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Left Behind: Reforming Trade Adjustment Assistance for the 21st Century

July 23, 2019
Sherria Duncan is a second-generation General Motors’ employee and a mother. She has been employed at GM’s Lordstown, Ohio plant since she was a teenager, working alongside her mother and providing for her younger daughter, Olivia. She is soon to be unemployed. In March of 2019, General Motors announced an end to production and the movement of the plant overseas. Preventative efforts by the United Auto Workers have been of no avail, and workers like Sherria are terrified because they don’t have “[a] safety net.”[1]

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.[2]

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.[3]

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.[4] 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.[5]

Image: The United States' active labor market spending as a percentage of GDP in 2014 paled in co...

Image: The United States' active labor market spending as a percentage of GDP in 2014 paled in comparison to France or Germany, who have actively invested in better worker retraining and readjustment programs. Source: The Brookings Institution.

Reforms for Trade Adjustment Assistance

Any substantive reform to this program must address it’s passive and active labor market failures.[6] 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.[7]

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.[8]

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%.[9] 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.[10]

Image: Of over 12 million unemployed American workers in 2017, only 23,314 participated in TAA-fu...Image: Of over 12 million unemployed American workers in 2017, only 23,314 participated in TAA-funded retraining programs. Source: Third Way.

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.[11] 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.[12]

Conclusions

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.[13] The risks posed by future trade-displacement and automation also require a serious reassessment of the Trade Adjustment Program and its failed legacy.[14] 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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  • The views expressed on the Student Blog are the author’s opinions and don’t necessarily represent the Wharton Public Policy Initiative’s strategies, recommendations, or opinions.

References

  [1]https://www.nytimes.com/interactive/2019/05/01/magazine/lordstown-general-motors-plant.html

  [2]https://www.nytimes.com/interactive/2019/05/01/magazine/lordstown-general-motors-plant.html

  [3]https://piie.com/blogs/trade-investment-policy-watch/fate-trade-adjustment-assistance-basics

   [4]https://www.washingtonpost.com/business/economy/from-22-an-hour-to-11-gm-job-cuts-in-ohio-show-a-hot-economy-is-still-leaving-parts-of-america-behind/2019/03/05/241b2784-3b80-11e9-a2cd-307b06d0257b_story.html?utm_term=.76b3135e7635

  [5]https://www.brookings.edu/blog/the-avenue/2017/01/10/maladjusted-its-time-to-reimagine-economic-adjustment-programs/

  [6]https://www.brookings.edu/testimonies/how-effective-are-existing-programs-in-helping-workers-impacted-by-international-trade/

  [7]https://piie.com/commentary/speeches-papers/reforming-trade-adjustment-assistance-keeping-40-year-promise

  [8]https://www.brookings.edu/research/insuring-americas-workers-in-a-new-era-of-offshoring/

  [9]https://www.thirdway.org/memo/unemployed-workers-need-modern-support-not-1960s-band-aids

  [10]https://obamawhitehouse.archives.gov/blog/2014/11/05/investing-manufacturing-communities-partnership-launches-second-round-competition

  [11]https://www.brookings.edu/blog/the-avenue/2017/01/10/maladjusted-its-time-to-reimagine-economic-adjustment-programs/

  [12]http://opportunityamericaonline.org/wp-content/uploads/2018/10/WCG-final_web.pdf [Pgs. 3-5, 16-17.]

  [13]https://www.nytimes.com/2015/06/26/business/economy/house-approves-trade-bills-expansion-of-worker-aid.html?_r=0

  [14]https://www.brookings.edu/blog/up-front/2018/12/13/the-robots-are-coming-lets-help-the-middle-class-get-ready/

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  • <h3>National Center for Education Statistics</h3><p><strong><img width="400" height="80" alt="" src="/live/image/gid/4/width/400/height/80/479_nces.rev.1407787656.jpg" class="lw_image lw_image479 lw_align_right" data-max-w="400" data-max-h="80"/>The National Center for Education Statistics (NCES) is the primary federal entity for collecting and analyzing data related to education in the U.S. and other nations.</strong> NCES is located within the U.S. Department of Education and the Institute of Education Sciences. NCES has an extensive Statistical Standards Program that consults and advises on methodological and statistical aspects involved in the design, collection, and analysis of data collections in the Center. To learn more about the NCES, <a href="http://nces.ed.gov/about/" target="_blank">click here</a>.</p><p> Quick link to NCES Data Tools: <a href="http://nces.ed.gov/datatools/index.asp?DataToolSectionID=4" target="_blank">http://nces.ed.gov/datatools/index.asp?DataToolSectionID=4</a></p><p> Quick link to Quick Tables and Figures: <a href="http://nces.ed.gov/quicktables/" target="_blank">http://nces.ed.gov/quicktables/</a></p><p> Quick link to NCES Fast Facts (Note: The primary purpose of the Fast Facts website is to provide users with concise information on a range of educational issues, from early childhood to adult learning.): <a href="http://nces.ed.gov/fastfacts/" target="_blank">http://nces.ed.gov/fastfacts/#</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
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  • <h3>Federal Aviation Administration: Accident & Incident Data</h3><p><img width="100" height="100" alt="" src="/live/image/gid/4/width/100/height/100/80_faa-logo.rev.1402681347.jpg" class="lw_image lw_image80 lw_align_left" srcset="/live/image/scale/2x/gid/4/width/100/height/100/80_faa-logo.rev.1402681347.jpg 2x, /live/image/scale/3x/gid/4/width/100/height/100/80_faa-logo.rev.1402681347.jpg 3x" data-max-w="550" data-max-h="550"/>The NTSB issues an accident report following each investigation. These reports are available online for reports issued since 1996, with older reports coming online soon. The reports listing is sortable by the event date, report date, city, and state.</p><p> Quick link: <a href="http://www.faa.gov/data_research/accident_incident/" target="_blank">http://www.faa.gov/data_research/accident_incident/</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>Federal Reserve Economic Data (FRED®)</h3><p><strong><img width="180" height="79" alt="" src="/live/image/gid/4/width/180/height/79/481_fred-logo.rev.1407788243.jpg" class="lw_image lw_image481 lw_align_right" data-max-w="222" data-max-h="97"/>An online database consisting of more than 72,000 economic data time series from 54 national, international, public, and private sources.</strong> FRED®, created and maintained by Research Department at the Federal Reserve Bank of St. Louis, goes far beyond simply providing data: It combines data with a powerful mix of tools that help the user understand, interact with, display, and disseminate the data.</p><p> Quick link to data page: <a href="http://research.stlouisfed.org/fred2/tags/series" target="_blank">http://research.stlouisfed.org/fred2/tags/series</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>HUD State of the Cities Data Systems</h3><p><strong><img width="200" height="200" alt="" src="/live/image/gid/4/width/200/height/200/482_hud_logo.rev.1407788472.jpg" class="lw_image lw_image482 lw_align_left" srcset="/live/image/scale/2x/gid/4/width/200/height/200/482_hud_logo.rev.1407788472.jpg 2x, /live/image/scale/3x/gid/4/width/200/height/200/482_hud_logo.rev.1407788472.jpg 3x" data-max-w="612" data-max-h="613"/>The SOCDS provides data for individual Metropolitan Areas, Central Cities, and Suburbs.</strong> It is a portal for non-national data made available through a number of outside institutions (e.g. Census, BLS, FBI and others).</p><p> Quick link: <a href="http://www.huduser.org/portal/datasets/socds.html" target="_blank">http://www.huduser.org/portal/datasets/socds.html</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>NOAA National Climatic Data Center</h3><p><img width="200" height="198" alt="" src="/live/image/gid/4/width/200/height/198/483_noaa_logo.rev.1407788692.jpg" class="lw_image lw_image483 lw_align_left" srcset="/live/image/scale/2x/gid/4/width/200/height/198/483_noaa_logo.rev.1407788692.jpg 2x, /live/image/scale/3x/gid/4/width/200/height/198/483_noaa_logo.rev.1407788692.jpg 3x" data-max-w="954" data-max-h="945"/>NOAA’s National Climatic Data Center (NCDC) is responsible for preserving, monitoring, assessing, and providing public access to the Nation’s treasure of <strong>climate and historical weather data and information</strong>.</p><p> Quick link to home page: <a href="http://www.ncdc.noaa.gov/" target="_blank">http://www.ncdc.noaa.gov/</a></p><p> Quick link to NCDC’s climate and weather datasets, products, and various web pages and resources: <a href="http://www.ncdc.noaa.gov/data-access/quick-links" target="_blank">http://www.ncdc.noaa.gov/data-access/quick-links</a></p><p> Quick link to Text & Map Search: <a href="http://www.ncdc.noaa.gov/cdo-web/" target="_blank">http://www.ncdc.noaa.gov/cdo-web/</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>National Bureau of Economic Research (Public Use Data Archive)</h3><p><img width="180" height="43" alt="" src="/live/image/gid/4/width/180/height/43/478_nber.rev.1407530465.jpg" class="lw_image lw_image478 lw_align_right" data-max-w="329" data-max-h="79"/>Founded in 1920, the <strong>National Bureau of Economic Research</strong> is a private, nonprofit, nonpartisan research organization dedicated to promoting a greater understanding of how the economy works. The NBER is committed to undertaking and disseminating unbiased economic research among public policymakers, business professionals, and the academic community.</p><p> Quick Link to <strong>Public Use Data Archive</strong>: <a href="http://www.nber.org/data/" target="_blank">http://www.nber.org/data/</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>Congressional Budget Office</h3><p><img width="180" height="180" alt="" src="/live/image/gid/4/width/180/height/180/380_cbo-logo.rev.1406822035.jpg" class="lw_image lw_image380 lw_align_right" data-max-w="180" data-max-h="180"/>Since its founding in 1974, the Congressional Budget Office (CBO) has produced independent analyses of budgetary and economic issues to support the Congressional budget process.</p><p> The agency is strictly nonpartisan and conducts objective, impartial analysis, which is evident in each of the dozens of reports and hundreds of cost estimates that its economists and policy analysts produce each year. CBO does not make policy recommendations, and each report and cost estimate discloses the agency’s assumptions and methodologies. <strong>CBO provides budgetary and economic information in a variety of ways and at various points in the legislative process.</strong> Products include baseline budget projections and economic forecasts, analysis of the President’s budget, cost estimates, analysis of federal mandates, working papers, and more.</p><p> Quick link to Products page: <a href="http://www.cbo.gov/about/our-products" target="_blank">http://www.cbo.gov/about/our-products</a></p><p> Quick link to Topics: <a href="http://www.cbo.gov/topics" target="_blank">http://www.cbo.gov/topics</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
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  • <h3>MapStats</h3><p> A feature of FedStats, MapStats allows users to search for <strong>state, county, city, congressional district, or Federal judicial district data</strong> (demographic, economic, and geographic).</p><p> Quick link: <a href="http://www.fedstats.gov/mapstats/" target="_blank">http://www.fedstats.gov/mapstats/</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>The Penn World Table</h3><p> The Penn World Table provides purchasing power parity and national income accounts converted to international prices for 189 countries/territories for some or all of the years 1950-2010.</p><p><a href="https://pwt.sas.upenn.edu/php_site/pwt71/pwt71_form.php" target="_blank">Quick link.</a> </p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>USDA Nutrition Assistance Data</h3><p><img width="180" height="124" alt="" src="/live/image/gid/4/width/180/height/124/485_usda_logo.rev.1407789238.jpg" class="lw_image lw_image485 lw_align_right" srcset="/live/image/scale/2x/gid/4/width/180/height/124/485_usda_logo.rev.1407789238.jpg 2x, /live/image/scale/3x/gid/4/width/180/height/124/485_usda_logo.rev.1407789238.jpg 3x" data-max-w="1233" data-max-h="850"/>Data and research regarding the following <strong>USDA Nutrition Assistance</strong> programs are available through this site:</p><ul><li>Supplemental Nutrition Assistance Program (SNAP) </li><li>Food Distribution Programs </li><li>School Meals </li><li>Women, Infants and Children </li></ul><p> Quick link: <a href="http://www.fns.usda.gov/data-and-statistics" target="_blank">http://www.fns.usda.gov/data-and-statistics</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>