Aid plan for unemployed gains support

A little-known federal program called wage insurance is winning bipartisan congressional support as a way to help workers displaced by international trade find new jobs and acquire new skills.

An alternative to unemployment insurance and government-funded training programs, wage insurance is designed to help older workers get rehired quickly. The program pays displaced manufacturing workers, age 50 and over, half the difference between their new and old salaries for two years.

Supporters say it encourages displaced workers to take lower-paying jobs and get on-the-job training. That beats government-administered job training, they say, particularly for older workers who don’t want to go back to school but have little or no savings and are unprepared to retire.

Republicans, including some Bush administration officials, and many economists in Washington have long supported wage insurance as a free-market solution to unemployment, and now a growing group of powerful congressional Democrats have embraced the notion. But the prospects for expanding the program are uncertain. President Bush’s 2008 budget would cut its funding by more than half, to $23 million from $53 million.

The Democratic supporters are backing a bill to expand the program dramatically by making it available to workers in other sectors and allowing younger workers to qualify. Sen. Charles E. Schumer (D-N.Y.), chairman of the Joint Economic Committee, and Rep. Jim McDermott (D-Wash.) plan to introduce wage insurance legislation after Congress reconvenes this month.

Sen. Max Baucus (D-Mont.), chairman of the Senate Finance Committee, and Sen. Norm Coleman (R-Minn.) proposed legislation this year that would use existing funds to expand wage insurance and an alternative, trade adjustment assistance, which offers federally subsidized training and extended unemployment and health benefits to displaced workers. The legislation would relax eligibility requirements, lowering the qualifying age to 40 and opening up the program to service workers.

Last week Coleman touted the advantages of wage insurance compared with trade adjustment assistance and traditional unemployment insurance.

“Wage insurance not only costs significantly less than trade adjustment assistance benefits, but it also encourages folks to find new work rather than relying on long-term unemployment,” Coleman said.

He added that the legislation “would allow more workers to choose wage insurance over traditional unemployment insurance or trade adjustment assistance, which is good for both displaced workers and our economy as a whole.”

But Democratic opponents, backed by labor unions, say wage insurance forces workers into low-paid jobs and undermines attempts to expand unemployment insurance and training programs.

Supporters of wage insurance point to workers such as Carolyn Livengood and her husband, Jerry, who chose wage insurance over other types of unemployment benefits.

The Livengoods became eligible for wage insurance last spring after their employer, GDX Automotive in Kannapolis, N.C., shifted their work to Mexico. Carolyn Livengood, 60, said federal and state training programs were not an option -- she and her husband hadn’t seen the inside of a classroom since high school -- and extended unemployment insurance would not cover their bills. So they took the wage insurance and found the best-paid jobs they could.

“I just figured with everything I got to deal with at this time, there’s no way I can do the schooling,” she said. “I do better hands-on.”

The Livengoods each earned $13.20 an hour at their old manufacturing jobs. Carolyn Livengood now works as a sales associate at a Target store for $7.25 an hour plus $3 in wage insurance. Jerry Livengood, 65, works in sanitation at a Krispy Kreme doughnut plant for $8.25 an hour plus $2.50 in wage insurance. That covers their basic bills, although they’ve had to cut back -- no more dinners at McDonald’s. And once the wage insurance runs out next year, Carolyn’s not sure what they’ll do.

“You watch your pennies, you eat a lot of leftovers, and you only buy what you got to have,” she said.

Congress created wage insurance as part of the reauthorization of the president’s trade promotion authority, or fast track, in 2002. It was considered an alternative to trade adjustment assistance.

Workers’ groups say both programs, which are up for reauthorization this year, are not widely advertised or explained to those who need them most.

Only about 6,900 workers have received wage insurance since it took effect in 2003, including 46 in California and about 800 in North Carolina, the largest state group, according to federal and state labor department officials.

Los Angeles workers eligible for wage insurance come from a variety of sectors, including textiles, furniture, medical and industrial manufacturing. They have been displaced primarily because of competition with China and Mexico, federal records show.

California workers displaced by trade in sectors such as manufacturing have the most difficulty finding jobs with equivalent pay, according to Jean Ross, executive director of the nonprofit California Budget Project in Sacramento. Average annual pay from 2000 to 2005 in the state’s expanding sectors was $44,057, compared with $51,215 in declining sectors such as manufacturing, Ross said.

“Which suggests workers find it very difficult to match their former salaries,” she said.

Lael Brainard, a former Clinton administration advisor now at the Brookings Institution in Washington, told Congress last month that wage insurance boosted displaced workers’ long-term earnings by giving them an incentive to take jobs they wouldn’t normally consider, where they would receive training more valuable than federal training. She said a Canadian wage insurance pilot program also cut workers’ average duration of unemployment by 4.4%.

But worker and labor groups, including the AFL-CIO, contend that wage insurance lures workers into low-wage jobs, depresses wages and squeezes low-wage workers out of the job market.

“There’s nothing wrong with getting back to work. The question is, are you getting back to a quality job or are you, by getting back right away, undermining your opportunities to get a better job, with health insurance and all of that?” said Maurice Emsellem, policy director of the National Employment Law Project in Oakland.

Critics point to workers such as Stephen Gentry, 54, of Seattle, who turned down wage insurance in favor of trade adjustment assistance, which he considered far more valuable.

Gentry was laid off in 2003 after Boeing Co. outsourced his job of 15 years to India. A father of three, he had to scrimp for a while, but he said the training paid off -- his new job as a software developer for Seattle Mortgage Co. pays slightly more than his old job did. He worries that Congress will use the training money he relied on to pay for wage insurance.

“It just sounds like we’re going to accommodate the ones who don’t want to put out any effort to go back to school,” Gentry said.

The Schumer-McDermott bill would expand unemployment insurance and wage insurance, relaxing eligibility restrictions for wage insurance to include younger workers from a variety of sectors. The new program would serve 300,000 to 500,000 workers and cost about $3 billion a year, paid out of the national unemployment trust fund reserves.

McDermott won support from Rep. Charles B. Rangel (D-N.Y.), chairman of the House Ways and Means Committee, as well as former Treasury Secretary Robert E. Rubin and former Labor Secretary Robert B. Reich.

Some Democrats, however, worry that party leaders are playing into Republicans’ hands by promoting wage insurance, which could result in compromise legislation that redirects rather than expands existing unemployment benefits.

Last month Rep. Jerry Weller (R-Ill.) countered McDermott’s proposal with legislation that would expand wage insurance by giving states waivers to shift funding from unemployment insurance and trade adjustment assistance.

White House spokesman Tony Fratto said Democrats’ wage insurance proposals were too expansive and costly by including workers whose job losses were not trade-related.

“They want wage insurance as an add-on” in addition to unemployment and trade adjustment assistance, something President Bush would be “disinclined” to approve, Fratto said.

Rep. Sander M. Levin (D-Mich.), chairman of the House Ways and Means subcommittee on trade, said wage insurance could not be expanded without also expanding unemployment and training programs.

Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, said wage insurance “should not be a shortcut to dealing with broader concerns about equity in the economy.”

Frank said he would support wage insurance proposals only as “part of a package” that includes “more people joining unions and better unemployment insurance and healthcare.”

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molly.hennessy-fiske@latimes.com