THE EMPLOYMENT SERVICE: THE FEDERAL-STATE PUBLIC LABOR EXCHANGE SYSTEM
CRS Report for Congress
The Employment Service: The Federal-State
Public Labor Exchange System
June 24, 1999
Alison Pasternak
Workforce Development Specialist
U.S. Department of Labor
Ann Lordeman
Specialist in Social Legislation
Domestic Social Policy Division
Congressional Research Service ˜ The Library of Congress
ABSTRACT
This report describes the federal-state system of public employment service (ES) offices which
was authorized by the Wagner-Peyser Act of 1933. The central mission of the ES is to
facilitate the match between individuals seeking employment and employers seeking workers.
The ES system is jointly operated by the U.S. Department of Labor and state employment
security agencies, and currently consists of more than 1,800 local offices.
This report begins with a brief history of the ES, and also describes the methods of service
delivery, the populations served, the ES role in the One-Stop delivery system under the
Workforce Investment Act of 1998, several products of America’s Labor Market Information
System, ES performance measurement, and funding under the Wagner-Peyser Act. The report
ends with a brief description of Alien Labor Certification programs, the Work Opportunity
Tax Credit, the Welfare-to-Work Tax Credit, and the Federal Bonding Program. This report
will be updated when new program or funding data become available.
The Employment Service: The Federal-State Public Labor
Exchange System
Summary
The federal-state system of public employment service (ES) offices was
originally authorized by the Wagner-Peyser Act of 1933. In 1998, the Workforce
Investment Act of 1998 amended the Wagner-Peyser Act to require states to deliver
ES services through state One-Stop delivery systems. Between 1994 and 1998, every
state received a One-Stop implementation grant to build a workforce development
system that reflects the principles of universality, customer choice, accountability, and
program integration. Due to its mandate to provide universal access, the ES is a
central component in most One-Stop systems.
Jointly operated by the U.S. Department of Labor (DOL) and the state
employment security agencies (SESAs), the central mission of the ES is to facilitate
the match between individuals seeking employment and employers seeking workers.
Presently, this no-fee public labor exchange system is comprised of more than 1,800
local offices in the 50 states, the District of Columbia, Guam, Puerto Rico, and the
U.S. Virgin Islands. Local ES offices are known by many names, such as
Employment Service, Job Service, One-Stop Career Center, and Workforce
Development Center. These offices offer an array of services to job seekers and
employers, including career counseling, job search workshops, labor market
information, job listings, applicant screening, and referrals to job openings. States
provide ES services through three tiers of service delivery: self-service, facilitated
self-help, and staff-assisted.
ES services are available to all job seekers and employers; the ES is a non-means
tested program. Special services are offered to veterans, persons with disabilities, and
unemployment insurance claimants who are referred to reemployment services
through the Worker Profiling and Reemployment Services system. Additionally,
regulations mandate that local ES offices provide migrant and seasonal farmworkers
with services that are equivalent to those received by non-farmworker job seekers.
The performance of the ES is currently measured through quarterly data reports
submitted to DOL by the states, but comprehensive labor exchange performance
measures are being considered by DOL.
In FY1999, under the Wagner-Peyser Act, Congress appropriated $761.7 million
for state delivery of ES services, $59.9 million for a variety of ES National Activities,
and $146.5 million for One-Stop implementation activities and projects funded under
America’s Labor Market Information System. The funds appropriated for the state
delivery of ES services are distributed through a statutory formula: two-thirds is
allocated on the basis of a state’s relative share of the civilian labor force and one-
third on the basis of the state’s relative number of unemployed individuals.
In addition to administering the ES system, DOL and the SESAs are involved
in the administration of several programs authorized under legislation other than the
Wagner-Peyser Act. These programs include Alien Labor Certification, the Work
Opportunity Tax Credit, the Welfare-to-Work Tax Credit, and the Federal Bonding
Program.
Contents
A Brief History of the Employment Service............................1
State Employment Security Agencies.................................5
Labor Exchange Services..........................................6
Service Delivery Tiers........................................6
Self-service ............................................ 6
Facilitated Self-help......................................7
Staff-assisted ........................................... 7
Populations Served..........................................8
General Public..........................................8
Veterans .............................................. 8
Migrant and Seasonal Farmworkers (MSFWs).................10
Persons with Disabilities..................................11
Referred Unemployment Insurance (UI) Claimants..............12
One-Stop Delivery System....................................13
America’s Labor Market Information System (ALMIS)..............14
America’s Career Kit....................................15
Other ALMIS Projects...................................16
Performance Measurement....................................17
Funding ...................................................... 20
Appropriations ............................................. 20
State Formula Allocations....................................21
States’ Use of Funds........................................22
Related Programs..............................................25
Alien Labor Certification.....................................25
Federal Employment Tax Credits...............................26
Work Opportunity Tax Credit (WOTC)......................27
Welfare-to-Work (WtW) Tax Credit........................27
Federal Bonding Program....................................27
List of Figures
Figure 1. Allocation of Wagner-Peyser Act Funds to the States............24
List of Tables
Table 1. FY1994-FY1999 ES Appropriations.........................21
Ms. Alison Pasternak was detailed to the Congressional Research Service for 6
weeks to research and write a paper on the Employment Service.
The Employment Service: The Federal-State Public
Labor Exchange System
A Brief History of the Employment Service
The first public labor exchange offices in the United States were city initiatives,1
begun as early as 1834 in New York. Later, state-supported labor exchange offices
were introduced in Ohio in 1890, and other states soon followed suit. During World2
War I, a flood of offices opened their doors and, under President Wilson, were
incorporated into the first U.S. public employment service (ES) system. The initial
mission of this system was to facilitate the mobilization of defense workers.
Management of the ES system was the responsibility of the newly-created U.S.3
Employment Service within DOL. At its peak during World War I, the ES system
consisted of 773 offices. Federal support for the system was withdrawn following
World War I, causing the organizational structure to collapse and by the early 1920s,
only a few states retained offices. The U.S. public employment service system was4
virtually non-existent by the end of the decade. It was not until the nation faced the
severe unemployment of the Great Depression that attention again turned to the labor
exchange system, and President Roosevelt resurrected the U.S. Employment Service.5
On June 6, 1933, the U.S. Congress passed the Wagner-Peyser Act, thereby
establishing the current federal-state system of public employment service offices.
The Wagner-Peyser Act also commissioned the U.S. Employment Service to promote
the establishment and maintenance of the federal-state public employment service.
Within 6 years, all 48 states, Alaska, Hawaii, and the District of Columbia had
established ES offices.6
“Labor exchange” is the process of facilitating the match between individuals seeking jobs1
and employers seeking workers.
Leonard P. Adams, The Public Employment Service in Transition, 1933-1968: Evolution2
of a Placement Service into a Manpower Agency. (Ithaca, NY: Cornell University, 1969).
p. 26. (Hereafter cited as Adams, The Public Employment Service in Transition.)
William Haber and Daniel H. Kruger, The Role of the United States Employment Service3
in a Changing Economy (Kalamazoo, MI: The W.E. Upjohn Institute for Employment
Research, 1964), p. 25. (Hereafter cited as Haber and Kruger, The Role of the US
Employment Service.)
Adams, The Public Employment Service in Transition, p. 26.4
George Martin, Madam Secretary, Frances Perkins. (Boston: Houghton Mifflin Company,5
Adams, The Public Employment Service in Transition, p. 25.6
During its early years, the ES’s primary mission was to facilitate the match
between job seekers and employment opportunities by referring unemployed
individuals to public service jobs and other job openings listed with the ES by
employers. In 1935, the Social Security Act created the Unemployment Insurance
(UI) program, and the role of the ES broadened to include administration of the
“work test” (i.e., monitoring UI claimants to ensure that they are able to work,
available for work, and actively seeking work), as well as provision of job-finding and
placement services for UI claimants. Since 1935, the mission of the ES has remained
fairly constant:
!To assist job seekers in finding employment;
!To assist employers in filling jobs;
!To facilitate the match between job seekers and employers;
!To participate in a system for clearing labor between the states; and7
!To meet the work test requirements of the state unemployment
compensation system.8
While the overall mission of the ES has changed little since 1935, its customer
focus and service delivery strategies have shifted dramatically, largely reflecting the
circumstances of the times. In the 1930s, the ES was used to place unemployed
workers in public service jobs to help alleviate joblessness during the Great
Depression. Millions of unemployed workers were screened for referral to public
works and work relief projects during this period. During World War II, the ES was9
temporarily federalized in order to effectively mobilize civilian labor and coordinate
interstate recruitment of workers to meet defense needs. Following the war, control
of the ES was returned to the states, and the policy of priority services for veterans10
was institutionalized. During the Korean Conflict, 1950-1953, the ES again became11
involved with the mobilization of labor to meet defense needs. After the Korean
Conflict, attention turned toward special groups, and services became targeted to
veterans, youth, persons with disabilities, older workers, ex-prisoners, Native
Americans, and minorities.12
“Clearing labor between the states” involves maintaining job listings for multiple states and7
referring job seekers to employment opportunities outside their own state.
Stanley H. Ruttenberg and Jocelyn Gutchess, The Federal-State Employment Service: A9
Critique (Baltimore: The Johns Hopkins Press, 1970). p. 4. (Hereafter cited as Ruttenberg
and Gutchess, The Federal-State Employment Service.)
Haber and Kruger, The Role of the US Employment Service, pp. 31-35.10
The Wagner-Peyser Act of 1933 mandated the creation of a veterans’ service “to be devoted11
to securing employment for veterans.” The Servicemen’s Readjustment Act of 1944 (58 Stat.
284, commonly known as the G.I. Bill) increased the responsibilities of the ES by requiring
that counseling and placement services be offered to veterans, and that veterans receive
priority in job placement over non-veterans.
Adams, The Public Employment Service in Transition, pp. 39-44.12
In the 1960s with the emergence of the War on Poverty and the passage of
statutes authorizing job training programs, the ES’s focus shifted away from13
providing labor exchange services to referring disadvantaged groups to training or
other social programs. Congress encouraged the shift in focus by increasing funds for14
the ES to help states meet the needs of these disadvantaged groups.
This situation changed dramatically in the 1970s after the enactment of the
Comprehensive Employment and Training Act of 1973 (P.L. 93-203); the ES returned
to its original labor exchange functions of providing job-finding services to job seekers
and filling job openings for employers. Because the ES had acquired an image for15
serving low-skilled workers during the 1960s, it lost much of its support from
employers, job seekers, and policy makers. Further, the ES’s relationship with the UI
system was strained because of concern that the ES’s focus on low-income workers
adversely impacted services to UI recipients. Additionally, in the 1970s, the
relationship between the ES and job training programs was tense, partly due to the
fact that the ES had to compete with job training programs for scarce resources.16
In an effort to better align local labor exchange services with local training
programs and to allow Governors greater flexibility to tailor ES services to meet local
needs, Congress amended the Wagner-Peyser Act in 1982 with the enactment of the
Job Training Partnership Act (JTPA) (P.L. 97-300). These amendments transferred
primary responsibility for ES program design and operations from DOL to the states,
and established a new Wagner-Peyser Act funding formula to target resources to
areas of greatest need (based on labor force size and unemployment rate). The17
devolution of authority from the federal government to the states, as well as a decline
in ES program funding levels from 1984 to 1990, contributed to inconsistency and18
under-performance of labor exchange services. The General Accounting Office
The Area Redevelopment Act of 1961 (P.L. 87-27), the Manpower Development and13
Training Act of 1962 (P.L. 87-415), the Economic Opportunity Act of 1964 (P.L. 88-452).
David E. Balducchi, Terry R. Johnson, and R. Mark Gritz, “The Role of the Employment14
Service,” in Unemployment Insurance in the United States: Analysis of Policy Issues,
Christopher J. O’Leary and Stephen A. Wandner, eds. (W.E. Upjohn Institute for
Employment Research, Kalamazoo, MI. 1997), p. 468. (Hereafter cited as Balducci et al, The
Role of the Employment Service).
Employment and Training Report of the President. Transmitted to the Congress, 1979.15
p. 62-63.
Patricia W. McNeil, “The Employment Security System: Preparing for the 21 Century.”16st
Prepared for the Committee on Education and Labor, U.S. House of Representatives, June
GAO. Employment Service: Improved Leadership Needed for Better Performance.17
GAO/HRD-91-88. August 1991. p. 16.
Between 1984 and 1990, Wagner-Peyser Act funding for state ES administration dropped18
(GAO) noted in 1989 that local ES offices varied dramatically in their ability to place
job seekers in jobs.19
In response to concerns expressed by many job seekers and employers about the
delivery of DOL-funded employment and training services, as well as dissatisfaction
with the provision of job information, DOL launched the One-Stop Career Center
system initiative in 1993 as a means to more effectively link the delivery of
employment and training services. The Department of Labor received funding for the
One-Stop initiative under the Wagner-Peyser Act. The goal of the One-Stop initiative
was to transform the provision of employment and training services, including labor
exchange services, into a coordinated information and service delivery system. Four
principles were central to the One-Stop initiative: universality; program integration;
customer choice; and performance accountability. The Department of Labor
encouraged states to use these four principles as the basis for cultivating workforce
development systems that streamline the delivery of employment and training services
to effectively meet the needs of job seekers and employers. Because ES services are
universally accessible to job seekers and employers, most states use the ES as the
central component of their One-Stop systems. For many job seekers and employers,20
the only contact they may need with the One-Stop system is through ES services.21
On August 7, 1998, President Clinton signed the Workforce Investment Act of
coordinate, and improve employment, training, literacy, and vocational rehabilitation
programs.” Among other things, WIA repeals JTPA on July 1, 2000, and codifies2223
the One-Stop Career Center system. Further, Title III of WIA amends the Wagner-
Peyser Act to require that ES services be delivered through state One-Stop systems.
In light of the fact that Wagner-Peyser Act services are available to all job seekers and
employers, ES public labor exchange services are likely to continue to be the
foundation of the One-Stop delivery system.
GAO. Employment Service: Variations in Local Office Performance (GAO/HRD-89-19
Balducchi, et al, The Role of the Employment Service, p. 477.20
Federal Register v. 63, n. 113, June 12, 1998, Department of Labor; Employment and21
Training Administration; United States Employment Service; Labor Exchange Performance
Measures, p. 32565.
H. Rept. 105-659, July 29, 1998, Congressional Record, p. H6604.22
For information about the training provisions under WIA, see CRS Report 97-536, Job23
Training Under the Workforce Investment Act, by Ann Lordeman.
State Employment Security Agencies
To receive funding under the Wagner-Peyser Act, Section 4 requires the
Governor of each state to “designate or authorize the creation of a state agency24
vested with all powers necessary to cooperate with the Secretary under this Act.”
States must maintain such a state agency “in order to obtain the benefits of
appropriations apportioned under” the Wagner-Peyser Act. Accordingly, every state
and territory maintains a state employment security agency (SESA) which operates
the ES program. The Department of Labor regulations require that Wagner-Peyser
Act services be delivered by public merit-staff employees.25
In most states, the SESA is also responsible for administering the UI program,
Alien Labor Certification programs, job training programs, and labor market
information (LMI) programs. As part of their LMI functions, SESAs collect data26
under cooperative agreements with DOL’s Bureau of Labor Statistics (BLS). The
federal-state cooperative programs for which SESAs collect labor force data include
Current Employment Statistics, Local Area Unemployment Statistics, Occupational
Employment Statistics, Covered Wages and Employment, and Mass Layoff
Statistics. 27
This report focuses primarily on the SESAs’ role as it relates to the ES system,
particularly the operation of Wagner-Peyser Act labor exchange services. While the
ES system incorporates activities that pertain to the UI program, job training
programs, and LMI programs, this report will address these programs only so far as
they are a function of the public labor exchange system (e.g., administration of the UI
work test, referral of job seekers to training services, provision of LMI to job seekers
and employers). This report ends with a brief description of Alien Labor Certification
programs, the Work Opportunity Tax Credit, the Welfare-to-Work Tax Credit, and
the Federal Bonding Program — none of which are authorized under the Wagner-
Peyser Act, but which do utilize Wagner-Peyser Act resources and facilitate the match
between job seekers and employers.
The WIA amendments to the Wagner-Peyser Act, which take effect on July 1, 1999, change24
the wording from “... cooperate with the United States Employment Service under this Act”
to “... cooperate with the Secretary under this Act.”
staffing was affirmed in State of Michigan v. Alexis M. Herman (W.D. MI, Southern Div.).
The Interstate Conference of Employment Security Agencies (ICESA) defines LMI as “the26
science of collecting, analyzing, reporting and publishing economic activities to describe and
predict the relationship between labor demand and supply.” ICESA: “An Introduction to
Labor Market Information”
[http://www.icesa.org/articles/template.cfm?results_art_filename=lmiintro.htm].
For more information about these programs and about LMI in general, see CRS Report 96-27
Labor Exchange Services
Service Delivery Tiers
The type of reemployment services needed by individual job seekers varies
widely, depending on such factors as job search capabilities, educational level,
employment experience, and occupational growth or decline in the local labor market.
Similarly, the type of labor exchange services needed by employers seeking workers
varies.
To meet these varying needs of ES customers (i.e., job seekers and employers),
DOL requires states to have the capacity to deliver labor exchange services through
three tiers of service delivery: (1) self-service; (2) facilitated self-help; and (3) staff-28
assisted. The Department of Labor expects SESAs to provide labor exchange
services through each of the three service delivery strategies. The core and293031
intensive services defined under Section 134 of WIA can be delivered through any
of these three delivery methods.32
Self-service. To preserve and expand customer access to ES services in the face
of declining state allotments (in real dollar terms), states are increasingly relying on
services that customers can access without staff intervention. These self-service
products are primarily electronic, e.g., state and national job banks, and the products33
of America’s Labor Market Information Service (ALMIS) which will be described in
the ALMIS section of this report. Not only are these services available to job seekers
and employers without the assistance of ES staff, but typically customers can access
these electronic resources away from local ES offices and outside normal business
hours. Generally, state job banks, the national job bank, and many ALMIS products
are accessible wherever there is access to the Internet, including public libraries,
private homes, schools, universities, military bases, and kiosks in shopping malls.
Federal Register, v. 63, n. 113, June 12, 1998, p. 32567.29
Core services include job search and placement assistance, provision of labor market30
information, initial assessment of skills, information about available services, and Resource
Room usage.
Intensive services include comprehensive employability assessment, development of an31
individual employment plan, screened referrals, individual and group counseling, job clubs,
and case management.
A job bank is a computerized network of job openings. When an employer places a job33
order (i.e., an announcement of one or more job openings) with an ES office, the ES staff enter
the job opening(s) into the state’s job bank. Many of these job openings are passed on to the
national job bank, known as America’s Job Bank. (Approved employers also have the option
of entering their job orders directly into the national job bank.)
Facilitated Self-help. Facilitated self-help resources are typically available in
the resource rooms of local ES or One-Stop offices. Here, customers are able to
access self-service tools, such as personal computers, resume-writing software, fax
machines, photocopiers, and Internet-based tools, while resource room staff are
available to provide assistance. The resource room staff interact with the customers
to facilitate usage of the resources. States are increasingly relying on this mode of
service delivery because it costs less than the staff-assisted delivery method for which
the ratio of staff to customers is higher.34
Staff-assisted. Staff-assisted services are provided to customers both one-on-
one and in groups. One-on-one services for job seekers often include assessment,
career counseling, development of an individual service plan, and intensive job search
assistance. One-on-one services for employers may include taking a job order or
offering advice on how to increase job seeker interest in a job opening. Group
services for job seekers include orientation, job clubs, and workshops on such topics
as resume preparation, job search strategies, and interviewing. Group services for
employers may include workshops on such topics as state UI laws or use of labor
market information. Other staff-assisted services that benefit both job seekers and
employers include screening and referring job seekers to job openings. Staff-assisted
services must be provided in at least one physical location in each workforce
investment area.35
These service delivery tiers are not a new strategy for the ES system. The 1971
Manpower Report of the President described a “new system” being tested in local ES
offices in six cities — Memphis, Phoenix, Pittsburgh, San Antonio, Syracuse, and
Wichita — that provided different levels of service based on the individual needs of
customers. Three levels of services were offered: “a streamlined, self-help service;
a combination of job development and direction in planning a personal job search; and
intensive employability services ...” Not surprisingly, it was found that self-help36
services, such as job banks, freed staff resources to assist job seekers with the greatest
need for individualized services. An adverse consequence of job banks, however,37
was noted in the 1974 Manpower Report of the President; the report claimed that job
banks contributed to such problems as “a deterioration in personal relationships
between ES staffs and employers and applicants.” The lessons learned from the38
experimental, three-tiered ES offices in 1971 still apply today: to effectively meet the
needs of job seekers and employers, local ES offices need to achieve a balance
between relying on electronic tools and maintaining personal contact with customers.
Federal Register, v. 63, n. 113, June 12, 1998, p. 32568.34
delivery areas” under JTPA (WIA’s predecessor), are designated by the Governor of each
state. In designating local areas, Governors must take into consideration such factors as
school districts, labor market areas, travel distance, and available resources.
Manpower Report of the President. Transmitted to the Congress, April 1971. p. 65.36
Manpower Report of the President. Transmitted to the Congress, April 1974. p. 62.37
Ibid.38
Populations Served
General Public. As noted above, Wagner-Peyser Act services are available to
all job seekers and employers through local ES offices which are known by many
names, such as Employment Service, Job Service, One-Stop Career Center, and
Workforce Development Center. The ES is a non-means tested program; Wagner-
Peyser Act services are available to any citizen or individual legally authorized to
work in the United States. Other than the capacity constraints caused by limited
resources, the only limits on ES service delivery are the prohibitions against making
referrals to job openings for which the filling of the opening is an issue in a labor
dispute involving a work stoppage and referring job seekers to job openings for3940
which a private placement agency will charge a fee for their services.
Current Population Survey data indicate that nearly 20% of 5.3 million
unemployed job seekers in 1998 visited a “public employment agency” in their quest41
for employment. This number does not capture the number of job seekers who use
DOL’s electronic labor exchange products outside of a local ES office.
Employment and Training Administration (ETA) data for Program Year (PY)
registered 17.9 million job seekers; referred 7.7 million people to jobs; and placed 2.1
million people in jobs. Almost 3.3 million individuals entered employment through
either a referral from the ES or on their own after receiving at least one ES service.42
The average federal cost per entered employment in PY1997 was $220.
While ES services are universally accessible by job seekers and employers,
certain groups of job seekers do receive special consideration.
Veterans. Inasmuch as Congress views the alleviation of unemployment and
underemployment among U.S. veterans, especially disabled and Vietnam-era veterans,
as a “national responsibility,” veterans are eligible to receive special consideration43
with ES services. These services are administered by DOL’s Veterans’ Employment
and Training Service (VETS) and delivered by Disabled Veterans Outreach Program4445
(DVOP) specialists and Local Veterans’ Employment Representatives (LVERs).
The DVOP and LVER staff are employed by SESAs, and funded by state grants paid
Section 13(b)(1) of the Wagner-Peyser Act, as amended.40
DOL, BLS. Employment & Earnings. January 1999. p. 208.41
Data are from the ETA 9002 report described in the Performance Measurement section of42
this report. A PY runs from July 1 through June 30. (In contrast, a federal fiscal year (FY)
runs from October 1 to September 30.) Cost per entered employment equals the total
Wagner-Peyser Act federal expenditures divided by the total number of individuals who
entered employment. State expenditures for ES services are not taken into account.
The DVOP program is authorized under 38 USC Section 4103A. 44
The LVER program is authorized under 38 USC Section 4104.45
with Federal Unemployment Tax Act (FUTA) dollars. In FY1999, $80 million was
appropriated for the DVOP program and $77 million was appropriated for the LVER
program. The Department of Labor expects these appropriations to support
approximately 1,460 DVOP specialists and 1,340 LVERs nationally in PY1999.46
About 300,000 veterans are projected to be helped into jobs at these staffing levels.
The principal mission of DVOP specialists is to develop employment and training
opportunities for veterans, primarily those with service-connected disabilities. To
achieve this end, DVOP staff need to identify disabled veterans, determine their needs,
establish employability plans, and link them with appropriate jobs and training
opportunities. Additionally, DVOP specialists are required to work with employers
to develop employment and training opportunities for veterans. As statutorily47
mandated, not more than three-quarters of DVOP specialists are to be stationed at
local ES offices. About one-quarter of DVOP specialists are stationed full- or part-48
time at other sites, such as veterans’ outreach centers, veterans’ service offices,
veterans’ medical centers, or military installations.49
Like the majority of DVOP specialists, LVERs are located in local ES offices.
As statutorily mandated, one full-time LVER is assigned to each local ES office at
which 1,100 or more veterans registered for assistance in the previous year; one half-
time LVER is allocated to each local ES office at which between 350 and 1,100
veterans registered. LVERs are required to assist veterans by directly providing, or50
supervising the provision of, labor exchange services, including assessment,
counseling, job search assistance, and referral to employment. Additionally, LVERs
must refer eligible veterans to training, supportive services, and educational
opportunities. It is also the responsibility of LVERs to monitor job listings from
federal contractors to ensure that eligible veterans receive priority in referrals to those
jobs. Further, LVERs are required to maintain cooperative working relationships51
U.S. Department of Labor FY2000 Budget Justifications of Appropriation Estimates and46
Performance Plans for Committee on Appropriations, vol. III, February 1999. pp. ASVET-
The full list of functional requirements for DVOP specialists is listed at 38 USC 4103A (c).47
For more information on employment services for veterans, see Fact Sheet no. OASVET 97-49
The Vietnam Era Veterans’ Readjustment Assistance Act of 1974 (38 USC 4212) requires51
employers with federal contracts or subcontracts of $10,000 or more to immediately list with
the local ES office all employment openings (except for executive and top management jobs,
positions filled from within the employer’s organization, and jobs lasting 3 days or less).
Federal contractors must also take affirmative action to employ protected veterans. It is the
responsibility of the local ES office to give covered veterans priority in job referrals.
Employers are not required to hire any particular applicant or to hire from a group of
applicants.
with community organizations, labor unions, and employers to encourage them to
employ veterans.52
In PY1997, 1,851,555 veterans registered for ES services nationally. Of those
veterans registered, 52% were referred to employment, and of those referred, 27%
were placed in jobs.53
Migrant and Seasonal Farmworkers (MSFWs). In the 1970’s, farmworkers
and farmworker advocacy groups filed suit against DOL for alleged discriminatory
treatment of farmworkers by DOL and SESAs. The principles that were agreed to54
in the lawsuit settlement became the basis for federal regulations regarding the
provision of ES services to MSFWs. In accordance with the regulations at 20 CFR
!Provide MSFWs with ES services that are qualitatively equivalent and
quantitatively proportional to those received by non-MSFWs;5556
!Provide the full range of ES services to MSFWs;
!Provide staff assistance to MSFWs to help them effectively use job order
information, and in those offices where a significant number of Spanish-
speaking customers are not fluent in English, provide these services in57
Spanish;
!Identify whether or not each customer is an MSFW, provide information about
ES services to MSFWs, and assist those who need help to register for ES
services; 58
!Operate an outreach program in order to locate and contact MSFWs who are
not being reached by the normal intake activities of local ES offices, provide
information about ES services, encourage MSFWs to visit their local ES office,
and deliver labor exchange services on-site if an MSFW cannot or does not59
wish to visit the local ES office; and
!Appoint a state MSFW Monitor Advocate whose duties are to include
participating in on-site local office reviews of MSFW services, reviewing the
state’s outreach plan, monitoring the performance of the state’s complaint60
system, and serving as an advocate to improve services for MSFWs.
The full list of functional requirements for LVERs is listed at 38 USC 4104 (b).52
DOL, Employment and Training Administration (ETA). U.S. Employment Service Annual53
Report, Program Year 1997. p. G-5.
NAACP v. Brennan, no. 2010-72. (D.D.C., August 13, 1974).54
In PY1997, 188,655 MSFWs registered for ES services nationally. Of those61
MSFWs registered, 45% were referred to employment, and of those referred, 75%
were placed in jobs. Funding for ES services to MSFWs typically comes from62
states’ Wagner-Peyser Act base grants; no Wagner-Peyser Act funds are specifically
ear-marked for MSFW services.
In addition to providing labor exchange services to MSFWs, SESAs are
responsible for ensuring that employer-provided housing for MSFWs meets certain63
standards. The regulations at 20 CFR 654 Subpart E require the conduct of a
preoccupancy inspection of employer-provided housing. States vary in their policies
for the conduct of these housing inspections. In some states, the SESA performs the
inspection, while in other states, a separate agency performs the inspection.
Regardless of who conducts the inspection, regulations compel the SESA to verify
that an inspection has been conducted and that the relevant housing standards are
being met by the employer. If the employer-provided housing fails to meet the
applicable standards, the SESA may deny Wagner-Peyser Act recruitment services to64
the employer.
Persons with Disabilities. Section 8(b) of the Wagner-Peyser Act, as amended,
requires that state plans include provisions “for the promotion and development of65
employment opportunities for handicapped persons.” Additionally, SESAs are
required to make job counseling and placement services available to persons with
disabilities. Further, states must designate at least one person in each ES office to be
responsible for ensuring that persons with disabilities receive the services to which
they are entitled. Both the Wagner-Peyser Act and WIA call for SESAs to cooperate
with state vocational rehabilitation agencies in serving persons with disabilities.
Funding for ES services for persons with disabilities typically comes from states’
Wagner-Peyser Act base grants; no funds are specifically ear-marked for these
services, although Governors can choose to use a portion of their Section 7(b) funds
(which will be described in the Funding section of this report) to provide services “for
groups with special needs.”
The ES operates on a PY that runs from July 1 to June 30. ES funds allocated in FY199761
covered ES activities in PY1997, which ran from July 1, 1997 to June 30, 1998.
DOL, ETA. U.S. Employment Service Annual Report, Program Year 1997. p. H-3.62
The Migrant and Seasonal Agricultural Worker Protection Act (P.L. 97-470) requires63
employers to comply with federal and state safety and health standards in the provision of
housing for MSFWs. ETA’s standards for agricultural housing are set forth at 20 CFR
Prior to the passage of WIA, state Wagner-Peyser Act plans were due annually to the65
Secretary of Labor. Under WIA, information regarding state delivery of Wagner-Peyser Act
services must be incorporated into states’ 5-year strategic plans, as required by Section 112
of WIA.
In PY 1997, 398,225 persons with disabilities registered for ES services
nationally. Of those registered, 49% were referred to employment, and of those
referred, 27% were placed in jobs.66
Referred Unemployment Insurance (UI) Claimants. Two essential functions
of the ES system are to assist unemployed individuals in gaining reemployment, and
to conduct the work test for UI claimants. Consequently, UI claimants comprise a
notable portion of the users of ES services. In PY1997, for example, 37% of the 17.967
million ES applicants nationally were eligible UI claimants. While all UI claimants
can receive ES services, certain UI claimants are provided special assistance by ES
local offices: those claimants who have been determined through “profiling” to be at
risk of becoming long-term unemployed.
In November 1993, Congress enacted amendments to the Social Security Act
(P.L. 103-152) requiring each state to set up its own Worker Profiling and
Reemployment Services (WPRS) system. State WPRS systems consist of four basic
steps: (1) profiling of UI claimants to identify their likelihood of exhausting UI
benefits; (2) selection and referral of some claimants with a high probability of68
exhausting benefits to reemployment services; (3) provision of reemployment69
services to referred UI claimants; and (4) collection of information on referred
claimants’ receipt of services and feedback to the UI program for determination of
continuing eligibility for UI benefits. State UI programs are responsible for the first
two steps, while ES and Economic Dislocation and Worker Adjustment Assistance
(EDWAA) service providers share responsibility for the third and fourth steps.70
Participation in reemployment services is a condition of benefit eligibility for referred
claimants; that is, if UI claimants who are referred to reemployment services through
the WPRS system refuse to participate, they risk becoming ineligible for UI benefits.
Once claimants are referred to the ES or EDWAA service provider for
reemployment services, those who are qualified to fill current job openings may
receive job referrals. Others must participate in reemployment services, which the
conference report for P.L. 103-152 described as “job search assistance and job
placement services, such as counseling, testing, and providing occupational and labor
market information, assessment, job search workshops, job clubs and referrals to
DOL, ETA. U.S. Employment Service Annual Report, Program Year 1997. p. G-3.66
Ibid.67
UI claimants who are “work attached” are not put into the selection pool; for example, those68
claimants who are members of a union hiring hall or have a recall date would not be placed
in the selection pool.
There is no federal requirement that all UI claimants identified as likely to exhaust benefits69
be referred to services; rather, the number of claimants referred to services is in most states
a factor of service capacity in local ES offices. In calendar year 1998, only 36.5% of
claimants identified as likely to exhaust benefits were referred to services.
EDWAA (Title III of JTPA) provides employment and training services for workers who70
have lost their jobs and will not be returning to their former employer. WIA repeals JTPA on
July 1, 2000, but services for dislocated workers will be maintained through the dislocated
worker funding stream of WIA.
employers, and other similar services.” The Department of Labor recommends that71
states provide referred claimants with customized service plans and individualized
services tailored to claimants’ reemployment needs.72
The goal of the WPRS system is to provide dislocated UI claimants with
reemployment services early in their unemployment spell so that they can enter new
jobs faster than they would have with later or no assistance. A study based on data
from three early-implementation states (Delaware, Kentucky, and New Jersey)
indicates that in the latter two states, WPRS reduced receipt of UI benefits by more
than one-half week, which translated into savings of $100 per claimant. In New73
Jersey, WPRS increased earnings for referred claimants by an estimated $190 in the
first quarter after the initial claim and $225 in the second quarter. A net-impact74
analysis of WPRS in a nationally representative sample of eight states is currently
underway. 75
One-Stop Delivery System
The goal of the One-Stop Career Center system is to provide a coordinated
service delivery system whereby job seekers and employers have access to numerous
workforce development services at a single neighborhood location. Under WIA, each
local workforce investment area is required to establish a One-Stop delivery system
through which access to core, intensive, and training services is provided, and access76
to the 19 required One-Stop partners is available. While the ES is only one of 1977
required One-Stop partners, the fact that ES services are universally accessible to job
seekers and employers means that the ES is the central component of most states’
One-Stop delivery systems.
H. Rept. 103-404. November 21, 1993. Congressional Record, p. 31444.71
Employment Service Program Letter, no. 1-98, October 17, 1998.72
DOL, ETA. Evaluation of Workers Profiling and Reemployment Services Systems: Report73
to Congress, 1997. p. III-11. (The estimates for Delaware were not statistically significant.)
Ibid., page III-15. (The estimates for Delaware and Kentucky were small and not74
statistically significant.)
The final report for ETA’s Evaluation of Worker Profiling and Reemployment Services75
Systems (Contract no. K-4749-4-00-80-30) is expected to be complete in fall 1999.
Training services include occupational skills training, on-the-job training, skill upgrading76
and retraining, entrepreneurial training, and job readiness training.
The required partners are as follows: the entities that carry out the programs authorized77
under Title I of WIA (i.e., services for Adults, Dislocated Workers, and Youth, Job Corps,
Native American programs, Migrant and Seasonal Farmworker programs, and Veterans’
workforce programs); Employment Service; Adult Education; Postsecondary Vocational
Education; Vocational Rehabilitation; Welfare-to-Work; Title V of the Older Americans Act;
Trade Adjustment Assistance; NAFTA Transitional Adjustment Assistance; Veterans
Employment and Training programs; Community Services Block Grant; employment and
training activities carried out by the U.S. Department of Housing and Urban Development;
and Unemployment Insurance.
Although states were not legislatively mandated to establish One-Stop Career
Center systems until the passage of WIA in 1998, DOL began to encourage states to
streamline the delivery of employment and training services in 1993 through the One-
Stop initiative. In 1994, the first six One-Stop implementation grants were awarded
to Connecticut, Iowa, Maryland, Massachusetts, Texas, and Wisconsin; meanwhile,
19 other states received planning grants. This effort subsequently expanded, and with
the awarding of the final implementation grants in PY1998, all states and territories
have received One-Stop implementation grants. The Department of Labor’s One-
Stop Office estimates that by early-1999, approximately 1,100 One-Stop Centers
across the nation had opened their doors.
One-Stop implementation grants have been awarded to the states and territories
on 3-year grant cycles, with funds for the second and third years contingent upon
satisfactory state performance in the previous year. The grant funds may be used for
implementation activities only. Most of the money is being expended by states for
physical, electronic, and communications infrastructure needed to link various
workforce development programs together, both through co-location and shared
information systems. The last of the implementation grants will expire on June 30,78
2001. Future funding for local One-Stop systems will come, in part, from the adult
and dislocated worker funding streams of WIA.79
Under WIA, each local workforce investment area must establish a One-Stop
delivery system and maintain at least one physical One-Stop Center, which may be
supplemented by affiliated sites. The WIA amendments to the Wagner-Peyser Act at
Section 7(e) require ES services to be delivered through state One-Stop delivery
systems. Further, the interim final regulations that implement the WIA amendments80
to the Wagner-Peyser Act make it clear that local ES offices may not exist outside the
One-Stop delivery system. The interim final regulations also mandate that funds81
authorized under the Wagner-Peyser Act be used to provide core services and may
be used to provide intensive services through states’ One-Stop systems.82
America’s Labor Market Information System (ALMIS)
An integral part of the One-Stop delivery system is the provision of readily
usable and easily accessible LMI to job seekers and employers in order to improve
their understanding of labor markets and to help them make more informed
employment-related decisions. In recent years, DOL has sponsored the development
of ALMIS products to support the One-Stop initiative and to provide, through
Scott Lazerus, Garth Mangum, Stephen Mangum, and Judith Tansky. The Public78
Employment Service in a One-Stop World. Policy Issues Monograph 98-02. (Baltimore: The
John Hopkins University, 1998). p. 6.
WIA, Section 134 (d)(1)(A)(i). 79
Final regulations will replace the interim final regulations by December 31, 1999.80
An ES office may operate as an affiliated site (i.e., not located in a One-Stop center) or be81
linked electronically to the local One-Stop system. 20 CFR 652.202.
modern communication technology, workers and employers with access to
information about federal, state, and local labor markets, job openings, and
employment and training services. As with the One-Stop implementation grants, the
ALMIS products have been funded under the Wagner-Peyser Act. Information about
all of the ALMIS products (13 as of the writing of this report) is available on the
ALMIS website at: [www.doleta.gov/almis]. What follows is a description of several
of the ALMIS products that are designed primarily to assist job seekers in obtaining
employment and employers in finding workers.
America’s Career Kit. “America’s Career Kit” is composed of four electronic
tools: America’s Job Bank (AJB), America’s Talent Bank (ATB), America’s Career
InfoNet, and America’s Learning eXchange. The impetus for AJB dates back to
President Nixon’s 1969 directive to establish a National Computer Job Bank. The
first job bank was established in Baltimore in 1968, and by the end of 1971, more than
100 metropolitan area job banks were operating in 43 states. In 1971, the first
automated state job banks were created when five states — Delaware, Maine,
Oklahoma, Rhode Island, and Vermont — linked their area job banks into statewide
systems. In 1979, DOL and the SESAs created the Interstate Clearance System83
which was replaced in 1983 by the Interstate Job Bank. On Veteran’s Day in 1993,84
AJB was inaugurated as an expansion of the Interstate Job Bank. AJB, a no-fee
service, joined the Internet in February 1995, and is now the largest electronic listing
of job openings in the world. It links to the job banks of the 50 states, the District85
of Columbia, Guam, Puerto Rico, and the U.S. Virgin Islands, as well as to the web
sites of private placement agencies and job postings on numerous corporate home
pages. AJB, which was developed jointly by DOL and the SESAs, is operated by the
New York SESA under a cooperative agreement with DOL.
ATB, which allows job seekers to post their resumes electronically, merged with
AJB in May 1998 to bring a wide cross-section of job seekers and employers into the
public labor exchange system. AJB, as the combined product is known, provides job
seekers with a large pool of active job opportunities, and employers with national
exposure for job openings, as well as access to job seekers’ resumes. Currently, more86
than 900,000 job openings and 300,000 resumes are available daily on AJB. The job
openings come from all over the country and represent all types of work; similarly, the
resumes are entered by job seekers with a wide range of skills and in diverse
occupations.
The third tool in America’s Career Kit, America’s Career InfoNet, provides87
information about national and state labor markets, employment trends, occupational
growth, wages, and training requirements. The newest component of America’s
Manpower Report of the President. Transmitted to the Congress, March 1972. p. 62. 83
For more information about the evolution of the computerized nationwide labor exchange84
network, see CRS Report 92-450, The Interstate Job Bank, by Linda Levine.
See: [http://www.doleta.gov/almis/jobnew1.htm].85
For an updated total, see AJB’s Internet website at: [http://www.ajb.dni.us].86
For more information on America’s Career InfoNet, see: [www.acinet.org].87
Career Kit, America’s Learning Exchange, offers job seekers information about88
education and training opportunities, including technology-based, distance learning,
and traditional courses.
Other ALMIS Projects. In addition to the electronic tools in America’s Career
Kit, DOL also funds other ALMIS projects, which are typically developed through
consortia of states, national agencies, DOL, and other entities. Following is a list of
some of these ALMIS projects which are intended to help employers and job seekers
make informed employment-related decisions:
ALMIS Database:
The purpose of the ALMIS Database is to serve the occupational information
needs of the country. It includes the following information: projected
employment; wage information; training information; employer information;
population and demographic data; economic indicators; and area cost-of-living
profiles. The schema for the ALMIS Database was developed by DOL, the
National Occupational Information Coordinating Committee, and a consortium
of states led by North Carolina. Nearly every state has populated the database
(i.e., filled the database with data), or is in the process of doing so.
ALMIS Consumer Report System:
The purpose of the ALMIS Consumer Report System, which is under
development, is to facilitate informed customer choice regarding employment,
training, and education programs. The ALMIS Consumer Report System will
provide performance data about employment, training, and education programs
in the states. The consortium developing the system is led by Texas and the
other Round I One-Stop implementation states (Connecticut, Iowa, Maryland,
Massachusetts, and Wisconsin).
ALMIS Employer Database:
To meet the needs of job seekers for information about employers, the ALMIS
Employer Database contains information about more than ten million employers
in the United States. Over 40 data elements are included, such as employer
name, mailing address, telephone number, fax number, contact person,
ownership code, industry, etc. The ALMIS Employer Database is available on
the Internet through America’s Career InfoNet. Maine is the lead state in the
ALMIS Employer Database Consortium.
Occupational Information Network(O*NET):
Upon completion, the O*NET database will contain comprehensive information
on job requirements and worker competencies for use by students, career
counselors, job seekers, employers, etc. The first public release of O*NET,
known as O*NET 98, includes data describing more than 1,100 occupations, as
For more information on America’s Learning Exchange, see: [www.alx.org].88
well as LMI from BLS on employment levels, occupational outlook, and wages.
O*NET 98 is available on CD-ROM, diskette, and Internet download. The
complete O*NET database, which will include a larger number of occupations
and descriptors, is scheduled for release in 2001. O*NET is designed to update
and eventually replace the Dictionary of Occupational Titles, which was
developed in 1938 and disseminated through a book format.
Performance Measurement
Lack of Performance Standards. Section 13(a) of the Wagner-Peyser Act, as
amended, authorizes the Secretary of Labor “to establish performance standards for
activities under this Act which shall take into account the differences in priorities
reflected in State plans.” Currently, however, there are no federally-mandated
performance standards for the ES system. While ES performance is primarily
measured through counts of service outputs (e.g., number of individuals registered
with the ES who received a reportable service; number who were interviewed,
counseled, or tested; number who received a job referral or a referral to training;
number who entered employment), DOL has not established minimum standards of
performance for ES activities. Consequently, sanctions are not levied against states
for poor performance because no standards exist to identify “poor.”
Evaluations. There are no national studies that provide indisputable evidence
of the overall effectiveness of basic ES labor exchange services. Because the ES89
must provide universal access, DOL has largely avoided random assignment
experiments which deny services to a control group of subjects. As a result, studies
of ES services that have been conducted over the years generally rely on comparison
group and/or statistical methodologies. Of these studies, one was a comprehensive90
national evaluation of the short-term economic impact of the ES. This study,91
conducted by SRI International and completed in June 1983, was the first in-depth92
and large-scale evaluation of the ES. The study calculated a benefit-cost ratio of
Balducchi, et al., The Role of the Employment Service, p. 483.89
For a summary of the pre-1997 studies that provide evidence regarding the effectiveness of90
the ES, see Balducchi, et al., The Role of the Employment Service, pp. 478-487.
Terry R. Johnson, Katherine P. Dickinson, Richard W. West, Susan E. McNicoll, Jennifer91
M. Pfiester, Alex L. Stagner, and Betty J. Harris. A National Evaluation of the Impact of
the United States Employment Service: Final Report, June 1983. Prepared by SRI
International under DOL contract no. 23-06-79-04. (Hereafter cited as Johnson, et al., A
National Evaluation of the Impact of the United States Employment Service.)
Ibid., p. xv.92
The study showed large positive earnings gains for unemployed women who received job93
referrals, and very small (or zero) gains for unemployed men who received referrals. SRI
International estimated that the short-term value of benefits exceeded costs by approximately
$65 per individual referred.
resources.” In light of the fact that this national evaluation was based on data from94
the early-1980’s, an analysis of the current effectiveness of the ES may be needed.
Accordingly, DOL initiated a study in July 1998 to evaluate the effectiveness of labor
exchange services in a One-Stop environment. The final report for this evaluation95
is scheduled to be completed in 2001.
ETA 9002 Report. States are required to submit to DOL’s Employment and
Training Administration (ETA) quarterly statistical reports of their ES service outputs
(e.g., number of job referrals, number placed in employment, number referred to
training). These data form the ETA 9002 report. The authority to collect ETA 9002
data is scheduled to sunset in August 1999. The Department of Labor has requested96
approval from the Office of Management and Budget for an extension through August
2000. The expiration of the ETA 9002 report is viewed by many, including ETA, as
an opportunity to re-examine how labor exchange services are measured.97
Some states and other stakeholders have expressed objections to the ETA 9002.
Some argue that the reporting requirements are too arduous, while others point out
that the output measures do not take into account the strength of the economy nor
local labor market conditions. Others note that counting methods of measurement,
such as those used by the ETA 9002 system, do not effectively measure the value
added since they do not address what would have happened in the absence of the
program, nor do they measure the return on investment since costs are not adequately
accounted for. Further, in 1991, the GAO noted that “performance of ES has varied98
dramatically among state and local offices,” and recommended “that the Secretary
assist states in the development of measurable goals and performance standards for
their ES labor exchange programs.” The Department of Labor and the states have99
begun efforts to improve labor exchange performance measurement and to identify
the data elements needed to produce effective measures.
Proposed Labor Exchange Performance Measures. In response to The
Government Performance and Results Act of 1993 (GPRA), which mandated
improved accountability of federal programs, ETA launched the Workforce
Development Performance Measures Initiative (WDPMI) to develop a menu of
Johnson, et al., A National Evaluation of the Impact of the United States Employment94
Service, p. xvi.
Evaluation of Labor Exchange Services in a One-Stop Environment. DOL contract no.95
X-6879-8-00-80-30. Contractor: Westat, Inc. of Rockville, MD.
In accordance with the Paperwork Reduction Act of 1980 (P.L. 96-511 ), government96
agencies must receive approval from the Office of Management and Budget (OMB) before
collecting data from ten or more persons. OMB’s approval of the ETA 9002 data collection
activities expires August 31, 1999.
Federal Register, v. 63, n. 113, June 12, 1998. p. 32566. 97
Louis Jacobson, Westat, Inc., speech before the National Center on Education and the98
Economy, Workforce Development Program — High Skills State Consortium. Clearwater,
FL. March 19, 1999.
GAO/HRD-91-88. August 1991. pp. 2, 5.99
performance measures for use in the workforce development system. As a companion
effort, the U.S. Employment Service in June 1997, organized a federal-state Labor
Exchange Performance Measures workgroup consisting of ETA, VETS, the Interstate
Conference of Employment Security Agencies, and state partners. The workgroup
was charged with drafting Wagner-Peyser Act labor exchange performance measures
that would complement the WDPMI effort.
The Labor Exchange Performance Measures workgroup proposed 14 labor
exchange measures. The measurement methods vary according to the method of
service delivery. The recommended measurement approach for the self-service
method of delivery focuses on AJB outputs; specifically, the workgroup
recommended counting growth over time of holdings (i.e., number of job orders and
resumes on AJB), usage (i.e., number of user sessions on AJB), and transactions (e.g.,
number of referral requests made by job seekers and number of resumes downloaded
by employers). The measurement approach for facilitated self-help strategies
combines usage and customer satisfaction measures. The measurement approach for
staff-assisted service delivery calls for assessment of the outcomes, effectiveness, and
impact of the labor exchange system. The 14 proposed labor exchange performance
measures were published in the Federal Register on June 12, 1998 (vol. 63, no. 113).
ETA solicited and received comments on the proposed measures, and plans to revise
the measures.
Performance Measurement in the States. The development of national ES
performance measures has lagged behind the progress of some states in developing100
and implementing measurement systems. Many states have created and tested
various measurement methods, including swipe card technology to count resource
room usage and surveys to measure customer satisfaction. In part, the delays at the
federal level have been due to the use of a committee approach for the development101
and approval of workforce development measures. Additionally, the passage of
WIA affected the work of the Labor Exchange Performance Measures workgroup.
Performance Measurement under WIA. WIA Section 136 requires the
establishment of a comprehensive performance accountability system to assess the
effectiveness of workforce investment activities funded under Title I of WIA (i.e.,
services funded through the adult, dislocated worker, and youth funding streams).102
It is not yet clear how the creation of a performance accountability system mandated
under WIA will effect the development of labor exchange performance measures.
Organization for Economic Co-Operation and Development (OECD). The Public100
Employment Service in the United States. (Paris, France, 1999). p. 107. (Hereafter cited
as OECD.)
Ibid.101
As part of the performance accountability system, WIA requires the Secretary of Labor102
and the Governor of each state to reach agreement on levels of performance for core
performance and customer satisfaction indicators. The negotiated levels of performance must
be incorporated into each state’s 5-year strategic plan as required under Section 112 of WIA.
Failure by a state to meet its expected levels of performance could lead to sanctions, while
exceeding the levels could lead to the receipt of incentive funds. In the Federal Register, v.
Wagner-Peyser Act labor exchange services are not funded under WIA and, therefore,
are not required by law to be measured through the performance accountability
system. However, DOL has indicated that it may adopt the indicators for other DOL
programs, including the ES.103
States have a vested interest in the development of an effective ES measurement
system, whether as part of WIA’s performance accountability system or as a separate
performance measurement system, since it is widely agreed that the lack of clear
performance measures, which might demonstrate the system’s effectiveness, has
contributed to the decline in ES program funding in recent years. In the absence of
concrete evidence of its performance, it has been difficult for the ES to build support
for its funding base.104
Funding
Appropriations
The primary source of funding for activities authorized under the Wagner-Peyser
Act is Federal Unemployment Tax Act (FUTA) (P.L. 76-1) revenues. FUTA imposes
a federal payroll tax on employers; typically, employers pay $56 per worker earning
$7,000 or more. FUTA revenues are credited to the Unemployment Trust Fund105
which, among other things, pays for the costs of administering the UI and ES
systems. 106
ES appropriations fund state allotments, ES National Activities, and One-Stop107108
Career Centers. Currently, 97% of the funding for state allotments comes from the
Trust Fund, while 3% comes from general revenue. As for ES National Activities,
100% of the funding is financed through the Trust Fund. Finally, only 5% of the
funding for One-Stop Career Centers comes from the Trust Fund, while 95% comes
Federal Register, v. 64, n. 56, March 24, 1999. DOL, ETA: Consultation Paper on103
Performance Accountability Measurement for the Workforce Investment System Under Title
I of the Workforce Investment Act. p. 14337.
OECD, p. 101.104
The current gross FUTA tax rate is 6.2%, but employers in states meeting certain federal105
requirements are eligible for a 5.4% credit, making the current net federal tax rate 0.8% on
the first $7,000 paid annually to each employee.
The Unemployment Trust Fund also funds the UI benefits of programs in the 50 states, the106
District of Columbia, Puerto Rico, and the U.S. Virgin Islands; railroad UI; railroad UI
administration; the federal half of the federal-state Extended Benefits Program; loans to
insolvent state UI programs; and UI benefits for federal civilian and military personnel.
In FY1999, ES National Activities funds support administration of Alien Labor107
Certification programs, AJB/Field Centers/Technical Assistance and Training, and
administration of the Work Opportunity Tax Credit and Welfare-to-Work Tax Credit.
In FY1999, One-Stop Career Center funds support implementation grants and America’s108
Labor Market Information System.
from general revenue. The following table presents the ES appropriations for
FY1994 (the year in which the first One-Stop implementation grants were awarded)
through FY1999.
Table 1. FY1994-FY1999 ES Appropriations
(dollars in thousands)
FY1994 FY1995 FY1996 FY1997 FY1998 FY1999
Allotments $832,856 $838,912 $761,735 $761,735 $761,735 $761,735
to States
National $85,492 $76,378 $58,934 $62,735 $62,735 $59,880
activities
One-stop $50,000 $100,000 $110,000 $150,000 $150,000 $146,500
centers
Total $968,348 $1,015,290 $930,669 $974,470 $974,470 $968,115
Source: ETA Budget Office.
State Formula Allocations
The Wagner-Peyser Act originally required a federal-state funding partnership
in which the federal government contributed 50% to the operation of state ES
systems, and the states contributed the other 50%. Initially, the only source of federal
funding for the ES program was general revenues. After passage of the Social
Security Act in 1935, FUTA dollars were used to finance the majority of the federal
government’s contribution to states’ ES systems. Then, during World War II when
the ES was federalized, the federal government became the sole source of funding for
the ES. Following the War and the return of the ES to the states, Congress amended
the Wagner-Peyser Act in 1949 to eliminate the federal-state match. Since that109
time, the federal government has been statutorily responsible for funding the ES
system, but many states opt to supplement federal dollars.110
While the 1949 amendments to the Wagner-Peyser Act gave the federal
government statutory responsibility for funding the ES, the amendments did not
mandate a formula for allocating funds to the states; the distribution of funds was left
to the discretion of the Secretary of Labor. One method used by the Secretary was
performance-based budgeting which was introduced in 1975; funds were allocated to
the states on the basis of their ES performance, measured in terms of the quality and
Ruttenberg and Gutchess, The Federal-State Employment Service, pp. 4-5.109
According to a survey by ICESA, in FY1998, 30 out of 53 states and territories110
supplemented federal ES funds with a total of $110 million. In FY1999, 27 states and
territories expect to supplement federal ES funds with a total of $152.6 million.
quantity of placements. This allocation technique was known as the Balanced111
Placement Formula. At the time JTPA was enacted in 1982, the Secretary of Labor
distributed funds to the states according to an administrative formula which allocated
staff years, then multiplied the staff years by each state’s approved salary and benefit112
rate.
JTPA amended Section 6 of the Wagner-Peyser Act to mandate an allocation
formula for use by the Secretary of Labor. The statutory formula was first used in
FY1984, and remains in effect today. The ETA Budget Office runs the formula each
December based on preliminary data and again the following March based on final
data, then distributes the states’ allocations to the 10 ETA Regional Offices.
Beginning July 1, the 54 states and territories can draw down their resources from the
Regional Office accounts. The funds are available to the states and territories for 3
program years.
In implementing the statutory allocation formula, the ETA Budget Office first
subtracts three pools of money from the total amount appropriated for state
allotments. These monies fund (1) state postage costs paid by ETA centrally, (2)
allotments for Guam and the U.S. Virgin Islands, and (3) a 3% reserve. The 3%
reserve is used to ensure that small states and states which receive a smaller113
allotment percentage than in the previous year have sufficient funds to administer an
ES system. The total allotment for each state is the state’s portion of the 3% reserve
(which may be zero) plus the amount allocated under the basic formula. The basic
formula allots two-thirds of the available funds on the basis of the relative number of
individuals in each state’s civilian labor force (CLF), and one-third on the basis of the
relative number of unemployed individuals in each state. The flow of Wagner-114
Peyser Act funds from Congress to the states is presented in Figure 1.
States’ Use of Funds
Section 7 of the Wagner-Peyser Act, as amended, mandates how states are to use
their ES allotments. Section 7(a) indicates that 90% of the funds are to be used for
the following activities:
!Job search and placement services;
!Recruitment services and special technical services for employers;
!Program evaluations;
Employment and Training Report of the President. Transmitted to the Congress, 1976.111
p. 122.
ETA, Office of Employment Security, fact sheet dated May 12, 1983. Reprinted in112
Employment and Training Reporter, published by The Bureau of National Affairs, Inc.,
Washington, D.C. (May 18, 1983), p. 1180.
States whose civilian labor force (CLF) is below 1 million and whose CLF density is below113
the median. (The CLF density is the ratio of CLF to land area in square miles.)
For a detailed description of the allocation formula, go to: 114
[http://www.doleta.gov/budget/esformd.htm].
!Linkages between Wagner-Peyser Act services and related federal or state
programs;
!Services for displaced workers;
!Development and provision of labor market information;
!Development of a management information system and reports; and
!Administration of the work test and services for UI claimants.
Section 7(b) of the Wagner-Peyser Act directs state Governors to reserve the
remaining 10% of the states’ allotments for the following purposes:
!To provide performance incentives for ES offices and programs;
!To provide services for groups with special needs; and/or
!To support exemplary models of service delivery.
Figure 1. Allocation of Wagner-Peyser Act Funds
to the States
Congress
U.S. Department of Labor
Step 1: Subtractions
(i) postage; (ii) territories; and (iii) 3% reserve
Step 2: Basic Formula Allotment
1/3 based on relative number of unemployed individuals
Step 3: 3% Reserve Allotment
Additional funding for small states and/or states losing in
percentage share from previous year
Step 4: Total Allotment for Each State
Basic formula allotment + any 3% reserve allotment
States
Labor exchange services Governors' reserve for
listed under Section 7(a)Section 7(b) activities
Related Programs
The U.S. Employment Service and SESAs are responsible for administering
certain programs authorized under legislation other than the Wagner-Peyser Act.
What follows is a description of several of the more staff-intensive programs which
facilitate the match between job seekers and employers. Each of the following
programs either directly or indirectly receives Wagner-Peyser Act funding.115
Alien Labor Certification
The Immigration and Nationality Act of 1952, as amended, requires that
employers seeking to hire aliens who are entering the United States for the expressed
purpose of obtaining permanent or temporary work must meet certain conditions. In
general, employers must establish, among other things, that they have attempted
without success to recruit U.S. workers, and that they will pay the prevailing wage in
the area for the type of work that will be performed by the alien workers.
There are five Alien Labor Certification programs administered by the SESAs
and/or DOL. These programs, described below, are as follows: (1) Permanent Labor
Certification; (2) H-2B Temporary Labor Certification; (3) H-2A Temporary Labor
Certification; (4) H-1B Specialty (Professional) Workers; and (5) D-1 Crewmembers.
SESAs typically provide employers with information on the programs and make
prevailing wage determinations. In addition, SESAs process applications and issue
certifications for the first three programs. The last two programs are administered by
the ten ETA Regional Offices.
Permanent Labor Certification. For the admittance of an alien as a permanent
resident, employers must obtain a permanent labor certification. In FY1997, 41,248
applications were received. The five occupations with the most approvals in116
FY1997 were as follows: software engineer; speciality or foreign food cook;
programmer analyst; systems analyst; and cook.
H-2B Temporary Labor Certification. Employers intending to hire aliens for
a period of up to 1 year (with a possibility of renewable for up to 3 years) to perform
temporary nonagricultural work must apply for a H-2B labor certification. The job
must be a one-time occurrence to fill a seasonal, workload, or intermittent need. In
FY1997, 2,189 applications were received. The maximum number of H-2B visas that117
can be issued each fiscal year is 66,000. In FY1997, the five occupations with the
Administration of Alien Labor Certification programs, the Work Opportunity Tax Credit,115
and the Welfare-to-Work Tax Credit is funded under the Wagner-Peyser Act. The Federal
Bonding program is funded under JTPA Title IV, but ES staff, whose salaries are paid
through Wagner-Peyser Act state allotments, provide information to employers and job
seekers about the program and are often involved in the bond issuing process.
Each application may be for more than one job opening.116
There is no corresponding limit to the number of job openings that may be certified under117
the H-2B visas.
most approvals were as follows: tree planter; crab meat processor; forest worker;
cleaner, housekeeping; and stable attendant.
H-2A Temporary Labor Certification. Employers who anticipate a shortage of
U.S. farmworkers and desire to bring non-immigrant aliens to the United States to
perform temporary or seasonal agricultural work must apply for H-2A visas. In
FY1997, 23,352 H-2A job certifications were approved; of these, 62% were in
tobacco. 118
H-1B Specialty (Professional) Workers. Employers intending to hire aliens for
a period of up to 3 years (with a possible extension of up to another 3 years) in
professional occupations or as fashion models must apply for a H-1B labor
certification. In FY1997, 180,739 applications were received. In general, the
statutory limit on the number of H-1B visas issued each fiscal year is 65,000;119
however, the perceived shortage of U.S. information technology workers led the 105th120
Congress to temporarily raise the cap. Of the H-1B applications approved in
FY1997, the top five occupations were as follows: computer-related occupations;
therapists; electrical engineers; accountants/auditors; and university faculty.
D-1 Crewmembers. Employers seeking to hire alien crewmembers to perform
longshore work in Alaskan ports must file attestations (i.e., assurances) with DOL121
agreeing to comply with certain conditions. Typically, fewer than 60 attestations
are filed by shippers each year.
State and federal administration of the ALC programs is funded under the
Wagner-Peyser Act, as a line item under ES National Activities. In FY1999, $36.3
million was appropriated for the ALC programs. ALC funds are allocated to the
states according to a formula based on the number of new applications received and
the number processed in the preceding fiscal year.
Federal Employment Tax Credits
There are two temporary tax credits, the Work Opportunity Tax Credit and the
Welfare-to-Work Tax Credit, that are intended to encourage employers to hire
members of certain groups whom they may otherwise resist hiring. SESAs are
responsible for certifying that newly hired workers belong to the target groups, as well
as for the administration, implementation, and reporting for both programs.
Administration of the two temporary tax credits is funded under the Wagner-
Peyser Act, as a line item under ES National Activities. In FY1999, $20 million was
For more information, see CRS Report 97-714, Immigration: The “H-2A” Temporary118
Agricultural Worker Program, by Joyce Vialet.
There is no corresponding limit to the number of job openings that may be certified under119
the H-1B visas.
For more information, see CRS Report 98-531, Immigration: Nonimmigrant H-1B120
Specialty Worker Issues and Legislation, by Ruth Ellen Wasem.
The conditions are contained in Federal Register v. 60, n. 12, January 15, 1995.121
appropriated for administration of the programs. Of this total, $480,000 was withheld
for postage costs; $20,000 was allotted to the U.S. Virgin Islands; and the remainder
was distributed among the 50 states, the District of Columbia, and Puerto Rico based
on a $64,000 minimum allotment and an allocation formula.122
Work Opportunity Tax Credit (WOTC). For-profit employers are entitled
to apply WOTC against their federal income tax liabilities when they hire a member
of one or more of the following eight groups:
!Welfare recipients and their family members;
!Veterans whose families receive food stamps;
!18-24 year old food stamp recipients;
!18-24 year old residents of empowerment zones (EZ) or enterprise
communities (EC);
!Summer youth (i.e., 16-17 year-old EZ/EC residents who are employed for a
!Vocational rehabilitation referrals;
!Economically disadvantaged ex-felons; and
!Supplemental Security Income recipients.
Employers must apply for and receive certification from the SESA that their new
hire is a member of one of these eight target groups. IRS Form 8850 must be mailed
to the state WOTC Coordinator within 21 days of the new hire’s start date. During
FY1998, SESAs issued 285,322 WOTC certifications to employers.123
Welfare-to-Work (WtW) Tax Credit. The purpose of the WtW Tax Credit is
to encourage for-profit employers to hire long-term welfare recipients. The
certification procedures are similar to those for WOTC. An employer cannot claim
both the WtW Tax Credit and WOTC for hiring the same individual. SESAs issued
46,580 certifications to employers during the first nine months that the WtW Tax
Credit was in existence (ending September 30, 1998).124
Federal Bonding Program
Purpose. Most employers purchase fidelity bonds to protect themselves from
employee dishonesty. Commercially purchased fidelity bond insurance, however,
typically does not cover potentially untrustworthy persons because they are designated
by insurance companies as being “not bondable.” As a result, job seekers who have
demonstrated past behavior which causes employers to doubt their honesty are
DOL, ETA. Field Memorandum no. 10-99. “Guidelines for Employment Service Cost122
Reimbursable Grants for FY1999 Work Opportunity Tax Credit/Welfare-to-Work Tax
Credit.” December 3, 1998.
For more information about WOTC, which is not permanently authorized, see CRS Report123
RL30089, Employment Tax Credits Expiring During the 106 Congress, by Linda Levine.th
For more information about the WtW Tax Credit, which is not permanently authorized, see124th
CRS Report RL30089, Employment Tax Credits Expiring During the 106 Congress, by
Linda Levine.
routinely denied employment. To combat this barrier to employment and facilitate the
employment of these at-risk job seekers, DOL established the Federal Bonding
Program (FBP).
History. The FBP was initiated in 1966 as a demonstration project under the
Manpower Development and Training Act of 1962 (P.L. 87-415). The program was
never codified into law; instead, it remains a DOL-administered project funded under
demonstration authority. Currently, the program is funded under JTPA Title IV
(Federally Administered Programs) which, among other things, funds pilot and
demonstration projects.125
The Department of Labor provides 10 bonds to each state at no charge;126127
beyond that, states must purchase bonds with their own resources. The program’s
funding level for the contract year running from July 28, 1998 to July 27, 1999 is
$150,000, which covers 10 bonds per state and the administrative costs of the128
contractor. Since inception of the FBP, the contractor for the program has been The129
McLaughlin Company, which serves as an agent for Travelers Property Casualty
Company.
Eligibility. Under the FBP, bond coverage is provided for any person whose
background leads employers to question the person’s honesty and deny him or her a
job. The program covers any worker who is “at-risk” due to being in one or more of
the following categories:
!Ex-offenders;
!Ex-addicts with a history of alcohol or drug abuse;
!Individuals with a poor credit record or who have declared bankruptcy;
!Individuals who were dishonorably discharged from the military; and
!Low income youth with a lack of work history.
Following the repeal of JTPA on July 1, 2000, funding for the FBP may continue under125
Section 171 of WIA.
Prior to July 1997, DOL funded all fidelity bonds under the FBP. The number of bonds126
a state could receive was limited only by the total number of bonds funded under the FBP
contract in a given year. In June 1997, the FBP was decentralized; as a result, DOL is no
longer the sole provider of fidelity bonds. There were several reasons for this decision. To
begin with, DOL conjectured that the FBP would be more sustainable if it became a federal-
state partnership. Secondly, declining JTPA resources forced DOL to engage in cost-cutting
measures. Finally, DOL believed that a federal-state partnership would allow DOL to
continue to play an active role in the program, while at the same time encouraging states to
increase their role. (Training and Employment Information Notice no. 5-98, August 3, 1998.)
In FY1998, a total of 1,100 bonds were purchased with state and local funds in 16 states127
(AR, CA, CO, DE, FL, GA, IA, IL, MD, MI, MN, NC, NY, SD, UT, and WA).
In FY1998, four states (KY, OH, OR, and VA) declined the 10 bonds because these states128
had decided not to participate in the FBP.
Federal Bonding Program, The McLaughlin Company, 1725 DeSales Street, N.W., Suite129
To be eligible, the individual must have a firm job offer and a scheduled start
date. Generally, the employer must offer full-time (at least 30 hours per week),
permanent work which cannot be considered self-employment.
Coverage. For states choosing to purchase bonds beyond the 10 offered by
DOL, the bonds can be purchased in packages of 25, 50, 75, and 100; the larger the
package, the cheaper the price per bond, yet all bonds cost less than $100 each. One
bond provides $5,000 coverage for 6 months. Between one and five bonds can be130
purchased per employee for a 6-month period. According to the “Guidelines for
Bonding” issued by The McLaughlin Company, one bond unit (providing $5,000
coverage) has proven sufficient to facilitate most job placements. Fidelity bonds
insure employers for any type of stealing by theft, forgery, larceny, or embezzlement.
There is no deductible amount, i.e., the fidelity bonds provide 100% insurance
coverage. 131
The ES Role. The Department of Labor recommends that ES staff understand
the FBP, inform employers and job applicants about the availability of fidelity bonds,
and familiarize themselves with the bond issuing process. Most local ES offices are
certified to issue fidelity bonds. Issuance of a bond can be requested by either the132
employer or the job applicant, neither of which needs to fill out paperwork for the
bond to be issued. It is the responsibility of the local ES office to fill out the one-page
“Fidelity Bond Certification Form” and to mail it to The McLaughlin Company, who
processes the paperwork and sends the fidelity bond to the employer who hired the
bondee.
Program Results. According to the FY 1998 FBP Annual Report produced by
The McLaughlin Company for DOL, since the program’s inception in 1966, nearly
40,000 people have obtained jobs due to being bonded. Less than 500 of these
individuals have proven to be dishonest workers, therefore the insurance claims
default rate has been 1.2%. The average amount paid per claim is $1,585
If during the 6 months of coverage, the bonded employee demonstrates job honesty, that130
worker can become “bondable for life” under commercial bonding made available to the
employer for purchase from the Travelers Property Casualty Company.
For more information about the FBP, see ETA’s website at: 131
[http://www.ttrc.doleta.gov/onestop/FBP.htm].
FBP information packet entitled “Unique Job Placement Tool: Answers to Questions about132
Fidelity Bonding.” (by The McLaughlin Company).