Dislocated Workers: An Early Look at the NAFTA Transitional Adjustment
Assistance Program (Letter Report, 11/28/94, GAO/HEHS-95-31).

The Labor Department has addressed several shortcomings affecting the
North American Free Trade Agreement's (NAFTA) Transitional Adjustment
Assistance Program.  This program, which was begun in January 1994,
provides benefits to workers who have lost their jobs because of
increased imports from or production shifts to Mexico and Canada.  By
shortening its worker certification time frame, Labor was able to make
almost all decisions on benefit eligibility within 40 days or less.
Also, the state's added role in the certification program ensured rapid
response services for workers who filed a petition.  Labor broadened the
program's eligibility requirements to include secondary workers (those
indirectly affected by NAFTA), but limited guidance, unclear authority,
and a slow and cumbersome funding mechanism may make it hard for these
workers to obtain benefits.  In addition, although the program more
closely tied cash benefits to training by eliminating waivers and
requiring workers to enroll in training, these restrictions have caused
some workers to receive incomplete assessments and remedial assistance,
along with a limited mix of services.  Labor has not addressed some
program shortcomings, such as the lack of ongoing support, follow-up,
and performance monitoring.  Labor has encouraged closer coordination
among federal dislocated worker programs but has not formally required
states to track participants.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  HEHS-95-31
     TITLE:  Dislocated Workers: An Early Look at the NAFTA Transitional 
             Adjustment Assistance Program
      DATE:  11/28/94
   SUBJECT:  Employment or training programs
             Aid for training or employment
             State-administered programs
             Federal/state relations
             Training utilization
             Vocational education
             Reductions in force
             Human resources training
             Unemployment compensation programs
             Eligibility determinations
IDENTIFIER:  NAFTA
             North American Free Trade Agreement
             Trade Adjustment Assistance Program
             DOL NAFTA Transitional Adjustment Assistance Program
             Mexico
             Canada
             DOL Economic Dislocation and Worker Adjustment Assistance 
             Program
             
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Cover
================================================================ COVER


Report to the Chairman, Employment, Housing and Aviation
Subcommittee, Committee on Government Operations, House of
Representatives

November 1994

DISLOCATED WORKERS - AN EARLY LOOK
AT THE NAFTA TRANSITIONAL
ADJUSTMENT ASSISTANCE PROGRAM

GAO/HEHS-95-31

Dislocated Workers


Abbreviations
=============================================================== ABBREV

  EDWAA - Economic Dislocation and Worker Adjustment Assistance
  NAFTA - North American Free Trade Agreement
  NAFTA-TAA - North American Free Trade Agreement Transitional
  Adjustment Assistance
  TAA - Trade Adjustment Assistance

Letter
=============================================================== LETTER


B-259260

November 28, 1994

The Honorable Collin C.  Peterson
Chairman, Employment, Housing
 and Aviation Subcommittee
Committee on Government Operations
House of Representatives

Dear Mr.  Chairman: 

In January 1994, the Department of Labor implemented a new program to
assist workers who lose their jobs as a result of the North American
Free Trade Agreement (NAFTA).\1 In developing the new NAFTA
Transitional Adjustment Assistance (NAFTA-TAA) program, Labor used
the existing Trade Adjustment Assistance (TAA) program as the model. 

However, in congressional hearings prior to the ratification of the
NAFTA treaty, our office and the Department of Labor's Inspector
General identified several shortcomings in the existing TAA program
that should be addressed in any program implemented to assist
NAFTA-affected workers.\2 In particular, we noted that the TAA
program (1) was often slow in reaching workers, (2) was not equally
accessible to all workers, (3) allowed the liberal use of training
waivers, (4) may not have tailored services, (5) did not provide
ongoing support, (6) did not link training with job opportunities,
and (7) lacked a system to monitor performance and effectiveness.  In
response, Labor promised to consider these shortcomings in the
implementation of the NAFTA-TAA program. 

Because you believe that an effective dislocated worker program is
particularly important in view of NAFTA, you asked us to do a
preliminary review of Labor's effort to make the changes needed to
provide services to NAFTA-affected workers.  More specifically, we
are reporting on Labor's efforts to shorten the time frame for
certification, include states in the certification process, broaden
eligibility requirements, and tie income support more closely to
retraining and eliminate waivers.  To respond to your request, we
spoke with program and union officials, analyzed petition data, and
visited several states to observe whether the shortcomings in the TAA
program had been addressed in the implementation of NAFTA-TAA (see
app.  I for details on our scope and methodology). 


--------------------
\1 This program was authorized under the NAFTA Worker Security Act
(Title V, P.L.  103-182). 

\2 Dislocated Workers:  Trade Adjustment Assistance Program Flawed
(GAO/T-HRD-94-4, Oct.  19, 1993) and Trade Adjustment Assistance
Program, Public Law 93-618, as Amended.  Audit of Program Outcomes in
Nine Selected States.  Fiscal Years 1991/1992, U.S Department of
Labor, Office of Inspector General, Report Number 05-93-008-03-330
(Sept.  30, 1993). 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

In summary, we found that Labor has addressed a number of
shortcomings that may have affected the NAFTA-TAA program.  For
example, Labor shortened its worker certification time frame,
resulting in almost all (94 percent) of the NAFTA-TAA determinations
being made in 40 days or less.  We also found that the state's added
role in the certification process ensured rapid response services for
workers who filed a petition. 

Although Labor broadened the NAFTA-TAA program's eligibility
requirements to include secondary workers (those indirectly affected
by NAFTA), limited guidance, unclear authority, and a slow and
cumbersome funding mechanism may make it difficult for such workers
to access benefits.  In addition, while NAFTA-TAA more closely tied
cash benefits to training by eliminating waivers and requiring
workers to enroll in training, these restrictions have resulted in
some workers receiving incomplete assessments and remedial
assistance, and a limited mix of services. 

Finally, in implementing NAFTA-TAA, Labor did not address other
shortcomings such as the lack of ongoing support, follow-up, and
performance monitoring.  While Labor has encouraged closer
coordination between federal dislocated worker programs, it has not
formally required states to track participants. 


   BACKGROUND
------------------------------------------------------------ Letter :2

The NAFTA-TAA program, which was implemented in January 1994 to
assist workers dislocated from firms because of increased imports
from or production shifts to Mexico and Canada, provides benefits in
addition to those available under the Economic Dislocation and Worker
Adjustment Assistance (EDWAA) program.\3 The NAFTA-TAA certification
process for dislocated workers to receive benefits begins when three
or more workers or an authorized representative files a petition with
the governor of the state in which the affected workers' firm is
located. 

Within 10 days of receiving a petition, the governor is to make a
preliminary finding concerning eligibility for federal dislocation
services.  At that time, individuals are considered eligible for the
EDWAA program and are to receive rapid response and basic
readjustment services.  Within 30 days of receiving the preliminary
eligibility finding from the governor, Labor is to review the
petition and make a final determination regarding certification
eligibility.  Within the first 9 months of the program, 251 petitions
were filed in 37 states and 116 petitions were certified by Labor. 
These certified petitions covered approximately 12,000 workers. 

In addition to the EDWAA rapid response and basic readjustment
services, workers certified by Labor are eligible to receive job
search and relocation assistance, job training, and cash benefits. 
NAFTA-TAA cash benefits equal the weekly unemployment benefits paid
by the state and begin immediately after these state benefits have
been exhausted.  These benefits continue for an additional 52 weeks,
but only if the certified workers are enrolled in an approved
training program within one of two deadlines.  These deadlines are
enrollment in an approved training program by (1) the last day of the
16th week of their initial unemployment insurance eligibility or (2)
the last day of the 6th week after certification, whichever is later. 
NAFTA-TAA provides training waivers of 30 days for workers who want
to receive the extended cash benefits, but only if extenuating
circumstances exist. 

In addition, Labor recognized the need for assistance to secondary
workers adversely affected by NAFTA.  Secondary workers include those
who supply or assemble products produced by directly affected firms
certified under NAFTA-TAA.  For example, workers who produce
automobile bumpers but do not work directly for the company affected
by the increased imports in cars are eligible to file a petition.\4


--------------------
\3 EDWAA is the principal job training program for dislocated
workers.  It operates in all states, providing a wide range of
reemployment assistance including classroom training, on-the-job
training, and job search assistance.  In 1993, the latest year for
which program data were available, funding of $596 million provided
assistance to about 262,000 workers.  For a discussion of the EDWAA
and TAA programs, see Dislocated Workers:  Comparison of Assistance
Programs (GAO/HRD-92-153BR,
Sept.  10, 1992). 

\4 This assistance was established by an administrative action and is
funded through existing EDWAA funds or the Secretary's National
Reserve Account.  Other workers who are eligible for this assistance
include certified workers not eligible for unemployment compensation
and those who were unable to meet the training enrollment deadline. 


   LABOR CERTIFICATION MORE TIMELY
------------------------------------------------------------ Letter :3

We found that the timeliness of the certification process has
improved.  During the first 9 months of the program, Labor completed
94 percent of its determinations within 40 days from the date the
petition was filed.  Under TAA, Labor had 60 days from the date the
petition was filed to certify workers.  In the initial months of the
program, Labor officials told us they were able to complete the
investigations under the shortened time frames because many of the
certifications had been shifts in production, which are not difficult
to determine compared with certifications involving determinations of
adverse impact from foreign imports.  In addition, Labor officials
told us that the states' role has, in effect, provided Labor with
additional field staff to collect the required data. 

Whether Labor will continue to meet the shortened time frames may
depend on the number of petition filings.  During the first 9 months
of the program, only 251 petitions were filed (see fig.  1).  By
comparison, over 1,100 TAA petitions were filed during the same time
frame. 

   Figure 1:  NAFTA-TAA Petitions
   and Certifications, by Month

   (See figure in printed
   edition.)

Before the ratification of NAFTA, Labor officials predicted that
NAFTA dislocations would be limited during the first 18 months of the
program.  Officials cited a number of reasons, including their belief
that labor-market changes would develop gradually.  In the state we
visited with few NAFTA-TAA filings, state officials cited a number of
reasons for the low number of NAFTA-TAA petitions, including improved
local economies and that some industry shifts had already occurred. 

However, some union officials voiced concerns that the lack of
program awareness and outreach in some areas might limit the number
of petitions filed.  Union officials told us that in some of the
states they visited, petition forms were not readily available in
local employment service offices and that employment service staff
were not aware of the NAFTA-TAA program. 

We found that program awareness and outreach varied in the states we
visited.  One state used a number of mechanisms to inform workers of
the NAFTA-TAA program, including posters, a recorded message for
callers waiting on hold for the state's unemployment department, and
informational letters that were distributed with unemployment checks. 
However, in another state, we found limited information at both the
state and local levels.  A worker told us that petitions were not
available at the local employment service office and that officials
provided little assistance in response to her inquiries.  Local
providers, serving certified workers, told us they received little
guidance from the state and knew very little about the program. 

Labor officials told us that there is no basis for determining
whether the number of NAFTA-TAA petitions filings is low.  However,
they agreed that states might vary in the outreach provided to
affected workers.  Labor officials also told us they did not receive
additional funding or staff with which to provide technical
assistance to the states in the implementation of the NAFTA-TAA
program.  They added that outreach is the responsibility of the
states and that Labor can only encourage states to provide outreach
to affected workers. 


   STATE ROLE ENSURES INTERVENTION
------------------------------------------------------------ Letter :4

We found that the states' role in the certification process ensures
intervention in the form of rapid response services for workers
filing a NAFTA-TAA petition.  All dislocated workers are eligible for
EDWAA services regardless of the reason for the dislocation.  In
three states we visited, officials told us that most NAFTA-affected
workers received rapid response and other EDWAA services before they
filed a petition.  But, in those instances in which the state was not
aware of the dislocations, the filing of a NAFTA-TAA petition ensured
that workers received rapid response and other basic readjustment
services. 

For two of the four petitions we tracked, the filing of a NAFTA-TAA
petition alerted state officials to the closures.  In these cases,
state officials told us they were unaware of the dislocations until
the petitions were filed.  Once the petitions were filed, the states
provided workers the rapid response and basic readjustment services
available under EDWAA.  In the other two states, the NAFTA-TAA
petitions were filed after a rapid response meeting in which
information on the NAFTA-TAA program was distributed to workers. 


   BENEFITS MAY NOT BE ACCESSIBLE
   TO ALL ELIGIBLE WORKERS
------------------------------------------------------------ Letter :5

NAFTA-TAA broadened eligibility requirements to include secondary
workers from firms indirectly affected by NAFTA, as well as other
certified workers such as those who are ineligible for state
unemployment compensation.  However, state officials told us these
workers may have difficulty accessing their benefits. 

The state officials believed that accessing these benefits might be
difficult because of limited guidance from Labor, unclear authority,
and a slow and cumbersome funding mechanism.  For example, they told
us that Labor has not provided regulations that clearly define
secondary workers.  They also said that Labor has not indicated who
has the authority or responsibility for identifying potentially
eligible workers.  Furthermore, the officials said that NAFTA-TAA
does not provide an expedited process to obtain funds under a process
that has previously been slow and cumbersome.  The officials told us
that these barriers act as a disincentive to outreach and hinder
service to secondary workers. 

A Labor official said that during the first 9 months of the program,
secondary workers had only filed one petition under NAFTA-TAA. 
Additionally, a state official told us that one group of
NAFTA-TAA-certified workers who were ineligible for unemployment
insurance benefits in that state had requested assistance under
EDWAA.  State officials involved in both petitions told us that these
workers had difficulty accessing benefits.  In one instance, Labor
took about 30 days to deny one group of workers NAFTA-TAA primary
certification and then another 30 days to certify them as secondarily
impacted. 

In the other case, a group of workers was certified under NAFTA-TAA
but was found ineligible for state unemployment insurance and thus
ineligible for NAFTA-TAA cash benefits.  Subsequently, state
officials submitted a request for assistance under EDWAA.  It took
Labor over 90 days to make a decision regarding this request.  A
state official told us that as a result of the delay, several workers
had dropped out of the program. 

Labor acknowledged that the NAFTA-TAA program for secondary workers
needs to be improved.  Labor officials agreed that the definition of
secondary workers needs clarification and the process for identifying
these workers improved.  However, they told us that they do not
believe these problems have resulted in the lack of petition filings
by secondary workers.  They believed that few secondary workers have
been affected by NAFTA because most of the firms certified to date
have been small businesses who have few, if any, suppliers. 


   BENEFITS MORE CLOSELY TIED TO
   TRAINING, BUT RESTRICTIONS
   HAMPER TAILORING
------------------------------------------------------------ Letter :6

The NAFTA-TAA law more closely tied income benefits to adjustment
assistance by eliminating waivers and requiring participants to
enroll in training.  However, these requirements might hamper the
tailoring of services to some affected workers.  Specifically,
NAFTA-TAA required that for certified workers to receive cash
benefits, they must be enrolled in an approved training program by
the last day of the 16th week of their initial unemployment insurance
eligibility or the last day of the 6th week after certification,
whichever is later.\5 While linking cash benefits to training helps
to ensure that workers get the assistance needed, especially with
delays in notification, NAFTA-TAA restrictions have resulted in some
participants receiving incomplete assessments and remedial
assistance, and a limited mix of services. 

An effective independent assessment of worker skills and interests is
key in determining what training is most effective for dislocated
workers.  However, we found that the 16/6-week enrollment deadline
shortened or eliminated assessments for some workers, especially
those who experienced delays in NAFTA-TAA eligibility notification. 
In one of the states we visited, the state did not notify workers of
their NAFTA-TAA eligibility until 2 weeks after Labor's
certification.  As a result, these participants had only 2 weeks to
enroll in training before classes began; because of the 16/6-week
enrollment requirement, these participants could not wait until the
following semester to enroll.  Local officials told us that this did
not leave time for in-depth assessment.  In another state, many of
the NAFTA-TAA-certified workers did not receive any assessment
because of time restrictions.  Many of these workers signed up for
training that was available and conveniently located, without the
benefit of a full assessment. 

We also found that for some workers, the shortened time frame limited
the amount of remedial training a worker received before having to
enroll in NAFTA-TAA-approved training.  For example, in one of the
states we visited, a group of certified workers who scored below a
12th grade level in reading and math during NAFTA-TAA assessment were
enrolled in college-level courses before they were ready.  One of the
workers we spoke with during our visit said that as a result, he was
having significant difficulty in his studies.  Further, the local
provider serving these workers told us that because of shortened
remedial preparation, some of these workers might not complete the
training. 

The elimination of training waivers also limited the mix of services
available for NAFTA-affected workers.  State and local officials told
us that training might not be needed for all participants.  They said
that some workers preferred job search or other readjustment
activities but enrolled in classroom training to receive their
extended cash benefits.  Officials told us that to better tailor
assistance, other readjustment services should also be allowable
links for receiving income-support assistance. 

In addition, Labor officials we spoke with said that the 16/6-week
enrollment deadline had resulted in some certified workers not
receiving any NAFTA-TAA services.  They told us that one group of
workers, through no fault of their own, missed both the 6- and the
16-week enrollment deadline.  In this instance, workers were not laid
off at the time of certification.  In addition, they had experienced
a separation earlier in the year.  At the time of their final
separation, 6 weeks had passed since their NAFTA-TAA certification
and 16 weeks had passed since their initial lay-off.  Consequently,
these workers were found ineligible for the NAFTA-TAA program. 

Labor officials believed that training and income support should be
linked, but they also have recognized that the 16/6-week training
enrollment deadline has resulted in a number of problems for some
workers.  Officials from Labor's Office of Trade Adjustment
Assistance told us they have suggested changing the training
enrollment requirement from the 16th week of the initial separation
to the 16th week of the final separation.  However, no further action
has been taken. 


--------------------
\5 Training is approved when it is determined that no suitable
employment exists, the worker will benefit from the training,
training will likely result in employment, training is available from
an appropriate school or other source, the worker is qualified to
undertake and complete the training, and the training is suitable for
the worker and available at a reasonable cost. 


   OTHER SHORTCOMINGS NOT
   ADDRESSED
------------------------------------------------------------ Letter :7

As previously discussed, we and the Department of Labor's Inspector
General identified several shortcomings that should be addressed in
the implementation of the NAFTA-TAA program.  However, while Labor
addressed some of these shortcomings, other concerns, such as lack of
a system to monitor performance, were not addressed.  Like TAA, the
NAFTA-TAA program does not require ongoing support, follow-up, or a
system to monitor performance. 

In the states we visited, we found that ongoing support, follow-up,
and tracking for NAFTA-TAA provided to participants varied.  For
example, in one state, NAFTA-TAA participants were routinely
co-enrolled in EDWAA.  In another state, NAFTA-TAA participants were
co-enrolled in EDWAA when funding was available.  Officials in these
two states told us that NAFTA-TAA participants who were co-enrolled
in EDWAA received routine contact and encouragement after they
entered training.  Also, co-enrolled participants were tracked and
monitored during training, and their employment status was verified
after completion.  In contrast, officials in the other two states
said they did not follow up on TAA or NAFTA-TAA participants'
training completion or track their subsequent employment because this
follow-up was not required. 

Labor recognizes the advantages of co-enrollment in the delivery of
services to trade-certified workers.  In a guidance letter dated
August 19, 1994, Labor encouraged, but did not require, all states to
dual enroll TAA and EDWAA participants.  In this letter, Labor also
stated that co-enrollment would address some of the concerns
previously identified, including the follow-up and tracking of
participants. 


---------------------------------------------------------- Letter :7.1

We did our work between April and October 1994 in accordance with
generally accepted government auditing standards.  As you requested,
we did not obtain written agency comments on a draft of this report. 
We did, however, discuss this report with Department of Labor
officials and have incorporated their comments where appropriate. 

As requested, unless you publicly announce its contents earlier, we
plan no further distribution of this report until 30 days from its
issue date.  At that time, we will send copies of this letter to the
Secretary of Labor and other interested parties. 

If you or your staff have any questions about this report, please
contact Robert T.  Rogers, Assistant Director, at (313) 256-8011. 
Other major contributors to this report were Cynthia A.  Neal and
Lynda L.  Racey. 

Sincerely yours,

Linda G.  Morra
Director, Education
 and Employment Issues


SCOPE AND METHODOLOGY
=========================================================== Appendix I

To determine whether Labor made the changes needed to provide
services to NAFTA-affected workers, we interviewed officials from the
Department of Labor's Office of Trade Adjustment Assistance regarding
the implementation of the NAFTA-TAA program and analyzed nationwide
petition data collected by Labor.  The data covered the first 9
months of the program and included the number of petitions filed,
number of workers certified, and time frames in which the
determinations were completed.  We then selected four
states--Michigan, Pennsylvania, Tennessee, and Washington--for
further review.  These states represented a cross section of
experience in the number of petitions filed and the number of workers
enrolled in training (see fig.  I.1). 

   Figure I.1:  Petitions Filed by
   State

   (See figure in printed
   edition.)

In each state, we selected one certified petition, which we tracked
at the local level.  These four petitions covered approximately 1,026
workers.  We also spoke with state and local officials in each of the
four states regarding implementation of the NAFTA-TAA program and the
services provided NAFTA-TAA participants.  At the state level, we
spoke with officials regarding program administration, including the
governor's role in the certification process.  We met with local
providers and reviewed the services provided NAFTA-certified workers. 
We also interviewed several NAFTA-TAA program participants regarding
their experiences with the program. 

In addition, we spoke with officials from the National Governor's
Association; the International Union, United Automobile, Aerospace,
and Agricultural Implement Workers of America; and the American
Federation of Labor and Congress of Industrial Organizations
regarding implementation of the NAFTA-TAA program. 

We did our work between April and October 1994.  We did not verify
the data Labor provided to us, nor did we verify the accuracy or
completeness of Labor's determinations.\6


--------------------
\6 In a prior study, Dislocated Workers:  Trade Adjustment Assistance
Program Flawed (GAO/T-HRD-94-4, Oct.  19, 1993), we estimated that 63
percent of the TAA petitions filed in 1990 and 1991 had flawed
investigations.  Many of these flaws appeared to be the result of
pressure to complete the complex investigations in 60 days. 

