Worker Adjustment: The Missing Ingredient in Trade Policy

There are two other cases for protectionism. One is that imports would destroy core domestic industries (“keystone industries”) which would weaken the American economy's capability of being competitive across the board. The second is that imports would destroy strategically important industries which would weaken U.S. national security. These arguments would continue to be heard even if the U.S. had a successful worker adjustment program.

For example, see Lawrence Robert Z. , Can America Compete? (Washington, D.C.: Brookings Institution, 1984), pp. 49–50, 54–63.

There is some evidence to buttress the view that TAA could increase public support for free trade. In a poll taken in 1972, 41 percent of Americans favored free trade, 34 percent opposed it, and 25 percent were not sure. When asked their attitude assuming that “workers who lost their jobs because of free trade did not suffer any personal financial loss and were retrained in jobs equal to or better than their old ones,” 67 percent were in favor of free trade, 15 percent were opposed, and 18 percent not sure. See Laudicina Paul , World Poverty and Development: A Survey of American Opinion. (Washington, D.C.: Overseas Development Council, 1973), pp. 56–57.

Kaldor Nicholas , “Welfare Propositions in Economics,” The Economic Journal (September 1939). Kaldor made no judgment as to whether the compensation should be paid. All he wanted to show was the potentiality of such compensation.

In an article written in 1950, Clair Wilcox rejected the notion of compensating workers for import injury, but endorsed the role of government assistance in easing the burden of adjustment to economic change. Wilcox observed that providing such assistance to all victims of economic change would obviate the difficult determination of eligibility and the measurement of injury inherent in a trade-only adjustment program. See Wilcox Clair , “Relief for Victims of Tariff Cuts,” The American Economic Review (December 1950).

This article focuses on TAA for workers. There were also TAA programs for firms and communities. The argument for assistance to firms is much weaker than for workers because there is no social necessity for rescuing uncompetitive firms. Firms have no raison d'être other than earning income, whereas workers do.

Special Message to the Congress on Foreign Trade Policy, January 25, 1962, in Public Papers of the Presidents of the United States. John F. Kennedy, 1962, p. 76.

Hearings Before the Committee on Finance, U.S. Senate, July 24, 1962, p. 241.

Hearings Before the Committee on Ways and Means, U.S. House of Representatives, March 19, 1962, p. 1145.

The floor manager was Eugene Keogh (D-N.Y.). For his testimony, see Congressional Record, June 27, 1962, p. 11112.

Trade Expansion Act of 1962, Section 328. The current provision is 19 USC 2296(c).

Data from U.S. Department of Labor, Employment and Training Administration.

Hearings Before the Committee on Ways and Means, U.S. House of Representatives, May 17, 1973, p. 1218.

Appendix VI to the AFL-CIO statement made by George Meany, Hearings Before the Committee on Finance, U.S. Senate, March 27, 1973, p. 1188.

Under the 1974 Act, the job search reimbursement was 80 percent of the cost of job search, not to exceed $500 per worker. In 1981, this was raised to 90 percent reimbursement, not to exceed $600. In 1984, it was raised again to $800. The relocation reimbursement was reduced in 1974 from 100 percent of the moving costs to 80 percent of them. The one-time payment was capped at $500. In 1981, the reimbursement was raised to 90 percent of costs and the payment cap was raised to $600. In 1984, the cap was raised to $800.

Appendix VI to the AFL-CIO statement made by George Meany, Hearings Before the Committee on Finance, U.S. Senate, March 27, 1973, p. 1188.

Corson Walter Nicholson Walter Richardson David Vayda Andrea , “Final Report. Survey of Trade Adjustment Assistance Recipients,” Mathematica Policy Research, Inc., December 1979, p. 130. [Hereinafter “Mathematica (1979)”].

Information on the inability of DOL to meet state training requests was obtained from officials of the Employment and Training Administration. See also Page Leonard , “The Broken Covenant—1962–1982,” University of Detroit Journal of Urban Law (Summer 1982), pp. 610–611.

Memorandum for the Heads of Certain Departments and Agencies, April 1, 1977, in Public Papers of the Presidents of the United States. Jimmy Carter, 1977, p. 554.

All data in this paragraph are from the U.S. Department of Labor, Employment and Training Administration.

The 68 percent calculation can be obtained from Mathematica (1979), pp. 38, 45 and 48. The GAO study found that 67 percent returned to their previous employer. See “Restricting Trade Act Benefits to Import-Affected Workers Who Cannot Find A Job Can Save Millions,” General Accounting Office, January 15, 1980, p. 10.

Gordon Michael R. , “Trade Adjustment Assistance May Be Too Big For Its Own Good,” National Journal, May 10, 1980, p. 766.

Mathematica (1979), pp. 28, 31, 71–72.

For example, see “Reauthorization of Trade Adjustment Assistance,” American Enterprise Institute, 1983, p. 16.

For example, see Mathematica (1979), p. 168.

Mathematica (1979), pp. 156 and 109. For a discussion of the validity of these findings, see Charnovitz Steve , “The Tragedy of Trade Adjustment Assistance,” unpublished report, U.S. Department of Labor, Bureau of International Affairs, February 6, 1981, pp. 29–37.

For example, see Mathematica (1979), pp. 89–90.

Mathematica (1979), p. 119. This was true even controlling for temporary layoffs.

Donlan Thomas G. , “Hands Across the Sea; Trade Adjustment Benefits Will Cost Uncle Sam Plenty,” Barrons, May 5, 1980, p. 30.

Mathematica (1979) states that “Less than 10 percent of the TAA sample as a whole took advantage of available employment services…” [Emphasis added], p. 172. See also Guzzardi Walter Jr. , “How to Foil Protectionism,” Fortune, March 21, 1983, p. 79.

Address Before a Joint Session of the Congress on the Program for Economic Recovery, February 18, 1981, in Public Papers of the Presidents of the United States. Ronald Reagan 1981, p. 111.

Special Message to the Congress on Foreign Trade Policy, January 25, 1962, in Public Papers of the Presidents of the United States. John F. Kennedy, 1962, p. 76.

The changes were contained in P.L. 97–35, Title XXV. This law (Section 2510) also abolished the tariff trust fund for adjustment.

The CETA authority to aid dislocated workers can be found in Comprehensive Employment and Training Act Amendments of 1978, Sections 221, 301 and 304.

In February 1985, the Administration requested a reduction of the $223 million appropriated for dislocated workers to $103 million. The Congress did not approve the reduction.

See “Restricting Trade Act Benefits to Import-Affected Workers Who Cannot Find A Job Can Save Millions,” General Accounting Office, January 15, 1980, p. 27. See also Mathematica (1979), p. 127.

Kulik Jane Smith D. Alton Stromsdorfer Ernst W. , “The Downriver Community Conference Economic Readjustment Program: Final Evaluation Report,” Abt Associates, September 30, 1984, pp. 37, 49.

Ibid., pp. 86, 88, 91, 108–120.

Corson Walter Long Sharon Maynard Rebecca , “An Impact Evaluation of the Buffalo Dislocated Worker Demonstration Program,” Mathematica Policy Research, Inc., March 12, 1985, p. 111.

The second phase showed a decrease in reemployment rates and no effect on earnings, but there are several reasons to discount these results. See Kulik , op. cit., pp. 92–94.

Corson , op. cit., p. 112.

Ibid., pp. 117–119.

The estimate of private sector spending on training comes from Carnevale Anthony P. Goldstein Harold , Employee Training: Its Changing Role and an Analysis of New Data (American Society for Training and Development, 1983).

See Bendick Marc Jr. , Dislocated Workers and Midcareer Retraining in Other Countries (The Urban Institute, August 1983), Meisel Harry , “Retraining and Other Services in Germany,” in Kolberg William , The Dislocated Worker (Cabin John: Seven Locks Press, 1983); Organization for Economic Cooperation and Development, The Future of Vocational Education and Training (Paris: OECD, 1983).

Over the history of the program to date (May 1975 to June 1985), DOL issued decisions within the 60-day consideration period in only 23 percent of the cases. Thirty-three percent of the cases took longer than six months. During the first six months of CY 1985, DOL processed only six percent of the cases within the 60-day period. These petition data are from the U.S. Department of Labor, Employment and Training Administration.

This problem was foreseen in 1976 by Mitchell Daniel J. B. who noted that TAA “had no solid constituency” and raised the question of whether TAA would survive. See Mitchell Daniel J. B. , “Is Adjustment Assistance An Answer?” California Management Review (Winter 1976), pp. 44–50.

It is hard to believe that twenty-three years earlier, the AFL-CIO position was that “It is not fair to the American consumer to assume that all solutions lie in the area of ‘protecting’ U.S. industry.” See Hearings Before the Committee on Finance, U.S. Senate, July 24, 1962, p. 280.

For example, see “Reauthorization of Trade Adjustment Assistance,” American Enterprise Institute, 1983, p. 25.

See “Restricting Trade Act Benefits to Import-Affected Workers Who Cannot Find A Job Can Save Millions,” General Accounting Office, January 15, 1980, pp. 25, 42–45; see also Rosenblatt Samuel M. , “Trade Adjustment Assistance Programs: Crossroads or Dead End?” Law and Policy in International Business, Vol. 19, No. 4 (1977): P. 1082.

For example, see “An Analysis of the Reagan Economic Program,” The Heritage Foundation Backgrounder, February 27, 1981, p. 11; see also Dorn James A. , “Trade Adjustment Assistance: A Case of Government Failure,” Cato Journal (Winter 1982), pp. 893–895.

Bergsten C. Fred Cline William R. , “Conclusion and Policy Implications,” in Cline , ed., Trade Policy in the 1980s (Washington, D.C.: Institute for International Economics, 1983).