a Lawndale, Calif., machine shop that made spare parts for McDonnell Douglas, North American and Lockheed, once had 39 machinists on the payroll. Now owner Ray Perry keeps a crew of only three.

Some aerospace executives believe the final answer to the aerospace-defense slowdown is to diversify entirely outside aircraft and space. They believe, for instance, that their companies' unique ability to focus intensive engineering and analytical talents on technical problems would be useful in finding answers to many social woes of the day. But they are finding the transition hard.

"Everyone is talking about opportunities in environmental engineering, urban renewal, housing and systems analysis in health and education," says Lockheed's senior economic adviser, Harry Biederman. "But the problem is that there is no central contracting authority. You have to contract with every city, state and county. The market is fragmented. And it takes an awful lot of systems analysis contracts to take the place of a C5A cargo jet."

A DIVERSIFIED EXAMPLE

Aerospace industry analysts cite Northrop Corp. of Beverly Hills as the industry's best example of diversification. Thomas V. Jones, chiarman, has moved the company away from reliance on any one large contract. The company's current contracts range from building a $175 million telecommunications network for Iran to making fuselages for the Boeing 747 to developing the P530 tactical fighter. The company also has moved heavily into the overseas market, selling its low-cost ($800,000) F5 "Freedom Fighter" to 15 countries.

Rohr Corp. of Chula Vista, now heavily in aerospace, is diversifying into the ground transportation business. Rohr won a $66.7 million contract to build 250 rail cars for the San Francisco Bay Area Rapid Transit District.

While the aerospace industry struggles to diversify, the out-of-work aerospace engineers see themselves as the victims of a shift in national priorities. Not all are bitter.

Jose Jiminez, a 45-year-old former trainer of Apollo astronauts for North American Rockwell who now operates a Tastee Freez ice cream stand in Brea, Calif., says: "I don't feel sorry for myself. I'm just a sign of the times."

In Burbank one laid-off engineer bought a power lawn mower and an edger and started a lawn-cutting business. "Hell, I'm making more money and having a better time than I ever did as an engineer," he says, "And I'm out in the sun all day."

[From the New York Times, June 7, 1970]

U.S. INDUSTRIAL ECONOMY UNPREPARED FOR PEACE

(The following article was written by Prof. Seymour Melman, professor of industrial engineering at Columbia University and editor of a series entitled "Conversion From a Military to Civilian Economy (Praeger, 1970))

The industrial economy of the United States has not been prepared for peace. In 1969, 3.4 million Americans worked in industry on Pentagon orders, 1.1 million civilians were on the Pentagon payroll and 3.4 million Americans served in the uniformed armed forces. Adding those whose livelihood is indirectly dependent on the 7.9 million Pentagon and military-industry employees, about 20 percent of the United States labor force of 77 million (excluding the armed forces) is economically dependent on the Department of Defense.

Until now, there has been little planning effort for converting from military to civilian work. In the military-serving factories, laboratories, and military bases, there has been no effort like the concerted 1944-45 program of conversion to civilian work.

Many thoughtful men have believed that, in a generally expanding economy, fiscal and monetary policies would suffice to facilitate a transfer of men and material from military to civilian tasks. In my judgment, it is unreasonable to expect that labor and other market mechanisms would facilitate a conversion process without substantial economic damage. This estimate is based upon:

The condition of concentration of military work in terms of industry, geography and occupation.

The institutional features that differentiate military from ordinary civilian work. The consequences of long concentration of the nation's research and development capacities on military work.

In 1968, six industries had more than 25 per cent of their labor force dependent on Pentagon orders. They were: ordnance and accessories (76.8 per ecnt); machine shop products (27.8 per cent); electronic components and accessories (38.6 per cent); miscellaneous electrical machinery, equipment and supplies (33.8 per cent); aircraft and parts (72.4 per cent), and other transportation equipment (26.4 per cent).

A few states account for more than half of military industry-Massachussetts, Connecticut, New York, New Jersey, Texas, California and Washington. Finally, there is a concentration of certain occupations in military work. Defense workers made up 6.1 per cent of the nation's employment in 1968, but here are the percentages of certain skilled occupations in military industry:

All engineers, 20 per cent; aeronautical engineers, 59 per cent; electrical engineers, 22 per cent: mechanical and metallurgical engineers, 19 per cent; draftsmen, 14 per cent, and skilled metalworkers, 10-25 per cent.

The density of military work by industry, geography and occupation means that localized rather than average national conditions determine capability for converting from military to civilian work.

Special features of military industry are also important. In these factories, cost-minimization is of secondary importance, and there is virtually no market test of the functional adequacy and price of key products. These conditions have produced a trained incapacity in much of military industry for serving a civilian economy. This affects general management, the design of products, production engineering and the marketing function. Thus, designing for the Pentagon often means priority to esoteric requirements remote from civilian needs and selling to the Pentagon has included diplomacy and negotiation that are remote from the marketing practices of civilian industry.

More than half of the nation's research and development budgets and manpower work for the military. The combined effect includes elaborate technology for military purposes and depleted technologies in many civilian industries. Polaris submarines are produced at an acceptable cost of $12 per pound, while merchant ships must be produced at less than $1 per pound.

Air frames have been manufactured so that they cost more than their weight in gold, but these are inconceivable as design and manufacturing practices for commercial vehicles.

Electro-mechanical instruments about the size of an egg are constructed at $15,000 per unit, and that is why the electronics industry of Japan, free of military priorities, designs and produces fine, low-cost electronics products for the world market. Military industry has lost the traditional American industrial capacity for offsetting high wages with high levels of productivity.

Firms that specialize in weapons will have the greatest difficulty in attempting a conversion of facilities and organizations to civilian use. Military divisions of larger civilian firms will have the best chance for successful conversion because of the professional assistance they can get from parent enterprises.

Plans for occupational conversion are as important as the best efforts for conversion of industrial plants. While substantial leadtime is needed for planning enterprise conversion, individuals should be able, within one year, to train for substantially new occupations.

As institutions, many of the firms and laboratories in military work are not readily convertible, but there is a fine chance for retraining individuals and regrouping them in new organizations that are civilian-oriented. Occupational conversion requires imaginative support from the Federal Government in the form of a "bill of rights for military industry employes," to sustain men from military industry, laboratories, and bases for a year while they are training for new occupations. Such an investment would create important new productive assets for the whole nation.

The 600-odd major military bases within the United States and their one million employes need economic development planning, requiring on the average, about one year of leadtime.

The market and product potentials for the veterans of military industry include the whole array of industries, services and facilities that have been allowed to deteriorate during 25 years of military priority. The agenda for public and private investments ranges from city rebuilding, housing, water supplies and medical facilities to reconstruction of depleted industries like railroads, shipbuilding and important parts of machinery production.

If the Indochina war is ended, more than $20-billion per year will be saved, and sensible recasting of United States military security policies-to exclude overkill ildups (ABM and MIRV) and Vietnam-type wars-can yield further annual tagon budget savings of as much as $30-billion.

These funds represent a vast new market potential, but will not be sufficient for an American reconstruction agenda that I judge to need not less than $70billion per year for at least a decade. Add to this a reasonable investment for economic development of 30 million Americans in poverty and the annual new productive outlays for the nation would exceed $100-billion.

Thus, conversion of part of military industry and manpower to use $50-million of potential Pentagon budget savings would start the nation on the road to civilian priority use of public-responsibility money, in a perspective that includes a shortage expecially of skilled labor for the rest of the century.

[From the New York Times, June 15, 1970]

SKILLED WHITES AFFECTED MOST BY JOBLESS RISE-AIRCRAFT, AEROSPACE, ARMS, AND AUTO INDUSTRIES ARE FOUND CHIEF VICTIMS-UNEMPLOYMENT IS CENTERED AMONG WORKERS IN MIDDLE WEST AND ON THE COAST WASHINGTON, June 14-The Labor Department said today that the nation's sharp rise in unemployment this year had been felt most by skilled white workers in the aircraft, aerospace, weapons and automobile industries in the Middle West and on the West Coast.

"This suggests that cutbacks in the defense and aerospace fields, the impacts of which are also being felt in many other industries, have been primary factors in halting the growth of factory employment since mid-1969," an analysis by the Bureau of Labor Statistics said.

The housing slump and slower automobile sales also added to joblessness, it said.

Unemployment has climbed by 1.3 million to a total of 4.1 million persons so far this year, increasing the national jobless rate from 3.5 percent to 5 percent of the civilian labor force.

LESS IMPACT ON BLACKS

Unemployment among Negroes has been less severe, primarily because they have never been largely represented in the industries showing substantial job losses since mid-1969, the report said.

It said that employment in the last 10 months had dropped 21.1 per cent in ordnance and accessories; 9.1 per cent in aircraft and parts production, and 13.2 per cent in motor vehicles and equipment.

Joblessness has been less severe in other industries, but shows signs of spreading, the report said.

"In the other goods-producing sectors of the economy-mining, construction and agriculture-employment has remained at a virtual standstill since last fall," it said.

And while service jobs grew throughout 1969, there has been virtually no further growth since February, it said.

"Although unemployment has been rising across the nation," the Labor Department said, "some areas have been hit much harder than others. Since industries bearing the brunt of the slowdown are concentrated in the Midwest and the Pacific Coast, it is these areas which have experienced the sharpest rise in unemployment."

"The Pacific Coast area, which contains only one-eighth of the nation's labor force, has accounted for about one-fifth of the national increase in state-insured unemployment during the April, 1969-April, 1970 period," the report said. "The principal factor accounting for the sharp rise in joblessness in this area is the reduction in aerospace and defense-related production.

"The unemployment rise in the Midwest is attributable primarily to cutbacks in automobile production and to a general weakness in durable goods production, which is heavily concentrated in this area."

MEN AFFECTED MOST

The pattern of industry slowdowns has mostly affected men, although joblessness has also climbed for women and teen-agers, the report said. Since December, 600,000 men have joined jobless rolls along with 400,000 women and 200,000 teen-agers.

"One of the surprising facts about the recent rise in unemployment has been the extent to which it has affected workers in high-skill jobs," the bureau said.

49-327-70-12

"The jobless rate for the professional and technical group has now returned to a level last attained-and then for only a very brief period-in 1963," it said. The rate was slightly more than 2 per cent.

Unemployment among blue-collar workers climbed from 4.3 per cent in December to 6.2 percent in May, with the sharpest rise also among skilled men, it said.

[From the Washington Post, July 22, 1970]

592,000 DEFENSE JOBS SEEN CUT IN 13 MONTHS

(By Michael Getler)

Military budget cutbacks have cost workers in the defense industry some 367,000 jobs in the past eleven months, according to latest Pentagon estimates, and the rate at which workers are being displaced is quickening.

Another 592,000 industry employees face lay-off notices within the next 13 months. (George P. Shultz, newly appointed director of the Office of Management and Budget, told the Joint Economic Committee of Congress on Monday that two million individuals, including military personnel, would be "affected" by the cutbacks between July 1969 and July 1971.)

Because of the general six to eight month backlog of military equipment orders, cuts made last fall in the Pentagon's fiscal 1970 budget are only now beginning to be reflected in higher unemployment rates. In May of last year, unfilled defense orders with manufacturers stood at $22.4 billion. The current backlog is now down to $19.4 billion.

According to Assistant Secretary of Defense Robert C. Moot, the Pentagon's Comptroller, a Bureau of Labor Statistics study has calculated defense-related employment in the private sector of the economy at 3.4 million jobs in fiscal 1969. Speaking in Washington yesterday to members of the President's commission of Personnel Interchange, Moot said "we are anticipating that this will fall to 2.4 million by the end of fiscal 1971," on June 30 of next year.

Moot also estimated that the loss of industrial jobs will have a greater impact on the national unemployment picture than an equally sized cutback in military personnel since so many of the younger ex-servicemen go on to school.

Between June 1969, and May 1970, some 471,000 military and civilian personnel working within the Defense Department also have been released, with all but 95,000 of these coming from the uniformed services.

Precisely how many of the displaced defense workers, civil servants and military personnel remain on the unemployment roles is impossible to determine accurately. Moot did point out that last June the national unemployment rate was 3.4 per cent and that since then the ranks of those out of work has swelled by 1,137,000 and boosted the rate to 4.7 per cent.

"We do know," Moot said, "that the 838,000 total reduction in defense has been an influencing factor, just as the 803,000 yet to be reduced will have an influence."

In addition to the projected industry cutbacks, the Pentagon plans to scale down the armed forces by another 175,000 men and the civilian defense establishment by some 36,000 by June 1971.

[From the Baltimore Sun, July 23, 1970]

MILLION-JOB LOSS EXPECTED BY 1971-PREDICTION BY PENTAGON'S ECONOMISTS IS GLOOMIER

WASHINGTON, July 22 (AP)—Broadening their predictions, Pentagon economists now forecast that cuts in military spending will cost about a million jobs in defense and related industries by mid-1971.

This is about 360,000 more civilian job losses than were projected by defense officials last winter when the Nixon administration sent its fiscal 1971 budget to Congress.

The projections cover a two year period ending next June 30.

Through May, defense industries jobs were down by 367,000 which is interpreted to mean a loss of about another 600,000 by July of next year. The tempo of unemployment is expected to pick up because backlogs of unfilled defense orders are being exhausted.

2,400,000 TOTAL

Robert C. Moot, the Pentagon budget director, has predicted that defenserelated employment will fall to about 2,400,000 workers by next summer. Officials have said that it is too early to estimate how many more production workers will be laid off because of the next budget now being drafted. Key weapons and manpower decisions for fiscal 1972 have not yet been made, but all signs point to an even tighter crimp in defense spending.

The February projection of about 540,000 job losses was based on an analysis of the impact of military buying cutbacks on primary defense industry, that is, the companies that actually produce military hardware and other supplies.

The higher estimate now being used takes account, in addition, of industries that supply materials to defense contractors—for example, cotton mills furnishing goods to uniform manufacturers.

Studies by the bureau of labor statistics indicate that the heaviest impact in joblessness in the defense industry has fallen on highly skilled workers, many of them in the aerospace and defense-related segment of the durable goods industry. The impact has been heaviest in the Pacific coast and Midwestern areas. Under the fiscal 1971 defense budget the allotment for procurement totals $18.8 billion, down 33.6 per cent from two years ago.

ECONOMIC CONVERSION: AN ANTIDEPRESSION SAFEGUARD?

(By Annie F. Haviland)

Washington, D.C., August 30 (UPI).—A plan is taking shape here for the conversion of the Nation to a more peace-oriented economy.

Advocates claim the concept would translate rhetoric about revising national priorities into action, give people jobs and perhaps even turn the southwestern U.S. desert into a rich garden spot.

The idea is "Economic Conversion."

Without it, according to congressional, labor, and business leaders supporting the plan, taxpayers will be buying fancy new weapons systems after Vietnam just so big defense firms can stay in business and the Nation can avoid massive unemployment.

According to the Labor Department, one of every 10 skilled or unskilled workers in the labor force is employed in defense-related work. Direct military production also represents about 8 percent of the Nation's total output of goods and services, known as the Gross National Product.

In World War II, economic conversion was the frantic process of retooling auto factories and other peacetime plants to produce planes, tanks, and weapons. Under the new approach, the conversion would be from military to peaceful purposes or as the Bible puts it-"They shall beat their swords into plowshares." For example:

Retooling an airplane factory to make pre-fab housing or mass transit vehicles.

Retooling a tank factory to make mobile health clinics in trailer-like bodies.

Equipping chemistry labs now developing materials for missiles and rocket fuels with facilities to research antipollution devices for water and air disposal of solid waste.

Retraining people to do these jobs would be a part of "conversion."

These suggestions are among those made at congressional hearings on economic conversion.

Last year, before the Defense Department (DOD) announced job cutbacks eventually affecting an estimated 1.5 million employees, Senator George McGovern D-S.D., and 30 Senate cosponsors introduced legislation which would require firms competing for defense contracts to start preparing for economic conversion. Under this approach, contracts would not be granted to companies unless they outlined ways their employees and facilities could be used for civilian production in case of defense cutbacks. This plan is not expected to get anywhere this year but almost certainly will be reintroduced when the new Congress meets next January.