No Help for Displaced Workers

As globalization pulls jobs from American factories, the federal government has created programs to help displaced workers find positions with pay comparable to the ones lost. These initiatives make for reassuring political speeches, but do they actually achieve their objective?

In the case of the four-decade-old U.S. Trade Adjustment Assistance Program (TAA), which helps workers whose jobs were axed because of increased imports, the answer is no, write associate professor Kara M. Reynolds and student John S. Palatucci, both of American University’s Department of Economics.   Reynolds and Palatucci compared the employment and salary trajectories of TAA beneficiaries with those of workers laid off in similar circumstances who weren’t eligible for the program. In 2007, approximately 150,000 Americans received a total of $850 million of TAA aid in the form of income support, health insurance, job search assistance, relocation compensation, and retraining. The 2009 stimulus expanded the program’s roster and benefits.   After controlling for geography and other factors, the authors found that TAA beneficiaries fared no better at getting new jobs than those who didn’t participate in the program. Furthermore, the TAA beneficiaries who did find jobs earned roughly 30 percent less than they did in their previous positions, while the other workers typically earned 18 percent less. (This disparity owes much to the fact that the TAA program targets workers who are most in need of help.)   There is a silver lining: Workers who participated in the voluntary training component of the program increased their likelihood of finding a job by 10 to 12 percentage points over those who did not. Their wages were also higher than those of beneficiaries who didn’t undergo training. Even these brighter numbers, however, did not make the TAA cohort more successful than the other group.   The authors suggest that mandatory training could make the TAA program more effective. But even with such a change, the need would persist for a better way to soften the ups and downs of free markets.

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