Left Behind: Reforming Trade Adjustment Assistance for the 21st Century
July 23, 2019
Sherria’s not alone. Lordstown’s General Motors is one of the largest in the nation, employing 729 hourly wage workers and functioning as the primary economic driver of the town. Furthermore, the issue is one of national attention, largely due to President Trump’s promises to save the plant, and because Lordstown has become a model for the now commonplace layoff story.
The Failure of Trade Adjustment Assistance
It was never meant to be thus. President Kennedy’s Trade Expansion Act of 1962, which created the Trade Adjustment Assistance program (TAA), was designed to offer relief. Workers could file in groups or through their firms or unions for trade adjustment aid. A properly functioning TAA could speedily return unemployed Americans to remunerative work through retraining and reallocation funding whilst helping them to recoup lost wages with extended unemployment insurance and tax deductions.
Sadly, TAA has seriously failed American workers. The program has consistently operated with subpar budgets and employed lackluster active labor programs. In Lordstown, Ohio: only 30 percent of Lordstown GM workers are enrolled in TAA. Most dropped out of retraining or general education classes and many are too old to return to high school. Furthermore, many who have found reemployment are paid less or have quit due to lack of skills suited for a modern job. The U.S. spent only 0.1% of its GDP on such active labor market policies like TAA in 2017, compared to almost 1% in France or 0.66% in Germany. This and TAA’s “small-bore programs” make scaling adjustment benefits and programs difficult.
Reforms for Trade Adjustment Assistance
Any substantive reform to this program must address it’s passive and active labor market failures. As of the 2002 TAA reforms, for example, TAA and NAFTA-TAA only provide income maintenance for 52 weeks out of the 78 weeks offered for paid training. In order to help workers stay in the training programs, instead of prematurely dropping out for low-paying jobs, TAA should extend income maintenance for the full 78 weeks as a component of passive labor market reform.
A TAA wage insurance program, designed to partially recoup the lost wages in the time workers are unemployed, could also address this deficiency. One such model for a wage insurance program is offered by Lael Brainard et al. (2005) of the Brookings Institution. This program would provide 50 percent of lost earnings or up to $10,000, to those workers who gain reemployment – a program that would ultimately cost $25 per worker.
Current TAA programs suffer from a lack of training funds and resources, especially in their distribution: nine of all fifty states receive 53% of total TAA funding, while the bottom 23 receive a little under 10%. Adjusting these local deficits highlights why it’s important that TAA’s emphasis on local job demand remain in place. If the goal is resuscitating communities, then poorly allocated resources or mandatory dislocation seems contradictory to the goals of TAA. One way to maintain this place-based approach is the Investing in Manufacturing Communities Partnership (IMCP) initiative proposed by the Obama administration in 2014, which could be integrated into TAA. The IMCP would offer intensive grant and investment assistance to sectors such as workforce and training, research and development, infrastructure, trade investment, and capital access for startups.
Along with making sure that workers are taken care of after crises, the federal government would do well to institute more pro-active labor approaches to both trade-related and general job displacement. Mark Muro and Joseph Parilla have offered a Universal Basic Adjustment Benefit idea which would bundle relocation and training grants, better job-search counseling, and resources for local communities to drive job growth, that could be integrated into a larger TAA framework. William Galston et al. (2018), like the Obama administration in 2015, has offered a federal financial aid program for workers who want career education, whether at short-term or non-degree programs, as well as apprenticeships in well-paying industries, such as metal fabrication or carpentry. Programs like this could better target how workers can find remunerative employment in booming manufacturing and service sectors.
Trade Adjustment Assistance has the potential to be an effective program, especially because the political climate is ripe for reform, and the recent economic boom has provided the necessary fiscal space to accommodate higher expenditures. The risks posed by future trade-displacement and automation also require a serious reassessment of the Trade Adjustment Program and its failed legacy. Of course, reforming Trade Adjustment Assistance will still be difficult and may still fall short of the mark. Nevertheless, ensuring that American workers have access to quality retraining programs and income assistance may go a long way towards alleviating the genuine suffering of working families and aid in what President Kennedy called “tearing down walls” for a free economic world order.
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http://opportunityamericaonline.org/wp-content/uploads/2018/10/WCG-final_web.pdf [Pgs. 3-5, 16-17.]