If a mill closes because it is losing sales to cheaper paper from South America, its workers are often eligible for special federal assistance. If workers at a similar mill are laid off because technological upgrades or lack of demand make their labor unnecessary, the trade assistance is not available. Rather than expanding Trade Adjustment Assistance, lawmakers should look at remaking the program to offer better benefits to displaced workers, whether their job loss can be traced to trade, increased automation or the relocation of a company from one state to another.
Trade Adjustment Assistance was initiated in 1962 as a way to ease the loss of manufacturing jobs to foreign competition. To qualify, the company, workers, union officials or the state department of labormust apply to the U.S. Department of Labor and demonstrate that the job loss was tied to moving production to a country that has a free trade agreement with the United States or because of foreign imports. The department reviews sales data and surveys customers to determine if moving jobs offshore or foreign imports are responsible for the layoffs. About 1,000 Maine workers are receiving TAA benefits.
Workers can qualify for benefits that far exceed those available to employees who lose their jobs for other reasons. Regular unemployment benefits last for a maximum of 26 weeks. Workers who qualify for TAA can extend these benefits, including retraining, for two years. Workers over 50 may get a wage subsidy and additional health care benefits are available.
This disparity prompted Harvard economist and former Bush official Greg Mankiw to ask two simple questions: “Can you really tell whether a worker is losing his job due to trade or due to other forces such as technological change?” Second, “Is a worker who loses a job due to trade deserving of a more generous safety net than a worker who loses his job due to other forces, such as technological change?”
The answer to the first is “not really” and the second, absolutely not. However, trade is a difficult topic politically and TAA allows more lawmakers, especially Democrats, to justify voting for trade agreements.
Sen. Olympia Snowe is a sponsor of legislation that would extend TAA benefits to service workers. Adding computer programmers and customer service personnel and making benefits more generous won’t eliminate the underlying inequity.
A better solution, offered by National Journal columnist Clive Crook, is to make TAA benefits less generous, but more broadly available. He cites a 2002 study that attributed just 1.5 percent of mass layoffs to import competition. Yet TAA costs $1 billion a year.
Extending TAA’s generous benefits too all displaced workers would be too costly, so Mr. Crook suggests eliminating the wage subsidy, which for laid-off workers over 50 can cover the difference in salary between the eliminated job and a new one, and using the money to assist more workers. A further improvement would be to make TAA qualifying rules simpler, as Rep. Mike Michaud advocates.
Most important, a better program would be less individually generous but help thousands more workers, regardless of why they lost their jobs.
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