Job Training and Jobless Workers

Overview
The Bush administration’s economic policies, including unfettered trade and budget-busting tax cuts for the wealthiest among us, are fueling greater economic uncertainties for ordinary Americans. Complementing the administration’s skewed priorities and flawed policies, employer cutbacks in severance pay, health care benefits, pensions, training and other workforce investments have added to economic concerns for active employees and jobless workers alike.

The Bush fiscal year (FY) 2006 budget make matters worse. Along with making deep cuts in programs on which working families rely, the budget continues to decimate and dismantle job training and employment programs for poor and unemployed workers and at-risk youths. Our most vulnerable families will pay a steep price for the administration’s wrong choices.

Good jobs that support families are the foundations of a strong economy and a strong nation, and creating and sustaining good jobs is the number one economic priority for Americans. Effective and meaningful job training programs and income support for jobless workers combined with job search assistance are key components of a comprehensive good jobs strategy. The president’s budget fails every part of the good-jobs test:

Part I. The Bush Budget Cuts All Major Worker Training Programs
The Bush budget cuts every major worker training program and repackages old initiatives that Congress declined to pass previously. In addition to cutting funds, Bush proposes drastic changes in job training and re-employment programs that will place increasing burdens on already hard-pressed working families, greatly diminish the federal role in this area of key national importance and reduce accountability and increase outsourcing of public employment service programs. The cumulative effect of the Bush proposals is to dilute the resources and efficacy of job training and job search assistance programs.

1. Cuts to Workforce Investment Act and Employment Service Programs Total cuts in real dollars: $520 million for FY 2006, $1.9 billion since FY 2001
Since taking office, President Bush has sought real dollar cuts of nearly $1.9 billion (inflation-adjusted dollars) in training and assistance programs to help unemployed and underemployed workers, including cuts in Workforce Investment Act (WIA) programs for adults and dislocated workers and in the Employment Service (ES). Notwithstanding misleading hype by the president and his representatives about their commitment to increasing job training resources, the president’s FY 2006 budget cuts job training and ES programs by more than $520 million.**

If enacted, the WIA block grant proposals Bush is advocating will cut an additional $284 million in real dollars from WIA and ES programs. The proposed new WIA Plus proposal, which would empower governors to consolidate TAA, Vocational Rehabilitation, Adult Education, Veterans Training and Food Stamp Employment and Training Programs into single block grants, would cut an additional $354 million in real dollars from these programs.

Budget cuts for job training programs have had and will continue to have predictably negative consequences. Despite employers’ growing demand for skilled workers, the number of workers trained under WIA has declined significantly from the number trained under the predecessor program, the Job Training Partnership Act (JTPA). Only 206,000 individuals received training under WIA in program year 2002 (latest available data), 34 percent fewer than received JTPA training in program year 1998, the last full year of JTPA operations. [1]

Chart 1 provides funding information for WIA and ES programs for fiscal years 2001, 2005 (enacted) and 2006 (proposed).

Forsaking Unemployed Workers
The Bush budget also invests less in helping unemployed workers get the training and assistance they need to find new jobs. These proposed reductions are in the wake of a still-lumbering recovery, in which job growth has been slow and uneven and problems of long-term joblessness persist. Yet instead of investing in proven programs that deliver guaranteed income support and job search assistance, the budget calls for squandering resources on a questionable program—Personal Re-employment Accounts—that will actually reduce, rather than increase assistance and support for unemployed job seekers.

Continued Hardship for the Unemployed
Unemployed workers and their families know the economy is not out of the woods yet. Between March 2001 and February 2005, the average length of unemployment rose from 13 weeks to 19 weeks. For much of 2004, long-term unemployment (27 weeks or longer) was at record high levels. One in five unemployed workers (1.6 million) has been jobless for more than six months. From late December 2003, when the federal emergency unemployment program ended, to mid-October 2004, more than 3 million unemployed workers—the highest number for any period of comparable length on record—exhausted their regular unemployment benefits with neither jobs nor additional federal aid on which to fall back. [2]

According to a December 2004 survey by the Heldrich Center for Workforce Development at Rutgers University, a significant share of American families has experienced layoffs since 2001:

Chart #1 Comparison of Key WIA and Employment Service Program Funding.

More than one-third (35 percent) of the surveyed workers reported they or family members had been laid off in the past three years. The same study found workers get little or no advance notice of layoffs. Companies evade existing federal notification requirements by ignoring them altogether or by staging layoffs so as to avoid the federal triggers. There is also evidence that firms are cutting back on severance pay and other benefits that can help laid off workers adjust. [3]

The consequences of job loss are profound for workers and their families, with unemployed workers who find new jobs frequently taking pay cuts. According to the Bureau of Labor Statistics, a majority of workers (57 percent) displaced from their jobs between 2001 and 2003 who found new work earned less in their subsequent positions. About one-third took a pay cut of 20 percent or more. [4]

Despite the jobs crisis of the last few years, the Bush administration has invested less in helping unemployed workers find new positions. Average per worker expenditures for WIA job training and job search assistance for dislocated workers has declined since 2001, a drop that would have been even greater had Congress gone along with cuts Bush has proposed. In real dollars, per worker spending on WIA job training and job search assistance has fallen every year since 2001, except in 2005, when Congress shifted $125 million out of displaced worker funding into the president’s community college initiative. Under the Bush FY 2006 budget, per worker spending is more than $100 less than in FY 2001, when unemployment was markedly lower.

2. Bush Budget Once Again Fails to Adequately Fund the Trade Adjustment Assistance Program and Does Nothing to Fix Its Flawed Administration Total cuts in real dollars: $103 million

The Trade Adjustment Assistance (TAA) provides income support and training to workers who lose their jobs due to trade. program, Rrenewed in 2002, and combined with the NAFTA Transitional Adjustment Assistance Program, the new TAA combined NAFTA-TAA and TAA, and significantly increased the number of workers potentially eligible for training and, income support and extended some health care coverage to eligible participants. However, the program has experienced significant problems, including and lacks insufficient resources. The Labor Department has declined to push for adequate resources or to conduct effective outreach to train state agencies and ensure that workers are aware of and receive needed benefits. TAA certification numbers vary by state, unrelated to the manufacturing job loss in each state. Many states exhaust their training funds before the end of each fiscal year, precluding numerous workers from being able to take advantage of training programs to which they are entitled. Specific concerns include the following:             

First, the Department of Labor’s TAA certifications have declined each of the last 3 years, a result at odds with the loss of 2.8 million manufacturing jobs over the same period and the explosive growth in the nation’s trade deficit, which reached a record-shattering $616 billion last year. Yet in FY 2004, only 147,658 workers were certified for TAA, down from 197,024 workers in FY 2003 and 233,204 workers in FY 2002. The trend in declining certifications continued in the first months of FY 2005.

Second, there is little question that the TAA certification numbers reflect DOL’s inadequate program administration. In the past 4 years, courts have entered numerous orders directing DOL 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. But these workers’ cases are the tip of the iceberg: The problems in DOL’s administration of TAA likely affected many more workers than those with the resources and tenacity to fight the denials in court.

Third, the TAA training grant program is the gateway through which dislocated workers obtain other TAA benefits and services. Unfortunately, the 2002 TAA Act caps appropriations for training grants. Instead of asking Congress to raise the caps to levels consistent with the need, the president’s FY 2006 budget seeks only $259 million in training funds, a $5 million cut in real dollars compared with FY 2005. The FY 2006 budget also proposes to cut funding for TAA benefits to $747 million, down from $855 million (in real dollars) in FY 2005. At a time of record trade-related job loss, TAA training funds and benefits should be increased, not cut.

Fourth, each year some states run out of training funds before year’s end, stranding dislocated workers without timely access to training they need to find new jobs. According to 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).

Fifth, there are significant problems in implementation of the TAA Health Care Tax Credit in many states, limiting access to health care for thousands of TAA-eligible participants. Through January 2004, the HCTC reached only 6 percent of workers who were receiving TAA training and income support.

Sixth, the Bush Labor Department has failed to implement or publicize the wage insurance program added to TAA in 2002, which supplements displaced workers’ wages under certain circumstances to encourage them to return to work sooner. According to the GAO, of the 1,962 approved TAA petitions in FY03, only 60 (3 percent) included approved requests for the wage insurance program.

Seventh, secondary workers are now eligible to receive benefits under the new TAA program but as the result of poor program design and inadequate guidance to identify affected workers, few 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.

Exacerbating these problems in TAA funding and implementation, the president’s FY 2006 budget contemplates a major change that will further dilute the program’s effectiveness. In addition to calling for a WIA and ES block grant, the administration proposes to allow governors to merge TAA funding with other job training programs at a reduced funding level. This “WIA Plus” proposal is inconsistent with Congress’s purpose in passing the Trade Adjustment Assistance Act in 1974, to provide support to workers who lose jobs due to increased imports and shifts in production overseas. The notion that such workers deserve special transitional assistance enjoys widespread consensus, which helped smoothed the way for passage of additional trade negotiating authority for President Bush in 2002. Allowing de facto block grants at the state level, however, will dilute TAA benefits and services, contrary to the longstanding quid pro quo of ensuring protections for workers in exchange for easing trade restrictions.

3. Forced Turnaround in H-1b Training Program**

5. New Funding for the Community College Program Comes At the Expense of Other Job Training Programs
The Bush budget proposes $250 million in funds for training programs administered by community colleges. While community colleges undoubtedly need more resources, this supposed “new funding” is simply “old money” recycled from programs the administration and congress have stripped. The FY 2005 appropriations bill took $125 million from the WIA National Emergency Grant program, a cut of over 40 percent, leaving this important program severely short of funds to help hard-pressed workers and communities. The FY 2006 budget proposes the same shell game with over $523 million in cuts to WIA and Employment Service programs, including the diversion of $125 million in national dislocated worker program funding to the new community college program.

In addition, the proposed funding is grossly inadequate to the needs of a nationwide community college system that until very recently, was still staggering under the weight of states’ worst budget crises in 60 years. States dealt with their crises by cutting funds for community colleges and universities, leading to hikes in tuition and fees, reduced admissions and more limited course offerings.

“This budget is absolutely a net loss” for community colleges, said David Baime, Vice President for Government Relations at the American Association of Community Colleges, who said he was caught “off guard” by the proposal to eliminate about $1.2 billion in annual spending on the Perkins vocational program. Community colleges receive about 40 percent of those funds, which they use to improve their technical and other vocational programs. [7]

6. Program Cuts Hurt At-Risk Youth Proposed Cuts: $61 million (real dollars)
The Bush budget proposes eliminating the WIA Youth program and consolidating youth funding into a block grant. Additionally, Bush has asked for a $61 million cut in for Job Corps, one of the most effective programs ever established to assist at-risk youth.

The cuts proposed in the FY 2006 budget are on top of President Bush’s repeated—and ultimately successful—efforts to eliminate funding for the Youth Opportunity Grants program, which provides job training to young people. In 2002, the program was funded at $225 million. In 2003, the president proposed funding of only $45 million ($43.5 million was actually funded), and in the 2004 budget, he proposed eliminating the program. Congress accepted his recommendation.

Part II. The Bush Block Grant Proposals Will Dismantle Worker Employment and Training Programs

1. Workforce Investment Act Block Grants Mean Less Training for Jobless Workers

2. The Safety Net of Employment Security and Unemployment Insurance Programs Is Undermined

A. Eliminating the U.S. Employment Service Hurts Millions of Job Seekers

Unbiased Help for All Jobseekers - Unlike private vendors, the ES places no restrictions on the employers or workers it serves. Any worker from a high school dropout to a Ph.D. and any firm from Microsoft to McDonald’s can request and receive free ES services. The ES is often the last resort for workers turned away from private placement agencies. The ES also occupies a unique position in the WIA One-Stop system, serving as the ideal entryway to One-Stop centers

In addition, the ES performs foreign labor certification, provides labor market information research and administers the “work test” for millions of Unemployment Insurance claimants, ensuring that UI claimants are registered for, and matched with, suitable job openings.

Outsourcing Employment Services - Eliminating the Employment Service opens the door to privatizing the operations it has performed. The ES is supported by statutorily dedicated federal employer payroll tax funds that, under the administration’s plan, could be diverted to funding privatized or outsourced job placement services. This change will replace the “honest broker” function of the ES with myriad organizations driven by profit, not by a commitment to public service.

Outsourcing ES operations undermines the principle of an unbiased, nonpartisan agency to administer job referrals and assist in paying UI benefits. It compromises adequate control over the uses of, and accountability for, federal funds from dedicated employer taxes. And, it weakens protections against breaches of confidential employer and claimant information and assurances that all services are provided in a nondiscriminatory manner.

In short, proposals to eliminate and block-grant the ES threaten the very foundation of a national labor exchange that cannot be replaced with 50 state privatized operations or Internet job searches.

B. Eliminating National Labor Market Information Will Jeopardize Workforce Policymaking

C. Proposed Changes Weaken the Unemployment Insurance Safety Net
Re-employment and Eligibility Assessments at WIA One-Stop Centers
The Bush administration proposes to shift responsibility for major unemployment insurance activities, such as eligibility assessments, to the WIA One-Stop System, using $10 million in proposed funding. This move would transfer resources available through the Unemployment Insurance Trust Fund to privatized WIA operations, setting the stage for outsourcing of UI administration to private contractors instead of reserving them to public agency staff.

Preventing and Detecting Fraud
Monitoring the UI system to ensure that jobless workers receive their UI benefits and employers pay UI taxes is appropriate. Erroneous overpayments of benefits to workers, deliberate or negligent failure to make employer contributions on behalf of covered employees, and erroneous underpayments and mistaken denials should be tracked and corrected. Unfortunately, the Bush FY 2006 budget places greater emphasis on detecting overpayments to workers than on achieving a balanced approach that addresses workers, employers and programmatic error.

At a time when UI administrative budgets are regularly cut, states should receive the full administrative resources necessary to help detect employer fraud and claimant overpayments. DOL should provide funding to states to track down employers who are cheating. It should give states more tools to detect fraud on the part of employers and their accounting firms, including employer misclassification of employees as independent contractors.

Additionally, DOL should not require states to use the federal income tax system to recover overpayments, as the FY 2006 budget proposes. Many states have implemented overpayment collection systems that reflect the unique circumstances of the overpayment and individual workers’ financial situations. Mandating reliance on the federal tax system would undermine these carefully tailored programs.

The budget’s proposal that states be allowed to use private collection agencies to recover “uncollectible” fraud overpayments and delinquent employer taxes is also deeply troubling. Privatizing the collection function, coupled with the powerful financial incentive the budget proposes for private collection agencies, will lead to abusive and potentially fraudulent collection practices that compromise the privacy of UI claimant and employer records and undermine the work of the state workforce agency. States should receive adequate resources for collection activities, and they should be allowed to dedicate a portion of their overpayment funds to support increased detection and auditing functions.

State Loans for Information Technology Infrastructure
UI administrative expenses have been chronically under-funded for 15 years, yet the Bush administration proposes to shift the burden for technology upgrades to the states by requiring them to take loans from the UI Trust Fund to pay for technology. States should not have to borrow for any administrative functions. The administration should provide adequate funding for the states to upgrade their UI systems and not force them into burdensome borrowing from UI trust funds that should be used for worker benefits.

Chart #4 (below) describes the funding cuts in vital ES and UI programs President Bush proposes in his FY 2006 budget.