Nation's infrastructure for assisting workers is crumbling

Despite recent improvements in total employment, the U.S. labor market continues to face serious challenges. At 7 percent, the unemployment rate, which hovered around 10 percent during the Great Recession, remains significantly higher than it was at this point (53 months) following the 3 previous recessions.

The labor participation rate (at 63 percent) and the ratio of employment to population (at 58.6) are lower than they were at this point in previous recoveries. The average and median duration of unemployment and the percent of the unemployed still looking for work after 6 months (37 weeks, 17 weeks and 37 percent respectively) remain twice as high as they were at this point in previous recoveries. Although close to 7 million more Americans are employed today than were at the official end of recession, total employment remains lower than it was before the Great Recession began.

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These challenges facing the U.S. labor market have exposed significant problems in the nation’s network of unemployment assistance and workforce development programs. Structural changes in the labor market since it was created have made certain features of the nation’s Unemployment Insurance (UI) system obsolete, seriously undermining the program’s ability to effectively serve its initial goal of automatically moderating large drops in income and personal consumption during economic slowdowns. Despite critical reforms implemented in 2009, the program is still not “automatic,” as evidenced by the fact that Congress is currently considering extending “emergency” UI for the 12th time in just 5 years. In addition, gaps in coverage and low benefit amounts seriously undermine the program’s ability to stabilize the economy, thereby requiring Congress and the Federal Reserve to make use of extraordinary measures to stimulate the economy during the Great Recession.

Triggers designed to automatically extend assistance in states with high unemployment rates are still not working effectively. In fact, extended assistance triggered off in 22 states in 2013, including in all 9 states with unemployment rates above 8 percent, shifting the burden onto Congress to fully fund “emergency” measures. It is hard to argue that a national emergency exists when workers living in states with unemployment rates above the national average constitute only one-third of the nation’s workforce. State UI programs need to be reformed in order to make them flexible enough to respond to local labor market conditions.

The expiration of extended UI benefits has diverted attention from the expiration of key Trade Adjustment Assistance (TAA) provisions that also took place at the end of 2013. Established 50 years ago in probably the last trade bill that received bipartisan support from both American unions and businesses, TAA has been providing more intensive assistance to workers, firms and communities facing dislocations due to increased import competition and offshore shifts in production. Democrats and Republicans in the House and Senate worked together over the last decade to modernize this small program, updating its coverage criteria and implementing innovation measures to encourage workers to acquire the skills necessary to return to work as soon as possible, thereby easing the adjustment costs to workers, their families and the overall economy. Ironically, many of these reforms expired at end of 2013 and authorization for the entire program is scheduled to expire at the end of 2014, at the same time Congress may begin considering further opening up of the US market to competition from Asia under the Trans Pacific Partnership (TPP).

Although all policymakers, regardless of where there are from or their political party affiliation, constantly call for workers to upgrade their skills in order to face mounting global competition, total federal spending per person on training and employment programs (after inflation) has dropped by one-third over the last 20 years. In fact, the current level of spending amounts to only $42 per person, far less than what is required to support serious training. And to make matters worse, the government’s major program designed to enhance workforce development – the Workforce Investment Act (WIA) has become increasingly out-of date as it continues to operate without Congressional authorization for almost a decade.

The need to extend UI and reinstate recent TAA reforms provides an opportunity for Congress to take a comprehensive look at the nation’s network of programs aimed at preparing American workers for current realities in the global economy. State UI triggers and funding mechanisms are clearly not working and need to be fixed. Unemployment assistance and training programs should be based on local labor conditions and workers’ needs and, not political considerations and assistance provided should be linked to helping workers return to work as soon as possible.

One of the things the National Security Agency may have learned while listening in on German Chancellor Merkel’s telephone conversations is that labor market reforms developed as part of a multi-year comprehensive reform effort are credited with helping shield the German economy from the kind of massive job losses experienced throughout the rest of Europe and the United States over the last 5 years. In exchange for extending UI and reinstating recent TAA reforms, Congress should establish a formal commission comprised of representatives from business, labor, academia and federal, state and local policymakers to analyze recent developments in the US labor market, evaluate existing programs and develop detailed recommendations for comprehensive reform in order to improve the effectiveness of the nation’s network of unemployment assistance and workforce development programs and prepare American workers to meet current and future domestic and global challenges.

Rosen is executive director of the Trade Adjustment Assistance Coalition, a non-profit organization that advocates on behalf of workers, firms and communities facing dislocations due to globalization.