Standoff Over Workers’ Aid May Hinder Trade Measures

For 40 years, the government has promised to throw a lifeline to U.S. workers who lose their jobs to overseas competition.

For 40 years, it has largely failed to follow through, say trade advocates. Fewer than one in six workers displaced by trade receives assistance from a federal program set up to provide them with temporary income and occupational training.

That unfulfilled promise has come back to haunt its supporters and has become part of the congressional impasse over the future of the program, called Trade Adjustment Assistance.

The partisan fight has blocked President Bush’s drive to restore “fast-track” trade negotiating authority, one of his top legislative priorities. It also has held up legislation to renew preferential treatment for developing nations and South American countries that are trying to export something besides cocaine.

More fundamentally, some experts say, the stall has contributed to declining political support for trade expansion and growing public unease about the effects of globalization.

“A quarter of a million people lost their jobs in trade-impacted industries last year, and only 30,000 got benefits,” said Howard Rosen, a former Labor Department economist who has launched the Coalition to Reform Trade Adjustment Assistance. “If we want to have trade, we have to deal with the consequences.”

Melvin Quezada is one consequence. He worked changing 10,000-pound tires on massive ore-hauling trucks until Phelps Dodge Corp. shut its Chino copper mine in southwest New Mexico in January. Most of the mine’s 600 workers were certified to receive income support and training under the Trade Adjustment Assistance program. But Quezada, 24, was ineligible because he worked for a subcontractor and “secondary workers” like him aren’t covered by TAA.

“I’m trying to bounce between a house payment, a car payment and food,” said Quezada, who signed up for auto mechanic training under a different government program but fears he will have to drop out when his unemployment insurance is exhausted. “To me, it was kind of discriminatory.”

No Middle Ground

A day of reckoning could come soon. Senate Majority Leader Tom Daschle (D-S.D.) has promised a floor vote by Memorial Day on legislation that packages fast-track authority and Andean trade preferences with a significant expansion of the Trade Adjustment Assistance program.

If TAA goes down, Democrats warn, the other trade measures will go down with it. The White House and House Republicans think the Senate’s TAA overhaul goes too far and want to set it aside for now. Attempts to find middle ground have been unsuccessful.

The battle over TAA reflects the breakdown of the traditional Republican-Democrat, business-labor coalition that has helped secure passage of trade legislation since 1962, when Congress heeded President Kennedy’s call to protect workers who lose their jobs to trade.

“Those injured by trade competition should not be required to bear the full brunt of the impact,” Kennedy said. “There is an obligation to render assistance to those who suffer as a result of national trade policy.”

The current law provides as many as 12 months of extended unemployment benefits to workers whose jobs are eliminated because of competition from imported goods.

TAA checks start arriving after the six months of regular unemployment benefits run out, and averaged $217 a week in 2000.

The program also pays for up to two years of vocational training, remedial education or English classes, which participants must take to keep the benefit checks coming.

With approval of the North America Free Trade Agreement in 1993, Congress created a separate program for workers displaced by trade with Mexico or Canada. It includes two categories of employees not covered under regular TAA: those who lose their jobs when companies move U.S. factories across the border, and “secondary” employees at firms, such as suppliers, indirectly affected by increased imports.

Last year, the Labor Department approved 1,559 petitions for assistance covering 213,609 workers. Of those, 33,800 ultimately received benefit checks, and 31,400 of those entered training. The department does not keep track of how many successfully complete training or what kind of jobs they get.

But one follow-up study indicates the attrition rate is high. In early 1998, Levi Strauss & Co. shut its manufacturing operations in Roswell, N.M., laying off 571 workers. All were certified to receive TAA benefits.

According to New Mexico state officials, 374 enrolled in training programs. Nearly three years later, only 99 had found jobs after graduating; 45 were still taking classes, 16 had moved out of town, and seven reported they were self-employed.

The study also found that the hourly wages of workers who did find jobs dropped from $9 at the Levi plant to an average of $6.50 at their new work sites.

Experts attribute the low success rate to several causes, some of them benign.

Some trade-displaced workers are excluded because their employers or unions don’t petition for benefits or because they work at secondary firms not covered by the NAFTA program.

Of those who are certified, some find jobs on their own before their regular unemployment benefits run out. Some drop out of the labor force or become self-employed.

Dealing With Red Tape

But analysts say there is no question that for many, the program itself is the problem. Just qualifying for benefits is time-consuming and confusing, and local administrators sometimes are no help.

“It felt like they were just waiting for you to make a mistake so they could take it away from you,” said Joe DiCenzo, who signed up for TAA-financed computer training after losing his machinist job at Motor Coils Manufacturing Co. in Braddock, Pa. “It wasn’t like they were there to help you.” DiCenzo, 40, quit the program after six months to take a route sales job with a bread company.

Some eligible workers drop out because they can’t make ends meet on $200 or so a week, particularly if they try to pick up the cost of health insurance, which can cost $500 or more a month for family coverage.

Some who sign up for two-year associate degree programs drop out because the income support lasts only 18 months.

TAA Overhaul Proposed

Senate Democrats have proposed a major overhaul. Their legislation would expand TAA to include farmers, ranchers, fishermen, suppliers and other secondary businesses, and workers cast aside when plants move to any country, not just Mexico or Canada. It would provide six months of additional income support, so participants could complete two-year training programs before the checks stop coming.

Two provisions of the Senate bill would take TAA into new territory. It would pick up 75% of the cost of health insurance during training, and would provide “wage insurance” for older workers who take new jobs at lower pay. For up to two years, the government would make up half the difference between their old salaries and their new ones.

Sponsors estimate the changes would roughly double the number of workers who qualify for TAA and triple the program’s cost from about $400 million a year to $1.2billion.

The Bush administration and congressional Republicans are particularly skittish about the health insurance provision, which they see as a potential Trojan horse trotting in the direction of universal coverage.

But for some displaced workers, health insurance is the highest hurdle of all.

Last year, Pat McCoy lost his job in the stockroom of International Paper Co.’s lumber mill in Costigan, Maine. McCoy, 49, has diabetes, high blood pressure and an irregular heartbeat. He takes 34 pills a day, and his prescription expenses total $9,280 a year. McCoy has been paying $724 a month to keep his health insurance while he completes a master’s program in gerontology at the University of Maine. He cashed in his 401(k) account, paid a 20% penalty and is drawing down the balance to cover his monthly expenses.

McCoy knows other mill workers who are in the same bind. “Some of them are in a situation where they’re making choices between food and medicine,” he said. “It doesn’t take a mathematician to figure out you’re gonna be in trouble real quick.”

The impasse has been aggravated by election-year politics and the increasingly visible rivalry between Bush and Daschle, who is seen as a possible presidential standard-bearer for the Democrats in 2004.

Some trade advocates fear the standoff could lead to a further fracturing of the bipartisan coalition that has kept the free-trade bandwagon moving for most of the last 40 years.

“I do not understand the reluctance of the administration to do something on TAA. Politically, that could only help the president,” said Clyde Prestowitz, president of the Economic Strategy Institute, a corporate-financed think tank.

Aid Has Limitations

Prestowitz said Bush and other free-traders should “step up to the plate and say, ‘Hey, the winners here ought to be willing to compensate the losers, and we’ll all be better off.’”

Yet even if a deal is worked out, there are limits to what the government can do. It’s one thing to help displaced workers pay the rent and keep their health coverage while they attend community college to learn new skills. It’s something else to make sure there will be jobs for them when they are done.

“I don’t know that people have given enough thought to why past programs have failed,” said University of Maryland professor and former U.S. trade official Peter Morici, who observed the shortcomings of adjustment programs during a previous posting at the University of Maine.

“They take laid-off shoe workers in places like Maine and train them to be welders and chefs, when there really aren’t those kinds of jobs in those places because the areas are so depressed,” Morici said. “What we’ve learned is the only good adjustment assistance program is a robust job market.”

But Barney Ourster, a former steelworker who counsels layoff victims in western Pennsylvania, said almost any type of training is beneficial because it shows prospective employers that an applicant has the ability to learn new skills. Most employers will want to do their own on-the-job training anyway, he said.

Even more important, Ourster said, is the effect it has on displaced workers.

“They thought they were brain-dead. They thought they couldn’t compete with their own kids. And here they are, able to learn new things,” he said. “The kind of life transformation that happens to folks who realize they still have a brain and can use it makes up for a lot of the money loss.”