2.5 Million Arms Jobs Are at Risk : * Defense: The government should help communities that suffer major losses of military-related business over the next 10 years, a congressional study says.

Cuts in defense spending could eliminate up to 2.5 million jobs nationwide over the next 10 years, and the federal government should help hard-hit communities by aiding displaced workers, according to a congressional report issued Friday.

The Office of Technology Assessment said the cutbacks resulting from the Cold War’s end will have only a “modest” impact on the economy, and will be less severe than those accompanying the end of World War II, the Korean War and the Vietnam War.

Still, the nonpartisan congressional agency said communities where defense spending is concentrated could suffer sudden and severe financial setbacks, and government should help ease the transition by arranging for retraining for displaced workers and aiding small businesses.

The report, requested by Sens. Edward M. Kennedy (D-Mass.) and Claiborne Pell (D-R.I.), was optimistic about the nation’s ability to adjust to the end of the Cold War’s massive military budgets.

Even in California, the defense employment leader, the share of state economic activity generated by military spending has shrunk to 7.8% from 15.6% in 1964, the report said.

“Some defense-dependent communities might still escape serious problems if their local economies are strong and diverse enough to take up the slack,” it said.

There are 6 million defense jobs nationwide. A 40% cut in military spending in the next decade, the study said, would eliminate 1.4 million defense industry jobs, 709,000 positions in the military services and 347,000 jobs held by civilians working for the Defense Department.

Many of the jobs will be eliminated by attrition as workers quit or retire, so the actual number who lose jobs is likely to be substantially less than 2.5 million, the report said.

“Compared to the size of the national economy, the current cutbacks in defense spending do not loom very large,” the study said, noting that 119 million Americans were working in 1991.

The nation’s most startling shift to civilian spending took place after World War II, from 1945 to 1948, when 33.4 million people, including 10.6 million members of the armed forces, left defense-related jobs. Many economists feared a depression, but the opposite happened: “Wartime savings and pent-up demand” produced a business boom, the report noted.

Employment plunged 2.5 million in the three years after the Korean War ended in 1953. Spending for the Vietnam War peaked in 1968, and military-related employment had dropped by 3 million by 1974.

As the country moves into the post-Cold War era, the economy “is not as robust as in earlier defense” spending declines because of the competitive challenge from Japan, the report noted. On the positive side, there are a greater number and variety of jobs than ever, and there are government programs to help distressed communities and displaced workers.

The losses in military jobs can be compared to the regional decline of coal mining, textiles and farming, the report said. “When and if defense spending drops to a permanently lower level, the story might be the same in highly defense-dependent communities--severe, long-lasting local effects but only minor impacts on the national economy,” the study noted.

However, for those who are laid off, it will be hard to get new jobs that offer the same salaries and benefits.

“By and large, defense jobs pay well, and in private industry are heavily tilted to manufacturing,” the report said. “For production and non-supervisory workers, defense jobs provide substantial middle-class incomes and good benefits that are hard to find elsewhere in the American economy of the 1990s.”