[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]


 
                       HOW EFFECTIVE ARE EXISTING
                      PROGRAMS IN HELPING WORKERS
                    IMPACTED BY INTERNATIONAL TRADE?

=======================================================================

                                HEARING

                               before the

                              COMMITTEE ON
                          EDUCATION AND LABOR

                     U.S. House of Representatives

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

             HEARING HELD IN WASHINGTON, DC, MARCH 26, 2007

                               __________

                           Serial No. 110-15

                               __________

      Printed for the use of the Committee on Education and Labor


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                                 ______

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                    COMMITTEE ON EDUCATION AND LABOR

                  GEORGE MILLER, California, Chairman

Dale E. Kildee, Michigan, Vice       Howard P. ``Buck'' McKeon, 
    Chairman                             California,
Donald M. Payne, New Jersey            Ranking Minority Member
Robert E. Andrews, New Jersey        Thomas E. Petri, Wisconsin
Robert C. ``Bobby'' Scott, Virginia  Peter Hoekstra, Michigan
Lynn C. Woolsey, California          Michael N. Castle, Delaware
Ruben Hinojosa, Texas                Mark E. Souder, Indiana
Carolyn McCarthy, New York           Vernon J. Ehlers, Michigan
John F. Tierney, Massachusetts       Judy Biggert, Illinois
Dennis J. Kucinich, Ohio             Todd Russell Platts, Pennsylvania
David Wu, Oregon                     Ric Keller, Florida
Rush D. Holt, New Jersey             Joe Wilson, South Carolina
Susan A. Davis, California           John Kline, Minnesota
Danny K. Davis, Illinois             Bob Inglis, South Carolina
Raul M. Grijalva, Arizona            Cathy McMorris Rodgers, Washington
Timothy H. Bishop, New York          Kenny Marchant, Texas
Linda T. Sanchez, California         Tom Price, Georgia
John P. Sarbanes, Maryland           Luis G. Fortuno, Puerto Rico
Joe Sestak, Pennsylvania             Charles W. Boustany, Jr., 
David Loebsack, Iowa                     Louisiana
Mazie Hirono, Hawaii                 Virginia Foxx, North Carolina
Jason Altmire, Pennsylvania          John R. ``Randy'' Kuhl, Jr., New 
John A. Yarmuth, Kentucky                York
Phil Hare, Illinois                  Rob Bishop, Utah
Yvette D. Clarke, New York           David Davis, Tennessee
Joe Courtney, Connecticut            Timothy Walberg, Michigan
Carol Shea-Porter, New Hampshire

                     Mark Zuckerman, Staff Director
                   Vic Klatt, Minority Staff Director


                            C O N T E N T S

                              ----------                              
                                                                   Page

Hearing held on March 26, 2007...................................     1
Statement of Members:
    Altmire, Hon. Jason, a Representative in Congress from the 
      State of Pennsylvania, prepared statement of...............    80
    McKeon, Hon. Howard P. ``Buck,'' Senior Republican Member, 
      Committee on Education and Labor...........................     3
        Prepared statement of....................................     4
    Miller, Hon. George, Chairman, Committee on Education and 
      Labor......................................................     1

Statement of Witnesses:
    Alford, Tim, Ph.D., director, Office of Workforce Development    38
        Prepared statement of....................................    40
    Bevard, David Lee, former employee of Maytag Refrigeration 
      Products...................................................     7
        Prepared statement of....................................     9
    Brainard, Lael, Ph.D., vice president and director, Bernard 
      L. Schwartz Chair in International Economics, the Brookings 
      Global Economy and Development Program.....................    34
        Prepared statement of....................................    35
        Internet address to Brookings Institution commentary, ``A 
          Fairer Deal for America's Workers in a New Era of 
          Offshoring,'' dated September 14, 2005.................    81
        Internet address to the Commonwealth Fund's issue brief, 
          ``Limited Take-Up of Health Coverage Tax Credits: A 
          Challenge to Future Tax Credit Design,'' dated October 
          2005...................................................    81
        Internet address to the Economic Policy Institute's 
          briefing paper, ``Globalization That Works for Working 
          Americans,'' dated January 11, 2007....................    81
        Wall Street Journal article, ``Federal Aid Does Little 
          for Free Trade's Losers,'' dated March 1, 2007.........    82
    Dorn, Stan, J.D., senior research associate, the Urban 
      Institute..................................................    11
        Prepared statement of....................................    13
    Herman, Bruce G., executive director, National Employment Law 
      Project....................................................    22
        Prepared statement of....................................    24
    Lee, Thea, policy director, AFL-CIO..........................    42
        Prepared statement of....................................    44


                       HOW EFFECTIVE ARE EXISTING
                      PROGRAMS IN HELPING WORKERS
                    IMPACTED BY INTERNATIONAL TRADE?

                              ----------                              


                         Monday, March 26, 2007

                     U.S. House of Representatives

                    Committee on Education and Labor

                             Washington, DC

                              ----------                              

    The committee met, pursuant to call, at 1:03 p.m., in room 
2175, Rayburn House Office Building, Hon. George Miller 
[chairman of the committee] presiding.
    Present: Representatives Miller, Kildee, Scott, Woolsey, 
Wu, Sanchez, Loebsack, Yarmuth, Hare, Clarke, Courtney, Shea-
Porter, McKeon, Wilson, Kline and Heller.
    Staff Present: Aaron Albright, Press Secretary; Tylease 
Alli, Hearing Clerk; Carlos Fenwick, Policy Advisor for 
Subcommittee on Health, Employment, Labor and Pensions; Michael 
Gaffin, Staff Assistant, Labor; Jeffrey Hancuff, Staff 
Assistant, Labor; Brian Kennedy, General Counsel; Joe Novotney, 
Chief Clerk; Megan O'Reilly, Labor Policy Advisor; Rachel 
Racusen, Deputy Communications Director; Michele Varnhagen, 
Labor Policy Director; Mark Zuckerman, Staff Director; Robert 
Borden, Minority General Counsel; Steve Forde, Minority 
Communications Director; Ed Gilroy, Minority Director of 
Workforce Policy; Rob Gregg, Minority Legislative Assistant; 
Jessica Gross, Minority Deputy Press Secretary; Victor Klatt, 
Minority Staff Director; Stephanie Milburn, Professional Staff 
Member; Molly McLaughlin Salmi, Minority Deputy Director of 
Workforce Policy; and Linda Stevens, Minority Chief Clerk/
Assistant to the General Counsel.
    Chairman Miller. The Committee on Education and Labor will 
come to order this afternoon for the purposes of conducting a 
hearing on, How effective are existing programs in helping 
workers impacted by international trade? Today, the committee 
will begin an examination of the U.S. trade policy and how it 
is affecting American workers.
    The trade policy is a controversial subject with strong 
points of view on both sides. When free trade agreements were 
being proposed in the early 1990s, proponents argued that they 
would produce a net economic benefit for the United States and 
its trading partners. It is true that there have been many 
winners of free trade in the United States. In the United 
States, the average consumer can buy a wide range of goods at 
more affordable prices, and in some developing countries, like 
China and India, the middle class is emerging.
    Yet, it is becoming ever clear that the free trade process 
is at a standstill. More countries are objecting to signing 
broad agreements. Citizen opposition to free trade is 
widespread around the world, and there is growing evidence that 
wage and health inequality is growing rather than shrinking 
internationally. In the United States, as we will hear today, 
too many workers are being hurt by international outsourcing 
and its resulting plant shutdowns. The effects are the most 
severe for older workers who have greater financial obligations 
and more limited opportunities to start or train for new 
careers, tens of thousands of laid off workers who have lost 
their homes or livelihoods and their standards of living when 
the bottom fell out from under them at work.
    American workers who are harmed by trade agreements are the 
reason we are holding this hearing. We are going to hear today 
about what happens to workers when their jobs go overseas and 
when their jobs disappear here at home. We are going to discuss 
the effectiveness of Federal programs that are intended to 
assist dislocated workers, like unemployment insurance, Trade 
Adjustment Assistance, the COBRA health benefits and the health 
care tax credit.
    Everyone knows these programs are too small and lack 
sufficient funding to provide adequate assistance to all of the 
workers who need it. The weekly unemployment benefit averages 
slightly more than $200 a week. The TAA program helped just 
70,000 workers last year but had a waiting list of 
approximately 50,000. The health care tax credit enacted during 
the last round of trade negotiations only benefited about 
28,000 workers, just 11 percent of the potentially 250,000 who 
are eligible, and that figure is also under challenge.
    When the international trade agreements cause American 
workers to lose their jobs through no fault of their own, we 
have a responsibility to make sure that they can make ends meet 
while they find a new job or, in the case of older workers, 
until they can get to retirement. If programs like Trade 
Adjustment Assistance are not getting the job done, then we 
either need to improve them or come up with new ways to support 
workers harmed by international trade, and we have to do it 
fast. The American workers and their families are already 
losing ground in this economy. They cannot wait around another 
decade for Congress to act. We all understand that the economy 
has undergone dramatic changes since the 1990s, and for America 
to retain its leadership in the global economy, we must now 
establish new public/private partnerships to create the 
industries and the jobs of the future. We must invest in 
educating a new generation of scientists and engineers. We must 
invest in cutting-edge research and development. We must make 
broadband access universal among other things. If we do all of 
these things, we can keep America's economy strong for 
generations to come, but even as we do these things, we must 
also help American workers who will be inevitably caught up in 
the changes and in the transitions that take place in the 
globalized economy. The status quo will not cut it, nor will 
knee-jerk reactions to ongoing globalization and ongoing 
international competitiveness.
    The purpose of this hearing is to understand what we can do 
to strengthen America's middle class, to understand the impacts 
on America's middle class of the changing international 
economy, of the globalization of that economy, of new trade 
agreements. It is time for us to understand that no longer can 
these programs be an afterthought that are simply put up to 
secure votes for the trade agreements that are before Congress, 
but they must become part of a national plan to make sure that, 
in fact, people do not end up losing their entire middle class 
standard of living because of changes in the international 
economy and changes here at home in the local economy and in 
response to international trade and to globalization. We must 
consider these workers and their families first, and we must 
understand that the contract to be arrived at in the name of 
trade agreements must put them on the same footing as those who 
seek to benefit from those trade agreements. That is the 
challenge for this committee and for other committees of the 
Congress, but I think, as we have heard from so many 
businesses, that the time really has come to rethink that 
compact that has been established after more than a decade of 
aggressive trade agreements--bilateral, multilateral 
agreements--and I think it is appropriate that we have this 
hearing at this time.
    With that, I would like to recognize Mr. McKeon, the senior 
Republican of the committee.
    Mr. McKeon. Mr. Chairman, thank you for convening this 
hearing.
    Free and fair trade is the cornerstone of our Nation's 
economy, and its impact on our workforce is an important issue 
for Congress to examine. I am pleased we are able to do so 
today. I have always believed that free and open markets 
comprise a rising tide meant to lift all boats. In our rapidly 
expanding global economy, for the United States to remain 
competitive, we must have a prominent seat at the table of free 
trade, and in fact, our Nation's working men and women depend 
on us to help ensure that seat at the table. And that is not 
just rhetoric; it is reality. Just consider these facts.
    In 2005, U.S. goods and services exports accounted for more 
than 10 percent of our gross domestic product and 20 percent of 
our economy's overall growth. U.S. jobs supported by the export 
of goods pay an estimated 13 to 18 percent more than the 
national average, and according to the Institute for 
International Economics, if the remaining global trade barriers 
are eliminated, U.S. annual incomes could increase by $500 
billion, adding roughly $4,500 per household.
    Let us be clear. If we relinquish our seat at the table, 
scores of American industries dependent on marketing their 
products to the international community, including 
manufacturing, agriculture and other key industries, will 
suffer, and so will their workers. And I am not about to let 
that happen. And I am hopeful Congress moves to extend the 
President's Trade Promotion Authority when it is due to expire 
this summer. Reducing trade barriers abroad will give our 
farmers, ranchers, manufacturers and service providers better 
access to the 95 percent of the world's customers living 
outside our borders. And extending this authority is an 
important step toward making that happen.
    However, I will be the first to recognize that the impact 
of trade is not completely beneficial to every worker or to 
every economic sector whether here in the United States or with 
one of our trading partners, and for these reasons, we have 
established a number of safety nets meant to assist workers or 
industries who have some adverse consequences associated with 
trade.
    Trade Adjustment Assistance, or TAA, is one of those safety 
nets, and I will look forward to our discussion of it later in 
the hearing. While I am open-minded to potential reforms in the 
TAA program, just as I am sure my friends on both sides of the 
aisle are open-minded to the benefits in extending a trade 
promotion authority, I believe one of the more meaningful ways 
we can address and help stem some of trade's more adverse 
consequences is by reforming programs that train and retrain 
our workforce.
    Dr. Alford, I reviewed your testimony, your prepared 
testimony, and I will be eager to hear how your home State of 
Alabama has done this, because here in Congress, we have worked 
to do the same.
    In 1998, through the Workforce Investment Act, we 
established one-stop career centers to help streamline job 
training and retraining services available to men and women 
looking to sharpen their skills and better navigate the new 
century's new economy. Republicans in the House have worked to 
strengthen this system even further, such as requiring State 
and local workforce investment boards to ensure their training 
system is dynamic and reflective of the workforce needs in the 
local area and allowing training for incumbent workers so 
employers may assist them in upgrading their skills.
    Our proposal from the 109th Congress also would have 
consolidated the Workforce Investment Act's three adult job 
training programs into one consolidated adult funding stream to 
simplify program administration and reduce inefficiency at the 
State and local levels. This would mean more efficient service 
when workers need it most.
    Mr. Chairman, in the last Congress, this committee advanced 
the Job Training Reform Bill early on in the first session, and 
I am hopeful we will again in this year. Our bill passed the 
House with a bipartisan vote, and as we look for ways to 
respond to the new realities of the 21st Century economy, 
including the impact of trade, I believe this set of reforms is 
one we all can rally around. Therefore, I hope this panel moves 
expeditiously on job training reform.
    Once again, thank you, Mr. Chairman, for bringing us 
together for today's hearing, and I look forward to hearing our 
witnesses' testimony and the discussion that will follow.
    [The prepared statement of Mr. McKeon follows:]

         Prepared Statement of Hon. Howard P. ``Buck'' McKeon,
       a Representative in Congress From the State of California

    Mr. Chairman, thank you for convening this hearing. Free and fair 
trade is a cornerstone of our nation's economy, and its impact on our 
workforce is an important issue for Congress to examine. I'm pleased 
we're able to do so today.
    I've always believed that free and open markets comprise a ``rising 
tide'' meant to lift all boats. In our rapidly-expanding global 
economy, for the United States to remain competitive, we must have a 
prominent seat at the ``table of free trade.'' And in fact, our 
nation's working men and women depend on us to help ensure that seat at 
the table. And that's not just rhetoric; it's reality. Just consider 
these facts:
     In 2005, U.S. goods and services exports accounted for 
more than ten percent of our gross domestic product and 20 percent of 
our economy's overall growth;
     U.S. jobs supported by the export of goods pay an 
estimated 13 to 18 percent more than the national average; and
     According to the Institute for International Economics, if 
the remaining global trade barriers are eliminated, U.S. annual incomes 
could increase by $500 billion, adding roughly $4,500 per household.
    Let's be clear: if we relinquish our seat at the table, scores of 
American industries dependent on marketing their products to the 
international community--including manufacturing, agriculture, and 
other key industries--will suffer. And so will their workers. I'm not 
about to let that happen, and I am hopeful Congress moves to extend the 
President's trade promotion authority when it is due to expire this 
summer. Reducing trade barriers abroad will give our farmers, ranchers, 
manufacturers, and service providers better access to the 95 percent of 
the world's customers living outside our borders, and extending this 
authority is an important step toward making that happen.
    However, I'll be the first to recognize that the impact of trade is 
not completely beneficial to every worker or to every economic sector--
whether here in the United States or with one of our trading partners. 
And for these reasons, we have established a number of safety nets 
meant to assist workers or industries who have seen some adverse 
consequences associated with trade. Trade adjustment assistance--or 
TAA--is one of those safety nets, and I'll look forward to our 
discussion of it later in this hearing.
    While I am open minded to potential reforms in the TAA program--
just as I am sure my friends on both sides of the aisle are open minded 
to the benefits in extending trade promotion authority--I believe one 
of the more meaningful ways we can address and help stem some of 
trade's more adverse consequences is by reforming programs that train 
and retrain our workforce. Dr. Alford, I reviewed your prepared 
testimony, and I'll be eager to hear how your home state of Alabama has 
done this because here in Congress, we've worked to do the same.
    In 1998, through the Workforce Investment Act, we established one-
stop career centers to help streamline job training and retraining 
services available to men and women looking to sharpen their skills and 
better navigate the new century's new economy. Republicans in the House 
have worked to strengthen this system even further, such as requiring 
state and local workforce investment boards to ensure their training 
system is dynamic and reflective of the workforce needs in the local 
area and to allow training for incumbent workers so employers may 
assist them in upgrading their skills. Our proposal from the 109th 
Congress also would have consolidated the Workforce Investment Act's 
three adult job training programs into one consolidated adult funding 
stream to simplify program administration and reduce inefficiency at 
the state and local level. This would mean more efficient service when 
workers need it most.
    Mr. Chairman, in the last Congress, this Committee advanced a job 
training reform bill early-on in the first session, and I'm hopeful we 
will again in this year. Our bill passed the House with a bipartisan 
vote, and as we look for ways to respond to the new realities of the 
21st Century economy--including the impact of trade--I believe this set 
of reforms is one we all can rally around. Therefore, I hope this panel 
moves expeditiously on job training reform.
    Once again, thank you, Mr. Chairman, for bringing us together for 
today's hearing. And I look forward to hearing our witnesses' testimony 
and the discussion that will follow.
                                 ______
                                 
    Chairman Miller. I thank the gentleman. I thank him for his 
comments.
    Let me be clear at the outset of this hearing that the 
intent of this hearing and the purpose is to look at the 
programs that are in place today, sort of top to bottom, and I 
think, if you have not read the testimony and you hear the 
testimony, you will discover that we have created a rather 
complex system for people to have to navigate. Not only is it 
very hard on them, but I question whether it is really the best 
use of taxpayer dollars when you look at the complexity of it, 
and what I think is there is probably bipartisan agreement 
about the services we are trying to provide, so I would just 
hope that everybody on the committee would understand that we 
really want to look at this in a very different light, and we 
are doing this, and for their part of it, the Ways and Means 
Committee is conducting the same effort to see whether or not 
we can provide a system that is more helpful and certainly more 
user-friendly.
    You know, we are working on legislation on the student loan 
application, to try to reduce the complexity of this and make 
it user-friendly for the people who have to use it. Currently, 
it is easier to go to the World Bank, as Mr. Rahm Emanuel 
reminded us, and to get a loan from the World Bank than it is 
to go and get a student loan. In the case of trade, we will 
hear about trying to acquire the health care benefits that are 
supposed to go along with this economic dislocation, which can 
also be fairly complex to say the least.
    We have a wonderful group of witnesses today. We are going 
to begin with Mr. David Bevard, who worked at the Maytag 
Refrigeration Products for 32 years. He and his wife, Pat, were 
two of the 2,500 people laid off when Maytag closed its 
Galesburg, Illinois, plant. At the time of the plant closing, 
Mr. Bevard was president of the International Association of 
Machinists, Local 2063. Mr. Bevard attended Sandburg College 
and Northern Illinois University.
    Stan Dorn is a senior research assistant of the Urban 
Institute. He has focused on research on health coverage, tax 
credits, Medicaid, auto enrollment strategies and providing 
health coverage for the uninsured. Mr. Dorn previously worked 
at the Economics and Social Research Institute, the Children's 
Defense Fund and served as managing attorney for the National 
Health Law Program's Washington Office.
    Mr. Bruce Herman is the Executive Director of the National 
Employment Law Project. Mr. Herman previously served as the 
president of the Garment Industry Development Corporation in 
New York City and as executive director to the AFL-CIO Working 
for America Institute. Mr. Herman is a graduate of Columbia 
University and a recipient of the Fulbright Award.
    Dr. Lael Brainard is the vice president and director of 
Global Economy Development Center at the Brookings Institution 
where she has written extensively on worker assistance 
programs, particularly wage insurance. She previously worked 
for the Massachusetts Institute of Technology and in the 
Clinton administration. Dr. Brainard has a Ph.D. in Economics 
from Harvard University.
    Dr. Tim Alford is the director of the Alabama Office of 
Workforce Development. Dr. Alford is a former teacher, 
principal and community college dean. He started his own 
consulting business designing workforce development programs 
and served as the founding executive director of a public/
private economic development corporation in Enterprise, 
Alabama. Dr. Alford has a Ph.D. in Educational Leadership from 
Auburn University.
    Ms. Thea Lee is the policy director and chief international 
economist at the AFL-CIO where she worked on domestic and 
international economic policy. Previously, Ms. Lee was the 
international trade economist with the Economic Policy 
Institute in Washington, D.C., and a netter of Dollars and 
Cents Magazine in Boston. Ms. Lee received a bachelor's degree 
from Smith College and a master's in economics from the 
University of Michigan.
    Welcome to all of you. Your written presentations will be 
put in the record in their entirety. The extent to which you 
can summarize would be appreciated. The light system will be, 
when you start testifying, there will be a green light. And 
then, later on, 4 or 5 minutes into it, there will be a yellow 
light which suggests that you may want to start summing up, but 
again, we will allow you to complete thoughts and sentences and 
paragraphs, and we look forward to your testimony. And there 
will be questions after all of the panel has testified.
    Mr. Bevard, we are going to begin with you. If you will 
turn your mike on, we will get going.

          STATEMENT OF DAVID LEE BEVARD, GALESBURG, IL

    Mr. Bevard. Good afternoon, Mr. Chairman and members of the 
committee. Thank you for giving me the opportunity to speak 
with you here today.
    My name is Dave Bevard. For 32 years, I worked at Maytag 
Refrigeration Products in Galesburg, Illinois, along with my 
wife, Pat. We were two of the approximately 2,500 people at the 
plant who believed that, if you worked hard, played by the 
rules and made a quality product, you would be rewarded for 
your efforts. Instead, on October 11th, 2002, we were given a 
pink slip and told that our plant would close and move to 
Mexico within 2 years. At the time of the closing, I was 
president of Local IM 2063, representing the workers at the 
facility.
    Until you have experienced it, you cannot truly appreciate 
the emotional devastation of knowing that the world as you know 
it is gone. After the final plant closing, I was able to work 
for the next year as a peer counselor through an outstanding 
AFL-CIO community service program to assist my fellow 
dislocated workers. In Galesburg, we were fortunate to have an 
excellent local workforce investment group to work with us as 
well as assistance from the State of Illinois who set up a 
facility for workers with additional programs and funding. I 
was able to experience firsthand and through working with my 
friends and coworkers the transition through job loss and into 
an uncertain future.
    The first necessity for displaced workers is counseling. As 
a peer counselor, I saw many individuals who were ready to 
throw up their hands and completely give up. With counseling 
and referring them to the proper channels, we were able to 
assist workers through their journey. I know counseling works. 
Work very much defines a person. Job loss is devastating, and 
the feelings of abandonment, failure, fear, anger and others 
are often not adequately addressed. Job loss is usually 
unexpected, and most people are not prepared to reinvent 
themselves and determine what to do with the rest of their 
lives.
    Amidst the emotional turmoil of the job loss, workers are 
quickly buried in a morass of bureaucracy and information that 
is difficult at best to sort out and comprehend. Maneuvering 
through the Trade Adjustment Act and other programs can be like 
entering a bureaucratic minefield. One wrong step and you may 
lose out on your eligibility for benefits. Further, it is often 
difficult to get clear and consistent answers concerning 
eligibility and available benefits. The result is that programs 
are not always uniformly implemented from one area to another 
or even within the same area. Workers would greatly benefit 
from having a single point of contact and support so they can 
receive a clear, concise and consistent interpretation of 
programs and their implementation.
    Since unemployment insurance is the first thing many 
workers seek when they lose a job, it would make sense to me 
that the unemployment insurance program have trained and 
dedicated staff to provide the outreach, intake counseling and 
referral help that trade-affected workers need. For those who 
qualify for Federal benefits, such as those available through 
the Trade Adjustment Act, they do provide additional assistance 
for displaced workers for which we are grateful, but they are 
not without their shortcomings.
    In very general terms, TAA is supposed to provide up to 2 
years of schooling or training, supplemented in conjunction 
with 2 years of unemployment. Unfortunately, plant closures 
rarely follow such a tidy schedule, and unemployment benefits 
and schooling rarely coincide. In our case, the plant closed in 
late September, so unemployment benefits began in October. 
However, schooling or training for most individuals did not 
start until the following January. Many people then must decide 
whether to compromise their program into something shorter or 
decide what they will do when their income runs out 3 months 
before their schooling is completed.
    When workers do choose a course of study, there may not be 
programs available in their areas of interest. If there are 
educational programs available, these programs may not be in 
fields that are determined to be growth areas and are therefore 
ineligible for funding. Sometimes educational facilities are 
not equipped to handle the number of applicants. Also, 
accredited schooling and training programs can often be in a 
state of flux where a program may be accepted under TAA at the 
beginning of a semester only to be dropped by the end.
    Another major problem in our area was funding. There were 
numerous periods of gaps in funding. When laid off, workers 
attempted to sign up for training only to find that that there 
were only enough funds for a portion of them. The others were 
put on hold until more funding came through, but meanwhile, 
their unemployment benefits are ticking away. Due to funding 
delays and available programs, some workers were, in effect, 
forced to scrap the educational opportunities that they were 
supposed to be entitled to. Workers should not be penalized for 
lack of funding.
    There are two other areas of concern that should be 
mentioned: financial counseling and health care. With job loss 
and reemployment at a lower income level, financial counseling 
should be made available to everyone. Also, with our job loss 
was the loss of health care benefits. In Illinois, Governor 
Blagojevich has implemented a program called All Kids, which 
makes affordable health care available for all children in our 
State. This program has been a Godsend for parents. However, 
due to the high costs and lack of benefits from their new jobs, 
far too many parents go without any health care and are one 
catastrophic illness away from disaster.
    The promise and the end result of all of the training is 
supposed to be workers who are trained in technical and 
specialized skills and placed in better jobs. In our 
experience, most of the workers who have completed their 
training and schooling have jobs in fields not related to their 
training, and also, with only a handful of exceptions, the new 
jobs pay substantially less than the jobs lost and usually with 
few, if any, benefits. In many cases, workers are reemployed in 
jobs that pay half of what they were previously making.
    As for my own personal experience, my wife had great 
difficulty psychologically adjusting to the loss of the job she 
had loved for 30 years. She was hired to work part-time in 
retail until she was diagnosed with cancer last September. She 
is currently completing her treatments. From the plant closure, 
I was fortunate to work for over a year as a peer counselor, 
working to transition my fellow coworkers into their new lives. 
After that, I was able to work in a contract job that lasted a 
few months. For a time, I stayed home after that to assist my 
wife through her surgery and recovery. I have applied for 
schooling, but our area has again been experiencing funding 
gaps, so currently, there is no money available. Today, I am 
unemployed and looking for work. And I have found that, despite 
my background, my age works against me. We are lucky enough to 
currently have health care, but the costs are severely cutting 
into us, and we are concerned about losing it.
    While we are grateful for the programs that are available, 
I do not know what we would have done without them. These 
programs do have serious shortcomings that could be greatly 
improved. The plain truth is that none of these programs make 
up for failed trade policies or adequately compensate us for 
the job loss and the disruption of our lives. Trade Adjustment 
Assistance and other programs are no substitute for fair trade 
agreements. Bad trade policies are devastating our 
manufacturing industry and hurting millions of workers. We must 
have fair trade agreements and ways to create and keep good 
jobs so that we can keep our middle class, which is the bedrock 
of our democracy.
    I would again like to thank Chairman Miller and the rest of 
the committee for this opportunity to testify, and I would be 
happy to answer any questions.
    [The statement of Mr. Bevard follows:]

                Prepared Statement of David Lee Bevard,
            Former Employee of Maytag Refrigeration Products

    Good Afternoon, Mr. Chairman and members of the Committee. Thank 
you for giving me the opportunity to speak with you here today.
    My name is Dave Bevard. I worked at Maytag Refrigeration Products 
in Galesburg, Illinois for 32 years, along with my wife, Pat. We were 
two of the approximately 2,500 people at the plant who believed that if 
you worked hard, played by the rules and made a quality product, you 
would be rewarded for your efforts. Instead, on October 11, 2002, we 
were given a pink slip and told that our plant would close and move to 
Mexico within two years. At the time of the closing, I was President of 
I.A.M. Local 2063 representing our workers at the facility.
    Until you have experienced it, you cannot truly appreciate the 
emotional devastation of knowing that the world as you know it is gone. 
After the final plant closing, I was able to work for the next year as 
a peer counselor through an outstanding AFL-CIO community service 
program to assist my fellow dislocated workers.
    In Galesburg, we were fortunate to have an excellent local 
Workforce Investment group to work with us as well as assistance from 
the State of Illinois, who set up a facility for workers with 
additional programs and funding. I was able to experience first hand 
and through working with my friends and co-workers the transition 
through job loss and into an uncertain future.
    The first necessity for displaced workers is counseling. As a peer 
counselor, I saw many individuals who were ready to throw up their 
hands and completely give up. With counseling and referring them 
through the proper channels, we were able to assist workers through 
their journey. Counseling works.
    Work very much defines a person. Job loss is devastating and the 
feelings of abandonment, failure, fear, anger and others are often not 
adequately addressed. Job loss is usually unexpected and most people 
are not prepared to reinvent themselves and determine what to do with 
the rest of their lives. Amid the emotional turmoil of the job loss, 
workers are quickly buried in a morass of bureaucracy and information 
that is difficult at best to sort out and comprehend.
    Maneuvering through the Trade Adjustment Act and other programs can 
be like entering a bureaucratic minefield. One wrong step and you may 
lose out on your eligibility for benefits. Further, it is often 
difficult to get clear and consistent answers concerning eligibility 
and available benefits. The result is that programs are not always 
uniformly implemented from one area to another or even within the same 
area. Workers would greatly benefit from having a single point of 
contact and support so they can receive clear, concise and consistent 
interpretation of programs and their implementation. Since Unemployment 
Insurance is the first thing many workers seek when they lose a job, it 
would make sense to me that the Unemployment Insurance program have 
trained and dedicated staff to provide the outreach, intake, counseling 
and referral help that trade affected workers need.
    For those who qualify for federal benefits, such as those available 
through the Trade Adjustment Act, they do provide some additional 
assistance for displaced workers for which we are grateful, but they 
are not without their shortcomings. In very general terms, TAA is 
supposed to provide up to two years of training or education 
supplemented in conjunction with two years of unemployment. 
Unfortunately, plant closures rarely follow such a tidy schedule and 
schooling and unemployment benefits rarely coincide. In our case, the 
plant closed in late September, so unemployment benefits began in 
October. However, schooling or training for most individuals, did not 
start until the following January. Many people must then decide whether 
to compromise their program into something shorter or decide what they 
will do when their income runs out three months before their schooling 
is completed.
    When workers do choose a course of study, there may not be programs 
available in their area of interest. If there are educational programs 
available, these programs may not be in fields that are determined to 
be ``growth areas'' and are therefore ineligible for funding. Sometimes 
educational facilities are not equipped to handle the number of 
applicants. Also, accredited schooling and training programs can often 
be in a state of flux. A program may be accepted under TAA at the 
beginning of a semester only to be dropped by the end.
    A major problem in our area was funding. There were numerous 
periods of gaps in funding. When laid off, workers attempted to sign up 
for training only to find that there were only enough funds for a 
portion of them. The others were put on hold until more funding came 
through. Meanwhile, their unemployment benefits are ticking away. Due 
to funding delays and available programs, some workers were in effect 
forced to scrap the educational opportunities that they were supposed 
to be entitled to. Workers should not be penalized for lack of funding.
    There are two other areas of concern that should be mentioned; 
financial counseling and health care. With job loss and re-employment 
at a lower income level, financial counseling should be made available 
to everyone. Also with our job loss was the loss of health care 
benefits. In Illinois, Gov. Blagojevich has implemented a program 
called AllKids which makes affordable healthcare available for all 
children in our state. This program has been a godsend for parents. 
However, due to the high cost and lack of benefits from their new jobs, 
far too many parents go without any health care and are one 
catastrophic illness away from disaster.
    The promise and end result of all of the training is supposed to be 
workers who are trained in technical and specialized skills and placed 
in ``better'' jobs. In our experience, most of the workers who have 
completed their schooling have jobs in fields not related to their 
training. Also, with only a handful of exceptions, the new jobs pay 
substantially less than the job lost and usually with few if any 
benefits. In many cases, workers are reemployed in jobs that pay half 
of what they were previously making.
    As for my own personal experience, my wife had great difficulty, 
psychologically, adjusting to the loss of the job that she had loved 
for thirty years. She was hired to work part time in retail until she 
was diagnosed with cancer last September. She is currently completing 
her treatments. Upon the plant closure, I was fortunate to work for 
over a year as a peer counselor working to transition my fellow co-
workers into their new lives. After that, I was able to work in a 
contract job that lasted a few months. I stayed home, after that, to 
assist my wife through her surgery and recovery. I had applied for 
schooling but our area has again been experiencing funding gaps so 
currently there is no money available. Today, I am unemployed and 
looking for work. I have found that despite my background, my age works 
against me. We are lucky enough to currently have health care but the 
costs are severely cutting into us and we are concerned about losing it 
due to cost.
    While we are grateful for the programs that are available, I don't 
know what we would have done without them; these programs do have 
serious shortcomings and could be greatly improved. The plain truth is 
that none of these programs make up for failed trade policies or 
adequately compensate us for our job loss and the disruption of our 
lives.
    Trade Adjustment Assistance and other programs are no substitute 
for fair trade agreements. Bad trade policies are devastating our 
manufacturing industry and are hurting millions of workers. We must 
have fair trade agreements and ways to create and keep good jobs so 
that we can keep our middle class which is the bedrock of our 
democracy.
    I would again like to thank Chairman Miller and the Committee for 
this opportunity to testify. I would be happy to answer any questions.
                                 ______
                                 
    Chairman Miller. Thank you.
    Mr. Dorn.

 STATEMENT OF STAN DORN, J.D., SENIOR RESEARCH ASSOCIATE, THE 
                        URBAN INSTITUTE

    Mr. Dorn. Good afternoon, Chairman Miller, Congressman 
McKeon and members of the committee. Thank you for the 
opportunity to speak with you today, and more importantly, 
thank you for your attention to this issue.
    As I think the opening comments indicated this afternoon, 
it seems to me that the plight of displaced workers is 
something that we all ought to be able to rally around. No 
matter how you feel about international trade, I think we all 
agree there are winners and losers. And it is critically 
important that those workers who suffer get the basic 
necessities of life, one of which is health care. Congress 
recognized this in 2002 in adopting an innovative Health 
Coverage Tax Credit, and I would like to discuss with you today 
the operation of that credit, how effective it has been in 
meeting the needs of displaced workers for health insurance, 
and some ways that Congress can improve the credit so that it 
does a better job.
    The Health Coverage Tax Credit, or HCTC, pays 65 percent of 
the health insurance premiums for displaced workers who receive 
certain other forms of Trade Adjustment Assistance. The credit 
is fully refundable. That means that, even if you owe little or 
no Federal income tax, you still can receive the credit if you 
qualify. Its most innovative feature is that it is advance-
able. You do not have to wait until the end of the year to 
claim your credit. You can have it paid each month directly to 
your insurance company when premiums are due. The credit may 
only be used for qualified insurance, which typically means 
COBRA coverage offered by a former employer or a State 
qualified plan or a private insurance plan arranged by your 
State. This program has considerable accomplishments to its 
credit which I discuss in my written testimony, but 
unfortunately, it does not do a very effective job of meeting 
displaced workers' needs for health care.
    Mr. Chairman, as you noted in your opening remarks, the OMB 
data suggests that only 11 percent of eligible workers benefit 
from the credit in any form, and both studies of workers and of 
State officials tell us the main reasons why. Number one is 
affordability. Many displaced workers cannot afford to pay 35 
percent of health insurance premiums, which is the amount 
unsubsidized by HCTC. This makes sense. On average, if you are 
an employee with a paycheck, it costs 15 percent of the premium 
for coverage that only includes the worker. It is completely 
unrealistic to imagine that someone who loses their job is 
going to be able to more than double the amount they spend on 
health insurance, and yet, that is exactly what the HCTC 
program asks of many displaced workers.
    In addition, you have to pay your health insurance premiums 
in full while you are waiting to hear from the IRS of whether 
you qualify for the credit. Lots of displaced workers do not 
have extra money to the tune of hundreds and hundreds of 
dollars sitting around in their family budgets that they can 
devote for that purpose. Affordability is an issue.
    The nightmarish administrative complexity of the process, 
Mr. Chairman, that you noted is a huge issue. Workers have to 
apply to between three and five agencies to get on the program, 
and they have to frequently shuttle paperwork back and forth 
between these different agencies, so enrollment is a big 
problem.
    In addition, the coverage that the credit provides often 
does not meet workers' needs for health care. Under the 
statute, if you are uninsured for 63 days during the several 
months before you try to enroll in an HCTC plan, that plan can 
completely exclude every treatment of preexisting conditions. 
In other words, everything that you know you need to meet your 
health problems is off the table if you have a 63-day coverage 
gap, but typically, it takes 6 months or more between job loss 
and the start of HCTC advance payment. So that means that many 
workers cannot get the coverage they need to meet their needs.
    In addition, there are nine States where every single 
State-qualified plan has an individual deductible of $1,000 or 
more. For some of us, that is not so horrible, but if you are 
living on a $290-a-week-unemployment-insurance check, that 
means health care is not affordable to you. Most HCTC-qualified 
plans flatly exclude or greatly limit such basic services as 
prescription drugs, maternity care and mental health services. 
So, in many cases, you can get the credit, but that does not 
mean you get the access to health care that is the purpose of 
that credit.
    Now, I am here to tell you these problems can be solved. 
Similar problems have been prevented or solved with other 
health care programs, and that gives me optimism and hope that 
workers like Mr. Bevard can obtain the kind of help they need 
with health coverage. Here are a few things I would recommend 
for the committee's consideration.
    First, increase the percentage of the premium that the 
credit pays to make it more affordable for workers, and for 
workers who have very low incomes who depend just on that 
unemployment insurance check without spousal income to tide 
them over, they would need additional assistance, so I would 
recommend a supplemental credit.
    It should be possible to eliminate any need to pay full 
monthly insurance premiums while you are waiting for the IRS to 
process your application. That is how Medicaid does it, how 
SCHIP does it. There is no reason why HCTC cannot do that as 
well.
    In terms of simplifying the administrative process, it 
seems to me Congress could ask the IRS to consult with PBGC and 
the Department of Labor and say, Come up with one form that a 
worker has to file with one place, and that is enough to start 
the process. There are a few other changes that I recommend in 
my testimony that I would be glad to talk about.
    In terms of coverage, it seems to me, if a worker is 
uninsured because of an HCTC administrative delay that is 
imposed without any choice of the worker, that loss of coverage 
should not lead to the exclusion of preexisting conditions.
    Finally, Congress could ask each State to arrange at least 
one comprehensive plan that would be available for all HCTC 
beneficiaries in that State, and if that State does not want to 
come forward and arrange that plan, then a Federal backup 
option could come to the fore, and perhaps DOL could make 
something available comparable to what Federal employees 
receive.
    Mr. Chairman, Mr. McKeon, members of the committee, this is 
a new program, and it is unprecedented in many important ways. 
It is not surprising that there have been problems, but now we 
know the facts. Now we have a chance to fix those problems, and 
I look forward to working with this committee in trying to 
figure out how this program can do a better job of reaching the 
goal that so many of us share.
    Thank you.
    [The statement of Mr. Dorn follows:]

                 Prepared Statement of Stan Dorn, J.D.,
             Senior Research Associate, the Urban Institute

    Despite important accomplishments, Health Coverage Tax Credits 
(HCTCs) have been generally ineffective in providing health care to 
displaced workers, for several reasons:
     The credits are used by only 11 percent of eligible 
workers.
     The coverage for which credits may be used often leaves 
out the health care that workers need. When job loss is followed by a 
gap in coverage of 63 days or longer, plans can deny treatment of the 
worker's known health problems. Moreover, many states offer only plans 
with high deductibles that make care unaffordable for workers with 
limited incomes. Also, such plans often exclude or severely limit such 
basic services as prescription drugs, maternity care, and treatment of 
mental illness.
     In some states, HCTC plans increase their premiums 
substantially for enrollees who are older, female, or have health 
problems.
     When a displaced worker turns 65 and qualifies for 
Medicare, the worker's spouse loses HCTC, even if that spouse is too 
young for Medicare and has no other coverage.
    Fortunately, older health coverage programs like Medicare, 
Medicaid, and the State Children's Health Insurance Program have 
already prevented or solved similar problems. This suggests that HCTC's 
shortcomings can likewise be addressed successfully through program 
changes like the following:
     Increase the size of HCTCs to pay at least 75 percent of 
premiums.
     When beneficiaries have low household income, provide 
supplemental credits that lower worker costs to no more than 10 percent 
of premiums. For administrative feasibility, certify low income based 
on prior-year tax data, current-year earnings data, recent income 
determinations by public assistance programs, or (as a last resort) 
applications by HCTC beneficiaries to Social Security offices, which 
already determine income for the Supplemental Security Income (SSI) 
program.
     Eliminate the requirement that workers must enroll in 
qualified coverage and pay full monthly premiums before the Internal 
Revenue Service (IRS) will rule on their eligibility for HCTC.
     Allow workers to apply by filing one form with one agency. 
Direct the IRS to share information with workers' authorized 
representatives who are helping with HCTC.
     In determining whether workers experience coverage gaps 
that permit health plans to deny treatment of known health problems, 
disregard periods of time during which workers are unable to access 
HCTC, either because they have not been sent notice of potential 
eligibility or because they are waiting for the IRS to rule on their 
application.
     Ask each state to arrange at least one qualified plan 
offering comprehensive benefits to HCTC beneficiaries, without large 
premium variations based on age, gender, and health status. If a state 
does not wish to assume this role, the federal government would arrange 
such coverage in the state.
     Continue HCTCs for otherwise eligible younger spouses when 
displaced workers enter Medicare.
    Good afternoon Chairman Miller, Representative McKeon, and 
distinguished members of the Committee. Thank you for the opportunity 
to speak with you today about health coverage for workers displaced by 
international trade, with a particular focus on the effectiveness of 
Health Coverage Tax Credits (HCTC).
    I plan to address three topics: health coverage challenges facing 
displaced workers; the strengths and weaknesses of the HCTC program in 
helping these workers retain health coverage; and policy options to 
improve the HCTC program so it can be more effective in meeting the 
health coverage needs of workers who lose their jobs because of 
international trade.
    I have two preliminary comments. First, I would like to thank the 
Nathan Cummings Foundation, the California HealthCare Foundation, and, 
above all, the Commonwealth Fund for generously supporting our several 
years of research into HCTC. Much of my testimony reflects information 
and insights gleaned through these philanthropies' investment in 
learning about this important program.
    Second, the views I express today are mine alone and should not be 
attributed to the Urban Institute, any of its sponsors, or any of the 
above-described funders of our prior HCTC research.
    Health coverage challenges facing displaced workers
    For non-elderly Americans, 74 percent of all health coverage is 
provided through employment (Urban Institute and the Kaiser Commission 
on Medicaid and the Uninsured 2006). The loss of employment thus often 
means a termination of health coverage--in fact, two-thirds of all 
uninsurance begins with job loss (Glied 2001).
    For companies with more than 20 workers, the Consolidated Omnibus 
Budget Reconciliation Act of 1986 (COBRA) provides displaced workers 
and other laid-off employees continued access to employer-sponsored 
insurance. However, the displaced worker must pay for the coverage, 
typically at a cost of the full premium plus a 2 percent administrative 
fee. Not surprisingly, this cost prevents most laid-off workers from 
taking advantage of COBRA, even if they qualify. In 2006, the cost of 
worker-only COBRA coverage offered by the average employer was $361 a 
month, or 31 percent of average unemployment insurance (UI) payments in 
2006.\1\
    Of course, some displaced workers can supplement their UI checks 
with spousal income or enroll in health coverage offered by a spouse's 
employer. Other laid-off workers are fortunate to have assets they can 
use to pay for insurance. Still others have strong educational 
backgrounds and quickly find new employment that provides health 
benefits. But many simply lose health insurance.
    For example, a Government Accountability Office (GAO) survey of 
displaced workers affected by trade-related layoffs in five sites found 
that the percentage who were either uninsured or who enrolled in HCTC 
and so may have lacked health coverage without assistance ranged from 
38 percent at a fine paper and pulp mill in Longview, Washington, to 63 
percent at a baked goods manufacturer in Hazelwood, Missouri 
(Government Accountability Office 2006). An earlier GAO report found 
that, at a knit goods manufacturer in Martinsville County, Virginia, 
most displaced workers lost their health coverage (General Accounting 
Office 2001b). A survey of displaced textile mill workers in North 
Carolina found that 68 percent become uninsured following their layoff 
(Friday 2003). The precise proportion of displaced workers who lack 
coverage thus varies from layoff to layoff but appears to be 
significant in many cases.
    The Health Coverage Tax Credit program
    After discussing current law, I will describe some of the program's 
accomplishments as well as its shortcomings.
    Current law
    As part of 2002 legislation giving the president fast-track 
authority over trade agreements, lawmakers expanded Trade Adjustment 
Assistance (TAA) in various ways. One important change was to help 
displaced workers obtain health coverage. The Trade Act of 2002 created 
a Health Coverage Tax Credit (HCTC) that pays 65 percent of health 
insurance premiums for eligible individuals enrolled in qualified 
coverage, leaving the worker responsible for the remaining 35 percent. 
The credits are fully refundable, which means that they are paid in 
full to all who qualify, including those who owe little or no federal 
income tax. The credits can be advanced directly to health insurers 
when monthly premiums are due, in advance of filing tax returns. HCTCs 
can also be claimed at the end of the year on annual income tax forms.
    The following is a general discussion of who qualifies for HCTC and 
what kind of coverage the credits subsidize.
    Eligibility
    Two basic groups qualify for HCTC: workers certified under the 
Trade Adjustment Assistance (TAA) program as displaced by international 
trade, and retirees age 55 to 64 receiving payments from the Pension 
Benefit Guaranty Corporation (PBGC). To qualify for HCTC as a displaced 
worker, an individual must either (1) receive Trade Readjustment 
Allowances (TRA), (2) meet all eligibility requirements for TRAs except 
exhaustion of unemployment insurance (UI), or (3) receive Alternative 
Trade Adjustment Assistance (ATAA). Dependents of eligible workers and 
retirees also qualify for HCTCs.
    HCTCs are not available to individuals who receive disqualifying 
coverage. This includes Medicare as well as employer-sponsored 
insurance where the employer pays 50 percent or more of the premium.
    Coverage that qualifies for HCTC
    Typically, a health plan qualifies for HCTC if it is either COBRA 
coverage offered by a former employer or a state-qualified health plan. 
State-qualified plans are not subject to any federal requirements for 
covered benefits or any limitations on varying premium charges based on 
age, gender, and health status. Such plans may not, however, 
participate in either Medicaid or the State Children's Health Insurance 
Program (SCHIP). The HCTC statute also provides that a non-group plan 
can be qualified, regardless of state policy decisions, if the worker 
received the coverage during at least the last 30 days of employment.
    The extent of state-qualified health plans' ability to vary premium 
charges based on individual risk factors was the subject of controversy 
soon after enactment of the Trade Act. Some in Congress argued that 
non-group coverage that varied premiums based on each enrollee's 
individual health history could constitute qualified coverage only for 
workers who purchased such plans during at least the last 30 days of 
employment, given the statute's specific language addressing non-group 
coverage. However, the Bush Administration ruled that any form of 
private health coverage arranged by a state can constitute a qualified 
plan, so long as the coverage meets certain consumer protection 
requirements of the Trade Act.
    These protections apply to individuals who, when they seek to 
enroll in an HCTC plan, have had at least three months of continuous 
coverage, without any insurance gaps that exceed 62 days. For such 
individuals, a state-qualified plan must guarantee issuance of 
coverage, may not exclude coverage of preexisting conditions, and may 
not charge more or provide less than to similarly situated enrollees 
not receiving HCTCs.
    Program accomplishments
    Several accomplishments are important to note:
     The Internal Revenue Service (IRS) and the Department of 
the Treasury have proved effective and nimble in surmounting a number 
of policy challenges, including the establishment of unprecedented 
advance payment mechanisms less than 12 months after enactment of HCTC 
legislation (Dorn and Kutyla 2004).
     Unlike the country's only previous health insurance tax 
credit (the so-called ``Bentsen child health tax credits,'' which 
operated briefly during the early 1990s and were repealed in 1993), 
HCTC implementation has not been accompanied by reports of widespread 
marketing fraud (House Ways and Means Committee 1993).
     Consumer protection requirements in the HCTC statute have 
not stood in the way of significant health plan participation. As of 
March 2006, 87 percent of potentially eligible individuals lived in the 
40 states with participating state-qualified insurers, which 
collectively offered 280 state-qualified options (Pervez and Dorn 
2006).
     In some cases, states and unions have enrolled more than 
half of potentially eligible workers by providing proactive, intensive 
application assistance (Dorn 2006).
    Program shortcomings
    Unfortunately, HCTC has experienced serious problems reaching its 
goals. I will discuss four of these problems: the failure of the credit 
to reach most eligible workers; the failure of some HCTC plans to cover 
necessary health care; some health plans' substantial increase in 
premium charges to workers who are older, female, or in poor health; 
and the termination of HCTC coverage for younger spouses when the 
displaced worker turns 65 and qualifies for Medicare. A fifth major 
problem--namely, high administrative costs for HCTC advance payment--
will be the subject of a new report the Commonwealth Fund plans to 
release later this week.
    HCTC reaches a small percentage of eligible workers
    The best-known problem with HCTC is that very few eligible workers 
use the benefit. According to the Office of Management and Budget 
(OMB), during 2004 (the most recent year for which full data are 
available) only 11 percent of eligible individuals used the credit 
either in its advanceable form or through claiming the credit on end-
of-year returns.\2\ From 2005 through 2007, the total volume of 
subsidies provided by HCTC averaged only 26 percent of the level 
Congress expected in passing the Trade Act, as reflected in Joint Tax 
Committee projections (Dorn 2006).
    Several surveys of workers and state officials paint a consistent 
picture of the reasons for such low take-up. First, 35 percent of the 
premium is more than most displaced workers can afford. Workers earning 
a paycheck contribute an average of 15 percent of premium costs for 
worker-only coverage (Kaiser Family Foundation 2006). It is simply not 
realistic to expect that someone who loses their job and falls on hard 
times will be able to more than double their spending on health 
insurance.
    Second, to obtain a determination of eligibility for HCTC, 
individuals must pay premiums in full, without subsidy, before advance 
payment begins. A number of states operate so-called ``gap filler'' 
programs that use Department of Labor (DOL) grants to pay 65 percent of 
health insurance premiums while workers are waiting for advance payment 
to start. But in other states, laid-off workers are required to 
``front'' full monthly health insurance premiums in hopes of receiving 
an HCTC refund paying 65 percent of such costs after the workers file 
their tax forms at the end of the year. Few displaced workers have 
enough excess income in household budgets to make such payments.
    Third, the application process for HCTC is quite complex. Workers 
must file applications with between three and five public and private 
entities, often being required to convey paperwork from one such entity 
to another. In addition, the underlying TAA program upon which HCTC 
eligibility is based has considerable complexity, with policy goals 
that have little to do with health coverage. Individuals can be denied 
TRAs for such reasons as an inability to obtain a waiver of ordinarily 
applicable job training requirements, the receipt of certain pension 
payments, etc. Whether or not such factors affect the justification for 
TRA receipt, they do not reduce workers' need for help purchasing 
health coverage, yet they can terminate HCTC eligibility.
    State-qualified insurance often fails to cover necessary health 
care
    Limited coverage offered by state-qualified plans is both the 
final, major cause of low take-up \3\ and a serious problem in its own 
right. Coverage that workers view as not meeting their needs is 
obviously less likely to be purchased, even with a subsidy. Moreover, 
limits on available coverage can prevent the HCTC program from meeting 
its fundamental objective of providing displaced workers with 
affordable access to essential health care.
    There are several reasons why state-qualified coverage may not meet 
workers' health care needs. First, if workers experience a 63-day gap 
in coverage between job loss and enrollment in a state-qualified HCTC 
plan, the plan can exclude all coverage of preexisting conditions. The 
vast majority of state-qualified plans do impose such restrictions, 
according to a 2003 survey (Dorn and Kutyla 2004).
    Gaps in coverage of 63 days or longer can easily arise, through no 
fault of the worker. According to OMB, after job loss ``it can take as 
long as six months before [the names of potentially eligible workers] 
reach the IRS,'' and after that information reaches the IRS and the IRS 
mails out an enrollment kit, the median interval until the start of 
advance payment is 99 days (Office of Management and Budget 2006).
    To be clear, with some layoffs, 63-day gaps in coverage have been 
averted. These have been large layoffs, such as the bankruptcy of steel 
mills and the closure of textile mills, that devastated communities and 
received the intense attention of state officials and the media. In 
such cases, public and private sector leaders have sometimes cooperated 
to expedite the processing of applications and avoid coverage gaps. But 
such extraordinary efforts are the exception, not the rule. With more 
typical layoffs, coverage gaps often exceed 62 days, which means that 
HCTC-qualified plans arranged by the state can exclude the very health 
care that workers know is needed to treat their medical problems.\4\
    Second, state-qualified plans offer limited benefits in many 
states. In 12 of 40 states offering state-qualified insurance in March 
2006, every plan had an individual deductible of $1,000 or more (Pervez 
and Dorn 2006). In 11 of 15 states surveyed in 2003, every state-
qualified plan either excluded or imposed severe limits on at least two 
of the following: maternity care, mental health care, prescription 
drugs, or preventive care (Dorn and Kutyla 2004). Workers do not 
receive affordable access to necessary care under these plans if they 
cannot afford $1,000 out of pocket before coverage begins or if they 
need the particular services that available coverage excludes.
    Premiums can vary greatly based on age, gender, and health status
    Insurers offering medically underwritten, nongroup coverage can 
charge more for enrollees who are expected to generate large health 
care costs. As of March 2006, such plans were offered as state-
qualified insurance in 9 out of the 40 states with state-qualified 
plans. In these nine states, premiums have sometimes increased 
substantially based on age, gender, and health history. For example, in 
June 2004, HCTC beneficiaries' 35 percent premium share for average 
state-qualified coverage in North Carolina was $357 a year for a 
healthy 25-year-old man, compared with $4,066 for a 55-year-old woman 
in the highest risk tier (Dorn, Alteras, and Meyer 2005).
    This raises questions of fairness. With medical underwriting, the 
very people who most need coverage are least able to afford it, based 
on individual characteristics that are outside their control.
    Basing premiums on individual risk-assessment through medical 
underwriting also raises issues of effectiveness, particularly when 
displaced workers are over age 40. Medical underwriting for displaced 
textile mill workers in North Carolina, for example, had a dramatic 
effect undermining take-up. Among the workers quoted higher premium 
rates after the underwriting process, fully 69 percent dropped out of 
the program at that point. If these individuals had instead completed 
their enrollment, more than 3,900 additional North Carolinians would 
have received coverage, increasing total national HCTC enrollment by 42 
percent (Dorn, Alteras, and Meyer 2005).
    Spouses lose health coverage when eligible workers turn 65
    The spouse of a displaced worker or PBGC retiree receives HCTC only 
while the worker or retiree qualifies for HCTC. If the trade-impacted 
worker turns 65 and enrolls in Medicare, HCTC eligibility ends for both 
the worker and the spouse. This makes some sense for the worker, since 
the worker is receiving Medicare. However, if the spouse is under age 
65, Medicare does not provide coverage. Such a spouse may have lost 
health insurance along with the worker when the layoff occurred. 
Without HCTC, the spouse may wind up completely uninsured until age 65, 
potentially suffering seriously impaired access to essential health 
care. This is a structural gap in HCTC's mechanisms for preventing 
trade-related job loss from terminating health coverage.
    Policy options to increase HCTC's effectiveness in helping 
displaced workers
    These problems can be overcome through intelligent redesign of 
HCTC. Similar problems have been prevented or solved with older health 
subsidy programs, such as Medicaid, Medicare, and SCHIP. This track 
record provides a measure of confidence that such challenges can 
likewise be overcome with HCTC.
    Increase the number of displaced workers who receive HCTCs
    Three policy changes directed at improving affordability and making 
the application process more user-friendly would go a long way toward 
increasing the number of displaced workers who receive help.
    1. Raise the percentage of premium paid by HCTC
    Based on input from health plan staff in states with extensive 
populations of displaced workers, I would recommend at least 75 percent 
of premiums as the basic subsidy level for HCTC, and potentially 
more.\5\ Essential to widespread participation is lowering worker costs 
to amounts that would not require forgoing or postponing other basic 
household needs. Medicaid and SCHIP programs have repeatedly found that 
lowering required premium payments can dramatically increase consumer 
participation (Dorn, Varon, and Pervez 2005).
    In addition, I would recommend a supplemental credit for eligible 
workers with low incomes, such as income at or below 200 percent of the 
federal poverty level.\6\ For low-income workers, a supplemental 
credit, in combination with the base credit, could pay something like 
90 percent of the premium.
    Such a means-tested supplemental credit would face several 
administrative challenges. First, the IRS is ill-equipped to do ``real 
time'' means-testing for a supplemental, income-based credit. The IRS 
is beautifully set up to determine prior year income, not 
contemporaneous income.
    Second, HCTC is already complex. Asking workers to take additional 
steps to obtain supplemental credits necessarily means that some will 
not complete the process and obtain those credits.
    Given these challenges, if a means-tested supplement is provided, 
the burden of the application process on workers must be minimized, and 
the IRS must not be asked to do contemporaneous income determinations. 
The following is one approach to reaching those goals:
     The IRS could automatically provide supplemental credits 
when data-matching shows that HCTC-eligible individuals have income 
that falls below specified levels. Such data-matching would tap into 
income information contained in prior-year tax records and current-year 
earnings records in the national New Hires Database administered by the 
Department of Health and Human Services for purposes of child support 
enforcement. The latter database includes both quarterly earnings 
information and new hires information from every state, including 
public and private sector employers.\7\
     The IRS could also provide supplemental credits to any 
HCTC-eligible individuals who show that they have already been found to 
have low household income by means-tested public assistance programs 
like Food Stamps, Low Income Home Energy Assistance Program (LIHEAP), 
etc.
     Only if these two methods failed to establish eligibility 
for supplemental credits would a worker need to submit an application 
showing low income. As mentioned above, however, the IRS would not be 
the right place to process such an application. Instead, workers could 
submit these applications to Social Security offices, which already 
determine current income levels in deciding eligibility for 
Supplemental Security Income (SSI).
    With every pathway to demonstrating low income that goes beyond 
prior tax records, another agency's certification of low income would 
establish eligibility for the supplemental credit, without any 
independent means-testing by the IRS. Other elements of HCTC 
eligibility already are based on similar certification by agencies 
outside the IRS. Pursuant to Internal Revenue Code Section 7527(d), 
status as a TAA-eligible individual or a PBGC recipient is demonstrated 
by certification from state workforce agencies (SWAs) or PBGC, 
respectively. The IRS independently investigates other elements of HCTC 
eligibility, but not receipt of TAA or PBGC benefits. Congress could 
take a similar approach to the issue of affordability and use other 
agencies' certification of low income to direct enhanced subsidies to 
the lowest-income displaced workers without asking the IRS to assume 
any responsibility for ``real time'' income determinations.
    2. Eliminate the requirement that workers must pay premiums in full 
while waiting for advance payment to start
    Displaced workers cannot realistically be required to pay premiums 
in full while the IRS is determining their eligibility for advance 
payment. To eliminate this requirement, eligibility determination could 
be separated from enrollment in qualified coverage. Currently, the IRS 
makes one finding in ruling on an application for advance payment, 
determining simultaneously whether the individual is (a) eligible and 
(b) enrolled in qualified coverage. The IRS denies advance payment if 
the worker is either ineligible or not enrolled in a qualified plan. 
This requires enrollment in a qualified plan, hence payment of 
premiums, before advance payment can begin.
    Medicare, Medicaid, and SCHIP take a very different approach. 
SCHIP, for example, first determines that a child is eligible. Only 
then is the child enrolled in a health plan offered by the state, and 
the family makes payments based on the child's eligibility for 
subsidies. The family is never required to purchase unsubsidized 
coverage.
    HCTC could be restructured along similar lines. The IRS could make 
eligibility determinations for workers who are not yet enrolled in 
qualified plans. To avoid unnecessary administrative costs, such 
determinations could be limited to individuals who have applied to 
enroll in a qualified plan and agreed to pay their share of premiums 
after HCTC advance payment begins. Once the IRS finds the worker 
eligible and authorizes the start of advance payment, the worker would 
begin making premium contributions for qualified coverage, 
contributions that are reduced based on the subsidy provided by 
HCTC.\8\ (As noted below, this would need to be accompanied by other 
policy changes that prevent the exclusion of preexisting conditions 
based on coverage gaps while workers are waiting for advance payment to 
start.)
    3. Simplify the application process and let workers receive 
effective help navigating the system
    Three policy changes would make the application process more 
workable for displaced workers. First, Congress could direct the IRS to 
develop, in consultation with DOL, PBGC, and representatives of health 
plans, a single, simple form that workers could use to apply for HCTC 
advance payment by filing the form with one public or private agency.
    Second, Congress could direct the IRS to permit taxpayers to 
authorize state officials, health plan officials, union officials, or 
others to act on their behalf and receive otherwise confidential 
information. Such authorization would be limited to the purpose of 
establishing HCTC eligibility, commencement and continuation of advance 
payment, and receipt of health coverage. In the past, the IRS's 
laudable commitment to preserving taxpayer privacy has been taken to 
levels that interfere with the receipt of health coverage. For example, 
officials in state workforce agencies have been unable to diagnose the 
causes of delayed initiation of advance payment because IRS staff 
refused to share information about workers' applications. To obtain 
information needed to provide coverage, state officials sometimes have 
had to bring workers into state offices, have workers call IRS staff, 
ask workers to relay state officials' questions to the IRS, ask workers 
to relay IRS answers to the state officials, and repeat the process 
until state officials understood the source of the problem sufficiently 
to devise a solution.
    For a brief period, the IRS addressed this issue by experimenting 
with a consent report pilot project operated through the HCTC Customer 
Contact Center. Callers to the HCTC toll-free line were asked if their 
contact information could be shared with state officials to see if the 
callers might qualify for extra help. In Virginia, 83 percent of 
callers consented to such information-sharing. State workforce agency 
staff then contacted these applicants and shepherded them through the 
process. More than 90 percent of these displaced workers ultimately 
enrolled in HCTC (Dorn 2006).
    Regrettably, this promising experiment was terminated after several 
months. Although taxpayer privacy was never breached, generalized 
worries about confidentiality brought the pilot project to an end. 
Clear congressional direction that asks the IRS to provide HCTC-related 
confidentiality waivers would be important in overcoming such worries 
and permitting displaced workers to get the help they need to navigate 
through even a simplified HCTC application process.
    Third, the relationship between TAA eligibility and HCTC 
eligibility could be simplified. Instead of making HCTC eligibility 
depend on receipt of ATAA, TRAs, or eligibility for TRAs but for 
receipt of UI, HCTCs could go to workers who are certified as displaced 
because of trade and who either qualify for any component of TAA 
assistance or would qualify for such a component but for their receipt 
of UI.
    Give HCTC beneficiaries access to health insurance that covers the 
health care they need, without large premium variations based on age, 
gender, or health status
    Two policy changes would reach this goal.
    1. Give each beneficiary access to at least one comprehensive plan 
with little or no premium variation based on individual characteristics
    Congress could adjust the HCTC statute to ensure that each HCTC-
eligible worker has access to at least one comprehensive health plan 
that does not vary premiums significantly based on age, gender, and 
health risk. Comprehensiveness could be defined in terms of actuarial 
value, an approach the SCHIP program has successfully used to preserve 
state and private-sector flexibility while ensuring that subsidy 
recipients can obtain the kind of comprehensive coverage that employers 
typically offer their workers. For the designated comprehensive plan, 
premium variation based on individual characteristics could either be 
limited or forbidden entirely.
    Under this approach, each state could choose either (a) to offer 
HCTC beneficiaries at least one state-qualified comprehensive plan 
without significant premium variation or (b) to have a federal agency 
arrange for such a plan to be offered to state residents. If a state 
failed to arrange such coverage by a certain date, a federally arranged 
plan would become available to HCTC beneficiaries living in the state. 
For example, HCTC beneficiaries in such a state could be offered one of 
the national fee-for-service plans that participates in the Federal 
Employees Health Benefits Program (FEHBP). To protect current FEHBP 
enrollees, HCTC beneficiaries would need to have their own group rate, 
separate from the rate charged for federal employees and retirees.
    The Health Insurance Portability and Accountability Act of 1996 
(HIPAA) took a similar approach to federal--state responsibilities. 
HIPAA established statutory goals for ensuring that, at the end of 
COBRA coverage, people could transition satisfactorily into individual 
coverage. States were given three basic choices for reaching those 
goals:
    (1) pass laws congruent with or stronger than the federal floor 
specified in HIPAA and enforce them using state agencies; (2) create an 
acceptable alternative mechanism for eligible persons in the individual 
market and enforce it with state agencies; or (3) decline to pass new 
laws or strengthen existing laws and leave enforcement of the HIPAA 
provisions directly to the federal government. (Nichols and Blumberg 
1998)
    By 2000, just four years after enactment of HIPAA, only three 
states left it to the federal government to set and enforce group-to-
individual conversion rules; nine states and the District of Columbia 
adopted or supplemented the federal rules and assumed enforcement 
responsibility; and 38 states were operating full-blown ``alternative 
mechanisms'' for achieving HIPAA's statutory goals (Pollitz et al. 
2000). By 2001, only one state remained that let the federal government 
enforce group-to-individual conversion rules (General Accounting Office 
2001a).
    This history suggests that, given the opportunity, the vast 
majority of states will develop their own methods to reach federally 
specified goals. However, the availability of a ``federal fallback'' in 
the case of HIPAA ensured that vulnerable beneficiaries did not suffer 
harm while states were coming up to speed. A similar approach could be 
taken to ensuring HCTC beneficiaries access to comprehensive coverage, 
without large premium variation based on factors like age, gender, and 
health status.
    If policymakers want to give states an additional incentive to 
arrange their own comprehensive coverage rather than leave this task to 
a federal agency, HHS could provide grants to cover state 
administrative costs in establishing such arrangements. Under this 
approach, if the federal government assumed the responsibility of 
arranging comprehensive coverage for HCTC beneficiaries in a particular 
state, the state's grant would revert to the federal Treasury. Many 
states would be loath to surrender both authority and dollars to the 
federal government.
    2. When coverage gaps result from factors outside the beneficiary's 
control, disregard those gaps in determining whether consumer 
protections apply
    Under some circumstances, it is important to give health plans the 
ability to take such steps as excluding coverage of preexisting 
conditions. Those measures prevent consumers from waiting to develop 
health problems before they seek coverage.
    Careful policy design can avoid that untoward result while 
dramatically increasing the number of displaced workers who use their 
HCTCs to obtain health insurance that covers treatment of known health 
problems. In determining whether a worker had continuous health 
coverage, periods of time could be disregarded when the worker was 
uninsured because factors entirely outside the worker's control delayed 
the receipt of subsidies. This disregard would encompass two intervals:
     The period between the loss of employer-subsidized health 
coverage and notice to the worker of potential HCTC eligibility; and
     The period between the worker's application for HCTC 
advance payment and the start of advance payment.
    The first period could be defined as ending a certain number of 
days after the IRS mails the worker an HCTC Program Kit. The second 
period could be defined as starting when a worker has done the 
following:
     Applied for HCTC advance payment;
     Applied to enroll in qualified coverage; and
     Made a binding commitment to pay the worker's share of 
premiums for such qualified coverage after HCTC advance payment begins.
    This approach seeks to be fair both to the worker and to the health 
plan. While the worker is without any available subsidies for health 
coverage, this policy would not unrealistically insist on full payment 
of health insurance premiums as a condition of later access to health 
insurance that meets the worker' known needs for health care. At the 
same time, this statutory change would effectively prohibit workers 
from intentionally delaying HCTC enrollment until they get sick and 
need care.\9\
    Permit younger spouses to retain HCTC after the displaced worker 
qualifies for Medicare
    Congress could modify HCTC eligibility so that, when a TAA- or 
PBGC-eligible worker turns 65 and qualifies for Medicare, HCTC 
continues to be cover family members who would otherwise remain 
eligible for the credit.
    Conclusion
    By and large, Health Coverage Tax Credits have been ineffective in 
providing displaced workers with affordable access to health coverage 
and essential health care. These problems resulted from design choices 
in the structure of the credit, choices that Congress could revisit. 
Subsidy levels could increase to make coverage affordable. Displaced 
workers could be spared the need to pay premiums in full while waiting 
for an eligibility determination. The application process could be 
simplified and authorized representatives empowered to help workers 
navigate the system and enroll in qualified coverage. Qualified health 
insurance could include at least one comprehensive coverage option in 
each state, without large premium increases for enrollees who are 
older, sicker, or female. And as long as workers are not dilatory in 
applying for subsidies and enrolling in coverage, health insurance 
could cover the services that workers need, without excluding coverage 
of preexisting conditions.
    HCTCs represent the country's first attempt to cover the uninsured 
by using tax credits that are paid monthly to insurers when premiums 
are due, in advance of filing annual tax returns.\10\ It is not 
surprising that this novel approach has encountered problems. However, 
now that the country has accumulated several years of experience with 
HCTCs, Congress has an opportunity to revise the program so it can do a 
much better job of accomplishing its basic objective, which surely 
everyone on this Committee supports--namely, for those workers who are 
harmed, rather than helped, by trade liberalization, ensuring that the 
Trade Adjustment Assistance program offers affordable health insurance 
that provides good access to essential health care.
    I would be delighted to answer any questions from the Committee.

                               REFERENCES

Dorn, Stan. 2006. ``Take-Up of Health Coverage Tax Credits: Examples of 
        Success in a Program With Low Enrollment.'' Prepared for the 
        Commonwealth Fund. Washington, DC: The Urban Institute.
Dorn, Stan, and Todd Kutyla. 2004. ``Health Coverage Tax Credits under 
        the Trade Act of 2002: A Preliminary Analysis of Program 
        Operations.'' Prepared for the Commonwealth Fund and the Nathan 
        Cummings Foundation. Washington, DC: Economic and Social 
        Research Institute.
Dorn, Stan, Tanya Alteras, Jack A. Meyer. 2005. ``Early Implementation 
        of the Health Coverage Tax Credit in Maryland, Michigan, and 
        North Carolina: A Case Study Summary.'' Prepared for the 
        Commonwealth Fund and the Nathan Cummings Foundation. 
        Washington, DC: Economic and Social Research Institute.
Dorn, Stan, Janet Varon, and Fouad Pervez. 2005. ``Limited Take-Up of 
        Health Coverage Tax Credits: A Challenge to Future Tax Credit 
        Design.'' Prepared for the Commonwealth Fund. Washington, DC, 
        and Seattle, WA: Economic and Social Research Institute and 
        Northwest Health Law Advocates.
Friday, Paul C. 2003. ``Long-Term Needs Assessment, Pillowtex 
        Employees.'' Prepared for the Cabarrus County Community 
        Development Corp. and the City of Kannapolis. Concord, NC: 
        Research and Training Specialists, Inc.
Glied, Sherry A. 2001. ``Challenges and Options for Increasing the 
        Number of Americans with Health Insurance.'' Inquiry 38(2): 
        90--105.
General Accounting Office. 2001a. ``Federal Enforcement of Health 
        Insurance Standards.'' GAO-01-652R. Washington, DC: General 
        Accounting Office.
------. 2001b. ``Trade Adjustment Assistance: Experiences of Six Trade-
        Impacted Communities.'' GAO-01-838. Washington, DC: General 
        Accounting Office.
Government Accountability Office. 2006. ``Trade Adjustment Assistance: 
        Most Workers in Five Layoffs Received Services, but Better 
        Outreach Needed on New Benefits.'' GAO-06-43. Washington, DC: 
        Government Accountability Office.
House Ways and Means Committee, Subcommittee on Oversight. ``Report on 
        Marketing Abuse and Administrative Problems Involving the 
        Health Insurance Component of the Earned Income Tax Credit.'' 
        WMCP: 103-14, 103rd Cong., 1st Sess., June 1, 1993. Washington, 
        DC: House Ways and Means Committee.
Kaiser Family Foundation and the Health Research and Educational Trust. 
        2006. ``2006 Employer Health Benefits Survey.'' Menlo Park, CA: 
        Kaiser Family Foundation.
Nichols, Len, and Linda Blumberg. 1998. ``A Different Kind of 'New 
        Federalism'? The Health Insurance Portability and 
        Accountability Act of 1996.'' Health Affairs (May/June).
Office of Management and Budget. 2006. ``Detailed Information on the 
        Internal Revenue Service Health Care Tax Credit Administration 
        Assessment.'' Washington, DC: Office of Management and Budget.
Pervez, Fouad, and Stan Dorn. 2006. ``Health Plan Options under the 
        Health Coverage Tax Credit Program.'' Prepared for the 
        Commonwealth Fund. Washington, DC: Health Management Associates 
        and the Urban Institute.
Pollitz, Karen, Nicole Tapay, Elizabeth Hadley, and Jalena Specht. 
        2000. ``Early Experience with 'New Federalism' in Health 
        Insurance Regulation.'' Health Affairs (July/August).
The Urban Institute and the Kaiser Commission on Medicaid and the 
        Uninsured. 2006. ``Health Insurance Coverage in America: 2005 
        Data Update.'' Washington, DC: The Urban Institute.
Employment and Training Administration, U.S. Department of Labor. 2006. 
        ``Monthly Program and Financial Data, U.S. Total for 2006.'' 
        Washington, DC: U.S. Department of Labor.

                                ENDNOTES

    \1\ The cost of COBRA coverage was calculated by the author from 
Kaiser Family Foundation and the Health Research and Educational Trust 
(2006); the percentage of UI payments was calculated from Employment 
and Training Administration (2007).
    \2\ Calculated by the author from Office of Management and Budget 
(2006).
    \3\ Another important factor involves outreach. Workers losing 
their jobs are assimilating both the emotional impact of job loss and a 
tremendous amount of incoming information about coping strategies, 
including but going far beyond available government benefits. It is 
very easy for messages about HCTC to get lost in the midst of such a 
storm (Government Accountability Office 2006). Coping with that kind of 
outreach environment would require the very best, state-of-the-art 
outreach and enrollment strategies, which have not yet been applied to 
HCTC (Dorn, Varon, and Pervez 2005).
    \4\ Another implication of these coverage gaps is that COBRA plans, 
which typically are quite comprehensive, can become unavailable. 
Ordinarily, a laid-off worker has an election period of 60 days, 
following job loss or notice of available COBRA coverage (whichever 
occurs last), in which to enroll in the employer plan. However, the 
HCTC statute creates a second COBRA election period. This period lasts 
for 60 days after a displaced worker first receives TRA or would 
qualify for TRA but for the worker's receipt of UI. However, this 
second COBRA election period cannot last beyond six months following 
the worker's loss of health coverage. Without intensive effort, more 
than six months can easily pass between job loss and first receipt of 
HCTC, denying the displaced worker access to HCTC-funded COBRA.
    \5\ For example, if the underlying premium for comprehensive 
coverage is sufficiently high, the HCTC subsidy may need to exceed 75 
percent for the remaining cost to be affordable for most displaced 
workers.
    \6\ In 2007, the federal poverty level is $17,170 for a family of 
three; $20,650 for a family of four; etc.
    \7\ Several different approaches to analyzing this data are 
possible. For example, eligibility for supplemental credits could be 
granted based on prior-year income. That approach is currently taken 
for purposes of low-income subsidy eligibility under Medicare Part D, 
where subsidies are provided automatically based on prior-year receipt 
of Medicaid or SSI. The Bush administration's tax credit proposals for 
uninsured workers without access to employer-sponsored insurance 
likewise would have means-tested the amount of the credit based on 
prior-year income. If policymakers take this approach to HCTC 
supplements, it would be important to leave room for displaced workers 
to show that their circumstances have worsened since the previous year. 
For that purpose, access to the National New Hires Database could be 
important, along with the other enrollment mechanisms I discuss.
    \8\ Some have suggested another approach. Under this alternative, 
the IRS would rapidly refund 65 percent of full premium payments 
workers make before the start of advance payment. While useful for some 
workers, this would not solve the problem for the workers who most need 
help. HCTC-eligible displaced workers would still be asked to come up 
with the money needed for full premium payments--money that many 
workers simply do not have in their household budgets, even for a few 
months.
    \9\ These periods could also apply to the second COBRA election 
period, specified in the HCTC statute. That is, in determining whether 
six months have passed since job loss and whether 60 days have passed 
since the worker first qualified for TAA, the statute could be revised 
to disregard the periods of time (a) between the worker's job loss and 
notice of potential HCTC eligibility and (b) between the worker's 
application for and receipt of advance payment. As with preexisting 
condition exclusions, this approach would require workers to move 
forward with dispatch but would not punish them for delays beyond their 
control.
    \10\ The so-called ``Bentsen child health tax credit,'' mentioned 
above, represented the only previous attempt to use federal income tax 
credits of any kind to subsidize coverage for the uninsured. This 
earlier health insurance tax credit was not advanceable during the 
year--a critically important feature of HCTC. Instead, it was claimed 
at the end of the year, as a supplement to the Earned Income Tax 
Credit.
                                 ______
                                 
    Chairman Miller. Thank you.
    Mr. Herman.

  STATEMENT OF BRUCE G. HERMAN, EXECUTIVE DIRECTOR, NATIONAL 
                     EMPLOYMENT LAW PROJECT

    Mr. Herman. Chairman Miller and members of the committee, 
thank you for the opportunity to address this important topic. 
This is a timely hearing because it is increasingly clear that 
the benefits of trade are not shared equally while the downside 
of trade is having a corrosive impact on the hard-fought gains 
of America's working families.
    For the past 2 years, the National Employment Law Practice, 
or ``NELP'' as we are known, has been working with dislocated 
manufacturing workers affected by the restructuring of the auto 
industry, concentrating especially in the States of Indiana, 
Michigan and Ohio. Our Midwest economic dislocation initiative 
involves working with the TAA program at the ground level. One 
of the products that we produced is this manual that assists 
unions and community groups in applying for the benefits 
associated with TAA. Based upon our firsthand experience with 
TAA, NELP has a number of suggestions about the priorities for 
Congress in reauthorizing TAA.
    In this testimony, I will briefly outline four major 
priorities regarding TAA reauthorization. I will then briefly 
address two issues that are intertwined with the discussions of 
TAA reauthorization: first, why training and education is an 
important option for some dislocated workers; and, two, why 
wage insurance is not a better option to address the impact of 
globalization on workers.
    TAA reauthorization issue number one: TAA certification 
rules currently exclude many workers impacted by trade. 
Therefore, we recommend a move toward a universal globalization 
adjustment assistance program by expanding certification rules 
for TAA eligibility. Specific recommendations include: shift 
dislocated worker programs toward a model that provides income 
support and health care by expanding TAA eligibility to protect 
more manufacturing workers while adding coverage for service 
workers and public employees; start a basic income support 
program for dislocated workers under TAA that is not tied to 
participation and training while providing intensive job search 
assistance and reemployment services; develop criteria to 
establish regional or industry-wide certification for workers 
impacted by globalization; develop a new and reliable source of 
funding supporting significantly increased expenditures for 
globalization assistance.
    Issue number two: A high priority for reform in 2007's 
reauthorization is to ensure that adequate TAA training funds 
are available to train all certified workers who wish to 
participate in meaningful retraining programs. TAA training 
funds are a capped entitlement while Trade Readjustment 
Allowances, TRA--the income support--is an entitlement under 
current law. We suggest the following solutions.
    Congress should make TAA training an uncapped entitlement. 
If overall limitations in TAA training funds are kept in place, 
ensure that added training funds flow automatically when new 
certifications are made. In addition, requiring the 
distribution of 95 percent of the reserve training funds by no 
later than July 1st each year is recommended to permit timely 
enrollment in fall semesters. Expanding eligibility to service 
workers without addressing the cap on TAA training funds will 
simply pit newly eligible service workers and public employees 
against manufacturing workers in a battle for scarce TAA 
training funds.
    The other reauthorization area is the health coverage tax 
credit. The biggest obstacle to HCTC eligibility is 
affordability. We address some specific recommendations in the 
written testimony that I will not go into at this point.
    Similarly with administration, this is a complicated 
program, as was discussed in the opening statements, and there 
needs to be some significant reforms to streamline and to make 
it more accessible. We have a number of recommendations in our 
written testimony, but we do encourage Congress to talk to the 
system operators, the program operators, the dislocated workers 
themselves who have a direct experience with the complexities 
of the program and address those.
    In terms of the debate or the conversation around training, 
``is it useful for dislocated workers,'' claims by critics that 
publically funded training is not affected are no truer than 
competing claims that training and education are an overall 
answer to the decline of middle class jobs. Both are 
unwarranted over-generalizations. In our view, job training and 
education results are directly related to the investment made 
and the time spent in training. Given the special employment 
challenges facing dislocated workers, it is helpful to look at 
those programs that have provided more long-term investment in 
training and income support.
    For example, Washington State provides dislocated workers 
with extended unemployment benefits and State-approved 
training. By the third quarter after leaving this program, 72 
percent of the more than 8,000 participants were employed, 
making an average of 93 percent of the predislocation wages. 
Other programs that are promising, that provide promising 
outcomes, include the California Employment and Training Fund 
and the Wisconsin Regional Training Partnership.
    In terms of wage insurance, we believe it is a flawed 
approach to addressing the needs of dislocated workers. A 
number of Members of Congress have proposed the development of 
wage insurance as a potential solution for the ills facing 
dislocated workers. We appreciate the concern but believe that 
this is not a strategy that is a viable solution for many 
dislocated workers.
    Rather than encouraging workers to forego their long-term 
interest for a wage insurance job, Congress should focus on 
more meaningful solutions that create genuine economic security 
and more family-friendly, sustainable jobs in our economy. We 
have seen this work in the States which have created a 
subsidized health insurance for the unemployed that runs 
alongside the UI program and self-sustaining home protection 
funds that provide no-interest loans for laid-off families so 
they can cover their mortgage payments in the areas of high 
unemployment. We also believe there are far too many questions 
regarding wage insurance.
    First, will wage insurance promote downward mobility for 
the Nation's most vulnerable workers? Wage insurance jobs are 
also likely to provide no health insurance and other crucial 
benefits. Therefore, wage insurance amounts to a subsidy to 
those employers and the economy to provide jobs with the worst 
wages and benefits.
    We are also not aware of any empirical evidence that wage 
insurance jobs will provide transferrable skills or meaningful 
training. In fact, there is strong empirical evidence that 
lower-wage jobs require less skill and, therefore, provide 
little or no on-the-job training of real value let alone 
transferable skills. These are just some of the questions that 
need to be addressed in terms of the wage insurance proposals.
    We thank the committee for having this hearing, and we are, 
of course, available to follow up with any questions.
    [The statement of Mr. Herman follows:]

                 Prepared Statement of Bruce G. Herman,
          Executive Director, National Employment Law Project

Introduction
    Chairman Miller and members of the Committee, my name is Bruce G. 
Herman, Executive Director of National Employment Law Project (NELP). 
NELP is a policy and legal organization focused on issues impacting low 
wage and jobless workers. NELP is pleased to accept the Committee's 
invitation to testify today on the subject of the effectiveness of 
programs in helping workers impacted by international trade.
    For the last two years, NELP has been working with dislocated 
manufacturing workers affected by the restructuring of the automotive 
industry, concentrating especially in the states of Indiana, Michigan, 
and Ohio. Our Midwest economic dislocation initiative involves working 
with the TAA program at the ground level. We are currently advocating 
for better implementation of the program with state and local agencies, 
advising interested parties on filing petitions for certification of 
eligibility for TAA, and assisting with post-certification rights and 
responsibilities presentations for certified workers, local unions, and 
community groups. In addition to my work at NELP, I have developed 
years of experience dealing with trade-impacted workers and creating 
``high road'' economic development partnerships, first as the President 
of the Garment Industry Development Corporation in New York City, then 
as Executive Director of the AFL-CIO Working for American Institute in 
Washington, D.C.
Trade Adjustment Assistance Overview
    Rising imports and outsourcing now expose much of our country's 
labor market to the downsides of trade. While U.S. manufacturing has 
borne the brunt of job losses due to trade for decades, financial, 
service and public sector jobs now face competitive pressures due to 
movement of these jobs offshore. With widespread public concern focused 
on job losses related to trade, globalization and its adherents are on 
the defensive. As in past periods when public concern about the 
negative impact of trade was high, Trade Adjustment Assistance (TAA) is 
once again garnering attention from policy makers and the media. In 
addition, TAA is currently up for reauthorization in this Congress. 
This moment offers an opportunity to make TAA a program that provides 
more extensive and more effective readjustment assistance for jobless 
workers out of work as a result of adverse impacts of national trade 
policy.
    In the course of its work around economic dislocation, NELP has 
interacted with federal, state, and local officials in many states that 
are charged with making TAA work in the real world. As a result, we 
have gained extensive knowledge of the nuts and bolts of TAA 
implementation as well as bigger issues relating to TAA 
reauthorization. Based upon our first-hand experience with TAA as well 
as the input of other stakeholders, NELP has a number of suggestions 
about priorities for Congress in reauthorizing TAA.
    As you know, Mr. Chairman, TAA for workers provides retraining, 
income support, and job search and relocation assistance to jobless 
individuals separated from work as a result of specified trade impacts. 
For those that can get certified as eligible, TAA, in some important 
ways, represents one of the very best programs for income support and 
retraining for jobless workers in the U.S.
    Both opponents and supporters of free trade and globalization have 
promoted TAA as a promise to the victims of U.S. trade policy. In 
reality, TAA has never lived up to its promised role as a comprehensive 
vehicle for readjustment of those losing work as a result of trade. 
Instead, TAA has most often operated in the shadows of overall training 
policy. Limited TAA eligibility rules prevent certification of many 
manufacturing workers who cannot prove their layoffs are directly 
related to trade impacts. Crabbed administration by both the Labor 
Department and in some states impedes those certified for TAA from 
taking full advantage of its best features. As a result, only about 
50,000 to 70,000 workers actually participate in TAA retraining or 
other services in any particular year, a tiny portion of those affected 
by international trade and only a modest proportion of those with job 
losses certified as trade-impacted by the government each year.
    The limited nature of TAA corresponds to its limited budget. In the 
last few years, TAA spending is $1 billion or less a year, with $220 
million appropriated for TAA training and about $700 million spent on 
income support for certified workers in FY 2006. In comparison, TAA 
assisted over 500,000 individuals in 1980 when TAA spending was $1.6 
billion (which would be $3.9 billion in 2007 dollars). A major priority 
is to increase funding for TAA training so each TAA certified worker 
who is well fitted to retraining can access assistance. This priority 
arises because TAA training funds are a ``capped entitlement,'' while 
Trade Readjustment Allowances (TRA) income support is an 
``entitlement'' under current law. Despite dramatically increasing 
trade deficits which reached a record of $763.6 billion in 2006, since 
FY 2003 the training cap has been set by Congress at $220 million a 
year.
    Despite its limitations, TAA offers a number of advantages for 
certified workers over other dislocated worker programs, including most 
provided under the Workforce Investment Act (WIA). In particular, the 
duration of income support and training (up to 104 weeks) under TAA far 
exceeds what is commonly available to dislocated workers that are not 
eligible for TAA. In addition, TAA has a limited health care 
component--known as Health Coverage Tax Credit--that provides a 
refundable tax credit to cover 65 percent of premium costs for workers 
receiving TRA. While this health care provision has serious structural 
limitations, HCTC at least recognizes that dislocated workers, as do 
all workers have a major need for health care coverage. By providing 
income support and some health care, TAA is partially addressing two 
pressing needs of dislocated workers that are not addressed under other 
state and federal dislocated worker programs in the vast majority of 
cases.
    In this testimony, NELP will first outline major priorities 
regarding TAA reauthorization. We will then briefly address two issues 
that are intertwined with discussions of TAA reauthorization; namely, 
(1) why training is an important option for some dislocated workers and 
(2) why wage insurance is not a better option than TAA to address the 
impact of globalization on workers.
Main TAA Reauthorization Issues
    TAA currently expires on September 30, 2007, unless reauthorized by 
Congress. TAA reauthorization offers an opportunity to eliminate legal 
and administrative barriers and make TAA available to more dislocated 
workers. Currently, there is a bi-partisan consensus that TAA should be 
improved. Positive reform bills were introduced last year in the House 
by Representatives Rangel and Smith (H.R. 4156), and already this year 
in the Senate (by Senators Baucus and Coleman, S. 122) and in the House 
(Representative English, H.R. 910). Although all these bills have 
positive features, we believe that a more comprehensive approach is 
needed, especially given the growing negative impact of trade on 
workers and the continuing loss of good jobs due to shifts overseas. We 
will now discuss the major issues involving TAA reauthorization.
    TAA Reauthorization Issue 1: Move toward a universal TAA program by 
expanding certification rules for TAA eligibility.
    Both Representative Rangel and Senator Baucus have spoken generally 
in support of what they have both termed ``Globalization Adjustment 
Assistance.'' To better serve workers dislocated by international 
trade's impacts, TAA eligibility should be delinked from strict rules 
designed to require workers to show a close connection to imports or 
shifts in production to get TAA certification. TAA certification rules 
currently exclude many workers impacted by trade.
    As an initial limitation, TAA certification is limited to workers 
``producing an article.'' This means that service workers and public 
employees that lose work due to offshoring of their jobs are not 
eligible for TAA because they do not make goods, but instead furnish 
services. A common example of this limitation is U.S. call center 
workers whose jobs are moved overseas to lower wage countries. These 
call center workers do not produce an article, so they are not eligible 
for TAA certification. The same can be said of computer programmers or 
engineering capacity that is being moved overseas. This particular 
problem with TAA certification is recognized by many key members of 
Congress and we support adding TAA eligibility for service workers and 
public employees as an important step during reauthorization.
    Beyond fixing TAA eligibility for service workers and public 
employees, there are remaining limitations in current law for 
manufacturing workers that are less widely understood. These 
limitations exist despite modest changes for secondary workers made by 
Congress in 2002. When reauthorizing TAA in 2007, Congress should 
eliminate remaining barriers for trade impacted manufacturing workers 
under existing rules governing TAA eligibility.
    Among the most important barriers is a limitation that denies TAA 
certification to many manufacturing workers that make component parts. 
This happens because parts workers, by definition, do not make articles 
that are ``like and directly competitive'' with finished products. As a 
result, when manufacturing parts workers lose jobs due to imports of 
finished products they are denied TAA in many cases. This occurs 
because imported final products compete with the domestic final product 
that their parts went into during final assembly. Only imports of parts 
would be ``like and directly competitive'' with articles manufactured 
by the parts workers, meaning that many of these parts workers are 
ineligible for TAA.
    In summary, under current law, there must be a close match between 
products to satisfy the ``like and directly competitive'' test for 
imports. For example, domestic workers that made television tubes are 
not eligible for TAA if they lose work due to the imports of fully-
assembled televisions. This is because imported televisions are not 
``like and directly competitive'' with domestically produced television 
parts.
    While some of these parts workers could theoretically gain TAA 
certification as ``secondary'' workers under the 2002 amendments to 
TAA, the rules for secondary workers embody other significant 
limitations. First of all, secondary component parts workers are 
eligible for TAA only if they provide parts as a 1st tier supplier. 
Manufacturing employees of second and third tier supplier firms 
impacted by international trade remain ineligible for TAA under present 
rules.
    Second, secondary certifications are dependent upon a TAA 
certification at the primary assembly plant for which upstream 
secondary workers are furnishing components or for which downstream 
secondary workers finishing assembly. Secondary workers, in most cases, 
have no ability to control whether or not a petition is filed at the 
primary firm and the quality of that petition. As a result of these 
limitations in certification eligibility, significant numbers of 
secondary workers are not eligible for TAA under current rules.
    GAO's 2004 study of TAA noted that few workers were taking 
advantage of expanded eligibility for secondary workers provided by the 
2002 amendments.1 While GAO's study recommended better outreach and 
assistance with filing petitions for secondary workers, these steps can 
only partially remedy the shortfall in certifications of secondary 
parts workers. Congress must recognize that existing rules bar TAA 
eligibility for many secondary manufacturing workers.
    In the automotive industry, roughly 2 manufacturing jobs in parts 
are lost for every job in an assembly plant closing they formerly 
supplied. No amount of outreach is going to help those working at 2nd 
and 3rd tier plants supplying Delphi, Ford, or GM assembly plants 
slated to close in many states. Unless Congress eliminates remaining 
barriers in current law for certification for manufacturing parts 
workers, these workers will not have TAA protections when they are laid 
off in coming months.
    Next, significant limitations exist under current law on 
eligibility for workers whose jobs are lost because their employers 
shift production outside the U.S. In the case of such shifts in 
production, workers are eligible if their jobs go to a country with an 
existing free trade agreement OR if the resulting shift in production 
increases imports of the article previously manufactured by the 
petitioning workers. The current formulation for TAA eligibility in 
cases of shifts in production has significant limitations: (1) since 
many countries, including China, do not have free trade agreements with 
the U.S., shifts in production to those countries are not covered by 
TAA; (2) if domestic workers made products for export prior to the 
shift of their jobs offshore to a country without a free trade 
agreement with the U.S., there will be no increase in imports to 
support certification; and (3) even if there are increased imports 
after a shift in production to a county without a free trade agreement, 
there is frequently a delay in the onset of imports following a U.S. 
plant closing. In addition, monitoring those imports and properly 
timing and documenting a TAA petition is nearly impossible for affected 
workers. For this reason, we recommend that Congress eliminate the 
requirement that limits TAA certification for shifts in production to 
those countries with existing free trade agreements. Any offshore shift 
in production should be covered by TAA.
    Finally, TAA eligibility rules require that workers at each plant 
separately petition for certification. Providing regional or industry 
wide certifications to address 2nd and 3rd tier suppliers and other 
non-certifiable firms in trade-impacted communities or industries has 
been proposed. This is a good concept, but there is a challenge in 
making this concept a workable reality. Some proposals for industry 
certification for TAA have limited the power to file these broader 
petitions to the International Trade Commission or Congressional 
committees. We support industry and/or regional certifications and 
would strongly recommend that Governors, unions, or affected local 
governments have authority to file these petitions.
    In short, we are advocating for a greatly expanded reach for the 
TAA program. Such an expansion will require significant additional 
federal resources. However, even at a time when federal resources are 
limited, it is the obligation of the government and the society to do 
more to compensate those who are impacted by trade policies through no 
fault of their own.
    Recommendation: Existing proposals for TAA reauthorization fall 
well short of the steps needed to reach a TAA program deserving of the 
Globalization Adjustment Assistance label. Here are some significant 
steps we recommend:
     Shift dislocated worker programs toward a model that 
provides income support and health care by expanding TAA eligibility to 
protect more manufacturing workers while adding coverage for service 
workers and public employees.
     Start a basic income support program for dislocated 
workers under TAA that is not tied to participation in training, while 
providing intensive job search assistance and reemployment services.
     Develop criteria to establish regional or industry wide 
certification for globalization impacted workers.
     Develop a new and reliable source of funding supporting 
significantly increased expenditures for globalization assistance.
    TAA Reauthorization Issue 2: A high priority for reform in the 2007 
reauthorization is to ensure that adequate TAA training funds are 
available to train all certified workers that wish to participate in 
meaningful retraining programs.
    This priority arises because TAA training funds are a ``capped 
entitlement,'' while Trade Readjustment Allowances (TRA) income support 
is an ``entitlement'' under current law. Despite dramatically 
increasing trade deficits, since FY 2003 the training cap has been set 
by Congress at $220 million a year. (In recent years, there has been a 
$39 million allocation for TAA administration, effectively raising the 
cap by 15 percent because prior to that time administrative funds were 
deducted from training funds.)
    There is a pronounced conflict between promising trade-impacted 
workers training with income support while only authorizing limited 
funding for TAA training. As a result of this conflict, TAA certified 
workers interested in training are not able to get training, they are 
steered into shorter-term training, or they have training delayed while 
reserve training funds are sought from the Labor Department (USDOL). 
Consequently, when these certified workers eventually get into training 
it is of shorter duration because those weeks of potential training are 
lost through delays in enrollment. Certified workers also lose 
additional TRA (the last 52 weeks of TRA) because participation in 
training is a condition of eligibility for those additional TRA 
benefits. Since no tuition dollars are available, TRA is denied as well 
in these cases.
    In a 2004 report to the Senate Finance Committee, the Government 
Accountability Office found 19 states had discontinued training 
enrollment due to shortages of training funds between FY 2001 and FY 
2003. NELP is aware of similar issues regarding training approvals in 
the last two years in Illinois, Michigan, and to some degree in Ohio. 
In Michigan, WIA dollars are currently being used to provide TAA 
certified workers with training in some locations due to delays in 
approving and distributing reserve TAA funding. For this reason, 
addressing the cap on TAA training during reauthorization is vitally 
important.
    Beyond the overall limitation on training under the $220 million 
cap on spending, the cap creates significant issues regarding 
distribution of training funds to states and interferes with the timing 
of funding. These issues arise because there must be an administrative 
mechanism to distribute limited TAA training funds to states and then 
on to recipients. If during reauthorization Congress ensures that 
training dollars flow automatically to TAA training participants, then 
these obstacles to training participation would be reduced or 
eliminated. Nonetheless, these distribution issues are very real 
obstacles that this Committee should understand if it wishes to better 
comprehend why some workers get less help from TAA than promised.
    To begin, U.S. Department of Labor's formula for allocating limited 
training funds among the various states is seriously flawed. Beginning 
in FY 2003, the Labor Department began withholding 25 percent of 
training funds ($55 million) as a reserve. The remaining 75 percent 
($165 million) is distributed to states based upon a formula that 
provides 80 percent of the base funding ($132 million) relying upon 
each state's training spending averaged over the prior three fiscal 
years with 20 percent of the funding ($33 million) based upon each 
state's average number of program participants over the prior 3 fiscal 
years.
    An obvious result of this sort of retrospective funding formula is 
that states with high TAA caseloads in 2000 to 2002 were advantaged at 
the outset as compared to other states. In addition, because the 
formula includes a hold harmless element and does not take current 
increases in TAA certifications into consideration, the formula does 
not adjust quickly enough for states with high TAA caseloads. As a 
result, some states with rapidly increasing caseloads must rely upon 
TAA reserve funding to pay for training. The table below illustrates 
some of our concerns.

                                     TAA BASE TRAINING ALLOCATION INEQUITIES
----------------------------------------------------------------------------------------------------------------
                                                   FY 04                             FY 06
                    State                      Certifications     FY 04 Base     Certifications     FY 06 Base
----------------------------------------------------------------------------------------------------------------
Washington..................................              30    $13.4 million               16    $14.4 million
Pennsylvania................................             128    $20.6 million               97    $14.9 million
North Carolina..............................             211     $6.3 million              180     $9.9 million
Michigan....................................              76     $5.3 million              104     $5.8 million
----------------------------------------------------------------------------------------------------------------

    Without suggesting any criticism of states with higher TAA spending 
levels, the outcome of the current TAA base allocation formula is 
difficult to understand from the perspective of equitable treatment of 
TAA participants. Perhaps most noticeable thing in our table is that 
Washington State got $14.4 million in its base training allocation for 
FY 2006 with just 16 TAA certifications, while North Carolina is 
getting $9.9 million for 180 certifications. Certainly, we believe the 
cost of training and the availability of training should be roughly 
equivalent for workers without regard to the state of residence of 
certified workers.
    Under the existing formula, states must increase spending and 
training participation to increase their base funding. But states that 
have a greater need now for TAA funds as compared to when the formula 
was started cannot keep pace by increasing their spending and 
participation unless they are willing to risk obligating training funds 
beyond levels set by their base allocations. Most states do not have 
sufficient confidence that they can approve training over base 
allocations or facing delays in distribution of reserve training funds. 
Conversely, if current funding levels impede approval and increases in 
participation, then the formula itself will never provide added base 
funding to a state.
    Additional funding issues are created because the Labor Department 
withholds 25 percent of allotted TAA training funds each year. While in 
theory these dollars are later available to states asking for reserve 
funds, states with higher TAA caseloads operate on the reasonable 
assumption that their base TAA training allocation is largely what they 
have to spend for TAA training in that fiscal year. For this reason, 
the Labor Department's withholding of reserve funds effectively limits 
TAA training spending through rationing by states when they approve 
individual training requests by certified workers.
    A second impact of withholding the training reserve is that USDOL 
advises Congressional staff that states have not expended all training 
dollars (or that there is no problem with the $220 million cap) because 
states did not obligate the prior year's entire training allocation. 
This report by USDOL is literally true, because, after paying for any 
approved requests for reserve funds during a year, USDOL distributes 
remaining reserve funds on the last day of each fiscal year. As a 
result, few states with higher TAA caseloads have obligated their 
entire training allocation during any fiscal year because they receive 
reserve funding on the last day of each fiscal year. USDOL then reports 
to Congress that few states spent their prior fiscal year's training 
allocation and that there is sufficient funding for TAA training. An 
additional issue is created because this late distribution of remaining 
reserve funds takes place around September 30 after enrollment 
deadlines for fall semesters have passed. As a result, workers laid off 
in the summer often wait until the next January to start training, 
losing potential weeks of training as a result.
    Solutions:
     Congress should make TAA training an uncapped entitlement. 
Eliminating the overall cap on training funding would also eliminate 
funding distribution bottle necks at USDOL, since release of training 
dollars could accompany any new TAA certification. This was essentially 
the practice in place prior to 2002.
     If overall limitations on TAA training funds are kept in 
place, ensuring that added training funds flow automatically when new 
certifications are made and that funding will be available over the 
projected term of training are essential steps for reauthorization. In 
addition, requiring distribution of 95 percent of reserve training 
funds by no later than July 1 each year is recommended to permit timely 
enrollment for fall semesters.
     With respect to funding, we also note that TAA 
reauthorization bills in this Congress and the prior Congress have 
proposed TAA eligibility for ``service'' workers and public employees 
losing work due to offshoring of their jobs. If this is done, then 
expanding TAA training funds is even more critical. Otherwise, TAA 
certified manufacturing workers will simply compete with newly eligible 
service workers for scarce TAA training funds/ Expanding eligibility to 
service workers without addressing the cap on TAA training funds will 
simply pit newly-eligible service workers and public employees against 
manufacturing workers in a battle for scarce TAA training funds.
    TAA Reauthorization Issue 3: Fix Health Coverage Tax Credit 
Program.
    Dislocated workers frequently lose their health care coverage when 
they are separated from work. Maintaining health insurance coverage, 
along with income support, serve one of the most important needs of 
families experiencing job loss. Despite the importance of health care 
coverage to laid off workers, most dislocated workers have not been 
able to participate in the Health Coverage Tax Credit (HCTC) program 
since it was offered in 2003. Once an application is set up, HCTC works 
as a refundable tax credit that pays 65 percent of health care premium 
costs to workers eligible for Trade Readjustment Allowances (TRA). 
Since TAA is the only federal program offering income support for 
dislocated workers, fixing HCTC so it can help more TAA certified 
workers get health care while they search for work or take training is 
another important priority for TAA reauthorization in 2007.
    The biggest obstacle to HCTC eligibility is its affordability. 
Under current rules, a jobless worker must pay 35 percent of his/her 
health insurance premium. If the only health plan available is COBRA, 
this cost can run into hundreds of dollars a month for family coverage. 
A second obstacle is that initial set up of an HCTC claim requires 
jobless workers to pay at least 1 and up to 3 months of health coverage 
premiums out of pocket. Needless to say, paying 100 percent of health 
care costs is not something that most working individuals could afford, 
let alone individuals that have been laid off.
    Beyond these two cost issues, the administration of HCTC is very 
complicated and dislocated workers cannot navigate the program without 
substantial assistance in completing applications and assembling the 
required documentation. While local unions, one-stops and community 
groups, and state agencies do their best to help, HCTC has had far too 
many administrative roadblocks. And, in some states there are no 
qualified health plans, other than COBRA, offered to TAA certified 
workers.
    Recommendations: There are a number of steps required to make HCTC 
a more workable solution for more dislocated workers.
     Congress should change the refundable tax credit formula 
from 65 percent tax credit/35 percent worker paid to 90 percent tax 
credit/10 percent worker paid.
     HCTC should provide up front 100 percent payment until 
refundable tax credit is set up by IRS.
     Tie HCTC eligibility to TAA participation as opposed to 
TRA recipiency because TRA is denied or interrupted in some cases and 
verification of TRA payment is a burden on HCTC administration.
     Congress should designate the Federal Employment Health 
Plan as a back up plan for HCTC in all states.
    TAA Reauthorization Issue 4: Remove Obstacles in TAA Program 
Administration.
    Many in Washington are puzzled by how few dislocated workers that 
are separated from TAA certified workplaces participate in TAA training 
or get TRA. For the most part, despite numerous studies by GAO and 
other researchers, how this program works on the ground is largely 
invisible to those making the rules. In our experience, TAA is a 
complex program to administer and this complexity is a significant 
reason why more workers don't participate in TAA. What is surprising to 
NELP is how well the program works despite its complexity, and this is 
largely due to many dedicated state and local staff that work very hard 
to make TAA work as well as it does. In many cases, these individuals 
are helped by United Way and community agencies, union staff, and 
others that pitch in and help out.
    What do we mean by complexity? During a typical dislocation 
involving TAA, many workers, often hundreds of workers, must be advised 
of their rights and responsibilities, learn about training options and 
enroll if appropriate, apply for HCTC or Alternative Trade Adjustment 
Assistance (ATAA) if desired, get training waivers if needed, and apply 
for unemployment insurance or TRA on a weekly or bi-weekly basis. 
Assessments are supposed to get done. Work search rules must be 
explained and job search must be documented. Class attendance must be 
documented and recorded. Mental health and social services needs must 
be addressed. The 8/16 week rule requires TAA certified workers to 
enroll in training by the end of the 16th week after his/her layoff 
from trade-affected employment OR the end of the 8th week after the 
week of the TAA certification decision covering his/her workplace. Many 
workers find out about TAA too late, especially when a certification 
decision is made after the plant closing and the company does not help 
the state agency locate the workers.
    States get no added administrative dollars to handle TRA payments 
and TAA administration is limited to 15 percent of approved training 
dollars. In small states, there are only 1 or 2 individuals responsible 
for rapid response and TAA in an entire state. Congress has added 
features like HCTC and ATAA that add further complexity. Many TAA 
certified dislocations take place in large workplaces, sometimes 
located in rural communities. Most states do not use peer networks and 
labor-management communities to engage workers to the degree we would 
recommend. Most agencies running TAA do not have staff adequate to 
serve hundreds of workers. Some locations do not have TAA 
certifications each year and staff turnover or promotion eliminates 
institutional knowledge. Even in smaller dislocations, an office might 
see a dozen dislocated workers for its WIA dislocated worker program in 
a year and then have dozens of TAA certified workers requiring services 
in a month or 6-week period.
    Recommendations: NELP staffers been involved with TAA to some 
degree since 1984. To our knowledge, those that really administer TAA 
in the states have never been seriously involved when TAA 
reauthorization takes place. For that reason, our overall 
recommendation is that Congress seeks input from unions, state 
agencies, one-stops and others involved knowledgeable with the 
technical aspects of TAA administration. NELP would help gladly with 
such an effort. At this point, a complete listing of administrative 
barriers is not possible, but based upon consultations with 
stakeholders, NELP recommends these added measures to simplify TAA 
administration and increase participation by TAA certified workers.
     Adequate administrative funding is essential. There is 
currently no TAA funding for job search assistance, case management, 
and assessments of TAA certified workers. This funding should be added 
to existing funds for program administration.
     We support using merit staff that administer state 
unemployment insurance laws, the UI work test, and Wagner-Peyser 
programs for implementation of TAA, and rebuilding that employment and 
training backbone in future years.
     The 8/16 week deadline for enrollment in training or 
obtaining training waivers is debilitating to the program and must be 
fixed. Legislation should lengthen time limits to 16 weeks and 26 weeks 
and automatically extend them when they are missed due to agency error 
or negligence. Permit waivers of 8/16 week deadline under state good 
cause rules.
     Permit training waivers for 90 days and allow work search 
waivers for those enrolled in but not yet participating in training.
Is Training Useful for Dislocated Workers?
    Claims by critics that publicly-funded training is not effective 
are no truer than competing claims that training and education are an 
overall answer to the decline in middle class jobs. Both are 
unwarranted overgeneralizations. In our view, as with most other human 
endeavors, job training and education results are directly related to 
the investment made and the time spent in training.
    In the U.S., especially in the last decade, we have mostly operated 
our training programs with a ``work first'' philosophy, and a majority 
of job training has been short-term and generic. This philosophy is 
embodied is the Bush Administration's proposed ``Career Advancement 
Accounts,'' which are essentially $3,000 vouchers. These accounts are 
provided to workers who are then expected to choose from competing 
training providers in order to get retrained for new occupations.
    When discussing retraining for trade-impacted workers, it is fair 
to narrow our focus because dislocated manufacturing workers are not 
the same as other workers receiving public training. In particular, 
dislocated manufacturing workers are older, have longer job tenures, 
less formal education, and have higher wages than most others getting 
publicly-funded training. Of necessity, many dislocated manufacturing 
workers are forced to look for work in new industries where their prior 
skills, seniority and wages are less likely to transfer. And, since 
trade-related economic dislocations are frequently concentrated in 
specific regions, a longer period of job search and intervening period 
of unemployment should be expected.
    This means that short-term training like that commonly employed 
under WIA is less likely to result in comparable replacement wages. 
Thus, as Professor Paul Osterman of MIT argues in his study of new 
options for employment and training policies, ``short-term training 
leads to small or non-existent gains'' for dislocated workers, `` while 
``more substantial long-term training does seem to improve the earnings 
of dislocated workers to an important degree.''2 Indeed, part of the 
problem with TAA training, which is largely a function of limited 
training funds, is that the training has been mostly short-term, as 
documented by the GAO.3
    Given the special employment challenges facing dislocated workers, 
it is helpful to look to those programs that have provided a more long-
term investment in training and income support. For example, Washington 
State provides dislocated workers with extended unemployment benefits 
to participate in state-approved training. Those who participate are 
mostly workers with just a high school degree who were laid off from 
manufacturing jobs in aerospace and other state industries.4 85% of 
them participated in community or technical colleges, with the largest 
numbers participating in information technology programs. By the third 
quarter after leaving the program, 72% of the more than 8,000 
participants were employed, making an average of 93% of their pre-
dislocation wages.5
    Other studies have shown that more extended training in community 
college program geared toward skills development can have a meaningful 
impact on the wages of dislocated workers. For example, an evaluation 
of dislocated workers participating in Pennsylvania's community college 
programs found that men earned $1,047 more per quarter by attending 
community college and women earned $812 more.6 Other training and 
education programs, like the California Employment and Training Fund 
and the Wisconsin Regional Training Partnership, successfully target 
key state industries, building partnerships between employers, unions 
and training providers.7 It is not just training for the sake of 
training. Instead, the training is demand driven by quality state and 
local planning and a partnership with employers that helps build a 
growing economy.
    Professor Osterman makes a strong case for building on these and 
other state innovations as the framework to reform the nation's 
employment and training system. He concludes that a primary element 
``the new programs share in common is that they make substantial 
investments in their clients. The new programs reject the quick and 
dirty training, short-term investments, and simple job search 
assistance models that characterize much of the traditional E & T 
system.''8 The challenge at the federal level is to build on these 
state innovations that equip the nation's workers to compete 
successfully for good jobs. There is certainly no shortage of 
experience, but what is needed is the will at the federal level and a 
far more substantial investment of resources. As documented by the 
states, a meaningful investment of resources in training can generate a 
substantial return to local business, workers and the economy.9
Wage Insurance is a Flawed Approach to Addressing the Needs of 
        Dislocated Workers
    In the past year, a number of members of Congress have proposed the 
development of ``wage insurance'', as a potential solution to the ills 
facing dislocated workers. We appreciate the concern being articulated 
by many about the needs of workers and their families whose lives are 
thrown into disarray when they lose a good job and find themselves with 
no other options but to take a major cut in pay on a new job.
    We strongly believe that wage insurance is the wrong solution. 
Rather than encouraging workers to forgo their long-term interests for 
a wage insurance job, Congress should focus on more meaningful 
solutions that create genuine economic security and more family-
friendly sustaining jobs in our economy. We have seen it work in the 
states, which have created subsidized health insurance for the 
unemployed that runs alongside the UI program and self-sustaining 
``home protection funds'' that provide no interest loans to laid-off 
families so they can cover mortgage payments in high unemployment 
areas. The states have also been at the forefront of new models of 
training that help make their local economies more competitive and save 
good-paying jobs.
    Like the AFL-CIO and several major unions that have expressed 
concerns with wage insurance, we also believe that there are far too 
many unanswered questions that convince us it is not the right time to 
move ahead with a national wage insurance program.
    First, it is important to ask whether wage insurance will promote 
more downward mobility for the nation's most vulnerable workers, since 
by definition wage insurance jobs pay far less. Thus, wage insurance 
jobs are also less likely to provide health insurance and other 
critical benefits. We believe that the limited federal resources 
devoted to the economic security of America's workers should promote 
good employment outcomes and quality jobs, but that is not the case 
with wage insurance. Wage insurance amounts to a subsidy to those 
employers in the economy who provide jobs with the worst wages and 
benefits.
    We are also not aware of any empirical evidence that wage insurance 
jobs will provide transferable skills or other meaningful training. In 
fact, there is strong empirical evidence that lower wage jobs require 
less skill and therefore provide little or no on the job training of 
any real value. This fundamental weakness of a wage insurance approach 
is compounded since both the Alternative Trade Adjustment Assistance 
program and proposals to expand wage insurance are written in such a 
way that precludes most workers from pursuing the quality education and 
training they need to compete for better jobs in today's economy.
    Second, does the experience with actual wage insurance programs 
make a convincing case that now is the time to create a new national 
program? What we know from the only major evaluation of a wage 
insurance program, the Canadian pilot program, is that it failed in 
most areas to achieve its intended results. Thus, the Canadians never 
adopted wage insurance. And we are still waiting for the results from 
the ATAA program which serves workers over the age of 50, although we 
know that participation in the trade program has been limited.
    Another question that has not received enough attention is what 
impact will the program have on other workers who are competing for 
similar jobs with those collecting wage insurance? A leading researcher 
with the Upjohn Institute found that ``virtually all the employment 
gains experienced by dislocated workers as a result of the wage subsidy 
come at the expense of other workers.'' Will this ``crowding out'' 
effect be even more severe in those communities in the Midwest and 
elsewhere where there are already large concentrations of dislocated 
workers?
    In addition to the research questions, there is also the concern 
that wage insurance could undermine those federal programs that now 
provide some measure of economic security to U.S. workers. An expanded 
wage insurance program would be in direct competition with resources 
for long overdue improvements in the TAA program and in bedrock 
economic security programs. We are also concerned with the precedent 
wage insurance will set when hostile groups like the Heritage 
Foundation are on record strongly supporting wage insurance as a 
``rapid reemployment'' substitute to dismantle the TAA program. Will 
wage insurance set the stage for more attacks on TAA? And when the next 
recession hits, will the Heritage Foundation and others argue for a 
more limited federal extension of jobless benefits when workers can 
qualify instead for wage insurance by taking jobs that require a 
significant pay cut? Already, the Bush Administration and Rep. Weller 
have called for waivers of federal UI law to authorize states to 
experiment with wage insurance with their UI funds. This support points 
to the great theoretical weakness of wage insurance--the way it fits 
within a work-first philosophy of low-cost interventions that push 
unemployed individuals into any job regardless of its quality. You 
cannot deal with the damage of trade policies to workers on the cheap.
    These are some of the difficult questions that leave many of us who 
work with these programs convinced that wage insurance could do far 
more harm than good.
Conclusion
    Both opponents and supporters of free trade and globalization have 
promoted TAA as a promise to the victims of U.S. trade policy. In 
reality, TAA has never lived up to its promised role as a comprehensive 
vehicle for readjustment of those losing work as a result of trade. 
However, the model put forward by TAA--extended income support to 
workers so they can complete meaningful training courses--holds great 
promise for dislocated workers. We are hopeful that the United States 
economic and political dialogue has finally reached the point that we 
take seriously the damage caused by globalization and provide the real 
resources and support to the TAA program.

                               RESOURCES

For more on TAA, please see Rick McHugh and Phil Gilliam, Getting 
        Certified for Trade Adjustment Assistance, a Guide for Unions, 
        Workforce Agencies and Community Groups, National Employment 
        Law Project, 2005.

                                ENDNOTES

    \1\ U.S. General Accountability Office ``Trade Adjustment 
Assistance: Reforms Have Accelerated Training Enrollment, but 
Implementation Challenges Remain,'' GAO-04-1012, September 2004
    \2\ Paul Osterman, ``Employment and Training Policies: New 
Directions for Less Skilled Adults'' (MIT Sloan School, October 2005), 
at page 14.
    \3\ U.S. General Accountability Office, Trade Adjustment 
Assistance: Most Workers in Five Layoffs Received Services, But Better 
Outreach Needed on New Benefits (January 2006) at page 21. In 
describing the results of the TAA training, which was provided to less 
than one-third of those surveyed, the GAO concluded ``it may be too 
soon to know the effect of training on employment outcomes'' because a 
large number of the workers surveyed (ranging from one-third to over 
60%) were still participating in training at the time of the study. Id. 
at pages 31, 35.
    \4\ Washington State Workforce Training and Education Coordinating 
Board, Training Benefits Program Review (December 2002).
    \5\ Id. at page 8.
    \6\ Trutko, et al. Final Report: Earnings Replacement Outcomes for 
Dislocated Workers: Extent of Variation and Factors Accounting for 
Variation in Earnings Replacement Outcomes Across State and Local 
Workforce Investment Boards (Capital Research Corporation, March 2005), 
at page A-8.
    \7\ Richard Moore, et al., Training that Works: Lessons from 
California's Employment & Training Panel Program (W.E. Upjohn for 
Employment Research, 2003); Neighborhood Funders Groups, ``Wisconsin 
Regional Training Partnership: Hooking Community Residents Up to Jobs 
(NFG Reports, Summer 2000, Issue Two, Vol. Seven).
    \8\ Osterman at page 25.
    \9\ Press Release, California Employment & Training Panel, ``State 
Agency Investment Training Workers is Pay Big Dividends for California 
Employers, Study Says'' (June 28, 2000); Kevin Hollenbeck, Wei-Jang 
Huang, ``Net Impact and Benefit-Cost Estimates of the Workforce 
Development System in Washington `` (Upjohn Institute: July 2003).
                                 ______
                                 
    Chairman Miller. We will segue to Dr. Brainard here on wage 
insurance.
    Welcome.

STATEMENT OF LAEL BRAINARD, PH.D., VICE PRESIDENT AND DIRECTOR, 
BERNARD L. SCHWARTZ CHAIR IN INTERNATIONAL ECONOMICS, BROOKINGS 
             GLOBAL ECONOMY AND DEVELOPMENT PROGRAM

    Ms. Brainard. Chairman Miller, Congressman McKeon, members 
of the committee, thank you very much for the opportunity to 
testify before the committee today.
    Clearly, today's workers face a very different labor market 
than did their fathers, and yet, the reality is they are still 
only offered the options that were available to our parents' 
generation in terms of the safety net. Today's workers are much 
less likely to be attached long-term to a particular employer 
and are much more likely to face the bracing winds of global 
competition, which is now reaching into higher and higher 
valued manufacturing as well as services. With increased 
turnover and increased competition, inevitably come increased 
uncertainty and, for many workers, increased economic 
insecurity. The question that you pose today is, How effective 
are existing programs in helping workers impacted by 
international trade? I think the answer is pretty clear.
    They are not as effective as we would all like them very 
much to be. Too many workers face the prospects of large 
declines in their earnings as well as in health insurance and 
other important benefits when they are displaced through no 
fault of their own. Despite the fact that we rank second to 
none as a nation when it comes to turnover, we are at the 
bottom of the pack when it comes to safety nets among the 
richer economies. And I will just point to TAA. TAA, because it 
is so carefully constrained in terms of who ends up becoming 
eligible, only certifies as eligible about 75,000 new workers 
per year, and if you look at the outcomes of that program, I 
think we are all disappointed by them. Between 2001-2004, an 
average of only 64 percent of participants found jobs while 
they participated in TAA.
    So my view is that we have a very brief opportunity to 
align the Nation's policies against the new realities facing 
American families. I think this is a moment to be bold. There 
is a lot of time to make up for, and I am not sure how long 
that window will be open.
    In the first instance, as people have said, it means 
instituting a set of policies that support good jobs that pay 
well here at home. They range across the board from investing 
in education, workforce training to infrastructure and 
competitiveness, but we also need to acknowledge that some 
people are going to lose and that we need to strengthen the 
Nation's safety net. I think it means strengthening the income 
and health insurance available to workers during periods of 
unemployment and certainly broadening access and the quality of 
training to those who are unemployed, but I also think it means 
ensuring against sharp earnings losses for those once they get 
reemployed.
    Mr. Herman talked about wage insurance not being a better 
option. I hope nobody proposes wage insurance as a better 
option. I think all three elements are not only compatible with 
each other but essential.
    If you look at why strengthening income and health 
insurance alone are, again, essential but not sufficient, I 
think the evidence on earnings losses following permanent 
displacement are sobering. I think they are sobering enough to 
make us take a serious look at additional policy instruments to 
help workers once they are reemployed, not just while they are 
unemployed.
    Take those displaced workers who qualify for TAA. Even 
after taking advantage of the extended unemployment benefits 
and the relatively expansive--but with flaws--training 
benefits, earnings in their new jobs are, on average, 20 
percent of those in their old jobs. That is quite an income 
shock. For permanently displaced workers who suffer earnings 
losses, which is about half of those reporting being reemployed 
full time, average earnings in the new job are about 16 percent 
lower than earnings in the previous job. So people are already, 
unfortunately, taking jobs that pay substantially less than the 
jobs that they had at their previous employers.
    An achieved goal of wage insurance would be for that group 
of workers to smooth their incomes to essentially help them get 
a foot back up on the economic ladder, and I think it is 
important to say this is not or should not be construed as a 
trade program only. I think the eligibility requirements 
associated with trade programs are so narrowing that it takes 
way too long to become eligible, and it does not help the 
number of people who deserve that kind of help. I think we have 
some evidence from a small program that was undertaken 
elsewhere that it does help to broaden the job search. It does 
help workers perhaps move into other sectors where jobs are 
being created, and it can facilitate valuable on-the-job 
training, again, not as a replacement for but as a supplement 
to existing programs.
    What would this cost? We estimate that a moderate program 
that replaces about 50 percent of losses for long-tenured, 
full-time, permanently displaced workers would cost roughly 
$3.5 billion per year on average, which is about $25 per worker 
as an insurance program. If you think about it, the price of 
$25 per worker, per year, wage insurance could be, again, one 
important policy tool alongside unemployment, strengthened 
unemployment insurance, along with health care insurance, along 
with improved training opportunities.
    I think we are facing a unique window of opportunity to 
finally make progress in significantly updating the Nation's 
safety net, and it would be a shame not to look at all of the 
options on the table and to move forward boldly.
    Thank you.
    [The statement of Ms. Brainard follows:]

   Prepared Statement of Lael Brainard,\1\ Ph.D., Vice President and 
  Director, Bernard L. Schwartz Chair in International Economics, the 
            Brookings Global Economy and Development Program

    Chairman Miller, Congressman McKeon, members of the Committee, I 
appreciate the opportunity to testify before your committee today.
---------------------------------------------------------------------------
    \1\ This draws from analysis in Lael Brainard, Robert Litan, and 
Nicholas Warren, ``Insuring American Workers in a New Era of 
Offshoring'' Brookings Policy Brief 143, July 2005 http://
www.brookings.edu/comm/policybriefs/pb143.htm and ``A Fairer Deal for 
American Workers in a New Era of Offshoring,'' in Susan Collins and 
Lael Brainard (eds.) Offshoring White Collar Work (Brookings Press, 
2006) http://www.brookings.edu/es/commentary/journals/tradeforum/
2005btf--brainard.pdf.
---------------------------------------------------------------------------
Today's Economic Realities
    American workers today face a very different employment outlook 
than their parents encountered back in the 1960s--when Trade Adjustment 
Assistance was enacted under President John F. Kennedy.
    Today's workers are much more likely to transition several times 
between different employers over the course of their working lifetimes. 
According to Princeton scholar Henry Farber, men currently in the age 
range of 35 to 64 are almost 20 percentage points less likely to be in 
ten-year jobs as were males in this age range roughly 45 years ago.\2\
---------------------------------------------------------------------------
    \2\ ``Is the Company Man an Anachronism? Trends in Long Term 
Employment in the U.S., 1973-2005'' forthcoming in The Price of 
Independence: The Economics of Early Adulthood, edited by Sheldon 
Danziger and Cecilia Rouse (New York: Russell Sage Foundation, 2007).
---------------------------------------------------------------------------
    Today, a much larger expanse of occupations and sectors are exposed 
to the bracing winds of global competition--with trade now exceeding 25 
percent of national income compared with less than 10 percent back in 
the 1960s.
    With increased turnover and increased competition come increased 
uncertainty and, for some workers, increased economic insecurity. For 
permanently displaced workers who suffer earnings losses, average 
earnings in the new job are 16 percent lower than earnings in the 
previous job, while displaced manufacturing workers moving into lower 
paying jobs face an average 20 percent drop in earnings. The 
consequences of job loss are particularly damaging in import-competing 
industries, where displaced workers face longer spells of unemployment 
and greater permanent wage declines than do workers in other 
industries.
    The causes for increased insecurity faced by American middle class 
households are complex, but almost certainly include globalization and 
changes in technology among the primary drivers. The current episode of 
global integration dwarfs previous expansions: the entry of India and 
China into the global labor force amounts to an expansion of roughly 70 
percent--concentrated at the lower end of the wage scale. Textbook 
economics would predict a squeeze on wage earners until capital and 
technology investments adjust. And the data suggest inequality is once 
again on the rise in many of the world's richer economies.
    Because China is successfully pursuing at a scale never seen before 
a growth strategy that is export-led and foreign direct investment fed, 
its rise is sending waves to the farthest reaches of the global 
economy. China is already deeply embedded in global manufacturing 
supply chains, confronting higher wage manufacturers with the difficult 
choice of moving up the value chain or lowering costs.
    India's concurrent economic emergence has complicated the 
challenge. While India is pursuing a growth strategy more reliant on 
domestic consumption and investment than China, nonetheless its success 
in exporting higher skilled ``knowledge'' services such as software 
programming has expanded the scope of globalization. Many Americans in 
white collar occupations are confronting the reality of low wage 
foreign competition for the first time.
How Effective Are Existing Programs?
    Today's hearing addresses the question, ``How Effective are 
Existing Programs in Helping Workers Impacted by International Trade?'' 
The answer is simple: existing programs are not nearly as effective as 
they must be in helping workers who may face the prospect of large 
earnings declines as well as loss of health insurance when their jobs 
are displaced through no fault of their own. In the face of accelerated 
job losses in manufacturing and white-collar offshoring in services, an 
ever-broader pool of American workers is finding that the nation's 
safety net has more holes than netting.
    Despite the fact that the U.S. labor market ranks second to none 
when it comes to job turnover, the nation's safety net for easing job 
transitions remains one of the weakest among the wealthy economies. In 
comparison with other high income countries, not only do U.S. 
unemployment benefits have a shorter duration, but displaced workers in 
America face the prospect of losing health benefits along with income. 
The main federally mandated unemployment insurance (UI) program 
contains so many restrictions that today only about 40 percent of all 
jobless workers receive benefits.
    The last serious overhaul of the nation's employment safety net was 
in 1962, when President John F. Kennedy established the TAA program to 
compensate workers who suffer job loss as a result of trade 
liberalization. But workers have long found it difficult, time-
consuming, and expensive to prove that they are entitled to extended 
unemployment benefits under the nation's Trade Adjustment Assistance 
(TAA) program.
    In 2002 Congress overhauled and expanded TAA, adding a health care 
tax credit, doubling the training budget, and substantially raising 
budget outlays for income support. But the TAA program continues to 
disappoint. Participation has remained surprisingly low, thanks in part 
to confusing Department of Labor interpretations and practices that 
ultimately deny benefits to roughly three- quarters of workers who are 
certified as eligible for them. TAA has helped fewer than 75,000 new 
workers per year, while denying more than 40 percent of all employers' 
petitions. And remarkably, the Department of Labor has interpreted the 
TAA statute as excluding the growing number of services workers 
displaced by trade.
    Despite its laudable goals, the TAA program has repeatedly failed 
to meet expectations. Between 2001 and 2004, an average of only 64 
percent of participants found jobs while they participated in TAA. And 
earnings on the new job were more than 20 percent below those prior to 
displacement.
Expanding Training and Insurance while Unemployed and Insuring Wages 
        once Reemployed
    I believe we have a brief window of opportunity to align the 
nation's policies against the new economic realities facing American 
families. In the first instance, this means instituting a set of 
policies that support good jobs and good pay here in America. They 
range from investing in education and workforce training to 
infrastructure and competitiveness policies.
    But we should also seize on this window of opportunity to 
strengthen the nation's safety net to better insure against the 
economic insecurity faced by too many American families. That means 
strengthening the income and health insurance available to workers 
during periods of unemployment, broadening access and improving the 
quality of retraining programs, and insuring against sharp earnings 
losses once reemployed. Let me be clear about this: I think all three 
elements are not only compatible with each other but essential.
    Strengthening income and health insurance and retraining programs 
while workers are unemployed are absolutely essential--but not 
sufficient when workers too often face the prospect of much lower 
earnings even after they secure a job following permanent displacement. 
Let's take trade displaced workers as an example. For those displaced 
workers who qualify for TAA, even after taking advantage of the 
extended unemployment benefits and relatively expansive training 
benefits that are available under TAA, earnings in their new jobs are 
on average 20 percent below their old jobs.
    The evidence on earnings losses following permanent displacement is 
sufficiently compelling to warrant a serious examination of additional 
policy instruments to help workers once they are reemployed--not just 
while they are unemployed. The time has come to augment existing 
programs by adopting a new insurance program that insures against sharp 
declines in wages, not just unemployment, for permanently displaced 
workers.
    A chief goal of wage insurance is to smooth the incomes of workers 
who suffer permanent displacement and declines in their earnings. Wage 
insurance is most likely to have overall positive economic benefits if 
it targets workers whose earnings would otherwise fall dramatically as 
forces outside their control devalue their skills.
    Evidence suggests that wage insurance encourages workers to 
consider different types of jobs and sectors of employment and, 
therefore, broadens the job search. This is particularly important for 
displaced workers whose firm-specific skills have declined in value. 
And wage insurance can facilitate valuable on-the-job training; the 
training that a displaced worker receives on a new job provides new 
skills that contribute directly to his or her performance in the new 
job.
    By replacing some of the lost earnings, wage insurance could also 
encourage more rapid reemployment; a Canadian pilot wage insurance 
program reduced unemployment durations by 4.4 percent on average.
    Because the goal is to provide partial insurance against extreme 
income fluctuations, wage insurance should be available to all 
permanently displaced workers, who have at least two years of tenure at 
the previous job. It might also make sense to restrict the program to 
workers displaced from full-time jobs and reemployed full-time, so as 
to avoid any possible incentive to reduce hours of work. Further, the 
compensation period would be limited to some transition period, perhaps 
2 years, long enough to help strengthen the new employment 
relationship.
    The wage loss replacement rate, the duration of benefits, and the 
annual cap on compensation determine the kinds of workers who would 
benefit most from the program. A high replacement rate (such as 70 
percent) combined with a low annual compensation cap would provide the 
greatest cushion to lower-income workers suffering steep losses in 
earnings, while a lower replacement rate (such as 30 percent) combined 
with a high annual cap would tilt benefits toward higher income 
earners.
    According to our estimates, a wage insurance program that replaces 
50 percent of earnings losses for long tenure full-time displaced 
workers up to a maximum of $10,000 per year for up to two years would 
cost roughly $3.5 billion per year, assuming modest offsetting savings 
in other programs. On a per worker basis, this cost falls midway 
between the current unemployment and retraining benefits available 
under UI and Worker Investment Act (WIA) programs and the comprehensive 
cost of TAA benefits.
    How do we think about the price tag? The net cost of $3.5 billion 
per year amounts to an insurance premium of roughly $25 per worker per 
year.
    Under such a program, an average trade--displaced worker, who 
earned $37,382 in 2004 and was reemployed with a 26 percent loss rate 
at $27,662 would instead receive $33,522 for the first two years after 
reemployment, thus enabling them to smooth their income while becoming 
more valuable in the new job.
    Of course, the costs can be substantially reduced by offering more 
modest benefits. For a high-unemployment year such as 2003, costs could 
range from a low of $1.6 billion for a one-year program with a 30 
percent replacement rate and a $10,000 cap to a high of $7 billion for 
a two-year program with a 70 percent replacement rate and a $20,000 
annual cap.
    Wage insurance could provide an important tool--in a broader set of 
policies--designed to help American middle class families insure 
against disruptive income fluctuations, while preserving the benefits 
of a dynamic economy. For the price of $25 per worker per year, wage 
insurance could be an important policy tool to help make work pay 
following displacement. Faced with a unique window of opportunity to 
finally make progress in updating and strengthening America's fraying 
safety net, it would be a shame not to move forward boldly on all 
fronts to provide greater economic security to American families.
                                 ______
                                 
    Chairman Miller. Thank you.
    Dr. Alford.

                STATEMENT OF TIM ALFORD, PH.D.,
           DIRECTOR, OFFICE OF WORKFORCE DEVELOPMENT

    Dr. Alford. Mr. Chairman and other distinguished members of 
the committee, it is my honor and pleasure to appear before the 
committee to share my views on the effectiveness of existing 
Federal programs in helping workers impacted by international 
trade.
    I come here as a seeker after truth and not as one who has 
found it. I also do so from the vantage point of the State 
Director of Workforce Development who has responsibility for 
the leadership, oversight and coordination of all such 
programs. Therefore, I am a generalist and claim neither 
particular experience nor expertise in the minutia of 
regulations, eligibility criteria and other such issues related 
to the day-to-day administration of the TAA program.
    I also come here from the convoluted vantage point of a 
former teacher, principal, superintendent, college 
administrator and instructor, economic developer, small 
business owner, business consultant in workforce development, 
and mayor. I am also a first-generation college student whose 
single-parent mother worked in the sweat shop shirt factories 
of rural south Alabama in the 1940s, 1950s and 1960s to make a 
subsistence living for us.
    I point this out to let you know that I have real heart for 
those hardworking persons who are adversely impacted by 
international trade as well as by the escalating workplace/
skill requirements in our Nation and in my State in particular. 
I think the Southern Regional Education Board said it best when 
it stated, ``it is as if many of our workers dozed off by the 
wood stove and awakened by the microwave, unprepared or under-
prepared for the skill demands of the 21st Century global 
innovation economy.''
    It is this global economy that has ushered tens of 
thousands of Alabama citizens out of textile, apparel and low-
skilled assembly occupations. It is likewise this global 
economy that has bankrupted a traditional southern economic 
development strategy based on cheap land and cheap labor. We 
all know there is cheaper land and cheaper labor elsewhere in a 
global economy, and we have the relatively new phenomenon of 
having even cheaper skilled labor elsewhere around the globe.
    At the same time that many Alabama citizens suffer from 
such job loss, globalization is bringing vast new opportunities 
to those in our State who are prepared for them. Although this 
transformation has already quietly begun, the Mercedes project 
brought new attention and emphasis to Alabama as a player in 
the global economy. Now our State is approaching almost 50,000 
employees in the automotive sector alone having added more than 
100,000 workers to the civilian labor force in the last 3 or 4 
years. Alabama is not only creating jobs; it is creating good 
jobs as evidenced by our State's recent gains in relation to 
national per capita income. We have experienced growth not only 
in the automotive sector but in other advanced manufacturing 
sectors, such as aerospace, aviation, shipbuilding, as well as 
high-tech services sectors, such as health care and finance.
    Practically every month brings a new record low in 
unemployment. Throughout my life, growing up in rural south 
Alabama, the question has always been, where are the jobs? 
Increasingly, in recent times, the question has become, where 
are the workers? And now the question is, where are the workers 
with the skills I need to do the jobs that I have? So we are 
engaged in a massive effort to help our people transition from 
that old cheap-land/cheap-labor economy to a 21st Century 
innovation economy of advanced manufacturing and high-tech 
services.
    In order to compete, businesses must be more innovative and 
productive, which requires utilizing more technology, which 
requires higher worker skill levels, which requires more and 
better education and training on all fronts. We are attacking 
the education and training imperative in many ways. We are 
implementing what I consider to be the most comprehensive and 
integrative certification program in the country. We are adding 
State resources for Alabama Industrial Development Training, 
our nationally top-ranked training program for new and 
expanding industry. We are engaged in K-12 reforms, as everyone 
is, such as the Alabama Reading Initiative, STEMs initiatives. 
We are working with over 200 companies and incumbent worker 
training programs, but we definitely need the Federal 
Government's continued investment in our people if we are to 
succeed.
    What would be the nature and extent of that involvement? 
Some general recommendations that I would make would be that 
all Federal workforce development programs should be developed 
as part of a comprehensive, integrated, holistic array of 
services that complement one another as opposed to isolated, 
stand-alone programs designed by various agencies for various 
populations with various purposes and various requirements.
    We still have a ways to go, in my view, to achieve our 
Workforce Investment Act's seamless delivery system. I think we 
must increasingly recognize and provide incentives in the 
development of career lattices and ladders which begin at 
levels commensurate with the skills that workers possess and 
move them up with concurrent or intermittent work and training 
in high-growth, high-demand, high-paying industry sectors.
    Likewise, we must deliver education and training outside 
the normal academic calendar and delivery system. When workers 
at Avondale Meals lost their jobs last year, most did not have 
the luxury of going back to school for 2 years even if we paid 
for it. They had mortgages and car payments due the next week 
and the following week. We must compress training when 
possible, and we must deliver it in ways that allow people to 
work concurrently. These people certainly did not need a 
retraining schedule consisting of a 1-hour class on Tuesdays 
and Thursdays and a 1-hour class on Mondays and Wednesdays. 
That comes from a former community college administrator.
    We must customize our options for individuals, and we must 
push decisions to the degree we can about the appropriateness 
of training programs and training facilities to the level 
closest to the customer. We must employ professionals rather 
than practitioners to accomplish this.
    Finally, I think the public workforce system, regardless of 
whatever programs are being considered, must be better 
connected to business in meaningful ways if we are to truly 
meet the skill needs and the skill demands of a 21st Century 
economy.
    I will defer my other remarks in the interest of time to 
the written record, and I will thank the committee for allowing 
me to appear before you today.
    Thank you.
    [The statement of Dr. Alford follows:]

                Prepared Statement of Tim Alford, Ph.D.,
               Director, Office of Workforce Development

    Mr. Chairman, other distinguished members of the Committee: It is 
my honor and pleasure to appear before the Committee to share my views 
on the effectiveness of existing federal programs in helping workers 
impacted by international trade. I do so from the vantage point of a 
state director of workforce development who has responsibility for 
leadership, oversight, and coordination of all such programs. 
Therefore, I am a generalist and claim neither particular experience 
nor expertise in the minutia of regulations, eligibility criteria, or 
other such issues related to the day-to-day administration of such 
programs.
    I come here from the convoluted vantage point of a former teacher, 
principal, superintendent, college administrator and instructor, 
economic developer, small business owner, business consultant, and 
mayor. I also come here as a first generation college student whose 
single-parent mother worked in the sweat-shop shirt factories of rural 
south Alabama in the 1940s, 50s and 60s to make a subsistence living 
for us. I point this out to let you know that I have a heart for those 
hard-working persons who are adversely impacted by international trade 
as well as the escalating workplace skill requirements in our nation 
and in my state in particular. I think the Southern Regional Education 
Board said it best when it stated: ``It is as if many of our workers 
dozed off by the wood stove and awakened by the microwave * * *'' 
unprepared or underprepared for the skill demands of a 21st century 
global, innovation economy.
    It is this global economy that has ushered tens of thousands of 
Alabama citizens out of textile, apparel, and low-skill assembly 
occupations. It is likewise this global knowledge economy that has 
bankrupted a traditional southern economic development strategy based 
on cheap land and cheap, unskilled labor. We all know there is cheaper 
land and cheaper labor elsewhere in a global economy; there is even the 
relatively new phenomenon of cheaper skilled labor.
    At the same time that many Alabama citizens suffered from such job 
loss, globalization was bringing vast new opportunities to those in our 
state who prepared for them. Although this transformation had already 
quietly begun, the Mercedes project brought new attention and impetus 
to Alabama as a player in the global economy. Now our state is 
approaching almost 50,000 employees in the automotive sector alone--
having added more than 100,000 workers to the civilian labor force in 
the last 3-4 years. Alabama is not only creating jobs, it is creating 
good jobs as evidenced by our state's recent gains in relation to 
national per capita income. We have experienced growth not only in the 
automotive sector but in other advanced manufacturing sectors such as 
aerospace, aviation, and shipbuilding as well as high tech service 
sectors such as healthcare and finance. Practically every month brings 
a new record low in unemployment.
    Throughout my life in south Alabama, the question has been ``Where 
are the jobs?'' In the past few years, it has increasingly become 
``Where are the workers?'' and now it is ``Where are the workers with 
the skills I need?''
    So * * * we are engaged in a massive effort to help our people 
transition from that old ``cheap land, cheap labor'' economy to a 21st 
century innovation economy characterized by advanced manufacturing and 
high tech services. In order to compete, businesses must be more 
innovative and productive which requires utilizing more technology 
which requires higher worker skill levels which requires more and 
better education and training.
    We are attacking the education and training imperative on many 
fronts. We are implementing what I consider to be the most 
comprehensive, integrated career readiness certification program in the 
country. We are adding state resources for Alabama Industrial 
Development Training--our nationally-number-one-ranked training arm for 
new and expanding industry. We are engaged in K-12 reforms such as the 
Alabama Reading and STEMs initiatives.
    But we definitely need the federal government's continued 
investment in our people if we are to succeed. What should be the 
nature and extent of that involvement? I would make some general 
recommendations in response to that question and I will be more 
specific if you have questions. In my view:
    1) All federal workforce development programs should be developed 
as part of a comprehensive, integrated, holistic array of services that 
complement one another as opposed to isolated, stand-alone programs 
designed by various agencies for various populations with various 
purposes and various requirements. We still have a ways to go to 
achieve your WIA vision of a seamless delivery system.
    2) I think we must increasingly recognize and provide incentives in 
the development of career lattices and ladders which begin at levels 
commensurate with the skills that workers possess and move them up with 
concurrent or intermittent work and training.
    3) Likewise, we must deliver education and training outside the 
normal academic calendar and delivery system. (When workers at Avondale 
Mills lost their jobs, most did not have the luxury of going back to 
school for 2 years--even if we paid for it. They have mortgages and car 
payments due next week.) We must compress training when possible and we 
must deliver it in ways that allow people to work concurrently. (These 
people certainly do not need a re-training schedule consisting of a 
one-hour class on Tuesdays and Thursdays and a one-hour class on 
Mondays and Wednesdays.)
    4) I think we must customize options for individuals. In the old 
linear paradigm in which you learned, then earned, then retired, many 
of these programs sufficed. Now as constant and pervasive job churning 
escalates and skill requirements constantly increase, we must develop 
individual education plans that truly support lifelong learning in the 
midst of work.
    5) To the degree possible, I recommend you push decisions about the 
appropriateness of training programs and training facilities to the 
level closest to the customer.
    6) To put all this together, we must employ professionals, not 
practitioners. They should be trained, certified, evaluated and 
compensated accordingly. They must be connected to reliable and valid 
labor market information and they must help our citizens connect with 
jobs leading them to self-sufficiency. (I can show you Career Centers 
with the same programs and staffing patterns that achieve entirely 
different results principally because of one's dedicated, dynamic 
professionals.)
    7) Finally, I think the public workforce system, regardless of 
whatever programs are being considered, must be better connected to 
businesses in real and meaningful ways if we are to meet their needs 
and thus help our people meet the skill demands of our 21st century 
economy.
    Before coming to my current job, I was mayor of Enterprise, 
Alabama--a town of 25,000 people adjacent to the Army Aviation Center 
at Fort Rucker in south Alabama. (Yes, it's the same Enterprise that 
was ravaged by a tornado three weeks ago, killing 9 people--8 of whom 
were high school students--and destroying an elementary school and the 
high school as well as 500 homes.) Once before in its history, the 
area's cotton-dependent economy was ravaged by the boll weevil, forcing 
the farmers to diversify their crops and leading them to peanuts which 
became a better cash crop. As a result, the City Council erected a 
monument to the boll weevil in middle of Main Street. On one level, it 
stands as a slight source of embarrassment. One another, it is a proud 
testimony to turning adversity into opportunity.
    I think the boll weevil story is a perfect metaphor for our U.S. 
competitiveness as bound up in its workers. The economic transitions 
have brought great hardships and will continue to do so. But if we 
cushion that to the degree that we can while developing the national 
sense of urgency and political will to answer these challenges--it 
might just be a boll weevil.
    If properly conceived and integrated, continuation of Trade Act 
Assistance can play a vital role in this regard.
                                 ______
                                 
    Chairman Miller. Thank you.
    Ms. Lee.

        STATEMENT OF THEA LEE, POLICY DIRECTOR, AFL-CIO

    Ms. Lee. Thank you, Chairman Miller, members of the 
committee, Mr. McKeon, for the opportunity to come today to 
talk about this important issue on behalf of the 10 million 
working men and women of the AFL-CIO.
    We are very pleased to have the opportunity to discuss ways 
to strengthen, reform and effectively fund the programs that 
help workers impacted by international trade that are so 
important to our members and to all American workers, but I 
wanted to start by making a broad distinction between two very 
different sets of policies. That is the economy-wide set of 
policies that we need to create and retain good jobs in the 
U.S. economy that are full-employment, macro-economic policies; 
strong labor market policies that protect worker rights on the 
job; fair trade policies to ensure that our workers, domestic 
producers and farmers have a fighting chance to compete and 
thrive in the global economy; and the appropriate tax currency, 
infrastructure, health care and education policies that create 
the solid foundation for national competitiveness with a high-
road economic strategy. Those are the important job-creating 
policies that we need to put in place.
    The second set of policies are those we are talking about 
here this afternoon, which are much more limited in scope but 
of great importance to workers as well, and those are those 
policies that provide a cushion of income support to displaced 
workers and help facilitate the transition to a new job, maybe 
even to a new occupation, and ideally, these programs would 
equip workers with the skills and training they need to move 
into good jobs.
    What I wanted to make clear is that these two are not 
substitutes for each other. We cannot fund dislocated worker 
programs and think that we have put in place good trade 
policies. We need to do both of those things, and the first set 
of policies are crucial to achieving that, and there are two 
points that I wanted to make in general.
    One is that both of these sets of policies should be part 
of a coherent, national, good job strategy. That should be the 
lens through which we look at all of these sets of policies: 
Are they helping us to create good jobs here at home?
    The second part is that there are resource constraints as 
we think about the displaced worker and assistance training. We 
do not live in an ideal world with unlimited dollars to spend, 
so we have to be very careful about how we set priorities for 
the kinds of programs we put in place, and we have to make sure 
that these programs are as effective as possible. My written 
testimony covers three specific programs: the Trade Adjustment 
Assistance program, unemployment insurance and wage insurance. 
And I will just briefly go over the key points on each of 
those.
    The TAA program, of course, is an important and useful, 
necessary program. It will always be a part of what we need in 
any modern economy, but that program needs to be expanded, 
reformed and fully funded, as several people here have 
mentioned today. In terms of the expansion of the eligibility 
criteria, as I think Bruce Herman and others have mentioned, we 
need to expand to make sure that all workers who lose their 
jobs due to trade are covered, including those who lose their 
jobs to a shift in production to a country not currently 
covered under the TAA program, countries that do not 
necessarily have a free trade agreement, like China, for 
example. And also, TAA should cover service and public sector 
workers who lose their jobs due to trade. And we have to 
ensure, of course, that the funding is sufficient to help all 
of the eligible workers.
    Funding is a crucial point, as Bruce Herman also said, that 
funding needs to be made secure and adequate. Mr. Bevard said 
earlier in his testimony that he qualified for the TAA 
training, but the money ran out at the State level, and he, 
therefore, was not able to get the training that he was 
entitled to and that he deserved. And that is unconscionable. I 
think we really do need to make the TAA program an uncapped 
entitlement and make sure that the funds are there so that 
every worker who qualifies for training gets that training and 
is able to take full advantage of the programs that are put in 
place.
    The program administration, of course, needs to be 
improved. There has been a lot of criticism of the Bush 
administration's Labor Department administration of this 
program by the Court of International Trade, where 90 percent 
of the cases that have been remanded to the Court of 
International Trade have been sent back to the Labor Department 
as erroneous denials of eligibility for workers. That there 
simply was not an adequate job done, not a competent job done 
in terms of determining eligibility for those workers, has 
created some unconscionable delays.
    The Secondary Worker Program in principle exists, and yet 
very, very few workers have been able to take advantage of that 
because the program has not been well designed. Only 2 percent 
of workers covered by TAA were secondary workers in fiscal year 
2003. That is the most recent year for which we have data 
because the Labor Department simply has not provided those.
    We also need to ensure that there is a key role for the 
State employment security and the unemployment insurance 
system, that the outreach, counseling, case management, skill 
assessment, training referral and support services should be 
using State UI agency staff and that this program is 
administered using merit civil service staff. That is very 
important and would ensure the quality.
    We talked about timely and accurate reporting. We do not 
have the basic numbers we need on the TAA program, any piece of 
it, whether the health care piece, the alternative Trade 
Adjustment Assistance piece or even just what happens to the 
workers who go through this program, and that is something that 
should be fixed in the near future. There are good programs 
that should be expanded that promote partnerships between 
government employers and labor to support job retention and 
creation as well as regional economic and community 
development.
    We share a lot of the concerns, just in closing, on the 
wage insurance program that have been discussed, and the 
concerns are in three categories: whether it is part of a good 
job strategy or whether the wage insurance program is really 
designed to encourage workers to take low-paying jobs with few 
benefits and few opportunities for on-the-job training as 
quickly as possible rather than help workers develop the skills 
they need and take the time they need to move into good jobs 
where there are strong career ladders and strong training 
opportunities.
    The second piece is whether the funding of wage insurance 
will, in the end, come out of the existing unemployment 
insurance and Trade Adjustment Assistance programs. We know 
that is the intention of many people who have proposed this. 
Congressman Weller proposed a bill, H.R. 1513, just last week 
where that was precisely the proposal, which was to fund the 
wage insurance program out of the State UI trust fund. And we 
have a strong objection to taking funds out of the programs 
that need to be strengthened, improved and fully funded in 
order to put them into a program where we have serious 
questions about what we know about the wage insurance proposal, 
whether it promotes actually downward economic mobility, 
whether it subsidizes low-wage employers rather than high-wage 
employers and whether it really does provide workers with the 
kind of career ladder and training that they need. At the end 
of that 2 years, what happens to the workers who have been in 
the wage insurance program?
    I thank you very much for the opportunity to come here 
today, and I look forward to your questions.
    [The statement of Ms. Lee follows:]

      Prepared Statement of Thea Mei Lee, Policy Director, AFL-CIO

    Thank you, Chairman Miller, and members of the Committee, for this 
opportunity to testify today on behalf of the more than 10 million 
working men and women of the AFL-CIO on the effectiveness of programs 
to help workers impacted by international trade. We are very pleased to 
have the opportunity to discuss ways to strengthen, reform, and 
effectively fund these programs, which are so important to American 
workers. However, we also wish to note that these programs are not a 
substitute for good trade policies that create and retain good jobs in 
the United States.
    We would like to address three specific programs in today's 
testimony: Trade Adjustment Assistance (including the Health Coverage 
Tax Credit), Unemployment Insurance, and Wage Insurance.
                      trade adjustment assistance
    The TAA program should honor the promise made to workers since 
1962: that the federal government will provide retraining, reemployment 
assistance, and income support to workers who have lost their jobs due 
to federal trade policies.
    The Trade Act of 2002 made significant changes to the Trade 
Adjustment Assistance (TAA) program. TAA provides income protection, a 
limited health care benefit, and job training for qualified workers who 
lose their jobs as a result of import competition or certain shifts of 
production overseas.
    Unfortunately, many laid-off workers are still not eligible for 
benefits, and others do not receive the benefits to which they are 
entitled. The program must be expanded and improved to ensure that 
trade-affected workers receive appropriate income support and training 
to smooth their transitions to new jobs.
    TAA should be expanded to cover all workers who lose their jobs due 
to a shift in production, regardless of where production was shifted. 
The current convoluted eligibility criteria exclude many workers whose 
jobs have shifted to countries like China, with which we do not 
currently have a free trade agreement or other preference program.
    TAA should also cover service and public sector workers who lose 
their jobs due to trade, and we must ensure that funding is sufficient 
to help all eligible workers.
Funding Must Be Increased
    1. The lack of a dedicated source of funds has caused many 
problems, including long waiting lists and denial of training to 
displaced workers.
    Workers injured by trade must not be denied benefits because of 
inadequate funding.
    Studies have shown that many states exhaust their TAA training 
funds before the end of each fiscal year, preventing numerous workers 
from being able to take advantage of training programs to which they 
are entitled. According to the Government Accountability Office (GAO), 
35 states expected that available TAA training funds for FY 2004 would 
not cover the amount they would obligate and spend for TAA-eligible 
workers--18 states estimated the gap at over $1 million.\1\
    2. We must provide full funding for the TAA program--TAA should be 
an uncapped entitlement.
    TAA training funds are capped at $220 million per year, while Trade 
Readjustment Allowances (income support) is an entitlement. Since 2004, 
TAA training has lost $32 million in inflation-adjusted funding (a loss 
of 16%).
    3. The Bush Administration's proposed cuts to TAA benefits will 
impair opportunities for long-term training.
    The FY 2008 budget proposes to decrease funding for income support 
benefits under TAA, assuming that fewer workers will take advantage the 
program next year. The 2008 budget proposes inflation-adjusted cuts of 
$124.7 million in TAA benefits funding compared to 2006.
    There appears to be little basis for the Bush Administration's 
assumption that there will be a reduction in TAA participants of almost 
6,000 workers in FY 2008 compared to FY 2006. The number of workers 
covered by TAA certifications has increased over the past two years. In 
2005, 117,904 workers were certified for TAA--in 2006, there were 
120,199 workers certified.\2\ Certainly, the trade deficit, especially 
in manufactured goods, is trending up for the foreseeable future, given 
the enormous imbalance between current imports and exports.
    4. Income support should not be reduced, but improved.
    Currently, eligible trade-injured workers do not begin to receive 
trade readjustment allowances until their unemployment insurance 
entitlements have been exhausted. The amount of their cash benefit is 
the same as the most recently weekly UI benefit (average $260/week).
    Prior to 1981, workers received weekly cash benefits in the form of 
trade readjustment allowances and UI combined that were equivalent to 
70% of their prior pay, up to a maximum of the average manufacturing 
wage. Pending improvements in UI for all unemployed workers, restoring 
the 70% wage replacement benefit as a minimum benefit would 
significantly remedy this shortcoming. The average weekly earnings of 
production workers in manufacturing for 2006 were $690.83. Seventy 
percent of that is $483.58.
Program Administration Must be Improved
    1. Inadequate administration of TAA denies benefits to eligible 
workers and causes unnecessary and unwarranted delays in delivery of 
benefits.
    In the past five years, courts have entered numerous orders 
directing the Department of Labor to reconsider erroneous denials of 
TAA income and training assistance to hundreds of trade-affected 
workers. Workers have suffered protracted delays in getting assistance 
as a result of these errors. Many more become discouraged or lack the 
resources to pursue appeals.
    The Court of International Trade has criticized the Labor 
Department for relying so heavily on employers, virtually to the 
exclusion of petitioning workers, for information on TAA petitions. DOL 
investigators rarely contact petitioning workers to seek additional 
information, documentation, or clarification.
    Judge Delissa Ridgway in an August 2006 opinion states that 
``investigators seem almost gullible in their willingness to accept at 
face value virtually anything an employer says--typically without even 
confronting the employer with other, conflicting information provided 
by petitioning workers (or sometimes the employer itself).''
    She goes on to say that ``DOL's persistent failure to verify the 
accuracy of the information on which it relies--as well as its pattern 
of turning a blind eye to obvious inconsistencies and discrepancies in 
the record before it--is beginning to verge on contempt for 
administrative and judicial process, and does a grave disservice to the 
hardworking men and women of this country.''
    ``Extrapolating workers' roughly 90% `rate of success' before the 
court to the hundreds of TAA petitions that are denied but not appealed 
every year suggests that the Labor Department's failure to properly 
investigate petitions is routinely depriving thousands of U.S. workers 
of the TAA benefits to which they are legally entitled. The Labor 
Department should be haunted by that fact. * * * Those statistics are a 
scathing indictment of the Labor Department's administration of the TAA 
program.'' \3\
2. Help for secondary workers is minimal and must be improved
    In 2002, the TAA program was expanded to cover secondary workers, 
such as parts manufacturing workers who lose their jobs when a client-
manufacturing firm moves its operations to another country. Poor 
program design and inadequate guidance to identify affected workers, 
however, have meant that few secondary workers are receiving benefits.
     Just over 2 percent of workers covered by TAA were 
secondary workers in FY 2003.
     No state has developed procedures to identify workers who 
are secondarily affected by a trade-related layoff in another state.\4\
    We must enact provisions that ensure full consultation with workers 
and their unions in the petition process. We must also develop 
industry-wide certification to streamline the petition process and to 
ensure that all workers in an affected industry are served.
There Must Be A Key Role for the State Employment Security/ 
        Unemployment Insurance System
    1. We must ensure and fund critical outreach, counseling, case 
management, skill assessment, training referral and support services 
using state UI agency staff.
    In its early evaluation of TAA implementation, Social Policy 
Research Associates noted that assessment is ``usually limited'' and 
``wrap around services are much less common in TAA.'' \5\ There are no 
funds in current TAA to pay for counseling, testing, assessment, and 
support services that provide workers with the help they need to make 
informed decisions regarding training. In the past, when Employment 
Service resources were more substantial, states were expected to use 
these resources to pay for such services.
    2. We should also ensure that the state Unemployment Insurance 
agency administers the TAA and TRA program using merit (civil service) 
staff.
    This will assure greater access to services for workers, greater 
accountability to the public and TAA participants, and improve 
tracking, record keeping and program reporting.
    The state Unemployment Insurance agency can identify workers whose 
jobs are affected by trade and offshoring; ensure that workers receive 
assistance in filing for the Health Coverage Tax Credit; counsel and 
refer workers to appropriate training; receive advance notice of a 
closing or layoff; and help to identify any training shortfalls.
    3. We must implement timely and accurate reporting.
    The Labor Department needs to provide timely, accurate and 
substantive data on specific TAA programs and services. We must 
establish a statutory requirement for monthly reporting of:
     Specific geographic locations which are the sources of 
imports;
     The new locations of companies who have shut down
    and left the United States;
     Information on the affected company, the location, the 
number of affected workers as well as union representation;
     State Rapid Response contacts to affected companies, 
workers and unions;
     Outreach, enrollment, service delivery and outcome 
information for workers who are eligible for adjustment services;
     Performance measures for adjustment programs that include 
impacts on pre- and post- program wages, earnings and benefits.
Do Not Expand the Alternative Trade Adjustment Assistance Program
    1. Wage insurance is not the best way to help dislocated workers or 
bolster a national ``good jobs'' strategy.
     Wage insurance promotes ``rapid reemployment'' by inducing 
displaced workers to accept lower-paying jobs with few benefits, 
thereby promoting downward economic mobility.
     Wage insurance may serve to subsidize low-wage employers 
and is unlikely to lead to skill development or strong career ladders.
Link Training to the Creation and Retention of Good Jobs
    1. We must support economy-wide strategies that focus on creating 
and maintaining good jobs.
    Our goal should be to create jobs with good wages and benefits; 
match qualified workers with those jobs; and support the efforts of 
workers to qualify for those jobs. We must create early intervention 
and community adjustment programs that involve all stakeholders, 
including organized labor, in addressing the effects of dislocation.
    2. We need to expand programs that promote partnerships between 
government, employers and labor to support job retention and creation, 
as well as regional economic and community development.
    We must support training that leads to good jobs, including on-the-
job training, as well as model labor-management industry/sector 
initiatives that have proven successful in saving jobs, improving 
employment outcomes and making industries more competitive.
    TAA programs must be closely linked with community economic 
revitalization and adjustment programs, as well as early intervention 
efforts, including community economic planning, finance programs, 
technology development and deployment programs
    There are many positive examples of high road labor-management 
sector partnerships in manufacturing (e.g. the Wisconsin Regional 
Training Partnership), health care (e.g. AFSCME District Council 1199 
upgrade training program in Philadelphia), telecommunications (e.g. 
``The Alliance'' administered jointly by CWA and AT&T) and aerospace 
(e.g. The Boeing and Machinists Union ``Quality Through Training 
Program'').
    Through the collective bargaining process, these partnerships 
develop plans to assess employer skill needs, analyze the skills gap, 
and implement programs that create career ladders and train workers in 
high-growth, high-wage occupations.
    We are particularly optimistic about the Apollo Alliance--a 
coalition of labor, business and environmental groups whose focus is on 
the development of ``green collar'' jobs that foster sustainable 
economies, energy independence, and healthier communities. The Alliance 
is working to create jobs in manufacturing, construction and 
transportation.
    These ``green collar jobs'' produce environmentally friendly 
products or services, like construction of green schools, solar panel 
manufacturing, energy efficiency retrofits of homes, or environmental 
clean up and restoration. These jobs provide family-supporting wages, 
skill development, and career ladders.
    Fro example, in Pennsylvania, Governor Rendell is promoting and 
developing renewable energy to attract wind, solar and battery 
manufacturing to the state. He has attracted companies that have taken 
closed steel mills and created good jobs building wind turbines.
Improve the Health Coverage Tax Credit under the TAA Program
    The TAA Reform Act of 2002 created the Health Care Tax Credit 
(HCTC) to assist certain recipients of TAA and Pension Benefit Guaranty 
Corporation (PBGC) beneficiaries to receive affordable health care. The 
program provides an advance, refundable tax credit for 65 percent of 
the cost of qualified insurance. The credit can also be provided when 
the individual's tax return is filed. The IRS administers specific 
components of this credit: enrollment, payment and compliance. DOL, 
through ETA and state workforce agencies, and the PBGC have 
responsibility for determining eligibility for HCTC.
    1. Problems with administration of the HCTC:
     A 2004 report by GAO \6\ found that only a small portion 
of the workers and retirees identified as potentially eligible receive 
the HCTC. GAO also addressed the issue of the lag time in coverage as 
it impacts participation: ``health coverage may not be affordable both 
in terms of an individual's ability to pay the entire premium amount 
while waiting to receive the advance HCTC and the ability to pay the 35 
percent share once payment starts.''
     A 2006 GAO \7\ report on five trade-related plant closures 
stated that no more than 12% of the workers at each site received the 
credit and that at 4 of the 5 sites fewer than half the workers who 
visited a one-stop center were even aware of the existence of the 
health care credit.
     An OMB Program Assessment Rating Tool (PART) assessment of 
the IRS's administration of the credit gave the program a ``NOT 
PERFORMING: Results Not Demonstrated'' rating. The PART cited low 
participation in the program and the ``lack of shared or coordinated 
performance goals with its main partners, DOL and PBGC.'' The 2006 
program improvement plan recommends that the participating federal 
agencies work together to develop goals and improve access to the tax 
credit for eligible workers.
     A December 2006 Urban Institute report \8\ found that only 
12 states as of October 2005 had ``gap filler'' NEG grants (a DOL/ETA 
program) to help workers pay for COBRA while they waited for their HCTC 
premiums to be subsidized.
2. Address Gaps in Coverage
    Delays in TAA processing and in PBGC pension takeovers can mean 
laid-off workers and retirees have lapses in coverage that disqualify 
them from receiving consumer protections necessary to get coverage. The 
program should address both the requirement that workers and retirees 
have 3 months of coverage in the months preceding when they seek to 
enroll in coverage [unclear: with the credit and the HIPAA requirement 
that individuals have no more than a 63-day lapse in coverage]. To fix 
this,
     Clarify that an individual must have had 3 months coverage 
immediately prior to the event that gave rise to HCTC eligibility 
(layoff for TAA, retirement for PBGC);
     Start the 63-day clock upon receipt of HCTC eligibility 
notice measured five days after the notice is mailed
3. Increase Affordability
    Studies have found that even with a 65% subsidy, many eligible 
individuals could not find affordable coverage. The subsidy must be 
increased and coverage must be available that is affordable both in 
terms of premiums and out-of-pocket costs.
    To do this:
     Increase the subsidy to 90%, or less if coverage option is 
available that is comprehensive and affordable (e.g., FEHBP-like 
coverage with rating restrictions; see below);
     Clarify that individual market coverage is allowed only 
where enrolled in that coverage 30 days prior to layoff. ``Arrangement 
with an insurer'' was not intended to open up the individual market, as 
Administration has interpreted it;
     Provide fallback plan through FEHBP plans (separate pool 
from federal employees);
     Require community rating of state-based options.
4. Other needed improvements
     Spouse coverage--allow spouse to remain eligible when HCTC 
recipient qualifies for Medicare;
     Align COBRA with TAA--extend COBRA coverage to length of 
HCTC eligibility so that individuals don't have to change coverage in 
those states where HCTC eligibility exceeds COBRA's 19 months;
     Provide WIA National Emergency Grant funding--to ensure 
interim coverage,
     Workers who lose their jobs often lose health care. As a 
result, it is important to link eligibility for HCTC directly to 
eligibility for TAA services and benefits. A TAA eligible worker should 
be eligible for the HCTC program for the period that they remain 
eligible for any part of the TAA program, including training, TRA, job 
search, job relocation or ATAA.

                            UI MODERNIZATION

    As you know, we are strongly supporting Representative McDermott's 
UI legislation, which would distribute as much as $7 billion from the 
federal UI trust funds over five years to encourage states to modernize 
their UI programs. For many years, the AFL-CIO has advocated for 
several of the specific items in this legislation, which we believe 
would make significant progress towards strengthening the UI system.
    Under Representative McDermott's proposal, one-third of the maximum 
grant amount available to each state would be distributed if the state 
counts workers' most recent wages for purposes of determining UI 
eligibility. Using such an ``alternative base period'' would address 
one of the most significant gaps in UI coverage by expanding 
eligibility for predominantly low-income workers who have paid into the 
UI system and earned qualifying wages. The AFL-CIO participated in the 
Advisory Council on Unemployment Compensation (ACUC), which recommended 
this particular reform in 1996, and since then we have consistently 
supported legislation to establish incentives for states to use an 
alternative base period.
    The remainder of the maximum grant amount available to each state 
would be distributed if a state meets two of three additional 
conditions: (1) it provides extended unemployment benefits for workers 
enrolled in state-approved job training; (2) it provides for the UI 
eligibility of workers seeking part-time work; or (3) it provides for 
the UI eligibility of workers who quit their jobs due to compelling 
personal circumstances (domestic violence, caring for a disabled family 
member, or following a spouse who has been relocated).
    First, we believe that providing incentives for states to support 
workers enrolled in training programs for high-demand occupations is an 
especially good idea that fits within a broader strategy of helping 
workers get good jobs. Similar programs in seven states have produced 
impressive outcomes with regard to employment and wage replacement.
    Second, the ACUC also recommended promoting UI eligibility for 
workers seeking part-time work, and since 1996 the AFL-CIO has 
consistently supported legislation to establish financial rewards for 
states that adopt this reform.
    Third, providing incentives for states to accommodate workers' 
compelling personal circumstances recognizes and rewards groundbreaking 
reforms that are especially important to women with families.
    Finally, Representative McDermott's bill would distribute to the 
states a total of $100 million per year over five years for the purpose 
of administering these reforms and making other improvements in the 
administration of the UI and Employment Service (ES) system. Since 
2001, federal funding for administration of the UI system has been cut 
by $305 million in real terms despite increasing demands on the system.
    Representative McDermott's proposal correctly rewards states that 
have been leaders in building a stronger UI system, and incorporates 
some of the best UI reforms that have been pioneered in the states. We 
applaud the Representative McDermott for taking this initiative and we 
look forward to working with him to enact this bill.
    While Representative McDermott's proposal is an important step 
forward, we realize that it does not address all the shortcomings of 
the UI program. For example, much more needs to be done to restore UI 
eligibility to a higher percentage of the workforce, to restore higher 
benefit levels, to repair the dysfunctional extended benefits (EB) 
program, and to address the severe under-funding of UI and ES 
administration. The National Association of State Workforce Agencies 
(NASWA) has recommended a special distribution of $2.4 billion over 
three years for administration of the ES/UI system, and this figure 
does not take into account the additional administrative needs arising 
from this legislation.

                             WAGE INSURANCE

    Representative McDermott has also asked us to comment on proposed 
legislation costing approximately $3.5 billion per year that would 
create a universal wage insurance program for displaced workers--far 
larger than the small pilot program within the Trade Adjustment 
Assistance (TAA) program that is available only to certain workers over 
50 years of age who lose their jobs because of trade. There are three 
main points I would like to make about this proposal.
    1. Wage insurance does not fit within a ``good jobs'' strategy.
    America is hemorrhaging good jobs, wages are stagnating, and the 
system of employer-provided health and pension benefits is being 
eroded. America is in dire need of a good jobs strategy. Such a 
strategy should strive to create good new jobs; to transform bad jobs 
into good jobs; to improve the effectiveness of programs that connect 
workers with the good jobs that are available; and to improve the 
effectiveness of job training and education programs that help workers 
qualify for those good jobs.
    A strategy to ensure that good jobs are available in the first 
place must include (1) balanced monetary and fiscal policies to promote 
full employment; (2) robust investments in communications and 
transportation infrastructure; (3) a national strategy to revive the 
manufacturing sector, including investments in technology development 
and dissemination, currency policy reform, and repeal of tax subsidies 
that encourage off-shoring of manufacturing jobs; (4) trade policies 
that discourage downward competition in wages and benefits and the off-
shoring of good jobs; (5) sectoral strategies in emerging sectors of 
the economy, such as renewable energy technologies, building on 
successful labor-management models in manufacturing, hospitality, 
telecommunications, and health care; (6) economic development 
initiatives; and (7) policies that promote worker rights and collective 
bargaining, higher wages, and improved health care and retirement 
security.
    Wage insurance does not help workers get good jobs. On the 
contrary, the most frequently invoked rationale for wage insurance is 
that it promotes ``rapid reemployment'' by encouraging workers to look 
for, consider, and accept lower-paying jobs they would not otherwise 
take.\9\ Getting workers to take bad jobs does not fit within any good 
jobs strategy we would propose.
    In fact, getting workers to take bad jobs is not a worthy objective 
at all. Our national focus cannot be rapid reemployment to the 
exclusion of job quality, because this would argue for the elimination 
of all assistance for displaced workers. It is undoubtedly true that 
eliminating all assistance for displaced workers would result in more 
higher-skilled workers finding reemployment more quickly at Wal-Mart 
and McDonald's, but this would hardly be a desirable outcome for 
higher-skilled workers, for the lower-skilled workers they displace, or 
for the economy as a whole.
    Helping workers find rapid reemployment in good jobs is a worthy 
objective, but our priority should be job quality. It is possible to 
reconcile job quality with rapid reemployment: for example, the Clinton 
administration created a grant program to provide reemployment services 
for UI claimants, but the Bush administration de-funded the program in 
its FY 2006 budget. In addition, the Employment Service (ES) provides 
workers with information they need to find good jobs that match their 
skills, and in 2000 the Labor Department noted that every $1 spent on 
reemployment services produces $2.15 in savings to the UI trust 
funds.\10\ But the Bush administration cut ES funding by $256 million 
in real terms between 2001 and 2007.
    To the extent that a wage insurance program diverts resources away 
from ongoing efforts to help workers get good jobs, or to improve that 
assistance, it amounts to giving up on workers. Even if wage insurance 
is funded with new revenues, this is money that could be used to create 
good jobs and help displaced workers get those jobs.
    Proponents of wage insurance sometimes argue that the existing job 
training programs do not work. It is true that some job training 
programs--particularly the less costly shorter-term training promoted 
under the Workforce Investment Act (WIA)--are less effective than 
others, but there are also many examples of effective training 
programs. The answer is to improve the effectiveness of job training 
programs, not to encourage workers to forego job training.
    Proponents of wage insurance routinely argue that wage-subsidized 
workers would receive on-the-job training of a higher quality than that 
provided by training programs.\11\ We know of no basis for this 
argument. In fact, lower-wage employers are the least likely to offer 
on-the-job training that provides transferable skills.
    Research has established that the probability of workers receiving 
workplace education is directly proportional to their wage and 
education levels. Workers with the highest wages and the most formal 
education receive the most extensive workplace education, while workers 
with the lowest wages and least education receive the least extensive 
workplace education.\12\
    Workers who accept lower-wage employment because of wage insurance 
are likely to be no better off at the end of their eligibility period. 
They will have foregone any opportunities to engage in a more fruitful 
search for a good job or to improve their skills or education level to 
qualify for a good job. As a result, we are concerned that the earnings 
potential of many participants could be negatively affected. Oddly 
enough, it is often the proponents of wage insurance who emphasize that 
education and training are the key to ensuring that the gains from 
economic growth are shared more broadly.\13\
    2. Advocates of wage insurance have proposed diverting resources 
from already under-funded programs serving displaced workers.
    We understand that Representative McDermott has no intention of 
substituting wage insurance for existing programs that assist displaced 
workers. However, this is precisely what other advocates of wage 
insurance have proposed.
    Wage insurance has repeatedly been proposed as a substitute for the 
UI program.\14\ At a May 4, 2006 hearing of this subcommittee, the Bush 
administration proposed legislation that would permit the diversion, 
without limitation, of state UI trust funds to pay for wage 
insurance.\15\ In fact Representative Weller has introduced 
legislation, H.R. 1513, that would do just that.
    Then last September a paper commissioned by the Hamilton Project 
proposed diverting two-thirds of aggregate UI funding to pay for wage 
insurance.\16\ And just last month the Bush administration again 
included the same legislative proposal in its FY 2008 budget.\17\
    Wage insurance has also been proposed as a substitute for the TAA 
program. The conservative Heritage Foundation has proposed replacing 
the TAA program in its entirety with wage insurance.\18\ Sen. Baucus 
(D-MT) alluded to such proposals in May 2002: ``There are those who 
would like to abandon traditional TAA entirely in favor of wage 
insurance. If this experiment [the TAA pilot program] succeeds, that 
may be just the course we decide to take in a few years.''\19\
    We are concerned that resources may be diverted away from TAA and 
the UI-WIA system if workers' choices are structured so that they 
``choose'' wage insurance over alternative forms of assistance. This 
choice will not be a meaningful reflection of worker preferences, 
however, if the alternatives to wage insurance are rendered 
unattractive or inaccessible. Already, workers who want to enroll in 
TAA job training are being denied access due to funding shortfalls, and 
the Bush administration's proposed TAA regulations would restrict 
access even further. Funding shortfalls and the Bush administration's 
emphasis on rapid reemployment are already limiting access for non-
trade-affected workers who want to enroll in quality WIA job training, 
and the administration's proposed WIA regulations would restrict access 
even further.
    The supposed cost advantages of wage insurance would create an 
incentive to structure workers' choices in this way. Some advocates of 
wage insurance argue that it would be less costly per worker than 
TAA.\20\ Others conclude that wage insurance would be less costly per 
worker than UI.\21\
    We are especially concerned that workers' choices would be 
structured in this way because of the known philosophical preference, 
on the part of some, for promoting rapid reemployment without any 
consideration of job quality. Critics of the UI-WIA system and TAA have 
traditionally argued that the availability of income support and job 
training creates a ``moral hazard'' that encourages workers to stay 
unemployed longer. By contrast, the leading argument for wage insurance 
is that it would counter this ``moral hazard'' by encouraging workers 
to take lower-paying jobs that they would not otherwise search for, 
consider, or accept, and thereby reduce the duration of their 
unemployment spell.\22\
    The issue of rapid reemployment is certain to arise when Congress 
next considers extending federal unemployment benefits during a 
recession. We know exactly what these debates look like. In 2001, 2002, 
and 2003, opponents of an extension argued that unemployment benefits 
prolong unemployment, and used inflated numbers to claim that laid-off 
workers already receive generous amounts of assistance. If this pattern 
repeats itself, the existence of a wage insurance program designed to 
promote rapid reemployment will be used as an argument against 
extending jobless benefits. And if this argument is successful, wage 
insurance will substitute for, rather than complement, unemployment 
benefits.
    We fully appreciate that Representative McDermott has no intention 
of financing his wage insurance proposal through the unemployment 
payroll (FUTA) tax system. Instead, his proposal would be financed 
through a new dedicated payroll tax of 0.1 percent of wages up to the 
taxable wage base of the Social Security program, which is currently 
$94,000 per year. But if there is bipartisan agreement on the design of 
a wage insurance program, we question whether it is realistic to expect 
defenders of the UI system to prevent the diversion of UI resources by 
insisting on an increase in payroll taxes.
    It would be especially unfortunate if wage insurance were financed 
by revenues from extension of the 0.2 percent FUTA surtax. The FUTA 
surtax is scheduled to expire in December 2007, but for the last two 
years the Bush administration has proposed a five-year extension. The 
surtax generates $7.4 billion over five years. We believe that any 
additional revenues from unemployment payroll taxes should be used 
solely to fund modernization of the UI system, and not for wage 
insurance.
    3. Further study would be necessary to resolve the many unanswered 
questions about a universal wage insurance program--including potential 
harm to workers.
    There has been remarkably little research into the possible 
consequences of a universal wage insurance program, and the empirical 
data on wage insurance is scarce. Our only real experience with wage 
insurance is with two pilot programs--one a short-lived pilot in Canada 
and the other an ongoing pilot with the TAA program. Further study 
would be necessary to resolve the following issues:
    To what extent would a universal wage insurance program shorten 
unemployment spells? Although rapid reemployment is the leading 
rationale for wage insurance, there has been relatively little study of 
this question. The Canadian pilot program showed only a small impact on 
unemployment spells.\23\
    To what extent would a universal wage insurance program induce 
workers to accept lower-wage employment they might otherwise refuse? In 
1995 the Upjohn Institute performed the only economic modeling to date 
on wage insurance and concluded that it ``would induce dislocated 
workers to search harder for jobs and accept employment that they might 
otherwise refuse.''\24\
    Would these lower-paying jobs lack benefits such as health 
insurance? We know that workers who collect unemployment benefits, by 
contrast, are more likely to find a new job with employer-provided 
health insurance.\25\
    What portion of wage subsidy recipients would have taken lower-
paying jobs even without the subsidy? Some proponents of wage insurance 
argue that its purpose is to provide income support for workers who 
would take lower-wage jobs even without the subsidy, while 
acknowledging that it will induce some workers to take lower-paying 
jobs.\26\ However, it is unknown what portion of subsidy recipients 
would take lower-paying jobs even without the subsidy. The smaller the 
portion of recipients induced to take bad jobs, the less the potential 
harm to workers.
    To what extent would the employment of wage-subsidized workers 
displace other workers? The Upjohn Institute's economic modeling found 
that the employment gains from wage insurance came almost completely at 
the expense of employment for other workers.\27\ If wage insurance 
turns out to be simply a game of musical chairs, encouraging workers 
laid off from highly-paid jobs to take lower-paying jobs that would 
otherwise go to workers with less skill and experience, then it raises 
serious equity concerns.
    To what extent would employers provide subsidized workers with on-
the-job training? Proponents of wage insurance regularly argue that 
wage insurance acts as a subsidy for employers to provide on-the-job 
training.\28\ But Representative McDermott's proposal contains no 
requirement that employers provide any on-the-job training at all. Wage 
insurance is a particularly poor policy choice for subsidizing on-the-
job training. The Job Training Partnership Act (JTPA) required that on-
the-job training lead to a progression of job skills and higher wages, 
with protection against displacement of other workers, and that labor 
organizations be consulted so that subsidized training met quality 
standards and linked workers to good jobs.
    To what extent would any on-the-job training given by employers 
provide transferable skills? Again, we know of no basis for the claim 
that employers of wage-subsidized workers would provide better on-the-
job training with transferable skills. Representative McDermott's 
proposal contains no requirement that on-the-job training lead to a 
progression of skills or higher wages.
    To what extent would a large-scale universal wage insurance program 
subsidize low-wage employers such as Wal-Mart? If wage insurance 
advocates are correct that wage insurance acts as a subsidy to 
employers, recipients of the subsidy would be, by definition, lower-
wage employers. And the amount of the subsidy would be greater for 
employers such as Wal-Mart that pay lower wages than their competitors, 
such as Costco.
    To what extent would employers be able to capture the subsidy by 
paying subsidized workers less than they would otherwise? Wage 
insurance can act as a subsidy for employers only if employers are able 
to pay program participants, or other employees, less than they would 
otherwise pay. It is sometimes assumed that employers will not know the 
identity of workers who are eligible for wage insurance, but this 
assumption is questionable. Any employer would be able to identify 
former Boeing workers after a Boeing layoff in Seattle, or former 
Delphi workers in Flint, Michigan, or former employees of any large 
employer whose layoffs are publicized.
    To what extent would wage subsidies lower wages for non-recipients? 
Subsidized employers might further benefit from a reduction of wages 
resulting from an increase in the total labor supply\29\ or from an 
increase in the number of workers willing to work for lower wages.
    To what extent would the availability of a program designed to 
promote ``rapid reemployment''--such as wage insurance--be used as an 
argument against strengthening programs serving displaced workers that 
have historically been attacked for prolonging unemployment? To what 
extent would it enable critics of programs serving displaced workers to 
make them less accessible or less attactive?

                               CONCLUSION

    We strongly support Representative McDermott's proposal to 
strengthen and modernize the UI system, and we look forward to working 
with him to enact this legislation. We believe available budgetary 
resources should be dedicated on a priority basis to a good jobs 
strategy, which includes strengthening the UI program and other 
severely under-funded programs that provide assistance for displaced 
workers. But we believe it makes little sense to divert scarce 
budgetary resources away from a good jobs strategy towards proposals 
that are specifically designed to induce workers to take lower-paying 
jobs. And further study would be necessary to determine whether a 
universal wage insurance program adversely affects workers by promoting 
downward economic mobility, diverting resources away from severely 
under-funded programs that serve displaced workers, subsidizing lower-
wage employers such as Wal-Mart, and causing job loss for lower-skilled 
workers.

                                ENDNOTES

    \1\ GAO, Trade Adjustment Assistance: Reforms Have Accelerated 
Training Enrollment, but Implementation Challenges Remain, GAO-04-1012, 
9/22/04.
    \2\ Congressional Budget Justification Fiscal Year 2008
    \3\ Judge Delissa A. Ridgway Slip Op. 06-132 UNITED STATES COURT OF 
INTERNATIONAL TRADE
    \4\ GAO, Trade Adjustment Assistance: Reforms Have Accelerated 
Training Enrollment, but Implementation Challenges Remain. GAO 04-1012. 
9.22.04.
    \5\ Social Policy Research Associates. What's Up with the National 
Evaluation of the Trade Adjustment Assistance Program, www.spra.com
    \6\ GAO-04-1012. September 2004
    \7\ GAO-06-43. January 2006
    \8\ Stan Dorn, J.D. Take-Up of Health Coverage Tax Credits: 
Examples of Success in a Program with Low Enrollment. Urban Institute, 
December 2006
    \9\ See, e.g., Howard Rosen, Testimony Before the Ways and Means 
Subcommittee on Human Resources (May 4, 2006) (``Wage insurance is 
specifically designed to encourage people to return to work sooner than 
they might have otherwise''); Robert Litan, Lael Brainard, and Nicholas 
Warren, ``A Fairer Deal for America's Workers in a New Era of 
Offshoring,'' Brookings Institution (May 2005) (``A main purpose of 
wage insurance is to accelerate the pace at which permanently displaced 
workers are reemployed'').
    \10\ Stephen Wander and Jon Messenger, Worker Profiling and 
Reemployment Services Policy Workgroup: Final Report and 
Recommendations, U.S. Department of Labor (2000).
    \11\ See, e.g., Lael Brainerd, Testimony Before the Joint Economic 
Committee (February 28, 2007) (``The retraining that a displaced worker 
receives on a new job provides new skills that contribute directly to 
his or her performance in the new job and is thus directly useful not 
only to the worker but also to the new employer''); Howard Rosen, 
Testimony Before the Ways and Means Subcommittee on Human Resources 
(May 4, 2006) (``In addition, it is hoped that the new employer will 
provide on-the-job training, which has proven to be the most effective 
form of training''); Robert Litan, Lael Brainard, and Nicholas Warren, 
``A Fairer Deal for America's Workers in a New Era of Offshoring,'' 
Brookings Institution (May 2005) (``The retraining that displaced 
workers receive on a new job is the best kind * * * in sharp contrast 
to generalized training programs such as those available under TAA'').
    \12\ See Ahlstrand, Bassi, and McMurrer, Workplace Education for 
Low-Wage Workers, W.E. Upjohn Institute for Employment Research (2003).
    \13\ See, e.g., Prof. Lawrence Summers, Testimony Before the Senate 
Finance Committee (March 8, 2007) (``It is particularly important that 
investments [in education] be made to ensure all of our citizens have a 
chance to fully participate and share in our prosperity * * * I believe 
it is also appropriate that consideration be given to thinking about 
methods of wage insurance''); Deputy Assistant Secretary of Labor Mason 
Bishop, Testimony Before the Ways and Means Subcommittee on Human 
Resources (May 4, 2006) (``the data * * * shows the gap that is 
emerging in our country between those that have post secondary 
educational attainment. That is not just 4-year degrees. It may be 2-
year degrees, industry-recognized certifications, licenses, et cetera, 
apprenticeship programs * * * That is how people's wages are going to 
rise * * * We have many, many individuals who, with better access to 
post secondary education and training, could get higher wages'').
    \14\ See, e.g., Robert Reich, ``Despite the U.S. Boom, Free Trade 
Is Off Track,'' Los Angeles Times (online) (June 18, 1999) (``Turn 
unemployment insurance into wage insurance. Unemployment insurance was 
originally intended as temporary income support during economic 
downturns, until the old jobs returned. But it is less relevant today, 
when most workers who lose their jobs never get them back. Their major 
worry is that the new job will pay less''); Timothy Kane, Heritage 
Foundation, Transcript of Hearing of the Ways and Means Subcommittee on 
Human Resources (May 4, 2006) (``I would want to encourage the states 
to experiment with radical freedom on how they do UI and wage 
insurance'').
    \15\ Unemployment Compensation Program Integrity Act of 2006 (May 
3, 2006) (``The Secretary of Labor may waive the requirements of * * * 
the Social Security Act to permit an exception to the requirement that 
money withdrawn from the unemployment fund of the state be used solely 
for the payment of unemployment compensation'' if the waiver will 
assist in ``accelerating the reemployment of individuals who establish 
initial eligibility for unemployment compensation''); ``Administration 
Wants UI Income Maintenance Strategy Waivers,'' Employment and Training 
Reporter (May 15, 2006) (``The Bush administration is asking Congress 
for authority to grant waivers of federal unemployment insurance 
policies that would allow states to implement novel strategies aimed at 
accelerating claimant reemployment * * * Deputy Assistant Secretary for 
Employment and Training Mason Bishop told the subcommittee * * * 
`Perhaps states would subsidize new-hire wages through wage insurance,' 
he said'')
    \16\ Jeffrey Kling, ``Fundamental Restructuring of Unemployment 
Insurance,'' The Hamilton Project (September 2006).
    \17\ U.S. Department of Labor, ``FY 2008 Budget Justification of 
Appropriation Estimates for Committee on Appropriations,'' (February 
2007), at SUIESO 25-26.
    \18\ Denise Froning, ``Trade Adjustment Assistance: A Flawed 
Program,'' The Heritage Foundation (July 31, 2001) (``The current TAA 
program has failed to provide effective assistance, one of the crucial 
factors for a successful adjustment program. If the aim of such 
programs is to help workers find new jobs, then the TAA should be 
eliminated over time and replaced by a program that provides 
incentives, not disincentives, for workers to do just that. Wage 
insurance is one such proposal that has won widespread support'').
    \19\ Sen. Baucus, Congressional Record (May 2, 2002), at S3795.
    \20\ Lael Brainerd, Testimony Before the Joint Economic Committee 
(February 28, 2007) (``On a per worker basis, this cost falls midway 
between the current unemployment and retraining benefits available 
under UI and Worker Investment Act (WIA) programs and the comprehensive 
costs of TAA benefits''); see also Sen. Baucus, Congressional Record 
(January 4, 2007) (``Wage insurance * * * can even save money over 
traditional Trade Adjustment Assistance.'')
    \21\ Howard Rosen, Testimony Before the Ways and Means Subcommittee 
on Human Resources (May 4, 2006) (``Wage insurance is also a less 
expensive form of assistance than unemployment insurance'').
    \22\ See, e.g., Lori Kletzer, ``Hamilton Project Media Call on 
Income Stability Among American Families'' (September 12, 2006) (``Part 
of its genesis came around in thinking about unemployment insurance 
itself. That is, unemployment insurance has a recognized distortion in 
the sense that you only collect UI if you remain unemployed. So there's 
a whole labor supply disincentive. Well, if one becomes eligible for 
wage loss insurance, only when you become reemployed, then there's a 
counter to that distraction * * * So it can counter the disincentive * 
* * More jobs look interesting or possible in the presence of wage 
insurance because if somebody who is making under $50,000 a year has to 
think about going from a job with tenure to a reentry job, with wage 
insurance, those jobs start to look a little more attractive. Jobs that 
were spurned won't be so spurned * * * it's a program that actually 
addresses in very important ways some issues that are out there 
regarding unemployment durations and job search''); Howard Rosen and 
Lori Kletzer, ``Reforming Unemployment Insurance for the 21st Century 
Workforce,'' The Hamilton Project (September 2006) (``Wage-loss 
insurance has some clear roots in the literature of optimal UI policy 
design, most clearly as a response to moral hazard concerns arising 
from a UI-recipient worker's reduced incentive to leave unemployment 
due to a reduction in the net return to securing a job''); Jeffrey 
Kling, ``Meeting the Challenges of the Global Economy,'' Brookings 
Institution Transcript (July 25, 2006) (``Receipt of UI benefits 
encourages longer unemployment spells * * * The new system [of wage 
insurance] would also introduce incentives to reduce unemployment * * * 
by creating stronger rewards for finding another job quickly'').
    \23\ Bloom, et al. ``Testing a Reemployment Incentive for Displaced 
Workers: the Earnings Supplement Project,'' Social Research and 
Demonstration Corporation (May 1999), at 39.
    \24\ Carl Davidson and Stephen Woodbury, ``Wage-Rate Subsidies for 
Dislocated Workers,'' Upjohn Institute (January 1995).
    \25\ Heather Boushey and Jeffrey Wenger, ``Finding the Better 
Fit,'' Economic Policy Institute (April 2005).
    \26\ Jeffrey Kling, ``Meeting the Challenges of the Global 
Economy,'' Brookings Institution Transcript (July 25, 2006) (``The new 
system [of wage insurance] would also introduce incentives to reduce 
unemployment * * * by creating stronger rewards for finding another job 
quickly'').
    \27\ Carl Davidson and Stephen Woodbury, ``Wage-Rate Subsidies for 
Dislocated Workers,'' Upjohn Institute (January 1995) (``But the 
simulations also raise the possibility that the gains for dislocated 
workers could come at the expense of other groups of workers; that is, 
other groups of workers could experience small increases in employment 
duration, and decreases in employment levels, that almost fully offset 
the gains for dislocated workers'').
    \28\ Joint Economic Committee, ``Meeting the Challenge of Household 
Earnings Instability'' (March 2007) (``Perhaps most importantly, wage 
insurance would subsidize the hiring and training of workers who 
transition into new jobs or sectors''); Lael Brainerd, Testimony Before 
the Joint Economic Committee (February 28, 2007) (``Wage insurance can 
act as a subsidy of on-the-job training for the worker's new 
employer''); Robert Litan, Lael Brainard, and Nicholas Warren, ``A 
Fairer Deal for America's Workers in a New Era of Offshoring,'' 
Brookings Institution (May 2005) (``The second critical value of wage 
insurance is that it acts like a training subsidy for the new 
employer''); Sen. Baucus, Congressional Record (January 4, 2007) 
(``Wage insurance provides an incentive for employers to hire lower-
skilled and older workers and train them on the job'').
    \29\ Jeffrey Kling, ``Responses to Questions About `Fundamental 
Restructuring of Unemployment Insurance' '' (September 2006) 
(``increases in total labor supply from wage-loss insurance may reduce 
wage levels, in the same manner as any other policy that encourages 
work'').
                                 ______
                                 
    Chairman Miller. Thank you very much, and thank you to each 
of the panelists for your recommendations, your suggestions 
and, in some cases, in your papers, the history of what may 
have gone wrong in a number of these programs in terms of 
implementation. I think that is very helpful to us.
    Again, Ms. Lee, I think you hit it on the head that we are 
trying to view this as one--there is a whole set of issues 
about growing the American economy and how the American economy 
responds to international competition and trade and what we 
need to do to meet that competition. And obviously, this 
committee is dealing with a lot of that in terms of education 
and the rest of it, but there also is, I think, a very clear 
feeling, I would certainly say in our caucus on the Democratic 
side of the House, that the current system simply is not 
sufficient to justify another round of, essentially, the status 
quo trade agreements; that that bargain will not be reentered 
into and that we have got to look at the impact of any of these 
trade agreements on workers' families and their communities. So 
that is sort of the setting here, but let me begin with a 
question.
    Mr. Dorn, we have two large, relatively easily accessible 
programs in health care. One is Medicare, and the other is 
Medicaid. Why do we make people chase all around looking for a 
health care program that may or may not meet their needs and, 
in one of which, if you do not do it in exactly the right 
sequence, you could lose your coverage for preexisting 
conditions, which could be devastating to an awful lot of 
families, certainly, you know, older families?
    Why do we do this? Why don't we just plug people into 
either Medicaid, or if they are 55 and over, why don't we plug 
them into Medicare, and if they turn out not to be eligible, we 
will deal with that down the road? Why are we making people 
chase around?
    I mean, I think the intent of the health care tax credit 
and paying for the premiums and all of that is helpful, and it 
is a different situation because there are already Federal 
dollars in a number of these programs, but the complexity to me 
just has to be devastating to a recently unemployed, long-term 
unemployed, job-disappearing family to then start to run 
through and try to negotiate all of these various gatekeepers, 
and again, if you do not do it in the right sequence, you go 
back to ``go,'' and you have been deeply prejudiced as a result 
of that.
    Mr. Dorn. Well, at the time that this passed in 2002, it 
was not easy to get bipartisan agreement on the health coverage 
tax credit. And I cannot imagine there would have been 
bipartisan agreement around a Medicaid expansion to cover these 
folks. Keep in mind that Medicaid is a categorical program for 
adults. For kids, if you are low-income, you get Medicaid. But 
if you are an adult, you have to be pregnant, currently caring 
for a dependent child, severely and permanently disabled or 
elderly. You could create a new Medicaid eligibility category, 
but the problem is, you would need to think about, how are 
those States going to come up with their share of the matching 
funds? During times of economic downturn, States have to live 
with balanced budget requirements, and when you have a State 
like, you know, North Carolina, for example, where they had the 
pillow textile mills close down, it was devastating. The State 
was not in a position where they could come forward with their 
share of the funds. So, certainly, you could go through and 
create a new Medicaid eligibility category for displaced 
workers, but I do not know how realistic it would be to expect 
a State to come up with its share of the dollars. You might 
want to have an enhanced Federal match or even a 100-percent 
Federal match.
    In terms of Medicare, you certainly could go that route, 
but the problem is the benefits are not so great in terms of 
Medicare. I mean, you have very high copayments for doctor 
visits, for hospital care. You know, we do, thankfully, have a 
prescription drug package right now. You could go down those 
routes, but you would need to tinker with those programs some, 
and so, in thinking about how to proceed, I would encourage the 
committee not to give up on the health coverage tax credit. It 
is a problem, but I think it is a fixable problem.
    Chairman Miller. Thank you.
    Ms. Brainard, why don't you describe how you think wage 
insurance fits into this scheme? The question was raised 
whether it would allow for a continuation of the health care 
tax credit. I think in your testimony, you suggested that it 
should be coupled with that, and the question is whether it is 
paid for out of the UI fund, the question of whether or not 
this is an add-on or this is a choice or this is a substitute 
to TAA.
    Ms. Brainard. Yes. I think it is really important that, if 
a wage insurance program were instituted, that it would be seen 
as an additional benefit, that it would be integrated along 
with the other available benefits and available through the 
one-stop shopping system that could be greatly improved as 
everybody has suggested because, if it is not, I think we are 
forcing workers to make choices that will potentially lead to 
more adverse outcomes.
    When this proposal was originally developed, it was prior, 
actually, to the existence of the health care tax credit under 
TAA, and the original version of it actually did include a 
health care tax credit that would then carry over to the new 
employer with the new employer potentially picking up the 
employee part of the premium, so there are ways of integrating 
it with health care which, I think, would greatly strengthen 
it. Again, I think it is critical that it not come out of 
existing funds. I agree wholly with that point. I think we are 
probably talking about different classes of workers, some of 
whom will opt for training because they will benefit a great 
deal from it and others of whom, for reasons that were 
described, need to get back to work, who are already getting 
back to work much more quickly and are experiencing--this is 
not a program that is going to cause people to take lower-
paying jobs; 50 percent of permanently displaced workers who 
are going back into jobs are experiencing average declines in 
wages of 20 percent. That is, unfortunately, the economic 
reality. So I think it is very important to add it as another 
option.
    Chairman Miller. But Mr. Herman raised the issue about 
eligibility under TAA, that we have got to look at the service 
sector; we have got to look at the people whose job impact is 
related to the loss of, maybe, a primary industry and all of 
the associated parts that are impacted.
    You would assume that those eligibility changes are also 
part of wage insurance?
    Ms. Brainard. I think the kinds of improvements that have 
been suggested to TAA are ones that I very much support. I have 
looked at the TAA program in some depth. The eligibility issue 
is a very serious constraint on it at the moment. As to 
services in particular, as we see off-shoring in the services 
sector, the anomaly that TAA does not cover services, I think, 
is glaring. So, again, I do not see the wage insurance program 
in any way being a substitute for improvements to TAA along the 
lines that have been suggested.
    Chairman Miller. You would have the same eligibility 
requirements?
    Ms. Brainard. No. I am sorry. I did not understand your 
question.
    I, actually, do not think, ultimately, that wage insurance 
should have a trade test associated with it. I think it should 
be available to all permanently dislocated workers, workers 
whose jobs have permanently gone away and are certified as 
having done so by the Department of Labor for reasons that are 
no fault of their own. I think, by having it tied narrowly to 
trade, you end up with the same very burdensome eligibility 
process where, as Thea Lee was saying earlier, the Department 
of Labor ends up kicking out a lot of the petitions for 
eligibility; the process is extremely long-winded. I think the 
case for all permanently dislocated workers to be eligible is 
as strong as for trade displaced workers to be eligible.
    Chairman Miller. Unfortunately, I suspect I am just under 
my red light time, so I am going to ask just one more question.
    Mr. Dorn, and I think, Mr. Herman, you would have 
presumptive enrollment. If the jobs disappeared, as to this 
business of your paying the premiums for what could turn out to 
be 6 months and all of these other things, you would both have 
sort of presumptive eligibility and enrollment or enrollment as 
a case for seeking permanent eligibility; is that right?
    Mr. Dorn. Well, I do not know about presumptive 
eligibility. I would have to think about that. We do that in 
the Medicaid program.
    What I was suggesting is, do not force workers to pay 
health insurance premiums in full before their eligibility is 
determined. Right now, Medicaid, SCHIP, all of these programs 
take time to determine whether somebody is qualified, but you 
do not have to shell out-of-pocket the full insurance premium 
while you are waiting for Medicaid or SCHIP to determine your 
eligibility. I was recommending that we should take the same 
approach with HCTC.
    Mr. Herman. We are in favor of presumptive eligibility 
because one of the really big hurdles--and this is what leads 
to so few people entering the program--is that upfront cost 
associated with covering those premiums while your eligibility 
is determined. That is an enormous barrier. All of the studies 
have pointed to that. That should be addressed.
    Chairman Miller. I will do this in the second round, but on 
a number of occasions in a couple of papers, you talk about 
people who in some instances are getting laid off from $7.00-, 
$8.00-, $9.00-an-hour jobs. There is not a lot of savings in 
that household, and so the idea that you are going to come up 
with this money--I do not know, Dr. Alford, what you have 
found, but we will let you address that. I will come back to 
you in the second round.
    I would like to recognize Mr. McKeon.
    Mr. McKeon. Thank you, Mr. Chairman. It is okay with me if 
you forget to set the clock.
    This has been an educational experience for me. I have been 
in Congress here 4 years. I don't think we have ever held a 
hearing on TAA because the major part of the jurisdiction, to 
my understanding, falls under Ways and Means and around here 
people don't like to give up any power.
    Now I talked to the chairman. He said that the chairman of 
the Ways and Means Committee wants him to be involved with 
this. So this is something that I look forward to because if we 
are going to have some jurisdiction we are going to have the 
ability to weigh in on this a little bit. It should be an 
interesting process.
    I was very involved in the WIA, Workforce Investment Act. 
In writing the law and in the reauthorization, we haven't quite 
gotten it done yet because when we pass it, it goes to the 
other side, and then that is the final, final resting place 
for, I hope, a lot of legislation that is being proposed now. 
But we have had that problem with it over the years. But one of 
the visions that I had for the Workforce Investment Act, the 
one-stops, was to give a place where somebody could go if they 
lost their job or if they wanted to get a better job or they 
wanted to get training for career enhancement or advancement, 
and as I visited one-stops I see some really good things 
happening.
    Now it looked to me like where people are falling through 
the cracks there should be a real coordination between these 
two rather than, like I say, the first time it has even come 
before us as a committee in 14 years. And I thought we were 
doing all of this wonderful stuff for workers, and I find out 
that there are a lot of things that we are not doing.
    Dr. Alford, in your testimony, you have got the most 
experience in the Workforce Investment Act, the workforce 
development, do you think that they should be a part of a 
comprehensive, integrated and holistic array of services that 
would--that we would be able to work together with the TAA?
    Dr. Alford. That is absolutely my primary message in being 
here, is that whatever education and training services are 
provided to help these people transition to a new economy, if 
that is one of the major purposes of our education and training 
programs, we have to consider the array of administrivia that 
is provided. We have to consider the consumer and that vantage 
point. We have to consider the business as a customer and that 
vantage point in this, and we have to consider how are those 
education and training providers providing this training in 
innovative ways that meet the needs of today's workers.
    Because as I say in my testimony, it is my view that the 
old linear aid cycle where you learned and then you earned and 
then you retired and rotted is just not how it works anymore. 
And if we can get people who have been dislocated back into 
employment in high growth, high demand and high paying sectors, 
and in many cases if they go under those sectors, these issues 
such as insurance and replacement wages, although there may be 
short-term reductions, if we could deliver their education and 
training in such a way that they could get into construction 
trades without being an electrician, as an example, but could 
begin by pulling conduit or something and then start delivering 
on-the-job training or apprenticeship training or on-line 
training or training at the end of the shift or training at 
night and on the weekends and those kinds of activities to 
build career ladders, whether we are talking about automotive 
or aerospace or whatever high growth sector it could be in any 
regional economy, I think we have got to approach it from all 
three of those vantage points to create a good holistic program 
that really meets workers' needs because if aren't meeting 
employers' needs it is not going to matter what we do on the 
supply side of any of this, in my view.
    Mr. McKeon. That is why we have employers sitting on the 
council so that you know what jobs are available so you might 
as well, as long as you are going to be training somebody, it 
makes sense to train them for a job that is going to be there.
    If I may, Mr. Chair.
    You know, the Federal Government is big and to think that 
we have got the Workforce Investment Act, which comes under our 
committee and then this TAA, which comes mostly under Ways and 
Means and sounds like both are attempting to do some of the 
same jobs, but it would sure be nice if we could work together. 
This might, might be an envelope here where there is some 
opening where we could work together because from what I hear, 
each of you have the same goal in mind. Somebody that loses 
their job, that is a traumatic thing, that in and of itself. I 
mean, I can't imagine you spend 30 years with a company and the 
next day it is not there. When you started out 30 years ago 
thinking the job was there forever, by the end of 30 years you 
probably thought it was going to be there forever. And the 
trauma that that would cause, if we could have a seamless 
program that would really help people to transition into 
something else, I think that would be our ultimate goal. That 
would be a wonderful thing to be able to work together and 
enhance both of these programs.
    So I am hopeful to be able to do something like that, Mr. 
Chairman.
    Chairman Miller. That is our hope.
    I view this--when I said--when I became chairman of the 
committee, I said this is a committee that is deeply involved 
with, hopefully, the strengthening and the growing of the 
middle class, and obviously we cannot have a policy where 
people and their families crash to the ground because of 
circumstances that were beyond their control that they lose 
that status while they are trying to get to the next, I don't 
know, to the next income, to the next career. And we are all 
looking for that seamless approach in that effort. And I think 
this is rather new that the two committees would be working 
together.
    We obviously administer the Department of Labor, which runs 
these programs, and I worry about a lot of the glitches that 
have been present in the testimony today, and we will hear from 
them later.
    But, you know, the Speaker has been asked very often how 
was she prepared to be Speaker of the House of Representatives. 
She reminds people all the time she was the mother of five and 
she has asked the chairmen to all get along here and help one 
another out. So here we are.
    Mr. McKeon. Mr. Chairman, years ago, Mr. Hoekstra and I did 
a study and we found one-third of the education programs under 
the study comes under the jurisdiction of this committee. The 
rest of them go under 39 different bureaucracies. Maybe if we 
can make some headway in this one, we can reach out for the 
education programs, too.
    Chairman Miller. You bait that hook a little bit and right 
away they are on the way. That is what scares the hell out of 
every other chairman.
    Mr. Kildee.
    Mr. Kildee. Thank you very much.
    If anyone wants to see the effect of our trade policies in 
the 30 years that I have been in the Congress, let them come to 
Michigan, particularly let them come to Flint, Michigan. Flint, 
Michigan had 190,000 people, now has about 118,000 people. 
Creates many problems. When people move out of town, they don't 
take their homes with them. So we have abandoned homes which 
are targets for arson. The town is nothing like it was when I 
was growing up and why dad joined the UAW back in 1936. 
Michigan has really suffered. There are about 12,000 
individuals eligible for TAA there.
    Let me ask this question to Mr. Herman.
    I would like to touch on the disconnect that seems evident 
between the USTR that should be taking care of the workers who 
are negatively impacted by our trade policies or at least be 
concerned about them, a disconnect between that USTR and the 
TAA program.
    Are there any efforts to formalize a relationship between 
the Office of USTR and the Department of Labor so they can work 
together to ensure that TAA reflects where we want to go with 
our broader trade policy?
    I looked at all of these trade policies as I have been 
here, and I have served with six Presidents and none of them 
have been right on this trade policy as far as I am concerned. 
Democrat or Republican, they have all been wrong. Is there any 
connect between the TAA people who are concerned about trying 
to retrain people, if there are jobs in the area to train them 
for, and the USTR.
    Mr. Herman, would you comment? I know you have been to 
Michigan a lot and your people have been there a lot.
    Mr. Herman. We certainly don't see that connection on the 
ground, which is where we have been in Michigan, and it is 
devastating for the communities like Flint and other 
communities in Michigan.
    The reason that we are advocates for a new and improved TAA 
is we think it is a more robust system that is more in sync 
with the current economic conditions than a lot of the elements 
of the safety net that were developed when losing a job was--
you needed temporary income support while you transitioned to a 
job kind of like the one you lost. Those days are gone. And 
Michigan clearly reflects that.
    What is needed is that longer period of income support, 2 
years which is possible under TAA, which will allow you to 
enter programs like the community college programs to get an 
associate's degree to really become totally skilled in a new 
industry. That is one of the essential sort of links that is a 
positive aspect of TAA.
    In terms of that program, TAA, and this relationship to 
overall trade policy, we don't see much of a connection on the 
ground and, in fact, it is pretty evident that there is a 
rather stark disconnection.
    Mr. Kildee. And will that be helpful if we could establish 
that somehow or encourage it somehow.
    Mr. Herman. It would be useful in order to understand the 
impact on local and regional economies that come about as a 
result of trade policies. I think those linkages are not sort 
of identified in a very comprehensive way during the 
negotiation and establishment of trade policies. And in some 
ways the programs, then, that we have to work with, like TAA, 
are sort of asked to fix the negative impacts. But often those 
negative impact are not foreseen with any kind of advanced 
notice and we are playing catch-up very much, and that is 
certainly the situation that we are seeing in Michigan.
    Mr. Kildee. One of the disadvantages that Congress has, it 
is its own fault because it gives up its own authority, is the 
so-called fast track. And fast track is up this year for 
reauthorization, where the President sends the trade agreement, 
which the USTR negotiates without input from even the 
Department of Labor, and we can't even amend it. And I think 
that Congress, it should reassert itself and say we would like 
to be able to amend and put some of these things into these 
trade agreements because they lack them right now.
    I don't know how--I have talked to the various Trade 
Representatives, and even those who think they are really 
sensitive people don't realize, really, what they are causing 
with Maytag there in Illinois, what they are causing in 
Michigan. And I think we have an opportunity this year to turn 
down the fast track. But if you can help us in other ways to 
encourage some cooperation between Department of Labor and USTR 
when these things are being negotiated, that would be helpful 
to this committee.
    Thank you, Mr. Chairman.
    Chairman Miller. Thank you. Mr. Kline.
    Mr. Kline. Thank you, Mr. Chairman.
    Mr. Chairman, I can't help but notice that we have, in our 
practice of your side selecting some witnesses and our side 
selecting some witnesses, we have skewed the normal balance 
here a little bit. I trust these are all very fine witnesses, 
but I hope this isn't a sign of things to come.
    Dr. Alford, I was looking briefly at the notes that we 
have, and I see you are from Enterprise and apparently were a 
teacher, instructor, and principal and so forth. I note that 
Enterprise has suffered from pretty horrific damage in the 
schools there. I don't know if that was close to your home. I 
hope not. I certainly hope that you and your family came 
through that well. That was pretty horrific and just heart 
wrenching to see what happened to the high school there.
    I also notice that you are from Auburn. If you are anything 
like my son-in-law, it is pretty obvious when you walk in the 
house--I keep trying to counsel him on that.
    We are trying to--we are exploring a lot things here. Mr. 
Kildee talked about trade policy itself, and his opposition to 
trade promotion authority, of course, is a reason he is on that 
side of the aisle and I am on this. I very much hope that we do 
have trade promotion authority, fast track. And certainly in 
places like Minnesota and your State of Alabama and Tennessee 
and others, the economy and job situation is quite different 
than what he has described in Michigan.
    Dr. Alford, we have heard some testimony today about the 
value of career counseling and we talked about a one-stop shop. 
Could you tell us how if someone is a dislocated worker in 
Alabama, what do they do if they want access to career 
counseling? How do they get it?
    Dr. Alford. Well, we have created what we have called the 
Workforce Development Planning Council, which is an interagency 
council that develops our comprehensive plan for workforce 
development in cooperation with the workforce and State 
Workforce Investment Board and ultimately goes to the Governor. 
And one of the things we strive to do within that is to 
determine where people are falling through the cracks to the 
degree that we can, and see if there are ways we can close 
those gaps.
    On career counseling, for instance, we now have--our WIA 
career counseling component is administered by the community 
colleges. And for those who find themselves in circumstances 
where they need career counseling and they are dislocated 
workers or workers otherwise in distress, whether they are 
eligible for intensive services or any of those kinds of terms 
that we tend to invent and these kinds of things, we can get 
them to a career counselor who is an employee of that community 
college in whatever district the worker lives.
    And so it is--interagency partnerships are the way that we 
are addressing those kinds of issues so that we can't require 
everyone to come and have meaningful career counseling.
    But in our rapid response activities to workers' 
dislocations, we let them know that that is available to them 
either through WIA--and we have the community colleges in that 
region there to let them know that if they are not eligible 
under any of these programs, you can still get good career 
counseling based on good labor market information from a career 
counselor at the community college itself.
    Mr. Kline. So it would be all dislocated workers would have 
that access, at least?
    Dr. Alford. All Alabama citizens.
    Mr. Kline. A rapid response.
    Dr. Alford. Yes.
    Mr. Kline. How does that work?
    Dr. Alford. When there is a significant layoff or plant 
closing, they require the--the bases are required to notify our 
office. We have a team of people who go out and meet with the 
leaders of that business. If there is union representation, the 
union leadership is included. We then schedule small group 
meetings with those employees who are going to be affected by 
the layoff, in which we tell them all about their benefits and 
what will be available to them and how they can convert their 
health insurance--whether that is effective as a means of 
conversion is another question--but unemployment insurance and 
how to access all of those kinds of things and the programs and 
activities that this committee and others of Congress provide 
for.
    And as a part of that, we would introduce them to community 
college people in that district and let them know what services 
are available there, including career counseling.
    Mr. Kline. Thank you very much.
    Mr. Chairman, I see my time has expired.
    Chairman Miller. Thank you. Mr. Hare.
    Mr. Hare. Just for the record, I think we have a group of 
wonderful witnesses. So thank you, thank you all for coming.
    I just want to, if I could, single out Dave Bevard. Dave is 
from my district and Gail is from my hometown. And thank you, 
Dave, for getting up at 2:30 this morning to fly out from the 
airport on a very bumpy ride with me.
    I talked a lot about Maytag in my hometown because I am 
extremely troubled at what poor treatment that workers at 
Maytag has. And I agree with Mr. Kildee in terms of trade 
agreements. We have to get something that starts standing up 
for ordinary people. And I think that Congress has a 
responsibility, a moral responsibility to you and your family 
and those 2,500 workers, to have a say in what happens.
    I would like to talk to you about something that we talked 
about on the plane coming in, and I know that Dr. Alford talked 
about the high-growth sectors that you and I were talking 
about. People were encouraged to go into health care, fields 
that were growing, and you were explaining to me some of the 
problems that people had in Maytag in going through some of 
that growth into those high-growth things.
    And I wonder if you would care to elaborate, share with the 
committee a little bit about that.
    Mr. Bevard. The first critical thing is what are you going 
to do with the rest of your life. And to be honest, the 
retraining is all great; and the question everybody asks is, 
what am I retraining for? And there are not a lot of good 
answers. They will tell you, in our instance, health care is a 
growing field and I know that that is the case. Not in our 
area. But it is a growth field. So you sign up for the 
schooling, and in our case there were like 400 people that 
wanted to go into health care. And a lot of communities, they 
wouldn't have the educational facilities to be able to 
accommodate 400 people. In our case, we were lucky that they 
did.
    The problem was once you get through the training, the 
actual classroom part, you go in for the clinicals where you 
actually go on the job somewhere, and due to the available 
facilities there are openings for 25 people.
    So there are 375 people that have signed up for a job 
growth area that can't get into it. And once you sign up for a 
TAA program, you are locked in. You don't switch. You are 
locked into that program.
    So, again, the question is where am I going. What am I 
transitioning into, because every area that they tell me--you 
know, first it was the computer industry, then it was the 
health care, and every one of those things we are seeing 
outsourced almost as fast as they can tell us it is a growth 
area. And, again--so there is just a problem with the training 
that is available.
    I know, for example, there is a great shortage of nurses in 
the country right now, over 1 million nurses that we are going 
to be needing over the next year. So they are saying it is a 
growth industry, and that is great, except in most areas, the 
United States as a whole, we don't have enough classroom 
facilities to be able to accommodate that.
    However, right now in India, they are putting out nurses 
like no tomorrow through their educational classes and 
training, and then giving them crash courses in English and 
sending them over to take our jobs again.
    So where am I going? You know, point me in a direction 
where there is a job that I don't have to play leapfrog every 2 
or 3 years.
    Mr. Hare. If you could, maybe for the committee and to 
remind me again, you were talking about a woman who came out at 
the plant that trained and wanted to go into a field and----
    Mr. Bevard. Sure. Again, since the unemployment benefits 
and the training don't coincide in our case, you started off 3 
months behind. So now what program do I compromise myself? And 
for example, there was one young lady--unfortunately, all of 
the educational institutes just take it as an opportunity to 
collect some quick money. She wanted to go into child 
development which is usually a 2-year associate's. Her clock 
was ticking so she tried to get into a 1-year certification. 
When we called the educational--one of the facilities there, 
they said we don't have that 1-year certification there. In 
fact, they dropped most of theirs. They said, How about we 
suggest cosmetology? We said, That is all well and good, but 
that is a far cry from child development. Why cosmetology? They 
said, Well, it is a 1-year certification; sign her up.
    So, you know, all too often we just herd them through the 
classes so we can say that we did. It looks good on paper.
    Mr. Hare. So let me conclude by asking you, if you had one 
or two things that you would recommend this committee do and 
this Congress do, given what you have seen in your peer 
counseling and what you have seen happen to yourself and your 
wife, what would you have us do?
    Mr. Bevard. First of all, where are the jobs? I keep 
hearing about the technical and the skilled and the specialized 
jobs. And I am hearing, like in Alabama, the auto industry and 
things, a lot of the things, the technical jobs, aren't that 
technical; they really aren't. But where are those jobs and 
where do we go to find this work?
    The other thing, you know, we need the facilities that are 
available for that, and the other thing is the gaps in funding. 
That is major. When you are forced to just sit and wait 
hopefully while the clock--while the clock is ticking away, and 
what do you do? So you are compromising yourself just from the 
get-go.
    Chairman Miller. If I just might.
    Dr. Alford, if you might, this question of plants make 
decisions to close or jobs change, what have you, they really 
don't do it with knowledge of the other cycles. One of which, 
of course, is the education cycle and the availability of 
classes, and Mr. Bevard laid out some of that. How do you 
address that? Because, again, you say the linear model in 
education sometimes doesn't work with what is going on in 
people's lives after they receive this news that the job has 
disappeared.
    Dr. Alford. Well, we don't have the authority to dismiss 
those requirements so we suffer from those same issues, because 
academic years and calendar years and when the time starts 
ticking are often at variance.
    One of the things we have done as a State, which doesn't 
solve the problem but mitigates to some extent, our community 
college system has granted a 50 percent tuition waiver to all 
dislocated workers. And once they are declared eligible--and we 
have several thousand of our citizens that took advantage of 
that last year. I was just reading a news letter that related 
that on the plane on the way up here.
    So that is why that happens to be on my mind. But there are 
some things at the State level that you can do. But I think 
that is probably a regulation. I don't know if it is statutory 
or regulatory, but that is something that needs to be brought 
into consideration to begin that cycle of time with the next 
traditional academic year and extend it a couple of years. I 
think that would be remedied rather easily.
    Chairman Miller. Thank you.
    Mr. McKeon. Mr. Bevard, how much notice did you have that 
the plant was going to move?
    Mr. Bevard. It was a curse and a blessing. They gave us a 
2-year phaseout.
    Mr. McKeon. So 2 years. Do you have a one-stop in your 
community? A Workforce Investment Act?
    Mr. Bevard. Yeah.
    Mr. McKeon. In communities I have seen, like my area, 
aerospace, is what has really been hit. And the companies will 
go work with the one-stop and they will set up programs, 2 
years. They could do a lot in 2 years if they--if you had a 
good functioning workshop. And if you could work to bring these 
programs together, I think we could make some real advancement 
here.
    Chairman Miller. Mr. Heller.
    Mr. Heller. Thank you, Mr. Chairman. I certainly do 
appreciate you putting this panel together, and I am learning a 
lot as a freshman Member of this body, discussing some of these 
issues.
    I think that the issues--I represent Nevada and I think our 
issues are a little bit different in a State like Nevada than 
some of my other colleagues are talking about their concerns in 
their States, maybe more mature northeastern States or some of 
these other States that have a more mature manufacturing 
sector, whereas in Nevada we kind of benefit from the Pacific 
Rim and some of these trade policies, and Nevada being so close 
to California, Oregon, and Washington and the ability to be a 
hub as a distributor--I think, Dr. Alford, you were the one 
that said the question isn't where are the jobs, the question 
is where are the workers. And that is what our concern is in 
our State is we can't find the workers. In fact, to the point 
where entry-level jobs are paying double digits now, $10 to $12 
an hour. Even fast food chains are paying that kind of level 
because they are competing so heavily to get these employees. 
In fact, our state is advertising nationally to get people to 
come to Nevada to work because we don't have enough employees.
    So I guess my question is, we passed a ballot question 
during the last election cycle that pegged our minimum wage 
to--index to inflation. It is a dollar above the Federal 
minimum wage and, that being the case, we are looking at the 
minimum wage being somewhere within the next 3 to 5 years, 
somewhere from $12 to $15 an hour.
    I guess I need to be--understand the difference between 
minimum wage and wage insurance, if you are talking minimum 
wage of that height, because I don't think wage is the problem 
in Nevada. I think health insurance is the problem in Nevada. 
If you could address that, anybody on the panel, I would 
appreciate it.
    Ms. Brainard. Wage insurance would be a program that would 
only be available to workers who are, because of permanent 
dislocation, because of permanent displacement of their jobs, 
would be available only if they experienced a decrease of a 
significant amount in their wages in the subsequent job. So it 
would help to ensure the different minimum wage----
    Mr. Heller. Could you define that, what a sharp earnings 
loss is?
    Ms. Brainard. For those workers currently who are getting 
reemployed following permanent displacement on average, those 
who lose--which is about 50 percent on average lose about 16 
percent of their income. In manufacturing it is about 20 
percent, and in services it is about 13 percent. But that is 
sort of a national average.
    So in Nevada, you may not have the same kind of statistics. 
You may not, in fact, have declines. But that is from a 
national point of view, the averages are about 16 percent 
overall 20 percent for manufacturing.
    Chairman Miller. Anyone else?
    Mr. Heller. Thank you.
    Chairman Miller. Thank you. Mr. Loebsack.
    Mr. Loebsack. Thank you, Mr. Chair, and thanks for having 
these witnesses here today. It has been very informative, there 
is no doubt about it. I want to make a couple of comments.
    I am happy there is such a wide range of folks here today. 
I really appreciate Ms. Cole's comments too, as the Chair does, 
about sort of looking at the macro picture as well as 
specifically TAA in this case because I have no doubt that we 
have got to deal with this macro level, too.
    I am also very appreciative of Mr. Kildee's comments about 
fast track or trade promotion authority, whatever you prefer to 
use, whatever term you prefer to use, because as a new Member 
of Congress, and as someone who wasn't academic before I came 
here and was very used to sort of looking at things in sterile 
terms and statistics and not really, until I was on the 
campaign trail, did I begin to talk to people like Dave Bevard 
and quite honestly hear the stories of individuals who we--we 
talk about workers being displaced. That is a very clinical 
term, to say the least.
    There are real people out there suffering; the losers, if 
you will, which I think is a horrible word to use as well. 
These are real people who are suffering. And we can talk about 
auto jobs being created in Alabama, and I do want to ask about 
that, Dr. Alford, or we can talk about wages in Nevada being 
$10 to $12 an hour.
    But my understanding is that 30 years ago there were 
workers in manufacturing industries in the United States who 
were making 10 to $12 an hour 30 years ago. What kind of real 
wages do we have now relative to 30 years ago? I think that is 
a really important question that we need to be thinking about.
    We can create new jobs in various States, but how much are 
those workers making per hour, and how does that compare to the 
previous period in American history, even 10 years ago?
    I think what we have seen over time and the statistics bear 
it out, the cold, hard statistics, that we see real declines in 
wages and, obviously, we are talking about different States 
here. Iowa wasn't doing particularly well in the manufacturing 
sector as probably many of you--some of you on this panel is 
aware.
    We have seen a lot of outsourcing of jobs. We have seen a 
lot of jobs that have left Iowa and not necessarily gone to 
other parts of the United States, but have certainly gone to 
other parts of the world.
    I do want to ask Dr. Alford, when you talk about these 
50,000 new auto jobs that have been created in Alabama, what 
kind of wages are we talking about, first of all?
    Dr. Alford. I have some data related to that that is 
actually from a presentation that I did a year or so ago, and 
wage records are usually in arrears. We are talking about a 
couple of years ago. But I think the relative picture would be 
the same. Transportation equipment, manufacturing at that time 
in Alabama had an average monthly wage of $4,367. I don't know 
how that compares, relatively speaking, to the other parts of 
the country. But that would translate into $50-60,000 on the 
average for an automotive production worker in our State, which 
is good wages for our State, and that is about four times the 
wages for food services and drinking places, which is a DOA 
designation--and about twice the wages for trade contractors 
and about twice, almost twice, for hospitals as a category.
    So specifically talking about automotive, you know, we have 
industrial maintenance technicians at Mercedes, and their H.R. 
Director is on my panel that I referred to earlier, who are 
making $120,000 a year. They have an associate's degree as a 
multicraft technician.
    So I don't know on a national scale whether these are good 
wages or not, but for our State, which has traditionally been 
economically depressed and still has a long, long way to go to 
be otherwise, these are good jobs and good salaries.
    Mr. Loebsack. Are those plants unionized in Alabama?
    Dr. Alford. They are not. Some have had union votes and 
they are--they have some effort to do so. As I understand at 
this time, Mercedes has had more than one vote. I am not sure 
exactly how many and----
    Mr. Loebsack. My time is almost expired.
    I also want to ask you about the success story in Alabama. 
Is that primarily due to Alabama's policies, or did the TAA 
programs, for example, have anything to do with this?
    Dr. Alford. Well, this would be primarily conjecture on my 
part. I don't have any real research related to that, but I 
think it is a combination of factors: the bids climate and the 
regulatory climate, the availability of workers, the training 
programs for new and expanding industries, the incentives that 
were provided to lure these companies, and aggressive State 
leadership, particularly in the Governor's Office, to recruit 
and track those companies. I think there is a combination of 
other things.
    Mr. Loebsack. My time has expired.
    Thank you, Mr. Chair, for letting me go over.
    Chairman Miller. Mr. Yarmuth.
    Mr. Yarmuth. Thank you, Mr. Chairman.
    Dr. Alford, you used a word in your statement before, the 
word ``adminstrivia.''
    Dr. Alford. I am not sure if that is a word either. I 
apologize for that.
    Mr. Yarmuth. I was intrigued.
    Dr. Alford. What I meant by that is often times we get so 
much junk in these regulations and one program versus another, 
I call it administrivia because many times it doesn't really 
speak to the true issue; like if you started within 16 weeks 
and the company didn't notify us to notify you and it is 
through no fault of your own, that is administrivia.
    Mr. Yarmuth. That is a great word.
    Dr. Brainard, you talked about the fact there are only 
75,000 workers a year in TAA. And I was wondering if you could 
elaborate on why you think that is. I mean, I know there is a 
lot of controversy over how many jobs are actually lost because 
of trade policies and so forth. But is this a factor that 
relates to certification processes or criteria? Would you 
elaborate on why you think that there are so few?
    Ms. Brainard. Yeah. I think the eligibility criteria, first 
of all, are overly restrictive. We have talked a little bit 
about that. Services is one of the most glaring examples. But 
then I--the way that those eligibility criteria are interpreted 
by the Department of Labor leads to, and I may have the number 
slightly wrong, but to about 40 percent of employers that apply 
for eligibility don't make it. And then beyond that, even of 
those companies where they are certified as eligible, a large 
majority of the workers associated with those often are not 
certified as eligible even when the companies are.
    So if you look at the recent GAO report that tracked, I 
want to say six plant closings, of those, they talked about a 
particular plant closing where there was a large number of 
workers that were losing their jobs, but only about a fifth of 
them were going to be eligible for TAA even though the closing 
itself had been certified by TAA. So the process is 
extraordinarily cumbersome. And at the end of the day, very few 
workers, relative to what just any commonsense persons might 
think should be eligible, end up actually being eligible.
    Mr. Yarmuth. Is this something that you think relates to 
vagueness in the way the statute was written or the way the 
legislation was drafted, or is there something that we should 
be doing to try to clarify the criteria? Is that an issue or 
not?
    Ms. Brainard. I don't know if others want to speak to that. 
I think it is both. I think it is both that eligibility 
criteria should be written more broadly, and secondly, that 
implementation by the Department of Labor should get some 
oversight and encouragement, so that this is a program that is 
actually easily accessible through the one-stop shopping 
mechanisms and that all of the benefits that are available 
through TAA should be clearly put on the table right away; 
because the other problem you have is that workers come in and 
they may get their--they may get their income supplements, but 
they may actually never make it to the training piece or they 
may not get their health care piece because it is complicated.
    And there is a small wage insurance program as part of TAA. 
And it is a very small number of workers that ever qualify for 
that because a lot of the State agencies aren't even aware of 
the specifics of that program.
    Ms. Lee. I would agree with what she has said. But there is 
a combination of eligibility criteria that can very easily be 
expanded to include the workers who work in the service sector 
of the public sector, to include the secondary workers, expand 
the definition of secondary workers. But also the program has 
been administered poorly, and it has also been administered 
very unevenly.
    One of the things that you see is that different States 
have very different levels of takeup rates, and some States are 
very aggressive in going out and informing workers of what 
their rights are, and they actually have staff whose job it is 
to help workers get into the program. And other States don't 
spend the same resources. And that is one of the reasons we 
have said we would like to see the UI system administered more 
uniformly at the national level with the merit staff and so on.
    So I think there are a lot of ways you could very easily 
increase the number of workers who are able to take advantage 
of the TAA program.
    Mr. Yarmuth. Just for the record, Mr. Chairman, I am 
reminded by the fact that Maytag is represented here, that in 
Louisville we have a General Electric plant that makes 
dishwashers, and because of the threat being posed by trade 
agreements and the threat to the loss of that plant, we didn't 
lose those jobs. They just renegotiated, forced a renegotiation 
in which the union went from an average salary--the employees 
went from an average salary of $17 to $18 an hour and agreed to 
go to $13 an hour to keep the plant open. We just skipped right 
to the 20 percent losses in salaries and voided all of the 
intermediary steps.
    Thank you, Mr. Chairman.
    Chairman Miller. Thank you. Ms. Woolsey.
    Ms. Woolsey. Thank you, Mr. Chairman.
    About HCTC, this ridiculously complicated process is just 
one more example why this country, the wealthiest Nation in the 
world, must have a national health care system. Period. I mean, 
then we wouldn't be going around and around in circles like 
this.
    I have a question and it is about training. When I was a 
human resources consultant, I did a lot of job placement for 
high-tech companies and I also would advise--did career 
counseling for people. It was a good way to make some extra 
money. And in our community, we had a university, it is still 
there, and they trained people. They have this wonderfully fun, 
wonderful course and degree in family counseling. Well, 
everybody would come to me, all of these bright and wonderful 
young students, with their resumes and would say, Now what can 
I do? And I would say, You go back to school and get a degree 
in something where you can make a living or get your master's 
or your doctorate and become a counselor. That school did such 
a disservice to these kids. They got a new president and all, 
and they changed.
    So who is deciding in these communities, who is deciding 
what to train for? What are the jobs that need to be filled? 
And, I mean, we are paying for this training; who is making 
these decisions?
    Mr. Dorn, with your--I mean, you do your research and 
analysis. Does anybody have any answers of how we are deciding 
what jobs to train for?
    Mr. Dorn. My focus is more on the health care side of 
things. I think other panelists are better able to answer it.
    Ms. Woolsey. Okay, Alabama, have at it.
    Dr. Alford. In Alabama, those decisions are made by the 
individual. We hope that they are informed decisions, but our 
attitude is this is America: You have a right to be wrong. And 
we try to counsel for training for the occupations where you 
are likely to get a job and be able to have self-sufficiency 
for a family.
    But a lot of people make emotional decisions. One of the 
high-growth training areas for colleges now is forensic 
science, because everybody watches CSI. Well, there aren't five 
forensic science jobs in Alabama, probably, you know, that are 
available.
    So people make a rational decision, but--and we try to 
counsel them away from those, but they have a right to do that 
from our philosophical perspective.
    Ms. Woolsey. But if it is Federal taxpayers that are paying 
for their training, I would think there would be, Mr. Chairman, 
to have something put together to know what jobs are available, 
and where, and what those jobs pay.
    Dr. Alford. We are doing comprehensive--the Integrated 
Workforce on Economic Development, strategic plans around 
regional economies, because economies are neither local nor 
State. So we have to do it at the regional level because we are 
producing, as a part of that, what the high-growth, high-
demand, high-paying jobs are in that region. And we are making 
those who do career counseling within that aware of that.
    I think it is something that there probably needs to be 
some debate in our Nation about, just as you see it. This is 
America. You have a right to choose whatever profession you 
would like. However, if the taxpayers are going to pay for 
that, then maybe it should be one of these top 10--that is a 
matter of philosophy, and we need to talk about that.
    Ms. Woolsey. Ms. Lee, you have something you wanted to add 
to that. And while you are doing that, I had a question for you 
and it relates to Alabama.
    Are the jobs in California going--California jobs moving to 
Alabama because they pay less, or is Alabama doing better now 
in having successes because the economy is improving?
    Ms. Lee. Okay. Thank you for the question.
    Let me pick up first on this question of how the choices 
are made about where the training is. Some of the programs that 
we have found to be most successful are the ones where you have 
a partnership between management, labor, and government--the 
Wisconsin Regional Training Partnership where the employees are 
part of the conversation about which skills are going to be 
needed, where the jobs are going to be. And sometimes this is 
done in a collective bargaining setting, sometimes not.
    But I think Washington State and Wisconsin State, those are 
the areas that we found that take the best of all of the 
different programs that you get, the combination of the 
employer involvement and the on-the-job training, but that you 
also have the workers and the unions involved and targeting 
towards particular sectors like health care, 
telecommunications, aerospace, where there can be some jobs.
    In terms of the question of Alabama versus California, I 
think that is a tough question. You certainly see some of the 
same--this is an age-old story about mobility of jobs within a 
country and between countries, whether the lack of unions or 
the lower wages becomes the draw, in and of itself. And 
obviously you have to have a combination of things. It is not 
just low wages, but it is also not just the high skills or the 
infrastructure that is important.
    I think you need to find that balance. Certainly we would 
like to see a situation where you never see competition between 
either States or countries on the basis of offering up workers 
who don't have the right to organize a union, who don't have 
the basic human rights protected on the job.
    We would like to see that as sort of a minimum set of 
criteria. And then beyond that, the competition that takes 
place is, one, to some extent, normal and healthy and natural.
    But the other thing I think that can be problematic is 
something I think Dr. Alford did mention, which is the tax 
incentives that different State governments offer to attract 
jobs and whether that gets to be a somewhat destructive 
competition where States and localities offer huge tax 
incentives and tax breaks to companies to locate jobs there, 
and then at the end of the day, they don't get enough out of 
it; that the jobs don't always stay around, that they aren't 
the same kind of jobs that were promised. And so that is 
something that I think there could be some national guidelines 
and limitations on that would be useful.
    Chairman Miller. Mr. Scott.
    Mr. Scott. Thank you, Mr. Chairman.
    Mr. Bevard mentioned nurses coming from other countries. I 
was at the community college the other day and they noted there 
is a long waiting list for people to get into nursing, and we 
haven't funded the slots and that is a problem. And I 
appreciate that.
    Is college tuition generally reimbursable as assistance if 
you want to go back to college?
    Mr. Bevard. Like I say, under TAA, it is not really a cap, 
but kind of a general amount that is allocated per worker, and 
it is for college for a training vocational program, for 
whatever. But it has to be in what they consider a growth 
industry.
    Mr. Scott. You can't go back to the liberal arts college 
and go into----
    Mr. Bevard. Right.
    Mr. Scott. My colleague from California mentioned kind of 
what we are training people for. When a plant closes, there are 
many types of loss. It is not just one job skill set. In 
selecting what people ought to be training for, isn't there 
some private sector involvement, like private industry counsel, 
that helps indicate to people what jobs are going to be 
available and what they ought to be trained for?
    Anybody want to--Dr. Alford?
    Or Mr.----
    Mr. Herman. Well, one of roles of the WIA is, indeed, to 
inform through labor market information where the jobs are. It 
is challenging because, again, there are many communities where 
we don't see a lot of job creation, or where we see job 
creation, we see it in industries that don't have family-
sustaining wages and benefits. Retail, food services, these are 
jobs growing in every community. That is why we need to address 
those jobs that have a ways to go to provide family-sustaining 
wages and benefits like manufacturing was addressed two 
generations ago.
    Two generations ago, manufacturing jobs were not good jobs 
in the country. They were dangerous, low in pay, and dirty. 
They became better through public policy, around health and 
safety, through unionization and through support in terms of 
overall national policies in investing in those industries. 
That is the trajectory that needs to be applied to some of the 
other industries, particularly service-sector industries where 
we don't see the quality of jobs that are sufficient. WIA is 
the place where that information is supposed to come forward 
through the business involvement.
    We also advocate for, as Thea Lee mentioned, a much more 
significant engagement in specific industries with labor, with 
management, with public sectors, with high-road partnerships 
that can address some of these shortcomings, build career 
ladders.
    That is part of the reason of the success in Nevada with 
the hospitality industries. Those jobs in Nevada and in Las 
Vegas, through the work of the Culinary Training Institute, 
have career ladders that allow workers to enter and achieve 
middle-class status in a relatively short period of time.
    That is not the case in a number of the industries in the 
service sector that are now driving our economy.
    Mr. Scott. Dr. Brainard and Ms. Lee suggested there are 
good programs and bad programs in terms of placement rates. Is 
a placement rate more of a function of the job training or the 
job availability? I mean, if you have an area of low--of high 
unemployment, you can train everybody you want, but they are 
going to have trouble getting jobs. And if there is low 
employment, you don't have to do much at all. People are going 
to grab them and train them. Is a placement a function of 
unemployment, unemployment rates, or quality of the program?
    Ms. Lee. Both. I think it is both. Clearly if you don't 
have a job, you can't get blood from a stone. There is no kind 
of training you can get that will create a job out of nothing. 
But on the other hand, you also need good training in many 
cases, particularly with folks who are making a huge career 
shift. They are going from a different kind of sector.
    The training is important. I think what Bruce Herman said 
in his testimony is also important; that what the research does 
show is that the long-term training tends to have a much higher 
wage per placement rate than short-term training. It is not 
something that is done easily. It is not something that is 
generally done cheaply; that investing in a deeper set of 
skills tends to pay off.
    Mr. Scott. Should that training--I think Dr. Alford 
suggested that training really should be part of the overall 
job training program and not a trade-specific program.
    Dr. Alford?
    Dr. Alford. Well, we believe that one of the things we 
should do within all of these programs, and we have redirected 
our adult education, our WIA youth programs, our TAA dislocated 
worker programs, Department of Rehabilitation, all across the 
board, in addition to any job-specific skills that may come out 
of those, we are requiring a career readiness certificate based 
upon work key scores which are developed in the workplace--
reliable, valid, proven over a number of years.
    So we in effect want to help our people and ensure our 
employers that they have learned how to learn, so that when 
this constant job turning that is bound to occur in this kind 
of economy--that we can make those transitions more easily, and 
that they can acquire new job-specific skills based upon these 
underlying job readiness skills.
    So that is one issue.
    Another issue that is related to the previous question that 
I think is worthy of consideration by national policy around 
all of these issues is ``make a job'' versus ``take a job.'' I 
think, as Ms. Lee said, you can't take a job that is not there. 
But I think one of the things we need to help our people learn 
sometimes in these transition processes is that one option 
might be in a more entrepreneurial vein of making your own job 
in those kind of circumstances rather than just the mindset--as 
an option--rather than just a mindset of I am going to take 
another job and in a similarly situated environment. That may 
not be an option.
    So I think entrepreneurial training should be one of the 
array of options that we consider as we move towards 
reconsideration of these issues.
    Chairman Miller. Thank you.
    Ms. Clarke.
    Ms. Clarke. Thank you very much, Mr. Chair.
    This has certainly been a very informative and timely 
hearing. And I appreciate the witnesses here today bringing 
forth all of these nuances that really need to be addressed. 
And I think it was quite a valiant effort that the Congress has 
made with the TAA. But in all safety net cases that I found, 
these holes and gaps, you know, can be just as dangerous to 
families that are looking for some security during the time of 
crisis, particularly when it is not a time of their own. And 
one of the things that I am concerned about are the nuances.
    I am concerned about seasoned employees, individuals who 
have been working for companies for years, and what their 
requirements are versus newcomers to the employment arena. You 
know, you just got into the company as a bright-eyed college 
student. You have been there for maybe 2 or 3 years and, bam, 
the economic climate changes.
    What are their needs versus, you know, someone who is just 
about to get the gold watch and now they are in their mid-
fifties and somebody is saying, We have got to retrain you. 
Your kids are going off to college. What is it that we embed in 
this policy that begins to look at those nuances in a real, 
real way, in addition to all of the other pieces that we are 
talking about, because this is not a one-size-fits-all at all, 
which is what you are all experiencing; and which is what, 
unfortunately, when you are doing Federal policy, we kind of 
gloss over.
    I think it takes information from folks on the ground, like 
you folks, to really look at those nuances as we look towards 
reauthorization, bringing them forward so we can look at the 
management, labor, government structure, which seems to be the 
partnership that would ultimately give us some of the answers 
we are looking for and address those types of issues.
    Let me just ask a couple of questions.
    Coming from New York--and it is good to see you, Mr. 
Herman. I know of your work. I want to know whether the TAA, as 
it stands, is available to all workers. And when I say that, I 
mean is it available to individuals who are in the workforce 
who may be residents of the United States or may be in between 
status? And how do the pressures with respect to the holes in 
the gaps impact on that population, and have we begun to 
address it?
    And then, finally, what would trigger the Department of 
Labor--when we know that a trade agreement has been signed, it 
looks like the climate for a particular industry is in a 
downward spiral--how do we react with respect to the 
individuals who are within those industries to begin the 
conversation around you might want to start looking at some 
options in terms of your career or your job.
    And then just finally, one more thing with that where that 
is concerned. You know, we have had to deal with a lot of 
corporate reorganization and downsizing, which has a very 
similar effect--or corporate corruption--where all of a sudden 
the whole corporation collapses.
    How does TAA address that? How are your organizations 
addressing those issues, and how can we address that through 
the reauthorization we are up to?
    Thank you very much.
    Mr. Herman. In terms of the overall, how does the program 
deal with the diversity of individuals who are trade impacted? 
Well, right now, it doesn't do it very well. As you know, I 
worked in the garment industry in New York, which was before 
the program was reauthorized in 2002, and we were confronted 
with significant layoffs on behalf of new immigrants, 
predominantly women, sort of middle-aged. And it was very 
difficult to bring them into the program. The program was 
improved at the last reauthorization, but I don't think that a 
lot of the barriers that those individuals had--non-native 
English speaking, very limited in terms of overall skill 
development, limited levels of formal education--are indeed 
taken into account even by the current configuration of the 
program.
    That is why in my testimony we advocate for globalization 
adjustment assistance, which would be a more universal program 
recognizing that all workers depending on--notwithstanding the 
point at which they are in their career, new entrants, middle 
career, or more senior, are impacted, and sometimes 
surprisingly, impacted by trade. And so they need to have these 
programs available to them, that a longer period of income 
support is absolutely essential, because the transition 
requires entire new skill development, new careers. And also 
that training, that important element, you need to have the 
training support, the resources for at least 2 years of 
education that would allow folks at least to get the 
associate's degree, if that is where they are in terms of their 
educational attainment.
    So it is very challenging, in part because globalization is 
impacting us universally, if you will, and the program is still 
very sort of too nuanced in that regard.
    Mr. Dorn. Could I add a comment about the older workers 
that you referenced?
    The Health Coverage Tax Credit program says it is up to the 
State to arrange whatever private insurance the State wants to 
arrange. And in a number of States, that means individually 
medically underwritten nongroup insurance, where the older you 
are the more you get charged, and the sicker you are the more 
you get charged.
    So, for example, in North Carolina in 2004, if you were a 
healthy young man at age 25, you would have to pay $357 a year 
for average State-qualified coverage. That is not bad. If you 
were a 55-year old woman, who was a breast cancer survivor in 
complete remission, you would have to spend $4,000. That is a 
35 percent share.
    So factors over which individuals have no control determine 
what they get charged, and that is something I would encourage 
Congress to examine in this upcoming opportunity to revise the 
TAA program.
    Chairman Miller. Thank you very much.
    If we can just impose on your time a little bit more if 
you--oh, excuse me.
    Ms. Lee, yes.
    Ms. Lee. Thank you very much, Mr. Chairman.
    I wanted to answer the last part of your question about the 
coordination between the trade policy and the labor market 
policy, and it goes back to what Mr. Kildee also asked earlier 
on. There is very little coordination, and in fact I think 
there is almost a denial that there are going to be any jobs 
lost, because the whole point of selling the trade agreements 
is to say that everybody is going to be a winner and we are 
going to create new jobs, we are going to be exporting lots of 
goods to Mexico or to Guatemala or wherever it is. And so that 
prevents us from doing the proactive planning that might be 
needed to say, Well, this industry is probably in the cross 
hairs, or, This region might lose a whole bunch of jobs, and 
let's get ready early on to deal with it.
    And one of the issues that we have raised is industry-wide 
certification that might make it quicker; that when you know a 
whole industry is going to lose a lot of jobs because of trade 
policy, then you could facilitate that instead of waiting for 
each individual plant and each individual worker to receive 
that certification. So I think that would be one improvement, 
and it goes back to--and the question you asked about the 
coordination.
    The Bush administration budget for this year assumes that 
there will be 6,000 fewer workers receiving TAA next year than 
there were this year. Now, that is at a time when the trade 
deficit is growing every year and is likely to grow for the 
foreseeable future. So how the Labor Department comes up with 
that estimate, when we know that the trade policy is going in 
the other direction, is another baffling piece.
    Thank you.
    Chairman Miller. Thank you very much.
    One of the more remarkable paragraphs, Mr. Herman, was 
written by you when you asked the question: What do we mean by 
complexity ``during a typical dislocation involving TAA, many 
workers, often hundreds of workers, must be advised of their 
rights and responsibilities, learn about training options, 
enroll if appropriate, apply for HCTC or an alternative trade 
adjustment assistance; if desired, get training waivers if 
needed; apply for unemployment insurance, or TRA, on a weekly 
or biweekly basis. Assessments are supposed to get done. Work 
search rules are explained, and a job search must be 
documented. Class attendance must be documented. Recorded 
mental health and social services needs must be addressed. The 
8- to 16-week rule requires TAA-certified workers to enroll in 
training by the end of the 16th week of his or her layoff from 
the trade-affected employment or the end of the 8th week after 
the week of the TAA certification decisions covering his or her 
workplace. Many workers find out about TAA too late, especially 
when the certification decision is made after the plant 
closing, and the company does not help the State agents locate 
the workers. That is like jacks or better to open to play in 
the system. You know, now you get to play, but that is the 
beginning of how you run in this system.''
    I would like to ask you and, I think, Mr. Bevard and Dr. 
Alford the question as to what extent have we put in time lines 
that just do not work when you are on the ground for the 
consumer, so to speak, for the person who has to run this 
gauntlet, or for those trying to design helpful programs and 
access for workers.
    Just in your sort of practical experience, Mr. Herman, you 
obviously have some recommendations which I will get to later.
    Mr. Herman. You read from my testimony, and that was just 
one sort of indication of the complexity of this program. 
Workers can get tripped up, of course, anywhere along that 
trajectory; and many, in fact the majority, of workers do. So 
there is a disconnect between when you are eligible for income 
support, when you have to enroll in training. If you miss the 
training deadline, then you become ineligible for the income 
support that also affects HCTC.
    So this is the overcomplexity of the program, and that is 
why you see such low takeup rates. So that is something that 
certainly needs to be addressed. It needs to be simplified and 
streamlined, and you need to recognize that the sequencing of a 
layoff notice, when you get income support, when you are 
eligible for assistance in terms of education, is often not in 
alignment with the formal education system. That is why, you 
know, if you get laid off in the middle of the fall and you 
cannot enroll until the next semester, that puts you at risk in 
losing some of the other benefits.
    So those sort of basic alignment issues are very much 
present in the current system, and that is part of the reason 
why it is just not working very well.
    Chairman Miller. Mr. Bevard.
    Mr. Bevard. Yes. I mean, like you said, the alignment is 
poor in regards to the coordination of benefits. It was 
interesting Mr. McKeon talked about the WIA, which we did have, 
but in all honesty, they did not address any of the concerns 
that I brought up other than that it provided some additional 
funding sources, but even that was not available to compensate.
    Again, you know, hearing that we had 2 years to prepare, 
that was a curse and a blessing because, again, the question is 
where do you go. When they made the announcement, they were 
telling us, okay, growth industries are in areas like computers 
and all this kind of thing, but by the time we were actually 
going out the door, now that has changed. So I have got my mind 
set on here is where I am going to go, but now I cannot go in 
that direction anymore, and so there is just a myriad of things 
that do not line up. You know, it all sounds good on paper, but 
in practicality it is very rare for the stars to line up to 
your benefit.
    Chairman Miller. Dr. Alford.
    Dr. Alford. I think that it is true for a number of 
reasons. One is that often when people are in the formative 
shock of losing a job, they are not at a readiness level to 
even hear about these programs and activities. They are 
worrying about where my kid's going to be tomorrow and how I am 
going to pay for child care and those kinds of more immediate 
issues. And so it is not because they are bad people or 
anything; they just are inundated with so many decisions to 
make and so forth that it may be much later before they can get 
ready to start thinking about what do I do next and what kind 
of education and training will I need to do that. And so that 
is part of the issue. That is what I meant when I said 
decisions about those kinds of issues should be pushed down to 
the people who are working with those people to the extent 
possible.
    The other issue, as I mentioned earlier, is often now it is 
not a matter of you lose a job, you go get training, you get 
another job. So often it is a matter of going into some kind of 
entry level for some kind of career ladder where you have to 
have interspersed education and training and intermittent 
certification to get through various levels there; because you 
can start in the hospitality industry and work your way up to a 
career, but you can take that job and get that health insurance 
immediately and have some kind of subsistence wage until you 
make those connections.
    So I think as you consider the reauthorization of WIA, and 
this program as well, that we should look to see if there is 
some way we could provide those kinds of options within the 
framework of what we are about here.
    Chairman Miller. Thank you. Your answer has raised a whole 
series of questions for me.
    Mr. Herman, in your statement you also make a very strong 
recommendation that Congress ought to seek some input from the 
union State agencies, one-shops, and others knowledgeable in 
this field. And we will take you up on that effort because, 
clearly, this hearing demands a follow-on to this as we look at 
how we might be helpful in making these programs more user 
friendly. I am always struck how complex we make programs for 
the most vulnerable people in our society. It is just quite 
amazing.
    Do any of my colleagues have another question that they--
Mr. Kildee.
    Mr. Kildee. Just one clarification first.
    I mentioned the figure 12,000 in Michigan. That is really 
12,000 certified since October 2005.
    Let me just say one thing, if I may, Mr. Chairman.
    This is a capped entitlement, so you have to tell people, 
Well, the cap has been reached, and therefore, you cannot get 
in this program. If Congress were to take the cap off, that 
would relieve one of the problems there, and I think we could 
take it off. You know, we could take it off by--we could fund 
it just by getting a little bit of that $2 trillion tax cut, 
which the President signed into law about 5 years ago, and put 
that into the entitlement. But a capped entitlement to my mind 
is rather cruel, particularly when that entitlement exists 
because of a sad situation caused by a sad trade agreement. But 
I just think we should take that cap off.
    Thank you, Mr. Chairman.
    Chairman Miller. Thank you.
    Mr. Hare.
    Mr. Hare. I just had one other thing, Mr. Bevard.
    We were talking about--again, you also went to Herrin, 
Illinois. I know Maytag closed a factory there.
    Mr. Bevard. Yes.
    Mr. Hare. And how many jobs?
    Mr. Bevard. About 1,000.
    Mr. Hare. About 1,000 there.
    Could you just briefly touch on the concern you had, too, 
because in Galesburg the workers there at least had an 
opportunity to go up to my hometown to work for John Deere or 
for Caterpillar. But in Herrin, Illinois, that is coal country 
basically, so for several hundred miles around, there is little 
for those folks to train to do unless you want to work in a 
mine.
    Mr. Bevard. Yes. Again, you are being educated for what? 
Again, in our area, like you said, you know, there were--you 
can drive 15 miles in either direction, and there are some jobs 
at a couple of factories that are open, but you run the risk of 
do I want to go through the same thing all over again,, but in 
Herrin, Illinois, while it is very deep in Southern Illinois 
and there are 1,000 people who have excellent educational 
opportunities, just outstanding, the problem is there are no 
jobs, absolutely no jobs. Coal is king. And if you want to work 
in the coal mines, that is fine, but there is not much else 
down there.
    So what do you do? You know, I have heard about 
entrepreneurial types of things, and that is all well and good. 
How many of those will be sustained in an area like that? 
Again, it all comes back to where do you train.
    In our facility, we had a gentleman who worked at one 
facility that was closed. He went to the next one, and they 
closed and moved to South America. Then he came to Maytag, 
which closed and moved to Mexico. He is 62 years old. He should 
be in the ballpark of retirement age. He has built up literally 
no pension because of all of the places he has been at. He can 
go through all of the training that he wants, but at age 62, 
nobody wants to hire him. So what do you do?
    Mr. Hare. That is a very sad commentary, Mr. Bevard.
    Thank you, Mr. Chairman.
    Chairman Miller. Thank you.
    Any other members?
    Last question. I promise.
    Mr. Herman, in your paper again, this question of--back to 
deadlines again--sort of the 8- to 16-week deadline on 
enrollment and training. Again, Dr. Alford has made the point 
and, I think, Mr. Bevard has made the point, you know, in many 
instances for these events for these families, they appear to 
be catastrophic. And I assume that it takes a while to kind of 
stabilize your thinking and think of a plan, but I would 
suspect your first concern is about income and how you are 
going to hold things together and not lose your house or your 
car or whatever it is that is pending.
    Shouldn't then the next question be independent of your 
first decisions you make--I mean whether you chose--if you had 
a wage insurance option or you had a TAA option or whatever 
income support options, shouldn't you then be able to say, 
Look, I have figured it out now. I am working at this job. I am 
getting wage insurance, but what I would really like to do is 
go off and get training in this area.
    I mean it seems to me, to force people to make a series of 
decisions here when almost all of us would be reeling from that 
kind of--I mean it happens to Members of Congress every 2 years 
every now and then. Wow. You know, try and retrain one of those 
puppies, but--excuse me. Excuse me. Stop.
    Mr. Herman. As I said in my testimony, they are cumbersome, 
they are arbitrary, they trip up a lot of workers. But one 
thing we know--and this relates to the relationship between or 
to the lack of relationship often between WIA and TAA--is 
advance notice and advance counseling help. A peer-to-peer 
program that Mr. Bevard went through is very important. That 
takes place in some places, not everywhere, in part because it 
is part of the rapid response system, so it is WIA funded, and 
it is part of rapid response and peer counseling; also layoff 
aversions. These are elements that we advocate for that need to 
be beefed up, because not all of these facilities, particularly 
when you get to second- and third-tier suppliers, necessarily 
have to close the way the overall assembly plants do. So that 
is one aspect.
    But as to the specific, you know, aspects that we identify 
in my testimony, the 8-16 rule is a really cumbersome one. It 
is quite arbitrary. We recommend just basically putting in a 
much longer time frame where workers can make decisions about 
what to select from a menu of options, because they need that 
time to sort things out. They also need counseling. They need 
support. They need advice.
    Very often, workers are confronted with these choices in 
isolation. You got the warn notice. You know your plant is 
going to close. Sometimes you have a union to help you out. 
Sometimes you do not. You are bombarded with just a plethora of 
information that you cannot even sort through on a timely 
basis, let alone make decisions that are going to influence the 
rest of your career and your family.
    So those issues, particularly lengthening the time frame in 
which workers have to sort through the options available to 
them, are very important and would make the system a lot more 
user friendly and would probably increase the takeup rates.
    Chairman Miller. Mr. Dorn.
    Mr. Dorn. I think implicit in your question is a 
fascinating paradigm shift for the system, and I make this 
comment a little nervously because I am more into the health 
coverage side of things than into the training side of things. 
But during this initial period of time when workers are reeling 
and are being bombarded with all of these messages about 
different benefits and about how to cope emotionally and so 
forth, I wonder whether there could be, as you said earlier, 
some kind of presumptive eligibility, some sort of initial 
coping period where you say to the worker, you know, for the 
next month, or however long that period is, you are going to 
have health insurance; you are going to have unemployment 
insurance payments; you are going to get certain basic things 
to hold your life together while you sort through the system 
and figure out where to go.
    I wonder whether that sort of presumptive eligibility 
system might be something worth considering.
    Chairman Miller. That and other questions will be answered 
by this committee in the future.
    Thank you so very much for all of your testimony. It has, I 
think, been very helpful to the members and to this debate. 
Thank you so much.
    Without objection, the members will have 14 days to submit 
additional materials or questions for the hearing record.
    With that, the committee will stand adjourned.
    [The prepared statement of Mr. Altmire follows:]

Prepared Statement of Hon. Jason Altmire, a Representative in Congress 
                     From the State of Pennsylvania

    Thank you, Mr. Chairman, for holding this critical hearing on how 
effective existing programs are in helping workers impacted by 
international trade.
    I would like to extend a warm welcome to all of our witnesses. I 
appreciate the time you took to be here today and I look forward to 
your testimony.
    I would like to begin my statement by reading from a letter sent to 
me by Mr. John Bolas, a constituent of mine, who is currently using 
Trade Adjustment Assistance benefits and asked that I share his story 
with the members of this Committee.
    ``Members of Congress: I am soon going to finish an accelerated 18-
month training program under the Trade Adjustment Assistance program. 
With the help of the TAA program I am moving from a dead end 
manufacturing job with few skills to having the skills to get a good 
job helping other people get back from sickness and injury to their 
former everyday lives.
    ``It has been a hard two years since I lost my job at the former 
Phoenix (now Anchor Hocking) glass plant in Monaca PA. In 2005 half the 
workforce was cut as my former employer faced cheap imported glass 
competition. Fortunately my union was able to get my workplace 
certified for the TAA program so I had enough training funds to go into 
the healthcare field to become a Certified Occupational Therapy 
Assistant. I expect to make $33,000 to start and I only made $25,000 in 
the glass plant.
    ``With a disabled wife and two young kids it was hard living on 
Unemployment and TRA weekly checks-they pay about 1/2 my former wage. 
My in-laws had to help us out and I took out a few loans to cover my 
family's living expenses. But without the checks, especially the TRA 
(Trade Readjustment Allowance) checks that started when my 6 months of 
state benefits ran out, I couldn't have made it at all.
    ``Not only was my tuition covered, but books and supplies were paid 
for by the TAA program. And if I can't find a job locally I understand 
that the TAA training program will help me look for work and move if I 
find it in another part of the state or country. I don't want to move 
my family but it helps to know I could get some help to move if I have 
to.
    ``For some of my co-workers it was hard to figure out what they 
wanted to train for their future jobs. It seems like most good paying 
manufacturing jobs are disappearing. For me it was easy because I saw 
my dad get through a stroke and then cancer. He got physical therapy 
but no real help getting back to his regular life. I wanted to help 
others do that and this training is directed to help people learn to 
use different ways to accomplish the things they need to get back to 
driving themselves, learning to use new tools like computers, to get 
back to their old jobs whenever possible.
    ``The TAA/TRA program worked pretty well for me. There were a lot 
of hoops I had to get through, deadlines that would have stopped my 
eligibility for benefits. They seemed unfair since I was doing my best 
to get on with remaking my life. State officials and a local group that 
helps unemployed people were there for me when I needed a little 
assistance getting things straightened out along the way.
    ``Thanks for listening to my story. I hope you keep this program 
for people who lose decent jobs and have to get trained for new kinds 
of work.''
    As you can see, Mr. Bolas was able to use Trade Adjustment 
Assistance to successfully transfer from a career in manufacturing to a 
career in health care. While Mr. Bolas was able to use the TAA 
effectively, he noted the difficult bureaucratic process he had to go 
through to qualify for and receive TAA benefits.
    The TAA program is a valuable tool for those who lose their jobs 
due to cheaply imported goods or job relocations outside of the United 
States. However, there are some serious issues that make TAA less 
useful than it should be. One of which is the failure to cover workers 
in service industries. For example, when USAir reservation jobs were 
relocated to El Salvador, many of my constituents lost their jobs. None 
of these workers, however, qualified for TAA. This is clearly unfair 
and we need to examine how best to address this as the program is 
reauthorized.
    There are many other issues that if corrected could make the TAA 
work better and more fairly for workers. I look forward to raising 
these issues as the reauthorization of the TAA program comes before 
Congress.
    Thank you again, Mr. Chairman. I yield back the balance of my time.
                                 ______
                                 
    [Additional submissions by Dr. Brainard follow:]
    [Internet address to Brookings Institution commentary, ``A 
Fairer Deal for America's Workers in a New Era of Offshoring,'' 
dated September 14, 2005, follows:]
http://www.brookings.edu/dybdocroot/es/commentary/journals/tradeforum/
        2005btf--brainard.pdf
                                 ______
                                 
    [Internet address to the Commonwealth Fund's issue brief, 
``Limited Take-Up of Health Coverage Tax Credits: A Challenge 
to Future Tax Credit Design,'' dated October 2005, follows:]
http://www.commonwealthfund.org/usr--doc/Dorn--limited--take-up--tax--
        credits--869--ib.pdf?section=4039
                                 ______
                                 
    [Internet address to the Economic Policy Institute's 
briefing paper, ``Globalization That Works for Working 
Americans,'' dated January 11, 2007, follows:]
http://www.sharedprosperity.org/bp179/bp179.pdf
                                 ______
                                 
    [Wall Street Journal article, ``Federal Aid Does Little for 
Free Trade's Losers,'' dated March 1, 2007, follows:]











                                 ______
                                 
    [Whereupon, at 3:21 p.m., the committee was adjourned.]

                                 
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