August 1, 2001 | News Releases on Welfare and Welfare Spending , Economy

Congress Should Give Unemployment Program Its Walking Papers, Analyst Says

WASHINGTON, Aug. 1, 2001-A federal program designed to help U.S. workers who lose their jobs due to import competition or because their jobs relocate overseas is ineffective at best and should be vastly revamped or even scuttled when it expires next month, a new Heritage Foundation paper says.

Created in 1974, the Trade Adjustment Assistance (TAA) program was designed to help workers allegedly hurt by global trade find new jobs and give them any necessary retraining. It also gives them relocation and financial aid until they become established in their new jobs.

But a review of the program by Denise Froning, a policy analyst in Heritage's Center for International Trade and Economics, shows it helps few people, works as designed for fewer still, is expensive and difficult to administer, and hasn't been adequately evaluated for effectiveness.

Of the more than 3.2 million workers who were laid off and filed for unemployment from 1997 through 1999, only about 68,000, or 2.1 percent, lost their jobs because of import competition or because their workplace relocated overseas, she notes. Of those who took advantage of TAA, most sought only the Trade Readjustment Allowance-the payments made to workers during their transitions.

During the three-year period, the government spent more than $900 million on the transition payments, while less than $9 million was requested to help with job searches and job relocations. This suggests, Froning says, that the TAA program "has become a mere compensation outlet, effectively discouraging workers from quickly finding new jobs." Those who did quickly find new employment often did so at far lower pay, which the program does nothing to address, she adds.

Complex regulations and onerous paperwork requirements associated with the program make it less useful still, Froning says. A survey conducted by a congressional commission of TAA's effectiveness revealed that 19 of the 46 state workforce agencies that responded rated the program "inadequate." It also showed that 19 of the 23 that rated the program "adequate" said it needs improvement.

Rather than continue to fund TAA, Froning suggests that Congress consider adopting wage insurance-which protects workers from the loss of income that often comes when switching jobs because of trade-and provide health insurance subsidies for displaced workers for up to six months.

Wage insurance would encourage workers to find new jobs quickly since they would not receive benefits until they again became employed, and health insurance would remove a major financial burden from the un- or underemployed.

Also, she says, the program should be applied to all displaced workers, regardless of how they lost their jobs.

"If we decide it's the government's duty to help workers who have lost their jobs for whatever reason, then we should do it fairly effectively and efficiently," Froning says. "That's the least we can do for the Americans whose taxes fund it."

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