July 6, 2011 | WebMemo on Trade
On June 28, Senator Max Baucus (D–MT), chairman of the Senate Finance Committee, announced that he would hold a “mock” mark up of the South Korea, Colombia, and Panama free trade agreements (FTAs). Unfortunately, the legislation authorizing the South Korea FTA includes a reauthorization of the Trade Adjustment Assistance (TAA) program that reaffirms the expansion of the programs that was created by the 2009 stimulus bill. The restoration of the stimulus expansion of TAA was agreed to by Baucus, House Ways and Means Committee chairman Dave Camp (R–MI), and the Obama Administration.
The TAA is an ineffective and costly program that provides job training, relocation allowances, and unemployment pay for workers who lost their jobs due to foreign trade while they attempt to shift into new occupations. With out-of-control spending and surging public debt threatening the nation’s stability, this is hardly a good time to provide overly generous benefits for only a small fraction of laid-off workers. Worse, there is little empirical support for the notion that TAA boosts participants’ earnings.
Continuing the Failed Stimulus
Perhaps because this is not the time for wasting precious federal income, Camp recently advanced the claim that TAA “has been cut not only from 2009 levels, but also below 2002 levels in several key areas.” This is not the case, however. Instead of cutting TAA back to pre-stimulus levels, the Baucus–Camp proposal restores and solidifies the most alarming aspects of the stimulus expansion.
No Evidence of Effectiveness
While TAA provides overly generous benefits for only a small fraction of laid-off workers, is there any evidence that this assistance and training improves workers’ earnings based on newly acquired job skills? Program evaluations of TAA say no.
Three quasi-experimental impact evaluations indicate that TAA is ineffective in raising participants’ wages. For example, a 2008 evaluation using a propensity score analysis by Professor Kara M. Reynolds of American University and a colleague found “little evidence that it helps displaced workers find new, well-paying employment opportunities.” In fact, TAA participants experienced a wage loss of 10 percent. The authors concluded that this negative impact “is obviously not the result one would expect from a program designed to help displaced workers.” This trend was confirmed by a Government Accountability Office report that concluded that TAA participants are more likely to earn less in their new employment.
Time to End TAA
Congress should not link the passage of any of the FTAs to renewal of TAA. The stimulus law was supposed to be temporary, yet the Baucus–Camp proposal strengthens and retains the stimulus expansion of TAA. Congress needs to draw a clear line in the sand by not allowing the stimulus expansion of TAA to become permanent. Instead of solidifying TAA’s expansion, Congress can immediately send a clear message that it is getting serious about the nation’s dire fiscal straits by not attaching TAA renewal to any of the FTAs and letting the entire TAA program expire in 2012.
David B. Muhlhausen, Ph.D., is Research Fellow in Empirical Policy Analysis in the Center for Data Analysis at The Heritage Foundation.
James Sherk, “Congress Should Allow Trade Adjustment Assistance to Expire,” Heritage Foundation WebMemo No. 3134, February 4, 2011, at http://www.heritage.org/Research/Reports/2011/02/Congress-Should-Allow-Trade-Adjustment-Assistance-to-Expire.
David Muhlhausen, “Trade Adjustment Assistance: Let the Ineffective and Costly Program Expire,” Heritage Foundation WebMemo No. 3135, February 4, 2011, at http://www.heritage.org/Research/Reports/2011/02/Trade-Adjustment-Assistance-Let-the-Ineffective-and-Costly-Program-Expire.
Press release, “Camp Statement on Announcement That Senate Finance Will Mock Mark Up Pending Trade Agreements, Trade Adjustment Assistance This Week,” U.S. House of Representatives, Committee on Ways and Means, June 28, 2011, at http://waysandmeans.house.gov/News/DocumentSingle.aspx?DocumentID=249264 (July 6, 2011).
Press release, “U.S. Labor Department Encourages Applications for Trade Adjustment Assistance Community College and Career training Grant Program,” U.S. Department of Labor, Employment and Training Administration, January 20, 2011, at http://www.dol.gov/opa/media/press/eta/eta20101436.htm (July 1, 2011).
U.S. Government Accountability Office, “Multiple Employment and Training Programs: Providing Information on Collocating Services and Consolidating Administrative Structures Could Promote Efficiencies,” January 2011, p. 5, at http://www.gao.gov/new.items/d1192.pdf (July 5, 2011).
Sherk, “Congress Should Allow Trade Adjustment Assistance to Expire.”
Paul T. Decker and Walter Corson, “International Trade and Worker Displacement: Evaluation of the Trade Adjustment Assistance Program,” Industrial and Labor Relations Review, Vol. 48, No. 4 (1995), pp. 758–774; Leah H. Marcal, “Does Trade Adjustment Assistance Help Trade-Displaced Workers?” Contemporary Economic Policy, Vol. 19, No. 1 (2001), pp. 59–72; and Kara M. Reynolds and John S. Palatucci, “Does Trade Adjustment Assistance Make a Difference?” American University, August 2008, at http://w.american.edu/cas/economics/repec/amu/workingpapers/2008-12.pdf (May 10, 2011).
Reynolds and Palatucci, “Does Trade Adjustment Assistance Make a Difference?” p. 3.
 Ibid., p. 22.