Robert Pollin Co-Director, Political Economy Research Institute University of Massachusets Amherst

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.

Robert Nichols President and Chief Operating Officer Financial Services Forum

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. 

Sammis White Director, Center for Workforce Development University of Wisconsin-Milwaukee

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.

Karen Tramontano Principal Dutko Worldwide

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.”

Bruce Meyer McCormick Tribune Professor University of Chicago

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. 

Robert Nichols President and Chief Operating Officer Financial Services Forum

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.

Anne Kim Director, Middle Class Program Third Way

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.

Simon Head Fellow, Rothermere American Institute University of Oxford

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. 

Josh Bersin President Bersin & Associates

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.

Jeanie Moore Vice President of Continuing Education Programs Rowan-Cabarrus Community College

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.

Gary Burtless John C. and Nancy D. Whitehead Chair in Economic Studies Brookings Institution

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.

Karen Tramontano Principal Dutko Worldwide

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.

Charlotte Howard Midwest Correspondent The Economist

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?

Jeanie Moore Vice President of Continuing Education Programs Rowan-Cabarrus Community College

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.

Gary Burtless John C. and Nancy D. Whitehead Chair in Economic Studies Brookings Institution

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.

Robert Pollin Co-Director, Political Economy Research Institute University of Massachusets Amherst

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.

Robert Nichols President and Chief Operating Officer Financial Services Forum

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.

Bruce Meyer McCormick Tribune Professor University of Chicago

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.

Terri Austin Representative State of Indiana

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?

Simon Head Fellow, Rothermere American Institute University of Oxford

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.

Sammis White Director, Center for Workforce Development University of Wisconsin-Milwaukee

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.

Robert Pollin Co-Director, Political Economy Research Institute University of Massachusets Amherst

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.

Gary Burtless John C. and Nancy D. Whitehead Chair in Economic Studies Brookings Institution

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.)

Charlotte Howard Midwest Correspondent The Economist

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?

Karen Tramontano Principal Dutko Worldwide

Posted October 1, 2008, 4:19pm

That is a very, very long story…

Thea M. Lee Policy Director AFL-CIO

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.

Anne Kim Director, Middle Class Program Third Way

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.

Josh Bersin President Bersin & Associates

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.

Gary Burtless John C. and Nancy D. Whitehead Chair in Economic Studies Brookings Institution

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.

Andy Levin Deputy Director Michigan Department of Labor & Economic Growth

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.

Charlotte Howard Midwest Correspondent The Economist

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?

Andy Levin Deputy Director Michigan Department of Labor & Economic Growth

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.

Jeanie Moore Vice President of Continuing Education Programs Rowan-Cabarrus Community College

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.

Bruce Meyer McCormick Tribune Professor University of Chicago

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.

Robert Pollin Co-Director, Political Economy Research Institute University of Massachusets Amherst

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.

Henry Farber Hughes-Rogers Professor of Economics and a Research Associate of the Industrial Relations Section Princeton University

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.)

Andy Levin Deputy Director Michigan Department of Labor & Economic Growth

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.

Charlotte Howard Midwest Correspondent The Economist

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?

Howard Rosen Executive Director Trade Adjustment Assistance Coalition

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.)

Howard Rosen Executive Director Trade Adjustment Assistance Coalition

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.

Josh Bersin President Bersin & Associates

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&rsqu