision, repeal 5-year income averaging for
lump-sum distributions, repeal the $5,000 exclusion of employees'
death benefits, simplify the method for taxing annuity
distributions under certain employer plans, and target access to
pension plans for small employers.
The House has passed H.R. 1594, introduced by Representative
John Saxton (R-NJ), to place restrictions on the promotion of
economically targeted investments in connection with employee
benefit plans by the Department of Labor and other federal
agencies. A similar bill (S. 774) has been introduced by Senator
Connie Mack (R-FL).
Responsibility for the oversight of public and private
retirement programs currently is spread across the Departments of
Labor, Treasury, and Health and Human Services. Transferring PWBA
to the Department of Health and Human Services (HHS) would lead to
more efficient research and retirement policy coordination.
Combining PWBA with HHS also would be a good first step toward
privatizing Social Security.57
What Congress Should Do:
Abolish the Economically Targeted
In 1994, DoL established the Economically Targeted Investment
Clearinghouse (ETIC) to provide information on investment
opportunities to pension plan managers. This program is DoL's way
of encouraging pension plans to invest in areas of the economy that
bureaucrats and politicians feel are underfinanced by private
capital markets. It is misguided and jeopardizes the safety of
pension plan assets.58 Tax dollars
should not be used as another form of corporate welfare to market
public investment choices to pension plan managers. If an
investment, public or private, provides a good opportunity to
pension plan managers, they will allocate plan funds
Eliminate the Office of Inspector
General's independent investigative authority.
The experience and expertise for investigating fraud and abuse
involving employee benefit plans reside in the PWBA. The existence
of competing enforcement authorities within the DoL creates
confusion and leads to duplication of effort. In recent years, PWBA
has increased its efforts to bring criminal cases. As a result,
PWBA investigators not only have expertise regarding how plans
operate, but also know how to work criminal cases.
Remove ESOPs from Title I (fiduciary
standards) of ERISA.
Employee Stock Ownership Plans (ESOPs) are hybrid benefit plans
with two often competing goals. They are designed to increase
employee ownership in companies and thereby improve productivity.
They also are treated as retirement plans, with participants
allowed to defer taxes on the value of their stock until it is
withdrawn at retirement. Although ESOPs are governed by ERISA's
fiduciary rules, several tax code sections give them special
treatment not available to other retirement plans. Because the
nature and financing of ESOPs are not always compatible with
ERISA's rules, PWBA has struggled to accommodate ESOPs under the
rules without damaging the fiduciary requirements that generally
work well for other retirement plans. The result has been confusing
and complicated rulings and legal standards. Congressional intent
clearly has been to foster employee ownership. Trying to
incorporate ESOPs into an Act designed to protect retirement income
will only undermine this goal.
Transfer the Pension and Welfare
Benefits Administration to the Social Security Administration, spin
off the Pension Benefit Guaranty Corporation as an independent
sub-Cabinet agency, and begin exploring ways to privatize pension
This would combine the agencies responsible for oversight of
public and private retirement programs and result in more efficient
research and retirement policy coordination. The Pension Benefit
Guaranty Corporation (PBGC) is a semi-independent, wholly owned
government corporation modeled after the Federal Deposit Insurance
Corporation and guided by a board of directors. Congress should
fund the PBGC separately and begin exploring ways to privatize
V. Eliminate Obsolete Workplace
The Employment Standards Administration (ESA) administers and
directs programs under a variety of federal labor laws and
executive orders. The Wage and Hour Division:
- Administers and enforces federal minimum wage, overtime, and
child labor provisions of the Fair Labor Standards Act;
- Determines prevailing wage rates for federal contracts subject
to the Davis-Bacon and Service Contract Acts;
- Registers farm labor contractors and enforces worker
protections of the Migrant and Seasonal Agricultural Worker
Protection Act; and
- Enforces provisions and restrictions of the Employee Polygraph
The Office of Federal Contract Compliance Programs administers
and enforces Executive Order 11246, as amended, which requires
federal contractors and subcontractors to take affirmative action
in hiring. The Office of Workers' Compensation Programs administers
the three basic federal workers' compensation laws: the Federal
Employees Compensation Act, Longshore and Harbor Workers'
Compensation Act, and Black Lung Benefits Act.
Today's economy is fundamentally different from when most of
America's major labor laws were passed. Labor market conditions and
labor-management relations have changed, but America's labor laws
have not. Workers are demanding more flexible hours, working
conditions, and compensation packages than current laws and
regulations allow. The heavy burden of outdated and restrictive
workplace rules reduces job opportunities and real wages. The
proliferation of mandated benefits and requirements now makes most
small businesses think very carefully before hiring additional
workers and is one of the forces leading employers to utilize
part-time, temporary, and contract labor.
The House of Representatives recently voted to reduce ESA's FY
1996 spending by 12.2 percent.60 The
Senate Appropriations Committee has approved a 9.9 percent
reduction. Both bills prohibit funding for implementation of
President Clinton's executive order concerning the permanent
replacement of striking workers by federal contractors, and the
House plans to repeal both the Davis-Bacon and Service Contract
Acts as part of the budget reconciliation process.
A number of bills to reform America's labor laws also have been
introduced in Congress.61 The House
recently passed the Teamwork for Employees and Management Act (H.R.
743) to allow employers to create employee involvement committees.
A similar bill (S. 295) has been introduced in the Senate by Nancy
What Congress Should Do:
Nullify Executive Order 11246, as
amended, and all affirmative action provisions in federal law.
Executive Order 11246, as amended62
and its implementing regulations prohibit federal contractors from
discriminating against employees or job applicants because of race,
color, religion, sex, or national origin and requires them to take
affirmative action to ensure equal opportunity for protected
groups. Contractors must develop a written plan covering each of
their establishments that includes remedial steps to correct
underutilization of available women and minorities.
Federal contractors and subcontractors already must comply with
existing civil rights laws without the executive order. Laws
requiring non-discrimination in employment are enforced through
agencies at the Equal Employment Opportunity Commission and the
Department of Justice. There are other, more equitable ways to
expand employment opportunities for all Americans without requiring
preferential hiring simply because individuals belong to certain
groups. In addition, the regulations to implement Executive Order
11246 impose 20.4 million hours of paperwork (9,795 full-time,
year-round workers) on federal contractors and subcontractors, the
single largest DoL paperwork requirement.
A recent Supreme Court decision on affirmative action concluded
that "the federal government can no longer make decisions based on
the race of the individual except when there is a compelling
governmental interest."63 Concurring,
Justice Antonin Scalia wrote, "In my view, government can never
have a 'compelling interest' in discriminating on the basis of race
in order to 'make up' for past racial discrimination in the
opposite direction." Further, Justice Clarence Thomas wrote,
"Government cannot make us equal; it can only recognize, respect,
and protect us as equal before the law. That these programs may
have been motivated, in part, by good intentions cannot provide
refuge from the principle that under our Constitution, the
government may not make distinctions on the basis of race."
Repeal the Davis-Bacon and related
Acts and the Service Contract Act.
The Davis-Bacon Act was enacted during the Depression explicitly
to prevent low-skilled nonunion workers -- chiefly blacks and
Hispanics -- from competing for federally funded construction
jobs.64 Unfortunately for these
workers, it has succeeded. This year's budget process may be the
only real opportunity to put an end to this Depression-era law that
contributes to racial discrimination, needlessly costs taxpayers
billions of dollars a year, stifles productivity, and subsidizes
special interests. If only the facts were at issue, there would be
no need for debate -- the Davis-Bacon Act would be repealed.
However, repeal is threatened once again by intense pressure from
special interests seeking to preserve their generous subsidies.
Congress must withstand this pressure, act in the interests of all
American workers, and repeal the Davis-Bacon Act.
The Service Contract Act (SCA) artificially inflates the cost of
federal service contracts by as much as $500 million per year and,
like Davis-Bacon, creates an unfair barrier for many unskilled
entry-level workers, who tend to be poor and minorities. DoL has
long been criticized for the way it operates under this law.
Despite two amendments,65 the SCA
continues to suffer from statutory ambiguity, administrative
problems, arbitrary requirements, and capricious
enforcement.66 The General Accounting
Office has recommended repealing the SCA because of DoL's
"inability to administer the act efficiently and effectively" and
because "it is impractical, in our opinion, to make 'prevailing
wage' determinations under the act in a consistently equitable
manner."67 Outdated by extensions of
the Fair Labor Standards Act to service workers, the SCA has become
an unnecessary and costly bureaucratic burden that should be
Reform the Fair Labor Standards Act to
allow employers to offer flexible schedule and compensation
The Fair Labor Standards Act (FLSA) was enacted to protect
unskilled, low-pay workers. However, in today's economy where both
parents likely are working, its rigid and inflexible provisions
hurt more than help. The FLSA deprives workers of the right to
order their daily lives on and off the job to meet the
responsibilities of work and home. For example, under the FLSA a
worker who wants to work 35 hours one week in order to attend a
child's parent-teacher conference, in exchange for working 45 hours
the following week, either must forgo five hours of pay or have an
employer willing to pay overtime the second week. Congress should
extend to private workers the same freedom that federal employees
have -- flextime -- and enable employers to offer flexible schedule
and compensation options to their workers.68
Reform the National Labor Relations
Act to remove restrictions on the ability for employers to create
employee involvement structures.
Employee involvement (EI) structures are a way to involve
workers in business operations to improve productivity, safety, and
customer service. Under current law, however, the only discussions
of workplace issues that are clearly legal between employers and
employees are those that occur in traditional collective bargaining
arrangements. Employers can listen to their nonunion employees but
cannot respond to their views without risking litigation and
significant legal costs. Further, the Commission on the Future of
Worker-Management Relations noted that the most legally vulnerable
EI structures are "those that take a broader, more systemic
approach to participation that the evidence suggests have the
greatest long-term, positive effects on economic
performance."69 Congress should reform
the National Labor Relations Act to exempt EI structures formed to
address issues of quality, productivity, safety, and customer
Transfer immigrant worker oversight
and enforcement functions to the Immigration and Naturalization
In the late 1940s, DoL's immigration responsibilities were
transferred to the Department of Justice to consolidate federal
immigration functions in the Immigration and Naturalization
Service. Since then, the federal government has shifted some of its
immigration responsibilities to employers70 and added new DoL enforcement
requirements.71 Responsibility for
immigration policy once again is fragmented. Transferring DoL's
immigration functions to the INS would combine the responsibility
for federal immigration programs in one agency and facilitate more
efficient immigration policy coordination.
Transfer any remaining ESA programs to
more appropriate departments or sub-Cabinet agencies.
Legal enforcement of the Fair Labor Standards Act should be
transferred to the Justice Department. Responsibility for federal
workers' compensation laws and black lung benefits -- both
primarily health-related income assistance programs -- should be
transferred to the Department of Health and Human Services.
Responsibility for all employment discrimination complaints should
be consolidated in the Equal Employment Opportunity Commission.
VI. Give Greater Independence to the
Bureau of Labor Statistics.
The American statistical system is one of the most decentralized
data-producing systems in the world. Eleven specifically
statistical federal agencies spend more that $1 billion annually.
Further, the Office of Management and Budget (OMB) has found more
than 70 individual agencies spending more than $500,000 a year for
statistical activities and estimates that the federal government
spent at almost $2.7 billion in FY 1994 for statistical
The Bureau of Labor Statistics (BLS) is the primary federal
data-gathering agency in the broad field of labor economics and
prices. It has no enforcement or regulatory functions and operates
somewhat independently from DoL. The BLS collects, processes,
analyzes, and disseminates data relating to employment,
unemployment, and other characteristics of the labor market. It
also publishes data on consumer and producer prices and workplace
health and safety. Most of the data are collected by voluntary
surveys conducted by the BLS and the Bureau of the Census, or on a
cooperative basis with state agencies.
Change is needed. The current structure of the federal
statistical system is inefficient and ineffective.73 The problems
with the U.S. statistical system result directly or indirectly from
fragmentation across the federal government. The system has neither
the advantages that come from centralization nor the efficiency
that comes from strong coordination of a decentralized system. As
currently organized, it will be hard-pressed to meet the data
demands of a technologically advanced and increasingly global
The House recently voted to reduce BLS spending for fiscal year
1996 by 1.3 percent. The Senate Appropriations Committee recently
approved a 6.1 percent reduction. Both bills double the amount
appropriated for revising the consumer price index (CPI).
What Congress Should Do:
Transfer the BLS into a new
sub-Cabinet Bureau of National Statistics along with the Census
Bureau and the Bureau of Economic Analysis.
Consolidating the Census Bureau, the BLS, and the BEA in a
centralized system is "the most effective solution to the problems
of the federal statistical system."74 A new Bureau of National
Statistics (BNS) would make it possible to develop and carry out a
comprehensive, systematic effort to combine surveys and develop
economies of scale. The BNS also would be in a better position to
undertake the careful evaluation and research needed to make
decisions about more efficient survey design and ways to eliminate
duplication and reduce paperwork and data collection burdens.
Incorporating the Bureau of Economic Analysis into the BNS is
essential if the new bureau is to influence priorities for the
broad array of statistical information required for the national
income and product accounts. Reforming the system will assure a
much better use of the tax dollars currently being spent on
Three major concerns need to be addressed.
1) The BNS should be run by an independent Board of Directors,
appointed by the President with the advice and consent of the
Senate for a fixed term similar to the Federal Reserve Board of
2) To ensure that the public's response to voluntary surveys is
not jeopardized, the BNS should be given complete legal
confidentiality for all information collection activity. Data
sharing arrangements with other agencies, for statistical purposes
only, could be maintained under carefully controlled procedures
approved and administered by the BNS Board.
3) Any administrative savings should stay within the agency to
improve the quality and quantity of the nation's statistical
information. Providing accurate information to the public and their
state and local representatives is an important function of the
VII. Eliminate the Office of the
The Office of the American Workplace (OAW), created in 1993 by
Secretarial Order, is responsible for administering and directing
discretionary workplace programs that encourage the development of
"high performance" workplaces.75 OAW also is responsible for
administering statutory programs to certify employee protections of
various federally sponsored transportation programs, overseeing the
financial integrity and internal democracy of American labor
unions, and assisting unions in improving their organizational and
administrative effectiveness. Labor Secretary Robert Reich recently
has assigned OAW the task of implementing President Clinton's
executive order prohibiting the permanent replacement of striking
workers by federal contractors.
OAW carries out these functions through two offices: the Office
of Workplace Programs (OWP) and the Office of Labor-Management
Standards (OLMS). In FY 1995, of OAW's total budget authority of
$31.4 million and 400 employees, $7.4 million went to OWP and $24.0
million to OLMS. For FY 1996, the President requested $41.8
million, or 33 percent more. Both the House and the Senate
Appropriations Committees have voted to eliminate OWP and transfer
OLMS to DoL's Employment Standards Administration.
What Congress Should Do:
Eliminate the Office of Workplace
In addition to setting up a clearinghouse for information on
high performance workplaces, OWP provides funds to unions to train
labor leaders on what constitutes a high performance workplace.
However well intentioned this may be, the federal government should
not subsidize businesses and unions to teach them about the concept
of "high performance" workplaces. This is more appropriately a
function of business associations, chambers of commerce, and labor
unions themselves. It is corporate and union welfare and should be
Eliminate the Office of
Nor should American tax dollars subsidize unions to "assist"
them in improving their organizational and administrative
effectiveness. These functions should be eliminated, the number of
full-time equivalent positions in OLMS should be reduced
significantly, and OLMS field offices should be eliminated. The
investigative and union oversight functions of the office should be
transferred to the Federal Bureau of Investigation (FBI) in the
Department of Justice.76
Repeal Section 13(c) of the Urban Mass
Transportation Act of 1964.
Section 13(c) of the Urban Mass Transportation Administration
Act of 1964 gives public transit the most restrictive labor
environment in America. To receive federal funds, local public
transit agencies must pay employees up to six years of severance
pay if their jobs are eliminated as a result of efficiency
improvements. No other workers enjoy such special privilege. Should
public transit agencies pursue service improvements that lead to
fewer workers, their mandated 13(c) liability can surpass the
federal funds they receive.77 Although many local governments are
trying to improve their public transportation systems through
competitive contracting and allowing private sector suppliers to
operate, Section 13(c) discourages or blocks these efforts.
Section 13(c) also adds to public transit costs and discourages
efficiency by giving labor unions special privileges. Before a
public transit agency can receive a federal grant, DoL must certify
that special protective arrangements for local transit workers have
been made. DoL generally interprets this to require negotiation of
special labor agreements between the public transit agency and its
Public transit agencies want desperately to improve service and
lower costs. At the same time, however, unnecessarily high labor
costs make them unable to withstand a long period without federal
funding. Section 13(c) has created this "Catch 22" for most public
transit authorities and should be repealed.
VIII. Streamline Departmental
The Departmental Management (DM) appropriation provides funding
for a number of different programs that manage, set policy, and
oversee its implementation at DoL. This includes the Office of the
Secretary and Deputy Secretary, the Solicitor's office, the Bureau
of International Labor Affairs, the Civil Rights office, and the
In FY 1995, DM's total budget authority was about $155 million
and 2,548 employees. Over half the budget, $82 million, went to
legal services and adjudication, and $26 million went to executive
direction. For FY 1996, the President requested $173.1 million, or
almost 12 percent more. The House recently voted to reduce DM
spending for FY 1996 by 13.2 percent. The Senate Appropriations
Committee recently approved a 7.6 percent reduction. The House
substantially downsized the Bureau of International Labor Affairs,
noting in its report that the bureau's activities are primarily
discretionary and could be carried out by the Office of the Trade
Representative or the State Department.
What Congress Should Do:
Eliminate the Bureau of International
Labor Affairs (ILAB), the Women's Bureau, the Civil Rights office,
and the National Occupational Information Coordinating
The Bureau of International Labor Affairs, Women's Bureau, Civil
Rights office, and National Occupational Information Coordinating
Committee either duplicate existing federal functions or perform
The Bureau of International Labor Affairs coordinates the
Department's international responsibilities, including relations
with international organizations, estimating the impact of trade
proposals, and ensuring compliance with worker rights provisions in
U.S. trade law. These functions duplicate those carried out by the
U.S. Trade Representative, the Department of the Treasury, and the
Department of State.
The purpose of the Women's Bureau is to promote "the welfare of
wage earning women and [seek] to improve their working conditions,
to increase their efficiency and to advance their opportunities for
profitable employment."78 The mission of the Department of Labor,
including the Secretary, is to promote the employment opportunities
of all Americans. There is no need for a separate bureau devoted to
women, just as there are none devoted to other minorities, such as
African Americans, Native Americans, or Asian Americans.
The Civil Rights office ensures compliance with Title VI of the
Civil Rights Act of 1964, as well as other regulatory
nondiscrimination provisions in programs receiving financial
assistance from DoL, and promotes equal opportunity in these
programs and activities. It also makes sure that all Department of
Labor employees and applicants are treated equally. There should
not be a separate appropriation for this activity within the
department. All agencies within DoL should ensure that their
programs are carried out in a nondiscriminatory manner. Individuals
who believe they have been discriminated against by the department
can file complaints under existing laws enforced by the Justice
Department and the Equal Employment Opportunity Commission.
Despite what federal officials may think, the National
Occupational Information Coordinating Committee is not a necessary
federal function. After funding for job training is consolidated
into state block grants, the states should be given the option of
setting up their own committees, in the event they decide that such
committees would be useful, and funding them out of their block
Today's economy is fundamentally different from when most of
America's labor laws were passed. Labor market conditions and
labor-management relations have changed, but U.S. labor laws have
not. Workers are demanding more flexible hours, working conditions,
and compensation packages than current laws and regulations allow.
Further, proliferating workplace legislation and DoL regulations to
enforce them present a significant barrier to the creation of
businesses and jobs, as well as to increases in real wages. It is
time for Congress to reform the administration and enforcement of
America's labor laws, and this means a fundamental rethinking of
both the Department of Labor and federal labor policy.
The primary objectives of this reform should be to reduce
excessive burdens on businesses and job creation while maintaining
workplace health and safety and to improve labor market flexibility
while maintaining basic employment protections. The best way to
achieve these objectives is by closing down the agency as a
Cabinet-level department. If the recommendations in this study are
implemented, $10.5 billion can be saved for the taxpayer from 1996
Cabinet-level status should be reserved only for departments
that provide core national activities of the federal government.
The Department of Labor does not fit this description.
Administering unemployment insurance, three-quarters of DoL's
budget, is a state function and should be devolved to the states as
a first step toward privatization. Ineffective federal job training
programs should be consolidated into state block grants and
rigorously studied. OSHA should be significantly reformed, combined
with MSHA, and set up as an independent sub-Cabinet agency free
from political influence. America's statistics would be improved by
combining the BLS with the Bureau of the Census as another
sub-Cabinet agency. Obsolete, ineffective, and wasteful rules and
programs should be repealed or closed down. What remains of the
Department of Labor, less than 2 percent of its budget, then could
be transferred to more appropriate Cabinet-level agencies like HHS,
Treasury, and Justice. There is no reason for these remaining
functions to be conducted by an independent department with
- See Craig E. Richardson and Geoff C.
Ziebart, Red Tape in America: Stories from the Front Line
(Washington, D.C.: The Heritage Foundation, 1995). See also William
G. Laffer III, "How Regulation Is Destroying
American Jobs," Heritage Foundation Backgrounder No.
926, February 16, 1993.
- U.S. Department of Labor, FY 1996 budget
press release, February 6, 1995.
- Mark Wilson, "Welfare Reform and Job
Training Programs: What Congress Doesn't Know Will Cost Taxpayers
Billions," Heritage Foundation F.Y.I. No. 61, August 16,
- From Red Tape to Results, Creating a
Government That Works Better and Costs Less, Department of Labor,
Accompanying Report of the National Performance Review, Office
of the Vice President, September 1993, p. 45.
- Mark Wilson, "Save Lives By Cutting Red
Tape: Redefine the Federal Role in Workplace Safety and Health,"
Heritage Foundation Backgrounder Update No. 259, September
- John Hood, "OSHA's Trivial Pursuit,"
Policy Review, Summer 1995.
- Labor, Treasury, and Health and Human
- PBGC currently is part of DoL's budget.
As a semi-independent agency, it should be funded like the National
Labor Relations Board under Title IV of the Departments of Labor,
Health and Human Services, and Education, and Related Agencies
- Among the issues being considered: job
training reform (H.R. 1617, S. 143); OSHA reform (HR. 1834, S. 592,
and others); employee involvement committees (H.R. 743, S. 295);
repealing Davis-Bacon (H.R. 500, S.141) and the Service Contract
Act (H.R. 246); updating the Fair Labor Standards Act (H.R. 1226,
S. 1129); reforming affirmative action (S. 497 and others);
pension/ERISA reform (H.R. 995 and others); and immigration reform
(H.R. 560, S. 269).
- U.S. Department of Labor, FY 1996
budget press release, February 6, 1995.
- Executive Order 11246 requires
non-discrimination in employment by federal contractors. It has
been amended twice, by E.O. 11375 and E.O. 12086.
- Olivia S. Mitchell, "The Effects of
Mandating Benefits Packages," National Bureau of Economic Research
Working Paper No. 3260, February 1990.
- Legally required benefits include
social security, unemployment insurance, and workers'
- Jonathan Gruber and Alan B. Krueger,
"The Incidence of Mandated Employer-Provided Insurance: Lessons
From Workers' Compensation Insurance," National Bureau of Economic
Research Working Paper No. 3557, December 1990.
- William G. Laffer III and Nancy A.
Bord, "George Bush's Hidden Tax: The
Explosion of Regulation," Heritage Foundation
Backgrounder No. 905, July 10, 1992.
- Jack A. Meyer, "The Impact of Employee
Benefit Costs on Future Job Growth," Manufacturers Alliance Policy
Review No. PR-133, March 1995.
- A good example is the Immigration
Reform and Control Act of 1986. Instead of effectively enforcing
U.S. immigration laws, Congress required employers to verify the
citizenship and employment eligibility of all individuals
- Most of this funding is related to the
Unemployment Trust Funds and is considered mandatory.
- The current 0.8 percent FUTA tax rate
has two components: a permanent tax rate of 0.6 percent and a
temporary surtax of 0.2 percent. The surtax was passed in 1976 to
restore depleted state UI accounts and was supposed to expire in
1987. The surtax has been extended four times, primarily to fund
extended benefit programs, since 1987 and now is supposed to expire
- Edwin M. Kehl, "Administrative
Simplification of Unemployment Compensation Programs," in W. Lee
Hansen and James F. Byers, eds., Unemployment Insurance: The
Second Half-Century (Madison: University of Wisconsin Press,
- The balance in the Employment Security
Administration Account will be $2.4 billion in September 1995. This
is $1.01 billion more than the statutory limit. There is also a
$7.4 billion balance in the Federal Unemployment Account that has
been built up using surplus FUTA payroll taxes.
- Lawrence F. Katz and Bruce D. Meyer,
"The Impact of the Potential Duration of Unemployment Benefits on
the Duration of Unemployment," National Bureau of Economic Research
Working Paper No. 2741, October 1988. This study concluded that
extending the duration of UI benefits from six months to one year
will increase the mean duration of unemployment by four to five
weeks. Examples of federal programs that increase the duration of
UI benefits are the Extended Benefits Program and Trade Adjustment
- In today's economy, the primary
purpose of the UI/ES system is to move workers whose jobs are
permanently lost into new ones as quickly as possible.
- Daniel S. Hamermesh, "New Estimates of
the Incidence of Payroll Tax," Southern Economic Journal,
Winter 1979. Research on the incidence of taxation generally has
concluded that payroll taxes are borne predominantly, if not
completely, by labor in the long run through lower real wages.
- Bruce D. Meyer, " Policy Lessons from
the U.S. Unemployment Insurance Experiments," National Bureau of
Economic Research Working Paper No. 4197, October 1992. The
willingness and ability of states to explore innovative ways to
reduce UI duration is evident from the number of state UI
experiments that have been wholly state funded.
- The actual gross FUTA tax rate is 6.2
percent. However, employers in states with federally approved UI
programs (all 50 states) may credit 5.4 percent (90 percent FUTA
offset) against the 6.2 percent tax rate, making the net FUTA tax
rate 0.8 percent.
- The 1992 amendment allowed states to
trigger EB based on a certain percentage of total unemployment rate
(TUR) instead of an adjusted insured unemployment rate (IUR). The
IUR is computed by dividing the number of people claiming UI
benefits by the number in jobs covered by UI. The TUR is the ratio
of all unemployed workers to all workers in the labor force in that
state. Eight states (Alaska, Connecticut, Kansas, Maine, Oregon,
Rhode Island, Vermont, and Washington) have approved the use of TUR
- Benefits generally are paid to workers
with substantial labor force attachment who have lost their jobs
through no fault of their own -- not to workers who quit their jobs
voluntarily, who were fired for cause, or who have had no recent
employment, such as those who are entering or reentering the labor
force. Some of the difference between the insured unemployment rate
and the total employment rate is due also to the exclusion of
self-employed, certain agricultural labor and domestic service
workers, railroad workers, and certain seasonal camp workers from
collecting UI benefits.
- FUTA funds are deposited indirectly in
the FUA when the EUCA and Employment Security Administration
Account (ESAA) have reached their statutory limits. The ESAA is
used to finance the administrative costs of the employment security
program and should be phased out. Funds in the ESAA should be
allocated to state UI accounts for the administration of state UI
- From Red Tape to Results, p.
- The TAA provides benefits to workers
for 78 weeks, while the vast majority of other laid-off Americans,
who qualify only for unemployment insurance, receive just 26 weeks
- In its 1993 semiannual report to
Congress, the Department of Labor Inspector General (OIG)
discovered in a nine-state audit of the program that "After 19
years of operation, neither ETA nor the states know whether the TAA
program is effective" in achieving its original goals of helping
workers find suitable employment. The OIG found that only one in
ten former participants "found new training-related employment that
paid or had the potential to pay suitable wages." Although the Act
requires that participants enroll in approved training courses, "
participants who did not wish to attend training were almost always
granted waivers without losing entitlement allowance."
- U.S. General Accounting Office,
"Multiple Employment Training Programs -- Information Crosswalk on
163 Employment Training Programs," GAO/HEHS-95-85FS, February 14,
- These numbers exclude funding for the
Employment Service, the Target Jobs Tax Credit, Alien Labor
Certification, and the Federal Bonding Program.
- U.S. Department of Labor, FY 1996
budget press release, February 6, 1995.
- See Wilson, "Welfare Reform and Job
- Job placement assistance may speed up
the transition from welfare to work and increase the number of
hours worked per year, but that is entirely different from the
primary purpose of training: better-paying jobs.
- National Governors' Association
memorandum, "Comments on CAREERS Act Proposal," May 12, 1995.
- The only effective way to evaluate job
training programs is to conduct an experimental design study that
randomly assigns individuals to a treatment group that can receive
services from the program under study or to a control group that
cannot and then evaluate the outcomes. See Orley Ashenfelter, "The
Case for Evaluation Training Programs With Randomized Trials,"
Economics of Education Review, Vol. 6, No. 4 (1987).
- What's Working (and what's not) A
Summary of Research on the Economic Impacts of Employment and
Training Programs, U.S. Department of Labor, January 1995, p.
- Much of this section is from Mark
Wilson, "Save Lives By Cutting Red Tape: Redefine the Federal Role
in Workplace Safety and Health."
- See Richardson and Ziebart, Red
Tape in America.
- Consequently, many employers are
reluctant to call OSHA for compliance assistance for fear of
triggering punitive inspections.
- From Red Tape to Results, p.
- OSHA will "fundamentally change its
operation from one of command-and-control to one that builds
partnerships among regulators and business. Second, OSHA will
eliminate or fix out-of-date and confusing standards and instead
identify clear and sensible priorities. Finally, OSHA will target
the most serious hazards and dangerous workplaces.... " White House
press release, May 16, 1995.
- From Red Tape to Results, p.
- Mine inspectors are required to have
at least five years of practical mining experience.
- MSHA and OSHA have about 1,100
inspectors each. MSHA spends over $13,000 per year for every mine
and about $750 per year for every miner, while OSHA spends around
$100 per covered worksite and $6 per worker. However, in 1992 the
coal mining industry had an injury and illness rate of 12.5,
compared to 17.5 in the primary metal industry and 16.3 in the
lumber and wood products industry.
- Scott A. Hodge, ed., Rolling Back
Government: A Budget Plan to Rebuild America (Washington, D.C.
The Heritage Foundation, 1995), p. 237.
- A number of MSHA provisions that
duplicate those in OSHA, and that therefore are no longer
necessary, are repealed by H.R. 1834.
- Examples of welfare benefit plans are
apprenticeship plans, vacation plans, and severance
- ERISA requires that employee benefit
plans be managed solely in the interest of the plan's participants
and beneficiaries for the exclusive purpose of providing benefits
and paying reasonable administrative expenses. Assets must be held
in a separate legal trust, and a fiduciary must be named who is
legally responsible for ensuring that the interests of the
participants and beneficiaries are protected. ERISA also contains
prohibitions against transactions between the plan and related
parties whose interests may be adverse to the plan.
- PWBA is responsible for establishing
and administering ERISA's fiduciary responsibilities and reporting
and disclosure provisions, and for determining whether a plan is
covered under ERISA.
- The IRS is responsible for
establishing minimum standards governing participation, vesting,
and funding of pension plans covered by ERISA.
- PBGC administers the federal insurance
system for defined benefit pension plans.
- Karl Borden, "Dismantling the Pyramid:
The Why and How of Privatizing Social Security," Cato Institute
Social Security Privatization No. 1, August 14, 1995.
- Cassandra Chrones Moore, "Whose
Pension Is It Anyway? Economically Targeted Investments and the
Pension Funds," Cato Institute Policy Analysis No. 236, September
- PBGC is part of DoL's budget. As a
semi-independent agency, it should be funded like the National
Labor Relations Board under Title IV of the Departments of Labor,
Health and Human Services, and Education, and Related Agencies
- This excludes the Black Lung
Disability Trust Fund.
- Among them: repealing Davis-Bacon
(H.R. 500, S.141) and the Service Contract Act (H.R. 246); updating
the Fair Labor Standards Act (H.R. 1226, S. 1129); reforming
affirmative action (S. 497 and others); striker replacement (H.R.
1176, S.603); and immigration reform (H.R. 560, S. 269).
- Executive Order 11246 was implemented
in 1965 and amended by E.O. 11375 and E.O. 12086.
- Adarand Constructors v. Pena,
115 S. Ct. 2097, 132 L. Ed. 2d 158 (1995).
- Mark Wilson, "Four Reasons Why
Congress Should Repeal Davis-Bacon," Heritage Foundation
Backgrounder Update No. 252, June 7, 1995.
- The SCA was amended in 1972 and 1976.
The purpose of these amendments was to expand coverage, improve
administrative efficiency, and assure enforcement.
- Beverly Hall Burns, "The Service
Contract Act of 1965: Time to Revise or Repeal," Villanova Law
Review, Vol. 29, No. 2 (1983-84).
- U.S. General Accounting Office, "The
Congress Should Consider Repeal of the Service Contract Act,"
- In 1978, Congress recognized the
benefit of these work arrangements and passed the Federal Employees
Flexible and Compressed Work Schedules Act. This Act authorized a
three-year experimental period of alternative work schedules for
federal employees. The experiment was so successful, it was
extended in 1982 and made permanent in 1985.
- U.S. Department of Labor, Commission
on the Future of Worker-Management Relations, Report and
Recommendations, December 1994.
- Rather than control illegal
immigration at U.S. borders, the Immigration and Nationality Act
requires employers to verify the employment eligibility of all
- DoL currently is responsible for
oversight and enforcement of the H-2A program -- temporary
agricultural employment for alien farm workers -- and the H-1A
program of the Immigration Nursing Relief Act of 1989.
- Statistical Programs of the United
States, Executive Office of the President, Office of Management and
Budget, Issues for Fiscal Years 1980-94.
- Janet L. Norwood, Organizing to
Count (Washington, D.C.: The Urban Institute Press, 1995), p.
71. Janet Norwood was Commissioner of the Bureau of Labor
Statistics from 1979 to 1991.
- According to the U.S. Department of
Labor, "high performance" workplaces utilize work organizations,
technology, and performance measurements that enhance business
competitiveness; improve the skills, involvement, and commitment of
front-line employees; and promote innovative relations among
managers, labor unions, and professional organizations.
- The investigative and union oversight
functions in the Office of Labor Racketeering in DoL's Office of
the Inspector General also should be transferred to the FBI.
- Assuming the 1988 annual compensation
level of $41,000 for the average public transit bus driver, legally
mandated severance pay could be as much as $250,000 per
- U.S. Department of Labor, FY 1996
budget press release, February 6, 1995.