PROBLEMS WITH THE CURRENT TAA PROGRAM
Despite widespread support for the
objective of the program, the effectiveness of the TAA program has
been the subject of widespread debate. One concern expressed is
whether a special program for trade-related job losses should
exist. Based on the principle that job displacements caused by
foreign competition are no different from job displacements caused
by any other form of competition, the Reagan and first Bush
Administrations each attempted to consolidate the TAA program with
other existing job training programs. Indeed, the number of
workers affected by trade is minimal compared to those who lose
their jobs for other reasons: Of the 3,245,034 workers who were
laid off and filed for unemployment insurance from 1997 through
1999, only 2.1 percent lost their jobs due to import competition or
overseas relocation. This percentage is lower
than the number of people who lost their jobs due to labor disputes
during the same time frame.
have also criticized the TAA's overall effectiveness, as well as
its ability to monitor its own success rate. Specifically, the
criticism has focused on the program's inadequate attention to
performance measures and failure to conduct proper evaluations of
the results program participants achieve. The TAA program does not
measure results. Instead, the Department of Labor and the ETA set
goals for the number of assistance programs each center implements
per year, not whether the aid proves successful.
addition, the bipartisan U.S. Trade Deficit Review Commission
conducted a survey on the effectiveness of the TAA, which revealed
that, of the 46 state workforce agencies that responded, 19
considered the TAA programs "inadequate." Of the 23 agencies that
considered the programs adequate, 19 responded that there was need
for "improvement." The state agencies
complained that the regulations for the TAA programs are
unnecessarily complex and create needless red tape.
Although the Department of Labor tightened
controls after an inspector general's report in 1993 found a number
of abuses in the TAA system, the controls themselves have not been
evaluated for their effectiveness.
Worse, instead of offering fast, effective
help to displaced workers, the TAA program has become a mere
compensation procedure, effectively acting as a disincentive for
workers to quickly find new employment. This is possible under the
TAA program because workers are allowed to obtain a training
waiver, which allows them to collect the cash payouts (the Trade
Readjustment Allowance, or TRA) without enrolling in any classes.
According to the Department of Labor, 38 percent of TAA
participants who left the program in 1999 received some type of
training waiver, more than the number of displaced workers that
enrolled in those training courses. The numbers bear out this fact:
Between 1995 and 1999, the TAA program spent $663.6 million for
basic allowances and $239.7 million for additional allowances. This
totals $903.3 million in five years for payouts. Meanwhile, only a
third as much went to training costs in the same time period. And
only $9 million--or one hundredth as much--over those five years
went to job search and relocation costs, in part because so few of
the TAA-eligible workers chose to use these elements of the
benefits program. According to an October 2000 report by the U.S.
General Accounting Office,
Most state officials we surveyed said job
search and relocation benefits have not been heavily utilized
because workers are reluctant to move to new areas, primarily
because of family commitments or ties to the community.
if more funds had gone to the training aspects of the program, the
training programs themselves are ineffective. The Institute for
International Economics, for example, points out that
Workers have no guarantees of employment
when they finish the training programs. For this reason there is
broad consensus that the best training is delivered on the job, or
if workers are already at a job, then in supplemental programs that
workers help pay for themselves and choose to attend at night or
other off hours.
Other problems with the TAA program
- The program as it stands does not address
earning loss after reemployment. Some limited data suggest that 75
percent of workers who left the program found new jobs, but many
earned much less that their former wages.
- Poor program tracking system: Despite some
improvement in monitoring program outcomes, data collection for
such purpose is still poor. Thus, accountability for the program is
lacking because it is difficult to find out just what success the
program is having. For fiscal years 1995 through 1999, an average
of $9.8 million was given to each of the 12 regional Trade
Adjustment Assistance Centers (TAAC) operating under cooperative
agreement with the Economic Development Administration (EDA). The
effect of the program, however, is not conclusive since there is no
formal evaluation process (monitoring or tracking) for program
results, and as a result, there is none of the information
necessary to assess the TAACs' performances.
- Weakness in internal control. Some reports
indicate that workers may receive benefits for which they are not
eligible, through the program's internal control weakness.
CONCLUSION AND RECOMMENDATION
TAA program does not work as it is designed. The current TAA
program has failed to provide effective assistance, one of the
crucial factors for a successful adjustment program. If the aim of
such programs is to help workers find new jobs, then the TAA should
be eliminated over time and replaced by a program that provides
incentives, not disincentives, for workers to do just that.
- Wage insurance is one such proposal that
has won widespread support. The Trade Deficit Review Commission
recommended "wage insurance" as a more comprehensive worker
adjustment solution. Robert Litan of the Brookings Institution and
Lori Kletzer of the Institute for International Economics proposed
putting wage insurance at the centerpiece of a more effective
adjustment program, attracting support from a broad spectrum of
policymakers and free-trade proponents. Two programs Litan and
Kletzer propose are wage insurance and subsidies for health
- Wage insurance would allow qualifying
displaced workers to receive benefits upon reemployment, protecting
workers from the loss of income that can result from finding a new
job that does not pay as well. This applies to workers who had been
employed at their previous job for at least two years, and in
moving to the new job, suffered an earnings loss that can be
documented. The insurance would be paid only after workers found a
new job. The workers would receive the wage insurance for up to two
years following the initial date of job loss.
- Health insurance subsidies would be
provided to qualifying displaced workers for up to 6 months, or
until they found a new job.
- Both programs would provide benefits to
full-time workers who have been dislocated, for any reason (not
just trade), from jobs they had held for at least two years.
particular, Litan and Kletzer argue that wage insurance would fix a
deficiency of the current TAA program. Unlike the current program,
which works as a disincentive for rapid reemployment, the proposed
wage insurance program would strongly encourage workers to quickly
find new jobs since they would not receive the assistance until
this takes place.
central issue in this reauthorization debate is the question of
what is the proper role of government in the United States. If we
decide that one of government's duties is to give money to workers
who have lost their jobs, for whatever reason, then we should do it
effectively and efficiently. Ensuring the existence of an effective
program will fulfill our responsibility to all Americans whose
livelihoods are affected through the taxes they have to pay in
order to make any such program possible. It is a betrayal of this
responsibility to continue to fund a program that has been proven
ineffective, and which cannot even measure its own results.
Denise H. Froning is a policy analyst in
the Center for International Trade and Economics at The Heritage
Foundation. This lecture is based on her testimony before the
Subcommittee on Tax, Finance and Exports of the House Small
Business Committee on July 24, 2001.