Posted October 1, 2008, 9:00am
Welcome to this discussion about one of the most pressing problems of our day. The plight of displaced workers is all too familiar. Since 2000, America has shed more than 3 million manufacturing jobs. Things seem to be getting worse. In August the national unemployment rate was 6.1%; Michigan’s was 8.9%. Meanwhile America’s programs for helping displaced workers remain a thin patchwork. Finding a new full-time job is difficult; those who do, often earn less than in their previous position.
I’d like to start by asking a few questions: what exactly do we mean by displaced worker? And how did we get here? Over the course of the presidential campaign there has been much talk about the effects of globalization on America’s workforce. What other forces are at play?
Posted October 1, 2008, 9:23am
I don’t know if there is any official definition of “displaced” worker. In my view, a reasonable definition, that would distinguish a “displaced” worker from simply an unemployed or underemployed worker is someone who is unemployed or underemployed due to a structural shift in the economy. The most significant structural shift would be the loss of manufacturing jobs due to the declining U.S. competitiveness. This problem is also emerging increasingly in non-personal services, such as call centers.
And how did we get here? The fundamental cause—as Blinder emphasized in his 2006 Foreign Affairs article “Fear of Outsourcing”—is that the U.S. labor market is increasingly integrated into a global market. In the global market, the U.S. operates with much higher labor costs. A big part of higher labor costs is of course wages relative to less developed economies. The other big factor is that, unlike virtually all other countries, our firms have to incorporate health care benefits into their overall compensation packages.
What other forces are at play? Globalization is a huge issue. But the effects of globalization are not inevitable. If the U.S. pursued a coherent set of policies to promote industries and job creation, that would weaken the pressures from low-wage economies. Universal health insurance would be a major step forward. In addition, a green investment industrial strategy—promoting dramatic increases in energy efficiency as well as advances in renewable energy—could be a major domestic jobs program. It would also reduce our dependence on foreign oil, and thereby also improve our trade and current account balances. And finally, of course, it would also fight global warming.
Posted October 1, 2008, 9:30am
Like the rest of the U.S. economy, the U.S. labor market is extremely dynamic. Jobs appear and disappear at amazing rates as companies start up and shut down. In 2007, the U.S. economy created 30 million jobs, while losing 29 million, for a net gain in private-sector employment of about 900,000 jobs. I've also read that about 25,000 jobs are created and another 25,000 are eliminated every hour that America is open for business. Economic adjustment is essential to the health of the U.S. economy. But adjustment presents real costs to some American workers, communities, and firms. Unemployed workers face major challenges: supporting themselves and their families when they no longer have earnings; searching and training for new jobs; and preserving earnings capacity in these new jobs. Not surprisingly, many American workers feel anxious—about economic change and the impact on their paychecks. Their concerns are real. While international trade receives most of the attention in the current political debate, it is only one of the forces driving this dynamic reallocation of people, capital, and ideas to emerging business opportunities. Technological advancements, seasonal business patterns, shifting customer tastes, and many other forces are also at work.
Posted October 1, 2008, 9:35am
In simplest terms a displaced worker is one who has lost a job. These are individuals with work histories. Many factors have been contributing to the growth in number of displaced workers, including the sub-prime financial meltdown. One of the sectors I watch is manufacturing. Job loss there has been substantial, but contrary to election rhetoric, the majority of jobs have been lost over recent years to productivity increases. That may loosely be attributed to globalization, but it is not the true definition. There is increasing competition; US manufacturers have responded by becoming leaner and workers have become more productive, leading at times to the need for fewer workers.
Posted October 1, 2008, 9:55am
While I understand the need for “definition”, it has been the very “definition” of displaced workers—i.e. workers that have been displaced as a result of “trade” that has resulted in the incredible lack of support for trade and the dynamic globalized economy that confronts the U.S. worker daily. With assistance to the U.S. worker being provided through TAA—and only when that worker has been displaced by trade—the result is that workers have every reason to search for the “trade” cause of their displacement. No surprise that workers believe—by an overwhelming majority—that trade is the cause of their economic demise—even though the facts do not support that belief. But, because the existing legislative framework disperses economic benefits and other assistance and support ONLY to those who have been displaced as a result of a negative trade impact, we are now “reaping what we sow.” Rather than perpetuate this result—we should have a legislative and regulatory regime that provides dynamic support to workers who are unemployed—regardless of the cause—with the exception of “just cause.”
Posted October 1, 2008, 10:04am
Besides international competition and improved productivity that have been already mentioned, there are other forces that lead to worker displacement. Technological change is constantly leading old products to be superseded by new ones that are often produced by different workers. We should recognize that these are long historical patterns. Manufacturing has been declining as a share of employment in the U.S. for over 50 years. These changes cause many workers to lose jobs and the skills that go with those jobs. These losses cause dislocations for the workers, their families and the communities in which they live. We should be particularly concerned with, and policy should focus on, workers who have lost jobs that they have held for many years, and who cannot as easily find alternative employment. These workers seem to suffer the greatest losses upon displacement.
Posted October 1, 2008, 10:11am
Karen makes a very critical and important point. The irony is that, despite the relatively small role that international trade plays in U.S. labor-market dislocations, TAA tends to dominate discussions of how government policy can mitigate the human costs of adjustment. TAA only addresses workers displaced by trade—and misses more than 90 percent of American workers in transition. TAA only offers retraining in the same field or industry—not responsive to the adjustment challenges they face today. Many workers in transition say TAA’s current benefits are inadequate or inappropriate for their needs—in recent years, less than a quarter of eligible workers actually take TAA benefits. I've seen stats that suggest that in 2007 just 93,903 American workers accessed TAA benefits—fewer than the number of jobs created and lost by the U.S. economy on an average day. One of the biggest problems is that America’s programs to deal with worker displacement are out-dated, Depression-era policies. We need to make these tools more expansive, effective, and equitable so that American workers have more options and flexibility as they compete in the global economy. Thanks Karen.
Posted October 1, 2008, 10:25am
This discussion is focused on people who are involuntarily displaced, but it’s worth putting this in the context of a larger phenomenon, which is that the era of lifelong employment is over. Every American worker is going to be “displaced” at some point in their careers, but much of that “displacement” will be voluntary. People today not only expect to but want to switch jobs and careers, which makes sense in a dynamic economy that is constantly creating new jobs, new opportunities and new industries. In fact, people now look unfavorably on someone who’s been at one job “too long.” The challenge for public policy will be to give people the means to take maximum control over the circumstances of their displacement (voluntary or involuntary), and particularly before it’s too late. And our policies have to be as dynamic as the economy we are currently in. The question is how to prepare people for those opportunities and maximize the likelihood that the next job will lead to higher wages and greater success.
Posted October 1, 2008, 10:32am
Our definition of who is, or who is not, a displaced worker is obviously critical to the discussion. I would argue for as wide a definition as possible, and one which goes well beyond the category of workers, less numerous than one might think, who have been displaced by the outsourcing of manufacturing jobs to the developing world. The problem of definition becomes more complex when one looks at that other leading agent of worker displacement, 'technological change'. In manufacturing industries such as automobiles or steel there has been a long term decline in employment brought about, in part, by the effects of automation, and this continues.
But what about areas of the service economy, such as 'customer relations management' (i.e. call centers),which is very IT intensive, and where there has been a steady increase in employment, the outsourcing of some jobs to India notwithstanding? What is notable about 'CRM', where up to six million Americans work, is that rates of employee turnover are exceptionally high, and contribute to the high 'churn rate' for the US economy as a whole. So what's going on here, since these workers are not being displaced by outsourcing overseas, or by automation?
These very high rates of employee turnover reflect the particular ways in which the technologies of workplace control are configured in the CRM industry. These IT regimes are often contemporary versions of Scientific Management, or Taylorism, they are industrial in spirit, and employees find them hard to live with—thus the high churn rates. However, managements are apparently prepared to live with these high rates of employee turnover in the interests of keeping labor productivity high and labor costs low. So one might say that workforce displacement is an integral aspect of management strategy. So does the US need stronger unions? I think so.
Posted October 1, 2008, 10:54am
Approximately 20% of the US workforce is in job transition at a given time, taking voluntary transitions between companies. It goes up as high as 24% at times. These are people who just quit and take a new position, illustrating the tremendous amount of churn that takes place in the workforce on a regular basis. The "displaced" people are essentially the ones who don’t have the skills, knowledge, opportunities, or perhaps the savvy to do this on their own.
Another way to consider this issue is to think about the dynamic nature of talent in general. In the US, there is a high "voluntary" unemployment rate, while the involuntary unemployment rate is around 6.1% (much higher in some states). The reason for this is that any growing economy and any growing business undergoes continuous transformation. Companies have products and divisions which fail, others that succeed beyond their wildest dreams. Such continuous changes create continuous changes in the job roles needed.
As a result, in today's business world, companies have to continuously "displace" some of their workers - and they can either watch them leave and go elsewhere or they can build internal succession and career programs to move them around internally. In the 1980s and 1990s most companies relied on the "pinball" model—where people bounced around from job to job like balls in the pinball machine, and many bounced right out of the company to work somewhere else. Today this no longer works, so from an employer's perspective these transformations demand a focus on internal career and talent management.
What this means is that in many rapidly changing companies the organization works hard to find ways to keep people. Right now, of course, we're watching the radical transformation of the banking and insurance industry, so many jobs are going away. But this process takes place constantly, so I would try to define the concept of "displaced workers" as the continuous evolution in job roles that take place as a company, country, and economy evolves.
Posted October 1, 2008, 10:58am
Mr. Meyer’s comments are certainly supported by the experience that we have lived in North Carolina. Generational dependency on traditional manufacturing combined with limited value attached to education as a pre-requisite and necessary component of employment has created a displaced workforce that is often rendered psychologically and physically immobile when job loss occurs. Traditional manufacturing relied upon a strong grassroots connection to the local community; when those jobs disappear, workers are generally unwilling to relocate and unable to navigate the “systems’ that are currently in place to provide assistance. Technological advances have widened the gap even further.
Posted October 1, 2008, 11:02am
Advances in technology, changes in consumer tastes, and shifts in world trade all contribute to job loss. Everybody benefits in the long run from improvements in worker productivity. But gains in productivity mean that fewer workers are needed to produce the same amount of goods and services. When productivity in an industry climbs fast enough, the need for employees in the industry will fall, and this will force many long-service workers to find jobs in another industry or occupation. Shifting consumer tastes and swings in global trade also result in a great deal of job loss. My preferred definition of a “displaced worker” is someone who has been laid off from a job that has lasted a year or more as a result of downsizing, plant closure, company bankruptcy, or some other event for which the worker is not responsible.
Posted October 1, 2008, 11:18am
Let me make two points to Kim’s previous comment. First, I understand that many believe that the new American worker voluntary chooses to leave his/her employment. And, I understand that many also believe that the “social compact” is outdated and no one is entitled to lifetime employment. But I believe both of these assumptions miss critical facts.
1. There are many workers—some of who are middle-aged—who have less education and who, although they do not believe they are entitled to lifelong employment, do not chose to leave their jobs. For many, there are in fact few jobs that provide decent wages and benefits like health care. For those workers, when they are displaced, we need an economic policy that supports their re-entry into the work force.
2. Even though jobs in the manufacturing sector represent a small percentage of the U.S. economy, thousands of workers continue to be employed in the manufacturing sector. And, for the most part, those jobs provide a solid livelihood for U.S. workers and their families. When workers in the manufacturing sector are “displaced” it is an undisputed fact that they—more than others—have difficulty finding other employment—employment that provides wages and benefits that are comparable.
Finally, it is true that the U.S. economy is dynamic and jobs are constantly being created—although with the current financial crisis we will learn just how dynamic our economy is—the jobs that have been created are less likely to represent “replacement” jobs. This view that jobs are constantly created is (perhaps) the correct macro economic analysis, but it falls far short when address real micro economic impacts. When a worker is displaced in Ohio and a job is created in New Hampshire these facts demonstrate that we may have a dynamic economy, but it nonetheless leaves our society with an unemployed worker in Ohio who may no longer be able to pay his/her mortgage, provide healthcare for his/her family and who may not have the skills necessary for his/her next job opportunity. This result is one that a comprehensive economic policy should address.
Posted October 1, 2008, 11:22am
It seems like there are several lines of debate already underway. We might best move forward by addressing the role of federal and local governments, and (as Simon and Josh mentioned) the role of unions and companies.
Let’s start with the federal government. Robert Pollin posed a big “if”: “If the U.S. pursued a coherent set of policies to promote industries and job creation, that would weaken the pressures from low-wage economies.” Why is the federal strategy so incoherent? Karen and Robert Nichols described the shortcomings of TAA. Why has the government been so ineffective in helping workers? Did the Workforce Investment Act, passed in 1998, do anything to improve America’s job-training system?
Posted October 1, 2008, 12:09pm
Training providers, particularly community colleges, need to understand and be conversant in federal regulations and policies regarding governmental benefits. If we are going to advise a “common client” regarding benefits and training associated with job loss, those clients deserve a coherent, well-articulated message from all service providers. Displaced workers are often pressed into making life-changing decisions in a compressed time frame which is full of uncertainty, shock, and personal devastation.
Consequently, education and training providers direct these individuals to training programs that may or may not lead to sustainable employment in their region based on a limited understanding of job availability and a work environment that is not predictable. Implementation and delivery of new programs for emerging jobs require human, facility, equipment, and financial resources that may not match the legislatively imposed time frame for these individuals to seek retraining that will connect them to a viable career. How do we move people effectively from job-seeking to career-planning when immediate needs of housing, food, and sustenance take priority, particularly with the lower-skilled workers from textiles and traditional manufacturing? Our current policies assume a “one-size fits all” approach.
Posted October 1, 2008, 12:35pm
Charlotte asks “Why is the federal strategy so incoherent?” The federal government has at least two sets of strategies to deal with worker displacement. One set of strategies is aimed at affecting the environment for job creation. Does the tax structure and regulatory environment encourage business start-ups and expansion? Does the federal government provide specific incentives for the creation of jobs in particular geographical areas (“enterprise zones”) or industries (for example, ethanol production or wind farms)? Another set of strategies focuses on providing aid directly targeted on displaced workers—helping them find new jobs, helping them become retrained to hold better jobs, or helping them deal with financial consequences of permanent job loss. I do not want to get involved in the debate over how to create a better tax and regulatory environment for job creation. The reason the U.S. does not have a more coherent set of policies to deal with those issues is that there are basic and legitimate disagreements among legislators and the voting public about how to create a better environment for job creation. Supply-siders assure us that low taxes are the best route to job creation. Defenders of industrial policy believe the government should be in the business of identifying high-value or potentially fast growing industries and then offering entrepreneurs specific incentives to enter or expand those industries. I’m deeply skeptical of both these approaches. But we should recognize that Congress has contained many passionate advocates of both strategies. National policies to encourage job creation reflect this disagreement, and there is no way the policies can be described as well integrated or coherent.
My main interest is on the second set of policies: How do we help displaced workers deal with their permanent job loss? First, we give them access to effective labor market exchange services. In the old days these were provided by the government-supported Job Service. Nowadays they are provided in something called One-Stop Career Centers, also paid for by the government. I have little doubt these services can be improved, and it would be worthwhile for us to discuss how this can be done. Second, we give them unemployment benefits, which provide temporary replacement of the wages workers lose as a result of unemployment. Many critics of unemployment insurance say that it can be improved. We should discuss strategies of reform. (I for one favor expansion of unemployment benefits to include temporary and partial earnings replacement for workers who are forced to accept a big wage cut in order to get re-employed.) Finally, the government offers a few programs to re-train or educate displaced workers so they can find new kinds of jobs. Although many people say they favor this approach, the budgets of the federal government and state and local governments suggest we do not favor education and re-training very much. The simple fact is that the nation does not spend very much money on education and training programs that are specifically aimed at helping displaced workers.
This brings me to Charlotte’s second question: “Why has the government been so ineffective in helping workers?” On the whole it has been relatively effective in giving temporary earnings replacement to workers who suffer short spells of unemployment after job loss. It has been less effective in delivering labor market exchange services. And it has been almost totally ineffective in devising education and re-training programs that deliver useful services to displaced workers. In a future post, I can offer some explanations for this ineffectiveness.
Posted October 1, 2008, 12:54pm
Charlotte Howard asks, “Why is the federal strategy so incoherent?” We could go through lots of detailed discussions as to the failings of specific interventions and programs. But in my view, the answer is more simple and basic. For a generation now, economic policy has been premised on the idea that there is no such thing as a problem of unemployment, or displaced workers. The fundamental policy concern has rather been to hold down inflation. Whenever we establish the inflation-safe level of unemployment (the so-called NAIRU—non-accelerating inflation rate of unemployment), that is the “natural” rate of unemployment, and no more policy interventions need to occur regarding macro employment policies.
Working from this premise has enabled us to ignore some fundamental trends. Gary says, for example, that everyone benefits from rising productivity. That isn’t necessarily true. Between 1972 and 2007, average labor productivity in the U.S. has roughly doubled. But average wages for non-supervisory workers is 10 percent lower in inflation-adjusted dollars in 2007 relative to 1972. This is a fundamental failing of our economy. The way to correct it is to place the creation and expansion of decent employment as a first-order, front-and-center concern of economic policy. We aren’t close to this line of thinking at present.
Posted October 1, 2008, 2:07pm
"Why is the federal strategy so incoherent?" Current worker transition programs, while well-intentioned, are inadequate to meaningfully help workers cope with the challenges faced in today’s economy. One of the principal programs designed to help workers, unemployment Insurance (UI) was introduced in the early 1930s and has not changed in any fundamental way since then. UI benefits were designed to supplement a worker’s salary until rehired by his or her previous employer. Today, the challenges facing unemployed workers are often much more involved: matching with a new employer, often in a new industry; upgrading or learning new skills; and coping with lost benefits, especially health care. A key policy priority of the new Administration ought to be a robust overhaul of this depression-era program along the lines of the robust reform to the welfare laws led by President Clinton in the 90s.
Posted October 1, 2008, 3:04pm
Gary has done a wonderful job of summarizing the policy issues here. I would like to defend his statement that “everyone benefits in the long run from increases in worker productivity.” While maybe not strictly true depending on your view of the long run, the benefits of productivity increases have been extremely widespread. The average wage and median income figures that are frequently touted as showing little improvement over the last 35 years are misleading because they account for inflation using the CPI (Consumer Price Index) which sharply overstates inflation. The Boskin Commission appointed by the Senate Finance Committee reported a dozen years ago that the CPI overstates inflation by more than a percentage point per year. Over 35 years this overstatement means that what is reported as a 10 percent decline in real wages has actually been about a 30 percent increase. The supposed 10 percent decline in average wages doesn’t fit with what we see in other measures of worker living standards. The ownership of cars and houses has expanded (well before subprime mortgages were common), and even those well below the median income are now much more likely to live in an air conditioned house in good condition with a washer, dryer and dishwasher.
Posted October 1, 2008, 3:23pm
One strategy to improve the overall effectiveness of TAA would be to improve the delivery of the rapid response system. Having a state workforce development agency work in a vacuum, isolated from other necessary and critical support agencies, creates a maze of paperwork, applications and fragmented services for displaced workers. Displaced workers end up being bombarded with bureaucratic vocabulary that has no meaning or context for them and adds to their feelings of frustration and confusion.
One concrete example of how to improve this situation would be to look at the models some states and local governments have employed to improve economic development services. The one-stop shop approach for incentives, permitting and zoning, together with other necessary and legitimate government functions has been successful from both the business and governmental end. Why not use this model to craft a new delivery of worker services for TAA & TRA (the Trade Readjustment Act), as well as UI and other agency support?
Posted October 1, 2008, 3:30pm
I think the answer to Charlotte Howard's question about 'federal strategy' for helping displaced workers should focus on the Community College as an institution which already extends to every corner of the nation, and has a long history of vocational training. Community Colleges have deep local roots, and they are a forum where all the interested actors—Federal, state and local governments, unions, businesses, community organizations, and of course displaced workers—can come together.
Let me give two examples of what can happen when everything comes right at this local level. A few years ago I looked at two mid-sized German engineering companies that wanted to train their American workers to high levels of engineering skill. They found no suitable courses at local Community Colleges, and so, working with the colleges, they created them. They knew exactly what they wanted, and they were prepared to spend the money to get it, and the programs have been very successful.
I don't see US companies lining up like this to train Master Machinists at Community Colleges, because that's not exactly a growth area in American manufacturing. But there are employment growth areas in the service economy—social services, health care, ‘customer relations management’ (see my previous comment) and now the green economy—where all parties would benefit from the kind of high caliber training the Germans organized. Why doesn’t this happen more often? Funding is one reason, and here I think the Federal Government should do much more than it does now. Exactly what form its funding should take perhaps we can discuss.
Posted October 1, 2008, 3:37pm
I would echo Robert (Nichols)'s call for a significant overhaul. We are using tools that were developed decades ago to deal with a much more dynamic economy and one that is shedding some of the tools and resources that were developed in the interim. One of the keys, and one that has proven very challenging politically, is that of upgrading skills or learning new skills at some public expense. If part of the new economy is continuous change, jobs and employers coming and going at a faster pace, we need to develop the mechanisms that will allow the workforce to be responsive to the newly developing needs. Part of the answer is in the construction of basic education. But part of it also must come in the form of a system that helps individuals gain the knowledge and tools they need to match the changing skill requirements of the newly developed jobs. The degree to which this responsive education and training system is paid for by individuals, employers, or the federal government must be debated. We have seen 35 years of labor surpluses that have let many employers get away from funding their own training programs. With the early retirement of the baby boomers, we are seeing more worker shortages. To fill these job vacancies, we need to create a new payment model that will better match openings and job seekers. That is likely to involve employer contributions in some form.
Posted October 1, 2008, 3:47pm
A quick response to Bruce Meyer:
1) Have you actually looked at the work of the Boskin Commission? It was very shoddy scholarship overall. It provided almost no evidence to support the contention that the Bureau of Labor Statistics was understating quality improvements in its consumer basket. A much more serious effort at improving the CPI was the Charles Schultz Commission of a few years ago, sponsored by the National Science Foundation.
2) However, even if we accept your premise coming out of the Boskin Commission inflation adjustments that real wages had risen 30 percent between 1972 and 2007, that still represents an annual average increase of one percent. This is hardly a sterling achievement, especially when average labor productivity rose by roughly 100 percent over this same period.
The overall point is this: we cannot assume that increasing productivity will lift all boats, especially in a globally integrated labor market, where U.S. workers face weakened bargaining power. We instead need policies and institutions that will enable workers to capture their fair share of productivity gains. Where to start? Recognizing, in the first place, that there is a problem.
Posted October 1, 2008, 4:02pm
The three main parts of the national policy to help displaced workers are: (A) programs to help match job-seeking workers to employers who are looking for new workers; (B) earnings replacement for the wages lost as a result of unemployment; and (C) worker retraining programs. By far the most costly part of this package is item B, earnings replacement provided through unemployment insurance (UI). In 2007, the government spent almost $33 billion for UI benefit payments. In normal times, workers in most states are eligible to draw up to 26 weeks of UI.
By international standards, U.S. benefits are neither very generous nor very long lasting. Many rich countries replace a larger percentage of the wages lost as a result of unemployment, and they replace them for a longer span of time—up to a year or longer.
Even if the UI program does a good job of replacing workers’ lost earnings while they are jobless, it does nothing to offset the earnings loss some workers experience when they are re-employed. In order to get a new job, some workers have to change their occupation. In many cases the new occupation has lower pay than the old one.
UI was established in the United States in the 1930s. At that time, most worker compensation consisted of money wages. UI was designed to replace the money wages workers lose when they are laid off. Since the 1930s more and more worker compensation consists of fringe benefits, such as health insurance and employer pension contributions. UI does not replace the health insurance and pension contributions that workers lose when they are laid off. The loss of health insurance protection is the more serious problem, because many families depend on the health insurance obtained as a result of the breadwinner’s job. When breadwinners lose their jobs, their families frequently lose their health coverage, too. To be sure, the U.S. now has a law that allows laid off workers to continue their health coverage if they pay the full premium for continued coverage. However, for many unemployed workers, the required premium payments are unaffordable. Either the UI system or the nation’s health care system must be reformed so that displaced workers can afford to obtain good health insurance.
(EDITOR'S NOTE: For Gary Burtless's full post on UI, click here.)
Posted October 1, 2008, 4:07pm
Simon’s comment about community colleges seems like a good starting point for tomorrow's discussion. That is, how can community colleges, governments and companies work together to re-train workers more effectively?
For now, however, I’d like to ask, why hasn’t this happened on a wider scale already? Is a lack of funding the only barrier?
Posted October 1, 2008, 4:27pm
The government needs to do two things: (1) support the creation of good jobs through appropriate investments, tax, and trade policy; and (2) ease the necessary transitions for workers from one job to another, both through income support and effective and appropriate training. In recent years, the U.S. government has performed neither function well.
The U.S. has significantly under-invested in workforce development, especially when compared to other industrialized countries. If we accept that we are not going to win a competition—and wouldn’t want to—to get our wages lower than all of our competitors, then it is clear that we will have to compete in the global economy on the basis of high-road, high-tech production. We won’t win that competition by skimping on training and skills development, and our growing trade deficit in advanced technology products ($54 billion last year, up from a surplus just seven years ago) makes that clear.
The best strategies to move dislocated workers toward re-employment are those that balance income support with access to long-term, high-skill education, training and certification. Dislocated workers need positions where they can advance up a career ladder while obtaining family-sustaining wages and benefits. The Trade Adjustment Assistance program contains elements of this strategy, but also needs to be updated, expanded, and better implemented. House Democrats passed a bill last year that would have expanded eligibility to service and public sector workers and improved the health care benefit, among other things. President Bush threatened a veto and the bill was not implemented. While it is of course true that many workers are displaced by forces other than trade, it is ridiculous to assert, as Karen does, that workers dream up a trade angle to their displacement in order to qualify for TAA. The truth is that we do need an expanded and revamped set of worker dislocation programs, but we should bring other programs up to the TAA standard, not water down one program that has the potential to work effectively.
Posted October 1, 2008, 4:39pm
To answer the question about why some of these things haven’t happened already, here’s one answer: politics. We recently commissioned a poll in which we asked people about their perceptions of government. 46% of Americans perceived government as mostly hindering them from succeeding and only 10% said they put a lot of trust in the government “to do the right thing for the middle class.” People don’t perceive the policies that are currently being offered or discussed in Washington as in sync with either their current needs and desires or their aspirations—hence no appetite for large expenditures in this regard (and certainly even less after the events of this week). As Rob Nichols pointed out in the context of TAA, the current system is hugely outdated. The current workforce development system also has historical roots in countercyclical efforts to dampen the effects of economic downturns, which as the consensus seems to show is not the mission it’s being called to fulfill today.
If we want to modernize the system, we’ll need some fundamental rethinking of not just what government can do well (that would emphatically not include government-run training and education programs) but a serious consideration of what people actually trust government to do. Policies cannot be implemented in a political vacuum, as we are learning this week. There are a couple ways in which this system is out of step with ordinary Americans. First, its focus is economic security and people are equally concerned about and aspire to economic success. A modern policy has to help people take advantage of the opportunities presented by a dynamic economy, not just help people cope with the downsides if they are the victims of change. Second, people have clear ideas of what government is competent to do versus the marketplace. People may not perceive government as nimble enough to actually help people find jobs in a changing economy, and that includes picking industries where there is potential future growth. This could explain the lack of a huge public groundswell for government/community college partnerships.
Posted October 1, 2008, 4:57pm
We do a lot of research on corporate training and it essentially falls into three broad categories.
First there are basic employment skills (reading, writing, math, communication skills) which all employers expect in their workers. Hopefully these skills are developed through our educational systems.
Second there are technical and functional skills: if you’re a welder, you need to be “certified” or experienced as a welder. If you are a sales person, you should have skills and experience in various aspects of sales. Most companies know that they can “hire” these skills by looking for experienced people, but that there is a price to pay for higher skilled people—so they build internal training and career development programs.
In the last 10 years one of the biggest growth segments in the US services industry has been the “for-profit” education companies (Kaplan, Capella, Apollo, and others) who deliver specialized degree and functional training programs to help people build these skills. Community colleges participate here as well. But almost any employer knows that they must invest in these areas as well, because each business has their own specific implementations of these roles.
For example, Starbucks expects its service people to deliver customer service in ways that are unique to Starbucks, so they must train their people to make coffee, greet customers, and clean the stores in their own way. 7-11 does this very differently, of course. McDonald’s is proud of the fact that one out of six workers in the US was trained and worked at a McDonald’s store, and they happily make this investment. The worldwide spending on corporate training is over $110 billion, so lots of private money goes into this market.
The third area of training and skills are what we call “leadership skills.” Do you have the skills to manage a team of people? Can you run the entire marketing department? Can you manage a profit and loss business? These higher level skills are part of what companies call their “leadership pipeline”—and employers and training companies understand the tremendous value of this kind of training. This industry alone is over $14 billion in size.
To try to understand how this all works, we have to look at the workforce skills among these segments. The government certainly should take responsibility for the core level of skills and supporting many widely used technical skills areas. In the UK, for example, there are networks of government-funded training institutions which focus on professional skills. In the US, the higher level training areas are left to the market, employers, and the private sector.
Posted October 1, 2008, 5:08pm
Charlotte asks why community colleges, governments, and companies have thus far been unsuccessful in establishing effective re-training programs for displaced workers. In the case of community colleges, displaced workers are not their main customer base. Most community colleges are in the business of providing basic college courses and vocational education mainly to two target populations—recent high school graduates and adults who are returning to school for a specific vocational objective. In addition, many community colleges develop specialized vocational training programs to serve the needs of important local employers—hospitals, manufacturing plants, and so forth. Community colleges have course offerings that are useful to displaced workers, but very few of their classrooms are filled with displaced workers. As a result, the special needs of displaced workers are not a focus of community college interest.
Employers worry mainly about their own short- and long-run human resource needs. If those needs can be filled by displaced workers, companies are happy to recruit and train them. If their needs can be filled by job applicants who are less expensive to find or train, displaced workers will tend to fall to the back of the hiring queue.
The failure of governments to establish effective re-training programs for displaced workers is due to a couple of factors. First, it is not easy to decide what course of training would be most effective for a particular worker. Does it make sense to re-train a former steelworker to be a medical technician? This depends on the worker’s aptitude and willingness to invest in retraining, and it also depends on the future demand for medical technicians. Neither is very easy to predict. A second factor, I think, is that both the state and federal governments have under-invested in research and development in the field of worker re-training. We would know much more about the effectiveness of different training strategies if the country had invested more resources in systematic experimentation with a variety of approaches. Instead, public spending in this field tends to be concentrated on providing immediate services without any thought about determining which services prove to be the most cost-effective and useful in the long run.
Posted October 1, 2008, 6:01pm
Let me jump in to offer a state perspective on all this.
In Michigan, there is certainly a lot of effective worker training going on—but it does not come close to meeting the need.
First of all, the need: we have led the nation in unemployment for two and a half years, usually about two full points above the national average. We currently have 8.9% unemployment. That’s 439,000 people. Add in 29,000 discouraged workers and 154,000 involuntary part-timers, and you get 622,000 Michiganders un- or underemployed, or almost 13% of our entire workforce. And, of course, as some have pointed out in this discussion, many of these folks are longer-term unemployed, and will not be able to match the standard of living they lost without substantial training.
Second, definitions of the displaced: For practical policy purposes, let’s discuss the eligibility criteria we adopted for Michigan’s No Worker Left Behind initiative. To be eligible for the program, you simply need not to be working today—no questions asked; or, you have a pink slip and know you will be out of a job soon; or you are employed but have a family income of $40,000 or less.
Why did we adopt such a broad definition? In terms of our decision not to stick to the picky Unemployment Insurance requirements to be considered “unemployed,” we figure Michigan will be better off if someone not working today gets serious training towards an in-demand job in our state. Period. In terms of including low income workers, we reasoned that there is no justice in affording benefits to someone who just lost a $90,000/year job while excluding someone making $9/hr. and working 32 hours per week at Wal-Mart.
Third, what’s really happening on the ground: Michigan is the epicenter of America’s workforce crisis. To pick just one statistic of many to choose from, we have 3% of the U.S. population but 8.4% of the nation’s manufacturing job loss—323,400 jobs gone between August 2000 and August 2008. So we are taking a bold approach with No Worker Left Behind (NWLB). We are offering up to two years’ worth of education for any eligible worker at $5,000 per year (up to $10,000 total) as long as they’re willing to study towards a certificate or degree leading to a job that makes sense for them personally in a growing or emerging field.
In NWLB’s first year (we started August 2007), we put more than 37,500 workers into training. While many of them are in short-term programs (certified nurse aid, truck driver), a much higher percentage than ever before are in longer term training studying for associate’s degrees, and some are even completing BA’s and MA’s.
Fourth, integrating the tangle of federal programs: In what I believe is a first for any state, NWLB tracks common data fields for all workers in federal and state funded training across the multiplicity of programs we administer, including WIA (the Workforce Initiative Act) adult, WIA dislocated worker, TAA, TANF (Temporary Assistance for Needy Families), and Rehabilitation.
Posted October 1, 2008, 6:05pm
Thanks to everyone for a lively debate so far. Gary very helpfully summarized the three main components for helping displaced workers: programs to match workers with employers; earnings replacement for lost wages; and re-training programs. We’ve read a lot today about the problems with unemployment insurance, TAA and most re-training efforts.
Leaving broader questions of national policy for now, my first question for tomorrow morning is this: Which government, community college or corporate programs provide good models for re-training? Is anyone doing this well?
Posted October 1, 2008, 6:10pm
In reply to Sammis’s excellent point about the need to debate public and private funding for job training, in Michigan we are trying to experiment with public-private partnerships. For example, in a negotiated deal with the State of Michigan and the UAW, Chrysler has agreed to pay for No Worker Left Behind training for all employees who take their buyouts. This means that in addition to whatever cash and other benefits employees get, the company is helping (in a modest way) departing employees gain the skills they need to transition to new careers successfully.
We are in negotiations with other companies (unionized and not) to support NWLB. Bottom line: the state simply doesn’t have the resources to train even half of the workers who need it. Clearly, while our negotiated experiments may help, they point to the need for a 21st Century national system of employer investment in training for workers who find themselves transitioning to new jobs.
Posted October 1, 2008, 8:46pm
Gary's points are completely valid. Community colleges serve a wide array of constituencies. In today's environment, community colleges are rapidly becoming the "college of choice" for the first two years of post-secondary education due to lower tuition costs and convenience. Simultaneously, we find ourselves remediating many of the recent public school graduates in reading, mathematics, and writing, while trying to deliver "cutting edge" technology programs to support local economic and workforce development. Displaced workers find themselves sandwiched between technically savvy generation X'ers and students who already possess post-secondary degrees who have returned to college for technical training to enhance their employability in a highly competitive marketplace. When you consider the soft skills that are also a vital component of today's skilled worker's tool box, the task is overwhelming. Which student base is most important to our mission? That is not an easy question.
Financial resources, skilled faculty, seed money (and time) for program development are all critical elements. Rowan-Cabarrus Community College benefited from a National Emergency grant of $2.3 million dollars from US DOL to assist with capacity building when our community lost 4800 textile jobs (Pillowtex) in 2003. While these were welcome and much-needed resources, we struggled to respond just-in-time to the needs of our new student population because of the frequent contradictions of federal legislation related to TRADE and our own local and state accounting systems.
Timing of the lay-off can also be a factor. In NC, colleges do not generate budget FTE (full-time equivalents) during the summer for college credit programs. Frankly, there is no incentive to enroll students in degree-seeking programs during a summer term. Trade and technical programs such as machining, welding, construction, etc. often suffer from low enrollments, yet there are unfilled jobs in these occupations. How do we attract students to these programs?
Community colleges are committed to their communities, but we recognize our limitations in meeting the needs of every single demographic. Our personal experience during the traumatic years of 2003-05 forced us to recognize that we could not create a bright future for everyone who turned to us for help. While our local community has demonstrated a semblance of economic recovery through the creation of service sector and retail jobs, there are still many people that are suffering from job loss and underemployment.
Posted October 1, 2008, 8:48pm
I don’t want to spend too much of the time of this forum on measuring inflation, but it does matter for understanding recent trends, and much of the discussion on trends in wages and well-being in the popular press is wrong. The official government price index (CPI) does sharply overstate inflation. The Boskin Commission’s bottom line has held up remarkable well to subsequent probing. I have read a tall stack of subsequent papers and they are almost all in general agreement. The commission members were among the most recognized and respected economists in the country. Even the BLS economists who produce the CPI have come up with numbers that are pretty close (Johnson et al., Monthly Labor Review 2006). The consensus seems to be that they were about right, with many researchers arguing that the bias is even greater than the 1 percentage point per year (Jerry Hausman, Journal of Economic Perspectives 2003 is a good example). The Schultze commission doesn’t contradict the Boskin Commission. In fact, it doesn’t give an alternative estimate of bias, just a lot of technical suggestions on how the BLS can improve its methods. The bottom line is that wages and living conditions have improved for nearly everyone. That doesn’t mean the gains have been shared equally.
Posted October 2, 2008, 8:43am
I agree with Bruce Meyer that this isn’t the place to belabor a highly technical debate on measuring inflation, though I also agree with him that this technical issue has widespread substantive implications. The more important issue is what I noted in my previous post: even if we accept his measure of real wage growth over the past 35 years, the figure he comes up with ends up being less than a 1 percent average annual growth rate of real wages. This is over a period when productivity roughly doubled.
So, regardless of what one thinks about the specifics of measuring the CPI, we still face the question of creating institutions that promote fair outcomes for working people in the face of intense pressure from globalization and the weakening of institutions that enhance worker bargaining power. Within that context, active labor market interventions—such as job training programs, whether on site or at external locations, such as community colleges, have an important role to play. But we have seen in countries that practice active labor market policies, such as the Nordic countries, they are capable of reducing structural unemployment—i.e. worker displacement—by a percentage point or two. That is a significant accomplishment. But it isn’t a substitute for macro and industrial policies focused on increasing labor market demand, and thereby improving worker bargaining power.
Posted October 2, 2008, 9:11am
I am sorry to weigh in so late, but yesterday was the Rosh Hashana holiday. I have followed the discussion with great interest, and don’t have much new to say at this point on strategies to help displaced workers subsequent to displacement. However, there is a larger issue that is worth pointing out.
The structure of employment in the U.S. has changed. Long-term employment by a single employer is much less common than it used to be. The nature of careers has changed, and workers can expect to change employers more frequently during their working life. The fraction of men aged 35-64 who have been with their employer at least ten years fell from about 50 percent to about 35 percent between 1973 and 2006. Over the same period the fraction of men aged 45-64 who have been with their employer at least twenty years fell from about 35 percent to about 20 percent. The changes for women are less dramatic given the increasing attachment of women to the labor force over this period. Interestingly, these changes are concentrated in the private sector. Long-term employment has become more common in the public sector, particularly for women.
(EDITOR'S NOTE: Henry's full post continues here.)
Posted October 2, 2008, 9:20am
I want to amplify Jeanie’s point: community colleges are a lynch pin of any system that can help displaced workers win a new life for themselves and their families—but there are many challenges. One of them that we may not have discussed in enough detail yet is the problem that so many un- and underemployed workers are not ready for associate’s level study in anything, yet such study is the route to good new jobs for so many workers.
Here in Michigan, one in three workers are not ready to do associate’s level work. Yet, as in many states, adult education has been largely defunded, even as the need for adult basic education, remediation, and ESL instruction grows in scope and importance. So we have decided we need to revision adult learning completely.
Since last spring, we have had adult educators, community college leaders, workforce professionals, and state officials at one table wrestling with the question of what adult learning should look like in the new century. We have decided that treating a GED as a terminal degree and allowing adult education to languish as a silo separate from post-secondary education and career pathways must end. We are beginning to envision a system in which all adult education, no matter how “basic,” will take place on some particular road to postsecondary study and/or job opportunity. So ESL must be occupational ESL, and our basic literacy and numeracy work must afford adult learners the hope and expectation that they’re not simply “catching up” or doing something “basic” that others did long ago, but that they’re on a dedicated path towards a specific career in health care, renewable energy, advanced manufacturing, or other areas of need and opportunity.
Posted October 2, 2008, 9:30am
Many thanks to Andy and Jeanie for describing their work in Michigan and North Carolina. Would anyone else like to discuss specific efforts by a state or community college? Also, Andy began to discuss the challenge of balancing public and private funding for training. Michigan seems to be taking an interesting approach. Are there other programs that encourage the private sector to pay for re-training?
Posted October 2, 2008, 9:50am
I was unable to participate in yesterday’s discussion. Some of the following comments are in response to those made yesterday. Others are designed to further the discussion. I apologize for the length of this intervention.
As has already been suggested, many factors contribute to job change. Voluntary job change is hopefully undertaken to enhance a worker’s career, skills and earnings. By contrast, workers have no control over the factors that contribute to involuntary job loss. Some workers lose their jobs due to poor management decisions. Other workers may lose their jobs due to technological change, productivity gains and increased domestic and international competition. Job loss under the former case is bad for the worker and bad for the economy. Job loss under the latter scenarios is bad for the worker, but may enhance productivity growth for the overall economy. The challenge to society therefore is to minimize the cost of job change to individual workers while maintaining the benefits to the overall economy.
(EDITOR'S NOTE: Howard's full post continues here.)
Posted October 2, 2008, 9:57am
I have a brief response to Karen and Rob (Nichols)’s comments concerning TAA’s contribution to worker anxiety over international trade. According to the Bureau of Labor Statistics, there are approximately 4 million dislocated workers each year. Approximately 2 million workers are affected each year by mass layoffs. A loose consensus of various studies suggests that approximately 500,000 workers lose their jobs each year as a result of increased imports. This does not include workers adversely affected by outward shifts in investment and production.
Over the last few years only approximately 100,000 workers have been deemed eligible for TAA by the Department of Labor. Of those, only half, approximately 50,000 workers, or less than 10 percent of potentially affected workers, actually received assistance under the program. It is hard to believe that this minority set of workers can be blamed for making workers anxious about their economic futures. Workers know first hand about the economic pressures they face; they don’t need to have them explained by Washington policymakers.
Having said that, I fully agree with Karen’s call for assistance to all workers, regardless of the cause of job separation. Josh, I am intrigued about your comments on private employer based training. Do you have any information on the effectiveness of this training? Does it result in higher wages? Longer job tenure? Do you know of any data concerning the extent of employer-provided training across companies?
As for why we don’t do more to help dislocated workers? A simple survey of this group, which seems more inclined to help these workers than others, will probably reveal great differences in the amount of public and private resources that should be devoted to this cause.
Posted October 2, 2008, 11:27am
To follow up on Howard’s question, the answer is absolutely yes. Employer-delivered training definitely delivers many specific benefits, including: improvements in workforce performance, improvements in employee, mobility increase in retention and engagement (lots of research shows that the #1 factor in employee engagement is “ability to develop my career”—not money), and improved ability to hire—what’s called improving the “employee brand.”
One reason for many of these benefits is that entry level, younger or transitioning employees really want to be developed in their new position. So if a company spends 1-3% of its payroll on training (that’s the typical budget), they see 10-20% or more improvement in performance, retention, and engagement—so the ROI is very large.
Over and over we have talked with companies who “cut training” to save money and really suffered over the long-run. Despite the benefits which seem so clear and obvious here, many business and HR leaders still think training is an “expense” which can be cut when times are bad. More and more companies now know that employee development is a strategic investment, especially because there is such a challenge with the aging workforce and influx of many young people.
As far as the extent of training in companies, it ranges from ½% of payroll in real laggard companies to 4% of payroll in well-run consulting companies. The average is about 2.4%, which turns into about $60 billion in the US and over $110 billion in the world.
Posted October 2, 2008, 12:09pm
I have been observing the discussion threads since the beginning of this topic with interest and agree with my peers regarding the many forces that impact the issues of displaced workers. When it comes to the impacts of globalization, Caterpillar is one the few companies responding to these shifts in human capital across all tiers of its organizational strategy including: sourcing/attracting, recruiting/selecting, performance management/rewards, learning & development, succession planning, and transition management. By transition management, I am referring to how we prepare existing employees to cope with job moves within the organization and new employees coming into the organization through onboarding and orientation processes. This is also broadened to include potential employees.
Since 2001, we have done a fair bit in this space in the preparation of employee skills through Caterpillar University and Talent Development, focusing on transferable skills that can help our displaced employees gain a quick start. A 6 Sigma team designed the Priority Candidate Placement Process (PCPP) in late 2005 and implemented in early 2006 to: 1) aid management and support employees who need new assignments; 2) enable recycling employee talent, by focusing on in-placement; 3) demonstrate Caterpillar’s commitment to employees.
Employees benefit by having the first opportunity to be considered for open positions. Hands-on counseling, advice and individual development programs—including resume writing, datasheet sheet updates, interview techniques, etc.—are provided to PCPP candidates. While participating in PCPP, employees continue to receive the same pay and benefits. In cases where the employee’s job is eliminated (either partially or in full) before the employee is placed in a permanent new position, a concerted effort will be made to place the employee in a temporary assignment.
Over the last two years, this process has enabled 43% lateral moves; 15% promotions; 18% demotions; 24% retirement, voluntary separation and others. On a rolling 12 months, we have 82 days on average before placement. In total, an average of 755 job openings per month were processed through PCPP this year.
In certain parts of our businesses, we also have programs that compensate for acquisition of technical skills to enhance their careers.
Posted October 2, 2008, 12:22pm
Most companies—and nearly all large corporations—certainly invest in training their workers. As Josh Bersin’s statistics make clear, however, for many companies the amounts invested are pretty small. Moreover, the total amount spent by private firms is modest in relation to total spending on education. Josh estimates that company training costs amount to about $60 billion a year. In comparison, in 2005 over $350 billion was spent on post-secondary education in the United States. Of that total, about $160 billion was provided by the federal government and state and local governments. (The remainder of funds came from private sources, including tuition payments, charitable gifts, and income from university endowments.)
Although the data on company training costs are not very precise, people who have carefully examined employer training conclude that the bulk of company investments are devoted to upgrading the skills of workers who already have accumulated a great deal of skill. In many cases, the workers receiving the most costly training are those in managerial and technical occupations, including many workers who have college and post-college degrees. Employers’ reluctance to invest a great deal of money in training someone they’ve just hired is understandable when viewed from the cold-hearted perspective of profit and loss. Many newly hired workers, including experienced workers who have just been laid off from a good job, will not remain with the company for more than one or two years. With this in mind, the employer will think hard about the wisdom of investing several thousand dollars in a person who may walk out the door next month or next year.
The reluctance of companies to invest in training new workers is one of the main arguments in favor of offering displaced workers some help in covering the cost of their own re-training. Of course, the government already provides a great deal of help along these lines, in the form of general subsidies to public colleges and universities, grants and scholarships to low-income Americans, and subsidized loans to youngsters and adults in middle class families. The question is, should the nation also create a much bigger and more generous program for re-training displaced workers?
Posted October 2, 2008, 12:35pm
I have a few comments related to the work being done by Community Colleges to re-train displaced workers and other adult learners who are returning to school. There are 31 Community Colleges in various parts of the country who currently participating in a national initiative called “Breaking Through” led by the National Council for Workforce Education (an affiliate of the American Association of Community Colleges) and Jobs for the Future. The initiative was designed around research related to strategies colleges need to employ to ensure the success of adult learners who are enrolled, primarily, in technical and occupational programs—as these programs most often equate to higher earnings and long-term career growth. As well, these graduates of programs often fill critical needs faced by the employer community. While we have a high unemployment rate in Michigan, we also have many skilled job openings that employers are having a hard time filling.
The Community Colleges involved in Breaking Through, including my own, are connecting current program offerings, and developing new program offerings that are aligned with current and emerging labor market trends, while providing additional supports, and offering programs in non-traditional ways that accelerate the time in which adult learners can earn certificates and/or degrees. Additionally, we are using several methods to reduce the amount of time students spend in remedial and developmental courses. One example is an accelerated American Welding Society certification program that we offered recently which was marketed to the dislocated. The program blended both credit (13 hours) and non-credit instruction (400 hours), and an industry recognized certification in 15 weeks. Programs offered in this manner are crucial for displaced workers, who, in most cases, have the need and desire to return to the labor market as quickly as possible.
Posted October 2, 2008, 12:40pm
Gary, your comments on employer-provided training are very helpful. Josh, do you have data on what share of workers actually receive employer-provided training? My impression is that the percent is rather small.
Posted October 2, 2008, 12:54pm
I want to focus on the retraining of displaced workers, and here there seems to be a consensus among panelists that the present arrangements are inadequate; government programs are patchy and ill conceived, while the private sector doesn't do enough. We've had much less to say about how this education and training might be improved, and perhaps we should do this on the second day. We are also charged to think new thoughts, so we shouldn't be too bound by the way things are done now. I continue to believe that a pivotal role should be played by community colleges (see my second comment yesterday). I note Gary Burtless' comment that “displaced workers are not a focus of community college interest,” but they clearly are in Michigan (see Andy Levin's and Robert Matthews's comments) and Burtless himself says that community colleges target “adults who are returning to school for a specific vocational objective.” That group can and should include displaced workers.
My own views about community colleges were formed over twenty five years ago when I had an experience which ties in with the problem of “wholesale displacement,” mentioned by Philip Howard in his reader comment yesterday. In the Spring of 1982, I spent some weeks in Youngstown, Ohio, soon after the steel industry in Youngstown, once the second steel town in the world after Pittsburgh, finally collapsed. This must rank among the most devastating examples of wholesale displacement in modern American business history. The community was in a state of shock, but what made matters worse was that not only was there no community college in Youngstown focusing on the specific problems of displaced steelworkers—there was no community college of any kind. I've felt ever since that, for the workforces of these stricken communities to begin their recovery and fight back, there needs to be an institution which belongs to their community and where their hopes and efforts can be focused—and in the US, that's the community college.
Posted October 2, 2008, 1:25pm
Howard, to answer your question—these days, almost all employees receive training of some kind, because as much as 1/3 of all corporate training is now done online. So most employees have access to online materials which teach basic technical and IT skills, compliance materials, employee communications, engagement skills, etc.
As far as formal training goes, again the number is high—at least 1/3 to 1/2 of the employees in most companies take part in formal training at least once per year. When we get to formal career management and career development, the number is much smaller—only 15-20% of employees have access to such programs from their employer.
But here is another startling statistic. Of the $60 billion or so which is spent on corporate training, more than $1.2 billion goes into tuition reimbursement—this is money given to workers/employees to use on their own for their own educational programs. Companies spend these huge sums because they don’t have the ability to build all the training their employees need and they view it as an important competitive advantage in attracting motivated, high performing workers.
Posted October 2, 2008, 1:30pm
I strongly agree with Josh’s comments. In our research on the connection between learning and development and employee engagement, we have found that there is a strong correlation between how L&D can help better engage employees. Among many factors that can affect employees’ engagement, I have noted that there is a 45% influence on the impact of employee engagement, and the perception of good career opportunities is the second most correlated item to engagement. With this said, we have invested substantially to continually build the capabilities of our workforce to meet the demands of our business strategy since 2001 with the creation of a corporate learning and development function. Managing growth is one of our major challenges and it is managing our business risk in employees' knowledge and skills, for both existing and new employees, that has been high on our corporate agenda. We are currently undertaking a huge transformation of workforce capability through the deployment of our Caterpillar Production System (order through delivery) to ensure the continuity of our production workforce within the global economy.
Posted October 2, 2008, 1:54pm
I’d like to return for a moment to Simon’s point about wholesale displacement. Simon says that Youngstown’s workers would have benefited from the help of a community college. Robert Matthews describes the work of a community college in a city devastated by the decline of Michigan’s car industry. But I’m curious to hear the panel elaborate on what happens when a city’s reason for existence suddenly disappears. That is, do you re-train workers with the hope that new companies will come to the town? Do you train workers so that they can be employed elsewhere, where more opportunities exist?
Posted October 2, 2008, 2:00pm
Simon is right. Community colleges are certainly pivotal to this whole issue. Whether the client’s needs are basic skills, GED completion programs, ESL, certification and upgrade, or degree and diploma opportunities—community colleges are a very valuable asset. The development and delivery of training and educational programs are at the heart of our mission, but there are also support services that have to be a part of the equation if displaced workers are going to connect to new jobs and careers.
One of the greatest lessons that we learned from our experience with displaced workers was that there must be a venue for these adults to develop job-seeking strategies along with acquiring new workplace skills. Many older Americans who are suffering from job losses in textiles, tobacco, furniture, and other traditional manufacturing have no previous experience or training in writing and preparing a resume, interviewing, or job search. Many of these workers need one-on-one assistance with these applications.
At Rowan-Cabarrus Community College, we have developed a career center in proximity of the old textile mill site, and we have targeted unemployed and underemployed adults in our outreach services. The community is experiencing an unprecedented transformation from textiles to biotechnology through the philanthropy and investment of David Murdock, CEO of Dole Foods. A world class research center focusing on health and nutrition is in development and is projected to create in excess of 37,000 jobs for the region by 2032. The project has the support of the state of NC, multiple university partners, and the business community.
Our R3 Center (Re-focus, Retrain, Re-employ) is an integral part of creating a pathway for local citizens to this development project through targeted workshops focusing on career-building, personal assessments of clients’ skills and interests, and referrals to training and employment assistance programs. Since January 2007, we have served over 2000 clients with over 8000 services, but our resources are dwindling as our funding is “soft” money. This project is evidence of yet another skills gap and challenge for our communities if people are to fully benefit from the education and training they receive through federal programs during their lay-offs.
Posted October 2, 2008, 2:29pm
Here's a couple of questions to be asked in addition to those Charlotte posed: What is the state of the strategic planning for that city? Has long-range planning identified major shifts that may or will emerge so that displacement strategies can be developed? What new skill sets need to be developed when the shift occurs? And should training in general focus on competencies that employees need to have in the future to be successful in the event of displacement?
Posted October 2, 2008, 2:50pm
I want to be sure to return to the broader picture before the end of the day. Both presidential candidates have visited Rust Belt states such as Ohio and Michigan again and again. Both talk about worker re-training, but offer few specifics. How would you advise the next president to proceed? What specific reforms or programs would you suggest?
Posted October 2, 2008, 3:15pm
One idea that might fit into the sweet spot of both high-impact on displaced workers or any worker in transition and political salience is a bridge insurance benefit—a $2,500 refundable, advanceable tax credit to help people maintain coverage between jobs and avoid gaps in coverage that could prevent them from picking up coverage later. A second idea might be to expand federal student loan funding to people who are in school less than part-time. Under current law, federal student loans are not available for someone who’s taking a class here or there at night to refresh their skills. Both ideas are simple and relatively cost-effective ways of helping a lot of people—and in a way that would have political salience as well.
Posted October 2, 2008, 3:19pm
One way to help displaced workers is to expand UI by offering workers a temporary supplement to their wages. This supplement is sometimes called “earnings insurance.” The idea behind this expansion of UI protection is that workers who accept a $10-an-hour pay cut should get part of this wage loss replaced with a temporary government payment—say, a supplement that covers one-half of the pay cut. This expansion of traditional UI both helps workers adjust to the pay cut and also provides them a financial inducement to get a replacement job as soon as possible. Earnings insurance should be limited to a fixed time period—say, the first 18 months after a worker is laid off. The longer the worker waits before accepting a new job, the lower the value of the earnings insurance payments. These payments will end 18 months after the worker’s layoff, regardless of whether the worker accepts a new job 20 days, 20 weeks, or 20 months after the layoff occurs. If the worker waits 20 months to take a new job, he or she will receive no earnings insurance payments.
Posted October 2, 2008, 3:25pm
What needs to be done in federal policy? Sticking with the narrow question of worker retraining, we should eliminate the Workforce Investment Act, with its emphasis on quick reemployment and its complete lack of income support. We need to invest in our workers if we want them—and our nation—to prosper! As several have commented, TAA’s narrow focus on manufacturing job loss makes no sense today. We should create one national job training program that provides income support, child care and transportation assistance to workers for up to two full years of training towards degrees and certificates that (1) make sense for the particular individual and (2) lead to in-demand jobs. We should include apprenticeships in the system and incentivize labor organizations to spread the practice of providing workers with systems of training and retraining coupled with portable health coverage and pensions.
Posted October 2, 2008, 3:32pm
In our experience, the most effective training programs promote partnerships between government, employers, and labor to support job retention and creation, as well as regional economic and community development. There are many examples of high-road labor-management partnerships in manufacturing, health care, telecommunications, and hospitality. These partnerships balance the needs of both business and labor to assess industry skill needs, and ensure that programs create career ladders and portable skills suitable for high-growth, high-wage occupations.
In particular, there are a lot of opportunities presented by the potential for ‘green collar’ jobs in the renewable energy and energy efficiency sector. These jobs would produce environmentally-friendly products and services such as construction of green schools, solar panel manufacturing, energy efficiency retrofits of homes, and environmental cleanup and restoration. Already, the renewable energy and energy efficiency industries are experiencing a lack of skilled workers. A 2006 study from the National Renewable Energy Lab (NREL) identified shortage of skills and training as a key business constraint.
In Pennsylvania, Gov. Rendell is using state policies to promote and develop renewable energy to attract wind, solar, and battery manufacturing to the states. He has attracted companies that have taken former closed steel mills and created good union manufacturing jobs in building wind turbines.
Certainly, Sen. Obama's proposal to invest in infrastructure and clean energy is a promising start to creating the demand for skilled labor. We need to make sure that we follow it up with an appropriate mix of government, community college, and labor-management training and workforce development programs to ensure that we can match skilled workers to the new job opportunities.
Posted October 2, 2008, 3:35pm
Andy, I couldn’t agree more. If we are going to spend Federal (i.e. taxpayer) money training people, the training should focus on skills which will be useful over the next 10 years, not training people for the jobs that “exist today” but may not be around for the long term. I think employers would pay into such a program if it was attuned toward their local hiring needs.
Posted October 2, 2008, 3:41pm
Following on Gary's thoughts, our organization recently sponsored some research in this area. The paper, which can be found on our homepage (www.financialservicesforum.org) was authored by Grant D. Aldonas, the founder of Split Rock International and a senior advisor at the Center for Strategic and International Studies; Robert Z. Lawrence, the Albert L. Williams Professor of International Trade and Investment at Harvard’s Kennedy School of Government; and Matthew J. Slaughter, Associate Dean of the MBA Program and Professor of International Economics at the Tuck School of Business at Dartmouth.
In the paper, Grant, Robert & Matthew suggest the following. 1) A wage-loss insurance program for workers 45 and older, to supplement their income when they take employment at a lower paying job. 2) Continued health insurance coverage while workers remain eligible for unemployment insurance. 3) Allowing workers in transition to supplement their unemployment benefits by withdrawing, without penalty, savings they have previously accumulated in tax- advantaged vehicles such as individual retirement accounts. And 4) Expanded eligibility for current federal training programs, combined with the expansion of tax preferences designed to encourage ongoing skills acquisition and life-long learning.
That is a short summary of their work, I encourage you to read the whole paper on our website. Click on the "Succeeding in the Global Economy" section.
Posted October 2, 2008, 3:54pm
I am in agreement with Thea's comment on fostering stronger partnerships between government, employers and labor to support workforce development. Based on this discussion, I think there is a gap in matching the displaced workforce to specific shortages of skilled labor. While there are existing efforts to this end, it is apparent that we are not getting the maximum benefits. We need to explore how to successfully partner between the three groups above. The Singapore government has a working model on building this critical symbiotic relationship and perhaps the next president should consider sending team of delegates to explore this aspect further.
Posted October 2, 2008, 4:23pm
I wish I could be more confident in Andy’s recommendation to create "one national job training program". The ordinary benchmark we would use to assess this kind of policy is to ask whether the benefits of the investment, in the form of higher future earnings, are large enough to justify the cost of the investment. Sadly, I do not know of any evidence from displaced worker programs showing that a two-year training program has a payoff that is big enough to justify the required investment on the part of worker and taxpayer. I’m pretty sure we can identify some displaced workers who derive big benefits from re-training, benefits that greatly exceed the cost of their re-training. The problem is to identify a strategy in which the payoffs from re-training are large enough for all the workers who enroll so that their net earnings gains are larger than the price of their re-training.
As I mentioned in an earlier post, if the country had invested more in research and development we might have identified successful re-training strategies by now. But we have not made very big investments in finding out how to make re-training programs more successful. The most reliable research studies available to us suggest that big investments in re-training displaced workers have a depressingly small payoff. For an unemployed worker who may have held a good job for the past 10 or 20 years, it is usually hard to identify an occupation where investment in training will have a reliable payoff. Many displaced workers who begin an intensive and costly re-training course do not complete it. The time and effort they spent getting re-trained might have been better devoted to looking purposefully and intensively for a decent job. One reason that many successful programs for displaced workers focus on speedy re-employment is that this approach has been shown to produce tangible benefits in the form of faster re-employment and short-term increases in earnings. One reason that expensive re-training programs have been deemed unsuccessful is that they reduce earnings in the short run, and there is little or no detectable gain in earnings after the training is completed.
I think we should keep trying to find successful approaches to worker re-training, but we cannot put all or even most of our bets on that single approach. If a majority of displaced workers will not derive any practical benefits from that approach—and that is what the evidence tells us—common sense suggests we should continue to devote most of our resources to approaches that do work or that at least provide tangible benefits to displaced workers. One approach is intensive job search counseling combined with improved labor market exchange. Another is earnings supplementation for the displaced workers who are forced to accept jobs where they earn wages far below the wages on the jobs they lost. The advantage of both these approaches is that they will provide tangible benefits to a much larger fraction of the workers who suffer serious harm as a result of job loss.
Posted October 2, 2008, 5:09pm
I think Gary makes several very important points on what works and what does not. With what are limited funds, we need to focus on what works. I think that job counseling is an important component and one that we have seen work. That should be supported. I think that attempting to better understand what skills will truly be needed to do various jobs well is critical to learn.
We make projections on job growth today that do not inform us to the degree that gives much confidence, especially in times of turmoil. We then need to understand if those skills that are going to be needed are teachable, and if they are, how best to do so. Income support for those in training is an important component, if we expect many displaced workers to be able to spend time learning new skills to the degree that can really assist them and employers. We need to develop better ways of getting workers linked to employers before they are on payrolls, so that the workers get a better understanding of their future jobs and the necessity of developing certain skills and traits that will help them succeed.
These steps will require some rethinking of our approach to dealing with the churn of the economy and how we can better utilize potential workers. With projected labor force shortages looming, it is imperative that we figure out how to make the most of the labor force that will present itself.
Posted October 2, 2008, 5:35pm
Finding answers to these difficult questions will require a robust and thoughtful dialogue in Washington and at the state and local levels. It is an important issue that affects all segments of our economy, not just those adversely impacted by trade or technological changes, and is more critical than ever given the challenges facing the U.S. economy.
One point we have not focused on, which I admit is off topic, is that global engagement is vital to the U.S. economy. The challenge before us is to ensure that American workers continue to benefit from the tremendous aggregate gains of global engagement—estimated by some as adding $1 trillion annually to GDP or about $10,000 to the average American family’s income each year—while implementing policies that effectively assist workers that are displaced. Some estimates suggest an additional $500 billion in national income annually—an average of another $5,000 per American family—is pos¬sible if further liberalization is achieved.
But in order to realize these additional benefits, the U.S. needs a broader, more-responsive safety net to help workers in transition regardless of the reason for their dislocation. It is crucial that government, the private sector, educators and workers all come together at the table to find a way forward, and to develop a 21st century worker adjustment program to match our dynamic 21st century global economy.
Posted October 2, 2008, 5:49pm
In my mind, we need a comprehensive set of policies if we want to have a material effect on the lot of displaced workers. A few elements:
1) With the Doha trade round in ashes, we need a fundamentally new approach to trade that takes workers and communities into account, just as this country finally realized when Congress was given meaningful powers to regulate interstate commerce and created the era of capitalism that grew a substantial middle class in this country. Now we need to create a world trade regime that can allow goods and services to flow in a way that helps raise standards rather than creating a race to the bottom.
2) We need to foster high-road partnerships among employers, community colleges, unions and others to foster economic development based on high productivity and ongoing worker training.
3) We need training and re-training programs that offer workers real opportunities to enter career pathways in job tracks that offer family sustaining wages and benefits.
4) Workers need more bargaining power. Improved training or other programs for displaced workers will not change the fact that huge pluralities of workers will remain mired in low wage, no or low benefit areas of retail, hospitality, health care and other service jobs. Overall, worker compensation has been falling behind productivity gains since the 1970s. When our largest private sector employer (Wal-Mart, with over 1.3 million employees) can easily have zero unionized workers without breaking a sweat despite paying low wages and having relatively poor benefits, something is wrong. We should pass the Employee Free Choice Act and allow workers to form their own organizations (yes, unions) whenever they wish.
Posted October 2, 2008, 5:52pm
I just want to say that whether and to what extent American workers have benefited from past trade liberalization is very much in contention. Clearly, trade liberalization and capital mobility have contributed to the dramatic growth in wage inequality and the stagnation of real wages vis-a-vis productivity growth over the last couple of decades. Trade is
not the only factor involved, but most empirical analysis concludes that it is a significant contributing factor. So reforming our trade policy is essential to ensuring that workers in the United States can share in the benefits of economic integration going forward.
Posted October 2, 2008, 5:57pm
It is a trend that more jobs, especially in manufacturing, flow from more mature economies to developing economies that have a lower cost structure. What should mature economies focus on to maintain their lead since they cannot effectively compete on cost? What types of new value-add businesses can those matured economies be in over the long run?
Posted October 2, 2008, 8:23pm
I think there is still a future for manufacturing, but only if innovation is more widespread. Returns on investment are higher on new products and lower over time as profits stem more from process improvements. The US needs to further develop the interest in designing and building new products. That requires developing not only the talent to invent, but the talent to build. It also suggests that there will be shorter periods of product dominance, so new products will have to be developed with greater speed and workers will have to be increasingly able to adopt to new demands coming from innovation product production. This may well create even more opportunities for creative training.
Posted October 2, 2008, 8:30pm
Thanks to everyone for participating in such an energetic debate. It seems that most would agree that the current system of re-training is scattered, under-funded and ineffective. How best to solve these problems is a more complex question. Panelists’ suggestions include investing in job counseling, promoting the growth of green-collar work, reforming our health-care system, helping those who take a pay cut and encouraging better collaboration between employers, unions and community colleges. This statement does not do justice to the breadth our debate. I hope that you have found each other’s posts as interesting as I have.