2.10.8 Report and display procedures. 



Other direct benefits should be identified by com- 

 ponent and added onto the benefits of the benefit- 

 cost analysis. The method used to value the bene- 

 fits should be presented in the report. Provide a 

 tabular breakdown of all other direct benefits 

 claimed for the project. 



Section XI— NED Benefit Evaluation 

 Procedures: Unemployed or 

 Underemployed Labor Resources 



2.11.1 Introduction. 



The economic effects of the direct use of other- 

 wise unemployed or underemployed labor re- 

 sources during project construction or installation 

 may, under certain conditions, be included as a na- 

 tional economic development (NED) benefit. Be- 

 cause of the dynamic nature of unemployment situ- 

 ations, the appropriateness of these benefits will be 

 determined in consideration of economic conditions 

 existing at the time the project is submitted for au- 

 thorization and for appropriations to begin construc- 

 tion. This section provides procedural guidance in 

 the evaluation of NED benefits resulting from In- 

 creased employment of these labor resources. Use 

 the procedures described In 2.11.4 to calculate 

 these benefits for all structural and nonstructural al- 

 ternatives considered during the planning process. 



2.11.2 Conceptual basis. 



(a) The social cost of a project is less than the 

 market contract cost In situations in which other- 

 wise unemployed or underemployed labor re- 

 sources are used in project construction. The op- 

 portunity cost of employing otherwise unemployed 

 workers In project construction or installation is 

 equal to the value of leisure time foregone by such 

 workers. Because society does not give up any al- 

 ternative production of goods and services and be- 

 cause it would be difficult to measure the value of 

 leisure time foregone, a zero opportunity cost is 

 used in these procedures. The opportunity cost of 

 employing otherwise underemployed workers 

 equals their wlthout-project earnings, which, by 

 virtue of their underemployment, are less than their 

 market cost. The most straightforward way to re- 

 flect the effects of employing unemployed or under- 

 employed labor resources would be to reduce by 

 the appropriate amount the project construction 

 costs In the NED account, but this method would 

 cause accounting difficulties in appropriations, cost 

 allocation, and cost shanng. Therefore, these ef- 



fects are treated as a project benefit in the NED 

 account. 



(b) Conceptually, any employment, anywhere in 

 the Nation, of otherwise unemployed or underem- 

 ployed resources that results from a project repre- 

 sents a valid NED benefit. However, primanly be- 

 cause of identification and measurement problems 

 and because unemployment Is regarded as a tem- 

 porary phenomenon, only those labor resources 

 employed onsite in the construction or Installation 

 of a project or a nonstructural measure should be 

 counted. Benefits from use of otherwise unem- 

 ployed or underemployed labor resources may be 

 recognized as a project benefit If the area has sub- 

 stantial and persistent unemployment at the time 

 the plan is submitted for authorization and for ap- 

 propriations to begin construction. Substantial and 

 persistent unemployment exists in an area when: 



(1) the current rate of unemployment, as deter- 

 mined by appropriate annual statistics for the most 

 recent 12 consecutive months, is 6 percent or more 

 and has averaged at least 6 percent for the qualify- 

 ing time periods specified in paragraph (2) and 



(2) the annual average rate of unemployment has 

 been at least; (i) 50 percent above the national 

 average for three of the preceding four calendar 

 years, or (ii) 75 percent above the national average 

 for two of the preceding three calendar years, or 

 (ill) 100 percent above the national average for one 

 of the preceding two calendar years. 



(c) Only the portion of project construction activi- 

 ty located In such an area Is eligible for employ- 

 ment benefits as calculated in accord with the pro- 

 cedures specified below. Any benefit claimed 

 should be clearly justifiable both In terms of avail- 

 ability of amounts of unemployed and/or underem- 

 ployed labor and their skills and occupations. 



2.11.3 Planning setting. 



(a) Without-project condition. The wlthout-project 

 condition Is the most likely condition expected to 

 exist In the future In the absence of a project, in- 

 cluding known changes in law or public policy. The 

 evaluation of NED benefits associated with the use 

 of othenwise unemployed and underemployed labor 

 resources is linked to the number by which these 

 resources would be reduced over time without a 

 project. 



(b) With-project condition. The with-project condi- 

 tion is the most likely condition expected to exist in 

 the future with a given project alternative. There is 

 a different with-project condition and thus a differ- 

 ent employment benefit for each alternative plan. 

 Currently, the employment benefit cannot be esti- 

 mated directly on the basis of a comparison of the 



93 



