Making Up for Lower Pay

By Lori Montgomery
Washington Post Staff Writer
Tuesday, March 6, 2007

When Michael Maynard's company announced it was moving overseas, the 53-year-old machine technician from Massachusetts quickly found a job at another firm. As the sole provider for his wife and two daughters, Maynard jumped at the new opportunity, even though he had to take a pay cut of nearly $8 an hour.

Then Maynard got lucky. He discovered that, unlike most Americans who lose their jobs, he qualified for a little-known federal program that pays up to $10,000 to certain workers dislocated by trade. In addition to his regular paycheck, he gets a government check for $117 a week, he said, a sum that "helps a lot."

Now, congressional leaders want to expand the program, known as wage insurance, with some arguing that it should be available to any worker who loses a job for almost any reason. The proposal is part of a broader effort to ease the anxieties of middle-class Americans who feel threatened by the globalization of business and a churning U.S. labor market that creates and destroys about 30 million jobs a year.

The proposal is also central to the debate in Washington over trade. Democrats warn that it will be difficult for them to extend the Bush administration's authority to negotiate trade agreements unless the social safety net for U.S. workers is significantly expanded. That authority expires in June.

"There's a huge ferment out there. And part of the reason for that ferment is that for the last 12 years we have denied what was happening to people while trade just exploded," said Rep. Jim McDermott (D-Wash.), chairman of the panel on income security and family support of the House Ways and Means Committee, which handles trade legislation.

From 2003 to 2005, 3.8 million workers were laid off from jobs they had held for at least three years because of plant closings, insufficient work or the elimination of their positions, according to data from the Bureau of Labor Statistics. About 70 percent had found new jobs by January 2006. But nearly half took a pay cut, the BLS found, and 29 percent reported earnings losses of 20 percent or more.

Only a fraction of job losses are due to increased competition from imports or the transfer of jobs overseas, economists say. Nonetheless, "people do wrongly associate a lot of job loss with trade," said Rep. Jim McCrery (La.), the ranking Republican on the Ways and Means Committee. "So addressing this in some meaningful way is necessary to keeping us at the forefront of knocking down trade barriers."

Entire Washington think tanks have cropped up to propose solutions, including a "strategic pause" in the approval of new trade agreements, a position backed by labor, and an array of expensive social reforms to ease the pain of job loss and reemployment. The Hamilton Project, founded by former Clinton Treasury secretary Robert E. Rubin, urges continued trade liberalization along with the creation of universal health insurance, more portable pensions, more focused job-training programs and wage insurance.

In Congress, leaders from both parties are working with the Bush administration to tackle the issue in hopes of proceeding with pending trade agreements -- while responding to a surge of public anger over free-trade policies, which became evident in last year's election. In recent weeks, wage insurance has emerged as a key part of those discussions.

The concept has been around for years, but no country has tried it on a grand scale, said Lael Brainard, director of the Global Economy and Development program at the Brookings Institution. The goal, she said, is to give displaced workers "a strong incentive to search actively for new employment," even at lower pay, by "smoothing over" the reduction in income.

Unlike unemployment insurance, wage insurance rewards a worker for taking a new job, Brainard said. And unlike general job-training programs, which carry no guarantee of future employment, wage insurance subsidizes on-the-job training and, in theory, helps a worker climb back up the economic ladder.

The nation's existing wage-insurance benefit was tucked into the federal Trade Adjustment Assistance program in 2002. It applies only to manufacturing workers 50 and older who are laid off as a direct result of international trade. They are eligible if they take a new job within six months of the layoff that pays less than $50,000 a year. The program, administered by the Labor Department, will make up half of a worker's lost wages for two years, up to $10,000.

CONTINUED     1        >

© 2007 The Washington Post Company