Technology and Structural Unemployment:

Reemploying Displaced Adults

February 1986

NTIS order #PB86-206174
Recommended Citation:

U.S. Congress, Office of Technology Assessment, Technology and Structural Unemployment: Reemploying Displaced Adults, OTA-ITE-250 (Washington, DC: U.S. Government Printing Office, February 1986).

Library of Congress Catalog Card Number 85-600631

For sale by the Superintendent of Documents

U.S. Government Printing Office, Washington, DC 20402
Foreword

The problems of displaced adults have received increasing attention in the 1980s,

as social, technological, and economic changes have changed the lifestyles of millions of Americans. Displaced adults are workers who have lost jobs through no

fault of their own, or homemakers who have lost their major source of financial

support.

In October 1983 OTA was asked by the Senate Committee on Finance and the

Senate Committee on Labor and Human Resources to assess the reasons and outlook for adult displacement, to evaluate the performance of existing programs to

serve displaced adults, and to identify options to improve service. In June 1984,

the House Committee on Small Business asked OTA to include in the study an examination of trends in international trade and their effects on worker displacement.

Worker displacement will continue to be an important issue for the remainder

of the decade and beyond, as the U.S. economy adapts to rapid changes in international competition, trade, and technology. While increasing automation and other

industry adjustments to new competitive forces benefit the Nation as a whole, they

do mean that millions of workers are displaced. The report shows that changes

occurring in trade and technology mean that people whose work involves mainly

routine manual and mental tasks, particularly in manufacturing, are vulnerable

to displacement. Tasks, jobs, and processes that are highly dependent on semiskilled

labor are those most likely to be moved offshore, lost to import penetration, or automated. As a result, less educated and less skilled workers are overrepresented among

the displaced, and are unlikely to qualify for highly skilled technical, professional,

or managerial positions which are less vulnerable to displacement.

This report concentrates on the problems of displaced blue-collar and nonprofessional white-collar workers. These workers are likely to face extended periods

of unemployment, loss of health insurance and retirement benefits, and reemployment only in a new job with lower pay. For many semiskilled blue-collar workers

the best route back to a good job is retraining, although even with retraining, initial wages are often lower than on the old jobs. Most displaced workers can benefit substantially from other reemployment services, such as job search assistance,

counseling, and job development. Relocation assistance is appropriate for some.

This report gives an overview of Federal programs that provide such services, and

evaluates the extent to which both private and public programs are meeting the

needs of displaced workers. It also includes an assessment of the extent to which

adult educational systems and new educational technologies can help displaced

workers and homemakers prepare for new jobs. In many cases, this preparation

involves basic education, an area where technologies such as Computer Aided Instruction and interactive videodisks are especially promising.

OTA thanks the many people—advisory panel members, government officials,

reviewers, and consultants—for their assistance. As with all OTA studies, the information, analyses, and findings of this report are solely those of OTA.

Director

. . .

I l l
Technology and Structural Unemployment:

Reemploying Displaced

Kathy Alessandro

Workers Advisory Panel

Joseph Weizenbaum, Chairman

Massachusetts Institute of Technology

Downriver Community Conference

Paul Barton

National Assessment of Educational

Progress

Marc Bendick

The Urban Institute

Paul Boyer

University of Wisconsin-Madison

Dennis Carey

Hay Associates

Dick Greenwood

International Association of Machinists and

Aerospace Workers

Donald Hancock

Vanderbilt University

Carol Hollenshead

University of Michigan

Robert Karasek

University of Southern California

Sar A. Levitan

The George Washington University

Robert Machin

Alliance Mortgage Co.

Jill Miller

Displaced Homemakers Network

Iles Minoff

Human Resources Development Institute

Ronnie Straw

Communications Workers of America

Burdette G. Taylor

IBM Corp.

Vi Traynor

American Electronics Association

Elizabeth Useem

University of Massachusetts

Gary Wuslich

LTV Steel Co.

NOTE: The Advisory Panel provided advice and comment throughout the assessment, but the members do not necessarily approve,

disapprove, or endorse the report for which OTA assumes full responsibility.

iv
OTA Project Staff–Technology

Reemploying Displaced Adults

and Structural Unemployment:

Lionel S. Johns, Assistant Director, OTA

Energy, Materials, and International Security Division

Audrey Buyrn,

Industry, Technology, and Employment Program Manager

Julie Fox Gorte, Project Director

Katherine Gillman, Senior Analyst W. Wendell Fletcher, Senior Analyst

Bradley T. Shaw, Analyst

Paula

Edna

Deborah R, Cichon, Analyst

M. Wolferseder, Research Assistant

Margaret Hilton, Analyst 1

John A. Alic, Senior Analyst

Eric Basques, Analyst

Saunders, Administrative Assistant

Andrea Amiri, Secretary

Individual Contractors

Joel Fadem

John Hansen

Bernard Ingster

Howard Rosen

Anne Covalt, Editor

Contractors

Human Resources Data Systems, Inc.

National Institute for Work and Learning

Norman D. Kurland & Associates

The Urban Institute

Industry and Trade Strategies

‘Analyst from August 1983 to September 1984.
Acknowledgments

This report was prepared by the staff of the Industry, Technology, and Employment Program of the

Office of Technology Assessment. The staff wishes to acknowledge the contribution of OTA’S contractors

in the collection, analysis, and preparation of material for the report, and to thank the following individuals, organizations, and government agencies for their generous assistance:

Abt Associates Inc.

Hal Axtell, Ford Motor Co.

William L. Batt, U.S. Department of Labor

Business Council for Effective Literacy

California Employment Training Panel

Congressional Research Service

Paul Delker, U.S. Department of Education

Displaced Homemakers Network

Employment and Immigration Canada

Ford Motor Co.

Francis Fisher, The Urban Institute

General Electric Co.

General Motors Corp.

H. Peter Gray, Rutgers University

John Hartmann, International Trade

Administration

Industrial Adjustment Service, Canada

Interstate Conference of Employment Security

Agencies

Allan Jacques, Employment and Immigration

Canada

Stan Jones, United Auto Workers of America

Mainstream Access Inc.

Mathematical Policy Research Inc.

National Commission for Employment Policy

National Governors Association

S.D. Warren Co.

The Boeing Co,

United Auto Workers

U.S. Department of Defense:

Department of the Army

Department of the Navy

Office of the Secretary of Defense

U.S. Department of Education:

Office of Educational Research and

Improvement

Office of Vocational and Adult Education

U.S. Department of Labor:

Bureau of International Labor Affairs

Bureau of Labor Statistics

Bureau of Labor-Management Relations and

Cooperative Services

Employment and Training Administration

U.S. General Accounting Office

Westat Inc.

Weyerhaeuser Co.
Contents

Chapter Page

l. Summary ... .., .., ... ... ,., ,.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

2. Policy Issues and Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

3. Worker Displacement . . . . . . . . . . . . . . . . . . . , ., . . . . . . . . . . . . . . . . . . . . . 105

4. Employment and Worker Displacement. . , ., . . . . . ., ., . . . . . . . . . . . . . . 135

5. National Displaced Worker Programs. . . . . . . . . . . . . . . . . . . . . . . . . ., . . . 163

6. Design and Performance of Displaced Worker Projects , , . . . . . . . . . . . . 225

7. Adult Education and Displaced Workers . . . . . . . . . . , . . . . . . . . . . . . . . . . 271

8. The Effects of Technological Change on the Nature and

Availability of Jobs.,., . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 321

9.The Effects of International Trade on U.S. Skills and Employment . . . . 371

10. Displaced Homemakers. , . . . . . . . . . ., . . . . . . . . . . . . . . . . . . . . . . , . . . . . . 409

Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 439

vii
Chapter 1

Summary
Contents

Page

Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . , 5

Displaced Workers: Definition and Description . . . . . . . . . . . . . . . . . . . . . . . . . 6

Displacement, Employment, and the U.S. Economy . . . . . . . . . . . . . . . . . . . 10

Displaced Worker Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Design and Performance of Displaced Worker Projects . . . . . . . . . . . . . . . . 25

Adult Education in the United States. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Causes of Displacement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Technological Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

International Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Displaced Homemakers: Program Structure and Performance . . . . . . . . . . . . 33

Policy Issues and Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

List of Figures

Figure No. Page

1-1.

1-2.

1-3.

1-4.

1-5.

1-6.

1-7.

1-8.

1-9.

1-1o.

Percentage of Displaced Workers and Percentage of

Labor Force, by Occupation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Displacement by Industry, 1979 to 1984, and Percentage of Total

Labor Force Accounted for by Each Industry, 1979 . . . . . . . . . . . . . . . . 9

Percentage of Labor Force and Percentage of Displaced Workers, by

Region, 1984 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Displaced Workers Weeks Without Work, as of January 1984 . . . . . . . . 11

State Unemployment Rates and Displacement, July 1985 . . . . . . . . . . . . 12

Production Workers as a Percentage of Manufacturing Employment.. 13

Production Workers as a Percentage of Employment in HighTechnology Industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Manufacturing Occupational Distribution . . . . . . . . . . . . . . . . . . . . . . . . . 31

Occupational Distribution in Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Trade as a Percent of GNP, 1950-84. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Ch. l—Summary ● 5

manual labor and routine mental tasks are vulnerable to computer-based technology. Through

the rest of the century, pressures for adjustment will hit hardest at people holding these

jobs.

Another group of displaced people, with

especially difficult problems of finding adequate jobs, is displaced homemakers. These are

women whose main job has been home and

family, but who must now support themselves

because of divorce, widowhood, disability or

long-term unemployment of their spouse, or

loss of eligibility for public assistance. Like

workers displaced from factories and offices,

they have lost their major source of income and

face painful readjustment problems. The number of displaced homemakers facing serious employment problems is in the millions, and is

growing. Federal assistance to displaced

homemakers has been meager in the past, but

recently was substantially increased in the Carl

D. Perkins Vocational Education Act of 1984.

Yet support for the programs serving this group

is still small in relation to their numbers. Barriers to employment are higher for displaced

homemakers than for mainstream displaced

workers, because many have little experience

in a paid job. Barriers to training are also high

because most of these women have no unemployment insurance or other income cushion

to see them through training.

To meet the challenge of living with global

competition while enhancing the quality of its

citizens’ lives, the United States will have to

move on many fronts to upgrade the skills of

its work force and to make the best use of the

abilities of its people. This includes giving all

Americans a sound basic education; giving

adult workers the opportunity to retrain later

in life, in classrooms or in the workplace; designing jobs and organizing work to take best

advantage of the skills people have or can acquire; and ensuring high-quality reemployment

and retraining services to workers who find

themselves in the wrong place at the wrong

time, and become displaced. Responsibility for

the success of such efforts is not just that of

the Federal Government, but of local and State

governments as well, working in cooperation

with employers and the private sector.

Policy options are discussed in chapter 2 of

this report, These options include congressional actions that could facilitate more rapid

response to displacement and quicker reemployment, enhancing both vocational and basic

education and training in JTPA and other programs, improving delivery of assistance to displaced homemakers, adjusting JTPA reporting

requirements to give more timely information

on program spending and services offered, improving labor market and occupational information, emphasizing research on the effects of

technological change on jobs, and enhancing

the contribution of instructional technologies

in adult education and training.

INTRODUCTION

The Senate Committee on Finance and the

Senate Committee on Labor and Human Resources requested that the Office of Technology Assessment (OTA) undertake an assessment

of the causes of and remedies for displacement.

The committees requested that special attention be given to the role of technology as a

cause of displacement, and that the assessment

explore the potential of instructional technology for retraining workers who need new skills

or basic education to find good new jobs. In

addition, these committees asked that OTA assess the extent to which occupational forecasts

made by the BLS incorporate and adjust for

technological change. A subsequent request,

made by the House Committee on Small Business, asked OTA to focus particularly on the

role of trade in causing displacement, and to

examine how trade affects employment in general, In response to these congressional interests, OTA undertook a study to answer the following general questions:
6 ● Technology and Structural Unemployment: Reemploying Displaced Adults

●

●

●

●

●

How does technological change displace

workers, and who is displaced by laborsaving machinery? What kinds of people

and industries are most likely to be affected by labor-saving technologies?

How do trade and offshore production affect employment in different sectors in the

United States? What kinds of workers and

industries are most likely to be adversely

affected by trade and relocation of production to offshore sites?

How do reemployment programs perform

in finding new jobs for eligible workers?

What kinds of services are offered, and

how effective are different types of programs and services?

To what extent do adult educational institutions serve the needs of displaced people or help adults prepare for job and career changes, and avoid displacement?

What are the roles of government and the

private sector in retraining and educating

displaced adults?

What contribution could new technologies

for training and education make in helping people to develop new skills and overcome basic skills problems?

To address these questions, OTA investigated industries affected by either significant

foreign competition or changing technologies,

or both, to find out how these changes affected

workers, numbers of job opportunities, and the

quality of jobs in the industries. National displaced worker programs and individual projects, public and private, were examined to

determine what kinds of workers are being

assisted, what kind of assistance is given, and

how well the assistance succeeded in finding

new employment and minimizing the costs of

displacement. The educational requirements of

displaced adults were assessed, as were the

abilities of existing adult education institutions

and instructional technologies in the public

and private sectors to help workers avoid displacement, by preventive training and by upgrading the skills of the work force. OTA examined the ability of the so-called hightechnology manufacturing sectors to replace

jobs lost in other sectors. Finally, OTA assessed

the overall employment trends in the United

States and their impact on the performance of

displaced worker programs and projects.

The Senate Committee on Labor and Human

Resources also requested that OTA, in addition

to assessing worker displacement, assess the

problems and needs of displaced homemakers.

To satisfy this request, OTA analyzed data

from the Bureau of the Census in order to estimate the number and characteristics of displaced homemakers and assessed the structure

and performance of national programs and individual projects for displaced homemakers.

Specific policy options were identified which

might improve the system of assistance for displaced workers, and help employed workers

make job and career transitions. In addition,

OTA identified some policy options that address occupational forecasting and research on

the employment effects of government-sponsored research. Because the report focuses primarily on displacement, other kinds of policy,

such as overall labor policy, industrial policy,

trade policy, and macroeconomic policy were

not addressed specifically. While trade, industrial adjustment, and macroeconomic performance do affect employment and displacement,

policies in these areas have other consequences

and objectives than affecting employment.

DISPLACED WORKERS: DEFINITION AND DESCRIPTION

Worker displacement is a continuing prob- products are made, and old products and techlem in a growing, dynamic economy. In the in- niques fall by the wayside. New competitors

dustrialized world, conditions of production enter the field, forcing existing enterprises to

and competition are constantly changing: new adjust or go out of business. Increasingly, this

production technologies are developed, new competition is international. The number of
Ch. l—Summary ● 7

countries whose products can hold their own

in industrialized countries is growing. There

is also a growing conviction that the pace of

such change is accelerating: that the adjustments must be made more often, that the pressure to change before the competition changes

is intensifying. Most experts agree that this dynamism is good for the economy as a whole.

The processes of competition and change allow people to choose from a wider variety of

goods and services, at lower cost, than would

be possible in a static economy.

However, technological change and world

economic interdependence mean that millions

of American workers are displaced, and some

must make forced work transitions several

times during their lives, Automation, changing conditions of trade, offshore production,

and changing consumption patterns have displaced millions of workers, and made it necessary for others to learn new skills, relocate,

or change jobs.

Between January 1979 and January 1984, 11.5

million workers lost jobs due to plant closings

or relocation, abolition of a position or a shift,

or slack work. of those, 5.1 million had had the

job for at least 3 years, and were considered displaced according to a special survey conducted

by the Census Bureau in January 1984 and analyzed by BLS. This definition underestimates

the number of displaced workers, primarily because workers (such as younger workers and

people who have just changed jobs) who have

not held their former jobs for 3 years are not

counted as displaced. However, it is inappropriate to count all 11.5 million workers who

lost their jobs during the period as displaced,

because some of the loss of jobs–particularly

that due to “slack work”—probably was cyclical.

By January 1984, 1.3 million of the 5.1 million displaced workers were still unemployed;

some 500,000 had been unemployed for more

than 27 weeks. About 730,000 people had left

the labor force, some by choice but many out

of discouragement or by retiring earlier than

they might have wished. During the entire 5-

year period, nearly one-fourth of the 5.1 million displaced workers were without work for

more than a year. Many of the 3.1 million workers who were reememployed had experienced

real difficulties finding new jobs. During the

5 years, nearly one-third of those who found

jobs and who reported their earnings had taken

pay cuts of 20 percent or more, and over onetenth of former full-time workers had taken

part-time work.2

Displaced workers are typically white males

of prime working age with a steady work history in a blue-collar job in the Midwest or

Northeast. However, many other groups are

represented. One-third of displaced workers

are women; 12 percent are black; 18 percent

are over 55. Forty percent of the full-time work

force is female, 11 percent is black, and 12

percent is over 55. Even though women are actually underrepresented in the population of

displaced workers, and black people are represented in proportion to their share of the work

force, these groups fared significantly worse

than white men in regaining employment after

being displaced.

Less skilled and less educated workers are

more likely to be displaced, and more likely to

have trouble finding a new job. Among the 5.1

million workers displaced from 1979 to 1983,

the most overrepresented occupational group

by far was machine operators, assemblers, and

repairers, who comprised 22 percent of the displaced workers but only about 7.5 percent of

the work force. Less likely to be displaced and

more likely to find replacement jobs were professionals; executive, administrative and managerial workers; technicians; salespeople; and

service workers (figure l-l).

The occupational group most at risk (machine operators, assemblers, and repairers) is

concentrated in manufacturing, and indeed,

manufacturing workers experienced job losses

far out of proportion to their numbers. Nearly

half the displaced workers were from manufacturing, although manufacturing employs

20f the 3.1 million workers considered displaced according

to the BLS definition who were reemployed by January 1984,

2 million reported earnings in both the old and the new jobs.
8 ● Technology and Structural Unemployment: Reemploying Displaced Adults

Figure 1-1.— Percentage of Displaced Workers and Percentage of Labor Force, by Occupation

SOURCE: U.S. Department of Labor, BLS, .ErnP/oYrnent and .Earnings, January 1985, and paul O. Flalrn and Ellen Sehgal, “Displaced Workers of

1979-S3: How Well Have They Fared?” Monthly Labor Review, June 1985, p. 7.

less than 20 percent of the work force (figure

1-2). The largest job losses occurred in nonelectrical machinery, automobiles, primary metals,

and textiles and apparel. Together, these four

sectors accounted for nearly 21 percent of all

displaced workers, although they employ only

about 6 percent of the work forces

Geographically, the hardest hit was the Great

Lakes region—Michigan, Ohio, Indiana, Illinois, and Wisconsin. This region accounted

for 24 percent of the displaced, but only about

18 percent of the work force. The Middle Atlantic area (New York, New Jersey, and Pennsylvania) and the East South Central region

(Mississippi, Alabama, Tennessee, and Kentucky) also had more than their share of disfigures relating to percentages of the work force in different

industries come from establishment data collected by States and

compiled by the Bureau of Labor Statistics. This data comes from

a survey of businesses with payrolls, and does not include people employed in agriculture or self-employed, The establishment

data for 1984 pertained to 82 percent of the entire work force,

or about 94 million people.

placed workers (figure 1-3). Since these regions

also are centers of manufacturing, this regional

concentration is not surprising.

Displaced workers are likely to experience

prolonged unemployment. Of the 5.1 million

workers displaced between January 1979 and

January 1984,43 percent were out of work for

at least 27 weeks, and nearly one-fourth of them

had periods of joblessness adding up to a year

or more (figure 1-4). Many of these people are

out of work long enough to exhaust unemployment insurance and family savings. Of the

nearly 2.5 million manufacturing workers displaced, less than 60 percent had found jobs as

of January 1984; the rest had either dropped

out of the labor force or were unemployed.

The costs of displacement do not usually end

with reemployment. Many displaced workers

take jobs at lower pay and status than they had

in their old jobs. Of the workers who reported

their earnings in the Census Bureau survey, 45

percent had taken a pay cut, and two-thirds of
Ch. l—Summary ● 9

Figure 1-2.— Displacement by Industry, 1979 to 1984, and Percentage of

Total Labor Force Accounted for by Each Industry, 1979

0

Mining

Construction

Durable goods

manufacturing

Nondurable goods

manufacturing

Transportation and

public utilities

Wholesale and

retail trade

Finance, insurance,

and real estate

Services

Government

Percent

I

those were earning less than 80 percent of their

former income. Even workers who find jobs

that pay as well as their former jobs may still

lose earnings over time, for they might have

received raises and adjustments for inflation

if they had been able to keep the old job. The

Congressional Budget Office found that, on

average, displaced workers experience longterm wage losses, and the greater the worker’s

seniority in the old job, the greater the loss.

Moreover, displaced workers lose benefits:

health benefits usually stop, and pension benefits suffer. The loss of health benefits is a

matter of urgent concern to many displaced

workers. A score of bills in the 98th Congress

proposed funding mechanisms for health insurance for the unemployed, and three such

bills have been introduced in the 99th Congress.

The economic stresses of displacement take

a toll in mental and physical health. Prolonged

unemployment, which most displaced workers

suffer, typically brings with it increases in

stress, anxiety, depression, physical ailments,

alcoholism, and family strife. While these emotional costs are difficult to quantify, they are

very real.
10 ● Technology and Structural Unemployment: Reemploying Displaced Adults

Figure 1-3.-Percentage of Labor Force and Percentage of Dis

by Region, 1984

Region

Percent of labor force Percent of displacement

SOURCE: US, Department of Labor, Bureau of Labor Statistics, unpublished data; and U.S. Depal

of Labor Statistics, Employment and Earnings, various issues.

placed Workers,

Iment of Labor, Bureau

Displacement, Employment, and

the U.S. Economy

Displacement can be devastating for communities and regions as well as individuals. The

decline of manufacturing has hit certain States

and regions much harder than others. Moreover, individual communities, and even whole

regions, may remain depressed for years, as

Appalachia did following the collapse of coal

mining in the 1950s and 1960s. Large losses of

employment have ripple effects in the community. A large layoff in one industry also affects

workers in supplier industries and workers in

local service establishments when laid-off

workers reduce spending. For example, the

unemployment rate of Michigan, in which

thousands of workers were displaced from the

automobile and related industries, was 10.4

percent in March 1985, still well above the national average nearly 2 years into an economic

recovery (figure 1-5).

Of course, if the economy—particularly the

local economy–is creating jobs at a healthy

rate, the ripple effects of large employment

losses dissipate more quickly, and displaced

workers may have an easier time finding new

jobs. However, the new jobs created may not

be ones that the displaced workers can move

into without major sacrifices of income, benefits and seniority, or without substantial education or training. It is unlikely that manufacturing employment—particularly production

work—will exceed its 1979 peak in the long run

(in the 1990s and beyond). Some observers, in

assessing the effects of new technology alone,

foresee a decline in manufacturing employment in absolute terms. Displaced manufacturing workers will increasingly have to find new

employment in service industries.

The shift of employment to services is well

established: in the United States, over 50 percent of employment has been in service sec-
Ch. 1—Summary ● 1 1

Figure l-4.—Displaced Workers Weeks Without Work,

as of January 1984

<5 5-14 15-28 27-52 >52

Weeks without work

SOURCE Paul O. Fla!m and Ellen Sehgal, “ Displaced Workers of 1979-83 How

Well Have They Fared?” Mofrth/y Labor Review, June 1985, p 12.

tors for over 50 years. By 1985, nearly threequarters of all employees in the United States

worked in service-producing sectors, In the last

decade and a half, nearly all the new jobs created in the United States have been in serviceproducing sectors: of the 23.3 million people

added to nonagricultural payrolls between 1970

and 1984, 94 percent were in service production; only 1 percent were in manufacturing.

Since 1979, manufacturing employment has

dropped by nearly 1.5 million employees.

The fastest growing sector is a category that

includes hotels and other lodging places, personal services, business services, auto repair

and service, motion pictures, amusement and

recreation services, health services, and miscellaneous services. Like employment in other

service-producing sectors, this sector includes

many kinds of jobs, from highly paid, wellesteemed positions such as physician, accountant, and computer programmer to low-paid,

less skilled positions such as nurse aide, clerktypist, and cashier. In general, employment in

service-producing sectors is lower paid than in

manufacturing: in 1984, average hourly wages

for production and nonsupervisory workers in

all the service-producing sectors was $7.52,

compared to $9.18 in manufacturing. Service

sectors have higher concentrations of jobs both

in generally low-paying occupations and in

management than manufacturing does. For displaced workers, who are often unable to move

into the more desirable jobs in service sectors

without substantial education or retraining,

moving to the service sector probably will

mean loss of income and status.

Some workers, of course, will be able to shift

from one manufacturing job to another, but

high-technology manufacturing sectors, such as

computer and semiconductor manufacture, are

unlikely to rescue many workers displaced from

traditional manufacturing sectors. While hightechnology industries have created jobs faster

than the economy as a whole, the employment

base of these industries is small, so the number of jobs created is relatively modest. Depending on the definition of high technology

chosen, only about 2.8 million to 9.7 million

people worked in high-technology manufacturing sectors in 1984.4 According to the most restrictive definition, which includes the sectors

most people would identify as high-technology

sectors, only 2.8 million people were employed

in high-technology manufacturing industries

‘The most restrictive definition of high-technology includes

industries with a ratio of research and development expenditures to net sales at least twice the ak’erage of all industries. This

definition includes sectors most people would identify as hightechnology: drugs; office, computing, and accounting machines;

communication equipment; electronic components and accessories; aircraft and parts; and guided missiles and space vehicles. The most liberal definition includes industries with a

proportion of technology-oriented workers (engineers, life and

physical scientists, mathematical specialists, engineering and

science technicians, and computer specialists) at least 1.5 times

the average for all industries. This definition includes many industries not commonly thought of as high-technology, such as

heavy construction; paints and allied products; soaps, cleaners

and toilet preparations; farm and garden machinery; and motor vehicles and equipment,
12 ● Technology and Structural Unemployment: Reemploying Displaced Adults

Unemployment rate (percent)

1 n 1 1 n 1 n West Virginia

Louisiana

Mississippi

Michigan

Alaska

Illinois

Oregon

Alabama

New Mexico

Ohio

Kentucky

Washington

Tennessee

Indiana

Nevada

Arkansas

Texas

California

Iowa

NATIONAL AVERAGE

Oklahoma

Idaho

Georgia

Florida

Montana

Arizona

New York

1

I 1

Missouri

Wisconsin

Wyoming J

Utah 1

Hawaii J

North Carolina

New Jersey

~

1

Colorado

South Dakota

Delaware

~

1

Connecticut ~
Ch. l—Summary ● 1 3

in 1984. Moreover, employment in many hightechnology sectors increasingly is skewed

toward managerial and professional occupations, which most displaced workers are unqualified for without a great deal of additional

education. Production jobs have grown more

slowly than total employment in many important high-technology sectors, and account for

less than 48 percent of employment in hightechnology manufacturing. In all manufacturing, production workers account for about 69

percent of employment (figures 1-6 and 1-7).

In addition, high-technology manufacturing

workers are not invulnerable to the economic

forces that lead to displacement. The persistent high value of the dollar in currency exchange markets has hurt high-technology manufacturers as well as traditional manufacturers.

While a fall in the value of the dollar would

help restore the competitiveness of some firms,

the long duration of the dollar’s imbalance has

allowed foreign producers of high-technology

as well as traditional goods to develop distribution and servicing networks throughout the

world. Recapturing this lost market share will

not be automatic or simple for U.S. producers.

Altogether, it is unlikely that high-technology

sectors will make up for lost employment in

declining manufacturing industries in the foreseeable future.

Small business cannot be counted on to make

up all the job losses in large manufacturing

firms. Although most evidence shows that

small businesses at times create more jobs than

large ones, the differential is uncertain and

may be rather small over the long run. Conclusions that small businesses create far more than

their share of jobs have been drawn from data

on establishments, which are not necessarily

the same as businesses; many small establishments are branches or subsidiaries of larger

firms. In 1978-80, small establishments created

jobs out of proportion to their share of total employment, but small firms (fewer than 100 employees) accounted for little more than would

Figure 1-.— Production Workers as a Percentage of Manufacturing Employment
14 ● Technology and Structural Unemployment: Reemploying Displaced Adults

Figure 1=7.—Production Workers as a Percentage of Employment in High-echnology Industries

54

53

52

51

48

47

46

—

1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984

Year

SOURCE: U S. Department of Labor, Bureau of Labor Statistics, Employment and Earnings, various issues,

be expected. In that period, small firms had 36

percent of total employment and generated 39

percent of new jobs. During the 1980-82 recessions, however, very small firms (fewer than

20 employees) generated all the net new jobs

in the economy; other sizes of business showed

declines during this period. Whether small

firms create more than their share of employment over the long term is unclear; the job creation record of small business appears highly

variable.

Displaced Worker Programs

Displaced workers are not the only unemployed workers. According to the definition of

displacement of the U.S. Department of Labor,

displaced workers accounted for about 14 percent of unemployment in January 1984. Displaced workers have the advantage of established work histories and good work habits,

and many have some transferable skills. As a

result, they are usually more employable than

disadvantaged workers or unemployed teenagers, many of whom lack acceptable work

habits such as demonstrated willingness to

show up on time and put in the requisite number of hours. In view of the greater problems

of the disadvantaged and current constraints

on public spending, some observers question

whether the government should provide special services for displaced workers.

One justification for government programs

for displaced workers is that these people bear

a disproportionate share of the burden for having a dynamic, adaptable, and generally open

economy. Displaced worker programs may be

viewed as the price society pays for an open

trade policy and for a labor market that permits private employers considerable latitude in

hiring and firing—much more than in some

other industrialized countries. Another justification is that displaced worker programs can

also help society avoid other kinds of expenditure, such as unemployment insurance, food

stamps, Medicaid, and welfare that arise during long stretches of unemployment. Little recent information is available on the extent to

which displaced worker programs substitute

for other kinds of social expenditures, but

earlier studies, evaluating the displaced worker

program of the 1960s, found that savings in

welfare and other transfer payments were large
Ch. I—Summary ● 7 5

enough to pay back the investment of public

funds in 2 to 4 years.

Concern over displacement, and government

programs designed to serve displaced workers,

tend to wax with unemployment and wane as

employment recovers. In 1962, concerned with

rising unemployment rates and fearing that

automation would aggravate unemployment,

Congress provided special funding for displaced workers in the Manpower Development

and Training Act (MDTA). Within 2 years,

however, a prosperous economy and falling unemployment caused a shift in the emphasis of

government employment and training programs,

toward assistance for disadvantaged workers.

The unemployment rate stayed low throughout the 1960s, partly due to the enormous fiscal stimulus of the Vietnam conflict and the

Great Society programs. In the 1970s, unemployment rates again edged up. By the late

1970s, unemployment in a nonrecession economy had risen to 7 percent, and it hit a postWorld War II high of 10.8 percent in December 1982, at the depth of the recession. Concern over displacement reemerged strongly.

Concern was translated into action with the

1982 Job Training Partnership Act (JTPA, Public Law 97-300). Title III of JTPA authorized

services for displaced workers. In October

1983, State Title III programs to serve displaced workers were initiated. Federal funding of $223 million was provided for a startup

period of 21 months.5 JTPA Title 111 was the

first Federal program designed to serve all

groups of displaced workers since the beginning of MDTA, in the early 1960s.

Although unemployment remains high by the

standards of the past four and a half decades,

it has fallen from its peak in the 1981-82 recession. In mid-1985, civilian unemployment fluctuated between 7 and 7.5 percent for nearly a

year, dipping to 7 percent in August. With the

unemployment rate falling from recession highs,

concern over displaced workers also lessened.

The economic recovery neither stopped nor

even greatly reduced displacement. Displacement is an ongoing process, associated with

technical and economic change, and the problems of displacement are not the same as those

of general or cyclical unemployment. Plant

closings and mass layoffs, major contributors

to displacement, are continuing during the recovery. Moreover, plant closings and mass

layoffs are by no means confined to mature industries such as steel, textiles, and automobiles.

For example, in Santa Clara County (California’s Silicon Valley) semiconductor industry

employment fell by about 2,000 in a few months,

from 51,000 in November 1984 to 49,000 in

May 1985. In the semiconductor industry as

a whole, employment fell by 9,600 between its

peak in December 1984 and July 1985.

The need for services to displaced workers

does not vanish during economic recovery and

growth. There is a continuing need for displaced worker services in an economy that is

changing as rapidly as that of the United States.

The demand for services may be greater during recessions, when it is more difficult for

displaced workers to find jobs on their own.

Displacement itself may increase during recessions, as some marginally competitive firms

close or permanently cut back production and

employment. For example, employment losses

in the textile industry have been heavy during

recessions, and these losses have not been

made up during recoveries. According to the

BLS survey, over 1.2 million workers were

displaced even in 1979, by most standards a

healthy year economically.6

Performance of JTPA Title III

Judgments about the effectiveness of Title III

should be made cautiously at this point. JTPA

Title 111 is the first comprehensive program for

displaced workers in nearly 20 years. Most

States have had to spend some part of the first

2 years of Title III’s existence organizing to

sThis funding covered fiscal year 1983 and the transition year,

a 9-month period from October 1983 to June 1984. JTPA is funded

by program year, beginning in July, rather than in October as

the Federal fiscal year does.

6This figure may be an understatement, because the workers

were surveyed 5 years after job losses occurring in 1979; according to BLS, people tend to forget events of the more distant past,

and probably underreported job losses in the earlier years of the

5-year period.
16 ● Technology and Structural Unemployment: Reemploying Displaced Adults

serve displaced workers. Few projects have yet

learned how to cope with differing economic

circumstances and changing populations of

displaced workers. As a result, some projects

and States have spent their initial allotments

of funds quite slowly, leaving $184.5 million

in unspent, but probably mostly obligated,

funds by June 1985.

Title III served 96,100 workers in its first 9

months, and another 132,200 workers were

newly enrolled in the full program year July

1984 June 1985. This is probably less than 5 percent of the eligible population. In 1983 over

3 million adult workers were displaced from

their jobs, according to the BLS survey; most

of these workers were eligible for Title III

services. 7 So far, the number of workers served

per year by Title III is about 3.5 times the

number of workers served by the Industrial

Adjustment Service (IAS) of Canada, while the

U.S. work force is almost 10 times larger than

Canada’s.

IAS and Title 111 are different: the Title 111

program offers a broad range of services, including counseling, job search and placement

assistance, vocational training, and education.

The IAS program is focused on helping displaced workers find new jobs quickly, offering

services immediately on notification of mass

layoffs or plant closings. The IAS program does

not itself provide vocational training or education, but can refer workers to Canada’s extensive, free adult training program. However,

IAS reaches many more workers, in relation

to the size of the Canadian labor force than

Title 111 does for the U.S. work force. If a

program similar to the IAS existed in the United

States, the number of people seeking services

from JTPA Title 111 might well increase.

So far, in a number of respects, the Title III

program seems to be working in accordance

with major emphases in the law. The Federal

role is minor, and States are in control of the

TThe eligible population in 1983 was roughly 3 million workers, based on the BLS survey which found 11.5 million people

had lost jobs due to employment cutbacks from 1979 to 1983.

Although BLS defines only 5.1 million of these people as displaced, holding the former job for 3 years is not a requirement

for eligibility in most States.

program. The influence of the private sector

is strong, particularly in the emphasis on placement, low costs, and marketing the program

to potential employers. The act’s limits on

administrative and support services have been

satisfied.

Whether Title III is an effective and sufficient

response to the problem of worker displacement is questionable. One important question

is whether the heavy emphasis on placement

may divert attention and resources away from

training. The limited information available on

program spending indicates that vocational

skills training in Title 111 programs is probably

sparse. Generally, the majority of displaced

workers are much more interested in returning

to work than in training or education, although

a significant minority of the people may become interested in training opportunities.

While retraining for strictly “high-technology”

skills and occupations may have been overemphasized in the past, training is still a very

important component of well-run displaced

worker programs. For many displaced workers, training is the best route back to a job with

reasonable opportunities for advancement.

This is particularly true for unskilled or semiskilled manufacturing production workers,

whose former jobs were based largely on routine manual and mental skills. Many of these

people need substantial retraining or education

to get good jobs in the service-producing sectors, where most new jobs are being created.

In well-run programs such as the Downriver

Community Conference in Wyandotte, Michigan, and the reemployment program at the

former Ford assembly plant in Milpitas, California, a substantial minority of workers–20

to 35 percent—are likely to choose and benefit from vocational skills training. It should be

emphasized that these percentages would be

much lower without these programs’ strong

commitment to counseling and encouraging

workers who are qualified to consider training.

A substantial barrier to retraining for displaced workers who are interested and qualified is that few adults can undertake it without income support. Basic unemployment

insurance (UI) benefits, lasting 26 weeks, are
Ch. l—Summary ● 1 7

Photo credits: Downriver Community Conference

In well-run training programs, workers may be trained in both

traditional and high-technology occupations
18 ● Technology and Structural Unemployment: Reemploying Displaced Adults

the main source of income for most workers

in training. Some training institutions and

programs have adapted effective courses to fit

this constraint, but by no means all. Extensive

training, without other sources of financial

support than basic UI, is often infeasible.

Judging by available numbers on spending,

emphasis on and commitment to training may

not be characteristic of JTPA Title III projects.

In the initial 9 months of Title III, spending per

worker averaged $768 and in the following

program year $895, far less than the approximately $3,000 spent on each worker at the Ford

Milpitas plant, where training–usually the

most expensive service offered in any displaced worker project—was emphasized heavily. However, information on Title III program

spending and services are both too limited and

too out-of-date to judge the effectiveness and

appropriateness of the program’s training component.

Another concern is the low priority most

State Title III programs give to remedial or

brush-up education for displaced workers, even

though displaced workers who lack good basic

skills will increasingly be forced to take lowwage jobs. A substantial proportion of U.S.

workers are poorly equipped to learn new job

skills, except for relatively elementary ones,

because they have deficiencies in basic education, or use only a narrow range of job skills

that do not transfer easily to different occupations.

While estimates of adult functional illiteracy

are both outdated and misleading, it is clear

that large numbers of adults lack adequate

skills in reading, writing, mathematics, problem-solving, and communication. These people

will find it increasingly difficult to compete

successfully for good new jobs once displaced,

or to qualify for occupational skills training.

Many people require remedial education before

they can benefit from other kinds of training.

Lack of basic skills in the work force is a

problem for U.S. businesses as well as for individuals. The lack may manifest itself in

sluggish productivity growth, increased needs

for supervision, and deficient product quality.

These costs are difficult to quantify but are

probably substantial. While private firms can

and sometimes do provide basic education to

employees, many employers feel, with some

justification, that it is the job of the public

school system, not business, to make sure that

people enter the work force with adequate

basic skills.

Retraining programs, which usually stress

placement, often do not emphasize basic skills

or remedial education. As a result, many

people with basic skills problems receive no

help at all from Title III projects. Few States

have made remedial education an integral part

of Title 111 services, although some with large

numbers of non-English speaking workers have

given it considerable attention. Most State directors of Title III programs see little need for

providing remedial education, because they

believe displaced workers have adequate basic

skills, because remedial education is available

elsewhere, or because of lack of interest on the

part of the displaced workers. Project staff who

work directly with displaced workers often see

the matter differently; a number of projects

have reported that one-fifth to one-third of their

clients cannot read or figure at the sixth-grade

level. Many displaced workers lack the basic

skills which would qualify them for good new

jobs or for training in skilled occupations. This

is especially true of those who formerly held

semiskilled or unskilled jobs—the same workers who are especially vulnerable to displacement. Displaced worker programs can offer

very effective remedial education services, as

some outstanding individual projects have

shown.

Of course, overcoming basic skills deficiencies is the responsibility of the individual as

well as that of society. In many areas, federally supported remedial education can be had

at little cost except time and effort. However,

demands for free remedial education are often

greater than the supply and waiting lists for

publicly funded remedial education classes exist in some areas. Even so, the majority of adult

workers with basic skills deficiencies do not

apply for remedial education, due to scheduling problems, inadequate motivation, or lack
Ch. I—Summary ● 1 9

of self-confidence. To reach these people, more

extensive outreach efforts are needed and, in

many areas, additional service.

State directors do see a need for early warning of plant closures and large layoffs. This

would allow States to begin offering assistance

before workers are out of jobs. This service is

permitted by JTPA but is difficult to provide

without advance information about layoffs.

Several States have put considerable effort into

offering services and information to workers

before they lose their jobs. These programs attempt to find out about impending layoffs by

enlisting voluntary cooperation of companies.

Typically, when the rapid response teams learn

about a planned plant closing, they mobilize

the local Employment Service (ES) office, the

State education and training authorities, and

community social service agencies to make a

plant visit acquainting the soon-to-be-displaced

workers with the options open to them. States

vary in their ability to provide quality pre-layoff

services. Some simply point the workers to

services available from established agencies,

but a few have developed an integrated set of

services, including special efforts to find new

jobs before the layoffs occur.

Some companies try to provide advance

notice of large layoffs or closings voluntarily;

others are required to do so in the bargaining

agreements with their unions. Others provide

little or no notice. Many workers receive only

2 weeks notice, or less, at the end of their jobs.

Over the past decade, the Congress, at least 20

States, and several localities have considered

legal mandates for advance notice, but there

is little actual legislation. Three States—Massachusetts, Michigan, and Wisconsin—encourage voluntary advance notice, but only one

State statute (Maine’s) requires it.

Some workers will not take advantage of adjustment services early, but having them available is important to boost workers’ morale and

allow them to plan ahead. It is also important

to offer training while workers are eligible for

the maximum amount of unemployment insurance or other forms of income support. It must

be noted, however, that early notice does little good if there is no program available offering reemployment and retraining services to

the workers. Despite the efforts in some States

to provide a rapid response to plant closures

and layoffs, it appeared in mid-1985 that many

States were still not adequately organized to

offer adjustment services promptly. Delays of

several months in delivery of Title III services

were not uncommon, even though response

times have improved since the Title III programs officially began in October 1983. Some

projects have nonetheless done an excellent

job. The Ford Milpitas project was an outstanding example of a prompt, positive response to

plant closing. Important factors in its success

were the 6-month advance notice required by

the Ford-UAW bargaining agreement; early

provision of an array of effective services; the

excellent leadership provided by Ford staff and

UAW members, who together ran the program;

and the help provided by agencies of the State

of California}

At the Federal level, advance notice legislation has been introduced in every Congress

since 1974, but none has been adopted. A bill

that reached the floor of the House in November 1985 was voted down by a close margin.

Opposition to advance notice is based on arguments: 1) that the requirement burdens business, forcing companies to keep troubled establishments open longer than is economical;

and 2) that advance notice can have perverse

effects, undermining the morale of the work

force and the confidence of suppliers, customers, and creditors. Proponents argue that businesses in European countries and Canada are

able to comply with advance notice requirements; Canadian officials report that difficulties with early notification are not an issue. Experience also shows that worker morale can

stay remarkably high after a plant closing announcement, so long as effective readjustment

services (which Title III can make available)

are offered promptly. However, advance notice might impose additional burdens on business and probably would increase demands—

and spending—for readjustment services.

Another issue is whether the Title 111 program will receive reliable, sufficient funding.
20 ● Technology and Structural Unemployment: Reemploying Displaced Adults

Two years after the program officially began,

Congress voted to cut Federal funding for the

program by 55 percent, from $223 million in

fiscal year 1985 to $100 million in fiscal year

1986. In proposing the reduction in early 1985,

the Administration cited low demand for expensive classroom training, a lower-than-expected rate of spending, and a large carryover

of unspent funds. Department of Labor (DOL)

officials argued that the cut would not affect

levels of service, because of the carryover funds

(which amounted to $184,5 million on June 30,

1985, the end of the program year). The National Governors’ Association, representing the

States, strongly opposed the reduction, arguing that most States had fully obligated their

Title III funds at the end of the program year;

that spending is on a rising curve, as States get

more experience with their newly established

Title 111 programs; and that the cuts would

force sharp reductions in services to displaced

workers in many States.

The General Accounting Office presented

evidence that, because of differences in rates

of spending and carryover funds among States,

23 States would have less money for services

to displaced workers in 1986 than was allocated to them in 1985. Most Title III funds are

allocated among the States by a formula that

is written in the law, so that changing the

allocation would be difficult. Thus, the overall

reduction in funding might mean that States

which began an active displaced worker

program early and spent most of their allocated

funds would have to cut back services.

Congress responded to this concern by

directing the Secretary of Labor to give

adversely affected States first priority for Title

111 discretionary funds, which are not allocated

by formula but are granted at the discretion of

the Secretary. What effect these funding

changes will have on the stability, quality, and

level of services to workers is not yet clear.

A problem that became evident throughout

1985, as Congress considered JTPA budget and

appropriation proposals, is that information on

Title III program spending and services is neither timely nor adequate. States are required

to submit reports on their Title III programs

only once a year, covering activities through

the end of the program year, June 30, and due

45 days later. The reports usually are not

complete until several weeks later. Thus, in the

spring, summer, and early fall, when Congress

is considering the budget for the following

fiscal year, the most recent State reports on

program activities are several months to more

than a year out of date.

In April 1985, for example, when Congress

considered the Administration’s proposal to rescind Title 111 funds for fiscal year 1985, the

State reports were nearly 10 months old.

Congress did not act on the rescission. In midSeptember, when congressional committees

were marking up and voting on JTPA funding

bills for fiscal year 1986, these State reports

dating from June 1984 were still the latest available on Title III activities. More recent data,

drawn from State reports for the program year

ending June 30, 1985, became available only

in the last few weeks before Congress took final

action on JTPA funding. The infrequency of

the reports lessens their value for oversight of

the program as well as for budget decisions.

The sparsity of data in State Title III reports

is also a problem. The Labor Department requires that they record only the amount of Title III funds spent during the program year;

numbers of workers served, numbers officially

leaving the program, and numbers placed in

jobs; and a few characteristics of the workers

finishing their stay in the program, such as age,

sex, race, and level of education. The reports

do not record obligation of funds by the end

of the program year, only spending; nor do they

provide information on how many workers are

receiving what kinds of services (e.g., vocational skills training in institutions, remedial education, relocation assistance, job search assistance, and on-the-job training).

Other Federal Programs

While JTPA Title III is the first comprehensive Federal program offering assistance to displaced workers in nearly two decades, other

Federal programs and agencies also play a role.

The most important are Trade Adjustment As-
Ch. l—Summary ● 2 1

sistance (TAA), providing compensation and

adjustment services to workers displaced as a

result of foreign competition, and the ES, the

long-established job placement service open to

every worker in the United States.

Trade Adjustment Assistance was established

in 1962, but served very few workers until requirements for eligibility were liberalized in

1974. The number of workers served by TAA

peaked in 1980, at 585,243. The program has

been cut substantially since 1981, when Congress redefined and limited TAA income support payments. In 1984, 29,300 workers were

served. Spending peaked at $1.6 billion in fiscal

year 1980, and declined to approximately $56

million in fiscal year 1984.

In the past, TAA was criticized for providing mostly income supplements, with few real

adjustment services. In the mid-1980s, the emphasis has shifted to training and helping eligible workers look for work in more promising areas and relocating. In 1984, 24,000 workers

received income support payments, 6,538 entered training, and 2,382 were given relocation

assistance. 8 Outlays for training in 1984 were

$18.5 million, compared with $5.2 million in

1980.

For eligible workers, TAA provides some significant benefits which JTPA Title 111 does not.

TAA income support payments can last as long

as 18 months for workers in training, and relocation assistance is more generous than

under JTPA. TAA support has made it possible

for some workers to complete longer term

training than they could otherwise have afforded, and encouraged some relocation out of

depressed areas.

The status of TAA was uncertain as this report was completed (in December 1985). Up for

reauthorization in 1985, TAA was temporarily

extended by Congress through December 19.

However, Congress adjourned for the year

without completing action on a budget reconciliation bill that proposed a longer term reauthorization for TAA. Meanwhile, under the

continuing resolution, TAA-eligible workers

aThe degree of overlap in these figures is unknown.

can continue to receive retraining and relocation assistance, but not income support, through

the end of fiscal year 1986. Hence, authorization for TAA technically expired, but the 99th

Congress was expected to give further consideration to the program in its second session.

One major concern regarding TAA is that it

is difficult, and possibly inequitable, to try to

distinguish among displaced workers by cause

of displacement and single out one group for

special treatment. The Administration, arguing

that Congress should allow the program to die,

held that TAA is unnecessary because JTPA

programs offer adequate services to all displaced workers, and because the Unemployment Insurance system provides income support to all unemployed workers. On the other

hand, TAA maybe warranted as the price of

liberal trade policies that benefit society as a

whole. Also, the program may help to ease protectionist sentiments among workers and industries affected by trade.

The ES system administers UI payments, often the only source of financial support unemployed displaced workers have. The national

network of federally funded Employment

Service (ES) offices provides free services such

as placement or helping clients to learn job

search skills. It generally serves a small segment of the labor market; when last surveyed,

only about 5 percent of people looking for work

reported they found jobs through their local ES

office. Although ES offices can offer additional

services such as skills assessment, job counseling, job development, and referral to suitable

training, most do not have the resources to provide these services to any but a few clients.

Title III projects often buy these services from

the local ES office. To expand the services to

all clients, the ES system would need additional

resources.

Congress has shown a special interest in two

of the services provided by the ES. First, JTPA,

like previous employment and training laws,

calls for the establishment of a computerized

interstate job bank and job matching system.

This goal is only partially fulfilled by the

Interstate Job Bank, in operation since 1984.

The bank’s coverage is limited to hard-to-fill
22 ● Technology and Structural Unemployment: Reemploying Displaced Adults

technical and professional jobs, and it is by no

means fully automated; many offices send job

orders to the bank by mail. An intermediate

step providing improved labor exchange information would be to upgrade and automate

intrastate job banks, so that information on job

openings and applicants could be quickly available throughout each State. For States with

compatible systems, electronic communication

or networking would be a possible next step.

Full automation of either the interstate or

intrastate job banks would require upgrading

many State systems, and this upgrading could

require substantial outlays of funds. One estimate, made by a committee of the Interstate

Conference of Employment Security Agencies,

was at least $240 million in capita] outlays

spread over 5 years. This figure does not include software, personnel training, and transmission equipment; on the other hand, it does

not reflect savings in maintenance and operation that can be expected from using a modern, efficient system. Thus, the cost of a fully

computerized, on-line, interactive national job

bank has not been estimated.

It is not certain that the expense of full computerization and extension of the Interstate Job

Bank to cover lower paid, lower skill jobs

would be justified, particularly since the interstate system would be useful only to workers

willing to relocate. However, a system that

could help displaced workers get jobs in distant

locations might help encourage some displaced

workers from communities where job prospects are poor to relocate. Moreover, improved,

automated job banks might work more effectively, thus encouraging more employers to list

jobs and more qualified workers to apply. Currently, there is no reliable information on the

full costs and potential benefits of automating

the Interstate Job Bank. Before launching into

a full-scale effort to automate, a comprehensive

analysis of such costs and benefits is needed.

The analysis should include a comparison of

a centralized national system with several ways

of linking individual automated State systems.

JTPA also requires the Department of Labor

to assist States in providing detailed information on local labor markets. The weakest element in local labor market information is data

on occupations currently in demand. For many

local labor markets, it is difficult to obtain this

information. The Department of Labor has provided some assistance to States in this area, in

connection with national occupational surveys,

but many State ES systems do not have the expert staff and funds needed to analyze the information available through DOL surveys. With

reductions in Federal funding over the last few

years, some State ES offices have taken major

cuts in research and analysis. The Administration opposes Federal assistance to States for

labor market information programs not targeted for national purposes, and proposes to

cut the small amount of funding currently

available to States for local labor market planning information.

Non-Federal Programs

Some State programs and collective bargaining agreements also contain provisions to help

displaced workers. In addition, many of these

programs are set up to train active workers to

avoid displacement. Retraining of active workers is not authorized under JTPA Title III. California has a program funded at $55 million per

year for retraining both displaced workers, and

active workers who are in danger of losing

their jobs unless they are retrained. The California Employment Training Panel is paying,

for example, for the retraining of tellers and

clerical workers of a major bank, where workers might otherwise lose their jobs as the bank

automates and closes branch offices.

Both General Motors and Ford have agreements with the United Auto Workers (UAW),

providing that money be donated to a retraining fund on the basis of hours worked by union

production employees. The Bell companies

also have agreements with the Communications Workers of American to fund retraining

of their employees. A major advantage some

projects have found in using the private training funds is that they are available immediately.

They can be used to start up services to workers promptly, without waiting until States or

the U.S. Department of Labor provide JTPA

funds—a process that often takes months.
Ch. l—Summary ● 2 3

Another strategy that some States and local

governments have adopted is to assist firms

threatened with failure to stay in business. This

helps maintain not only jobs but the economic

life of communities. While many enterprises

cannot be saved without continuing subsidies,

some plant closings are avoidable. Community

or State assistance may help keep some businesses afloat when certain conditions are met.

First, there must be enough time to devise and

implement a strategy to improve the ability of

firms to compete; often, this means a year or

more, Second, there must be a reasonable likelihood of profitability once a strategy is implemented. Finally, both labor and management

must be willing to make some sacrifices. Even

if all these conditions are met, some jobs may

be lost as firms become more efficient and raise

productivity. However, successful community

and State assistance to troubled firms can preserve some employment which would be lost

if the businesses failed.

Foreign Programs

Labor policies to avoid displacement, to assist workers who are displaced, and to offer retraining to adult workers have generally been

less active in the United States than in some

other industrial democracies. Most European

countries and Canada have programs designed

to deal with displacement. Even in Japan, where

the active government role is small, social and

business customs often provide a high degree

of security for some of the work force (primarily males). Many of these foreign programs are

considered successful, but probably would not

transfer well to the United States, However,

elements of them can be instructive.

Sweden’s adult training programs and employment services are generally considered

effective at finding jobs for people and, when

there are few jobs to be had, at providing adults

with excellent opportunities to acquire new

skills. This effectiveness stems partly from the

involvement of business and labor in determining what kinds of training are needed. Laidoff Swedish workers who cannot find work

usually enter training, which gives them new

skills and may enable them to get new jobs.

This also keeps the unemployment rate low,

since workers in training are not considered

unemployed. To the Swedes, paying income

support for people in training is preferable to

paying unemployment insurance, and it upgrades the work force. For people who do not

require training, individualized job-hunting

services are provided. Advance notice of plant

closings allows rapid response to avoid long

layoffs.

The Swedish system of dealing with displacement has many elements that would be impractical in the United States. It is extremely expensive—Sweden’s labor programs account for

2 to 3 percent of its gross national product

(GNP)–and rely heavily on subsidies to industries to keep people employed. Its main beneficiaries are employed workers, while new

entrants to the labor market do not enjoy the

same access to services. The system also may

tend to discourage worker mobility, and relies

on immigrant guestworkers to take the less

secure jobs, While Swedish labor policies have

kept the unemployment rate low–less than 3.5

percent even during the recent recession and

3.3 percent in 1984—the Swedish economy is

not without troubles. Inflation in Sweden has

been higher than in the United States for over

a decade; personal taxes, too, are higher in

Sweden. These drawbacks, however, are not

necessarily a result of specific Swedish labor

policies and some elements of the Swedish

system—effective worker training, early notification of layoffs and rapid response, and

labor-management involvement in determining

training needs—might be adaptable to U.S. conditions.

Canada is another source of useful examples.

At a modest cost to the taxpayer, Canada’s IAS

(formerly the Manpower Consultative Service)

gives effective reemployment service (not including retraining) to workers displaced by

plant closings or large layoffs. Promptly after

learning that a layoff is planned, IAS offers to

help establish a labor-management adjustment

committee whose job is to place the laid-off

workers as soon as possible—often before the

layoff occurs.
24 ● Technology and Structure Unemployment: Reemploying Displaced Adults

With a small field staff of 66, and a budget

of $8 million, the IAS provided several kinds

of employment services for about 120,000 workers in fiscal year 1982-83.9 Some 36,000 of these

workers were displaced in plant closings or

mass layoffs and received plant-based adjustment services at a cost of $6.1 million ($171 per

worker), of which the government contributed

$3.9 million ($108 per worker]. Over the years

(except during deep recession) the labor-management committees formed with IAS’s help have

found jobs for about two-thirds of all the workers involved in the layoffs, usually within a year

or less.10 IAS offers its services in all cases of

layoffs involving more than 50 people, and will

step in where smaller numbers of people are

involved if asked.11 If the offer is accepted,

which is nearly always the case, IAS provides

an experienced, independent chairman (usually a retired businessman) to help the committees get established and do their work. The IAS

role is strictly facilitation; the effort at the plant

level is by labor and management, not by labor, management, and government.

The major thrust of the IAS program is reemployment. The committees provide no training,

although they may refer people who desire

training to one of the institutions participating

in Canada’s extensive system of adult vocational education. IAS costs are modest, averaging $10,000 to $20,000 per plant served.

Adult vocational training in Canada is wellfunded and heavily attended. The Canadian

Government spent over $1 billion (over 1 per-

‘Services provided by the IAS, in addition to the placement

assistance for victims of plant closings, include work-sharing

and technical assistance to firms in temporary crisis; retraining assistance for workers in firms undergoing technological

change; and training of skilled workers for new and expanding

firms. IOThe committees generally finish their work, and then dssolve, in about I year. Usually, followup studies are not done,

so that there is little information about what became of workers who did not find jobs through the committees; presumably

some find jobs on their own, some remain unemployed after the

committees dissolve, some leave the labor force, and some may

enter training,

IIWorkers who are part of closings or layoffs involving fewer

than 50 people are eligible for Canadian unemployment insurance, vocational education and training, and the services of the

Canadian employment service. IAS also offers services when

fewer than 50 workers are involved, but advance notice is not

required in these cases.

cent of its budget) in the 1983-84 fiscal year on

adult training, including income support for

trainees.12 Approximately 277,000 people enrolled in the national adult training program

that year. People who are eligible for this training are adults referred by one of Canada’s

publicly funded Employment Centres or the

IAS. Employed people can take advantage of

Canadian job training too, although higher

priority in some programs is given to training

for the unemployed.

Income support for unemployed or partially

employed trainees in Canada can be extended

for up to 2 years. This income support is one

reason that many Canadian workers are able

to take much more extensive training than people in JTPA-sponsored training; the average

length of stay in Title III projects for those who

take classroom training is currently about 22

weeks, some of it spent in activities other than

training (e.g., testing, assessment, counseling,

and job search). About 20 percent of the people

enrolled in Canadian adult training in 1983-84

were in remedial education. Training in

basic educational skills, less emphasized in the

United States than in Canada, is probably

needed to about the same extent in both countries. The Canadian Government also emphasizes training in “critical skills” occupations—

those considered important to the national

economy and in which shortages are anticipated. Although some of these critical skills

occupations are high-technology—robotics technicians and computer hardware specialists—

many are not, such as machinists, tool and die

makers, welders, offshore drillers and derrick

workers, millwrights, and chefs. It is not clear

whether the emphasis on critical skills is very

effective. It is difficult to identify what skills

or occupations might be in demand, even in

the short run.

While Canadian vocational training is extensive, it is probably more effective in helping

trainees to get better paying, more highly skilled

jobs rather than in helping to combat unem-

~ZThere is n. comparable figure for the United States. The

United States has no program which offers free vocational education and income stipends to adults who have been referred

to training by the Employment Service.
Ch. l—Summary ● 2 5

ployment. The Canadian unemployment rate

has been higher than that of the United States

for more than a decade; in 1984, the rate was

still over 11 percent.

Elements of the Canadian system which could

be useful in the United States are an IAS-like

system, or some other flexible, quick, plantbased response to large layoffs; and the excellent access to vocational and remedial education offered to adults, along with income support to make extensive training possible.

Design and Performance of

Displaced Worker Projects

Within the framework of JTPA, there is considerable room for different kinds of services

and different ways of offering them. This flexibility is one of the strong points of the program, since different areas and different groups

of workers have different needs which rigidly

prescribed projects might not serve well. However, while it is important to tailor displaced

worker programs to the appropriate workers,

communities, and economic circumstances,

there are some elements of program design that

tend to make all projects more successful.

Projects that have active cooperation of labor and management as an integral part of

reemployment efforts are more likely to be effective than projects without such support. Employers, particularly with the cooperation of

labor, can make important contributions to displaced worker projects. At the Ford Milpitas

auto assembly plant, for example, Ford gave

the plant’s industrial relations manager a free

hand when the plant closing was announced

to “do what was right. ” In this case, the right

action meant personalized counseling on benefits and retirement, testing of every worker

who wanted education or skills training courses,

a great emphasis on and variety of vocational

training, remedial education offered in the

plant at convenient times for workers, a determined search for local job openings, and letting people take new jobs before the plant

closed without loss of severance pay, These

services began months before the plant closed

and continued at the plant for 16 months after

Photo credit Downriver Community Conference

A worker learns word processing in a retraining

program run by the Downriver Community Conference.

production ended, with a company-paid skeleton staff available to run the services. The Milpitas project cost between $5.6 and $7.2 million (depending on how the resources provided

by Ford are valued), and served 1,997 workers

at a cost of $2,800 to $3,600 each. In addition

to company money, funding came from the

State of California, JTPA Title III, a retraining

fund provided as part of the Ford-UAW bargaining agreement, and TAA.

By almost any standards, the Milpitas effort

was outstanding. Until the day the plant closed

—6 months after the announcement—quality

and productivity continued to rise. On the date

that services officially ended (Sept. 1, 1984), 83

percent of those looking for work had found

jobs: 1,460 people were employed. Five hundred had retired or were within a few months

of retirement; 118 were still in training; and

308 people were unemployed.

While public funding and the health of the

local California economy were important elements in this success, this should not minimize

the role of prompt action based on labor-management cooperation that already existed at

Milpitas. This was not always the case: labormanagement relations were rocky through the

1970s in the plant. In 1979, a new plant manager took over, committed to the idea of em-
26 . Technology and Structural Unemployment: Reemploying Displaced Adults

ployee involvement that Ford and the United

Auto Workers had just written into their national contract. Employees were encouraged

to solve problems cooperatively with management, and supervisors began to listen to shop

floor workers’ ideas on improving quality and

productivity. By 1982, the Milpitas plant was

at the top of the Ford assembly division for

productivity and quality. While this effort was

not sufficient to keep the Milpitas plant open

in the face of intense world competition—the

plant apparently closed because of the expense

of transporting cars from the California plant

to the rest of the Nation and because of general contraction of Ford—the foundation of good

labor-management cooperation was a critical

element in the success of the reemployment

program at Milpitas.

Employers usually have networks in local

business communities, which can be effective

at finding out what firms are hiring and what

occupations are in demand and at sponsoring

or promoting former employees to other business people. Employers and labor-management

teams are also likely to know the strengths and

skills of their own workers and can be effective at recommending qualified workers for

new jobs. Also, workers are more likely to take

advantage of services offered by employers if

they already have good relationships with management, as is often the case in plants with effective labor-management teams.

Another feature of projects that serve the

spectrum of displaced workers well is a full

range of services, from job search assistance to

training. Projects that offer a broad range of

services are likely to meet the needs of a diverse

group of clients under different economic conditions, not just a single group of those easiest

to serve. However, in differing economic circumstances, different services may need more

emphasis. In prosperous times and areas, job

search assistance may be effective for the majority of workers entering programs. In communities facing longer term economic decline,

vigorous relocation efforts may be needed. Finally, during recessions or in areas where jobs

are hard to find, more workers usually are interested in training for new occupations.

Adult Education in the United States

Most displaced workers, even if they have received a few months’ notice of layoff, do not

have the time or the resources to devote to formal, full-time educational programs; moreover,

many are not interested. As a result, many institutions offering adult education often play

a relatively minor role in displaced worker

projects, with some notable exceptions. For

example, many community colleges and vocational/technical schools are involved in displaced worker projects. However, adult education institutions could be more active in

retraining and educating displaced workers, if

some extra attention is given to designing programs specifically for displaced adults. Such

programs can also be a major force in providing people with skills that will make them less

vulnerable to displacement (“preventive training”), or prepare them for finding a good job

more readily if they should be displaced.

Both basic and career-oriented adult education will need to adapt to significant changes

in the demography of the work force in the next

few decades. The U.S. work force is aging, reflecting the aging of the baby boom generation,

now in its prime working years. By the year

2000, half the labor force will be middle aged

(35 to 54), compared to only about 35 percent

today. This demographic trend, together with

changes in jobs brought about by changing

technology, will mean that more older workers than in the past will periodically need to

refresh basic educational skills and learn or upgrade job skills. Much of this upgrading is

likely to happen on the job, but some will come

through the formal system of adult education.

Historically, however, older workers are significantly less likely than the young to seek

adult education. Educational institutions may

need to make changes in program design, curricula, logistics, and outreach efforts to attract

more older workers.

Like older workers, less educated and unemployed people also tend to take little advantage

of adult education. Part-time enrollments in

adult education more than doubled between

1957 and 1984, and 60 percent of the students

take courses for employment-related reasons.
Ch. l—Summary ● 2 7

However, participation rates are much higher

among those who are employed and well educated than among those who are not. Participants are also much more likely to be in management, administration, and technical or

professional occupations than lower level

white- and blue-collar jobs.

The same pattern prevails among people who

receive education at an employer’s expense.

Private business plays a crucial role in funding and delivering education and training to

adults, providing probably more than half of

all job-related education and formal training

to adults through in-house courses or arrangements with outside institutions. The most likely

recipients of such assistance, however, are

white, well educated, and in higher level managerial, administrative, and professional jobs.

Some private firms make adult education more

accessible to blue-collar and lower level whitecollar workers through employer-supported education programs. Recent collective bargaining agreements emphasize education and training more than in the past, and some firms

conduct basic education programs for their

workers. Additional education and training

could be offered at low cost through partnerships of business and local educational institutions. Many high schools, if asked, will proPhoto credit UAW-Ford Ernp/oyee Development and Training Program

A UAW-represented Ford employee gets one-on-one

instruction in a Basic Skills Enhancement session at

the Ford Dearborn Engine Plant. This feature of the

UAW-Ford Employee Development and Training

Program is designed for people with

fundamental educational needs.

vide adult basic education at the worksite, a

union hall, or other facilities convenient to

workers. Community colleges are often willing to adjust course locations and times to fit

the needs of adults and local labor markets as

well. Some unions also have active education

and training programs, which often entail partnerships with educational institutions.

The Federal Government plays a substantial

direct role in funding some kinds of adult education. Nearly half the costs of State and local

remedial education programs are provided by

the Federal Government, for example, and the

Federal Government also picks up a substantial portion of publicly supported vocational

education programs that are specifically targeted to adults. For most other continuing education programs, the Federal Government plays

a minor direct role, compared to States and private business. The indirect role, however, can

be large. The expenses private employers incur for adult education can be deducted from

Federal taxes as normal business expenses, and

individuals can deduct expenses for education

directly related to their current jobs. The Federal Government is also the largest single provider of adult education and training, particularly in programs offered by the Department

of Defense.

Another potential Federal role is in developing and adapting instructional technologies to

adult education, sharing more of its own experience in training technologies with the private sector and educational institutions. Many

new educational technologies—including television, videotape, videodisk, and computeraided instruction (CAI)—can significantly improve the quality of adult education. Television

and CAI can help overcome geographic and

scheduling barriers to adult education, and

some CAI programs have considerable potential for use as a supplement to instructors in

adult basic and vocational education. Many of

these technologies. were initially federally

funded. The Department of Defense, for example, was instrumental in the early development

of computer-based instructional programs, interactive videodisk systems, and various simulators and emulators used in training.
28 ● Technology and Structural Unemployment: Reemploying Displaced Adults

There is evidence from several projects that

well-designed CAI materials can help adults

learn quickly and well. In some comparisons

with conventional classroom instruction, CAI

has been shown to cut instruction time by 25

percent or more, and adults in these CAI classes

did somewhat better on tests than adults in the

control groups. Interactive videodisk systems

are highly promising for providing a wide variety of vocational skills training. Several factors, in addition to the new computer technologies, have contributed to the success of new

educational technologies in both basic and vocational education programs. Many of the

projects benefited from closer attention to

project design, greater efforts to encourage participation, and more training of instructors

(paid and volunteer) than is typical in most

adult education projects. In CAI projects, the

computer rarely stands alone; rather, it works

best as a supplement to, rather than a replacement for, good instructors and volunteers.

CAUSES OF DISPLACEMENT

Workers are considered displaced when some

permanent and structural change has occurred,

either in the economy as a whole, in some sectors, or in their own firms. People who are unemployed as a result of cyclical changes in the

economy are not generally considered displaced, although when cyclical downturns are

deep and long lasting, as in the back-to-back

recessions in the early 1980s, it can be difficult to distinguish cyclical from structural unemployment. The result, for the individual, is

often exactly the same. For the typical displaced workers in the early 1980s—steelworkers and autoworkers-it mattered little whether

their distress resulted from displacement or a

cyclical downturn. Both unemployed steelworkers and autoworkers were told, during the

early 1980s, that their jobs were probably gone;

that it was time to make a major change.

The outcomes for these two groups of workers illustrate some of the difficulties in trying

to identify who and how many people are displaced at any moment. Unemployed steelworkers, displaced from an industry where competitive problems date back two decades or more,

are still suffering the consequences of displacement. Employment in the steel industry in 1985

is lower than it was during the depths of the

1981-82 recession; even optimistic observers

expect steel employment to continue to fall.

Autoworkers, on the other hand, have been

recalled in much greater numbers than many

analysts expected. Employment in motor vehicles and equipment averaged 860,000 in

1984, below its peak of over 1 million workers

in 1978. Since 1982, however, total employment in the industry has increased by nearly

168,000, with the number of production workers increasing by nearly 157,000.

Both industries have sacrificed technological leadership to Japan and other foreign competitors, and both have suffered from sharpened

competition from imports. Wages in both the

steel and automobile industries are above the

average for manufacturing; in 1984, the average hourly earnings of production workers in

steel was $12.99, and in autos $12.74, while the

average for all manufacturing production workers was $9.18. Both industries have responded

to competitive pressures by seeking trade protection and by modernizing and automating

plants. Employment in both industries has contracted, although the contraction of steel employment is far more severe. In other words,

both industries have experienced all the forces

causing displacement and have reacted to them

in nearly the full range of ways.

The long-term outlook for automobile employment is not yet clear. During most of the

recovery from the 1981-82 recession, the auto

industry was protected by a restrictive Voluntary Restraint Agreement (VRA) with Japan,

which significantly limited the number of Japanese automobiles in the U.S. market. The VRA

expired in March 1985, and since then Japanese imports, though still restrained by an edict

of the Japanese Ministry of International Trade

and Industry, increased dramatically, rising
Ch. l—Summary ● 2 9

from about 1.85 million in 1984 to an annual

rate of 2.9 million in June 1985. Increasing imports, without continued growth in overall demand for automobiles, will affect U.S. employment.

Also, the recovery of automobile employment

has been boosted by the rebound in large car

markets, helped along by falling petroleum

prices and stable gasoline prices. This rebound

apparently leveled off in early 1985. Lower oil

prices could last for a few more years, but it

will be a challenge for U.S. automakers to

maintain their market share. Meanwhile, to remain competitive, the auto industry will continue to automate, which also reduces jobs.

As experience in both industries indicates,

the causes of displacement are technological

change and international competition. Both

terms cover a variety of factors that cause displacement, including labor-saving innovations,

offshore production and outward processing,

import competition, and loss of export markets.

Firms which face intensified competition

from foreign producers often respond by automating domestic production in an effort to

lower costs and meet the competition. Even

this may not save many jobs; in some industries, even highly automated systems are readily transportable to lower wage countries.

Other responses include shifting into less

threatened product lines, moving operations

offshore, or, when these strategies fail, shrinking or going out of business. All of these responses can displace people. Whether such

displacement is trade-or technology-related is

often impossible to determine. Analyses that

attempt to separate the employment effects of

trade from those of changing technology or increased labor productivity often miss the critical links between foreign competition and

changing technology,

Technological Change

The number of jobs available is the result of

a variety of strategic choices, including choices

of technology. Often, the choice is to replace

human labor with technology, a factor that has

helped double output per labor hour in the

United States since World War II. At the same

time, a growing population and rising

affluence-thanks in part to the rising productivity made possible by the capital-for-labor

shift—brought increasing demands for goods

and services. The increasing demand, together

with new products made possible by new technologies, were major factors in the growth of

U.S. employment,

Labor-saving technology can have a jobdestroying effect, but the drive for greater labor productivity can help maintain or increase

the ability of U.S. firms to compete with foreign producers. However, greater labor

productivity, by definition, means that fewer

workers can produce equivalent output; unless

demand for output rises faster than productivity, jobs will be lost. At the same time, without productivity increases, declining competitiveness may cause even more jobs to be lost.

Changing production technology often saves

some jobs at the expense of others.

Increasing productivity, in the face of slowly

growing or level demand, has cost jobs in the

textile, automobile, and other industries, While

some sectors, such as computing and telecommunications equipment manufacture, can look

forward to rapidly rising demand for products

and probably increases in employment, many

others are likely to lose employment as demand

grows more slowly than productivity. Competition from products made abroad increases the

need to boost productivity and intensifies the

resulting downward pressure on employment

in affected industries. Manufacturing industries, because they make a product that can be

consumed far from its place of origin, are especially vulnerable to foreign competition, And

indeed, as has been shown, half the loss of jobs

due to displacement (as defined by the BLS) in

1979-83 were in manufacturing, which accounts for less than 20 percent of employment,

The 1981-82 recession certainly was responsible for some of those job losses, and the high

value of the dollar is the reason for some continuing losses. The combination of pressures

from changing technology and trade mean that

declines in overall manufacturing employment

are unlikely to reverse and may continue.
30 Technology and Structural Unemployment: Reemploying Displaced Adults

Technological changes alter the nature of

jobs as well as the level of employment. These

effects are not simple and predictable, however. An important factor is that equipment

and hardware alone do not govern the way jobs

and work can be reorganized. When a new

technology replaces human labor in performing some tasks, the remaining tasks can often

be regrouped into new jobs in various ways,

although the latitude on the part of managers

and their technical advisors to redesign jobs

has limits. In addition, all the options that do

exist often are not apparent. The nature of the

jobs may also vary depending on the organization of work throughout the enterprise; the options can range from a high degree of central

management control, with narrow, rigidly defined jobs designed to minimize the potential

for human error, to a more participatory style,

with greater autonomy, variety, and responsibility built into workers’ jobs. The range of decisions in redesigning organizations or jobs

does have limits, being constrained by the technologies themselves, costs, and such factors as

product design and volume, training and abilities of the work force, national policies on

quality of worklife, and the politics of the

workplace.

Sometimes, applications of new technology

have led to de-skilling of individual jobs; for

example, jobs such as those of some machinists

and telephone operators have been de-skilled

as jobs were redesigned to take advantage of

computer-based technologies. Yet there are

many examples—from offices to factory shop

floors-where the adoption of new technologies has led to jobs with broader responsibilities, more skills, and requirements for a better understanding of the entire work process,

including one’s part in it.

Some of the skills needed to make use of advanced technologies are qualitatively different

from the skills many displaced workers possess. Routine manual and mental skills, often

learned through on-the-job experience, are vulnerable to technological displacement, while

reading, basic math, and problem-solving abilities, combined with social skills, are more

highly valued. When factories are automated,

for example, the need for semiskilled and unskilled production workers often diminishes,

while the need for skilled maintenance and repair people increases. In many cases, the workers selected to learn the new, more challenging maintenance jobs are the ones whose basic

verbal, mathematical, and cognitive skills are

best. Familiarity with computers and electronic

instrumentation, the ability to troubleshoot,

and the possession of a broad, conceptual model of complex processes are becoming more important. While this trend does not manifest

itself in sudden shifts, it does mean that displaced workers whose former jobs consisted

mostly of tasks requiring routine manual and

mental skills will have increasing difficulty

finding comparable new employment.

If the effect of current technological changes

is to raise the proportion of more highly skilled

jobs in the Nation’s occupational mix, that effect

will continue a long-standing trend. Throughout

the 20th century, higher skilled occupations

such as professional and technical workers,

managers, and administrators have grown faster than some lower skilled occupations such

as farmworkers, nonfarm laborers, and operatives. It would be misleading, however, to conclude that the economy is moving rapidly toward a future where highly skilled occupations

predominate. Millions of lower skilled jobs

have been created in fast-growing service industries, which accounted for nearly 95 percent of the growth in employment between

1970 and 1984. In general, service sectors have

higher concentrations of both high- and lowskilled jobs than manufacturing (figures 1-8 and

1-9).

Many of the fastest growing and better paid

service jobs require several years of vocational

or postsecondary education, but other fastgrowing jobs, such as sales work, do not. What

is clear is that the number of lower skilled jobs

in manufacturing is diminishing, and lowskilled and semiskilled manufacturing workers will increasingly be faced with taking other

low-skilled jobs in service-producing sectors,

which often pay less than manufacturing jobs,

or with undertaking substantial periods of

training or education to qualify for more skilled

work in either manufacturing or services.
Ch. l—Summary ● 3 1

Figure 1“8.—Manutacturing

14 ~

12 “

10 -

8 -

6 -

4

2 -

Occupational Distribution

Higher pay- – — — – – -–- – – --- ----- -– - Lower p a y

SOURCES: US Department of Labor, Occupatior?a/ Employment in Mining, Construction, Finance, and Services (Washington, DC’ U.S. Government

Printing Office, February 1984); U.S. Department of Labor, Occupational Employment in Manufacturing Industries (Washington, DC: U.S.

Government Printing Office, September 1982); U S. Department of

Labor, Occupation/ Employment in Transporlatlonr Communications,

Uti/ities, and Trade (Washington, DC: U,S Government Printing Office, December 1984); Earl F, Mellor, “Weekly Earnings in 1983 A Look

at More Than 200 Occupations, ” Monthly Labor Review, January 1985.

International Competition

Immediately after World War II, relatively

few countries were capable of producing many

of the goods and services in demand in the

United States and overseas, and this country

was also more efficient at producing most of

these things than any other nation. This has

changed. While the United States is still the

world’s largest producer of goods and services,

the number of nations that can produce sophisticated goods and services has proliferated, and

Figure l-9.-Occupational

12

10

8

6

4

2

0

Distribution in Services

1

Higher pay - – --- ----- Lower pay

SOURCES: U.S. Department of Labor, Occupational Employment in &fining, Construction, Finance, and Services (Washington, DC’ U.S. Government

Printing Office, February 1984); U S Department of Labor, Occupational Employment in Manufacturing krdustries (Washington, DC: US.

Government Printing Office, September 1982), U.S Department of

Labor, Occupation/ Employment in Transpoflation, Communications,

Uti/ities, and Trade (Washington, DC U.S Government Printing Of.

fice, December 1984); Earl F. Mellor, “Weekly Earnings in 1983: A Look

at More Than 2GU Occupations, ” Monthly Labor Review, January 1985

their ability to compete with U.S. products has

risen greatly. In part, this is due to the fact that

other countries are challenging many U.S. sectors in terms of productivity and technology;

in part, changes in competitiveness can be

traced to higher U.S. production costs resulting from factors such as failure to modernize,

inadequate attention to product quality, high

wage rates and capital costs, and—a particular problem so far in the 1980s—the high value

of the U.S. dollar relative to other currencies.

Over the past two decades, the importance

of trade and international competition to the

U.S. economy has increased significantly.
32 ● Technology and Structural Unemployment: Reemploying Displaced Adults

Trade (imports plus exports) has increased

from less than 11 percent of GNP in 1965 to

nearly 22 percent in 1985 (figure 1-10). In the

1960s, the United States consistently ran trade

surpluses. These surpluses turned to deficits

in the 1970s, and the deficits ballooned in the

early 1980s. By 1984, the U.S. current account

deficit was nearly $102 billion. The current account balance is the balance on imports and

exports of goods and services plus the balance

on unilateral transfers (including international

transfers of funds such as gifts, pension payments, and government grants). The merchandise trade deficit, or exports of goods minus

imports of goods, was over $107 billion. The

United States has run surpluses in services

trade for many years, but this surplus has been

diminishing, having peaked at over $41 billion

in 1981. In 1984, the huge merchandise trade

deficit, plus an$11 billion deficit in unilateral

transfers, swamped the services surplus of $17

billion. The rising value of the dollar in the

1980s is responsible for much of the deterioration in the trade accounts, but a number of

sectors had lost competitiveness before this

change. Recapturing the competitive edge,

even for firms hurt primarily by currency fluctuations, will be difficult.

The trade balance is only one measure of’

change in international competition. Many

U.S. firms have responded to intensified comFigure 1-10.—Trade as a Percent of GNP, 1950-84

25 r

23

21

19

13

11

9

1950 1955 1980 1985 1970 1975 1980 1985

Year

SOURCE: Counctt of Economic Advisers, Economic Reporf of the President,

transmitted to the Congress February 1985 (Washington, DC: US.

Government Printing Off Ice, 1985).

petition by moving production operations offshore, or by sending partially finished products

to overseas plants for processing and then reimporting the processed products. Outward

processing has become a much more important component of U.S. manufacturing firms’

strategy, now accounting for nearly one-sixth

of U.S. manufactured imports. Between 1969

and 1983, the value of items assembled abroad

increased by nearly a factor of 12, or almost

20 percent per year. Outward processing is particularly significant in motor vehicles and

parts, apparel, and several types of electrical

equipment. The most important reason for the

increase in outward processing is foreign competition, which has led U.S. producers to lower

costs by seeking lower wage countries. This is

true not just for the United States, which has

had higher wages than the rest of the world

throughout most of the post-World War II period. Japanese producers, too, have moved assembly operations to lower wage countries as

wages in Japan increased. This does not necessarily imply that U.S. wages—or, for that matter, Japanese wages—should come down; it

does mean, however, that there is little security in many American unskilled or semiskilled

jobs in industries whose products can be readily traded internationally.

Very little can be done to reduce the incentives to import cheaper, foreign-made products,

to prevent offshoring, or to avoid all employment losses in industries facing stiff competition from low-cost foreign products. Trade protection, largely in the form of quotas, has been

used to mitigate the pressure in some industries,

but seldom prevents all job losses. There are

several reasons for this.

First, the General Agreement on Tariffs and

Trade has decreased the importance of tariffs

and forced participating nations to use newstyle quantitative restrictions, such as orderly

marketing arrangements and voluntary export

restraints, to protect domestic industries. Because tariffs apply to imported goods independent of their origin, and the new quantitative restrictions are usually bilateral or multilateral, these quantitative restrictions often

constitute very leaky protection. In some cases,
Ch. l—Summary ● 3 3

producers in countries that do have agreements

restricting exports to the United States simply

route their products through countries with no

restrictions. As a result, quantitative restrictions are often ineffective at stemming imports.

Apparel imports, for example, multiplied more

than 20 times (from $595 million to over $12

billion) between 1967 and 1984, with some

quantitative restrictions in place.13 During the

same period, employment in the apparel industry fell from nearly 1.4 million workers to less

than 1.2 million. The restrictions probably

slowed losses of American apparel jobs overall. Nonetheless, there was a great deal of displacement in addition to the net job losses, as

the industry shifted to lower wage areas within

the United States.

Second, quantitative restrictions do not remove incentives for U.S. producers to move

production to lower cost areas. U.S. producers can engage in outward processing without

the imported items being subjected to quantitative restrictions. For example, between 1980

and 1983, when the U.S. automobile industry

was protected by a voluntary restraint agreement with Japan, imports under the Tariff

Schedule of the United States 807.00 (TSUS

807.00, one form of outward processing) nearly

doubled, rising from $5.3 billion to $9.8 billion.

While employment in the auto industry increased during the full period of the VRA—

from 789,000 in 1980 to 860,000 in 1984—industry employment was substantially depressed in 1980, down from a peak of over 1

million in 1978.

While protection is ineffective in preventing

all job loss, it may nonetheless be an important

part of a strategy to lessen the impact of forlsNOt all growth in imports Was due to leaks; the quantitative

restrictions permitted some growth in imports.

eign competition on the U.S. work force. Particularly if combined with industry efforts to

phase out unprofitable lines of businesses over

time or improve competitive ability, protection

can stretch out the period of employment decline and help to avoid rapid, large job losses

that might swamp local labor markets with displaced workers. Moderate employment declines over periods of a few years can often be

mitigated by attrition and early retirement programs, avoiding some or all of displacement.

Moreover, phasing production out slowly can

often give workers more time to find or train

for new jobs. In addition, protection (or threats

of it) may motivate some foreign producers to

build production facilities in the United States

in order to keep market share and avoid trade

restrictions. The protection of the VRA, and

proposals to renew such protection, probably

are significant factors in the decisions of

Toyota, Nissan, and Mazda to locate automobile assembly plants in the United States.

Manufacturing employment is particularly

vulnerable to displacement resulting from increased international competition. Products

can be made in one location and shipped to another, replacing labor in the consuming country. Exported services, on the other hand, are

more likely to use labor in the country of consumption, since the production and consumption of the products (such as restaurant services, lodging, some banking and financial

services, and some retail and wholesale trade)

cannot be physically separated.14 As a result,

it is not surprising that manufacturing workers are disproportionately represented among

the displaced.

IAInternationa] trade and competition in service industries are

the subject of an ongoing OTA assessment, lnternatfonal Competition in the Service Industries,

DISPLACED HOMEMAKERS: PROGRAM STRUCTURE AND PERFORMANCE

Displaced homemakers are women whose problems of finding good jobs with other disprincipal occupation has been homemaking, placed workers, but the barriers they face are

and who have lost their main source of finan- often greater because of their lack of expericial support.l5 Displaced homemakers share ence, often, their existing skills are not transIsA few men may fit the definition of displaced homemakers, ferable to good new jobs: and they may need

but most are women. This discussion is confined to female dis- retraining or education in order to find steady,

placed homemakers. well-paid work. Estimates of the number of dis-
34 Technology and Structural Unemployment: Reemploying Displaced Adults

placed homemakers range from more than 2

million to about 4 million.

providing the first national estimates of the

displaced homemaker population for more

than a single year, OTA found a 28-percent increase in their numbers, from 1.7 million in

1975 to 2.2 million in 1983. These figures are

conservative. Different definitions and different databases have produced estimates for single years that are more than twice as large.

Definitions of displaced homemakers also vary

from one State and Federal law to another,

with little consistency in eligibility for program

services.

For analytic and descriptive purposes in this

report, displaced homemakers are defined as

women who:

●

●

●

●

are between the ages of 35 and 64; and are

divorced, widowed, or separated; or

are married but the husband is absent, seriously disabled, or long-term unemployed;

or

are losing public assistance income from

sources such as Aid to Families with Dependent Children, when the youngest

child reaches the age where dependent

care ceases; and

have had serious employment problems,

including unemployment, working part

time but preferring full time, working at

pay below the minimum wage, or dropping out of the labor force from discouragement,

Much of the increase in the population of displaced homemakers since 1975 can be attributed to divorce, separation, or desertion. By

1983, nearly half (over 1 million) of displaced

homemakers were in this category. Over 60

percent of displaced homemakers had children

living at home. Their families were generally

small; only about one-fifth of displaced homemakers lived in families of four or more. Even

with small families, however, many displaced

homemakers live in or near poverty. In 1982-

83, nearly half of them had family incomes below $10,000. At least 30 percent of those in families of four or more were below the poverty

level, compared with only 15 percent of all

families.

By definition, displaced homemakers have

trouble finding satisfactory jobs. Half of them

were employed, but at pay below the minimum

wage or in a part-time job when they wanted

full-time employment. In 1975 (the most recent

available occupational data), 42 percent were

service workers, in jobs such as waitress, hotel maid, or nursing home aide. This compares

to only 22 percent of all women in such occupations at that time. Displaced homemakers

were underrepresented in clerical, professional, technical, and administrative jobs.

Government programs serving displaced homemakers are relatively new. The first publicly

sponsored displaced homemaker program was

in California in 1975, and the first Federal program came in the 1976 amendments to the Vocational Education Act. By not including displaced homemakers as a target group, as CETA

did, JTPA weakened Federal support for displaced homemaker programs. Stronger support

came in 1984, in the Carl D. Perkins Vocational

Education Act. The act authorized spending of

up to $84 million annually for services to single

parents and homemakers, including displaced

homemakers. For fiscal year 1985,$63 million

in Federal Voc Ed grants is available for services to single parents and homemakers, including displaced homemakers.

What portion of the VOC Ed funding for services to single parents and homemakers will be

devoted to displaced homemaker programs is

not yet known. Moreover, there is some resistance in the vocational education establishment

to the idea of setting aside funds for special

groups such as single parents and homemakers. On the whole, however, it appears likely

that Voc Ed support for displaced homemaker

assistance will increase substantially, exceeding any Federal funding targeted to this group

in the past.

Even with the increases, Voc Ed funding is

still small in relation to the number of displaced

homemakers. Moreover, although Voc Ed

grants can be used to support a considerable

range of services, the emphasis is on vocational

training, not job placement. For many displaced homemakers, the choice of training is

not feasible. Lacking either unemployment in-
Ch. l—Summary ● 3 5

surance or income from other family members

to provide temporary or partial income support, they urgently need a job. The Job Training Partnership Act, another major Federal

program that serves some displaced homemakers, is much more focused on placement

of clients in jobs than the Voc Ed program.

Also, it is potentially an additional important

source of funding for programs serving this

large and growing group of jobseekers who

face serious barriers to employment. Access to

JTPA programs, as well as to Voc Ed programs,

is important to displaced homemakers.

JTPA funds were a relatively minor source

of support for displaced homemaker projects

in 1984-85. Barriers to serving these women

with JTPA funds include the following: some

displaced homemakers do not qualify for Title

11A programs serving the economically disadvantaged, often because their previous income,

before they became displaced, was too high;

despite exceptions to the low-income rules for

Title 11A projects, not many service providers

are making use of them; many States do not

consider displaced homemakers eligible for Title III services, which have no income limits.

Another problem is that displaced homemaker

service providers often lack information about

JTPA. In addition, local Private Industry Councils, which guide JTPA decisions, are often opposed to special services for this group.

Currently, several hundred displaced homemaker projects exist, probably serving more

than 100,000 people annually, or at most about

5 percent of the population. According to project directors, the most effective programs include a comprehensive mix of services, including personal counseling and training in job

search skills and actual job skills. The clients

are a diverse group, however, including minority women, long-time welfare recipients, women from rural areas, older women, and widows.

For some, services designed to meet their particular needs are appropriate.

Many displaced homemakers cannot take advantage of the educational and training opportunities open to them because of financial need.

The law authorizes the use of Voc Ed funds for

child care, transportation needs, and other support services for single parents and homemakers, and allows training stipends in cases of

acute economic need. However, the funds have

rarely been used for these purposes. Under

JTPA, about 15 percent of funds can be used

for supportive services, including such expenses

as day care and transportation, and needsbased payments necessary for participation. So

far, 10 to 11 percent of Title 11A funds and 6

to 7 percent of the Federal share of Title III

funds have been used for these purposes. Considering the limited degree of participation in

JTPA programs by displaced homemakers, it

seems unlikely that they received much if any

of this low level of spending for supportive

services and training allowances. Federally

assisted student loans are designed primarily

for young people, and are less accessible to displaced homemakers as well as to adult displaced workers. Lack of income support is a

significant handicap to displaced homemakers

who could benefit from training, including

those who need some remedial education to

qualify for jobs or skills training.

Adequate information on programs serving

displaced homemakers has never been collected. This includes information about elements of program success and failure, important to local project directors in designing

effective services. The Perkins Act does not require much detailed or specific reporting on

programs serving single parents and homemakers, nor does the Department of Education,

which administers the act, have any such requirement. State officials are beginning to develop a consistent, national system of data collection including characteristics of clients

served, services provided, outcomes, and followup results 1 year later.
36 ● Technology and Structural Unemployment: Reemploying Displaced Adults

POLICY ISSUES

Adjustment to structural economic change

has been a major issue in the 1980s. In public

debate, attention has focused on a broad range

of policies that affect both the rate of structural

change and the need for adjustments on the

part of American business and workers. The

debate encompasses alternative macroeconomic strategies designed to stimulate economic

growth and employment, trade policies responding to major changes in U.S. trade balances and international trading practices, and

proposed industrial policies that affect the conduct and performance of different sectors of

the U.S. economy. Actions taken in these policy areas affect the need for worker adjustment,

but have much broader implications for economic performance and industrial structure.

This study focuses specifically on policies to

facilitate worker adjustments or transitions between jobs and industries as those jobs and industries change.

In recent years, assistance to workers who

have lost jobs due to structural changes in the

economy has been debated at some length in

Congress. Congressional actions on the issue

include establishing JTPA in 1982, with its national program to provide training and reemployment assistance to displaced workers under Title III. Also, under the Carl D. Perkins

Vocational Education Act of 1984, Congress expanded vocational education opportunities for

single parents and homemakers (including displaced homemakers) and for adult workers displaced by technological change or in need of

training to remain employed. These recent initiatives, together with the TAA program, which

has existed since the early 1960s, emphasize

the need for assistance to displaced workers

as a specific component of U.S. training and

employment policy.l6

However, taken together, these initiatives

reach only a minority of displaced workers;

JPTA Title III, the largest program, probably

16 Several other measures authorizing adjustment assistance

to workers who have lost their jobs due to changes in public policy have also been adopted over the years, These special programs have not been addressed in this report.

AND OPTIONS

serves less than 5 percent of the eligible population. Whether policymakers see additional efforts for displaced workers as needed will depend on how the issue is viewed in a broader

context, which includes current budget deficits and the needs of other groups for employment and training assistance. Specific actions

and short-term funding levels chosen depend

largely on whether Congress views support for

worker adjustment as an emergency response

to high unemployment during economic downturns or a continuing national commitment.

Regardless of the way worker adjustment policies are viewed, displacement is a continuing

problem, affecting millions of workers every

year, If Congress does wish to strengthen adjustment assistance to displaced workers, OTA’s

assessment of the experience to date with such

assistance suggests a number of options that

merit consideration.

These options have been divided into 11 issue areas. Issue areas 1 through 4 deal with improvements in delivery of assistance to displaced workers, or workers who have received

notice of layoff. Issue area 5 contains options

for improving services to displaced homemakers. Issue areas 6 and 7 deal with options to

improve research on occupational skills, occupational forecasting, and labor market information. Issue areas 8, 9, and 10 include options

to improve adult basic skills, or proactive strategies to improve both the quality of the existing work force and the ability of individual

workers and homemakers to make career transitions if they are displaced. Issue area 11 deals

with options to develop, improve, and disseminate new instructional technologies for adult

basic and vocational education.

Issue Area 1: Improving rapid response

to displacement

Experience in existing programs clearly shows

the benefits of making retraining and reemployment services available to workers before

they are laid off. JTPA permits pre-layoff assistance for workers who have received notice of

termination or layoff, but many States offer
Ch. l—Summary ● 3 7

very little pre-layoff assistance. In some cases,

this is because there are no institutions designed to respond rapidly to an announced

plant closing or mass layoff, Only a few States

have designated personnel to respond to plant

closings. Congress might wish, through oversight or legislative directives, to encourage

more States to establish early-response institutions, or it may wish to establish a federally

supported service, possibly like Canada’s IAS,

to deliver pre-layoff assistance,

Even when effective institutions exist to deliver pre-layoff assistance, they operate best

when there is advance notice of plant closings

or mass layoffs. Thus, Congress might wish to

provide incentives for advance notification of

plant closings or mass layoffs, or to require

some form of advance notice.

Issue Area 2: Encouraging rapid reemployment

The emphasis of JTPA Title III is on placement in new jobs, and most projects have reported a fair degree of success in placing their

clients, largely through job search assistance,

job development, and finding on-the-job training positions. Performance in placing workers

in new jobs could be improved with additional

measures to offer more effective relocation

assistance, and to provide temporary wage supplements for displaced workers taking jobs that

pay less than the old job, thus easing the adjustment.

Many displaced workers cannot find new

jobs at comparable wages to those on the jobs

they lost. Temporary wage subsidies could be

offered, limited to a fixed transition period during which workers could get experience on the

new job and recoup some of their earning power. One proposal would allow displaced workers to receive up to 80 percent of their remaining UI benefits over the course of a year if they

took a lower wage job before exhausting benefits. This might help some displaced workers

get back to work earlier than they otherwise

would. The wage supplement is a new concept.

One approach would be to try it first on a small

scale in a pilot project.

Some displaced workers—especially those in

communities where job prospects are poor—

might be able to find jobs more comparable to

the ones lost, if they had sufficient information

and resources to relocate. Relocation assistance

is allowed under JTPA, but most States were

making little use of it in their Title III programs

in 1984-85. Greater relocation assistance funds

are available under TAA, which technically expired in late 1985. Continuation of the TAA

program and legislative directives encouraging

greater emphasis on relocation assistance, in

appropriate circumstances, under JTPA might

be considered.

Another way to facilitate relocation is through

improving intrastate or interstate job banks to

provide jobseekers with lists of current job

openings throughout the State, region, or Nation,

This would require computerization of the job

banks. JTPA authorized a nationwide computerized job bank and job matching system. A

limited interstate job bank has been set up, but

it covers only a small number of jobs, and is

only partially automated. Most State systems—

which are the basis for an interstate bank—

are not fully computerized either.

Good estimates of the costs of computerizing

State job banks and linking them in an interstate system are not available, but preliminary

indications are that fully automated systems

within each State might require capital spending of at least $240 million over a period of 5

years or so, (This does not count the costs of

telecommunication equipment, software, and

staff training time.) Benefits of a more comprehensive and fully automated interstate job bank

are uncertain as well. It is not clear that workers would use the information in the job bank

to relocate, since many of the jobs listed by Employment Service offices are low skill and low

pay, and probably would not attract workers

from other communities. However, improvement of the system might encourage employers

to list more and better jobs.

In light of the uncertainties, a thorough investigation of the costs and potential benefits

of automating either intrastate job banks or a
38 ● Technology and Structural Unemployment: Reemploying Displaced Adults

centralized interstate job bank would be prudent before moving ahead. Any such study

should compare a centralized, on-line system

with several ways of linking individual automated State systems. Even without automated

job banks, greater emphasis on relocation assistance through JTPA could be effective for a

minority—possibly 5 to 10 percent—of displaced workers.

Issue Area 3: Enhancing education and training

opportunities in Title Ill projects

A substantial minority of participants in displaced worker projects—as many as 20 to 30

percent in well-run projects—view training as

the best route to a new job with potential for

advancement. This percentage fluctuates, depending on the availability of job opportunities

in the community. During recessions, more

workers choose training, while during periods

of prosperity, the number of workers seeking

training tends to fall because prospects for reemployment are better.

Regardless of the condition of the local economy, few workers can afford to undertake

training without some income support. For

many workers, the principal source of income

support is unemployment insurance, which is

generally limited to 26 weeks. JTPA specifically

directs States to excuse workers in Title III

projects from UI work search requirements

while they participate in training courses.

Reflecting the 26-week constraint of UI income support, some vocational training institutions have developed compressed courses

that run for 22 weeks. Some courses also have

flexible entry times. However, only the workers who enter training before or shortly after

layoff would be able to complete a 22-week

course while still receiving UI. Many workers

prefer to search for new jobs before undertaking training, and many displaced worker projects encourage this approach. For these workers, opportunities for skills training are limited

or possibly foreclosed. Moreover, although

short courses may be sufficient for some kinds

of training, workers who could benefit from

longer training courses may have to forgo them

because of lack of income support. Loss of

health insurance is another reason that some

displaced workers choose not to undertake

training, but instead try to get a new job as soon

as possible.

For workers interested in intensive skills

training, additional income support may be

needed. JTPA Title III does not prohibit stipends to workers in extended training or education, but stipends are very seldom provided.

Various ways of providing such income support might be considered. Recent legislative

proposals include enlarging the access of displaced workers to Federal student aid assistance, providing an additional 26 weeks of Federal unemployment compensation to workers

in intensive training or remedial education,

and permitting displaced workers to use penalty-free disbursements from Individual Retirement Accounts as income support while training. These kinds of assistance, which could be

implemented singly or in a package, could be

targeted to workers who have demonstrated a

commitment to extended training or education,

rather than permitting all workers to take

advantage of extended income support.

In addition, some congressional bills have

proposed to fund extended health insurance

benefits for unemployed workers, and others

would provide it for workers affected by closure of a defense facility or defense-related

business. Congress might consider providing

some form of extended health benefits for displaced workers who are enrolled in vocational

skills training courses as part of an income support package as described above.

Up to 20 percent of the participants tested

in displaced worker projects have shown deficiencies in basic educational skills; some of

these workers require fairly intensive remedial

education before they can benefit from vocational skills training courses. Many other workers have less severe basic skills deficiencies,

but still may need some help with basic skills.

Remedial education currently is a clear but

unmet need in the Title III program. As shown

by some exemplary projects, displaced worker

projects can deliver remedial education very

effectively, However, most States give little or

no attention to remedial education in their Ti-
Ch. l—Summary ● 3 9

tle III programs, and even those that do fall

short of the need (assuming that roughly 20 percent of displaced workers need the service).

Remedial education might be encouraged if

States were directed to certify remedial education programs as approved JTPA training for

UI recipients, and excuse those recipients from

work search requirements while enrolled. Basic educational achievement could be included

as a performance standard in JTPA Title III

programs, as it is in Title 11A programs. Finally,

Congress might consider earmarking a portion

of JTPA funds for remedial education.

The estimated cost of providing remedial education for approximately 20 percent of JTPA

Title III participants is about $6 million per

year—about 3 percent of Title III appropriations in fiscal year 1985. Since Title III has

probably served less than 5 percent of the eligible population, however, this $6 million would

not go very far toward solving the basic skills

problem in the work force.

Issue Area 4: Improving information and reporting

on JTPA

Current information and reporting under

JTPA and related programs does not adequately

support congressional needs. The most pressing needs are for current information on the

numbers of people affected by permanent layoffs and plant closings, on the demand for

JTPA services overall, and on the demand for

different types of services offered in JTPA programs. Without this information, Congress

lacks adequate guidance in establishing yearly

funding for Title III, or for determining the

effectiveness of the program.

Reporting on the demand for services in displaced worker programs is out of date. Congress was considering the fiscal year 1986

budget, which will determine JTPA funds for

the program year beginning July 1, 1986, in the

summer of 1985. At that time, the most recent

report on the numbers of workers served and

program spending was over a year old. Brief

quarterly or semiannual reports showing current levels of spending and demands for services might serve better as a guide for congressional appropriations.

Moreover, information on the mix of services

offered in Title 111 programs—including vocational skills training, on-the-job training, remedial education, relocation assistance, and job

search assistance—is incomplete and uncertain. More detailed reports, at least on an annual basis, on the service mix, outcomes by different type of service, and characteristics of

participants receiving various kinds of service

could help Congress determine the benefits of

this federally funded program, and signal needs

for changes in direction.

JTPA directs the Secretary of Labor to collect data on the number of permanent layoffs

and plant closings, the number of workers affected, the geographical location of closings,

and the types of industries. Money for an initial 8-State pilot study was not appropriated

until 1984. In fiscal year 1985, Congress appropriated funds for a nationwide survey, which

is now being done; funds were again appropriated for this purpose in fiscal year 1986. Annual updating of this information may require

specific appropriations in the future.

Issue Area 5: Improving services for displaced

homemakers

In 1984, the Carl D. Perkins Vocational Education Act authorized spending of up to $86

million per year on grants specifically designated for services to single parents and homemakers, including displaced homemakers. In

mid-1985, about $63 million had been appropriated for grants serving this targeted group

in the year beginning July 1, 1985. An undetermined but probably sizable portion of these

grants will be spent for assistance to displaced

homemakers. In the past, Federal spending targeted to displaced homemakers was comparatively small, never exceeding about $8 to $10

million per year.

Yet even the increased Voc Ed grants are still

very modest in relation to the eligible population. NO estimate has been made of the numbers of single parents and homemakers, but displaced homemakers alone probably number 2

to 4 million. If all of these people were to participate in the new Voc Ed program—and twothirds of the Voc Ed set-aside grants for single
40 ● Technology and Structural Unemployment: Reemploying Displaced Adults

parents and homemakers went to displaced

homemakers–$11 to $22 per person would be

available. A roughly comparable figure for displaced workers eligible for JTPA Title III assistance in the transition year 1983-84 was $74.

Under the Comprehensive Employment and

Training Act of 1980, the comparable figure for

disadvantaged workers eligible for general employment and training programs was $250 per

eligible person. These figures are given only

for purposes of comparison; actual uptake of

services by eligible people is never 100 percent,

and participation varies among groups.

Voc Ed programs under the Perkins Act were

just gearing up in 1985. It is too early to identify all the policy issues that might arise under

the new law, but one that is already under debate is whether and how to amplify the very

sparse data about displaced homemakers. Very

little information has been collected on existing programs. The Perkins Act authorizes, but

does not require, the Department of Education

to develop data on provision of vocational education opportunities for single parents and

homemakers, including displaced homemakers. This information, as well as data on provision of other services such as outreach and

counseling, job development, job search assistance, and basic education, would be useful to

States in using existing funds efficiently, and

to Congress in making appropriations for these

purposes in the future.

A potential topic for oversight is whether the

State Sex Equity Coordinators are able to wield

the authority the law gives them to administer

the single parents and homemakers programs,

and whether the set-aside funds are reaching

their intended beneficiaries through programs

designed to meet their special needs. The Perkins Act places substantial emphasis on setasides, or targeting portions of the grants to

special populations. These set-asides, including the 8.5 percent for single parents and homemakers, were opposed by many in the vocational education establishment. AS implementation

of the act gets underway, Congress may wish

to focus oversight attention on how the setaside provisions are being met.

JTPA is a potentially important source of employment and training services to displaced

homemakers. Although there is some overlap

in services with those that Voc Ed grants can

provide, JTPA emphasizes job placement more

heavily, while the focus of the Voc Ed act is

on training. Congress did not define-displaced

homemakers as a principal target group for

JTPA programs, although they are specifically

mentioned in the law as one of the groups facing employment barriers and therefore eligible for some services. Because of income eligibility criteria, it can be difficult to use JTPA

funds in projects designed to serve displaced

homemakers. Congress may wish to provide

legislative guidance on whether projects serving the special needs of displaced homemakers

can be funded under JTPA, and whether JTPA

services (either under Title 11A or Title 111)

should be more readily available to displaced

homemakers.

For displaced homemakers, the barriers to

training and education are probably greater

than they are for workers displaced from paid

jobs, because few displaced homemakers have

either unemployment insurance or income

from another family member to sustain them

during training. According to directors of displaced homemaker projects, many of these

women need remedial education in order to get

an adequate job, and many could benefit from

vocational skills training to improve their earning power and possibilities for advancement.

Congress provided for only very limited income support in both the Perkins Act and

JTPA, and training allowances are seldom provided. Another possible source of income,

guaranteed student loans, are more readily

available to young students than to displaced

adults. Congress may wish to consider whether

to encourage or provide more income support

for displaced homemakers in training. Better

information on services provided to displaced

homemakers, and numbers of women receiving the services, would provide an improved

basis for consideration of this issue.

Issue Area 6: Improving labor market and

occupational information

Whether displaced workers and homemakers

choose training or an immediate job search,

they can benefit from detailed, up-to-date in-
Ch. l—Summary 41

formation on the kinds of jobs available in the

local labor market. The same is true of projects

that offer reemployment, education, and training services to displaced workers and homemakers, In many States the information provided to displaced workers projects is neither

current nor detailed enough to give an adequate picture of what occupations are in demand locally. As a result, many projects are

forced to operate with little information or initiate more extensive job development efforts

than would be necessary if good local information existed.

In various surveys, BLS collects a great deal

of information on local unemployment rates,

levels of employment and earnings by industry, and on occupations within industries.

Much of this information is funneled into national employment estimates and occupational

forecasts. Some, but not all, States collect additional data to provide more detail on the occupational patterns of local industries. In these

States, ES analysts put together various sets of

information, from the local to the national

level, and thus provide a rough picture of growing, static, and declining occupations within

the State or, in some cases, local areas. With

the sharp drop in Federal funding and staffing levels in the ES system since fiscal year

1982, however, the ability of many States to collect additional information on local employment has been weakened. If Congress wishes

to place more emphasis on the provision of detailed local labor market information, several

options are available, including: 1) legislative

guidance through JTPA oversight to focus attention on providing better information at the

local level and on more informed use of existing data, and 2) appropriation of funds for the

specific purpose of developing local labor market information.

Issue Area 7: Conducting research on the effects

of technology on jobs

Technological change affects both the number of job opportunities and the skills and education needed to perform jobs. BLS long-range

forecasting specifically attempts to incorporate

the effects of technological change on the numbers of occupations in different industries.

Forecasting the effects of technological change

on the numbers of jobs will, inescapably, result in inaccuracies, simply because the effects

of technologies on jobs are influenced by a variety of factors that are difficult to predict, including overall socioeconomic changes and domestic and international competition. These

forecasts would be more useful if additional resources were devoted to sensitivity analyses of

the effects of major changes, including changes

in technologies. Sensitivity analyses might help

jobseekers and people making career choices

to understand how the requirements of given

careers might change in the future, but the

analyses would be unlikely to improve significantly the overall accuracy of the forecasts.

How new technologies will affect skills and

education needed in the work force is not completely determined by the technologies alone.

Management, workers, and society in general

make decisions which influence how technologies affect jobs. The characteristics of the machines or technologies, however, do limit available choices. Therefore, if American businesses

are to create jobs that build on the current and

potential skills of American workers, those

skills must be taken into account when the

technologies are designed. There is a tendency

to design skills and humans out of new, automated production processes; there do not seem

to be many deliberate efforts to design new

technologies that create new, skilled jobs or enhance the skills of existing workers, although

such efforts could pay dividends not only in

providing better jobs, but in using the technologies themselves more effectively.

Congress might wish to encourage systematic evaluation of the employment impacts—

both quantitative and qualitative—of new technologies by requiring evaluation of employment impacts in major federally supported

technology development efforts of the Department of Defense, the National Science Foundation, and the National Bureau of Standards. In

addition, Congress might wish to direct the National Science Foundation or other agencies to

fund one or more centers for engineering research in alternative work organization or job
42 ● Technology and Structural Unemployment: Reemploying Displaced Adults

design areas, aimed at finding ways to design

skilled jobs in conjunction with new or existing technologies.

Issue Area 8: Improving basic skills in

the work force

While it is clear from evidence gathered in

displaced worker and homemaker projects that

basic skills deficiencies are widespread, the exact magnitude of the problem is unknown. A

better understanding of the dimensions of the

basic skills problem of young adults (21 to 25

years old) is expected in the spring of 1986,

when a national survey of functional literacy

levels among this age group is scheduled for

completion. This is the first national survey of

adult basic educational skills in more than a

decade. Regular, systematic surveys of basic

skills performance levels among adults (not just

young adults) could help provide guidance to

Congress in funding programs to combat adult

functional illiteracy.

Even without more exact information on the

numbers of adults with basic skills deficiencies,

Congress may wish to consider expanding support for basic educational programs for adults.

This could be accomplished through Federal

support of adult basic education through increased outreach and provision of services under the Adult Education Act (AEA), together

with development of a long-term strategy to increase participation in AEA programs. Encouraging employed adults with poor basic skills

to upgrade those skills while still employed can

help improve the competitiveness of their employers, as well as help them to make career

changes if they do become displaced. Displaced

workers with good basic skills are more likely

to find new jobs quickly after being displaced,

and there are more job and training options

open to them (see Issue Area 3, above).

Issue Area 9: Encouraging greater use of adult

education to ease worklife transitions

Many unskilled or semiskilled workers are

unaware that adult education can reduce their

vulnerability to displacement, or that training

programs are available within their communities. While skilled workers, professionals, and

managers are more likely to take advantage of

educational and training facilities in their communities or workplaces, these people, too, may

not know about all the options open to them.

Congress may wish to consider authorizing

outreach programs to inform adult workers of

the postsecondary educational opportunities in

their communities, to encourage their participation. This kind of program also could be used

to inform people with basic skills deficiencies

about remedial education opportunities that

would prepare them for postsecondary programs.

Another option is a program of educational

financial assistance targeted to workers most

likely to be displaced. Under existing policies,

tax deductions for training generally extend

only to courses related to a worker’s current

job, and part-time adult students who are employed have difficulty competing for Federal

financial assistance. Workers in industries or

occupations that are considered particularly

vulnerable to displacement might be given preferences in access to Federal financial assistance. Eligibility for the assistance could be

determined by State or Federal labor and employment agencies.

Issue Area 10: Encouraging training and retraining

of active work forces

The impact of displacement on the work force

can be reduced if workers in displacementprone industries or occupations begin to make

transitions to different careers while they are

still employed. Often, factors leading to displacement develop over a long time, sometimes

over several years. While some workers may

make effective use of this time to find a new

job or develop different job skills, most do not.

This is especially true of the workers most vulnerable to displacement, that is, unskilled or

semiskilled workers.

One of the most effective ways to deliver education and training to workers is at the workplace, with the support of employers. Estimates

vary greatly, but American business probably

spends tens of billions of dollars a year on

worker education and training—much more

than the Federal Government. However, with

the exception of on-the-job training (which is
Ch. I—Summary ● 4 3

not usually counted as a training expenditure),

most of this assistance is heavily weighted

toward professionals, technicians, managers,

and other highly skilled people. The workers

most vulnerable to displacement—low-skilled,

nonsupervisory or production workers—are

probably the group least served by employerprovided education and training. In addition,

many small businesses do not have the resources to provide the kind of education and

training many larger businesses offer.

Measures Congress could consider to broaden

employers’ support for employee education

and training include: 1) continuing the exclusion from taxable income of employee benefits under qualified employer-provided continuing education programs, an exclusion which

will not apply to the 1986 tax year unless it is

extended by Congress; 2) developing an improved information base on employer-provided

training and education to better judge its adequacy, and to help identify public policies encouraging these services; and 3) adopting new

incentives to encourage employers to extend

training and education opportunities to underserved groups of workers, possibly by allowing employers to use such expenses as tax credits. An alternative to the third option might be

a small additional payroll tax to finance retraining of either active or displaced workers from

businesses that do not choose to provide such

services themselves. Employers who do provide education and training to low-skilled production and nonsupervisory workers could be

exempted from such a tax.

Issue Area 11: Encouraging research, development,

and transfer of instructional technology

New instructional technologies, including

computer-aided instruction (CAI) and interactive videodisk systems, have great promise

in adult training and education. These systems

can improve access to training and education

since they can be made available at times and

places that are convenient for adults. They also

can reduce the amount of time it takes to learn—

an important advantage given the limited

amount of time most adults have available for

education. Some studies have found that adults

in computer-based training achieved the same

competencies as adults in conventional training in less than three quarters the time. Although the initial costs of these technologies

are often viewed as a barrier to their adoption,

the costs are decreasing, and operating costs

can be very low when high use levels are

achieved. New educational technologies are especially promising for teaching basic skills,

where a large clientele and relatively unchanging curriculum offer the potential for very costeffective instruction.

New educational technologies, despite their

promise, are not yet widely used in adult education. One reason is that few teachers and

administrators have much experience with these

technologies, and potential users have trouble

judging the quality of the courseware that is

available. Most courseware was not specifically designed for adults, and information on the

performance of courseware packages is seriously lacking. Potential users need data on how

well different systems work, as a basis for investment.

If Congress wishes to encourage greater use

of instructional technologies, the Federal role

could be expanded through more effective

measures to transfer federally developed training technologies to education and training institutions, and the private sector; greater support for development of new adult basic and

vocational training materials for instructional

technologies; and establishment of one or more

national centers to focus research on how

adults learn.

Many instructional technologies in current

use were developed or supported by Federal

agencies—mainly the Department of Defense

but to some degree the Department of Education and the National Science Foundation. Systems developed for the specific needs of the Department of Defense can often be adapted to

civilian adult education, but information frequently is not available to potential users.

Moreover, the expense of modifying them may

inhibit adoption. Congress might wish to consider establishing a training technology transfer office to keep a descriptive inventory of

training technologies developed under Federal
44 ● Technology and Structural Unemployment: Reemploying Displaced Adults

agencies, together with information on the capabilities of the technologies. Such an office

could also encourage adaptation of the courseware for civilian use by allowing commercial

enterprises to lease or buy federally developed

technologies, modify them, and sell them to

end users.

Much of the courseware used in basic skills

education was developed for high school students–not the mature population of adults that

have basic skills deficiencies. Support for research and development of new courseware

specifically designed for adults could enhance

the potential contribution of instructional technology in the adult education system. Such

activities could be funded through the Adult

Education Act. To avoid competition for the

limited funds available for delivery of remedial

education services under AEA, it may well be

that a separately funded mechanism would be

needed.

Congress may also wish to encourage more

research on the nature of the adult learning

process. Currently, little research is conducted

on such questions as how to design curricula

and instructional approaches so that they are

appropriate for adults, how to measure functional literacy levels among adults, and how

to evaluate adult performance in educational

programs. Also, little attention has been given

to the adult learner in evaluations of instructional courseware. Such issues could be addressed through a research program focused

on the adult learner. One option would be for

Congress to direct the Department of Education to charter one or more national research

centers for adult learning and basic skills.
Chapter 2

Policy Issues and Options
Page

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

Current Programs . . . . . . . . . . . . . . . . . . . . . . 0 . . . . . . . . . . . . . . . . . . . . . . . . . 47

Major Policy Goals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

Delivery of Assistance to Displaced Workers. . . . . . . . . . . . . . . . . . . . . . . . . . . 51

Rapid Response to Displacement . . . . . . . . . . . . . . . . . . ., . .;,...... . . . . . 52

Facilitating Rapid Reemployment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

Education and Retraining Under Title III... . . . . . . . . . . . . . . . . . . . . . . . . . 62

JTPA Information, Reporting, and Monitoring Requirements . . . . . . . . . . . 66

Trade Adjustment Assistance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69

Assistance to Displaced Homemakers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70

The Perkins Vocational Education Act and Displaced Homemakers . . . . . 71

The Job Training Partnership Act and Displaced Homemakers. . . . . . . . . . 73

Options for Assistance to Displaced Homemakers . . . . . . . . . . . . . . . . . . . . . 75

Labor Market Information and Occupational Research Needs . . . . . . . . . . . . 77

Local Labor Market Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....77

Improving Long-Range Projections of Future Job Opportunities . . . . . . . . . 79

Research on the Effects of Technology on Jobs . . . . . . . . . . . . . . . . . . . . . . . 81

Strategies for Facilitating Worklife Transitions . . . . . . . . . . . . . . . . . . . . . . . . . 82

Basic Skills and the Work Force +, . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83

Continuing Education and Worklife Transitions . . . . . . . . . . . . . . . . . . . . . . 89

Employer-Supported Training and Education . . . . . . . . . . . . . . . ., ..,.,.,, 93

The Federal Role in Research, Development and Transfer of

Instructional Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96

Transfer and Diffusion of Federal Training Technologies . . . . . . . . . . . . . . 96

Development of Instructional Technology for Basic Skills . . . . . . . . . . . . . . 99

Support for Research and Evaluation on Adult Learning.. .. ... ... ... .100

List of Tables

Table No. Page

2-1*

2-2.

2-3.

2-4.

2-5.

2-6.

Selected Options for Improving Adjustment Assistance in

JTPA Title III Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

Options to Improve Information, Reporting and Monitoring Under

JTPA Title III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67

Policy Issues for Displaced Homemakers. . . . . . . . . . . . . . . . . . . . . . . . . . . 76

Issues in Labor Market Information and Occupational Research . . . . . . 78

Selected Options for Facilitating Worklife Transitions . . . . . . . . . . . . . . . 84

The Federal Role in Research, Development, and Transferor

Instructional and Training Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Ch. 2—Policy Issues and Options ● 4 9

evitable change. Three such goals might be to:

1) expand services to displaced workers and

put a stronger emphasis on training, 2) improve

the skill level of the U.S. work force in general,

and 3) enlarge the information base both for

programs that serve displaced workers and for

those that help Americans prepare for worklife transitions.

Expanding Services to Displaced Workers and

Emphasizing Training

First, there are policy choices to be made on

how many displaced workers government-sponsored programs should try to reach, and how

much emphasis retraining should receive in the

mix of adjustment services offered, In the first

years of the new JTPA Title 111 program, only

a small proportion of eligible displaced workers—probably less than 5 percent—received Title 111 services. It also appeared that most programs focused strongly on placing workers

promptly in new jobs, with less emphasis on

retraining and other relatively expensive services, such as relocation. In projects strongly

committed to training, as many as one-third of

participants may enroll, and costs per client

are typically $2,000 or more. In the JTPA transition year, ending June 1984, the Title III program cost per client was $768; in the 1984 program year, ending June 1985, the cost per client

was $895.3

If Congress wishes to support a broader displaced worker program, designed to attract

more participants and enlarge training opportunities, it might consider a package that includes: 1) aggressive outreach, including crisis response teams that help deliver adjustment

services in plants which are closing or undergoing mass layoffs, starting before the layoffs

begin; and 2) a stronger emphasis on retraining, including extended income support—up

to 1 year or more, at the level of unemployment

insurance benefits—for displaced workers and

sThe Title 111 program cost per client given here is the Federal portion. For three-quarters of Federal Title 111 grants, matching funds are required; they may be public or private, in cash

or in kind, and may include a wide variety of items, including

unemployment insurance payments and the employer’s share

of subsidized wages for workers getting on-the-job training.

displaced homemakers who are enrolled in

training needed for employment. Training

would include, for those who need it, remedial

work in reading and math skills.

The costs of a Title III program extended to

more people, combined with a stronger commitment to retraining, would be considerably

higher than present program costs, although

benefits to the workers involved and to society would also increase. A nationwide program

of aggressive outreach, including pre-layoff

assistance, might cost the government about

$30 to $50 million per year, depending on how

much is contributed by the private sector and

assuming that the services would reach about

300,000 people annually.4 However, savings

gained from more effective service delivery

could offset some of these costs, Benefits in the

form of faster reemployment of displaced

workers, and less spending for unemployment

insurance and income transfer payments,

might also offset costs.

The costs of greater emphasis on retraining,

though they cannot be figured precisely, are

likely to be substantial. Benefits would be

gained when the training begins to pay off in

higher incomes for the retrained workers, more

taxes paid on their incomes, and less need for

transfer payments. More effective outreach

might attract many more displaced workers to

the Title III program. The Labor Department

currently uses a planning figure of 150,000 per

year for displaced workers expected to receive

Title III services. Assuming that aggressive outreach raises the figure to about 300,000 per year

and that 20 percent of the extra participants

opt for training, at a cost of $2,000 apiece more

than the current average cost per Title III client, the additional cost would be about $60 million per year. This compares to $223 million

appropriated for all Title III services in fiscal

year 1985, and $100 million for fiscal year 1986.

In addition, if 5 percent of displaced workers—say 15,000 people—opted for extended

training and received income support for one

AInformation on costs of various elements of displaced worker

programs is summarized in later sections of this chapter, and

is discussed more fully in chs, 5 and 6.
50 ● Technology and Structural Unemployment: Reemploying Displaced Adults

year, the extra cost (beyond the average unemployment insurance benefits paid to unemployed workers now) would be about $47

million. Most displaced homemakers do not

qualify for unemployment insurance. Income

support for them during training—even at the

modest level of $119 per week, the average unemployment insurance payment—could imply

substantial outlays. For example, if 20,000 displaced homemakers per year chose this option,

the cost would be about $124 million.

Given the likelihood of higher Federal spending if a more aggressive program of assistance

to displaced workers is adopted, Congress

might wish to consider alternative funding

mechanisms for this option. For example, legislation has been proposed in the 99th Congress

that would impose a small duty on imported

goods, and earmark the proceeds for assistance

to workers losing jobs on account of trade. If

Congress believes the import duty concept has

merit as a way to finance adjustment assistance, it might want to consider making all displaced workers eligible for assistance funded

by the import duty–not just those displaced by

trade. As discussed throughout this report,

especially in chapters 8 and 9, the effects of

trade, technological change, and changing consumer preference are so interrelated that singling out one as the cause for particular cases

of displacement is always difficult, often impossible. Another possibility to consider would

be a small payroll-based tax for financing the

retraining of displaced workers,

An import duty or payroll tax might not be

considered appropriate for financing services

to displaced homemakers. Yet an argument can

be made that both individual employers and the

competitive position of the American economy

benefit from having available well-trained,

competent workers, offering skills that are in

demand. Thus, opening programs financed in

these ways to displaced homemakers might be

a possibility.

Improving the Skills of the Work Force

A second major goal that Congress may wish

to consider is a vigorous program to improve

the skill level of the U.S. work force. The purpose would be to increase the competitiveness

of American firms and, at the same time, to

protect the earning capacity and standard of

living of American workers. Instead of reacting to displacement after the fact, this set of

options would try to prevent it when possible,

and otherwise prepare for it so as to mitigate

its painful effects. An aggressive program in

support of this goal could include: 1) greater

emphasis on improving reading, math, and

other basic skills of adult workers; 2) support

for research, development, and evaluation of

technologies that effectively help adults learn

both basic educational skills and specific technical skills; 3) transfer of federally developed

education and training technology to the public education system and to private businesses;

4) support for programs that help adults continue their education and training on their own

initiative; and 5) support for the retraining of

active workers by employers.

The costs to the Federal Government of achieving this goal are difficult to determine, even

roughly, but would certainly be substantial. For

example, the most important Federal program

for adult basic education supports State and

local projects that serve between 2 million and

2.6 million people per year; these figures are

small compared with a frequently cited estimate that more than 25 million American

adults are functionally illiterate. While that estimate should not be accepted uncritically, it is

clear that current programs serve only a fraction of adults who need basic education. Federal expenditures for the program in fiscal year

1985 amounted to $102 million ($38 million less

than the law authorized]. States typically contribute an equal or greater amount than the

Federal Government contribution, It is not

clear how many more adults would enter the

program if more emphasis were placed on outreach. Even with expanded outreach, it is

unlikely that all of the people with basic skills

deficiencies would be reached.

Instructional technologies, such as computeraided instruction and interactive videodisk systems, hold high promise for adult education

and for training of workers by private employers. An expanded Federal role to encourage use

of instructional technologies for basic skills and
Ch. 2—Policy Issues and Options . 51

technical training would entail some additional

expenditures, but these costs could bring benefits (e.g., faster program completion by adult

participants). Most courseware now used for

adult basic education was developed for high

school students or young adults. Thus, Federal

support for research and development of courseware for basic skills might focus on mature

adults. In addition, a specifically designed

mechanism for transferring Federal training

technologies and materials to the private sector and public educational institutions could

be adopted, to give training technologies greater

visibility than they have under existing, generic

mechanisms for transfer of federally developed

technologies. One legislative proposal would

fund a mechanism of this kind at $3 million

per year. Several other options for improving

work force skills (e. g., greater support for individuals’ continuing education, a tax credit

for employers who offer increased training opportunities to their workers, and possible use

of a small payroll-based tax to finance training and retraining activities) could also be considered. The costs to the Federal Government

for some of these options (e.g., a tax credit)

would depend largely on employer and employee responses to the incentives.

Improving Information

A third major policy goal for Congress to

consider is improvement of information, so

that training and employment programs are

better matched with the needs of the labor market and can serve workers more effectively. For

whatever other major goals Congress might decide to undertake, better knowledge is basic.

Compared with the extra costs of active programs to serve more displaced workers or to

upgrade workers’ skills, costs of better information appear to be relatively low—in the tens,

not hundreds, of millions.

An improved information program could include these elements: 1) more frequent and

more detailed reports on how many workers

are being served in Title III programs and what

kind of services they are getting; 2) annual

reporting on plant closings throughout the

United States, including the numbers of workers affected, their characteristics, and the regions most affected; 3) adequate funds for collection and analysis of better labor market

information at the local level, especially on occupations and skills in demand; 4) adequate

funds for obtaining up-to-date qualitative information about jobs, for the use of educators, career counselors, training and employment project staff, and people making career choices; 5)

evaluation of the employment effects of major

technology developments that are federally

supported; and 6) funding of a center for research on new ways to organize work and design jobs as technological advances take place.

Specific issues emerging from OTA’s examination of displaced worker programs, displaced homemaker programs, and other employment, training, and education services are

discussed in the rest of this chapter. A number of additional issues besides those briefly

mentioned above are included. They are grouped

into five policy areas: 1) delivery of assistance

to displaced workers; 2) policy issues affecting

displaced homemakers; 3) options for labor

market information and research related to occupational change; 4) strategies for facilitating

worklife transitions; and 5) the Federal role in

research, development, and transfer of instructional technology.

DELlVERY OF ASSISTANCE TO DISPLACED WORKERS

Title III of the Job Training Partnership Act As in any new program, initial difficulties have

created a new program for offering adjustment been apparent in some States and projects.

assistance to displaced workers. In the brief While some of these difficulties have been overtime the program has existed, displaced worker come with experience, other problems are

projects have been launched in nearly all States. more fundamental.
52 ● Technology and Structural Unemployment: Reemploying Displaced Adults

Overall, on the basis of currently available

data, it appears likely that fewer than 5 percent

of displaced workers across the country participate in JTPA projects. The reasons why people fail to participate are difficult to document,

but they probably include lack of knowledge

about the existence of programs, failure of

some projects to offer services in demand locally, and relatively low demand for services

during a period of economic recovery (as in the

first years of the Title III program, 1983-85).

Some of the approaches emphasized below,

such as greater emphasis on outreach and prelayoff services, can be expected to increase participation in displaced worker programs.

The low participation rate of displaced workers in Title III projects suggests caution in

drawing simple relationships between funding

for the program and the rate of unemployment.

An aggressive outreach effort that attracted

more participants could also require increased

funding for the program–even if unemployment should decline. Conversely, if nothing is

done to improve participation levels, funding

levels will remain modest, but only a small portion of displaced workers who could benefit

from JTPA services will be assisted by projects.

OTA’s review of the experience so far with

displaced worker projects indicates that several issues related to delivery of assistance

merit consideration: 1) improving abilities to

respond rapidly to plant closings and mass

layoffs; 2) encouraging prompt reemployment,

possibly through temporary wage supplements

or relocation; 3) enhancing education and training opportunities in displaced worker projects;

and 4) improving information, reporting, and

monitoring under JTPA Title III programs.

Specific options for improving adjustment

assistance in JTPA Title 111 programs are discussed below, and summarized in tables 2-1

and 2-2. In addition, questions about Trade Adjustment Assistance, the special program to assist workers displaced by competition from imports, are also discussed.

Rapid Response to Displacement

(Issue Area 1, Table 2-1)

Experience so far with displaced worker programs strongly suggests that the best time to

begin assistance to workers is before layoffs actually occur. Although not every worker will

take advantage of the services early, having

them available is important to boosting morale

and offering training while workers are still

eligible for the maximum amount of unemployment insurance and other forms of income support. Moreover, many workers will use job

search assistance to find new jobs before the

layoffs begin, so that their employment is never

interrupted. Advance warning of layoffs makes

it possible to take constructive action early; but

unless it is associated with other measures to

assist the displaced workers, it maybe of only

limited benefit to them, while possibly imposing added burdens on employers.

While JTPA authorizes pre-layoff assistance,

only a few States have developed institutions

to deliver services before layoff in any systematic fashion. In the event that Congress wishes

to place greater emphasis on pre-layoff assistance, several options are available, including:

1) legislative guidance (through JTPA oversight

or appropriations directives) to focus greater

attention on pre-layoff assistance efforts (option la in table 2-1), 2) creation of a consultative service to encourage cooperative efforts by

labor and management to offer pre-layoff assistance (option lb), and 3) encouragement of

early notice of mass layoffs and plant closings

(option 1c). These options are not mutually exclusive, but could be implemented independently. Pros and cons of the individual options

are discussed below.

An adequate, up-to-date count of plant closings in the United States does not exist, but

most State directors of JTPA Title 111 programs

reported that plant closings were continuing,

in some areas accelerating, during 1984 and
Table 2-1.—Selected Options for Improving Adjustment Assistance in JTPA Title III Programs

-, Issue area and Options Relationship to other options

Issu Area 1: Improving rapid response to displacement

Relationship to current poIicy Estimated cost of option to Government

a) Congressional’action-suc’h as oversight effort; or

appropriations directives, to encourage greater

use of pre-layoff assistance in Title Ill projects

Although this option could be conducted in

conjunction with 1 b and 1c below, it IS viewed here

as a single option that would entail less extensive

action than the other two options

JTPA authorizes pre-layoff assistance, but provision

of this service by State Title Ill programs IS hampered

by an absence of institutions to provide pre-layoff services and by absence of advance notice of Impending

layoffs m most States Legislative guidance and encouragement through the JTPA oversight process

might encourage more State action

Implementing this option could Increase JTPA Title Ill services, if pre-layoff assistance were not provided at the expense of current services, additional funding could be

needed Federal fundmg requirements under this option

could depend on State carryover fund balances a

Authorize the establishment of Federal or federally supported State consultative services to facilitate cooperative labor-management pre-layoff

assistance

If adopted nationwide, this option might be more ef -

fective if implemented in conjunction with advance

notification (option 1c) However, the option could

be implemented in selected States on a demonstration project basis (I e , in those States that already

require or encourage notification) or on a voluntary

notice basis

Demonstration projects could be conducted by the

Secretary of Labor under current authority, using discretionary funds from JTPA If adopted nationwide,

legislative authorization for a small unit in an existing

Federal agency, or for support of State-run adjustment

services could be considered

Based on experience with a similar program in Canada,

such a consultative service might cost about $171 per

worker served If approach were applied nationwide, the

costs could be as high as $30 to $50 million per year in

Federal funds, depending on how much IS contributed by

non-Federal sources and assuming that 300,000 workers

per year receive services Selected pilot projects could

serve as an initial step in implementing this alternative

b

c Require, or provide incentives for, early or advance notification of large plant closings and

layoffs

Advance notification (whether voluntary or required

by State and/or Federal Government) IS needed for

pre-layoff assistance of the sort discussed m option

There IS currently no Federal requirement for advance

notification although legislation has been proposed

since 1974 One State (Maine) requires advance notice, a few other States (Massachusetts, Michigan,

and Wisconsin) have voluntary inducements for early

warmng of plant closings or layoffs

Costs not estimated, if Implemented as a Federal requirement, costs would depend on expenses of establishing and

maintaining a new Federal regulatory program

lb A nationwide advanced notification system could

provide information for plant closing and mass lay -

off data reports (discussed in option 4d)

Issue Area 2: Facilitating rapid reemployment

Assisting workers in relocation through”

I) Iegislative directive under JTPA to encourage

greater use of relocation options, and

II) continued authorization of relocation help under TAA or provision of equivalent benefits

under JTPA.

These two options could be adopted singly, or in concert In general, the emphasis placed on relocation

assistance wiII vary greatly among States and localities depending on prospects for local economic development to create new jobs. In some declining

areas, relocation may be one of the few options open

to displaced workers Under JTPA Title Ill, the emphasis placed on relocation would depend on State

program decisions.

The Trade Adjustment Assistance program has provided for relocation allowances to workers certified as

displaced by trade, but wiII expire unless reauthorized, Relocation assistance also is permitted among

the range of services authorized by Title Ill of JTPA,

but few projects make much use of this option

Among the few intensive relocation programs now in place,

financial assistance to workers ranges from $650 to $1,600

per worker, with $1,050 being the average for TAA If

10,000 workers were served each year, costs of relocation assistance would be about $85 million per year for

JTPA Title Ill (assuming average relocation expenses of

$850 per worker) a This IS about 4% of overall JTPA funding in FY 85 A less expensive option would be to authorize a program of guaranteed or low-cost loans for relocation

expenses,

The direct costs of conducting a study of the State systems and the national system have not been estimated,

but would be minor If study led to expansion of the system, major costs could be entailed Cost of establishing

a fully computerized nationwide job bank system with jobmatching capabilities have not been estimated. By one estimate, it could cost $241 million over 5 years to bring just

data processing equipment in all States up to date Alternate funding mechanisms (e g possible use of ES trust

funds) could be assessed in the study

Lack of experience with this approach suggests a need

for caution in evaluating the costs of wage supplements

Based on assumptions stated m the text, the maximum

cost of providing wage supplements under the option would

be $690 more per worker than under current UI benefits

For every t 00,000 workers in such a program, costs could

be $69 million above the cost of their UI benefis Actual

costs could be lower if significant numbers of workers who

would otherwise remain on the UI rolls until their benefits

expired participated in the program

a)

Require the Secretary of Labor to submit a report

to Congress which examines the costs and benefits of automated State job bank systems, linked

m several ways, and compares these with a fully

automated, central national job bank system with

job-matching capabilities.

If the investigation showed that expanded, automated

job banks would be cost-effective, they could factilitate relocation

Section 465 of JTPA authorizes the Secretary of Labor

to establish and carry out a nationwide computerized

job bank and matching program Limited steps

towards Implementing section 465 have been taken

by the Labor Department’s Employment and Training

Administration

b

c Authorize temporary wage subsidies to displaced

workers as an inducement to take lower paying

jobs with a potential for advancement One proposal would allow workers to receive (over the

course of a year) up to 80’% of their remaining

UI benefits if they take lower wage jobs than required by the State UI system

Could be Implemented independently or in conjunction with options 2a and 2b For many workers, other

options (e. g , relocation or intensive classroom training) offer more promise as a reemployment strategy

Other than m some company-union contracts, no wage

supplement programs currently exist. Given the lack

of experience with the wage subsidy approach, one

possibility would be to demonstrate wage subsidies

on a trial basis
Table 2-1.—Selected Options for Improving Adjustment Assistance in JTPA Title Ill Programs—Continued

Issue area and options Relationship to other options Relationship to current policy Estimated cost of option to Government

Issue Area 3: Enhancing education and training opportunities in Title Ill projects

a) Authorize income support to displaced workers

in training programs which extend beyond the 26-

week regular schedule for UI benefits, through

a targeted program of assistance. An additional

26 weeks of income support at a level equal to

UI benefits would make it possible for Title Ill participants to take 9-month training courses, leaving some time for job searches at the end of the

courses. Eligibility for the extended support could

be determined at an early point of regularly scheduled UI benefits

b) Emphasize remedial education services in JTPA

projects by:

i) identifying achievement of basic education

skills as a performance standard in JTPA Title

Ill projects;

II) directing States to excuse unemployed people from UI work search requirements while

enrolled in intensive remedial education

classes; and

III) earmarking a portion of JTPA funds for remedial education m Title Ill projects.

In general, it can be expected that more workers WiII

be interested in intensive training programs when immediate reemployment opportunities are limited; the

availability of additional income support for displaced

workers participating in intensive training could increase the number of Title Ill participants seeking

training.

These three options could be adopted singly, or in

conjunction with each other. Options for remedial

education in JTPA projects can also be viewed in the

broader context of Federal assistance for adult basic

and adult secondary education under the Adult Education Act. (See options for improving basic skills

in the active work force, table 2-5, Issue Area 8 )

JTPA Title Ill does not prohibit a stipend program of

income support for workers in intensive training, but

stipends are very seldom provided, Some workers may

not be able to participate in a long-term training program extending beyond expiration of UI benefits (usually, 26 weeks). Although UI benefit levels are used

here to identify costs, additional income support for

displaced workers in intensive training could be

funded through JTPA Title Ill or a separate fund (such

as has been provided under Trade Adjustment Assistance).

1)

ii)

‘‘Employment competencies ” are identified as a

performance standard only for JTPA services provided to youths. Adults (either disadvantaged or

displaced) are not included.

Some States do not include remedial education

among the ‘‘approved” activities in which participants receiving UI benefits are exempted from

work search requirements while in training JTPA

specifically exempts Title Ill workers in full-time

intensive skills training from such requirements,

but does not explicitly mention remedial education

iii) Some State JTPA Title Ill programs provide little

specific funding for remedial education

Costs of providing an additional 26 weeks of income support at an equivalent level to UI benefits might average

about $3,094 per worker. For every 7,500 people (5%

of the assumed number of JTPA Title Ill participants) found

eligible for extended income support while training, costs

of the program would be $23.2 million. Experience from

Canada (which has an extensive training system coupled

to income support) and limited data from California suggest that the per worker cost calculated above IS on the

high side. a b

I) To the extent that additional services (beyond current

services) were added, some additional costs could be

entailed a

II) Same as (I) above, for JTPA. Some additional State UI

costs would result.

iii) Extra costs for remedial education specifically provided

in some of the better Title Ill projects average about

$200 per worker. For every 30,000 Title Ill participants

needing such courses, and taking advantage of them,

the cost would be $6 million, a little under 3% of the

Federal Title Ill appropriation for FY 85a b

aco~t~ t. the Federal Government of ,mplement,ng the ~~tl~n may depend In pafl on ~he!he~ states carry over su~s~an!lal Unspeflt, and unobllga!ed lltle Ill funds at the end of program years unspent Title Ill funds carried Over frOlll the prOgranl

year ending June 30, 1985 amounted to $1845 mdllon nationwide Amounts earned over dtffered greatly from one State to another

t) Estimate ,s derived from the available information about the propofllon of displaced workers that are Ilkely to avail themselves of this parhcular OptlOn The Department Of Labor uses the figure of 150,000 workers served by displaced worker prOjeCtS

each year for planmng purposes, the 150,000 number IS used m this chart as a ‘‘baseline’ figure for the number of workers likely to use Title Ill m a hypothetical year The actual figure could be higher or lower

SOURCE Off Ice of Technology Assessment
Ch. 2—Policy Issues and Options ● 5 5

1985.5 Under JTPA Title III, States may offer

displaced workers pre-layoff assistance and

may support early intervention programs, conducted in cooperation with employers or labor

organizations, for plant closures or layoffs that

are expected to be permanent. Several States

have put considerable effort into rapid response

teams, They attempt to find out about impending layoffs and bring reemployment programs

to the workers early. Because most States do

not require or even encourage advance notice

of plant closings and large layoffs, the States

that are interested in rapid response try to enlist voluntary cooperation from companies in

giving early warning. Many State managers of

JTPA Title 111 programs mention as a leading

concern the need to learn of large layoffs and

plant closings in advance, so they can offer

prompt assistance.

In States where rapid response teams exist,

the teams typically mobilize and coordinate responses from a number of State and local agencies whenever they learn about an impending

plant closing. A team representative may make

plant visits, acquainting the soon-to-be-displaced workers with options and available services, such as testing and assessment to determine transferable skills or needs for education

and training, job counseling, job search training, and possibly job placement efforts.

How many major plant closings and layoffs

are reached by these rapid response pre-layoff

efforts is not known. Anecdotal reports suggest

that in 1985 many States were not yet prepared

to act promptly to news of layoffs. Some companies wishing to provide timely adjustment

services to workers they are laying off have

sought technical assistance from State Title III

programs or local Private Industry Councils

(PIC) but have not received a prompt, effective

response. The ability of Title 111 programs to

provide help quickly to displaced workers is

one potential topic for JTPA oversight.

While States can support plant-centered displaced worker projects under JTPA, the law

sThe U.S. General Accounting Office is analyzing data on plant

closings and the number of workers affected by them; the study

is scheduled for completion in 1986.

provides no mechanism especially designed to

help create such projects. Moreover, no State

has yet established any permanent agency to

help labor and management establish their own

worker adjustment and placement committees.

Among the unique advantages of such committees are personal acquaintance with the workers and their abilities, and personal networks

for turning up local job opportunities. In addition, unionized workers are more likely to trust

and participate in a program that their union

is committed to and responsible for. Management participation makes clear the company’s

commitment to assisting its laid-off workers.

Many companies are able to make valuable

contributions of space for a reemployment and

retraining center in the plant, staff time to operate it, and time off for workers to attend program activities.

Canada’s 20-year-old Industrial Adjustment

Service (IAS)6 provides a model for such a program and evidence that it can work well at

moderate cost. Labor-management committees

established by the IAS operate placement efforts in most of Canada’s major plant closings

and layoffs. Except in the depths of recession,

the committees have consistently placed about

two-thirds of the laid-off workers during the

period they are in business (generally 1 year).

In Canada’s fiscal year 1982-83, IAS-assisted

committees offered adjustment services to

about 36,000 workers losing their jobs in plant

closings and large layoffs. (Translated into

terms of the U.S. labor force, which is nearly

ten times as large as Canada’s, this figure is

equivalent to about 320,000 workers served,)

The cost to Canada’s National Government for

the part of the IAS program that serves these

workers was roughly $3.9 million in 1982-83,

with contributions from the private sector

bringing the total to about $6.1 million, Canada’s

economy was in deep recession in 1982-83;

costs of the IAS program are reported to be

lower in nonrecession years.

Four factors seem to account for much of the

IAS achievement. First is the fact that the people who know the plant’s workers best, and

61AS was formerly called the Manpower Consultative Service.
56 ● Technology and Structural unemployment: Reemploying Displaced Adults

also are personally acquainted with other employers in the area, can be highly effective in

turning up job openings. Second, the small

cadre of IAS field officers (numbering only 66

for labor adjustment services in 1984) have a

high degree of responsibility, are not bound by

red tape, and respond quickly, usually within

a day. Third, each labor-management committee is chaired by an independent, experienced

chairman, chosen by the committee from an

IAS list; thus, it is not necessary for each committee to reinvent the wheel. Finally, most of

Canada’s labor force is covered by legal requirements for advance notice of plant closings

or layoffs affecting more than 50 workers; this

enables the IAS to get an early start.

Because of significant differences in the two

programs, Canada’s IAS cannot be compared

directly with JTPA Title 111 services in the

United States. The JTPA program is much

broader, encompassing training as well as

placement, and it serves a more general population of displaced workers, not just those affected by plant closings and large layoffs. At

the same time, at least in its first years, the Title III program served many fewer workers in

relation to the size of the labor force. In addition, its measure of performance is looser.

About 177,700 workers were served in Title

III programs during program year 1984 (July

1984 through June 1985), including 132,200

who were newly enrolled that year. Of those

served, 113,600 had officially left the program

–had been terminated, in the language used

in State reports—by June 30, 1985. (The rest

were still in the program.) Of those terminated,

74,200 were reported to have found jobs. (No

information is available about those who were

not placed; presumably they left the program

while still unemployed.) The entered employment rate reported by the Labor Department

for the Title 111 program nationwide for program year 1984 was 65 percent; the figure is

based on workers who signed up for the program and were counted as having terminated

from it. In Canada’s IAS program, placement

rates of 66 percent over the years are based on

all the workers displaced in plant closings or

mass layoffs. There are no comparable placement figures for JTPA.

In drawing lessons for the United States from

the Canadian experience, an IAS-like program

might be regarded as a supplement to, or a part

of, the broader JTPA Title III program, not as

a substitute. Continuing programs not based

in plants would still be necessary, since many

displaced workers lose their jobs a few at a time

in communities affected by plant closings and

layoffs. An IAS-like program, though moderate in cost, would require funding, possibly on

the order of $108 to $171 in government funds

per worker served, depending on how much

the private sector contributes. New funds

might be provided for such a program, or Title III money might be diverted for it, especially

if these funds were exempted from the 5 percent limit the law imposes on State administrative costs of JTPA programs.7

Advance notice of layoffs is an important

part of rapid response efforts. While some companies try to provide as much advance notice

as possible, others provide little or no notice.

In the United States, over the past decade, Congress, at least 20 States, and several localities

have considered legal requirements for advance notice. Few States, however, have actually adopted such requirements. One State

(Maine) currently requires advance notice of

plant closings or layoffs affecting more than

50 workers; three (Massachusetts, Michigan,

and Wisconsin) have voluntary advance notice

laws.

At the Federal level, bills relating to advance

notice have been introduced in every Congress

since 1974 but none has been enacted. One proposal (H.R. 1616) was brought to the floor of

the House in November 1985 and defeated by

a close vote, 208 to 203. Some other proposals

(but not H.R. 1616) would link advance notice

to other requirements, such as provision of

severance pay, extended health insurance coverage, and retraining or relocation allowances

to the laid-off workers. Some opposition to

plant-closing bills may have been based on objections to the cost of these obligations. Of the

bills in the 99th Congress calling for advance

notice, some (e.g., H.R. 211 and H.R. 1212) also

7

1n late 1985, the U.S. Department of Labor was considering

undertaking a pilot program similar to the IAS model in cooperation with a few selected States.
`Ch. 2—Policy Issues and Options ● 57

include other employer obligations. However,

H.R. 1616 (the bill voted on by the House in

the 99th Congress) called only for 90 days advance notice of layoffs affecting 50 or more

workers, unless business circumstances made

this impossible, with no further obligations on

employers except for consultation with employees on alternatives to plant closings. The

idea of using the advance notice period for

examining alternatives to closure raises a different issue from the options under discussion

here, which relate only to delivery of effective

adjustment services before layoff.

In the longstanding controversy over a legal

requirement for advance notice, opponents

have made two principal arguments: 1) that it

burdens business, forcing companies to keep

ailing firms open longer than is economically

efficient, and weakening industrial competitiveness; and 2) that it can have a perverse effect, undermining the morale of the work force

and changing terms of business with customers, suppliers, and creditors, thus forcing the

closure of some plants that might have managed to stay open.

Those who favor the requirement point to experience, in other countries and in this country under union contracts, where advance notice is the rule. In Canada and a number of

European countries, businesses (including

U.S.-owned businesses) are able to comply with

advance notice requirements. Experience also

shows that worker morale can stay remarkably high after a plant closing announcement,

so long as effective readjustment services are

offered promptly. Without this constructive

and timely action, advance notice might be disruptive. The two issues are intertwined. Provision of services to displaced workers before

layoff is highly desirable; it is hard to accomplish without early warning of layoff; and early

warning may accomplish little unless a prompt

response is made and high-quality services are

provided.

Laws that encourage, but do not require, advance notice are a compromise, and have

sometimes won the backing of both sides in the

argument. (e.g., both business and labor supported the concept of incentives for advance

notice in Massachusetts; the State law encourages compliance with voluntary guidelines

that include advance notice, and bars companies that do not comply from State-guaranteed

loans and tax breaks.) In a less formal way, and

without rewards or penalties to promote compliance, some managers of State JTPA Title III

programs are trying to persuade employers that

it is in their own interest to give early warning of plant closures and layoffs. They stress

the potential for keeping worker morale high

and maintaining good community relations. Although some success has been reported from

these efforts—Arizona, for example, says that

word-of-mouth reports from satisfied employers have encouraged other employers to cooperate—most States interested in pre-layoff

assistance are frustrated by their inability to

anticipate the layoffs.

Facilitating Rapid Reemployment

(Issue Area 2, Table 2-1)

Most displaced workers seek rapid reemployment when jobs similar to their old jobs in

wages and skills are available in their communities. However, many displaced workers are

not able to find comparable jobs. Programs

such as relocation assistance or publicly funded

temporary wage supplements might help these

displaced workers get back to work more

promptly than they otherwise would.

For displaced workers who take new jobs

paying less than the old ones, wage supplements might bridge part of the income gap; the

payments would be limited to a fixed transition period during which workers could get experience on the new job and recoup some of

their earning power. Except in some collective

bargaining agreements, no wage supplement

program exists at present. In communities

where job choices are few and poor, relocation

offers some displaced workers improved chances

for satisfactory reemployment. Relocation

assistance, including both information and financial assistance, is currently available to displaced workers under Title III of JTPA and to

eligible unemployed workers in the Trade Adjustment Assistance program, (Even though

TAA’s authorization lapsed as this report went
58 . Technology and Structural Unemployment: Reemploying Displaced Adults

to press, relocation assistance and some other

kinds of TAA assistance apparently will continue through the end of fiscal year 1986 under a continuing resolution enacted on December 19, 1985. See subsequent section on TAA

for details.]

If Congress wishes to consider the expansion

of relocation assistance or the establishment

of wage supplements to encourage prompt

reemployment of displaced workers, several

options are available, including: 1) legislative

guidance through JTPA oversight to encourage

attention to the relocation option (option 2a (i)

of table 2-1); 2) continued authorization of TAA

relocation assistance or provision of equivalent

benefits under JTPA (option 2a (ii)); 3) direction that a study be conducted on the costs and

benefits of expanding the intrastate and interstate job bank system to facilitate relocation of

displaced workers (option 2b); and 4) legislative authorization of partial, temporary subsidies to displaced workers accepting jobs at substantially lowered wages (option 2c).

Relocation Assistance

U.S. workers have traditionally been mobile;

many still are, especially younger people. However, it is usually true that fewer than 10 percent of displaced blue-collar workers relocate

to new areas, even when there is little hope of

satisfactory new jobs in their home communities. Many displaced workers are mature or

older people for whom the costs of moving are

high: selling a house at a loss, paying more for

housing in a high-priced boom town, giving up

a spouse’s job, breaking family and community

ties. In fact, the circumstances in which very

many displaced workers might choose to relocate are probably limited. Vigorous efforts to

help workers relocate are most appropriate in

areas of long-term economic decline or in very

limited labor markets (e.g., mining communities that once depended on copper, iron, or uranium, where chances of economic revival are

remote). Considerable numbers of displaced

workers may be encouraged to move from

communities where their job prospects are

poor, if they can get help in job hunting outof-area, and financial help with relocation expenses.

On the basis of limited experience from an

Employment Service (ES) program in the 1970s

and the more recent efforts of a few displaced

worker projects, it appears that several kinds

of services are needed to support relocation of

displaced workers, in appropriate circumstances. These services include: 1) information

and counseling about employment and living

conditions in other areas; 2) adequate, current

information on job openings and assistance in

locating suitable jobs for individual workers;

3) financial assistance to help cover the out-ofpocket costs of job searches and interviews in

distant areas; and 4) limited aid with moving

costs. The costs of moving from a depressed

area can be so high that even generous relocation allowances will not fully cover them, but

some assistance with moving expenses is an

important part of the package.

JTPA does not explicitly set limits on the

amount of relocation assistance that may be

given to displaced workers, but there are practical limits. Relocation assistance can be quite

expensive, and States have other claims on

their Title III grant money. In Arizona, for example, where many displaced workers come

from copper mining communities, the State Title III program emphasizes relocation to an unusual degree. However, because of funding

limitations, the program allows no more than

$650 per worker in financial assistance. TAA

relocation assistance is comparatively generous; up to $800 is allowed for out-of-area job

search and an additional limit of $800 is set for

defrayal of moving expenses.

Currently, relocation assistance plays a minor role in most displaced worker programs.

In a telephone survey of State managers of Title 111 programs, 22 provided information on

relocation assistance; 13 said none of their

clients received it. Of the nine that responded

positively, only three said they provided the

service to 5 percent or more of their clients,

or spent as much as 5 percent of their funds

on the service. Arizona, with its copper miners,

provided relocation assistance to 15 percent of

clients; Minnesota, where many displaced

workers come from the State’s played-out iron

mines, provided the service to 10 percent.

About 500 workers in these two States com-
Ch. 2—Policy Issues and Options ● 5 9

bined received relocation assistance in the

transition year, October 1983 to June 1984.

Because of the special circumstances in

which a strong emphasis on relocation is most

appropriate, it is likely that provision of the

service will continue to vary a great deal

among States. It may be, however, that more

workers in a substantial number of States

would take advantage of the option if it were

offered in more effective form. For planning

purposes, the U.S. Department of Labor currently assumes that 150,000 workers per year

will be served in Title III programs. For a rough

indication of the cost of offering more intensive relocation efforts, let us assume that 10,000

workers per year (distributed unevenly across

the country) receive the service. If the cost per

worker were midway between $650 (as in Arizona) and $1,050 (roughly the average TAA

grant in 1984), the overall program cost would

be $8.5 million per year. This is about 4 percent of $223 million, which was the Federal

share of Title 111 program funding in fiscal year

1985. If more effective delivery of all services

to displaced workers had the effect of expanding participation, demand for relocation assistance might rise, along with demands for other

services.

The figure of $8.5 million for relocation assistance to 10,000 displaced workers (or $17 million for 20,000, and so on) may be compared

to the cost to the Federal Government of people’s adjusting their taxable incomes by subtracting job-related moving expenses. In 1982

(the last year for which figures have been published) taxpayers took adjustments of about

$3.7 billion for moving expenses connected

with their jobs. If the average income tax rate

of 26 percent is applied to this figure, the loss

to the Federal treasury was over $900 million.

The Federal income tax moving adjustment is

of very limited help to a workers in low tax

brackets; tax credits are in general more helpful to people in low tax brackets than deductions or adjustments.

One option that is not offered either under

JTPA or the TAA program is low-cost loans to

displaced workers to cover moving expenses.

A loan has the advantage of encouraging relocation when that seems to be the best option,

without the public’s paying for a move that the

worker might undertake anyway.

Relationship of the Interstate Job Bank System

to Relocation

Theoretically, a nationwide computerized job

bank and job-matching system might be helpful to workers contemplating relocation, since

it could acquaint jobseekers throughout the Nation with current job openings, and acquaint

employers with applicants who may fit their

needs. Such a system was authorized by JTPA

but does not yet exist, although the Labor Department’s Employment and Training Administration (ETA) has taken some steps in this

direction. Two considerations suggest caution

in trying to make the Interstate Job Bank listings more comprehensive and more fully automated: 1) the cost of doing so, which has not

yet been estimated; and 2) questions as to how

much the service would be used. On the other

hand, a current, complete system of job listings

might serve a broader range of jobseekers, and

do it more effectively, than the partial system

that now exists.

The Interstate Job Bank in Albany, New

York, was opened by ETA in July 1984, replacing the 5-year-old Interstate Clearance System.

The bank operates as an exchange center for

job orders in State ES systems throughout the

country. Evidence of expanded coverage over

the old system is that 44,700 job openings were

listed in the bank in 1984, compared with 1,500

the previous year. The Interstate Job Bank is

not, however, the complete nationwide system

envisioned in the law. It is quite limited in coverage, has no job-matching features, and is by

no means fully computerized.

Listings with the Albany Interstate Job Bank

now consist largely of hard-to-fill jobs, most of

them professional and technical, selected for

inclusion by State ES systems. The idea behind

the selection is that the bank serves workers

considering relocation, and lower level jobs are

thought to hold little attraction for people considering moves (and, conversely, blue-collar

workers without special skills do not ordinarily consider relocation).
60 Technology and Structural Unemployment: Reemploying Displaced Adults

No attempt is made in the Interstate Job Bank

to match job orders with clients whose applications are on file in ES offices throughout the

country; instead, job matching is done in the

local ES offices. Connections between the State

systems and the interstate bank are only partly

computerized. All but six States send in their

job orders by mail, and all but one receive the

listings back by mail; only Nevada has two-way

telecommunications links with the Albany center. Allowing time for mail deliveries and updating of the listings, the turnaround time from

State ES systems to the interstate bank and

back again is at least 8 days, probably more

often 10. A one-way telecommunications link,

such as five States now have to the bank, can

reduce the lag time to as little as 2 or 3 days.

A two-way link, like Nevada’s, allows same-day

communication.

Two questions are at issue in upgrading the

present Interstate Job Bank. One is faster communication, so that job orders are listed quickly

and removed quickly when the jobs are no

longer open. The other is broader coverage. An

on-line, instantly reactive, dial-up job bank system, covering all the jobs in the ES systems,

is feasible technologically. However, it would

require upgrading of automation in State systems. Not all statewide job banks are automated; in those that are, automation is present

in varying degree; and the systems are not always compatible. To build a unified system

would almost certainly require scrapping some

of what is already in place.

No detailed estimate of the cost of a comprehensive, nationwide, computerized on-line system has been made. The costs would have to

include not only the hardware (computers and

telecommunication lines), but a software system, plus staff time for training, operation, and

maintenance. Altogether, the system would

clearly cost a good deal more than the mail-in

system most States use now, at least for the

period when capital investments are being

made and training costs are at a peak. In 1984,

the Interstate Conference of Employment Security Agencies estimated that it would require

an investment of $241 million over 5 years to

bring the data processing equipment of all State

Employment Security systems up to date; this

figure includes only the cost of the hardware

(modern mainframe computers, desk terminals,

and disk storage technology). The estimate covered data processing needs for unemployment

insurance and labor market information as well

as for the Employment Service.

One alternative for improving the existing Interstate Job Bank is for all States to transmit

data one or both ways by telephone line, rather

than by mail, as most do now. This could reduce delays in listing and removing job orders.

No cost estimate of this alternative is available.

Another, more fundamental, alternative would

be to put efforts first into upgrading State job

banks and matching systems. At present, Missouri is the only State with a fully automated

“paperless” system. If other States developed

similar systems, communication among them

on job openings and qualified applicants could

be accomplished either by networking the State

systems or, in a more rudimentary fashion, by

making each State system available for electronic query by an office in any other State. In

either case, a degree of commonality would

have to be designed into all the State systems.

As noted above, the capital cost of installing

modern equipment in all States has been estimated at $241 million over 5 years. This

amounts to $48 million per year, and is about

6 percent of the current $770 million annual

budget for basic services in the ES system. The

costs of telecommunication equipment, software development, and staff training time are

not included, but neither are the savings in

operation and maintenance that ES systems probably would reap from using modern equipment.

The principal criticism of a nationwide, comprehensive, computerized job bank is its potential cost in relation to benefits. Since the ES

system is entirely federally supported, upgrading the present interstate bank (or intrastate

banks, for that matter) would require either added Federal funds or a redirection of present

resources, with possible sacrifice of other ES

services or closure of some ES offices. Federal

support for ES and unemployment insurance

is provided through a system of trust funds.

Possibly, job bank improvements might be
Ch. 2—Policy Issues and Options ● 6 1

funded through the use of trust fund money

without necessarily raising taxes directly. However, the issue is complex and would require

study. A significant question is what type and

what level of improvement would be worth the

cost, regardless of how funded.

It is not certain that an improved interstate

bank would improve the functioning of the labor market, since many of the job orders flowing into ES offices call for very limited skills

and pay low wages, These jobs often have

limited appeal even for local workers, not to

speak of workers in distant places. Hard-to-fill

professional and technical jobs that might have

national markets are already entered into the

Interstate Job Bank. Whether even these jobs

listings are attractive to workers considering

relocation is uncertain; often the jobs are hard

to fill because the pay they offer is relatively

low. In addition, it maybe questioned whether

there is a need for professional jobs to be covered in a publicly financed labor exchange system, since there are many private exchanges

(including nonprofit ones, such as professional

associations) serving them.

An argument in favor of broader coverage

of listings is that blue-collar and other lower

paid workers are often more willing to relocate

when they are given practical help in getting

jobs at the other end. Adequate information

about job openings, although not sufficient by

itself to encourage relocation, is one part of the

necessary help. An interstate bank that lists a

broad range of jobs might be used cooperatively by ES offices and displaced worker projects to encourage relocation out of depressed

areas into areas where jobs are going begging.

The enhanced effectiveness and reputation of

a more comprehensive, quickly reactive interstate ES system might attract more job orders

from employers, leading to further improvement of the system. The same might be true

of the intermediate step of up-to-date computerization of intrastate job banks.

Some bills before the 99th Congress call for

greater attention to upgrading the Interstate Job

Bank or intrastate banks. One (H.R. 670) would

authorize $50 million per year for 4 years to

develop and implement computerized job bank

systems in each State, using software that is

compatible with other systems in so far as possible. Another (S. 1033) calls for establishing

a nationwide job bank and job-matching program in connection with employment services

for veterans.

Another bill (H. R.1219) takes a different approach, calling for a study to determine if the

benefits of a highly sophisticated national job

bank would outweigh the costs, The proposal

would direct the Secretary of Labor to submit

a report to Congress on such a bank’s feasibility and costs, containing information on: 1) the

extent to which the nationwide job bank and

job matching system authorized under JTPA

could be expected to increase employment opportunities in each State; 2) the estimated cost

of making such a system fully operational; 3)

the extent to which development of the system

would require changes in the existing ES operations of each State; and 4) the feasibility of

using nonprofit privately operated job-referral

services for low-skill jobs in low-wage industries, rather than using the State ES offices or

a nationwide computerized job bank and matching program. Any study of the benefits of an

automated national job bank should compare

a centralized, national system with several

ways of linking individual automated State

systems.

Wage Supplements

Many displaced workers find rapid reemployment only in jobs that offer substantially

lower pay than their old jobs. This is a common burden of displacement. In recent years,

at least 30 percent of adult workers who found

new full-time jobs after displacement took pay

cuts of 20 percent or more. Temporary, partial supplements to the wages on a new job

have been proposed as a way to ease the transition for some displaced workers.

If temporary supplements to wages on lower

paying jobs were available, some workers might

be inclined to seek reemployment sooner, with

the benefit to themselves of getting back to

work, getting experience in new jobs, and gaining time to recoup some of their former earning power. Additional benefits to society might
62 ● Technology and Structural Unemployment: Reemploying Displaced Adults

include a smaller overall bill for income support payments. This outcome is not certain,

however; the cost of wage supplements might

exceed present costs of income support programs. There has been very little experience

with wage supplement programs—certainly

none on a national scale. The only such programs in existence are those in a few companyunion contracts which allow the use of supplementary unemployment benefits to temporarily bring wages on a new job close to the

level of wages on the old job.

One suggestion for government action is to

establish a special trust fund for wage supplements, limited to a fixed transition period and

available only to older, more experienced workers. Another is contained in a bill in the 99th

Congress (H.R. 758) which proposes, among

other things, to offer supplemental payments

from the unemployment insurance (UI) trust

fund to workers who take jobs at a lower wage

than is required under their State’s UI law. The

payments could amount to as much as 80 percent of the UI benefits an unemployed worker

is eligible to collect, and could last as long as

a year. No cost estimates are available for these

proposals. They might prove to be quite costly,

especially if they attracted large numbers of

new participants to the Title 111 program.

A cost estimate for a hypothetical wage supplement program may be roughly calculated.

For every 100,000 workers receiving a wage

supplement, the cost might be about $70 million per year, assuming that these workers receive 80 percent of the full benefits for which

they are eligible. The calculation is based on

the average UI benefits received by U.S. workers in 1984 ($119 per week for 15 weeks) and

the maximum duration of UI benefits in nearly

all States that year (26 weeks). The number of

recipients of a wage supplement would depend

strongly on the exact terms of the program.

With 30 percent of reemployed displaced workers taking pay cuts of at least 20 percent, the

number could be high.

A wage supplement program, though novel,

might be viewed not as entirely new, but as an

alternative use of unemployment insurance to

encourage faster reemployment. The program

might also be regarded as somewhat analogous

to subsidies paid to employers in on-the-job

training programs. In any case, because of the

large uncertainties as to levels of participation

and costs, if Congress is interested in the proposal, a trial or demonstration program might

be the most practical first step.

Education and Retraining Under Title Ill

(Issue Area 3, Table 2-1)

Several issues have arisen about education

and retraining in JTPA Title III programs, including: 1) uncertainty about how much emphasis is being placed on classroom skills training in Title 111 projects, 2) possibly providing

extended income support for workers enrolled

in skills retraining courses, and 3) giving greater attention to the remedial education needs

of displaced workers.

Inadequate Data on Formal Training in

Title Ill Projects

In some of the better displaced worker projects, a substantial minority of participants—

perhaps as many as 20 to 30 percent—choose

training in a new skill or occupation, seeing

the retraining as an important avenue to a good

job. Depending on local job opportunities, demands for training may vary; it appears that

more workers opt for formal training during

recessions than during prosperity, when immediate reemployment prospects are good.

Some concern exists, however, that JTPA Title III programs may be overemphasizing immediate placement, at the expense of skills

training. Although classroom training is expensive, it may best serve the long-term interests

of some displaced workers. With the information currently available, it is difficult to tell how

much training and education is being offered

in Title III programs. The Labor Department

does not require States to provide detailed

breakdowns on the number of participants and

the funds spent for each of the services provided in Title III projects. The question of

whether adequate emphasis is being placed on

classroom training services is, therefore, a potential topic for congressional oversight. It
Ch. 2—Policy Issues and Options ● 6 3

seems unlikely that detailed information about

the mix of services provided under JTPA will

become available unless Congress specifically

requires the Labor Department to instruct

States to provide the information. This information could be a required component of an

expanded State reporting system under JTPA,

discussed in a subsequent section of this chapter. (See options 4a, 4b, and 4C in table 2-2.)

Income Support Alternatives for Workers

in Intensive Training

For most workers, unemployment insurance

benefits are the primary source of income during training. JTPA directs States to exempt displaced workers who are enrolled in eligible

training activities from the work-search requirements of the UI system.8 Many skills retraining courses offered to displaced workers

are brief, lasting only a few weeks, in order to

fit training and job search assistance into the

regularly scheduled 26-week duration of UI

benefits,

While these short-term courses may be sufficient for training in some skills, some displaced

workers who could benefit from longer, more

intensive training courses may not be able to

participate without income support lasting

longer than UI benefits. Unlike the TAA program, which has provided up to 52 weeks of

income support to eligible workers while they

are in approved training, stipends for displaced

workers in training are rare under JTPA Title

111.

Several ways to provide additional income

support to displaced workers in longer term

training have been proposed in recent Congresses. Some proposals would give supplemental Federal unemployment compensation

BThe U.S. Department of Labor’s Employment and Training

Administration issued a directive on implementation of this requirement (contained in Section 302 of ]TPA] on June 29, 1983.

Section 302 requires states to identify employment opportunities, and associated training opportunities, for groups of individuals eligible for Title 111 assistance. Acceptance for such training is deemed acceptance of training by the State under Federal

laws relating to unemployment benefits. Section 33o4 of the Federal Unemployment Tax Act of 1970 indicates that benefits to

otherwise eligible individuals should not be denied if the individual is participating in training approved by the State.

to unemployed workers who continue in JTPAfunded training after their regular UI benefits

expire. Another approach is to encourage

States to expand eligible training activities for

workers receiving UI benefits. Still another approach is to permit displaced workers to use

penalty-free disbursements from Individual

Retirement Accounts for tuition expenses

while they are training. Finally, some bills

would give displaced workers and displaced

homemakers greater access to Federal student

aid assistance.9

If Congress wishes to pursue the concept of

offering additional income support to displaced

workers in extended training programs, the

question of containing the costs could be critical. One way to keep costs down would be to

target the available assistance only to those

who have demonstrated a commitment or need

for extended training. In a targeted approach,

eligibility for extended income support probably should be determined for most workers

before the half-way point of their regular UI

eligibility. (See option 3a in table 2-1.)

If screening of this sort were employed, what

would be the likely costs of offering targeted

assistance to displaced workers in extended

training under JTPA Title III? Assuming that

each worker in intensive training needed 1 year

of income support (9 months for a classroom

training course plus some leeway at the beginning and end of the course), an additional 26

weeks of income support beyond the usual 26

weeks would be needed. If the added income

support were equal to regular UI benefits, the

additional cost would average $3094 per

worker. (While UI payments have been used

as the basis for computing costs, it would not

necessarily be desirable to fund the program

through the UI system; funding through JTPA

Title 111 appropriations or through a separate

fund might be more appropriate.)

%ee, for example, H.R. 37oo, the proposed Higher Education

Amendments Act of 1985 as reported by the House Committee

on Education and Labor on Nov. 20, 1985. In addition, proposals

have been made to encourage workers and employers to establish individual training accounts (ITA) to cover training expenditures should the worker become unemployed. The ITA concept

is discussed in ch. 6, and in the continuing education section

of this chapter.
64 ● Technology and Structural Unemployment: Reemploying Displaced Adults

The number of people likely to make use of

intensive training programs of this sort will

fluctuate, depending on general economic conditions and reemployment prospects. However, the demand for training is not unlimited.

Even in JTPA projects that emphasize training,

generally only about 20 to 30 percent of the participants take classroom training, and, of these,

most enroll in short-term courses. If 5 percent

of all JTPA participants qualified for the extended income support, the cost of the program

would be $23.2 million, assuming (as does the

Labor Department for planning purposes) that

the Title III program serves 150,000 people nationwide.

Health Care and Displaced Workers in Training

Some displaced workers who would otherwise be good candidates for classroom training may feel it necessary to forgo training when

jobs are available, so they can regain health insurance benefits for themselves and their families. Provision of health services to displaced

workers, like extended income support, might

encourage more displaced workers to take

retraining courses.

The issue of medical and health services benefits for the unemployed (and for other people

not covered by insurance plans) has been the

subject of considerable legislative debate in recent years. Discussion of the issue as it relates

to unemployed people in general is beyond the

scope of this report.l0 JTPA, in theory, already

authorizes States to provide health care for displaced workers participating in Title 111 training projects. While specific information is not

available on provision of health services to Title III participants, it is generally believed that

few if any States offer it. JTPA generally places

a 30-percent limit on the proportion of Federal

funds that can be used for administration and

“supportive services” (health care is just one

of several “supportive services” permitted un1OFor a discussion of proposals in Congress related to health

insurance benefits for the unemployed in general, see janet Pernice Lundy and Anne C. Stewart, “Health Insurance: Proposals

in the 99th Congress, ” Library of Congress, Congressional Research Service, Issue Brief IB84067.

der the act).11 Because 15 percent of the States’

share of Federal funds may go to the costs of

administration, the effective limit for supportive services (for funds subject to the limit] is

15 percent.l2 In fact, States may spend far less;

so far, 6 to 7 percent of the Federal share of

Title 111 spending has gone to supportive services. Given the limited information now available, Congress might wish to address the health

services issue, as it relates to participation in

training, as one subject of oversight on classroom skills training in JTPA. (See table 2-2, option 4c.)

Remedial Education and the Displaced Worker

Displaced workers with basic educational

deficiencies (as in reading, writing, arithmetic,

and oral communications) may be seriously

hampered in their search for reemployment,

and are often unable to participate in training

or retraining programs. Up to 20 percent of

participants tested in displaced worker projects

have shown deficiencies in basic educational

skills; some of these workers may require fairly

intensive remedial education to correct the

deficiencies. Other workers with less severe,

yet still serious, basic skills deficiencies might

benefit from shorter term courses.

Displaced worker projects can serve as a

highly effective delivery system for adult basic

education. However, the high promise of Title III programs as a vehicle for providing remedial education is not being met. While specific displaced worker projects often strongly

emphasize remedial education, the findings

from an OTA phone survey of State Title 111

program managers suggest that remedial education has not been given high priority at the

State level. Only half the States responded to

questions about the number of displaced workers receiving remedial education; of these,

seven indicated that no Title III funds were

1l~’he ao-percent limitation is stated in Section 307(a) of JTPA.

Section 4(24) defines supportive services to include health care.

IZunder Title III, only the formula-funded grants to States are

subject to the 30 percent limit. About three-quarters of Title III

grants are formula-funded, the rest are disbursed at the discretion of the Secretary of Labor. Altogether, the 30 percent limit

applies to only one-half of the Federal and non-Federal funds

available to a Title 111 program.
Ch. 2—Policy Issues and Options ● 6 5

spent for remedial education. Even among the

States that said they provided remedial education in Title III projects, the percentage of

clients served by basic education was usually

low. Of the 18 responding States in this category, participation levels among Title III clients

ranged from 0.1 to 18 percent. Eleven of these

States—or nearly two-thirds—provided remedial education services to less than 10 percent

of Title III participants, and seven provided

these services to less than 5 percent.

Thus, it appears that only a few States are

providing remedial education to clients in Title III projects at a level that even approximates

the probable need for services (using the 20 percent figure cited above as a rough indication

of need). If Congress desires to place greater

emphasis on remedial education in Title III

programs, areas that merit attention include:

1) expanding JTPA’s performance standards to

include improvement in basic education skills

as a goal of Title III projects, 2) directing States

to excuse unemployed people receiving UI benefits from work search requirements while they

are enrolled in intensive remedial education

classes, and 3) earmarking a portion of JTPA

funds for remedial education in Title 111

projects.

It is possible that UI requirements in some

States make it difficult for displaced workers

to take intensive full-time remedial education

courses while receiving UI benefits. While

JTPA (as noted above) directs States to excuse

displaced workers from UI work search requirements if they are enrolled in eligible training opportunities conducted under Title III,

displaced workers enrolled in full-time remedial education classes are not explicitly covered by the exemption. OTA’s phone survey of

State Title III program administrators indicated that several States do not consider remedial education a training opportunity (under

the meaning given to it under Section 302 of

JTPA) or as “approved training” by the State.13

lsIn addition to the provision in JTPA, Federal law governing

the UI system also directs that otherwise eligible unemployed

people can be excused from work-search requirements and still

receive UI benefits, if they are participating in any Stateapproved training—not necessarily JTPA-funded training.

Some concern exists that JTPA’s emphasis

on successful placements and low costs may

discourage projects from offering remedial

education. The concern has been greatest in

the case of Title II programs for economically

disadvantaged people, but it may also be relevant to some Title III projects. For youth programs under JTPA Title 11A, performance

measures include employment competencies

recognized by the local PIC and completion of

schooling, as well as placement in jobs. These

measures are not included for adult workers,

either disadvantaged or displaced.

How the UI work test or JTPA performance

standards affect offerings of remedial education in displaced worker projects is uncertain.

It is probable, however, that some workers who

could benefit from remedial education are affected adversely. Congress could encourage

more attention to remedial education if it explicitly stated that “training” under JTPA includes remedial education, and that improving

basic skills in reading and mathematics is considered a positive outcome of training (see options 3b (i) and 3b (ii) in table 2-1).

Another measure to encourage delivery of remedial education as part of displaced worker

projects would be to allow or to require a setaside of a given percentage of Title 111 funds

for this purpose (see option 3b (iii), table 2-1).

There are several mandatory set-asides in Title 11A; for example, 8 percent of these funds

must be allocated for continuing education

agencies, including adult and vocational education. In the same way, a small portion of Title III funds might be allocated to State agencies that provide education in basic skills for

adults. For example, States might be directed

to spend at least 3 percent of their Title III

funds for remedial education. This is much

more than most States now spend on remedial

education in Title III programs, although less

than what is spent in the most ambitious State

efforts. (i.e., about 5 percent).

One way to estimate the additional cost of

emphasizing remedial education in displaced

worker programs is to look at actual costs in

some exemplary projects. The Ford/UAW project at the Milpitas, California, auto assembly
66 ● Technology and Structural Unemployment: Reemploying Displaced Adults

plant enrolled 770 workers in remedial education—39 percent of the 1,997 who signed up

for services. The average extra cost per participant was $245 (it was only $130 per course, but

many workers signed up for more than one

course). In the Midland, Pennsylvania, project,

which offers a range of remedial education

services with excellent participation, the extra

cost to the project is $97 per participant. Assuming that 150,000 displaced workers were

to participate per year in Title III projects, and

20 percent take advantage of remedial education, the cost, at $200 per participant, would

be $6 million. This is a little under 3 percent

of the Federal appropriations of $223 million

for Title III programs in fiscal year 1985.

JTPA Information, Reporting, and Monitoring

Requirements (Issue Area 4, Table 2-2)

OTA found several areas where current information and reporting under JTPA Title III

and other related programs may not adequately

support congressional oversight of program

activities, identification of budget priorities, or

policy formulation. In addition, questions have

been raised about the adequacy of Federal guidance and information to States. Four areas of

particular concern are:

●

●

●

Reporting on demand for services in displaced worker programs is inadequate and

out-of-date. The Labor Department requires States to provide summary annual

reports on JTPA programs, which include

figures on numbers of participants and

spending levels. These reports could be

more helpful to Congress in making budget

decisions if they were more timely.

No reporting is required on the mix of

services in displaced worker programs—

that is, how many workers receive each

service, including job search assistance,

vocational skills training, on-the-job training, remedial education, and relocation

assistance. Such information could be useful to Congress in judging the effectiveness

of the Title III program.

Reliable nationwide information on permanent layoffs and plant closings (the

number occuring each year, the number

●

of workers affected, the geographical location of closings, and the types of industries) does not yet exist. JTPA requires the

Secretary of Labor to collect this information and publish it annually, but the effort

was not undertaken until Congress appropriated funds for it.

Some States complain that the Labor Department has given them insufficient direction in implementing JTPA programs,

and believe they must be extra cautious in

such matters as determining eligibility, so

as not to have spending disallowed in audits later. The problem may be temporary,

since it will ultimately be “solved” in the

audit process, but in the meantime delivery of services to displaced workers in

some States may be less than optimal.

If Congress wishes to emphasize these reporting requirements under JTPA more strongly,

or to strengthen the Federal role in guiding

States in areas of uncertainty, it may choose

among several means of doing so, including:

1) legislative guidance through JTPA oversight,

to focus attention on congressional and State

needs for timely information; and 2) earmarking appropriations for collection and publication of data.

Timely, adequate reports on participation in

and spending for displaced worker programs

could assist Congress in making appropriations

decisions (see option 4a, table 2-2). The Labor

Department requires reports from the States on

their Title III activities only once a year, covering the period through the end of the program year, June 30, and due 45 days later. Not

all reports are submitted in time; collection of

data that are reasonably complete for most

States may be delayed several more weeks.

Congressional hearings on budget and appropriations for the following fiscal year begin in

the spring; reports on spending and program

activities that do not arrive until near or after

October 1, when the new fiscal year begins, are

of limited value. Even when the congressional

schedule slips, and work proceeds on the new

fiscal year’s appropriations after the fiscal year

has begun, information that arrives so late in

the session may not receive much analysis or

attention.
Table 2-2.–Options to Improve Information, Reporting and Monitoring Under JTPA Title Ill

Issue area and options Relationship to other options Relationship to current policy Estimated cost of option to Government

ISSUe Area 4: Improving information, reporting, and monitoring

a)

b)

c)

d)

e)

—

Legislative guidance to the Department of Labor

requiring more frequent reports from the States

on the number of particpants and spending levels

for JTPA Title Ill programs

Legislative guidance to the Secretary of Labor requiring Title Ill grant recipients to report on the

service mlx provided in their projects at least on

an annual basis

Legislative oversight on the extent of classroom

skills training opportunities offered in Title Ill

projects, including the question of whether

greater emphasis on health care services would

increase participation m intensive training

Legislative directive (with earmarked funding) to

the Secretary of Labor to continue to compile and

report on permanent layoffs and plant closings,

as required by section 462(e) of JTPA.

Legislative directive to the Secretary of Labor to

provide more active guidance to State Title Ill programs to clarify areas where uncertainties exist

(e.g , the question of who is eligible for Title Ill

projects).

SOURCE Off Ice of Technology Assessment

Quarterly or semiannual reports on Title Ill programs

would help Congress make budget decisions about

Title Ill and conduct oversight of the programs

Information about demand for and provision of different services (e g , skills training, basic or remedial

education, relocation assistance, reemployment services), would help decisionmakers m Congress and

the administration determine whether a full mix of

services IS provided and would also help in budget

and appropriations processes

Because inadequate information exists about the mix

of services provided in JTPA Title Ill projects, oversight process would be made more effective if combined with reporting requirements in option 4b

Better information about plant closing and large

layoffs (including data on the number of closings and

workers affected, location of facilities, and types of

industries) could be helpful in determining JTPA Title Ill priorities. In addition, plant-closing information of this sort would be useful if a national program

of pre-layoff assistance was adopted.

This option, while continuing the policy under JTPA

of giving the States flexibility in implementing their

programs, would clarify concerns of some program

managers that they have been given too little guidance about what JTPA permits.

This option could be Implemented through a congressional directive to the Secretary of Labor to require

recipients to submit quarterly or semiannual reports

on Title Ill activities (Section 165 of JTPA already authorizes this. )

Like (a) above, this option also could be Implemented

through Congressional guidance to the Secretary of

Labor on implementation of section 165 of JTPA

Classroom skills training IS one of several services

JTPA Title Ill projects are authorized to provide, and

for some displaced workers IS the best route back to

a good job. Some concern exists that classroom training opportunities are given little emphasis in some Title

Ill projects–to the detriment of some displaced workers who might benefit from such training Also, some

displaced workers who would otherwise benefit from

intensive training may seek Immediate reemployment

when available m order to regain health care benefits

for themselves and their families. Although JTPA Title Ill authorizes States to provide health care to Title

III participants, it appears that few have done so

Section 462(e) of JTPA requires the Secretary of Labor to develop plant closing data, and to publish a

report based on this data “as soon as practicable’

after the end of the calendar year. Implementation of

this provision did not begin until Congress made specific appropriations for the purpose in FY 84 and FY

85. Whale nationwide data are now being developed,

annual updating of the data and reporting may require

specific appropriations m the future The U.S General Accounting Off Ice IS currently conducting a study

of large plant closings and mass layoffs on a one-time

basis, with results expected m 1986

The Department of Labor IS authorized by JTPA to provide such guidance.

Not calculated but small’ some additional project costs

would be associated with more frequent report preparation, these data are now prepared annually

Not calculated. Many Title Ill projects and some States

already develop this information. In other cases, this option would require Title Ill recipients to compile additional

information m their reports submitted under section 165

of JTPA, and this would add somewhat to the costs of JTPA

administration

The direct costs of oversight would be small However,

classroom training IS one of the most expensive JTPA services To the extent that oversight resulted m greater emphasis in classroom training in JTPA projects, additional

costs could be recurred. Additional costs could also be in-.

curred if more States offered health care services to Title

Ill participants, although a major increase in Federal costs

would not occur unless the spending limit (generally 30%)

on administrative and supportive services were lifted

Initial appropriations for section 462(e) were $1 million in

FY 84 for an 8-State pilot project. and $5 million for FY

85 for expansion of the data compilation process to the

remaining 42 States (The data on plant closings are derived from unemployment insurance data, not actual

records on plant closings or layoffs ) Costs for the data

would probably be less m the future

Not calculated, but direct costs would be small
68 ● Technology and Structural Unemployment: Reemploying Displaced Adults

The Title III reports that States are required

to file are brief and simple. Submitting them

quarterly, or at least semiannually, probably

would not impose an undue burden. These

timely reports could be more useful to Congress than annual submissions. Such reports

would have to be interpreted carefully, however, because spending rates for displaced

worker programs are not necessarily even, for

several reasons (one is that plant closings are

sporadic, not predictable, and many States set

aside a portion of their Title III funds for contingencies). It might be useful to add information on obligations, as well as on spending, of

Title 111 funds. A telephone survey done in October 1985 by the National Governors’ Association showed that, although there was a large

carryover of unspent funds at the end of the

program year, June 1985, most States had fully

obligated their Title III funds by that time.

Analysis of figures on obligation of these funds

by States, as well as on spending, could be useful to Congress in its budget decisions.

Current information on the operation of the

Title III program is especially desirable because demands for services appear to fluctuate with changing economic conditions. Displaced workers tend to seek services less, and

probably opt for expensive classroom training

less, in good times than in bad. Demands for

services may also rise when services are delivered more effectively–for example by rapidresponse teams that establish pre-layoff services in plants undergoing closure or mass

layoffs. Congress may wish to adjust funding,

depending on the uptake of services, the choice

of services, and therefore the rate of spending

and obligation of funds.

Although JTPA leaves decisions on service

mixes to the States (and the States may delegate these decisions to project directors), Congress may wish to be informed on how many

workers are getting vocational skills training,

on-the-job training, remedial education, relocation assistance, and so on. Without this information, it is difficult to determine the full

benefits to workers from this federally funded

program, or to identify the need for possible

changes in direction. One branch of the Labor

Department’s Employment and Training Administration does currently collect data, on a

sample basis, on participants, service mix, and

outcomes in Title III projects. However, the information from these sample surveys is neither

detailed enough nor certain enough to give

Congress an adequate picture of the mix of

services being offered in displaced worker projects. Reports, made at least annually, on how

many workers receive specific services, on the

outcomes (e.g., placement rates, wages) of various types of services, and how much money

the program is devoting to each service could

help to fill the information gap (see option 4b,

table z-2).

Another information gap that may be of concern to Congress relates to plant closings. Directors of Title III programs in a number of

States believe that plant closings have been frequent throughout the economic recovery, and

want to assure early delivery of services to the

affected workers. Despite JTPA’s requirement

of annual reports on plant closings, no nationwide compilation is yet available. Congress

appropriated $1 million in fiscal year 1984 for

a pilot study of plant closings, based on unemployment insurance records, in eight States; in

1985 another $5 million was provided for a full

50-State study. The Administration proposed

rescission of the latter sum, on the grounds that

economic recovery made a plant-closing study

unnecessary. Congress did not approve the rescission, and the full study is reportedly going

forward. Results of the study maybe useful to

Congress in considering whether further special attention to plant closings is warranted

(e.g., as in the proposals to require or encourage early warning of plant closures and mass

layoffs). Annual studies, should Congress wish

to continue them, may depend on the provision

of specific funding directives in the appropriations process (option 4d, table 2-2).

JTPA assigns the Federal Government a minor role in the direction of training and employment programs. Congress may, however,

wish to consider whether the State programs

would operate more effectively if Federal guidance were more specific on items likely to be

reviewed in audits (option 4e, table 2-2). Exam-
Ch. 2—Policy Issues and Options ● 6 9

pies are definitions of eligibility for displaced

worker projects, and acceptability of various

kinds of expenditures as part of the State match

for Title III grants. Once a number of audits

has been completed, such questions may be resolved. But meanwhile, some State program

managers may be imposing unnecessary restrictions for fear of an audit; some JTPA project directors say that service to clients is hampered because of State-imposed restrictions

and red tape. State JTPA programs might benefit from clearer guidance beforehand.

A positive contribution the Federal Government can make to displaced worker programs

is in information sharing and evaluation of the

performance of programs. The Department of

Labor’s ETA supports organizations such as

the National Governors’ Association (NGA)

and the National Alliance of Business (NAB]

in bringing State JTPA officials together for information sharing on JTPA programs. Federal

support for all information sharing activities

under JTPA cost about $3 million per year, of

which only part is related to Title 111 activities.

A useful addition to these activities might be

to create a continuously operating information

clearing-house (either within the Labor Department itself or through the NGA or NAB) which

could provide States with up-to-date information on how States are handling common

problems.

ETA also undertakes several kinds of evaluation efforts which can be useful in monitoring training programs, and in assessing the possible need for changes. Among these activities

is support for contractor studies of individual

projects, including a report on model projects.

A long-term evaluation of the impact of JTPA

programs, comparing participants with similar nonparticipants, is planned. Estimated

funding for ETA evaluations was $8.6 million

in fiscal year 1985; the figure includes evaluations of the entire $3.8 billion JTPA program,

not just Title III. The Administration has requested $11.3 million for ETA evaluation activities in fiscal year 1986.

Trade Adjustment Assistance

TAA, established in 1962 and liberalized in

the Trade Act of 1974, was intended to provide

compensation and adjustment services to workers who lost their jobs from the consequences

of foreign competition. Though much reduced

from its height in 1980, when spending reached

$1.6 billion and nearly 600,000 workers were

certified as eligible for services, TAA was still

a fairly substantial program in 1985. (Spending for the program declined sharply after Congress redefined and limited TAA income support

payments in the Omnibus Budget Reconciliation Act of 1981.) Assistance to workers was

funded at about $71 million in fiscal year 1985,

including a $26 million appropriation for training and relocation, and estimated outlays of

$45 million for income support. A parallel program of financial and technical assistance to

firms losing business because of foreign competition was funded at $25 million, plus loan

guarantee authority of $15 million. As has been

noted, TAA’s authorization technically lapsed

in December 1985. However, some TAA services apparently can be provided under a continuing resolution signed into law by President

Reagan on December 19, 1985 (Public Law 99-

190). This law continues TAA funding for retraining, job search and relocation assistance,

but not income support, through the end of fiscall year 1986.14

Congressional interest in the program remains high, and additional consideration of

TAA in 1986 is likely. The conference committee report on H.R. 3128, the budget reconciliation bill that was still pending when Congress

adjourned at the end of 1985, proposes to continue TAA and to fund the program through

a small uniform duty on imports.15

In addition, at least 13 bills to extend or modify TAA were proposed in the first session of

the 99th Congress. Some of these bills would

reauthorize current programs with little modification. Others would reauthorize only the

llThiS a~propriation is provided in Section IOl(j) of Public Law

99-190 which appropriates such amounts as may be necessary

for continuing activities under Sections 236, 237 and 238 of the

Trade Act of 1974 through the end of fisca~ year 1966 under the

terms of fiscal year 1985 appropriation acts. Activities conducted

under the three sections are training, job search allowances, and

relocation assistance, but not income support.

IsThe Conference Committee provisions on TAA can be found

in Title XIII of H.R. 3128, the proposed Consolidated Omnibus

Budget Reconciliation Act of 1985, as contained in House Report 99-453, Dec. 19, 1985.
70 . Technology and Structural Unemployment: Reemploying Displaced Adults

worker assistance component of TAA, but not

the firm assistance program. Still others would

modify the current program substantially, or

propose quite different programs.

The principal argument against continuing

TAA is that it is difficult, and probably inequitable, to try to distinguish among displaced

workers by cause of displacement, and to single out one group for special treatment. The

Administration, arguing that Congress should

allow the program to die, held that TAA is unnecessary and duplicative, because JTPA programs offer adequate services to all displaced

workers, whatever the cause of their displacement; and that the unemployment insurance

system provides sufficient income support to

all unemployed workers. On the other hand,

it is argued that TAA assists workers who are

paying <he price for a national policy (removal

of trade barriers) that benefits society as a

whole. Also, the program may ease protectionist sentiment among workers in trade-affected industries.

For eligible workers (those certified as having been displaced due to increased imports

of directly competitive products) TAA has provided some significant extra benefits beyond

those offered under JTPA Title III. TAA income support payments (set at the level of unemployment insurance benefits) has lasted as

long as 18 months for workers in training, and

relocation assistance has been more generous

than under JTPA. Thus, TAA support has enabled some workers to complete longer term

training than they otherwise could have afforded, and has encouraged some relocation

out of depressed areas. In fiscal year 1984,

35,000 workers received income support payments, 6,538 entered TAA-assisted training,

and 3,120 got relocation assistance. (The

amount of overlap in these figures is not

known.) If Congress chooses not to reinstate

the program, some TAA-eligible workers can

be served in JTPA Title III projects, although

not necessarily at the same level of service.

ASSISTANCE TO DISPLACED HOMEMAKERS

In the Carl D. Perkins Vocational Education

Act of 1984, Congress demonstrated a strong

interest in providing Federal support for programs serving displaced homemakers. The act

authorized spending of up to $84 million per

year on services specifically designated for single parents and homemakers, including displaced homemakers. For fiscal years 1985 and

1986, Congress appropriated $63 million for

Vocational Education (Voc Ed) grants serving

this targeted group.

Of the $63 million in Voc Ed grants set aside

for single parents and homemakers, an undetermined but probably quite large share will go

to programs serving displaced homemakers.

Records on past Federal spending targeted to

displaced homemakers are incomplete, but

CETAl6 and Voc Ed funds combined probably

never exceeded $8 to $10 million per year. (See

chapter 10 for details.) Even so, the increased

l@The comprehensive Employment and Training Act.

funding is a comparatively small sum for a

training, education, and employment program

open to a population of millions, as the following comparisons with CETA and JTPA indicate.

No estimate has been made of how many single parents and homemakers there are, but displaced homemakers alone probably number

over 2 to 4 million (depending on how the term

is defined). Supposing that all these people

were to participate in the new Voc Ed program,

and that two-thirds of the available funds were

spent on displaced homemakers, only $10 to

$21 per person would be available. The comparable figure under CETA in fiscal year 1980,

when approximately $4 billion was spent for

general employment and training programs

open to 16 million disadvantaged workers, was

about $250 per eligible person. In fiscal year

1985, when $223 million was appropriated for

the JTPA Title III program, and the eligible

population of displaced workers was probably
Ch. 2—Policy Issues and Options ● 7 1

about 3 million, the comparable figure was

about $75 per person. These figures are given

only for the sake of comparing overall funding levels relative to the size of the targeted

populations. They are not intended to suggest

that 100-percent” participation by any group is

realistic. Moreover, participation rates and the

demand for services may vary substantially

among the groups.

Vocational education programs under the

Perkins Act were just gearing up in 1985; it was

still too early to identify all the major policy

issues that might arise under the new law. One

issue already under debate, however, is whether

and how to amplify the extremely sparse data

about displaced homemakers—how many there

are, their characteristics (e. g., age, family size,

income, cause of displacement), the level and

kinds of services provided to them, and program outcomes (e.g., training completed, placement in jobs). Another issue likely to come up

is whether the State administrators in charge

of the women’s programs under the Voc Ed act

are in fact able to exercise the authority the law

grants them, and are actually dispensing the

funds that the law sets aside for these programs.

Another major Federal program that serves

some displaced homemakers is JTPA. While

the services provided under JTPA are similar

to those that can be offered with Voc Ed funds,

the emphasis is different: JTPA stresses placement in jobs more heavily, while the Voc Ed

program emphasizes education and training.

Also, as discussed above, funding for displaced

homemaker programs under the Perkins Act,

though much increased from previous levels,

is still comparatively small. Both the JTPA and

Voc Ed programs are important sources of

funding for displaced homemaker projects.

OTA’s review of service to displaced homemakers under JTPA indicates that it is at a modest level so far. In 1984, 57 of 355 displaced

homemaker projects responding to a survey reported that they had JTPA funding, and about

10 percent of the projects’ funding came from

this source. Issues of interest to Congress in

looking at the relation between JTPA and services to displaced homemakers might include:

1) eligibility of displaced homemakers, under

both Title 11A and Title III; and 2) relations between displaced homemaker projects and the

JTPA system (i.e., State JTPA program managers, local directors of Service Delivery Areas,

and local PICs).

An issue relevant to both the Voc Ed and

JTPA programs is the special barriers faced by

displaced homemakers who are interested in

training or education. Unlike the majority of

workers displaced from paid jobs, most displaced homemakers have no unemployment insurance for income support during even a brief

training course. Furthermore, few have income

from spouses or other family members to rely

on. Although supportive services and training

allowances for trainees in acute economic need

are authorized in both the Perkins Act and

JTPA, they have not been much used in either

program. Competition for student financial aid,

another possible source of income support, is

keen; and the aid is often more readily available to young people going directly into college from high school than to displaced adults

entering or reentering training in preparation

for a job.

The Perkins Vocational Education Act and

Displaced Homemakers

Information

Current, consistent national information on

displaced homemakers and the programs that

serve them is not available. States could be

asked to provide such information under the

Perkins Act, but the Administration has not

done so. Thus, if Congress wishes to see the

development of such data, it may have to consider ways of mandating it, such as requiring

routine reporting by the States or instructing

the U.S. Department of Education to undertake

studies of the programs serving single parents

and homemakers, including displaced homemakers.

Little systematic information has ever been

collected about displaced homemakers or the

projects created to serve them. Nationwide estimates of the number of displaced homemakers

vary widely according to the definition selected

(e.g., whether women under 35 years old are
72 . Technology and Structural Unemployment: Reemploying Displaced Adults

included or excluded). Many State vocational

education agencies do not have reliable data

on how many displaced homemakers reside in

their State. Even less information is available

about single parents and homemakers (the

group entitled to set-aside funding under the

Perkins Act). Systematic evaluations of the effects of displaced homemaker programs have

not been conducted, even though some programs are now more than 10 years old; there

are scarcely any reports even of outcomes (e.g.,

how many participants found jobs and at what

wages, how many entered training, how many

completed training, or how many found jobs

related or unrelated to training).

The Perkins Act does not explicitly require

any routine reporting from States on numbers

and characteristics of single parents and homemakers (including displaced homemakers) receiving assistance from Federal Voc Ed grants,

of services provided, or of outcomes. The U.S.

Department of Education is not requiring such

reports. Department officials contacted by

OTA say that the reports are unnecessary, and

would be inaccurate and intrusive if required.

In general, the Administration opposes Federal

requirements for reporting of data not considered essential to an agency’s mission or demanded by law.

A number of State administrators of Voc Ed

women’s programs (the State Sex Equity Coordinators) consider it essential to give Congress a factual basis for deciding whether the

needs of single parents and homemakers are

being met in accordance with the law, whether

the programs serving them are effective, and

what spending levels are appropriate. Some

State officials are taking the lead in developing a data collection system that could be used

to build a consistent set of statistics. A number of States may participate in the system, but

it is not likely that all will.

Another alternative would be to require a

special study on the characteristics of services

provided to single parents and homemakers.

The Perkins Act directs the U.S. Secretary of

Education to conduct applied research on

aspects of vocational education emphasized in

the act; one of these is effective methods for

providing quality vocational education to target groups, including single parents and homemakers. In mid-1985, the Department had no

plans underway for an applied research study

on the topic of single parents and homemakers.

The Perkins Act also unequivocally requires

a national assessment of vocational education

assisted under the law, through independent

studies and analysis and in consultation with

Congress, to be delivered by January 1, 1989

(9 months before the Perkins Act is due to expire). l7 A description and evaluation of the vocational education services delivered to target

groups, including single parents and homemakers, must be included in the assessment.

Intent of the Set-aside

The Perkins Act places substantial emphasis on set-asides, or the targeting of portions

of the grants to States’ special populations.

These set-asides amount to 57 percent of the

grants and, for some groups, are entirely new.

The set-asides, especially the 8.5 percent for

single parents and homemakers, were adopted

over the strong opposition of much of the vocational education establishment. Under the old

Voc Ed act, displaced homemakers were named

as a target group, but no specific amounts were

designated for services to them. As programs

under the Perkins Act get underway, Congress

may wish to exercise a considerable degree of

oversight on whether the set-aside provisions

are being implemented in the way the law prescribes.

A potential topic for oversight is whether the

Sex Equity Coordinators are able to wield the

authority the law gives them to administer the

single parents and homemakers programs, and

whether the set-aside funds are reaching their

intended beneficiaries. Suppose, for example,

that a State allocates Federal grant funds to

vocational education in secondary and postsecondary schools by the usual formulas, with

—.——— ITThe act specifies that the National Institute of Education in

the U.S. Department of Education shall carry out the study. However, the Institute was not re-authorized in 1985, and the Department intends to let it expire, The Department proposes to

carry out the mandated study in its Office of Policy, Budget, and

Evaluation,
Ch. 2—Policy Issues and Options ● 7 3

an extra effort to enroll single parents or homemakers in an attempt to meet the 8.5 percent

“quota,” but with no attempt to set up special

programs for the group. Congress may wish to

assure itself that States are using the specified

parts of their Federal grants to “meet the special needs” of single parents and homemakers

and other targeted groups,

A different but related subject for oversight

is whether the States are able to use this large

infusion of new funds effectively. The eligible

population, though uncertain in numbers, is

certainly very large in relation to the funds. But

are those eligible aware of the programs? Are

they seeking services? Is the system able to absorb the new funds efficiently and provide

services that are genuinely helpful and in demand? These are some of the questions that

Congress might want to pursue.

The Job Training Partnership Act and

Displaced Homemakers

Eligibility

Although Congress did not define displaced

homemakers as a principal target group for

JTPA programs, they are specifically mentioned in the law as one of the groups facing

employment barriers and therefore eligible for

some services. Because of the various eligibility criteria in the law, however, it can be difficult to use JTPA funds in projects designed

to serve the specific needs of displaced homemakers.

Large numbers of displaced homemakers are

poor enough to meet JTPA’s definition of disadvantaged, and therefore would be eligible for

service in most Title 11A projects. The problem is that many displaced homemakers, because of their lack of confidence and experience in the job market and their sudden loss

of personal and financial support, do better in

projects designed to meet their needs specifically than in larger employment and training

projects serving a variety of clients.

In addition, if employment and training projects accept only women who meet the income

criteria for Title 11A, they exclude many others

who need and could benefit from their services. Some displaced homemakers exceed the

income limits because their losses of income

were recent, and their incomes before they became displaced were too high. Others may be

better off, but still need the counseling, assessment, and job readiness training that a displaced homemaker project can provide. JTPA

does provide for Title 11A services to certain

groups, including displaced homemakers, who

exceed the income limits; roughly 10 percent

of funds available to Service Delivery Areas are

set aside for this purpose. According to early

reports, however, most States are not using the

l0-percent-window money to provide services

to these groups.

A few States are serving displaced homemakers under Title III, which has no income

limitations, JTPA gives States a great deal of

latitude in defining eligible dislocated workers,

and some consider displaced homemakers to

fit under the category of long-term unemployed

workers who are not likely to find reemployment in the same or similar occupations.

Relations With the JTPA System

Altogether, it is hard for many projects specializing in serving displaced homemakers to

apply for and get JTPA funds. The biggest

difficulties reported by project directors, in

addition to the tangle of determining eligibility, are: 1) that project staff lack information

and are outside the JTPA system, and 2) that

PICs are not interested in funding special programs for special populations. The “outsider”

problem may well disappear over time, but the

disinclination of PICs to fund projects for special groups could pose a continuing difficulty

for displaced homemaker projects, since most

of the projects are founded on the idea that

their clients need a special set of services.

The eligibility and special population problems might usefully be considered together. If

projects serving only displaced homemakers

are able to get JTPA Title 11A funding, and if

States allow services to 10 percent of the clients

of these projects without regard to their income, then many of the barriers that displaced
74 . Technology and Structural Unemployment: Reemploying Displaced Adults

homemakers face in taking advantage of JTPA

services would be lowered. This might be an

appropriate subject for legislative guidance

through JTPA oversight.

Alternatively, Congress might wish to encourage or direct States to serve displaced

homemakers projects funded under Title III.

This would simplify the eligibility problem,

since there are no income limits in Title III.

A number of States have expressed interest in

serving displaced homemakers under Title III,

and some have sought information from the

States that are already doing so, such as Florida,

Pennsylvania, and New York. On the other

hand, if more effective delivery of Title III services is developed (e. g., by establishing a service such as Canada’s IAS, discussed earlier in

this chapter) participation of mainstream displaced workers might rise markedly. Quite possibly, funding for the Title III program might

have to be increased if another large group (2

to 4 million displaced homemakers) were unequivocally made eligible.

Income Support for Displaced Homemakers in

Vocational Training or Education Programs

The Vocational Education Act amendments

of 1978 (now superseded by the Perkins Act)

mentioned displaced homemakers specifically

as a group eligible for income support during

training, in cases of acute need, but anecdotal

reports indicate that it was seldom provided.

The Perkins Act does not mention displaced

homemakers in connection with income support, though there is a general provision for stipends in cases of acute economic need which

cannot be met under work-study programs.

The Perkins Act does specifically provide for

supportive services, including day care and

transportation costs for single parents and

homemakers in training, and for scheduling

and organizing training programs to make

them more accessible to single parents and

homemakers.

Under JTPA Title 11A, 30 percent of spending may go for a combination of administrative costs and costs of supportive services and

needs-based income payments. There is a 15-

percent limit on administrative costs, so that

at least 15 percent is theoretically available for

supportive services and income payments. The

limit can be waived under certain circumstances, such as a high local unemployment

rate. Under Title III, there is a roughly similar

but less stringent limit on costs of supportive

services, wages, allowances, stipends, and administration; the limit applies to no more than

half of the combined Federal and non-Federal

funds available to a Title III program. In the

first years JTPA programs were operating, substantially less than the limit was spent for supportive services and income payments; 10 to

11 percent of Title 11A funds and 6 to 7 percent of Title III funds were spent for these

purposes. It is not known how much, if any,

of what was spent went to displaced homemakers.

Should Congress wish to encourage the provision of income support to displaced homemakers in training, Voc Ed grants and JTPA

programs could be used to deliver this service.

The UI system, which has sometimes been proposed as both the funding source and delivery

system for extended income support during

training for mainstream displaced workers, is

not available to most displaced homemakers.

Legislative guidance, through oversight hearings, is one way Congress might encourage or

direct greater emphasis on income support for

displaced homemakers in the Voc Ed and JTPA

programs. However, because of the dearth of

data about the numbers of displaced homemakers demanding services, and how many are

interested in training, there is no solid information base for estimating participation and

the costs of increased income support.

Assuming income support was provided to

displaced homemakers in training at the level

of average UI payments ($119 per week in

1984), the cost would be about $3,100 per person for 26 weeks, or $6,200 for a year. Program

costs might be estimated at $31 to $62 million

for every 10,000 people who took advantage of

the program. Such costs are high in relation

to present levels of funding; the Voc Ed grants

set aside for single parents and homemakers

were funded at $63 million for fiscal year 1985.

Assuming 15 percent is the practical limit for
Ch. 2—Policy Issues and Options ● 7 5

supportive services and income payments under JTPA, about $33 million was available to

displaced workers for these purposes under Title III in fiscal year 1985, and approximately

$280 million to disadvantaged workers under

Title 11A.

Considering the lack of experience with an

income support program for displaced homemakers in training, its possible high cost in relation to present sources of funding, and the

scarcity of information about displaced homemaker programs, a full-scale national program

may be premature. An alternative might be for

Congress to require the Department of Education to develop improved information on existing displaced homemaker programs supported by Voc Ed grants, including numbers

of clients and services provided. At the same

time, Congress might wish to consider special

funding for a pilot program, offering income

support to displaced homemakers enrolled in

training courses needed for employment. Evaluation of the pilot project could help in identifying likely participation rates and costs for

future projects.

Options for Assistance to

Displaced Homemakers

(Issue Area 5, Table 2-3)

OTA’s assessment of experience so far with

Federal programs offering assistance to displaced homemakers identifies several problems

that have already arisen and others that may

arise in bringing reemployment and retraining

services to this group. If Congress wishes to

encourage greater delivery of services to displaced homemakers, it might consider the following actions:

● Encourage collection of nationwide data

on single parents and homemakers, including displaced homemakers, served under

the Carl D. Perkins Vocational Education

Act. One option would be congressional

direction to the Department of Education

to collect data from States through routine

●

●

●

●

reports, or to undertake a special study.

This might be done in one of several ways:

through legislative guidance in oversight

hearings, by direct communication with

the Department of Education, or through

the appropriations process (option 5a (i),

table 2-3).

Assure that State Sex Equity Coordinators

who are in charge of Voc Ed women’s programs have the authority to establish the

special programs for single parents and

homemakers that are called for in the law,

and that the set-asides in Federal funds

which the law provides for this group are

reaching the intended beneficiaries in a

way that “meets their special needs” (option 5a (ii), table 2-3).

Clarify that projects serving only displaced

homemakers may be funded under JTPA

11A, and assure that States are allowing the

use of lo-percent-window money to serve

groups that face special barriers to employment (including displaced homemakers),

without regard to income (option 5b, table 2-3).

Consider taking action that would either

clarify to States that they may consider displaced homemakers eligible for services in

JTPA Title III programs, or would direct

them to do so. Clarification might be accomplished through legislative guidance

in oversight hearings. A direction to States

to consider displaced homemakers eligible for Title III services would probably

require a change in the law.

Consider providing income support to displaced homemakers in job training and

education programs. One option would be

to first require better information on existing displaced homemaker programs, including participation rates and types of

services provided. While this information

is developed, Congress might also wish to

consider funding a pilot project providing

income support to displaced homemakers

undergoing vocational training needed for

employment.
Table 2-3.—Policy Issues for Displaced Homemakers

Issue area and options Relationship to other options Relationship to current policy Estimated cost of option to Government

Issue Area 5: Improving delivery of assistance to displaced homemakers

a) Options related to the Carl D. Perkins

Vocational Education Act:

I) direct the Department of Education to collect

data from the States on single parents and

homemakers including the number of displaced homemakers and the extent of services

provided them under the Carl D. Perkins Vocational Education Act of 1984; and

II) conduct oversight, with legislative directives

as needed, to assure that State program sex

equity coordinators have the authority to establish special programs for single parents and

homemakers as called for in the law, and that

set-asides established by the law are reaching the intended beneficiaries,

b) Options related to JTPA:

i) provide Iegislative guidance to clarify that

projects serving only displaced homemakers

can be funded under JTPA Title IIA; and

II) under JTPA, provide legislative guidance to

clarify that displaced homemakers can be

served under Title Ill, or direct the States to

serve displaced homemakers under Title Ill,

c) Consider providing income support to displaced

homemakers in training courses needed for employment, based on information from:

i) studies required from the Department of Education on existing displaced homemaker programs, including number of participants and

services provided; and

II) a pilot project, funded by Congress, providing income support for displaced homemakers

m training courses in a few selected projects,

furnishing information on participation rates

and costs

SOURCE Off Ice of Technology Assessment

Option could be Implemented independently or in conjunction with other aspects of the Perkins Act that

relate to development of information about adults in

vocational education Option also could be implemented in conjunction with (ii) below.

Annual reporting of information on single parents and

homemakers (option (i) above) could be useful in implementing this option.

Could be implemented through option 4e, pertaining

to the Issue of overall guidance to States under JTPA,

Legislative guidance could be implemented under option 4e, pertaining to overall guidance to States under

JTPA. A directive to the States requiring service to

displaced homemakers under Title Ill probably would

require a change in the law.

Option (I) could be Implemented in conjunction with

option 5a(i), relating to collection of data on displaced

homemakers,

The Perkins Act targets funds for provision of vocational education opportunities for single parents and

homemakers, It also authorizes (but does not require)

the Department of Education to develop data in this

area on an annual basis. The Perkins Act specifically

requires an independent evaluation of services provided to targeted groups to be completed in 1989.

The Perkins Act establishes a set-aside for single parents parents and homemaker programs and gives sex

equity coordinators authority to administer the programs. This is a substantial change from the prior program, which did not contain set-asides for targeted

groups. Because the set-aside approach is new, some

States may find it difficult to comply.

JTPA, while not targeting displaced homemakers as

a principal group for services under the law, does

identify displaced homemakers as a group eligible for

some services under the Title IIA due to the employment barriers they face,

JTPA does not explicitly identify displaced homemakers as a group to be served under Title Ill, but several States are doing so, considering them as longterm unemployed.

Both the Perkins Act and JTPA provide for limited income support to trainees m cases of acute economic

need, Little income support is being provided under

either law.

Costs of requiring the data would add somewhat to State

administrative expenses under the vocational education

program.

Not estimated, but small,

To the extent that Congress encourages States to provide

greater services for displaced homemakers under Title II

and Title Ill of JTPA, additional costs under JTPA could

be recurred.

To the extent that Congress encourages States to provide

greater services for displaced homemakers under Title Ill

of JTPA, additional costs could be Incurred,

Costs of income support to displaced homemakers in jobrelated training could be very substantial, depending on

participation rates and level of allowances. Allowances at

the level of average UI benefits in 1984 ($119 per week)

would cost $3,100 to $6,200 per participant for 26 weeks

to 1 year. Program cost would be about $31 to $62 million

for every 10,000 participants,
Ch. 2—Policy Issues and Options ● 7 7

LABOR MARKET INFORMATION AND OCCUPATIONAL RESEARCH NEEDS

Local Labor Market Information

(Issue Area 6, Table 2-4)

Whether displaced workers opt for retraining or for immediate job searches, they can

benefit from detailed, up-to-date information

on the kinds of jobs available in the local labor market. The same is true of projects that

offer reemployment and retraining assistance

to displaced workers. As a rule, only a small

portion of the available jobs in a local labor

market are listed with ES. In many States the

information provided to displaced worker projects is neither current enough nor detailed

enough to give an adequate picture of what occupations are in demand in local labor markets.

Some managers of displaced worker programs

are not aware, moreover, of the information

that does exist, or of how best to use it.

If Congress wishes to place more emphasis

on the provision of detailed local labor market information, several options are available,

including: 1) legislative guidance through JTPA

oversight to focus attention on providing better information at the local level, and on the

more informed use of existing data; and 2) appropriation of funds for the specific purpose

of improving local labor market information

(option 6a, table 2-4).

JTPA calls on the States to design comprehensive, cost-effective systems of labor market

information, for the State and areas within the

State, that answer the needs of employment

and training projects. State agencies, under the

technical guidance of the U.S. Department of

Labor’s Bureau of Labor Statistics (BLS), collect a great deal of information on local unemployment rates, on levels of employment and

earnings by industry, and on occupations

within industries, much of which is funneled

into national employment estimates and occupational forecasts. Some (not all) States collect additional data to show more detail on the

occupational patterns of local industries. In

these States, ES analysts are able to put together various sets of information from the local to the national level, and thus provide a

rough picture of growing, static, and declining occupations within the State; in some

cases, the ES analysts develop estimates for local areas. The same kind of data is the basis

for State and local occupational projections.

Principal users of local labor market information include State vocational education planners, as well as managers of employment and

training programs.

Some States (possibly 20) are able to provide

reasonably current, detailed information on occupations in demand in at least some of their

local labor markets. The data that most States

collect in cooperation with BLS may be adequate for at least a fair approximation, but

many States lack the funds and the expert staff

to do the necessary analysis. With the sharp

drop in Federal funding and staffing levels in

the ES system since fiscal year 1982, the ES

research and analytic staffs in many States

have been weakened,

Although JTPA authorizes Federal support

for development of State and sub-State labor

market information, the Administration approach is to keep Federal spending for this purpose to a minimum. In general, for labor market information needed at the national level

(such as the monthly estimates of employment

and earnings) Federal spending has risen in the

past few years.l8 The BLS plans, however, to

reduce funding and detailed coverage in the

statistical program that produces estimates of

occupational employment by industry; this is

the program which a number of States use for

developing local estimates of occupations in

demand. Moreover, Federal assistance for programs to develop local planning data is slated

for cuts. Since 1980, Federal funding for these

small programs has stayed flat in current dol18This is not true of other statistical programs conducted by

the Bureau of Labor Statistics. Aside from labor market information programs, which are funded mainly from the Unemployment Trust Fund, and a major on~time revision of the Consumer

Price Index, spending for BLS statistical programs was cut sharply in constant dollars in fiscal years 1981 and 1982, then rose

to about the level of fiscal year 1980. The Administration has

proposed a 10 percent reduction (constant 1980 dollars) for these

programs for fiscal year 1986.
Table 2-4.—issues in Labor Market Information and Occupational Research

Issue area and options Relationship to other options Relationship to current policy Estimated cost of option to Government

Issue Area 6: Improving labor market and occupational in information

a) Legislative guidance-through JTPA oversight-to

focus attention on the need for better labor market information at the local level, and provision

of additional funds for improving local labor market information.

b) Provide adequate funds for obtaining and updating qualitative information about jobs.

Better information about local labor markets could

help JTPA project managers, vocational education

officials, career counselors, and others make more

informed judgments about education, training, and

reemployment options that make sense locally.

Qualitative information about jobs is used by educators, career counselors, employment officials, and

people making career decisions and therefore is useful in implementing reemployment and education

options.

Issue Area 7: Conducting research on the effects of technology on jobs

a) Direct Federal agencies to evaluate the employ- The evaluation process could provide an early warnment effects of major federally supported tech- ing system about future technological changes which

nology development efforts. could affect employment, education, and training

programs.

b) Direct the National Science Foundation to fund one Option could lead to increased attention on the part

or more centers for engineering research to fo- of engineers and engineering students to the potencus on alternative work organization and job de- tial for better matching of technology development

sign in development of manufacturing technology. efforts with human capital.

JTPA authorizes Federal support for development of

State and substate labor market information. Federal

funding for programs to develop local planning data

has remained constant for several years. For FY 86,

the Administration has proposed reducing Federal

funds for local planning data from $7,3 to $4.3 million. This would reduce the amount of ES staff available to develop and analyze local data.

Section 462 of JTPA emphasizes the need for current

qualitative information about jobs. For example, funding for the Dictionary of Occupational Titles has declined over the last decade from about $2.6 to $1,8

million in fiscal year 1985.

Evaluation of employment impacts of federally supported research is seldom undertaken.

Currently, the National Science Foundation’s program

for Engineering Research Centers has led to the funding of six centers affiliated with universities. All of the

proposals and centers in the area of manufacturing

have been oriented toward achieving advanced levels

of automation in factories This option would strike

a more balanced approach in the area of manufacturing,

SOURCE Office of Technology Assessment

An estimated $8 to $9 million would be enough to maintain a minimum level of ES staff needed to develop and

analyze local labor market data. This compares to $7.3

million for local labor market data in the FY 85 budget,

and the $4.3 million proposed by the Admimstration for

FY 86.

Restoring prior funding levels would entail modest additional expenitures,

Costs of conducting such evaluations have not been estimated, but would be a minor component of overall Federal R&D expenditures.

If one center were funded at the level of existing centers,

this option would cost $3 million over a 5-year period, or

$600,000 per year for each center that is established.
Ch. 2—Policy Issues and Options . 79

lars, declining in real terms about 30 percent.

For fiscal year 1986, the Administration budget

proposes a reduction in local planning data

funds of about 40 percent–from about $7.3 to

$4.3 million, If the cut were restored and adjustments made for inflation, Federal assistance would be in the range of $9 to $10 million. This increase over the requested level

could be used to restore and maintain a minimum level of ES staff needed to develop and

analyze local labor market data.

Some JTPA projects deal with the lack of information on occupations in demand by commissioning surveys of local employers to determine recent hiring patterns. The results can

be useful depending on the sophistication of

the surveys. Many projects use performancebased contracts, which put the burden of finding out what occupations and skills are in demand on training institutions; the trainers are

not paid in full until an agreed-on percentage

of trainees are placed in jobs related to their

training,

An idea for improving information about local occupational demand is under development

in Colorado, with the support of several other

States. Employers in most States are already

required to file quarterly reports for unemployment insurance purposes, showing the numbers of employees at the beginning and end of

the period and also identifying the employer’s

detailed industrial classification. When these

reports are aggregated, they can show hiring

flows by local area and industry, but not by occupation. In the pilot project being planned by

Colorado, the employer will be asked to add

occupational titles for all employees. Thus, if

the projects succeed, the raw data for showing quarterly hiring flows by industry, locality, and occupation will be available.

Some technical and financial difficulties may

be involved in this kind of project. Employers

may find it very troublesome to assign titles to

their workers’ occupations, and this problem

could delay submission of UI reports and taxes;

it might also interfere with employers’ willingness to cooperate in surveys sponsored by BLS

for national purposes. Costs to the States of aggregating and analyzing the data could be high.

However, many analysts and managers in the

employment training field are interested in a

trial of the idea, because the possible benefits

are substantial.

Improving Long-Range Projections of

Future Job Opportunities

As a part of its national labor market information programs, the Federal Government develops long-term occupational projections. The

projections are used in a number of practical

and theoretical ways. For example, vocational

counselors and students may use them as an

aid in career planning, Educators may use

them in planning courses, Job counselors in

employment and training projects refer to them

in deciding in the kinds of training to offer.

Analysts sometimes use them to assess the occupational effects of technological change, and

associated long-range shifts in education, training, and employment priorities. A recurring

question in employment and training policy

has been whether there would be much practical benefit in launching a substantial effort

to improve the occupational forecasting system. This question is examined below in terms

of both quantitative projections and qualitative

occupational information developed by the Labor Department.

Quantitative Forecasting

BLS periodically prepares and updates longterm quantitative forecasts of occupations by

industry, using a series of models. In the process, BLS staff make a number of assumptions

about future economic activities, technology,

and trade. These assumptions are generally

based on long-term trends of the past, tempered

by expert judgment. However, expert judgment

can miss developments that affect the forecasts. For example, few experts predicted the

energy crises that would dominate the 1970s,

or that the dollar’s value would rise so dramatically in the 1980s, and that it would remain

high for so many years.

These two examples make another point as

well, however, Some trend-breaking events can

be at least partially anticipated. In the 1960s,
80 Ž Technology and Structural Unemployment: Reemploying Displaced Adults

some experts postulated that dwindling petroleum supplies and the formation of the Organization of Petroleum Exporting Countries cartel could have a major impact on energy prices

in the 1970s, although few would have predicted the sudden and dramatic nature of the

1973 oil embargo. Similarly, the deterioration

of U.S. trade balances began in the 1970s, and

while the combination of events that led to the

unprecedentedly large trade deficits of the

1980s was perhaps not predictable, it was not

unthinkable. While nobody could expect forecasters to pinpoint these major events, sensitivity analysis of occupational forecasts could

postulate such events and examine the possible effects. This kind of sensitivity analysis–

looking at how model outcomes change when

different assumptions are used–would not

necessarily yield more accurate forecasts, but

it might give policy makers, career counselors,

and people making career decisions better insight into the uncertainties and risks surrounding different career choices.

Forecasts can become outdated rather quickly.

For example, forecasts published in April 1979

projected that manufacturing would employ

over 23 million people in 1985; actual manufacturing employment was only 19.3 million in

September 1985, and there are no prospects of

its reaching 23 million in the immediate future.

Indeed, as discussed in chapter 4, the long-term

trend is likely to be flat or declining. Forecasts

of employment in specific industries also can

fall wide of the mark in just a few years; the

April 1979 BLS projections estimated that

590,000 people would be employed in the steel

industry in 1985; but steel employment in September 1985 was only 291,000, with few prospects for any increase.

These problems are not due to poor forecasting techniques or tools, nor are they necessarily

due to poor judgment. Forecasting–particularly long-term forecasting–is inherently likely

to be inaccurate, simply because it is impossible to anticipate all the factors that will affect

the Nation’s economy in the future. As a result, BLS corrects and updates its long-term

forecasts every other year, but even this exercise can leave the forecasts with significant

inaccuracies.

Although the overall accuracy of the longterm projections probably cannot be improved

significantly, a few modifications in the current process could result in some incremental

improvements over time. Knowledge of the impact of technology in the workplace might be

improved if measures of technological change

were incorporated into the on-site evaluations

and questionnaires used by ETA in updating

the Dictionary of Occupational Titles (DOT).

This knowledge could serve to improve projections if effectively used by the BLS projection

staff. BLS might also improve the projection

process by documenting all technological assumptions made within the projection model

and evaluating these assumptions when data

become available. Sensitivity analysis of major technological assumptions could also be

useful in exploring the range of possible effects.

While additional funding might improve

BLS’s ability to estimate such things as the employment effects of new technologies, policymakers cannot expect great accuracy in occupational forecasts, particularly for the longterm projections. Calls on the part of some

vocational educators, employment and training

managers, and PICs for very detailed occupational forecasts may be based on unrealistic

ideas about what these analyses can reasonably

be expected to provide.

Qualitative Occupational Information

In addition to its occupational forecasts the

Labor Department provides qualitative information about the nature of different jobs, training requirements for specific occupations, pay

scales, and the expected number of opportunities in different occupations. The publications used most widely include the Occupational Outlook Handbook, the Occupational

Outlook Quarterly, and the DOT.

Funding for these occupational information

publications, and for supporting functions in

BLS and ETA, has been declining. Funding for

the Occupational Outlook Handbook, for example, has dropped over the last few years; the

number of jobs reviewed in the handbook was

cut from over 300 in the 1978/1979 edition to

about 200 in the 1982-83 edition. More occu-
Ch. 2—Policy Issues and Options ● 8 1

pations are planned for review, however, in the

1986-87 and 1988-89 editions. Although the

handbook remains a major source of information about possible future jobs, some job counselors believe that its usefulness declined with

the reduction in number of occupations reviewed.

Whether funding is adequate to maintain

DOT is another concern, DOT, consisting of

detailed descriptions of thousands of jobs, is

a major source of qualitative information about

occupations in the United States, and is an important basis for other employment information developed by the Department of Labor (including the Occupational Outlook Handbook).

Without constant updating, DOT’s usefulness,

and the usefulness of the occupational information series that rely on it, will decline.

The need for current qualitative information

about jobs is explicitly recognized in Section

462 of JTPA. The provision calls on the Labor

Department to maintain “descriptions of job

duties, training and education requirements,

working conditions, and characteristics of ocpupations. ” ETA plans to update DOT in its

efforts to fulfill this requirement. Data gathering–finding out what jobs consist of–is planned

for new technology-oriented jobs. Existing job

descriptions are slated for updates on a rotating schedule. To complete this work, people

are being trained for onsite job evaluations.

Surveys of additional job sites are planned to

check the accuracy and applicability of the onsite evaluations.

Whether these plans will be carried out at the

level needed to maintain and update DOT will

depend on adequate funding for several years.

Spending for DOT, as reflected by obligations,

has declined in the last decade from an estimated $2.6 million in fiscal year 1975 to an

estimated $1.8 million in fiscal year 1985. The

Administration has requested $1.7 million for

this activity in its 1986 budget proposal—a level

of funding that may not be adequate to meet

the objective of obtaining and updating qualitative information about jobs that is stated in

JTPA. Congress may wish to assure that spending for DOT is kept at an adequate level to improve qualitative information on jobs (option

6b, table 2-4).

Research on the Effects of Technology on Jobs

(Issue Area 7, Table 2-4)

As discussed in chapter 8, technology alone

does not dictate the nature of jobs. When new

technologies are adopted in the workplace, jobs

can be redesigned and work reorganized in a

number of different ways. Productivity, the

quality of jobs, and the level of unemployment

may all be affected by these managerial choices.

Better understanding of these issues may help

firms improve both their international competiveness and the quality of jobs.

A focused program of Federal support for research in work organization and job design,

and greater emphasis on the dissemination of

research results to industry could enhance understanding of these issues. Options relating

to such research include: 1) conducting oversight on current research on the subject by Federal agencies, 2) providing support for evaluation of the employment effects of federally

supported technology development efforts, and

3) funding research projects or programs on

alternative work organization and job design

approaches. While the U.S. Department of Defense (DOD) and some other Federal agencies

(e.g., the National Science Foundation (NSF))

conduct or support “human factors” research,

funding for research on work organization and

job design by these agencies is probably quite

modest.

Research on technological change and its implications for job skills and vocational education is emphasized in several provisions of the

Carl D. Perkins Vocational Education Act of

1984. Among other things, the act specifically

directs the Secretary of Education and the National Center for Research in Vocational Education to undertake research activities on “curriculum materials and instructional methods

relating to new and emerging technologies, and

assessments of the nature of change in the

workplace and its effects on individual jobs. ”

As this act is implemented, questions about
82 ● Technology and Structural unemployment: Reemploying Displaced Adults

funding priorities and research commitments

related to technological change and its effects

on jobs could be a subject of congressional

oversight deliberations.

The Federal Government has done little to

evaluate the employment implications of its

own research and development (R&D) activities. Some federally supported innovations

(such as numerically controlled machine tools

and computer-aided design) have had significant effects on the workplace in the past.

Continuing Federal support for technology development in such areas as programmable

automation and advanced computer systems

will also result in innovations affecting jobs in

the future. While some evaluation of the employment effects of federally supported technology development may have been conducted

ad hoc, this is not normally a specific component of the research budgets of Federal

agencies.

One way to focus more attention on this issue would be for Congress to direct Federal

agencies to conduct evaluations of the likely

effects of their major R&D efforts on the nature of jobs and the level of employment (option 7a, table 2-4). There could be drawbacks

to this approach: such assessments might be

considered as a drag on technological innovation. Also, those most knowledgeable about the

research may not be best suited to assess its

social implications. An advantage of the evaluations is that they could provide an early warning system alerting decisionmakers to upcoming changes in technologies that could affect

employment education, and training needs in

the future.

The Federal Government could also provide

greater support for research and education on

work organization and job design (option 7b,

table 2-4). Government support could come

through the NSF’s program to establish Engineering Research Centers at universities. The

goal of the program is to develop engineering

knowledge through cross-disciplinary research

that would improve the competitiveness of U.S.

industry and prepare engineers to contribute

to that effort. In the first year of operation of

the program, NSF approved six centers to undertake research in several engineering fields.

If fully funded, the six centers could receive

up to $94.5 million over a 5-year period.

The concept behind these centers is to further

fundamental research in engineering, increase

the effectiveness of engineering education, and

strengthen linkages between universities and

industry. So far, all of the proposals for manufacturing-related centers emphasize advanced

automation in the factory. Yet people remain

the most adaptable element in manufacturing

systems. To preserve employment in the relatively high-wage U.S. economy, U.S. firms and

industries must maintain or regain competitiveness. A combination of advancing technology and work organization designed to make

use of a skilled work force could help to achieve

the goals of competitiveness, expanding employment, and providing satisfying jobs. One

way to pursue these goals would be for Congress to direct NSF to request proposals for an

engineering center with a research mission that

focuses on alternative approaches for work

organization, and evaluation of the effects of

these alternatives on the nature and number

of jobs. Taking advantage of its affiliation with

a university, such a center could also work

towards enhancing recognition among engineering students and faculty of the importance

of matching technical designs with skills available in the production work force. If funded

at about the same level as the existing engineering research centers, the center would require

about $3 million over a 5-year period, or about

$600,000 per year.

STRATEGIES FOR FACILITATING WORKLIFE TRANSITIONS

Structural unemployment might be lessened ferent careers before they actually lose their old

if workers in displacement-prone industries or job. Often, changes leading to displacement deoccupations begin to make transitions to dif- velop over a long time, sometimes several
Ch. 2—Policy Issues and Options . 83

years. While some workers may effectively use

the time to find new jobs or develop different

job skills that may be in greater demand, most

do not. Should more attention be focused on

helping currently employed workers manage

worklife transitions before they lose their jobs,

and, if so, what kinds of measures should be

emphasized?

These questions are examined below in three

issue areas: 1) improving basic skills among the

large number of adults (including many employed adults and many displaced homemakers) with serious educational deficiencies, 2)

expanding the role of the continuing education

system in helping workers prepare for possible career changes, and 3) considering the potential for retraining active work forces through

incentives to employers to offer broader education and training opportunities to blue-collar

and lower level white-collar workers.

These issues have broader implications than

their potential to help some workers avoid displacement in the future; this is part of the reason why OTA selected them for analysis. A

well-trained, highly motivated work force is important to the prosperity of the domestic economy and to the ability of U.S. firms to compete

internationally. The pace of technological

change requires that many workers upgrade or

develop new job skills during the course of their

working lives. Due to demographic changes,

the burden of making such worklife transitions

will increasingly fall on the shoulders of older

workers, who as a group have traditionally

been disinclined to undertake retraining. Helping workers make occupational or worklife

transitions may help U.S. firms to make technological or economic changes that benefit the

economy as a whole. If Congress wants to provide more assistance for occupational adjustment, a wide range of options are available.

Selected options are summarized in table 2-5

and discussed below. (A separate section of this

chapter discusses the role that instructional

technology can play in adult education and

training.)

Basic Skills and the Work Force

(Issue Area 8, Table 2-5)

A sizable portion of the U.S. work force has

serious deficiencies in basic education skills

(including basic mathematics, reading, writing

and oral communications). Workers with such

deficiencies often do not advance in their jobs,

and have difficulty adapting to technological

changes. If displaced, they are usually less able

than better-educated workers to compete for

new jobs and may have to settle for entry-level

or lower skill jobs. Generally, employers are

reluctant to hire workers with basic skills deficiencies, since even low-skill jobs often involve

reading, writing, and simple calculations. The

costs of basic skills deficiencies to U.S. business firms have never been estimated; anecdotal evidence suggests that they are high.

Examples of these costs include mistakes in inventories, inability of workers to follow written instructions, and lost time due to increased

supervisory requirements.

The need for increased emphasis on basic

skills in displaced worker programs has already been discussed. Obviously, however, it

is preferable for workers to remedy basic skills

deficiencies while they are employed. (Still better, of course, is to learn basic skills in school

to begin with.) Several issues related to improving basic skills in the work force are discussed below, including: 1] whether current

funding for adult basic education programs is

adequate, 2) whether employers and the private

sector should play a greater role in such programs, and 3) whether more information is

needed about the magnitude of the problem.

A separate section of this chapter discusses issues and options related to the Federal role in

developing instructional technologies, including technologies used in adult basic education.

The Issue of Funding

Since 1966, the Federal Government has provided grants to States for remedial education

under the Adult Education Act (AEA). These
Table 2-5.-Selected Options for Facilitating Worklife Transitions

Issue area and options Relationship to other options Relationship to current policy Estimated cost of option to Government

Issue Area 8: /reproving basic skills in the work force

a)

b

Expand Federal support for State and local adult

basic education. Program elements might include:

1 ) Increased funding for services and outreach

activities under the Adult Education Act (AEA),

and 2) development of a long-term strategy to increase participation in the AEA, including goals

and related funding levels. Development of a

strategy for congressional consideration could be

done through a special commission or study

Require regular, systematic surveys of basic skills

performance levels for the U.S. adult population,

and provide appropriations for this purpose every 3 or 4 years.

Options to provide more emphasis on remedial education m JTPA Title III programs are discussed m

table 2-1, Issue Area 2.

Option 8b would be helpful in implementing long-term

strategy for improving basic skills, such as proposed

in option 8a. Option would also be useful in determining whether basic skills problems are on the increase, as IS widely speculated. By some estimates,

20% of the adults in the U.S. have very serious basic

skills problems, Among employed workers, the figure

may be as high as 15%. These estimates are based

on a 1974 survey that has not been updated.

Issue Area 9: Encouraging adults to use continuing education in worklife transitions

Selected options are

a)

b)

Authorize an outreach program to inform and encourage adults to make use of the education and

training resources available in their communities.

Authorize targeted educational assistance to

workers likely to be displaced. One option would

be for State or Federal labor or employment agencies to Identify occupations or industries vulnerable to widespread placement, Workers m such

occupations or insdustries would be eligible for

preferential treatment in receiving Federal financial assistance for students.

This option would increase adult awareness of postsecondary educational opportunities, including those

for adults in need of remedial education before they

could participate in postsecondary education. A

separate outreach program for people with very serious basic skill deficiencies may also be needed,

A targeted program of educational assistance could

be one of the services offered in conjunction with advanced notification and pre-layoff assistance (options

1b and 1c m table 2-1)

Remedial education services supported by AEA are

undertaken by several thousand organizations at the

State and local level. Remedial education services can

also be offered under Title Ill of JTPA, Title II of JTPA,

and in some circumstances under programs supported

by the Federal vocational education program, Some

States also use social services block grants to provide remedial education, In contrast to these programs, AEA services are provided to the public at

large, not special populations,

Section 1242 of the Education Amendments of 1978

(Public Law 95-561) specifically authorizes the assessment of the performance of children and young

adults in basic skills through a National Assessment

of Educational Progress (NAEP), A new, one-time survey of literacy skills covering 21 to 25 year olds is

being conducted for the NAEP by the Educational Testing Service, using discretionary Department of Education funds, Results of the NAEP survey are expected

in the spring of 1986

Title I of the Higher Education Act of 1965 originally

supported outreach activities for adults that were

underserved by educational institutions. This program

has not been active since 1980; however, legislation

to reinstate adult outreach has been proposed.

Under current policies, employed adults who are part -

time students find it difficult to compete for available

Federal financial assistance

Option 8a would increase appropriations for AEA to the level

authorized in FY 85 ($140 million) for the FY 86-88 period

(when such sums as necessary are authorized) Full appropriation at the authorized level for FY 85 would cost

the Federal Government $40 million more than the Administration proposed m its FY 86 budget request and $38 milIion more than was appropriated in FY 85, The costs of

a long-term strategy for dealing with functional illiteracy

are difficult to estimate without better information about

the number of adults with a need for basic education, and

about goals for a national strategy. The AEA program

served about 2.3 million people in 1981; some believe a

program two or three times as large would still not reach

all adults with basic skills deficiencies,

The NAEP one-time survey of 21 to 25 year olds costs about

$1.9 million. It is believed that a similar amount IS all that

would be required to survey an all-aged sample of the adult

population, due to efficiencies gamed through sampling

of a broader section of the population and through use of

the NAEP model.

A legislative proposal introduced m the 99th Congress.

would authorize $50 million for FY 86, and such sums as

necessary through FY 91, for postsecondary continuing

education grants related to renovation and outreach, and

research and development, among other provisions

A wide range of alternatives has been proposed in Congress and elsewhere to help workers undertake education as a way to avoid displacement or to save money for

future traning needs. Many of these proposals would probably not greatly enhance educational opportunities for blue-

-collar and lower income white-collar workers. A targeted

approach might partially overcome this problem If limited to loan programs, a preference system would have little overall impact on costs, Grants, or other forms of direct

assistance, could entail substantial costs.
Table 2-5.—Selected Options for Facilitating Worklife Transitions-Continued

Issue area and options Relationship to other options Relationship to current policy Estimated cost of option to Government —

Issue Area 10: Encouraging training and retraining of active work forces

a)

b

c

Continue tax treatment for employer provided edu--

cation programs under section 127 of the Internal Revenue Code, with a stipulation that information continue to be developed on the

characteristics of workers who participate in the

program.

Conduct oversight on the experience to date with

employer provided training that IS supported by

Federal or State programs

Consider additional incentives for employer

provided training (e.g., use of tax incentives) or

possible use of a payroll tax as a mechanism for

financing retraomomg of either active or displaced

workers One proposal would allow business a

25% tax credit for future training expenses exceeding the firm’s average for the prior 5 years

Eligible training activities would include apprenticeships, cooperate vocational education programs. and other actlvmes Identified by the

Secretary of Labor

SOURCE Office of Technology Assessment

This option could be adopted either singly or in conjunction with other options for employer trainng. The

section 127 program IS one of the few existing incentives by which the Federal Government encourages employed workers to undertake coninuingumg

education that is not necessarily related to a worker’s current job

This option could be adopted singly, or as part of

a broader consideration of additional initiatives for

employer provided training

Expanded public support for employer provided training can be seen as a defense against displacement

if it results m a better trained work force

Congress has allowed employees to exclude educational assistance provided under a qualified company

program from their taxable income, even when the

education was not directly related to their current jobs

This exclusion wiII not apply to the 1986 tax year unless specifically extended by Congress. The Administration’s 1985 tax proposal suggests that this program be extended and made permanent

The 1984 amendments to the vocational education program allow for employer provided training of active

work forces under certain circumstances.

Presently, employers count employee training expenses as a business expense Some cooperate

vocational projects are carried out in conjunction with

State and Federal programs. A few States also provide customized training to business, or support

retraining of active work forces when the alternate

could be displacement of workers.

Very little hard data exists about the costs of the section

127 program m terms of lost revenue to the Federal

Government Estimates made m 1984 on extension of the

program through the end of 1985 suggested that the extension would cost a total of $186 million for FY 85 and

the first quarter of FY 86.

Not estimated, but small

Under the 25% tax credit proposal, the Federal Government would pick up one-fourth of the costs of Increased

employer expenditures for training in eligible activities

(e g , apprenticeship, occupational trainingg, and activities approved by the Secretary of Labor). The degree of

employer response is not estimated.
86 . Technology and Structural Unemployment: Reemploying Displaced Adults

programs offer courses in adult basic and secondary education and courses in English to

speakers of other languages. Some other Federal programs can also fund remedial education services for certain groups of adults: for

example, JTPA Title II projects can provide

basic education services to economically disadvantaged youths and adults; Title III projects

can offer remedial education to displaced

workers; and some States allocate part of their

social services block grants under Title XX of

the Social Security Act for basic education

services to welfare recipients. The AEA is the

largest source of Federal funds for adult basic

education (ABE) in the general population,

however.

About 2.3 million adults received remedial

education under the AEA program in the program year ending June 30, 1981, the last year

for which official statistics on participation in

the Federal AEA program have been collected

from the States.19 The total number of adults

participating in all literacy and basic skills programs is larger, since it includes people served

by volunteer groups, community organizations,

and State or local projects not funded under

AEA. However, the total is difficult to estimate

because of the likelihood that some participants

are counted more than once.

The more than 2 million adults receiving remedial education each year probably are only

a small part of those in need of some remedial

education. The size of the population in need

is not known. However, the U.S. Department

of Education estimated that up to 27 million

adults were functionally illiterate in 1982. It

also estimated that about 2.3 million adults (including young high school dropouts, high

school graduates with inadequate basic skills,

and legal or illegal immigrants) are added to

the pool of of Americans in need of basic eduIoUnofficlal statistics provided by State program administrators suggest that as many as 2.6 million people participated in

the program in 1964. It is unclear whether this apparent increase

reflects an actual increase in the number of participants in the

AEA program itself, or different reporting procedures. Some

States, for example, may not distinguish between adult education projects supported with AEA funds’ and adult education

projects supported solely by other funds when they prepare State

level reports that are not officially required by AEA.

cation each year. On the basis of these estimates, some people have concluded that as

many people are added to the pool of adults

in need of basic education each year than are

served by the AEA programs.

These figures should not be accepted uncritically—the 27 million figure, for example, was

derived by applying 1974 survey data to the

1982 population of adults, and the 1974 survey

had serious shortcomings (see ch. 7). Moreover,

all efforts to define “functional literacy” are

based on somewhat arbitrary assumptions about

the level of literacy required to function effectively in society. Nonetheless, even though the

exact number of adults in need of remedial education is unknown, the number is clearly large;

a serious basic skills problem does exist in this

country. Over the long term, improvements in

education of children in primary and secondary schools may ease the problem. However,

the need for remedial education in the adult

population will remain a crucial educational

priority for the foreseeable future.

Some States report that their AEA programs

have not been able to keep up with the demand

for remedial education. Illinois, which served

114,000 people in its AEA and State-supported

basic education programs in 1984, estimates

that 44,000 additional people could have been

served if resources had been available. Illinois

officials estimate that 16,000 people were on

actual waiting lists to receive basic education

services at the end of May 1985. California,

which led the Nation in the number of people

served by AEA projects (over 600,000), may

have turned away 1,000 people a week in 1984.

When waiting lists exist, many AEA projects

curtail outreach activities designed to attract

the large population of educationally disadvantaged adults who lack the motivation, self-confidence, or information to seek out AEA classes.

Administrators of local programs are reluctant

to reach out to this group when their classrooms are already filled with more motivated

adults.

While some States have recently increased

funding for adult basic education, more Federal funding almost certainly will be needed
Ch. 2—Policy issues and Options • 87

if there is to be a significant expansion in the

national commitment to remedial education.

In 1982, total Federal and State expenditures

for the AEA program were $229 million, of

which 56 percent was contributed by the States

and localities, and the remainder by the Federal Government. Federal appropriations for

the AEA program have remained in the $100

million range for 3 years. Congress appropriated about $102 million for the AEA program

in fiscal year 1986. Higher funding, more in

keeping with the authorized level of $140 million for fiscal year 1985, could help restore the

Federal commitment to its level of a few years

ago, after inflation is taken into account.

It is more difficult to determine the level of

spending needed, at all levels of government,

to deal effectively over the long-term with the

need to improve adults’ basic skills. Some

studies estimate that a multiyear, multibillion

dollar commitment would be needed. In addition to more funds, new delivery systems, and

different approaches to basic skills education

could be required. All projections of long-term

fiscal needs for adult basic education programs

are hampered by the unreliability of available

data on the number of adults with basic skills

deficiencies.

Given the uncertainty about what outcomes

could be expected from a given level of funding, Congress might wish to create a special

study commission (or call on the executive

branch to do so) to develop an overall long-term

strategy for addressing the basic skills problem.

Several different participation goals (with associated funding requirements) could be identifed. The commission or agency formulating

the strategy could be required to develop the

information in time for congressional deliberations on reauthorization of the Adult Education Act (the current authorization expires on

Sept. 30, 1988). This, together with a higher

level of interim funding of the program, is an

option Congress may wish to consider (see option 8a, table 2-5).

Some sentiment already exists in Congress

for reevaluating approaches for dealing with

functional illiteracy. For example, joint resolutions introduced in both Houses of the 99th

Congress would establish a national commission on illiteracy.20 The temporary commission,

half of whose members would be appointed by

the President and the other half by Congress,

would report and make recommendations to

the Congress within one year of its establishment. As these proposals are framed, it is not

clear how much emphasis the proposed commission (if authorized) would give to adult

functional illiteracy, relative to improving basic

skills of young people high school age.

The Role of Employers and the Private Sector

Given constraints on Federal spending, considerable interest exists in the potential of alternative delivery systems for adult basic education. Such alternatives include more reliance

on volunteers and volunteer organizations to

provide educational services, and greater involvement of employers and unions in sponsoring education projects for workers. Foundations and other nonprofit organizations are

also active in supporting innovative basic skills

programs.

Volunteer organizations, such as Laubach

Literacy Action and Literacy Volunteers of

America, conduct their own literacy projects,

and also have ties to State and local ABE projects. Although nationwide data are not available, volunteers are also used in basic education projects supported by the AEA. If welltrained and effectively supervised, volunteers

could help expand the reach of AEA-supported

projects, and allow some people on waiting

lists to enter classes sooner. Volunteers often

provide one-to-one tutoring, an approach that

can help overcome lack of self-confidence or

lagging motivation. Often, individual sessions

can be arranged between volunteer tutors and

clients to fit the clients’ schedules.

ZOThe Commission is proposed in House Joint Resolution 213

and Senate Joint Resolution 102, as introduced in the 99th Cong.

A similar commission and study was called for in S. 1160, the

proposed National Defense Authorization Act for fiscal year 1986

as passed by the Senate on June 5, 1985. The provision was

dropped in the conference committee on the bill. For status and

discussion of these and other proposals in the 99th Congress,

see Paul M. Irwin, “Adult Literacy Issues, Programs, and Options,” Library of Congress, Congressional Research Service, Issue Brief IB85167.
88 • Technology and Structural Unemployment: Reemploying Displaced Adults

Volunteerism is emphasized in the Department of Education’s Initiative on Adult Literacy, announced by President Reagan and

former Secretary of Education T.H. Bell in September 1983, and the National Adult Literacy

Campaign, sponsored by the Coalition for Literacy in conjunction with the Advertising

Council. Under the Campaign, a national advertising effort to attract students and to recruit

volunteer tutors and corporate sponsors was

launched in January 1985. At present, it is not

clear whether State and local volunteer organizations and the instructors and administrators of adult basic education programs are prepared to make effective use of volunteers who

respond to the campaign. It may be possible

to improve the use of volunteer tutors by providing funds for their recruiting and training.

Federal seed money, channeled through the

Department of Education’s Division of Adult

Education, could help build the capacity of local volunteer organizations.

Employers and unions could play a significantly greater role than they do now in efforts

to improve basic skills in the work force. Some

companies sponsor programs at worksites or

in conjunction with local educational institutions to provide basic skills courses to their employees. So far, no one has collected the data

needed to evaluate these company-sponsored

programs. In theory, at least, they offer the advantages of convenience of time and place and

of peer group support. However, most companies do not offer basic skills programs, and

many feel that this is the task of the public

schools alone.

Identifying current and potential roles of employers in providing basic skills education to

employees could be a subject for congressional

oversight of AEA. Or, if Congress decides to

establish a commission on functional illiteracy,

it could direct the commission to assess ways

to encourage employers to provide basic education to their workers.

Given the limited funds available for projects

that serve all eligible adults, it may be questioned how much direct public support should

be given to employer-provided basic education

projects. In reauthorizing AEA in 1984 through

Public Law 98-511, Congress authorized States

to support ABE projects undertaken by forprofit organizations when this would contribute

significantly to the objectives of the act, and

when the for-profit organization could provide

substantially equivalent education at a lesser

cost or provide services and equipment not

available in public institutions.2l Thus, it appears that employers, as well as proprietary

schools and for-profit learning centers, can

qualify for AEA funds under some circumstances. Similar provisions are contained in the

Carl D. Perkins Vocational Education Act of

1984, which authorizes basic skills programs

in support of vocational education objectives.

Depending on whether States choose to fund

such activities, a track record will begin to

emerge in the next few years on these forms

of private-public sector educational partnership. If additional public support for employerprovided basic skills courses is merited, care

will be needed to assure that traditional basic

education programs for the public at large are

not jeopardized. The danger of supporting private programs at the expense of general public ones might be avoided if public support for

employer-provided basic education were part

of an earmarked package of training incentives.

Selected options to encourage greater employer

involvement in training the active work force

are discussed in Issue Area 10 of this chapter.

The Importance of Information and Monitoring

Better information is essential for formulating and monitoring the success of long-term

programs to reduce functional illiteracy in the

United States. The most frequently cited estimates of functional illiteracy are derived from

the 1974 survey of adult performance levels

which categorized 20 percent of the adult population as functionally incompetent and another

30 percent as marginally competent. This survey was not a survey of literacy levels, but

nonetheless has been widely cited as a measure of functional illiteracy.

Zlpubljc Law 98-511, Section 304.
Ch. 2—Policy Issues and Options ● 8 9

The need for periodic monitoring of the

scope of the adult basic skills problem in the

United States is clear. A new one-time survey

of literacy levels among young adults (21 to 25

years of age) is now being undertaken by the

Educational Testing Service as part of the National Assessment of Educational Progress

(NAEP). Results of the new survey are expected

in the spring of 1986. Given the magnitude of

the problem, periodic surveys (perhaps every

3 or 4 years] of adult literacy and basic skills

performance levels on a national basis would

be desirable. The cost of the current NAEP survey (for young adults only) is estimated to be

$1.9 million, It is believed that an expanded

survey, sampling functional literacy levels of

all adult age groups, would cost about the same,

since the already developed NAEP model could

be used to analyze a broader sample of the

adult population. Survey findings would be

most useful to policy makers if they could be

related directly to needs for adult basic education programs and associated funding levels.

Better information about State and local AEA

projects, and projects conducted through alternative delivery systems (such as employers,

volunteer organizations and foundations, and

other Federal programs) would also be desirable. From 1982 through 1984, restrictions on

data collection by the Department of Education were in effect for the AEA program. As

a result, official national data obtained from

the States about their AEA programs is quite

limited for the program years 1982 through

1985. In reauthorizing AEA in 1984, Congress

was more specific about the kinds of information the Secretary of Education may obtain

from the States under the program, In addition

better information about basic education services that are funded separately from AEA

projects would help to determine the nationwide commitment to remedying adult basic

skills deficiencies.

If Congress wishes to be assured that a continuing effort is made to improve information

on basic skills, it may wish to consider providing separate funding for periodic surveys of

adult literacy levels (option 8b, table 2-5). It also

may wish to be assured, through its oversight

of implementation of the 1984 amendments to

AEA or through establishment of a special

study or commission on functional illiteracy,

that data on State and local programs are adequate to meet congressional needs. Developing better estimates of employer-provided basic

education, for example, could be a function of

a study or commission on adult education,

while a responsibility to develop information

on federally supported activities (other than

those through AEA) could be assigned to the

Federal Interagency Committee on Education.

Continuing Education and Worklife Transitions

(Issue Area 9, Table 2-5)

Some workers in declining occupations or

industries may be able to lessen the likelihood

of displacement in the future by getting training in new job skills while they are still employed. An extensive system of adult education

and training exists in the United States. Parts

of this system, such as community colleges and

some vocational schools, are highly accessible

to adult workers.

As a practical matter, comparatively few

blue-collar workers undertake preventive retraining. Many workers do not believe that the

education and training system has much potential for helping them prepare for occupational changes even when it is clear that their

jobs are vulnerable to displacement. Also,

workers often have very limited information

about the kind of training that is most likely

to open new job opportunities. Moreover,

workers preparing for career changes usually

have to do so on their own initiative, often with

little or no financial support from employers

or the Government. For example, most adult

workers seeking training for a career change

study part time, and only a small portion of

Federal student-aid is available to part-time students. While some adults are able and willing

to finance their own retraining, many are not

prepared to do so.

Over the last few years, several approaches

have been proposed to make it easier for adult

workers to take education and training that
90 • Technology and Structural Unemployment: Reemploying Displaced Adults

would help them change careers. These approaches include, among others: 1] greater emphasis on outreach, to encourage more adults

to take part in education and training; and 2)

expansion of financial assistance available to

adults in education programs, either directly

through student-aid programs, or indirectly

through changes in the Internal Revenue Code.

Another approach would be to target special

assistance for retraining workers in occupations or industries that are subject to widespread displacement. In theory at least, this approach could help some workers in declining

occupations make career transitions while they

are still employed.

Expanded Emphasis on Outreach Activities for

Adults (Option 9a, Table 2-5)

Several barriers prevent many adults from

making use of educational programs in their

communities. These include personal and psychological barriers, such as lack of self-confidence; difficulties in scheduling instruction

at times and locations convenient to adults;

lack of career counseling for adults; and lack

of information about available educational resources and opportunities. (Financial barriers

are also important; these are discussed separately.)

Increased Federal support for adult outreach

is under consideration, and several bills on this

issue have been introduced in the 99th Congress.

22 Some bills propose to reinstate an outreach program as part of Title I of the Higher

Education Act of 1965 (as amended), a law up

for reauthorization in the 99th Congress. Many

of the continuing education activities originally

authorized under this title were modified by

the Higher Education Act of 1980. Funding for

the continuing education and adult outreach

activities under Title I peaked at $18 million

in 1976. Since fiscal year 1981, when most of

the funds already appropriated for the adult

outreach program were rescinded, no funds

ZzSee, for example, H.R. 37oo, the proposed Higher Education

Amendments Act of 1985 as reported by the House Committee

on Education and Labor on Nov. 20, 1985, S. 480, introduced

on Feb. 20, 1985, and H.R. 1473, as introduced on Mar. 7, 1985.

have been appropriated specifically for the outreach provisions of Title I.23

Renewed Federal support for outreach activities might encourage more workers to participate in career education and training, and

cause educational institutions to offer more

programs to meet the educational needs of undeserved groups of adult learners. One of the

Title I bills introduced in the 99th Congress (S.

480) would authorize up to $50 million in fiscal year 1986 (and such sums as necessary

through 1991) for innovation and outreach

projects and R&D activities related to postsecondary continuing education. The bill identifies several groups of adults as likely to benefit from these programs, including (among

others) dislocated workers, people (especially

women) returning to the labor force, those

needing remedial education or counseling to

benefit from postsecondary education, and employees of small or medium size firms that do

not offer training and education activities,

The bill would authorize the Secretary of Education to make grants to institutions of higher

education (including qualifying proprietary institutions and postsecondary vocational institutions) to better serve adult learners. The

grants could be used to make educational opportunities available to adults at convenient

times and locations (including the workplace);

to promote collaborative efforts with employers

and employees to make postsecondary education responsive to local, regional, and national

employment and economic conditions; to help

adults overcome barriers limiting their participation in postsecondary education; to provide

information and counseling services for adults;

to develop innovative delivery systems and curricula to facilitate career development and transitions; and to implement technology-based

delivery systems to enhance adult access to

postsecondary education. The grants could not

be used for stipends.

z3A5. discussed in Reauthorization of the Higher Education Act:

Program Descriptions, Issues and Options, prepared by the Congressional Research Service for the Senate Committee on Labor and Human Resources, February 1985 (Senate Print 99-8),

pp. 440-441.
Ch. 2—Policy Issues and Options • 91

The need for expanded outreach activities in

remedial education programs is discussed separately under the heading Basic Skills and the

Work Force (Issue Area 8) of this chapter. Remedial education programs traditionally attract

only highly motivated adults; outreach directed

to less motivated adults with basic skills problems may attract more people to these programs. The Title I outreach activities in the

proposals discussed in this section could be

used to provide guidance, counseling, and remedial instruction to adults who need such

services to benefit from postsecondary education, Another option would be to expand the

emphasis on outreach activities in publicly supported remedial education programs, such as

those conducted with the support of the Adult

Education Act. Neither of these options is

mutually exclusive.

Financial Assistance for Continuing

Training and Education

Federal financial assistance to working adults

for continuing education traditionally has been

quite limited. However, in recent years, proposals have been made to increase the level of

support or to broaden the circumstances under which adults could receive financial assistance for continuing education. Most of these

bills and legislative proposals can be grouped

in three broad categories: 1) increasing the access of part-time adult students to Federal financial aid for education, 2) broadening the tax

deductibility of education and training expenditures to include education not directly related

to one’s current job, and 3) creating special tax

advantages for individual training accounts to

finance education or training. This approach

is discussed in detail in chapter 6.

Most employed adults who participate in education or training are part-time students and

are not enrolled in degree or certificate programs. This limits their access to Federal financial assistance. The major Federal aid programs for postsecondary students—Pen grants,

Guaranteed Student Loans, College Work-Study,

Supplemental Educational Opportunity Grants,

and National Direct Student Loans—are structured primarily to help dependent, full-time students in the 18- to 22-age range.

With the exception of Guaranteed Student

Loans, students are eligible for Federal aid under these programs only if they are enrolled in

“eligible programs” leading to a degree, a certificate, or other formal program of preparation for a recognized vocation, This requirement excludes more than half of the adults in

postsecondary courses. only two programs,

Supplemental Educational Opportunity Grants

and College Work-Study, are available to students enrolled less than half time, Since 1980,

Congress has permitted up to 10 percent of the

funds in these two programs to be given to students who are enrolled less than half time,

Even so, few schools earmark the full 10 percent to these students.

Many adults who might otherwise be eligible for assistance may have trouble competing

for funds because eligibility requirements are

designed for financially dependent young people. For example, adults who own homes may

be penalized in calculations of the need for financial aid. Displaced workers are affected by

calculations of need based on the previous

year’s income. Legislation has been proposed

in the 99th Congress which would require discounting of home equity and unemployment

benefits in calculating financial aid needs for

dislocated workers, thus allowing determination of needs to be based on their current income.

24 Other options Congress might consider

to increase the access of adults to Federal student aid include modifying the degree and certificate requirement and earmarking more aid

to students enrolled less than half time.

Several bills have been proposed to allow taxpayers to deduct or, in some cases, take tax

credits for eligible education expenses in calculating their income taxes. While some of

these bills limit the deduction or credit to accounts established for dependents of the taxpayer, others also allow the taxpayer to deduct

or take credit for his or her own educational

Zqsee, for examp]e, H.R. 161 1,the proposed Dislocated Workers Act of 1985, as introduced on March 20, 1985 and H.R. 3700

as reported by the House Committee on Education and Labor

on Nov. 20, 1985.
92 ● Technology and Structural Unemployment: Reemploying Displaced Adults

expenses.

25 The deduction allowed varies from

$1,000 to $2,000 annually in different bills.

Some bills specifically identify expenses incurred at vocational schools as eligible expenses, while others do not. Broadening the tax

deductibility of education expenses would benefit most those with higher incomes (and thus

higher tax brackets), and therefore may be

more useful to managers and professionals

than to blue-collar workers; tax credits would

be of greater benefit to lower income workers

than deductions.

Similarly, professional and technical people

with relatively high incomes may be more

likely to make use of individual training accounts than workers with lower incomes. As

proposed in bills introduced in the 99th Congress,

26 the individual training account approach would authorize tax deductible training accounts, funded jointly by employers and

workers, that could be drawn on to provide

vouchers for training or relocation assistance

if a worker was displaced. Contributions to individual training accounts by both employers

and employees would be deductible for income tax purposes. Large employers (defined

as companies employing 25 people or more)

who refused to participate in the program

would not be eligible for certain reductions in

Federal unemployment taxes.

Another approach for assisting adults in

financing education would be to authorize taxpayers to establish tax-deductible education

savings accounts regardless of their employment status. One possibility would be to permit individual taxpayers to set up special taxdeductible savings accounts to meet educational expenses of themselves or their dependents. Such a tax deduction might be extended

to taxpayers who do not otherwise itemize

deductions, and could be used for educational

expenses at an institution of higher learning

or a vocational schoool. Both features could be

—.—ZsThese include H.R, 96, introduced on Jan. 3, 1985, which

would allow taxpayers an income tax credit for education expenses, and H.R. 414, also introduced on Jan. 3, 1985, which

would allow an income tax deduction for education expenses,

ZeThese proposals include H.R. 26, as introduced on January

3, 1985, and S. 934, as introduced on ApriI 17, 1985.

attractive to blue-collar workers interested in

retraining, but (as with other proposals involving tax incentives) it is hard to tell how many

workers would enroll in courses they would

not otherwise have taken.

All these approaches—whether aimed at direct student aid or at tax incentives for education—need to be viewed in the context of curent debate about the Federal deficit, tax reform,

and Federal education priorities. At a time

when major reductions in Federal student-aid

have been proposed, increases in financial aid

to adults might reduce aid available to other

categories of students. By the same token, new

tax incentives to help workers finance education for career changes, while not intensifying

competition for direct financial aid, would affect Federal revenues and may be viewed as

contrary to tax simplification and deficit reduction.

Besides options intended to increase access

to continuing education for all adults, a more

limited and focused approach would be to target some educational assistance to workers employed in declining occupations or industries

(option 9b, table 2-5). Workers could use this

assistance to obtain new job skills while they

still have jobs. Determining worker eligibility

for such assistance would depend on projections or forecasts of industrial activities, This

could be done at the Federal or State level;

workers in declining industries or occupations

could be made eligible for special consideration

under various education assistance programs.

Such an approach could have both positive

and negative features. A matter of concern is

whether a targeted approach would reach more

than a few workers, given the uncertain reliability of occupational forecasts, and the resistance of many workers to retraining even when

they are actually displaced, not merely threatened. Also, it can be argued that it is inappropriate for the Federal government to provide

positive incentives for workers to leave any industry or occupation, since it is possible that

this might accelerate the process of decline. On

the positive side, a targeted approach would

help some workers prepare for career transi-
Ch. 2—Policy Issues and Options ● 9 3

tions while still employed, thus easing the process of change and probably reducing the number of workers experiencing displacement in

the future. In cases where several months of

advance notice of layoffs or plant closings were

given, targeted educational assistance could be

an especially useful option. In fact, this option

could be one of the services offered to workers in pre-layoff assistance programs. (Prelayoff assistance options are summarized in Issue Area 1, table 2-l).

Employer-Supported Training and Education

(Issue Area 10, Table 2-5)

Corporate training activities are sometimes

viewed as exclusively a concern for the private

sector. However, components of this training

system are indirectly supported by the public

at large, because of favorable tax treatment of

employer-provided training and links between

business and publicly supported educational

institutions. Thus, questions about access to

training and education assistance by different

levels of employees within firms, and about the

quality and kind of services provided, are likely

to be raised increasingly in Congress and elsewhere. Two issues that are especially relevant

to legislative debate about the employers’ role

in helping employees prepare for career changes

are: 1) the immediate question of whether to

continue favorable tax treatment for employees receiving tuition and other educational

assistance from employers offering qualified

continuing education programs, and 2) the

question of whether greater public support

should be provided for training and retraining

of active work forces, and for improving access of blue-collar or less educated employees

to training.

Access to the Corporate Training System

By virtually any measure, employers are a

dominant factor in the continuing education

and training of employed workers. Estimates

of direct expenditures on training and indirect

support of educational activities on the part of

employers for their employees range from

about $10 billion to over $100 billion per year.

These estimates do not include informal training given to employees at the workstation.

While the role of employers is great, it is clear

that access to employer-provided or employerassisted training is by no means uniform. It is

generally believed that people who work for

large companies are much more likely to receive education and training than those working for small companies. This belief, while

plausible, is difficult to substantiate simply

because most of the statistical data on corporate training programs focuses on large corporations.

Some larger firms in highly technical fields

have established broad continuing education

programs that can be used by all employees,

sometimes in conjunction with employment

security programs aimed at retraining current

employees. Also, the recent attention to training and retraining in union contracts is a potentially important vehicle for meeting the

needs of workers who are union members.

However, only about 18 percent of all U.S.

workers belong to unions, and of these, only

a minority are covered by contracts with extensive training provisions.

Most corporate training and education is focused on the needs of managers, administrators, professionals, and technicians. In part,

this reflects the greater need for continuing

education in professional, managerial, and

technical careers. Training requirements for

many blue-collar jobs often can be satisfied

through a few hours or days of instruction.

However, the pattern also reflects the reluctance on the part of some employers to provide

training in broad transferable skills, since such

investments could be lost to the company if the

employee found other employment.

In the long run, narrowly focused training

and education policies by employers may be

self-defeating. A well-educated and highly

trained work force, at all levels of employment,

is an essential component of an internationally

competitive economy. Moreover, corporations

with human resource policies that aim to enhance the skills and talents of all their employees may find it easier to attract and keep a
94 . Technology and Structural Unemployment: Reemploying Displaced Adults

highly motivated work force. At the same time,

employers cannot be expected to assume the

costs of retraining workers for jobs with other

employers.

All current estimates of corporate expenditures in training their employees are of questionable accuracy. Estimates vary from a fraction of 1 percent to 3 or more percent of the

gross national product. This lack of reliable

data impedes analysis of more important questions, such as whether U.S. employers are underinvesting in human capital, and how the

commitment of U.S. employers to employee

training compares with that of employers in

other advanced economies. Given the importance of these questions to debate about policies related to employer provided training,

Congress might wish to call on the executive

branch to develop an improved information

base on employer-provided training.

Tax Incentives for Employer-Provided

Education Programs

Congress generally has not used the Internal

Revenue Code as a vehicle for encouraging individuals to participate in continuing education. The major exception has been education

or training to maintain or improve an employee’s current job skills, or instruction that is required by the employer. Employees can deduct

such expenditures as business expenses in calculating their income tax. However, workers

cannot deduct education or training expenses

to prepare for new careers or different jobs.

The other major exception has been favorable tax treatment of benefits from employee

education assistance programs that many companies now offer. These programs provide employees with tuition assistance or other forms

of support for courses that may not be directly

related to their current jobs. Since 1978, Section 127 of the Internal Revenue Code has allowed employees to exclude educational assistance provided under a qualified company

program from their taxable income, even when

the education was not job-related.27 If Congress — -- ZTorigina]]y authorized for a 5-year period, the 98th Cong. extended section 127 until Dec. 31, 1985 through enactment of Public Law 98-611. The section 127 program had been allowed to

lapse at the end of 1983. However P.L. 98-611 re-instated the

exclusion and made it retroactive for the 1984 tax year. It also

limited the amount of the exclusion to $5,000.

wishes this exclusion to be continued, it will

need to act to extend the provision (option l0a

in table 2-5) so that it will apply in the 1986 tax

year. (The exclusion expired on Dec. 31, 1985.)

Bills to continue the exemption have been introduced in the 9gth Congress.28

Some believe that these benefits should be

considered income for purposes of the Federal

income tax. A key issue in debate about continuing the program is whether the public costs

in maintaining the exclusion are justified by

the program’s potential to reach a broad crosssection of employees. Company education

plans that qualify for the Section 127 exclusion

must not favor employees who are corporate

officers or owners, or are highly compensated

in comparison with other employees, and the

educational program must be “for the exclusive benefit of the employees. ” Except for

sports, games, and hobbies, the kind of education supported by a company program is not

restricted; it can include courses that are not

related to the employee’s current job.

Labor representatives have argued that because lower level jobs are more narrowly defined, a requirement that courses be job-related

in order not to be counted as income would

discriminate against lower level employees, including women and minorities. Furthermore,

the response of blue-collar workers to employer-provided tuition assistance is generally low

because of barriers such as lack of information

and lack of self-confidence. If Congress allows

tuition assistance to become taxable income,

new barriers may be added.

Comparatively little information is available

about who benefits the most from favorable tax

treatment of employer-provided training, or

what the true costs of the program have been

to the Federal Government. A 1985 survey by

the American Society for Training and Development found that, among the 319 firms with

education programs responding to the survey,

—-——. .-— .— Z$see for example, S. 558 and H.R. 1356, as introduced in the

99th Cong, It should be noted that the Appendix of the President’s May, 1985, tax proposal report to the Congress calls for

a permanent continuation of the exclusion, and also for the dropping of the $5,OOO annual limitation on the exclusion, Section

1161 of H.R. 3838, the proposed Tax Reform Act of 1985 as

passed by the House on Dec. 17, 1985, proposes to extend the

exclusion through Dec. 31, 1987.
Ch. 2—Policy Issues and Options ● 9 5

72 percent of participating employees earned

less than $30,000 per year, and 22 percent

earned less than $15,000. The survey found

participation rates to be highest among companies with fewer than 500 employees. The survey was not representative of firms as a whole

since over half the respondents employed over

3,000 people.29

In extending the Section 127 provision until

the end of calender year 1985, Congress directed the Treasury Department to provide a

report (due at the end of October 1985) on the

status of the program. In the meantime, estimates presented in congressional reports on

the extension suggest that loss in tax and social security revenue for the five-quarter extension period (ending on Dec. 31, 1985) would

be $155 million in fiscal year 1985, and $31 mil1ion for the first quarter of fiscal year 1986.

Alternative Policies to Encourage Training and

Retraining of Active Work Forces

Several proposals have been made in recent

Congresses that would broaden Federal support for employee training of active work

forces. Many of these proposals have as a

stated purpose enhancement of U.S. industrial

competiveness. They emphasize the advantages of training and maintaining an adaptive

and skilled work force as a defense against future displacement.

A wide range of policy questions and alternative courses of action are associated with this

issue. Specific aspects of the issue that are considered below include: 1) use of congressional

oversight to review the experience to date with

public incentives for employer-provided training; 2) consideration of whether additional tax

incentives would encourage employers to provide broader training and education opportunities to employees; and 3) possible use of payroll taxes patterned after the Federal-State

unemployment compensation system as a

mechanism for financing employer-provided

training in situations where workers might

ZoArneriCan Society for Training and Development, Employee

Educational Assistance: Who Pays, Who Benefits (Arlington, VA:

American Society for Training and Development, 1985).

otherwise be displaced, or, alternatively, in

financing training or retraining of displaced

workers.

Most existing cooperative approaches to

work force education and training on the part

of employers, unions, and public agencies are

recent in origin. As discussed in chapter 5,

some States support or assist training or retraining of work forces by private employers.

Often, this training assistance is offered as an

incentive to attract new industry to a State or

region. Sometimes it is provided as part of a

strategy to encourage local firms to stay in an

area and to help them remain competitive.

Some Federal assistance to State-industry cooperation programs is also available. For example, the Carl D. Perkins Vocational Education Act of 1984, the major law governing

Federal vocational education expenditures, authorizes States to use some of these funds for

training and retraining of active work forces

by private employers, under certain circumstances. While special State programs for adult

training and retraining authorized by the Perkins Act have not been funded, some funds

under the basic grant program of the act are

targeted for adult training and retraining. Evaluation of the experience to date with these programs and activities might be a useful subject

for congressional oversight (option l0b, table

2-5). oversight could broaden public understanding of the issues involved and help Congress evaluate alternative proposals should it

wish to expand assistance for employer-provided training (see option 10c, table 2-5).

Several proposals of this sort have been offered in recent Congresses. For example, one

purpose of H.R. 1219, the proposed National

Training Incentive Act of 1985, would be to

stimulate greater investment in training by employers. (The bill also would allow displaced

workers to withdraw funds from their individual retirement accounts to finance approved

training, without paying a tax or penalty on the

amount withdrawn.) The bill would authorize

a 25-percent tax credit for a company’s training expenditures that exceed the average annual

amount it spent on training in the previous 5-

year period. Eligible training expenditures
96 • Technology and Structural Unemployment: Reemploying Displaced Adults

would include registered apprenticeship programs, qualified employer-designed or employer-sponsored training programs, cooperative

vocational education programs, programs at

postsecondary schools, and other programs for

improving job skills directly related to employment.

Possible use of payroll-based funding to train

and retrain both employed and unemployed

workers has evoked some interest. The use of

payroll-based contributions to finance training

is perhaps most fully developed in France,

where a government-imposed obligation to finance training has been in effect for employers

of 10 or more workers since 1971. French companies may use this obligation—currently about

1.1 percent of a firm’s total wage bill—to finance internal training of employees, or for

industry-wide training activities. Employers

who do neither must contribute an equivalent

amount to programs for unemployed people in

approved training centers or to the national

government.

Another possibility is to levy a special payroll tax on employers equivalent to a small portion of the unemployment insurance tax, and

earmark it for training and retraining programs. Two States—California and Delaware—

have enacted payroll-based taxes, collected

through the UI system, to finance retraining

of workers. These payroll-based taxes, strictly

speaking, are not part of the UI system. Federal law prohibits diversion of any part of the

UI tax for any non-UI purpose.

THE FEDERAL ROLE IN RESEARCH, DEVELOPMENT AND TRANSFER OF

INSTRUCTIONAL TECHNOLOGY

Instructional technologies, such as computerassisted instruction and courseware for interactive videodisk systems, play an increasingly

prominent role in the delivery of training and

education to the work force. Many currently

used instructional technologies were developed

by or with the support of Federal agencies, and

some have been adopted by industry due to

their potential to cut training costs and provide

uniform quality instruction at diverse locations. Instructional technologies have significant potential for effective use in the delivery

of basic skills instruction to adults, and in many

vocational training and retraining applications.

In several basic education and technical training projects involving the computer, adults

have learned very quickly, and in some cases

have committed more time to their studies than

students taking traditional courses (see ch. 7

for details).

Despite their promise, instructional technologies have not yet come into widespread use

in the adult education system. Congress may

wish to take steps to encourage greater use of

these technologies in meeting the educational

and training needs of both employed workers

and displaced workers. The Federal role in research, development, and transfer of new instructional technologies could be expanded

through: 1) more effective measures to transfer federally developed training technologies

to education and training institutions and to

the private sector, 2) greater support for development of new adult basic and vocational

training materials for instructional technologies, and 3) establishment of one or more national centers at universities to focus research

on how adults learn. (See Issue Area 11, table

2-6.)

Transfer and Diffusion of

Federal Training Technologies

Effective and timely transfer of federally developed training technologies to State, local,

and private sector education and training institutions can contribute to efforts to upgrade

the skills of the U.S. work force. Over the years,

the Federal Government has played a major

role in developing many training technologies,

including computer-based education and training, simulation, and educational applications
Table 2-6.—The Federal Role in Research, Development, and Transfer of Instructional and Training Technology

.

Issue area and Options Relationship to other options Estimated cost of option to Government

Issue Area 11: Encourging research, developement, and transfer of instructional technology

— Relationship to current policy

a)

b)

c)

Transfer and diffusion of federal training technologies

Require the executive branch to establish a specific mechanism to facilitate the transfer and adoption of federally developed training materials and

technologies by public education and training institutions, and the private sector. One Iegislative

proposal before the 99th Congress would establish a Department of Commerce Office of Training Technology Transfer and require other agencies to appoint a training technology transfer

officer An Inventory would be made of current

and proposed Federal training technologies (defined as computer software developed for training) A mechanism for private sector involvement

in financing the conversion of training technologies to non-Federal public interest users of these

technologies IS provided.

Federal support for research and development on

Instructional technology.

In addition to continued support for research on

the next generation of instructional technologies,

Congress could earmark some funds specifically

for the development and application of instructional courseware for adult basic skills (This

funding would be m addition to basic skills R&D

now undertaken by the Department of Defense )

Support for research and evaluation on adult

Iearning.

One option would be to fund one or more national

centers for research on adult learning with a special focus on adult literacy. The centers could be

affiliated with universities.

SOURCE Off Ice of Technology Assessment

Option could be Implemented m conjunction with (b)

or (c) below Option also can be seen as facilitating

rapid adoption of new training, education, and ininstructional technologies for JTPA Title Ill projects.

and also could serve as a possible mechanism for

transfer of adult basic education and vocational education instructional technologies to industry and public education systems (See Issues Areas 3, 8, 9

and 10 )

Could be adopted in conjunction with (a) and (c),

and would also support other ‘basic skills’ Options

(See issue areas 3, 8, and 10. )

Could be adopted in conjunction with other basic

skills options.

A generic Federal technology transfer mechanism is

provided in the Stevenson-Wydler Technology lnnovahon Act of 1980 (Public Law 96-480)

Section 309 of the Adult Education Act (as amended

m 1984, Public Law 98-511) could be used to support development of courseware oriented to adults

However, 309 funds may not be set aside for this purpose unless appropriations under AEA are at least

$112 million (Funds for AEA in FY 85 amounted to

$102 million. ) The Department of Commerce IS currently considering whether a need exists for evaluation of interactive videodisc systems to deliver basic

skills as part of its effort to Improve productivity in

the labor force

While no center on adult Iearning exists, a new national center on education and employment is expected

to be established through the support of the Department of Education, this or other centers could focus

some research on adult Iearning

Legislative proposal for training technology transfer m the

99th Congress would authorize up to $3 million annually

This IS substantially less than an earner proposal m the

98th Congress, which proposed direct grants for conversion of federally developed technologies to non-Federal

uses Under the approach proposed in the 99th Congress,

the private sector–not the Federal Government–would assume the costs of modifying training technologies so that

they could be used m non-Federal applications by nonprofit organizations, (In return. for-profit organizations

making such conversions would be provided certain benefits, such as reduced fees or exclusive marketing rights. )

Outside of the Department of Defense, government funding for basic skills courseware for adults IS very modest,

probably less than $2 million, Including State activities

funded under AEA. Doubling the current level of funding

would cost about $4 million per year

If the center concept explored here IS adopted, a small

amount of funding (say $1 million by the Federal Government annually) could be used to Identify and provide partial funding for adult learning research Some funding support could be sought by the center from industry and other

government programs The center could also be assigned

responsibility for evaluation of some new courseware for

basic skills
98 • Technology and Structural Unemployment: Reemploying Displaced Adults

for interactive videodisk technologies. As research and development sponsored by the Federal Government continues, new applications

for training technologies that have promise for

use in training by private industry and by

educational institutions are being developed.

Several Federal agencies, including DOD,

NSF, and the Department of Education (ED),

support research and development on new

training and educational technologies. Currently, DOD has the largest budget for instructional technology. DOD training and education

technologies may have broad applicability to

many civilian uses, but are not specifically developed for use by the public education system

or the private sector, while technology diffusion is a major purpose of NSF and ED activities in this area. Federal R&D activities in this

area are discussed in chapter 7.

Several DOD research and development projects related to basic skills have promise for effective use in retraining projects for displaced

workers and other adults needing remedial education in order to find and hold good jobs. For

example, research projects are now underway

in the Naval Personnel Research and Development Center, the Army Research Institute, and

elsewhere within DOD that, in different ways,

explore the potential of the computer in delivering job-related basic skills instruction. Some

work also has been done within the military

on adapting interactive videodisk systems to

basic skills instruction.

DOD also has developed new training technologies and materials in such areas as maintenance, equipment repair, electronics and a

wide variety of other skill areas that are relevent to vocational education and training for

jobs in the civilian economy. Some of these

projects involve production of training lessons

for delivery on interactive videodisk systems.

These and other projects, if shown to be effective in the military, may well have potential for

conversion to civilian use in time.

Other DOD and NSF research is focused on

developing new instructional technologies with

potentially far reaching implications for delivery of education and training. Some research

is aimed at developing “authoring” systems for

courseware that could bring down the costs

and make it easier for trainers and educators

to prepare their instructional materials for use

on computers and videodisk systems. These

and many other promising areas of research

have potential for widespread application

throughout the education and training system

—including new ways to provide instruction

to adults.

Effective diffusion of Federal training technologies to non-Federal users is by no means

assured. Some of these training technologies

are developed to meet the specific internal

training needs of the sponsoring agency, and

information about the new technologies often

is not widely available. In addition, some instructional technologies developed specifically

to meet the training needs of an agency or mission may not be useful for other applications

without modification. The expense involved in

converting these instructional technologies to

civilian use may limit the pace of adoption.

One approach for addressing these issues

would be for Congress to direct the executive

branch to establish a mechanism to transfer

Federal training technology (Issue Area 11, option ha). Such a mechanism is proposed in

S.1662, a bill introduced in the 99th Congress.30

A purpose of the bill would be to facilitate the

transfer of Federal training technologies to the

private sector and State and local agencies to

support education, training, and retraining of

industrial workers, especially those working in

small businesses.

The bill defines training technology as software for computer-based instruction, interactive

videodisks, audiovisual devices, programmed

learning kits, and associated manuals and devices. It would establish an Office of Training

Technology Transfer within the Department of

Commerce’s National Technical Information

Service 3l and would direct all Federal agencies

30S. I&j2, the proposed Training Technology Transfer Ad, was

introduced Sept. 19, 1985.

311ww is also the location for another government-wide technology diffusion office, the Center for Utilization of Federal

Technology, mandated by the Stevenson-Wydler Technology Innovation Act of 1980.
Ch. 2—Policy Issues and Options ● 9 9

that use training technology to designate a

training technology transfer officer. The bill

would authorize the appropriation of $3 million in fiscal year 1987, and such sums as may

be necessary in each succeeding year to carry

out the training technology transfer program.

A function of the training technology transfer office would be to maintain a comprehensive inventory of training technologies developed under the supervision of Federal agencies.

The inventory would also provide information

about patents, copyrights, or proprietary interests affecting its conversion or transfer.

To facilitate adoption of training technologies by non-Federal users, the bill would encourage for-profit commercial users to finance

the conversion of training technologies for use

by nonprofit public interest users (schools, colleges, voc ed facilities and all agencies under

JTPA). 32 Specifically, the agency would be authorized to sell or lease training technology to

commercial users. Nonprofit users could apply to receive the technology at no cost. In

cases where the technology must be modified

or converted before it could be used effectively,

the public interest user could enter into a cooperative agreement with the commercial user.

Commercial users in such agreements, in turn,

would be offered favorable terms by the Government (e.g., waiving or reducing prices and

lease fees, or exclusive sale or lease arrangements) in return for accomplishing the conversion or modification. (Three conditions would

limit the circumstances in which such favorable terms could be granted: the cooperative

agreement must call for conversion of the technology by the commercial user to the needs of

the public interest groups, the conversion

would be performed at no charge to the public interest group, and the agreement must be

acceptable by the Director of the Office of

Training Technology Transfer.)

Another way to address this issue would be

to give training technology transfer higher visibility in the existing mechanism for technol- —.- .-. . -

aZThiS 1S in contrast to a similar training technology transfer

proposal introduced (but not enacted) in the 98th Cong., in which

the Federal Government was authorized to provide conversion

grants.

ogy diffusion set up by the Stevenson-Wydler

Technology Innovation Act of 1980 (Public

Law 96-480). Public Law 96-480 established a

generic apparatus for Federal technology diffusion which applies to most Federal laboratories. While this law has not been fully implemented, its provisions for Offices of Research

and Technology Applications within the Federal laboratories and for a Commerce Department clearinghouse for information about Federal technologies have been implemented.

While this mechanism could be employed to

provide information about Federal training

technologies, it has only occasionally been used

to transfer a federally developed training technology. 33 Thus, if Congress wishes to give training technology transfer a high degree of visibility, it may wish to establish a specific technology

diffusion mechanism.

Development of Instructional Technology for

Basic Skills

Very little of the courseware and other instructional materials now used in basic skills

programs was developed with mature adults

specifically in mind. Even some of the most

widely used courseware in adult education

projects was developed for young people in the

16- to 21-year age group. Much of the current

work on basic skills being conducted by the

training and human resource development laboratories of DOD is focused on the young recruit, not the mature adult. Moreover, instructional technologies and courseware developed

to meet the specific basic skills needs of the military are not automatically consistent with the

objectives of industry and civilian educational

institutions. For example, DOD courseware for

basic skills is often focused on the narrow objective of teaching the minimal academic skills

needed to perform specific jobs. This approach

331n one case, publicLaw 96-480 has been used as the mechanism for diffusion of a federally developed training technology.

A computer-assisted reading improvement program that was developed by the Navy has been transfered to two libraries, where

it is used in basic literacy programs for adults and high school

dropouts. ORTAS in two Army and Navy research laboratories,

and the National Commission on Libraries and Information

Science, were involved in this technology transfer project (see

ch. 7 for details).
100 Ž Technology and Structural Unemployment: Reemploying Displaced Adults

might be appropriate when used by firms to

upgrade the skill levels of employees. As an

overall objective of a local adult education

class, however, the approach of linking basic

skills instruction narrowly to a specific job is

less appropriate.

Little of the instructional technology R & D

budget of the Federal Government is aimed at

developing general basic skills instructional

materials for older, mature adults. This has not

been a high priority instructional technology

activity in the Department of Education. States

are using more funds for instructional technology development under AEA than in the past.

In fiscal year 1985, for example, states spent

$1.2 million for technology projects under Section 310 of AEA, twice the amount spent for

this purpose in fiscal year 1983. Also, the Fund

for the Improvement of postsecondary Education recently made a small grant to a community college for developing, field testing, and

validating courseware for adult basic education. The National Institute of Education (NIE)

(now part of the Office of Educational Research

and Improvement) currently supports a National Center for Educational Technology at

Harvard University. However, this center focuses on the elementary and secondary school

system, not on adult education. Total R&D expenditures by NIE for educational technology

were $12,7 million from fiscal year 1980 through

fiscal year 1985, but only one project was

clearly related to adult basic skills.

Given the contribution that improved basic

skills courseware might make to adult basic

education, additional support for R&D in instructional technologies for basic skills may be

appropriate (Issue Area 11, option b). Several

alternatives could be pursued. One possibility

would be to direct the Secretary of Education

to fund such activities through Section 309 of

AEA. This would require an annual appropriation for AEA of at least $112 million—the level

needed to trigger a 5-percent set-aside authorized under Section 309 of the law for research,

development, demonstration, dissemination,

and evaluation projects; another option would

be congressional action to remove the $112

million trigger. To avoid competition for the

limited funds available for delivery of remedial

education services under AEA, it may well be

that a separately funded mechanism would be

needed.

Some other Federal agencies in addition to

ED, could play a role in supporting such activities. For example, the Department of Commerce’s Office of productivity, Technology,

and Innovation is seeking to identify an appropriate demonstration project that would test

the effectiveness and costs and benefits of interactive videodisk systems in addressing a major human resource problem for industrial

training. It is currently sponsoring a needs

assessment study of the potential of interactive

videodisks in dealing with functional illiteracy,

If the needs assessment study shows that further work would be desirable, the Department

may need additional funding to proceed. As is

discussed in chapter 7, the interactive videodisk has substantial promise in adult basic

skills instruction, especially if courseware

appropriate to adults can be developed. Finally,

DOD and other Federal agencies from time to

time have conducted evaluations of instructional technologies. Making the results of such

evaluations widely available would be one way

to improve knowledge about instructional technology.

Support for Research and Evaluation on

Adult Learning

Besides emphasizing the transfer of training

technologies and the development of courseware for mature adults, Congress may also

wish to consider options to encourage more research on the nature of the adult learning process. Currently, little research is focused on such

questions as how to design curricula and instructional approaches so that they are appropriate for adults, how to measure functional

literacy levels among adults, and how to evaluate adult performance in educational programs. Moreover, educational researchers have

given little attention to the adult learner in undertaking evaluations of different forms of instructional technologies. These and other issues could be addressed through a research
Ch. 2—Policy Issues and Options ● 101

program focused specifically on the adult

learner” (Issue Area II, option c).

Greater attention by the research community

to the subject of adult learning could lead to

medium and long-term benefits, such as more

effective programs for basic skills, continuing

education, and worker training and retraining—all important issues in maintaining the

skill level of a work force that will be composed

of increasing numbers of older workers in the

years to come, Therefore, congress may wish

to consider measures to focus greater attention

on adults in learning research, particularly research related to basic skills. This could be

done in conjunction with, or separately from,

34A legislative proposal for such a program is contained in H.R.

3700, the proposed Higher Education Amendments Act of 1985

as reported by the House Committee on Education and Labor

on Nov. 20, 1985. Section 122 of H,R. 3700 would establish a

program of grants to eligible institutions for adult learning research and research application.

the training technology transfer and courseware development options described above.

One option would be for congress to direct

ED to charter one or more national research

centers for adult learning and basic skills. It

would also be possible to earmark some research funds for adult learning at existing research centers. For example, ED is considering several proposals for new research centers

for education, including a proposed National

Center for Education and Employment, which

would address continuing education as one of

its areas of concern. However, establishment

of one or more new national centers devoted

specifically to research on adult learning and

basic skills would focus research, and give

greater attention to the importance of this subject in the educational community. Federal

funding for the centers could be kept at a modest level—say under $1 million per year.
Chapter 3

Worker Displacement
Contents

Page

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............105

The Dimensions of Worker Displacement . . . . . . . . . . . . . . . . . . . .. ... ... ...105

Personal Costs of Displacement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..., ..110

Unemployment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. .. .. ... .. ...... .110

Lower Pay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...........115

Loss of Benefits . . . . . . . . . . . . . . . . . . . . . . . . . ...

Early Retirement . . . . . . . . . . . . . . . . . . . . . . . . . .

Relocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Mental and physical Stress . . . . . . . . . . . . . . . . .

The Workers Most Affected . . . . . . . . . . . . . . . . . .

Older Workers . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Less Skilled Workers . . . . . . . . . . . . . . . . . . . . . .

Minorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Women Workers. . . . . . . . . . . . . . . . . . . . . . . . . . .

The “Handicap of Affluence” . . . . . . . . . . . . . . .

Social costs of Displacement . . . . . . . . . . . . . . . . .

Regional and Occupational Mismatches . . . . . . .

Is There a Missing Middle . . . . . . . .

List

Table No.

3-1.

3-2.

3-3.

3-4.

3-5.

3-6.

3-7.

3-8.

3-9.

Employment Status of Displaced

Ethnic Origin, January 1984 ..

Employment Status of Displaced

January 1984..., . . . . . . . . . . . . .

Employment Status of Displaced

January 1984..... . . . . . . . . . . . .

. . . . . . . . . . .

of Tables

Workers

... 

Workers

.... . .

Workers

. . . . . . . .

by

by

by

.

... ..,.,!.,,.,,,...,,118

.. . . . . . . . . . . . . . . ..! 119

. . . . . .. . . . . . . . . . . . . 119

. . . . . . . . . . . . . . . . . . . . 120

. .... . . . . . . . . . . . . 121

. . . . . . . . . . . . 121

. . . . . . . . . . . . . . . . . . 122

.. . . . . . . . . . . . . 123

 . . . . . . . . . . . . . . . . . . 123

. . . . . .. . . . . . . ... 124

. . . . . .. .... . . . 125

... . . . . . . . . . . . . . 127

... . . . . . . 131

Page

Age, Sex, and

.107

occupation of Lost Job,

.110

industry of Lost Job ,

. . . . . . . . . . . . . . . . . . . . 111

Employment Status and Area of Residence in January 1984 of

Displaced Workers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .114

Displaced Workers, 1979-83: Weeks Without Work Since Job Loss .. ..115

Earnings of Displaced Workers Holding Full-Time Wage and

Salary Jobs in January 1984, Jobs Lost and Replacement Jobs,

by Occupation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................116

Reemployed Displaced Workers, by Selected Industry of Lost Jobs,

and Weekly Earnings on Lost Jobs and Job Held in January 1984., , ..,117

Employment Loss in Closings and Job Replacement Rates:

All Industries by Region, 1976-82 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .129

Average Hourly Earnings of production Workers unselected

Manufacturing Industries, July 1985 . . . . . . . . . . . . . . . . . . . . . . . . . . ... .130

List of Figures

Figure No, Page

3-1.

3-2.

3-3.

3-4.

Number of Workers Displaced, 1979-83 . . . . . . . . . . . . . . . . . . . . . . . .. ...108

Percentage of Displaced Workers and Percentage of Labor Force,

by Occupation.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...............109

Regional Divisions of the United States . . . . . . . . . ..................,112

Percentage of Labor Force and Percentage of Displaced Workers,

by Region, 1984 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....113
Ch. 3—Worker Displacement . 107

Table 3-1.—Employment Status of Displaced Workers by Age, Sex,

and Ethnic Origin, January 1984

Total Percentage Percentage Percentage not in

Age, sex, race (in thousands) a employed unemployed labor forceb

Total, 20 years and older . .

20-24 years . . . . . . . . . . . .

25-54 years . . . . . . . . . . . .

55-64 years . . . . . . . . . . . .

65 years and older. . . . . .

Men:

Total, 20 years and older

20-24 years . . . . . . . . . .

25-54 years . . . . . . . . . .

55-64 years . . . . . . . . . .

65 years and older. . . .

Women:

Total, 20 years and older

20-24 years . . . . . . . . . .

25-54 years . . . . . . . . . .

55-64 years . . . . . . . . . .

65 years and older. . . .

White:

Total, 20 years and older

Men . . . . . . . . . . . . . . . .

Women . . . . . . . . . . . . .

Black:

Total, 20 years and older

Men . . . . . . . . . . . . . . . .

Women . . . . . . . . . . . . .

Hispanic origin:

Total, 20 years and older

Men . . . . . . . . . . . . . . . .

Women . . . . . . . . . . . . .

5,091

342

3,808

748

191

3,328

204

2,570

461

92

1,763

138

1,239

287

99

4,397

2,913

1,484

602

358

244

282

189

93

60.1

70.4

64.9

40.8

20.8

63.6

72.2

68.2

43.6

16.8

53.4

67.8

58.0

36.3

24.6

62.6

66.1

55.8

41.8

43.9

38.8

52.5

55.2

46.3

25.5

20.2

25.4

31.8

12.1

27.1

21.7

26.8

34.1

12.9

22.5

18.0

22.6

28,0

11.3

23.4

25.1

20.2

41.0

44.7

35.6

33.7

35.5

30.0

14.4

9.4

9.6

27.4

67.1

9.2

6.1

5.0

22.3

70.3

24.2

14.2

19.4

35.7

64.1

13.9

8.8

24.1

17.1

11.4

25.6

14.1

9.3

23.6

aData refer to persons with tenure of 3 or more years in one job, who lost or left that job between January 1979 and January

1984 because of plant closings or moves, slack work, or the abolishment of their positions or shifts,

bworkers may retire from the labor force because of voluntary choice, retirement, or discouragement.

Note: Breakdown data on the ethnic groups will not sum to the corresponding totals because data for “other races” are not

presented and Hispanics may be included in both white and black populations. Thus, Hispanics may be counted more

than once in the table,

SOURCE: Paul O. Flaim and Ellen Sehgal, “DisDlaced Workers of 1979-83: How Well Have Thev Fared?” Morrthlv Labor Review.

June 1985,

1979 to 1983, since some of the job losses—

especially those due to slack work—were probably cyclical and temporary. Moreover, some

workers displaced from their jobs found new

ones quickly, with pay as good or better as on

the old job.

For many of the displaced workers, however,

the consequences of job loss were painful and

long lasting. Of the 5.1 million termed displaced by BLS, the 500,000 who had been

unemployed for half a year or more in January 1984 were clearly having difficulty adjusting to the job loss. It is uncertain how many

of the 730,000 workers who dropped out of the

labor force did so by choice, and how many

stopped looking for work out of discouragement or retired earlier than they wished. Of

approximately 2 million former full-time wage

and salary earners who reported their pay on

the jobs they lost and on new jobs they held

in January 1984, 941,000 (46 percent) had taken

pay cuts—in the case of 621,000 of these workers, large cuts of 20 percent or more. In addition, many former full-time workers (357,000

out of 2.8 million reporting, or 13 percent) took

part-time jobs and thus had a drop in their earnings. The figures are not additive, because they

are based on different numbers of respondents,

but it appears that at least half the workers who

were reemployed earned less income on the

new job than the old—and this takes no account

of the effects of inflation.

Another analysis of the survey results, done

for the Bureau of International Labor Affairs
108 ● Technology and Structural Unemployment: Reemploying Displaced Adults

of the Department of Labor, excluded displaced

workers over 61 years old but included all

others, regardless of tenure on the old job. preliminary findings from this analysis were that

29 percent of the blue-collar workers displaced

over the 5 years were unemployed as of January 1984 and 10 percent were out of the labor

force; for white-collar and service workers, 20

percent were unemployed and 12 percent were

out of the labor force. The average drop in

earnings of those reemployed, adjusted for

inflation, was 15 percent for blue-collar workers and 12 percent for white-collar and service

workers. 6

Another way at looking at the dimensions of

displacement is to consider the flow of displaced workers over time. As figure 3-1 indicates, the number of displaced workers rose

every year from 1979 through 1983. Of 11.5

million workers losing jobs over the 5 years,

1.2 million lost their jobs in 1979, and 3.3

million lost jobs in 1983. possibly, the losses

in the earlier years are understated; respondents tend to forget events that occurred in the

more distant past, so that workers surveyed in

1984 may have failed to recall some job losses

that happened in the earlier years.7 In addition,

some of the losses in the later years were no

doubt due to the severe recession that began

to lift only in 1983, especially late that year. It

is not always possible, however, to distinguish

cleanly between cyclical and structural loss of

jobs, particularly when two recessions follow

back to back, as in 1980 and from mid-1981

through part of 1983. The effects on workers

of prolonged unemployment are much the

same, whether analysts eventually conclude

‘Information provided by U.S. Department of Labor, Bureau

of international Labor Affairs, from a preliminary draft report,

Michael Podgursky and Paul Swain, “Labor Market Adjustment

and Job Displacement: Evidence From the January, 1984 Displaced Worker Survey,” August 1985, This study analyzed results of the BLS survey for all workers aged 20 to 61 who were

displaced from 1979 to 1983 due to plant closings, abolition of

a position or shift, or slack work, regardless of tenure on the

job. The analysis covered 9.5 million workers, considering

separately 5.8 million blue-collar workers and 3,8 million whitecollar and service workers.

7Paul Flaim, Chief, Division of Data Development and Users’

Services, Bureau of Labor Statistics, letter to Julie F. Gorte,

Project Director, Office of Technology Assessment, Aug. 30,

1985.

Figure 3-1.- Number of Workers Displaced, 1979-83

3.4

r

2.6

2.4

2.2 -

2.0 “

1.8

1.6 “

1.4

1.2

1.0

0.8 -

0.6 -

0.4

0.2

0.0 —

1979 1980 1981 1982

Year

Based on 11.5 million displaced workers

Based on 5.1 million displaced workers who lost jobs they had

held for 3 years

SOURCE: U.S. Department of Labor, Bureau of Labor Statistics, unpublished data

from January 1984 survey of displaced workers.

that the unemployment was cyclical or structural. The worker in any case has to find

another job. a

According to the BLS survey, displacement

hit some groups of workers, some industries,

and some regions harder than others. Younger

workers fared better than older ones in finding

new jobs, men did better than women, whites

did better than Hispanics and much better than

blacks (table 3-1). Although unemployment

.———

8For analysis and discussion of this point, see Lynn E. Browne,

“Structural Change and Dislocated Workers,” New England Economic Review, January/February 1985.
Ch. 3—Worker Displacement ● 109

rates for women were lower than for men (23

v. 27 percent), reemployment of women was

much lower (53 v. 64 percent); many women,

nearly one-quarter of those displaced, dropped

out of the labor force.

The more skilled or professional a worker,

the less likely he or she is to lose a job, and the

more likely to find a new job after displacement.

Production workers–skilled, semiskilled, and

unskilled—lost jobs in far greater proportion

to their numbers than managers, professionals,

and technicians (figure 3-2). Moreover, 75 percent of managers and professionals who lost

jobs landed on their feet, with only 17 percent

still unemployed in January 1984 (table 3-2).

Two-thirds of technicians and salesworkers

found jobs, as did more than 60 percent of

skilled blue-collar workers. Among the 1.8

million less skilled workers, including machine

operators, assemblers, and laborers, only 55

percent had jobs, and 32 percent were unemployed. Among clerical workers, who are

largely female, 54 percent were employed, 26

percent were unemployed, and 20 percent

were out of the labor force. Service workers,

also predominantly female, showed a similar

employment pattern.

Manufacturing workers experienced job

losses far out of proportion to their numbers—

2.5 million, nearly half of all the workers displaced, lost manufacturing jobs (table 3-3). This

contrasts with the 20 percent share of manufacturing jobs in total private nonagricultural

employment. Within manufacturing, the job

losses were skewed to durable goods, with the

biggest losses occurring in nonelectrical machinery (396,000), automobiles (224,000), and

primary metals (219,000), mostly steel. The

worst reemployment record was in primary

metals; only 46 percent in this group had found

jobs by January 1984, while 39 percent remained unemployed. In the nondurable goods

Figure 3-2.—Percentage of Displaced Workers and Percentage of Labor Force, by Occupation

20

15

10

5

0

SOURCE: U S Department of Labor, BLS, Employment and Earnirrgs, January 1965, and Paul O Flalm and Ellen Sehgal, 4’Diaplaced Workers of

197983: How Well Have They Fared?” Month/y Labor Ffewew, June 1965, p. 7.
110 . Technology and Structural Unemployment: Reemploying Displaced Adults

Table 3-2.-Employment Status of Displaced Workers by Occupation of Lost Job, January 1984

Total Percentage Percentage Percentage not in

Occupation of lost job (in thousands) a employed unemployed labor forceb

Total, 20 years and older . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,091 60.1 25.5 14.4

Managerial and professional . . . . . . . . . . . . . . . . . . . . . . . . . . 703 74.7 16.6 8.8

Technical, sales, and administrative support . . . . . . . . . . . . 1,162 60.6 21.1 18.3

Technicians and related support. , . . . . . . . . . . . . . . . . . . . 122 67.9 25.3 6.8

Sales occupations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 468 66.7 14.6 18.7

Administrative support, including clerical . . . . . . . . . . . . . 572 54.1 25.5 20.5

Precision production, craft, and repair. . . . . . . . . . . . . . . . . . 1,042 61.6 26.1 12.3

Mechanics and repairers . . . . . . . . . . . . . . . . . . . . . . . . . . . 261 61.3 29.3 9.4

Construction trades. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 315 63.2 23.8 13.0

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 467 60.8 25.8 13.4

Operators, fabricators, and laborers. . . . . . . . . . . . . . . . . . . . 1,823 54.6 31.6 13.7

Machine operators, assemblers, and inspectors . . . . . . . 1,144 56.0 27.5 15.6

Transportation and material moving. . . . . . . . . . . . . . . . . . 324 63.8 28.7 7.5

Handlers, equipment cleaners, helpers, and laborers . . . 355 41.8 47.6 10.6

Service occupations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 275 51.0 24.1 24.9

Farming, forestry, fishing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 b b b

‘Data refer t. ~er~ons with tenure of 3 or more years In one job, who lost or left that job between January 1979 and January 19~ because of Plant closin9s or movest

slack work, or the abolishment of their positions or shifts.

bData not shown where base is less than 75,W.

SOURCE: Paul O. Flaim and Ellen Sehgal, “Displaced Workers of 1979-83: How Well Have They Fared?” Morrth/y Labor Review, June 1985.

sector, 212,000 textile and apparel workers lost

their jobs, as did 175,000 workers in food and

kindred products. In all manufacturing, about

59 percent of the displaced workers were reemployed, while 27 percent remained out of

work.

The hardest hit geographical area, both in

absolute numbers of displaced workers and in

their relation to the size of the area labor force,

was the East North Central region—the States

of Ohio, Indiana, Michigan, Illinois, and Wisconsin (figures 3-3 and 3-4 and table 3-4). In this

region, 1.2 million workers were displaced, and

only half were reemployed by January 1984;

189,000 (16 percent of the total number displaced in the region and 47 percent of those

unemployed) had been out of work for more

than half a year. In the Middle Atlantic region

—New York, New Jersey, and Pennsylvania—

nearly 800,000 workers were laid off, but the

proportion of the work force affected w a s

smaller, and the reemployment record better.

A less publicized area with more than its share

of displaced workers was the East South Central region—Alabama, Mississippi, Kentucky,

and Tennessee. The number of workers displaced here (378,000) was smaller than in the

other two areas, but unemployment was persistent; 15 percent of the displaced workers

(over half of those still unemployed in 1984)

had been jobless for 27 weeks or more. This

was nearly as high a rate of persistent unemployment as in the East North Central region.

Altogether, the survey indicates that displacement was a substantial and enduring

problem from 1979

PERSONAL COSTS OF DISPLACEMENT

Unemployment ment insurance and

Prolonged unemployment is the most obvious family income.

of the personal costs borne by displaced work- Of the 5.1 million

to 1984.

to suffer serious losses in

adult workers displaced

ers. These people typically remain out of work between 1979 and 1984,43 percent (2.2 million)

much longer than other unemployed workers— were without work for a total of at least 27

long enough for many to run out of unemploy- weeks during the 5 years (the weeks without
Ch. 3—Worker Displacement ● 111

Table 3.3.—Employment Status of Displaced Workers by Industry of Lost Job, January 1984

Total Percentage Percentage Percentage not in

Industry of lost job (in thousands) a employed unemployed labor forceb

Total, 20 years and older . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Nonagricultural private wage and salary workers . . . . . . . .

Mining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Construction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Durable goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Lumber and wood products . . . . . . . . . . . . . . . . . . . . .

Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . .

Stone, clay, and glass . . . . . . . . . . . . . . . . . . . . . . . . . .

Primary metal industries . . . . . . . . . . . . . . . . . . . . . . .

Fabricated metal products . . . . . . . . . . . . . . . . . . . . . .

Machinery, except electrical . . . . . . . . . . . . . . . . . . . .

Electrical machinery . . . . . . . . . . . . . . . . . . . . . . . . . . .

Transportation equipment . . . . . . . . . . . . . . . . . . . . . .

Automobiles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other transportation equipment . . . . . . . . . . . . . . .

Other durable goods . . . . . . . . . . . . . . . . . . . . . . . . . . .

Nondurable goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Food and kindred products . . . . . . . . . . . . . . . . . . . . .

Textile mill products . . . . . . . . . . . . . . . . . . . . . . . . . . .

Apparel and other finished textile . . . . . . . . . . . . . . .

Paper and allied products . . . . . . . . . . . . . . . . . . . . . .

Printing and publishing . . . . . . . . . . . . . . . . . . . . . . . .

Chemical and allied products . . . . . . . . . . . . . . . . . . .

Rubber and miscellaneous plastics . . . . . . . . . . . . . .

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Transportation and public utilities . . . . . . . . . . . . . . . . . . .

Wholesale and retail trade . . . . . . . . . . . . . . . . . . . . . . . . . .

Wholesale trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Retail trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Finance, insurance, and real estate . . . . . . . . . . . . . . . . . .

Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Agricultural wage and salary workers . . . . . . . . . . . . . . . . . .

Government workers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5,091

4,700

150

401

2,483

1,675

81

65

75

219

173

396

195

354

224

130

116

808

175

80

132

60

103

110

100

49

336

732

234

498

93

506

100

248

60.1

59.8

60.4

55.0

58.5

58.2

67.9

47.5

45.7

62.0

62.3

48.2

62.6

62.9

62.1

59.1

52.5

59.8

63.O

58.0

64.0

62.8

57.9

61.4

69.6

57.6

78,5

65.0

69.9

63.3

25.5

25.8

31.0

30.7

27,4

28.9

19.1

30.5

38.7

32.2

27.4

34.5

26.0

24.0

29.4

24.2

32.6

26.2

14.2

22.9

27.3

18.3

26.8

21.6

22.0

21.5

12.4

20.5

22.9

18.7

14.4

14.4

8.6

14.3

14.1

12.9

13.0

22.0

15.6

5.8

10.3

17.3

11.4

13.1

8.5

16.7

15.0

13.9

22.8

19.1

8.7

18.8

15.3

16.9

8.4

20.9

9.1

14.5

7.2

18.0

aD&arefert~ ~erS~nS~itht~nure ~fsor more years inone]ob, who Iostor left that ]Ob between January 1979 and Januaty 19S4 becauseof plant closingsor moves,

slack work, or the abolishment of their positions or shifts.

bData not shown where base is less than 75,000.

SOURCE: Pau10 Flaim and Eilen Sehga~ “DisplacedWorkers of 1979-83: How Well

work were not necessarily continuous). Nearly

one-quarter of the workers (1.2 million) were

without work for a year or more, and the

median weeks without work was 24.1 weeks

(table 3-5).9 0f the 3.5 million displaced worksThe numbers intables3-4 and 3-5 are not comparable. Table

3-4 refers to displaced workers who were unemployed inJanuary 1984, and had been continuously unemployed for5 weeks

or less, or 27 weeks or more, at that time. Table 3-5 refers to

the total weeks without work experienced by displaced workersbetween 1979 and 1984, not necessarily continuously. Also,

the terms “unemployed” and “without work” are not synonymous, because thelatter might include aperiod ofjoblessness

when workers were not looking for work, and sowouldbe defined asout of the Iaborforce, not unemployed.

Have They Fared?” Monthly Labor Review, June 1985.

ers who received unemployment insurance,

half exhausted their benefits.

A score of studies of individual plant closings done over the past quarter of a century

supplement the information gathered in the

BLS survey of displaced workers. Wilcock and

Franke followed more than 2,600 workers in

five cities after the shutdowns of four meatpacking plants and a laundry equipment manufacturing plant in 1959 and 1960. 10 A year

IORichard C. Wi]cock and W.H, Franke, Unwanted Workers:

Permanent Layoffs and Long-Term Unemployment [New York:

Glencoe Free Press, 1963],
112 . Technology and Structural Unemployment: Reemploying Displaced Adults

Figure 3-3.-Regional Divisions of the United States

WEST NORTH CENTRAL NORTHEAST

Iowa

Texas

u

Pacific

after the layoffs, unemployment among these

displaced workers ranged from 22 to 65 percent, largely depending on the state of the local

economy. But even in the most prosperous of

the cities sampled—Peoria, Illinois, where the

community-wide unemployment rate was below

2 percent shortly after the plant closing and

was still only 3.8 percent 1 year later—22 percent of the displaced workers were out of work

a year after the layoffs. In every one of the five

cities, the unemployment rate for displaced

workers was far higher than the overall local

rate, from 6 times as high in Peoria to 12 and

13 times as high in East St. Louis, Illinois, and

Oklahoma City.

Other case studies underscore the point that

displaced workers experience unusual and prolonged unemployment. Two years after the

1956 shutdown of the Packard automobile

manufacturing company, which displaced

4,000 workers, Aiken, Ferman, and Sheppard

questioned a representative sample of 260 exPackard workers.” Only 45 percent had jobs.

Another 32 percent had found work at some

time during the 2 years, but were currently

IiMichael Aiken, Louis A, Ferman, and Harold L. Sheppard,

Economic FaiZure, Alienation, and Extremism (Ann Arbor: MI

University of Michigan Press, 1968]. These figures apply to white

workers; 4S black workers in the Packard closing were surveyed

separately.
Ch. 3—Worker Displacement ● 113

Figure 3-4.— Percentage of Labor Force and Percentage of Displaced Workers,

Percent of labor force

by Region, 1984 -

Region

Percent of displaced workers

SOURCE. U.S O@artment of Labor, Bureau of Labor Statistics, end unpublished data; and U.S. Department of Latmr, Bureau

of Labor Statistics, Employment and Eanirr@, various issues.

unemployed. (With no seniority in their new

jobs, they were the first to be laid off.) Twentythree percent had not yet found any job. At the

time of the survey, the auto industry was depressed, and Michigan’s unemployment rate

was 13. s percent. The ex-Packard workers’

unemployment rate was 55 percent. 12

More recently, Aronson and MacKersie

tracked workers who were displaced when

three large companies (Westinghouse, Brockway Motors, and GAF) closed plants in New

York State in 1976 and 1977, laying off a total

of 2,800 workers. *s Over one-fifth of the workers sampled remained without jobs for a year

‘

z

Ibid., p. 31 ff.

laRObert ArOnSOn and Robert MacKersie, Economic cOlMequences ofl%nt Shutdowns in New York State [lthaca, NY: New

York State School of Industrial and Labor Relations, Cornell

University, 1980), pp. 11-12.

or more, while local unemployment rates were

between 6 and 8 percent. 14

Hansen and Bentley reported on the closing

of four sugar beet processing plants in Utah,

Idaho, and Washington in 1979, in which approximately 3,000 workers were laid off. 15

Surveying the displaced workers 1 to 11⁄2 years

after the shutdowns, these authors found unemployment ranging from 19 to 42 percent at

the various sites. Overall, at the four sites 27

percent of the former sugar plant workers were

14The reported Unemployment rate for these displaced Wm+-

ers was higher: al percent for 1 year or longer after the layoffs.

However, the authors believe that this figure included some

workers who were in full-time training and should not have been

reported as unemployed. ibid., pp. 33-34.

ls~ary B. Hansen and Marion T. Bentley, Mobilizing cOlZlmUnjty Resources to Cope With Plant Shutdowns: A Denzonstratjon Project (Logan, UT: Business and Economic Development

Series, Utah State University, 1981).
Table 3-4.—Employment Status and Area of Residence in January 1984 of Displaced Workersa (in thousands)

Regional totals (in thousands)

New Middle East North West North South East South West South

Characteristic Total England Atlantic Central Central Atlantic Central Central Mountain Pacific

Total . . . . . . . . . . . . . . . . . . . . . . 5,091 260 794 1,206 426 664 378 484 211 667

Employment status in

January 1984:

Employed . . . . . . . . . . . . . . . . 3,058 171 428 621 276 461 209 344 148 399

Unemployed. . . . . . . . . . . . . . 1,299 48 225 400 96 117 113 85 33 181

Period of unemployment,

percentage of unemployed

workers:

Less than 5 weeks . . . . 22 b 24 21 13 29 17 25 b 18

27 weeks or more . . . . . 39 b 37 47 48 26 52 30 b 28

Not in labor force . . . . . . . . . 733 41 141 185 54 85 56 55 30 86

%lata refer to persons with tenure of 3 or more years in one job, who lost or left that job between January 1979 and January 19S4 because of plant closings or moves, sl~kWork, or the abolishment of their

positions or shifts.

bData not shown where base is 18SS than 75,000.

SOURCE: Paul O. Flaim and Ellen Sehgal, “Displaced Workers of 1979.83: How Well Have They Fared?” A.forrt/r/y Labor Review, June 19S5.
Ch. 3—Worker Displacement ● 115

Table 3-5.-Displaced Workers, 1979-83: Weeks Without Work Since Job Loss (numbers in thousands)

Weeks without work since job loss

Total a

Less than 5 5-26 27-52 More than 52 Median number of weeks

Total. . . . . . . . . . . . . . . . . . . 5,091 1,173 1,619 983 1,211 24.1

Men . . . . . . . . . . . . . . . . . . . 3,328 766 1,115 644 732 21.8

Women . . . . . . . . . . . . . . . . 1,763 407 504 339 479 26.3

aData refer t. ~er~ons with tenure of 3 or more years in one job, who lost or left that job between January 1979 and January 1984 because of Plant closin9s or moves,

slack work, or the abolishment of their positions or shifts,

SOURCE: Paul O Flaim and Ellen Sehgal, “Displaced Workers of 1979-83: How Well Have They Fared?” Monthly Labor Review, June 1985

out of work, 59 percent had jobs, and the rest

had dropped out of the labor market.

Hansen and Bentley discovered that neither

the local Employment Service nor anyone else

in the four communities had accurate information about unemployment among displaced

workers after the shutdowns. Some community

leaders greatly underestimated it. Nor were

they informed about other problems the workers faced. “This lack of reliable data hindered

[community] responses . . . and left unanswered

the pervasive and factually untrue assertions

that there were no problems of unemployment

or other needs. ”

Lower Pay

A second major cost of displacement is that

many workers who are reemployed take worse

jobs, at lower pay and lower status, than they

had in their old jobs. For example, after the

shutdowns of the meatpacking and laundry

equipment plants in 1959 and 1960, displaced

workers who found jobs settled for pay that

averaged 9to 41 percent less (depending on the

city) than the pay in their old jobs.16 Similarly,

Dorsey’s study of workers displaced in 1961 by

a Mack truck plant closing in Plainfield, New

Jersey, showed a 40-percent drop in the wages

of reemployed workers.17

The BLS survey of displaced workers indicated rather more moderate losses of earnings

(see the earlier discussion and table 3-6). As

noted above, the analysis of the BLS survey results sponsored by the Labor Department’s BuIewilcock and Franke, op. cit., p. 144.

17John W. Dorsey, “The Mack Truck Case: A Study in Unemployment,” Studies in the Economics of Income Maintenance,

Otto Eckstein (cd.) (Washington, DC: The Brookings Institution,

1967), pp. 202-203.

reau of International Labor Affairs (ILAB)

adjusted reemployment earnings for inflation,

and found average declines of 12 percent for

white-collar and service workers and over 15

percent for blue-collar workers.16 This analysis

covered only former full-time workers who

found new full-time jobs and reported their

earnings on both the old and new jobs. It did

not take into account earnings losses of former

full-time workers who were reemployed in

part-time jobs.

The occupational group that suffered the

greatest losses in earnings were blue-collar

semiskilled and unskilled workers, including

machine operators, assemblers, and laborers.

In this group, 37 percent took pay cuts of 20

percent or more (not adjusted for inflation),

compared with 26 percent of managers and

professionals and 30 percent of workers in all

occupations (table 3-6). The ILAB study, showing average reemployment earnings for occupational groups adjusted for inflation, found

that professionals had only a 3-percent drop in

earnings, while the decline for managers was

much greater—16 percent. This compares with

18-percent declines in average earnings of

unskilled and semiskilled blue-collar operatives

and laborers, but only 10 percent for skilled

blue-collar craft workers.

By industry, workers displaced from durable

goods manufacturing jobs, which are generally

well paid, had the steepest drop in earnings.

As table 3-7 shows, the 980,000 workers who

formerly worked in durable goods industries,

were then displaced, and afterward found new

jobs, reported a drop in median earnings from

lalnfOrrnation from a prdirninary draft report Of the results

(Podgursky and Swain, op. cit.) was provided to OTA by the U.S.

Department of Labor, Bureau of international Labor Affairs.
116 ● Technology and Structural Unemployment: Reemploying Displaced Adults

0
Ch. 3—Worker Displacement ● 117

Table 3-7.—Reemployed Displaced Workers, by Selected Industry of Lost Jobs, and

Weekly Earnings on Lost Job and Job Held in January 19848

Median weekly earnings

Reemployed workers

Industry of lost jobs(in thousands) Lost job Job held in January 1984

Durable goods. . . . . . . . . . . . . . 980 $344 $273

Primary metals . . . . . . . . . . . 100 407 246

Transportation equipment . . 222 399 319

Nondurable goods . . . . . . . . . . 493 264 254

Textile mill products . . . . . . 48 181 187

Apparel and other finished

textile products. . . . . . . . . 83 202 197

aData refer t. persons with terlure of 3 or more years in one job, who lost or left that job between January 1979 and January

1984 because of plant closings or moves, slack work, or the abolishment of their positions or shifts,

SOURCE: Paul O Flaim and Ellen Sehaal, “Displaced Workers of 1979-83: How Well Have They Fared?” Month/y Labor Review,

June 1985.

$344 per week on the old job to $273 per week

on the new one. By contrast, the much lower

median weekly earnings of textile mill workers did not decline after displacement but rose

slightly from $181 to $187 per week. (These

wages are in current dollars, without adjustment for inflation.)

Many displaced workers who eventually find

new jobs at wages equal to their former wages

still lose earnings over time, because they

would have received pay raises as well as

adjustments for inflation if they had been able

to keep their old jobs. Two large studies of

thousands of displaced factory workers in the

1960s and early 1970s compared the earnings

of these workers with earnings of workers who

kept their jobs in the same industries. Both

studies found substantial losses for the displaced workers in the first 2 years after layoff.

Helen, Jehn, and Trost, studying 9,479 workers from 42 plants that closed between 1969

and 1972, found that male workers in nine

industries lost, on the average, 24 percent of

expected earnings the first year after the plant

closed, and 14 percent the second year.l9 T h e

average losses for women were 27 percent the

first year and 11 percent the second. First-year

losses for some large groups of workers (female

workers in textiles and weaving, men’s clothing, and radio and television manufacturing)

were nearly 40 percent.

loArlene Helen, Christopher Jehn, and Robert P. Trost, ~arnings Losses of Workers Displaced by Plant Closings (Alexandria

VA: The Public Research Institute, 1981).

After the second year, this study found that

the earnings gap between the victims of plant

closings and workers who kept their jobs

dwindled rapidly; by the third or fourth year

the losses for displaced workers were small or

negligible. In fact, the average earnings of

displaced women workers had surpassed those

of the comparison group by the fourth year.

The study concluded that the earnings losses

for workers displaced in plant closings are not

permanent, but can be large. In each of the first

2 years after the plant closings, earnings losses

were at least as high as 20 percent for displaced

women workers in four of the nine industries,

and for men in three.

Jacobson’s earlier study found rather more

persistent earnings losses for displaced workers.

20 This study looked at the earnings experience of 1,024 prime-age male workers who lost

jobs (not necessarily due to plant closings)

between 1962 and 1966 in 11 diverse manufacturing industries. The job losers’ earnings were

compared with those of similar workers in the

same industries who kept their jobs. Two years

after layoff, the average displaced worker in

all 11 industries had lost earnings, with losses

ranging from 1 percent in television receiver

manufacturing to 47 percent in steelmaking.

ZOLouis S. Jacobson, “Earnings Losses of Workers Displaced

From Manufacturing Industries,” in U.S. Department of Labor,

The Impact of International Trade and Investment on Employment (Washington, DC: U.S. Government Printing Office, 1978);

Louis Jacobson and Janet Thomason, Earnings Loss Due to Displacement, report prepared for the U.S. Department of Labor

(Alexandria, VA: The Public Research Institute, 1979),
118 ● Technology and Structural Unemployment: Reemploying Displaced Adults

Six years afterward, several groups of workers had not yet recouped. Automobile, steel,

meatpacking, aerospace, and petroleum refining workers still had average earnings losses

of 12 to 18 percent. Generally, the losses were

greatest in better paying, strongly unionized

industries. But even workers displaced from

lower wage industries such as women’s clothing, electronics, and shoes, had only pulled

about even. Workers displaced from two industries that faced strong foreign competition in

the 1970s (television receiver manufacturing

and cotton weaving) were substantially better

off after 6 years than the workers in the comparison group.

Why the two studies had different findings

on the persistence of earnings loss is not entirely clear. Possibly, the greater prosperity of

the mid-1960s had the paradoxical effect of

exaggerating the earnings losses of the displaced workers that Jacobson studied. Those

who kept their jobs made large wage gains

relative to the job losers, whose worklives were

interrupted. In the less prosperous 1970s, the

job keepers did not do much better than the job

losers, except for the first year or two. Both

studies did find substantial losses for most

displaced workers in the first 2 years and higher

losses in high-wage unionized industries.

The Congressional Budget Office (CBO)

found that displaced workers generally experience long-term wage losses, and the greater

their seniority in the old job, the greater their

loss.

21 CBO estimated that, 2to 6 years after

displacement, workers with less than 10 years

tenure on their old jobs were earning 91 percent of the wages they would have made had

they not been displaced; workers with 10 to 20

years tenure were earning 81 percent; and

those with 20 years or more tenure were earning 75 percent.

ZIU.S. Congress, congressional Budget Office, ~is~oca~ed

Workers: issues and Federal Options (Washington: CBO, 1982),

pp. 13, 17-18. CBO staff calculated the wage losses based on unpublished results of a survey of 916 displaced workers in 13

States, from New England to California, in a variety of industries. The survey was conducted by the Institute for Policy Research and Evaluation of Pennsylvania State University in 1975.

For most displaced workers, the first few

months of job loss are cushioned by unemployment insurance; some also get supplementary

unemployment benefits or severance pay from

their former employers, and some receive

special government aid such as Trade Adjustment Assistance (TAA). Despite these cushions, the combined effects of unemployment

(often protracted unemployment) and lower

wages after reemployment depress the incomes

of displaced workers significantly. Rosen’s

recent study of blue-collar women workers laid

off from the clothing and electrical goods

industries in New England supports this conclusion. Even with a combination of unemployment insurance, TAA benefits, and reemployment within a few months, the average worker

lost 20 percent of her annual earnings in the

year following job loss.22 The Aronson-MacKersie

study of displaced workers in New York State

disclosed a similar (18-percent) drop in family

income. 23

Loss of Benefits

Loss of benefits is another serious economic

burden for the displaced worker. Older workers’ seniority is wiped out, which often means

loss of protection against future layoffs. Health

benefits usually stop; individual replacement

policies may cost more than twice as much.

Pension benefits suffer.

To many displaced workers, the loss of health

benefits is a most urgent concern. Of the 5. I

million adult workers displaced from 1979 to

1983,4 million—78 percent—were covered by

group health insurance on their old jobs. By

January 1984, only 65 percent were covered

under any plan, group or individual. Of those

who were unemployed, 60 percent had no coverage, and 40 percent of those out of the labor

force were not covered. Among black unemployed workers who were previously covered,

75 percent had no coverage at the time of the

..— ZtEllen ]. Rosen, ~O~SOfl Choice: Ernp]oyrnent and UnenIployment Among “Blue Collar” Women Workers in New England, report prepared for the U.S. Department of Labor, Employment and Training Administration (Boston, MA: Social Welfare

Research Institute, Boston College, 1982), pp. 133-134.

ZsAronson and McKersie, Op. Cit., p. 51.
Ch. 3—Worker Displacement • 119

survey. The ILAB-sponsored analysis of the

same survey examined losses of group health

insurance coverage. This study found that 70

percent of blue-collar workers had group coverage on their old jobs; of those previously covered by group insurance, 42 percent had lost

it. Of white-collar and service workers, 67

percent formerly had group coverage, and 30

percent of them had lost it.24

Pension rights of displaced workers now

have some protection by law, but are by no

means completely secure. Before 1974, when

the Federal Government began to regulate private pension plans under the Employment

Retirement Income Security Act (ERISA), displaced workers could lose all their pension

rights when a company closed its doors. This

happened to the workers displaced in the

Packard shutdown in 1956, and to most of the

Massachusetts shoe workers displaced by shutdowns in the early 1970s.25 Even under ERISA,

however, workers are still likely to lose important pension benefits in a plant closing. Most

workers cannot pick up their same pension

plans in new jobs; portable pensions that follow

the individual worker are rare, and multiemployer pension plans cover less than onequarter of all participants in private plans.

Unless displaced workers are able to continue

in their same plans on new jobs, they cannot

continue to add years of service as a base for

higher retirement pay. They also lose credit for

their years of service before 1974, when ERISA

took effect. Younger workers who were on

their way to eligibility for pensions (after a

vesting period, generally 5 to 10 years) may

have to go back to zero.26

Z41nformation provided by U.S. Department of Labor, Bureau

of International Labor Affairs, from Podgursky and Swain, op,

cit.

25Barry BluestOne and Bennet Harrison, The Deindustria]ization of America (New York: Basic Books, 1982), p. 58.

Z6U. S. Congress, congressional Budget Office, Work and

Retirement: Options for Continued Employment of CVder Workers (Washington, DC: CBO, 1982); and U.S. Department of Labor, Labor-Management Services Administration, What You

Should Know About the Pension and Welfare Law (Washington, DC: U.S. Department of Labor, 1978),

Early Retirement

The older displaced worker who has the

option of early retirement is better off than one

who remains out of work for months or who

has no choice but to take a substantial pay cut

to get another job. Many unions have bargained for early retirement as a benefit for

older workers who are permanently laid off.

Yet, for older people who are still vigorous and

eager to work at full pay, pensioning off may

be only half a loaf.

In general, for most people, retirement is

apparently a positive experience. Parries and

his associates followed a nationally representative sample of men for 15 years, from 1966

to 1981, as the men passed from middle age

into old age.27 Three-fourths of those who had

retired said that retirement met or exceeded

their expectations; 70 percent said they would

retire at the same age if they had it to do over

again. The great majority also reported they

were able to get by on their retirement incomes.

Typically, family income was three-fifths of

what it had been the last year before retirement. The major exception to the general experience of economic and psychological satisfaction with retirement was seen among men

who had retired early because of ill health.

Despite the number and richness of studies

of retirement in general, data on early retirement after displacement are scanty. Most people,

except those in ill health, retire by choice.

Whether those who retire involuntarily because

their jobs have disappeared are as satisfied as

the general run of retirees, or whether they

share the dissatisfactions of those who retired

early due to ill health, is not known.

Relocation

Ordinarily, no more than 10 percent of displaced blue-collar workers move to new communities in search of other jobs. Americans

may be mobile compared with the citizens of

other industrial democracies, but it is easy to

ZyHerbert s. parries, d d., Retirement Among American Men,

report to the U.S. Department of Labor, Employment and Training Administration (Columbus, OH: Ohio State University, Center for Human Resource Research, 1984).
120 ● Technology and Structural Unemployment: Reemploying Displaced Adults

exaggerate this characteristic, In a recent 5-

year period, 47 percent of American households moved, compared with 33 percent in Japan and 38 percent in the United Kingdom, but

a relatively small number of people who moved

frequently accounted for a large proportion of

the moves in the United States. Furthermore,

half the moves took place within local areas;

only 20 percent were across a State line.28

The leaving of friends, family, and community are serious social and psychological costs

of moving for many workers. The financial

costs can be substantial as well—e.g., selling

a house at a loss in a depressed area, finding

affordable housing in a more prosperous but

more expensive area, and, increasingly in recent years, giving up a spouse’s job in a twoincome family. Social research on why families

move suggests that most people prefer to stay

where they are. If they move, it is usually because they are pushed out by unfavorable economic conditions, not because they are lured

out by the promise of better jobs elsewhere.29

Of the displaced workers surveyed in 1984,

13.5 percent reported that they had moved to

a different city or county to look for work or

take a different job.30 Nearly one-quarter of

those surveyed were managerial, professional,

or sales workers—groups which are ordinarily

more inclined to relocate than service or blue-

-collar workers. Under special circumstances,

such as a guaranteed job with the same company at the other end, the number of blue-collar

workers deciding to relocate may rise substantially, to 20 percent or more (see chapter 6).

Mental and Physical Stress

The economic stresses of displacement take

a toll in mental and physical health. A family

with its savings wiped out after a long spell of

unemployment and with no earnings coming

in is extremely vulnerable to stress-related illZ8Marc Bend ick, “worker Mobility in Response to a Plant CIOsure, ” Managing Plant Closings and Occupational Readjustment:

An Employer’s Guidebook, Richard P. Swigart (cd,) (Washington, DC: National Center on Occupational Readjustment, Inc.,

1984), p. 40.

Z9B]uestone and Harrison, op. cit., pp. IOZ-104.

sOF]aim and Sehgal, op. cit., p. 11.

ness. Typical of prolonged unemployment are

increases in anxiety, depression, physical ailments, alcoholism, and family strife.

One of the Cleveland steelworkers dismissed

when U.S. Steel closed plants in 1984 was

acutely aware of the emotional strains ahead.

As soon as he got news of the plant closing,

he said, “I sat down with my wife and told her

I’m going to apologize in advance for the next

year. In a year I could be like too many of my

laid-off friends, single and going to AA meetings every night.”31

Cobb and Kasl found physical evidence of

stress in medical examinations of 100 blue-

-collar workers displaced in two plant closings

in the 1960s.32 The displaced workers, compared with 74 controls, had an increased incidence of ulcers, hypertension, and arthritis.

Other findings were increased levels of cholesterol, blood sugar, and uric acid, suggesting

increased risks of heart disease, diabetes, and

gout. Two workers in the group committed

suicide, and two others tried or threatened it.

The authors observed that the suicide rate was

30 times the national norm for blue-collar

workers, although the study numbers were too

small to be statistically significant. In followup

studies, Cobb and Kasl found that many of the

stress-related symptoms they observed disappeared rather quickly. Most of the workers

found new jobs, similar in pay and status to

their old jobs, without long delays; the average

duration of unemployment was 15 weeks. The

plant closings in this study occurred during the

prosperous 1960s when unemployment rates

were low.

Brenner found a statistical relationship between employment rates and various indica-

— -———-

31 Margaret Engel, “Plant’s Closing Exacts a Toll on Workers’

Spirits, ” The Washington Post, Jan. 3, 1984; see also Earl Bohn,

“Stee]-Plant Closing Stuns Johnstown, PA,” The Washington

Post, Jan. 3, 1984.

Szsidney Cobb and Stanislas V. Kasl, “Some Medical Aspects

of Unemployment, ” report prepared for the U.S. Department

of Health, Education, and Welfare, National institute for Occupational Safety and Health, 1977; Jeanne Prial Gordus and

Sean P. McAlinden, Economic Change, Physical Illness, Mental Illness, and Social Deviance, study prepared for U.S. Congress, Joint Economic Committee, Subcommittee on Economic

Goals and Intergovernmental Policy, 98th Cong., 2d sess. [Washington, DC: U.S. Government Printing Office, 1984),
Ch. 3—Worker Displacement • 121

tors of health and well-being. He reported that

the 14.3-percent rise in unemployment between

1973 and 1974 was associated with 45,936

additional deaths, including 28,510 excess

deaths from heart and vascular disease, 403

homicides, 270 suicides, and 8,416 additional

mental hospital admissions .33

The emotional costs of plant closings, though

difficult to quantify, are among the more distressing burdens borne by displaced workers.

Some feel real bereavement. Not only is their

livelihood gone, but the social center of their

lives has vanished. When the Packard plant

closed, half the displaced workers had been

with the company for a quarter century or

more. A 48-year-old machine operator who had

started at the plant when he was 19 said: “I

could have cried. It’s like losing your home.”34

33M, Harvey Brenner, Estimating the ~fff?CtS Of ~cOnOMic

Change on National Health and Social Well-Being, study prepared for the U.S. Congress, Joint Economic Committee, Subcommittee on Economic Goals and Intergovernmental Policy,

98th Cong., 2d sess. (Washington, DC: U.S. Government Printing Office, 1984), p. 3.

qqAiken, et a]., op. Cit., p. 23.

Thirty years later, textile workers in North

Carolina felt the same way. When the Old Fort

Finishing Company shut down in 1984, a 51-

year-old veteran, who had worked in the plant

since high school, said: “It hit us all like a lightning bolt, or a death in the family.”35

Wilcock and Franke, in their five-city study

of plant closings, suggested that the psychological costs may be harder to bear even than economic hardship.

Perhaps the most serious impact of shutdowns, particularly for the long-term unemployed, was a loss of confidence and a feeling

of uneasiness . . . The unemployed worker

loses his daily association with fellow workers, This loss means not only disappearance

of human relationships built up over a period

of years but also the end of a meaningful institutional relationship.36

3’Bill Petersen, “Death of a Textile Plant, ” The Washington

Post, Jan. 31, 1985.

qewi]cock and Franke, op. cit., pp. 166, 185.

THE WORKERS MOST AFFECTED

The workers hardest hit by displacement are

older workers, the less educated, the less skilled,

minorities and, in many cases, women. In

almost every survey and case study over the

past 25 years, a very strong finding is the link

between prolonged unemployment and age.37

Older Workers

When the Mack truck plant in Plainfield,

New Jersey, closed in 1961, laying off nearly

3,000 production workers, age was found to be

the most important factor in duration of unemployment. 38 A study of workers displaced

by the 1964 shutdown of the Studebaker auto

plant in South Bend, Indiana, showed the same

effect; age was more strongly linked with unsTJeanne p. CordUs, IJau] Jarley, and Louis A. Ferman, plant

Closings and Economic Dislocation (Kalamazoo, MI: The Upjohn Institute for Employment Research, 1981), p. 81.

s8Dorsey, op. cit., pp. 196-197.

employment than race, education, skill, or any

other factor examined.39

The Wilcock and Franke five-city study found

that in each city the long-term unemployment

rate (1 year or more out of work) was twice as

high for workers 55 and over as for workers

under 35.40 The study of ex-Packard workers

found that those over 60 averaged 15 months

without work, compared to 7 months for those

under 50. 41 In a typical comment, one of the

Packard workers said: “I went to fifteen places

for work. All they want is a young man. My

record at Packard didn’t mean a thing.”42

—— .-—

~J. John Palen and Frank J. Fahey, “Unemployment and Reemployment Success: An Analysis of the Studebaker Shutdown, ”

industrial and Labor Relations Review, January 1968.

qowi]cock and Franke, op. cit., p, 55.

qlAiken, et a]., op. cit., p. 31. These figures apply to white workers; minority workers were analyzed separately.

qZIbid., p. 33.
122 . Technology and Structural Unemployment: Reemploying Displaced Adults

Several studies have documented the greater

difficulties less educated workers face in finding new jobs after displacement.43 This handicap is often linked with age. Older Americans,

by and large, have fewer years of schooling

than younger ones.

Although age discrimination in hiring is now

against the law, the pattern persists. The BLS

survey of displaced workers in 1984 showed

higher unemployment rates for workers aged

55 to 64 than for younger groups, with especially high rates for older men (see table 3-1).

A recent BLS study affirmed the finding. Analyzing unemployment data from 1968 to 1981,

Rones concluded that older people in general

do not have high unemployment rates, but once

they are unemployed they “are far less likely

to find a job than are their younger counterparts. ”44 He found that the duration of unemployment rises with age, and that this link is

most pronounced for older workers who persist in looking for a job until they find one,

rather than dropping out of the labor market.

A senior BLS official recently gave several

examples of older well-qualified workers who

could not find work, even in fields where demand is strong, for example, technical writing

in the aircraft industry. said the official: “If

you’re a male over 55 looking for a job, you’re

competing with 16 to 19 year olds” for entry

level jobs such as retail sales clerk or janitor,

“Age is a terrible disease in the American job

market, ” he said.45

Some directors of retraining and reemployment programs report a different experience.

One said, “We have good luck placing older

workers, because they read and add better than

younger workers, and they know the line

employers want to hear. ” Nonetheless, even

though some employers may value older workers for their reliability and stability, others consider them harder to train for new tasks, and

perhaps less productive. An older worker may

also be perceived as a poor investment for

ttlbid., p. 87.

-Philip L. Rones, “The Labor Market Problems of Older Workers,” Monthly Labor Review, May 1983, p. 10.

4SRona]d KUtscher, Assistant Commissioner, U.S. Bureau of

Labor Statistics, interview, November 1983.

training, or too costly in health insurance and

pension benefits.46 Well-run displaced worker

programs may indeed help older workers overcome the age barrier; but the nationwide survey results and unemployment figures consistently support the conclusion that the barrier

exists.

For middle-aged as well as older workers, the

very strengths of maturity, steadiness, and long

tenure with one employer may become weaknesses in the search for a job after displacement. Workers with more seniority are likely

to be the last laid off in a declining industry,

and therefore may find themselves in a poor

job market after others have had a head start.

Many mature displaced workers have held only

one job in their lives and have no idea how to

look for a job effectively.

Mature workers usually find it much harder

to move away from a distressed area than do

younger workers. Many are strongly rooted by

family and community ties; if they own a home,

it may be unsalable; and they are perhaps less

adventurous than younger people about moving to an unfamiliar town with no assurance

of a job or a place to live. To many mature and

older displaced workers, the financial and psychological costs of moving away are simply too

high.

47

Less Skilled Workers

In general, the less skilled a worker, the

harder it is to find a new job after displacement. The BLS survey found that the occupational group with the worst reemployment

experience was the unskilled handlers, equipment cleaners, helpers, and laborers (see table

3-2). Only 42 percent of these displaced workers were employed in January 1984, while 47

percent remained unemployed; this compares

with 60 percent employment and 26 percent

46Gordus, et al., op. cit., p. 84.

47Marc Bendick, Jr,, and Judith Radlinski DeVine, “workers

Dislocated by Economic Change: Do They Need Federal Employment and Training Assistance?” Appendix B in National

Commission for Employment Policy, Seventh Annual Report:

The Federal Interest in Employment and Training (Washington,

DC: National Commission for Employment Policy, 1981), p. 204;

and Hansen and Bentley, op. cit., p. 150.
Ch. 3—Worker Displacement • 123

unemployment for the entire group of 5.1 million adult workers displaced from their jobs in

the 5 years up to 1984.

According to some case studies, semiskilled

workers have special difficulties in finding new

jobs, Years of experience in one job may give

a worker well-honed skills that are not transferable; this seems especially true of semiskilled operatives in manufacturing industries.

For example, Dorsey’s study of the dislocated

Mack truck workers discovered that skilled

workers had no trouble finding jobs; in a sample taken 10 months after the plant closed, all

the skilled workers were reemployed, compared with a 70-percent reemployment rate for

all the ex-Mack workers. 48 Unskilled workers

were next most successful in finding new jobs.

The semiskilled, the largest group laid off, were

least successful. Their speed and efficiency in

running their own particular machines in the

Mack plant were not versatile enough skills to

be valuable in new jobs; if they found work it

was at pay substantially less than their previous wages.

Minorities

As table 3-1 showed, minority workers are

at a disadvantage in finding new jobs after

displacement. Forty-one percent of black displaced workers were unemployed in January

1984. Hispanic workers, somewhat better off

at an unemployment rate of 34 percent, were

also more likely to be jobless than white displaced workers (23 percent unemployed).

Case studies of the past show there has been

little change in the pattern. Nineteen months

after the Packard company closed down in

1956, almost 40 percent of its displaced black

workers were unemployed, compared with

one-quarter of the white workers. 49 Wilcock

and Franke found in their five-city study (19wl60) that unemployment was especially severe

among blacks, even though they were younger

and about as well educated as whites; that

when the black workers found new jobs they

took bigger pay cuts than whites; and that after

48 Dorsey, Op. Cit., p. 201,

4eAiken, et a!., op. Cit., p. 133.

retraining they were less likely than whites to

find jobs using the skills they had learned.50 The

discrepancies were large. For example, in East

St. Louis 85 percent of blacks were unemployed for 6 months or more, compared with

61 percent of whites,

Women Workers

One-third of the adult workers displaced

from their jobs between 1979 and 1984 were

women. In some situations, the effects of displacement are harsher for women than for

men. In others, their experiences may simply

be different,

The BLS survey found that the unemployment rate for women workers was somewhat

below that for men, but the reemployment rate

for women was markedly lower (table 3-1). The

difference lay in the fact that many more women—24 percent for women v. 9 percent for men

—were out of the labor force at the time of the

survey. How many of these women stopped

looking for work by choice or retirement, and

how many out of discouragement, was not revealed by the survey. The period of time without a job was also longer for women than for

men, 26 v. 22 weeks (table 3-5); again, it is not

clear whether some women were out of the labor force by choice during at least part of that

time.

Case studies shed further light on women

workers’ experience of displacement. The older studies, dating from the 1960s, showed

women at a great disadvantage in rates and

duration of unemployment and in wage losses

on getting new jobs. 51 In some cases, unemployment rates among women were almost

three times the rates for men.52 In plant closings where both men and women were laid off,

and both had made about the same wages

before layoff, reemployment wages were typically one-third lower for the women than for

men.

53

Sowilcock and Franke, op. cit., Pp. 53-54.

slGordus, et al,, op. cit,, pp. 89-90.

sZHerbefi Hammerman, “Five Case Studies of Displaced Workers,” Monthly Labor Review, June 1964, pp. 663-690.

Sswilcock and Franke, op. cit., pp. 144-145.
124 ● Technology and Structural Unemployment: Reemploying Displaced Adults

Recent experience is somewhat more mixed.

A study of men and women workers who lost

their jobs when a Pennsylvania thermostat control factory closed in 1981 found a continued

disadvantage for women.

54 Both men and

women had very high unemployment rates and

great earnings losses, but the women were in

worse straits. Fifteen months after the plant

closed, 42 percent of the men were out of work,

and 59 percent of the women. The reemployed

men were making only 40 percent, and the

women 30 percent, of their former earnings,

which had been at the relatively low wage of

$6 per hour. Formerly full-time workers, many

of them worked only sporadically or part time

after displacement, which accounts in part for

their very low earnings.

Rosen’s study of New England blue-collar

women displaced in 1979 showed rather different results. Five to nine months after they

were laid off from their factory jobs (mainly

in the apparel and electrical goods industries),

59 percent of the women were back at work,

24 percent were unemployed, 2 percent were

“discouraged” and had given up looking for

work, and 13 percent were out of the labor

force. 55 Wage reductions for the reemployed

workers were minor, about 2 percent. This

small loss compares favorably with the earnings losses of male factory workers reported

in other case studies.

Behind this comparison, however, lie some

revealing figures. While their wage losses on

the new jobs were slight, these women did not

have a great deal to lose; their wages before layoff averaged $4.36 per hour, while the average

U.S. manufacturing wage in 1979 was $6.70

per hour. The higher a woman’s wages before

layoff, the greater was her wage loss. This

study also indicated that repeated layoffs erode

earning power; the best predictor of low wages

——

54 Kay A. Snyder and Thomas C. Nowak, “Sex Differences in

the Impact of a Plant Shutdown: The Case of Robertshaw Controls, ” Sociology Toward the Year ZOOO: The Social Galaxy,

Charles Babbitt (cd.) (Harrisburg, PA: Pennsylvania Sociological Society, 1983), pp. 228-239.

MRosen, op. cit., p. 93; see also Ellen 1. Rosen, “Men and

Women: The Dilemmas of Unemployment,” report prepared for

the U.S. Department of Labor, Employment and Training

Administration [Boston, MA: Boston University and Nichols College, Center for Applied Social Science, n.d.).

for the women job losers was the number of

layoffs they had experienced in the past 10

years.

Despite their low wages, the women Rosen

studied were earning more than pin money.

Over 40 percent were the primary earners in

their families, and of these, two-thirds were

unmarried heads of households. Even the

married women whose husbands had full-time

jobs contributed, on average, more than onethird of their family incomes.

For the whole group, incomes dropped an

average of 20 percent the year of the job loss,

mainly because of the lost time at work; this

was a net loss, taking into account unemployment insurance and transfer payments such as

TAA benefits. One-third of those who were

single heads of families dropped below the poverty line during the year they lost their jobs.

The “Handicap of Affluence”

Displacement is a leveling experience. The

workers who lose the most are generally those

who held the best jobs, with good pay, generous

benefits, and job security in strongly unionized

industries. 56 To “affluent” displaced workers,

such as former steel and auto workers, the

wages in available new jobs may look far less

than adequate to meet their obligations.

A reemployment center in the Buffalo area,

for example, was able to help 523 of 798 people

enrolled in the program find jobs between

September 1982 and September 1983; about

half those enrolled were displaced steelworkers.

57 The center’s 66-percent placement rate

was more than respectable in this hard-hit steel,

auto, and chemicals manufacturing region,

where unemployment reached 15.2 percent in

November 1982. However, the workers who

got new jobs had to take very substantial pay

cuts, dropping on average from $10.00 per hour

SoJacobson’s stU&es of displacement in several manufacturing industries, based on I percent of Social Security records,

confirm this observation, See Jacobson, op. cit.; and Jacobson

and Thomason, op. cit.

S7L. M. Wright, Jr., “Case Study: Buffalo Worker Reemployment

Center,” report prepared for the U.S. Department of Labor, Employment and Training Administration (Princeton, NJ: Mathematical Policy Research, Inc., 1985), p. 50.
Ch. 3—Worker Displacement ● 125

to $6.62 per hour, or 34 percent below the previous average wage for these workers and 24

percent below the national average manufacturing wage, then $8.73 per hour.

In other places, in better economic times, the

decline in wages has been less severe. For instance, the Downriver Community Conference,

a reemployment center near Detroit, placed 72

percent of 700 participating workers (displaced

from the auto supply industry) between July

1980 and September 1981, 56 On average, these

workers took a pay cut of about $1 per hour,

dropping from a wage of $9.29 per hour before

layoff to $8.20 on the new job. (In real terms

the drop was greater, since the inflation rate

was then about 12 percent,) The experience of

comparable workers displaced from similar

plants indicated that, without the assistance of

the Downriver program, reemployment wages

would have ranged from $5.50 to $6.50 per

hour. The average manufacturing wage at the

time was $7.50.

Some displaced workers hold out for a long

time, getting by on savings, unemployment

insurance, and earnings of other family

members, before they settle for a job that means

a steep drop in earnings. For workers who have

been through layoffs in the past and then have

been recalled, hope that the plant will reopen

SOD. Alton Smith, Jane Kulik, with Ernst W. Stromsdorfer, The

Downriver Community Conference Economic Readjustment

Activity Program: Impact Findings From the First Phase of Operations, report prepared for the U.S. Department of Labor, Employment and Training Administration (Cambridge, MA: Abt

Associates, Inc., 1983), pp. 1-8.

dies hard. This resistance to taking a lesser job

has been termed a “handicap of affluence” and

an impediment to reemployment. “The more

attractive the previous job, the more tempted

a dislocated worker is to remain unemployed

waiting for even a remote chance to return to

that job.”59

The question may arise whether a sharp drop

in the earnings of a formerly well-paid worker,

unfortunate as that may be for the individual

involved, should rightly be considered a problem for public policy. Framed this way, however, the question misses the point that it is

unjust and unwise to expect displaced workers to bear the whole burden of displacement.

For a mature, experienced worker to have to

start over at the bottom of the economic ladder

is definitely a heavy burden. This does not

imply that displaced workers have a lifetime

right to the wages they were earning before

displacement, or that society must offer such

a guarantee. The point is rather that many

displaced workers need assistance in searching

for, or retraining for, a new job with reasonable pay and prospects for security or advancement. It is in society’s interest as much as the

individual’s to make sure that assistance is

forthcoming. Failure to do so invites resistance

to the technological advance and other changes

that keep U.S. industry productive and competitive.

soBendiCk andDevine, op. cit., p. 204; see also Linda LeGrande,

U.S. Congress, Congressional Research Service, “Dislocated

Workers: An Analysis, ” 1983, p. 22.

SOCIAL COSTS OF DISPLACEMENT

Whole communities, or whole regions, can workers themselves; the second wave, supbe badly hurt by the loss of an important plant pliers for the plant that closed down and shops

or the decline of an industry. Many old New that the workers patronized; the third wave, the

England mill towns had not recovered a gen- community, which once collected taxes from

eration after losing textile plants to the South the plant, the workers, and the suppliers and

in the 1940s and 1950S. The Appalachian coal shops they kept in business. 60 often these

region, never prosperous, was crushed economically by the loss of 300,000 coal mining

jobs from 1948 to 1968. %uppliers and their employees may in some cases suffer displacement effects before the primary industry. Companies unPlant closings and massive layoffs have rip- der competitive pressure may try to cut costs by buying parts

and subassemblies overseas or perhaps from new domestic supple effects, The first wave hits the displaced pliers in low-wage areas,
126 ● Technology and Structural Unemployment: Reemploying Displaced Adults

communities are pressed to provide extra

social services and welfare from a shrunken

tax base.

If the local economy is expanding, the ripple

effects of layoffs may dissipate quickly. Indeed,

research on business closures indicates that the

most prosperous parts of the country have the

highest rates of closings–and of employment

loss—but also have the highest rates of employment gains, which more than compensate for

the job losses. 61 It is in areas of economic

stagnation or decline that plant closings and

mass layoffs can deliver a crippling blow to

communities.

Systematic studies of the effects of plant

closings and mass layoffs on communities are

not available, but useful information can be

found in a handful of individual case studies.

Community effects are perhaps most clearly

evident in an isolated company town. Consider, for example, the case of Anaconda,

Montana. 62 For 75 years, the economic base of

this town of 12,000 people was the Anaconda

Copper and Mining Company’s smelter. It

directly employed 1,500 people, 1,000 from

Anaconda and 500 from neighboring Great

Falls. In 1980, Atlantic Richfield, which had

purchased Anaconda Copper and Mining a

few years earlier, closed down the smelter. Ultimately, the loss of the smelter and the ripple

effects from its closing meant the loss of $42

million in annual payroll in a county where the

payroll from all sources was only $51 million.

In the immediate aftermath, local businesses

were as much affected as the smelter workers.

The town’s Chevrolet dealer told a Los Angeles

Times reporter: “The businessmen are getting

the brunt of it right now. They gave [the smelter

workers] $3,500 in severance pay—l got caught

with $500,000 in cars.” Thirty-six businesses

OICandee Harris, “The Magnitude of Job LOSS From Plant closings and the Generation of Replacement Jobs: Some Recent Evidence,” The Annals of the American Academy of Political and

Social Science, vol. 475, September 1984,

6ZBill Curry, “smelter Closing Gives Cash Registers a HO11OW

Ring,” Los AngeJes Times, Jan. 11, 1981; see also Curry, “Town

Loses Its Payroll But Finds a Will to Survive, ” Los Angeles

Times, Apr. 5, 1981, both cited in Bluestone and Harrison, The

Deindustrialization of America, op. cit., pp. 70-71.

in the town laid off 20 percent of their employees, and one-fourth anticipated further layoffs.

Some owners, who had expected their businesses to give them a comfortable retirement,

went bankrupt. As for the smelter workers, a

few took early retirement. Some left town, selling their houses for little more than half the

purchase price.

Emotional trauma was roughly indicated by

a few statistics. Visits to the Alcohol Service

Center increased 52 percent, the number of

people seeking drug counseling increased 50

percent, and admissions to the Mental Health

Center rose 62 percent.

Ripple effects can be very extensive when

industries that are central to a region’s economy undergo decline. The fortunes of the auto

industry, for instance, affect a wide network

of other industries. The U.S. Department of Labor estimates that for every 100 jobs lost in the

motor vehicle industry, another 105 jobs are

lost in the direct supplier network, which

includes steel, ferrous castings, aluminum,

synthetic rubber, glass, plastics, and textiles.

Bluestone and Harrison estimate that still

another 95 jobs may be lost in more remote

industries (e.g., iron ore mining) and in transportation, warehousing, and wholesale and

retail trade. Altogether, then, if 1,000 auto

workers are laid off permanently, as many as

another 2,000 jobs might be lost. 63

Such estimates must be taken with caution,

however. The multipliers used for estimating

ripple effects (positive or negative) of business

expansions and contractions are derived from

input-output models. The models, though highly

complex, still tend to simplify the real world.

Their quantitative projections may be quite off

the mark in specific cases. For example, when

the Lykes Corporation shut down the Campbell

Works plant of Youngstown Sheet and Tube

in September 1977, various studies by local and

State agencies projected that job losses in the

Youngstown area would eventually affect 4,000

8~BlUeStOne and Harrison, op. cit., p. 74. These calculations

were made for jobs lost because of lowered production. The ratio might be different for jobs lost because of increased productivity.
Ch. 3—Worker Displacement . 127

to 14,000 additional workers.64 Many people

feared that the Campbell Works closing would

deal a mortal blow to the community.

What actually happened was that employment in the Youngstown area declined only

slightly in the year after the closing. The national economy was booming, with a 4.1 percent increase for the year in nonagricultural

jobs; the State of Ohio enjoyed a modest share

in the boom, with a 2.1-percent expansion in

jobs; and the decrease of jobs in Youngstown

was small (1.4 percent). In this prosperous year,

the local General Motors plant raised production, making up some of the loss in manufacturing jobs for the plant closing, and employment in retail trade rose. Two more local

factors also helped to expand retail jobs: the

laid-off steelworkers got liberal TAA benefits,

and Youngstown grew as a retail center for

neighboring counties in Ohio and Pennsylvania.

Nonetheless, the apprehension that the Campbell works closing would hurt Youngstown was

not mistaken. Buss and Redburn, studying the

area 2 years afterwards, concluded that if the

plant had not shut down, Youngstown would

~Terry F. Buss and F. Stevens Redburn, Shutdown at Youngstown: Public Policy for Mass Unemployment (Albany, NY: State

University of New York Press, 1983).

have shared fully in the national prosperity

rather than struggling to stay even. They estimated that nonagricultural employment would

have risen 2.5 to 4 percent instead of declining

1.4 percent. Moreover, the local economy suffered a loss in purchasing power; the retail jobs

that supplanted manufacturing jobs in 1977

and 1978 paid less than $5 per hour on the

average, compared to the typical manufacturing wage of $10 per hour.65 The town of Campbell, where the plant was located, experienced

a drastic shrinkage of its tax base. Even though

property taxes were raised, the town still had

to borrow $750,000 from the State to keep the

schoolrooms open. 66

In January 1980, Youngstown’s weakened

economy received another shock when U.S.

Steel closed its Youngstown works, laying off

13,000 workers. Five and one-half years later,

Youngstown had not recovered. In July 1985,

the national unemployment rate (civilian, not

seasonally adjusted) was 7.3 percent; for Ohio,

it was 9.3 percent; and for the Youngstown

metropolitan area, 11.3 percent.

e51bido

~Ohio AFL-CIO, “Plant Closings in Campbell Force Higher

Taxes, ” News and Views, Feb. 29, 1980, cited in Bluestone and

Harrison, op. cit., pp. 73-74.

REGIONAL AND OCCUPATIONAL MISMATCHES

The Youngstown experience, indeed the eco- most did not. The consequence of the regional

nomic state of much of the Northeast-Midwest shifts in manufacturing jobs was persistent

frostbelt, highlights the importance of local and double-digit unemployment in much of the inregional effects in the displacement of work- dustrial Northeast.

ers. While aggregate U.S. employment in the

manufacturing industries was roughly unchanged from 1973 to 1980 (at slightly over 20

million workers),67 manufacturing jobs dropped

10 to 17 percent in New York, Ohio, and Michigan. New York and Ohio each lost over 150,000

manufacturing jobs; Michigan lost more than

200,000. While some workers relocated to

Texas, California, and other growing areas,

Nationwide data on plant closings are limited

and unsatisfactory (see box 3-A), but the best

available information shows a similar but more

complex regional picture. It appears that regions winning jobs between 1976 and 1982 had

higher rates of job loss from dissolution of

businesses than regions where unemployment

rose, but the winning regions more than compensated with exceptionally high rates of job

WU.S. manufacturing employment dropped from 21.0 million generation. The converse was-also true. ‘As

in 1979 to 19.4 million in August 1985. table 3-8 shows, the Middle Atlantic and East
128 • Technology and Structural Unemployment: Reemploying Displaced Adults
Ch. 3—Worker Displacement Ž 129

down over along time before officially and permanently closing, so that the figures cited for average

number of workers displaced are most likely too low. -

Nationwide estimates of plant closings and displaced workers derived from proxy data are much

higher than those based on press accounts. Several analysts have based plant-closing estimates on

Dun & Bradstreet’s market indicator files, which are kept current for over 5 million business establishments (defined as the specific locations where business activities take place). By following changes

in the files from year to year, researchers can track the number of business establishments that have

opened, closed, or relocated (assuming the establishment keeps its same name and file number);

changes in the number of employees at each establishment can also be followed.

The Dun & Bradstreet data are not compiled for the purpose of counting plant closings, and present

problems when used for that purpose. For example, multi-establishment firms do not always list all

their branches or subsidiaries. If one of these shuts down, the event is not recorded as a plant closeing. On the other hand, a merger, acquisition or divestiture of a particular establishment could be

recorded as a plant closing, when all that actually happened was a change in plant management.

One objective of the GAO study of plant closings is to check the accuracy of the Dun & Bradstreet

data as a proxy for a direct count.

Following Dun & Bradstreet data from 1976 to 1982, a recent study sponsored by the U.S. Small

Business Administration concluded that 24.8 million jobs were lost during the period in business

dissolutions. 4 Some 16.2 million jobs were lost due to “plant closings,” defined as dissolutions of

establishments in firms with 100 or more employees. The remainder, 8 .6 million jobs lost in dissolutions of smaller firms or branches of firms, was considered "turnover,” These figures reflect only

jobs lost, not jobs created during the same time. According to the same study, job creation exceeded

job losses throughout the period, though just barely in the 2 years from 1980 to 1982.

Wandee Harris, ‘“The Magnitude of Tob f.ma F~~m Plani @oatigs and the Gmaration of Re@aee~ent Jobs: Some Recent Evidence,” The

Annals of the Am@rkao Academy of Political and SOCM Science, vol. 47S, Saptembor 19S4.

Table 3-8.—Employment Loss in Closings and Job Replacement Rates:

All Industries by Region, 1976-82

Employment loss in closingsa

Region Number (in thousands) Percent b Replacement ratesc

New England . . . . . . . . . . . 872 28.8 1.49

Middle Atlantic . . . . . . . . . 2,696 29.6 1.17

East North Central . . . . . . 3,077 29.7 1.23

West North Central . . . . . . 958 29.2 1.68

South Atlantic . . . . . . . . . . 2,639 35.9 1.51

East South Central . . . . . . 947 34.0 1.29

West South Central. . . . . . 1,808 38.0 1.93

Mountain. . . . . . . . . . . . . . . 688 40.2 2.15

Pacific . . . . . . . . . . . . . . . . . 2,512 41.2 1.70

U.S. total . . . . . . . . . . . . . 16,177 33.4 1.50

%Iosings in firms with 100 or more employees.

bEmp\oyment Ios3 as a percentage of 1976 employment.

cThe replacement rate measures the number of jobs created for each job iOSt in CfOSingS.

SOURCE Candee Harris, “The Magnitude of Job Loss From Plant Closings and the Generation of Replacement Jobs: Some

Recent Evidence, ” The Annals of the American Academy of Po/itica/ and Social Sc/ence, vol. 475, September 1964.
130 ● Technology and Structural Unemployment: Reemploying Displaced Adults

North Central regions lost jobs due to plant

closings at rates lower than the national average, but their job replacement rates were even

lower. The East South Central region, where

the job loss rate was a little above average, also

had a poor record in job creation. All three of

these regions had large numbers of displaced

workers in 1984.

Another source of mismatch between jobless

workers and jobs is the shift of manufacturing

jobs from the older smokestack industries into

faster growing high-technology industries

where wages for production (blue-collar) workers are usually lower than the average manufacturing wage.68 Many of the jobs that are

most visibly declining—e.g., in steelmaking—

pay considerably more than the average manufacturing wage. There are other differences

besides the wage gap. Not surprisingly, the

proportion of women and nonunionized workers is greater in production jobs in the newer,

faster growing high-technology industries.

Altogether, the new jobs being created in manufacturing often do not fit very well with those

that are disappearing.

Table 3-9 compares wages for production

workers in five manufacturing industries in

which overall employment grew 24 percent

between 1979 and 1984 with wages in five

industries where employment shrank 24 percent during the same time, and is projected to

decline further by 1995. In the fast growth

industries, wages in July 1985 averaged $8.19

to $10.06 per hour; in the slower growth or

declining industries, $10.90 to $13.82 per hour.

‘6aThe high-technology sector is defined in various Ways. llepending on the definition, employment in the sector varied from

2,5 to 12,6 million in 1980, and increased by 20 to 40 percent

from 1972 to 1982. See ch. 4 for further discussion.

The average manufacturing wage at that time

was $9.52 per hour.

High-technology manufacturing industries

probably will create no more than a minor

share of the new jobs in the U.S. economy in

the next 10 or 20 years. The greatest growth

will almost certainly come, as it has for the last

40 years, in the service-producing sector of our

economy, which now accounts for 72 percent

of all U.S. jobs. The shift to the service sector

has recently accelerated. From 1960 to 1979,

the United States gained some 6 million jobs

in the goods-producing sector, of which 4.2

million were in manufacturing; in the same

period 29.6 million jobs were added in the

service-producing sector.69 From 1979 to mid1985, the Nation lost 1.6 million jobs in manufacturing, while adding 9.6 million in the service industries. Considering that half the 5.1

million workers displaced from their jobs since

1979 were in manufacturing, the extent of the

mismatch between the old jobs and the new

jobs is evident.

Service sector jobs are not always inferior

jobs.70 Many low-paying service jobs have re-

.—60Emp]oyment and Earnings, September 1985, table B-1. The

jobs are those of employees on nonagricultural payrolls.

TOThe broadest definition of service sector includes everything

but the goods-producing industries (agriculture, mining, construction, and manufacturing). It encompasses transportation,

communication, public utilities, wholesale and retail trade, finance, insurance, real estate, other personal and business services, and government. Analyses of jobs in the service sector are

usually based on data that classify jobs by industry. Another way

of looking at jobs is by occupational category; e.g., “clerical

worker, ” which is essentially the same job in a bank as in an

auto assembly plant. The occupational category “service worker”

must be distinguished from “workers in the service industries. ”

The occupational category refers to workers such as janitors,

cooks, waiters, hotel maids, food service workers, and health

service workers. Most of these workers are employed in the

service sector, but some are in other sectors such as manufacturing.

Table 3=9.-Average Hourly Earnings of Production Workers in Selected Manufacturing industries, July 1985°

Average hourly Average hourly

Slow growth industries 1979-95 earnings Fast growth industries 1979-95 earnings

Blast furnaces and basic steel products . . $13.51 Office and computing machines . . . . . . . . . $9.52

Primary nonferrous metals . . . . . . . . . . . . . . 13.82 Electronic components and accessories . . 8.28

Nonferrous rolling and drawing . . . . . . . . . . 11.10 Engineering and scientific instruments . . . 10.06

Motor vehicles and equipment . . . . . . . . . . 13.37 Measuring and controlling devices . . . . . . . 8.93

Farm machinery and equipment . . . . . . . . . 10.90 Medical instruments and supplies . . . . . . . 8.19

agenef]ts are not included in earnings figureS.

SOURCE: U.S. Department of Labor, Bureau of Labor Statistics, Employment and Earnings, September 1985, table C-2.
Ch. 3—Worker Displacement • 131

placed still lower paying agricultural and laborer jobs. Also, not all manufacturing jobs are

good jobs. For example, the average wage for

production workers in apparel in mid-1985 was

$5.69 per hour, compared with $9.52 for all

manufacturing and $8.54 for the entire private

sector. Moreover, the service sector is broad

enough to include occupations from corporation lawyer to restaurant dishwasher. Some

parts of the service sector—e.g., transportation

and public utilities—pay above-average wages

to nonsupervisory workers ($11.38 per hour in

1985). The categories with most employees,

however, pay below-average wages (e.g., $5.92

per hour in retail trade and $7.86 per hour in

the catchall “services” category). Overall,

service sector wages—$7.73 per hour in 1985

for nonsupervisory workers—are substantially

lower than the $9.52 average wage for production workers in manufacturing.71

TIData o~wages of productlc)n workers in manufacturing and

service industries are from Employment and Earnings, September 1985. The overall service sector wage is a weighted average, calculated from earnings and employment in the various

categories of service industries,

According to the Bureau of Labor Statistics,

the 10 occupations expected to produce the

most new jobs by 1995 are quite traditional

ones, all in the service sector, that already

account for millions of jobs in our economy .72

For at least 5 of the top 10, pay and prestige

are low: janitors and cleaners, cashiers, waiters

and waitresses, nursing aides and orderlies,

and retail salespersons.. Another 2 of the 10—

registered nurses and kindergarten and elementary teachers—are jobs held principally by

women where mediocre pay often does not

match the demanding responsibilities. The

other 3 in the top lo—truck drivers, wholesale

trade salesworkers, and accountants and auditors–are relatively well-paid jobs often held

by men. Only one of these three (truck drivers)

is a blue-collar job.73

nu. s. Department of Labor, Bureau of Labor Statistics, “Nine

Out of 10 New Jobs Projected to be in Service Industries, ” news

release, USDL 85-478, Nov. 7, 1985.

Tssee Ch, 4 for further discussion of the jobs being created in

the U.S. economy, and the differences in character and pay from

the jobs that are disappearing in the restructuring of American

industry.

IS THERE A MISSING MIDDLE?

The changing character of jobs in the U.S.

economy is one element of the argument, made

by some analysts, that the American middle

class is eroding.74 Displacement of well-paid

blue-collar workers from the older, unionized

smokestack industries, and replacement of

those jobs by jobs paying considerably less, are

seen as causes of the “declining middle.” Other

analysts see no evidence of any such long-term

trend, and believe that if earnings or family

incomes did show a tendency to polarize during the last 10 or 15 years (a point on which

there is some disagreement), the main factors

were demographic and temporary. 75

The evidence on whether there has been a

shift in earnings away from the middle is conflicting. Lawrence, for example, found that fulltime workers earning a “middle-income” wage

of $13,000 to $26,000 (in 1983 dollars) constituted 50 percent of the work force in 1969

but dropped to 46 percent in 1983, with 3 percent falling into the lower class group and 1

percent rising into the upper class group. 76

T4See, for example, Barry Bluestone, ‘‘1 ndustrial Dislocation

and Its Implications for Public Policy, ” paper prepared for the

Third Annual Policy Forum on Employability Development,

Washington, DC, 1983; Bob Kuttner, “The Declining Middle,”

The Atlantic Monthly, July 1983; Thomas M, Stanback, Jr,,

“Work Force Trends,” in National Academy of Engineering, The

Long Term Impact of Technology on Employment and Unemployment (Washington, DC: National Academy Press, 1983);

Lester Thurow, “The Disappearance of the Middle Class,” The

New York Times, Feb. 5, 1984.

TSSee, for example, Sar Levitan and Peter E, Carlson, “MiddleClass Shrinkage?” Across the Board, October 1984; “The Myth

of the Vanishing Middle Class, ” Business Week, July 9, 1984,

pp. 83-86; Robert J. Samuelson, “Middle-Class Media Myth,” National )ournal, Dec. 31, 1983. For a summary of both views, see

Victor F. Zonana, “Is the U.S. Middle Class Shrinking Alarmingly? Economists Are Split, ” Wa]] Street Journal, June 20, 1984.

7ERobert Z. Lawrence, “Sectoral Shifts and the Size of the Middle Class,” The Brookings Review, Fall 1984. The drop in middle

class earnings was confined to males; 56 percent of male work-
132 ● Technology and Structural Unemployment: Reemploying Displaced Adults

Thurow found the same tendency in household

incomes. If a middle-class household is defined

as one whose income is between 75 and 125

percent of the median ($15,000 to $25,000 in

1982), the middle class shrank from 28.2 percent of households in 1967 to 23.7 percent in

1982. About half of those households changing

status fell below the middle class, and half rose

above it.77 Rosenthal, analyzing pay data for

416 occupations, found no evidence of workers dropping from the middle. He found virtually the same proportion of workers in middle-income occupations (paying about $14,200

to $20,000 in 1982) in 1982 as in 1973.78 Some

of the disagreements in findings among these

authors are due to differences in definition of

the middle class, or differences in the time

period chosen for analysis.

Those who are skeptical that the middle class

is shrinking attribute any perceived declines

in earnings or family incomes to the entrance

of millions of baby boomers into the work force

in recent years, thus swelling the ranks of lowincome households. Another explanation of

apparent shifts in household incomes is the

ers were in the middle range in 1969, 47 percent in 1982, with

most of the excess dropping into the lower earnings group. Female workers with middle-class earnings increased from 39 to

44 percent. Lawrence attributed most of the drop in the male

worker middle class to entrance of the inexperienced baby boom

generation into the job market.

TTLester C, Thurow, Op. cit.

z8Nea] Rosenthal, “The Shrinking Middle Class: Myth or Reality?” Monthly Labor Review, March 1985.

increasing number of women in the work

force. While women with working husbands

and more education boost family incomes,

those who are less educated or are single

parents add to the number of low-income

families.

Some analysts point to several factors that

together may be responsible for a decline in the

middle class since the end of the 1960s: higher

unemployment, more single-person households,

more two-earner families, the baby boom effect, and the changing industrial and job structure of the economy.79 These analysts do not

expect the shrinkage of the middle class to

continue, but neither do they think the losses

of the past few years will be reversed.

So far, the thesis of the declining middle may

be judged not proven (to borrow the noncommittal verdict available to Scottish juries). If the

thesis ultimately proves correct, if the technological gains that raise productivity and benefit society, but displace workers, do not come

back to enrich and enlarge a middle class of

well-paid workers, American society as a

whole will be the loser. The healthy market that

supports American business could decline, and

the optimism and sense of fairness which are

the basis for social harmony could be seriously

damaged.

TsMCKinley L. B}aCkbUrn and David E. Bloom, “What Is Happening to the Middle Class?” American Demographics, January 1985.
Chapter 4

Employment and Worker Displacement
Contents

Page

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..........................135

Causes of Displacement: Technological Change... . ...................137

Causes of Displacement: International Competition . ...................141

Causes of Displacement: Changing Consumption. . ....................142

Unemployment and Displacement . . . . . . . . . . . . . . . . . . . . . . . .............143

Employment Trends: The United States in the World Context . .........144

Reasons for Differences in Employment Growth . ....................146

Employment Trends in the United States . .........................153

List of Tables

Table No. Page

4-1. Components of the Growth in Employees on Nonagricultural

Payrolls, 1970-84 . . . . . . . . . . . . . . . . . . . . . . . . . . ......................154

4-2. Occupational Distribution of Selected Industries . ..............,....157

List of Figures

Figure No. Page

4-1.

4-2,

4-3.

4-4,

4-5.

4-6.

4-7.

4-8.

Labor Force and Employment in the United States, 1940-84 , .........137

U.S. Unemployment, Civilian Noninstitutional Population

16 Years and Over, 1951-84 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .......138

Civilian Labor Force and Employment in Selected Countries,

Percent Change 1973-84 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........145

Labor Force Participation Rates for Western Industrialized

Nations, 1983 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............147

Employment in the U.S. Steel Industry, 1950-85 .................,...149

Hourly Compensation for Manufacturing Production in

Selected Nations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............151

Multilateral Trade-Weighted Value of the U.S. Dollar, 1975-84 . .......152

Rate of Change in Private Nonagricultural Employment,

July 1981 to May 1984. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .......156
Ch. 4—Employment and Worker Displacement • 137

Figure 4-1 .–Labor Force and Employment in the United States, 1940=84

1940 1945 1950 1955 1960 1965 1970 1975 1980

Civilian labor force ---–---– Employmen t

SOURCE: U.S. Department of Labor, Bureau of Labor Statistics, Employment and Earnings, various issues

crease it in hard times when jobs are scarce

and adjustment is more difficult for those

displaced—assuming that funding is adequate

to begin with. (See ch. 5 or further discussion

of this point.) But a better understanding of the

relation between economic growth, job losses

and creation, and displacement may help to

steer a steadier course in responding to the

problems of worker displacement.

Causes of Displacement:

Technological Change

Technology has changed worklives for centuries, first enabling agriculture to support

larger populations than hunting and gathering

could do and later liberating people from subsistence agriculture. In the 20th century, technology has largely replaced human labor on

farms in industrialized countries. Increasingly,

it is replacing some of the more dangerous,

onerous, and repetitive tasks in manufacturing

and services. Electronic technologies are now

also helping with routine mental tasks, including manipulating figures and spelling.

These changes have naturally brought about

displacement, some of it far from painless. In

1811, after England had been at war with France

for nearly20 years, the skilled knitters of Nottinghamshire faced soaring food prices, sluggish trade because of the French and English

blockades, lowered wages, and loss of jobs to

new machinery and cheap child labor, The

workers smashed the machines. In 11 months,

they destroyed over a thousand knitting frames.7

At the same time, wool croppers and combers

‘Witold Rybczynski, Taming the Tiger: The Struggle to Control Technology (New York: Viking Press, 1983), pp. 36-37.
138 . Technology and Structural Unemployment: Reemploying Displaced Adults

Figure 4-2.–U.S. Unemployment, Civilian Noninstitutional Population 16 Years and Over, 1951-84

1951 1954 1957 1960 1963 1966 1969 1972 1975 1978 1981 1984

Year

SOURCE: U.S. Department of Labor, Bureau of Labor Statistics, Ernployment and Earnings, July 1985, p. 10.

also lost income and jobs when machinery

replaced their skilled labor, and also destroyed

the machines. Despite a few early successes,

the Luddites (named for the mythical General

Ned Ludd) were soon crushed. An army of

12,000 soldiers was dispatched to put down the

uprisings, and the English Parliament repealed

statutes dating from Elizabethan times that

assured minimum wages, and fair hours and

working conditions for laborers. England’s

handloom weavers and shearers, once independent and well paid, became the new poor.

In 20th-century America, the long migration

of workers from farms to cities became a mass

exodus after World War II. The postwar revolution in agricultural technology–the adoption

of mechanical cotton pickers and harvesters,

chemical pesticides and fertilizers, high-yielding crop varieties—forced farmworkers off the

land. Employment in agriculture dropped by

3.6 million (42 percent) from 1947 to 1964. Writing in 1965, the National Commission on Technology, Automation, and Economic Progress

called this exodus “the most profound of all

displacements.” Many of the displaced farmworkers, “suffering from deficient rural educations, lacking skills in demand in urban

areas, unaccustomed to urban ways, and often

burdened by racial discrimination, exchanged

rural poverty for an urban ghetto.”8

In the same period, Appalachian coal mining collapsed, displacing large numbers of

workers. Between 1948 and 1968, oil and gas

took over most of the coal market, and technological advances in mining eliminated still

more jobs. During this time, employment in

coal mining fell from 436,000 to 126,000. Between 1947 and 1954 alone, coal mining employment fell by 46 percent.9 Despite special

efforts to bring economic development and

new jobs to Appalachia, and despite some recovery in coal production and employment after 1968, the region has not yet recovered. For

instance, the unemployment rate in West Virginia, the heart of the coal mining region, was

over 13 percent in August 1985, higher than

in any other State.

‘US. National Commission on Technology, Automation, and

Economic Progress, Technology and the American Economy,

Volume 1 (Washington, DC: U.S. Government Printing Office,

1966), p, 20.

oIbid., p. xii.
Ch. 4—Employment and Worker Displacement • 139

These examples from the past illustrate how

serious, long-lasting social difficulties can arise

from worker displacement and that technology

is a potent factor in causing displacement. The

conclusion is not warranted, however, that

technological change alone is responsible for

the problems of displacement, or that curtailing

technological advance will minimize displacement. Technological change is a powerful engine for economic growth. While technological change has destroyed some jobs, it has not

destroyed work. Some observers have suggested that, with technology replacing people

in many endeavors, there will eventually be less

work left for people to do. So far, however, the

ability of people to create new endeavors as old

ones are mechanized, and to devise new products to satisfy old and new needs, has roughly

kept up with the ability of mechanization to replace human effort. Indeed, technology has

been a key ingredient in creating new jobs.

This idea is not new: it was a major conclusion of the National Commission on Technology, Automation, and Economic Progress in

1966. The Commission was created by Congress in August 1964, in response to national

concern about the steady upward creep of the

unemployment rate after World War 11 and

widespread fears that automation would limit

the growth of employment while the labor

force continued to grow. By the time the Commission made its report in 1966, the unemployment rate had fallen to its lowest level in more

than 10 years, and concern over displacement

and technology had faded. The coincidence of

a rapid fall in the unemployment rate, following on the heels of intense public concern over

the displacement effects of automation, caused

many observers to conclude unequivocally that

technology creates more jobs than it destroys.

Certainly, technological changes have helped

to create jobs; however, technology was only

one of many factors responsible for the prosperity of the late 1960s. The fiscal stimuli and

jobs programs of the period were extremely important. The experience of the 1960s may not

repeat itself, nor does it support the view that

technological change will always create more

jobs than it destroys. As the Commission itself

concluded:

It has become almost a commonplace that

the world is experiencing a scientific and

technological revolution . . . According to one

extreme view, the world—or at least the United

States—is on the verge of a glut of productivity

sufficient to make our economic institutions

and the notion of gainful employment obsolete. We dissent from this view. We believe

that . . . it diverts attention from the real problems of our country and the world. However,

we also dissent from the other extreme view

of complacency that denies the existence of

serious social and economic problems related

to the impact of technological change.l0

Worker displacement is one of these problems. Undeniably, advances in technology have

contributed to the strength of American industry, but it is equally clear that technology can

promote industrial competitiveness while limiting employment. Changes in process technologies that increase productivity enable fewer

workers to produce the same output. If productivity rises at a faster rate than output, the level

of employment in the relevant sectors will fall.

If changes in productivity are rapid and employment shrinks correspondingly, normal turnover and attrition cannot handle the needed

work force reductions, and workers are displaced. Even if the economy is expanding and

jobs are being created in other industries,

many displaced workers still face adjustment

problems.

Labor-saving technology has been a significant factor in the falling employment levels of

the textile industry, for example, Between 1955

and 1977, production in the textile industry

rose 113 percent, while employment dropped

by 22 percent.11 This trend still holds for the

textile industry, and is increasingly found in

other industries as well.

l“Ibid., p. 1.

IIVinod K. Aggarwa] with Stephan Haggard, “The Po]itics of

Protection in the U.S. Textile and Apparel Industries, ” American Industry in International Competition: Government Policies

and Corporate Strategies, John Zysman and Laura Tyson (eds. )

(Ithaca, NY, and London: Cornell University Press, 1983), p. 259.
140 ● Technology and Structural Unemployment: Reemploying Displaced Adults

Employment in the steel industry dropped

from a peak of 726,000 workers in 1953 to

289,000 workers in September 1985. Output

rose moderately in the 20 years 1953-73, from

112,000 tons to 151,000, but declined afterward, dropping to 93,000 tons in 1984. * According to one analysis, “there has been a

steady improvement and change in technology

that is used by the U.S. steel industry . . . This

has led to the reduction in employment.”l2 The

outlook for steel employment, moreover, is not

expected to improve: “The remainder of the

decade will probably see further losses in jobs

with total employment approaching the 200,000

level by 1990.”13

The automobile industry probably faces a

similar future. It has already lost jobs due to

a combination of foreign competition, plant

modernization, and maturity of the market.l4

In May 1979, employment in the auto industry was at an all time high of 1,048,000 workers. Six years later, in May 1985, employment

in the industry stood at 883,000—a drop of

165,000, or about 16 percent. It probably will

fall further by 1990, even if the industry’s modernization and reinvestment program allows

it to regain the competitiveness it lost in the

1970s, 15 because it is highly unlikely that the

demand for motor vehicles will increase as rapidly as productivity.

Steelworkers are probably the most visible

of today’s displaced workers, but there are

others from a variety of industries. Some ana-

— “American Iron and Steel Institute, Figures for 1985 were not

yet final when this reported was prepared, but indicated a further drop in steel production, to below 90,000 tons.

12Joe] S. Hjrschhorn, Testimony at Joint Hearings, Technology and Employment, before the House Committee on Science

and Technology, Subcommittee on Science, Research and Technology and the House Committee on the Budget, Task Force on

Education and Employment, Serial No. 41 (Committee on

Science and Technology), Serial No. TF4-4 (Committee on the

Budget), June 1983, p. 283.

‘sIbid., p. 285.

14u,s. Congress, Office of Technology Assessment, U.S. ~ndustrial Competitiveness: A Comparison of Steel, Electronics,

and Automobiles, OTA-lSC-135 (Washington, DC: U.S. Government Printing Office, 1981).

IsSee, for example, ibid., p. 95; and Alan Altshuler, Martin Anderson, Daniel Jones, Daniel Roos, and James Womack, The Future of the Automobile: The Report of MIT’s International Automobile Progr8m (Cambridge, MA: The MIT Press, 1984), pp.

204-205.

lysts expect that the introduction of new technologies, such as computers and telecommunications, will make it increasingly difficult to

maintain employment in a number of industrial sectors.

A critical question, of course, is the effect of

technological change on employment as a

whole, on the creation of new jobs as well as

on the destruction of old ones. Rosenberg says:

It seems to be much easier to anticipate the

employment-displacing effects of technological change than the employment-expanding

ones . , . Even a casual glance back into history

appears to confirm this . . . In the 1950s, when

the computer was still in its infancy, it was

confidently predicted that all of America’s future needs would be adequately catered to by

a dozen or so computers. Even Thomas Edison, a genuine inventive genius, is said by one

of his biographers to have anticipated that the

phonograph would be used primarily to record the death-bed wishes of elderly gentlemen!l6

Whether technological innovation will in the

future create more jobs than it destroys is not

known. What is certain is that such innovation

will continue to require reallocations of the

work force.

Besides affecting the number of people working in particular industries, technology also

powerfully affects the kinds of work people do.

The aggregate effects of these changes, however, are neither simple nor predictable. Much

has been written about the de-skilling effects

(i.e., reduction in the skill requirements of jobs)

of new technology, and there is equally voluminous literature on technology’s stimulating

effect on demand for more skilled and better

educated people. Some observers think both

things are happening, creating a gap in the

middle-skill or middle-income range. However,

the effects of technology on the types of jobs

IHNathan Rosenberg, Testimony at Joint Hearings, Technology and Employment, before the House Committee on Science

and Technology, Subcommittee on Science, Research and Technology, and the House Committee on the Budget, Task Force

on Education and Employment, Serial No. 41 (Committee on

Science and Technology), and Serial No. TF4-4 (Committee on

the Budget), June 1983, p. 283.
Ch. 4—Employment and Worker Displacement ● 141

available and the kinds of tasks workers perform is never independent of human decisions.

Managers, engineers, designers, and, to some

extent, workers themselves all have some power

over the design of work, but none of these

groups has the exclusive power to define jobs,

Each group is constrained by the actions and

decisions of all the others. As a result, if jobs

are de-skilled, or a skills gap created, the problem is not a failure of technology, but one of

human systems, Chapter 8 gives a more detailed ana

change.

lysis of the-effects-of technological

Causes of Displacement:

International Competition

International trade, 1ike technological change,

can bring about gains or losses of jobs—gains

from exports and losses (in a less direct and

consistent way) from imports. In the middle

1980s, the losses were much more apparent

than the gains. Trade has many important economic effects, of course, other than those on

jobs—e.g., putting pressure on national economies to concentrate their resources on what

they produce most efficiently, and bringing a

wide variety of goods, at low cost, to consumers throughout the world. This brief discussion,

and the more detailed consideration in chapter 9, does not cover the broader aspects of

trade but concentrates on the employment effects, and in particular, on displacement of

workers.

Loss of international competitiveness by U.S.

firms employing U.S. workers also results in

displacement. A few industries, such as steel,

apparel, textiles, and shoes, have been strongly

challenged by foreign competitors for decades.

In the past dozen years, many more industries

have been affected, a trend much accelerated

in the 1980s. In 1971, the United States experienced a trade deficit in merchandise (manufactured and natural resource goods) for the

first time in 90 years. It totaled $2.3 billion.17

Between 1971 and 1985, there were 2 years of

ITThomas 0. Bayard, Trends in U.S. Trade: 1960-79, U.S. Department of Labor, Bureau of International Labor Affairs, Economic Discussion Paper 7, October 1980, p, 13.

merchandise trade surpluses (1973 and 1975);

otherwise, the picture has been one of mounting deficit. In 1984, the merchandise trade deficit was $107 billion. The job losses due to deteriorating trade balances cannot be measured

directly, but one source estimated that as many

as 3 million Americans would be unemployed

in late 1985 as a result.18

The great rise in the value of the dollar since

1981 is a major reason for the recent unprecedented trade deficits; the rise of the dollar, in

turn, has been linked to large Federal budget

deficits and high interest rates—all part of a set

of complex relationships that are not considered in this report. In addition to the powerful influence of the overvalued dollar, a number of industries have longer standing and

more basic competitive problems; they have

been losing out to foreign producers at least

since the late 1970s, when the dollar was undervalued. Examples are steel, autos, machine

tools, agricultural machinery, radio and TV

sets, and parts of the semiconductor industry,

as well as apparel and footwear.

There is no one-for-one correspondence between job gains due to exports and job losses

due to imports. The case of exports is simpler,

however; exports add to the total demand for

products made in the United States, and stimulate employment. Even so, exports can rise

without a corresponding rise in jobs, if labor

productivity is rising. This occurred in 1984;

the value of merchandise exports went up $20

billion, yet the number of export-generated jobs

decreased slightly, from 4.6 to 4.5 million. The

level of exports is still the major influence,

however; jobs due to exports were estimated

to be 6 million in 1980, and 5 million in 1982,

after the value of merchandise exports fell from

$224 to $211 billion (without adjusting for inflation).

The relationship between jobs and imports

is more complex. If imports rise, jobs in the

United States may not decline, for several reaKIC. Fred Bergsten, Director, Institute for Int@rnatiOna] ECOnomics, “U.S. Trade Deficit: Causes, Consequences and Policy

Responses, ” testimony at hearings on the U.S. Trade Deficit,

before the House Committee on Ways and Means, Subcommittee on Trade, March and April, 1984; Serial No. 98-73, p. 180.
142 . Technology and Structural Unemployment: Reemploying Displaced Adults

sons. The most important is that rapidly growing world demand may compensate for increased imports, so that U.S. employment can

rise even in an industry which is losing part

of its market share to foreign producers. This

was the case in the semiconductor industry

from 1978 through 1984; despite rising imports,

U.S. employment grew. Only in 1985 were

some job losses registered in the industry,

largely due to slumping demand. In the more

mature auto market, on the other hand, where

world demand has grown slowly or remained

static in recent years, U.S. workers have lost

jobs as foreign producers (mainly the Japanese)

gained a larger share of the market.

Firms facing great pressure from imported

goods or services may choose among several

strategies to protect themselves, including:

. retooling existing production facilities to

cut cost and raise efficiency of production;

• moving production to low-wage countries;

● moving production to lower wage parts of

the United States;

● going out of business, or moving into less

threatened lines of business; and

● asking for trade protection.

Most industries faced with international competitive pressure take all or most of these steps,

as did, for example, the textile and apparel industries. In 1933, in response to depressed

prices, the Federal Government instituted price

supports for cotton.l9 While this provided some

relief to cotton farmers, it placed some cotton

textile and apparel manufacturers, who were

unable to buy cheaper foreign cotton (because

of a restrictive quota) at a disadvantage. In

addition, the apparel industry, which had always relied on the secondary labor market,20

had to raise wages when minimum wage legislation was enacted (even though apparel

wages remained much below the average private sector wage). Unable to compete effectively with cheap foreign cotton and cheap foreign labor, and facing smaller markets due to

loThis description of the textile and apparel industries is drawn

from Aggarwal with Haggard, op. cit., pp. 249-312.

~he secondary labor market includes less skilled people who

tend to enter and leave the labor market often or those who cannot command high wages.

substitution of other materials for cotton and

declining per capita expenditures on apparel,

firms in the industry turned to most of the strategies listed above. Many firms moved south to

capture the lower non-union wages; many

retooled to handle synthetic fibers. Some businesses did both. Some firms, particularly

smaller firms, were unable to adjust, and went

out of business. Finally, the industries lobbied

for, and got, trade protection, first the Short

Term Arrangement in 1961, then the Long

Term Agreement, and later the Multifiber

Arrangement, which is in force until July 31,

1986.

While these adjustments were taking place,

many workers were displaced. Employment in

the apparel industry fell from over 1.4 million

in 1973 to less than 1.2 million in 1984. This

loss represents only a fraction of the displacement that has occurred in this industry. Earlier,

as firms moved south and west, the share of

textile industry employment in the Northeast

dropped from 40.5 percent in 1950 to less than

22 percent in 1970. The pattern was similar in

apparel: employment in New York and Pennsylvania, which accounted for 47 percent of industry employment in 1950, dropped to 24 percent by 1975.

Many other industries today face the same

kinds of pressure. Some, like the steel industry, have been pressured by international competition for decades; others, such as the semiconductor industry, have many challenges still

ahead of them. Chapter 9 provides a more thorough discussion of the effects of trade on employment.

Causes of Displacement:

Changing Consumption

Finally, changes in domestic consumption

patterns can cause worker displacement. Public tastes and preferences change. New products are introduced, old ones are abandoned.

Blacksmiths lost jobs as the automobile replaced the horse as a primary means of transportation. Adding machines are replaced by

hand calculators, and hand calculators, sometimes, by microcomputers. Often, just a slow-
Ch. 4—Employment and Worker Displacement ● 143

down in the growth of demand for a product, percent of personal expenditures to to less than

while labor productivity is improving, is enough 7 percent.2l Although personal expenditures

to cause displacement in an industry. This was rose in absolute numbers, growth in productrue, for instance, in the apparel and footwear tivity exceeded growth in demand for apparel.

industries. Between 1950 and 1977, expenditures on clothing and shoes fell from over 10 21 Aggarwal with Haggard, op. cit., p. 256.

UNEMPLOYMENT AND DISPLACEMENT

Displacement problems should not be confused with unemployment problems. They are

related, of course. For displaced workers and

others, finding a job is more difficult when the

general unemployment rate is higher than in

more prosperous times. Yet, for many displaced workers, getting a job is not simple even

when the unemployment rate is low. Moreover,

what is considered a low unemployment rate

has been changing steadily for more than three

decades.

The “natural rate” of unemployment is a theoretical concept, defined as the lowest unemployment rate the Nation can sustain without

inflationary pressure. This “natural rate” has

been altered to accommodate a steadily rising

unemployment rate. This rate, also referred to

as the “benchmark” rate of unemployment, is

supposed to represent the rate of unemployment society considers acceptable; therefore,

when the rate is at the benchmark, full employment is considered to exist.

The concept of a “natural” or “benchmark”

rate of unemployment is an outgrowth of the

theoretical relationship between unemployment and inflation. This relationship, according to the well-known Phillips curve, is inverse;

i.e., as unemployment falls below a certain rate,

inflation rises. In the early 1960s, this “natural” rate of unemployment was thought to be

about 4 percent.22 This rate was proposed by

the Kennedy Council of Economic Advisors,

who concluded that it represented frictional

employment fell below 4 percent, many economists believed, inflation would begin to rise

sharply. 23

With the rising unemployment rate in the

1970s, some analysts attempted to reestimated

the “natural” rate, using economic modeling

techniques. Most current analyses conclude

that the “natural” rate of unemployment has

increased following World War II. According

to a recent staff study of the Joint Economic

Committee (JEC), the natural rate of unemployment increased by 2.24 percentage points in

the 1960s and 1970s, from 4.38 percent between 1961 and 1969 to 6.62 percent between

1973 and 1979, and there are indications that

it has risen still further since 1979. Connaughton and Madsen estimate that the rate increased

from 4 percent in 1961 to 6.7 percent in 1981.24

The increase in the “natural” rate is attributed

to several factors, but most analyses emphasize

the increased participation of women and teenagers in the labor force. The JEC, for example,

attributes 57 percent of the increase in the natural rate to increased participation of so-called

nonprime demographic groups, namely teenagers and women. These groups of people,

according to the JEC study, have higher unemployment rates due to their lower skill levels

and relative lack of work experience. There is

some evidence, however, that this explanation

is not entirely correct. In the early 1970s, it appeared that rising unemployment rates were

due primarily to youth unemployment. By the

and structural unemployment expected to oc- 23Even inflation, according to some analysts, is not enough cur regardless of economic conditions. If un- to keep unemployment below its natural rate in the long run.

See U.S. Congress, Joint Economic Committee, The Natura~ Rate

22John E, Connaughton and Ronald A. Madsen, “Estimating of Unemployment (Washington, DC: U.S. Government Printing

Benchmark Unemployment for the 1980s, ” paper prepared for Office, 1982).

the 1982 American Economics Association annual meeting. Z4Connaughton and Madsen, op. cit.
144 ● Technology and Structural Unemployment: Reemploying Displaced Adults

late 1970s, however, unemployment among

prime-age men had risen. It accounted for

nearly 57 percent of the increase in the overall unemployment rate between 1977 and 1982;

during the same period, the contribution of

prime-age women remained unchanged.25

The other major causal factor in the rise of

the “natural” rate, according to the JEC study,

is the expansion of the social safety net, including unemployment insurance compensation,

medical payments, food stamps, and other

forms of social welfare. These programs change

“people’s attitudes with respect to what is an

acceptable job, producing an upward drift in

the natural unemployment rate.”26

The fact that unemployment rates have been

on an upward trend since the end of World

War II suggests that structural unemployment

is on the rise in the U.S. economy. To attribute this trend to a rising “natural rate” of unemployment implies that nothing needs to be

or can be done about it—a very dangerous

choice. Employment and training programs,

both for disadvantaged and displaced workers,

are attempts to counter the effects of structural

causes that keep people who want jobs out of

work. To the degree that these programs succeed, the trend of rising unemployment rates

will be halted or reversed.

Most forecasters expect that, given steady

economic growth and rising productivity, the

unemployment rate will decline gradually or

remain about where it is.27 Some analysts, however, anticipate a labor shortage beginning in

the late 1980s, marking the end of the 4(1-year

trend toward increasing unemployment. According to this school of thought, the rising unemployment rates of the past 15 years were due

mostly to demographic factors—particularly

the entry of the baby boom generation and

more women into the labor force.28 As the number of people entering the labor force declines

in the late 1980s, the unemployment rate is expected to fall. Analysts taking this view largely

discount the effects of structural factors. Other

observers, pointing to the pervasive and rapid

adoption of new technologies, and growing

problems of U.S. international trade and the

national debt, are less sanguine.

Without strong, sustained economic growth,

the most likely prospect is that unemployment

rates will remain high relative to historical

standards. With moderate growth, unemployment might decline slightly in the next few

years; with slower growth we might see very

little decline in unemployment, even with

fewer new entrants to the labor markets. With

any kind of recession, unemployment could

easily climb above 10 percent again, and might

stabilize at a level even higher than the current

rate, if historical trends are any guide. In any

case, it is likely that manufacturing employment will continue to fall.

ZSMichael podgursky, “sources of Secular Increases in the Unemployment Rate, 1969 -82,” A40nddy Labor Review, July 1984,

p. 21.

zeu, s. congress, Joint Economic Committee, oP. cit., P. 13.

27Jane Seaberry, “High Jobless Rate Said Socially Harmful,”

The Washington Post, Feb. 22, 1985, pp. DI-D2.

qt shou]d be recognized that neither of these factors explains

the rising unemployment rates of the 1950s.

EMPLOYMENT TRENDS: THE UNITED STATES IN THE WORLD CONTEXT

Despite the relatively high unemployment of

the mid-1980s, the United States is currently

the envy of much of the industrialized world

for its ability to create jobs, in contrast to the

recent performance of Western Europe. In the

12 years from 1973 through 1984, the United

States created 19.9 million civilian jobs.29 DurZuComparative statistic5 in this section are for civilian labor

force and employment. The numbers change slightly if military

ing the same period the work force increased

by over 24 million people (about 27 percent),

with a resulting rise in the civilian unemployment rate (see figure 4-2) from 4.9 percent in

1973 to 7.5 percent in 1984. Over the same

—...—

employment is includeci. Data for European countries are adjusted to approximate U.S. concepts. See Joyanna Moy, “Recent

Trends in Unemployment and the Labor Force, 10 Countries, ”

Monthly Labor Review, August 1985; data for years earlier than

1975, U.S. Department of Labor, Bureau of Labor Statistics.
Ch. 4—Employment and Worker Displacement ● 145

period, Great Britain, France, and West Germany together lost nearly 3 million jobs, while

their combined work forces increased by nearly

3.3 million (4.5 percent). Civilian unemployment rates increased from 2.7 to 10.1 percent

in France, 0.7 to 7.8 percent in West Germany,

and 3.1 to 13.0 percent in Great Britain.30 These

three countries have fared substantially worse

than some other Western European nations

(figure 4-3), but are chosen for discussion because their economies most nearly resemble

that of the United States.

In light of this comparative record, it has

been accepted that the United States is much

more effective at job creation than Europe.

Analysts and business writers on both sides of

the Atlantic are engaged in policy debates on

the reasons for the differences. U.S. “success”

has been attributed to a variety of factors, ranging from different rates of investment in laborsaving machinery, to cultural values and attitudes toward risk taking. Much of the discus-

—-. . . . - . .

30unpub]iShed data, U.S. Department of Labor, Bureau of I~abor Statistics. Unemployment data for European countries are

adjusted to approximate U.S. concepts. Similar data on the civilian unemployment rate for selected OECD countries are in

Joyanna Moy, “Recent Trends in Unemployment and the Labor Force, 10 Countries,” Monthly Labor Review, August 1985.

sion, however, begs a basic question: by what

standards is the United States doing better than

Europe? In aggregate numbers of jobs added,

and also in the rate of job creation, the United

States is far and away the stellar performer in

the Western world—partly because it has the

largest work force of all Western industrial nations, and has also had the greatest rate of increase in its work force in the past dozen years.

Measured by unemployment rates, however,

the “success” of the United States is a very recent phenomenon. The unemployment rates of

West Germany and France were lower than

that of the United States until 1984, and that

of the United Kingdom was until 1980. The currently lower rate in this country may be due

in part to a more rapid and complete recovery

from the global recessions of the early 1980s,

and not altogether to a fundamentally superior

ability to create jobs.

Unemployment rates may not be ideal indicators of labor market success either. In the

United States and many other countries in the

Organization for Economic Cooperation and

Development (OECD), the concept of unemployment involves an element of choice. To be

considered unemployed, a person must be both

out of a job and looking for one. Workers who

Figure 4-3.-Civilian Labor Force and Employment in Selected Countries, Percent Change 1973-84

United

States

Canada

—

Australia Japan France West Great Italy Netherlands Sweden

Germany Britain

SOURCE: U.S. Department of Labor, Bureau of Labor Statistics, unpublished data, 1985
746 ● Technology and Structural Unemployment: Reemploying Displaced Adults

are not actively searching for jobs are not defined as unemployed, but rather as nonparticipants in the labor force. In some cases, lack

of participation may be due to attitudes and

culture: for example, in some countries, it is

not customary for women to seek work outside

the home. However, poor prospects of landing

a job may also discourage some people from

looking for work. Thus, low participation rates

may also be an indication of poor labor market performance.31 It is useful to look at labor

force participation rates in addition to unemployment rates, although neither is an adequate

indicator of success, or lack of it.

Measured in terms of the total labor force

divided by the population of working age (those

15 to 64 years old), U.S. labor force participation rates are high compared both to overall

OECD labor force participation and the average of OECD Europe (figure 4-4). Interestingly,

low participation rates appear to be related to

high unemployment rates to some degree. Of

the 12 countries with lower participation rates

than the U.S. rate, 7 had higher unemployment

rates. Only one of the four countries with higher participation rates than the United States

had a higher unemployment rate. It is a mistake, however, to attach too much importance

to this correlation. Japan, whose participation

rate is the same as that of the United States,

had a far lower unemployment rate (2.7 percent in Japan versus 9.6 percent in the United

States in 1983). Both Canada and Great Britain, where participation rates are nearly the

same as in the United States, had higher unemployment rates (11.9 and 12.8 percent, respectively).

Although comparing unemployment rates,

labor force participation rates, and growth in

employment cannot prove conclusively that the

United States has a better record of job creaSl[n Italy, for example, discouraged workers (people who want

a job but have given up looking because they think they cannot

find one) outnumbered the workers counted as unemployed 11

to 10 in 1982 and 1983, using U.S. concepts, The number of discouraged workers in the United States amounted to 15 percent

of the unemployed, both during the recession (last quarter of

1982) and during recovery (last quarter of 1984). Current data

on discouraged workers are not available for all OECD countries. See Moy, op. cit., p. 17.

tion than Europe, this country has certainly

been more successful than the largest Western

European countries in the 1980s. No single reason can account for the difference. Although

part of it may reflect faster U.S. recovery from

recession, structural factors may play a part as

well.

Reasons for Differences in Employment Growth

Job creation results from the birth of new enterprises, the expansion of existing ones, and

immigration (relocation of enterprises from outside the area to inside). Job losses result from

the death of enterprises, their contraction, and

outmigration. In an economy whose labor force

is growing, such as in the United States, more

jobs must be created than lost simply to maintain employment rates. Even in countries with

more stable work forces, like West Germany

and the United Kingdom, job creation is important to offset the normal, ongoing economic

processes that result in job loss,

There is little persuasive information on

what factors account for high rates of job creation. Despite the obvious connection between

macroeconomic growth and job growth, the

growth of gross national product (GNP) alone

may not be sufficient to provide enough jobs

to keep employment up. Between 1975 and

1983, output in the United States and Canada

grew by 23 percent, and employment increased

17 percent. In Japan, output went up by 42 percent while employment rose only 10 percent.

In Europe, output rose 23 percent while employment fell 1 percent.32 In West Germany,

GNP growth was 1 percent in 1983 and 2.5 percent in 1984; yet the German unemployment

rate rose in both years.33 Growth of gross dosZThe ~conom~st, “The Spectre of Unemployment at London’s

Feast,” June 9, 1984, p. 44.

SsIt is possib}e that the statistics themselves are somewhat misleading. Some European economists believe European statistics

seriously overestimate unemployment because they neglect the

“shadow” or “underground” economy and the employment it

creates. Economists estimate that the West German underground

economy adds several percentage points to the country’s gross

national product, accorciing to Eckhardt Wohlers, “The Shadow

Economy–An Expanding Field of Activity, ” lntereconomics

(Hamburg: Verlag Weltarchiv Gmbh, September/October 1984),

especially p. 215.
Ch. 4—Employment and Worker Displacement ● 147

Figure 4-4.—Labor Force Participation Rates for Western Industrialized Nations, 1983

Netherlands

Italy

Luxembour g

Belgium

West Germany

OECD Europe

New Zealand

France

Austria

Switzerland

Total OECD

Australia

Canada

United Kingdom

United States

Japan

Norway

Finland

Denmark

Sweden

I 1 1 1 1 1 1 1

0 10 20 30 40 50 60 70 80 90

Participation rate (percent)

SOURCE: Organization for Economic Cooperation and Deployment, OECD .Emp/oyment Out/ook, (Paris: OECD, September 1984), p. 22,

mestic product in France has grown throughout the 1980s, averaging between 1 and 2 percent per year, while the French unemployment

rate has risen steadily, from 6.4 percent in 1980

to 10.1 percent in 1984. As a result, European

analysts take the notion of “jobless growth”

seriously. Similar concerns are stirring in the

United States as well. Recently, there have been

warnings that the United States may undergo

a “growth recession,” or a period of economic

growth too slow to reduce unemployment.

The jobless growth Europe has experienced,

and the faster growth in output than in employment in other countries, reflects rising productivity. Growth in productivity is, of course, a

desirable economic goal, just as job creation

is. The higher worker productivity is in a national economy, the higher the wages that can

be supported without loss of competitiveness.

Growth in output in firms or industrial sectors

without growth in jobs means higher standards

of living—at least for the people employed in
148 ● Technology and Structural Unemployment: Reemploying Displaced Adults

those firms and sectors. But unless job creation is going on elsewhere in the economy, and

unless nations have workable ways of distributing the wealth that comes from rising productivity, the gap between the employed and

the unemployed will widen.

Several factors may account for employment

losses in major European countries over the

past 10 years. These factors fall into three categories: 1) competitive problems, 2) economic

structure and trade, and 3) labor and capital

mobility.

Competitive Problems

A significant loss of ability to compete in

world markets can hurt employment. Several

explanations have been put forward for recent

losses in competitiveness of European industrial nations. Among the suggested explanations are failure to invest enough in technology that would modernize existing industries;

overinvestment in mature industries with competitive problems and not enough innovation

and investment in high-technology growth industries; and rising costs, especially labor

costs, aggravated by inflated currency values.

Some of these explanations contradict each

other, and some apply as much to the United

States as to Europe, thus failing to account for

the relative success of the United States in creating enough jobs for people seeking them.

However, some may provide a partial explanation.

Failure to enter new kinds of industries can

damage the competitive position of industrialized nations. Europe, once a pacesetter in scientific advance and technological innovation,

has fallen behind the United States and Japan,

according to many Europeans. In one example

of the effects of this loss of leadership, the

European Economic Community (EEC) lost 17

percentage points of the market share in world

exports of high-technology products between

1972 and 1980.34 This trend is viewed as a partial explanation for European difficulties in creating jobs, and in some sectors, losing jobs.

34 Robin Knight, “Europe’s High-Tech Gap Sets Off Warning

Bells,” U.S. News and World Report, vol. 98, No. 20, May 27,

1985, p. 45.

Failure to invest as rapidly as offshore competitors in technologies to modernize older

industries has also been blamed for some of

Europe’s troubles. However, this argument applies equally to some U.S. industries, for example, steel. U.S. basic steel plants tend to be

older, less efficient, and smaller than steelmaking facilities in other countries; failures to invest adequately in modern technology have

contributed to the dwindling world market of

the U.S. industry. Now, without protection,

segments of the U.S. steel industry would have

a hard time even in domestic markets. The U.S.

industry’s problems date back to the 1950s and

1960s; declining steel employment (due in part

to rising productivity but also to loss of markets) is long-established (figure 4-5). Jobs in the

industry fell, from a peak of 726,000 in 1953,

to 289,000 in September 1985.

All industrialized countries, in fact, have lost

competitiveness in industries that are particularly dependent on production labor. Steel,

shipbuilding, textile, apparel, and automobile

production and employment have been hurt in

almost all major OECD countries, including the

United States. One hypothesis for Europe’s difficulty in maintaining employment is that the

money spent by European governments to prop

up mature industries with competitive problems diverts funds from other, higher growth

sectors, and may only postpone job loss in the

mature industries. as This argument (which is

somewhat contradictory to the one blaming

loss of jobs on failure to modernize older industries) is a variant of the idea that European

countries have not invested enough in technologically advanced growth industries. Whether

investment funds are diverted to older industries at home, or to high interest ventures in

the United States—currently a much larger

diversion—the point is that new industries are

not being nourished.

s~see, for example, Rclbert B. McKersie and Werner Sengenberger, job Losses in Major Industries: Manpower Strategy Responses (Paris, France: Clrganisation for Economic Co-operation

and Development, 1983), p. 20; National Research Council, The

Competitive Status of the Steel Industry, prepared by the Committee on Technology and International Economic and Trade

Issues, Steel Panel, Office of the Foreign Secretary, National

Academy of Engineering and the Commission on Engineering

and Technical Systems (Washington, DC: National Academy

Press, 1985), pp. 79-81, 99.
Ch. 4—Employment and Worker Displacement ● 149

Figure 4-5.-Employment in the U.S. Steel Industry, 1950-85

1950 1955 1960 1985 1970 1975 1980 1985

Year

Note” 1985 figure is for March,

SOURCE US Department of Labor, Bureau of Labor Statistics, Emp/oyrnent and Earnings, various issues.

Overinvestment in declining sectors is an

issue under discussion in West Germany. The

German Government subsidizes a variety of

industries, including agriculture and forestry,

food, wholesale trade, energy, mining, iron and

steel, shipbuilding, aerospace, railways, and

shipping, Since 1979, subsidies per employed

person have risen fastest in iron and steel, and

shipbuilding. 36 While this kind of subsidy may

postpone or stretch out the loss of employment

in declining sectors, subsidies will not prevent

eventual employment loss, and they probably

discourage capital and labor from moving to

higher growth sectors.

Labor costs and exchange rates also affect

a country’s competitive position. Labor costs

depend on both wage rates and productivity.

A country can afford to support higher wages

3@rganisation for Economic Co-Operation and Development,

Germany, OECD Economic Surveys (Paris, France: OECD, July

1984), pp. 47-49.

for its workers if their productivity is higher

than that of workers in other countries, For this

reason, both the United States and industrialized European countries have been able to

afford a relatively high standard of living without sacrificing their ability to compete in a variety of sectors. However, when a country’s

wages outrun productivity, or when even high

productivity cannot overcome the advantage

of low wage rates, declining competitiveness

results. Managers often seek to move production offshore or to substitute capital for expensive labor in response, Both these strategies

hurt employment–although less than going out

of business, which is sometimes the alternative.

High wage rates are often a deterrent to

hiring new workers and an incentive to automate or produce offshore in order to reduce

dependence on expensive labor. During the

1970s, European wages were rising faster than

European productivity, and the result was that
150 ● Technology and Structural Unemployment: Reemploying Displaced Adults

European workers in some sectors priced

themselves out of the market. European products became more expensive, hurting both

sales and employment.

As an explanation for differences between

U.S. and European employment gains, however, the argument is flawed. During the 1980s,

the situation reversed. U.S. wage rates increased dramatically relative to wages in other

nations, mostly because of the large rise in the

value of the dollar. (In domestic terms, however, real hourly earnings of U.S. production

and nonsupervisory workers on private nonagricultural payrolls were between 5 and 6

percent lower in 1985 than in 1977.) German

manufacturing wage rates, once nominally 25

percent higher than those of U.S. workers, are

lower than U.S. wage rates at present rates of

exchange (figure 4-6).37 Yet the United States,

after the 1982 recession, was more successful

in reducing its unemployment rate than was

West Germany. Also, during the 1970s, when

hourly compensation in many European countries (including West Germany, Sweden, Belgium, and the Netherlands) was higher in international monetary terms than it was in the

United States, European unemployment rates

were lower than U.S. rates.

The cost of other worker benefits, which can

also increase labor costs, are not closely related

to unemployment rates either. Total compensation, including wages, leave, financial bonuses, payments in kind (e.g., food, housing,

medical treatment), and legally required private

insurance, are higher in most major European

countries, especially West Germany and France,

than in the United States.38 However, total compensation is also high in Japan, with its exceptionally low unemployment rate. The total compensation rates of the United Kingdom and

Canada, where unemployment rates are significantly higher than in the United States, are

close to corresponding U.S. figures.

sTRichard S. Be]ous, “The Growing Gap Between U.S. and Foreign Labor Costs, ” Congressional Reseamh Service Review, vol.

6, No, 3, March 1985, p, 10.

SeRichard S. Be]ous, Library of Congress, Congressional Research Service, “An International Comparison of Fringe Benefits: Theory, Evidence, and Policy Implications,” Report No. 84-

815 E, pp. 13-16,

Exchange rates have a much more profound

influence on competitiveness than simply their

effect on wage rates. High currency values

make all of a country’s products more expensive to foreigners, and make foreign goods

more attractive in the domestic market. If exchange rate imbalances persist, it becomes difficult to create employment in industries with

heavily traded products.

Great Britain learned this lesson in the first

two decades after World War II, when British

governments tried to maintain the traditional

value of the pound sterling to protect its role

as a reserve currency and the position of

London as a financial clearinghouse.39 That

created unrealistic exchange rates that hurt

British exporters. Britain finally devalued its

pound in 1967, and agreed to let the pound

float in 1971, but by then a great deal of damage to British manufacturing and employment

had been done; according to one analysis, “It

is hard to exaggerate the devastating consequences of the overvalued currency on British

industry. ”40

The effort to devalue the pound was undermined in the late 1970s. North Sea oil earnings

strengthened the pound, not necessarily with

respect to the U.S. dollar, but certainly compared to other EEC currencies. This further

encouraged imports, depressed exports, and

generally depressed domestic employment. It

was not until 1984, as oil prices fell, that the

pound dropped relative to other currencies.41

The United States now faces a similar problem. Since 1980, the dollar has risen significantly against other currencies (figure 4-7), depressing U.S. exports and encouraging imports

and offshore production. The result is a rec39JOhn Zysman, GOvernrnents, Markets, and Growth: Financial Systems and the Politics of industrial Change (Ithaca, NY:

Cornell University Press, 1983), p. 173.

q’JIbid,, p. 174.

41 During 1984, the pound fell 26 percent, to a record low of

$1.05; at one point, the pound sank below a one-to-one exchange

rate against the Soviet ruble. The British central bank stabilized

the pound at $1,06. With the decline in the value of the dollar

from its peak early in 1985, the pound had risen to about $1.40

in autumn 1985. The source of most of these statistics is

Lawrence Ingrassia, “Sterling Drops Sharply Despite Good

Health of the British Economy, ” Wa]] Street )o~rfia], Jan. 17,

1985 and The Economist, Mar. 9, 1985, p. 104,
Ch. 4—Employment and Worker Displacement ● 151

Figure 4-6.-Hourly Compensation for Manufacturing Production in Selected Nations

140

120

Japan West Germany Sweden Canada Unite d

Kingdom

ord trade deficit, with an accompanying loss chinery, competition from less developed and

of up to 3 million jobs.42 The trade deficit has

been particularly tough on manufacturing. Manufacturing employment fell by over 1.6 million

from 1979 (annual average) to August 1985.

The overvalued dollar was a significant factor.

Economic Structure

Manufacturing employment has declined in

Europe as well as in the United States. Employment in industry declined in every OECD

country except Japan in 1983, and average

OECD employment in industry has fallen annually since 1979.43 Most of the decline is in

manufacturing. Most job creation has been in

services, in OECD Europe as well as the United

States.

Several interrelated reasons are often cited

for losses of manufacturing employment: adoption of automation and other labor-saving ma4zBerg5ten, Op. cit.

430ECD statistics show employment by three sectors: agriculture, industry, and services. Industry employment consists of

manufacturing; mining; construction; and electricity, gas, and

water. Most of this is in manufacturing: 70 percent of all industry employment in Japan is in manufacturing, 69 percent in Canada, 72 percent in the United States, 71 percent in France, 77

percent in West Germany, and 74 percent in Sweden.

newly industrializing nations, and stagnant

demand in many sectors. Manufacturing is

certainly more vulnerable to foreign competition than are most service industries. As a

result, few industrialized nations can expect

to increase manufacturing employment, and

many analysts expect absolute declines in manufacturing employment to continue.

Countries that depend greatly on manufacturing employment may have difficulty creating enough jobs in other sectors to offset their

losses in manufacturing employment. This may

be another partial explanation for differences

in European and U.S. employment. Nearly 30

percent of employment in OECD Europe is in

manufacturing, compared to about 20 percent

in the United States. In 1981, nearly 34 percent

of German workers were employed in manufacturing, down from nearly 40 percent in

1970. British manufacturing employment in

1983 was only 70 percent of what it had been

in 1973, while services employment was nearly

10 percent higher.44

+3rganisation for Economic Co-operation and Development,

United Kingdom, OECD Economic Surveys (Paris, France:

OECD, January 1984), p. 28.
152 ● Technology and Structural Unemployment: Reemploying Displaced Adults

Figure 4-7.–Multilateral Trade-Weighted Value of the U.S. Dollar, 1975-84 (March 1973 = 100)

SOURCE:

Year

Board of Governors of the Federal Reserve system, cited in Executive Office of the president, EconornkF@orf of the Preslderrt, transmitted to

February 1985 (Vhshlngtotl, DC: U.S. Government Printing Off Ice, 1985), p. 351.

Labor Mobility

Labor mobility can be a key factor in job

creation. There are two aspects to labor mobility: industry or occupational mobility, and

geographical mobility. On both counts, European labor may be less mobile than in the

United States.

Proponents of this argument point out that,

to hire new people readily, employers must be

able to let workers go without undue difficulty.

Rigid rules governing firing practices and generous nonwage compensation may constitute

undue difficulty. It is generally more difficult

for firms in many European countries to fire

workers (other than for cause) than for U.S.

businesses. The European approach is to protect employed workers, even though jobs or

operations may be eliminated or redefined. In

Europe, a combination of collective bargaining

agreements, legislation, and social understandings discourages or prohibits businesses from

ConIgress

laying off workers.45 In West Germany, for example, one company reported that reducing its

work force took several months and entailed

negotiations on severance pay and benefits

with almost every individual worker.46 Severance pay can be quite high. When one automobile plant reduced employment in West Germany several years ago, the cost per laid-off

worker was nearly $13,000. AT

Although these policies probably make employers more reluctant to hire, and thus hinder job creation in Europe, they do have positive effects as well. At least until the recession

of the 1980s, employment in most of Europe—

particularly West Germany—has been more

stable than U.S. employment in the face of cyclical economic variations. For individuals, this

4SMc Kersie and Sengenberger, cit., p. 70.

46John A]ic, senior Associate, Office of Technology Assessment, personal communication, June 19, 1985.

4TMc Kersie and Sengenberger, op. cit., p. 77’.
Ch. 4—Employment and Worker Displacement ● 153

stability is desirable. However, when structural

economic change is needed to keep up with

global competition, such stability may be bought

at a high price. *B

Geographic mobility is more difficult in Europe than in the United States for several reasons. First, movement across Europe’s many

national boundaries is considerably more difficult than movement within the United States,

Aside from that, many Europeans are less willing to move or travel to a new job than U.S.

workers. 49 In part, this may be a matter of culture. One British worker, with 13 years of experience at a clay factory before it closed in

autumn of 1981, refused another job the company offered because it was 15 miles away.

“It’s a hell of a way off,” he said. “I’m not a

traveling man. ”50 However, mobility could also

be affected by the ease of transportation. U.S.

workers may be more willing to take work

farther from home because they are more likely

to have automobiles. In the United States, the

number of persons per car averages 1.9; comparable European figures are 2.5 in West Germany, 2.6 in France, 2.8 in Italy, and 3.4 in the

United Kingdom.5l

Employment Trends in the United States

The foregoing sections have discussed some

of the reasons why the larger industrial democracies of Europe have created fewer jobs than

the United States, However, the apparent U.S.

superiority originated fairly recently, In the

1970s, the unemployment rates of the United

Kingdom, West Germany, and France were below the U.S. rate. Moreover, the United States

shares, or is beginning to experience, many of

the problems Europeans face in creating new

jobs. The high value of the dollar makes exporting difficult, encourages imports and offshore

production, and raises U.S. wages relative to

ABIbid., p. 71.

“Janet Norwood, “Labor Market Contrasts: United States and

Europe, ” Monthl~’ Labor Review, vol. 106, August 1983, p 7,

‘“Barry Newman, “In Britain, the Jobless Tend to Stay Jobless as Hirers Shun Them,” The Wall SYreet)ourna], h4a} 7, 1984,

p, 24.

~l~hrjstopher Wood, “Another Turn of the Wheel, ” ‘f’he Economist, March 2, 1985, p. 3.

those of workers in other countries. U.S. involvement in world markets has increased, and

so has the proportion of the U.S. economy

which is exposed to foreign competition. In

some sectors, outmoded plant and equipment

diminish the competitiveness of U.S. industry.

In much of the manufacturing sector there is

great competitive pressure to invest in laborsaving machinery. Some service industries,

such as banking and insurance, face similar

pressure.

On the other hand, the greatest influx of new

jobseekers into the U.S. labor market is over.

According to many analysts, that flood of entrants was at least partially responsible for rising unemployment rates of the 1970s, Rates of

labor force growth have slowed and are expected to continue slowing down, Between

1970 and 1980, the labor force grew annually

by nearly 2.6 percent. The U.S. Bureau of Labor Statistics (BLS) forecasts that the labor

force will reach 131.4 million in 1990, which

means growth of less than 2.1 percent per year.

From 1990-95, BLS forecasts labor force growth

slowing to 1,0 percent per year. 52

Employment Growth

Overall employment grows when the number

of jobs created exceeds the number of jobs that

disappear. In the United States, published employment figures refer only to net developments, rather than aggregate numbers of jobs

created and lost, In general, the United States

loses about 8 percent of its jobs each year,

meaning that it must replace about half of its

job base every 5 years.53 Between 1970 and

1984, the United States added 26.3 million net

jobs. During the same period, the work force

increased by 30.7 million people, and unemsZRandolph Brown, “Demographics of the Current and Future

of American Work Force, ” Profit Sharing, vol. 32, November

1984, p. 6.

5sDavid L. Birch, Director, Program on Neighborhood and Regional Change, Massachusetts Institute of Technology, testimony

at joint hearings on Technology and Employment before the

House Committee on Science and Technology, Subcommittee

on Science, Research and Technology, and the House Committee on the Budget, Task Force on Education and Employment,

Serial No. 41 (Committee on Science and Technology), Serial

No. TF4-4 (Committee on the Budget), June 1983, p. 87.
154 ● Technology and Structural Unemployment: Reemploying Displaced Adults

ployment rose from 4.9 to 7.5 percent. The

large increase in the work force was the result

of two factors: the entry of most of the “baby

boom” generation into the labor market, and

the increase in the participation rate of women.

Between 1970 and 1982, the participation rate

of women in the U.S. labor force increased

from 43.3 to 52.6 percent, while the participation rate of men declined slightly,54 probably

because rising Social Security benefits made

it possible for a great many men to retire

earlier.

With this expansion came a slowdown in

productivity growth, which some analysts

argue was the result of the entry of a large

group of relatively inexperienced workers.

Others believe that the rush of new jobseekers

brought down wages, which made hiring new

people more attractive, in many cases, than

capital investment. While the rate of growth

of capital investment per worker declined,

employment increased.

The Shift to Services

Nearly all the increase in employment since

1970 has been in service sectors. Of the 26.3

million new jobs added to the U.S. economy

between 1970 and 1984, 23.3 million were on

nonagricultural payrolls; the other 3 million

were self-employed or employed in agriculture.

Of the 23.3 million added nonagricultural jobs,

S4MOY, op. cit., P< 47”

only 223,000, or 1 percent, were in manufacturing (table 4-1).

The slight rise in manufacturing employment

since 1970 conceals a shorter term trend. Manufacturing employment peaked in 1979 at 21

million people and has since fallen by more

than 1.6 million employees.55 The sectoral shift

toward service industries is long-standing. Jobs

in the service-providing industries began to

outnumber these in goods-producing industries

in 1922, and except for World War II have increased their relative share ever since. Job

creation figures indicate that the shift toward

employment in services is continuing. Between

1970 and 1984, manufacturing employment

grew by an average rate of only 0.04 percent

per year, while the number of employees on

private sector payrolls grew at over 2.1 percent

per year. Service employment increased at an

annual rate of 2.76 percent. The growth rates

of individual sectors ranged from 1.04 percent

SbThe decline in manufacturing employment may be overstated. After the 1970s, manufacturing employment fell and did

not recover fully until 2 to 4 years following the recession. The

recovery of manufacturing employment less than 24 months into

the current recovery may therefore be incomplete. On the other

hand, manufacturing employment fell between December 1984

and July 1985. While the recovery from the 1982 recession has

been somewhat more rapid than recoveries from other postwar

recessions, manufacturing employment has recovered more

slowly and less completely than in the past—in large part because of the trade deficit, never before such a prominent feature in a recovery. For a discussion on recovery of manufacturing employment after recessions, see Lynn E. Brown,

“Structural Change and Dislocated Workers,” New England Economic Review,” January/February 1985, p. 20,

Table 4.1.–Growth in Employment, Nonagricultural Payrolls, 1970.84

Number of new jobs

Sector (in thousands) Percentage of new jobs

Total private . . . . . . . . . . . . . . . . . . . . . . . . . 23,276 100.0

Goods producing . . . . . . . . . . . . . . . . . . . . 1,326 5.7

Mining . . . . . . . . . . . . . . . . . . . . . . . . . . . . 375 1.6

Construction . . . . . . . . . . . . . . . . . . . . . . 728 3.1

Manufacturing . . . . . . . . . . . . . . . . . . . . . 223 1,0

Service producing . . . . . . . . . . . . . . . . . . . . 21,952 94.3

Transportation and public utilities . . . . 655 2.8

Wholesale trade . . . . . . . . . . . . . . . . . . . 1,533 6.6

Retail trade . . . . . . . . . . . . . . . . . . . . . . . 5,214 22.4

Finance, insurance, and real estate. . . 2,020

Services . . . . . . . . . . . . . . . . . . . . . . . . . . 9,114 39.2

Government . . . . . . . . . . . . . . . . . . . . . . . 3,415 14.7

Note: Numbers do not add due to rounding,

SOURCE: U.S. Department of Labor, Bureau of Labor Statistics, Ernployment and Earnings, various issues.
Ch. 4—Emplyment and Worker Displacement ● 155

per year in transportation services (the highest paying service sector) to 4.29 percent per

year in “other services,” a BLS category that

includes hotels and other lodging facilities,

personal services, business services, auto repair and service, motion pictures, amusement

and recreation services, health services, and

miscellaneous services. In the last few years,

service sectors have accounted for the fastest

rates of growth in job creation (figure 4-8).

What kind of jobs are these new service jobs?

Some service jobs are good jobs by almost any

definition, but in general, poorly paid work is

more prevalent in service industries than in

manufacturing, Altogether, wages in nongovernmental service-producing industries, where

the great job growth is taking place, are lower

than in manufacturing. Of the 56.4 million employees in the private service-producing sector

in July 1985, 45.4 million—80 percent—were in

industries where production and nonsupervisory workers are paid less than the average

for similar workers in all private jobs, and substantially less than the manufacturing wage.

Average hourly earnings of nongovernmental

production and nonsupervisory workers in

services were $7.73, while comparable earnings in manufacturing were $9.53. The lowest

hourly earnings in any major sector were in

retail trade, in which 17.5 million production

and nonsupervisory workers made an average

of less than $6.00 per hour.56 As table 4-2 shows,

employment in many service sectors is concentrated in generally low-paid occupations

such as those of service, clerical, and sales

workers. In 1983, the average weekly earnings

of managerial and professional workers were

$440, compared to $305 for sales workers and

$258 for clerical workers. Production workers,

including precision production, craft, and repair as well as operators, fabricators, and

S13U. S. Department of Labor, Bureau of Labor Statistics, ~mp]oyment and Earnings, August 1985, tables B-1 and C-1, OTA

calculated the average hourly earnings of production and nonsupervisory workers in the nongovernmental service-producing

sector as the weighted average of earnings of workers in five

industry groups making up the sector: transportation and public utilities; wholesale trade; retail trade; finance, insurance, and

real estate; and services.

laborers, had average weekly earnings of $320.57

While employment in some service sectors is

more heavily weighted toward higher paying

managerial and professional jobs than manufacturing, almost all service sectors have greater concentrations of very low-paid people.

A frequently voiced concern is that many of

the jobs in fast-growing industries pay poorly

compared to jobs in declining industries. One

study showed that the average weekly earnings

of production workers in the 20 most rapidly

declining industries was $310, while the corresponding earnings of production workers in

the 20 most rapidly growing industries was

only $210.58 Of the 20 fastest growing sectors,

16 were service sectors. Only 6 of the most rapidly declining sectors were in services, while

10 were in manufacturing.

From the standpoint of the displaced worker,

the salient feature about the distribution of the

new U.S. jobs created in the last 15 years is that

a great many are low paid and of low status.

Without substantial re-education or retraining,

blue-collar workers laid off from declining industries are unlikely to be able to get jobs that

provide opportunities to recapture lost income

and status. Moreover, the working environment

of most of these jobs is completely different

from that of a traditional factory environment.

For workers used to the social culture, physical

conditions, hubbub, and noise of a factory, the

transition to working in an office, health care

facility, or restaurant is abrupt. The last major transition, from agricultural to manufacturing work, may have been less jolting for many

people.

Employment in Manufacturing

While manufacturing as a whole has not created jobs over the past decade and a half, some

STEar] F. MellOr, “weekly Earnings in 1983: A Look at More

Than 200 Occupations,” MonthJy Labor Review, January 1985.

OTA calculated the $320 as the weighted average of the earnings of operators, fabricators, and laborers ($276), and the earnings of workers in precision production, craft, and repair ($379).

Secited in Lucy Stetson Gorham, “U.S. Industry Employment

Trends From 1969 to 1995 and the Implications for Economic

Inequality,” master’s thesis, Department of City Planning, Massachusetts Institute of Technology, June 1984, pp. 20-22.
156 ● Technology and Structural Unemployment: Reemploying Displaced Adults

Figure 4-8.—Rate of Change in Private Nonagricultural Employment, July 1981 to May 1984a

–20 –15 - l o –5 o 5 10 15 20 25

Percent

aBa~ed on ~ea~OmllY ~dju~ted data includes only payroll employees.

SOURCE: U.S. Department of Labor, Bureau of Labor Statistics, establishment sutvey data.

manufacturing sectors have grown while others technology industries are in the manufacturhave declined. The so-called high-technology ing sector. Under the most liberal definition,

sectors are often identified as the job-creating only about 62 percent of the 12.6 million worksectors of the future, in contrast to mature industries like steel, automobiles, textiles, and workers greater than 1.5 times the average for all industries, apparel, which will probably continue to lose or 5.1 percent of total employment;

iobs gradually under the most favorable cir- 2. industries whose ratios of R&D expenditures to sales are

u

cumstances. more than twice the average for all industries, or greater

than 6.2 percent: and

High-technology industry employment varies, 3. industries that satisfy criteria concerning both the relative

depending on how high technology is defined, R&D expenditures and the proportion of technology-oriented

workers.

from 2.5 to 12.6 million (in 1980).59 Not all high- For a fuller discussion of these definitions, see U.S. Congress,

Office of Technology Assessment, Technology, Innovation, and

5QThe three definitions used by the BLS are: Regional Economic Development, OTA-STI-238 (Washington,

I. industries that employ a proportion of technology-oriented DC: U.S. Government Printing Office, July 1984), pp. 17-20.
Ch. 4—Employment and Worker Displacement ● 157

Table 4-2.-Occupational Distribution of Selected Industries

Percentages

Managers and Professional Technical Service Production and Clerical Sales

Industry officers workers workers workers maintenance workers workers

Manufacturing ... , . . . . . . . . . . . . 6.6 6.9 2.9 1.8 68.1 11.5 2.2

Banks, credit . . . . . . . . . . . . . . . . . 19.0 6.1 0.7 2.2 0.5 70.2 1.2

Securities and commodities

brokers . . . . . . . . . . . . . . . . . . . . 17,2 14.2 1.5 2.4 1.3 44.3 19.0

Insurance, real estate . . . . . . . . . . 15.5 10.3 1.2 9.5 8.5 40.9 14.1

Hotels, etc. . . . . . . . . . . . . . . . . . . . 6.8 2.0 0.2 65.4 8.0 16.4 1.2

Personal services . . . . . . . . . . . . . 11.6 5.1 0.3 35.9 28.0 15.9 3.2

Business services . . . . . . . . . . . . . 9.0 12.5 5.7 26.2 14.1 28.7 3.8

Auto repair . . . . . . . . . . . . . . . . . . . 14.9 0.9 0.1 1.5 64.9 15.5 2.2

Miscellaneous repair. . . . . . . . . . . 13.8 2.3 6.2 1.3 57.7 13.8 4.9

Health services . . . . . . . . . . . . . . . 5.9 20.9 17.7 32.6 4.2 18.5 0.1

Legal services . . . . . . . . . . . . . . . . 6.7 38.0 0.3 1.5 53.5 –

Wholesale trade, durables . . . . . . 11,2 5.7 4.2 0.9 27.6 29.1 21.3

Wholesale trade, nondurable. . . 10.2 3.6 0.7 2.0 35.1 28.0 20.5

General merchandise stores . . . . 9.2 2.5 0.2 5.8 11.1 24.6 46.5

Food stores . . . . . . . . . . . . . . . . . . 10.4 1.4 0.1 11.1 27.5 32.7 16.7

Eating and drinking. . . . . . . . . . . . 7.6 0.4 — 85.3 1.1 4.2 1.2

SOURCES: U.S. Department of Labor, Bureau of Labor Statistics, “Occupational Employment in Transportation, Communications, Utilities, and Trade,” Bulletin 2220

(Washington, DC U S. Government Printing Office), December 1984, p. 6; U.S. Department of Labor, Bureau of Labor Statistics, “Occupational Employment

in Mining, Construction, Finance, and Services, ” Bulletin 2186 (Washington, DC: U.S. Government Printing Office), February 1984, p. 5; U.S Department

of Labor, Bureau of Labor Statistics, “Occupational Employment in Manufacturing Industries, ” Bulletin 2133 (Washington, DC U S. Government Printing

Office), September 1982, p 4.

ers in these industries—some 7.7 million employees—worked in the manufacturing sector.

Under the most restrictive definition, all 2.5

million high-technology employees worked in

manufacturing. Whatever the definition, hightechnology employment grew faster than total

wage and salary employment between 1972

and 1982. Under the broader definition, employment grew by 20 percent; under the narrower,

by nearly 40 percent.60

High-technology employment probably will

not compensate for lost blue-collar jobs in other

manufacturing sectors for two reasons. First,

employment in some high-technology industries is increasingly skewed toward managerial

and professional occupations, again affording

the worker displaced from traditional manufacturing few options. For example, production

jobs in the semiconductor industry have been

going offshore,61 leaving the industry in this

country with a heavier concentration of managers and professionals. Moreover, high-technology industries account for only 3 to 13 percent of employment (depending on definition),

and even rapid growth may not offset losses

eOIbid., pp. 19-23.

O]John A, A]ic, Martha Ca]dwel] Harris, and Robert R, Miller,

“Electronics in the World Economy, ” mimeo, p. 17,

in other parts of manufacturing, which account

for far more jobs.

Second, high-technology manufacturing, like

many traditional manufacturing sectors, has

problems with foreign competition. In many

electronics industries, Japanese and other manufacturers have made inroads into areas of

former U.S. strength. In consumer electronics,

for example, many U.S. firms succumbed over

the last decade to pressure from Japanese,

Korean, and Taiwanese manufacturers, Few

radios or black-and-white televisions are made

in the United States today, and color television

manufacture is mostly an assembly operation,

No video cassette recorders are made in the

United States, and import penetration of home

and auto radios and stereo systems was over

76 percent in 1982.62

Other electronics sectors, such as semiconductors and computers, are still strong, but

have become much more vulnerable to foreign

competition. The trade balance in semiconductors fell from a surplus in 1980 to a deficit

EZU .s. Congress, Office of Technology Assessment, international Competitiveness in Electronics, OTA-ISC-200 (Washington, DC: U.S. Government Printing Office, November 1983), pp.

11-12.
158 • Technology and Structural Unemployment: Reemploying Displaced Adults

of nearly $3 million in 1984. The trade surplus

in computing equipment fell roughly 15 percent during that time. Employment in both

industries has been hurt; employment in computing equipment was down by nearly 32,000

between August of 1984 and August of 1985,

with nearly all the losses in production

employment. Total employment in the semiconductor industry fell by 7,200 between

August 1984 and August 1985; production

employment declined by 19,600 (more than

offsetting a rise in non-production jobs). Other

high-technology sectors are facing problems

too. Aircraft manufacture, long a bastion of

U.S. manufacturing strength, is facing strong

competition from Airbus Industrie of Europe.63

High-technology manufacturers, and U.S.

manufacturing in general, have been hurt by

unfavorable currency exchange rates. Yet in

some high-technology sectors, competitive

problems have other causes. Many high-technology sectors still lead in innovation, production costs, and technology over even the most

sophisticated foreign rivals. However, without

serious attention to such things as quality control, investment in modern capital equipment,

research and development, and the design of

manufacturing systems that integrate people

and machinery in cost-effective ways, the lead

could erode.64

High-technology industries are certainly a

bright spot in the U.S. economy. For instance,

while employment in computers is modest

compared to the job count in many other industries, it is quite clear that computer technology has created large numbers of jobs and

new enterprises throughout the economy. The

same is true of telecommunications. What is

not clear, however, is whether rapidly

changing technology will mean the United

States can continue to create enough new jobs

to avoid a crisis in the future. While many

analysts have concluded from past experience

53’’ Europe’s Airframe Makers Expand Penetration of Transport Market,” Aviation Week and Space Technology, vol. IZ2,

No, 11, Mar. 18, 1985, pp. 204-212.

Oasee, for example, U.S. Congress, International Competitiveness in Electronics, op. cit.; and John W. Wilson, “America’s

High-Tech Crisis, ” Z3usiness Week, Mar. 11, 1985, pp. 56-67.

that “technology creates more jobs than it destroys,” this is too simplistic a view. Technology does create jobs, but never alone; other

factors—e.g., general economic growth; government spending; and changes in world competition, demand, and population—are equally

important in affecting employment. It is more

accurate to say that technology creates jobs

only through advances that can increase demand for existing products or create new demand for new products. Therefore, there is no

evidence that technological advance alone will

continue to stimulate employment. It is not safe

to assume that high-technology sectors will

rescue the workers displaced from traditional

manufacturing sectors of the economy. Few

workers displaced from traditional manufacturing, especially unskilled or semiskilled

workers, can expect to make easy transitions

to high-technology industries. Those who do

will probably earn substantially less (if they

originally worked in the steel or automobile

industries) or little more (if they came from

apparel or textile industries) than they made

in traditional sectors.

Business Size and Job Creation

It is generally thought that small businesses

create more jobs than large ones. As a result,

some analysts believe that fostering small business will stimulate job growth. In much of Europe, where problems in creating new jobs have

recently been particularly acute, many governments have invested in programs to aid small

business, or help individuals to start new businesses. These programs have had a small, but

positive, impact on aggregate employment

growth, although often not enough to makeup

job losses from mass layoffs or closures of major employers.65

Do small businesses really create more jobs?

Will investing in small business spur employment growth? The available information is

equivocal, suggesting a need for caution. Evidence on job creation by size of business is

thin, but all quantitative studies conclude that

6SGraharn Todd, creating New Jobs in Europe: HO w Local Initiatives Work, Special Report No. 165 (London: The Economist

Intelligence Unit, April 1984), pp. 10-11.
Ch. 4—Employment and Worker Displacement ● 159

small establishments are responsible for more

than their share of net job creation, when

“share” is measured by the proportion of employment in various sizes of establishments.

Small establishments—those with fewer than

100 employees—were responsible for over 80

percent of net job creation between 1969 and

1976,

68 and 78 percent between 1978 and

1980. 67 Small establishments employ only about

49 to 54 percent68 of the private sector labor

force.

Establishment data, however, do not tell a

complete story. Small businesses are not the

same as small establishments. According to

Armington and Odle, while “ .. .91 percent

of businesses with employees have only a

single location . . . the other 9 percent that are

multi-location firms employ 62 percent of the

private sector work force and consequently

have a substantial impact on aggregate measures. ” Looking at job creation data from the

standpoint of firms rather than establishments,

the findings change markedly. Small businesses—

defined as establishments in firms with fewer

than 100 employees—employed 36 percent of

the labor force and generated 39 percent of net

new jobs between 1978 and 1980.69 Another

study reaches a different conclusion: it shows

that enterprises with 20 or fewer employees

accounted for 38.5 percent of net job creation

between 1976 and 1982, although they had only

about 20.5 percent of total employees.70 The

— —— 5eDavid L. Birch, ‘‘Who creates the Jobs?” The Public interest, fall 1981.

6TCatherineArmington and Marjorie Odle, “Sma]i Business—

How Many Jobs?” The Brookings Review, vol. 1, No. 2, winter

1982, pp. 14-17.

oaThere are three different databases that relate employment

to establishment and business size: the Unemployment Insurance (UI) database, the Dun and Bradstreet Market Identified

File (DMI), and County Business Patterns (CBP). CBP data show

54,5 percent of employment in small establishments [with less

than 100 employees), UI data show 51 percent of employment

in small establishments, and DMI shows 48.4 percent of employment in small establishments. Source: Bruce D. Phillips, Senior Economist, Office of Economic Research, Small Business

Administration, “A Comparison of Three Establishment-Based

Data Sources, the Dun and Bradstreet Market Identifier File

(DMI), County Business Patterns (CBP), and Unemployment Insurance (U.1,) Data, 1977 -1978,” mimeo draft.

89 Arlington and Odle, op. cit., p. 15.

70U. S. small Business Administration, The State of small Business: A Report of the President (Washington, DC: U.S. Go\’ernment Printing Office, May 1985), p. 22.

seeming contradictions of these studies have

not been resolved; the Small Business Administration simply reports that “[t]he 1978-1980

period appears to be an aberration. ” Whether

this is true, or whether the percentage of new

jobs created by small businesses varies for

identifiable reasons, is unknown. The preponderance of evidence seems to support the view

that small firms do indeed create more than

their share of new jobs; however, the evidence

is not very strong or consistent.

Job creation in the small-business sector is

also related to activity in larger enterprises.

Many larger businesses increasingly rely on

temporary and contract personnel to supplement their own work forces during times of

expansion. 71 In part, this is to avoid the costs

of hiring (the “social overhead”) and firing

(including severance pay and services to laidoff workers); the motive is also to maintain

stable and good relationships with the permanent work force. As a result, at least some of

the job creation of small businesses is dependent on growth in larger businesses. This kind

of job growth probably would not be greatly

affected by aid to small businesses.

There is some evidence that small establishments account for a disproportionate number

of first jobs. By examining first regular civilian jobs of males less than 22 years old, Schiller

concluded that small establishments account

for 67 percent of initial job attachments, while

employing 58 percent of the entire work force .72

This study does not clearly distinguish between

small firms and small establishments, and the

kinds of workers studied are too restricted to

allow general conclusion. However, it provides

suggestive evidence that small establishments

account for more hiring of new labor market

entrants than large business.

Job growth in small businesses–establishments or firms—is also quite volatile. Birch

concludes that:

TICarey W. English, “Behind Hiring of More Temporary Employees,” U.S. News and World Report, Feb. 25, 1985, p. 76.

TZBradley R. Schiller, ‘

( ‘Corporate Kidnap’ of the SmallBusiness Employee, ” Public Interest, summer 1983, pp. 72-87.

Unfortunately, Schiller does not distinguish “firms” from “establishments.”
160 ● Technology and Structural Unemployment: Reemploying Displaced Adults

The road to future growth is a tortuous one

indeed . . , Dynamic, job creating establishments appear to oscillate, or pulsate, constantly. Periods of expansion are the best

predictors of future decline, and declining

periods are the foundation upon which future

business growth is based, Stable firms, those

that have somehow isolated themselves from

the ups and downs in the world around them,

are the most likely to fail in the end . . . Just

as failure appears essential to our system, so

does instability.73

Other studies (Armington and Odle, and

Tietz) agree; Tietz notes an even greater degree

of volatility than Birch.74 Moreover, Tietz finds

73 Birch, op. cit., p. 8.

TqFindings are cited in Richard Greene, “Tracking Job Growth

in Private Industry, ” Monthly Labor Review, September 1982.

that the bulk of employment growth is concentrated in a small percentage of small establishments. Many small firms are born and die

within a very short time; firms that “make it”

often grow rapidly. At some point, small successful firms often turn into large ones, some

through continued growth, and some by acquisition. Sometimes, successful small firms acquire others, or are acquired by others. In the

latter case, some people may lose jobs. While

this kind of flexibility appears to be good for

the economy, it can be jolting for individuals,

for a large number of small businesses fail.

Flexibility in business creation, growth, contraction, and death may provide a degree of

overall economic stability which is not matched

at the individual level. Job security is not a

feature of employment in the small-establishment or small-business sector.
Chapter 5

National Displaced Worker Programs
Contents

Page

Overview and Findings ... , . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .163

The Job Training Partnership Act. . . . . . . . . ..........................163

Other Federal Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............165

Non-Federal Programs to Help Displaced Workers . . . . . . . . . . . . . . . ... .166

Labor Policies and Adult Worker Training in the United States and

Other Industrial Democracies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..167

The Evolution of Displaced Worker Programs . .........................168

Federal Employment and Training Programs: 1960-83 . ................168

The Job Training Partnership Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....170

The Employment Service and Unemployment Insurance . . . . . . .........172

Federal Displaced Worker Programs of the 1980s ..... . ...............173

Status of Title III Programs . . . . . . . . . . . . . . . . . . . . . . . . ................173

Issues in Implementing JTPA Title III . . . . . . . . . . .....................178

Trade Adjustment Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..196

The Employment Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...........198

Non-Federal Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .................204

Supplementing the Job Training Partnership Act. . . . . . . . . . . . . . ........205

Retraining Active Workers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...207

Community and Government Assistance to Prevent Plant Closings .. ....209

Labor Policies and Adult Worker Training in the United States and

Other Industrial Democracies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .......213

Labor Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...............213

Sweden . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .......................215

Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................218

List of Tables

Table No. Page

5-1.

5-2.

5-3.

5-4.

5-5.

5-6,

5-7.

5-8.

5-9,

Enrollments, Outcomes, and Selected Characteristics of Terminees,

JTPA Title III Program, October 1983-June 1984 . . . . . . . . . . . . . . . . . . . . 174

Enrollment and Outcomes in JTPA Title III Programs by State,

October 1983-June 1984 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............175

Percentage of Participants in Title III Displaced Worker Projects

Receiving Various Services, October 1983-June 1984.................183

performance Standards for Entered Employment Rates and Actual

Entered Employment Rates, by State, October 1983-June 1984 . .......184

Basic Skills Education Offered in Title III Programs: Percentage of

Clients Served, 1984 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...........186

Basic Skills Education Offered in Title III Programs: Percentage of

Funds Spent, 1984 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............186

State Definitions of Displaced Workers That Restrict or Extend

the JTPA Definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...........192

Workers Certified for Trade Adjustment Assistance,

Calendar Years 1975-84 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .........196

Trade Adjustment Assistance, Participants and Services,

Fiscal Years 1975-84 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...........197
Ch. 5—National Displaced Worker Programs ● 165

ing by 55 percent. In proposing the cut in

early 1985, the Administration cited a slow

rate of spending due to lack of demand for

extensive vocational retraining, and a large

carryover of unspent funds. Several other

factors contributed to the States’ initial

slow rate of spending: the inevitable delays in starting up a major new program

and, in many States, a conservative approach in saving funds for contingencies.

As States gained more experience with displaced worker programs, many spent at a

faster rate, and most had fully obligated

their Title III funds by the end of the 1984

program year (June 30, 1985). However,

State reports for program year 1984, which

became available in fall 1985, showed that

the carryover of unspent funds was still

large on an aggregated, nationwide basis.

In cutting funds for Title III, Congress

expressed no intent to cut the level of program services; both House and Senate

Appropriations Committees stated their

expectation that the carryover funds, together with the new smaller appropriation,

would be enough to maintain the same

program level. It appeared, however, that

because of differences in rates of spending and carryover funds among States, 23

States would have less money for services

to displaced workers in 1986 than their

1985 allocation. States that got an early

start in providing services and spent most

of their allocated funds might have to cut

services. Responding to this concern, Congress directed the Secretary of Labor to

give first priority for discretionary Title 111

funds to States that would otherwise have

to cut back services, and to keep Congress

advised of the possible need for supplemental funds. What effect the funding

changes will have on the stability, quality,

and level of services to workers is not yet

clear.

● A problem that became apparent as Congress considered fiscal year 1986 appropriations for Title 111 is that reports on State

programs are neither timely nor adequate.

The reports are due 6 weeks after the end

of the program year (end of June), but are

●

usually not complete until several weeks

later. Thus, when Congress is considering

the budget for the following year in the

spring through the fall, the latest State

reports on program activities are several

months to more than a year old. Moreover,

information in the reports is scanty. The

Labor Department requires that States report only the amount of Title III funds

spent during the year, numbers of workers served, numbers officially leaving the

program, numbers placed in jobs, and a

few characteristics of participants. The

reports do not include information on obligation of funds, only on spending; nor do

they state how many workers are receiving what kind of service (e. g., vocational

skills training, remedial education, relocation assistance, job search assistance, and

on-the-job training).

Federal direction and oversight of the

JTPA employment and training programs

are minimal. While some State officials

welcome the noninterventionist policy of

the U.S. Department of Labor, others are

fearful that, without guidance from the Department, some project services will be disallowed by Federal auditors. Some States

have imposed tight regulations and considerable paperwork requirements on Title 111 projects to avoid trouble with audits

later. One Labor Department service that

many States would like is more exchange

of information about Title 111 practices in

other States, and about their successes and

failures in providing services.

Other Federal Programs

Trade Adjustment Assistance (TAA) is a major Federal program open to displaced adult

workers who lost their jobs due to foreign competition. Although much reduced from its 1979-

80 peak, TAA was still funded at about $70 million per year and served some 30,000 workers

annually in 1984-85. For eligible workers, TAA

offers extended unemployment benefits, training assistance, and help with relocation to find

a new job. Unlike the Title III program, TAA

extends income support to workers in approved
166 ● Technology and Structural Unemployment: Reemploying Displaced Adults

training, and it provides more generous relocation help than most Title III projects. TAA

authority technically expired at the end of 1985,

when Congress failed to pass the budget reconciliation bill that proposed a longer term reauthorization of TAA. A continuing resolution

was passed, which allowed certified eligible

workers to continue to receive relocation and

retraining assistance through fiscal year 1986.

However, the full TAA program may be revived, as the 99th Congress is expected to give

it further consideration in the second session.

The nationwide network of federally funded

Employment Service (ES) offices plays a substantial role in serving displaced workers. Most

commonly, the local Title 111 project buys from

the local ES office services such as placement

or helping clients to learn job search skills.

Without the funds from Title III projects, ES

offices could not offer displaced workers such

services as assessment, job counseling, job development, and referral to suitable training.

Congress has shown special interest in two

services that the ES system can provide. First,

JTPA, like other employment and training laws

before it, calls for the Secretary of Labor to

establish a computerized interstate system to

pool ES job orders nationwide and match applicants with job openings. The Interstate Job

Bank, in operation since 1984, goes some way

toward the goal of linking the State ES networks into a national system. However, the

bank’s coverage is limited to hard-to-fill technical and professional jobs, and it is by no

means fully automated. Technologically, the

system could be fully automated, but first many

State systems would have to be upgraded. The

costs of a fully automated interstate job bank

have not been carefully estimated.

It maybe questioned whether the benefits of

fully computerizing the interstate job bank and

extending its coverage to lower paid, lower

skill jobs would be worth the cost, considering that an interstate job bank is useful only

to workers who might want to relocate. However, such a system might encourage the relocation of a broader range of workers; if it

proved effective it might also encourage more

listings by employers and more applications by

well-qualified workers. Information is scanty

on both the costs and benefits of a fully computerized nationwide system, or on the intermediate step of upgrading State systems.

JTPA also calls on the Labor Department to

help States provide detailed information about

local labor markets. The weakest element in local labor market information is data on occupations currently in demand. One reason is

that State ES systems do not have the expert

staff and funds to analyze information that is

currently collected. Cuts in Federal funding in

the last few years have led some State ES

offices to reduce research and analysis staff.

Federal assistance to States for collection of occupational data on a State and substate basis

may also be reduced. The Administration opposes Federal spending for labor market information that is not explicitly required by law

or strictly related to national labor market information programs,

Non-Federal Programs to Help

Displaced Workers

A number of States have set up their own

programs to aid displaced workers. A few national collective bargaining agreements have

established funds for the same purpose (e.g.,

the United Auto Workers’ agreements with

General Motors and Ford for retraining funds).

A major element in both the State and private

programs is retraining of active workers to

avoid displacement. JTPA does not cover this

kind of activity. The State and private preventive retraining programs are funded at tens of

millions of dollars per year; by far the greater

share of training and education of active workers is done by employers, who spend billions

per year on these activities.

Some States and communities have also undertaken to help firms that are in danger of going out of business. The point is not only to

avoid the costs of displacement for workers

and their families, but also to preserve the economic life of communities. In a dynamic economy, some plant closings and labor shifts are
Ch. 5—National Displaced Worker Programs ● 167

inevitable, but not every closing is unavoidable.

Key considerations for State governments or

communities considering efforts to save threatened firms are: 1) Is there enough time to adopt

a corrective strategy? 2) Are there realistic

prospects for the firm’s profitability that are

likely to attract alternative investors? 3) Are

management and labor willing to make sacrifices to create a more productive and profitable enterprise? In many cases, plants can be

saved only at the cost of some jobs as productivity improves. States and communities can

help troubled firms in several ways, including

promoting labor-management cooperation; establishing continuing programs, such as rapid

response teams, technical consulting services,

and flexible financing; and, as needed, helping to find new financing or a new owner.

Labor Policies and Adult Worker Training

in the United States and Other

Industrial Democracies

Many industrialized nations have adopted labor policies that are designed to deal with employment problems and to improve the contribution of labor to national competitiveness.

Among them are programs for the retraining

and reemployment of adult displaced workers.

Experience with such programs in other industrial democracies may provide useful lessons

for the United States, keeping in mind that policies which succeed in other cultures do not

always travel well.

An example is Sweden’s large and costly labor programs, which account for 2 to 3 percent of the country’s gross national product,

and generally provide services to 5 or 6 percent of the labor force per year. The major services are wage subsidies, retraining, and public service employment. This combination has

helped to keep Swedish unemployment rates

below 3.5 percent even in the recession of the

1980s, when unemployment rates in large

European countries and in the United States

were 10 percent or more. Sweden’s inflation

rates since 1971 have been about average for

European countries, and generally above those

in the United States.

A Swedish Government agency operates

what is generally considered a well-run adult

training program and nationwide employment

service. Business and labor are involved at all

levels in determining the kind of training

needed. Many laid-off workers, especially the

less skilled, enter training; while in training

they receive stipends roughly equal to unemployment insurance. The Swedish system also

provides individualized job-hunting services

for workers who do not require training. Rapid

response, to avoid long layoffs, is emphasized.

Mandatory advance notice of plant closings allows early action to assist displaced workers.

Major drawbacks to the Swedish system, besides its cost, are some untoward effects on equity and efficiency. Established workers are the

main beneficiaries of the system, not those just

entering the labor force. Also, the system probably depends in part for its success on having

immigrant guest workers take less secure jobs.

The system may discourage worker mobility,

and industry innovation and entrepreneurship.

In Canada, labor policy is a less formal social partnership between business, government, and labor than a number of selective interventions by the national government to

correct deficiencies in the private market.

Nonetheless, Canadian labor programs are

large; in fiscal year 1984, the national government spent $1 billion of its $89 billion budget

for adult training programs alone. About 2.3

percent of the labor force took part in government-sponsored training. Training courses are

usually lengthy (averaging 1 year) and trainees

are eligible for extended unemployment insurance or allowances.

A point of practical interest to U.S. policymakers is the positive example of Canada’s Industrial Adjustment Service (IAS). At modest

expense to the taxpayer (about $108 per year

for every worker served), this small federal

agency gives effective reemployment assistance (not including expenditures for retraining) to workers displaced by plant closings.

This is accomplished by efforts at the plant

level to turn up jobs. In fiscal year 1982-83, the

Canadian IAS program served about 36,000

workers displaced in plant closings and large
168 ● Technology and Structural Unemployment: Reemploying Displaced Adults

layoffs–equivalent to approximately 350,000

workers in the much larger U.S. labor force.

This suggests that more effective delivery of

readjustment services to displaced American

workers might stimulate higher levels of participation than the 4 or 5 percent currently

served by JTPA Title III projects.

Despite Canada’s active policies to help displaced workers find jobs and to provide retraining to adults, Canadian unemployment rates

have been high relative to those of most industrialized nations in the past dozen years, and

were somewhat higher than U.S. rates (an average of 6.8 v. 6.3 percent from 1970 through

1981). Canada was hit very hard by the recession and had not recovered in 1984, when its

unemployment rate was still over 11 percent.

THE EVOLUTION OF DISPLACED WORKER PROGRAMS

U.S. displaced worker programs originated

in the automation scare of the late 1950s and

early 1960s, when unemployment was on the

rise and thousands of workers were losing jobs

in industries undergoing structural change.

The Federal Government, some of the States,

private business, and labor unions all became

involved in helping displaced workers.

Federal Employment and Training Programs:

1960-83

The first Federal program for retraining and

reemployment of displaced adult workers since

the Great Depression was established in 1961,

under the Area Redevelopment Act (ARA).

During his West Virginia travels in the 1960

Presidential campaign, John F. Kennedy pledged

Federal assistance to lift the Appalachian region out of its long decline and to help chronically unemployed workers of the area to find

jobs. One result of this pledge was the ARA

program, funded at $14.5 million and available

only to unemployed or underemployed workers in depressed areas. It offered free 16-week

training courses and provided allowances equal

to unemployment benefits during training.

Other Federal programs were combined with

this retraining to bolster economic development in depressed areas, especially Appalachia.

The Manpower Development and Training

Act (MDTA) of 1962 created a much larger displaced worker program. MDTA was adopted

in response to a rising national unemployment

rate (approaching 7 percent in 1961) and to

growing fears that technological changes were

radically and permanently altering American

industry, reducing jobs, and displacing midcareer adult workers. Under MDTA, unemployed and underemployed workers could take

retraining courses of up to 1 year and draw a

weekly allowance equal to unemployment benefits. Originally funded at $100 million a year,

the aim of the program was to retrain adults,

especially those displaced by technological

change.

Within a year or two, the focus of Federal

training efforts began to shift. The unemployment rate dropped and fears about automation

faded. Public and congressional concern turned

from displaced adult workers to the disadvantaged—poorly educated, unskilled workers

with unstable work histories, and youths with

no job experience at all. Congress amended

MDTA in 1963 to allow spending of one-quarter of the funds on training for youths under

22, and money was also provided for literacy

training. The following year, President Johnson declared his War on Poverty, proposing

new, bigger programs for job training and job

creation, but now targeted to disadvantaged

young people and unemployed heads of households, many of them welfare recipients.

Throughout the 1960s and 1970s most of the

focus remained on disadvantaged workers. The

Comprehensive Employment and Training Act

(CETA), signed into law by President Nixon in

1973, changed the mechanisms but not the

main goal of the program, namely to help people handicapped by poverty, race, age, disabil-
Ch. 5—National Displaced Worker Programs ● 169

ity, or limited education to get a job. CETA

consolidated nine earlier programs (including

MDTA); transferred the responsibility for running them from the Federal Government to 476

prime sponsors, broadly representative local

committees acting under the direction of mayors,

county officials, or in some cases governors;

and added a large new public employment

component. As unemployment rose during the

1970s, the CETA program grew from $1.4 billion in 1973 to $10.3 billion in 1979, and public sector employment became much larger

than training, By the end of the decade, training accounted for only one-quarter of the money

spent on the program. Box 5A briefly describes

the results of government-sponsored adult

worker training programs of past years—MDTA

and the training component of CETA.

Programs to help adult displaced workers did

not drop completely out of sight during the

later 1960s and 1970s. Most of the programs

were quite small and targeted specifically to

groups whose jobs might be affected by particular congressional actions. For example, loggers, sawmill workers, and others who might

be displaced when Congress established the

Redwoods National Park got special benefits

in the Redwood Employee Protection Program.1

By far the largest of these special programs

was Trade Adjustment Assistance. It was established in 1962 to compensate and retrain

workers who lost their jobs to foreign competition due to lowered tariffs. TAA reached few

workers in the next 12 years because proving

that job losses were caused by lowered tariffs

and certifying the affected workers was too difficult. In 1974, after a new round of tariff reductions, Congress liberalized TAA, making

eligibility easier and extending benefits.

The revised TAA offered a generous benefits package to groups of workers who lost their

jobs as a consequence of foreign competition:

income maintenance at a higher level and for

a longer period than unemployment insurance

IFor a description of these special programs, see U.S. Congress, House Committee on Ways and Means, Federal Provisions

for Special Employee income Protection Programs and the Unemplo~’ment Insurance Program, Committee Print 96-49, Feb.

15, 1980.

provided, plus training and relocation assistance. In its first 4 years (fiscal years 1976-79)

the revised TAA program cost about $844 million, providing assistance to about 500,000 displaced workers. But in 1980 and 1981, with.

large layoffs in the auto industry, spending shot

up to $3.1 billion. Over 800,000 workers received TAA assistance in those 2 years.

From 1976-81, TAA funds went mainly to income maintenance, with little spent for retraining or other forms of readjustment assistance.

Only $43 million of $3.9 billion, or $11 of every

$1,000 spent, went for training, out-of-area job

search, and relocation. Of the 1.4 million workers eligible for TAA, only 48,000 (3,5 percent)

entered training, and 10,000 (fewer than 1 percent) got job search or relocation assistance.

Only about one-third of those eligible for training ever heard about it, and the funds for training had to be borrowed from CETA, which had

many other groups to serve. Moreover, bureaucratic delays in certifying workers’ eligibility

were very long. The average worker waited 14

months after layoff before getting his first TAA

check, and by that time, half the affected workers were back at work.

Congress undid most of the income maintenance provisions of TAA in 1981. Cash benefits were cut back to the level of unemployment

insurance (UI) payments, and were allowed to

begin only after UI eligibility was exhausted.

The training component of the program was

kept alive, and in 1982 Congress earmarked

funds for it ($25 million) for the first time.

In the 1978 CETA amendments, Congress

had included a small program for displaced

workers, As CETA neared its expiration date

in 1982 and Congress considered whether to

renew it, displacement of experienced adult

workers was once again an urgent issue. With

the economy in the trough of the deepest recession since the 1930s, with millions of workers

on the streets, and with the distinct possibility that many would never return to their old

jobs in the mill or on the assembly line, Congress enacted for the first time in 20 years a

broad new program to assist displaced workers. It is contained in Title III of the Job Training Partnership Act of 1982, successor to

CETA.

Ch. 5—National Displaced Worker Programs ● 171

Two other important changes responded to

criticisms of CETA. First, income support for

trainees was much diminished. Critics had

charged that the training allowances under

CETA were quite often higher than the wages

trainees could earn in paid employment, thus

encouraging people to enroll for the wrong reasons. Others argued that many workers simply cannot afford training unless some form

of income support is available, even if not as

much as CETA provided. In the end, JTPA did

not explicitly prohibit income payments to

trainees, but did specify that 70 percent of the

Federal funds going to JTPA projects must be

spent on training and related employment services, leaving no more than 30 percent for administrative costs and support services. A limit

of 15 percent was set for administrative expenses. Even though the law does not impose

a strict 15 percent limit on support services

payments, 2 this level has served as a rough

guide to PICs and State and local officials. In

the first 2 years of implementation, JTPA projects spent much less than 15 percent on support services.

Finally, JTPA specifically mandates performance standards for evaluating job-training programs, with rewards for success and sanctions

for failure. The criteria for success of displaced

worker programs are “placement and retention

in unsubsidized employ merit,” CETA contained

no such explicit statutory requirements for performance.

JTPA’s Title III (the section directed to adult

displaced workers) focuses, like the rest of the

law, on training. But training “and related employment services” are broadly enough defined

to include many forms of reemployment assis2Title I IA of JTPA, for disadvantaged workers, specifies the

conditions under which a waiver may be granted for exceeding the 30-percent limit on supportive and administrative services, Supportive services may include needs-based income payments and services that enable workers to participate in training,

such as health care, transportation, and child care. In Title 111,

for displaced workers, there is a 30-percent limit on spending

for supportive services, wages, allowances, stipends, and costs

of administration. The limit applies to Federal funds provided

by formula to all of the States, but not to discretionary grants

made by the Secretary of Labor. In any case, the limit applies

to no more than half the total amount of Federal and non-Federal

funds available to Title 111 programs.

tance, such as counseling and job search services. Relocation assistance may also be provided. Exactly what services are provided,

how, by whom, and for whom, is left up to the

States. The only restrictions the law imposes

on eligibility are that workers receiving benefits must fall into one of the following categories:

10

2.

3.

they have been terminated or laid off or

have received notice of layoff, are eligible

for unemployment insurance or have exhausted it, and are unlikely to return to

their old industry or occupation; or

they have been laid off or received notice

of layoff in a permanent closing of a plant

or facility; or

they are long-term unemployed and have

little chance of finding a new job in their

old occupation or one similar to it in the

area where they live; this includes older

people whose age creates a barrier to employment.
172 . Technology and Structural Unemployment: Reemploying Displaced Adults

Title III accounted for $223 million of the

$3.8 billion allotted to JTPA in program year

1984. 3 State contributions from non-Federal

sources are required to match about threequarters of the Federal Title 111 money. As

much as half of the match, however, can be UI

payments to participating workers; also, the

match does not have to be in cash, but may be

in kind (e.g., office space and overhead contributed by community colleges). Altogether,

the Title III portion is a relatively small part

of the the whole JTPA program. Yet compared

with what was previously available in Federal,

State, and private programs for displaced

workers, it was a huge infusion of new money.

Before JTPA, there were a handful of displaced

worker projects. By mid-1985, even with the

very slow startup under Title 111, hundreds of

projects were in existence throughout the

Nation.

The Employment Service and

Unemployment Insurance

This brief history of Federal programs serving adult displaced workers would not be complete without a mention of the Employment

Service. Created by Federal law during the

Great Depression, it is the oldest government

service available to displaced workers, or anyone seeking a job. It was intended to serve the

entire Nation with clearinghouses to bring jobseekers together with employers trying to fill

job vacancies. Today, the system is a combined

Federal-State enterprise, with the Federal Government establishing standards, issuing guidelines, prescribing activities, and providing the

funds. The States are in charge of running the

ES offices, in 2,400 locations across the country,

In theory, an ES office can do nearly everything a displaced worker project can do, except pay for training. It can counsel clients,

help them sharpen job search skills, test them

to find out their vocational and educational

skills, refer them to training, contact employers

to turn up jobs for them (i.e., develop jobs), as

3

Federal funds under JTPA are provided to States in program

years lasting from July 1 to the following June 30, rather than

in Federal fiscal years from October 1 to September 30,

well as perform the traditional role of matching jobseekers with requests from employers.

In fact, for many reasons—not least that ES

staff has been stretched thinner over the years

as more duties were laid on and the labor force

grew—the ES usually provides very few of

these services. In 1981, 7 percent of all jobseekers coming to ES offices received counseling, 5 percent skills testing, 1 percent training

referrals, and 12 percent special efforts to develop jobs. Twenty-three percent of applicants

were eventually placed in jobs.4

A serious drawback to displaced workers

using the ES for its most basic and traditional

service—finding jobs—is that many of the jobs

listed with the ES are not very good. About 38

percent of the job listings flowing into ES

offices are in low-pay low-status occupations;

these jobs represent only 11 to 15 percent of

total U.S. employments Experienced workers

accustomed to middle-class wages may not get

much help from the ES in finding a good new

job. Moreover, the jobs listed with the ES are

few compared with jobs that may actually be

open on the “hidden job market, ” but are neither listed nor advertised. A Federal survey in

1973 showed that only 5.1 percent of people

looking for work in the previous year found

jobs through their local ES office.6

One of the principal extra duties ES offices

perform, in addition to job matching, is administering UI benefits, (The fact that most workers call the Employment Service “the unem4U. S. Department of Labor, Employment and Training Report

of the President (Washington, DC: U.S. Government Printing Office, 1982). These figures, for fiscal year 1981, are the most recent published on ES activities. The President’s Employment

and Training Report has not been published since 1982.

sNearly half the job cinders filled within l-day by ES offices

are for these occupations. They include domestic worker, restaurant worker, janitor, farm worker, unskilled construction laborer, and service station attendant. See U.S. Department of Labor, Employment and Training Administration, The Public

Employment Service and Help Wanted Ads [Washington, DC:

U.S. Government Printing Office, 1975), pp. 68-70,

BBy comparison, 34.9 percent were placed through direct application to employers, 26.2 percent through word-of-mouth information from friends and relatives, 13.5 percent through newspaper ads, 5.6 percent through private employment agencies,

and the remainder by various means. See U.S. Department of

Labor, Bureau of Labor Statistics, Jobseeking Methods Used b.v

American Workers, Bulletin 1886 (Washington, DC: U.S. Government Printing Office, 1975), p, 7.
Ch. 5—National Displaced Worker Programs ● 173

ployment office” is a tribute to the prominence

of this task.) The purpose of unemployment insurance, also created by Federal law during the

depression, is to provide temporary income

replacement for workers who have lost jobs

through no fault of their own.

The UI system covers 97 percent of wage and

salary workers, although only about 30 to 50

percent of unemployed workers have actually

collected benefits in recent years. The rest were

ineligible because they had been unemployed

so long that they exhausted their benefits, or

because they had never worked, or had not

worked long enough to qualify, or had left their

jobs voluntarily. The proportion of unemployed

workers eligible for UI in the United States is

low compared with other industrialized countries. For example, in August 1984, Sweden,

West Germany, and Japan compensated over

60 percent of their unemployed, while the comparable figure in the United States was 31

percent. 7

Regular UI benefits last 26 weeks. The permanent Extended Benefits program, the costs

of which are shared equally by the Federal Government and by the States, can provide another

13 weeks of coverage when the insured unemployment rate in a State is high;8 the triggers

7

For a complete description of the UI system, see U.S. Congress, House Committee on Ways and Means, Background Material and Data on Programs Within the)urisdiction of the Committee on Ways and Means, Committee Print 99-2, Feb. 22, 1985.

‘The insured unemployment rate in a State is the percent of

workers covered by unemployment compensation who are collecting benefits. This rate has been substantially lower than the

total unemployment rate in recent years, reflecting the fact that

half or fewer of unemployed workers were collecting benefits.

In 1983, when the civilian unemployment rate averaged 10.1 perare high enough that not many States qualified

throughout the entire 1982-83 recession. In January 1985 only Alaska and Puerto Rico were

eligible. The temporary Federal Supplemental

Compensation (FSC) program, authorized by

Congress for September 1982 through March

1985 and phased out thereafter, underwrote UI

extensions of 8 to 14 weeks in all States and

was paid for entirely by Federal funds. Some

displaced workers covered by union contracts

can also collect supplementary unemployment

benefits (SUBS); for the most senior workers,

SUBS together with UI may replace as much

as 95 percent of earnings and last as long as

2 years.

The two main objectives of UI are: 1) to provide a cushion for unemployed workers between jobs, and 2) to help stabilize the economy in recessions. For displaced workers who

have little hope of ever returning to their old

jobs, UI can serve another purpose as well: provide a source of income while the workers

learn job search skills or retrain for a new occupation. However, the relatively brief duration of UI, the low level of compensation in

some States, and the difficulty of collecting it

during retraining in some States and some circumstances all make it a somewhat uncertain

source of income for displaced workers who

choose training and education.

cent, the insured unemployment rate was 4.3 percent. The comparable figures for 1984 were 7.8 and 2.9 percent. In 1985, in

most States, the Extended Benefit program was activated if the

current 13-week average insured unemployment rate was 6 percent or above. Some States with high total unemployment rates

did not qualify for the program because their insured unemployment rates were much lower.

FEDERAL DISPLACED WORKER PROGRAMS OF THE 1980s

By 1985, displaced worker projects were nu- Status of Title Ill Programs

merous and diverse. Delays in gearing up the

new JTPA Title III program were common, but Participation

even so, more than 700 project sites existed in In the first 9 months of the Title III program’s

1985, either providing services or planning to

do so.9

existence—the transition year from October

1983 through June 1984—some 96,100 displaced

‘U.S. Congress, General Accounting Office, unpublished in- workers signed up for services; in the followformation. ing program year, July 1984 through June 1985,
174 ● Technology and Structural Unemployment: Reemploying Displaced Adults

177,700 workers were served, including 132,200

who were newly enrolled during the year. How

many of the workers eligible for services are

taking part in Title III programs is not certain,

but it appears that participation is below 5 percent. In calendar year 1983, 3.3 million adult

workers lost their jobs because of plant closings or relocations, abolition of positions or

shifts, or “slack work.”10 Some of the job losses

due to slack work may have been cyclical, but

most of the 3.3 million job losers probably

would fit the definition of displaced workers

that the States generally use to determine eligibility for Title III programs.11 Taking 3 million

as a rough estimate of eligible displaced workers in 1983, about 4 percent participated.

Of the workers terminating from Title III programs by June 30, 1985 (that is, officially leaving the program by that date), 65 percent were

male, 70 percent were white, 80 percent were

high school graduates, and 94 percent were

over 22 years old. Minority workers were overIounpub]ished information from the U.S. Department of Labor, Bureau of Labor Statistics (BLS), based on the survey of displaced workers described in Paul O. Flaim and Ellen Sehgal,

“Displaced Workers of 1979-83: How Well Have They Fared?”

A4cmth]y Labor Review, June 1985. The figure of 3.3 million includes all adult workers who lost jobs because of plant closings

and employment cutbacks, regardless of tenure on the job.

According to the BLS definition of displacement, which includes

tenure of 3 years on the job lost, about 1.5 million workers were

displaced in 1983. The BLS definition is more restrictive than

the definition of eligibility used by most States.

llsee the section entitled Eligibility, this chapter, for a dhwsion of States’ definitions of workers eligible for Title 111 services.

represented in Title III projects. They accounted

for 30 percent of participants, but only 14 percent of all displaced workers (following the Bureau of Labor Statistics definition) from 1979

to 1983 (see table 5-1 and refer to ch. 3).

Outcomes

Of the 177,700 displaced workers taking part

in Title III programs in program year 1984,

113,600 were terminees at the end of June 1985

(the rest remained in the program past that

date). Of the terminees, 74,200 (65 percent)

were reported as having “entered employmerit.”12 This entered employment rate, achieved

in a time of economic stability and moderate

growth, is comparable with the placement rates

of the MDTA programs for adult workers in

the 1960s.13

IZU. S. l)ep@rnent of Labor, Highlights of JTPA Program performance for Titles 11A and III During the JTPA Program Year

1984 (Washington, DC: Department of Labor, November 1985).

The other major source for data in this section was an OTA survey of officials of State Title 111 programs. OTA conducted the

survey by telephone from November 1984 through February 1985

and received information from 49 of the 50 States. Not all States

were able to supply all the information requested. Despite some

inconsistencies in the reporting and the incomplete data, the

telephone survey yielded information not available elsewhere

about the early implementation of Title 111 programs.

~aplacement rates for displaced workers in MDTA projects

were generally about 70 percent in the 1960s, also a relatively

prosperous period. See Gerald G. Somers, Retraining the Unemployed (Madison, WI: The University of Wisconsin Press,

1968).

Table 5-1.—Enrollments, Outcomes, and Selected Characteristics of Terminees,

JTPA Title Ill Program, October 1983-June 1985

October 1983-June 1984 July 1984-June 1985

New enrollments . . . . . . . . . . . . . . . . . . ., ., 96,100 132,000

Terminations . . . . . . . . . . . . . . . . . . . . . . . . . . 50,500 113,600

On board at end of period ., . . . . . . . . . . . . 45,600 64,100

Entered employment:

Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,500 74,200

Percentage of terminations . . . . . . . . . . . 720/o 650/o

Selected characteristics of terminees:

Male . . . . . . . . . . . . . . . . . . . . . . . ., ... , ., 68%0 620/o

Minority ... , ., . . . . . . . . . . . . . . . . . . ., . . 30 30

22 years and older . . . . . . . . . . . . . . . . . . . 95 94

High school graduate . . . . . . . . . . . . . . . . 78 80

NOTE: Figures are for 50 States, Puerto Rico, and Territories.

SOURCE: U.S. Department of Labor, Employment and Training Administration, “Highlights of JTPA Program Performance for

Titles 11A and Ill During the JTPA Transition Year (October 19K-June 1984),” November 19S4; and “Highlights of

JTPA Program Performance for Titles 11A and Ill During the JTPA Program Year 19S4 (July 19&-June 19S5).
Ch. 5—National Displaced Worker Programs . 175

Table 5-2 shows by State the number of dis- these data were available). Twenty-nine States

placed workers enrolled in Title III projects reported entered employment rates above the

during the transition year, the entered employ- national average, which was 72 percent in the

ment rates for those who terminated, and transition year; 10 States claimed entered emwages on the old job and the new one (where ployment rates of 90 percent or above.

Table 5-2.—Enrollment and Outcomes in JTPA Title Ill Programs by State, October 1983-June 1984

Total Entered Average hourly wage

State Enrollment terminated employment ratea Old job New job

Alabama . . . . . . . . . . . . . . . . . . .

Alaska. . . . . . . . . . . . . . . . . . . . .

Arizona . . . . . . . . . . . . . . . . . . . .

Arkansas . . . . . . . . . . . . . . . . . .

California . . . . . . . . . . . . . . . . . .

Colorado. . . . . . . . . . . . . . . . . . .

Connecticut . . . . . . . . . . . . . . . .

Delaware . . . . . . . . . . . . . . . . . .

Florida . . . . . . . . . . . . . . . . . . . .

Georgia. . . . . . . . . . . . . . . . . . . .

Hawaii . . . . . . . . . . . . . . . . . . . . .

Idaho. . . . . . . . . . . . . . . . . . . . . .

Illinois. . . . . . . . . . . . . . . . . . . . .

Indiana . . . . . . . . . . . . . . . . . . . .

Iowa . . . . . . . . . . . . . . . . . . . . . .

Kansas . . . . . . . . . . . . . . . . . . . .

Kentucky . . . . . . . . . . . . . . . . . .

Louisiana . . . . . . . . . . . . . . . . . .

Maine . . . . . . . . . . . . . . . . . . . . .

Maryland . . . . . . . . . . . . . . . . . . .

Massachusetts . . . . . . . . . . . . .

Michigan . . . . . . . . . . . . . . . . . .

Minnesota . . . . . . . . . . . . . . . . .

Mississippi . . . . . . . . . . . . . . . . .

Missouri . . . . . . . . . . . . . . . . . . .

Montana . . . . . . . . . . . . . . . . . . .

Nebraska . . . . . . . . . . . . . . . . . .

Nevada . . . . . . . . . . . . . . . . . . . .

New Hampshire . . . . . . . . . . . .

New Jersey . . . . . . . . . . . . . . . .

New Mexico . . . . . . . . . . . . . . . .

New York . . . . . . . . . . . . . . . . . .

North Carolina . . . . . . . . . . . . . .

North Dakota . . . . . . . . . . . . . . .

Ohio . . . . . . . . . . . . . . . . . . . . . .

Oklahoma . . . . . . . . . . . . . . . . . .

Oregon . . . . . . . . . . . . . . . . . . . .

Pennsylvania . . . . . . . . . . . . . . .

Rhode Island . . . . . . . . . . . . . . .

South Carolina . . . . . . . . . . . . .

South Dakota . . . . . . . . . . . . . . .

Tennessee . . . . . . . . . . . . . . . . .

Texas . . . . . . . . . . . . . . . . . . . . .

Utah . . . . . . . . . . . . . . . . . . . . . .

Vermont . . . . . . . . . . . . . . . . . . .

Virginia ..,...... . . . . . . . . . . .

Washington . . . . . . . . . . . . . . . .

West Virginia. . . . . . . . . . . . . . .

Wisconsin . . . . . . . . . . . . . . . . .

Wyoming . . . . . . . . . . . . . . . . . .

2,713

0

1,554

2,762

8,839

286

527

285

1,139

630

564

228

7,567

3,628

3,958

698

828

361

246

2,406

1,127

3,524

2,840

1,894

5,778

1,199

473

1,478

403

1,979

102

1,144

3,691

102

4,699

166

1,690

5,875

608

1,718

25

599

2,227

434

94

6,778

2,293

1,385

3,859

171

1,538 7 8 %

0 0

484 91

1,269 88

5,031 73

256 90

386 89

112 90

730 82

41 76

345 73

136 77

3,051 65

975 81

2,447 51

376 89

291 59

309 60

126 94

1,250 66

532 87

1,737 95

1,740 63

1,242 71

5,041 81

947 78

266 46

848 66

227 90

529 71

54 30

665 68

1,166 96

29 38

2,256 74

62 53

1,016 89

4,135 49

438 77

798 67

10 100

339 66

1,352 67

202 71

39 85

3,400 73

1,124 90

876 89

1,497 91

133 29

$ 5.15)

NA

10.46

NA

8.02

7.00-20.00

7.23

NA

NA

5.42

4.91

NA

NA

NA

7.88

6.11

NA

NA

NA

NA

4.00-12.00

NA

NA

4.44

7.53

10.00

6.00

6.84

8.50

NA

14.00-15.00

5.78

4.53-6.14

5.34

NA

3.00

NA

7.11

5.00-6.50

4.60

3.72

5.28

NA

7.26

4.60

NA

NA

6.24

7.81

7.55

$4.68

NA

8.81

NA

8.53

6.50-10.00

7,46

NA

4.20

5.03

4.94

8.13

6.61

NA

6.69

5.64

NA

NA

5.00

NA

6.00

9.47

6.25-7.00

4.18

7.93

7,92

5.58

5.78

6.00

NA

NA

6.19

4.10-4.88

4.87

5.35

5.00

6.14

8.80

4,50-5.00

4.73

5.14

4.94

NA

6.88

5.54

3.87

NA

7.71

6.33

7.32

NA—Not available.

a

The entered employment rate is the percentage of clients terminating from Title Ill Pro9rams who found lobs.

SOURCES: Fordataon enrollment, total terminated, and entered employment rates (except forColorado~ U.S. Departmentof Labor, Employment and TrainingAdministration, unpublished data Foraverage hourly wages on old and new jobs, OTA telephone survey The OTA survey was also the source for total terminated

and entered employment rates for Colorado. At the time Colorado reported to the Labor Department (June 30, 1984), no participants in the State’s Title

Ill program had yet found jobs. At the time of theOTA survey (from fait 1984 through winter 1985~90 percent of terminees had entered employment
176 ● Technology and Structural Unemployment: Reemploying Displaced Adults

The term “entered employment” may be

somewhat misleading as a measure of placement results of the programs. Since it is based

only on those who terminated from the programs, it is higher than and not comparable

with placement figures based on all participants in a program. (MDTA projects reported

on this basis, showing placements as a percentage of all who enrolled; so did the national dislocated worker demonstration projects of 1982

and 1983, described in ch. 6.) In a new program, entered employment rates may temporarily overstate favorable outcomes, since the

best qualified participants may find jobs first,

and thus leave the project first. The entered

employment rate for program year 1984 did in

fact decline to 65 percent, from 72 percent in

the transition year. In addition, anecdotal evidence suggests that some projects, trying to

show good placement results, do not even list

clients as enrolled until they are fairly certain

the client will be placed,

Also, entered employment rates include

recalls to old jobs as well as placement in new

jobs. This helps explain Michigan’s remarkably

high reemployment rate in the transition year.

The State’s biggest Title III project at that time

was the Pontiac Retraining and Employment

Program, serving nearly 2,200 auto workers

who had long been on layoff from General Motors plants. When auto manufacture picked up

in 1984, most of these workers were recalled,

and the project showed an entered employment

rate of 93 percent. The recalls also shed light

on Michigan’s reported average reemployment

wage of $9.47, the highest reported by any State

for the transition year (table 5-2).

Not all States with high reemployment rates

had the same experience as Michigan. Arizona,

for example, reported a 91 percent entered employment rate, but it was not due to recalls,

Sixty percent of the displaced workers served

by Arizona’s Title III projects had been connected with the copper industry, which was depressed in the mid-1980s and was not recalling many workers. Other Arizona clients, from

a variety of manufacturing industries, also got

new jobs, not recalls.

There may also be special reasons why some

States show extremely low reemployment

rates. New Mexico, for example, had just begun its displaced worker program at the end

of the transition year; the State’s entered employment rate of 30 percent was based on only

102 enrollees and probably is not representative.

The earnings data reported by States show

only moderate drops in wages for the displaced

workers who were reemployed with the assistance of Title III projects. Of the 30 States

reporting average old and new wages of their

clients, 19 reported lower reemployment wages.14

Six States reported average wage losses of as

much as 20 percent. Nine States reported

higher average wages on the new jobs; four

showed increases of 20 percent or more. In two

States, the new average wage was nearly identical with the old. On the whole, reemployment

wages were modest. According to a Labor Department survey of a sample of Title III projects, the average for participants finding new

jobs by March 1985 was $6.15 per hour.l5 The

average private sector wage was then $8.52 per

hour.

Funding and Spending

JTPA provides that Federal grants for displaced worker programs may be given to States

in two ways: by formula, or at the discretion

of the Secretary of Labor. Formula grants are

allocated to each State in accordance with its

relative share of all unemployed workers in the

country, its share of “excess” unemployed

workers (“excess” being defined as more than

4.5 percent of the civilian labor force), and its

relative share of people unemployed longer

than 15 weeks. At least three-quarters of all

JTPA Title III grant money must be allotted to

the States by formula grants and, except where

unemployment is high, the States must match

IQTA telephone survey.

q.J.s. Department of Labor, Employment and Training Administration, Division of Performance Management and Evaluation,

Summary of JTLS Data for JTPA Title IIA and 111 Enrollments

and Terminations During January-March 1985 (Washington, DC:

Department of Labor, August 1985]. The report includes data

for Title 111 programs for July 1984-March 1985.
Ch. 5—National Displaced Worker Programs ● 177

the grants dollar for dollar, in cash or in kind,

from public or private funds. Up to one-quarter

of the Title 111 money can be reserved for the

Secretary of Labor’s discretionary grants, which

go to benefit people affected by mass layoffs,

natural disasters, or Federal Government actions (e.g., relocation of Federal facilities), or

to people who live in areas of high unemployment or in designated enterprise zones. No

State match is required for the discretionary

grants.

In the 21-month startup period for JTPA programs, October 1982 through June 1984, the

States received about $201 million of Federal

money to support displaced worker projects.

For several reasons, spending for the new Title III program started up rather slowly. For

the first 12 months of that period (fiscal year

1983), displaced worker projects could apply

for JTPA grant money, but State Title III programs had not yet begun. The projects that received Federal funds during that time were

mostly ones already operating, such as six demonstration displaced worker projects that were

originally funded by CETA and other Labor

Department funds.

In October 1983, the JTPA program officially

began. States began to implement both their Title 11A programs (for disadvantaged workers)

and Title 111 programs (for displaced workers).

Whereas Title 11A was in some respects a continuation of CETA, with experience behind it,

Title III was brand new. Many States did not

begin serving displaced workers until nearly

the end of the transition year. By June 30, 1984,

States had spent $74 million, about 37 percent,

of the $201 million. More was in the pipeline,

however, A survey of 20 States showed that

they had obligated over 97 percent of their Title III funds for the year.16

At the end of program year 1984 (June 30,

1985), the carryover of unspent Title 111 funds

was still larger—about $184.5 million—despite

the fact that the pace of spending had picked

16 Robert F. Cook, et a],, Transition year ]mp]ementation of

the Job Training Partnership Act, report prepared for the U.S.

Department of Labor, Employment and Training Administration (Rockville, MD: Westat, Inc., 1985].

up. During the year, States had $343.5 million

in Federal Title III money available for spending (this included funds carried over from previous years plus new appropriations). Taken

altogether, the States spent $159 million, or

about 46 percent of the available funds. In a

telephone survey by the National Governors’

Association (NGA), 20 States reported on obligations as well as spending of their Title III

funds. They had fully obligated their formulafunded grants, and had obligated 89 percent

of all available money (formula and discretionary). States also reported to NGA that they had

spent 71 percent of their formula allocations,

and 31 percent of discretionary grants. *7

Location and Operation of Projects

Because of the flexibility JTPA affords, the

700-odd” current displaced worker projects vary

greatly, ranging from projects centered around

a single plant closing to services distributed

throughout the State in local offices, available

to any displaced worker who walks in. Operators of the projects are equally diverse. JTPA

gives control of displaced worker programs to

the States; in all but seven the Governor or

State agencies kept control of the Title III program instead of turning it over to local entities, the Service Delivery Areas (SDAs).18 Some

States designated existing agencies (often State

Employment Security Agencies, which operate the ES system) or a consortium of agencies

(often including the State departments of labor,

education, and economic development) to

deliver displaced worker services statewide.

More commonly, States decided that their existing agencies lacked the capacity to run the

new projects, and instead appointed a State

official to choose contract operators through

ITNational Governors’ Association, ‘‘Background Information

Regarding JTPA Title III Funding,” survey summary attached

to memorandum entitled Z,egisline (Washington, DC: National

Governors’ Association, October 1985),

IWDAS represent much the same kind of local governmental

bodies as prime sponsors under CETA. Under JTPA, a good deal

of authority over the job training programs for disadvantaged

workers (Title 11A) remains with the SDAS and their associated

PICS. Title 111 is different: States can keep full control of displaced worker programs if they wish to,
178 . Technology and Structural Unemployment: Reemploying Displaced Adults

competitive bids.l9 The result is a melange of

project operators, including State agencies,

local governments, community colleges, vocational technical schools, SDAs, PICs, companies, unions, and community-based organizations.

Illinois, for example, established a network

of 23 centers for displaced workers, mostly in

community colleges, but a few run by such

operators as a county agency, a city agency,

a union council of building trades, and a

community-based organization. The Illinois

Department of Commerce and Community Affairs, which is in charge of the State’s program,

selected areas of high unemployment and economic distress in which to locate the centers.

Wisconsin has a different mix. In several

counties, the local ES offices dispense a broad

array of services to all eligible displaced workers. Other projects are targeted solely to workers displaced by technological changes in particular plants; they offer retraining to equip the

workers for jobs that depend on the new technologies.

Some States are concentrating on economic

development in using their JTPA funds, offering customized training to attract new businesses, or providing wage subsidies to employers in the form of 50-percent payment of

on-the-job training expenses. In these States,

the agencies responsible for economic development are likely to take a leading role in the

planning, and sometimes the management, of

Title 111 programs.

Service Mix

The different kinds of services that displaced

worker projects customarily offer are briefly

19AS of Ig64, 17 states had chosen to operate statewide Programs; 16 used State agencies and 1 contracted with the AFLCIO employment and training unit to run the program statewide.

Thirty-two States used requests for proposals to select contractors for individual projects, Seven turned JTPA funds over to

SDAS. (These numbers add to more than 50, because some States

used more than one method of allocating JTPA resources.) See

Wayne M. Turnage, et al., The Organization of Title 11 of the Job

Training Partnership Act in 50 States, report to the U.S. Department of Labor, Employment and Training Administration (Rockville, MD: Westat, Inc., 1984).

outlined in box 5B, with a rough indication of

their costs. Reflecting different local needs and

the different approaches that States have taken,

projects vary widely in the mix and range of

services they offer. In Maine, for example, the

Franklin County Community Action Council

operated a full-service project for workers displaced from two shoe factories, beginning with

pre-layoff services. Workers received counseling, prevocational competency training (i.e.,

basic literacy and math), skills training, job development, support services, and relocation

assistance. Other projects provide much more

limited options. For instance, where States are

using Title 111 programs for economic development, displaced worker projects tend to feature customized training or on-the-job training.

Some of the projects in several States (e.g.,

North Carolina, Rhode Island, and Tennessee)

offer only these services.

The mix of services now offered in all Title

III projects is difficult to determine. The Department of Labor does not require reports on

the service mix, although it does collect information on the subject from time to time on a

study or sample basis. Nor do the States, which

usually defer decisions on the service mix to

local project directors, have very precise information on the number. of participants receiving various services or on the amount of

funding devoted to each. Discussion of issues

related to the service mix in Title III projects

in 1984 and 1985 appears in the next section

of this chapter.

Issues in Implementing JTPA Title Ill

It is premature to make definitive judgments

about the sufficiency and effectiveness of the

JTPA Title 111 program in responding to the

problems of worker displacement. First, the

program is still young. Most States did not even

begin to organize their Title III programs until well into the transition year, which ended

in June 1984. Second, information about the

make-up and outcome of the programs is extremely scanty. The reports States are required

to submit to the Department of Labor on the

operation of their programs are brief and infrequent; they are submitted only once a year
Ch. 5

National Displaced Worker Programs  115
180 . Technology and Structural Unemployment: Reemploying Displaced Adults

as of the end of June and contain only minimal information on program activities. Supplementary studies sponsored or conducted by

the Labor Department add some information

to the annual reports, and OTA has collected

some additional data from States, but the sum

of information on how the Title III program

is progressing remains quite incomplete.

A few major points have emerged. The Title

III program, as noted above, served quite a

small number (probably no more than 5 percent) of the eligible workers in the transition

year. The number of workers served in the 1984

program year rose slightly, but estimates of the

eligible population are not available for any year

after 1983. The reasons for the low participation are not clear—whether it was due to a slow

startup of the program, or whether workers did

not know about Title 111 services, or thought they

did not need them, or thought the services were

not effective is unknown. The contrast with

neighboring Canada in numbers of displaced

workers served by a national program is considerable. As described later in this chapter,

Canada’s 2&year-old Industrial Adjustment

Service brings reemployment and readjustment

services to workers into plants hit by closings

or large layoffs, usually before the layoffs begin. In fiscal year 1982-83, about 36,000 Canadian workers received these services; this

translates to about 350,000 American workers,

since the U.S. work force is nearly 10 times as

large as Canada’s. In the 1983-84 transition

year, JTPA Title III programs in the United

States served the annual equivalent of about

128,000 displaced workers.

A second point is that the Title 111 programs

strongly emphasize prompt placement in a new

job, with retraining playing a relatively minor

role. Several factors influence this choice, including the stress placed by program directors

and business advisors on quick placement as

a goal, the low cost of this strategy, and the expressed desire of many displaced workers to

get back to work as soon as possible. Data on

how many workers are receiving training in

new or upgraded vocational skills are fragmentary, but overall spending figures for the Title

III program indicate that training is not a very

prominent feature. Vocational skills training

is relatively expensive, often the most costly

choice in displaced worker projects. Individual projects that are strongly committed to

retraining spend about $2,000 to $3,000 per

worker. In the Title III program during the

transition year, the Federal share of spending

was $768 per worker, and in program year

1984, $895 per worker.20

Third, in several important respects, the Title III program is working in accordance with

major emphases in the law. States are in overall charge of the programs, and the Federal role

is minor. The influence of private business is

strong, especially in the local PICs. Sixty percent of the PICs are reported to have a primary

or dominant role in local policymaking, and

another 18 percent are characterized as equal

to local officials in importance. The business

influence is felt in several ways, including an

orientation toward placement, low costs, and

marketing the program for greater credibility

with employers.2l The act’s requirement for

zOA]though states are required to match about three-quarters

of Federal Title 111 grants from non-Federal sources, a large part

of the match comes from I-H payments or in-kind contributions

from State, local, and private sources. Thus it is difficult to estimate the cash value of’ non-Federal contributions to the Title

111 programs.

Zlcook, et al,, Op. cit., pp. 12-13; Gary Walker, Hilary Feldstein,

and Katherine Solow, An Independent Sector Assessment of the

Job Training Partnership Act, Phase II: Initial Implementation

(New York: Grinker, Walker Associates, 1985); U.S. Senate, Committee on Labor and Human Resources, Oversight—job Training Partnership Act, hearing before the Subcommittee on Em-
Ch. 5—National Displaced Worker Programs ● 181

Photo credits: California Employment Training Panel

Retraining offers many displaced workers their best opportunity to get a new job with good pay and opportunities for

advancement. Some training courses are in high-technology occupations (cable television, left) and some in traditional

ones (cabinetmaking, right).

emphasis on training and related employment

services, rather than support services and

administration, has so far been satisfied. In the

transition year, Title III projects spent 17 percent for administration and only 6 percent for

supportive services; in program year 1984, 16

percent went to costs of administration and 7

percent to supportive services.22

ployment and Productivity, 98th Cong., 2d sess. (Washington,

DC: U.S. Government Printing Office, 1984) and Preliminary

Oversight on the job Training Partnership Act, report prepared

by the Subcommittee on Employment and Productivity (Washington, DC: U.S. Government Printing Office, 1984).

ZZu. s. Department of Labor, Highlights of JTPA program performance During the JTPA Transition Year (Washington, DC:

Department of Labor, 1984); and U.S. Department of Labor, Highlights of JTPA Program Performance During Program Year 1984,

op. cit, 1984,

These achievements in carrying out major intentions of the law are accompanied by some

concerns. The emphasis on rapid placement

of participants in jobs and low program costs

may tend to skew the service mix so that the

individual needs of some participants are not

met—such needs as training in new vocational

skills and improvement of basic reading and

math skills. Questions have been raised about

whether the Federal hands-off approach has

gone so far that States lack adequate information and technical assistance. Other issues

arose with the 55 percent budget cut for the

Title III program for fiscal year 1986. The discussion below considers issues such as these,

concentrating on those of particular interest

to Congress and other policy makers.
182 . Technology and Structural Unemployment: Reemploying Displaced Adults

Service Mix

On the basis of overall program spending

figures, it appears that retraining has not so far

been a large component of the Title III program. The question arises whether the program

emphasis on high placements and low costs

might bias the mix of services offered to displaced workers. Does the program create incentives to pay too much attention to shortterm outcomes and too little to the long-term

needs of the individual worker? In particular,

is skills training slighted simply because it costs

more than job search assistance? Is on-the-job

training (OJT) oversold because it virtually

guarantees high placement rates, at least for

one day after placement when the results are

recorded? Are needs for remedial or brush-up

courses in reading and math put aside, because

these courses do not bring immediate payoffs

in low-cost placements? Answers to these questions are not entirely clear, but a combination

of factors, including the program stress on

placements and low costs, and also client

desires, influence the service mix in Title 111

projects.

The quantitative information available on the

Title III service mix is not only limited, but may

be misleading. In a survey of selected Title III

projects, the U.S. Department of Labor found

that 31 percent of clients are initially assigned

to job search assistance, 25 percent to classroom training, 24 percent to on-the-job training, and 20 percent to “other services, ” which

include assessment, vocational or personal

counseling, or “pre-employment skills” services. This breakdown very likely understates

the number of participants receiving job search

assistance, since it reflects only the client’s initial assignment and does not include job search

services offered later to those who completed

classroom training or other services.23 In view

of the low overall per capita spending for the

Title III program in the transition year and program year 1984, the figures may also overestimate those receiving classroom training. The

definition of classroom training used in the LaZ3U. S. Department of Labor, Summary of J’ZZS Data for JTpA

Title 11A and Title III, op. cit.

bor Department survey specified that it includes basic education, skills training, or a

combination of the two, that it is usually conducted in a school-like setting, and that it provides the academic and/or technical competence required for a particular type of job.

In response to the OTA telephone survey,

State Title III managers emphasized their uncertainty about the service mix their clients

were receiving, but some did offer estimates.

Table 5-3 shows the results for the four most

frequently mentioned services: counseling, job

search training, on-the-job training, and vocational skills training in schools and institutions. 24 Of the States that replied, half or more

reported that at least 50 percent of participants

in Title III projects received counseling and job

search training. Most of the responding States

said that fewer than 50 percent of clients received on-the-job training and fewer than 25

percent got vocational skills training in institutions.

A contract study for the Labor Department,

looking at 23 local displaced worker projects

run by Service Delivery Areas, also found an

emphasis on job search skills training.25 More

than half the projects concentrated on training in such techniques as resume writing,

methods for locating employment, and group

job-finding efforts (job clubs). Some projects

supplemented these activities with counseling

and referral services. The study observed:

“Project operators believe Title III participants

need job search instruction more than institutional training.” Seven projects required clients

to attend job search training classes before they

were eligible for any form of skills training.

Five projects provided only assessment of

clients’ skills and experience, in addition to job

search assistance.

Z41n interpreting table 5-3, the reader should keep in mind that

the States had different amounts of information about participation in various services. Thirty-eight States gave estimates for

the percentage of their clients receiving on-the-job training, 34

for job search training, 31 for counseling, and 29 for vocational

skills training in institutions. The rest of the States may have

offered some of these services; in most cases where States did

not respond, they simply lacked information.

Zscook, et al., op. cit.
Ch. 5—National Displaced Worker Programs Ž 183

Table 5-3.—Percentage of Participants in Title Ill Displaced Worker Projects

Receiving Various Services, October 1983-June 1984

Percentage of Number of States reporting

participants provided Job search On-the-job Vocational training

the service Counseling training training in institutions

s 24% . . . . . . . . . . . . . . . 9 8 14 15

25 to 490/0 . . . . . . . . . . . . 3 7 11 7

50 to 74% . . . . . . . . . . . . 4 7 5 6

2 75%0 . . . . . . . . . . . . . . . 15a

12 4 1

Totals . . . . . . . . . . . . . . 31 34 38 29

aThirteen of these fifteen States reported that 90 to 100 percent of their Title Ill Clients received counseling.

NOTE: Total States reporting may not include all the States that offer the service in question. States’ information was incomplete on what services were provided to participants in local Title Ill projects.

SOURCE: OTA telephone survey

Nine of the twenty-three projects had designed specific skills training programs, usually short-term courses in educational and

training institutions. Twelve projects offered

some on-the-job training, but few relied on it

as the major focus of their efforts. One SDA

favored OJT because it provides income to

trainees, and others were attracted by the high

probability of placement once the OJT subsidy

ends.

In its survey of State Title 111 managers, OTA

questioned whether JTPA performance standards, required under the law, are having an effect on the service mix, JTPA directs the Secretary of Labor to set performance standards

to determine whether a program meets the

goals that Congress established. The Department of Labor issued such standards for the

transition year for Title 11A programs, setting

numerical values for seven measures of performance, including entered employment rates

for adults, youths, and welfare recipients (e.g.,

the number of people finding jobs in relation

to the number terminating from the program);

positive termination rates for youths (which includes achieving higher competency in basic

reading and math skills as well as finding a job);

costs per participant who entered employment

and costs per positive termination. States can

modify the nationwide standards to accommodate local economic conditions and the character of participants served.

The Labor Department had not yet set numerical standards for Title 111 by mid-1985, but

States were required to establish a standard for

entered employment for the formula-funded

portion of their Title III program. Forty States

reported by early 1985 that they had adopted

performance standards, eight of them using Title 11A standards and the others adopting separate Title III standards.26 By and large, the

standards were not overly demanding; only a

few States had trouble meeting them. Table 5-

4 shows the entered employment standard for

the States reporting it and the actual entered

employment rate in those States in the transition year. Only a few States include in their Title 111 performance standards anything beyond

costs and entered employment rates. Eleven

States reported that they have a standard for

reemployment wages, ranging from $4.20 to

$5.54 per hour; in two States (Massachusetts

and Wisconsin) the new wage must equal at

least 85 percent of the wage on the old job. Two

States (Washington and Wisconsin) said they

specify retention on the new job as a standard

(e.g., 90 percent of workers placed must keep

their jobs for at least 6 months to meet the

standard).

Responses to OTA’s survey indicated that

pressure to achieve higher placements and

lower costs probably issued less from the JTPA

performance standards than from the informal

goals that program managers and private sector policymakers were striving to achieve. One

State, Massachusetts, reported that it had set

qualitative goals as well as quantitative placeZeFour of the forty States reporting that they had established

performance standards for their Title 111 programs did not

specify what the standards were.
184 ● Technology and Structural Unemployment: Reemploying Displaced Adults

Table 5-4.—Performance Standards for Entered

Employment Rates and Actual Entered

Employment Rates, by State,

October 1983-June 1984

Performance standard

for entered Actual entered

State employment rate employment rate

Alabama . . . . . . . . . . .

Alaska. . . . . . . . . . . . .

Arizona . . . . . . . . . . . .

Arkansas . . . . . . . . . .

California . . . . . . . . . .

Colorado . . . . . . . . . .

Connecticut . . . . . . . .

Delaware . . . . . . . . . .

Florida . . . . . . . . . . . .

Georgia. . . . . . . . . . . .

Hawaii . . . . . . . . . . . .

Idaho. . . . . . . . . . . . . .

Illinois . . . . . . . . . . . .

Indiana . . . . . . . . . . . .

lowa . . . . . . . . . . . . . .

Kansas . . . . . . . . . . . .

Kentucky . . . . . . . . . .

Louisiana . . . . . . . . . .

Maine . . . . . . . . . . . . .

Maryland . . . . . . . . . .

Massachusetts . . . . .

Michigan . . . . . . . . . .

Minnesota . . . . . . . . .

Mississippi . . . . . . . .

Missouri . . . . . . . . . . .

Montana . . . . . . . . . . .

Nebraska . . . . . . . . . .

Nevada . . . . . . . . . . . .

New Hampshire . . . .

New Jersey . . . . . . . .

New Mexico . . . . . . .

New York . . . . . . . . . .

North Carolina. . . . . .

North Dakota. . . . . . .

Ohio . . . . . . . . . . . . . .

Oklahoma. . . . . . . . . .

Oregon . . . . . . . . . . . .

Pennsylvania . . . . . . .

Rhode Island . . . . . . .

South Carolina . . . . .

South Dakota . . . . . .

Tennessee . . . . . . . . .

Texas . . . . . . . . . . . . .

Utah . . . . . . . . . . . . . .

Vermont . . . . . . . . . . .

Virginia. . . . . . . . . . . .

Washington . . . . . . . .

West Virginia. . . . . . .

Wisconsin . . . . . . . . .

Wyoming . . . . . . . . . .

65.0

48.8

50.0

72.0

55.0

60.0

58.0

55,0

51,8

d

55.0

65.0

58.0

55.0

80.0

55,0

75.0

58.0

60.0

60.0

58.0

68.0

56.0

58.0

52.0

72.0

58.0

60.0

58.0

58.0

e

65.0

63.1

58.0

58.0

58.0

60.0

60.0

d

78

91

88

73

90

89

90

82

76

73

77

65

81

51

89

59

60

94

66

87

95

63

71

81

78

46

66

90

71

30

68

96

38

74

53

89

49

77

67

100

66

67

71

85

73

90

89

91

29

aNo clients were served in Alaska’s Title Ill program in the tranSitiOn Year.

bNo information available.

cTitle Ill standard not established.

dstandard established but not specified in reply to OTA sur_vQY.

eln Pennsylvania, each Service Delivery Area sets Performance standards.

SOURCES: U.S. Department of Labor, Employment and Training Administration,

unpublished data, for actual entered employment rates (except for

Colorado)” OTA telephone survey for entered employment rate

performance standards and actual entered employment rate for

Colorado.

ment and cost goals. The qualitative goals included involvement of labor, PICs, communitybased organizations, and community development corporations in Title III programs; encouraging program innovation; and a mandate

for equal access to the program for “linguistic

and cultural minorities. ”

Twelve of 42 State Title III managers said

that the State’s performance standards or goals

had a dominating effect on the service mix in

projects. Several volunteered that the effect

was highly positive. Most saw no conflict between the interests of the clients and the goals

of “getting people out quickly” and “stretching dollars.” Like many of the directors of local

projects, State Title III officials regard shortterm, inexpensive job search assistance as best

suited to the needs of experienced adult workers. Thirty States saw less influence from State

performance goals or standards. A Connecticut official, for example, said the State’s Title

III program is “people oriented, not goal oriented. ” In Massachusetts, with its unusual

qualitative performance standards, a Title 111

official reported that the State standards do

have an effect, which is to ensure that minority group members receive services.

Officials in five States (Kansas, New Mexico,

Oklahoma, Oregon, and Texas) explicitly stated

that funding is the driving force behind the

service mix in their Title III programs, and

many other States alluded to this factor, remarking especially that the high cost of vocational skills training in institutions is a deterrent. Other principal factors determining the

service mix were the requirement for State

matching funds (which favors OJT, since most

States count the employer’s 50 percent share

of the OJT wage toward the match) and the desire of many displaced workers to return to

work immediately. In addition, projects operating in rural areas or small towns are often

remote from institutes or community colleges

that offer vocational skills training,

Costs to the client as well as to the program

are seen as a deterrent to classroom skills training. JTPA discourages support payments and

stipends; so far, 6 to 7 percent of Federal Title

III funds have been spent for supportive serv-
Ch. 5—National Displaced Worker Programs ● 185

ices. Displaced workers who enroll in classroom training must have another source of income, such as unemployment insurance or

another family member’s earnings. In addition,

courses in vocational-technical schools and

community colleges are usually on a semester

schedule, which may not fit the need of many

displaced workers to begin training promptly.

One of the few States to emphasize classroom

vocational skills training was West Virginia.

With an unemployment rate of nearly 16 percent, the State was not required to match JTPA

Title III funds, so that tuition assistance to displaced workers became affordable. With few

jobs available, it appeared that clients were

willing to invest the time in classroom training. In Ohio, too, with its pockets of high unemployment, officials mentioned considerable

use of vocational skills training. Of 10 other

States reporting that substantial numbers of

clients (one-third or more) were enrolled in

classroom skills training, three-Arizona, Colorado, and Utah—offered similar explanations.

All three States targeted long-term unemployed

miners for service and offered them a chance

to train for new occupations.

On-the-job training is favored by State program managers over classroom skills training

because it provides an easy match, and clients

are reported to like it because they can begin

to earn money right away. Nonetheless, the evidence so far indicates that OJT was not much

more prominent in Title III programs in the

transition year than was classroom training.

The reasons must be speculative, but perhaps

most displaced worker clients were able to find

jobs in an expanding economy with brief, inexpensive job search assistance, without wage

subsidies. OJT may in some instances cost less

than classroom training, or at least provide a

match more readily, but it costs more than job

search assistance alone. As mentioned, some

projects require clients to search for jobs for

a few weeks before allowing them to apply for

any kind of training. Other projects may have

no such formal requirement but still may regard classroom training as the last resort. For

instance, Arizona, with its commitment to

retraining unemployed miners, still tried to

keep the training brief and to concentrate on

improving existing skills such as welding.

Remedial Education

In projects serving displaced workers, staff

members often comment on the need many of

their clients have for remedial education in

basic skills–reading, math, and oral and written communication. It is not uncommon for 20

percent of participants in the projects to test

at the sixth grade level or below in reading and

math, even when the majority are high school

graduates. 27

Many of the State Title III program managers

who commented on remedial education appeared to have a different perspective from that

of project staff, who work directly with clients.

Some State officials said there was little demand for the service because most displaced

workers are not interested in more education.

Others said their clients did not need the service because most were high school graduates.

Still others said that since remedial education

is already offered by local school systems, Title III projects do not need to provide it; rather,

the projects should refer clients to existing programs. State officials expressed little interest

in finding more effective ways to bring remedial education to workers who need it. Chapter 6 describes a few projects which have

devised successful ways to deliver remedial

education to displaced workers, overcoming

the reluctance that a great many adults feel at

exposing incompetence in basic skills.

Not all State officials gave remedial education low priority. States with large numbers of

non-English-speaking displaced workers (including Arizona, California, Hawaii, Massachusetts, and Texas) offered training in English as a second language. Utah and Colorado

both provided remedial education as a first step

in vocational retraining of long-term unemployed miners or steelworkers.

Although 28 of 47 State Title III managers

reported that remedial education gets some TiZpsee ch. G for a more complete discussion of the needs of displaced workers for remedial education.
186 ● Technology and Structural Unemployment: Reemploying Displaced Adults

tle III funding in their programs (either in the

form of independent courses or as part of skills

training courses), the actual delivery of this

service as part of Title III programs appears

to be minimal. Only 23 States responded to a

question about the number of displaced workers getting remedial education within the Title 111 program. Five of those States said none

of their clients received the service; in the other

18 States, from 0.1 to 18 percent of participants

were served. Of 18 States estimating how much

Title III money they spent for remedial education, 8 said they spent nothing. No State

spent more than 5 percent of its funds in this

way, and spending of 2 percent or less of total

program expenditures was typical (tables 5-5

and 5-6).

The emphasis in JTPA programs on job placements and program costs may discourage offering of remedial education. Witnesses at a

Senate oversight hearing on JTPA in 1984 suggested that this might be SO.

28 Most State Title

III officials rejected this view. Two agreed that

cost considerations were a deterrent. New

Hampshire tries to refer clients to remedial

education courses funded by non-JTPA sources,

and New Jersey serves displaced workers with

Title 11A educational funds, when possible.

Massachusetts regards its qualitative performance standards as a positive inducement to provide basic education to workers who need it,

to ensure equal access to skills training and

reemployment services.

ZaThe Suggestion Was made in connection with the Title 11A

program, but could apply to Title 111 as well. See U.S. Congress,

Senate Committee on Labor and Human Resources, Hearings,

op. cit., pp. 102-105, and Preliminary Oversight report, op. cit.,

pp. 8-9.

Table 5-5.-Basic Skills Education Offered in

Title III Programs: Percentage of Clients Served, 1984

Number of

Percentage of clients served States reporting

0 . . . . . . . . . . . . . . . . . . . . . . . . . . 5

0.1 to 4.9% . . . . . . . . . . . . . . . . . . . . . . . . . 7

5.0 to 9.9%. . . . . . . . . . . . . . . . . . . . . . . . . 4

10.0 to 18.0%. . . . . . . . . . . . . . . . . . . . . . . 7

Total . . . . . . . . . . . . . . . . . . . . , . . . . . . . 23

NOTE: States reporting may not represent all the States offering thts service In

their Title Ill programs. States’ information on the services provided at

the project level was not complete

SOURCE: OTA telephone survey.

\

Table 5-6.— Basic Skills Education Offered in

Title III Programs: Percentage of Funds Spent, 1984

Number of

Percentage of Title Ill funds spent States reporting

o 8

0.1 to- 2.0%: : : : : : : : : : : : : : : : : : : : : : : 7

2.1 to 5.0% . . . . . . . . . . . . . . . . . . . . . . 3

Total. . . . . . . . . . . . . . . . . . . . . . . . . . 18

NOTE: States reporting may not represent all the States offering this service in

their Title Ill programs. States’ information on the services provided at

the project level was not complete

SOURCE: OTA telephone survey,

Projects that wish to offer remedial education may encounter difficulty in maintaining

UI benefits for workers who take the courses.

JTPA directs States to excuse displaced workers enrolled in skills training courses from the

work test under UI, that is, the requirement

that anyone collecting UI must be available for

work and actively searching for work. Unless

States specifically provide the same exclusion

for remedial education, workers enrolled in intensive full-time courses to gain proficiency in

reading and math would have to comply with

the work test. In the OTA survey, 7 States reported that they do not allow UI for unemployed workers enrolled full time in remedial

education courses; 19 said they allow UI benefits to continue; and 17 gave a conditional answer, that is, they excuse workers from the

work test only if the State authorities specifically

designate the courses as approved training.

The effect of either the UI work test or the

JTPA performance standards on offering remedial education in displaced worker projects is

not certain. In any event, most State Title III

managers do not appear to give high priority

to remedial education among the services available to displaced workers.

Funding

Citing the slow rate of spending of Title III

grant money through June 1984, the Reagan

Administration proposed in February 1985 to

cut Federal funding for Title III by more than

half. In its 1986 budget, the Administration

asked for a rescission of $120 million from the

$223 million appropriated for fiscal year 1985,

and proposed a similar budget of $100 million
Ch. 5—National Displaced Worker Programs • 187

for fiscal year 1986. The Administration also

proposed to rescind $25 million of $26 million

in Trade Adjustment Assistance training funds

in fiscal year 1985, and to let the program expire at the end of September 1985, as it was

scheduled to do. These proposals for deep

funding cuts raised policy issues on the continuity of the Nation’s displaced worker program

and on appropriate levels of funding in different circumstances.

With the Job Training Partnership Act, Congress attempted to avoid the many changes in

funding and program direction that had characterized CETA. JTPA allows an unusual degree of fiscal continuity; funds appropriated for

the Federal fiscal year beginning in October are

released to the States the following July (the beginning of the JTPA program year) and can be

carried over for 2 more program years thereafter. Thus projects may keep Federal funds on

hand for as long as 3 years after they are appropriated by Congress. This allows both for longterm planning and the ability to reserve some

funds for contingencies. It also means that,

since money is appropriated such a long time

before it is spent, unexpected changes may

occur—either in the economy or in the operation of the program—that would justify another

look, and possible adjustments to the funding.

This is especially true with a new, untried program like Title 111.

It is reasonable to conclude that the slow rate

of spending for Title 111 projects through June

1984 and the carryover of $127 million was due

largely to delays in starting up a major new program. Some States were quite deliberate about

starting slowly, taking their time to put together

high-quality programs and avoid wasteful mistakes. The method chosen by a number of

States to establish projects—requests for proposals from contractors—has its own built-in

lags. JTPA’s requirements for the creation of

Private Industry Councils and for their approval of project plans added to the delays. In

addition, some of the State agencies charged

with planning the programs were inexperienced,

and on occasion got involved in time-wasting

bureaucratic wrangles over control of the Title III funds.

As Title III programs entered their second

year, some of the growing pains were over, and

many States were allocating money to services

for displaced workers at a faster clip. Others,

however, were slower to organize effective

services, or for other reasons did not serve a

large number of displaced workers. In many

of these States, the lump of unspent funds carried over from the past was pushed along

through the new program year. Nationwide,

the unspent funds continued to mount. Summary information from State reports on program year 1984 became available in late September 1985, indicating that the carryover as

of June 1985 was about $185 million.29 As congressional committees made their funding decisions for fiscal year 1986, Labor Department

officials argued that the Administration’s proposed cut in Title 111 funds would not affect

levels of service, because of the carryover

funds.

On the other side, the National Governors’

Association, representing the States, strongly

opposed the cut. It argued that most States had

fully obligated their Title III allocations by the

end of June 1985; that spending for displaced

worker services was on a sharply rising curve,

as States gained experience with the new program; and that the cuts would force sharp reductions in services to displaced workers in

many States.30 The General Accounting Office

presented evidence that, because of differences

among States in rates of spending and funds

carried over, 23 States would have less money

for services to displaced workers in 1986 than

was allocated to them in 1985. Since the formula for allocating three-quarters of Title III

money among the States is written in the law,

changing the allocation would be difficult. a*

Z9The carryover would have been over $190 million but for

the fact that the Secretary of Labor allocated $5,6 million in Title 111 discretionary funds to the Trade Adjustment Assistance

(TAA] program in the spring of 1985. After the Administration

proposed a rescission of nearly all TAA funds for fiscal year

1985, disbursal of TAA funds was frozen while Congress considered the rescission. Congress did not act on the rescission,

but the Administration did not release the TAA funds until the

legal time for Congress to act had passed. Meanwhile, the TAA

program operated on JTPA Title 111 funds.

sONationa] Governors’ Association, op. cit.

UU. S. Congress, House Committee on Education and Labor,

Subcommittee on Employment Opportunities, Hearings on the

(continued on next page)
188 Ž Technology and Structural Unemployment: Reemploying Displaced Adults

In approving the Title III budget cut, the

appropriations committees of both houses of

Congress indicated that they did not expect a

reduction in levels of service to displaced workers. 32 The House Appropriations Committee

anticipated that the large carryover of unspent

funds would make it possible to maintain the

same program level in 1986 with substantially

less budget authority. The Senate Appropriations Committee said the program’s operating

level is expected to remain constant nationally.

The committee expected the Secretary of Labor to use discretionary funds to prevent serious program disruptions in individual States,

and to keep it advised about the possible need

for additional appropriations. The conference

report on the continuing resolution, adopted

by Congress on December 18, 1985, directed

the Secretary of Labor to give first priority for

discretionary funds to States that would otherwise have to cut back services, and to report

on possible needs for added funds to maintain

program levels.33

The effect of these funding changes on the

stability, quality, and level of services to workers is not yet clear. States with large carryovers

of funds may be little affected. States that

started early with an active program serving

displaced workers are likely to be without such

a cushion. If a large share of the Secretary’s

discretionary funds is devoted to helping out

these States, then less will be available for the

original purposes of the fund—responding to

contingencies such as mass layoffs or natural

disasters, easing the effects of relocating Federal Government facilities, or giving extra help

to areas of high unemployment. Another problem is that some States have fully obligated

(continued from previous page)

Job Training Partnership Act, Title 111, testimony of William J.

Gainer, Associate Director, Human Resources Division, U.S.

General Accounting Office, Nov. 8, 1985.

32U.S. congress, House Committee on Appropriations, Repofi,

Departments of Labor Health and Human Services, and Education, and Related Agencies Appropriation Bill, 1986, 99th

Cong., 1st sess., House Report 99-289, Sept. 26, 1985, p. 9; U.S.

Congress, Senate Committee on Appropriations, Report, Departments of Labor, Health and Human Services, and Education and

Related Agencies Appropriation Bill, 1986, 99th Cong,, 1st sess.,

Senate Report 99-151, Oct. 4, 1985, p. 11.

wu.s. Congress, House of Representatives, Conference Report

House Joint Resolution 465, Further Continuing Appropriations

for Fiscal Year 1986, 99th Cong., 1st sess., report 99-450, pp.

361-362.

their fiscal year 1985 Title III funds; even

though this money is not yet spent, it is not

available for needs that may arise during the

next year. In any case, it may be difficult for

some States with active, established Title III

programs to plan for continued high-quality

services to their displaced workers.

A major reason for States to carry over some

portion of their Title III funds is to keep contingency funds on hand. Plant closings do not

occur on a predictable schedule. Although the

law allows for tapping the Secretary of Labor’s

discretionary funds in case of unexpected plant

closings, States cannot always count on this

resource. Managers of 49 State Title III programs, taking part in conference calls sponsored by the National Governors’ Association

in February 1985, expressed serious concern

about delays in receiving discretionary funds.34

According to many States, the Department of

Labor takes far longer than the prescribed 60

days to decide on applications. Disbursal of discretionary grants has been slower than spending from formula-funded grants, which are under State control. Twenty-two percent of the

$51 million in discretionary funds was spent

in the transition year, versus 42 percent of the

$150 million in formula grants. In program

year 1984, States reported to NGA that they had

spent over 70 percent of their formula funds,

but only about 30 percent of discretionary

grants. 35 Nor can States be sure that their requests for discretionary funds will eventually

be approved. For example, both Arizona and

Rhode Island got an early start on unusually

active Title III programs, and neither carried

over large contingency funds. Both applied for

discretionary grants to respond to major plant

closings, but both were turned down on the

grounds that their statewide unemployment

rates were low. Both these States nevertheless

had large numbers of displaced workers in relation to the size of their work forces. As discussed in chapter 4, significant displacement

can occur even in prosperous times and areas.

s4Eve]yn Ganzg]ass, Memorandum to State JTPA Liaisons on

the State Title III Conference held by the National Governors’

Association Feb. 13-14, 1985, Mar. 7, 1985. Four l-hour regional

conference calls were held in the 2-day session,

abNational Governors’ Association, Op. cit.
Ch. 5—National Displaced Worker Programs ● 189

In originally proposing the deep cuts in Title III funding, the Administration attributed

the carryover from the transition year to a single reason: that few workers indicated a need

for extensive retraining, generally the highest

priced of authorized services, so that the program was much less costly than anticipated.

Considering the other reasons for the initial

low rate of spending, this reason probably was

not dominant, although it may have had some

effect.

Through 1985, Title, III programs operated

in an economy that, nationwide, was expanding and adding jobs. (There were regional exceptions, such as the steel centers of Ohio,

West Virginia, and western Pennsylvania.) yet

worker displacement was still occurring, and

the national unemployment rate remained

above 7 percent. Most States, even prosperous

ones, reported that restructuring of industry

was continuing, plant closings were still numerous, and the number of displaced workers

eligible for services was not declining, 36 Most

States also reported that there was substantial

demand for their displaced workers services

in 1985.37 Five States volunteered that their

funding was not sufficient to take care of all

the demands. There is evidence, however, that

displaced workers are not as inclined to seek

retraining when jobs are available as they are

during recessions, when training is a constructive alternative to idleness. Moreover, the overall demand for employment and training services is higher during hard times.

As noted elsewhere in this report, vocational

skills training is an indispensable part of a highquality displaced workers program, no matter

what the economic circumstances. For many

workers displaced from semiskilled or unskilled

factory jobs, the best hope for new jobs with

chances for advancement, either in manufacturing or in service sectors, lies in vocational

skills training. Many well-run projects make a

strong commitment to vocational training for

this reason. Even so, economic conditions do

affect the demand for retraining and other

readjustment services.

—

s6Ganzglass, op. Cit.

sTNationa] Governors’ Association conference call and OTA

telephone survey.

Other changes also may influence demand.

For example, improving the quality or delivery of services to displaced workers may stimulate increased participation. As discussed in

chapter 6, projects that combine several key

elements—bringing services to the workers in

plants undergoing closure or layoffs, involving

management and labor in delivery of services,

starting services early (before layoff if possible), and offering a comprehensive range of

services—are most likely to attract high levels

of participation. If Congress wishes to encourage and support more States in adopting proactive programs of this kind, the result could well

be a substantially enlarged demand for services. Thus, depending both on economic circumstances and program changes, demands

for services may rise or fall, and Congress may

wish to adjust funding for the national displaced worker program.

Information Collection: The Federal Role

As Congress considered both the proposed

rescission of Title III funds for fiscal year 1985

and JTPA funding for fiscal year 1986, the lack

of adequate, timely data on spending and services became a trying problem. The U.S. Department of Labor requires that States report on

Title III activities only once a year, within 45

days after the end of the program year on June

30. In practice, the reports are usually not complete until several weeks after the due date. In

both 1984 and 1985, the Labor Department did

not publish data from the State reports until

late November. The infrequency of these reports and the timing of their collection and

publication is ill-suited to the needs of Congress, both for budget decisions and oversight

of the program.

In spring 1985, for example, when Congress

held hearings on the budget for the following

year and considered the rescission proposal,

the most recent State reports on their Title III

programs dated from June 30, 1984. In midSeptember, when congressional committees

were marking up and voting on appropriations

bills, these State reports—now over 1 year

old—were still the latest on Title 111 activities.

Summary information from the State reports
190 ● Technology and Structural Unemployment: Reemploying Displaced Adults

on program year 1984 (ending June 1985) became available only in the last few weeks before Congress took final action on JTPA funding. In early November, at the request of the

House Education and Labor Committee, Subcommittee on Employment Opportunities, the

General Accounting Office obtained more detailed data showing program year 1984 spending by individual States, in order to analyze the

effect of the 55 percent cut in appropriations

state-by-state.

State reports on Title III activities are not

only infrequent but very brief. The Federal requirements for information in the reports include nothing more than the number of people enrolled in the program, the number who

terminated, the entered employment rate for

those who terminated; a few items on the gender, minority status, age, and educational level

of terminees; and the amount of Federal funds

spent during the year—but not the amount obligated by the end of the year. This information is a slender basis for analyzing the performance of JTPA programs, for determining

funding needs in relation to performance, for

learning from experience, and for improving

future performance.

The Labor Department has supplemented the

annual reports with more frequent surveys of

selected projects and other kinds of studies that

provide richer detail. These studies, current

and planned, will supply some of the information missing from the annual State reports.

Quarterly and semiannual surveys of geographically representative Title 111 projects add

limited information on the service mix (initial

assignments to job search assistance, classroom training, OJT, or other services) and

outcomes (entered employment rates and reemployment wages) by kind of service. The

studies also provide information on how many

clients participated and their length of stay in

the program. These studies are useful, but incomplete. Data on some important kinds of

services are not covered, for example, on remedial education and relocation assistance.

Also, because of problems in finding representative Title III projects, the results are somewhat

uncertain.

The Department of Labor also plans to carry

out long-term studies comparing earnings of

JTPA program participants and nonparticipants. This kind of study is uniquely valuable

in showing the overall effects of employment

and training programs and in helping Congress

to evaluate their long-term worth. These studies

will not, however, meet the need for timely information at shorter intervals.

Early Warning of Layoffs and Pro-Layoff Assistance

The need for an early warning system for

plant closures and large layoffs, to allow assistance to workers before they are out of a job,

is a leading concern of Title 111 program directors. State officials repeatedly raise the topic

in conferences and surveys.38 Some argue that

early action to assist displaced workers benefits not only the workers but employers and society at large. With a reemployment program

in place before the layoff, worker morale tends

to stay high, to the advantage of employers as

well as employees. Many workers can be helped

to find a new job without interruption, thus

saving themselves loss of income, saving outlays from the State UI trust fund, and saving

employers payment of taxes into the fund.

Other workers can plan for training in a new

occupation while they still have their full UI

eligibility ahead of them for income support.39

Several States attempt to collect information

about impending layoffs, and bring reemployment programs to the workers early. Some try

to encourage cooperation from employers in

giving advance warning of layoffs. Few States

have enacted laws to require advance notice,

but about 20 have given them some consideration in the last few years. Chapter 6 discusses

advance notice in the context of services to

displaced workers and summarizes the arguments for and against legally requiring advance

notice.

Sarbido

Sosee ch. 6 for a detailed discussion of the possibilities and

advantages of early action before layoffs occur.
Ch. 5—National Displaced Worker Programs ● 191

Arizona, New Hampshire, Rhode Island,

South Carolina, and Texas are some of the

States that are active in rapid response. Arizona, for example, created a Pre-Layoff Assistance Coordination Team (PACT) to mobilize

services of the State Title III program, the Employment Service, the UI program, and where

appropriate, community block grants and community colleges, at the first announcement of

a plant closing or layoff. The team brought

services to the workers in the plant or at a

nearby center; offered testing, counseling, job

search workshops, and job placement; and requested that the employer give workers time

off during the working day to attend the prelayoff sessions. The employer was also asked

to appoint a company coordinator to take

charge of company activity and cooperate with

the PACT; to let employees know what services were available; to host a Job Fair, if possible, and to try to place its laid-off workers with

business contacts, suppliers, or even competitors. Arizona officials reported that in 10 months

of operation (through February 1985, when

Arizona’s Title III funds were nearly fully obligated), the PACT team enrolled 1,275 workers. Of those, an estimated 250 to 300 were reemployed before layoff—generally in just a few

days, since notice of the layoffs was usually

brief. Once the plant was closed, the remaining clients were transferred to one of Arizona’s

permanent, continuing displaced worker centers for further service, until placement.

Although some States by 1985 had put substantial effort into pre-layoff assistance, others

were not prepared to respond quickly and effectively when companies requested help in

serving employees who were about to be laid

off. Some companies, unable to get adequate

technical assistance from local PICs or the

State Title III program, hired private consultants to help organize services for their displaced workers, using Title 111 funds. As discussed in chapter 6, advance notice of layoff

is much diminished in value if high-quality adjustment services are not offered promptly to

the affected workers. According to some private consultants who help companies plan displaced worker services, PICs and State program officials are improving in their ability to

respond to calls for help, but many still have

a long way to go. The 5 percent limit on State

administrative costs for JTPA programs may

be partly responsible for some of the States’

failings in providing technical assistance. The

potential for building either a small Federal

agency or State agencies capable of providing

rapid response to plant closings and layoffs is

discussed elsewhere in this report (chs. 2 and

6 and the section entitled Canada, this chapter).

Some States are interested in using rapid response teams for another purpose other than

providing services to displaced workers; that

is, to try to avoid a plant closing or layoff by

offering assistance of various kinds to the company (see the section in this chapter entitled

Community and Government Assistance to

Prevent Plant Closings). A number of State

managers of Title 111 programs have expressed

the desire to use JTPA funds for retraining active workers, so as to avoid displacement in the

first place. JTPA allows Title III services to

commence when workers receive notice of layoff, but not before. A few States have begun

to use Title 111 funds more preventively, authorizing retraining of active employees when employers announce that they will be laying off

unless retraining assistance is forthcoming

from a Title 111 project. A few States have

adopted programs to assist in the retraining of

active workers who would otherwise be displaced (see section in this chapter entitled

Non-Federal Programs: Retraining of Active

Workers).

Under the Carl D. Perkins Vocational Act of

1984, employers can get Federal assistance for

retraining their active employees (see ch. 7). A

special new program authorized under the Perkins Act would support education and training programs designed cooperatively with employers, and open to employed individuals who

require retraining to retain their jobs, or who

need training to upgrade their skills to qualify

for higher paid or more dependable employment. Congress did not provide funding for this

program in fiscal years 1985 or 1986.
192 . Technology and Structural Unemployment: Reemploying Displaced Adults

Eligibility

JTPA’s definition of displaced workers can

be construed quite broadly. It encompasses

most adult workers who have lost a job, or have

received notice of termination, and are not

likely to return to that job or a similar one, or

have been unemployed for a long time and

probably will not find employment in their old

occupation and home area. (See table 5-7 for

the JTPA definition of displaced workers.)

States have some leeway to alter the definition,

but most have not done so. Thirty-four of fortynine States responding to OTA’s telephone survey used JTPA’s definition; another two added

language that made the definition more explicit; and two more directed Service Delivery

Areas to determine eligibility under the JTPA

definition. Seven States added restrictions to

the definition, four broadened it to cover more

workers, and two States did both (table 5-7).

The alterations of the JTPA definition point

out special problems that some of the States

face—in particular, high local rates of unemployment and, in farm States, foreclosures. Six

of the eight States that narrowed eligibility have

unemployment rates higher than the national

average. One, Illinois, explicitly stated that it

had too many displaced workers to serve adequately with available funds. Its definition is

one of the most restrictive: the displaced worker must have been in an occupation that is not

growing (as determined by the State DepartTable 5-7.—State Definitions of Displaced Workers That Restrict or Extend the JTPA Definition

State Restrictions and extensions

Alaska. . . . . . . . . . . . .

Illinois . . . . . . . . . . . .

Kentucky . . . . . . . . . .

Kansas . . . . . . . . . . . .

Nevada . . . . . . . . . . . .

Pennsylvania . . . . . . .

West Virginia. . . . . . .

Arizona . . . . . . . . . . . .

Iowa . . . . . . . . . . . . . .

Kansas ... , . . . . . . . .

New Hampshire . . . .

Wyoming . . . . . . . . . .

Restrictions:

Worker must be:

1. a resident of the State, and

2. attached to an industry for 3 years or more, and

3. terminated due to a closure or a reduction in the work force, and

4. unlikely to return to former occupation or industry.

Worker must:

1. be in an occupational group that is not growing (as determined by State agency), and

2. have proof of a job search of at least 1 month.

Worker must:

1. have been laid off no more than 3 years ago, and

2. have worked in layoff job or occupation at least 1 year.

Worker must have been laid off no more than 2 years ago.

Worker must have been laid off no more than 3 years ago.

Worker must have been laid off no more than 2 years ago (waivers may be granted).

Worker must have been a victim of a complete closure of plant or mine or of another operational

closure.

Extensions:

Serves workers who:

1. have received or will receive notice of termination;b

2. were long-term unemployed (13 weeks) or have exhausted their UI benefits, and have taken

stop-gap employment (at substantially lower pay or skill level than on the old job)b

Serves self-employed people who have filed for bankruptcy or have a notice of foreclosure

(including farmers)

Serves self-employed people such as farmers or businessmen.

Serves victims of plant closings or major layoff (25 or more people).b

Serves workers who are:

1. Victims of plant closings or substantial layoffs,b

2. Eligible for retraining under Trade Adjustment Assistance, and

3. Unemployed and affected by economic or industrial changes that have resulted in loss or

reduction of employment opportunities, as determined by State officials. . . . .

aThe definition of dislocated workers in JTPA, SSC. 302, is *foliows:

● Each State is authorized to estabiish procedures to identify substantial groups of eligible individuals who:

—have been terminated or laid-off or who have received a notice of termination or layoff from employment, are eligible for or have exhausted their entitlement

or unemployment compensation, and are uniikely to return to their previous industry or occupation;

—have beerr terminated, or who have received a notice of termination of employment, as a resuit of any permanent closure of a plant or facility; or

—are long-term unemployed and have iimited opportunities for employment or reemployment in the same or a similar occupation in the area in which such individuals

reside, including any older individuals who may have substantial barriers to employment by reason of age.

bErnphaS/S added to @rlOte difference from definition in JTPA Sec. 302.

SOURCE: OTA telephone survey.
Ch. 5—National Displaced Worker Programs ● 193

ment of Commerce and Community Affairs),

and must show proof of a job search of at least

1 month. West Virginia limited eligibility to victims of plant and mine closings. In Alaska,

where unemployment remained as high as 10.5

percent in late 1984, the State definition imposed such stringent restrictions that Title 111

officials found it difficult to apply. No clients

were served in Alaska in the transition year.

Several States effectively ruled out service to

the very long-term unemployed by restricting

services to those laid off no more than 1 to 3

years ago (table 5-6). Maine, which does not

have a high unemployment rate but does have

a large pool of long-term displaced workers to

serve, takes a different approach. It does not

restrict eligibility, but does no outreach, to

guard against being overwhelmed with clients.

Arizona, on the other hand, broadened the definition of the long-term unemployed to include

workers who took jobs at substantially lower

pay and skill level than on their old jobs.

Of the five States that broadened the definition of eligible workers, two (Kansas and Iowa)

included self-employed people such as farmers.

North and South Dakota did not explicitly extend the definition to farmers, but did set up

special training activities for them under Title III. Some of the farm States extended training assistance to whole families who were losing their farms and livelihoods—to wives and

older children who were now looking for

nonfarm work, as well as to heads of farm

households.

Three States (Florida, New York, and Pennsylvania) reported that they serve displaced

homemakers in their Title III programs, even

though these women often have limited experience in the job market and do not fit the usual

definition of displaced worker. In these States,

displaced homemakers were included as longterm unemployed.

Several additional States expressed interest

in serving displaced homemakers under Title

III, or the displaced self-employed, or farmers,

or the underemployed who had taken stop-gap

jobs; but they were unsure of their authority

to do so. States that broadened eligibility did

it on their own, without guidance from the Department of Labor. Some officials in these

States, and others in States which did not expand eligibility but considered it, believed they

were running a risk of disallowance in audits

by the Labor Department’s Inspector General.

Creaming in Participant Selection

The strong emphasis under JTPA on high job

placements and low costs has led some people to question whether the workers who are

most job-ready, and least in need of assistance,

are being selected to participate. Early studies

of Title 11A projects (for disadvantaged workers) indicate that this may be occurring,40 but

studies of Title 111 projects have found little evidence of creaming. In States where there are

too many displaced workers to serve adequately

(e.g., Illinois), eligibility restrictions do rule out

some applicants, but not by screening out the

less able. Some projects require participants to

attend workshops for learning job search skills

at the outset; they consider that workers who

do not attend are not motivated enough to benefit from other project activities. The only evidence of overly rigid selection of participants

in Title 111 programs is limited and anecdotal.

A few reports suggest that contractors providing training on a performance basis (i.e., they

do not get paid until the trainee is placed) are

extremely selective in choosing their candidates. Since most Title 111 projects emphasize

job search assistance, not training, this kind of

creaming probably does not affect large numbers of displaced workers.

~Both the Westat study, commissioned by the Department of

Labor, and the “independent sector” Grinker-Walker study reported extensive screening of applicants to Title 11A projects,

both at initial intake by Service Delivery Areas and later for admission to on-the-job or classroom training. The issue was a recurring topic in oversight hearings of the Subcommittee on Employment and Productivity of the Senate Committee on Labor

and Human Resources, in Jackson, Mississippi, on July 12, 1984.

Some witnesses at the hearing pointed to the positive aspects

of screening—that it helps to select those “able to benefit” as

well as those “in special need” of JTPA services; both purposes

are mandated by the law. The reports also pointed out that many

demographic characteristics are the same for JTPA Title 11A participants as they were for CETA (e.g., as many minority group

members are served). However, fewer high school dropouts are

being served under JTPA. See Cook, et al., op. cit., ch. 6; and

Walker et al., op. cit., pp. 50-69; U.S. Congress, Senate Committee on Labor and Human Resources, op. cit.
l94 ● Technology and Structura/ Unemployment: Reemploying Displaced Adults

Generally, it appears that most States have

not imposed barriers to entering Title III projects, as long as displaced workers meet the

broad criteria set forth in JTPA. In fact, a number of States confronted with severe displacement problems that were not very evident

when the act was passed (e.g., farm foreclosures)

seem willing to stretch the definition to serve

the affected workers.

Federal Guidance

Federal direction and oversight of the national employment and training program is

minimal. JTPA gave the States the primary role

of oversight, and they have assumed it—so

much so that one JTPA State director said of

the Department of Labor: “It’s as if they dropped

off the face of the earth.”41 The question that

arises is whether the Labor Department has

carried the hands-off approach so far as to

cause difficulties in the program.

The problem, as some State officials see it,

is that Federal auditors (mainly, the Labor Department’s Inspector General) will not be as

~lwa]ker, et al., op. cit., p. 135.

“noncommittal and noninterventionist” as the

Department itself has been. The practical effect is “paranoia” in some States.42 To avoid

later trouble with audits, they have imposed

strict regulations and paperwork requirements

on Service Delivery Areas and other service

providers. A study of Title 11A programs reported that 36 of 57 SDAs (63 percent of the

sample) found State reporting and other administrative requirements more burdensome under JTPA than under the federally directed

CETA.

43 Anecdotal evidence suggests that

some Title III projects are also suffering from

excessive caution and bureaucratic delays at

the State level. one director of a project that

received Title 111 funds said it took 6 months

to get State approval of a $1,500 invoice.

Areas of uncertainty mentioned by some

State Title 111 managers include the definition

of eligibility for Title III services and the acceptability of some kinds of funding as State

matches for Title III funds. Not all States complain of too little guidance from the Labor Department, however; and some complaints may

reflect the inevitable problems and uncertainties in taking charge of a new program.

There is little dispute that it is entirely appropriate for the Federal Government is to help

States and individual projects exchange information about their practices, successes, and

failures. For several years, the Labor Department’s Bureau of Labor-Management Relations

and Cooperative Services has collected information, published reports, and held workshops

on model displaced worker projects, particularly those sponsored by employers or by labor and management together. In 1985, the Labor Department commissioned a report on

model Title 111 projects.

In addition, the Labor Department provides

funds to organizations such as the National

Governors’ Association and the National Alliance of Business to support informal, direct exchanges of current information among the

AZIbid,, p. 138; see also U.S. Congress, Senate Committee on

Labor and Human Resources, Preliminary Oversight, op. cit.,

pp. 7-9.

A31bid,
Ch. 5—National Displaced Worker Programs ● 195

State, local, and private parties who are providing employment and training services. A

number of States hold regional JTPA conferences for the same purpose. Except for the

small labor-management bureau mentioned

above, the Labor Department itself is not much

involved in activities of this kind. The State Title III officials interviewed in OTA’s telephone

survey stressed the importance of exchanging

information about their programs; in fact, some

of them sought information about other States’

practices from the interviewer.

Some States reported considerable difficulty

in managing information about their programs

for their own internal planning. A number of

States, afraid of exceeding the 5-percent limit

imposed by JTPA on State administrative costs,

do not have adequate staff to operate their management information systems. According to

some States, for example, the spending limit

rules out hiring data entry clerks. In some, local service providers enter data in their own

systems, but there is no hookup to the State

administrative agency that is supposed to monitor the information. One State, West Virginia,

reported that local information is being delivered to the State system but the technical expertise to gain access to it is lacking. Some of

these problems may be worked out with time,

but some States might benefit from more technical assistance from the Labor Department in

setting up and operating management information systems.

The State Match

One aspect of the JTPA Title III program

with which States report substantial dissatisfaction is the requirement to match formulafunded grants dollar-for-dollar. In a few States,

including California, Delaware, Iowa, Nebraska, and New York, legislatures have provided

funds that Title III programs can use for part

or all of the match, but the majority of States

assemble a variety of in-kind contributions

(e.g., donated private or public facilities, machines, time of instructors at community colleges, employer-donated staff time), and the

employer’s half of OJT wages. UI benefits are

an important component; JTPA allows the

States to meet up to half their match obligation

with UI payments. This extremely varied way

of putting together matching funds, most State

officials agree, imposes quite a bookkeeping

burden. Another criticism is that most sources

for the match do not really add anything to the

Title III program, since they would be provided

anyway; they only add to the paper work. This

criticism applies especially to UI benefits.

More important, the match requirement biases the shape and content of the States’ programs. Several States commented on the attraction of OJT, because it automatically provides

a match. Vermont officials, for example, said

they use OJT almost 100 percent for this reason. One State JTPA director commented that

State programs use OJT more than may really

be desirable; less costly job search assistance

might suffice for many clients. He said: “Our

first question should be ‘how can we help?’ not

‘how can we match?’ “

The match requirement may determine who

delivers services. In fact, 22 of 46 States reported that this factor affected their selection

of project operators. For example, most Illinois

Title 111 projects are located in community colleges, which generate a match with in-kind

contributions. This may be as good a choice

as any other. But the match consideration does

tend to rule out such project operators as labor unions or nonprofit community-based organizations. It may also determine to some degree who gets service. Seventeen of forty-five

States said that the matching requirement leads

to targeting of services to workers eligible for

unemployment insurance. The State of Washington explicitly requires that half of the participants in Title III projects be recipients of

UI benefits, thus providing a match. One State,

South Dakota, simply avoided the problem in

the transition year by spending only funds left

over from the Emergency Jobs Bill of 1983,

which did not require a match.

At least one State, Arizona, tries to ensure

service for the most workers by designating unusual sources as matching funds, including the

severance pay employers provide to laid-off

workers, release time that employers give

workers to attend activities in Title III projects,
196 Ž Technology and Structural Unemployment: Reemploying Displaced Adults

and the money workers spend in relocating

that is not repaid from Title III funds. Such adventurous States may be risking disallowance

of their matches on audit. So far, no matching

funds have been disallowed.

As States gain more experience with the Title III program, difficulties with the matching

requirement may recede. Some States with

budget surpluses may consider enacting their

own displaced worker programs, thus providing a reliable source of matching funds. In general, States have a good deal of experience with

matching many kinds of Federal grants, and

have come to terms with the requirement. Possibly, the very flexibility JTPA allows States in

providing a match—with public or private

funds, in cash or in kind—has caused some initial confusion. But this flexibility is a positive

feature in that it helps poorer as well as richer

States offer services to displaced workers.

Another positive feature of JTPA is its forgiveness of part or all of the match in States with

unemployment rates above the national average, thus ensuring services in States where

needs are likely to be great and the States’ ability to contribute small.

Trade Adjustment Assistance

The once large and costly TAA program was

much reduced by the mid-1980s, but still provided substantial benefits to eligible displaced

workers, In 1984, about 30,000 workers were

certified by the Department of Labor as having lost their jobs due to foreign competition

and therefore qualifying for assistance. By

comparison, at the height of the program in

1980, over 585,000 workers were certified as

eligible (table 5-8). Not only did the number of

certified workers decline after 1980, but extensive income support payments for unemployed

workers were also sharply cut. In 1985, the

TAA-eligible worker could receive income support payments, or Trade Readjustment Allowance (TRA) only as a continuation of, and at

the same level as, his basic UI benefits, and

only up to 1 year of UI and TRA combined.

Payments could be extended for another 6

months if the worker were in approved training.

Table 5-8.—Workers Certified for Trade

Adjustment Assistance, Calendar Years 1975-84

Year Workers certified

1975a 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,842

1976 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143,578

1977 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143,700

1978 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164,407

1979 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 221,082

1980 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 585,243

1981 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,820

1982 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,127

1983 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,366

1984 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,800

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,451,965

aData for April through December.

SOURCE: U.S. Congress, House Committee on Ways and Means, Background

Material and Data on Programs Within the Jurisdiction of the Committee on Ways and Means, 99th Cong,, 1s1 sess., Committee Print WMCP:

99-2, Feb. 22, 1985, p. 264.

As table 5-9 shows, outlays for TRAs dropped

from a high of $1.6 billion in fiscal year 1980

to $35 million in fiscal 1984; outlays were expected to be about $45 million in fiscal year

1985. 44 The TAA appropriation for training,

out-of-area job search, and relocation assistance was $26 million in fiscal year 1985. A

parallel TAA program of assistance to firms

provided technical and financial assistance to

firms in trouble because of foreign competition.

The 1985 appropriation for TAA assistance to

firms was $25 million; from 1975 to 1984, the

program cost $300 million.

With the reduction of the TAA program, the

delays that once characterized it were also

much reduced. The Employment and Training

Administration of the Labor Department, which

administers the program, reported that in 1985

petitions for certification from workers were

virtually all acted on within 60 to 90 days.

As of 1985, the emphasis in the TAA program for workers was on training and, to a

considerable degree, on helping eligible unemployed workers look for work in more promising areas and relocate. What TAA provides

for workers in training that JTPA Title 111 does

not is income support, up to 1 year after the

basic 26 weeks of unemployment benefits are

qqTrade Readjustment Allowances are funded as part of the

larger Federal Unemployment Benefits Assistance Account and

do not receive separate line-item appropriations. Therefore outlays, not appropriations, are reported for TRAs.
Ch. 5—National Displaced Worker Programs . 197

Table 5-9.—Trade Adjustment Assistance, Participants and Services, Fiscal Years 1975-84

Workers receiving Outlays for Number of workers Outlays (millions of dollars)

Fiscal TRAs TRAs Entered J o b J o b

year (millions of dollars) (millions of dollars) training search Relocatio n Training search Relocation

1975 . . . . . 47,000 71 463 158 44 . . . . . . . . . . . . . . . . . . . . . . . . . .

(4th quarter)

1976 . . . . . 62,000 79 823 23 26 . ................2.7 . . . . . . . . . . . . . . . . .

1977 . . . . . 111,000 148 4,213 277 191 . . ., . . . . . . .3.8. . . . . . . . . . . 0.2

1978 . . . . . 156,000 257 8,337 1,072 631 12.0 0.2 0.6

1979 .., . . 132,000 256 4,458 1,181 855 12.0 0.3 1.2

1980 . . . . . 532,000 1,622 9,475a 931 629 5.2 0.1 0.7

1981 . . . . . 281,000 1,444 20,386a

1,491 2,011 1.9 0.3 2,0

1982 .., . . 30.000 103 5,844 697 662 18.4 ., . . . . . . . . . 1.0. . . . . . . . . . .

1983 . . . . . 30,000 37 11,299 696 3,269 33.0 . . . . . . . . . . .3.0. . . . . . . . . .

1984 . . . . . 24,000 35 6,538 757 2,382 18.5 0.2 2.3

aofWOrker~entering trafflfflgin lg80,5,640(59~e~~e”t) paid forthelrown training costs; in 1981, 18,940 (94 percent) paid for their own training Trainees were eligible

forTRA living allowances.

NOTES’ Trade Readjustment Allowances (TRAs) provide income support during unemployment or or training Job search expenditures are for job searches outside

the worker’s commuting area In 1976, 1977, 1982, and 1983, not all outlays for training, job search, and relocation were reported separately

SOURCE U S. Congress, House Committee on Ways and Means, Background Material and Data on Programs Within the Jurisdiction of the Committee on Ways and

Means, 99th Cong. 1st sess , Committee Print WMCP:99-2, Feb. 22, 1985, pp 267-269

exhausted. Once groups of workers are certified as eligible for TAA, the local Employment

Service office deals with individual workers,

trying to place them in suitable jobs or, failing

that, arranging for training. The ES offices may

approve training only if no suitable employment can be found, if the training is likely to

lead to a job, and if the worker is qualified for

the training. On-the-job training is favored, but

classroom training may also be approved. In

fiscal year 1983, the number of TAA-eligible

workers enrolled in training amounted to more

than one-third of those receiving income support payments and to over one-quarter in fiscal year 1984 (table 5-9).

Helping workers to relocate is a significant

part of the TAA program. Eligible unemployed

workers who cannot find suitable jobs in their

commuting area can conduct out-of-area job

searches and collect reimbursement for 90 percent of necessary expenses up to $800. They

can also collect 90 percent of reasonable and

necessary moving expenses for themselves and

their families, up to $800. This allowance of

$1,600 for out-of-area job search and relocation

is far above what is available in most JTPA Title 111 programs. Although JTPA can pay for

both services, funds must be shared among

many other activities. Some States consider

relocation assistance a support service, so that

the money to pay for it has to come out of the

JTPA funds allocated for nontraining expenses

(roughly 30 percent). This puts a strict limit on

funding.

In Arizona, for example, where 60 percent

of Title 111 clients had lost jobs in the deeply

depressed mining industry or mining towns,

relocation to such thriving areas as Phoenix

and Tucson is a much-favored option; 15 percent of participants are reported to receive

relocation services. The State JTPA program

officials feel they cannot afford more than a

$650-per-worker allowance for out-of-area job

search and relocation, even though they would

like to encourage more clients to consider this

alternative.

The continued existence of the TAA program

is in question. In its 1986 budget, the Administration opposed extending TAA past the expiration date of September 30, 1985; a proposed

rescission for 1985 (which Congress did not

agree to) would have removed all but $1 million from the $26 million already appropriated

for training, job search, and relocation for fiscal 1985, on the grounds that JTPA served the

same purpose and TAA was not needed. In

September 1985 Congress passed, and the

President signed, a temporary extension of

TAA, and there were reports that the Administration was reconsidering its position of trade

adjustment assistance. Meanwhile, at least 13

bills had been proposed in Congress to extend

or modify TAA. One approach was to create

a trust fund to finance TAA, supported by a

small uniform import duty. The Senate adopted

this idea in its budget reconciliation bill, reauthorizing TAA and providing earmarked funding from the import duty. As Congress ad-
198 •Technology and Structural Unemployment: Reemploying Displaced Adults

journed at the end of 1985, it had not passed

the budget reconciliation bill, which contained

authorization of TAA. Thus, TAA authority expired, at least for the time. However, it maybe

revived, since Congress has shown a strong interest in the program. As this report was written, certified workers can continue to receive

allowances for retraining and relocation through

the end of fiscal year 1986, according to a continuing resolution passed in late 1985.

TAA has been criticized for its cause and effect approach–an “over-preoccupation with

pinpointing the cause of dislocation’’—leading

to inconsistencies in certifying workers for

eligibility. 45 As discussed in chapters 8 and 9,

it is difficult-often impossible—to disentangle

trade from other causes of displacement, such

as technological advance and changing consumer preferences. On the other hand, it can

be argued that it is equitable to give special adjustment assistance to workers who can be

identified as directly paying the costs of a government policy—in this case, the lowering of

trade barriers—which is intended to benefit society as a whole. For eligible workers, TAA

provides significant benefits in addition to

those available under JTPA Title III: extended

income support for people in training and

more generous relocation assistance.

The Employment Service

The nationwide network of Employment

Service offices is playing a substantial role in

serving displaced workers. The State Employment Security Agencies, which administer the

ES offices, provide services for fees to Title III

projects in 33 States. In 10 States, they provide

services at no fee to the JTPA program, and in

three there is a mixture of free and for-fee services. Ten States have put their Employment

Security Agencies directly in charge of Title

111 programs, establishing basic testing, counseling, job search assistance, and training referral services in local ES offices throughout the

State, and then adding other elements such as

OJT contracts with local businesses. In other

States, local ES offices submit proposals to the

State JTPA officials to operate displaced worker programs. The most common arrangement

is that the local Title III project buys from the

ES office services such as job development and

placement or helping to run a job search workshop. There are only seven States or territories

in which the ES system takes no part in Title

III programs.46

The extra money furnished by JTPA has

made possible most of the contributions from

the ES system. With only its own resources, the

ES system could hardly provide the assessment, testing, job counseling, development of

job opportunities with employers, help with

self-directed job search, and referral for suitable skills training that a good displaced worker program offers. For years, the ES system did

not grow, despite large increases in the work

force and despite special responsibilities imposed on the system by Federal and State laws

(e.g., the duty to make special efforts for disadvantaged workers and other target groups).

From 1966 to 1981, the staff level for basic ES

services was kept at 30,000 positions while the

civilian work force increased 45 percent.

In fiscal year 1982, Congress cut the ES system staff to 24,800 positions, and there it remains. Most State agencies have responded to

the cuts not by closing offices but by stretching staff thinner and cutting services—usually

the more politically acceptable solution. There

were still some 2,400 ES offices nationwide in

1985, about the same number as in 1981. But

counseling services, which had reached only

7 percent of clients in 1981, dropped by 40 percent during the same time. Testing, previously

available to 5 percent of ES clients, declined

by 30 percent.47 By and large, it is only in JTPA

projects, with their infusion of extra funds,

that ES staff are able to offer such individual

services.

Aspaula Duggan and Virginia Mayer, The New American CJnemp]oyment: Appropriate Government Responses to Structural

Dislocation (Washington, DC: The Northeast-Midwest Institute,

1985).

*Information provided by the Interstate Conference of Employment Security Agenc:ies.

471bid.
Ch. 5—NationalDisplaced Worker Programs . 199

Automation

Since the late 1960s, the ES system has tried

to compensate with automation for the limited

time the staff can devote to individual clients.

Today, the entire system has more-or-less automated job banks serving every metropolitan

area and, in some cases, entire States. The job

bank is a current listing of new and unfilled

job orders, collected in a central office from

every local office in the area. Some local offices

still send in their job orders overnight by courier and receive an updated list the next morning, but about 20 States have an intrastate

computer network, and can update listings

throughout the workday.48

The job banks have the obvious advantage of

opening to applicants in every local ES office

the job listings from all other ES offices in the

area. Their main drawback is that they weaken

personal links between ES staff members and

employers who may be long-standing clients.

Some offices hold their job bank listings closely,

disclosing them only in individual interviews

with jobseekers. Others release a censored version of the listings, with the employer’s name

removed, to other institutions (such as to Title

III projects) or to jobseekers themselves. The

idea is to protect the employer from unwanted

calls from unscreened applicants.

A more complex use of automation is in job

matching. The jobseeker’s skills and experience

are described and coded, and then compared

with the characteristics of jobs on order to find

a good fit. The key to the usefulness of the system is in the choice of descriptors and their application to individual cases. Two descriptor

systems have been developed for the Department of Labor, one based on the detailed job

descriptions in the Dictionary of Occupational

Titles, the other on key words that cut across

job titles. Applying the descriptors is more than

‘Sources for material in this section include David W. Stevens,

“Public- and Private-Employment Agency Roles in Providing

Labor Market Information and Job Search Assistance: Past,

Present, and Future,” contractor report prepared for the Office

of Technology Assessment, August 1984; Linda LeGrande, Library of Congress, Congressional Research Service, “The National Job Bank System,” March 1985; and information provided

by the U.S. Department of Labor, Employment and Training

Administration.

a routine task. It calls for human effort, skill,

and time. These requirements, plus the costs

of computers and telecommunication, are constraints on the widespread adoption of automated job matching. In 1984, 16 States were

using job-matching systems that were at least

partially automated in at least some of their labor market areas. For their job-matching systems, as for their job banks, some offices still

used courier deliveries instead of direct computer communications.

Although nearly every State has job banks

that are at least partially computerized, fully

automated job order and job-matching systems

are still the exception. Missouri provides an example of such a system. All 48 local ES offices

within the State, and 12 more in Kansas and

Illinois, are linked by microwave or land lines

to the State Employment Security Agency’s

mainframe computer. Current information

about applicants and job orders is fed into the

system throughout the day. When a local office refers an applicant, this information is entered into the system; when the desired number of applicants (determined by the employer)

has been referred, that fact instantly shows up

on all the State’s ES computer terminals.

For 20 years, Congress has expressed a continuing interest in creating a nationwide job

bank and job-matching program within the national ES system. Both CETA and JTPA authorized the Secretary of Labor to establish a computerized national program, using electronic

data processing and telecommunication as

much as possible. The Interstate Job Bank, developed by the New York State labor department for the U.S. Department of Labor, and

operating out of Albany since July 1984, has

made progress toward the congressional goal.

Building on the Interstate Clearance System,

which had been established a few years earlier,

the interstate bank listed 44,700 job openings

in 1984—up from 1,500 per year in the older

system.

The Interstate Job Bank is not a complete,

fully computerized interstate clearance system.

The bank’s coverage is deliberately limited.

State and local ES offices are asked to select

job orders that have remained unfilled for a cer-
200 ● Technology and Structural Unemployment: Reemploying Displaced Adults

tain number of days, are in certain hard-to-fill

professional and technical occupations, and

are above a specified salary level. The rationale is that these kinds of jobs have a national

market; the purpose of the interstate bank is

to serve people considering relocation, and

lower level jobs are not very likely to attract

such people. It is argued, moreover, that most

blue-collar and clerical workers without special skills do not usually consider relocation.

Within the guidelines suggested by the U.S. Department of Labor, each State ES system has

discretion over which job orders to report, at

what time and by what means, and also when

to remove them from the bank’s listings.

The Interstate Job Bank has no job matching

feature. This was dropped on the grounds that

it duplicated services offered at the State and

local level. Finally, the system is by no means

fully automated. In 1985 only five States outside of New York sent in job orders by telecommunication; the rest used the mail. Most send

computer tapes, but seven still send paper copies. Nearly all States receive the bank’s listings back by mail, on microfiche cards (three

receive computer tapes), Except for local ES

offices in New York State, only Nevada has

two-way telecommunication links with the Albany center. The turnaround time for most

States, allowing time for mail deliveries and updating the listings, is 8 to 10 days. The one-way

telecommunications link that five States now

have with the bank allows a turnaround of as

little as 2 or 3 days. With Nevada’s two-way

link, same-day communication is possible.

In proposals to improve the Interstate Job

Bank, two specific issues are involved: 1) faster

communication, so that job orders are listed

quickly and removed quickly when the jobs are

no longer open; and 2) broader coverage. More

fundamentally, questions of improving the national job bank relate to its central purpose,

which is to help workers move from places

where they cannot get jobs to places where they

can. How much can improvements in the interstate system contribute to this goal?

Technologically, it is feasible to make the Interstate Job Bank both comprehensive in coverage and instantly interactive. An important

consideration, however, is matching technology with the most likely needs and uses. The

main argument against a comprehensive Interstate Job Bank is that many of the job orders

flowing into ES offices are for low-pay, lowskill jobs, and that few clients would be interested in applying for these jobs in distant

places, Professional and technical hard-to-fill

jobs that might have a national market are already entered into the Interstate Job Bank

(though not instantaneously). However these

jobs may not attract workers considering relocation either, since the jobs are often hard to

fill because their pay is relatively low.

The argument on the other side is that many

blue-collar and less educated workers have in

fact chosen to relocate when given practical

help in getting jobs at the other end, including

financial help with out-of-town job search and

moving expenses. In a pilot project conducted

by the ES system from 1976 to 1980, blue-collar

workers took advantage of these kinds of relocation assistance in large numbers; 38 to 44

percent relocated, compared to only 13 to 16

percent of professional workers taking part in

the project (ch. 6 provides details). The pilot

project was conducted in one geographical region (the southeast), not nationwide, and 80

percent of the relocations were within that region. Some other relocation projects that succeeded also involved moves within a region.49

These results suggest that computerized exchange of job bank information might proceed

by steps, first within States, then among neighboring States, and finally, if it seems desirable,

nationwide.

From the standpoint of technology, the upgrading of State systems is a necessary first

step. Statewide job bank systems vary a great

deal in degree of automation, and the existing

systems are not always compatible. If more

States develop fully computerized systems, and

if some degree of commonality is designed into

all the systems, communication among them

on job openings and qualified applicants could

be accomplished in several ways. For example,

each State system could be available for elecAssee, for example, the discussion of the relocation of Armour

meatpacking plant employees in the 1960s, ch. 6.
Ch. 5—National Displaced Worker Programs • 201

tronic query by an office in another State or,

at a more sophisticated level, selected systems

could be linked by networking. These intermediate steps, less complex and costly than a

fully interactive national system, might still

prove a practical, effective help to workers considering a move.

In a time of general budgetary stringency and

reduced ES budgets, it may be questioned

whether State ES agencies will allocate enough

funds to automate or revamp their statewide

job bank systems. Congress might choose to

appropriate funds for this purpose from the

trust fund account that supports the State employment systems. One bill in the 99th Congress (H.R. 1036) would provide $50 million

each year for 4 years for the purpose of fully

automating State job bank and job-matching

systems.

No one has made a detailed estimate of the

costs either of a comprehensive, computerized

interstate system or of an intermediate system.

Complete costs would include not only the

hardware (computers, terminals, and telecommunication lines), but also software systems

and staff time for training, operation, and

maintenance, In 1984 the Data Processing

Committee of the Interstate Conference of

Security Agencies estimated that the costs of

bringing all State employment security dataprocessing equipment up to date would be

about $241 million.50 This figure covered only

the costs of modern mainframe computers,

desk terminals, and disk technology, but not

telecommunication lines, software, or staff

time.

A more optimistic indication of the costs of

upgrading the automation of State systems

comes from Missouri, which has a fully automated system. Officials of the Missouri Employment Security Agency report that the

agency borrowed $1.6 million from the U.S.

Department of Labor in fiscal year 1984 to upgrade their system’s hardware. The State expects to pay back the loan within 4 years,

Sornterstate Conference of Employment Security Agencies,

Data Processing Committee, “A Report on the Data Processing

Financing Needs of the Employment Security System” (Washington, DC: ICESA, 1984).

mostly from savings on operation and maintenance of the up-to-date equipment. Missouri

has about 2.4 percent of the U.S. labor force;

thus according to the Data Processing Committee’s estimates, upgrading the Missouri system

might have been expected to cost about $5.6

million, not $1.6 million. Without a detailed

cost study, it is not possible to resolve the

apparent discrepancies in these figures.

Altogether, understanding of both the costs

and benefits of a broader, more fully automated

exchange of job bank information among States

is limited. A study of these costs and benefits,

including a consideration of several technical

options for linking State systems, is needed as

a reasonable basis for decisions on upgrading

the Interstate Job Bank.

Other applications of new communication

technology, besides automated job banks, have

been suggested to improve ES service to clients

and possibly to save staff time as well. For example, one State administrator is exploring the

use of telephone recordings combined with a

redialing system, to reach clients outside of

regular office hours with news about job openings. (The U.S. Internal Revenue Service and

catalog order firms are already using this technology.)

Labor Market Information

Much has been said about the difficulty of

forecasting the demand for occupations as a

basis for planning education and training.51 In

fact, in many States it is difficult to find good

information even about current openings in

local labor markets. CETA and JTPA both directed the Secretary of Labor to develop current employment data, by occupation and industry, for the Nation, States, and local areas;

and Governors were given responsibility for

overseeing and managing statewide information systems on labor markets and occupational supply and demand.

The weakest element in this information system is detailed, up-to-date estimates of occuSlch. 8 discusses the Bureau of Labor Statistics system of occupational forecasting.
202 . Technology and Structural Unemployment: Reemploying Displaced Adults

pations in demand in local labor markets. The

ES job banks do not provide it, because they

generally contain only a small portion of the

jobs that are available in their areas, and lowpay, low-skill jobs are overrepresented. Potential beneficiaries of better information on occupations in demand are individual workers

looking for jobs or considering retraining,

JTPA project staff, Private Industry Councils,

State economic development planners, and the

ES offices themselves.

Some States do a good job of providing estimates for occupations in demand in local

areas. State Employment Security Agencies

(SESAs, which administer statewide ES systems, routinely collect a great deal of labor market information to meet the data needs of national programs. Under the technical guidance

of the Bureau of Labor Statistics (BLS), they

amass data on local unemployment rates, insured employment and wages, levels of employment and earnings by industry, and occupations within industries, much of which is

used to produce national employment estimates and occupational forecasts. Box 5C summarizes the purposes and content of these four

Federal-State cooperative programs.

Some States collect extra occupational data

to show in more detail the patterns in local industries. Putting together industry and occupational data, SESA analysts are able to form a

rough picture of which occupations are growing, static, and declining in the State and in

some local labor markets. The same data can

serve as the basis for State and local projections

of occupations in demand. According to BLS

officials, about 20 States provide reasonably

current, detailed estimates of occupations in

demand for at least some local areas. In the

States that do not, a principal difficulty is lack

of funds and expert staff to analyze the data

that are available. With the cuts in funding and

staff for ES systems since fiscal year 1982,

some States have chosen to allocate fewer resources to research and analysis divisions, thus

weakening their ability to provide local labor

market information.

State and local labor market information may

now be in jeopardy for another reason. The

BLS has announced plans to give the Occupational Employment Survey (OES) lowest priority among the four Federal-State cooperative

statistical programs, partly because the data are

of greater interest to States than to the Federal

Government. 52 The Administration wishes to

reduce Federal support for local labor market

information that is not directly needed for national purposes, such as determining eligibility or fund allocation for Federal programs like

JTPA, or producing national labor force statistics. JTPA states, however, that the Secretary

of Labor “shall develop and maintain for the

Nation, State, and local areas, current employment data by occupation and industry, based

on the occupational employment statistics program.”53 The Administration also proposed a

cut in the Federal Government’s small program

of local planning grants to States, covering a

broad range of needs for local labor market information. In fiscal years 1984 and 1985, funding for these grants was $7.3 million. The 1986

budget proposed $4.3 million for fiscal year

1986, and Congress appropriated this amount.

Some JTPA projects seek information on occupations in demand by commissioning surveys of local employers to determine their recent hiring patterns. The results may be more

or less useful depending on the sophistication

of the survey. Many projects use performancebased contracts, which put the responsibility

for knowing what kinds of skills are salable on

the trainer.

A new idea for improving information about

local occupational demand is under development in Colorado and is attracting interest

from several other States. Employers in most

States are already required to file quarterly

reports for unemployment insurance purposes,

showing the number of their employees at the

beginning and end of the period and the wages

paid the employees. The reports also identify

the employer’s detailed industrial classification. When data from the reports are aggre52uos+ congress, House Ccxnmittee on Government Operations,

An Update on the Status of Major Federal Statistical Agencies,

Fiscal Year 1986, 99th Cong., Ist sess., a report prepared by the

Congressional Research Service (Washington DC: U.S. Government Printing Office, 1985), p. CRS-38.

SsJob Training Partnership Act of 1982, Sec. 462(a).
WI!. u . ... ------
204 . Technology and Structural Unemployment: Reemploying Displaced Adults

gated and compared across quarters, they can

show hiring flows by local area and industry—

but not by occupation. In the Colorado pilot

project, the employer is asked to add occupational titles for all employees. Thus, if the

project succeeds, the raw data will be available

for showing quarterly hiring flows not only by

industry and locality, but also by occupation.

The technical and financial difficulties of this

kind of project could prove formidable. The

first hurdle is that some employers report only

for central offices, not for branches. More

fundamentally, employers might find it very

troublesome to classify their workers’ occupations by title, which could at the least delay submission of UI reports and taxes. The request

for such detailed reports might also erode

employers’ willingness to respond to long--

established surveys sponsored by BLS for national purposes, most of which rely on voluntary cooperation. The costs to the States of

aggregating and analyzing the data from millions of employers might be high enough to exceed the benefits of this procedure considerably. However, many analysts and managers in

the employment and training field are interested in testing the idea, because the potential

benefits are substantial.

Some of the demands from vocational educators, employment and training managers,

and Private Industry Councils for more or better occupational information concern forecasts

more than recent or current data. Occupational

projections, like other forecasts, are uncertain

by nature. Their value quickly diminishes with

the number of years they try to look ahead. Recent, detailed information on hiring in local labor markets is of immediate use, however, and

can also keep short-term projections up to date.

Given a choice, policymakers might want to

spend scarce funds more on collecting and

analyzing current data than on constructing sophisticated models for projections.

NON-FEDERAL PROGRAMS

In the late 1970s and early 1980s, before A few of the larger statewide and nationwide

JTPA, there were a few dozen State, local, and programs still exist independently, sometimes

private displaced worker projects, usually sup- contributing funds to individual displaced

ported by some Federal funds.54 Many of these worker projects in combination with JTPA, and

non-Federal projects have by now run their sometimes providing a different kind of servcourse or have been folded into JTPA projects. ice than JTPA does.

sqFOr a brief summar In addition to their supplementary role in y of some of these projects, see John A.

Hansen, Andrew Martin, and James Maxwell, “Retraining Dis- funding services for displaced workers, nonplaced Adult Workers for Jobs in the 1980s and 1990s: A Re- Federal job training programs are often de- view of Past Programs, Current Proposals and Future Needs, ”

contractor report prepared for the Office of Technology Assess- signed for related purposes: 1) retraining acment, August 1983. tive workers, both to avoid layoffs and to help
Ch. 5—National Displaced Worker Programs ● 205

keep firms competitive; Z) underwriting the

costs of training the initial work forces of new

and expanding businesses, to encourage economic development; 3) providing community

or State government assistance (e.g., guaranteed loans or technical assistance) to firms that

are in trouble and in danger of closing, to avoid

worker displacement. Some programs undertake all of these activities, and one activity may

merge into another—often there is little distinction between them.

Supplementing the Job Training

Partnership Act

The largest of State programs to assist displaced workers is California’s Employment

Training Panel (ETP). Founded in 1982, it has

about $55 million a year to spend for retraining workers who are unemployed and collecting UI benefits, or have exhausted UI and are

still out of work, or are in danger of losing their

jobs and going on the UI rolls. The source of

the funding is a small tax imposed on employers who pay unemployment insurance, and are

not currently in debt to the UI system (positive

reserve employers). At the same time the tax

for ETP was imposed, the UI tax was lowered

by the same amount.55 (California’s trust fund,

unlike that of many States, has run a surplus

for a number of years.)

In its first 18 months, from January 1983

through July 1984, ETP authorized training for

21,000 people. About 70 percent of these people were unemployed when they entered training, and many qualified for services under

JTPA Title III. A number of displaced worker

projects have received training funds from both

the JTPA Title 111 and the California ETP programs; for example, an outstanding project in

Milpitas, California, directed by a labor-management team at the site of a closed Ford assembly plant, received about $2 million from

each. (See ch. 6 for a description of the FordUnited Auto Workers project at Milpitas,)

Ssunder current Federal and State laws, money collected by

UI taxes cannot be diverted but must be used for UI benefits.

Legally, the ETP tax is not a diversion, but the UI tax collection

system is used to collect it.

Photo credit.’ Ca/ifornia Employment Training Panel

The California Employment Training Panel provide s

retraining both for displaced workers and for activ e

employees who need training to avoid displacement.

With its annual budget of $55 million, ETP

is not a supplement to JTPA but is far larger.

California received a formula allotment of $7.9

million for its Title III program in the 9-month

transition year (the equivalent of $10.5 million

annually). Nor is the ETP program a duplicate

of Title III. ETP strongly emphasizes the retraining of active workers to prevent displacement and the use of job training to promote

economic development.56

Se]nformation on ETP is drawn from The Employment Training Panel, Annual Report 1984 (Sacramento, CA: State of California, 1984], ETP’s monthly newsletters, and interviews with

California State officials, institutional trainers, and directors of

displaced worker projects.
206 • Technology and Structural Unemployment: Reemploying Displaced Adults

The Employment Training Panel is structured for fast action with a minimum of red

tape. Training projects typically begin with a

telephone call from a business or training

agency to one of ETP’s three regional offices,

followed by a meeting with ETP staff to discuss and outline the training. There are no application forms to fill out; ETP staff take care

of the paperwork. When speed is important,

a project outline and formal agreement with

the Panel can be concluded in less than a

month. In the early days of JTPA, when most

State programs were not yet organized and

long delays in approving project funds were

common, this kind of fast, nonbureaucratic response was especially helpful in getting projects started.

ETP is strongly committed to training that

leads directly to jobs. Employers who accept

wage subsidies to provide on-the-job training

must assure that they will keep the trainees on

as regular employees, and training institutions

offering classroom courses must place trainees

in jobs related to their training, or they do not

get paid. The panel asks for 100-percent” placement, although some flexibility is allowed in

practice. ETP also demands that training be for

lasting jobs with a future, paying at least $5 per

hour to start (more in higher cost areas).

ETP gives priority to customized training

that prepares workers to perform specific jobs

for specific employers who agree to locate or

expand in California. According to the panel,

California must offer this kind of service to

compete with other States for new business

and new jobs. For example, ETP training funds

were used to attract Integrated Device Technology (a silicon wafer fabrication company)

to Salinas, an area hard hit by factory closings.

The company had considered locating its plant

and 275 jobs in Idaho instead.

Some other States are showing interest in

training programs funded by the equivalent of

a small portion of the UI tax, in much the same

fashion as California. Delaware was the first

to follow suit, with its “Blue Collar Jobs Act,”

passed in 1984 and funded at $1.6 million a

year. In Delaware’s case, the new tax was

enacted when the State finished paying back

a loan to the Federal Unemployment Account.

(Delaware’s UI trust fund ran a deficit during

the recession.) The special employer tax dedicated to paying back the loan was lifted just

as the new tax, equal to a portion of the special tax, was imposed. The practical effect was

a UI tax reduction for employers, while the

State got funding for a new job-training program. As in California, most of the training

funded by the program will be offered to unemployed or displaced workers, but one-quarter of the funds are reserved for “industrial”

training, including the retraining of active

workers.

Another source of supplementary funding

for displaced worker projects is private funds,

primarily the jointly administered management-labor training accounts provided in some

union contracts. The largest of these are the

nickel-an-hour and dime-an-hour funds negotiated by the United Auto Workers (UAW) in

their national contracts with Ford and General

Motors. Built by contributions of 5 or 10 cents

for every hour worked by union employees,

collections for the Ford-UAW fund amounted

to about $10 million a year, and for the GMUAW fund to approximately $50 million a year,

in 1985.

Both programs operate their own retraining

and reemployment centers, open to any laidoff worker with recall rights, and both have

contributed to displaced worker projects based

in plants that were closing. The nickel and

dime funds, like California’s ETP fund, were

essential to giving several projects a prompt

start. Similarly, a retraining fund provided by

the agreement between the LTV steel company

and a United Steelworkers of America union

local in Midland, Pennsylvania, helped the

Midland project for displaced workers get off

the ground in 1983, while delays of more than

a year followed applications for JTPA money.

Flexibility remains a principal advantage of

these private funds. Because JTPA-funded services are open only to unemployed workers,

someone in the midst of a remedial education

or skills training course as part of a Title 111
Ch. 5—National Displaced Worker Programs . 207

Photo credit: UAW-Ford Employee Development and Training Program

Flanking their instructor, two laid-off Ford workers are

learning machining skills in a retraining course offered

under the UAW-Ford Employee Development and

Training Program.

project cannot continue once he gets a job. The

nickel- and dime-funded programs serve active

as well as unemployed displaced workers, and

so do not suffer from this drawback. Moreover,

the privately funded training centers are able

to serve underemployed workers who have

taken a stopgap job as well as those out of work.

As the condition of the auto industry improved

in 1984 and 1985, the emphasis in the employer-union training programs serving auto workers shifted to include active employees as well

as the unemployed.

Retraining Active Workers

Programs that emphasize retraining of currently employed workers usually have several

goals in view. The California Employment

Training Panel, for example, emphasizes that

retraining workers who are threatened with

layoff can save the workers’ jobs, save employers the costs of personnel turnover, and

save outlays from the UI trust fund. The panel

also states that a principal goal of active retraining is to encourage the adoption of new technologies, thus helping California businesses to

stay productive and competitive. The effect, besides avoiding the immediate loss of jobs, is to

make future employment more secure.

Through June 1984, 30 percent of the California workers benefiting from ETP training

were active employees. To qualify for ETP

funds, employers had to certify that, without

retraining, their workers would be laid off and

replaced with people who already had the skills

that employers now required. Employers often

cited the need for workers who could use computerized equipment and systems. According

to an ETP report, at least half the job training

the panel has funded involved some form of

computer technology, ranging from office automation to wafer fabrication in semiconductor

plants.

A number of ETP’s active retraining projects

serve small and medium-sized businesses. For

example, 173 drafters working for 46 Los Angeles architectural firms were retrained in

computer-assisted drafting and other automated processes, which cut the time required

for producing architectural drawings by 50 to

75 percent. In another Los Angeles project,

ETP helped to pay for the retraining of 148 employees of 15 apparel firms. These employees

learned to operate computerized equipment

that designs patterns, adjusts pattern sizes, and

determines the placement of patterns on fabric. No other such training program existed in

the Western United States. Without the training, employers reported, they would have pirated trained workers from the east coast, or

they would have exported work overseas to

low-wage countries. Either way, current employees would have lost their jobs.

Large businesses are also taking advantage

of ETP-funded training. The Hughes Corp.,

California’s biggest single employer, used ETP

funds to retrain 990 workers, some of them

current employees in danger of layoff, some

former workers eligible for recall, and some

new hires, to operate a sophisticated new inventory control and production management

system. So far, the largest of the ETP-aided

projects for retraining active workers is $5 million of assistance to the Bank of America. The

bank is closing branch offices and plans to

retrain 2,000 former tellers, operations assistants, and clerical workers for such jobs as spe-
208 Ž Technology and Structural Unemployment: Reemploying Displaced Adults

cial loan officers, personal banking officers,

and computer-banking assistants.

Some uneasy questions arise about the use

of public funds by large, financially healthy

firms to train their workers. California ETP

staff argue that many firms adopting new technologies would find it simpler and cheaper to

replace current workers with newly hired people who have trained themselves at their own

expense, and that ETP retraining saves the financial and emotional costs of displacement.

Moreover, the availability of ETP funding for

training allows firms to spend more for investment in capital equipment, thus improving

their competitive position. In any case, since

the ETP program is funded directly and solely

by what amounts to a portion of the UI tax,

paid by employers, the panel believes that it is

appropriate to support any training that reduces UI-covered unemployment, current or

potential.

Altogether, the public share in retraining of

active workers is minute compared to the private. As chapter 7 discusses, spending by employers for formal training and education of

their employees probably amounts to at least

$10 billion per year and possibly much more.

Informal training in the workplace, while

almost impossible to quantify, is certainly of

great importance as well. Public assistance for

preventive retraining, mostly funded by States,

probably adds up to no more than tens of millions per year, compared with the billions spent

by employers. Clearly, the public sector cannot take the place of the private in this activity. It is the private sector that now provides,

and will continue to provide, by far the most

retraining of current employees that a changing and competitive economy requires.

Private programs such as the nickel and dime

funds are structured ways of obtaining employer-funded training for currently employed blue-

-collar workers. For the union, a principal goal

of the retraining programs for active workers

is to bolster job security. For example, the 1984

UAW-General Motors contract calls for a job

bank, supported by the dime fund, that will provide retraining and General Motors employment for workers whose jobs are lost due to

technology or productivity improvements or to

outsourcing (purchase of auto components

abroad). This contract provision does not apply to jobs lost because of changes in consumer

preference. People assigned to the job bank

may be trained to serve in a roving team of substitutes, but in any case are supposed to be

offered training to upgrade their skills. The job

bank program has not yet had a real test. In

mid-1985, auto sales and production were

strong enough that only 41 people had been assigned to it, and they stayed only 2 weeks before getting new General Motors jobs.

In 1984 and 1985, nearly all the retraining

of active General Motors employees that the

dime fund supported was preparation for work

in redesigned, modernized plants, not a response to elimination of jobs. For some employees—for example, the hundreds of workers assigned to two technologically advanced

steering gear plants, or the skilled technicians

and repair crew in assembly plants—the retraining is technical and fairly demanding. For

others—for example, assembly line workers in

the modernized Pontiac, Buick City, and Hamtrack assembly plants—much of the retraining

consists of a 3-week course emphasizing team

building, learning to trust fellow workers, and

understanding the importance of quality. For

those who need it, short courses in remedial

or brush-up education in reading and math is

offered. A key element in the success of the attitude training received by assembly line workers, stressing the connection between the worker’s own welfare and the success of the product

in the marketplace, appears to be the joint union-management administration of the program.

Another privately funded national program

for retraining active workers was negotiated

in a 1983 contract between AT&T and the Communications Workers of America. In anticipation of rapid technological change in the telecommunications industry, the contract called

for the company to spend up to $36 million

over 3 years for retraining employed workers.

With the breakup of AT&T, the regional Bell

companies as well as AT&T itself have taken

over the training obligation.
Ch. 5—National Displaced Worker Programs . 209

In each of these companies, a labor-management advisory board approves training that it

believes will help the employees fit into other

company slots, as jobs and the organization of

work evolve with changing technology—or,

failing that, will help them find other jobs in

the local economy. In 1985, thousands of AT&T

and Bell employees took advantage of training.

The Northwestern Bell joint advisory board, for

example, approved training in individually

selected community college courses, and 3,300

(25 percent) of employees signed up. The Bell

South board emphasized correspondenc e

courses, in subjects ranging from basic math

and English to typing, business-letter writing,

algebra, and digital electronics. some 5,000 employees enrolled. Of 76,000 nonmanagerial employees of AT&T’s communications division,

10,000 were taking home study courses in mid1985, chiefly in electronics, accounting, computer-related skills, and arithmetic.

The joint advisory boards responsible for

framing the training programs have emphasized

the importance of improving broad, generic

skills, and many employees are seeking this

kind of training. When it comes to more specific technical skills, the advisory boards have

little to go on. They have received relatively little information from the company managements on the jobs and skills expected to be in

demand in the future, partly because union

members have complicated bumping rights

based on seniority, and it is hard to foresee

what jobs will be open. Also, some companies

consider information on their future job skill

needs proprietary. As for employment outside

the companies, the advisory boards face the

same difficulties many others do in finding

readily available, detailed information on job

demands in the local labor market. To anticipate what jobs will be in demand in a few years

is still more chancy.

The company-provided retraining did not extend to workers who lost jobs in the largest layoff in AT&T’s history—the cutback of 24,000

of 117,000 jobs in the company’s Information

Systems division, announced in August 1985.

AT&T did provide reemployment assistance,

however. Besides offering ex-employees help

with resumé writing and job search skills, the

company set up a central labor exchange information program with a free long-distance

telephone number. Employees were asked to

list their job skills and interests, and employers

to list job openings. The initial response from

employers seeking skilled employees was brisk;

some 1,700 employers listed nearly 6,000 job

openings in the next few days after national

advertisements publicized the information exchange. The company planned to keep the exchange active at

year.

Comunity and

least through the end of the

Government Assistance to

Prevent Plant Closings

Plant closings and large labor force shifts are

an inevitable part of economic growth and

change, an aspect of the “creative destruction”

of capitalism. This does not mean, however,

that every threatened plant closing is unavoidable. In some cases, troubled companies are

able to adopt effective strategies to enhance

their competitiveness, with or without public

assistance, and thus avoid the necessity of closing down. Even though the strategy for survival

may involve sacrifice, such as trimming the

work force, the massive worker displacement

and community distress of a complete closing

is averted.

Some firms, because of technological obsolescence, strong foreign competition, loss of

product demand, or plain poor management

have little chance to survive. In others, the

changes required for survival are so far reaching, and time and resources so limited, that

closing down is the only reasonable option. Efforts to keep these firms in business and save

jobs will, in the long run, be wasted. Not all

decisions to close down a firm are clear cut,

however. The reasons for resorting to a shutdown are various, and some are more compelling than others. Some firms have reasonable

prospects for long-term success if they can

weather a short-term crisis and at the same

time do what is necessary to enhance their

long-run competitiveness and profitability.
210 • Technology and Structural Unemployment: Reemploying Displaced Adults

“Doing what is necessary” often means the

loss of jobs. Restoration of a firm’s competitiveness often depends on improving productivity, that is, achieving more output per hour

of labor. Unless sales rise enough to compensate, saving the company costs some jobs—but

not as many as if the company went out of business. For example, in 1974 the Japanese company Matsushita bought Motorola’s moneylosing Quasar operation, which made television sets, Matsushita invested heavily in

labor-saving equipment and also moved some

of its operations to Mexico, where wages were

lower. At the same time, the company redesigned the product and reorganized work to improve quality and encourage employee participation. With all this, some jobs were lost. Yet

if the company had failed, several thousand

more U.S. workers would have lost their jobs.s’

Because local communities often have a large

stake in the survival of a threatened plant, they

may become involved in efforts to save it. State

or Federal Government agencies may also be

drawn into the efforts. Public or community

agencies considering this course will make

wiser decisions if they first size up the reasons

for the closing and the longer term prospects

of the firm. The following questions are among

the key considerations.

Is there enough time? Early detection of

problems so that there is time to adopt a corrective strategy is essential. Also, both management and labor must clearly recognize that

short-term measures (e.g., temporary work

sharing) will seldom be effective unless they

are combined with a long-term strategy to improve the company’s competitive position.

often, it takes several months to conduct a feasibility study just to determine whether there

really are practical alternatives to shutting

down, and several more months may be needed

to negotiate the necessary changes.

WU. S. Congress, Office of Technology Assessment, Mernatiomd Competitiveness in Electronics, OTA-ISC-200 (Washington, DC: U.S. Government Printing Office, November 1983), p.

338; J, A. Alic and M, C. Harris, “Employment Lessons From

the U.S. Electronics Industry, “ in Proceedings of the Zd international Conference on Human Factors in Manufacturing, H.

J. Bullinger (cd.), Stuttgart, West Germany, June 11-13, 1985.

Are there realistic prospects for profitability

that are likely to attract other investors? Some

modestly profitable plants are slated for closure

because they do not provide the rate of return

that meets the goals of corporate managers or

stockholders. These plants may be good candidates for acquisition by other investors, although in some cases the parent company will

not want to sell out to a potential competitor.

Other firms may have reasonable prospects for

profitability if capital is invested, costs are cut,

or management is generally improved. More

rarely, companies may have the potential to

convert to a different product line with better

prospects for profit, if the physical plant and

employee skills are suitable for the new product.

Are both management and labor willing to

make sacrifices to create a more efficient, productive, and profitable plant? Often, successful turnarounds depend on reforging relationships between labor and management, with

give and take from both parties in devising an

effective plan of action. Management has to be

able and willing to commit capital funds to a

risky endeavor, and often to share some decisionmaking power with labor. Long-term wage

concessions may be required of both managers

and workers, and labor unions may have to accept changes in work rules, occupations, and

staffing.

Communities can sometimes play a critical

role in helping to save threatened plants. Their

contribution may be in the form of encouraging labor and management to work together for

the company’s survival, finding alternative investors or new owners, providing training for

the work force in a modernized plant, or upgrading public facilities or services. Even when

the prospects for saving plants look favorable,

communities also need contingency plans for

assisting displaced workers. The plant may

after all close, or if it survives, it may need a

smaller work force or a different kind of work

force. A certain amount of displacement is

likely in any event. Some communities have

permanent local organizations that can undertake these responsibilities. In others, less formal efforts are undertaken as needed, usually

in response to specific plant closings.
Ch. 5—National Displaced Worker Programs “ 211

Most States do not have specific programs

to channel assistance to troubled industries or

plants in danger of closing. Their efforts to help

are likely to be ad hoc or directed more toward

the general goal of economic development and

job creation. A few States, including California, Massachusetts, and South Carolina, have

established continuing programs to help firms

and industries in distress.

Promoting Labor-Management Cooperation

A recent innovation, the Area Labor-Management Committee (ALMC) is intended to foster cooperative solutions to company-worker

problems that may threaten the company’s existence and the prosperity of the community.

ALMCs have been tried most commonly in

communities plagued by poor labor-management relations, where firms have closed or fled,

and new ones cannot be attracted, Since the

1970s, a score of communities have established

ALMCs.

One of the oldest and best known of these

organizations was founded in 1970 in Jamestown, New York, At that time, this small manufacturing town (population 40,000) in the far

western part of the State had entered a condition of economic decline, brought on in part

by very poor relations between management

and labor. After a major employer went out of

business, the town’s mayor (Stanley Lundine,

now a member of Congress) convinced local

business and labor leaders to forma voluntary,

community-wide labor-management committee. Co-chaired by representatives from labor

and business, the committee also includes the

mayor, the city ombudsman, and someone

from the Federal Mediation and Conciliation

Service as ex officio members.

Jamestown’s ALMC adopted a strategy of local economic renewal, attempting both to retain local firms and attract new ones. The committee offers a cooperative program to assist

local industry, better labor relations, develop

human resources, and improve productivity.

A key element of the program is in-plant labormanagement committees, which look for cooperative solutions to problems that affect the

firm’s ability to compete. The ALMC keeps the

committees supplied with technical assistance

from the local community college, consultants,

and local and State agencies. One study credited

the ALMC with saving 1,708 jobs from 1972

to 1981.56 Many of these jobs were in plants that

would have closed or relocated had productivity not improved. The same study concluded

that ALMC had helped to create 2,500 new jobs

in the community, many of them in firms that

would not have located or expanded in the

area, had the old negative image of labor-management relations persisted. In 1985, 12 inplant committees were operating in Jamestown

area plants, including 9 under ALMC sponsorship.

A modest-sized Federal agency employing

the same approach as that of the ALMCs is the

Division of Cooperative Labor-Management

Programs, U.S. Department of Labor. Its mission is to foster joint efforts by labor and management to improve productivity and enhance

the quality of worklife. Its assistance to business, labor, and public organizations includes

information services, workshops, technical

assistance, and provision of resource materials.

State Programs to Help Troubled Firms

Massachusetts is one of the few States with

a permanent, established program to help troubled firms. Created by law in 1984, the State

program includes several different services.

One is the Massachusetts industrial service

which, at a firm’s request, offers help in improving outmoded technologies and poor management, or in searching for a new owner if

necessary. Firms may take advantage of a consulting service which can develop an adjustment strategy to be followed by the present

owner or, failing that, to serve as the basis for

attracting a new owner. The industrial service

is also authorized to assist communities hit by

plant closings, either by looking for new uses

Christopher B. Meek and William F. Whyte, “Community

Economic Revitalization: The Jamestown ModeI of Cooperative

Labor-Management Problem Solving, ” in Gary B. Hansen and

Marion T. Bentley, Problems and Solutions in a Plant Shutdown:

A Handbook for Community Involvement (Logan, UT: Utah State

University Center for Productivity and Quality of Working Life,

1981), pp. 291-308.
212 . Technology and Structural Unemployment: Reemploying Displaced Adults

for idled plants or by trying to attract new business (the more conventional economic development strategy). The service is also charged

with developing an early warning system, identifying the kinds of industries that are vulnerable to plant closings and to significant losses

of employment.

Another program created by the same law

is a stabilization trust, the purpose of which

is to provide “flexible high-risk financing” to

troubled firms that are deemed economically

viable. The financing is intended to make possible a change in ownership, or corporate restructuring, or a turnaround plan that could

avert plant closure. The trust is designed to

supplement financing by private sources and

other public agencies, not to replace them. The

program is new, and how it will work in practice has yet to be proven. The difficulty in such

programs is evident: how to select companies

that have a good chance of becoming productive and competitive, and to avoid wasting time

and money on ones that do not.

South Carolina’s Rapid Response Team shares

some features with the Massachusetts program. The Governor established this coordinating body in the summer of 1983, to deal with

the large number of textile mill and manufacturing plant closings occurring in the State. At

first, the team was seen as a temporary recession measure, but in the fall of 1983 a task force

of the Governor recommended making it permanent, to play a part in the State’s strategy

for economic development. The State Development Board was put in charge, with other

State agencies responsible for education, training, employment security, and development

financing also serving on the team. Additional

agencies can also be tapped when needed.

The missions of the team are to identify problems related to plant closings and to coordinate

State and local assistance when closings occur.

Two specific goals are aversion (helping plants

avoid closings when possible) and conversion

(when the closing is inevitable, helping to convert the work force to new employment and

the plant back to productive use).

The State Development Board has a central

clearinghouse to collect as much early warning of plant closings as possible from such

sources as local development boards and councils of government, chambers of commerce,

banks, and local ES offices. When notified of

an actual or probable closing, the team arranges a site visit. If its evaluation suggests economically sound alternatives to closing the

plant, the team works with the plant management on an aversion strategy package that may

include provision of business information, financial assessments, loans and tax incentives,

assistance in research and marketing, and

technological assistance, including retraining

workers for jobs using automated equipment.

By mid-1984, the team had visited 12 plants

threatened with closure, affecting 3,485 workers. One of the plants—Anderson Mills in the

town of Anderson, employing 450 people—

seems to have been saved through a combination of financial and management assistance.

Two plants were successfully converted. The

Racine Glove Co. in Manning and the Sunbeam

small appliance plant in Denmark were both

sold to new owners making similar products,

and both are back in production. All 85 workers at the glove company were rehired. Employment at the appliance plant, formerly 250,

was expected to reach 200 two years after the

new owner took over.

Helping to Find New Financing or New Buyers

One of the strategies that States, local governments, and communities use to help troubled

firms is to arrange financing for improvements

that may pull the firm through. Community officials or local citizens sometimes serve as intermediaries in getting technical or financial

assistance from State or Federal agencies.

Rarely, local governments may themselves provide direct financial help or incentives to a

threatened firm. If the current owner cannot

or will not stay in business, community representatives may seek a buyer. Sometimes a local government serves as a middleman between a troubled firm and new investors or a
Ch. 5—National Displaced Worker Programs • 213

new owner. When it works, this approach is

very cost-effective for local taxpayers. Even after a plant has closed and the workers have

been laid off, community and State action

sometimes succeeds in finding a new owner

to reopen the plant. In rural or isolated places,

where one plant can make a critical difference

to the economic life of a community, local

leaders and government officials have compelling reasons to try persistently to revive the

plant. Such an instance is described in box 5D.

Worker ownership of a failing plant is another

option, much publicized but not very often accomplished, to avoid plant closure. Employee

stock ownership plans are widespread in U.S.

businesses (in part because of tax advantages

conferred under the Employee Retirement

Income Security Act of 1974 and its amendments), but the National Center for Employee

Ownership knows of only about 35 instances

of worker buyouts to avoid plant closings since

about 1970. Because of incomplete reporting,

the actual number of such buyouts may be

twice as great, perhaps 70 cases, but this is still

only about 1 percent of all employee-owned

operations. State and Federal agencies on occasion offer some help in worker buyout efforts, sometimes by sharing the costs of feasibility studies to determine if worker ownership

is viable. State assistance has not played a

prominent part in most buyouts, however.

The largest and best known worker buyout

so far was the one negotiated between the National Steel Corp. and employees at its Weirton, West Virginia, Steel Division in 1983. A

year earlier, the company announced that it

would consider employee ownership a viable

alternative to its plans to gradually reduce new

investments in the plant as a prelude to closing it. Consultants hired by the company and

employees to explore the feasibility of worker

ownership found that the long-term prospects

for the company’s steel products were favorable, on the condition that employees take significant wage cuts.

Pensions and benefits accrued under National Steel’s tenure were another key negotiating point. If the plant closed while National

owned it, the company’s closure costs would

swell to hundreds of millions of dollars for such

items as early pension payments and severance

pay. At the same time, workers were concerned

that they could lose all benefits if the company

failed after they took it over. In the final agreement, the employees accepted a 20-percent

wage cut, while the company agreed to continue its pension and benefit obligations for 5

years after the buyout. During its first year as

an employee-owned firm, Weirton made a

profit of $60.6 million.

The Weirton worker ownership agreement

depended very little on direct spending of government funds. The West Virginia Economic

Development Authority provided $125,000 for

an initial feasibility study, and two counties in

the area contributed an additional $35,000. At

one time, the city applied for a Federal urban

development action grant to help with in-plant

improvements, but its application was rejected.

LABOR POLICIES AND ADULT WORKER TRAINING IN THE UNITED STATES AND

OTHER INDUSTRIAL DEMOCRACIES

Labor Policy

Government policies specifically designed to

deal with labor adjustment are relatively new.

In most industrialized countries, active (or

selective) labor policies date only from the

1960s. Before that, governments relied on three

kinds of policies to affect employment and unemployment: 1) general macroeconomic policy, 2) employment insurance and welfare, and

3) economic development policy. Adult training and retraining programs also existed for

years in many industrialized nations, but only

in the 1960s did the OECD countries begin to

use these programs systematically to meet the

employment needs of selected groups, regions,

and economic sectors; that is, to make them

a part of active labor policy. The active labor
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Ch. 5—National Displaced Worker Programs ● 215

policies in modern industrial democracies center on three objectives: 1) developing human

resources and adjusting the labor force to structural changes, with the goal of fostering economic growth; 2) improving the employment

opportunities of marginal groups, thus contributing to social equity; and 3) ameliorating the

trade-off between inflation and unemployment,

by stabilizing employment during cyclical

downturns and removing labor market bottlenecks during periods of growth.

Adult retraining and reemployment assistance is one of a range of policy tools that governments now use to deal with specific labor

problems. The ways other industrialized countries have structured this assistance, and fit it

into their broader labor policies, are highly varied, These varieties of experience may offer insights to U.S. policy makers, keeping in mind

that not all foreign experience can translate

easily into the political and economic culture

of the United States.

For example, the combined classroom learning and apprenticeship in vocational skills that

most German young people acquire in their

high school years provides West Germany with

an able work force, to the benefit of the nation’s

productivity and competitiveness. Japan’s system of lifetime employment favors continued

retraining of active workers, at least for the

one-quarter or so of Japanese workers included

in the system. Employers who are able to keep

their workers and retrain them as markets and

technologies change contribute both to their

own and to the nation’s adaptability and competitiveness.

The labor policies and adult training programs of two industrialized democracies have

been selected for brief discussion here. The

Swedish system has attracted notice as an example of a stable social partnership between

business, labor, and government, with both full

employment and business efficiency as major

goals. Canada exemplifies a more laissez-faire

approach, combined with a substantial commitment to training and adjustment programs

for workers displaced by trade and technology

changes.

Sweden

Sweden’s retraining and reemployment programs and other labor measures are the largest

and most costly in the world, accounting for

about 5 to 8 percent of government expenditures in recent years, and 2 to 3 percent of gross

national product. These programs typically

provide services to 5 or 6 percent of the labor

force in the course of a year. Although expensive, the Swedish system is considered well run

and effective. To a substantial degree, it has

met the three goals set for it: 1) facilitating

structural adjustment; 2) keeping employment

high while holding inflation down (i.e., stabilization); and 3) promoting social equity by giving job skills to as many citizens as possible.

Stabilization has been partially achieved,

with more success in controlling unemployment than inflation. More than any other Western country, Sweden uses active labor policies

to keep unemployment down. In 1980, for example, when the U.S. unemployment rate was

over 7 percent, Sweden’s was 2 percent. Sweden’s annual unemployment rate never rose

above 3.4 percent even in the depths of the

1980s recession, when the U.S. unemployment

rate reached 9.7 percent and the average rate

for Western European countries was over 11

percent. International comparisons are tricky,

however, because Swedish policy deliberately

provides government subsidies for wages, training, and public sector jobs to keep people off

the unemployment rolls when private business

activity is depressed.

Sweden’s recent record of inflation control

is only mediocre. In the decade 1971-80, the

average annual rate of inflation in Sweden was

9.6 percent, a little below the average for Western European countries, but above the U.S. annual rate of 7.9 percent for the decade. As inflation moderated in the 1980s, Sweden stayed

about even with the rest of Western Europe,

but U.S. inflation rates were much lower (i.e.,
216 • Technology and Structural Unemployment: Reemploying Displaced Adults

a 3-year average of 9.9 percent for 1981-83

in Sweden, versus 6.6 percent in the United

States).

As a small, trade-dependent country, Sweden

is conscious of the need to stay competitive internationally. The nation’s labor policy is intended to help individual workers adjust to

structural economic change, not to prop up

declining industries indefinitely. Nonetheless,

wage subsidies, which indirectly support declining industries, are a prominent part of

Swedish policy.

The National Labor Market Board (AMS), an

independent tripartite body that includes government, business, and labor representatives,

formulates the broad outlines of Sweden’s labor policy, under the guidance of the government and Parliament. All Swedish labor programs, including job training, placement, wage

subsidies, relocation assistance, and job creation, are coordinated under AMS. AMS is also

the only legal employment service in Sweden.

This enables local AMS offices to gather a great

deal of information about worker needs and job

vacancies in their areas; at the same time they

are part of a nationwide agency with ready access to job listings throughout the country. Despite the centralizing role of AMS, its local

offices have ample discretion and can act

quickly. The government-run adult training

program in Sweden has the dual function of

providing new skills and helping to reduce unemployment during downturns in the business

cycle. Bottleneck training, directed toward preventing skills shortages, is also supported to a

limited degree as an anti-inflation measure.

The training centers, administered by AMS,

provide courses to a large number of workers;

approximately 1 percent of the 4.4 million people in Sweden’s labor force are in governmentsponsored training each year. Apparently, the

training courses are well chosen and reasonably effective. About three-quarters of graduates have jobs within 6 months, mostly in the

work the students were trained for, and dropouts are reported to be few.

The training courses are free and are open

to adult workers who are unemployed, in danger of becoming unemployed, or hard to place.

(Bottleneck training is open to employed workers.) The AMS Employment Service determines

eligibility. Courses range in duration from 2 to

72 weeks, commonly lasting about a year, and

are scheduled to admit students at frequent intervals. Throughout training, the student workers receive a stipend that approximately equals

the unemployment benefits they qualify for.

Workers in training are generally the less

skilled and less educated and formerly held

jobs in occupations for which there is declining demand. Remedial education is offered to

those who need it before they begin skills training. Quite a few older trainees have no more

than 6 or 8 years of formal schooling.

Other selective labor measures administered

by AMS include special placement assistance,

which is all that many displaced workers need.

The Swedish system puts special emphasis on

an immediate response, on the grounds that

long delays between layoff and employment

assistance hurt motivation and make successful retraining or placement less likely. Swedish law requires advance notice of impending

layoffs of five or more workers, so that an early

response is possible. Circumstances vary, but

in a large layoff, the AMS Employment Service often moves into the workplace immediately, trying to match workers with job openings. For workers who do not find jobs, the

service usually recommends either training or

a subsidy to the firm, to encourage it to retain

the workers at least temporarily.

Wage subsidies to employers, like government-sponsored training, are a major feature

of the Swedish system. A third sizable element

is counter-cyclical public employment. Altogether, 90 percent of Swedish labor program

expenditures go to what are called active measures to combat unemployment, with 10 percent

going to passive unemployment insurance and

other cash assistance to the jobless.

The Swedish approach is in many ways a

huge transfer program in which the employed

pay taxes—at very high rates—that are used to

keep other workers in a variety of training and

subsidized labor schemes. Foreign analysts

sometimes describe the extensive wage subsidies, training expenditures, and public sector
Ch. 5—National Displaced Worker Programs ● 217

employment in Sweden as masking what would

be counted as higher unemployment in other

countries. A different view—one which the

majority of Swedes evidently share—is that the

country’s labor policies are more cost-effective

and socially productive than leaving the workers to collect unemployment insurance. Wage

subsidies, for instance, encourage companies

to keep marginal workers at less cost to the government than paying full unemployment benefits to laid-off workers. Even when workers

in training have no immediate prospect of jobs,

because of recession, they are learning useful

skills while costing the government only a little more than unemployment benefits,

The system has its limitations in treating all

kinds of workers equitably. During the late

1970s, despite Sweden’s low unemployment

rate, the duration of unemployment for those

without jobs was longer than in earlier decades. Also, since the late l970s, unemployment

rates have been considerably higher for younger and older workers (those in age groups 16

to 24, and 55 to 64) than for workers in the middle age brackets. In addition, some Swedish unemployment must be regarded as exported.

Guestworkers from Finland and other poorer

countries are returned home, or no longer are

allowed to immigrate, when the demand for labor declines.

Indeed, a certain degree of inequity seems

built into the system. There is a growing welfare gap between those who established themselves in the labor market and will get continuing protection and those who are not in this

fortunate position. The latter are less likely to

get good jobs, partly because the system is designed to protect those already employed. This

arrangement also makes it harder for workers

who dislike their current jobs to change them.

There is also concern in Sweden about the

implications of the job-protection policy for

structural adjustment to changing economic

conditions. By 1980 the government and some

analysts began to speak of the declining adaptability of job applicants and employers. Comfortable with staying where they were, workers showed an increasing preference not to

move from their companies or regions. Employers, too, found it easier to accept wage subsidies and keep workers in old lines of business than to enter new activities. The 1980

Conservative government responded with new

measures, including new grants to encourage

more geographical mobility. Whether the present

Social Democratic government will continue

these measures, and whether they will have

any real effect, remains to be seen,

Several observations can be drawn from the

extensive Swedish experience with training,

wage subsidies, and other active labor policies,

First, a wide range of policies can be used to

prevent and, when necessary, respond to industrial dislocation. Retraining is one option,

not necessarily the most effective for all situations or individuals. Nor do all of the options

involve subsidies. Some are simple but prompt

measures to help displaced workers find new

jobs, before layoff if possible. Other policies,

including early retirement and agreements to

transfer laid-off workers to other company

plants, can be used to limit the number of workers facing dismissal.

Second, the Swedish experience suggests the

value of considering alternatives to unemployment benefits as the main response to joblessness. In terms of society’s interest in improving

skill levels, and in terms of the dignity and

productivity of the individual, simply putting

people on unemployment may not necessarily

or always be the best option.

Third, Swedish experience shows that bureaucratic does not necessarily mean rigid,

inflexible, and wasteful, The Swedish system

of training centers is run by a government

agency, and it works. One reason it works is

that business and labor are involved at all

levels, particularly in identifying what kinds

of training are needed. They provide valuable

contacts, information, and support, AMS also

has a unique source of current information in

its network of employment service offices. Joining a comprehensive employment service with

the authority to plan training, along with a

mandate to adjust courses to changing clients

and jobs, makes for a flexible and effective

training system.
218 ● Technology and Structural Unemployment: Reemploying Displaced Adults

This leads to the complex issue of how much

of the Swedish system could be successfully

transferred to other countries, particularly to

the United States. Clearly, the fact that Sweden

is a small homogeneous country in which government officials are trusted helps make the

system accepted and successful. So does the

overwhelming public support for the goal of

full employment, even if it means very high

taxes and high government spending. Equally

important is the genuine, if sometimes overstated, cooperation between labor and business, at all levels of society, which has existed

for half a century. Related to this last point is

the powerful political role of organized labor

in Sweden. Eighty percent of Swedish workers belong to labor unions. Many of the work

force reduction methods used in Sweden are

inconceivable without very strong unions in all

industries and very strong, prolabor laws concerning employee rights and prenotification requirements.

Very few of these supporting conditions exist in the United States, An attempt to emulate

the entire Swedish system would surely fail.

Some elements of the system, such as the government monopoly on placement services, are

most unlikely to travel well from a small homogeneous country to a large, highly varied

and individualistic one. A more practical approach is to select elements of the system—

for example, commitment of extra resources

to training during recessions, provision of individual effective counseling for displaced

workers, and advance notice of and early response to layoffs—and tailor them to this nation’s needs and constraints.

Canada

Canada has an active, varied labor policy.

The Canadian approach is less a formal social

partnership between government, business,

and labor, on the Western European model,

than a series of selective interventions by the

national government to correct what are seen

as deficiencies in the private market. The labor programs are meant to support a national

policy of lowering world trade barriers, making Canadian industry competitive, fostering

technological advance, and thereby promoting

economic growth. Elements of Canada’s labor

policy include an extensive, well-funded jobtraining program for adults, with income support for trainees; wage subsidies and public

sector job creation, especially in communities

with heavy job losses due to structural economic change; and a small, flexible, highly efficient placement program for workers hit by

plant closings or large layoffs.59

Canada’s national government supports two

kinds of job training for adults: tuition-free institutional courses, in community colleges and

vocational schools run by the provinces; and

industrial training, supplied by employers in

plants and classrooms and paid for cooperatively by the employer and government. Both

have the dual purpose of improving individual

workers’ employability and earning capacity

and of meeting the skill needs of the labor market. As of 1979, studies of program results

showed that 75 percent of trainees (institutional

and industrial) obtained jobs after training, but

only about one-half of these were in jobs for

which they had been trained. With a change

in the law in 1982, both parts of the National

Training Program began to emphasize “critical skills” training, in occupations designated

as nationally important and in which shortages

are anticipated. This new approach tips the balance somewhat from the individual worker’s

needs to the nation’s needs, but priority is still

given in some training programs to workers

who are considered disadvantaged in the labor market, including women workers and

Natives.

In fiscal year 1983-84, the Ottawa government spent $1 billion on job training for adults

(defined as people who are past the age of re5QMuch of the material in this section was provided by officials of the Canadian Ministry of Employment and Immigration,

including AlIan Jacques, Director General, Labour Market Planning and Adjustment, and his deputy Blair Lopes; Pierre Leclerc,

Director, Industrial Adjustment Service (formerly the Manpower

Consultative Service); and Norman Allison, Director, Human

Resources Development Branch, Ontario Region, In addition,

see Abt Associates of Canada, “Evaluation Study of the Industrial Adjustment Service (IAS) Program, ” report prepared for

Employment and Immigration Canada, Program Evaluation

Branch, November 19/34.
Ch. 5—National Displaced Worker Programs ● 219

quired school attendance).

60 With a national

budget of $89 billion and a labor force of 12

million, this is a substantial sum, Some 277,000

people, about 2.3 percent of the labor force,

participated—again, quite a sizable number,

compared with approximately 1 percent of the

work force who are in job training in both

Sweden and West Germany.

61 The Canadian

figure is probably somewhat overstated, because about 43 percent of the trainees were

young people (24 years of age and under), a

higher percent than in other countries, Nonetheless, job training for adults in Canada is impressive in its size.

Despite a national policy favoring more reliance on industrial training, Canadian job training in 1983-84 was still quite strongly classroom-oriented. The great majority of adult

workers starting government-sponsored training were in institutional training (231,000 people); nearly three-quarters were enrolled in

vocational skills courses, some 20 percent in

remedial education or language training, and

the rest in some form of job readiness training. Almost everyone in full-time training

courses received government-financed income

support, either UI benefits (which can last as

long as 2 years for trainees), or small training

allowances, sometimes with supplements for

day care or transportation. The number of people in industrial training was about 46,000—

higher than in 1982-83 but sharply down from

the 80,000 or so of recent years, probably because the continuing recession in Canada

made employers unwilling to take on trainees.

The critical skills training program, which

the government now emphasizes so strongly,

has begun to grow, In 1984, 82 job titles were

on the government list of ‘‘occupations of national importance. ” These received priority in

government subsidies to training facilities as

well as in assignment of candidates to industrial and classroom skills training, About 12,500

————— BOG{) J,erllment of Canada, M in ist r}’ of Employment and I mremigration, Annual S’iatistical Bulff?fin: Natiorral Training Program, 1.!)83-84, VVH-3-488E, 1985.

H 11 n pre~.io~ls recent vea rs, part icipat ion i n training lt’as el’en

hi~her, closer to s per;ent of the work force. Participation fell

off during the recession because of a steep drop in numbers of

;~’ork(;r~ I 11 industrial training,

(27 percent) of the workers who began industrial training in 1983-84 were learning critical

skills occupations, and the government devoted

over one-third of its spending for classroom

skills training to the designated occupations.

By no means all the occupations on the list

could be regarded as high-technology; the list

included machinists, tool and die makers,

welders, offshore drillers and derrick workers,

millwrights, and chefs as well as robotics technicians and computer hardware specialists.

Typically, industrial trainees in the critical

skills program were high school graduates who

already had jobs before training, and nearly all

were men. In more traditional types of government-funded training, disadvantaged workers,

unemployed people, and those threatened with

unemployment get first chance, and about onequarter of participants are women.

Canada has a variety of other labor programs

besides job training. The free, nationwide system of Employment Centres, which make the

assignments to government-supported adult

training, is similar in many ways to U.S. Employment Service offices—including having

private competition and having a relatively

small share of available jobs in their job listings. The national government has recently targeted both regional economic and labor policies toward assisting communities seriously

weakened by the loss of industries or plants.

For selected communities, the Industry-Labor

Adjustment Program offers special loans and

grants to industries, encouraging firms to stay

in the area or move into it. To workers, the

program offers temporary public service employment (limited to 2 years), portable wage

subsidies (transferable from one employer to

another) for those over 40, early retirement for

those over 55, and relocation subsidies, as well

as training.

An outstanding Canadian program that targets services to adult displaced workers is the

Industrial Adjustment Service, or IAS (formerly the Manpower Consultative service).

Since 1963 this small federal agency has offered several kinds of assistance to employers

and workers in individual firms: placement

assistance for workers displaced in plant clos-
220 ● Technology and Structural Unemployment: Reemploying Displaced Adults

ings or large layoffs; work sharing (part-time

unemployment insurance) and technical assistance, to tide plants over a temporary crisis and

avoid layoffs; retraining workers in plants undergoing technological change; training skilled

workers for companies that are opening or expanding and that would otherwise face labor

bottlenecks. About half of the IAS workload relates to plant closings and permanent layoffs.62

This part of the IAS program is described in

box 5E.

Canada’s labor programs, while more extensive than those in the United States, still bear

some resemblance to ours. There are differences; for instance, government intervention

in particular industries and areas of social welfare is more common in Canada than in the

United States. However, these differences are

considerably less than those between the U.S.

system and the systems of the Western European social democracies.

Canada’s emphasis on training in critical

skills is of particular interest. It is too early,

only 3 years after the passage of the National

Training Act which established the emphasis,

to judge how it is working out. Already, it is

clear that identifying what skills are in demand—let alone what will be in demand a few

years hence—is no simple job. When the 1982

law was passed, some anticipated that the

Canadian Occupational Projection System

would be able to pinpoint the occupations in

demand for the next 5 to 10 years by using an

elaborate econometric model. But, not surprisingly, the Canadian researchers have not yet

been able to provide such projections. What the

training branch of the Ministry of Employment

and Immigration actually does in designating

demand occupations is to rely on information

provided by its regional economists, including

job order and unemployment data from Canada’s 450 Employment Centres, information

solicited from employers and labor organizations, and figures on how many people are already in training. Regional offices of the Ministry now make additions to and deletions from

the national list, since it has become obvious

that regional differences are considerable.

Also, it is clear that many of the occupations

in demand are quite traditional ones (e.g., chef

and assistant cook) and are not all in novel

high-technology occupations.

Another interesting point about the Canadian

experience is that quite a large proportion of

the adult work force is in free, full-time government-sponsored training, including remedial education in basic skills for those who

need it. Training courses tend to be fairly

lengthy (1 year is typical), compared with the

average 15-to 23-week period spent by trainees

in JTPA projects in the United States, and government income support is relatively generous.

Nearly all full-time adult trainees in Canada

have some form of support.

Finally, a point of practical interest is the

positive example of Canada’s IAS. At modest

expense to the taxpayer (roughly $107 per

worker served)63 this small federal agency is

able to give special, effective placement assistance each year to tens of thousands of workers hit by plant closings, even in plants characterized by poor labor-management relations.

This is accomplished by efforts at the plant

level to turn up jobs, without the use of a

mandatory national job-listing service like

Sweden’s.

Canada’s labor policies, unlike Sweden’s, are

not designed for the specific purpose of reducing unemployment during downturns in the

business cycle. Despite its active employment

and training policies for displaced and disadvantaged workers, and its program of special

assistance to communities undergoing structural economic change, Canada’s unemployment rate for more than two decades has usually been higher than the average for industrial

countries, and somewhat higher than, but comparable with, the U.S. rate. (In the 11 years 1959

through 1969, the U.S. and Canadian unemployment rates both averaged about 4.8 per-

‘uA detailed description of the IAS job placement program may

be found in William L. Batt, Jr., “Canada’s Good Example With

Displaced Workers, ” Harvard Business Review, July-August

1983.

eslf the contributions of the private as well as the public sector are included, IAS program costs per participant in 1982-83

were about $171.
Ch. 5—National Displaced Worker Programs ● 221
222 ● Technology and Structural Unemployment: Reemploying Displaced Adults

— - ——— 

cent; from 1970 through 1981, the U.S. rate

averaged 6.3 percent and the Canadian rate 6.

percent.) However Canada was unusually hard

hit by the recession of the 1980s and slow to

recover. In the 3 years, 1982 through 1984,

Canada’s unemployment rate was between 11

and 12 percent—a worse record than that of

the United States and many European countries.

As discussed in chapter 4, the relation besimple. Programs that help displaced workers

get retraining or find jobs more quickly than

they would on their own should have some effect on the unemployment rate; but this effect

may be quite small compared with major influences on a country’s employment situation

from factors such as macroeconomic policy,

trade policy, and the dependence of the country’s economy on natural resources.

tween unemployment and displacement is not

Contents

Page

overview and Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..........225

Common Ingredients of Success . . . . . . . . . . . . . . . . ..., . . . . . . . . . . . . . . . .225

Issues in Project Design , . . . . . . . . . . . . . . . . . . ., . . . . . . . . . . . , , ., , , , ., , .226

Areas for Federal Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..., . . . . . . ,226

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ., ..., ....227

A Pioneer Project: The Armour Automation Fund . ...................22 7

Measuring Success . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..........228

Common Ingredients of Success.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ......233

Plant-Centered Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....234

Timing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . , .236

Employer Responsibility and Labor-Management Cooperation . . . ., .. ...240

Differences in Situation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . , ...242

Issues in the Design of Displaced Worker Projects . . . . . . . . . ..., ., , ....243

Getting Into the Program . . . . . . . . . . ~ . . . . . . . . . . . . . . . . . . . . . . . . .......246

Financial and Personal Counseling. . , . . . . . . . . . . . . . . . . . . . . . . . . . . .. ...247

Job Search Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........248

On-the-Job Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ., , .249

Vocational Skills Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..........250

Remedial Education. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. ....260

Relocation Assistance . . . . . . . . . . . . . , . . . . . . . . . . . . . . . . . , . , . . . . . . . . . , .261

Proposals to Assist Individual Retraining Efforts . . . . . . . . . . . . . . . . ., .....265

List of Tables

Table No. Page

6-1. Program Outcomes, Displaced Worker Demonstration Projects,

1982-83. ....., . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..., . . . ..229

6-2. Costs and Placement Rates by Type of Service, Demonstration

Displaced Worker Projects, 1982-83 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .245

6-3, Entered Employment Rate and Reemployment Wage by Type

of Service, Sample of JTPA Title II Projects, July-March 1985. ....., ..245

6-4. class Size Training provided in Displaced Worker Projects. . .........252

6-5. Examples of Vocational Training Offered in JTPA Title III Displaced

Worker Projects, 1984-85. . . . . . . . . . ...............................25 3

6-6. Class Size Training provided by the Ford/UAW Program at

Milpitas, CA, 1983-84 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............255

6-7. Individual Retirement Accounts, by Size of Adjusted Gross Income,

1983 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........................266

Figure

Figure No. Page

6-1. Downriver Community Conference Economic Readjustment Program. .244
Ch. 6—Design and Performance of Displaced Worker Projects ● 227

—

INTRODUCTION

Experience with modern displaced worker

projects is still quite limited. Few in this

country have been in existence long enough to

provide a good idea of whether they are working as intended, or whether some elements in

them are more successful than others. But by

putting together insights drawn from projects

of the past, findings from the few evaluations

of more recent projects, and observations of

current ones, it is possible to sift out useful

guidance to good project design. Of particular

interest are findings that relate to government

policies, and how they may help, or perhaps

unintentionally hinder, the offering of employment and training services to displaced

workers.

The findings discussed below are not conclusive: they are not based on irrefutable evidence. They are, however, something more

than suggestions. They represent the collective

wisdom of many experienced people, a few

well-designed studies on what works best in

helping displaced workers find productive new

jobs, and early returns from the JTPA displaced

worker program,

A Pioneer Project:

The Armour Automation Fund

During the automation scare of the early

1960s, one of the best and most thoroughly documented efforts to retrain and reemploy displaced workers was the Armour Automation

Fund. The product of collective bargaining in

an industry noted for its stormy labor history,

it established a cooperative tripartite committee made up of management (the Armour company, then the second largest U.S. meatpacking

company), labor (the two unions representing

the company’s workers), and two impartial cochairmen (Clark Kerr, then President of the

University of California, and George P. Shultz,

then Dean of the University of Chicago School

of Business).

From 1950 to 1965, Armour overhauled its

operations nationwide, closing big old plants

and opening smaller, leaner ones with modern

equipment in new locations. Altogether, the

company closed 21 plants employing 14,000

workers, and laid off almost half its workers.

In 1959, halfway through, with nine plants employing 6,000 workers already closed, Armour

announced plans to lay off 6,000 more workers and shut down six more major plants. At

this point, in the course of negotiating a new

labor-management contract, Armour and the

two unions established the Automation Fund

Committee. Armour supplied $500,000 for the

committee’s operations. Its duties were to

study the problems of displacement and recommend solutions.

A 1966 study by Shultz and Weber summed

up 5 years’ research and experience of the

Automation Fund Committee. ’ Twenty years

later, the insights of this report have not lost

their value.

Some major conclusions of the report:

●

●

●

●

There is no single, simple approach to the

problems of worker displacement. Different people have different needs. The adjustment program must provide a variety

of options, including placement, training,

transfer, and early retirement, together

with careful and patient individual counseling,

Advance notice of a plant closing or major layoff is a prerequisite for constructive

action. Notice of at least 6 months allows

time for recovery from the shock and then

time for planning, choice, and action.

Placement efforts should be on a special

project basis; routine State Employment

Service procedures are inadequate to handle the problems of mass layoffs.

Workers with limited education can profit

from retraining for occupations in demand; appropriate training can be found

for most interested, motivated workers.

Overly rigid screening can rule out good

candidates.

I George P. Shultz and Arnold R. Weber, Strategies for the II~splaced t%’orker (Westport, CT: Greenwood Press, 1966),
228 ● Technology and Structural Unemployment: Reemploying Displaced Adults

● Workers in training must have adequate

income support, from unemployment compensation, part-time work, or a combination of sources. Without adequate financial support, trainees will be forced to drop

out before training is completed.

The report recognized that no program for

the placement, training, or transfer of permanently displaced workers—however well

funded or energetically administered—can escape the dominating influence of the labor

market. Where unemployment is high or the

local labor market is thin, job opportunities for

displaced workers simply may not exist. Another

finding was that most displaced workers, even

with help, lost ground. The Automation Fund

Committee’s performance must be judged in

this context; its successes were only relative.

It did help hundreds of ex-meatpackers to find

new jobs, or get retraining, or transfer to other

Armour plants. Although the record is incomplete, it clearly indicates that workers assisted

MEASURING

Before discussing lessons from the successes

or failures of more recent displaced worker

programs, it is well to consider first what

constitutes success. The most obvious answer

is, simply, finding a new job. The Job Training

Partnership Act adopts “placement and retention in unsubsidized employment” as the

only measures of performance under Title III,

which created the displaced worker program.

The purpose of writing this measure of performance into the law was to make operators

of jobs projects accountable for their successes

or failures. Projects that meet specific performance standards set by the States (based on the

criteria in the law) are rewarded with continued funding. Those that fail must account

for their failures, and bring their performance

up to standard within 2 years or face loss of

funding.

While job placements have the virtue of simplicity and ease of measurement as indicators

of success, they are not without complications.

First, there is the fact that the economic climate

by the committee fared better in finding new

jobs than those who had no such help. Even

so, most of the displaced workers suffered

losses. For example, workers who chose retraining made slightly better wages on new jobs

than those who did not; yet their hourly earnings declined drastically from the level at

Armour—25 to 35 percent for men and 50 to

60 percent for women.

Displaced worker programs, Shultz and

Weber concluded, must cultivate a “sense of

mobility” —an awareness on the part of the

worker of opportunities and how to capitalize

on them. This calls for a variety of services:

counseling, instruction in job-seeking techniques, information about possible jobs in a

wide market, and information about prevailing wage levels and occupational training. Government and private programs can help the

jobless help themselves, but self-help starts with

the knowledge the programs can impart.

SUCCESS

is a predominating influence on the ability of

any project to place workers in jobs. Also, the

backgrounds and abilities of the workers served

and the range of services provided may be

important factors. These complexities are recognized in JTPA. The law allows States to vary

their performance standards to take account

of economic, geographic, and demographic

factors, the characteristics of the populations

served, and the types of services offered.

A few examples drawn from six displaced

worker demonstration projects of 1982 and

1983, sponsored by the U.S. Department of Labor, illustrate the point. The projects, located

in different regions and experiencing different

economic conditions were in Alameda County,

California; Buffalo, New York; Lehigh Valley,

Pennsylvania; Mid-Willamette Valley, Oregon;

Milwaukee, Wisconsin; and Yakima, Washington.2 Table 6-1 summarizes some characteriszMaterial in this secticln on the six demonstration projects is

drawn from evaluation reports conducted by Mathematical Policy

Research, Inc., for the Employment and Training Administra-
Ch. 6—Design and Performance of Displaced Worker Projects ● 229

Table 6-1 .–Program Outcomes, Displaced Worker Demonstration Projects, 1982-83

Project site

Lehigh Mid-Willamette

Outcomes Alameda Buffalo Valley Valley Milwaukee Yakima

1.

2.

3.

4.

5.

6.

7.

8.

9.

Participants a . . . . . . . . . . . . . . . . . . . .

Placements . . . . . . . . . . . . . . . . . . . . .

Recalls. . . . . . . . . . . . . . . . . . . . . . . . .

Transfers to other programs . . . . . .

Placement ratea (2+1). . . . . . . . . . . .

Entered employment rate

[(2+3)÷1] . . . . . . . . . . . . . . . . . . . . . .

Adjusted entered employment rate

12+3)÷(1 -4)] . . . . . . . . . . . . . . . . . . .

Average placement wage . . . . . . . . .

Percent decline . . . . . . . . . . . . . . . . .

3,134

549

610

1,641

180/0

37 ”/0

780/o

$7.40

360/o

798

523

27

0

660/0

690/o

690/o

$6.62

340/0

1,285

411

26

200

320/o

34%

40 ”/0

$6.70

240/o

305

185

0

3

61 0/0

61 0/0

61 “/o

$7.37

300/0

2,713

231

0

0

8.50/o

8.50/o

8.50/o

$6.60

250/o

243

198

0

8

81 0/0

81“h

830/o

$8.11

19 ”/0

asee text for a dl~~”s~lon of the factors, such as screening of applicants, which affected the number of Paflici Pants, and thus Placement rates

SOURCES Mathemat!ca Policy Research, Case Study of the A/arneda County and Souttrgate LX#ocated Worker Demonstration Projects, Jack Wichita, Case Study

of the Milwaukee Dislocated Worker Program, Case Study of Operation Jobsearch: The Lehigh Valley Dislocated Worker Demonstration Project, and Case

Study of Project S. A. V. E.: The Y’akima, Washington Dislocated Worker Demonstration Program; L.M. Wright, Jr., Case Study: Buffalo Worker ffeemploymenf

Center, Buffalo, New York and Case Study kf/d-Wi//amette Va//ey Job Assistance Network, Sa/em, Oregon (Princeton, NJ: Mathematlca Policy Research,

19S4); Marcia Jerrett, et al., Serving the Dislocated Worker: A Report on the Dislocated Worker Demonstration Program (Cambridge, MA: Abt Associates,

1963); and Walter Corson, et al , Process and Implementation Issues (n the Design and Conduct of Programs to Aid the Reemployment of Dislocated Workers Findings Based on the Dislocated Worker Demonsfratfon Project (Princeton, NJ. Mathematical Policy Research, 1984).

tics and results of these six projects, including

placement rates and earnings on the new jobs

compared with the old jobs,

Among the six projects, the one in Yakima

attained the highest placement rate, 81 percent—a remarkable achievement during an

economic recession and a credit to the project

operator. But the high rate of placements also

reflected Yakima’s fast recovery from severe

economic stress (at one time the local unemployment rate reached 16 percent, with the

shutdown of construction of a nuclear power

plant). It also reflected the character of the participants, who had been rigorously screened for

motivation and “serviceability.” Those considered hardest to place were weeded out in a

tion, U.S. Department of Labor: Mathematical Policy Research,

Case Study of the Alameda County and Southgate Dislocated

Worker Demonstration Projects; Jack Wichita, Case Study of the

Milwaukee Dislocated Worker Program, Case Study of Operation Jobsearch: The Lehigh Valley Dislocated Worker Demonstration Project, and Case Study of Project S.A. V. E.: The Yakima,

Washington Dislocated Worker Demonstration Program; L, M.

Wright, Jr., Case Study: Buffalo Worker Reemployment Center,

Buffalo, New York and Case Study: Mid-Willamette Valley Job

Assistance Network, Salem, Oregon (Princeton, NJ: Mathematical Policy Research, Inc., 1984). See also Marcia Jerrett, et al.,

Serving the Dislocated Worker: A Report on the Dislocated

Worker Demonstration Program (Cambridge, MA: Abt Associates, 1983); Walter Corson, Rebecca Maynard, and Jack Wichita,

Process and Implementation Issues in the Design and Conduct

of Programs to Aid the Reemployment of Dislocated Workers:

Findings Based on the Dislocated Worker Demonstration Project

(Princeton, NJ: Mathematical Policy Research, 1984).

series of interviews; of 1,350 applicants, only

243 actually enrolled. Many of the participants

were skilled construction workers, accustomed

to job changes and willing to relocate.

At the other extreme was the project in

Milwaukee, which placed only 8.5 percent of

participants (231 out of 2,713 enrolled). At the

trough of the recession, Milwaukee’s unemployment rate was 11.9 percent, well above the

national average; but the area quickly rebounded

in the recovery, Probably the local unemployment rate was not a major factor in Milwaukee’s placement record, More significant was

the fact that this project did no screening whatsoever; anyone who registered was enrolled.

(About 1,200 workers completed job applications; if only these are considered participants,

the placement rate rises to 20 percent.)

As discussed in chapter 5, the concept of

“entered employ merit,” which States use in

reporting outcomes of JTPA projects, calls for

even more cautious interpretation. Whereas

“placement” counts only the new jobs found

by participants, “entered employment” counts

recalls as well. This sometimes produces

puzzling results. For instance, the JTPA Title

III program in Pontiac, Michigan, reported an

astonishing entered employment rate of 93

percent in 1984; however, practically all of the

jobs this figure represented were recalls of Gen-
230 • Technology and Structural Unemployment: Reemploying Displaced Adults

eral Motors employees. a Many of the workers

enrolled in the project had been on layoff for

3 or 4 years, and were rightly regarded as displaced workers; the extent and rate of reemployment at General Motors took everyone by

surprise.

Another aspect of the entered employment

rate that could easily be misunderstood is that

it is based on “terminations,” people who have

officially ended their participation in the projects, Placement rates that are based on total

participants—everyone who enrolled in the

project—are not comparable; they are almost

always lower. More detailed discussion of the

reported outcomes under JTPA appears in

chapter 5.

Job retention, the other statutory measure of

performance under JTPA Title III, can only be

evaluated after the passage of time. Few displaced worker projects have followed participants systematically enough or long enough to

find out whether clients keep their new jobs,

“Entered employment” in JTPA reports refers

to l-day retention on the job. In an OTA telephone survey of State managers of Title III

programs, conducted in 1984-85, only two (in

Washington and Wisconsin) said they considered retention on the job as part of the standard of performance. Q Some projects do follow

participants after placement, but usually for no

more than 90 days. In the absence of a longterm followup, a possible indicator of whether

jobs the displaced workers enter will be lasting

is the quality of the job, including livable

wages, chances for advancement, and reasonable job security.

tRobert Cook (cd.), “Dislocated Worker Projects Under Title

111 of the Job Training Partnership Act,” report to the U.S. Department of Labor Employment and Training Administration

(Rockville, MD: Westat, I~c., 1985).

4JTPA directs the Secretary of Labor to establish performance

standards for both Title 11A programs (for disadvantaged workers) and Title 111 programs (for dislocated workers). At the time

of the OTA telephone survey, the department had not yet set

numerical standards for Title 111 programs, but governors had

been required to establish a standard for the entered employment rate for terminees for the 1984 program year (beginning

July 1, 1984). The Labor Department is developing performance

standards for Title 111, in consultation with representatives of

business, labor, and States.

The period of unemployment is another useful measure of success, but again caution is in

order. Some displaced workers, especially if

they are covered by extended supplementary

unemployment benefits (SUBS), may not look

for work seriously for a long time. Even the

average worker, with only 6 months of UI to

fall back on, may not begin the search for work

immediately. An initial period of unemployment may simply be a period of adjustment.

Prolonged unemployment or repeated bouts of

unemployment are signs of more serious trouble.

A significant measure of success is earnings,

in particular earnings on the new job compared

with the old. Most displaced workers do not

immediately find jobs that pay as much as their

old ones; their skills and experience may not

be very attractive to new employers. But programs that help workers find better jobs than

they can find on their own, and help to keep

earnings losses to a minimum, have achieved

substantial success.

JTPA does not mention earnings as a measure of performance for Title 111 programs, although it does for Title 11A, for disadvantaged

workers. s California’s Employment Training

panel, which provides reemployment and retraining services for displaced workers, emphasizes the importance of the earnings measure. It requires that trainers, unless they place

their graduates in jobs paying at least $5 an

hour, do not get paid. A number of projects

funded by JTPA Title III are making similar

stipulations in their contracts with trainers.

The average reemployment wage for participants in Title III programs in 1984 was reported to be $6.15, and in most States was

moderately lower than the wage on the old job.6

Measures of success, while taking benefits

into account, cannot ignore costs.7 The sim- ——

5JTPA states that “the basic measure of performance for adult

training programs under Title 11 is the increase in employment

earnings and the reductions in welfare dependency resulting

from participation” (JTPA Sec. 106 (b)). In 1984, a wage of $4.91

per hour was part of the national performance standard for Title 11 programs.

%ee ch. 5 for details.

7JTPA mentions costs in connection with Title 11: “The Secretary (of Labor) shall prescribe performance standards relating gross program expenditures to various performance measures” (JTPA Sec. 106 (b)(4)).
Ch. 6—Design and Performance of Displaced Worker Projects ● 231

plest way to include costs is to calculate them

per placement. The drawback to this simple

calculation, however, is that the only value, or

benefit, weighed against the cost is that of

getting a job, without regard for the quality of

the new job, earnings both immediate and

future, the breadth of choice offered to participants, the character of workers enrolled in the

program, and local economic conditions.

The demonstration displaced worker programs of 1982-83 are again illustrative. The

lowest costs per placement among the six projects were Milwaukee’s ($l,503); the next to

highest were Buffalo’s ($3,014, or about twice

as high).8 Milwaukee offered only two services,

job development and placement—no testing

and assessment, no job search skills training,

no classroom training. Only 231 jobs were

turned up for the 1,200 or so who completed

applications and expected to get service from

the project. Reemployment wages in Milwaukee were among the lowest of the six projects

($6.60 per hour), but since pre-layoff wages

were also comparatively low (about $8.80 per

hour), the decline in wages was 25 percent, not

the largest among the projects, Although Milwaukee’s unemployment rate was temporarily

higher than the national average, the area recovered faster than the Nation as a whole.

Buffalo, by contrast, has been a distressed

labor market for years, with unemployment

persistently above the national average. Mainly

serving displaced steel, auto, and rubber workers, the Buffalo project offered a full range of

services, from outreach through assessment,

training, and placement, Nearly half the participants took classroom or on-the-job training.

Buffalo’s placement rate was a creditable 66

percent (523 for 798 participants). Ultimately,

the placement rate may have been still better;

the project and recordkeeping ended when

more than half the workers taking classroom

training had only recently (within 90 days or

less) completed their courses. Reemployment

— . ——

BOf the six programs, the most expensive by far, in terms of

placing workers, was that in Alameda County, California, ser\-

ing mainly workers laid off from a General Motors assembIy

plant. Further discussion of the results in Alameda Country appears at a later point in this chapter.

wage rates in Buffalo were low, $6.62 per hour

on average, %1 percent below the pre-layoff

wage of approximately $10.00 per hour.

These vignettes make the point that no simple, single measure such as cost per placement

fully captures the performance of a displaced

worker program, Such measures are useful.

They highlight achievements or disappointments that might not otherwise be apparent.

But they are aids to understanding, not substitutes for it.

Long-term impact evaluations offer a more

complex and sophisticated way to measure the

success of displaced worker programs, by

tracking results over several years, comparing

earnings of workers who participated with

those of similar workers who did not, and

analyzing costs and benefits, to the individuals

involved and to society. g Judging by these

measures, the training programs of the 1960s

funded under the Manpower Developmen t

Training Act (MDTA) were by and larg e

successful. Long-term followup studies showed

that participants’ earnings were substantially

higher than those of comparison groups, and

the return on public investment was large and

rapid (see ch. 5). For modern displaced worker

projects, the oldest of which date back to 1980,

the results are not yet in. The U.S. Department

of Labor intends to evaluate the impact of JTPA

training programs, but first resuIts are not

expected until 1988.

Meanwhile, two large modern displaced

worker projects have been studied for their

overall effects: the Downriver Community Conference employment and training program and

the Buffalo dislocated worker demonstration

program. Downriver, the first to be studied,

showed favorable results in 1980-81, but no

positive impacts in 1981-83. Buffalo, operating

for one year in 1982-83, showed large, favorable effects on both employment and earnings.

l0

gFor a he]pfu] discussion of the evaluation of employment and

training programs, see Michael E. Borus, A4easuring the Impact

of Ernplo~rment-Re/ated Social Programs (Kalamazoo, MI: The

W.E. Upjohn Institute for Employment Research, 1979].

lo]ane Ku]ik, D, Alton Smith, and Ernst W. Stromsdorfer, The

Doh’nriier Communit~r Conference Economic Readjustment: Fi-

(cont]nufd on next pagt’]
232 . Technology and Structural Unemployment: Reemploying Displaced Adults

Photo credit: Downriver Community Conference

Drafting is one of the training courses offered to

displaced workers by The Downriver Community

Conference.

The Downriver Community Conference, a public agency serving 16 communities southwest

of Detroit, began its displaced worker project

in 1980, offering reemployment and retraining

services to approximately 1,500 workers who

lost their jobs in the shutdown of BASF and

Dana, two auto supply plants. Results of this

Phase One Downriver project, lasting from July

1980 to September 1981, were favorable. Compared with similar workers involved in two similar plant closings in the Detroit area, Downriver participants were reemployed at rates 13

to 20 percentage points higher, and with earnings $77 a week more, than would be expected.

In Downriver’s Phase Two, lasting from November 1981 to September 1983 and serving

about 600 workers laid off from the Ford Motor Co. ’s Michigan Casting Center, no positive

results were evident. The workers served by

Downriver did no better, and in fact by one

measure (reemployment rate) did worse, than

would be expected if they had received no services. 11

(continued from previous page)

nal lkduation Report, report to the U.S. Department of Labor,

Employment and Training Administration (Cambridge, MA: Abt

Associates, Inc., 1984); Mathematical Policy Research, Inc., An

Impact Evaluation of the Buffalo Dislocated Worker Demonstration Program, report to the U.S. Department of Labor, Employment and Training Administration (Princeton, NJ: Mathematical Policy Research, Inc., 1985).

llKu]ik, et a],, op, cit., and Jane Kulik, D. Alton Smith, Ernst

W. Stromsdorfer, The Downriver Community Conference ReadSeveral explanations have been put forward

for these divergent results. One factor may

have been that most of Phase Two took place

in the depths of the 1981-83 recession, and that

no displaced worker project, however well designed and well run, could make a difference

at that time. Also, the Ford workers had more

sources of financial support (supplementary

unemployment benefits and Trade Adjustment

Assistance, as well as UI) while they were unemployed than the Phase One workers did;

they may have been less eager to accept the jobs

available through the project. The most compelling explanation, the Downriver study concluded, was “unmeasured differences” between the workers in the first and second

phases—factors such as “motivation, attitude,

and maturity” that affect the morale of a plant’s

entire work force and shape their reemployment experience.12 In any case, it is risky to

draw general conclusions from the experience

of one group of workers, from one plant, at a

time when the local unemployment rate was

16 to 18 percent.

The Downriver study concluded, overall, that

‘‘it is indeed possible to design and operate effective programs for dislocated workers,” that

the programs “can produce positive impacts

on participants’ employment and earnings, ”

and that “these benefits can exceed the costs

of operating such programs.”13

The results of the Buffalo project, also operating in conditions of deep recession, were unequivocally favorable. The project served 798

workers, the majority (510 people) from nine

target plants, mainly in the steel and auto industries, plus a smaller, varied group (288 people) from several hundred area employers. The

study estimated that in the 6 months after the

project ended, participants from the target

plants were employed, on average, 60 percent

of the time instead of the 30 percent that would

justment Activity Program: Impact Findings From the First

Phase of Operations, report to the U.S. Department of Labor,

Employment and Training Administration (Cambridge, MA: Abt

Associates, Inc., 1983). The authors of the impact study had no

complete explanation of the negative impacts on the Ford workers’ reemployment rates, but speculated that participants may

have been more selective about job offers than the comparison

group of workers,

IZKu]ik, et al., op. cit., 1984, pp. Xv-XVi.

Wbid.
Ch. 6—Design and Performance of Displaced Worker Projects • 233

be expected, based on the experiences of a

comparison group. The participants worked an

average of 24 hours per week, instead of the

10 hours a week expected, and had average

earnings of $174 per week, versus the $59 expected ($290 versus $197, if only employed

workers are included). In the nontarget plant

group, the results were also uniformly positive,

although the effects of participation were judged

to be relatively smaller. In the 6-month period

after the project ended, these participants

worked, on average, 27 hours per week compared to an expected 19 hours, and were earning $194 dollars per week versus $96.

Summing up the overall net impacts of the

project on employment and earnings, the

Buffalo study concluded that “even in a poor

economy, job-search assistance and retraining

services can significantly facilitate the readjustment of dislocated workers.”14 A caveat was

then added about the uncertainties of generalizing results from one area and one project,

The authors pointed out that the Buffalo project

not only offered a comprehensive array of services, but also had a strong organizational structure and a highly experienced staff.

The discussion so far has mostly concerned

measures of success that are based on benefits

to displaced workers. Also important are benefits to employers and to society at large. Employers benefit when publicly financed retraining programs supply them with workers who

have learned special skills required for jobs that

have to be filled. Employers also benefit from

the worker screening and job matching that

displaced worker projects can provide. Some

of these benefits are hard to quantify, and may

——

IA Mathematica Policy Research, Inc., op. cit. (1985), p. 18.

not be explicitly counted in evaluating the performance of displaced worker programs. But

they count for a good deal in public acceptance

and political support for such programs, and

are at least implicitly present in simpler measures of success.

The same is true of benefits to society, Successful performance of a displaced worker program implies a host of benefits, ranging from

ones that can be quantified—e,g., reduced

drains on unemployment insurance trust funds,

lower payments for welfare or food stamps,

and increased tax revenues from reemployed

workers—to ones that cannot—e.g., fair treatment of workers who bear the heaviest burden

of adjustment to technological change and

world competition.

For the displaced worker projects of the

1980s, there has so far been very little investigation of the payback on the public investment

in retraining and reemployment services. The

Buffalo impact study looked at spending for

four income support programs–unemployment

compensation (UI), SUBS (which are provided

by employers, not the public), food stamps, and

public assistance—but pointed out that none

of these programs were much used by the

Buffalo workers. Many of the workers had been

laid off for a year or more before the displaced

worker project began, and had exhausted their

UI and SUBS. The project tended to reduce the

amounts that workers received from these two

programs, but the impacts were not significant

statistically, mainly because usage was low.

Relatively few of the Buffalo workers received

public assistance or food stamps either, However, for the participants from target plants, the

study did find statistically significant reductions in

efits as

COMMON INGREDIENTS OF

food stamp and public assistance bena result of taking part in the project.

SUCCESS

Several key ingredients of success seem to available and with the commitment of managebe common to many kinds of displaced worker ment, in cooperation with labor, to provide efprojects, whatever the details of their individ- fective services. Finally, the best projects are

ual designs. These common ingredients have designed specifically to fit their own economic

to do with where and how soon services are situations, regions, and people.
234 . Technology and Structural Unemployment: Reemploying Displaced Adults

Plant-Centered Projects

Some of the best-run displaced worker projects are those centered in plants that are closing or undergoing large layoffs, and are operated by people who work at the plant on both

the labor and management sides. Plant-centered projects have several advantages in their

favor: the people who run them have a personal

stake in the outcome, know many of the individual workers involved, and are acquainted

with the local business community where the

hidden job market (openings that are never

publicly announced) is found. Also, such programs fill a special need, which is to serve large

numbers of workers with similar skills and

work histories who are all dumped on the labor market at once. Even in good times, it is

difficult for local labor markets to absorb a

great many similar workers at the same time.

Several examples illustrate the worth of the

plant-centered approach; one is the Johnson

and Johnson project in Chicago in 1983, described in box 6A. In most of the plant-centered

projects that have worked well, the companies

involved were large, the workers were represented by unions, labor-management relations

were good to excellent, and labor-management

teams were in charge. In almost every case, the

team leaders were exceptionally resourceful

and dedicated. Can plant-centered programs

work without these special assets?

Two decades of experience in Canada suggest that they can. Since 1963, a small Federal

agency, the Industrial Adjustment Service

(IAS, formerly the Manpower Consultative

Service) has set up thousands of labor-management reemployment committees in virtually

every major plant closing or layoff in Canada.

IAS moves in quickly, usually before any layoffs occur, to establish the committees and

provide them with technical advice, modest financial help, and experienced, independent

chairmen. The committees’ job is to mobilize

community resources for reemploying the displaced workers. They get in touch with area

employers in similar lines of work, unions that

may know of job openings, and more distant

employers who may need the laid-off workers.

Most committees finish their work by the end

of year, and go out of business, Typically, they

find jobs for two-thirds of all the workers displaced, and for most of the workers who sign

up to participate in the program.15

There is no real analog of the Canadian IAS

in this country. The closest are the rapid response teams some States have created in their

JTPA Title III programs, which bring job

search assistance services to plants where

workers have been given notice of layoff. A few

States, including Arizona and South Carolina,

have put considerable effort into rapid response or pre-layoff assistance. They believe

that by finding new jobs for many workers before they are laid off, and thus avoiding any

interruption in employment and any payment

of unemployment insurance, the effort more

than pays for itself. (Ch. 5 discusses these efforts further.) However, some features of the

Canadian IAS that contribute to its consistent

success and low cost are not usually found in

JTPA rapid response programs; that is, the

establishment of labor-management committees within the plant, with the plant’s workers

and managers directing it, under the leadership

of an independent chairman. The IAS-assisted

committees usually stay in existence for at least

a year, rather than disappearing or changing

their locus and sponsorship when the plant

closes, as is true of some of the rapid response

efforts mounted by States,

Wherever they exist, plant-based labor-management committees can take advantage of

JTPA Title III funds and, in some cases, can

get additional support from State programs or

the private sector. Sometimes employers laying off workers bring in consultants to advise

them how to set up adjustment committees,

often with union participation. These committees, once established, can apply for JTPA

funds. However, as of 1985, none of the States

had created an institutional mechanism under

JTPA to help create labor-management adjustment committees in plants undergoing closure

or layoffs.16 Part of the problem may be that

15A more detailed description of the Canadian Industrial Adjustment Service appears in ch. 5.

loin late Ig8!j, the Department of Labor was considering a pilot project, in cooperation with selected States, to provide technical assistance to plant-based projects, possibly on the model

of the Canadian IAS.
Ch. 6—Design and Performance of Displaced Worker Projects Ž 235

Box 6A.—Labor-Management Committee at Johnson & Johnson Plant

Finds Jobs for Displaced Workers

When Johnson & Johnson decided in 1982 to close an antiquated Band-Aid plant in Chicago,

it was faced with laying off half the plant’s 700 employees in a deeply depressed labor market.

(The rest of the workers were moved to a modern Johnson & Johnson plant nearby.) Under its contract with Amalgamated Clothing and Textile Workers Union, the company provided generous

severance pay, extended health benefits, early retirement for those who wanted it, preferential

hiring in other company plants, and at least 3 months’ notice to any employee slated for layoff.

The company and union together also undertook to help the laid-off workers find jobs. At an

earlier Johnson & Johnson plant closing in downstate Illinois, a consulting firm teaching job search

methods had failed to help the hourly workers. This time, the plant’s personnel manager and the

president of the union local formed a committee to do the job themselves. “We decided not to pay

a lot of money for people who didn’t understand our employees as well as we did,” said one of

the committee co-chairmen.

The committee’s job development efforts began with a lunch invitation to representatives of

zoo companies and employment agencies, allowing them to get acquainted with the Johnson &

Johnson employees. The response was uniformly positive; companies that were not hiring offered

names of others that might be, and so the network grew. Another committee effort was a direct

mailing to 500 companies, selected from business directories by location and type of business, which

included brief sketches of categories of workers available from Johnson & Johnson. The recipients

had only to check the category of workers they were interested in. This brought zoo replies within

4 weeks. In addition, Johnson&Johnson offered to train some of their workers to fit new employers’

needs. In addition to job development, the committee also offered counseling and job search skills

workshops.

A year later, 70 percent of the hourly workers seeking new jobs had them–and this included

workers who had been laid off at least a year earlier and came back to take advantage of the program. Skilled workers were usually snapped up quickly with no loss in pay, but the semiskilled,

on average, took pay cuts from about $8 to $6 per hour, Chicago’s unemployment rate was over

12 percent at the beginning of 1983, when the reemployment efforts for Johnson& Johnson workers began, and was still 8.5 percent at the end of the year. In light of all the evidence (see ch. 3)

that displaced workers experience unusual and prolonged unemployment—even in communities

with low unemployment rates—this project achieved a good measure of success.

State administrative costs under JTPA are limited to 5 percent of Federal grants. Many States

have no more than two or three officials working full time on the JTPA Title III program;

often they are ill-equipped to give technical

assistance to companies or unions that want

to set up plant-based services for displaced

workers.

The great majority of displaced worker projects in the United States are operated by continuing outside organizations, not by plantbased committees. In fact, JTPA’s provision of

rewards and sanctions for performance assumes that whoever is running the projects will

be back the next year. There is one important

advantage to this approach, which is that a continuing project can serve a broad population.

In most communities suffering mass layoffs or

plant closings, other businesses feel ripple effects. For example, in Buffalo in 1981-82, more

than half the worker displacement, following

large layoffs and closings of steel and auto

plants, occurred in numerous small establishments, especially retail stores. Workers who

lose their jobs in twos and threes, or even tens,

usually cannot be served effectively by a plantbased committee. Moreover, even when an effective plant-based effort has served workers

in a plant closing or large layoff, a continuing
236 ● Technology and Structural Unemployment: Reemploying Displaced Adults

project can serve workers who have not yet

been satisfactorily placed when the committee

goes out of business.

Another advantage of a continuing organization is that, if it is effective in finding jobs and

matching workers to them, it can build a reputation, both with area employers and with the

workers it serves. This kind of reputation is

self-reinforcing; employers list good jobs with

projects that send them well-qualified workers,

and workers sign up with projects that offer

good training and list good jobs.

To sum up, plant-based labor-management

committees have unique advantages in serving

workers from their own plants; that is, personal

acquaintance with the workers and their abilities, and personal networks for turning up job

opportunities in the community. No Federal or

State program is designed specifically to encourage the formation of such committees, although they can be supported under JTPA.

Permanent displaced worker projects have a

different major advantage, in that they can

serve displaced workers both from target plants

and from the wider community. Both kinds of

projects are needed. There is no reason why

they cannot coexist.

Timing

The best time to start a displaced worker

program is before the layoffs begin. Although

not every worker will take advantage of the

program early, having it available is important

to boosting morale, avoiding bitterness and

apathy, enabling people to plan their future,

and offering training to those who need it while

they still have before them the basic 26 weeks

of unemployment insurance plus any available

supplemental programs.

An outstanding example of the value of early

action was the displaced worker program at the

Ford Milpitas plant near San Jose, California,

described in box 6B. Other displaced worker

programs also got off to an early start with

good results. For example, in phasing down its

Chicago Band-Aid plant, Johnson & Johnson

gave every displaced worker at least 3 months’

notice, and some as much as 2 years’ notice.

The Brown & Williamson Tobacco Co. announced the coming closure of its Louisville

plant, with the loss of 3,000 jobs, in 1979. As

required by its union contract, the company

gave 18 months’ notice before the first layoff,

but it was 3 years before the plant shut down.

The idea of the 3-year lead time was to reduce

the work force gradually, allowing a staggered

influx of workers into the local labor market.17

It should be noted that in all these cases, early

notice of a closing or layoff was accompanied

by a program of high-quality adjustment services to the workers being laid off. Advance

notice of layoff without the provision of such

services is much less useful.

Most directors of displaced worker projects

are convinced of the value of early intervention, not only in fairness to the affected workers, but also as a way to keep constructive

action going. “People need structure,” said one

director. Without a program of services in

place at the time of layoff, the usual sequence

is “the first month, they complain. The second

month, they take a trip with the family. The

third month they fix up the house. The fourth

month, depression sets in. ”

The employment and training project of the

Downriver Community Conference found that

if services are available before the plant closes,

half the workers take advantage of them. Up

to a year after closing, 35 percent sign up. After

2 years, 17 percent participate.18 Does this

mean that workers simply find jobs on their

own, without help, as time passes? Yes, of

course, many do. The Buffalo impact study

concluded that the majority of displaced workers interviewed [of whom 35 percent partici-

~TOther projects that gave advance notice of layoffs and began services to displaced workers early include those of the Dana

Corp. (Edgerton, WI, four-wheel drive axle plant); Empire-Detroit

Steel (Portsmouth, OH, plant); and Goodyear Tire & Rubber (Lee

Tire of Conshohocken, PA). All were plant-based projects operated by labor-management committees. For details of several of

these projects see U.S. Department of Labor, Labor Management

Services Administration, Plant Closings: What Can Be Learned

From Best Practice (Washington, DC: U.S. Government Printing Office, 1982),

IsKathleen Alessandro and W. Robert Schnieders, “case

Study—Retraining Workers Displaced From the Automotive Industry Into Robotic Technicians, ” paper presented to the Society of Manufacturing Engineers (Dearborn, Ml: Society of Manufacturing Engineers, :[984).

238 ● Technology and Structural Unemployment: Reemploying Displaced Adults —

pated in the reemployment/retraining project)

found jobs on their own, but only after a n

average duration of unemployment after layoff of 14 to 15 months, and at substantially

lower pay than on the old job. The point of providing adjustment services, and providing

them early to a larger number of workers rather

than later to a smaller number, is to help the

workers get jobs sooner, stay employed more

steadily, and earn more than they would without such help. The Buffalo study, the Downriver study to some degree, and the earlier longterm impact studies of MDTA all concluded

that readjustment assistance can indeed help

displaced workers accomplish these things.

Another argument for early intervention is

based on anecdotal evidence, which suggests

that many displaced workers who are long

unemployed lose the habit of, and confidence

for, work. Some get by on repeated cycles of

working just long enough to be eligible for UI,

then collect UI while working at odd jobs for

cash or barter in the underground economy.

Employers, as well as displaced workers, can

benefit from early intervention, A prompt start

on reemployment can save outlays from the

State’s unemployment trust fund, which employers pay for through an earmarked tax.

Also, it enhances a company’s reputation both

with the public and with their remaining workers (in cases where the plant does not shut

down completely) if those who are laid off are

seen to get effective help.

Having services available early for displaced

workers does not imply that every participant

must begin early. Workers themselves, one

researcher observed, do a pretty good job of

determining at what point after their layoff

they are likely to gain from the program. l9 T h e

Canadian IAS has found that a program length

of 1 year or a bit more is about right to serve

most workers.

So far, research studies on the relation between advance notice and subsequent employIQRebecca Maynard, “LeSSOnS From the DOL-SpOmred WOrkers Demonstration Program, ” paper presented at the National

Alliance of Business Conference on Displaced Workers, Detroit,

M1, June 1984.

ment and earnings of displaced workers are

limited and inconclusive. A study of Maine

plant closings found that unemployment in localities affected by the closings was significantly lower when advance notice was given.

This included indirect or ripple effects on employment in the community, as well as direct

effects on workers laid off in the plant closure.

20 Another study, looking at 30 plant closings from 1969 to 1972, found that advance

notice did not seem to reduce earnings losses

significantly, but a number of shortcomings in

the data were noted. 21 Neither study took into

account what services, if any, were offered to

workers expecting to lose their jobs in the plant

closings.

This point is critical. Advance notice of layoff will be of less value if no services are offered

to the workers during the lead time the notice

provides. without constructive action, morale

can deteriorate during the notice period (although it can be argued that uncertainty, compounded by rumors, can be even more damaging to morale). Action either by a crisis

intervention entity like Canada’s IAS, or by existing labor-management committees, or by a

project operating under JTPA auspices, can

make positive use of early notice.

Another key point is that notice of a plant

closing must be unequivocal if possible. workers who have put in 15 or 20 years at a plant,

and many times have gone through temporary

layoffs, often find it incredible that the plant

is really closing. The bad news is easier to believe when company managers disclose the reasons in detail, including information on the

company’s financial position, If a company announces, before layoff, that it will help provide

services for displaced workers, that also helps

to bring home the reality of the situation,

ZONancy R. Folbre, Julia L. Leighton, and Melissa R. Roderick, “Plant Closings and Their Regulation in Maine, 1971 -1982,”

Industrial and Labor Relations Review, January 1984.

ZIArlene Ho]en, Christopher Jehn, and Robert P. Trost, Earnings Losses of Workers Displaced by Plant Closings, report to

the U.S. Department of Labor, Bureau of International Labor

Affairs (Alexandria, VA: The Public Research Institute, 1981).
Ch. 6—Design and Performance of Displaced Worker Projects ● 239

JTPA provides that displaced worker services may begin before layoff, as soon as the

workers are given pink slips, A number of State

directors of JTPA Title III programs have expressed strong interest in an early warning system so they can offer pre-layoff assistance more

readily.

22 Some employ ingenious methods to

find out in advance about plant closings and

mass layoffs. For example, Rhode Island collects information via its business-retention program, in which State staff visit each firm in the

State every year. Several States, including Arizona, Colorado, South Carolina, and Texas,

encourage companies to give voluntary advance notice of impending layoffs; they also

rely on newspaper accounts and word o f

mouth. Arizona program leaders, particularly

active in pre-layoff assistance, encourage companies that benefit from this service to displaced workers to make it known to other companies.

An issue that concerns many States with respect to early warning is how and whether they

can use Title III funds to prevent plants from

closing, Some State-funded programs offer retraining and other kinds of assistance to try to

prevent closings and worker layoffs. 23 So does

the Canadian Industrial Adjustment Service.

JTPA, however, defines displaced workers who

may be served under Title 111 as those who are

already unemployed, or have received notice

of termination. A brief discussion of policies

to prevent worker displacement appears in

chapter 5.

Considering the advantages of early action,

is it reasonable to require advance notice of

plant closings and large layoffs by law? This

proposal is highly controversial. The two main

arguments against it are, first, that such a requirement overburdens business, forcing companies to keep ailing plants open longer than

they otherwise would, and longer than is ecoZZAn OTA-t~]eph~ne survey of State ~ i rectors Of JTPA Title

111 pro~rams, ~ondu~ted from October 1984 to January 1985,

found that ~re-layoff assistance to displaced workers and early

warning of plant closings were among the directors’ top concerns. See ch. 5 for results of the survey and further discussion

of the early warning issue as it affects JTPA programs.

Z3TW0 examp]e5 are the California Employment Training panel

and South Carolina’s Rapid Response Team, both discussed in

ch. 5.

nomically efficient; and second, that the requirement can have a perverse effect, forcing

the closure of some plants that might otherwise

have remained open. It is argued that the announcement of a planned closing or mass layoff can seal the firm’s fate, as workers take

other jobs (or perhaps lose interest in their

work), and creditors, suppliers, and customers

change their terms of doing business. Opponents also say that government-imposed requirements for advance notice are quite different from such requirements in collective

bargaining agreements, since in the bargaining the labor union presumably trades some

other advantage for the advance notice.

Some European countries, most of Canada, 24

the State of Maine, and the city of Philadelphia

require advance notice of plant closure or

large-scale layoffs. 25 Proponents of plant closing legislation point to the compliance of business, including I-J. S.-based firms, with Canadian and European advance notice laws as

evidence that the laws can work without being too burdensome, Mandatory advance notice laws usually include an escape hatch

which allows firms not to give notice when

business circumstances make it impossible,

Several States and some local governments

are considering plant-closing legislation that

requires advance notice. Some are deterred,

however, by the argument that plant closing

laws will drive business away to other States

or localities. In addition, State and local plant

closing laws might be challenged in court on

grounds that Federal law preempts them, or the

Constitution prohibits them.

2 6

Zqslx of ten Canadian provinces, including the most POPU1OUS,

require advance notice of plant closings or layoffs affecting 50

or more workers; the notice required \aries from 8 to 16 weeks,

depending on the number of workers affected. The Canadian

national government has a similar plant closing law covering

certain classes of workers,

ZsSouth Carolina requires advance notice of layoffs only from

employers who require their employees to give notice of their

intention to quit work.

Z13A Pennsylvania State court invalidated a Pittsburgh plant

closing ordinance in 1983, mainly on the grounds that a State

law prohibits municipalities from imposing duties and requirements on businesses, The court also relied in part on the argument that the ordinance was preempted by a Federal law, the

National Labor Relations Act, though the court did not thorough-

(continumi On nt~lt page)
240 ● Technology and Structural Unemployment: Reemploying Displaced Adults

Michigan, Massachusetts, and Wisconsin

have laws encouraging employers to give advance notice of layoffs and plant closings

voluntarily. An earlier Wisconsin law, repealed

in 1983, made advance notice mandatory; the

new law establishes voluntary guidelines and

incentives. The Massachusetts law, adopted in

1984, established a “social compact” that encourages companies to give 90 days’ notice of

a plant closing; firms that are financed, insured, or subsidized by quasi-public State agencies must agree to accept the “voluntary standards of corporate behavior” stated in the law,

which include advance notice.

Relatively few American workers are covered by collective bargaining agreements that

require employers to give advance notice of

plant closings or major layoffs. Only about 18

percent belong to unions, and the percentage

is declining. Moreover, in 1980, only 15 percent of major collective bargaining agreements

(those covering more than 1,000 workers) contained language either requiring advance notice or authorizing union participation in the

procedure of plant closing. 27 Some companies

voluntarily provide advance notice of layoffs,

but many do not. An example of the latter was

a Silicon Valley firm which reportedly called

employees off the afternoon shift, told them

they were fired, escorted some off the property

through back doors, and locked and chained

the premises.

28 Of 5.1 million adult workers

who were displaced from their jobs between

1979 and 1984,29 2.2 million reported that they

—.— (continued from previous page)

ly explain its reasoning. No other court has yet ruled on the

preemption claim, or claims that State and local plant closing

legislation may be unconstitutional. For details of the arguments,

see Richard P. Swigart (cd.), Managing Plant Closings and Occupational Readjustment: An Employer’s Guidebook (Washington, DC: National Center on Occupational Readjustment, 1984),

pp. 123-129.

Z7U.S Department of Labor, Bureau of Labor Statistics, “Major Collective Bargaining Agreements: Plant Movement, Interplant Transfer, and Relocation Allowances, ” bulletin 1425-20

(Washington, DC: U.S. Department of Labor, July 1981).

‘“Tamar Lewin, “Workers’ Rights in a Closing Tested,” The

New York Times, July 19, 1984.

ZoTheSe are people who lost jobs they had held for at le=t 3

years because of a plant or business closing, abolition of a position or shift, or slack work; the job losses occurred between January 1979 and January 1984. The data were collected in a special survey of the U.S. Census Bureau in January 1984 for the

Bureau of Labor Statistics, U.S. Department of Labor. For details of the survey results, see ch. 3.

did not receive advance notice or expect the

layoff. The rest (2.9 million), who said they got

advance notice or expected the layoff, did not

specify what “advance notice” amounted to. 30

plant closing legislation has been introduced

into congress from time to time over the past

10 years, including, in addition to advance notice of layoffs, such features as mandatory

severance pay, continued health insurance coverage ,

31 and transfer rights for workers. Other

features sometimes included are Federal loans

and technical assistance to communities, businesses, or groups of workers who may want

to buy out a plant and keep it open. No bill with

these other features has ever been reported out

of a full congressional committee, although

some have been the subject of hearings.

In March 1985, Rep. William Ford (D-MI)

joined with Representatives William Clay (DMO) and Silvio Conte (R-MA) to introduce a

simplified, bipartisan plant-closing bill (H. R.

1616). It would require all employers to give

90 days’ notice before laying off 50 or more employees, unless ‘business circumstances make

this impossible. The bill would also require employers to discuss alternatives to closure with

unions (where they exist) during the notice

period, and would encourage such consultation with employees in non-union shops. Plant

closing notices would go to the Federal Mediation and Conciliation Service, which would

be authorized to provide assistance in plant

closing disputes. This bill was reported out of

the full House Committee on Education and

Labor in July 1985, and defeated by a narrow

margin by the full House late in the year.

Employer Responsibility and LaborManagement Cooperation

A number of companies, faced with the necessity of closing a plant or permanently laying off large numbers of workers, have taken

SoInformation provided by the Bureau of Labor statistics.

JIThe Worry uppermost in the minds of many workers faced

with layoff is the loss of company-provided health insurance.

A number of major union contracts call for 3-month to z-year

extensions of health insurance benefits for displaced workers,

as well as severance pay, an early retirement option, and priority consideration for jobs in other plants owned by the company.
Ch. 6—Design and Performance of Displaced Worker Projects • 241

responsibility for tempering the impacts. Usually, in these cases, union contracts call for advance notice of a plant closing and provision

of some kind of assistance for the displaced

workers, with union participation if appropriate. Some companies fulfill these obligations

rather perfunctorily, for example by hiring contractors to offer the workers a few days of

counseling. Others have gone far beyond what

the union contract called for.

At the Ford assembly plant in Milpitas, for

example, the contract called only for advance

notice, for a meeting between company and

union to discuss the matter, for provision by

the company of counseling and placement assistance, and for preferential hiring in other

Ford plants. What the Ford Motor Co. did,

however, was to give the plant’s industrial relations manager a free hand to “do what was

right. ” The plant was kept open for 16 months

after production ended, housing all program

services except for vocational skills training

and thus giving the displaced workers a onestop shopping center in familiar surroundings.

A company-paid skeleton staff stayed onto run

the services.

The experience at Milpitas and other outstanding projects in which the companies took

leading parts highlights several unique contributions that private employers can make. They

can make space in plants for employment

and training centers and for suitable training

courses (e.g., remedial education]; provide staff

to run the employment and training centers;

allow employees time off from work to attend

counseling and job search workshops; and possibly keep the employment centers open after

the plant is closed. Of course, not all employers

can provide such a full range of services. Independently owned companies that are forced

to close probably cannot afford most of them;

but many large companies that are closing

branches in the course of restructuring their

businesses can help to provide top quality services for their ex-employees.

In several cases of best practice in closing

a plant, the union was involved as actively as

the company in planning and running the services for displaced workers. In most instances,

these joint efforts were built on preexisting

labor-management cooperation. For example,

the Dana Corp. ’s four-wheel drive axle plant

in Edgerton, Wisconsin, closed in 1980, had

never had a strike in 8 years, and had an employee turnover rate of 1 percent, Both the

Dana Corp. and Johnson & Johnson, as well as

the Ford plant, had employee involvement

teams actively cooperating in improving the

plants’ productivity and product quality. The

Brown & Williamson Tobacco Co. was a pioneer in establishing, together with its two unions (the Bakery, Confectionery and Tobacco

workers Union and the International Association of Machinists and Aerospace Workers),

joint labor-management committees to handle

the phase-out of 3,000 jobs and the creation of

employment and training services.

Labor-management cooperation is a strong

plus, Workers are likely to trust and use services that are planned, directed, or endorsed by

their unions or representatives. Where labormanagement teams do not already exist at the

time a plant is closed, cooperative direction of

the services can still be developed, as the Canadian IAS experience shows. This was the case

at the Ford Motor Co.’s Oakdale, Ontario assembly plant, where more than 2,000 workers

were laid off in two stages, in November 1979

and May 1980. A task force appointed by the

president of Ford of Canada called in IAS (then

called the Manpower Consultative Service, or

MCS). The labor-management committee s

formed at Oakdale under MCS turned up jobs

so effectively that within 8 months 94 percent

of participants were placed. Of all the laid-off

workers, (participants and nonparticipants) 80

to 85 percent had found jobs.

In the United States, government support for

labor and management efforts to create effective displaced worker programs is mostly in the

form of information sharing. A small office in

the Department of Labor, the Bureau of LaborManagement Relations and Cooperative Programs, publishes material on best practice in

plant closings, holds workshops, and responds
242 ● Technology and Structural Unemployment: Reemploying Displaced Adults

to calls for help from States, companies, and

unions .32

On the private side, both business groups

(e.g., the National Alliance of Business and the

National Center on Occupational Readjustment, Inc.) and labor (e. g., the Human Resources Development Institute of the AFL-CIO)

are active in collecting and imparting information on practical ways of helping workers and

communities hurt by plant closings.

Differences in Situation

The nature and condition of the local economy are dominating influences on the success

of displaced worker projects, and also on their

design. Projects that offer a full range of services are generally desirable; they are best able

to meet the needs of the whole spectrum of displaced workers, not just those easiest to serve.

However, different services may need special

emphasis, depending on the local economic situation,

In a diversified urban industrial economy,

most displaced workers will find jobs, given

effective job search assistance that helps them

crack the hidden job market, and training in

new skills for those who want it and can benefit from it. Except in the troughs of recessions,

there are usually jobs to be found in a deep,

diversified labor market, even though it may

take some time to find them. For example, even

in Buffalo, with its long history of unemployment rates above the national average, the displaced worker project operating in 1982 and

1983 was able to place two-thirds of its clients.

Szpublications of the Bureau (formerly the Labor-Management

Services Administration) include U.S. Department of Labor,

Labor-Management Services Administration, Plant Closing

Checklist: A Guide to Best Practice (Washington, DC: U.S. Government Printing Office, no date), and Plant Closings: What Can

Be Learned From Best Practice (Washington, DC: U.S. Government Printing Office, 1982).

More isolated urban centers with very narrow industrial bases—one-plant or one-industry

towns—are in worse trouble when the plant

closes or the industry declines. Steel towns like

Youngstown and Portsmouth, Ohio are examples of industrial areas with shallow labor markets that have not come back to robust life with

the resurgence in the economy. Rural areas dependent on mining, such as the Appalachian

coal country or eastern Utah since the coal and

uranium mining bust, may be very resistant to

the best efforts of displaced worker projects.

In areas that show no evidence of economic

revival and seem too hopeless to provide new

jobs, vigorous relocation programs may help

some displaced workers,

In a prosperous local economy, many workers fare quite well with nothing more than relatively brief, inexpensive assistance in searching for a new job. In addition, a thriving

economy may favor the acquisition of new

skills. Opportunities are plentiful, so that displaced workers, with only modest retraining,

can move in to entry positions as more experienced skilled workers move up. The advantages of forgoing an immediate job in favor of

training may not be obvious, however, to adult

workers accustomed to bringing home paychecks. Where there is a choice between training and a job, displaced workers often benefit

from help in realistically estimating their earning potential with and without training,

In a depressed economy displaced workers

may be more inclined to opt for training in new

skills. When there are few jobs to be had, many

workers find retraining more productive than

idleness. From the perspective of public policy, funding needs for displaced worker programs may rise and fall with the state of the

economy, not only because more workers apply for services during hard times, but also because training—-the most expensive service—

will likely be in greater demand,
Ch. 6—Design and Performance of Displaced Worker Projects ● 243 — —

ISSUES IN THE DESIGN OF DISPLACED WORKER PROJECTS

A brief description of a typical displaced

worker project will serve to introduce the elements of project design. Because Downriver is

the oldest of current projects and has often

served as a model for others, it is chosen for

illustrative purposes here,

The first step is outreach: making project

services known to displaced workers and inviting them to participate. Then, those who

sign up must attend orientation, take a serie s

of basic education and aptitude tests, and take

part in a 4-day job-seeking skills workshop. The

workshop helps workers identify their own

skills and experience, learn to identify potential employers, produce resumes, and practice

job interviews. The sequence in this first phase

of Downriver’s program is mandatory. Those

who do not follow it are dropped. The intention is to screen out workers who are not committed to a whole-hearted job-seeking effort.

Once they are enrolled, participants follow

different paths depending on their abilities and

interests, Those who have salable skills may

need only some sharpening of their abilities to

search for jobs, or they may take advantage of

job openings that the project’s job developers

find, Others, with good reading and mathematics skills, but without job skills that are currently in demand, may be referred to training

courses. The idea is to reserve training for

those who need it most and can benefit from

it. A third choice is on-the-job training (OJT),

in which employers receive a subsidy for hiring new workers, usually amounting to 50 percent of wages, and lasting for 1 to 6 months.

At Downriver, OJT is not considered training

—the acquisition of new skills required for a

new occupation—so much as a placement tool,

The hardest workers to serve are those who

lack marketable skills and are seriously deficient in basic educational abilities. For these

workers, Downriver has experimented from

time to time with remedial education, or looked

for suitable OJT slots. Finally, Downriver includes in its package of services relocation and

out-of-area job search assistance, for those who

are able and willing to move.

The Downriver program follows a sequence

in which the least expensive services ar e

offered first. putting the job search workshop

early in the sequence tests participants’ commitment and enables them to look for a job

promptly, if they do not want or need the more

expensive training or relocation services that

come later in the program. Figure 6-1 shows

the sequence of Downriver services, as presented to participants.

The hundreds of displaced worker projects

recently created under JTPA Title III differ substantially; not all include the complete menu

of services outlined above, although all these

activities can be funded under the law. Nor do

all of the projects follow the same sequence as

Downriver, or require the same mandatory

steps. Some, for example, require all participants to spend a few weeks in job search before they become eligible for any form of training. Some (probably a minority) do not require

attendance at a job search workshop. Some offer financial and personal counseling as an integral part of project activities.

The experience of the six demonstration

projects of 1982 and 1983 is a guide to comparative costs of the different services offered

to displaced workers. These projects recorded

outcomes as well as costs by type of service.

In addition, the U.S. Department of Labor collected data on outcomes (entered employment

rates and reemployment wages) by type of service from a sample of JTPA projects serving dis-
244 ● Technology and Structural Unemployment: Reemploying Displaced Adults

Figure 6-1.— Downriver Community Conference Economic Readjustment Programa

—How The Program Will Work With You—

Step by step Activity Explanation

You have been scheduled for a group

kick-off session with DCC Staff

To expose you to general information

Orientation and services this program can and

2 hours cannot provide

You have been scheduled for group

testing— we call it “Assessment For

Experienced Workers”

Individual appointments have been set

up for each person. We know a lot of

information is required—thanks for

your cooperation

These tests will give our staff an idea

“Assessment for of your interests and abilities

Experienced Workers”

This session verifies your eligibility

Intake and Enrollment and formally enrolls you into the

Certification program

1 for each participant

You will be scheduled for a specialized

group workshop to fine-tune your

Job Seeking Skills

You get a day off—DCC Staff meets to

review your case files

I Classroom Training I

Job Seeking Skill Workshop

4 days 8:30-4:00 p.m.

Monday-Thursday

Assessment

Then, an individual or group

meeting with you will be

scheduled this week

This workshop will expose you to the

labor market. Tells you how to use

resource material. Helps you to

prepare for an interview. Helps you

to develop a resume.

Counselors and job developers will

review your skills, interests and

aptitude and schedule an individual

or group session to meet with you to

discuss your options

On-the-Job Training r Resource Center

(OJT) Direct placement into jobs

placed workers in the 9 months from July 1984

through March 1985 (tables 6-2 and 6-3).

Results reported by type of service must be

judged with a good deal of caution. As discussed previously, placement rates and entered

employment rates are not the only measures

of success, nor always the best. For the demonstration projects, most of the outcomes were

recorded soon after classroom training had

ended, so that reported placement rates for this

service may be too low. In addition, the favorable effects of classroom vocational training on

earnings should become more apparent over

time—not necessarily in the first job after

training.

Conversely, reported placement rates for OJT

may overstate the effectiveness of the service,

because they are early reports; OJT contracts

often require employers to retain the trainees

for 30 days or more in order to receive payment. In the case of the Labor Department

data, all outcomes are reported for just 1 day

after placement. Another important caution,

in comparing results by type of service, is that

many projects (like Downriver) send their most

job-ready clients directly into the job market,

reserving training for those who need more

help.

Keeping these caveats in mind, the results indicate that of the major types of service, job

search assistance is least expensive; both OJT

and classroom training cost considerably more

per participant. Costs per placement for classroom training were far out of line in two demonstration projects, especially in Alameda

County, where the project placement rates
Ch. 6—Design and Performance of Displaced Worker Projects ● 245

Table 6-2.–Costs and Placement Rates by Type of Service, Demonstration Displaced Worker Projects, 1982-83

Project site

Lehigh Mid-Willamette

Major type of service Alameda Buffalo Valley Valley Milwaukee Yakima

Placement rates (percent):

Job search assistance only . . . . . . . . . 17.2 62.4 27.1 68.0 5.3a

80.8

Job search assistance and

on-the-job-training . . . . . . . . . . . . . . . 32.4 75.8 47.5 NA 87.0 92.5

Classroom training. . . . . . . . . . . . . . . . . 16.5 57.1 38.9 47.7 46.7

Total . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

17.5 65.5 32.0 60.7 8.5a

80.7

Cost per participant:

Job search assistance with and

without on-the-job training . . . . . . . . $1,132 $1,697 $ 533 $1,133 $ 128a

$1,882

Job search assistance only . . . . . . . . . NA 851 407 1,133 73a

1,387

On-the-job training only . . . . . . . . . . . . NA 2,319 975 — 1,387 2,481

Classroom training with job

search assistance . . . . . . . . . . . . . . . . 4,117 3,282 1,303 1,935 4,851

Classroom training only . . . . . . . . . . . . NA

—

2,431 896 802 3,464

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,951 $1,975 $ 720 $2,349 $ 128b

$2,009

Cost per placement:

Job search assistance and

on-the-job training . . . . . . . . . . . . . . . $ 6,389 $2,521 $1,716 $1,665 $1,503 $2,198

Job search assistance only . . . . . . . . . 6,234 1,363 1,499 1,665 1,384 1,716

On-the-job training , . . . . . . . . . . . . . . . . 11,219 4,181 2,829 — 1,678 4,181

Classroom training. . . . . . . . . . . . . . . . . 25,671 5,744 3,309 4,052 10,396

All participants . . . . . . . . . . . . . . . . . . . .

—

11,306 3,014 2,256 2,349 1,503 2,504

aThi~ figure is not comparable with th~~e for other ~ite~, be~au~e the ~nl~ services offered in Milwaukee were job development and on-the-job-training.

bThis figure IS driven by the large number of workers in the placement POOI (See fOOtnOte a).

NA= Not available.

— =Service was not provided.

SOURCE” Walter Corson, et al., Process and Implementation /ssues in the Design and Conduct of Programs to Aid the Reemployment of Dislocated Workers Findings

Based on the Dislocated Worker Demonstration Project (Princeton, NJ: Mathematical Policy Research, Inc., report to the U S. Department of Labor, Employment and Training Administration, 1984).

Table 6-3.—Entered Employment Rate and

Reemployment Wage by Type of Service,

Sample of JTPA Title Ill Projects,

July-March 1985

Entered Average hourly

employment reemployment

Major type of service ratea wage

Classroom trainingb 

. . . . . . 650/o $6.31

On-the-job training . . . . . . . 84 5.92

Job search assistance . . . . 70 6.42

Other servicesc . . . . . . . . . . 62 5.80

Overall . . . . . . . . . . . . . . . . 70% $6.15

aThe entered employment rate is based on participants terminating from the

project’s services.

bclassroom training includes &@c education, vocational training, or a

combination of the two, conducted in schools or training institutions.

cother services include vocational or pW30rId Counseling, SS.SeSS171eflt SefViCeS,

preemployment skills training, and support services such as transportation.

SOURCE: U.S. Department of Labor, Employment and Training Administration,

“Summary of JTLS Data for JTPA Title 11A and Ill, Enrollments and

Terminations During January-March 1985, ” August 1985.

were extremely low. In the other, Yakima, only

15 out of 243 participants were enrolled in

classroom training, probably too small a number to yield meaningful results. The results of

job search assistance, in terms of immediate

placements and wages on the new job were

good; for many displaced workers, this service appears to provide effective reemployment

help at modest cost. OJT shows high placement

rates but lower reemployment wages than the

other major services. This may reflect a selection factor (e.g., participants who are most jobready get job search assistance and those who

score well on aptitude and basic skills tests are

selected for classroom training); or it may simply mean that OJT is used more heavily in

lower wage sections of the country.
246 ● Technology and Structural Unemployment: Reemploying Displaced Adults

The discussion that follows does not cover

every element of program design in a detailed

or comprehensive way; instead, it treats issues

that are of most interest to policy makers at all

levels of government.

Getting Into the Program

Outreach

Often, displaced workers who could profit

from reemployment and retraining programs

never hear about them, Many adults with

steady work histories are not accustomed to applying for government help (except for unemployment insurance), and may not be aware it

exists. The surest way to reach the eligible

workers affected by plant closings or mass

layoffs is to offer assistance at the plant site before the layoffs begin. Other methods for reaching eligible workers include notices in the media, letters to individual workers, and personal

contact. For example, when the LTV Steel Co.

acquired a closed-down Crucible steel plant in

Midland, Pennsylvania, it offered reemployment and retraining services to former Crucible workers, many of whom had been out of

work for 2 years or more. The outreach method

the Midland project chose was to knock on

doors.

In times of prolonged economic distress, displaced worker projects may have no trouble

reaching applicants. In fact they may be overwhelmed. In 1982, the Buffalo demonstration

project was so swamped with applications that

participants had to be chosen by lottery. Delaware had the opposite problem when it opened

its displaced worker program in 1984. Displaced workers were scattered, rather than

concentrated in large plant closings, and it took

time for workers to become aware of the services, The local Employment Service (ES) rarely

referred unemployed workers to the program.

Not until the displaced worker project staff

made positive recruitment efforts (e.g., placing

posters, application cards, and drop boxes in

ES offices) did eligible workers discover the

services available to them. Delaware’s Department of Labor has since established closer

links between the ES and its displaced worker

program,

Orientation

workers are introduced to the project’s expectations at orientation, This is the time to

make clear what the project can and cannot offer, No one can offer assurance of a new job

with as good pay and benefits as the old one.

A fortunate few workers, usually the highly

skilled, will do as well or better, but most will

have to start new jobs at a sacrifice, even after

retraining. If this fact is not clearly understood

to begin with, everyone suffers; participants are

disappointed or bitter, project staff are frustrated, and placement rates are low as workers wait for good jobs that do not materialize.

It should also be clear from the start that not

everyone needs or can benefit from training.

Some of the most disappointing outcomes of

recent displaced worker projects were those in

which training was oversold, or where participants were not tested and carefully matched

with training opportunities.

At the same time, the project must offer

workers better prospects than they have on

their own. Downriver emphasized the staff

commitment to finding jobs that offer acceptable wages to participants, keeping loss of earnings to a minimum, The Ford Milpitas project,

in the heart of California’s high-tech Silicon

Valley, emphasized opportunities for advancement with retraining. One co-director (management) said:

We told them, you’ll start at lower wages

(than the $12 an hour Ford paid). Your ability

to rise will be based on your own skills; it

won’t be collective, through the union.

The other co-director (labor) said:

Workers were hammered with the reality of

facing options. You don’t have to take training if you want an assembler’s job at $4,.50 an

hour,

Screening

Some displaced worker projects, like the one

at Ford’s Milpitas plant and the Midland project sponsored by LTV, try to serve every worker who signs up, (In fact, the Midland project

serves displaced workers’ families as well as

the workers themselves,) Others, like the dem-
Ch. 6—Design and Performance of Displaced Worker Projects ● 247

— —

Photo credit UAW.Ford Employee Development and Training Program

The UAW-Ford Employee Development and Training Program has established several centers that offer a range of testing,

job placement, and training services to displaced workers. Here, laid-off workers are attending an orientation session

at a Detroit center.

onstration project at Yakima, Washington,

screen applicants rigorously, saving their efforts for those considered most able or motivated to find jobs. Downriver and the projects

modeled on it take an in-between position,

weeding out applicants who do not attend the

mandatory initial steps of the program.

Rigorous selection of participants has sometimes been criticized as creaming, that is, selecting for service the workers best prepared

and most likely to get jobs on their own. The

performance standard set forth in JTPA Title

III–placement and retention in the job—might

be thought to encourage creaming, but there

is little evidence of this so far in JTPA-funded

displaced worker projects, except for entry into

some highly selective skills training courses.

(See ch. 5 for further discussion of this issue.)

Financial and Personal Counseling

Many displaced workers benefit from counseling on their financial and personal situation

as early as possible after losing their jobs, People who have worked all their adult lives may

have little idea how to cope with the emotional

shock of losing a job or the financial adjustments they have to make. Typically, displaced

workers are unaware of what community social service programs have to offer, and are

reluctant to ask for help. Counseling can acquaint workers with community resources that
248 ● Technology and Structural Unemployment: Reemploying Displaced Adults

they may need, and can help them make financial plans to avoid losing their homes or other

irreplaceable assets.

Displaced worker projects do not commonly

provide personal or financial counseling themselves, but may refer clients to community

agencies that do offer counseling. In a recent

survey of 120 displaced workers at 10 sites in

the northeast and midwest, the workers commented that not enough projects offer them

help in contacting creditors, reorganizing their

finances, and seeking financial aid to carry

them through till they find a new job.33

Job Search Assistance

Job search assistance is offered in two forms:

1) job development and job matching, which

are provided by the project staff; and 2) training the individual worker to find his or her own

job. Job development by the project is valuable

because so much of the real job market is

hidden; jobs are filled by word of mouth or

network, not through newspaper ads, private

employment agencies, or the public Employment Service. Training for workers in finding

their own jobs is valuable because so many

displaced workers do not know how or where

to look. Often, displaced workers have had just

one job in their lives, and they got it by showing

up at the plant gate.

Building Workers’ Job Search Skills

Job search workshops are intended to give

people skills in finding their own jobs, an asset that will last throughout their working lives.

The aims of the workshops are to build confidence and motivation, as well as to teach practical job-hunting skills. Typically, the workshop

lasts 20 hours, over 4 or 5 days, with the first

session often spent in “skills identification. ”

This exercise, in which workers list all the tasks

they have performed and skills they have developed in their worklives, is intended to give

people an emotional jump start, helping to raise

ssGa]e Zahniser, William L. Ashley, and Lawrence W. Inks,

Helping the Dislocated Worker: Employer and Employee Perceptions (Columbus, OH: The National Center for Research in

Vocational Education, Ohio State University, 1985).

the low self-esteem that so many workers feel

after being laid off. The rest of the workshop

sessions are devoted to learning skills in resumé writing, job interviewing, and locating

potential employers,

Following the workshop, most programs provide a resource center for self-directed job

search, outfitted with a telephone bank, telephone and business directories, newspaper

classified advertising sections, and a bulletin

board with listings of job openings from local

government offices and the local Employment

Service, and often from program participants

who wish to share information they have uncovered. Resource centers work best when they

are located on the same premises as the rest

of the program, and when they have a full-time

knowledgeable staff.

Highly structured job clubs, often the subject

of favorable publicity, did not work very well

for the demonstration projects that tried them.

They were expensive and usually not very

popular. In the most rigid version of the job

club approach, a group of a dozen people meet

8 hours a day for 4 weeks, spending the first

2 weeks in classroom preparation and the next

2 intensively working the phones. Members of

the club continuously cold call employers for

job leads, relying on support from each other

to keep going through discouragements,

Downriver tried job clubs, found they diminished the participants’ initiative, and abandoned the high-pressure system in favor of a

lower key, self-directed job search, using the

help of the resource center, One demonstration

project, Lehigh Valley, also reported good results with a more relaxed version of the job

club.

Job Development

One of the most useful forms of assistance

a displaced worker project can offer is to discover job openings that are never publicly announced. Plant-based projects, as the Canadian

IAS experience demonstrates, are especially effective in finding jobs in the hidden job market. In the United States, the sweep of area employers performed by the Johnson & Johnson
Ch. 6—Design and Performance of Displaced Worker Projects ● 249

team (see box 6A) was typical; the Dana Corp.

team, the Ford Milpitas team, and a number

of others have used similar techniques,

Plant-based job development is especially

helpful to unionized displaced workers looking for jobs in a non-union environment. Dislike and fear of unions can be a powerful deterrent to hiring. This was true in Plainfield,

New Jersey, in 1961, when the Mack truck

plant closed. It was true in Cortland, New

York, in 1977, when the Brockway truck plant

closed (indeed much of the town blamed the

union for the closing); and it was true in Edgerton, Wisconsin, in 1981, and in Chicago and

San Jose in 1983.34 The Johnson & Johnson

team invited neighboring company managers

to lunch to meet displaced workers “to show

them, ” said the co-director of the team, “that

our union folks are not ogres, ”

Continuing displaced worker programs can

also achieve good results in job development,

especially when they earn the confidence of local employers in their ability to screen workers for job openings. Successful job developers

keep in personal touch with local employers,

selling their services by offering to save employers the trouble and expense of interviewing numerous applicants. With the project doing the screening and referral, the employer

need see only a few well-qualified people.

Faced with a depressed job market (either cyclical or structural), some displaced worker

projects have tried unconventional ways of

finding jobs. Lehigh Valley, in the depths of the

recession, hired advertising agencies to market the program to the business community.

The staff believed that this marketing effort did

elicit calls from employers. Several projects

considered enlisting private employment agencies, but only Buffalo tried it. Unfortunately,

it produced no jobs. Possibly, the agencies’ ino4John W, Dorsey, “The Mack Truck Case: A Study in Unemployment, ” Studies in the Economics of Income Maintenance,

Otto Eckstein (cd.) (Washington, DC: The Brookings Institution,

1967]; Robert Aronson and Robert McKersie, Economic Consequences of Plant Shutdowns in New York State (Ithaca, NY:

Cornell University, New York State School of Industrial Relations, 1980); and OTA interviews with directors of reemployment programs of the Dana Corp., Johnson & Johnson, and the

Ford Milpitas assembly plant.

experience with blue-collar workers accounted

for the lack of results, In 1982, when unemployment in the Detroit area was above 18 percent,

the Downriver project staff attempted to create jobs. They provided assistance to small and

medium-sized plants in getting military contracts—the only new business available at the

time.

Job Matching

This essential service can be provided in a

number of effective ways, from simple handsorting of files to elaborate computerized systems, For example, Downriver is experimenting with a highly automated keyword system,

which breaks down job titles into relevant

skills, codes participating workers’ skills, and

then matches workers with job openings on the

basis of the skills match, While preparing to

adopt the automated system, Downriver job developers simply sorted clients’ forms into 27

occupational categories, and stored them in file

folders.

Some projects have found that modest homemade automated systems work quite well. The

Ford Milpitas project, for example, began by

entering every worker’s test scores, interests,

and background on the plant’s large mainframe

computer, When the plant closed and the mainframe was moved out, project staff found they

could store enough information on a small

personal computer to sort and pick out likely

candidates for new jobs or training courses,

Similarly, the Mid-Willamette demonstration

project found a personal computer quite adequate for storing and sorting clients’ files.

On-the-Job Training

In practice, on-the-job training is often an

effective tool more for placement (and sometimes for economic development) than for the

acquisition of new transferable skills. The

typical subsidy to employers for trainees is 50

percent throughout the training period, which

may last from 1 to 6 months. Often, OJT contracts require that the worker remain on the

job for 30 to 90 days, with some of the payment

contingent on retention; in some cases, how-
250 • Technology and Structural Unemployment: Reemploying Displaced Adults

ever, there is simply an understanding that

workers are to be kept on.

High initial placement rates make OJT an

attractive option to many service providers,

and also to workers who want to get back on

the job as soon as possible. In the JTPA Title

11A program, OJT is increasingly popular.35

Information is less complete for Title III. Most

State programs report that OJT is included in

their service mix; probably about one-fourth of

clients use it.36 Some projects do not offer it

at all.37 Possibly the reason is that the experienced adult workers served by Title III programs can often be placed without an OJT

subsidy. The subsidies seem to be most effective in placing workers in small and mediumsized businesses.

Vocational Skills Training

For 25 years, many experts have prescribed

training as the sovereign remedy for structural

unemployment of displaced workers. With the

computer revolution of the late 1970s, and the

simultaneous increase in worker displacement,

prescriptions for training became more insistent. The idea gained currency that if people

were being displaced by robots, they had better

learn to tend the robots.

A few years of recent experience with displaced worker programs have made the point

that the training idea, in this form, was oversimplified and oversold. Whatever part technological advance may have in the displacement of workers (there are other factors of at

least equal importance, as discussed elsewhere

in this report), new jobs to replace those permanently lost are not necessarily high technology and do not always involve retraining.

Experience so far also teaches that a minority of displaced workers—perhaps 20 to 30

g5&ry walker, Hilary Feldstein, and Katherine SOlow, An Independent Sector Assessment of the Job Training Partnership

Act, Phase 11: Initial Implementation (New York: Grinker, Walker

Associates, 1985), pp. 25-26.

~esee ch. s for details.

‘7Robert F. Cook, et al., “Transition Year implementation of

the Job Training Partnership Act,” a report prepared by Westat,

for the U.S. Department of Labor, Employment and Training

Administration, 1985, pp. 9-40 to 9-41.

percent in well-run projects—are likely to

choose and to benefit from vocational skills

training. This is not, however, an inconsiderable number. While vocational training may at

times have been overemphasized, it remains an

essential part of the service mix for displaced

workers. For many semiskilled blue-collar

workers whose old jobs have permanently disappeared, training in new skills is the best

chance to recapture the ability to command

good wages. Displaced worker projects can

open that opportunity to many people who

would not find it on their own.

Course Selection

One of the most demanding tasks in setting

up a skills training program is choosing the

right courses—ones that teach skills that are in

demand. As chapter 5 discusses in more detail,

information about the occupations in demand

in local labor markets is likely to be incomplete.

In the six demonstration projects, despite

attempts by the staff to choose training courses

realistically, most graduates did not get jobs related to their training. These projects were all

short-term, lasting just 1 year, so there was no

time for a survey of employers to discover what

occupations were locally in demand. Typically,

the project staff first tried to identify occupations in demand by using State labor market

information, which usually turned out to be

insensitive to local job markets and somewhat

out-of-date, By necessity, most of the projects

then turned to information from the project’s

job developers, training providers, and Private

Industry Councils, which represent local business. The fact that trainees in these projects

graduated in the depths of the recession was

no help.

Downriver had time for a more systematic

approach. The planning staff studied trade

journals, reviewed economic forecasts from

local universities, and analyzed labor market

data collected by State agencies to identify local

trends, Job developers checked the planners’

results, interviewing local employers and querying trade associations. Downriver did not report specifically on training-related placements,

although the overall record for placements
Ch. 6—Design and Performance of Displaced Worker Projects • 251

Photo credits Downriver Community Conference

Training courses for displaced workers include a wide range of occupations, from repair of electronic equipment

to landscaping.

after classroom training appeared favorable in

Phase One. (In Phase Two, nothing worked

very well.) High-technology training, however,

did not come off very well. Workers who took

specially designed programs in numerical control machine operation and electronics fared

substantially worse in finding jobs than trainees

in more traditional skills. One reason may have

been that the high-technology courses were

new and the trainers inexperienced. In addition, however, Downriver program staff believed they may have been ahead of the market

in developing some of their classroom programs. Demands for some skills grew more

slowly than anticipated.

In Buffalo, results of three out of four hightechnology training courses were dismal. In

courses on copy machine repair, microprocessor/microcomputer repair, and digital telephone maintenance, placements related to

training were below 20 percent. Trainingrelated placements for medical word processing, on the other hand, were nearly 60 percent.

Table 6-4 summarizes the subjects offered in

class-size training (i.e., courses set up especially

for the displaced workers) in the six demonstration projects and Downriver’s Phases One

and Two, More than half the classes offered

were in some kind of repair and maintenance,

both traditional (e.g., truck engines) and hightechnology (computers, microprocessors, robots). Training in the high-technology area was

prominent in all the projects. These skills were

thought to be in demand, and also to offer the

best chances for advancement. In addition,

there was probably an element of fashion in

the course selection. In the absence of any very

certain knowledge about the labor market

(especially while the economy was stalled in

deep recession), planners tended to select

something new.

With more experience, projects are changing

their course selections. Downriver has dropped

its highly demanding robotics course, finding

that the auto manufacturers are mostly training

robotics technicians drawn from among their

own active work forces.38 Simpler, but still

taln fact, much of the worker training involved in the use of

new technologies may be occurring in the workplace, with active workers (not new hires) the trainees. The California Employment Training Panel, which helps the State’s employers

retrain active employees as well as supporting training projects

for unemployed workers, reports that more than half the projects

it funded in 1983 and 1984 involved some form of computer technology.
252 ● Technology and Structural Unemployment: Reemploying Displaced Adults

Table 6-4.—Class Size Training Provided in Displaced Worker Projectsa

National De,pmstratopm Projects, 1982-83

Alameda:

Air-conditioning/refrigeration services

technician

Automatize technician

Cable TV installer

CAD/CAM drafting technician

Certified welding

Computer technician

Digital technician

Electronic technician

Microwave technician

Welding technician

Word processing

Buffalo:

Computerized numerically controlled

machines

Copy repair technician

Floor mechanic

Heating, ventilation, air-conditioning

repair

Microprocessor/microcomputer

technician

Small engine repair

Telephone repair

Truck mechanic

Word mocessing (medical)

Lehigh valley:

Computer services

Computer technician

Computers and business systems

marketing

Floor covering

Mid-Willamette Valley:

Computer-assisted drafting

Computer operations

Electronics technician

Welding

Southgate:

Air-conditioning and refrigeration repair

Automotive and diesel mechanics

Cable TV installer

Computer operations and service

Dietetic technician

Industrial computer maintenance

Machining

Motorcycle mechanic

Yakia :

Industrial computer maintenance

Downrlver Community

Conference, 1980-82:

Phase One (1980-81):

Electronics

Energy auditor

Heating and cooling

Machinist

Numerical control

Pipe welding

Screw machine

Phase Two (1981-82):

Accountant

Building operations management

Computer/data processing

Drafter detailer

Electronic technician

Industrial sales

Machine tool

Robotics

Technical preparation

Welding/welder-fitter

Word processing management

a{iclass size training” is training in classes that are designed especially for participants in dis~laced worker Drolects.

bL’TeChnlCal prepar~lon” Was a-q-week course in reading-and math, to prepare workers for skills training COurSe~.

SOURCES: Mathematical Policy Research, Case Study of the Alameda County and Soutlrgate Dislocated Worker Demonstration Projects, Jack Wichita, Case Study

of the Milwaukee Dislocated Worker Program, Case Study of Operation Jobsearch: The Lehigh Valley Dislocated Worker Demonstration Project, and Case

Study of Project S.A. V. E.: The Yakima, Washington Dislocated Worker Demonstration Program; L.M. Wright, Jr., Case Study: Buffalo Worker Reemployment

Center, Buffalo, New York and Case Study.’ Mid-Wi//ametfe Va//ey Job Assistance Network, Salem, Oregon (Princeton, NJ: Mathematical Policy Research,

1984); Marcia Jerrett, et al., Serving the Dislocated Worker: A Report on the Dls/ocated Worker Demonstration Program (Cambridge, MA: Abt Associates,

19S3); and Walter Corson, et al,, Process and Implementation Issues in the Design and Conduct of Programs to Aid the Reemployment of Dislocated Workers:

F/nd/ngs Based on the Dislocated Worker Demonstration Project (Princeton, NJ: Mathematical Policy Research, 1984).

exacting courses in repair of electronic devices

(office computers, copiers, vending machines,

radios and TVs) are being offered in a number

of projects with good placement results.

For example, the Delaware Technical Community College offers an 18-week concentrated

course in electronic repair that begins with

basic electrical circuitry and proceeds to electronics. In a graduating class of 15 displaced

workers in 1984, all had jobs within a month

at an average wage of $7.02 (the average wage

on previous jobs was $10.33). Both large and

small firms were hiring these graduates of a

short, intensive course, at lower wages than

they would pay a graduate of a 2-year associate degree course, and then training them further on the job with possible pay advances in

the future. One reason for the success of this

course is that the director was careful not to

train too many candidates at once. It would be

easy to flood the receptive but limited local

market for these modestly trained technicians.

Short courses in telecommunication installation and repair are also working out well. With

deregulation of the telephone system, there is

a proliferation of small telecommunication

firms, many of whom are willing to take on

graduates of short courses at modest wages.

Downriver, though it is now emphasizing

high-technology training less than in its earlier

days, continues to offer a 27-week training

course in electronics and computer repair.

Graduates generally make no more than $4.50

to $6 an hour to start, but usually can workup

to $8 or more within a year.

Several projects in addition to Buffalo have

found that training in high-technology clerical

skills appears to pay off. For example, in 1983,

when the San Francisco Blue Cross-Blue Shield
Ch. 6—Design and Performance of Displaced Worker Projects ● 253

office decided to move 400 jobs (mostly claims

processors) to low-cost, low-wage towns i n

California’s central valley, a labor-management

adjustment committee arranged several options for training the laid-off workers. Thirty

workers selected a 4-month course in word

processing, offered by a private training contractor. All graduates were placed, at wages

averaging $7.44 per hour, compared with $7,46

to $9.55 per hour on the old jobs.

The vocational training offered in JTPA Title

III projects for displaced workers covers a very

broad range of skills and occupations, some

high-technology but many in quite traditional

fields. State directors of Title III programs,

surveyed in 1984-85, mentioned 50 or more

kinds of training as examples of what their

programs were offering. 39 As table 6-5 shows,

the list ranges from landscaping and upholstering to data processing and computer repair.

JTPA’s statutory requirement of performance

standards has led some projects to adopt a new

mode of course selection. Project staff make

the initial choice of courses, either together

with the local Private Industry Council (PIC)

or with the PIC’s approval. Then, the training

contract is put out for bids, with the proviso

that trainers themselves must meet performance standards. In a sense, this transfers the

performance requirement to the trainers. A

typical contract may require that, for the trainer

to receive final payment, 75 percent of graduates find full-time jobs, with all but 10 percent

of the job training-related; that the starting

wage be no lower than $4 to $5 per hour; and

that trainees be retained on the job for at least

so days.

4 0

About half the States (24 of 46 responding to

the question in OTA’s telephone survey) use

performance-based contracts in their JTPA

Title 111 programs, and 11 use them predominantly, Reliance on this kind of contrac t

appears to be growing. In a sample of 40

Sesee ch. 5 for further discussion of survey resuhs.

4ocontract5 requiring 1OO-percent placements are rare. The

California Employment Training Panel requires them, but in

practice allows some flexibility, If the 100-percent rule is rigidly

enforced, trainers must include some leeway in their contract

price.

Table 6-5.—Examples of Vocational Training Offered

in JTPA Title Ill Displaced Worker Projects, 1984-85

Aircraft mechanical

operations

Airline attendant

Air-conditioning and

heating mechanic

Asbestos handler

Auto mechanic

Bank teller

Boat building

Bookkeeper

Cabinet maker

Cable splicing

Carpentry

Casino worker

Chemical operator

Clerical and office work

Computer repair,

maintenance

Construction

Culinary arts

Data processor

Day-care worker

Drafting

Diesel mechanic

Electronics

Energy conservation work

Fisherman

Golf course mechanic

Health and medicine

Heavy equipment operator

Hotel-motel manager

Industrial maintenance

Industrial sewing

Institutional attendant

Iron pourer

Lab technician

Landscaping

Machine tool and die

Machinist

Mechanical, electrical

engineer

Office machine service

Printing and publishing

Real estate

Retail trade

Security guards

Statistical process control

Telephone technician

Truck driving

Tourism occupations

Upholsterer

Welding

Xerox technician

SOURCE OTA telephone survey

Service Delivery Areas providing JTPA Title

IIA services to disadvantaged workers, 27 reported in late 1984 that they used performancebased contracts to ensure accountability of

training institutions. Six of the twenty-seven

said they had only recently adopted this kind

of contracting.

4 1

So far, it appears that performance-based

contracting is an effective way to make sure

that skills taught in training courses are in

demand, and that the trainers do a good job of

teaching the skills. It also reassures students

of the worth of the program. It also has a pronounced effect on selection of students, Trainers who do not get paid if they do not find jobs

for their graduates have a powerful incentive

to select students with care. Both common

sense and experience teach that it is a great

mistake to admit people to training if they lack

the necessary basic educational skills or aptitudes. Yet selection that is too rigid amounts

to creaming. Some projects try to guard against

too-rigid selection criteria by requiring trainers

—. —.. .— - .- Alcook, et al., op. cit., P. 10-21.
254 ● Technology and Structural Unemployment: Reemploying Displaced Adults

to explain their reasons if they reject applicants

who were approved for training by the project

counselors.

Selection of Trainees

In most projects, selection criteria for people

going into training are that they need it (do not

have marketable skills), can do the work (have

passed the requisite tests), and will not have

to drop out for lack of income support. Some

well-financed projects do not impose the first

requirement. The Ford Milpitas project, for

example, encouraged everyone to take appropriate education or training, whether English

as a second language, remedial reading or

mathematics, or a demanding g-month course

in mask design (computer-aided etching of circuits on microchips, through the sequential use

of stencil-like masks).

Projects that drop the second requirement—

testing for appropriate placement—do so at

their peril. This does not mean that only a select few can be admitted to training. Some

projects that are committed to training have

been able to devise an array of vocational training courses —combined, where necessary with

remedial courses in reading and math—that

suit a broad range of skills and aptitudes. Nor

does it mean that projects must immediately

confront displaced workers with a battery of

tests. Academic tests can be extremely intimidating to adult workers who are years away

from classrooms. Projects that are successful

in providing training first orient their clients

to all aspects of the project, including an explanation of why testing is necessary for proper

placement of workers who are interested in vocational skills training.

An example of training with little attention

to selection was the Southgate project in the

Los Angeles area. Begun with the best of intentions, the project ended in stress, waste, and

for many workers, bitter disappointment.

The General Motors assembly plant in Southgate closed in March 1982, laying off 4,300

hourly workers. A modest retraining and reemployment project, begun a few months after

the closing, was greatly expanded in September

1982, when General Motors, the United Auto

Workers, and the State of California signed an

agreement to underwrite the project.

Training was a major element of the expanded project; 45 percent of the 1,682 participants enrolled in the 28 classes offered. But it

was hurriedly put together, in an attempt to

complete training while workers still had unemployment insurance and Trade Adjustment

Assistance (TAA) income maintenance. As a

result, classes started with teachers unprepared

and books and equipment missing; at least 10

of the classes had to be extended. Most of the

courses were technical, in fields in which

employers require credentials such as work experience or a certificate from a credible training institution. Southgate’s program was not

able to provide either.

The demanding content and fast pace of

many of the courses required substantial homework and good basic skills in reading and

mathematics. Unfortunately, most of the students, although hard working and highly motivated, were unprepared. They had not been

screened for their basic educational skills; furthermore, trainers were eager to enroll students

and were not very selective.

In the end, 30 percent of classroom trainees

dropped out. Few of the trainees who stuck

with it got jobs related to their training. Altogether, by September 30, 1983, the Southgate

project had placed only 60 workers in jobs—

3.6 percent of the participants. (Another 366,

or 22 percent, were recalled to other GM

plants.) This may not be a fair indication of the

project’s results, since it continued past that

date. However, it had been in existence for 12

months at the time the results were reported.

In a project in Alameda County, California,

serving mostly workers displaced from the GM

assembly plant at Fremont, the dropout rate

from training courses was even higher than

Southgate’s–50 percent. Like Southgate, the

Alameda County project was not selective in

placing workers in training courses; the courses

also were set up hurriedly, and trainers were

not required to place graduates.
Ch. 6—Design and Performance of Displaced Worker Projects ● 255

Alameda County’s placement rate was 17.5

percent, with another 19 percent getting recalls. Other factors probably contributed to the

poor results: the GM workers had high supplementary unemployment benefits during the life

of the project, and rumors persisted that the

plant would reopen. In fact, GM and Toyota

did eventually form a joint new venture (New

United Motor Manufacturing, Inc., or NUMMI),

which opened a refurbished assembly plant at

the Fremont site in 1985.

According to State of California records, the

Southgate and Alameda County projects combined spent $8,3 million in the year November

1982 through October 1983. 42 During that time,

511 of 3,448 participants found new jobs;

another 983 were recalled to other GM plants.

The cost per placement in both projects combined (omitting recalls) was approximately

$16,000. This compares with a range of $1,500

to $3,000 per placement in five demonstration

displaced worker projects operating at approximately the same time in other parts of the

Nation .

4 3

The Southgate and Alameda County experiences are sometimes cited as evidence that

“training doesn’t work” for displaced workers,

especially semiskilled workers. This conclusion

is not warranted. It can only be concluded that

training was ineffective under the circumstances

of those projects. One of the major circumstances was failure to test and screen participants adequately.

Experience in the Ford Milpitas project points

to some quite different lessons. This project

4ZFor data comparing the Alameda project with the five other

demonstration projects, the period October 1982-September 1983

is used. Sources are reports by Abt Associates and Mathematical Policy Research. See table 1. A different source, records of

the State of California cited below, provides details on costs of

both the Alameda and Southgate projects; these records cover

a slightly different time period {November 1982-October 1983),

and show slightly different figures for participants and outcomes.

%tate of California, Health and Welfare Agency, Employment

and Development Department, “General Motors/United Auto

Workers/State of California Reemployment and Retraining Program, November 1, 1982-October 31, 1983,” report prepared for

Joint Legislative Budget Committee (Sacramento: 1984). See also

Mathematical Policy Research, op. cit.; and Jay Mathews, “Retraining ‘83—The Class in Room E221, ” The Washington Post,

NOV. 6-9, 1983.

was just as committed to training as Southgate,

but took pains to match workers with suitable

training. Everyone who wanted training was

tested. Those adequately prepared could go

directly into skills training, but still had to be

selected by trainers. Most of the training was

under performance-based contract, and trainers

could be highly selective. For example, when

San Mateo Community College offered a course

for microwave technicians, more than 100

people applied for it; 25 were selected. The

project staff later established another microwave technician class in a private technical

institute.

Table 6-6 summarizes the skills courses offered by the Ford Milpitas program. Not all the

courses required a high level of basic education; for example, courses in landscape gardening did not. Some were high-technology (such

as mask design and CAD-CAM drafting), but

many were in more traditional areas, Silicon

Valley has a great many small metalworking

job shops doing work to order for high-technology firms; the shops were willing to hire entrylevel machinists, trained in the project’s 6-

month course, at $6 per hour. With experience

and further training, many of these machine

tool operators could expect to workup to very

good wages (the better paid machinists in Silicon Valley make upwards of $18 per hour).

Table 6.6.—Class Size Training Provided by the

Ford/UAW Program at Milpitas, CA, 1983-84a

Auto service technician

Bus driver

CAD drafting

Computer repair

Electronic technician

Heating, air-conditioning, refrigeration

Heavy equipment operator

Landscaping

Machinist

Microwave technician

Plant maintenance mechanic

Semiconductor mask design

Truck driver

Welding

a{4Class size training” is training in classes that are designed especially fOr Par.

ticipants in displaced worker projects.

SOURCE: The Local UAW.Ford Employee Development and Training Committee,

Milpitas, CA.
256 • Technology and Structural Unemployment: Reemploying Displaced Adults

participants in the project who did not get

into skills courses at first had another chance.

Of the 770 people who took part in the project’s

unique remedial education program, 341 later

went into skills training. Altogether, 748 people,

or 37 percent of all those who signed up to participate in the program activities, took vocational skills training courses.

Although overall placement results of the

training program are not all recorded, the dropout rate for training courses was low—about

8 percent, and most of those left to take jobs.

Only about 2 percent were real dropouts from

the program. Project staff were satisfied that

most trainees would be placed in trainingrelated jobs. The only failure they knew about

was a welding course; placements from it were

low, possibly because of the recession.

The Ford Milpitas project demonstrates how

it is possible to be selective in assigning people

to training courses without being overly exclusive. The extensive range of courses offered,

and the excellent remedial courses for people

who lacked basic skills, made it possible for

workers who wanted training to get it,

Design and Scheduling of Courses

Many displaced worker projects try to offer

some skills training courses that are compressed

into periods of less than 1 year, Displaced

workers are adults, and most are responsible

for earning a living for themselves and their

families. Few have the luxury of more than the

standard 6 months’ eligibility for UI to spend

in full-time training courses—less the time it

takes for admission to a displaced worker project before training, and placement afterwards.

It is for this reason that Downriver persuaded

a local community college to compress its 2-

year associate degree in electronics into 9

months; that the standard training course for

displaced workers in Illinois is 22 weeks; and

that the Delaware Technical Community College has created an 18-week course in electronics repair.

The shortening of technical courses generally means that the trainee cannot cover as

much ground as a full-time student can in the

usual 2-year course for an associate degree or

a technical certificate. Displaced workers finishing brief courses usually cannot command

entry wages as high as young technicians

armed with degree or certificate, but they can

get back to work sooner.

A common observation by the staff in several projects and in several training institutions

is that displaced workers do better with their

peers, in class-size courses designed specifically for them, than in established classes with

youths just out of high school.44 The displaced

workers tend to go at a slower pace, need more

explanation and repetition, and appreciate the

rapport with and support of their coworkers

from years past. In addition, class-size courses

designed for displaced workers may be more

conveniently scheduled than academic courses,

A number of community colleges, however,

now offer training modules which individual

students can enter once a month or even more

often.

In the Ford Milpitas project, which had

much greater participation in training than

most projects, workers definitely preferred

class-size over regular courses. This was not

a foregone conclusion. Community colleges

abound in the San Jose area. Factory workers

do not seem intimidated by them; often their

sons and daughters go there. Tuition was not

a problem; it was mostly free at that time in

California and where there were fees, the project had money from the Ford/UAW fund to pay

them. However, of the 1,997 workers who

signed up for services, only 205—about 10 percent—chose established courses in educational

or training institutions; 543 or 27 percent,

chose class-size courses offered either by private trainers or local community colleges.

Income Support

JTPA programs discourage stipends for trainees. Even though stipends are mentioned in the

law as an allowable expenditure, they are

qqclass.size courses are established for workers in displaced

worker programs and are open only to them. They are usually

designed for about 15 to 25 students; trainers generally require

an agreed-on minimum enrollment before offering the courses.
Ch. 6—Design and Performance of Displaced Worker Projects ● 257

—- —

Photo credit:

Displaced workers in California are learing to

repair tractors.

rarely provided in Title III programs. Adult

displaced workers who desire training must

find some other way of supporting themselves;

indeed, in most projects one of the criteria for

selecting displaced workers for training is that

they have income to see them through. Other

family members, or part-time jobs, may provide

some of the necessary support. For the displaced workers who are eligible for it, UI is

usually an essential part of the package, Few

can count on more than the basic 26 weeks of

UI. Extended benefits, providing an extra 13

weeks, were in effect in 1985 only in Alaska,

West Virginia, and Puerto Rico. Federal supplemental compensation, enacted during the

recession, has been ended. Moreover, for the

average worker, UI may provide less than a

bare minimum income, considering that in

1984 the average weekly benefit was $119.

The Trade Adjustment Assistance (TAA) program provided income support for workers in

approved training for up to 18 months, but was

open only to workers certified as having lost

their jobs because of foreign competition. TAA

authorization lapsed in 1985, and may be revived (see ch, 5). A minority of workers are

eligible for supplementary unemployment benefits (SUBS) under union contracts, but even

those eligible sometimes do not collect. SUBS

are paid only until funds set aside for them run

out, which has happened in a number of instances when plant closings were preceded by

long layoffs.

It is not easy to set up worthwhile training

courses that coincide with the 6 months that

UI benefits last. Participants have to enter the

displaced worker program early; assignments

to training must be made expeditiously; courses

often have to be truncated or compressed.

Some projects, managing to do all this, were

still beset by additional problems of keeping

workers on the UI rolls, at least in the early

days of the Title III program. JTPA unequivocally directs States to maintain UI benefits for

displaced workers who take advantage of “training opportunities” the States have identified;

the Department of Labor has underscored this

mandate with one of its few directives to States

on JTPA. Most, if not all, States understand the

plain meaning of the law and directive, which

is that workers enrolled in a training course

underwritten by JTPA funds do not have to be

“available” for work but are eligible to keep on

receiving UI while in training, Still, in some

cases, local ES offices misunderstood the directive and cut trainees off the UI rolls.

When JTPA funds are not involved, the situation is not so clear. In the 1970 amendments

to the Federal Unemployment Tax Act, Congress directed States to maintain UI eligibility

for workers attending training courses approved by the State. Some States escape the

requirement by not approving training courses

that are paid for by non-JTPA money—private

sources such as the 5-cents-an-hour funds that

are set aside for training under GM and Ford/

UAW contracts, or possibly the workers’ own

funds. Other States, while they do not positively deny UI benefits to workers in training,

do not draw the workers’ attention to the fact

that they may be eligible. Of 44 State Title III

program managers responding to OTA’s telephone survey, 20 said their States allow UI

eligibility for unemployed workers in full-time

training not funded by JTPA, 17 gave a conditional answer, and 7 said their States do not

allow it.

Some States are reluctant to approve UI

eligibility for workers in full-time training
258 ● Technology and Structural Unemployment: Reemploying Displaced Adults

because they believe they must be conservative

in managing their UI funds. During the three

recessions of the past 10 years, many States

went heavily into debt to the Federal Government to keep their trust funds solvent. At the

beginning of 1985, 21 States still owed $9.8

billion in Federal loans (down from $13.2 billion a year before). Congress has directed the

States to repay their loans expeditiously.

A bill (H.R. 1947) to encourage States to

approve training for workers collecting UI benefits was introduced by Representative Kennelly

and four cosponsors in the 99th Congress. The

bill would allow UI payments made to workers in training to be credited against any interest a State owes the Federal Government for

loans to their UI trust funds. The bill would

also direct the Secretary of Labor to help States

develop criteria for approval of training programs open to people receiving UI benefits.

Unlike many States, California has had a

surplus in its unemployment trust fund for

years. For a time, California workers enrolled

in training courses were permitted to receive

UI benefits for 52 weeks, so long as they were

in approved training courses. Taking advantage of these extended UI benefits, plus SUBS,

the ex-Ford Milpitas workers taking a tough 9-

month class in mask design were able to stay

the course. Twenty-two of the original 24 graduated. A bill in the 99th Congress (S. 395) would

allow any State to extend unemployment insurance for workers in training an extra 10

weeks, at Federal expense.

prolonged income support can, however,

also have perverse effects. A common observation by project staff is that workers who are

expecting recall, or are collecting generous

SUB payments, are not likely to participate in

displaced worker programs. Instead of using

the time that income supports last for an intensive job search or retraining, some workers

simply wait for something to turn up. Depending on the jobs available, some workers have

to make quite a financial sacrifice in going back

to work. Consider, for example, the situation

of a worker who formerly made $10 or $12 per

hour, can now find nothing better than jobs

paying $4 to $6 per hour, and is covered by UI

and SUBS that replace (for a time) 90 percent

of his old wage.

Some collective bargaining contracts include

a provision that makes it less costly for such

a worker to start a new low-paying job. The

Ford UAW contract, for example, allows workers to collect SUBS to make up most of the

difference between their old wages and the

lower wages in new jobs, until their SUBS run

out. This arrangement has the advantages of

getting people back to work, giving them experience in new jobs from which they can advance, and allowing them time to recoup some

of their earning power. Directors of the Ford

Milpitas project urged workers to use this strategy, and they believed that it worked, since

participation in training was so high. Similar

in purpose is a suggested scheme for a new

worker insurance system, to compensate workers for a part of the difference between wages

on old jobs and lower wages on new ones. The

compensation would last only for a fixed transition period, and participation might be limited to older, more experienced displaced

workers. 45

In the 99th Congress, a bill (H.R. 758) introduced by Representative Stark would allow

various forms of extra income support from the

UI system for workers in training. First, it

would authorize States to pay partial UI benefits to part-time workers enrolled in approved

training courses: this “short time” compensation would be available only to workers in industries with declining employment. If the

worker in training were on the job half time,

for example, he would be eligible for half his

full weekly UI payment. The bill would also

allow States to extend the amount and period

of UI payments, for workers who elect to take

approved training. In addition, it provides for

supplemental payments from the UI fund to

workers who take jobs at a lower wage than

is required under the State’s UI law. The payments could amount to as much as 80 percent

qSAlice M. Rivlin (cd,), Economic Choices 1984 (Washington,

DC: The Brookings Institution, 1984), p. 150. See ch. 2 for a discussion of this and similar proposals.
Ch. 6—Design and Performance of Displaced Worker Projects ● 259

of the total UI benefits the worker could collect

if he were unemployed, and could last as long

as 1 year. The aim of the last provision is to

ease the transition from a higher paying job to

one that pays less, but gets the worker back on

the job and, possibly, in a position to recoup

earning power.

Another approach to income support for displaced workers in training was proposed by

Malcolm Lovell, a former undersecretary of labor and guest scholar of the Brookings Institution. 46 His proposal is, first, to define displaced workers as laid-off employees who have

4 years of employment covered by a State UI

system and is certified by their former employers as being unlikely to return to work for that

company in the next 6 months. Then, the certified displaced worker would be offered a

choice between proceeding independently to

find a new job (in which case he or she would

be eligible for regular UI benefits and other

State or private assistance plans) and taking

part in a new displaced worker program. The

worker would have 4 weeks to decide between

the two options,

The new program would consist of a required sequence, in which the worker would

first go through several months of job counseling and job search assistance and training. If

no suitable job were found during this period,

the participant could then go on to education

or training, with a voucher providing full tuition for short courses and partial tuition for

longer ones. Some extended income support

would be provided beyond regular UI; it would

be paid from a special trust fund, supported

by a l-cent-an-hour tax on employers and employees. Income assistance would be limited

by the amount in the trust fund.

An approach tied more closely to existing

systems was proposed in a staff paper of the

National Commission for Employment Policy .47

~Malcolm R. Love]], Jr., “An Antidote for Protectionism,” The

13rookings Review, fall 1984.

47 Stephen E. Baldwin and Ann Donohue, “Displaced Workers: New Options for a Changing Economy, ” paper presented

at the Fifth Annual Research Conference, Association for Public Policy Analysis and Management, October 1983 (Washington, DC: National Commission for Employment Policy, 1983).

It suggested that by the 13th week of covered

unemployment all UI claimants should be

interviewed, and those identified as displaced

workers would enter a sequence of services

structured to encourage reemployment. Workers determined to need training could enter

training courses any time after the assessment,

and would be eligible for 13 weeks of extended

UI benefits for income support—even if the

State’s unemployment rate was not high enough

to trigger the extended benefit program.

The potential of government-provided financial aid to students to help provide income

support for displaced workers, or other adults

who need to prepare for job or career changes,

is discussed briefly in chapter 7.

Availability of Jobs

Some projects have observed greater interest in skills training during economic hard

times than in prosperity. For example, in

Downriver’s Phase One (1980-81), 45 percent

of participants entered training. In Phase Two,

during the 1982-83 recession, 75 percent signed

up for courses. Participants in the two phases

differed little in age and education. With recovery, in 1984, the proportion of Downriver

clients taking skills training dropped to about

30 percent. There may well have been other

reasons for the changing service mix at Downriver, but anecdotal evidence from other projects tends to confirm that, when no jobs are

available, many workers are more inclined to

consider training,

What this suggests for Federal policy is that,

in recession, displaced worker projects may encounter an upsurge of requests for vocational

skills training by clients. Since classroom training tends to be more expensive than other services, higher funding would be needed to serve

the same number of workers, assuming that requests for training were granted for all the

workers able to benefit from it. It may well be

in society’s interest to grant such requests, Displaced workers who spend a period of unemployment learning new skills—or in remedying basic skills deficiencies—rather than simply

collecting UI benefits, may considerably im-
260 ● Technology and Structural Unemployment: Reemploying Displaced Adults

prove their chances of finding a satisfactory

new job when the economy recovers.

Remedial Education

In Downriver’s first two phases, 60 percent

of participants had a high school or post-high

school education; at the same time, 20 percent

of the participants scored below sixth-grade

level on standard reading and mathematics

tests. Likewise, in the Alameda County program, most participants were high school graduates, but their scores on a standard education

test were comparable to those of sixth- and

seventh-grade students. At the Ford Milpitas

plant, 11 percent of those tested were below

sixth-grade level, and another 16 percent below

eighth-grade level.48 Some of these test scores

indicate rustiness; some people can gain considerably in tested ability in relatively brief

brush-up courses. For others, the scores reflect

a more fundamental lack of educational competencies. People who lack basic reading and

mathematics skills are not just unprepared for

skills training. They are often seriously handicapped in finding new jobs; even filling out

application forms can be a formidable task.

The staff of many displaced worker projects

recognize the needs of their clients for remedial education. A few projects, notably the

Milpitas project, have provided it very effectively. Another with a strong emphasis on remedial education is the Midland, Pennsylvania

project, operated jointly by LTV Steel and

Local 1212 of the United Steelworkers of America. The Midland center sponsors special refresher classes, daytime and evening, open to

community members as well as displaced workers and their families. Classes are held in the

union hall, where all the other project activities except vocational skills courses take place.

In addition to an instructor who spends full

time on the adult education program, teaching

classes and offering individual help when

needed, the center provides a self-paced audiovisual tutorial system. This unusual program,

%ee Kulik, et al., op. cit., 1984 for the Downriver project, and

Mathematical Policy Research, op. cit., for the Alameda project;

for Milpitas, data provided by Milpitas Adult Education department, Milpitas Unified School District,

termed a refresher program by the project staff,

has evoked an exceptional response. Of 590 displaced workers and family members participating in the Midland project from October 1983

through March 1985, 88 took adult education

courses. In addition, 36 members of the community took part.

Both the Midland and Milpitas projects relied strongly on group support and esprit de

corps in their successful adult education courses.

These, plus skilled teaching, helped to overcome the reluctance-even shame—that many

adults feel about admitting the need for help

in basic skills.

Not many displaced worker projects have

been able to fill the need for remedial education

as successfully. At Downriver, for example,

staff members refer clients with low mathematics and reading scores to the adult education courses available in public school night

courses. Some go, but many do not. In its early

days, Downriver worked with community colleges to add 4 weeks of technical preparation,

(i.e., a refresher course in mathematics and

reading) for clients entering skills training.

Today, like a number of other projects, Downriver relies mostly on performance-based contracts. Contractors are not required to spend

time on remedial education. Most do offer a

few hours of brush-up in the basics at the beginning of a technical course, but workers selected for admission to these courses have

already tested at the ninth-or tenth-grade level

in mathematics.

In Illinois, where most displaced worker

projects are based in community colleges, vocational training courses are typically designed

with 4 weeks of brush-up in technically oriented mathematics and reading at the beginning. Many project staff feel that 4 weeks is not

enough, but this is all the State allows under

its definition of training for JTPA purposes.

Moreover, the vocational training courses are

already compressed into 22 weeks; if any more

time is spent on the basics, the vocational

training suffers.

Directors of State Title III programs surveyed

by OTA in 1984-85 added evidence that reme-
Ch. 6—Design and Performance of Displaced Worker Projects . 261

—

dial education, thus far, plays a relatively small

part in projects serving displaced workers. Although 28 of 47 States reported that remedial

education gets some Title III funding (either

as an independent course or as part of another

course such as vocational training), the percentage of workers receiving this service is

small, and the share of funding going into the

service is still smaller.49

Relocation Assistance

Relocation has long appealed to policymakers

as a way of assisting displaced workers. In fact,

the option has not been used much so far in

displaced worker programs, The reasons are

several, but a leading one is that many workers tend to view moving away as the last resort, For middl-aged and older workers, the

costs of moving can be particularly high: selling one’s home at a loss in a depressed market,

uprooting families and abandoning community

ties, embarking on an uncertain venture in an

unfamiliar town where high prices may quickly

wipe out whatever assets are left after the

move, Even assuming things go well in the new

location, older workers have relatively few

working years ahead in which to make up the

losses of moving with higher earnings. In recent years, with the increase in two-income

families, the loss of a spouse’s job is another

deterrent to relocation.

Blue-collar workers generally are more hesitant to move than managers or professional

workers, Usuallthey do not have a job waiting at the other end, and most have little practice in finding one. Because layoffs are such

a common feature of semiskilled workers’ lives,

they are less inclined than professionals to give

up the positive values of community and roots

for the uncertainties of new jobs in distant

places. Another important difference is that the

individual qualities of workers applying for

semiskilled blue-collar jobs are not likely to be

so decisive as those of people applying for techqoForty.nine of fifty States replied to the survey, but not all of

them answered all the questions. For some questions, especially

on details of the various services provided, information was

scanty. More detailed discussion of the results of the survey appear in ch. 5.

nical and professional positions; this makes

relocation a more chancy proposition for semiskilled workers.

Downriver, for example, encouraged relocation in its early days, but later came to regard

it as a high-risk, low-payoff approach. Only 8

percent of participants in Downriver’s first two

phases relocated, and one-fifth of those returned. Of the six demonstration projects in

1982 and 1983, four offered relocation assistance. Only 51 workers, or 3.8 percent of placements in the four programs, moved to new

areas. By far the highest proportion of workers opting for relocation—amounting to 11 percent of placements—were in Yakima and MidWillamette Valley, both small projects in the

Pacific Northwest. Many of the projects’ participants in these projects who moved went

only as far as the nearest city (Salem or Portland). Most were young, or were graduates of

high-technology skills training courses, or were

construction workers, accustomed to moving

to find new work. It should be recalled, however, that the demonstration projects took” place

during the recession, when workers probably

had reason to doubt that they would find jobs

if they moved.

Under the most favorable circumstances—

that is, transferring to a new job within the

same company—a substantial number of displaced blue-collar workers may elect to move.

The Armour Automation Fund, in its pioneering displaced worker program in the 1960s, initially found that only 4 of 1,200 workers transferred from plants closing in Birmingham and

Fort Worth to other plants in distant cities. Results were quite different, however, in the later

closing of Armour’s Sioux City, Iowa plant.

The company offered its employees jobs at new

plants only 50 to 200 miles away. Workers who

transferred were able to take their seniority

rights with them, and also were given the option of going back home within 6 months with

no loss of severance pay (so-called flow-back

rights). Under these circumstances, 234 of

1,150 displaced workers opted for the transfer

and stuck with it.50 more recent example is

sOShultz and Weber, op. cit.
262 . Technology and Structural Unemployment: Reemploying Displaced Adults

that of the Brown & Williamson Tobacco Co.,

which set aside 350 noncraftsman and 45

craftsman jobs in its new Macon, Georgia,

plant for workers laid off in Louisville and

Petersburg, Virginia, in the early 1980s.51

A number of large companies, such as General Motors and Ford, help workers to relocate

by offering preferential hiring, under their collective bargaining contracts with unions. This

gives displaced workers first priority for jobs

opening up in existing plants, but usually does

not allow the workers to bring with them full

seniority rights for layoffs and recalls. It does

allow transfer of seniority for benefits such as

pensions and SUBS. The lack of seniority in the

new location is a major deterrent to many

workers in weighing the costs of moving. However, flow-back rights, which preserve severance pay if the worker quits or loses the new

job, may make the venture more attractive. Circumstances differ, but if employees are given

some financial assistance and assurances of

seniority, as many as 20 percent may accept

interplant transfer offers.52

In situations other than transfer, it may take

exceptional effort to encourage a substantial

portion of displaced workers to relocate. The

effort can be worthwhile when the displaced

workers live in isolated, shallow labor markets,

where the prospects of new job opportunities

are poor even with a prosperous national economy. In some severely depressed areas, relocation may be the most promising alternative

to prolonged poverty, and perhaps to welfare

dependency.

The Portsmouth, Ohio, displaced worker

project, which started up in 1980 after the closure of the Empire-Detroit Steel plant, was an

outstanding example of effective relocation.

The company, the union local (of the United

Steelworkers of America), and Federal, State,

and county agencies underwrote the effort. The

cooperation of the State and local governments

u~u.s, Department Of Labor, LabOr-Mma8erntm services Administration, op. cit., pp. 37-41, sZMarC Bendick, “worker Mobility, ” Managing plant clOShgS

and Occupational Readjustment: An Employer’s Guidebook,

Richard P. Swigart (cd.) (Washington, DC: National Center on

Occupational Readjustment, 1984).

was exceptional; more often, local government

leaders want to rebuild their community, not

send away stable, experienced workers. Ordinarily, it is not a politically palatable choice to

concede that workers will be better off in

another State or community than the one that

State and local government officials represent.

About 1,000 workers were still employed at

the Empire-Detroit plant when it closed. They

received an unusual and innovative array of

relocation services, from job development out

of town and out of State to modest assistance

with the costs of moving. The project looked

nationwide for jobs, especially in the South and

West; each response got a followup request for

information on stability of employment, wage

rates, local acceptance of workers from out

of the area, and information about the community.

A unique feature of the project was group

relocation. For the primary relocation site,

Longview, Texas, the project staff arranged for

group interviews through the local Employment Service office, and hired a bus to take the

workers to Texas. The group move that resulted had some drawbacks; if one worker became dissatisfied and went back to Ohio, others

returned too. But most stayed, enjoying the

advantage of comradeship and a transplanted

community. By mid-1982, 2 years after the project began, about 200 workers and their families had moved from the Portsmouth area,

mostly to east Texas.

Another successful experiment in the relocation of blue-collar workers was more extensive and longer lasting, but was not targeted

to displaced workers.53 For 4% years, from

1976 to 1980, the U.S. Department of Labor

sponsored the Job Search and Relocation Assistance pilot project, to see whether various

kinds of assistance encouraged unemployed

workers to make worthwhile moves for jobs in

new locations. Local Employment Service ofBsMaterial on the relocation experiment is drawn mostly from

John K. Herzog and Cilla J. Reesman, job Search and Relocation Assistance Pilot Project (JSRA), report prepared for the U.S.

Department of Labor, Employment and Training Administration (Rockville, MD: Westat, Inc., 1981).
Ch. 6—Design and Performance of Displaced Worker Projects ● 263

fices in eight southeastern States took part in

the experiment. After an initial phase in which

eligibility was restricted to long-term unemployed, eligibility rules were relaxed so that the

project was open to any unemployed or underemployed person registered with the ES office

who could not find, or could not be expected

to find, suitable employment within reasonable

commuting distance from home, From beginning to end, 6,644 applicants were enrolled;

1,858 (28 percent) relocated.

Remarkably, relocation rates were highest for

workers usually considered least likely to migrate. Of those with less than 12 years of education, 45 percent moved, compared with 16

percent of the college-educated. Blue-collar

workers such as nonfarm laborers, craft workers, and operatives had the highest relocation

rates among occupational groups—38 to 44 percent, compared to 13 to 16 percent for professional, technical, and managerial workers, Although older workers relocated at lower rates

than younger ones, their rates were still far

higher than among workers in general. Experienced workers who relocated showed earnings

gains of about $2,500 a year; their counterparts

in a comparison group, who were not offered

special assistance and did not relocate, suffered

losses of about $1,000 a year.

Workers eligible for relocation assistance in

the experiment were applicants registered with

their local ES office who could not find suitable jobs within commuting distance of their

homes. Different groups were offered special

assistance at three different levels: 1) information about out-of-area jobs and long-distance

telephone referral to prospective employers; 2)

the same as Level One, plus up to $500 to cover

the costs of traveling to a job interview, with

no limit on the number of job search grants;

and 3) the same as Level Two, plus a maximum

of $2,000 cash assistance toward the costs of

relocating to a new job in a new community,

Overall, benefits to participants in the pilot

project—i.e., increased earnings in the first 12

months after relocation assistance, over and

above what would have occurred without the

assistance—were 2.3 to 3.3 times the total cost

of the program, In addition, the tax payback

was extremely rapid. Federal taxes paid by participants on their additional first year earnings

were estimated at 66 and 83 percent of total

program costs. The whole cost to the taxpayers,

according to the estimate, was paid back in

about 18 months—and this does not take into

account savings in income transfer programs,

or in unemployment compensation.

In most ES offices, Level Two was the most

effective service, delivering benefits to participants that were at least 60 percent greater than

the cost. But in two very high-volume low-cost

offices, Level Three was the best performer,

with benefits to participants of at least three

times the cost of these quite generous services,

Level One—information and telephone referral only—was not effective, Although these

services cost the least, they did not produce

many placements.

Results of this pilot project cannot be generalized in a simple way to the ES system as a

whole, or to displaced worker projects. The

relocation experiment operated in just one region (the Southeast), which at that time had

substantial immigration and centers of economic prosperity. Eighty percent of the relocations took place within the region, which

tended to limit job search and relocation costs

and to reduce culture shock for participants.

Still, the pilot project achieved remarkable success in encouraging relocation among groups

of workers who are usually reluctant to move,

and did so at costs well below benefits, both

to participants and, in a remarkably short time,

to the taxpayers.

One of the less satisfactory aspects of the relocation project was an attempt to use the Employment Service’s monthly summary of job

orders throughout the Nation to find job openings out of the area. This did not work well.

The sheer bulk of listings was overwhelming,

and even with a special effort to update them

weekly in the Southeastern region, many of the

job orders were out of date, having been filled

or canceled. As authorized by JTPA, the U.S.

Department of Labor has improved the system

of interstate job clearances in recent years. An

Interstate Job Bank, located in Albany, New

York, and beginning operations in July 1984,
264 • Technology and Structural Unemployment: Reemploying Displaced Adults

is intended to serve workers considering relocation. 54 However, listings in the interstate

bank are far from complete, being limited

mostly to higher paying and hard-to-fill professional and technical jobs; nor is the system fully

automated. Listings may or may not be current,

and they are available only in the ES offices

that pay to get them. Currently, about 47,000

job orders appear in the Interstate Job Bank per

year.

Displaced worker projects may be able to improve on out-of-area job information by establishing good working relationships with ES

offices elsewhere, as the Portsmouth, Ohio

project did with the Longview, Texas ES office. However, with 25-percent cuts in ES staff,

the likelihood of special services by a distant

ES office to displaced workers out of its own

area has probably declined. As for more general information about employment opportunities, some States’ ES systems have good

detailed data about occupations currently in

demand in local labor markets, but many do

not. Workers considering relocation also need

up-to-date information, which displaced worker projects may be able to provide, on costs of

living, housing availability, schools, amenities,

and crime rates in other communities.

Financial assistance for out-of-area job search

and moving costs is allowed under JTPA Title

III; but relocation assistance is expensive, and

it has to compete with other program activities. So far, it is playing a minor part in the mix

of Title III services. In OTA’s telephone survey of State managers of Title III programs, 22

provided information about relocation assistance. Thirteen reported that none of their

clients received the service, and only three said

that as many as 5 percent of clients received

it, or that as much as 5 percent of program

funds were spent on relocation assistance.

Even in the States that emphasize relocation,

financial assistance is modest. In Arizona, for

example, where 60 percent of Title III clients

lost jobs in the deeply depressed mining indusSqsee ch. 5 for a more Cornp]ete description and evaluation Of

the interstate Job Bank system and a discussion of local labor

market information.

try, relocation to such thriving areas as Phoenix and Tucson is a much-favored option; 15

percent of participants are reported to receive

relocation services. Program officials feel they

cannot afford more than a $650-per-worker allowance for job search and relocation costs

combined, even though they would like to encourage more clients to consider this alternative.

The Trade Adjustment Assistance program

provides much more explicitly for relocation

assistance, and sets relatively generous levels

for funding it–up to $800 for out-of-area job

search and another $800 maximum for moving expenses. These limits are less, however,

than the Labor Department’s relocation project

in 1976 to 1980 allowed. In fact, assistance

from public funds rarely covers the full costs

of relocating. In the Portsmouth project, workers who relocated got $100 a week for up to

4 weeks, plus a modest $100 for moving expenses. By contrast, Empire-Detroit Steel paid

full relocation costs for employees (mostly

managerial) who were transferred to new jobs

within the company; the average payment was

$25,000. 55 The costs of transporting people and

household goods are only a small fraction of

a relocation allowance this generous. The big

financial costs involved in relocating from a

depressed area are low sales prices for homes

owned by the workers, and high mortgage rates

for a new home, compared with low rates on

old mortgages. Only where employees are exceptionally valuable are companies willing to

pay for all these costs of relocation.

The Federal income tax law and regulations

make substantial allowance for moving costs.

Even taxpayers who do not itemize their deductions, but take the standard deduction, may

~SThis cost seems to be fairly typical of payments for emplOyerpaid moves. For example, costs were about $25,000 per worker

when the American Electric Power Co. moved 800 employees

from New York to Columbus, OH, in 1983. The Employee Relocation Council of Washington, DC, estimated the cost of relocation per worker at $26,000 to $30,000 in 1983. This estimate

includes very generous benefits, such as compensation for the

difference between the sales price and assessed value of the

worker’s home or interest-free loans for a down payment and

compensation for higher mortgage rates in the new home for

a few years.
Ch. 6—Design and Performance of Displaced Worker Projects ● 265

adjust their taxable income by subtracting costs

of moving expenses when the move is related

to a new job, or a change in job location. Moving expenses can include travel for househunting, temporary living expenses in the new location, and travel, meals and lodging during the

move, as well as transportation costs for household and personal goods. A deduction from

taxable income is of course worth more to people in higher tax brackets than to workers of

low or average income. Tax credits, applied

against the tax bill itself, are a greater benefit

to all taxpayers, but proportionately more to

people in the lower brackets.

For many workers, the financial and social

losses in moving from a depressed area may

be so high that even generous relocation allowances or tax deductions are not adequate

recompense. For workers to undertake relocation, they must be convinced that potential

returns from the new jobs are worth more than

attachment to the old communities. Most displaced workers, even in very stressed communities, probably will not make that calculation.

Given effective assistance, however, as many

as 20 percent have done so, and that is a considerable number.

PROPOSALS TO ASSIST INDIVIDUAL RETRAINING EFFORTS

Some of the retraining proposals introduced

in recent sessions of Congress could be of significant benefit to people who, on their own

initiative, seek training for career changes; the

extent to which they would help displaced

workers faced with the necessity of finding a

new job is less clear. An example is the idea

of Individual Training Accounts (ITAs) as proposed in H.R. 26, introduced by Representative Durbin with many cosponsors in the 99th

Congress. S. 934, introduced in the Senate by

Senator Hart and cosponsors, is similar.

The ITA plan is to establish a semivoluntary

program of special accounts, to be used for

training or relocation expenses for anyone who

is unemployed through no fault of his own and

is eligible for unemployment insurance, or

whose employer certifies that he will be discharged permanently within 6 months. The accounts would be setup in State UI systems, and

would be financed by matching tax-deductible

contributions from workers and employers.

Employees could choose whether to set up an

ITA; employers who did not choose to contribute would be subject to an extra tax.58 The ITAs

Seunder H. I?. 26, employers with 25 or more employees would

be required to contribute to ITAs, or be subject to a continuation of a $14-per-employee surcharge on their Federal Unemployment Tax, imposed in the 1970s to replenish one of the UI

system’s trust funds and due to expire about 1987. States would

have to make authorization of ITA a part of their UI legislation

would mount up to a modest limit ($4,000 in

H.R. 26) but could continue to accumulate interest. Unemployed workers could tap their

accounts for payment of tuition and fees to certified training facilities, after getting job counseling in local ES offices. The accounts could

be also used to defray a limited portion of relocation expenses. If the workers never used

their accounts for training, they could collect

what they contributed on retirement, and employers could recover their shares.

Proponents argue that an ITA system would

provide an assured source of funding for the

retraining of displaced workers in an economy

undergoing rapid structural change, and would

assign the financial responsibility to the three

most interested parties—government, employers, and workers. Critics contend that the system could cost the U.S. Treasury substantial

amounts in lost revenue, with benefits going

only to the workers actually displaced—who

could amount to a much smaller number, or

a different group of people, than those participating. The risk of displacement differs among

firms and industries, so that a generic approach

may be inappropriate.

to qualify for the employer tax credit against the Federal Unemployment Tax. Loss of the credit ($378 per employee as of

Jan. 1, 1985) would approximately triple the average employer’s

UI tax bill.
266 ● Technology and Structural Unemployment: Reemploying Displaced Adults

The ITA proposal is essentially a plan for

financing adult education and training, on an

individual basis, for involuntarily unemployed

workers. It might supplement, but would not

replace a comprehensive displaced worker program such as JTPA Title III, which offers an

array of services for the majority who do not

undertake retraining as well as for the minority who do. Nor would it take the place of the

training component in Title III programs. For

the workers most vulnerable to displacement—

unskilled and semiskilled manufacturing workers—the most effective means for delivering

training is probably a skillfully administered

displaced worker project. The unmet need in

training for displaced workers is not so much

training expenses (tuition, fees, books and so

on), which can be provided under JTPA, as income support during training. ITA proposals,

as currently drawn, would not allow use of the

accounts for income support.

The people most likely to take advantage of

ITAs are those who already are inclined to seek

adult education and training on their own

intitiative—i.e., those who are more educated,

more affluent, and more often in professional,

managerial, and administrative jobs. (See ch.

7 for a discussion of who participates in adult

education.) For higher income people, favorable tax treatment of contingency savings accounts could be a useful way to encourage

retraining. Tax deductions are worth less, however, to lower income workers. In addition,

many low and middle income people may feel

that they cannot afford to put money aside for

a contingency that may never arise. In fact, low

and middle income taxpayers hold much less

than their proportionate share of tax-sheltered

Individual Retirement Accounts (IRAs). As table 6-7 shows, half of the 96 million people who

filed Federal income tax returns for 1983 reported $15,000 or less in adjusted gross income,

but they accounted for less than 8 percent of

all the money put into IRAs that year. Another

20 percent of taxpayers reported adjusted gross

incomes of $15,000 to $25,000; their contributions to IRAs amounted to 15 percent of the

total.

Another aspect of the ITA plans as proposed

is that they put most of the responsibility for

choosing appropriate training on the individual worker. Neither full-time project planners

nor local PICs have found it easy to determine

what skills are currently in demand, much less

what will be in demand a few years hence. One

experienced project director, in fact, opposes

training vouchers that give displaced workers

too much choice. “We can’t leave clients to

their own devices, ” says this director. “People

tend to pick courses in a vacuum. We make no

bones about helping them make better decisions.” Whether overburdened ES offices could

fulfill this counseling function adequately is

questionable. Currently only a very small portion (7 percent in 1981, lower thereafter) of jobseekers coming 10 ES offices receive job or career counseling.

Another proposal to cover training expenses

(H.R. 759, Representative Stark) would allow

workers eligible for unemployment insurance

to take training or education allowances in lieu

of UI payments. A bill to encourage readjustment of displaced workers in a different way

(H.R. 1690, Representatives Wyden, Gephardt,

and Schumer) proposed a demonstration program in 5 or 10 States, in which displaced

workers could take a lump sum equivalent to

Table 6-7.—individual Retirement Accounts, by Size of Adjusted Gross Income, 1983

Number of returns Individual Retirement Accounts

Size of adjusted gross income (thousands) Percent Amount (thousands) Percent

<$15,000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,435 50.3 $2,492 7.7

$15,000 to $24,999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,662 20.4 4,960

$25,000 to $49,999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

15.3

22,939 23.8 15,692 48.5

> $50,()()() . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,257 5.5 9,205 28.5

Total 98,294 100.0 32,348 100.0

SOURCE: U.S. Treasury Department, Internal Revenue Service, “Preliminary Income and Tax Statistics for 1983 Individual Income Tax Returns,” Sta(lstlcs of Imorne

Bu//et/rr, winter 19S4-S5, p. 28.
Ch. 6—Design and Performance of Displaced Worker Projects . 267

their maximum UI benefits to go into business

for themselves. The amounts involved per

worker would probably be modest. The average weekly benefit for UI claimants in 1984

was $119; at that rate, a lump sum payment for

26 weeks would amount to $3,094.

H.R.1219, introduced by Representative

Johnson and 45 cosponsors in the 99th Congress, would give favorable tax treatment to

training accounts for displaced workers but,

unlike the ITA plan, would require no contribution from employers. Instead, it would allow

displaced workers to make early withdrawals

from their IRAs with no back taxes or tax penalty, if the money were used for tuition, fees,

book expenses, and the like in training programs approved by the Secretary of Labor.

Workers who used their IRAs for training expenses would have less from that source when

they retire. There is a precedent for allowing

early withdrawal from tax-deferred retirement

funds for other purposes, Retirement funds set

up under Section 401(k) of the tax code may

be tapped for several purposes, including payment of college tuition, purchase of a home,

or payment of unreimbursed medical costs,

Because it is based on the existing IRA system, the plan proposed in H.R. 1219 would not

require any new system for collection of contributions, and would not remove additional

revenue from Federal income taxes. Another

part of H.R. 1219, however, would provide a

25-percent tax credit to employers who spend

more on training employees than their 5-year

historical average, This tax credit, which could

reduce Federal tax revenues, is patterned after the existing research and development tax

credit, and is intended to encourage employers

to invest in upgrading the skills of their active

workers on the job, (See ch. 2 for further discussion of the proposal.)

Under both H.. 1219 and the ITA proposals,

only workers who have lost their jobs (or received notice of layoff) would be eligible to

withdraw funds from their training accounts.

It may well be that these training voucher systems would serve best to encourage lifetime

education and retraining, rather than as a crisis response to the needs of displaced workers.

To work most effectively for the purpose of

encouraging worklife transitions, tax-exempt

training accounts might be open to employed

as well as unemployed workers. For people

who are planning ahead, foreseeing the necessity of training for a new job or career, setting

up a fund to draw on later for tuition could be

a major help—especially if they could use it

whether or not they are employed, whichever

is most feasible in their own circumstances.
Chapter 7

Adult Education and Displaced Workers
Page

Overview and Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. ... + ...271.271

Changing Context of Adult Education and Training . . . . . . . . . . . . . . . ......274

Implications of Demographic Change for Adult Education

and Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...276

Education and the Ability to Gain Employment.. . ....................276

Education and Income . . . . . . .............................,......27 7

Estimates of Basic Skills Deficiencies Among Adults . .................278

Delivery System for Adult Education and Training . ....................282

Expenditures for Adult Education and Training . .....................282

Major Providers of Education and Training . .........................283

Instructional Technology in Adult Education and Training . .............290

Delivery Systems for Instructional Technology. . ......................290

Studies of the Effectiveness of Instructional Technologies . .............292

Evaluation of Courseware in Adult Basic Education . . . . . . . ............296

Role of Learning Centers in Computer-Assisted Instruction . . . . . . .......296

Vocational and Industrial Applications for Training Technologies . . . . ...297

Federal Role in Instructional Technology Research and Development ....299

Overcoming Barriers to Adult Education . .............................303

Employer Involvement in Basic Skills Education . .....................303

Designing Programs to Meet Adult Needs. . ..........................306

Targeting Occupational Training to Job Needs... . ....................308

Federal Support for Adult Education and Training . ....................310

The Adult Education Act . . . . . . . . . . . . . . . . . . . . . . . ...................311

The Vocational Education Program . . . . . . . . . . . . . . . . . . . . . ...........313

Job Training Partnership Act. . .. . . . . . . . . . . . . . . . . . . . . . ........315

Educational Support for Individuals.. . ..............................316

List of Tables

Table No. Page

7-1.

—. 

7-2.

7-3.

7-4.

7-5.

7-6.

7-7,

7-8,

Selected Studies of Employer Perceptions of Job-Related Skills

and Education. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........281

Number of U.S. Public and Private Postsecondary Schools With

Occupational Programs, by Type of School, 1982 . ..................286

Enrollment in U.S. Noncollegiate Noncorrespondence Postsecondary

Schools With Occupational Programs, by Type of School, 1975-81 .. ...287

Barriers to Adult Participation in Education . .......................303

Corporate and School System Models to Improve Basic Skills

Competencies .. .. .. .. . .. . .. ... ... ... . . . . . . . . . . . . . . . . . . 305

Demographic Characteristics of Participants in Adult Education

Projects, by Program Type . . . . . . . . . . . . . . . . .. .. ... ... ...... .. ....311

Selected Characteristics of Adult Education Projects . ...............312

Selected Federal Postsecondary Financial Assistance Programs . ......317
Ch. 7—Adult Education and Displaced Workers ● 273

—

software) can help adults learn faster and better than they typically do in conventional

classes. In some controlled studies of adult

basic education and technical training, CAI has

been found to reduce instruction time by 25

percent or more, compared to conventional

classroom instruction, Also, the adults in these

CAI classes did somewhat better on tests than

the adults in the control groups.

Several factors in addition to the computer

have contributed to the success of CAI basic

education projects, Some of these projects benefited from closer attention to project design,

greater efforts to encourage participation, and

more training of volunteers than is typical in

most adult education classes. In CAI projects,

the computer rarely stands alone. Rather, it is

used in conjunction with classroom instruction, or tutorial assistance from a teacher or

trained volunteer. The quality of the human

contribution has a substantial effect on the

outcome.

More evaluation of such projects is needed

to determine how these success stories can be

replicated dependably by others. So far, few

adult basic education projects use CAI, and

most of the controlled studies of CAI in adult

education are a decade or more old. Initial information from more recent CAI projects suggests that many of these projects also have been

successful; however, few formal or independent evaluations of the projects exist, and consistent, comparable measurements of learning

gains are not available. Many new courseware

products are being introduced, but few of these

were specifically developed for adults, and

some are of questionable quality. Evaluations

would help new users in applying CAI effectively and in determining which courseware

products work best.

Instructional technologies can make an important contribution to vocational skills training and retraining programs for adults, and to

efforts by U.S. business firms to maintain and

upgrade the skill level of their work forces. The

potential of instructional technology to reduce

training time makes them especially attractive

to industry.

Applications for interactive videodisk systems seem highly promising for a wide variety of vocational skills training applications.

Initial use of these systems has been in highly

specialized training by the military or industry. Although few evaluations have been done

outside of these specialized applications, the

characteristics of this technology—its ability to

engage the student, to present high-quality

visual images, and to offer large flexibility in

branching–are well suited for use in industrial

skills training. Some vendors of industrial

training products and services are beginning

to offer generic skills lessons (e.g., for electronics theory and repair) on interactive videodisk systems. Interactive videodisk systems

also hold distinct promise for use in adult basic

education, provided more work is done to develop courseware that makes full use of the advantages presented by the medium. Courseware also needs to be developed for the mature,

adult student in the civilian population.

The Federal Government can assist efforts to

apply and adapt instructional technology to the

needs of adults by sharing more of its own training products and experience with the private

sector and educational institutions. There is

growing interest in improving the diffusion of

federally sponsored training and educational

technologies to the private sector and educational institutions.

Many instructional technologies were initially funded by the Federal Government, especially the military, which was instrumental in

the early development of computer-based instructional programs, interactive videodisk systems, and various simulators and emulators

used in training programs. Most of the specialized skills training done by the military is in

areas which have private sector counterparts,

such as aircraft maintenance, electronics, and

communications, and the military in some

cases has used instructional technologies to

teach these skills. The military is also a leader

in developing new courseware for delivering

basic skills education.

The Federal Government also is a major

source of funds for adult basic education pro-
274 ● Technology and Structural Unemployment: Reemploying Displaced Adults

grams, picking up one-third to one-half the

costs of State and local remedial education

projects. Also, due to changes made in the Federal vocational education program in 1984,

States must now set-aside part of their Federal

vocational education grants to increase educational opportunities for adults. The Federal

cost-share for such projects can range from 50

to 100 percent.

While it is not a major source of funds for

most other kinds of continuing education, the

Federal Government does play a large indirect

role. Federal student aid programs support

some adult students, private employers’ expenses for work force training and education

can be deducted from Federal taxes as a normal business expense in the tax code, and individuals can also write off tuition expenditures for courses that are directly related to

their current jobs. In addition, under a tax provision that will not apply in the 1986 tax year

unless extended by Congress, tuition and other

educational assistance provided under a qualified company education program cannot be

considered income to the employee for tax purposes. As an employer, the Federal Government—especially the military—also is the country’s largest provider of education and training

to adult workers.

CHANGING CONTEXT OF ADULT EDUCATION AND TRAINING

A strong commitment to education has existed in the United States since its founding.

However, formal education has not always

been viewed by employers as a key factor in

hiring decisions for most jobs. In 1940, half the

labor force had a ninth grade education or less.

With the massive commitment to education following World War II, the average number of

years spent in school among U.S. citizens rose

very rapidly. Today, roughly four-fifths of those

in the labor force who are 25 to 64 years old

have at least a high school diploma, and nearly

one-fourth have 4 years of college or more.4

Those who did not graduate from high school

are at a disadvantage in the labor market.

There also has been a large increase in adults

who continue their education after high school

or college. Between 1957 and 1984, the proportion of adults taking part-time education grew

from 7.6 to 13.5 percent of the adult population. These part-time students cited job-related

reasons for 62 percent of the courses they took

in 1984.5 Some view this growth as evidence

4Burt S. Barnow, The Education, Training and Work Experience of the Adults Labor Force From 1984 to 1995 (Washington, DC: National Commission on Employment Policy, June

1985), pp. 7-9.

‘Preliminary, unpublished data from the May 1984 survey of

participation in adult education, as provided by the Office of

Educational Research and Improvement (OERI, formerly the Nathat education is now a lifelong endeavor, helping workers adapt to changing job conditions,

obtain promotions and make career changes

at various stages of their working lives. Most

of the adults who take advantage of education

opportunities, however, are already well educated, and are in professional, technical, and

managerial jobs in which the value of education is clearly recognized. (See box 7A.)

Blue-collar and nonsupervisory white-collar

or service industry workers are much less likely

to participate in adult education. While some

of these workers do take advantage of continuing education to help them change jobs or advance within a company, education and training often has limited relevance to their current

jobs. Others may have had negative experiences with education in childhood, and do not

see it as relevant to their adult lives. Some of

these workers do not have broad, transferable

skills that would help them change jobs within

a firm, or secure another job if displaced, and

some have serious educational deficiencies that

prevent them from developing such skills.

-—. —.— .-—

tional Center for Education Statistics), U.S. Department of Education. OERI, through the Census Bureau, surveys participants

in adult education (defined as part-time students over 17 years

of age enrolled in an organized course of instruction) every 3

years.
Ch. 7—Adult Education and Displaced Workers Ž 275
276 . Technology and Structural Unemployment: Reemploying Displaced Adults

Implications of Demographic Change for Adult

Education and Training

Demographic trends will significantly affect

adult education and training requirements over

the next 15 years. The adult education system

will need to focus more attention on people in

the mid and late stages of their careers, as the

baby boom generation (people born between

1946 and 1964) move into midcareers in 1arge

numbers. As is discussed in chapter 4, most

of those in the baby boom have already entered

the labor force.

Because baby boom workers greatly outnumber those born after them, an estimated threefourths of the people who will comprise the labor force of the year 2000 are already in it. The

labor force will also become much older than

it is today. According to one analysis, middleaged workers (those 35 to 54 years old) will

make up nearly half the labor force at the turn

of the century, compared to 35 percent in

1982.11 Younger workers [those between 18 and

34) will decline from 48 percent of the labor

force, to 37 percent in the year 2000. Since the

number of middle-aged workers is growing as

a proportion of the work force, human resource

development programs will need to focus increasingly on this group.

It is also expected that women, who have

traditionally received less training then men,

will continue to increase their labor force participation rate, although perhaps more slowly

than in the past two decades. In the year 2000,

according to the above analysis, women will

comprise 48 percent of the labor force, compared to 44 percent in 1982. Even though the

number of workers under 35 will decline, current projections suggest that young women,

many of them black, will comprise a growing

proportion of this age group.

Workers who are 55 and older are not expected to increase as a proportion of the work

force in the year 2000, even though people in

this age group will increase in the population

IIAS discusser in h4a]Colrn H. Morrision, “The Aging of the

U.S. Population: Human Resource Implications, ” Monthly Labor Review, May 1983, pp. 13-19.

as a whole. However, this assumes that the current trend toward earlier retirement will continue without important changes in national

retirement policies. Beyond the year 2000,

older workers will make up a growing proportion of the work force, as increasing numbers

of people born between 1946 and 1964 reach

the age of 55.

Education and the Ability to Gain Employment

Since 1940, the median time spent in formal

education among U.S. adults has increased

from 8.4 to 12.6 years of school. Among young

adults (those between 25 and 29) the increase

in time spent in school is especially striking.

In 1940, six out of ten workers in this age group

had not graduated from high school, and only

6 percent had a college education or more. In

1984, all but 14 percent in this age group were

high school graduates, and one in five had

graduated from college.12 Although the increase in the proportion of recent high school

graduates entering college appears to be tapering off, the average number of school years of

people in the labor force will continue to increase as workers born before World War II

retire or die.

The increase in number of years of school

has occurred in all major occupational areas,

and therefore cannot be attributed simply to

rapid growth in professional, technical and

clerical jobs. About two-thirds of the male blue-

-collar workers who were employed in 1982 had

completed at least 4 years of high school, and

many have spent some time in college. About

56 percent of the employed male laborers were

high school graduates in 1982, compared to 27

percent in 1970.

It is difficult to generalize about how much

of this increase in length of time spent in formal education is actually needed in the performance of jobs. In many instances, job requirements have become more sophisticated,

IzA1l figure5 cited in this paragraph are taken from Dave M.

O’Neil and Peter Sepielli, Education in the United States: 1940-

1983, U.S. Department of Commerce Bureau of the Census CDS85-1 (Washington, DC: U.S. Government Printing Office, 1985),

pp. 45-49.
Ch. 7—Adult Education and Displaced Workers ● 277

so that workers with more education are needed.

In other cases, employers may reject job applicants who have not graduated from high school

because of an assumption that high school

graduates may be more productive and capable than those with fewer years of schooling.

(See ch. 8 for discussion of the effects of technology on the nature of jobs.)

Using education to “screen” job applicants

is largely a post World War II phenomenon,

when education began to be seen as a work

prerequisite not only for professional and

white-collar jobs but also for many apprenticeship programs, and skilled or semiskilled factory jobs. Even for laborers, some employers

hire only high school graduates among job applicants. While such policies obviously make

it more difficult for the less educated to find

jobs, they are not totally arbitrary. Deficiencies

in basic education, poor oral communication

skills, and inappropriate work attitudes are a

major problem for U.S. businesses. The problem extends to many who have graduated from

high school and even college, but tends to be

greatest among those with fewer years of formal schooling.

Education and Income

Strong correlations have been drawn between work force participation rates, employment levels, and number of years at school. The

labor force participation rate for those who

have not completed junior high school is less

than 40 percent, compared to 68 percent for

those with a high school diploma, and 77 percent for college graduates.13 In March 1984,

according to the U.S. Department of Labor, the

unemployment rate among college graduates

stood at just 2.7 percent, compared with 7.2

percent for high school graduates and 11.6 percent for those with 8 years or less of schooling. The unemployment rate among high school

dropouts was even higher, 12.4 percent. One

reason for this strong correlation is that workers with less education are also more likely to —— —.

laAs cited in sar A. Levitan, Garth L. Mangum, and Ray Marshall, Human Resources and Labor Markets: Employment and

Training in the American Economv (New York: Harper & Row,

1981), table 3-3, p. 30.

be in occupations that are subject to high unemployment.

Many studies have found years of school to

be strongly correlated with lifetime earnings

and with upward occupational mobility. These

correlations were especially strong during the

1950s and early 1960s, During the 1970s, most

estimates of rates of return from investment in

education declined from their high point in the

mid-1960s. 14 The income gap between college

graduates and high school graduates without

college diplomas narrowed, possibly reflecting

the large number of baby boom people entering the job market. This situation may have

been temporary in nature: very recent data

(covering the period 1979-83) show the median

income of male college graduates once again

increasing relative to the income of high school

graduates, at least among males who were 25

to 34 years old.15 Attempts to disaggregate estimates of economic returns from education suggest that most of the economic benfits from

education are concentrated in about 40 percent

of the work force; for other workers, more

years of school does not provide an especially

favorable rate of return strictly as an investment.

Nonetheless, for many displaced workers,

education and retraining can be the most promising avenue for finding jobs that offer longterm opportunities for advancement. As is discussed in chapter 6, a sizable minority of people in well-run displaced worker projects—perhaps 20 to 35 percent—are interested in and

have the background for vocational skills retraining. Many other displaced workers have

basic educational deficiencies which, if not

overcome, could make it more difficult for

them to successfully complete a retraining

course to obtain new skills, conduct a competent job search, and compete with younger,

often more educated applicants for a position.

Those who receive remedial education, career

guidance, and vocational or occupational training should have greater likelihood of success

in seeking new jobs.

lqIbid., p. 134.

lsO’Nei] and Sepie]li, op. Cit., P. AO.
278 ● Technology and Structural Unemployment: Reemploying Displaced Adults

Estimates of Basic Skills Deficiencies

Among Adults

Although the median education level in the

labor force now exceeds 12 years, a large number of Americans–including many high school

graduates—lack the basic skills, and general

knowledge that a high school education traditionally has been supposed to confer. Some

adults can only read and write at a rudimentary level; others lack skills or ability in abstract

reasoning, computation, and oral communications, or do not possess interpersonal skills and

positive work habits that are valued by employers. Often, people who have very serious

deficiencies in basic skills are referred to as

functionally illiterate.

Functional literacy is a very difficult concept

to define and measure. By the strictest definition of literacy—minimal ability to read and

write in any language—less than 1 percent of

the U.S. population say they are illiterate when

surveyed by the Census Bureau. Functional

concepts of literacy or numeracy make assumptions about how proficient people need

to be in reading, writing, and arithmetic to

function in society (e.g., ability to read at the

ninth-grade level). Competency tests attempt

to identify the particular skills adults need to

perform adequately in society, and then measure the ability of adults to apply these skills in

everyday situations.

Most national estimates about the number of

adults with basic skills deficiencies are based

on a survey of 7,500 adults that was conducted

in 1973 and 1974, called the adult performance

level (APL) survey. APL concluded that about

one-fifth of U.S. adults were “functionally incompetent” in terms of basic survival skills—

such as matching personal characteristics with

job requirements stated in help-wanted ads, or

correctly filling out a check.16 A higher proportion of the unemployed, 35 percent, fell into

this category. Among the employed, unskilled

and semiskilled workers had the lowest performance levels. The study also found that

18ReSU]tS of this survey are provided in: Final Report: The Aduh

Performance Level Study (Austin, TX: The University of Texas

Division of Extension, August 1977).

another 30 percent of Americans were only

“marginally competent’ ’cleaving the impression that only half of the adult population functioned competently.17

Although the APL study did not measure

adult literacy levels, the 20 percent estimate has

come into widespread use as a proxy for adult

functional illiteracy.18 The U.S. Department of

Education, applying the APL findings to the

1982 U.S. population, estimated that 27 million

adults are functionally illiterate today, and that

an additional 47 million adults do not function

proficiently. These two groups together—a total of 74 million people—have been referred to

as the “pool of Americans in need of basic education.”19 Unfortunately, the APL survey does

not help in identifying the levels of basic education that would be required to meet this

need—i.e., it does not provide a basis for distinguishing among those that may simply need

several brush-up courses and those who need

basic education from the ground up. Moreover,

virtually all aspects of the APL survey, from

its guiding philosophy and methodology to its

interpretation of the meaning of test results and

documentation of test quality, have received

unfavorable criticisms from educational researchers over the years.20 The APL survey,

now more than a decade old, continues to be

used because nothing better or more recent is

yet available.

A national assessment of young adult functional literacy levels (focusing only on adults

in the 21- to 25-year-old age range) is being conducted for the National Assessment of Educational Progress (NAEP) by the Educational

Testing Service. The purpose of the effort is

to collect data about the nature of the literacy

I’Ibid., p.~1.

IaSee Irwin Kirsch and John Guthrie, “The Concept and Measurement of Functional Literacy, ” Reading Research Quarterly,

No, 4, 1977-1978, pp. 486-50ij for a discussion of different concepts of functional literacy.

:9Paul Delker, “Defining Functional Illiteracy, ” Functional

Literacy and the Workplace (Washington, DC: American Council

of Life Insurance, 1983), p. 33.

ZOFor a review of these criticisms, see Walt Haney and Lloyd

David, “The APL Study: Science, Dissemination and the Nature

of Adult Education, ” APL Revisited: Its Uses and Adaptation

in States (Washington, DC: U.S. Government Printing Office,

1980), pp. 53-79.
Ch. 7—Adult Education and Displaced Workers ● 279

problem, and its extent among young adults.

Results from this one time survey are expected

in April 1986.21

The NAEP assessment, hopefully, will appreciably improve the state of knowledge about

literacy problems among young adults. About

40,000 households across the Nation are being

screened to find between 3,600 and 5,000

young adults and several hundred 17 year olds

who will participate in a 90-minute literacy exercise, According to the study plan, participants who are able to complete some basic

reading and writings tasks (e.g., reading a simple passage aloud) will be given a more complex series of tasks to perform. People who are

unable to complete the basic tasks, and a random sample from those who can, will be given

an oral language interview. One purpose of the

interview will be to determine how well these

people use spoken English. Another purpose

will be to determine how familiar these people are with different forms of written materials. For example, each person will be asked to

identify such common materials as job applications, classified ads in a newspaper, and bus

schedules. The participants will be asked

whether they know what the article is used for,

whether they actually need to use this type of

information, and whether they seek assistance

in using it.

The NAEP study also may help to give a

clearer picture of the characteristics of young

adults who have literacy problems. All of the

survey participants will be questioned about

their background and attitudes in order to collect data about how literacy skills vary by sex,

race, family history, educational background,

work demands, and so forth. This information

may be useful in designing remedial education

programs that take into account the very different motivations and life situations of people

who lack basic skills. Several different groups

of people with literacy problems have been

identified in previous studies:22

——

ZIFor a description of the survey, see National Assessment of

Educational Progress, “NAEP Profiles of Literacy: An Assessment of Young Adults (Development Plan),” Princeton, NJ, April

1985.

ZzSee, for example, Carman St. John Hunter and David Harman, Adult Illiteracy in the United States: A Report to the Ford

Foundation (New York: McGraw-Hill, 1979).

●

●

●

●

Motivated adults who need little prompting to take advantage of remedial education, and whose personal situation makes

it possible for them to commit the time and

resources to education when they have

access to it. These adults constitute most

of the students in adult basic education

classes, and they are often very successful in achieving the goals they set for themselves.

Motivated adults who would be likely to

take advantage of adult education if they

could find the time or resources to participate. Some special assistance (e.g., time off

from work, child care assistance, or transportation) may be needed to make it possible for these adults to participate in education.

Adults who value education, but are unlikely to participate in education unless

major changes occur in their life situations.

These adults have fundamental problems

(e.g., chronic unemployment, poverty, or

poor health) that consume most of their

time and resources. Unless they are convinced that education can help them manage these problems, they are unlikely to

participate.

Adults who do not value education, or who

find it irrelevant to their lives. These people are unlikely to participate unless a

basic change occurs in their attitude about

education, or unless their life circumstances change. Many adults are unwilling or unable to commit enough time to

overcome deficiencies in basic education

or to go on to obtain a high school equivalency degree. Some of these individuals

had negative experiences in school when

young, feel trapped in dead-end jobs or are

unemployed, and see little benefit from remedial education. They do not feel part of

the middle-class system in which education plays so strong a part.

Current federally supported remedial education programs, while offered without charge

to adults at the basic education level, probably

reach only highly motivated adults. Less motivated adults may need extensive encouragement to participate. Reaching these people may

require significant outreach activities through

community-based efforts and volunteers.
280 ● Technology and Structural Unemployment: Reemploying Displaced Adults

Obviously, any long-term solution to the

problem of functional illiteracy among adults

will require improvements in primary and secondary school education. According to the National Commission on Excellence in Education, as many as 13 percent of all 17 year olds

can be considered functionally illiterate. Among

students who are members of minority groups,

this figure can be as high as 40 percent. By applying the 13 percent figure to 1980 Census

data, the U.S. Department of Education concluded that as many as 535,600 functionally illiterate 17 year olds are added annually to the

pool of adults in need of adult basic education.

While it is clearly an important subject, assessment of the primary and secondary school system is not within the scope of this report.

Readers are referred to the OTA assessment,

Informational Technology and Its Impact on

American Education, as well as several other

recent studies concerning adequacy of the U.S.

education system, for further information.23

Basic Skills Deficiencies and the Workplace

Large numbers of workers have serious deficiencies in basic education that impede their

ability to get a job, or once employed, to advance beyond entry-level positions, and to

adapt to workplace changes. Results from the

displaced worker projects discussed in chapter 6 indicate that about 20 percent of those

who are participating in these projects need

some remedial education. Since, in some cases,

refresher or brush-up courses are all that is required, this finding only confirms the thrust

of the APL survey, not its details,

ZsAt least nine major reports on the primary and secondary

school systems have been issued in recent years, including those

by the National Commission on Excellence in Education, A Nation at Risk; the National Task Force on Education for Economic

Growth, Action for Excellence: A Comprehensive Plan To improve Our Nation Schools, 1983; the Carnegie Foundation for

the Advancement of Teaching, High School: A Report on Secondary School in America, 1983; and the Twentieth Century

Fund Task Force on Federal Elementary and Secondary Education Policy, Making the Grade, 1983. Readers interested in a

concise summary of these and other recent reports on the primary and secondary school system are referred to James B. Stedman, “Education in America: Reports on its Condition and Recommendations for Change, ” Library of Congress, Congressional

Research Service, Issue Brief #IB83106, September 1984.

The costs of inadequate primary and secondary education to business, industry, and government employers have never been quantified. However, they are undoubtable very large.

Several recent surveys of employers have attempted to identify educational skills most

sought by employers among recent high school

graduates. In general, these surveys have concluded that employers want workers to have

greater proficiency in reading, writing and

computational skills, and better attitudes about

the workplace than shown by many recent high

school graduates. Employers differ about the

degree to which specific occupational skills are

desirable in the high school graduates they hire.

Selected findings of some recent studies are

summarized in table 7-1.

One of the few surveys to ask employers

about the proficiency of their employees in

basic skills was conducted in 1982 by the Center for Public Resources, a New York based

organization that focuses on strategies for business involvement in addressing public problems. 24 Companies responding to the center’s

survey reported significant deficiencies among

workers in jobs that required high school education. The most serious inadequacies—from

the standpoint of the responding employers—

were in mathematics, speaking, listening, and

problem-solving skills. Many workers apparently found it difficult to understand verbal instructions, or to verbally express ideas and

problems. Several companies linked poor arithmetic of their employees to incorrect inventorying, inaccurate production reports, and

improper machine measurement and parts specifications. A large number of the companies in

the survey had launched programs to update

worker skills to the level of the 9th or 10th

grade. However, these companies may not be

representative of business as a whole, because

the CPR survey only had an 8.7 percent response rate.

24James F. Henry and Susan Ueber Raymond, Basic Skills in

the U.S. Workforce (New York: Center for Public Resources,

1983).
Table 7-1 .—Selected Studies of Employer Perceptions of Job-Related Skills and Educationa

Nature of study

Questionnare sent to 1.798 firms

610 (22%) were returned

Whose opinion was sought?

Senior personnel executives of

firms with 500 or more employees

Study and date

Conference Boardb (1977)

,,

Key findings about education

Vocational curricula ranked higher than -

academic curricula m secondary schools in their

Key findings about job skills in current work force

54% found deficiencies in language skills, 24%

found deficiencies in mathematical or

computational skills, 18% mentioned nonskill

areas (e.g. faulty attitudes towards work), 7%

found deficiencies in interpersonal skills

ability to prepare students for work

Center for Public Resourcesc

(1982) Questionnaire sent to 2 125 firms,

184 (8.7%) were returned

Questionnaire was also sent to

unions and public schools

More than two-thirds of those

responding were personnel

directors, others were training

directors or line supervisors. CPR

also surveyed educators and union

leaders

Interviews with chief employment

officer and training officer of each

firm, questions were asked about

hiring requirements and specific

vocational training needed for

specific entry-level jobs requiring

less than 4 years of college

Respondents from business found mathematics,

science, and speaking and listening skills to be

the most Important skills deficiencies of high

school students entering the work force

Educators gave greater weight to reading and

writing skill deficiencies

Business found greatest skills deficiencies in outof-high-school employees to be mathematics,

science, and speaking and listening skills,

reading skills were found generally adequate for

specific job, but writing skills were found to be a

greater problem

Survey of os Angeles area

employers (1983) Survey of 172 firms classified by

size, 32% of sample employed

fewer than 50 people, 41 0

/0

employed 50-499, 27% employed

500 or more

Study concluded that most employers were

more concerned about positive work habits and

attitudes than specific technical job skills among

job applicants, since the firms themselves can

provide training Study suggested that high

schools should reduce emphasis on skill

training, and concentrate on ‘ ‘teaching young

people to read, write, compute, and think.”’

For jobs entailing low or medium skills, good

work habits and attitudes were found to be the

most important component of job success in 75

and 64% of cases, respectively, followed by

lingustic and computation skills (12 and 22%),

and technical job skills (13 and 14%) For highskill jobs (requiring more than 24 months of

vocational preparation), technical skills were found

to be the key factor in job success in 62% of

cases

National Academy of Sciencee

(1984) Panel report on high schools and

the changing workplace

Report reflects judgments of a

panel chiefly composed of public

and private sector employers about

present and future job opportunities

The ability of high school graduates to learn and

adapt to changes m the workplace IS the major

asset required by employers Core competencies

to perform entry-level jobs and continue the

learning process are essential, technical and

vocational education can enhance employability

but cannot substitute for core competencies,

positive attitudes and sound work habits are of

basic Importance

Not addressed, however, the appendix of the

report contains a rebiew of the literature that

examines the relationship between job

performance and tests of cognitive skills this

literature found that basic congentive skills were a

chief component of job performance, especially in

more complex jobs, and many of these cognitive

skills (e. g , numerical skills, reading. vocabulary,

and attention to detail) were ‘‘educable ‘‘

and job requirements

school graduates

for high

Research and Forecastsf

(1983) Telephone survey, based on a Top executives, half of those

surveyed were chief executive

officers

47% strongly agreed and 30% somewhat

agreed that a required core of basic courses m

high school IS needed

random sample of 108 firnm on the

Fortune List of 1,300 corporations

~Thls ~ha~t Provides WIY selected flndlngs horn the referenced repofls

bsevmour Lusterman ~ducat/on m /miLs[ry (New York The Conference Board 1977)

CJaMeS F Heflr~ and SU~an Ueber Raymond &SIC s’kII/s m the u .S kvork Force The CorWastmg PercepOorrs of Business Labor and Pffbhc Educaflon ~ New York center for F’ubllc Resources 1983)

dwellford w Wllrns The ~ Inllted UtIhfy nf Vocaflonal Education hllfOFfUa ~rnployer S VEWS Pub//c Affa[rs Report Bu//ebn of Ifre Irrsm(e of Goverrrrrrerrlal Sfud/es Lfrrwers/ty of Cahforma t?erkeley VOI 24 No 4 August 198 3

eRePorf of the panel ~ secondary Schoof Educa[lon for the Changing Workplace Mgfi Scfroo/s and fhe LMangmg Workplace The ~rnP/oYers ~lew (Washington DC National Academy ‘ress 1984J

fReSearch and Forecasts Inc 8uslness Poll (New York Fall 1983)

SOURCE OftIce of Technology Assessment adapted in part from Information provided by Paul E Barfon Employers and High Schools The Flf Between Learning and Working paper prepared for the Committee for Economic Development in press 1986
282 ● Technology and Structural Unemployment: Reemploying Displaced Adults

DELIVERY SYSTEM FOR ADULT EDUCATION AND TRAINING

A large and multifaceted adult education and

training system has existed in the United States

for many years, In many urban and some rural areas, community colleges and other local

institutions offer a range of educational services that are highly accessible to adults, Business firms are a major component of this system: by one estimate, employers, through

in-house programs, provided about one-fourth

of all adult education courses in 1984, and may

also have financed an additional one-third of

all adult education courses (e. g., those taken

at schools and other institutions).25 Informal

(on-the-job) training by business is even greater,

although expenditures for such activities are

very difficult to estimate. A number of unions,

through collective bargaining agreements and

some formal programs, also are active in providing education and training to workers. A

quite recent development in adult education

has been the learning center, often entailing

computer-assisted instruction. Some learning

centers are run by for-profit corporations,

while others are nonprofit private organizations that are not part of the public education

system per se.

While the adult education system serves the

employed far better than the unemployed, displaced workers in most urban areas can find

some programs that are relevant to their needs,

as is discussed in the pages below. Barriers to

participation, and innovative approaches for

overcoming these barriers, are both discussed

later in this chapter.

Expenditures for Adult Education and Training

Estimates of total national investment (private as well as public) in adult education and

training range from under $50 billion to $150

billion or more. This wide range in estimates

reflects the uncertainty about how much business firms spend on formal training and eduZsInformation on employer provided and financed adult education provided by the Office of Educational Research and Improvement (formerly National Center for Education Statistics)

from preliminary, unpublished data from the May 1984 survey

of adult education.

cation of their employees. Most national estimates of business expenditures for training

extrapolate data from a few firms to the economy as a whole. Because of the different methods and assumptions used, estimates have

ranged from a low of about $2 billion annually

to a high of $100 billion.

A report by the American Society for Training and Development (ASTD), while recognizing the inherent limitations of the data, estimated that employers may have spent between

$5 and $10 billion in 1981 for formal in-house

training, with $7 billion being the most likely

figure. The ASTD report also estimated that

employers spent another $3 billion for courses

taken by employees at outside institutions.

Hence, ASTD concluded that total (in-house

plus outside) employer training expenditures

were about $10 billion in 1981. If wages and

salaries of trainees were considered a training

expense, the total would rise to about $21 billion.26 Informal training of employees at their

workstations, while obviously of enormous importance, is even less susceptible to accurate

ZeCarneva]e and Goldstein, op. cit., P. 36.
measurement than formal training, and few attempts have been made to estimate the costs

of this training,

The ASTD study also attempted to identify

where adult education specifically related to

employment takes place (over 60 percent of

adult education is for job-related reasons), The

report estimated that in-house training by employers accounted for about one-third of all jobrelated adult education. This understates the

role of employers, since they pay for a high

proportion of the courses taken by their employees at outside institutions, If these courses

are factored in, according to the study, employers would account for about half of the

financing for job-related adult education,

About 45 percent of job-related adult education takes place at educational institutions.

Four-year colleges and universities account for

the largest share in this subgroup (about 16 percent of the total), However, 2-year colleges,

adult programs in high schools and vocational

schools, and proprietary schools together account for about one-fourth of the spending.

These schools are more accessible than 4-year

colleges to blue-collar and nonsupervisory

white-collar and service industry workers, and

often specialize in occupational and vocational

training.

The Federal Government is by far the largest

single organization providing training in the

United States, and, within the Federal Government, the Department of Defense (DOD) conducts the greatest amount of training. DOD

spent about $13.4 billion on training in fiscal

year 1984.27 About $3.2 billion of the total was

for specialized training to provide personnel

with the skills and knowledge needed to perform specific jobs, Many of these skills are

related very closely to civilian skills, such as

communications, medical services, food preparation, and maintenance and repair of vehicles or electronic equipment. For this reason,

DOD’s training activities are relevant to the priZ7U. s. ~~pa rtment of Defense, IVli)jtar~’ ,~~anpott’er Training

Report for FY’ 1984, report prepared by the Office of the Assistant Secretary of Defense (Manpower, Reser~re Affairs and I,ogistics], hlarch 1983, p. Z.

Ch. 7—Adult Education and Displaced Workers ● 283

—

vate sector. In addition, DOD plays a key role

in development of new training and instructional technologies and materials. Since many

of these technologies are developed to reduce

training time and costs, they are of considerable interest to the private sector, (The role of

DOD and other Federal agencies in research

and development in instructional technology

is discussed subsequently in this chapter.)

Aggregated data on training and education

activities for the 5 million State government

employees and 9 million local government employees is not available, but such activities are

substantial. On the State level, California, Texas,

and New Jersey offer extensive programs to

their employees.

Major Providers of Education and Training

A complex delivery system for adult training and education has evolved over the years.

Linkages among businesses, labor unions, community colleges and trade schools are common,

and are probably increasing. Many community

colleges have arrangements with business

firms to provide courses or customized training at plant sites, and they also have responded

to union requests for courses at union halls and

other places convenient to workers.

Distinctions by function also have become

blurred: remedial education, once almost always given through the local public school system, is now offered by private learning centers,

libraries, many 2-year colleges, and some employers. Two-year colleges, in particular, offer

an assortment of education and training programs, ranging from occupational training for

people without high school degrees, to technician training programs, to academic programs

for people preparing to transfer to a 4-year college or university. Many 4-year colleges and

universities, also, now conduct outreach programs to meet the broader educational needs

of adults in their community.

Some of these are long-standing programs.

Since 1903, for example, the Massachusetts Institute of Technology (MIT) has operated the

Lowell Institute School, which offers technician training to high school graduates, This
284 ● Technology and Structural Unemployment: Reemploying Displaced Adults

program was originally set up to train industrial foremen to use new industrial equipment

that was coming into use in turn-of-the-century

America. Today, about 500 students are trained

at Lowell each semester in electronics, mechanical drafting, and other technical areas.

The students do not receive associate degrees,

but because they are able to use MIT facilities

and equipment (much of it state-of-the-art), the

program is popular with many employers in

the area.

Employee Training by Business and Industry

Employer-provided training tends to be shortterm and job-specific. Labor force mobility, or

“job-hopping” is quite high in the American

labor market. In 1981, the median job tenure

for men was 4 years, while for women it was

2.5 years.28 As a result, employers have a strong

financial incentive not to provide training in

broad, transferable skills which would be lost

to the company if an employee finds other employment.

Remedial education and retraining programs

are offerred by some firms. About 18 percent

of firms responding to a 1985 Training Magazine survey of some U.S. firms with 50 or more

employees said they offered a remedial education program of some sort.29 Such programs

will be addressed in greater detail later in this

chapter.

About one-fifth of the firms that responded

to the survey also said they made a special effort to retrain employees whose jobs were being phased out so that they could perform substantially different jobs within the company.30

(In 1984, when the same question was asked,

about 29 percent of the responding firms said

they offered retraining). Production workers

were most likely to receive retraining, followed

by middle-managers, first-line supervisors, of-

“Francis W. Horvath, “Job Tenure of Workers in January

1981, ” Job Tenure and Occupational Change, 1981 (Washington, DC: U.S. Department of Labor, Bureau of Labor Statistics,

1983), p. 2,

ZoDale Feuer, “Where the Dollars Go, ” Training: The Magazine of Human Resources Development, October 1985, p. 48.

sOIbid., p. 51.

fice/secretarial employees, and customer serv-/

ice employees.

Besides job-related education and training,

some firms offer educational assistance programs (e.g., tuition aid for continuing education courses) for their employees. Since 1978,

the Federal Government has encouraged companies to establish such education programs,

through a provision in the Internal Revenue

Code that allows employees to receive education assistance under a qualified company program without paying taxes on it. (As discussed

in ch. 2, the provision will not apply to the 1986

tax year unless Congress acts to extend it.) A

recent survey by the American Society of

Training and Development reported that, among

companies with educational assistance programs that responded, 5.6 percent of the eligible employees participated in educational assistance programs in 1984. The 319 companies

that responded to the survey employed about

6 percent of the U.S. work force.31 The highest level of participation, 14.4 percent of eligible employees, was reported by firms employing less than 500 employees; however, only 38

firms in this category responded to the survey.

Among firms of all sizes, 72 percent of the recipients of educational assistance made less

than $30,000 per year, and about 22 percent

made less than $1.5,000 per year.

While most firms play a limited role in continuing education, many large or technologically sophisticated firms operate “learning

centers” for their employees, often offering

self-paced courses ranging from remedial education to continuing education in engineering.

Several business firms and some industry organizations have established their own colleges

and universities. A report by the Carnegie Institute for the Advancement of Teaching32 identified some 18 corporate education institutions

that grant degrees of one sort or another, of

SIAmerican Society for Training and Development, EmP~~Yee

Educational Assistance: Who Pays, Who Benefits (Alexandria,

VA: American Society for Training and Development, May

1985).

sZNel] Eurich, corporate Classrooms: The Learning Business,

A Special Report on Education in Industry and Business (Princeton, NJ: Princeton University Press, 1985).
Ch. 7—Adult Education and Displaced Workers ● 285

which half had received accreditation since

1977. Some of these schools (e.g., Northrop

University) were originally created or sponsored by corporations, but have since become

independent organizations.

Union Training and Education Programs

Concern about technological innovation and

its impact on workers has raised the importance of training and education to labor unions.

Unions are trying to make employer provided

training more accessible to union members,

and are seeking training, retraining, and education agreements in collective bargaining with

management. Some unions also run education

programs supported by membership contributions.

Several recent collective bargaining agreements, including those negotiated by the Communications Workers of America and the

United Auto Workers, place substantial emphasis on broadening training and education opportunities for workers beyond job-specific

training. The 1982 Ford and General Motors

settlements established nickel-an-hour and

dime-an-hour funds for training and retraining

of autoworkers. (These funds are discussed in

ch. 5.) Under the Communications Workers settlement, reached in August 1983 before the

AT&T breakup, each Bell operating company

and AT&T was given one year to begin offering, at company expense, training and retraining programs to employees for personal and

career development, and to qualify workers

who would otherwise be displaced for other

jobs within the company. Most of the Bell operating companies are now offering a range of

training programs, including home study and

classroom training through community colleges in response to the agreement. More than

45,000 workers were participating in such

courses by the end of 1985.

The Lifelong Education and Development

(LEAD) program of the Service Employees International Union (SEIU) is an effort to provide

workers in low-paying, entry-level positions in

the health care industry with the necessary

training and education to advance to better

jobs, In 1980, the LEAD program, with the encouragement of the U.S. Department of Labor,

was successful in establishing the Nation’s first

nurses apprenticeship programs, Since then,

the program has worked to establish joint labormanagement committees to implement career

ladder programs, which identify the qualifications and training and education requirements

employees need for job advancement where

they work.

Delivery of Remedial Education

Since 1966, the Federal Adult Education Act

has supported State and local remedial education programs. The purpose of the law, which

was most recently reauthorized in 1984, is to

enable all adults in the United States to acquire

the basic skills needed to function in society,

including “employability” skills, and to acquire

the equivalent of a high school diploma if they

do not already have one. The program supports

adult basic education (ABE), adult secondary

education (ASE), and general education development (GED) courses to prepare adults to take

the high school equivalency exam. In addition,

many primary and secondary schools also offer adults English-as-a-Second-Language (ESL)

courses for immigrants.

Federal support for ABE programs is channelled through the States to public and private

organizations (including public school districts,

community colleges, and community organizations) under the Adult Education Act. About

2.3 million people enrolled in ABE, ASE, and

ESL programs in the program year ending on

June 30,1981. (This was the last year for which

official national data is available; State officials

estimate that 2.6 million people participated in

these programs in 1984,) Enrollment quadrupled between 1970 and 1980, The Federal role

in supporting adult education is discussed in

detail later this chapter, and in chapter 2.

Traditionally, remedial education has been

offered at night in elementary and secondary

schools. However, the 1978 amendments to the

Adult Education Act encouraged the expansion of programs to other sites. By 1980, according to the Department of Education, over

60 percent of all classes took place in churches,

community centers, and other nontraditional
286 . Technology and Structural Unemployment: Reemploying Displaced Adults

sites. In addition, an increase in outreach activities had occurred.33

Volunteer efforts are an important part of remedial education. Volunteers from two national literacy organizations (Laubach and

Literacy Volunteers of America) reach about

75,000 people per year. Volunteers are also

used in State-administered adult basic education programs, but data on the number of volunteers is not available,

In 1984, the Coalition for Literacy, made up

of 11 literacy and adult education organizations, began the National Adult Literacy Campaign to emphasize the need for volunteer efforts in literacy programs. In conjunction with

the Advertising Council, the coalition is conducting a 3-year advertising campaign to recruit volunteer tutors, bring opportunities for

remedial education to the attention of functionally illiterate adults, and encourage involvement of the business community. In addition,

a National Adult Literacy Project has been

established by the Reagan Administration.

Recognition that functional illiteracy has

widespread costs to business and society has

led some employers to actively promote remedial education for their work forces; some companies provide basic skills courses for their emSSU.S. Department of Education, “Justifications of Appropriation Estimates for Committees on Appropriations Fiscal Year

1985, ” p. 274.

ployees. In 1983, the Business Council for

Effective Literacy, founded by Harold W.

McGraw, Jr., was established to encourage

greater awareness of the business community

about the problem of adult functional illiteracy.

A later section of this chapter discusses the potential role of employers in basic skills education.

Occupational and Vocational Education

Most formal occupational and vocational

training for adults is provided at publicly supported community colleges and vocationaltechnical area schools and institutes, and private proprietary schools. Table 7-2 shows the

number of postsecondary schools offering occupational programs, while table 7-3 shows enrollments in different programs from 1975 to

1981. Most students in these programs are recent high school graduates seeking vocational

skills, and adults looking to improve their

existing skills, or to learn new ones. Students

usually must pay for occupational training, although costs can be quite moderate. Some students are participants in federally assisted employment and training programs, and are in

many cases eligible for other Federal assistance. Apprenticeship programs also meet the

training needs of some workers.

The Community College System.–While perhaps

better known for college-level course offerings,

most community colleges offer occupational

Table 7-2.—Number of U.S. Public and Private Postsecondary Schools With Occupational Programs,

by Type of School, 1982

Private

Type of school Total Public Total Proprietary Nonprofit

Total . . . . . . . . . . . . . . . . . . . 9,208 1,904 7,304 6,013 1,291

Vocational/technical . . . . . . . . . 734 611 123 102 21

Technical institute . . . . . . . . . . 157 8 149 138 11

Business/commercial . . . . . . . . 1,287 5 1,282 1,235 47

Cosmetology/barber . . . . . . . . . 2,177 6 2,171 2,164 7

Flight . . . . . . . . . . . . . . . . . . . . . 799 7 792 788 4

Trade. . . . . . . . . . . . . . . . . . . . . . 747 11 736 702 34

Arts/design. . . . . . . . . . . . . . . . . 248 1 247 214 33

Hospital . . . . . . . . . . . . . . . . . . . 783 119 664 59 605

Allied health . . . . . . . . . . . . . . . 364 87 277 227 50

Junior/community college . . . . 1,017 820 197 83 114

College/university . . . . . . . . . . . 597 228 369 9 360

Other. . . . . . . . . . . . . . . . . . . . . . 298 1 297 292 5

SOURCE U S Department of Education, National Center for Education Statistics, Survey of Postsecondary Schools with Occupational Programs, 1982
Ch. 7—Adult Education and Displaced Workers . 287

Table 7-3.—Enrollment in U.S. Noncollegiate Noncorrespondence Postsecondary Schools With

Occupational Programs, by Type of School, 1975-81

Percent change

Type of school 1975 1977 1979 1981 1975-81

Total . . . . . . . . . . . . . . . . . . . . 1,399,100 1,495,200 1,623,918 1,687,097 20.6

Vocational/technical . . . . . . . . . 495,000 478,400 522,051 469,926 5.1

Technical institute . . . . . . . . . . 92,100 34,500 35,348 61,117 33.6

Business/office . . . . . . . . . . . . . 339,200 440,500 498,599 468,374 38.1

Cosmetology/barber ... , . . . . . 113,000 132,400 148,467 171,417 28.9

Flight . . . . . . . . . . . . . . . . . . . . . 72,900 63,300 67,407 63,362 13.1

Trade. . . . . . . . . . . . . . . . . . . . . . 158,000 159,100 169,055 228,113 44.4

Arts/design. . . . . . . . . . . . . . . . . a 36,800 44,095 56,613 a

Hospital . . . . . . . . . . . . . . . . . . . 71,100 48,200 42,595 40,610 42.9

Allied health . . . . . . . . . . . . . . . a 55,600 60,554 60,041 a

Other. . . . . . . . . . . . . . . . . . . . . . 37,800 46,400 37,747 67,524 78.6

NOTE Surveys of Noncollegiate Postsecondary Schools were conducted in 1976, 1978, 1980, and 1982, but in each case data are for the number of students enrolled

during the 12-month period ending June 30 of the previous year.

aData not available

SOURCES U S Department of Education, National Center for Education Stat! st!cs, “Enrollments and Programs in Noncollegiate Postsecondary Schools, ” 1976 and

1978, and unpublished data from the 1980 and 1982 surveys of Noncollegiate Postsecondary Schools

and vocational programs that reflect local labor force needs. Occupational students at 2-

year colleges now outnumber academic program students who expect to transfer to 4-year

colleges or universities.34 Community colleges

are highly responsive to the learning and training needs of workers in their communities,

More blue-collar and nonsupervisory whitecollar or service workers take courses at 2-year

colleges than other types of schools. Many

community colleges also offer remedial education to students who need to improve their

basic skills, and some community colleges offer highly innovative adult literary programs

(for an example, see the discussion of Project

ABLE in the instructional technology section

of this chapter.)

Linkages (or “partnerships”) between community colleges and local businesses and industries are common. The pros and cons of

these cooperative projects are discussed in a

subsequent section. Community colleges also

have close ties with labor unions, and many

offer programs off-site in workplaces, union

halls, and community centers.

For-Profit Proprietary Schools.–Over 6,000 proprietary schools provide occupational and vocational training, accounting for two-thirds of all

postsecondary schools that offer occupational

programs. In 1980, about 4,100 proprietary

schools had been accredited by an organization recognized by the U.S. Department of Education, or were eligible for certain Federal student assistance programs.35 Proprietary schools

often specialize in one trade or specialty, such

as business and commercial schools, schools

of cosmetology, and flight schools, Generally,

these schools offer certificates for completion

of occupational study programs, but not degrees.

Often, a high school diploma is not required

for admission.

Proprietary schools offer considerable flexibility in scheduling, which is attractive to adult

workers. Courses are often short, liberal arts

requirements are usually minimal, and a yearround schedule of day and evening classes is

common,

Tuition at proprietary schools is often much

higher than at publicly supported community

colleges. Nonetheless, these schools often attract lower income students, including many

who are not high school graduates. Enrollees

in accredited proprietary schools are eligible

for Federal Pen Grants (formerly Basic Educational Opportunity Grants) and Federally Insured Student Loans. Because there are so

many proprietary schools, it is difficult to genSipau] E. Barton, Workl;fe Transitions: The Adult Learning

Connection (New York: McGraw-HilI, 1982), p, 18.

351 nformation provided by the National Center for Education

Statistics [now the Office of Educational Research and Improvement], U.S. Department of Education, 1985.
288 ● Technology and Structural Unemployment: Reemploying Displaced Adults

eralize about their effectiveness in preparing

students for jobs.

A 1984 study by the U.S. General Accounting Office found that many proprietary schools

that were eligible to receive Pen Grant students

had misrepresented themselves when recruiting students and had violated the rules of their

accrediting associations.36 The study also said

that the industry-based accrediting associations

rarely took action to ensure that their standards were met, Dropout rates from the schools

eligible for Pen Grant recipients were very

high, The proprietary schools dispute these

findings, noting that their high dropout rates

reflect the difficult backgrounds of their students, and arguing that they have improved

their ethical standards. Together with educators in publicly supported schools and private

industry trainers, the proprietary schools have

begun to explore greater self-regulation as a

means of improved quality of instruction and

curriculum.

Apprenticeship Programs. –The goal of apprenticeship is to produce highly skilled workers

who are well versed in the theory and practice

of their trade, and are therefore adaptable to

variety of work situations. In theory, workers

who complete good apprenticeship programs

should be more productive than those with less

training. Because of their understanding of the

theory of their trade, they also may be more

versatile in adapting to technological changes

that can make specialized skills obsolete.37

Apprenticeship is widely used in Western

Europe, especially in West Germany, where it

is an integral part of the vocational education

system. Called the “dual system” because it

combines on-the-job training and conventional

vocational education, this apprenticeship system involves about 90 percent of West German

16 year olds who are not bound for a university. (Those who do not participate must attend

SOLJ.S. Genera] Accounting Office, Many Proprietary Schools

Do Not Comply with the Department of Education’s Pen Grant

Program Requirements, GAO/H RD-84-17 (Washington, DC: U.S.

Government Printing Office, Aug. 20, 1984].

sTLevitan, Mangum, and Marshall, op. cit., P. 186.

vocational school until they are 18.) Students

in the dual system typically spend 1 or 2 days

a week at a vocational school; during the other

weekdays, the students work under contract

with an employer.

The practice of apprenticeship in the United

States is much different. Apprenticeships here

often involve formal agreements between employers and candidates for apprenticeship

(often with union involvement when collective

bargaining exists). Traditionally, over half of

U.S. apprenticeships have been in the construction trades. Other trades with large numbers

of apprentices include metalworking, service

and repair trades, personal services, and graphic

arts.

Although informal apprenticeship occurs,

formal programs are registered by State labor

departments or meet U.S. Department of Labor standards. Apprentices in these programs

receive classroom instruction or another form

of structured study in subjects pertinent to their

trades, and are employed for 1 to 4 years under the tutelage of a masterworker before receiving certification. The Federal program,

launched in 1937 under the National Apprenticeship Act (Fitzgerald Act), provides technical assistance, and support services to State

agencies and local programs through the Department of Labor’s Bureau of Apprenticeship

and Training. Federal vocational education

funds can also be used to support classroom

instruction of apprentices at vocational high

school or other public schools with approved

vocational plans.

Apprenticeship programs at one time served

mostly white males. Adoption of equality of opportunity provisos and outreach efforts to attract minorities and women to apprenticeship

programs have had some success. Minority

representation in registered programs grew

from less than 6 percent of apprentices in 1967

to about 18 percent in fiscal year 1981. Women

comprised less than 1 percent of apprentices

in 1973, but 6 percent in 1981. In 1984, about

322,000 people received training under registered apprenticeship programs.
Ch. 7—Adult Education and Displaced Workers ● 289

Adult Participation in Higher Education

As a response to displacement, higher level

academic education has less relevance to most

blue-collar and nonsupervisory white-collar

and service industry workers than vocational

and technical training. However, for some displaced workers, pursuing an academic degree

can be the path to an entirely different career,

Two-year academic programs offered by

community colleges are highly accessible to

adults. Many courses are offered in the evenings or on weekends, a schedule most working adults find convenient, and tuition is often

low. Average tuition in 1983-84 was $528 for

public 2-year colleges, compared with $1,284

for public 4-year universities.38 Also the liberal

admissions policies of many 2-year colleges

may attract adults who did poorly in high

school,

Academic programs offered at 4-year colleges and universities are generally less accessible to displaced workers and disadvantaged

adults than those at 2-year colleges. In 1978,

nearly half of the courses taken by adults at 4-

year colleges and universities were for academic credit. Most studied part-time or in short

courses, and two-thirds were working full-time.

The types of adult enrolled, half were professional and technical workers and one-quarter

were managers, reflects an educational mission

that is aimed at higher level academic education. 39

se~.s, Department of Education, National Center for Education Statistics, The Condition of Education: 1985 Edition (Washington, DC: U.S. Government Printing Office, 1985), table 2.16,

P. 118.

Servan Charner and Byrna Shore Fraser, “Access and Barriers

to Adult Education and Train ing, ” contract study prepared for

the Office of Technology Assessment, September 1984, p. 22.

Continuing education or extension programs

at 4-year institutions also attract large numbers

of adults. These programs generally do not provide credit toward a degree and the programs

are generally supported almost entirely from

student fees. Continuing education students

are generally well educated and have relatively

high incomes,

Over the next decade, as the size of the traditional college-age population continues to decline, more colleges and universities will be

forced to attract an older clientele, or else decline in size.4

~ As a result, collegiate institutions

are becoming more flexible in accommodating

the needs of adults.

Some modifications—such as scheduling

classes in the evenings and on weekends, offering courses at regional campuses, libraries,

workplaces, and union halls, providing childcare services, or using television and audio

transmission to reach students—may have little effect on the academic standards of the institution. Some other devices—such as granting academic credit for studies in trade schools,

on-the-job training, participation in community-based groups, volunteer work, employment experience, artistic achievement, and military service and training—may be attractive

to adults who wish to complete an academic

program quickly, but clearly do have the potential to lower academic standards if they are

abused,

~Herbert L, Smith, “Higher Education Future, American

Demographics, September 1983, p. 22.
290 • Technology and Structural Unemployment: Reemploying Displaced Adults

INSTRUCTIONAL TECHNOLOGY IN ADULT EDUCATION

AND TRAlNlNG41

Most studies of instructional technologies

have focused on primary, secondary and college students, or on special populations of

adults (e.g., members of the military). Much

less attention has been given to the use of instructional technology in helping meet the education and training needs of adult blue-collar

workers and nonsupervisory white-collar workers. This section discusses the use of computers, interactive videodisk systems, and other

technology-based systems in delivering vocational training, and basic skills education to

adult workers.

Historically, the Federal Government has

played a primary role in research and development of new instructional technologies.

Many pioneering applications for instructional

technologies were initially developed or supported by the Department of Defense, the National Science Foundation, and the Department

of Education and its predecessor agency.

The entire field of instructional technology

is changing rapidly, as new applications and

markets for education and training products

are developed. Advances in basic research on

information technologies may greatly expand

the capabilities of instructional technology over

the next 15 years. For example, research on expert systems (a form of artificial intelligence)

has already led to initial commercial uses in

certain well-defined applications. A recent

OTA report, Information Technology R&D:

Critical Trends and Issues, discusses trends

and prospects for information technology in

detail. 42 Another OTA study is looking at the

long-term implications of what might be posqlParts of the discussion on instructional technology in this

chapter are adapted from Norman D. Kurland & Associates, The

Role of Technology in the Education, Training and Retraining

of Adult Workers, a report prepared for the Office of Technology Assessment, Oct. 5, 1984. This contract report provides a

detailed analysis of instructional technologies used in adult education. Readers interested in use of instructional technologies

in the educational system as a whole, including children and

young adults, are referred to the OTA assessment, Informational

Technology and the American Educational System, op. cit.

4zOTA.c IT-Z68, February, 1985.

sible to achieve through the use of instructional

technologies after the year 2000.43

Delivery Systems for Instructional Technology

The use of computers, videotapes and videodisks, and other technology-based systems for

delivering education and training is increasing. Instructional technologies have become

widespread in training programs used by the

military and large corporations. Although educational institutions have been slower to adopt

instructional technologies, the number of computers in public school classrooms has grown

rapidly since 1980, and several thousand instructional programs for computers are now

advertised for educational applications.

Technology-based delivery systems for education and training are changing rapidly, reflecting advances in information technology.

It can be expected that as new, more sophisticated technologies are marketed, instructional

applications for these systems will be developed. Computer-based instruction, videotape

and videodisk systems, and instructional television are briefly discussed below,

Computers. –Most current uses for the computer in learning involve computer-assisted instruction (CAI), or computer-managed instruction (CMI), or both. CAI refers to several forms

of instruction that computers can deliver to

students—e,g., drill-and-practice exercises for

printed material previously given to the student, or new materials presented through programmed learning, Other terms (e.g., computer-enhanced learning) often refer to more

advanced CAI applications, such as use of

simulation or games in learning.

A major use of CMI is to keep track of the

progress of individual students or groups of

students. It can be used to guide the student

to appropriate learning materials or instrucqsThese implications are being addressed in OTA’S assessment

of technology and American economic transition,
tional sequences, depending on the student’s

progress and objectives, CMI is valuable for

collection of data about student performance.

It can help improve the productivity of teachers

and trainers, since it often reduces the time

they must spend in routine tasks such as grading tests and keeping records, CMI can be used

either independently, or in conjunction with

CAI. Until recently, the computational and

data storage requirements of CMI systems limited their use to large-scale learning systems,

However, with the heightened capability of

microcomputers, combined CMI-CAI systems

can be used in networks of microcomputers,

Computer instruction in basic skills is now

more than 20 years old. During this period, several basic skills programs have been developed.

PLATO, a very large computer-based educational system that was developed in the 1960s

at the University of Illinois with substantial

Federal support, includes both basic skills and

GED preparation programs. PLATO is now

marketed by Control Data Corp. The Computer

Curriculum Corp. (CCC), a for-profit corporation founded in 1967 to develop marketable

CAI materials for basic math and reading skills,

offers turnkey systems of computer hardware,

educational software, and support services for

CAI in basic skills and GED preparation that

have been used in several adult education

projects .44

Interactive Videodisk Systems.–When linked to a

computer, interactive videodisk or videotape

systems can be very versatile. Interactive systems allow the students or trainees to map their

way through the system, progressing to the

next problem when they succeed in completing the previous one, or “branching” to a remedial exercise when they are unsuccessful.

Until recently, most interactive video systems

used videotapes, not disks. However, the advantages of disk systems (in terms of random

access capabilities, information density, and

durability) are increasingly recognized.

44~ase studies describing the development and use of PLATO

and the CCC systems up until 1982 can be found in the O T A

assessment, Informational Technolog~~ and Its Impact on American Education., op. cit., pp. 128-134.

Ch. 7—Adult Education and Displaced Workers • 291

Each side of a disk can store 54,000 frames

of textual or graphic information. Because the

resolution is high (about 350 lines per inch)

when displayed, each frame can store highquality pictorial or graphic images. Individual

frames can be recalled from any location on

a disk in 2 seconds or less, and can be kept on

the screen indefinitely without damage. By

contrast, it can take 30 seconds or longer to recall portions of videotapes, and the tape can

be damaged if’ frozen on the screen.

While not yet in widespread use, interactive

videodisk systems can be expected to play a

growing role in industrial training programs.

The price of disk systems has been declining

rapidly, Some commercial training vendors

now market skills training lessons to industrial

clients at prices roughly comparable to those

for similar videotape lessons (assuming that the

client already has the necessary hardware). Interactive videodisk systems do not appear to

be used in adult basic education programs at

this time; however, a basic skills curriculum

using interactive videodisks has been developed in the Army, and is now undergoing

evaluation.

Television.–Several forms of television (e.g.,

broadcast, cable, videotape) remain important

for adult education and training, As a broadcast medium, television is able to bring instruction to large numbers of people who otherwise

might be unable to attend classes at a particular location or time. While most adults prefer

live instruction to television, studies conducted

in the 1960s showed that students learn from

television about as well as from direct instruction.

Broadcast television often requires a large

number of paid subscribers, or a subsidy to

cover the high costs of producing or delivering programs, Several technologies can reduce

costs of delivery, so that specialized courses

can be offered, Instructional Television Fixed

Service (ITFS) is a low-cost broadcast system

which can transmit live courses over a 20-mile

reception area, using microwave transmission

and dish-shaped receivers, Northeastern University is using ITFS to deliver graduate level
292 • Technology and Structural Unemployment: Reemploying Displaced Adults

courses to professional engineers at some

Boston-area electronic and electrical companies. The service includes one-way video and

two-way audio, so that the students can communicate with faculty. Television also has been

successfully used in providing information and

education to displaced workers. An example

of such a project, Detroit’s Communication/

Information System for the Unemployed, is discussed later in this chapter.

Studies of the Effectiveness of

Instructional Technologies

Several studies conducted over the last 10 to

15 years have found well-designed CAI programs to be effective in teaching basic academic skills. Most of these studies have focused

on elementary and secondary school students,

disadvantaged youths and young adults, or special adult populations such as members of the

armed services or prisoners. 45

The few existing studies on the effectiveness

of instructional technologies in education and

training of older adults also suggest positive

outcomes. Nearly all these evaluations predate

1980, and therefore do not reflect the greater

experience with use of computers in instruction that has been gained since then. Researchers at the University of Wisconsin’s Center for

Research on Learning and Teaching recently

analyzed the findings of 24 evaluations that

compared computer-based education (CBE)

with conventional classroom training of adults.

These studies—all that remained after the research team’s criteria for screening were applied—generally found that CBE had positive

results for adult learners.46

qSFor a discussion of these results, see the OTA assessment,

Informational Technology and Its Impact on American Education, op. cit., pp. 128-134.

ieChen.Lin C. Ku]ik, James A. Kulik, and Barbara J. Shwalb,

“Effectiveness of Computer-Based Adult Education, ” Center for

Research on Learning and Teaching at the University of Michigan, a presentation at the annual meeting of the American

Educational Research Association, Chicago, March 1985. As

used in this paper, computer-based education included computer-assisted instruction, computer-managed instruction, and

computer-enriched instruction (CEI). Eighteen of the studies involved CAI, three involved CMI, and two involved CEI.

In particular, the analysis showed that the

adults taking computer-based education needed

three-quarters or less instructional time than

those adults who received conventional instruction. The adults in CBE classes also received slightly higher scores on their final examinations than those receiving conventional

instruction. Five of the twenty-three studies involved adult basic education; the remaining

studies involved technical training.

While these results are promising, some caution should be exercised in generalizing about

the superiority of one medium over another.

One educational researcher, analyzing the research record, concluded that learning differences could not be unambiguously attributed

to different media.47 Since it is very difficult

to control all the factors that could lead to

differences in learning, several rival hypotheses can be devised from the same data to explain differences in performance or time-savings. For example, more attention may be given

to instructional design when new technologies

are introduced than when the same material

is presented through conventional instruction.

If the same attention were given to instructional design in conventional courses, the students receiving conventional instruction might

fare just as well. However, if computers and

other new media prompt greater attention to

instructional design so that delivery of instruction is made more effective, this is a virtue of

the new media.

It should also be kept in mind that instructional technologies are evolving very rapidly,

and that the new technologies may be superior

to those only a few years older, As educators

have gained experience about instructional

technologies, the knowledge base about how

to use them also has grown. In the University

of Wisconsin’s review of CBE project evaluations, only a few of the studies involved recent

projects. Of the 24 studies, 13 were conducted

after 1975, but only 2 after 1980.

qTRichard E. Clark, “Reconsidering Research on Learning

From Media, ” Review of Educational Research, winter 1983,

vol. 53, No. 4, pp. 445-459.
Ch. 7—Adult Education and Displaced Workers ● 293

In the section that follows, more recent experience with CAI in adult basic education is

addressed, A subsequent section discusses the

growing use of instructional technology in industry, and the potential of these technologies

in vocational skills training.

Recent Examples of CAI in Adult Basic Education

Several CAI projects for adult basic and adult

secondary education have been launched since

1980, While few formal evaluations of these

projects have been published so far, some of

the projects appear to have been highly effective. Often, the projects have involved innovative planning and design, considerable use of

teachers and trained volunteers, and sometimes, active support from community organizations and local foundations.

An example is Project ABLE (for Adult Basic

Literacy Education), a program run by Central

Piedmont Community College in Charlotte,

North Carolina. This CAI project began in July

of 1983, and more than 250 students with reading levels below eighth grade had enrolled by

April of 1984. Students receive instruction at

neighborhood centers, including a shopping

center that is open 6 days a week, a community center, and a church.

During the first year of Project ABLE, the

adult students (who averaged 36 years of age)

reportedly needed only about 21 hours of instruction to gain one grade level in reading and

math, a striking accomplishment compared to

an average of 150 hours required for similar

gains elsewhere in the State. The project provides individual tutoring by volunteers to all

students with less than fourth grade skills, and

tutoring is also available for students in more

advanced instruction, The project combines

this individual human attention with the use

of PLATO and 12 other software packages for

adult basic education and GED preparation.

Community leaders were extensively involved from the early stages of Project ABLE.

Members of an advisory committee composed

of people from the local media, the ministry,

business and county government promoted the

project, and helped to recruit adult students.

The recruitment campaign, using public service announcements on radio and television, appearances on talk shows, and announcements

at churches, was aimed at an adult audience

with limited ability or inclination to read. In

addition, newspaper stories, and flyers sent

with food stamp mailings and water bills, publicized the program to the community at large,

and helped attract volunteer tutors. On the first

day the center was open, 77 people enrolled

in Project ABLE; 20 more followed the next

day. About 70 volunteers showed up on the

first day training was offered; the project staff

had expected only about 20.

Many adults in CAI basic education courses

study more than their counterparts in conventional courses. In a basic education program

run by the Great Neck, New York, public

school system, adults participating in computer-assisted basic education averaged 196 hours

of attendance. This was about 80 percent more

than the average for non-CAI students, 108

hours. By the end of the course, the CAI students showed an average gain of 3.71 years in

reading and 3.55 years in math—compared to

the course objective of 2.5 years. (Average gain

by non-CAI students is not available.) The CAI

project was developed by the Computer Curriculum Corp.

A questionnaire given to participants in the

Great Neck project provides additional evidence that CAI projects can motivate adults to

study more. Ninety-eight percent of the adult

students said that they enjoyed studying with

the computer, especially mentioning the clear

explanations and immediate feedback. Nearly

three-fourths of the students said they would

like to use the computer more often; only 5 percent said they would like to use it less often.48

Very good results also have been reported by

nonprofit learning centers around the country

that are using a Comprehensive Competency

Program (CCP) that is being distributed by the

Remediation and Training Institute. CCP uses

a variety of previously developed materials for

teaching academic and functional skills, in4.9AsdiscussedinNorman D. Kurland & Associates, op. Cit.,

p. 65.
294 ● Technology and Structural Unemployment: Reemploying Displaced Adults

eluding public and private domain printed materials, software, and audiovisual materials.

While CCP does not have to be delivered on

computer, most of the centers use a combination of CAI and printed materials. CCPS also

have instructors available to help students.

During the second quarter of 1985, 1,220 people at 58 nonprofit learning centers were terminated from these programs. About 42 percent of the people were over 22 years of age.

For all second-quarter terminees, the centers

reported an average gain of 1.2 grades in reading skills in 50 hours of related instruction, and

1.5 grades in math in 40 hours of related instruction. If projected linearly, this would suggest gains of 2.4 years in reading and 3.7 years

in math for 100 hours of instruction. However,

only about 15 percent of the participants in

these projects completed 100 hours of instruction. According to the institute’s summary

report:

. . the mean reading and math gain rate per

100 hours of instruction were four times higher for learners with less than 50 hours of instruction than for those with over 50 hours.

Nevertheless, the “gain rate per 100 hours of

related instruction” is the common metric for

assessing basic skills instruction, and the reading and math gain rates achieved by CCP

learners were more than double the standards

for remedial education.49

This difficulty in expressing learning gains

in quantitative terms illustrates a fundamental problem that exists in evaluating CAI projects, and in making comparisons among ABE

projects in general. The ideal comparison

would take into account not only differences

among teachers, instructional materials, and

approaches, but also differences among the students themselves. Students enter ABE classes

with very different levels of academic skills.

Those who are simply rusty in, say, arithmetic,

may recover their knowledge very quickly,

while those who never had this knowledge to

begin with may learn slowly. Also, students

49A]] figures cited are from “The Comprehensive Competencies Program: A Summary, ” Remediation and Training Institute, Washington, DC, n.d. The quotation is from p. 15 of the

same report.

often show plateaus in learning—i.e., rapid

progress may be followed by a period of consolidation, before another period of rapid progress begins. For these reasons, the expected

level of achievement or a norm for adult basic

education can only be stated in very gross

terms—e.g., one grade level gain for every 80

to 120 hours of instruction. so

Even using this broad range, the evidence

strongly suggests that more rapid learning

takes place in well-managed CAI systems than

is likely to be achieved in most basic education

classes that use only traditional methods of instruction. In addition, while not yet established,

effective replication of results may be easier

to accomplish using CAI than in systems that

are more highly dependent on the individual

teacher. A key purpose of the Remediation and

Training Institute’s program is to provide an

academic and functional competency program

that can be applied in a variety of settings. Thus

the institute provides step-by-step information

to the learning centers on how to organize,

manage, implement, and evaluate the Comprehensive Competency Program. Although it is

too soon to say for sure, the fact that so many

projects report initial success with CCP suggests that the program

licated.

Cost Factors Affecting the

Instructional Technologies

can be effectively repAdoption of

The cost of introducing new technologies has

been viewed as a barrier in many education

programs. Indeed, the initial costs of acquiring hardware and courseware can appear high

when costs are looked at in simplistic fashion.

However, well-designed CAI programs can offer a number of cost advantages that are attractive in comparison with conventional methods

of adult education.

First, when well-designed courseware is

used, the computer can help raise the productivity of teachers, allowing each teacher to

Sosee for example, Thomas G. Sticht, Basic Skills in Defense,

report issued through the Office of the Assistant Secretary of

Defense (Manpower, Reserve Affairs and Logistics), March 1982,

p. viii, for discussion.
Ch. 7—Adult Education and Displaced Workers ● 295

— —

spend more time on instruction and less time

on administration, grading, and recordkeeping,

Second, the costs of acquiring hardware have

declined very rapidly, and many ABE projects

may have access to computers in schools,

libraries, training facilities, businesses, and

other institutions. While good courseware is

often expensive, it can be used at any location

and at any time. This is particularly useful in

providing basic education to adults, who may

have difficulty in scheduling classes or getting

to class locations, Third, since adults tend to

learn more quickly in CAI projects than is typical for basic education, these projects may be

able to serve more people. Most adults find

savings in time needed for education very attractive.

Computerized learning centers are not all

that expensive to set up, judging from data

compiled by the Remediation and Training Institute from 58 learning centers that used its

Comprehensive Competency Program during

the second quarter of 1985. The typical center

had a capacity to serve about 30 people, and

used about eight computers for instruction, as

well as another computer for management purposes. The mean investment to establish the

typical learning center was slightly under

$43,000. Computers, peripherals, and instructional software accounted for about 52 percent

of this investment, and another 28 percent was

for printed materials, and audiovisual equipment and materials, The remaining 14 percent

was for supplies, furnishings, and center restoration, Using the second quarter of 1985 as

a base, the institute estimates that the annualized operating costs for the typical center

would be about $80,800. Nearly three-fourths

of this would be for staff salaries and fringe

benefits. With amortization of the investment

in the learning center over a 3-year period, the

annual costs of the learning center would rise

to just under $100,000 [assuming a 10 percent

interest rate).

The costs of providing instruction at the

centers can be measured in a number of different ways. Using full operation costs for the second quarter of 1985 (including the costs of

amortizing the investment in the center), the

costs per instructional hour work out to $8.45.

If amortization of the investment is not included in this calculation, the operating costs

per instructional hour are $6,90, However, the

institute estimates that the learning centers

were used at only 23 percent of their maximum

capacity in the second quarter of 1985. If the

centers were used at 75 percent of maximum

capacity for 50 hours weekly, the costs per

learner instructional hour would be $2.00,

according to the institute.

Low utilization levels have been a problem

in some other projects as well. One western

New York public school district, for example,

received a grant in 1983 from the Governor’s

office for a project to help steelworkers in danger of displacement obtain a high school equivalency degree—a requirement for a job interview at one steel mill that was still hiring in

the area. The school district leased a CAI program and 16 computer terminals for the project, Some of the project’s computer terminals

were made available 24 hours a day, and one

was located in a union hall for the convenience

of workers. Even so, the terminals were used

less than half the time.51 One factor that probably contributed to the low utilization level was

the fact that many of the laid-off workers were

receiving occupational skills training during

the day, and had little inclination to pursue

GED courses at night, To attract greater use,

the program was opened to anyone in the community who wanted to use it; however, the initial response was not great and the project was

suspended at the end of December 1983.

Even at the 23-percent utilization level, the

CCP learning centers apparently have been

quite successful in attracting public and private funding. Based on the second quarter of

1985 data, the Remediation and Training Institute estimates that the average annualized

revenue (e.g., contract services, in-kind support) of the centers would be $114,000 (including in-kind support) —well above the estimated

$99,000 needed to run the typical center even

when the investment for computers and other

equipment has not been amortized. This sur51 Norman ~, Ku r]a rl~ & ASSOC latf?s, Op. C lt., ~. 67.
296 • Technology and Structural Unemployment: Reemploying Displaced Adults

plus can be used for improvements,

services and institutional support.

Evaluation of Courseware in

Adult Basic Education

adjunct

Most basic skills software now available is

designed for the K-12 market, not the market

represented by adult basic education. However, some of these products—particularly

those used for high school students—contain

remedial components which in some instances

may be suitable for adults.

Many States have established software evaluation projects or clearinghouses for elementary

and secondary education—but this has seldom

been extended to the adult basic education

level. One of the few organizations that does

evaluate software for adult basic education is

the Region X Adult Education Software Consortium, which is comprised of ABE officials

in Idaho, Oregon, Washington, and Alaska.

The consortium has established a software

evaluation team which specifically looks at the

suitability of courseware for ABE instruction,

and disseminates its findings to school districts

in the region. While useful to adult educators,

the Region X consortium has limited resources.

National independent organizations that specialize in evaluation of educational software,

such as the Educational Products Information

Exchange Institute (EPIE) and the MICROSIFT

project of the Northwest Regional Educational

Laboratory, also focus largely on the K-12 system. However, some evaluated products aimed

at remedial education for older adolescents (16

to 18 years of age) maybe suitable for ABE instruction as well. Although most of the evaluated products are tried out to some degree in

school settings, these evaluation services do not

conduct formal “field testing” under controlled

conditions.

Vocational education is another area where

limited evaluation of courseware has been undertaken. The National Center for Research on

Vocational Education, located at Ohio State

University, has developed an evaluation form

and guide for vocational education courseware, including secondary and postsecondary

curricula. The center plans to provide some coordination of evaluations using its system.

Role of Learning Centers in

Computer-Assisted Instruction

Both for-profit and nonprofit private learning centers provide a variety of educational

services to adults. Many of the pioneering CAI

projects for adult basic and secondary education have been undertaken by such centers.

Some centers have been supported primarily

by private funding, with little or no funds from

Federal and State ABE programs. The large

role played by the private sector indicates the

active interest of community organizations,

community colleges, private foundations and

for-profit corporations in reducing adult functional illiteracy.

Some companies—most notably Control Data

Corp.—have established for-profit learning

centers in many cities across the country

which will provide basic skills training either

to individuals directly or to employees through

their employers. CDC now operates more than

100 such centers, and in each of them adults

can take basic skills training using the PLATO

system. In addition, a number of companies

have established learning centers for their employees.

Since 1980, many nonprofit learning centers,

supported in part by local and national private

foundations, have become active in computerassisted instruction programs. In some areas,

foundations and educational institutions have

cooperated to establish model learning centers,

designed to serve adults and also to provide

community colleges, school districts, and other

local organizations with the training and resources needed to establish their own CAI programs. In the Minneapolis-St. Paul area, for example, five local foundations and the St. Paul

public school system have committed $1.3 million to support the Technology for Literacy

Center (TLC), which opened at a St. Paul shopping center at the end of May 1985.

Patterned in part on Project ABLE, TLC is

intended to serve as a model for other literacy

projects in the twin cities region. It focuses on
Ch. 7—Adult Education and Displaced Workers ● 297

adults who have reading, writing, and math

skills below the eighth grade level. The TLC

staff hopes to enroll 1,300 adults in the program

over a 3-year period, and to train 200 administrators, teachers, and volunteers in the use of

CAI. Matching grants will be offered to existing literacy projects to stimulate the use of instructional technology. An important part of

the program is to train instructors and volunteers from other programs to use CAI. The

project is administered by the community education department of the St. Paul Public School

System, which employs the staff.

During its first 5 months of operation, TLC

served 487 people. About 56 percent of these

people were not high school graduates and 68

percent tested below the eighth grade level.

About 43 percent of the people were employed,

and about 46 percent had sought prior help for

basic skills education. Students working at the

fourth to twelth grade levels use the Control

Data Corp. ’s PLATO basic skills program, plus

a variety of offerings from other companies,

in their learning program. Students who are

below the fourth grade level do not use CAI,

but receive one-on-one tutoring from volunteers trained in the Laubach method of literacy education. About 55 volunteers are involved

in the project. The project will be subject to

continuing formal evaluation over the 3-year

period,

Nationally, the Remediation and Training Institute’s Comprehensive Competency Program,

developed with the support of the Ford Foundation, was used by 73 nonprofit organizations

in 20 States by the end of June 1985. A variety

of different kinds of nonprofit institutions are

represented on the list, including Job Training

Partnership Act Title 11 project agencies, postsecondary schools, community-based organizations, and alternative schools.

While CCP does not have to be delivered on

computer, most centers use a combination of

CAI and printed materials. For example, students at Project Options, a program at the National Learning Center in Washington, DC,

spend about one-third of their classroom hours

using CAI, and the rest of the time using printed

or audiovisual materials. The program is individualized and self-paced. After students get

initial orientation and testing to determine their

performance level, a teacher selects appropriate first week lessons for them, and tells them

how to locate materials in the room. From then

on, the students pace themselves. They test

themselves, using written answers, when they

feel it is appropriate. Teachers are available for

one-on-one help whenever students request it.

Project Options, set up in early 1984, has

been supported by several foundations, with

computer companies and book companies providing or donating some materials and technical assistance. Local government agencies,

including correctional agencies and employment services agencies, engage the center by

contract to provide basic skills and job skills

competencies to young adults and adult students. The center offers morning, afternoon,

and evening classes in 3-hour segments to minimize interference with work schedules. Orientation sessions, offered every 2 weeks to new

students, encourage scheduling flexibility.

Vocational and Industrial Applications for

Training Technologies

A number of different forms of instructional

technology are used in vocational education

and industrial training. Tutorials, ranging from

slide projector presentations, to videotape, to

highly interactive videodisk lessons, are among

the most extensively used formats for training

materials, Off-the-shelf audiovisual tutorials are

available in a wide range of vocational and

business management subjects.

While not yet widely used in vocational education and industrial training, interactive

videodisk systems may well become a major

new medium for industrial training, As a training medium, interactive videodisk systems offer several features that are well suited for industrial skills training. The high visual quality

of the videodisk, random access to all frames

on the disk, and features such as touch screens

can be used to engage the participation and attention of the student, The ability of these systems to simulate actual equipment and situations, to keep track of problem areas for the
298 ● Technology and Structural Unemployment: Reemploying Displaced Adults

student, and to offer individualized remedies

are other attractive features,

Currently, most training applications for interactive videodisk are customized products

developed for highly specialized military or industrial functions. However, generic, off-theshelf products are beginning to appear as the

costs of producing interactive videodisk decline. For example, some training firms are

now offering skills training lessons for interactive videodisk to their industrial clients at

prices roughly competitive with videotape. For

example, the Industrial Training Corp. recently

began offering an interactive videodisk training program in electrical/electronics theory

and skills training. Its introductory prices for

individual lessons on videodisk are actually

lower than the prices it charges for its individual videotape lessons in similar subjects. This

does not include the costs of presentation hardware, however.

Other applications for instructional technologies in industrial training and vocational education include simulators, emulators, and various kinds of job aids. Simulators and emulators

are usually employed when it would be too expensive, dangerous, or logistically difficult to

provide training on the actual equipment or

system. To varying degrees, simulators duplicate the behavior of actual machines (e. g., a

ship or airplane) or. complex systems (e. g., a

powerplant). While the extent of their use in

vocational training is limited, some companies

(e.g., companies offering temporary services)

use simulators or emulators to train people to

use a wide variety of word-processing systems

that temporary typists can be expected to encounter as they move from one company to

another.

Job aids are used to either supplement prior

training or, in some instances, to reduce the

need for training. Job aids are often used to provide instructions to workers so that they can

perform tasks that require specific skills that

are only infrequently required. A recent development in job aids is embedded training, in

which instructions for use or repair of equipment is implanted in the equipment itself, As

microchips have become cheaper, it has become possible to design machines to automatically instruct workers in how the machines

should be used and repaired.

Use of instructional technology in business

has spread rapidly, in part because industry

places a premium on technologies that can reduce training time. Large firms account for the

most widespread use of these technologies. According to a Training magazine survey, about

27 percent of all U.S. companies with 50 or

more employees used computer-based training

in 1985, compared to 22.3 percent in 1984.

Among 1arge companies (those with 10,000 employees or more) about 56 percent used computer-based training.52

The Training magazine survey also found

that about 12 percent of companies with 50 or

more employees used some form of computerdriven interactive videotape or videodisk players in their training efforts. Among different

businesses, use of interactive video (both tapes

and disks) was highest among finance, insurance and banking firms. About 6.5 percent of

manufacturing firms with more than 50 employees used interactive video in some format

in their training programs. Vidoetapes accounted for about four-fifths of the interactive

video use, and only about 2.6 percent of all

firms in the survey used interactive videodisk

systems.

A recent Conference Board report, based on

survey and interview information from 218

large U.S. companies, concluded that new

training technologies are having important effects on corporate training programs, Benefits

of the new technologies, according to the report, include more effective instruction, pacing of instruction to meet individual needs, and

the ability to train individuals on an as-needed

basis rather than in groups. Also, the technol-

————— ——-

sZJack Gordon, “computers in Training, ” Training; The Magazine of Human Resources Development, October 1985, p, 55,

The survey found that a much larger proportion of firms—46

percent of all firms with 50 or more employees and 74 percent

of firms with 10,000 or more employees—used computers in

training for some purpose; however, this included data management, word processing, and graphics, as well as computer-based

training.
Ch. 7—Adult Education and Displaced Workers ● 299

— —

ogies allowed for greater control over the content of the training program.53

Three out of five corporations in the survey

reported significant changes in training methods and training technology in the past 5 years.

In some companies, changes in training methods followed adoption of new training technologies (e. g., computers facilitate self-administered training), A rapid growth in various

forms of television for training was noted. Live

videotape playback, for example, is used to appraise and correct employee performance in

training sessions. One company’s training department operated an internal corporate television network, transmitted by satellite to 67

company locations in the United States and

Canada. The network is used primarily to train

sales, service, and other personnel about new

products; it has also been used for engineering education.54

Many large corporations have their own

training staff, who are versed in the use of new

instructional technologies, and often prepare

training materials for in-house use. In addition,

a number of firms in the training industry itself specialize in providing either generic or

customized instructional technologies and media to business. Some of these firms have

carved out niches to provide training products

and services to meet the specialized training

needs of a wide variety of businesses.

Nationwide information about the size and

characteristics of this component of the training industry is limited. However, according to

the above cited Training magazine survey, U.S.

firms with 50 or more employees budgeted at

least $4.4 billion in fiscal year 1985 for external training expenses. While seminars and conferences were the largest single item of the

training budget, these firms also earmarked

about $763 million for off-the-shelf materials,

$618 million for custom materials, and $797

million for hardware for fiscal year 1985. Outside services (a category that includes printing

and production costs for training materials as

well as consultant services that did not involve

conferences) were budgeted at $808 million.

Federal Role in Instructional Technology

Research and Development

Over the years, the Federal Government has

been a major actor in developing many instructional technologies that are now used in the

public education system and private sector

training. Federal agencies with the most direct

and important roles over the years have been

the Department of Education (ED) and its predecessor agency, the Office of Education in the

former Department of Health, Education, and

Welfare, the National Science Foundation

(NSF), and the Department of Defense (DOD).

DOD expenditures on educational technology

R&D were over $250 million in fiscal year 1982,

compared to combined expenditures by NSF

and ED on educational technology of $18 million. 55

DOD, NSF, and ED research funds have been

important in developing key educational applications for several technologies. In 1959, NSF,

as well as the DOD, provided initial funding

for development of the PLATO computer-based

educational system at the University of Illinois.

Another major computer-based education system, called TICCIT, was developed by the

Mitre Corp. with NSF support. NSF also supported research at Stanford University to develop uses for the computer in basic reading

and math skills. The Office of Education played

an important role in early history of educational television, and supported development

of a number of computer-based educational

materials, among other things. The Department

of Defense, owing to the large share of its

budget earmarked for training of personnel in

specialized skills, has made major contributions to the development and use of CAI, CMI,

simulation, and training and education applications for interactive videodisk.

Sjseymou r Lusterman, Trends in Corporate Education and

Training (New York: The Conference Board, Inc., 1985), p. v.

54 Jbid., pp. 13- I 4,

ssThe overa]l role of the Federal Government in educational

technology research and development is addressed in detail in

the OTA assessment, Informational Technolog~’ and Its Impact

on American Education, op. cit., pp. 111-137.
300 ● Technology and Structural Unemployment: Reemploying Displaced Adults

Several R&D projects are now underway in

DOD that concern basic skills education. Many

of these research projects are part of an overall effort by DOD to develop basic education

programs that are directly tied to development

of the skills needed for performance of specific

jobs.56 While still under development or evaluation, these new approaches for basic education may be relevant to basic skills projects

provided by employer or displaced worker

projects. Because of the job-specific orientation, this approach may be less appropriate for

adult basic education classes which may have

broader literacy and education goals among

their objectives.

The Army is developing a computer-based

functional curriculum (called the Job Skills

Education Program or JSEP) for soldiers who

show deficiencies in knowledge or basic skills

required for successful job performance.57 A

precursor to JSEP was the completion, in 1983,

of a detailed Baseline Skills Analysis of the academic competencies soldiers need to perform

tasks in 94 military occupational specialties

(MOS). Also, diagnostic tests were developed

to determine whether the individual soldier actually possessed the prerequisite level of competency required for the job.58 From this information, a taxonomy was developed of over zoo

~These activities reflect congressional concern, expressed by

the House and Senate Appropriations Committees for fiscal year

1978, that on-duty basic skills programs offered by the services

be related to job performance. While beyond the scope of this

assessment, the Department of Defense is a major provider of

remedial education in the United States, and basic skills programs offered by the individual services have been the subject

of considerable analysis over the years. See, for example, U.S.

General Accounting Office, Report to the Secretary of the Army:

Poor Design and Management Hamper Army’s Basic Skills Education Program, GAO/FPCD-83-19 (Gaithersburg, MD: U.S. General Accounting Office, June 20, 1983). For a history of remedial education programs in the services, see Thomas G. Sticht,

Basic Skills in Defense, report issued by the Office of the Assistant Secretary of Defense (Manpower, Reserve Affairs and Logistics], March 1982.

S7For a detailed discussion of JSEP, see Beatrice J. Farr, “The

Job Skills Education Program: Computer Systems for Army Education, ” paper prepared for the International Conference of the

Association for the Development of Computer-Based Instructional Systems, Philadelphia, PA, March 1985.

SBThis work was performed by RCA under contract with the

Training and Doctrine Command (TRADOC). RCA subcontracted with the Educational Testing Service to develop the diagnostic tests.

prerequisite competencies needed at certain

skills levels for the 94 MOS, as well as skills

all soldiers need to know,

Under the JSEP project, computer-based modularized lessons are being developed for 180

of the prerequisite competencies. Florida State

University is developing JSEP under an Army

Research Institute (ARI) contract awarded in

1982.59 The system is designed to be delivered

on the Army’s five mainframe PLATO systems,

and on MicroTICCIT, a micro-computer-based

tutoring and instructional management system

marketed by the Hazeltine Corp. Three field

tests of JSEP were conducted in the summer

of 1985, with a fourth scheduled for 1986.

Evaluation information was not available as

this report was completed.

In the Navy, an Experimental Functional

Skills Program (XFSP), is under development

by the Navy Personnel Research and Development Center in San Diego and the Naval Postgraduate School. XFSP is intended to develop

functional reading and mathematics skills that

are related to a knowledge base that has a specific Navy orientation.60 The reading component of XFSP is designed to be delivered in

three forms: by a teacher using paper-andpencil materials only, by a computer in a learning center only, or by a combination of these

two in a classroom.

The computer-based instruction component

of the program uses several existing public and

private domain materials, including a reading

skills improvement software program called

LaSCAI that was developed by the Navy. Each

software program has an editing feature that

teachers can use to customize lessons. For example, a vocabulary drill can be tailored to include technical terms used in specific Navy

jobs.

The XFSP research also has produced a new

reading test battery for testing reading skills

. -—

ssThe~ontract is funded by the Education Directorate of the

Army Deputy Chief of Staff for Personnel.

aOFor a discussion of this project, See Thomas Sticht, Louis

Armijo, Natalie Koffman, and Kent Roberson, “The XFSP:Reading and Mathematics Project, ” paper presented at the annual

meeting of the Military Testing Association, San Diego, CA, October 1985.
Ch. 7—Adult Education and Displaced Workers . 301

and gains in Navy-related knowledge. A small

evaluation study has been conducted which

compares test results from students in the

XFSP with a sample of students in “general”

reading programs offered by education contractors to the Navy. These students were given

the new Navy-related reading tests, and also

a general reading test. Not surprisingly, students in the general reading program did better on the general reading test, while students

in XFSP showed little improvement in general

reading but consistent gains in Navy-related

reading and knowledge.

The Department of Defense is playing a major role in the continuing development of interactive videodisk systems, through the Army’s

Electronic Information Display System (EIDS).

According to a recent report by the U.S. General Accounting Office, the Army plans to acquire up to 20,000 interactive videodisk systems between fiscal years 1986 and 1990 for

use in training and other information display

activities.61 It has programmed $100.3 million

for this acquisition over the 5-year period, as

well as an additional $27 million for development, production, and distribution of videodisk

courseware from fiscal year 1984 to 1990. The

Army told GAO that it will reevaluate field

needs for the equipment before large-scale

procurement begins in 1989. The EIDS units

will be built to a standard specification, so that

the same interactive video courseware can be

used on all of the units. The Army has also developed an authoring system for interactive

videodisk, called the Production Management

System (PMS). PMS automates a number of

functions, and reduces the need for computer

programming in developing training programs

for interactive videodisks.

Other research is exploring the potential of

interactive videodisks in applications that are

relevent to basic skills education. The Army Research Institute has sponsored the developolFor a discussion of this and other Army procurement plans

for training materials, see U.S. General Accounting Office, improvements Needed in the Army’s Program for Developing Extension Training Materials for Use by Soldiers in Field Units,

GAO/NSIAD-85-73 (Washington, DC: U.S. General Accounting

office, 1985).

ment of the Spatial Data Management System

(SDMS), an interactive videodisk learning strategies program. This package is intended to help

students apply learning strategies such as mental imagery, identification of keywords and

ideas, or mnemonics in studying, taking tests,

solving problems, and making decisions. In a

pilot test of this “learning strategies curriculum” with high school students who were poor

learners in Berks County, Pennsylvania, both

the students and the teachers reacted favorably

to the instructional material and the mode of

delivery.62

Another interactive videodisk project is the

Space Time Army Reconnaissance System

(STARS), which uses a format similar to videogames to present basic skills lessons. Under

contract with the U.S. Army in Europe Continuing Education System, the University of

Maryland has developed a STARS curriculum

for general basic skills, and another curriculum designed to help soldiers read and understand a specialized repair manual. Evaluation

of the STARS program has been conducted, but

results were not available when this study was

completed. Like most of the basic skills education projects conducted by the Department

of Defense, STARS is oriented to the young

adult, and uses images and examples that people in the military can relate to.

Several federally sponsored research projects

are also underway to create instructional design tools, such as courseware authoring systems, for developing new educational products

and curricula. These tools are intended to help

trainers and educators who are not computer

specialists to design new courseware. This research is funded in part by various military research laboratories and the National Science

Foundation, Another role of the Federal Government is in developing evaluation information about its own experience with instructional technology,

The prominent role played by the Federal

Government in instructional technology reezpeter R. Ramsberger, Paul J. Sticha, and Anne S. Leopold,

“Interactive Videodisc for Basic Skills Training Using the Spatial Data Management System, ” n.d.
302 ● Technology and Structural Unemployment: Reemploying Displaced Adults

search, development, and application has led

to concern about whether adequate procedures

are in place to transfer instructional technologies developed with public support to the private sector and educational institutions. Most

of this concern has been focused on research

funded by the Defense Department. DOD work

on instructional technology often has broad applicability to civilian training and education

programs, but is not specifically developed for

use by the private sector or public education

institutions. By contrast, technology diffusion

is a principal purpose of both NSF and ED

activities in this area.

A generic mechanism for diffusion of federally developed technologies was called for by

the Stevenson-Wydler Technology Innovation

Act of 1980 (Public Law 96-480). While some

aspects of Public Law 96-480 have not been implemented, many Federal laboratories have

established Offices of Research and Technology Applications (ORTAs, called for by the

law. The purpose of the ORTAsis to facilitate

information transfer about laboratory activities

that have potential for use by industry. The law

also established a Center for Utilization of Federal Technology in the Department of Commerce to compile and disseminate information

about technologies owned or originated by the

Federal Government. (This function has been

assigned to the National Technical Information

Service.)

Stevenson-Wydler can be used for diffusion

of Federal training technology developed in

Federal laboratories to State and local governments and the private sector. For example, the

Department of Defense and the National Commission on Libraries and Information Science

have been cooperating in a project to determine

whether the LaSCAI reading improvement program developed by the Naval Personnel Research and Development Center for Navy recruits can be effective in teaching basic skills

in CAI projects for adults and high school dropouts. CAI programs using LaSCAI have been

launched at two libraries (one in Maryland, the

other in West Virginia). The project has involved ORTAs at both U.S. Army Human Engineering Laboratory and the Naval Personnel

Research and Development Center. Extension

of the project to the Pittsburgh area is under

consideration. 63

Facilitating the transfer of training technologies for civilian use is one of several subjects

addressed by a joint committee on education

and training for national security that has been

established by DOD and ED. A working group

of the committee looks at civilian sector applications for training and education technologies

developed by DOD. Another working group

works on basic skills issues. The Department

of Defense is also working with the Department

of Education to provide information on JSEP.

Legislation has been introduced in the 99th

Congress to establish a training technology

transfer program to encourage more effective

diffusion of Federal training technology to

educational institutions and the private sector,

The bill, S. 1662, defines training technology

as computer software developed by Federal

agencies to train their employees. It includes

instructional software for computers, interactive videodisks, audiovisual devices, programmed learning kits, and manuals or devices

that are integrally related to the software.64 Under the legislation, all Federal agencies that use

such training software are to designate a training technology transfer officer. It also would

establish an overall Office of Training Technology Transfer in the National Technical Information Service of the Department of Commerce. Among other things, the office would

compile and maintain an inventory of Federal

training technologies. The bill also would

establish a mechanism to encourage the involvement of for-profit companies in converting or modifying Federally developed training

technologies so that they can be effectively

used by non-profit institutions. (See ch, 2 for

further discussion of this legislation.)

6SInformation provided by the National Commission on

Libraries and Information Science.

%ec. 3 of S.1662, as introduced on Sept. 19, 1985.
Ch. 7—Adult Education and Displaced Workers • 303

OVERCOMING BARRIERS TO ADULT EDUCATION65

While the number of adults in education and

training courses has increased greatly over the

last 25 years, many people most in need of education and training are nonparticipants. No national surveys have been made to determine

why people fail to take advantage of adult education. However, State and local studies have

identified impediments to participation, some

of the most common of which are listed in table 7-4.

Some barriers arise from the life experience

and situation of the person: for example, many

adults lack self-confidence or motivation to

make education pay off in the job market. Other

problems are institutional or structural: people who live in rural areas are less likely to have

Essome of the discussion in this section is drawn from Norman D. Kurland & Associates, The Role of Techno)og~’ in the

Education, Training and Retraining of Adult Workers, a previously cited contract report prepared for OTA, and Ivan Charner

and Byrna Shore Fraser, Access and Barriers to Adult Education and Training, another previously cited contract report prepared for OTA.

Table 7-4.—Barriers to Adult Participation in Education

Category and specific barriers

Situational barriers:

● Not able to afford the class

● Lack of time

● Not able to enroll because of lack of previous education

● Family responsibiIities

● Job responsibilities

Social-psychological barriers:

● Lack of confidence in ability

● Feeling too old to learn

● Low self-esteem

● Tired of school

● Lack of interest

● Family or friends do not approve

Structural barriers:

● Inconvenient course scheduling

● Work schedule prevents class attendance

● Lack of transportation

● Relevant courses not offered

● Financial support restrictions

● Program is too long to complete

● Too much red tape

● Lack of information about courses

● Lack of information on support assistance

● Inadequate counseling

SOURCE Adapted by the Off Ice of Technology Assessment from Ivan Charner

and Bryna Shore Fraser, “Access and Barriers to Adult Education and

Tra(rr{ng, ” contract report prepared for the Off Ice of Technology As.

sessment, September 1984

a full range of educational services available,

and in many urban areas, some education programs may be offered in suburban locations

that inner-city residents find difficult to reach.

Costs of adult education, while often reasonable, may be too high for unemployed or lowincome adults to pay without help. Finding

relevant courses that fit in with adult schedules is also a problem for many adults.

As experience with adult learners has grown,

it has become clear that changes in traditional

curricula, teaching methods, and delivery approaches are often needed for a program to

work well with adults. Good adult education

programs must respond to real-world needs of

participants for skills, jobs, or services, and

must be delivered in ways that overcome barriers that prevent adults from participating.

Some approaches to accomplish this are briefly discussed in the next three sections.

Employer Involvement in

Basic Skills Education

Many employed workers with basic skills

deficiencies find little reason to participate in

remedial education offered by public schools.

Photo credit; UAW-Ford National Development Training Center

Adult participation in education and training can be

facilitated if courses are provided at convenient times

and places. This computer literacy project is being

provided at a local union hall, as part of an employee

development and training program.
304 ● Technology and Structural Unemployment: Reemploying Displaced Adults

Some workers, such as high school graduates

with poor basic skills, may not recognize that

they have educational deficiencies that could

affect their job performance. A number of corporations have become involved in basic skills

education, and some offer basic skills education to their employees. These corporate programs can overcome some barriers that keep

some working adults from taking adult education classes offered by public school systems.

In particular, onsite programs can reduce

scheduling and transportation conflicts, especially if the classes are offered at worksites during or after shifts. A few corporations overcome time barriers, which can be significant

for workers with families, by offering courses

on company time. Corporate and union encouragement also can help motivate some employees to take advantage of adult education

opportunities. Employer involvement in adult

literacy programs is being actively encouraged

through the Business Council on Effective

Literacy (BCEL), a publicly supported foundation set up in 1983 to increase corporate awareness of functional illiteracy problem.66

Employer-provided basic skills programs are

probably more common than is generally recognized. However, little information is available about the number and effectiveness of

such programs, or how many workers are

served by them. It is difficult to judge whether

more firms offer basic education to their employees than in the past, simply because few

firms were surveyed until recently and no survey is complete. Training magazine’s 1985 survey of U.S. companies with more than 50 employees found that about 19 percent of the

firms that responded offered some form of remedial education; this was an apparent reduction since the 1984 survey, when one-fourth of

the responding firms said they offered remedial education.

Another source of information about corporate involvement in remedial education

comes from the Center for Public Resources’

1982 study of basic skills in the U.S. work force.

Three-fourths of the 184 firms that responded

to the CPR survey (although not a representative sample of U.S. business) offered basic skills

competency programs to their employees.

About 35 percent of the firms simply offered

tuition assistance to employees, while the remainder either provided courses onsite or in

cooperation with other companies. Survey respondents were also active in partnership programs with local high schools, aimed at improving educational skills of young people who

will soon be in the labor market. Table 7-5 gives

examples of such cooperative approaches.

Most of the companies responding to the

CPR survey were primarily concerned about

deficiencies in oral communications and computation. However, some companies have

broader programs. Nabisco Brands offers employees at its Suffolk, Virginia, Planters Peanuts factory 4 hours of elementary school

courses a week on company time, with additional classes available on their own time.67

Sprague Electric Co., in Sanford, Maine, offers

its employees time off to attend a nearby school

to improve their reading.68 Both Polaroid Corp.

and the Chesapeake & Potomac Telephone Co.

(serving the Washington, DC region) have offered remedial education to workers for more

than 10 years. Other innovative programs, such

as Kimberly-Clark’s Educational Opportunities

Plan and Mountain Bell’s onsite Career Resource Center, can be used by employees to

overcome basic skills deficiencies.

While some larger companies offer onsite remedial education programs to their employees,

most smaller companies cannot do so. Some

public school systems now provide basic education and GED preparation at plant sites if

asked by an employer, usually at cost. Montgomery County, Maryland, for example, has

been offering a range of remedial education

services to local firms for several years. Employers receive contractual services that are designed to meet the particular needs of the company and its employees. The county also offers

courses in English as a second language at

66BCEL activities include publication of reports and a quarterly newsletter for the business community on adult literacy

programs, planning, and issues.

a7’’How Business Is Joining the Fight Against Functional 11-

literacy,” Business Week, Apr. 16, 1984, p. 98.

68Basjc skj~js jn the u.S. Workforce, op. cit., p. 28.
Ch. 7—Adult Education and Displaced Workers ● 305

Table 7-5.—Corporate and School System Models To Improve Basic Skills Competencies

Models

I

I

Subject focus Locus Form

Banker’s Life Co. “People Handle with Care” . . . . . . . . . X . . . . . . . . . . . X . . . . . . . . X . . . . ., X ., ., . . .

City National Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . x x .. . . . . x .. . . . . . . . . . . .

McGraw Hill —’’Numbers Skills . . . . . . . . . . . . . . . . . . ., X . . . . . . . . . X . . . . . . . . . ., . . . X . . . . . . . . .,

Mountain Bell . . . . . . . . . . . . . . . . . ., . . . . . . . . . . . . . ., . . . . . . . . . . . . x x . . . . . . . . x . . . . . . . . . x

Polaroid. ... . . . . ... ... . . . . . . . . . . . . . . . . . . . . . . . . . . X X . . . . . X . . . . . . . X . . .

Kimberly -Clark . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . X X . . . . . . . . . X . . . . . . . . . . X . . . . .

Sprague Electric Co..... . . . . . . . . . . . . . . . . . . X . . . . . . . . . . . . . . . . X . . . . . . . X . . . . . X . . . . . . . .

Boston Edison . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . X X X . . . . . . . . . . . . . . . . . X . . . . .

Chesapeake &Potomac.. . . . . . . . . . . . . . . . . . . . . . X . . X . . . . . . . . . . . . . . . . . . X . . . . . . . . . . . . . . . X . . . . . . X . . . . . .

Pittsburgh Public School System . . . . . . . . . . . . . . . . . . . . . . . . . . . . X . . . x . . . . . . . . . x . . . . . . . . .

Continental lllinois Bank &Trust Co. . . . . . . . . . . . . . . . . . . X . X . . . . . . . X . . . . . . . . . . . .

Ralston Purina Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . X . . . X . . . . . . . . X . . . . . . . . . . . . .

Reader’ s Digest..... . . . . . . . . . . . . . . . . . . . . . . . X .. . . . . . . . . . . . . . . X . . . . . . . . X . . . . . . . . .

General Foods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . X . X.. . . . . X . . . . . . . . . . . . .

Mutual Benefit Life... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . X . X . . . . . . X . . . . . . . . . . . . . . . .

Rexnord . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . X . . . X . . . . . . . X . . . . . . . . . . . . . .

Vought Corp . . . . . . . . . . . . . . . . . . . . . . . . . . . . . X .. X . . . . . . . . . . . . . . X . . . . X . . . . . . . . . . . . . . . . .

Omaha National Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . X . . . . X . . . . . . . . . . . . X . . . . . . . . . .

Manufacturers Hanover ... ... . . . . . . . . . . . . . ., . . . . . . . . . . . . . . . . x . . . . x . . . . . . . . . . . . . . . . x . . . . . . . . . .

General Foods ’’Operation Opportunity” . . . . . . . . . . . . . . . . . . . X . . . . . X . . . . . . X j.. X . .

Security Pacific National Bank ’’Project STEP’’... . . . . . . . . . . . . . . X . . . . X . . . . . . . X . . . . . . . .

Kaiser Aluminum. . . . . . . . . . . . . . . . . . . . . . . . . . ., . . . . . . . x x . x . . . . x x .. x . . . . . . . x . .

Genessee Intermediate School District/

Flint Chamber of Commerce . . . . . . . . . . . . . . . . . . . . . . . . . X X . . . X X . . . X . . . . . . . . . . .

Summer School District............,.. . . . . . . . . . . . . . . . . . . . X X . . . . . . . . . . . . . . . . . . . . . . . . . . . . . X

Digital & lntel w/Paradise Valley USD . . . . . . . . . . . . . . . . . . X . . . . . . . . . . . . . x . . . . . . . . . . . . . x x . . . . . . . . . . .

Lawrence School Department, . . . . . . . . . . . . . . . . . . . . . . . . . . . . X . . . . . x . . . . . .. . . . . . . . . . x

Harrisburg School System, . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . X . . . . . . X . . . . . . . . . . . . X . . . . . . . .

Xerox Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . X . . . . . . . . . . . . X .,. X . . . . . . . . . . . .

Eastman Kodak . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . X . . X . . . . . . . X . . . . X X X . . . . . X

Erie Opportunities industrialization Center . . . . . . X X X X X . . . . . . . . . . . . . . . X . . . . . . . . . X .. X . . X

Merit Employers Clerical Enrichment Program . . ., . . . . . . . . . . . . . . x . ... .. x . . . . . . . . x . . . . . . . . . .

National Association for Drug Abuse . . . . . . . . . . . . . . . . . . . . . . . . . X .. . . . . . X . . . . . X . . . . . . . X

Trilateral Council for Quality Education . . . . . . . . . . . . . . . . . . . . . . . X . . . . . . . . . X . . . . . . . . . . . . . . . . X . . . . . .

New Horizons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . X X .. . . . . . . X . . . . . X . . . . . . . . .

Worcester Area Career Consortia . . . . . . . . . . . . . . . . . . . . . . . X . . . . . . . . . . . . X . . . . X . . . . . .

Control Data. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . X X X . . . . . . . . . . . X . . . . . . . . . X . . . . . . X . . . . . . . . .

Washington, DC School System . . . . . . . . . . . . . . . . X . . . X X .. . . . X . . . . . . . . . X . . . . . X . X . . . . X .,.

Seattle Public Schools. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . X . . . . . . x . . . . . . . . . x . x . . . . . . . . x

a

Including work behavior skills

SOURCE James F Henry and Susan Ueber Raymond, Bas/c Ski//s (n the US. Work Force (New York Center for Public Resources, 1983), p 29

plant sites, a service that is well-received by local employers because of the large number of

recent immigrants to the area.

Affiliations between local ABE projects and

businesses and unions to provide basic skills

instruction to workers are fairly common. According to a recent survey of State adult education directors, about 4,000 arrangements of

this sort exist among the 31 States that have

formal programs to involve companies and

unions in ABE projects. Most of these projects

involve small or medium-size corporations,

Federal Adult Education Act funds, apparently, provided the greatest amount of money

for these services, followed in order by business and industry funding, other State and local funds, JTPA, and other sources.69

e’JJorie Lester Mark and Garrett Murphy, ‘‘The Basic SkillsBusiness/Union Connection, ” American Association for Adult

and Continuing Education, Washington, DC, October 1985.
306 • Technology and Structural Unemployment: Reemploying Displaced Adults

Some private community-based foundations

are also active in promoting basic education

at the work site. In the Twin Cities, Literacy

’85, a project of the St. Paul Foundation, will

assess basic skills of workers, and develop special curricula for employers under contract.

Many workers faced with imminent layoffs

or displacement can also benefit from remedial education course offerings, provided sufficent time is available to institute a program.

Often, such programs depend on cooperative

efforts on the part of management, unions, and

educational institutions,

A successful program of this sort was run

cooperatively by the Ford Motor Co. and the

United Autoworkers prior to the planned shutdown of Ford’s Escort assembly plant in Milpitas, California, in the spring of 1983. (This

program is described in ch, 6.) During the 6-

month period prior to the shutdown, the company and union undertook an extensive education and retraining program. Initial testing

of over 1,600 workers showed that 11 percent

scored below the sixth grade level, and another

16 percent were below the eighth grade level.70

As a result, the union-management team realized that remedial education would be extremely important to the success of their

planned occupational retraining programs.

The team called in the Milpitas Unified School

District, which offered the workers courses at

the plant site, after hours in the 5 months before the plant actually closed in May 1983, and

during the day through most of the following

year. Intensive courses in basic education, algebra and pre-algebra, GED preparation, and

English as a second language were offered

each time, depending on the workers’ needs

and enrollment levels. The courses were repeated six times over the entire course of the

project, giving the displaced workers several

opportunities to participate.

Because of the flexible scheduling, the use

of the plant site both before and after the shutdown, and the union’s active encouragement,

—.-.———

TOcaro] A. upton, ~eetiflg the Educational Needs of the

UAW/Ford Displaced Workers (San Jose, CA: San Jose State

University, 1984), p. 13.

response to the course offerings was very high.

By May 1984, a year after the plant had closed,

over one-third of the laid-off workers (770) had

taken one or more classes. Of these, 341 entered occupational training programs and 205

were placed in jobs, for a total of 546 successful completions.71 As the result of these courses,

175 displaced workers passed the GED examination. 72

Designing Programs To Meet Adult Needs

Adults who do not think of education as a

continuing activity in their lives may not turn

to it even when education could help them

make occupational adjustments to threatening

changes in the local economy. Programs to attract these adults, therefore, are more likely to

succeed if they are designed to anticipate the

special problems and needs of the group they

are intended to serve. A successful remedial

education program for laid-off auto workers,

such as the Milpitas project described above,

may have quite different characteristics than

projects that are successful among rural people or economically disadvantaged adults in the

inner city. Three projects that have been specially designed to meet the needs of specific

groups of adults are discussed briefly below.

Adults who live in rural areas often have difficulty in obtaining educational services that

meet their specific needs. Some rural adults

who are functionally illiterate high school graduates, for example, may not be eligible for some

local GED programs and may live too far away

to take advantage of the voluntary literacy programs that can be found in many urban areas.

A program offered by the Center for Adult Education of the West Virginia Institute of Technology is aimed at serving this group.

Begun in the fall of 1983, the project is based

on the premise that adults will be more likely

to stay in remedial education if they learn to

read about issues that concern them most.

—- — 71A few workers were enrolled in remedial education courses

at that time, and many were enrolled in occupational training

classes, making it impossible to determine final job placements.

7“’Related Basic Skills Vocational Training UAW/FordMilpitas Adult Education Grant 200” (unpublished data from

Milpitas Unified School District, dated Apr. 9, 1984).
Ch. 7—Adult Education and Displaced Workers . 307

Adults are encouraged to define their own interests, and the materials used to teach them

(e.g., union contracts, welfare regulations, or

newsletters) reflect their life experience.

Courses are sponsored by unions, community

groups, and prisons, and these organizations

provide the location for classes. The program

uses adult adjuncts (former project participants

or staff from unions, prisons, and community

groups) to help in the teaching, and participants are paired to reinforce learning. This informal support network, along with using reading materials that participants are comfortable

with, helps overcome deficiencies in self-

-confidence. 73

Although a promising approach, the project

is only reaching a very small portion of the

State’s adults with literacy problems. About

250 adults participated in the program during

its first year, and another 175 people in the second year. Most were unemployed mine workers or textile workers. A variety of different

measurements of the effectiveness of the approach have been made by the project staff.

Participants given standardized tests frequently used in adult education classes did

very well in language skills. The program was

funded by the U.S. Department of Education’s

Fund for the Improvement of Postsecondary

Education through a 2-year $180,000 grant.74

In another part of rural America, a quite

different kind of literacy problem—the need for

computer literacy—is being addressed by an

Idaho project for rural adults. Acronymed

READI, the project arose from a recognition

that an increasing number of rural jobs in the

State required workers to use computers, but

training opportunities in rural areas were very

limited. Among other developments, computerized lumber mills were being built in the State,

and many farmers felt a need to learn how to

use computers in bookkeeping and farm management. Computers are also increasingly used

by the rural banking industry, local government, and county extension offices.

73charner and Fraser, op. cit., pp. 85-85.

7q111fc)rmat10n ~)rok,l{]e(] h}, the staff of the Center for Adolt ~~ducat ion of the tl’est \’ irginia Institute of Technolog~’.

Begun in the fall of 1983, the program is

administered by the University of Idaho’s cooperative extension department. Two major

goals were identified: developing a curriculum

to teach rural adults how to use computers

(programming computers is not part of the objective), and developing an appropriate delivery system for rural communities. Access to

computers has not been a problem, since computers in county extension offices and local

high schools, as well as the university’s extension system computer are available to participants.

The project relies heavily on local advisory

committees, who are actively involved in the

actual delivery of the program. Peer teachers

(local owners of small businesses, farmers, and

homemakers) are selected by the local advisory

committees and trained by project staff to recruit students and teach the courses under the

overall supervision of the project staff. This approach is intended to encourage participants

to exchange ideas and feelings, and increase

their self-confidence. The courses are provided

free of charge to participants, and are held two

evenings a week for a 4-week period. Job referral services are also made available to participants.

From the summer of 1984 through fall of

1985, about 500 people took the course. About

one-third of these people were self employed

people who use computers in their businesses.

Another third of the students were taking

courses to get jobs in such fields as bookkeeping, word processing, or office work. The project is expected to continue through the fall of

1986. It is funded by a $268,000 3-year grant

from the Fund for the Improvement of Postsecondary Education, and about $150,000 in

matching funds. This includes course development costs, as well as peer teacher training,

outreach, and delivery.

Urban areas generally have a far broader

range of educational services for adults than

is typically present in rural America. However,

cities that are confronted with widespread layoffs or unemployment may have an immediate need to provide job counseling, education
308 Ž Technology and Structural Unemployment: Reemploying Displaced Adults

and retraining, and other services to the unemployed that exceed local capabilities.

In Detroit, where heavy layoffs in the auto

industry in the early 1980s created massive

displacement, a project called the Communication/Information System for the Unemployed

(CISU) has tapped the potential of television

to bring education and information services to

large numbers of displaced workers. CISU is

sponsored by Wayne State University and a

number of other schools that formed the Southeastern Michigan Educational Television Consortium in the late 1970s, WTVS (the Detroit

public television station), the United Auto

Workers, the Michigan Employment Security

Commission, and a number of other organizations. 75

When the layoffs hit Detroit in the early

1980s, the consortium, in coalition with UAW,

the State employment security commission and

WTVS, were able to use television to provide

the unemployed with information on the local

job market, job-hunting techniques, and occupational training. In 1982, the coalition set

up CISU to provide information and education

services on a continuing basis, and in 1983,

CISU received a JTPA Title III grant from the

Governor’s office for job training to make

displaced workers aware of locally available

services.

CISU provides information to unemployed

viewers about services that are available locally

through use of public broadcasting, cable television, and instructional television fixed service (ITFS), A 24-hour cable television channel,

called the Working Channel, offers courses and

services related to job search assistance, job

listings, “survival” information services, GED

and ABE courses, and vocational training.

ITFS is used to deliver material for broadcast

to the many cable systems involved in the

project.

The Working Channel can be viewed not

only in homes equipped for cable, but also at

over 200 sites in southeastern Michigan. To

ps’rhis discussion of CISU is based on Norman D. Kurland &

Associates, op. cit., p. i’, and additional information provided

by CISU staff.

serve areas without cable, about 50 viewing

sites have been equipped with dish-antennas

that allow them to receive direct transmission

of programs through ITFS (this low-powered,

short-distance transmission system was discussed in the instructional technology section

earlier in this chapter). Another 150 viewing

sites have been set up in areas served by cable, as well. Sites include union halls, churches,

public service agencies, libraries, and community colleges, among others. Unemployed people also have the opportunity to come to these

centers to participate in working circles, groups

of 5 to 15 people that work together to address

common problems. Videoconferencing is used

so that different working circles can exchange

information and perspectives.

Unemployed workers in Detroit also can benefit from Wayne State University’s “weekend

college, ” a program begun in 1973 to reach

working adults through televised courses, complemented by classroom sessions on the weekends. In 1975, Michigan’s employment security commission held that unemployed workers

could receive unemployment insurance benefits while attending the weekend college. An

effort is being made to encourage unemployed

workers to use Pen grants and tuition grants

to enter the degree program.

Although it would be a mistake to generalize too much from these few examples, it is

clear that education programs that are aimed

at a specific part of the adult population—such

as unemployed workers or educationally disadvantaged adults—work best when they are

designed with the specific needs of the target

population in mind. Programs that are effective in responding to the educational objectives

of mature adult workers often require modifications in traditional curricula and teaching

methods, as well as innovative approaches in

the delivery of education. Often, these programs will involve linkages between educational institutions and business, unions, and

community organizations.

Targeting Occupational Training to Job Needs

Communities or regions that are responsive

to changing labor market needs are often able
Ch. 7—Adult Education and Displaced Workers ● 309

to attract new industry, even if they have lost

some of their old employment base. Local vocational education institutions can be an important factor in attracting new industry to an

area, as a 1984 study of Lowell, Massachusetts,

suggests. ’G The area has experienced a great

deal of structural change since 1960, with large

job losses in textiles and apparel and a major

influx of jobs in such industries as computers,

electronics, transportation equipment, and instrument manufacturing. Over the same

period, the occupational training system expanded rapidly and changed its curriculum to

meet the changing needs. Between 1970 and

1982, over 85 percent of the graduates of public and private vocational schools received skill

training that was “on target” or “reasonably

aligned” with occupational employment

changes. Courses in skills required by the

rapidly-expanding “high-tech” sector grew

twice as fast as other training programs.77

Firms generally consider the availability of

a skilled work force to be an important factor

in making location decisions. A recent OTA

report found that about half of all State efforts

to attract high-technology development included education and training programs.78

Strong vocational education programs alone

cannot create a healthy economy. However, a

recent report by a committee of the National

Research Council found that firms may well

be attracted to areas that have strong vocational

programs that meet the particular firms

needs. 79

A number of steps can be taken to target occupational training more closely to real-world

job needs. Information about the training

needed to develop skills for specific jobs can

Tepatricia M, F]ynn, Production Life Cycles and Their Implications for Education and Training (Waltham, MA: Bentley Col-

]ege, 1984).

771 bid., p. V-2.

78u ,s. Congress Office of Technology Assessment, Technology, innovation, and Regional Economic Development, OTASTI-238 [Washington, DC: U.S. Government Printing Office,

1984), p. 62.

7QNationa] Research council Committee on Vocational Education and Economic Development in Depressed Areas, Education for Tomorrow’s Jobs (Washington, DC: National Academy Press, 1983), pp. 66-67.

be very important. Sometimes, careful study

will reveal mismatches in the requirements of

vocational skills training courses and the kinds

of skills that are really needed on a job. For example, an extensive study of job requirements

in Canada found that, while communications,

reasoning skills, and interpersonal skills were

important to a wide variety of jobs, vocational

skills training courses included requirements

far beyond these generic skills, especially in

mathematics and science. As a result of the

study, the Ontario community colleges greatly

reduced the science component in several skills

training courses. In the United States, the Department of Defense, through such efforts as

the Army’s Baseline Skills Research Project

(discussed earlier in this chapter), is developing a great deal of information about the basic

education and training requirements needed

to perform specific jobs in the military. Since

many military jobs have civilian counterparts,

this information may be useful to corporate

trainers and vocational education teachers outside of DOD.

Another approach to closer targeting of vocational courses to real-world training needs is

collaboration between institutions that provide

vocational education and local business. Since

passage of the Vocational Education Act of

1963, private sector involvement in planning

of vocational education has been encouraged

through various advisory councils at all levels

of government. The National Research Council study referred to above found that highquality vocational education programs typically had developed close ties with business

and labor.80 However, it also concluded that

more effort is needed to extend collaborative

ventures to other programs and situations.

The National Research Council study focused primarily on vocational education in the

secondary schools. However, the trend towards

increased partnerships between community

colleges and local business also can lead to

closer targeting of vocational education with

the needs of the local labor market. These arrangements with business take a variety of

‘Ibid., p, 68.
310 ● Technology and Structural Unemployment: Reemploying Displaced Adults

forms, including plant-specific training provided by the college under contract with a local employer, equipment use or donation, industry assistance in developing programs, faculty

assignments in industry, industry personnel

provided as part of the instructional staff, sharing of facilities, and on-the-job training.

Employees in firms engaged in such partnerships often stand to benefit from the arrangement, Some employees who might not participate

in a skills training course may be encouraged

to do so if it is linked to their own firm. Some

firms pick up the cost of courses when their

employees take them, and a few even allow employees to take these courses on company time.

Lack of self-confidence may also be overcome

when courses are offered at the workplace and

classes are made up of peers, rather than

younger, full-time students.

Such cooperative arrangements benefit community colleges in several ways by broadening their ability to meet community needs, enhancing program offerings, and increasing

revenues. However, concern exists that partnerships could lead some schools to lose sight

of their broader educational mission, and that

other important program commitments could

be diminished. Areas for concern include possible loss of faculty to industry; overreliance

on short-term programs to support the college;

the chance that industry’s specific training

demands may threaten the schools’ responsibility for providing programs with the same

standards as its on-campus offerings; and the

danger that focusing on job-specific training

may limit the general employability of workers and reduce the adaptability of the work

force.

FEDERAL SUPPORT FOR ADULT EDUCATION AND TRAINING

While the Federal Government contributes

less than 10 percent of all funds for public education nationwide, it plays a more important

role in State and local programs providing

adults with basic education and vocational education. The Adult Education Act (AEA), administered by the U.S. Department of Education

(ED), contributes nearly half of the funds States

and localities spend for adult basic education

under this program. Under the Carl D. Perkins

Vocational Education Act, enacted by Congress in 1984, the States are now required to

target some of the grants they receive from the

Federal vocational education (Voc Ed) program

(also administered by ED) to provide more

vocational education opportunities to adults,

with the Federal Government authorized to

pick up half or, in some cases, all of the costs

of such programs.

Due to changes made in 1984, the AEA and

Voc Ed laws authorize States to give employers, for-profit schools, and businesses that specialize in educational services a greater role in

these programs than heretofore, The 1984 amendments also call for greater coordination of these

programs with JTPA (which is administered by

the Department of Labor). Some funds appropriated under Title II of the Job Training Partnership Act are earmarked to State continuing

education agencies, including vocational and

adult education agencies.

Most other kinds of continuing education receive little direct support from the Federal Government, but indirect support is important. The

tax code allows businesses to treat the costs of

training work forces as a normal business expense in calculating their Federal taxes, and

individual workers can write off tuition expenses for courses that are directly related to

their current jobs. Also, from 1978 through

1985, employees did not have to consider tuition and other forms of educational support

provided under qualified company programs

as income on which they owe Federal taxes.

This provision will not apply in the 1986 tax

year unless extended by Congress. Some adults

also receive support from Federal student aid

programs.
Ch. 7—Adult Education and Displaced Workers ● 311

The Adult Education Act

The Adult Education Act, first enacted in

1966 but amended most recently in 1984, is the

largest Federal program supporting remedial

education for adults. AEA provides grants to

States for local programs of adult basic education, adult secondary education, and English

as a second language. The Federal Government

is authorized to provide up to 90 percent of the

cost of providing these services, with the balance contributed by the State. In practice, the

State cost-share varies significantly, Some

States contribute the minimum, while others

pick up three-quarters or more of the cost of

providing these services.

About 2.3 million people took part in AEAsupported projects in the 1981 program year,

the last year for which official data on participation are available. According to unofficial

data provided by State administrators, about

2,6 million adults were served by AEA projects

in 1984, including 1.8 million people in ABE

classes, and 760,000 people in ASE courses. An

estimated 281,000 people completed GED requirements in 1984. The 1984 information is

not based on official U.S. Department of Education data, however. In 1981, the Administration placed restrictions on the kinds of data that

the States were required to report under AEA.

As a result, much of the State and local information for program years 1982 through 1985

is based on data provided unofficially by the

States. In reauthorizing the program in 1984,

Congress authorized the Department of Education to obtain additional program data from

the States, so that more detailed official reporting on AEA can be expected in the 1986 program year. Table 7-6 shows selected characteristics of participants in the AEA program.

Federal funding for AEA has fluctuated over

the last 5 years; in fiscal year 1981, $100 million was appropriated for the program. In fiscal year 1982, funding for AEA was reduced

to $86.4 million. In fiscal years 1983 and 1984,

funding was increased to $95 million and $100

million respectively .81 The Adult Education Act

Amendments of 1984 (Title I of Public Law 98-

511) authorized the appropriation of $140 million in adult education funds for fiscal year

1985, and such sums as may be necessary for

fiscal years 1986 through 1988. Congress appropriated $102 million for the program in fiscal year 1985 and a like amount for fiscal year

1986. The adult education program is a forwardfunded program, so that funds actually appro81ApprOpriatiOns for State grants, teacher training, and special projects gradually increased from about $2o million in fiscal year 1965 to a high point of $122 million in fiscal year 1980.

(This included $22 million in emergency funding for English

training of Cuban, Haitian, and Indochinese immigrants, )

Table 7-6.—Demographic Characteristics of Participants in Adult Education Projects, by Program Type

Participation, by program type (percent)

Adult basic Adult secondary English as a

Characteristic education education second language All programs

Sex:

Male ., . . . . . . . . . . . . . . . . . . . . . . . . 45.6 41.1

Female. . . . . . . . . . . . . . . . . . . . . . . . 54.4 58.9

Age:

16 to 21 years old . . . . . . . . . . . . . . 31,0 47.5

22 to 34 years old . . . . . . . . . . . . . . 37.6 33.8

35 to 59 years old . . . . . . . . . . . . . . 24.2 15.8

~ 60 years old. . . . . . . . . . . . . 7.3 2.9

Ethnicity:

Hispanic . . . . . . . . . . . . . . . . . . . . . . 24.8 6.6

Native American. , . . . . . . . . . . . . . . 1.1 1.4

Asian/Pacific , . . . . . . . . . . . . . . . . . . 1,7 0.1

Black, not Hispanic . . . . . . . . . . . . . 22.5 18.7

White, not Hispanic . . . . . . . . . . . . . 49.9 73.2

SOURCE U S Department of Education, Off Ice of Vocational and Adult Education

47.4

52.6

22.9

44.9

25.9

6.4

57.3

0.1

31.1

0.5

11.1

41.2

58.8

22.4

42.7

28.2

6.7

20.6

1.2

7.5

27.4

43.3
312 . Technology and Structural Unemployment: Reemploying Displaced Adults

priated for fiscal year 1986 will be expended

between July 1986 and September 30, 1987.

In program year 1982, the Federal Government provided about 44 percent of the $229

million that State education agencies and local school districts spent on AEA programs.

The Federal share declined to about one-third

of AEA costs in program year 1983; about $259

million was spent on AEA programs that year,

with the State and local contribution amounting to $173 million. California accounted for

most of the increase in State spending, contributing $103 million in program year 1983, compared to $64.8 million in program year 1982.

The decline in the Federal share also reflects

the reduced Federal expenditures for AEA in

fiscal year 1982.

In 1978, Congress called for expansion of the

AEA delivery system so that it would include

other organizations besides the public school

system, including business, labor unions, and

community organizations. As shown in table

7-7, a high proportion of adult education

projects, especially ABE projects, are now

given outside traditional elementary and secondary school settings. Congress also authorized the States to allocate some of their AEA

funds to nonprofit organizations to establish

or expand adult education projects. In its 1984

amendments, Congress authorized States to

use AEA funds for projects run by for-profit

organizations that could make a “significant

contribution” to attaining the objectives of the

act, and if the for-profit agency could provide

“substantially equivalent education at a lesser

cost” or provide “services and equipment not

available in public institutions.”82

Section 310 of AEA requires States to allocate at least 10 percent of their Federal grant

to special experimental demonstration projects

and teacher training. Special projects include

those involving innovative methods, materials,

or programs. Funding for Section 310 projects

involving instructional technology doubled between fiscal years 1983 and 1985, from $600,000

to $1.2 million. States have also used Section

310 funds to develop new assessment materials and procedures, such as the California

Adult Student Assessment System (CASAS).

CASAS is intended to improve competencybased adult education programs.

Section 309 of AEA authorizes the Secretary

of Education to set aside 5 percent of appropriated funds (but only when annual appropriations are over $112 million) for special research,

development, demonstration, dissemination,

and evaluation projects. Three kinds of activities are authorized: 1) “improving adult education opportunities for elderly individuals and

adult immigrants”; 2) “evaluating educational

technology and computer software suitable for

providing instruction to adults”; and 3) “supporting exemplary cooperative adult education

azAdu]t Education Act Amendments of 1984, Public Law 98-

511, Sec. 304,

Table 7-7.—Selected Characteristics of Adult Education Projects

Participation, by program type (percent)

Adult basic Adult secondary English as a

Characteristic education education second language All programs

Setting:

Elementary school . . . . . . . . . . . . . .

Secondary school . . . . . . . . . . . . . .

Community college/vocationaltechnical school . . . . . . . . . . . . . .

Adult learning center . . . . . . . . . . .

Other . . . . . . . . . . . . . . . . . . . . . . . . .

Format:

Individualized instruction . . . . . . . .

Group instruction. . . . . . . . . . . . . . .

Combination . . . . . . . . . . . . . . . . . . .

12.6

14.4

5.5

26.3

41.2

37.7

27,1

35.2

5,6

44.1

12.2

25.9

12.2

66.4

21.5

12.1

5.5

32.5

15.0

33.8

13.3

13.8

41.8

44.4

8.6

29.0

9.8

27.6

25.1

44.0

27.7

28.2

SOURCE: U S Department of Education, Office of Vocational and Adult Education
Ch. 7—Adult Education and Displaced Workers ● 313

programs which combine the resources of business, schools and community organizations. ”

Funding for AEA has not reached the $112 million level, and Section 309 has not been used.

The Vocational Education Program

A continuing program of Federal support for

vocational education has been in place since

1917, when the Smith-Hughes Act first authorized grants to States for vocational education

in public schools and other noncollegiate institutions. Several subsequent pieces of legislation, including the vocational education acts

of 1946, 1963, 1976, and 1984 expanded Federal support for vocational education. While

Federal funds comprise only about 10 percent

of total State and local vocational education expenditures, most of these funds are targeted for

specific objectives (such as serving the needs

of special populations or promoting innovation

in vocational education), and often support half

or more of a State’s activities aimed at these

specific objectives.

In 1984, Congress made far-reaching changes

in the Federal vocational education program

through enactment of the Carl D, Perkins Vocational Education Act (Public Law 98-524).83 The

new law places substantially more emphasis

on providing vocational education opportunities to adults, displaced homemakers and single parents, and workers displaced by technological change or in need of training to remain

employed. The law also authorizes States to use

Federal funds to support employers in training and retraining of employees in some circumstances, and emphasizes basic skills education to a greater degree than prior vocational

education law. State vocational education

plans are to specify coordination provisions

with Job Training Partnership Act and the

Adult Education Act,

BsPub]lc Law 98-524 amends and replaces the Vocational Education Act of 1963 (Public Law 88-210). It is named the Carl D.

Perkins Vocational Education Act, in honor of the late Congressman from Kentucky who died in 1984,

The 1984 law authorizes the appropriation

of $950 million for vocational education in fiscal year 1985, and such sums as may be necessary for fiscal years 1986 through 1989, to

support several existing and new program objectives. As a forward-funded program, fiscal

year 1985 funds will be disbursed in the July

1985 to September 30, 1986 period. Major provisions in the law that apply to training and

retraining of adult workers are discussed

below.

Basic State Grants (Title II).–Basic grants, which

are allocated to the States by a funding formula,

comprise about 84 percent of the total funds

authorized under the 1984 act. States can use

these basic grants for three kinds of activities:

State administration; provision of “vocational

education opportunities” to certain population

groups (Title IIA); and for “improvement, innovation and expansion” of vocational education (Title IIB). Congress appropriated $782.5

million for the basic grants in fiscal year 1985,

and $782,4 for fiscal year 1986.

Of the total basic State grant, up to 7 percent

can be used for State administration, and of the

balance remaining, 57 percent is to be used to

provide vocational education opportunities.

This is to take the form of vocational education services and activities that “meet the special needs” and enhance participation of several groups of people, including adults in need

of training or retraining, and single parents and

displaced homemakers (Title IIA). States must

match the 12 percent of the Title 11 allocation

that is earmarked for adult training and retraining needs, while there is no matching requirement for the State in the case of the 8.5 percent of the Title II funds that is directed at

single parents and displaced homemakers.

Other groups of people covered by the targeted

Title 11A allocations are handicapped persons,

the disadvantaged, individuals in programs to

eliminate sex bias and stereotyping in vocational education, and criminals in correctional

institutions.

States have greater discretion in the use of

the remaining 43 percent of their basic grant

that is earmarked for improvement, innovation,
314 ● Technology and Structural Unemployment: Reemploying Displaced Adults

and expansion of vocational education under

Title IIB. Among many other things, States are

authorized to use these funds for improving or

expanding adult programs for upgrading the

skills of employed workers, workers who are

unemployed or threatened with displacement

due to technological change or industrial dislocation, workers with limited English proficiency, and displaced homemakers. The law

also authorizes States to use Title IIB funds to

provide stipends for students with “acute economic needs” which could not be met through

work-study programs. The stipends cannot exceed “reasonable amounts” prescribed by the

Secretary of Education.

Under both parts of Title II, States are authorized to use employers, private vocational

training institutions and private postsecondary

institutions as providers of training when these

private institutions could contribute to the objectives of the State plan and could provide

equivalent training at less cost, or could provide equipment or services not available at public institutions. This opens up the possibility

that more training and retraining activities conducted by employers will be supported by Federal funds.

State’s may use Title 11A allotments for basic

skills instruction when it is related to instructional programs for those special need populations targeted by the act, Title IIB funds may

be used for curriculum development in vocational education, including application of basic

skills training.

Special State Programs (Title III).–Title III of the

act authorizes grants for five kinds of special

State programs, including programs for adult

training, retraining, and employment development. This special grant may be used for vocational education programs authorized under

Title 11 of the law that meet the needs of:

1. high school graduates or dropouts who

need additional vocational education to

enter the labor force;

2. unemployed people who need training to

increase their employability;

3. employed individuals who need retraining

to keep their jobs, or training to upgrade

skills so that they can obtain a better or

more dependable job;

4. displaced homemakers and single parents;

5. workers 55 and over; and

6. employers who require assistance in training individuals for new employment opportunities or in retraining employees for

skills needed because of changes in technology, products, or processes.

The funds can be used for “short-term programs of retraining” for upgrading or updating skills due to changed work requirements,

and for “education and training programs designed cooperatively with employers. ” The law

identifies several examples of such cooperative

efforts, including:

1.

2.

3.

4.

The

institutional and worksite programs, including apprenticeship programs;

quick-start customized training in new or

labor short industries;

building linkages between vocational education institutions and private sector employers; and

recruitment, job search assistance, counseling and remedial services, and information and outreach programs.

special program funds can also be used

to cover the costs of serving adults in other

vocational education programs, including instruction costs, and costs of keeping school facilities open longer.84

Although the law authorized the appropriation of $35 million for this special program for

fiscal year 1985 (and such sums as are necessary for fiscal years 1986 through 1989), Congress did not appropriate funds for this purpose in fiscal years 1985 and 1986.

Another special State program authorized by

Title III is for career guidance and counseling

(such as activities to assist individuals in maintaining marketability of current job skills in

established occupations, developing new job

skills to move away from declining occupaMOther examples listed in the law include curriculum development, acquisition of instructional equipment and materials,

personnel training, pilot projects and related services, and instruction for apprentices in apprenticeship programs.
Ch. 7—Adult Education and Displaced Workers • 315

tional fields, and developing midcareer job

search skills). Also, Title III authorized a special program for industry-education partnerships in high-technology occupations. Congress did not provide appropriations for these

programs in fiscal years 1985 and 1986.

National Programs (Title IV).–Some of the national

programs called for by the law also have direct

relevance to displaced workers. (National programs are administered directly by the Department of Education, not the States. ) Research

is to be conducted on, among other things,

strategies for improving worker training and

retraining, and development of new curriculum materials and methods relating to new

technology, and assessment of workplace

changes and its effect on individual jobs. An

independent assessment is to be made of the

vocational education programs assisted by the

act, including the effectiveness of the program

in reaching adults and other people identified

in Title 11A. The National Center for Research

on Vocational Education (now housed at Ohio

State University) is to undertake research and

development on effective methods to provide

quality vocational education to these targeted

individuals, and to report annually on joint

planning and coordination of vocational education law with JTPA. (The report is to go to

Congress and the Secretaries of Education and

Labor).

The Secretary of Education is directed to set

up at least one center for retraining of displaced workers to demonstrate the application

of vocational education theories to the specific

problems encountered in retraining displaced

workers. The Secretary is also to establish

model centers to focus attention on the vocational education needs of older individuals

(those 55 and above), including training and

retraining of older workers whose skills have

been rendered obsolete by technological change,

and older individuals who are displaced homemakers.

Job Training Partnership Act

The role of remedial and vocational education in retraining displaced workers under Title 111 of JTPA is discussed in detail in chapter 6. In addition, Title II of JTPA can be used

to provide economically disadvantaged adults

and youths with basic education, vocational

education, and other educational opportunities. 85 For fiscal year 1984, Congress appropriated about $1.9 billion for Title 11A activities,

which are directed at provision of training opportunities for economically disadvantaged

youths and adults.

The law requires States to allocate 8 percent

of these funds to State educational agencies,

including vocational and adult education agencies. According to U.S. Department of Education survey data on the use of the set-aside,

States actually utilized $62.8 million for this

purpose in the initial year (fiscal year 1984).

Nearly half of. the set-aside was used for postsecondary education, and about one-third was

used for vocational education; only about 17

percent of these funds ($10.7 million) was used

for remedial education.86 Thus, it appears that

most of the Title II set-aside is being used for

postsecondary and vocational education programs, and that the State agencies are using

only a small portion of the set-aside for remedial education.

While displaced worker projects supported

by Title III of JTPA often provide remedial education, no special funds are set aside for remedial or other kinds of education under Title III.

As is discussed in chapter 6, there is an apparent reluctance on the part of some State agency

administrators to encourage greater use of remedial education in Title III projects for displaced workers. The possibility of establishing

a set-aside of funds for remedial education in

Title III projects is discussed in chapter 2.

‘Remedial education for adults was also authorized under the

Comprehensive Employment and Training Act (CETA), which

JTPA replaced. Under CETA, about 90,000 adults attended

classes in remedial education, English as a second language, and

high school equivalency in 1980. See Congressional Budget Office and National Commission for Employment Policy, CETA

Training Programs: Do They Work for Adults? [Washington, DC:

U.S. Government Printing Office, July 1982), p. 8.

‘Information provided by the Office of Vocational and Adult

Education, U.S. Department of Education. An additional $13.2

million was used for “other” purposes such as corrections

programs.
316 • Technology and Structural Unemployment: Reemploying Displaced Adults

As has been mentioned, Congress, in its 1984

reauthorizations of both the Adult Education

Act and the vocational education program, recognized a significant need for careful coordination of these programs with JTPA, which is

administered by the Department of Labor.

Among other things, State planning periods under the vocational education program are to be

“coterminous” with those under JTPA. Local

applications for State assistance under the

vocational education program are to be made

available for review by the appropriate JTPA

administrative entity.

Educational Support for Individuals

For several years, the Federal Government

has encouraged employed adults to participate

in employer-provided tuition assistance programs by making such assistance tax exempt

to the employee. Job-related tuition assistance

has never been considered income for employees, and is therefore tax exempt. In 1978, Congress extended this exemption to all forms of

tuition assistance, including tuition assistance

for courses that were not job related, provided

under qualified company educational programs.

This provision lapsed at the end of 1985, just

as this report was being completed, raising the

possibility that employer-provided tuition assistance that is not directly related to an employee’s current job will be taxed as ordinary

income in the 1986 tax year. However, as is discussed in chapter 2, legislation to extend the

provision are under consideration in the 99th

Congress. For example, a provision in H.R.

3838, the proposed tax reform bill that was

passed by the House on December 17, 1985,

would extend the provision through the end of

1987.

Federal financial assistance programs for

students may help some employed workers,

displaced workers, and homemakers who elect

to participate in postsecondary vocational or

academic education. Forms of Federal student

aid include direct loans, guaranteed student

loans, grants, veterans assistance, and other

kinds of direct assistance to special populations. Many Federal assistance programs for

postsecondary education support students in

vocational and technical education programs

at eligible (accredited) institutions as well as

academic students at colleges and universities.

The largest Federal assistance programs are

shown in table 7-8.

A number of practical barriers make it difficult for adults to compete for the available

financial assistance. Most employed adults participating in adult education are enrolled halftime or less because they are working or have

family responsibilities that make it difficult to

enroll full time in a program. Under most of

the programs, students must be enrolled at least

half-time to qualify for aid. Exceptions are Supplemental Educational Opportunity Grants and

College Work-Study; even though 10 percent

of the funds in these programs can be given

to people enrolled less than half-time, few

schools earmark the full 10 percent. Students

who are not enrolled in a degree or certificate

program, or other formal program of preparation for a recognized vocation, are ineligible

for most forms of assistance except Guaranteed

Student Loans. Adults who own their own

homes may be penalized in calculations of financial need. Another problem, affecting displaced workers especially, is that determination of need for financial aid is based on the

previous year income. Hence, workers who

had a good income prior to a layoff maybe ineligible for aid. As is discussed in chapter 2,

a number of different proposals have been

made to expand financial assistance opportunities for displaced workers and adults generally. Some bills, for example, propose to amend

the Higher Education Act to discount home

equity in calculating financial aid needs for

displaced workers, and would base the determination of need on current income.

Often, student financial aid packages involve

combined support from more than one Federal

loan and grant programs, as well as support

from other public and private institutions. Federal support (both loans and grants) generally

cannot exceed $5,000 in any given academic

year. Financial aid can be used for tuition,

room and board, and educational assistance.

Adults who are not in residence at a school

may be eligible for limited “cost of attendance

allowances” which may defray a portion of

their living expenses while they are enrolled.
—

Funding level

FY 1985

Program ($ millions)

Pen Grantsb

3,612 -

Table 7-8.—Selected

Eligible recipients

Financially needy undergraduates en- X x Grants, maximum $1,900 in award year

rolled at least half-time in institutions of 1984-85 Awards usually disbursed

postsecondary education who are main- through the institution in which students

taining satisfactory academic progress are enrolled Pen Grants may be used m

conjunction with other Federal assistance

Supplemental Educational

Opportunity Grants 412 Available through school to needy stu- X x

dents as supplement to Pen Grants or

to help with other educational needs

Schools can allocate 10% of funds for

less than half-time students

Guaranteed Student Loans 3,798 Students enrolled half-time at eligible x x x x

postsecondary institutions Students

from families with incomes of more than

$30,000 undergo a financial need test

National Direct Student to determine eligibility

Loans 217 Students accepted or enrolled at a par- X X X X

ticipating postsecondary institution who

demonstrate financial need

College Work Study 592

Veterans Educational Assistance

Program (GI bill) 1,295

—— aon-the-lob tramna ~joorentlceshlm etc

Grants, award level made by school but

must be between $200 and $2,000

Educational loans from participating

banks and lenders, guaranteed through

government

Loans provided through participating

schools

Lower income undergraduate and gradu- X x x x Grants to institutions that cover 80% of

ate students at participating Institutions wages paid to students for part-time emUp to 10 percent of CWS funds can be ployment

used for students enrolled less than

half-time

Miltary personnel on active duty for 180 X x x x x Up to 45 months of assistance provided

days between 1955 and 1976 directly to eligible veterans (1.5 months

of assistance per month of active service)

Assistance can be used for education,

on-the-job training, apprenticeships

correspondence courses, and workstudy programs

.

Comments

About 2,850,000 students received Pell

Grants in 1984-85 school year for an

average award of $990 In 1983-84,

75% of awards were to students whose

family incomes were $15,000 or less

About 655,000 students at 4,200 postsecondary schools received SEOGs in

1984-85 school year

33 million loans entailing $75 billion in

borrowed capital were disbursed in FY

1984, including some multiple awards

During 1984-85 school year, 867,000

students received loans averaging $800

from NDSL. Three fourths of NDSL

awards have been given to students

whose family incomes are $20,000 or

less Postsecondary institutions must

match Federal loan capital contributions

on a l-to-9 basis

In 1984-85, 737,000 CWS awards were

made with total funding including matchnng funds by schools) amounting to $649

million In 1982-83, about 70% of the

awards were to dependent undergraduates, 20% were to independent undergraduate students, and 10% were for

graduate students

In FY 1983, GI bill educational assistance was provided to 476,104 veterans

in college-level courses, 9,402 in correspondence courses, 1,118 in flight

school, 25,444 in on-the-job training,

84,410 in secondary and other schools,

and 2,232 in farm programs

bFormer~y the Basl~ E&ca~,onal Opporlunlty Grant pr~gra~ FY 1985 f“nd)ng level sh~~n does not lnclucje $250 MIIIIOI)to cover FY 1984 shortfalls

SOURCE Off Ice of Technology Assessment Oata used In this charl was assemblec! from several sources Includlng Charlotte Jones Fraas Student Financial Atd Programs FY 86 Budget Library of Congress Congressional Research serv!ce Issue

Brief 85056 Dec 16 1985 and Karen Spar Federa/ Emphyrnenf and JofJ Trammg Programs Library of Congress Congressional Research Serwce Repofl 84.79 EPW Apr 30 1984
Chapter 8

The Effects of Techno ogical Change

on the Nature and Availability of Jobs
Page

Overview and Findings . . . . . . . . . . . . . . . . . . . . . . . . .....................321

Technological Change and the Availability of Jobs . .....................322

Productivity and Jobs . . . . . . . . . . . . . . . . . . . . . . . ......................322

Occupational Shifts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. ... ... ... ..330

Technological Change and the Nature of Jobs . .........................335

Technology and the Range of Job Options . ..........................337

Tasks and Skills Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...........341

Redesigning Jobs as Part of Technological Change . ...................349

Technology and the Organization of work . . . . . . . . . ....................354

New-Model Organization of Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..356

Appendix 8A: Forecasting the Effects of Technological Change on Jobs ...362

The Bureau of Labor Statistics Occupational Projections . . . . . . .........363

The Dictionary of Occupational Titles . ..............................366

List of Tables

Table No. Page

8-1.

8-2.

8-3.

8-4.

8-5.

8-6.

8-7.

8A-1.

Figure

Productivity Improvement Activities Undertaken in the

—

United States, Based on a Survey of Industrial Engineers . . . . . . .. ...327

Operating Revenues, Employment, and Labor Productivity,

Telephone and Telegraph Services Industry (SIC 4811 and 4821)

1972-85 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........................328

Telephone Operator Employment and Long-Distance Calls, 1950-80 ..328

Trends in Output, Employment, and Productivity, Miscellaneous

Plastics Products Industry (SIC 3079), 1972-85 .....................329

Percentages of Total U.S. Employment Accounted for by

Major Occupational Groups, 1900-80 . . . . . . . . . . . . . . . . . . . . . . . . . ....331

Aerospace Industry Employment by Occupational Group, 1968-85 ...335

The Changing Tasks of Medical and Radiologic Technologists .. ....347

Occupations With the Largest Job Growth and Fastest Growing

Occupations as projected by the Bureau of Labor Statistics, 1984-85..364

List of Figures

No. Page

8-1,

8-2.

8-3.

8-4.

8-5.

8-6.

Private Business Sector: Output per Hour of All Persons,

Output per Unit of Capital and Multifactor Productivity, 1948-84.....326

Telephone Communications (SIC 4811) . ...........................327

Major Occupational Groups of the U.S. Civilian Labor Force,

1900-80 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ......331

Total Private Nonagricultural and Manufacturing Employment,

1947-84 . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................332

Production Workers as a Percent of Total Manufacturing Employment,

1947-84 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ......332

Control Network for a Semiautomatic System . ....................,342
Ch. 8—The Effects of Technological Change on the Nature and Availability of Jobs ● 323

of technology to replace human labor.2 At the

same time, unless demand and output are rising faster than labor productivity, some jobs

will be lost. Yet if U.S. industry does not become more productive, many sectors are likely

to lose out to foreign competition and even

more jobs will disappear.

Overall demand remains the central factor

determining the number of jobs created or displaced. Increased productivity can lower a

firm’s or an industry’s costs, thus enhancing

competitiveness, raising consumption, and creating more jobs. Moreover, when labor-saving

technology is introduced during a time of general economic growth or is adopted gradually,

normal attrition may take care of all or most

reductions in the work force without any need

for layoffs. For these reasons, increases in labor productivity do not necessarily equate to

displacement. In addition, technological advances that create new products and new consumer demand are a powerful force for economic growth and the creation of new jobs.

Labor productivity is only one factor determining U.S. competitiveness. Other elements

include: good labor-management relations,

well-trained employees, improved design so

that products can be made more easily and perform better, and higher quality in terms of

meeting design specifications more closely, Labor productivity is important to lower costs

and greater competitiveness, but it is one

among many contributing elements.

An example of an approach to improved

competitiveness that includes higher labor

productivity, a better product, and improved

labor relations comes from General Electric

(GE) plant making household dishwashers in

Louisville, Kentucky.3 The plant underwent a

——.

ZHistorically, the United States has been particularly resourceful with labor-saving devices. See, for example, H.J. Habakkuk,

American and British Technology in the Alineteenth Century;

The Search for Labor-Saving inventions (New York: Cambridge

University Press, 1962).

3Based on an OTA site visit and on James Stevens, “Forging

the Focused Factory, ” Appliance, June 1983, pp. 34-39; Steven

C, Wheelwright and Robert H. Hayes, “Competing Through

Manufacturing, ” Harvard Business Review, vol. 63, JanuaryFebruary 1985, pp. 99-109; H. Garrett DeYoung, “GE: Dishing

Out Efficiency, ” High Technology, vol. 5, May 1985, pp. 32-33.

major modernization program in the late 1970s.

Aware of advances in Japanese manufacturing,

GE rejected an $18-million proposal to make

incremental improvements in the plant and instead chose a $38-million program to cut costs,

improve quality, and protect the company’s

competitive position.

While making major changes in the manufacturing process, the program also altered

product design and the use of human resources.

By 1983, the refurbished plant was in full operation. The newly designed dishwasher is less

expensive to manufacture and is of higher quality. The rejection rate in GE tests has dropped,

the number of customer service calls has fallen,

and the dishwasher was rated highly by an independent consumer organization, While output per employee rose 33 percent, increased

demand for the product kept plant employment

stable.

In the past, manufacturing procedures at GE

were developed after the product designers had

completed their work. For the Louisville program, the product and process were designed

together by a multidisciplinary team, The product design allowed the use of a highly controlled manufacturing process, including a central computer and microprocessors at several

points in the process. The interior of the dishwasher is a one-part plastic tub, produced automatically by a series of high-pressure injection

molding machines. Molded-in features reduce

the number of parts requiring assembly and allow many assembly tasks to be automated. The

tub travels through numerous stages of production via an automated material-handling system. Throughout subassembly, parts are manufactured as needed, so that inventory costs are

kept to a minimum.

The program also included a new approach

to employee relations. Management discussed

with union officials and first-line supervisors

the market and business conditions impelling

change. Employees were retrained for their

new assignments, and information centers

were established on the shop floor to keep communication channels open. The production

equipment was designed to give workers greater

control over their work environment than in
traditional assembly line jobs. For example, in

final assembly, an overhead conveyor positions

the near-complete dishwashers. The person assembling each unit can adjust the swiveling

carrier that holds the dishwasher to a comfortable position. Also, the conveyor system is designed so that workers have more than the

usual control over the pacing of tasks.

In the GE Louisville plant, it is difficult to

isolate the effects of improved labor productivity from other factors that helped to lower

unit production costs and improve competitiveness. Automation of the plant, including

integration of the product design with new

manufacturing equipment and processes, contributed to raising labor productivity. The new

approach to labor-management relations and

extra training for the work force may also have

contributed to higher labor productivity, and

probably helped to improve utilization of the

new capital equipment as well. The lower rejection rate after in-plant tests helped to hold

down costs. The greater reliability in use (as

evidenced by fewer service calls) and the design characteristics of the new dishwasher

made it appealing to customers. All these factors combined contributed to increase sales,

which resulted in no loss of jobs, despite higher

labor productivity.

It is also difficult to isolate the effects of technology (in the sense of product design and

productive apparatus) in improving labor productivity. In general, technological change

rarely occurs in an otherwise unchanging environment. Other factors, such as labor-management relations, may change as well. The mov-
Ch. 8—The Effects of Technological Change on the Nature and Availability of Jobs c 325

ing assembly line, developed by Henry Ford in

1914, is one of the best-known examples of productivity-enhancing technological advance.

This innovation was credited with an eightfold

improvement in productivity over traditional

methods, which brought the cost of an automobile within the reach of a mass market.4 However, Ford’s innovations were not confined to

technology alone. He also made significant

changes in labor policy, offering an 8-hour

workday and doubling wages, to $5 per day.

In this historic case, the role of technology cannot be entirely separated from other factors

affecting productivity.

Different Measures of Productivity

Another way to illuminate the importance of

human factors in raising productivity, lowering costs, improving quality, and maintaining

competitiveness is to consider different measures of productivity. The term “productivity”

usually denotes output per unit of labor, but

it can refer to both labor and capital, as in the

following definitions:

● labor productivity: output per labor-hour;

● capital productivity: output per unit of capital (physical assets); and

● multifactor productivity: output per unit

of labor and capital, measured in dollars. s

The Bureau of Labor Statistics (BLS) compiles data on productivity as output divided by

units of both labor and capital, and analyzes

the data by sector for private business, private

nonfarm business, and manufacturing.” Rising

labor productivity combined with rising capital expenditures indicate that technology is being used to make labor more efficient and to

limit the wage bill. This is a familiar concept,

and generally describes the pattern in U.S. industry since World War II. The less familiar

measure of capital productivity indicates how

efficient the use of equipment, inventories,

qWilliam J. Abernathy, The Productivity Di)emma: Roadblock

to Innovation in the Automobile Industry (Baltimore: John Hopkins University Press, 1978).

sOutput is estimated in dollars, adjusted for inflation.

‘U.S. Department of Labor, Bureau of Labor Statistics, “Trends

in Multifactor Productivity, 1948 -1981,” Bulletin 2178, September 1983. The analysis excludes government enterprises, which

accounted for 2 percent of total business output in 1981.

buildings, and land is, in terms of raising output. Equipment—the capital asset that embodies new technologies—was the fastest rising

capital input from 1948 to 1981, growing 5 percent per year.

As figure 8-1 shows, output per hour for all

persons (labor productivity) rose more than

twofold from 1948 to 1984. Output per unit of

capital assets, on the other hand, did not rise.

For over three decades there was “no apparent long-term savings in the amount of capital

services required to produce a unit of output.”7

New technology, therefore, has not lessened

capital costs in the U.S. economy since World

War II; it has served to limit labor expenditures. In other industrialized nations, capital

productivity declined since 1955—except for

Japan, which experienced a moderate rise.8

The reasons why U.S. capital productivity

stayed flat for nearly 40 years are not clear, but

its failure to grow argues for greater attention

to the efficient use of technology. This may

come about through widespread adoption of

tactics that many successful companies here

and abroad already use; for example, closer

links between product design and manufacture, less idle time for capital equipment, better training for employees so they can use

equipment more effectively, and improved labor relations that give employees a greater say

and greater stake in the future of the enterprise. 9 More efficient use of capital equipment

can also contribute to lower costs and higher

quality. Attention to improving human capital

is also likely to raise labor productivity as well

as capital productivity.

Both technology and people are vital resources

for more efficient economic production. A sur-

. . . ..——

‘Ibid., p. 16.

6Luc Soete and Christopher Freeman, “New Technologies, Investment and Employment Growth, ” Employment Growth and

Structura) Change (Paris, France: Organisation for Economic

Co-operation and Development, 1985), p. 67. For a review of

Canadian manufacturing, see Uri Zohar, Canadian Manufacturing: A Study in Productivity and Technological Change, Volume 1: Sector Performance and Industrial Strateg~~ (Toronto:

James Lorimer & Co., 1982),

‘See, for example, Harry Maier, “Innovation, Efficiency, and

the Quantitative and Qualitative Demand for Human Resources,”

Technological Forecasting and Social Change, vol. 21, 1982, pp.

15-31; Soete and Freeman, op. cit., pp. 52-82.
326 ● Technology and Structural Unemployment: Reemploying Displaced Adults

Figure 8-1.– Business Sector: Output per Hour of All Persons, Output per Unit of Capital, and

Multifactor Productivity, 1948-84

(Index, 1948= 100)

/?ev/ew, vol. 108, No. 11, November 1985, p, 99.

vey of industrial engineers, for example, indicates that effective strategies for increasing

overall productivity rely on people as well as

machines (table 8-l). Of the organizations surveyed, 69 percent undertook employee involvement programs; the engineers rated 63 percent

of these programs successful in raising productivity. Worker training was used less frequently, but was rated 74 percent successful.

The engineers found that capital investment for

new or automated machinery was 86 percent

effective, but the introduction or expansion of

robotics was successful less than 50 percent of

the time.

Technology, Productivity, and Demand

Technology, productivity, and demand affect

each other and also affect employment. Productivity gains, by lowering costs, can stimulate greater demand. Rising demand can offset the employment-shrinking effects of gains

in productivity.

In telephone services, for example, technology promoted dramatic increases in labor productivity and also contributed to rapid growth

in demand (figure 8-2 and table 8-2). Computerized switching and direct long-distance dialing resulted in falling costs for long-distance

service and generally lower rates (in constant

dollars) to customers.10 While employment in

IOWhi]e costs of long-distance calls were falling, Costs of 10-

cal service rose, reflecting rising input prices and the lack of

technological changes comparable to those of toll calls. Until

1982, the AT&T system used some of the revenues from longdistance calls to reduce local service rates (in constant dollars).

See U.S. Congress, Congressional Budget Office, The Changing

Telephone Industry: Access Charges, Universal Service, and Local l?~tes (Washington, DC: U.S. Government Printing Office,

1984).
Ch. 8—The Effects of TechnologicalIChange on the Nature and Availability of Jobs ● 327

Table 8-1 .—Productivit y improvement Activities

Undertaken in the United States, Based on a

Survey of Industrial Engineers

Undertaken

New activity activity Effective

Formal employee involvement in

productivity improvement

planning and evaluation (quality

circles, suggestion

programs, etc.) ., . . . . . . . . . . . . . . .

Evaluating performance and

establishing specific productivity

improvement targets . . . . . . . . . . . .

Introduction or improvement of

inventory control methods . . . . . . .

Capital investment for new or

automated machinery (not

including robotics). . . . . . . . . . . . . .

Introduction or expansion of use of

robotics . . . . . . . . . . . . . . . . . . . . . . .

Introduction or improvement of

quality control methods, etc. . . . . .

Systems innovation (integrated

factories, advanced material.

handling techniques,

computerized manufacturing

methods, etc.). . . . . . . . . . . . . . . . . .

Improvement of quality of product

through worker training . . . . . . . . .

Development of indirect-labor

standards and controls . . . . . . . . . .

Other a 

. . . . . . . . . . . . . . . . . . . . . . . . . .

68.70/o 63.1 ‘/o

63.3 66.7

64.4 70.8

75.1 85.7

25.9 44.1

66.2 73.0

45.1 70.7

48.7 73.5

30.9 54.1

76.1 94.3

NOTE Based on a sample of 765 nonstudent Industrial Engineers in the UnKed

States

aThe bi~h success rate Of “other” activities Implies the Importance Of productivity

efforts tailored to meet specific conditions.

SOURCE. Lane Gardner Camp, “IEs Evaluate Productivity Improvement Efforts

in Own Organizations and Across U S ,“ trrdusfria{ Errg;neerjng,vcx

17, January 1985, p 82

1985 was about the same as in 1972, operating revenues had more than doubled in constant dollars. Output per employee hour, or labor productivity (as defined and calculated by

BLS) rose 85 percent.

The remarkable changes in technology for

long-distance calls has affected the composi.

tion of the work force in the telephone service

industy, as well as the overall employment

level, In the 30 years from 1950 to 1980, employment in the industry rose 60 percent. At

the same time, while long-distance calls increased fifteenfold, operators declined from

43.5 percent of the industry work force to 14.1

percent, with an absolute loss of more than

100,000 jobs (table 8-3). Meanwhile, professional and semiprofessional jobs rose from 4.9

to 12.2 percent, business and sales jobs from

Figure 8.2.—-Telephone Communications (SIC 4811)

Labor productivity

1954 1957 1960 1963 1966 1969 1972 1975 1978 1981I 1984

Year

Employees

#

19541957 1960 1963 1966 1969 197.2 1975 1978 1981 1984

Year

SOURCE: US. Department of Labor, Bureau of Labor Statlstlcs, PrOdUCtJV1/y

Measures for Selected hrtiustrl~s 1954-82, Bullet[n 2189 (Washing.

ton, DC: US Government Printing Off Ice, December 1983),

5.3 to 11.1 percent, and construction, installation, and maintenance jobs from 23.7 to 36.5

percent of industry employment.11

Recent economic and technological changes

in the telephone industry may affect the industry’s relatively stable employment level of the

llG~org~ Kohl, Te~hno]o@c~~ Change in Telecommunications:

Zts Jmpact on Work and the Worker (Washington, DC: Communications Workers of America, 1984).
328 ● Technology and Structural Unemployment: Reemploying Displaced Adults

Table 8-2.—Operating Revenues, Employment, and Labor Productivity, Telephone and Telegraph Services Industry

(SIC 4811 and 4821), 1972-85

Domestic operating revenues Output per

Production employee hour

(in millions of (in millions of Total employment workers 4811 only

Year current dollars) 1972$) (000s) (000s) (1977= 100)

1972 . . . . . . . . . . . . . . 25,750 25,750 1,002 790 70.0

1973 . . . . . . . . . . . . . . 29,600 — 1,007 780 74.6

1974 . . . . . . . . . . . . . . 32,200 — 1,010 778 78.4

1975 . . . . . . . . . . . . . . 35,900 — 981 748 85.9

1976 . . . . . . . . . . . . . . 40,400 — 961 730 93.3

1977 . . . . . . . . . . . . . . 44,100 38,150 975 738 100.0

1978 . . . . . . . . . . . . . . 49,500 43,574 1,013 756 105.8

1979 . . . . . . . . . . . . . . 54,754 48,957 1,070 789 110.8

1980 . . . . . . . . . . . . . . 61,208 50,253 1,082 795 118.1

1981 . . . . . . . . . . . . . . 70,837 53,664 1,095 796 124.4

1982 . . . . . . . . . . . . . . 78,886 56,752 1,100 790 130.1

1983 . . . . . . . . . . . . . . 86,870 57,952 984 720

1984a . . . . . . . . . . . . . .

—

95,700 62,345 1,010 749 —

1985 b. . . . . . . . . . . . . . 106,000 65,760 1,000 745 —

NOTE: Only asmall proportion of total employment in the telephone and telegraph services industry IS in telegraph services(2 percent in 1985) HoweveL the data

on operating revenues are not broken down between telephone services (SIC 4811) and telegraph services (SIC 4821). For this table, employment is reported

for the two industries combined,

aEstimate.

bForecast.

SOURCES: US. Department of Commerce, International Trade Administration, U.S Industrial Outlook 1985 (Washington, DC: U.S. Government Printing Office, January

1985): and U.S DelIartment of Labor, Bureau of Labor Statistics, Productivity Measures ~of Se/ected /rrdustries 1954-82. Bulletin 2189 [Washington, DC U S

Government Printing Office, December 1983)

Table 8.3.—Telephone Operator Employment and

Long-Distance Calls, 1950-80

Number of long- Number of

Year distance calls (000s) operators

1950 . . . . . . . . . . . . 175,721 244,190

1955 . . . . . . . . . . . . 218,544 242,105

1959 . . . . . . . . . . . . 365,114 198,499

1962 . . . . . . . . . . . . 377,253 167,215

1970 . . . . . . . . . . . . 884,285 213,614

1975. , . . . . . . ., . # 1,492,782 176,454

1980 . . . . . . . . . . . . 2,641,713 128,214

SOURCE: George Kohl, Technological Change in Telecommunications: Its Impact

of Work and the ~or~er (Washington, DC: Communications Workers

of America, 1984).

past decade. The breakup of the Bell System

by consent decree in 1982 encouraged competition that had already begun in pursuit of

AT&T’s long-distance markets; competitors include ITT, IBM, Northern Telecom, GTE, and

Western Union. Moreover, the telecommunications and data processing industries are converging, and new technologies are developing

rapidly in the combined industries. Many of

these new technologies rely on digital equipment and computer software. Examples include satellite microwave communications,

cellular mobile and air-to-ground telephones,

electronic mail and banking, electronic credit

card verification, digital paging, and automatic

credit card calling.

The race to develop technologies and capture

markets will continue, and the total market is

expected to grow and change rapidly. The implications for employment are uncertain. While

fast growing markets are usually expected to

create new jobs, many of the new applications

of telecommunications and data processing are

highly automated already. Some technologies,

such as electronic banking, have reduced the

need for human labor, a trend that maybe seen

throughout telecommunications. Intensified

competition, moreover, may bring about job

losses and displacement, In August 1985, for

example, AT&T announced it would cut 24,000

jobs in its information systems division, which

makes and markets communications and computer equipment. The reason given was competitive pressure and the need to cut costs.l2

Some of these jobs were in the manufacture of

IZMark Maremont and Michael A. pollock, “AT&T Hangs UP

on 24,000 of Its Workers, ” Business Week, Sept. 2, 1985, pp.

35-36.
Ch. 8—The Effects of Technological Change on the Nature and Availability of Jobs “ 329

equipment, and were exported to a lower wage

facility abroad (see ch, 9).

A contrary example is the plastics products

industry, where no broad shift to new laborsaving technology has occurred in recent years.

The plastics market grew rapidly from 1972 to

1985 as plastics replaced traditional materials

(e.g., glass, paper, metal, and wood) in a broad

range of products, from toys to automobile

bumpers; the value of shipments rose 70 percent (constant dollars) in this period (table 8-4).

A common method of plastics product manufacture is injection molding. The job of the

operator controlling the injection molding machine is an important one in the industry,

accounting for about 100,000 of total industry

employment of roughly half a million.13 In most

plastics plants, this job has not changed much

since the early 1970s, Nor has labor productivity in the plastics products industry risen

much; it increased only about 14 percent from

lsThe number of operators classified by BLS as compression

and injection mold machine operators, plastics, was 101,000 in

1979 and 93,OOO in 1982, with the decline probably due largely

to the recession. Figures for this occupation for later years were

not available when this report was written, Total employment

in the miscellaneous plastics products industry (SIC 3079) was

488,000 in 1979 and 479,000 in 1982.

1972 to 1981 and did not keep up with growth

of labor productivity in all manufacturing.14

With the expansion of the plastics market and

the less-than-average rise in labor productivity,

employment in plastics climbed 35 percent

from 1972 to 1981 (table 8-4), while the constant

dollar value of shipments rose 47 percent.

Technology does exist for greater automation

of injection molding and higher labor productivity. Computerized automated equipment can

deliver molds and load plastic resins into the

molding machine, and electronic sensors can

monitor the operation throughout its cycle.

Thus, in principle, the need for operators can

be greatly reduced. Plants that mass produce

a standard product (e.g., bleach bottles) can use

highly automated systems. GE uses such a system in its Louisville dishwasher plant. The typical plastics product shop, however, is not large,

and produces a variety of products in relatively

small batches. Even though computerized

equipment exists for batch production (capable of delivering the correct mold to the machine), few shops have installed it. Whether the

——.— IAJames D, York, “productivity Growth in Plastics Lower Than

All Manufacturing, ” A40nth)y Labor Review, vol. 106, September 1983, pp. 17-21.

Table 8-4.—Trends in Output, Employment, and Productivity, Miscellaneous Plastics Products Industry

(SIC 3079), 1972-85

Year

1972 . . . . . . . . . . . . . . . . .

1973 . . . . . . . . . . . . . . . . .

1974 . . . . . . . . . . . . . . . . .

1975 . . . . . . . . . . . . . . . . .

1976 . . . . . . . . . . . . . . . . .

1977 . . . . . . . . . . . . . . . . .

1978 . . . . . . . . . . . . . . . . .

1979 . . . . . . . . . . . . . . . . .

1980 . . . . . . . . . . . . . . . . .

1981 . . . . . . . . . . . . . . . . .

1982 . . . . . . . . . . . . . . . . .

1983a 

. . . . . . . . . . . . . . . .

1984a 

. . . . . . . . . . . . . . . .

1985b 

. . . . . . . . . . . . . . . .

Value of

shipments

(millions)

10,696

12,944

15,190

14,810

18,189

23,693

26,796

29,116

30,583

34,122

37,029

38,350

41,575—

Value of

shipments

(1972$)

10,696

12,446

11,702

9,966

11,586

14,571

15,922

15,620

14,977

15,761

16,672

16,932

17,691

18,225

Total

employment

(000s)

346.9

385.4

377.5

335.4

375.2

453.7

486.6

487.7

470.1

469.5

479,2

510.1

591.1—

Production

workers

(000s)

Output per

employee hour

(1977= 100)

276.4

307,0

301.6

260.4

295.7

358.0

384.8

386.8

368.9

369.5

369.1

397.7

469.8—

86.6

93.6

86.2

86.2

89.5

100.0

100.8

94.8

95.7

98.5—

—

—

—

NOTE: Miscellaneous Plastic Products (SIC 3079) is the industrial classification for the manufacture of plastic goods not classified elsewhere, This group encompasses

about half the total output of plastic materials

aEstimate.

bForecast

SOURCES U S Department of Commerce, International Trade Administration, U.S. /rrdusfria/ Out/ook 1985 (Washington, DC U.S. Government Printing Office, January

1985); and U S. Department of Labor, Bureau of Labor Statistics, Product/vi/y Measures for Se/ecfed /rrdustries 1954-82, Bulletin 2189 (Washington, DC: U S

Government Printing Office, December 1983).
330 ● Technology and Structural Unemployment: Reemploying Displaced Adults

structure of the industry and cost considerations will remain the same over the next dozen

years is unknown, so that employment estimates must remain largely speculative. If the

labor-saving technology is widely adopted, employment of molding machine operators could

shrink. Yet lowered costs might lead to further

expansion of demand for plastics, with the effect of adding jobs in the industry–though not

necessarily in the occupation of molding machine operator.

Occupational Shifts

As the example of the telephone industry indicated, technological changes that influence

employment do not affect all kinds of jobs

equally. Historical data on employment provide a source of insight on the links between

technological change and occupational patterns. Aggregated employment data, however,

are only suggestive, since factors other than

technology are major causes of many occupational shifts. As chapter 9 discusses, it is difficult to separate the influences of technology,

international trade, domestic competition, and

changes in consumer preference on employment even in specific industries or occupations, much more so throughout the economy.

For example, competition from low-wage countries may impel U.S. manufacturers to adopt

labor-saving technology that eliminates many

blue-collar production jobs; or companies may

decide instead (or in addition) to shift some production jobs abroad. Thus the observation that

production jobs have declined as a share of

manufacturing jobs for several decades does

not tell us directly that technology is eliminating jobs. Analysis of individual industries and

occupations is needed to investigate, in each

case, the importance of various factors in the

rise or fall of employment.

The Past

Historical data are not complete, but changes

can be tracked in broad occupational groups.

The groups are professional and technical

workers, such as scientists, engineers, technicians, purchasing agents, and accountants;

managers and administrators; salesworkers,

such as sales clerks and agents; clerical workers, such as office clerks, secretaries, keypunch

operators, and bookkeepers; craft and kindred

workers, such as carpenters, mechanics, machinists, and typesetters; operatives, such as

assemblers, machine tool operators, production painters, and forklift operators; nonfarm

laborers, such as pipelayers, helpers, and highway maintenance workers; service workers,

such as building custodians, waiters and waitresses, flight attendants, and barbers; and farmworkers.

The 2Oth century has seen major changes in

employment by occupation. Most notable is the

decline in prominence of farmworker jobs. The

number of farmworkers fell from 37,5 percent

of the work force in 1900 to less than 3 percent in the 1980s (table 8-5, figure 8-3). The

change stemmed from the mechanization of

agriculture and other advances in technology

(e.g., the development of new crop varieties

and the rapidly increasing use of commercial

fertilizers and pesticides), as U.S agricultural

production tripled and productivity rose elevenfold during the period.

Since World War II, the number of production workers in manufacturing industries has

also declined relative to the total work force,

although more moderately. Both the relative

share of manufacturing jobs in the economy

and the relative share of production jobs in

manufacturing have declined (figures 8-4 and

8-5). Within manufacturing, the proportion of

production workers went from 84 to 69 percent

between 1947 and 1984. From 1979 to 1985,

manufacturing employment dropped absolutely

as well, by over 1.7 million jobs. Nearly all of

the jobs lost were those of production workers.15

The unskilled occupation of nonfarm laborer

has declined sharply in this century, from 12.5

percent of U.S. employment in 1900 to 4.6 percent in 1980. With growing industrialization

in the first half of the century, operatives (most

of them semiskilled manufacturing workers)

IsSee ch. 4 for a discussion of employment trends.
Ch. 8—The Effects of Technological Change on the Nature and Availability of Jobs Ž 331

Table 8-5.—Percentages of Total U.S. Employment Accounted for by Major Occupational Groups, 1900-80

Occupational group 1900 1910 1920 1930 1940 1950 1960 1970 1980

Professional and technical workers. . . . 4.3 4.7 5.4 6.8 7.5 8.6 10.8 14.5 16.1

Managers and administrators . . . . . . . . . 5.8 6.6 6.6 7.4 7.3 8.7 8.1 8.1 11.2

Salesworkers . . . . . . . . . . . . . . . . . . . . . . . 4.5 4.7 4.9 6.3 6.7 7.0 7.1 7.0 6.3

Clerical workers . . . . . . . . . . . . . . . . . . . . 3.0 5.3 8.0 8.9 9.6 12.3 14.1 17.8 18.6

Craft and kindred workers. . . . . . . . . . . . 10.5 11.6 13.0 12.8 12.0 14.2 13.6 13.9 12.9

Operatives . . . . . . . . . . . . . . . . . . . . . . . . . 12.8 14.6 15.6 15.8 18.4 20.4 18.9 18.0 14.2

Nonfarm laborers ... , . . . . . . . . . . . . . . . 12.5 12.0 11.6 11.0 9.4 6.6 5.2 4.7 4.6

Service workers. . . . . . . . . . . . . . . . . . . . . 9.0 9.6 7.8 9.8 11.7 10.5 11.2 12.8 13.3

Farmworkers . . . . . . . . . . . . . . . . . . . . . . . 37.5 30.9 27.0 21.2 17.4 11.8 6.0 3.1 2.8

NOTE Figures are approximate, due to changing classification systems See sources for details

SOURCES U.S Department of Commerce, Bureau of the Census, Historical Sfafist/cs of the IJrrited Slates, Part 1 (Washington, DC: U.S. Government Pnntlng Office,

1975), and U S Department of Labor, Bureau of Labor Statistics, Errrp/oyrnent arrcf Eamirrgs, January 1981)

Figure 8.3.–Major Occupational Groups of the U.S. Civilian Labor Force, 1900-80

100 r

30

20

10

n

workers

❑ Managers and

administrators

❑ Salesworkers

NOTE: Figures are approximate, due to changing classification systems See sources for details.

SOURCES. U S. Department of Commerce, Bureau of the Census, /-fistor/ca/ S~at/st/cs of the Uruted States, Part 1 (Washington, DC: U.S. Government Pnntlng Off Ice,

1975); and U.S Department of Labor, Bureau of Statistics, Employment and Earnings, January 1981).
332 . Technology and Structural Unemployment: Reemploying Displaced Adults

Figure 8-4.—Total Private Nonagricultural and

Manufacturing Employment, 1947-84

1947 1952 1957 1962 1967 1972 1977 1982

Year

SOURCE. U.S. Department of Labor, Bureau of Labor Statlstlcs, Employment

and Earnings.

Figure 8-5.— Production Workers As a Percent of

Total Manufacturing Employment, 1947-84

1947 1952 1957 1962 1967 1972 1977 1982

Year

SOURCE: U S Department of Labor, Bureau of Labor Statlstlcs, Employment

and Earnlnos.

rose to 20.4 percent of all workers in 1950, but

fell thereafter to 14.2 percent. The proportion

of skilled blue-collar craft and kindred workers also declined, but less steeply. The most

remarkable occupational increases were those

of clerical workers (rising from 3.0 to 18.6 percent of the work force from 1900 to 1980) and

of professional and technical workers (rising

from 4.3 to 16.1 percent),

Even though forces other than technology

contributed to occupational shifts from 1900

to 1980, and even though occupational titles

changed their meaning over these years, technology has apparently created demands for

more highly skilled workers, and diminished

demands for less skilled workers, in this

century.

The Present and Near Future

This report and other recent OTA assessments have found that the technological advances now taking place favor the continuation of some but not all of the occupational

trends of past decades.16 Computer-based technology is transforming many kinds of work,

and is a major factor in shifting demands for

some skills, groups of skills, and occupations

to others. Several general patterns are emerging:

●

●

In manufacturing, where about 18 percent

of employed Americans now work, job opportunities will probably rise for technicians, mechanics, repairers, and installers,

as well as for engineers and computer scientists.

Employment opportunities in manufacturing will probably fall for all production

workers. This includes operatives, especially those doing the most routine work;

laborers; and many metalworking craft16U, S. Congress, Office of Technology Assessment, Computerized Manufacturing Automation: Employment, Education, and

the Workplace, OTA-CIT-235 (Washington, DC: U.S. Government Printing Office, April 1984), ch. 4; U.S. Congress, Office

of Technology Assessment, Automation of America Offices,

1985-2000, OTA-CIT-287 (Washington, DC: U.S. Government

Printing Office, December 1985), ch. 2.
Ch. 8–The Effects of Technological Change on the Nature and Availability of Jobs . 333

workers, such as machinists and press

operators. Job openings for lower and middle managers may also fall.

● In offices, where 40 to 45 percent of workers are employed, growth in job opportunities will probably slow down over the

next few years and by the 1990s may begin to decline. Specific jobs most likely to

decline are those for clerical workers,

especially where the main tasks are entering and transferring data, Employment opportunities may also shrink for lower and

middle managers.l7

The finding for clerical workers indicates a

break with the past. With the rapid diffusion

of office automation, clerical worker jobs may

undergo the kind of downturn experienced by

operatives since 1950. The OTA report Automation of Americia Offices, 1985-2000 found

that computers are a fundamental technological change, as telephones and typewriters were

—not just a marginal improvement.18 Overall

it appears that the trends of past decades toward greater demand for professional and

technical workers and slackening demand for

manufacturing production workers will continue or perhaps accelerate, In manufacturing,

the effects of computer-based and other advanced technologies on occupational patterns

probably reinforce the effects of international

competition (see ch. 9). Both forces put the jobs

of production workers, especially the semiskilled and unskilled, at risk.

—..--—-——

Izoveral] employment in offices—just as in manufacturing and

in specific industries— is determined by other factors besides

technology, most significantly product demand. By lowering

costs, changing the services offered, and improving quality, technological advance can help to raise demand for the services provided by office workers (e. g., banking, financial services), as it

does for manufacturing products. Thus, if overall demand rises

enough, the employment-dampening effects of technology on

office jobs may be offset. This does not affect the conclusion

that among office workers, the clerical worker job is most at risk

from technological advance.

18The Bureau of Labor Statistics, in its occupational employment forecasts, takes a more gradual view of the effects of office automation and indicates continued growth in office employment. An evaluation of the way BLS generally takes

technological change into account in its occupational employment forecasts appears in app. 8A of this chapter. The OTA report Automation of America Offices, 1985-2000 evaluates the

BLS method for handling technological change in relation to

office automation. Ibid.

Many industries illustrate the point. A leading example is the motor vehicle industry, responding to pressure from foreign competition

by large capital investments in new equipment,

redesign of products, and reorganization of

plants and firms. The end result is fewer jobs

in planning and scheduling, in moving parts

around the factory, and in painting, welding,

and assembling automobiles, In many plants,

robots already apply sealant and paint and do

spot welding; automated materials handling

nearly eliminates the need for human forklift

operators. Jobs for factory clerks decline as

computer-controlled just-in-time delivery systems are installed. The potential for further reduction of semiskilled jobs appears high, New

body designs (as in the Chrysler minivans) facilitate assembly by robots and also reduce the

number of parts that have to be assembled.

Automation of testing and inspection implies

further losses of job opportunities for semiskilled workers.

Besides the much-publicized robots and

other forms of computerized automation now

being adopted in auto manufacture, less noticed but significant changes in conventional

equipment have eliminated some semiskilled

jobs.19 For example, new coatings for machine

tool cutting edges can double the cutting speeds,

thus improving productivity and reducing demand for machine operators. Quick die change

presses are more expensive than conventional

equipment and are used mainly where dies

have to be changed frequently; but these presses

can be operated by one worker at a master control panel—compared to at least six on conventional presses.

Some skilled production workers, such as

machinists and tool and die makers, in autos

are also being displaced. In the future, as computerized equipment becomes more reliable

and electronic diagnosis is increasingly available, maintenance and repair workers may be

less needed. Among technical occupations,

drafting is declining. For the present and near

Iesee LJ. s. Department of Labor, Bureau of Labor Statistics,

The Impact of Technology on Labor in Four industries, Bulletin 2228 (Washington, DC: U.S. Government Printing Office,

1985).
334 Ž Technology and Structural Unemployment: Reemploying Displaced Adults

future, prospects for employment growth in

production are favorable for electricians and

mechanics, repairers, and installers, but the increased demand for craft and technical workers will be less than the reduction in demand

for operatives.

The textile industry, like the auto industry,

is under intense pressure from foreign competition, and many of the larger mills are responding with rapid adoption of automated machinery.20 Federal regulations limiting cotton dust

levels to protect workers’ health may also have

contributed to the rapid pace of modernization.

In modern mills, a continuous opening-blending-carding operation (known as direct-feed

carding) both raises productivity and meets the

cotton dust regulations.

Unskilled and semiskilled jobs dwindle in the

modern direct-feed carding plant. The semiskilled job of picker operator is eliminated, and

there is no need for laborers to move fiber laps

from one separate machine to the next. Also,

labor for cleaning and maintaining the machines is reduced, since cotton dust levels are

lower. Spinning, the final step in yarn manufacture, is also being modernized as open-end

or rotor spinning replaces ring spinning. The

modern machine integrates several processes

that were separate (roving, spinning, and winding), can outproduce the conventional spindle

four or five times, and do it with less semiskilled and unskilled labor. In weaving, shuttleless looms average two to three times the output of conventional looms and thus require

fewer operators. Demands for skilled technicians have risen in modernized plants; shortages are reported in some areas.

In the aerospace industry—aircraft, missile

and space, and avionics (electronic communication, control, and monitoring equipment)—

technological advances also appear to be reducing jobs for production workers.21 However, dezo]bid,; See also us. Department of Commerce, International

Trade Administration, 1986 U.S. Industrial Outlook (Washington, DC: Department of Commerce, January 1986), p. 42-2. See

ch. 9 for discussion of the effects of international trade on textile industry employment.

ZIInformation in this section was drawn from OTA staff visits

to an aerospace manufacturing plant and publications of the U.S.

Departments of Labor and Commerce and the Aerospace Industries Association of America, as cited below.

mand for the product is a more obvious and

powerful influence on both total employment

and production jobs. Table 8-6 shows a clear

pattern of rises and falls of production jobs in

aerospace depending on sales—from highs of

over $30 billion in 1968 and 1983, when military aircraft purchases were large, to a low of

$21.5 billion (constant 1972 dollars) in 1977.

Nonetheless, as is typical for high-technology

industries, the proportion of production workers is lower than the all-manufacturing average, and is declining. Aerospace is by any definition a high-technology industry, with a ratio

of research and development expenditures to

net sales at least twice the average for all industries and a relatively high proportion of

technology-oriented workers.22 From 1972 to

1982, growth in the industry’s spending for

new capital averaged 23 percent per year—

nearly as high as in the computer industry. This

rate compares, for example, with a growth rate

in capital spending of less than 10 percent in

the automobile industry during the same

period. 23The proportion of scientists, engineers, and technicians in the work force is

high–over 25 percent in 1985.

Production workers accounted for only 45

percent of the aerospace industry work force

in 1985, compared with 68 percent in manufacturing industries overall. The share of production jobs in aerospace employment has declined from 52.6 percent in 1968 (table 8-6).

Although numbers on employment losses related to technological change in the industry

are elusive, it seems likely that the industry’s

widespread adoption of numerically controlled

(NC) equipment since the late 1960s has been

a factor in the relatively low and declining level

of production jobs.

NC machine tools were introduced in the

aerospace industry in the 1950s, partly because

.— ZZFOr definitions of high-technology industries and data on

their employment, see U.S. Congress, Office of Technology

Assessment, Technology, Innovation, and Regional Development, OTA-ST1-238 (Washington, DC: U.S. Government Printing Office, July 1984), The aerospace industry is included under all definitions, including the most restrictive (ratio of R&D

spending to sales twice the average).

Z3U. S. D8p@rnent of Commerce, International Trade Administration, 1986 U.S. Industrial Outlook, op. cit., pp. 28-8, 36-4,

37-13.
Ch. 8—The Effects of Technological Change on the Nature and Availability of Jobs ● 335

Table 8.6.–Aerospace Industry Employment by Occupational Group, 1968-85

Employees

Sales Production Scientists

(in billions Total workers Percentage and Percentage Percentage

Year of 1972$) (000s) (000s) of total engineers of total Technicians of total All others

1968 . . . . . . 30.1

1969 . . . . . . 27.9

1970 . . . . . . 26.5

1971 . . . . . . 22,3

1972 ., . . . . 21.5

1973 . . . . . . 23.4

1974 . . . . . . 23.1

1975 . . . . . . 22.4

1976 . . . . . . 21.7

1977 . . . . . . 21.5

1978 . . . . . . 22.6

1979 . . . . . . 24.8

1980 . . . . . . 27,9

1981 . . . . . . 29.6

1982 . . . . . . 29,4

1983 . . . . . . 30.8

1984a . . . . . . —

1985a . . . . . . —

1,403

1,295

1,069

924

944

962

973

925

898

894

1,032

1,152

1,218

1,203

1,153

1,171

1,252

1,299

738

658

528

448

473

484

483

444

420

410

519

592

612

578

535

528

567

584

52.6

50.8

49.4

48.5

50.1

50.3

49.6

48.0

46.8

45.9

50.3

51.4

50.2

48.0

46.4

45.1

45.3

45.0

221

203

167

159

168

164

166

167

166

173

170

177

196

194

200

207

223

234

15.8

15,7

15.6

17.2

17.8

17.0

17.1

18.1

18.5

19.4

16.5

15.4

16.1

16.1

17.3

17.7

17.8

18,0

81

72

67

60

65

66

67

63

62

59

64

69

78

84

79

87

93

98

5.8

5.6

6.3

6.5

6.9

6.9

6.9

6.8

6.9

6.6

6.2

6.0

6.4

7.0

6.9

7.4

7.4

7.5

363

362

307

257

238

248

257

251

250

252

279

314

332

347

339

349

369

383

NOTE” Data based on December survey. Industry strikes occurred in 1977 and 1983 Employment figures include aircraft, missile, and space industries (SIC 372 and

376); estimated aerospace-related communication equipment (SIC 3662) and instruments (SIC 381 and 382); and estimated related products (SIC 28,35,73,89, etc )

aEstlmates.

SOURCE Aerospace Industries Association, Aerospace News, Washington, DC

1984/85 (New York” Aviation Week & Space Technology, 1984).

they were able to meet demanding specifications for military orders (which account for 50

to 70 percent of the aerospace business). In

addition, the automated tools save the production labor of skilled and semiskilled machine

operators. Other NC applications reduce the

need for several kinds of semiskilled production labor. For example, NC pipe-bending machinery eliminates the need for time-consuming measuring and bending of pipes by humans,

NC riveting improves quality and reduces the

number of riveters required for a given job.

Fiber-optic cable and new cockpit designs

promise to reduce the need for a range of production work in electrical wiring, from the

Apr. 19, 1985; and Aerospace Industries Association, Aerospace Facts and Figures

semiskilled job of cutting wires to specified

lengths to the more skilled tasks of wire-splicing

and routing.

The employment figures in the aerospace industry suggest some of the difficulties that production workers losing jobs in manufacturing

now face. Displaced production workers who

want to remain in the same industry will need

training to qualify for one of the growing technical occupations. Yet there are not enough of

these jobs to go around, Between 1968 and

1985, technical jobs in aerospace grew by

30,000, while jobs for production workers

dropped by 154,000.

TECHNOLOGICAL CHANGE AND THE NATURE OF JOBS

Technological change affects not only the

number of jobs but also their nature. Skills may

become obsolete, new skills may be demanded,

and the content of particular jobs may be

altered. If automation simplifies or de-skills a

job, wages for that kind of job may fall; or the

job may become mechanical and stultifying.

On the other hand, new technologies may open

possibilities of more interesting, better paid

jobs, at least for those workers with the skills

to qualify.

Concerns about the effects of technology on

the nature and quality of jobs and the skills re-
336 ● Technology and Structural Unemployment: Reemploying Displaced Adults

quired for them are not new. As factory automation was adopted in the late 1950s, many

people expected not only that factory employment would fall but that blue-collar workers

would have to acquire higher skills to deal with

the new equipment. With the rapid economic

growth and falling unemployment rates of the

1960s, these concerns diminished. Some skills

and occupations were obviously affected—

those of compositors, for instance, as typesetting was computerized, or longshoremen, with

changes in packaging and containerization.

Many of the affected workers were represented

by strong unions, which won comfortable settlements for those who were displaced. More

generally, the strong economic growth and rising real wages of the 1960s eased readjustment

problems.

Today, the debate on what technology is doing to skill requirements has reappeared and

now extends to white-collar and service workers as well as blue-collar workers. Two opposing points of view are prominent—that technological change leads to upgrading of skills,

making for better jobs but also requiring more

training or education, so that less skilled people may have trouble finding jobs; or, on the

contrary, that advanced technology de-skills

jobs, making them narrower, more repetitious

and perfunctory, and leaving workers as nothing but machine tenders at relatively low pay.

A third view has also emerged: that technological changes are increasing the quality and number of some higher level jobs while eliminating or downgrading middle-level positions,

thus creating a skills gap between lower and

higher level jobs.

Framed in this way, the arguments are overly

simple. First, they focus too narrowly on the

relation between skill levels and wages, leaving out of account the powerful influence of

economic conditions; and second, they take too

narrow a view of technology, assuming that the

equipment and hardware alone determine

what jobs will be like.

The differing economic conditions of the

1960s and the 1980s illustrate the importance

of the first factor. If some kinds of factory work

were de-skilled by the automation of the 1960s

(an arguable assertion), the prosperity, low unemployment rates, and rising real wages of that

decade more than compensated most workers.

Also, in some manufacturing industries, collective bargaining contributed to higher pay

than might have been expected for workers

with limited skills or education. By the mid1980s, by contrast, real wages of production

and nonsupervisory workers on private nonagricultural payrolls had been declining for

more than a decade. In 1985 hourly earnings

of these workers were about 6 percent below

their earnings in 1977 (in constant dollars);

weekly earnings had dropped 9 percent below

the 1977 level, and were about 14 percent below their highest point, in 1972 and 1973. The

reasons had less to do with changes in the skill

content of jobs, associated with technological

change, than with a number of economic and

social factors—the entrance of millions of inexperienced young people and women into the

job market in the 1970s, the inflation of the late

1970s, the deep recession of the early 1980s,

the persistence of unemployment in the mid1980s at rates above 7 percent, the decline of

labor unions, and intense competition from

lower wage countries. In this situation, with

real wages on the decline and unemployment

rates high by historical standards, the effect on

wages of de-skilling a large number of jobs

might prove considerable.

Also missing in the de-skilling/upgrading

argument is the point that technology alone

does not determine the nature of jobs. It does

not, by itself, raise, lower, or polarize the skills

required. While the characteristics of a new

technology, and the competitive environment

of the firm or industry adopting it, set limits,

there is usually room for some latitude in redesigning jobs. In organizing the tasks that remain for human workers to do, managers and

engineers (sometimes with worker participation) may have a range of options, from rationalizing jobs—i.e., reducing them to simple,

repetitive tasks—to broadening and integrating

jobs, that is, including more kinds of tasks in

each job and establishing for each a goal that

is the logical culmination of the set of tasks,
Ch. 8–The Effects of Technological Change on the Nature and Availability of Jobs . 337

A wide range of options does not always exist; costs and other constraints are important.

Also, it is often difficult to foresee exactly what

options there may be with new, unfamiliar

technologies. Nonetheless, as examples in the

following sections show, different solutions are

possible with some jobs; upgrading and deskilling of essentially the same job are occurring in different firms and countries.

OTA’s analysis does suggest some commonality in the skills that will be needed in factories, offices, and services such as health care

to make effective use of advanced technologies.

These skills differ from the ones that many displaced workers possess. Routine mental and

physical skills (e.g., those used in operating machines, moving materials, punching keyboards)

will be less in demand. More in demand will

be good basic competencies in reading and

math, a broad understanding of how the individual worker’s tasks and job fit with those of

others, an aptitude for team work, and an ability to get the feel for, and take responsibility

for, the proper functioning of expensive equipment in complex production systems.

Technology and the Range of Job Options

How Technology Displaces Jobs

Even though technology alone does not determine the makeup of jobs, it is a major force

in determining the range of possible job options. Its main effects are: 1) to displace tasks

previously performed by people; 2) to create

new tasks; and 3) to limit, by its inherent features, the ways in which tasks can be allocated

to specific jobs.

New technologies can displace the tasks of

human workers in several ways. The most obvious way is for a machine to take over a task

performed by a worker. Robots that load workplaces into automated machine tools, for example, take the place of the human worker, but

the task still exists. Another common form of

technological displacement is a change in process or product that eliminates the task. Some

plastic parts, for example, need hand finishing

to remove flash (excess material) from the finished product. A different molding technique,

used for some parts, prevents the flash from

forming, thereby eliminating the finishing

operation. The task of hand finishing is not

automated; it is no longer needed. Tasks may

also disappear when technology changes the

demand for a product. For example, when

hand calculators replaced slide rules, several

specialized precision machining and printing

tasks disappeared.

Tasks, or parts of jobs, are more commonly

displaced than entire jobs; work is restructured

to use new technology, in some cases leaving

fewer people performing the same amount of

work. For example, a law firm may employ five

lawyers, all of whom spend part of their days

searching for legal references. When the firm

introduces a computer to identify sources, the

laywers can do more work of other kinds. If

four lawyers can handle as many cases with

a computer as five could without the computer,

one lawyer can be displaced. The computer,

however, does not possess the skills of a lawyer. In the same way robots, no matter how

adroit they become, do not replicate human

workers.

Often, new technologies both displace and

create tasks. For example, automatic materialhandling equipment displaces the manual task

of driving a delivery cart and most of the loading and unloading tasks. At the same time, it

requires computer programming, machine

monitoring, and maintenance.

The design of technology may limit or expand the options for allocating tasks. The positioning of workstations on an assembly line,

for example, limits the tasks that can be assigned to any one person, since a worker cannot perform tasks at two distant stations at the

same time. New technology may also broaden

options. A case in point is advanced electronic

equipment, which allows an airplane pilot to

perform navigational tasks. These examples illustrate the fact that many of the features of

a new technology which limit or expand options for assigning tasks are designed into the

technology. Design choices are not unconstrained. They are limited by physical possi-
338 ● Technology and Structural Unemployment: Reemploying Displaced Adults

bility, scientific understanding, engineering

know-how, traditional ways of thinking, and,

most significantly, by costs. Even so, the effects

of technology on the tasks workers perform

arise from the decisions made by people, from

the early stages of research, development, and

design, to the end point of use of the new equipment or methods in the workplace.24

How decisions made in the design stage affect jobs is illustrated by a recent Swedish effort in which workers cooperated with computer scientists to develop a new printing

technology. Computerized text entry, typesetting, and layout have made far-reaching

changes in the number and quality of jobs for

production workers in printing. Making up

pages for newspapers was once the province

of printers on the shop floor, in the days of lead

type. Today it is becoming a computer terminal job. By 1980, the Swedish Graphic Workers Union, representing printers, typographers,

lithographers, and other production workers

in printing, sought a role in developing software that skilled workers could use as an advanced tool in making layouts.25 Instead of leaving the technology design solely to vendors and

computer scientists, the workers wanted a say

in research and development, to support technology that would make use of their skills, create desirable working conditions, and contribute to higher product quality.

With the help of public funding, the union

formed a cooperative program with government and business called Project UTOPIA (in

Swedish, an acronym for training, technology

and products from a skilled worker’s perspective). The project developed a computer and

software system that allows the operator to

visualize on the computer screen both full-page

layouts and close-ups of details. This feature

gives the operator greater power to design in24For a comparative study of the work-related priorities of engineers and computer systems designers in the United Kingdom,

Sweden, and the United States, see: Bo Hedberg and Enid Mumford, “Design of Computer Systems”; and J.C. Taylor, “Job Design Criteria Twenty Years Later, ” in Design of Jobs, Zd cd,, L, II.

Davis and J.C. Taylor (eds.) (Santa Monica, CA: Goodyear, 1979),

pp. 44-53 and 54-62, respectively.

ZSRobert Howard, “UTOPIA: Where Workers Craft New Technology,” Technology Revievv, vol. 88, No. 3, 1985, pp. 42-49.

teresting layouts than other computerized layout systems, which do not show the actual page

on the screen. According to the workers, an

operator who has to “work blind” without seeing how the page will look is less able to create an attractive, varied layout. Another benefit of the union’s involvement was that it gave

participants a broader understanding of the potential of computer technology in printing.

The labor-management-government cooperation of the UTOPIA project is rare. Even in

Norway, where laws guarantee union involvement in technological planning, unions are

more likely to wait until new systems are designed and implemented before making a critical assessment. It is nearly always managers,

guided by technical experts, who make the major decisions on the design and use of new technology. 26

People and Machines

There are limits to replacing human labor

completely with technology. Three kinds of

considerations influence the mix of human beings and technology in producing goods and

services: 1) technological constraints: the fact

that some tasks cannot be done well, or economically, or at all by mechanical or electronic

means; 2) the need for people to design, operate, maintain, and repair technology; and 3) the

selection of some tasks for people to perform

because the tasks are important to quality of

worklife, or tradition, or aesthetics, despite

proven abilities of machines to perform those

tasks.

In assigning responsibility among humans

and machines, engineers and managers often

view people as adjuncts, available to do whatever is too complex or too expensive to automate. Some regard people as unpredictable,

demanding, and inefficient compared with machines, and see automatic manufacturing as an

opportunity to design humans out of the system. People are not so easily dispensable, howZ6Leslie Schneider, “Technology Bargaining in Norway,” Technology and the Need for New Labor Relations, Discussion Paper Series, John Fitzgerald Kennedy School of Government, Harvard University, August 1984.
Ch. 8—The Effects of Technological Change on the Nature and Availability of Jobs ● 339

ever. While technical advances have enabled

machines to take over some of the work people did in the past—with improvements in

productivity and reductions in costs—it is seldom possible to do without human judgment

and flexibility.

Human skills are rarely directly comparable

with those of machines. Descriptions of what

people can do as if they were machines (mechanistic models of skill) and descriptions of

what machines can do as if they were people

(anthropomorphic models of technical performance) fail to capture the great versatility

of human labor. A robotic system, for example, may include visual sensors to locate objects and an electronic controller to respond

to this information. Yet this system does not

begin to match the complexity and adaptability of human perception, thought, and action.

People are much better than machines at work

requiring judgment, interpretation, and adaptability. When a nail hits a knot, a carpenter can

adjust. Current generations of robots cannot.

A computerized vision system can spot solder

runs on a printed circuit board but cannot interpret X-rays of pipeline welds. Confusion

over what people do well and what machines

can do well leads to poorly designed jobs and

machines. z’

Automated systems, while they may run with

fewer people, still require some people. When

computers are integrated with complex systems—in process control, for example—performance of tasks does not become wholly automatic (see box 8A). The same is proving to be

true in automated systems for small-lot production.28

z7K.NOrOandy.Okada, “Robotization and Human Factors, ”

Ergonomics, vol. 26, October 1983, pp. 985-1000; H. McIlvaine

Parsons and Greg P. Kearsley, “Robotics and Human Factors:

Current Status and Future Prospects,” Human Factors, vol. 24,

October 1982, pp. 535-552; and Warren P, Seering, “Who Said

Robots Should Work Like People?” Technology Review, vol. 88,

April 1985, pp. 59-67.

ZaSee, for examp]e: Robin P. Bergstrom, “Taking Stock of

FMS . . . Users Speak Up,” Manufacturing Engineering, vol. 92,

March 1984, pp. 48-55; “Roundtable Participants Talk About

CIM Myths and Realities, People Aspects and the Future,” Zndustria] Engineering, vol. 17, January 1985, pp. 35-51.

Photo credit: Cincinnati Milacron

Industrial robot welding a computer frame assembly

Automated systems cannot be idiot-proofed.

In fact they are likely to be more sensitive than

labor-intensive systems; one unexpected occurrence can shut down a highly automated process. Moreover, when heavily stressed, faced

with unusual conditions, automated systems

may fail in unexpected ways, throwing the decisions back on human operators. All too often,

as in the Three Mile Island accident, the people have trouble coping—perhaps because their

jobs have been poorly designed.29 As jobs in

automated systems become more routine under normal circumstances and more demandZ9For a list of Operator limits on automated systems, see

Christopher D. Wickens, Engineering Psychology and Human

performance (Columbus, OH: Charles E. Merrill Publishing Co.,

1984), pp. 490-495. For a discussion of work design issues at

Three Mile Island, see Joel A. Fadem, “Automation and Work

Design in the United States,” Automation and Work Design, F.

Butera and J.E. Thurman (eds.) (Amsterdam: North Holland,

1984), pp. 647-696.
[page omitted]

This page was originally printed on a dark gray background.

The scanned version of the page was almost entirely black and not usable.
Ch. 8—The Effects of Technological Change on the Nature and Availability of Jobs • 341

ing when complex systems malfunction, operators may have more trouble diagnosing system

problems in an emergency, just when quick

and correct response is vital.

In general, highly automated systems demand greater responsibility by employees and

depend more heavily on human judgment and

skill than do more traditional systems. Whether

the job is that of a nuclear powerplant operator or an air traffic controller, man-machine

integration becomes more crucial as the capabilities of the machine expand. One implication is that the distinctions between managers

and production workers narrow as the latter

take on greater responsibilities.

Task and Skills Changes

As new technologies are adopted in the workplace, cognitive and communication tasks will

be shared by workers and computers, and people will share tasks of observation and physical manipulation with sensors and mechanical actuators or manipulators. Because some

kinds of tasks are more suited to the capabilities of machines than others, jobs made up

mostly of such tasks may be vulnerable to displacement.

Figure 8-6 depicts a semiautomatic system

in which human workers and machines both

perform tasks. Human-operated manual commands and computer commands can both control the work. In the automated loop, the computer model, a collection of algorithms and

specifications of acceptable operating conditions, sends directions to actuators. Sensors

continuously enter data on changes in the work

environment, keeping the computer model current. The manual loop allows worker control

of the system through an input-output device

to the computer model. People regulate the

work process through manual testing and observation, and manipulate it by operations such

as part loading or repairs (see box 8A).

As figure 8-6 indicates, the greater the reliance on sensors, actuators, and the computer

model, the less the need for the corresponding

human tasks, Computer algorithms displace
342 ● Technology and Structural Unemployment: Reemploying Displaced Adults

Figure 8-6.—Control Network for a Semiautomatic System

SOURCE: Office of Technology Assessment.

the human tasks of routine organization and

transfer of information, and also well-defined

computational tasks, such as daily production

planning, accounting, and correspondence.

Mechanical sensors can take the place of some

sensory and perceptual tasks, and mechanical

actuators displace tasks requiring manipulative

skills. so

The riveting of airplane skins illustrates some

of the ways in which tasks are assigned to humans and machines with computerized technology (see box 8B for details). Riveting, a fastening task traditionally done with a hand-held

riveting gun, can also be performed with a

Sosee, for example, Stephen G. Peitchinis, Computer TechnoL

ogy and Employment: Retrospect and Prospect (New York: St.

Martin’s Press, 1983), p. 98.

computer-controlled machine. The correct procedures for positioning and driving rivets come

both from stored information in the computer

and from the operator’s knowledge. Electronic

sensors and the vigilance of the operator protect the process from poor rivets and machine

malfunctions. Many (not all) of the manipulative tasks shift to the riveting machine, but human operators gain some new cognitive tasks,

such as avoiding uncorrected program errors,

stopping the machine in case of malfunction,

and doing minor troubleshooting. Other workers—skilled maintenance people—must be familiar with the machine and knowledgeable

about computer and electronic instrumentation.

Hospital technical workers provide another

example of changing tasks and changing skill
Ch. 8—The Effects of Technological Change on the Nature and Availability of Jobs ● 343

IBaeed ork an CYf’A am st@y at Boeing Commercial Airplane Co,, Seattle, WA. February 1!$85,

*or a hi$ttwy of riveting, M Walter G. Vincenti, “Te&?mologtcrd Knowledg8 Without Schmee: Tlte innovation of f%ah Riveting in Americen Airp]an~ ca, 193@ca, MNO,’g Tachntdogy dCub??, vol. 25, INo, 3, 19S4, pp. 54D-57fL
344 ● Technology and Structural Unemployment: Reemploying Displaced Adults

requirements with advances in technology, as

described in an OTA contractor report.31 Medical technologists test blood and other body

fluids for a number of factors, including the

presence of chemical substances and diseaseproducing organisms, number and characterslBernard Ingster, Charles P. Hall, Jr,, and Arnold I. Silverman, “Effects of New Technology on Skill Requirements of Clinical Laboratory Technologies and Radiologic Technologists, ”

contractor report prepared for the Office of Technology

Assessment,

istics of white and red blood cells, blood type

and clotting time, and the status of the body’s

immune system. Credentials for medical technologists include a bachelor’s degree in biology or chemistry. These workers are expected

to decide whether test results are valid, to grasp

the significance of patterns of daily test results

for individual patients, and to alert physicians

to potentially life-threatening conditions. They

also need manual skills for laboratory bench

work with such equipment as pipettes and bottled reagents.
Ch. 8—The Effects of Technological Change on the Nature and Availability of Jobs Ž 345

Photo credit: Gemeral-Electro Mechanical Corp.

Worker operating a riveting machine

In clinical chemical laboratories, where technologists test blood for chemical substances,

most of the work is done with fast, automated,

computerized equipment. Automation of the

work began in the 1950s and has become increasingly more sophisticated. Technologists

in modern labs need only type in the test selection on a computer keyboard, load the specimen, and push a button. The equipment can

determine whether a sample is out of normal

range and redo the test automatically, and can

record and transmit results to other workstations. Technologists retain responsibility, however, for validating test results. If they are out

of the normal range, and the technologist feels

that the process was faulty, he/she must run

the test again. Or, the technologist may determine that the tests are a valid indicator of the

patient’s health. Technologists are also expected to retain their manual skills for occasions when physicans want independent confirmation of an automated test result and, more

rarely, in case of emergency failure of the automated equipment. In common with factory

workers using automated equipment, these laboratory workers must have enough understanding of the equipment to spot malfunctions and

do simple troubleshooting. Table 8-7 summarizes the changing tasks of both clinical lab

technologists and radiologic technologists with

the introduction of new equipment.

Despite the steady rise in labor productivity

of clinical laboratory technologists, employment of medical technologists approximately

quadrupled from 1966 to 1982, increasing from

38,000 to 150,000. Exactly comparable data for

hospital beds and patients are not available, but

the ratio of full-time hospital employees to patients in hospitals rose from 2.24 in 1965 to 3.76

in 1982, and medical technologist jobs were

part of that growth. The reason was the rapid

introduction of new technologies and services,

especially after Medicare and Medicaid laws

were passed in 1966. It is expected that budget

stringency and cost containment for both

Medicare and Medicaid will now sharply curtail the rate of hospital employment growth.32

Total hospital employment has in fact dropped

slightly since 1983. In one of two hospitals

studied by OTA’s contractor, employment in

clinical laboratories dropped slightly from 1979

to 1984, but attrition took care of the reductions; there were no layoffs. In the other hospital, clinical lab employment has remained

stable; it may expand, since the hospital is discontinuing some work once performed by an

outside commercial laboratory and bringing

that work into its own labs.

Changes in skill requirements for radiologic

technologists show a different pattern from

that of clinical lab technologists, where the emphasis is on further automation of existing

diagnostic services. In radiology, the new technologies are linked with significant advances

in the physician’s diagnostic abilities. With

conventional X-rays, the way to visualize different segments of the body is to rotate the patient

or the equipment and take several pictures, In

the newer technology of computed tomography (CT) the body part is placed within a ring

of multiple X-ray sources, which are linked to

electronic systems that capture multiple images. Computers process the images and inteSzlbid., Section B.
grate them for visual display on monitors or

film. CT scanners are able to take extremely

thin cross-sectional “slices” of the head and

body, at different angles, and produce crisper

images than the conventional X-rays. CT has

been in use for about 10 years.

A still newer technology is magnetic resonance imaging (MR). Like CT, it produces

cross-sectional images generated by computer;

but in contrast with X-ray technologies, it

produces clear images of soft tissues without

obstruction by bone. The main component of

the technology is a powerful, ring-shaped magnet, which is fitted closely around the head or

body part of the patient,

Both CT and MR do something new and different from conventional X-rays; they supplement, not supplant, the older technology. The

tasks associated with conventional X-ray are

not displaced, but new ones are added (table

8-7). The old and new tasks usually are not performed by the same people, however; CT and

MR technologists are usually specialists who

have been given further training after qualifying in conventional radiologic techniques. Employment of radiologic technologists is not ex-
Ch. 8—The Effects of Technological Change on the Nature and Availability of Jobs . 347

Table 8-7.—The Changing Tasks of Medical and Radiologic Technologists

Displaced Unchanged Created

Work tasks tasks tasks tasks

Medical technologist:

Understanding chemical test reactions sufficiently to assess the quality

of manual testing processes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Having the manipulative skills to perform laboratory bench tests . . . . . . . . . .

Maintaining quality standards during manual testing . . . . . . . . . . . . . . . . . . . . .

Confirming changes during manual testing by visual inspection . . . . . . . . . . .

Performing manual testing according to strictly defined protocols and

“self-review” of work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Understanding the significance of a pattern of results of daily testing of

a patient . . . . . . . . . . . . . . . . . . . . . . . . ... , ... , . . . . . . . . . . . . . . . . . . . . . . . . .

Confirming and validating test results. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Observing the results of the process being performed to ensure correct

protocols are followed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Determining when to inform physicians of a potentially life-threatening

situation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... , ... , ... , . . . . . . . . . . . . . . . . .

Maintaining quality standards during instrument testing . . . . . . . . . . . . . . . . . .

Determining if results produced by automatic instruments are valid . . . . . . .

Understanding the operating systems, protocols, work flow, and

maintenance practices for diverse automatic instruments. . . . . . . . . . . . . . .

Having the manipulative skills to control automatic equipment . . . . . . . . . . . .

Monitoring the information on cathode-ray tubes and test data recorded

by automatic equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Identifying the kinds and probable sources of malfunctions of

automatic instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Raidologic technologist:

Understanding conventional X-ray procedures, with particular attention to

body positioning and film exposure techniques . . . . . . . . . . . . . . . . . . . . . . .

Using good interpersonal skills in working with patients and physicians . . .

Having the manipulative skills in working with equipment and patients . . . .

Reviewing of X-ray film to assure that the desired body area has been

filmed and that the film quality is as specified by the physician . . . . . . . . .

Determining proper body position and exposure parameters for X-ray

imaging of the “target” body area . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Deciding whether the target area is filmed as requested . . . . . . . . . . . . . . . . .

Following highly detailed procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Understanding cross-sectional anatomy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Understanding the operating characteristics of the computed-tomography

(CT) scanner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Understanding the operating principles of the magnetic resonance (MR)

scanner . . . . . . . . . . . . . . . . . , . . . , . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Understanding how the CT or MR equipment accommodates body

positioning and exposures automatically . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Showing more sensitivity in interpersonal relationships with patients who

must be confined for a long period in small areas . . . . . . . . . . . . . . . . . . . . .

Reviewing of MR image films that do not show bone structures. . . . . . . . . . .

Determining that the CT or MR equipment is operating correctly . . . . . . . . . .

Determining whether a cross-sectional anatomy image has been filmed

as requested by a physician . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Identifying the nature of malfunctions in CT or MR equiptment . . . . . . . . . . . .

x

x

x

x

x

x

x

x

x

. . . . . . . . . .

. . . . . . . . . .

. . . . . . . . . .

. . . . . . . . . .

. . . . . . . . . .

. . . . . . . . . .

x

x

x

x

x

x

x

. . . . . . . . . .

. . . . . . . . . .

. . . . . . . . . .

. . . . . . . . . .

. . . . . . . . . .

. . . . . . . . . .

. . . . . . . . . .

. . . . . . . . . .

. . . . . . . . . .

x

x

x

x

. . . . . . . . . .

. . . . . . . . . .

. . . . . . . . . .

. . . . . . . . . .

x . . . . . . . . . .

. . . .

. . . .

. . . . . .

. . . . . .

. . . . . . . . . .

. . . . . . . . . .

. . . . . . . . . . . . . . . . . . . .

. . . .

. . . .

. . . .

. . . . . .

. . . . . .

. . . . . .

. . . . . . . . . .

x

x

x

x

. . . .

. . . .

. . . . . .

. . . . . .

. . . . . . . . . . x

. . . . . . . . . . x

x

. . . . . .

. . . . . .

. . . . . . . . . .

. . . . . . . . . .

. . . . . . . . . .

. . . .

. . . .

. . . . . . . . . . . . . . . . . . . .

. . . .

. . . .

. . . .

. . . .

. . . . . .

. . . . . .

. . . . . .

. . . . . .

. . . . . . . . . .

. . . . . . . . . .

. . . . . . . . . .

x

. . . . . . . . . . x

. . . . . . . . . . x

. . . . ... x

x

x

x

. . . .

. . . .

. . . .

. . . . . .

. . . . . .

. . . . . .

x

x

. . . .

. . . .

. . . . . .

. . . . . . ,,

SOURCE Off Ice of Technology Assessment, based on Bernard Ingster, Charles P. Hall, Jr , and Arnold I Silverman, “Effects of New Technology on Sk Ill Requirements

of Cllnical Laboratory Technologists and Rad!ologlc Technologists, ” contractor report prepared for the Office of Technology Assessment, October 1984
348 • Technology and Structural Unemployment: Reemploying Displaced Adults

pected to decline, but to continue growing

moderately.

CT and MR require rather less skill in positioning the body than conventional X-rays,

since they produce their images from multiple

sources. They both require understanding of

cross-sectional anatomy and the ability to recognize whether the image on a monitor is satisfactory, as well as familiarity with how the new

equipment works. In the case of MR, technologists must understand the basic principle of

the technology and the power of the magnet;

they, as well as physicians and nurses, must

be aware of the potentially fatal hazard to a patient with metallic implants in his body. Both

CT and MR technologists need interpersonal

skills to help put patients at ease during lengthy

procedures (up to an hour) -especially in the

case of MR, which may require a patient to

keep his head immobile in a small, tight container. Like other workers using computerized

equipment, MR and CT technologists must be

alert to equipment malfunctions. They must

know when the trouble is beyond making a few

simple adjustments, and when to call in the repair specialist.

Changes in the nature of work in computerized offices have features in common with

those of factories and hospital laboratories. A

recent study of automation in French banking

concluded that workers in computerized systems need to use higher order conceptual skills,

to form a mental model of how the system

works.33 The study found that, while automation lessened some of the traditional skill requirements for data entry clerks, it also required new and qualitatively different skills. A

grasp of banking and computer operations became more important with automation, and the

growing interdependence of parts of the system heightened the need for cooperation among

the clerical workers. At first, these qualitative

shifts in skill requirements were not recognized. When the French banks originally computerized, managers simplified jobs and reaapau] Adler, “Rethinking the Skill Requirements of New Technologies,” Working Paper, Harvard University Graduate School

of Business Administration, 1983.

duced training requirements. However, they

soon found that the clerks’ isolation and lack

of understanding of how the system worked

were causing errors, lowering productivity,

and making customers angry. In response,

French banks had to make major investments

in retraining clerical workers, particularly in

basic computer literacy, the structure of the

bank’s processing system, and the logic of bank

accounting. 34 The unexpected result of computerization was that low-level clerical jobs became more important to maintaining the quality and efficiency of banking operations as a

whole.

The analysis of French banking is one of several studies suggesting that individual responsibility, ability to coordinate work with others,

and decisionmaking skills increase as both

service and manufacturing jobs are automated.35

New technologies based on computer systems

tend to displace routine mental and manual

tasks, and in some cases displace tasks requiring more complex skills, such as operation of

machine tools. At the same time, they add requirements of human operators for judgment,

evaluation, the ability to spot problems and either solve them or call on specialists to do so,

and an understanding of how one’s own tasks

and job fit into the larger picture. A grasp of

basic statistical concepts–an understanding of

trends and limits—will be needed for many jobs

for better quality control. Social skills–ability

to communicate readily and work with others

as a team-often take on increasing importance.

Many of the general skills needed for working with computerized systems are transferable from one job to another. These skills are

provided, at least in part, by a good basic education that teaches quantitative, verbal, reasoning, and social skills. For many displaced workers and adults currently in the labor force,

remedial education in reading, simple mathematics, and elementary scientific and practical technical principles may be needed if they

s’Ibid., p. 24.

sSF. Butera, “Designing Work in Automated Systems: A Review of the Case Studies, ” Automation and Work Design, F.

Butera and J,E. Thurman (eds.) (Amsterdam: North Holland,

1984), pp. 43-105.
Ch. 8—The Effects of Technological Change on the Nature and Availability of Jobs . 349

are to work effectively with advanced technologies (see ch. 7). In many cases, the new technologies require highly skilled maintenance

workers. Workers selected for training in maintenance and repair work are likely to be those

with a good basic education. For these workers, a knowledge of secondary school mathematics, electronics, and computers will be valuable assets.

Some observers interpret the changes involved with advanced technologies as moving

toward simpler, narrower, less-skilled tasks for

human workers. In the earlier wave of automation, beginning in the late 1950s, many people expected that the automated factory would

require increased skills, more training, and better education of workers, Bright’s 1957 case

studies of the metalworking, food, and chemical industries indicated that, after a period of

heightened skill requirements in the early

stages of automation, the level of skills required

of operators diminished with the growth of

computer control and greater reliability of

automated equipment. so

Bright also found that automation did not

greatly increase the need for skilled maintenance workers. Like operators of the machines,

maintenance people might need higher skill

levels to debug a first, unique piece of automated equipment, but at a later stage few special skills would be required to maintain the

more advanced and reliable equipment. Some

analysts expect that computer-based technologies will follow a similar pattern. They argue

that after computer programs have been tested

and debugged and operations become more

stable, the skills required of everyone, from

operatives to maintenance workers to engineers, are likely to decline. However, if the

pace of change is accelerating, as many analysts believe, then learning periods will recur

at shorter intervals.

In any case, computerized technologies will

require skills that are qualitatively different

from the skills needed to work with older technologies. One recent survey of advanced tech-

‘dJames R, Bright, “Does Automation Raise Skill Requirements?” Harvard Business Review, July-August 1958, pp. 85-98.

nologies in manufacturing describes the shift

as follows:

The direction of manufacturing skills changes

is from physically involved, manipulative, tactile, “hands on” type of work to that which

is conceptual, cognitive, and based on an abstract understanding of the process. Instead

of maintaining close physical contact with the

product and with the process through touch,

sight, sound and smell, the production worker

stands aside while the integrated combination

of computers and machines proceeds with

minimal direct human intervention. In one job

of this kind a worker loads a workpiece into

a computer-controlled machining center and

starts the machine. For the next 7% hours,

while the machine makes the myriad cuts required, the worker merely attends the machine, intervening only once, about 4 hours

into the process, to re-orient the part on its fixture . . . The workpiece is large and valuable,

as is the machine. A broken tool, a loose fixture, a defect in the workpiece, or a “glitch”

in a computer program could cause thousands

of dollars of damage in a few seconds. The

worker is monitoring the process rather than

being part of it.37

The same study found that the need for skilled

maintenance workers is declining as the connection between computer and machine becomes

closer. Diagnosis of trouble and prescribed

remedies may be provided by a computer located far from the factory.

Some of these examples raise broader issues

than whether different kinds of skills are

needed for new technologies. They put the

question of raised or lowered skill requirements into the context of how jobs are redesigned as part of technological change, and

whether job quality is enhanced or degraded,

The following section discusses this subject,

Redesigning Jobs as Part of Technological Change

When new technologies are introduced into

a factory or office, the ways in which tasks are

rearranged into new jobs have a critical influoTRobert T. Lund and John A. Hansen, Keeping America at

Work: Strategies for Employing the New Technologies (New

York: John Wiley & Sons, 1986), pp. 93-94,
350 ● Technology and Structural Unemployment: Reemploying Displaced Adults

ence on the nature of the jobs. The pattern of

tasks can determine whether the new jobs are

de-skilled or upgraded, whether they contain

variety or are narrow and repetitious, whether

they involve broader responsibilities or are confined to an isolated aspect of the firm’s business, and possibly whether they provide opportunities for growth and advancement to better

jobs.

As with other aspects of new technology,

managers and technical experts make the major

decisions on how tasks are to be reorganized

into jobs. The primary objective of managers

in these decisions is efficiency—minimum cost

consistent with constraints such as product design, production volume, capital spending limitations, and enough flexibility to accommodate

changes in design or production volume. It is

not always simple and obvious, however, what

kinds of job design and work organization are

most conducive to efficiency. Often, when new

equipment is brought in, no one specifically

considers the range of options for rearranging

jobs; and it maybe hard even to foresee all the

options. Options that would change the jobs of

many people may be rejected because it is easier to stick with established procedures and

areas of responsibility. Nor is there any uniform answer for all businesses. Different companies choose different strategies for achieving efficiency, and these choices may in turn

lead to differing choices in the design of jobs

and organization of work, even with the same

equipment. Decisions about job design may

also reflect other important factors, such as

training and abilities of the work force, national policies on quality of work life, relations

with labor unions, and the politics of the workplace.38 Examples in this section illustrate some

of the latitude and some of the constraints in

job design. A later section discusses innovative

SeSee, for example, L,E. Davis and J.C. Taylor, “Technology

Effects on Job, Work and Organizational Structure: A Contingency View,” Quality of Working Life Volume One: Problems,

Prospects and the State of the Art, L.E, Davis and A.B. Cherns

(eds.) (New York: The Free Press, 1975), p. 220-241; David F. Noble, Forces of Production: A Social History of Industrial Automation (New York: Knopf, 1984); Harley Shaiken, Work Transformed: Automation and Labor in the Computer Age (New York:

HoIt, Rinehart & Winston, 1984).

organization of work that some companies are

adopting together with technological advances.

With the introduction of numerically controlled (NC) machine tools, for example, new

and old tasks may be allocated among jobs in

a number of different ways. With traditional

machine tools, a machinist operates one machine. His responsibilities include deciding

how a part is to be cut, selecting cutting tools

and work-holding fixtures, and determining the

cutting speed for each workpiece. The job also

is likely to include making adjustments during

the cutting operation; continually checking for

tool wear, vibration, and malfunctions; and

measuring the part for accuracy. The finished

workpiece is the machinist’s responsibility.

The use of NC machines alters this traditional

set of tasks. Most of the planning (selecting the

cutting tools and work-holding fixtures) is

taken over by the NC programmer; so is the determination of cutting speed. Monitoring tasks,

such as making adjustments and checking for

malfunctions, remain for the machine operator, although their character may be changed

somewhat. New tasks include programming

and operating the NC controls and monitoring

more than one machine.

In an analytic review of studies describing

how jobs were restructured and work reorganized after the introduction of computerized

numerically controlled (CNC) machine tools,

Kelley found a wide range of solutions, with

no single pattern predominating.39 The range

was from de-skilling, to upgrading of jobs, to

a polarization of jobs in which one machine

operator took on the new tasks of programming, proofing out (testing the program) and

editing, and the rest found their jobs de-skilled.

One study of U.K. and West German plants

found that programming tasks were often added

to the machinist’s job, especially in small-scale

operations. Another study of five U.K. plants

found that in each case a programmer had exssMaryellen R, Kelley, “Programmable Automation and Production Workers’ Skills: An International Comparison of Management Practices, ” Working Paper WP 86-002 (Boston: College

of Management, University of Massachusetts at Boston, October

1985).
Ch. 8—The Effects of Technological Change on the Nature and Availability of Jobs ● 351

elusive charge of planning, testing, and editing the programs—so exclusive that in two

plants the control cabinet for the editing machine was locked, and only programmers and

supervisors had the key. A third pattern in U.K.

plants was for programmers to have sole charge

of all programming functions at the outset, but

over time, for operators gradually to assume

responsibility for proofing out and editing.

According to Kelley’s analysis, job redesign

varied in U.S. plants. Analyzing four of Shaiken’s case studies of shops where CNC machine tools were used, she concluded that in

one, machinist jobs were definitely de-skilled;

here, operators were not allowed to change the

program or perform any major setup tasks.40

In another case, a modest size plant specializing in small-batch production, CNC operators

did not create programs, but set up their own

machines, and also proofed out programs. In

the latter capacity, the operators kept some informal control over the technology by offering

suggestions to the programmer. In the other

two plants, blue-collar workers created, proofed

out, and edited CNC programs—but in both

these cases only one worker wrote programs

(in one plant, a CNC lathe operator, and in the

other, a machine repairer/millwright). In one

of these plants, some of the operators set up

their own machines and did some proofing out

and editing of programs. Kelley’s own observations at another two U.S. plants showed similar variation; in one, machinist jobs were definitely de-skilled, with no responsibility for

programming or setups. In the other, operators

were expected to fine-tune the programs.

Studies of how automated flexible manufacturing systems (FMSs) have been managed in

different countries illustrate the range of

choices in designing jobs around a more complex advanced technology. They also shed

some light on the factors, besides those directly

.——.———.

40 Ke]]q na]vze ~ four case studies, for which clescriptions of

the organization of machining work were provided, from H,

Shaiken, S. Kuhn, and S. Herzenberg, “Case Studies on the Introduction of Programmable Automation in Manufacturing,” vol.

II, part A in U.S. Congress, Office of Technology Assessment,

Computerized Manufacturing Automation, op. cit.

related to efficiency, that influence the choices. al

One study of FMS in three countries (the United

States, Japan, and West Germany) found that

strategies of firms differed by country, with

West German firms strongly emphasizing flexibility, U.S. firms giving higher labor productivity top priority, and the Japanese combining emphasis on quality improvement with

both flexibility and higher labor productivity.42

As the firms’ strategic goals differed, so did the

definition of jobs and organization of work.

An FMS is a production unit made up of

semi-independent workstations, connected by

automated material handling systems and controlled by computer, which is designed to manufacture different kinds of parts in relatively

small batches. The system typically includes

NC machining centers, loading stations, and

robots or conveyors to move materials; it may

also have other workstations such as automatic

inspection devices, FMS units are frequently

used to make parts for automotive equipment—

e.g., transmission case and clutch housings for

tractors, or turbine engine components for military tanks; but the FMS can also be adapted

to manufacture of robots or NC machine tools,

as in the famous Fanuc Ltd. factory in Japan,

where machine tools operate at night with no

one on the machining floor and only one worker in a control room. When designed and used

appropriately, the FMS offers two major advantages: 1) the capacity for nearly full-time use

of expensive NC machine tools; and 2) the ability to produce small batches of parts or products economically, because setup costs are

minimal for later batches once a first batch has

— —.— — ——

AI See for example, T. Martin (cd.], Des~gn of Lllork in Automated Manufacturing S~’stems, Proceedings of the International

Federation of Automatic Control Workshop, Karlsruhe, Federal

Republic of Germany, No\’ember 1983 (New York: Pergarnon

Press, 1984), including A. Alioth, “Flexible Automation and job

Design in Manufacturing Systems: Conclusions From a Visit to

Japan, ” I. Asendorf and Schultz-Wild, “Work Organization and

Training in a Flexible Manufacturing S~stem-An Alternati\’e

Approach, ” and A. D’Iribarne and B. Lutz, “Work Organization

in Flexible Manufacturing Systems—First Findings From International Comparisons”; see also Ramchandran Jaikumar, “Fiexible h!anufacturing S}’stems: A Managerial Perspective, ” Working Paper 1-784-078, Harvard Business School, Division of

Research, 1984.

qZJaikumar, op. cit.; Alioth in Martin, op. cit.; D’ Iribarne and

Lutz, op. cit.
352 . Technology and Structural Unemployment: Reemploying Displaced Adults

been programmed and produced. These two

qualities of high utilization of machines and

flexibility are not altogether consistent; one

may have to be sacrificed to some degree to the

other.

Jaikumar’s exploratory survey examined

about 70 percent of the systems operating in

the world in 1981, with closest attention to the

26 FMS installations then operating in the

United States. (There are currently about 50

FMS installations in the United States.) The

study concluded that the systems were most

flexible-in the sense of adapting quickly to

variations in products and volume-in West

Germany. The number of parts made in German FMS units ranged from 50 to 200, with

a mean of 85. In the United States, the average number of parts made per installation was

8, and in Japan, about 30.

In the United States, Jaikumar’s study found

that FMS was usually managed as a project

with a beginning and an end, not as a continuing process. A team of experts, generally provided by the vendor, installed the system. After a debugging period when engineers and

programmers solved software and production

problems, further changes tended to be minimal. The goal in most installations was maximum use of the machines with little downtime

and high labor productivity; job design featured

routine, repeatable tasks. Typically, the machines did not require the skills of master

machinists but could be run by less skilled

operators, whose duties included changing hydraulic fluid, oiling machinery, changing parts

such as drill bits, checking gauges, using the

computer terminal for routine checks, and

making simple diagnoses when something

went wrong. Electrical and mechanical maintenance people were trained to follow a disciplined set of procedures with little deviation

from the manual.

Flexibility in the German systems appears to

depend greatly on the interaction between man

and machine. The German FMS units are usually run with a small crew of highly skilled

workers who received special training in all

aspects of FMS tasks, including basics of NC

control, NC-machine and robot programming,

detection of faults, and work scheduling. These

crews work two shifts; for the third shift, lessskilled workers only monitor the machines.

The quality brought to the system by the highly

skilled human workers is versatility and ability to solve problems. Using a rather general

software structure, they make adjustments

based on their own knowledge which is “idiosyncratic, not perfectly reproducible, and not

transferable. ”43

The Japanese firms typically pursue a strategy of using FMS units both for improving

quality and for gaining the flexibility to schedule short-term variations in products and volume. (In addition, as shown by the unmanned

operation of night shifts in FMS units, the Japanese also apparently aim both for higher labor productivity and for a demonstration of

their technical prowess.) The design of jobs is

consistent with these combined goals. Japanese

FMS units have two classes of workers: about

five highly qualified operators in each unit

doing controlling tasks, and one or two less

skilled workers whose tasks are feeding and

taking off parts. Operators take part in creating software for the systems, evaluating it from

a practical point of view as engineers develop

it—the two often working alongside each other

on the factory floor. This system gives the operator enough understanding of the program that

he can make corrections or adjustments during production. To qualify for an operator position, workers need a good education, which

they now get in Japan’s public high schools.

Because of the educational requirements, FMS

operators are mostly young people recently out

of school. Older machinists, trained through

apprenticeship to work on conventional machine tools, are rarely retrained for the NC

centers in FMS units.

Several factors have apparently affected the

choice of strategies and job design in the early

installation of FMSs in these different countries. For example, German national policy supports projects to improve the quality of work

life; a pioneer FMS project in West Germany,

installed in an automotive parts plant of a large

ds]aikumar, Op. Cit., P. 324
Ch. 8—The Effects of Technological Change on the Nature and Availability of Jobs ● 353

manufacturing company, was sponsored by the

German Ministry for Research and Technology, Integral to the project was a nonhierarchical organization of work using a skilled,

versatile crew. Besides government support,

the project benefited from an ample supply of

skilled production workers, the product of

West Germany’s highly developed apprenticeship and industrial training system. Whether

such a system is adaptable to other countries

is an open question; indeed whether it will

prove profitable in West Germany is uncertain.

Japan’s use of FMS also reflects its national

institutions and traditions. The rigorous technical and scientific education offered in public schools produces well-qualified workers

prepared to learn and use high-level skills in

FMSs. A relatively broad definition of jobs is

also typical of the practice in many Japanese

manufacturing firms. In the United States, the

tradition of designing factory jobs with narrow,

strictly defined tasks is long-standing. The

American version of early FMS installations

found in Jaikumar’s exploratory study was in

this tradition.

Management decisions about the redesign of

jobs as new equipment is brought in can have

decisive effects on job quality. For example, a

computerized system to handle customer requests for telephone repair caused job dissatisfaction for the clerks who operated it.44 The

management goal was to speed operations and

reduce the number of clerks needed to take customer requests and dispatch maintenance

crews. Under the old system, clerks in local repair centers received requests from customers,

recorded details on a form, initiated a manual

test of the customer’s telephone service, made

a tentative date for the repair and handed the

form to the supervisor of the repair crew. In

the new computerized system, clerks were relocated to a few answering centers. They no

longer communicated directly with the repair

crew, but entered information from customers’

requests by keyboard into a centralized computer system. The computer instantaneously

dispatched the data to the appropriate repair

center and at the same time started an automatic check of the customer’s service.

The new system was not only unpopular

with workers but had some unexpected bad effects on performance. The clerks worried about

job security and were dissatisfied with the boring nature of the work (mostly data entry), the

physical confinement, and the loss of personal

contact with customers and repair workers.

Performance suffered from errors and delays

because most of the clerks were inexperienced

with keyboards, and had not been adequately

retrained. The physical separation of answering clerks and repair crews led to jurisdictional

disputes, and also to a loss of responsiveness

to customers’ individual needs. Reacting against

the new system, some employees resorted to

tactics that undermined it. At one busy repair

center, workers discovered that an idiosyncrasy in the computer program allowed them

to erase the record of a customer’s call—which

they proceeded to do at the end of their shift,

giving the next shift a clean slate and also frustrating customers who never got a reply to their

service calls.

In other cases, managers have designed more

interesting, responsible jobs around new technologies—usually because they expect better

employee performance and greater overall efficiency as a result. For example, in the letter

of credit department of the First National Bank

of Boston, one person at a computer terminal

can now review documents, create a file, send

a letter, and authorize payment. This series of

jobs was formerly performed by a chain of

clerks. Under the new system, wages in this

section of the bank have been raised, and the

position is “sometimes a way station in the

officer-training program.”45

Shenandoah Life in Virginia was able to

streamline operations with the use of a new

computer system—but only after a period of

using the computer less effectively.48 At first,

qATrevor A. Williams, “Technological Innovation and Futures

of Work Organization: A Choice of Social Design Principles, ”

Technological Forecasting and Social Change, vol. 24, 1983, pp.

79-90.

qSBob Kuttner, “The Declining Middle, ” The Atlantic MonthI&v,

July 1983, p, 64.

qoJohn B. Myers, “Making Organizations Adaptive to Change:

Eliminating Bureaucracy at Shenandoah Life, ” IVational Productivity Review, Spring 1985, pp. 131-138,
354 ● Technology and Structural Unemployment: Reemploying Displaced Adults

the routine operation of converting a customer’s multiple insurance policies into one universal policy was organized assembly-line fashion. Even with the computer, it took 32 people

in three departments 27 days to complete the

process. With a decision to organize the operation differently, six team members participated in designing their own office layout, salary system, and the work within their team.

The new organization, coupled with the new

computer systems handled a 13-percent increase in business without additional employees, service complaints and errors declined.

Human factors are a constraint on the ability of management to upgrade or downgrade

jobs. For example, reorganizing work may involve trespassing on traditional turf within

organizations, and encounter resistance. Quality of work and productivity may ultimately decline if individual judgment is removed from

work. If a software package controls all decisions, workers may be less willing to spot and

correct errors, try more effective approaches,

or aim for higher quality.47 Lack of appropriate skills in the labor force can also limit organizational choices.

The examples in this section indicate that the

decisions made in task allocation can affect the

occupational mix in the work environment, the

skill level and scope of particular jobs, and the

degree of training required for particular jobs.

How tasks are reassigned to jobs and workers

as new technology is introduced has important

implications both for the skill requirements of

jobs and for retraining needs.

qTShoshana Zuboff, “New Worlds of Computer-Mediated

Work,” Harvard Business Review, September/October 1982, p.

147.

TECHNOLOGY AND THE ORGANIZATION OF WORK

In any business, things run like clockwork

only some of the time. Other times, parts of the

system threaten to go out of control. Factories

of almost any type are complex systems, often

chaotic and messy. For instance, at any particular time a job shop producing components

and assemblies to order will have a certain

number of jobs in process. The lot sizes will

differ, as will the required materials. In addition, the shop may have a queue of jobs waiting to enter the process flow. It will have a certain stock of machine tools and production

equipment, with partially overlapping capabilities. Machinery and equipment that in principle can be assigned a given job will produce

parts that are qualitatively different (e.g., a

milled surface versus one produced by a shaper

or a surface grinder). Operating costs will differ depending on the equipment used. More

highly skilled operators may be needed for

some machines and for some tasks than for

others. The shop can subcontract work, and

may have to for specialized operations such as

plating or high-quality welding. Add to these

factors such imponderable as machine breakdowns and late deliveries of materials and supplies; the result is a factory of some complexity,

One response to this complexity is to break

down jobs into simple, narrow clusters of tasks,

and to attempt to keep the potential for human

error to a minimum. Work is arranged so that

each person need learn and perform only simple tasks such as installing a taillight lens on

a car, monitoring the dials on a control panel,

or loading a program into an automated machining center.48 How these tasks are to be

accomplished—e.g., whether to use red lighting for the dials—becomes the job of the expert,

commonly an engineer or industrial psychologist. The same building block approach is

used to organize the work of the whole enterprise. Departments organized by specialized

activity take responsibility only for their own

functions (e.g., drilling, grinding, heat treatment, painting and finishing, materials handling, shipping, maintenance, and repair). One

group of people designs and develops the product. Another group lays out factories and specifies the manufacturing operations, A third

group supervises production employees.

aesee S.A. Konz, Work Design (Columbus, OH: Grid Publishing, 1979); B.W. Niebel, Motion and Time Study, 7th ed, (Homewood, IL: Irwin, 1982); A. Chapanis, Man-Machine Engineering (Belmont, CA: Wadsworth, 1965).
Ch. 8—The Effects of Technological Change on the Nature and Availability of Jobs ● 355

Despite its appeal of simplicity and order,

this approach may not lead to minimum cost

or to maximum productivity and efficiency.

Even assuming that simplifying jobs makes for

greater efficiency (an assumption that has

proven untrue in some enterprises), maximum

efficiency in individual tasks or jobs, or in subsystems in isolation, need not result in an optimum for the system as a whole.

Different forms of work organization—where

jobs include a variety of tasks and call on a

broader repertory of skills, worker groups have

more responsibility, and work is organized

around the product rather than in specialized

departments and subsystems—have been advocated as both improving worklife and leading

to greater productive efficiency. In what circumstances new forms of work organization

can satisfy both these objectives is not clear.

Often the objectives of job satisfaction and organizational efficiency are compatible, but not

always and not necessarily.

The benefits of new forms of work organization may be hard to trace. Most companies,

when they introduce such systems, do so to improve efficiency, defined broadly. However,

companies that have adopted them, and consider them successful, usually do not reveal details, for competitive reasons. Thus, quantitative information on efficiency improvements

is difficult to obtain.

There is a another reason as well for the lack

of concrete data on benefits of new organizational design. For substantial departures from

past practices, conventional accounting measures may not capture the full range of benefits. Even in cases that seem on the surface

straightforward, such as improved inventory

control, direct cost reductions give only part

of the picture. For example, in the Japanese

companies that have pioneered minimum inventory systems, part of the benefit is indirect:

reducing inventory to low levels exposes bottlenecks elsewhere in the system. Minimum inventory becomes a tool for improving system

performance, but cost accounting seldom captures such benefits.

In general, evidence that participative systems of work organization help to make firms

more productive is fragmentary and anecdotal.

Nonetheless, the fact that an increasing number of firms, from steel mills to agricultural

chemical companies, are adopting these systems suggests that they are improving productivity either directly or indirectly. Another possibility is that some advanced technologies may

be especially suited to work organization that

stresses individual responsibility, flexibility,

and multiple skills.

Methods of organizing work are changing in

many cases to fully exploit new technologies.

Many foreign and domestic firms are experimenting with the organization of work with

goals of reducing costs, gaining flexibility to

meet changing market conditions, exploring

new products and services, and improving the

quality of worklife. A new model of production systems seems to be emerging in the

United States and in other advanced industrial

nations. It is based on the idea of integrated

production systems, with integration entailing

substantial use of computers to tie together

manufacturing operations, link manufacturing

with design, and more closely couple both these

activities with other corporate functions.49 But

qesee, for examp]e, U.S. Congress, Office of Technology Assessment, Computerized Manufacturing Automation: Employment,

Education, and the Workplace op. cit., ch. 3.

Photo credit LTV Steel Co

Employee involvement group
356 . Technology and Structural Unemployment: Reemploying Displaced Adults

there is more to the idea of integration than

technology. It includes the social system of the

factory as well.

New-Model Organization of Work

Emerging forms of work organization in advanced industrial nations tend to share common characteristics, described below:

●

●

●

Production jobs are defined somewhat

more broadly than in traditional organizations. Work groups often share responsibility for a number of tasks, with individuals learning several jobs and rotating

among them. Individual workers perform

more tasks, and more varied tasks, and

preassembly or subassembly may be integrated into final assembly. Production

workers may also have greater responsibility for and control over materials handling, machine setup, maintenance and repair of equipment, quality control, and

even production scheduling.

Companies tend to provide more training.

Even production workers normally classed

as unskilled or semiskilled are getting

more training. On-the-job training has generally proven adequate for many programs

of job expansion or job rotation, broader

skills coming with broader experience.

Quality circles50 and other group activities

can also become training venues. Companies introducing work groups have sometimes chosen to provide training in social

skills.

Off-site training for production workers

has been relatively rare in the United

States, except for remedial education or

training for jobs that incorporate tasks

traditionally viewed as the province of

skilled workers (e.g., troubleshooting production equipment).

Training is intended in part to acquaint

employees with corporate goals and to enhance motivation, sense of belonging, and

commitment to those goals. Typically,

... -— sOQua]ity circles usually consist of a group of workers meeting regularly to discuss product quality, process improvements,

and related topics.

●

companies show employees how their jobs

contribute to the firm’s end products. The

employees are encouraged to view themselves as participating, for example, in the

production of completed automobiles rather

than merely in installing bumpers. (“I help

build Honda Accords,” rather than “I put

bumpers on Hondas.”) Some firms that

have moved to new-model work organizations provide training that covers the function, design, and marketing of their products. Sometimes they include such topics

as manufacturing methods, quality assurance, and ergonomics.51 A few companies

have begun to give employees “management information” on profitability y or longrange planning.

Management may allocate to groups of

workers some or all of the responsibilities

formerly vested in foremen and first-line

supervisors. . Workers may have limited

control over the pace of work, job methods, and working conditions, and they

may be responsible for quality control and

for coordinating work within groups or departments. Such groups commonly allocate tasks among their members.

As the group takes over responsibility for

controlling absenteeism, for ensuring quality, or for allocating work, the foreman’s

role may shift to that of facilitator and communication channel between the group and

higher management. Often, the ratio of

foremen to production workers declines.

Many foremen with experience in traditional organizations have a hard time adapting to such changes, and careful selection

or retraining of foremen often proves necessary. Some companies have chosen to

eliminate foremen and first-line supervisors entirely.

Giving supervisory control to work groups

can heighten the stress for some people.

Among the causes are competition both

within and among groups—the same forces

that some managers look to for greater

slErgonomics and human factors engineering are closely related terms applied to the design of machinery and equipment

so that it will be easy, safe, and efficient for people to use.
Ch. 8—The Effects of Technological Change on the Nature and Availability of Jobs ● 357

productivity. Work groups often have

some control over their membership, perhaps veto power over new employees.

Sometimes, new employees begin with

probationary periods. People who do not

fit in may find themselves not only uncomfortable, but out of a job. Thus, work groups

have potential inequities and abuses that

few companies have yet acknowledged.

● Selection criteria for new employees may

weigh motivational and attitudinal factors

more heavily than credentials or past experience. Social skills may also get new

emphasis. Some American firms have

adopted multiple levels of screening, with

aptitude and perhaps psychological tests

followed by interviewing. The interviews

may involve prospective peers as well as

supervisors and personnel officers. Rather

than concentrating solely on preexisting

skills, such screening procedures often

aim at finding people who will fit into the

system—at managerial levels as well as on

the factory floor.

● Pay scales tend to reflect the skills an employee has acquired (the jobs he or she has

mastered), the performance of the work

group, or both. In addition to meeting objective standards such as written tests, a

person seeking a pay-for-skills increment

may have to be informally passed on by

other group members, as well as by supervisors. Some companies are replacing individual incentive pay with group incentive plans, so called payment-for-results.

Incentives or bonus plans may depend on

product quality as well as output. Groupbased incentives create new pressures on

individuals. Where the spread in performance within a group is substantial, those

viewed—rightly or wrongly—as laggards

may find their situation untenable.

• Managers may grant production workers

a say in some of the decisions concerning

new equipment and procedures, as well as

day-to-day operations. Typically, participation takes the form of group meetings

among representatives of the production

employees and the company’s technical

and managerial staff, When a new plant

is laid out, the designers may draw on the

experience of employees in the firm’s existing factories. However, production workers have seldom exercised control over major design decisions–those that shape the

system.

Companies may replace their existing,

compartmentalized organization of work

with one that is centered on the product.

People may identify more readily with a

department that makes a complete product rather than a piece of one; thus product-centered organization helps engender

employee motivation and commitment.

Another goal of “product-centered organization” is to create a relatively direct and

natural flow between the input and the

output of the system. In many cases, organizing by product rather than by function

also helps to minimize work-in-process inventories, cuts the elapsed time for producing to order, and improves equipment utilization.

Although no census exists, several hundred

plants having characteristics described above

are probably operating in the United States.52

For example, General Motors (GM) is experimenting with alternative work organizations

at some of its most automated plants, including the Buick City complex in Flint, Michigan,

and the New United Motor Manufacturing,

Inc., joint venture with Toyota in Fremont,

California. Team assignments are replacing

tightly defined job classifications, and production workers are assuming greater responsibility for scheduling and product quality. More

far-reaching changes are planned for GM’s

Saturn project in Spring Hill, Tennessee. GM

and the United Auto Workers have developed

an approach that includes relaxed work rules,

consensus decisions on pay and benefits, and

a union voice in strategic planning. To prepare

WA few years ago, the Work in America Institute estimated

that perhaps a hundred American firms had instituted selfmanaging work teams, in some cases at several plants. See

Productivity Through Work Innovations: A Work in America

Znstitute Policy Study (New York: Pergamon Press, 1982), p, 35,

The same study estimated that about 500 U.S. companies had

instituted bonus or gain-sharing programs such as ScanIon plans,

Also see the Resource Guide to Labor-A4anagement Cooperation

(Washington, DC: U.S. Department of Labor, October 1983].
358 ● Technology and Structural Unemployment: Reemploying Displaced Adults

workers for wider responsibilities, GM will

provide training in production skills, decisionmaking, and business methods. For the Saturn

project, GM has designed a totally new car,

more suited than current designs to automated

manufacture.

Service companies as well as factories can

be organized in innovative ways. For example,

some banks formerly centered around huge

data-processing departments have switched to

smaller departments specializing by type of

customer (e.g., retailers) or type of transaction

(e.g., currency exchange). When a single department provides most or all of the services

a given client needs, the bank’s employees tend

to be more responsive, and the system becomes

more intelligible to the customer.53

With the continued development of advanced

production systems, the adoption of new-model

organization of work may expand. Future generations of factories will be more highly automated, with distributed computing a primary

tool for achieving greater integration. Although

highly automated systems may need fewer employees, those employees will carry heavier

responsibilities and need different skills than

blue-, grey-, or white-collar employees in older

factories. As pointed out earlier, automated systems cannot be idiot-proofed; indeed they tend

to be more sensitive, less robust than laborintensive systems, Thus, production workers

may assume some responsibilities similar to

those of supervisors and managers.

One implication of these changes is that employee control on the factory floor may gradually expand. At present, organized labor is

often ambivalent about comprehensive redesign

of factory systems, including elements such as

quality circles. Unions have traditionally advocated detailed descriptions of jobs and strict

demarcation between one job and another, and

some labor leaders see these work rules as protective of jobs and pay. Others may believe that

organizational redesign could provide more

6jFOr an example, see R.W. Walters, “The Citibank Project:

Improving Productivity Through Work Redesign,” The innovative Organization: Productivity Programs in Action, R, Zager

and M.P. Resow (cd.) (New York: Pergamon Press, 1982), p. 109.

satisfying jobs, but are wary because job design

and quality circles have been used as tools for

keeping out unions. In general, labor has had

little to say about reorganization of work around

new technologies, although technical experts

sometimes solicit the opinions and advice of

shop floor workers, or committees representing blue-collar workers may be consulted. But

with increasing responsibilities, operators of

integrated, expensive, and sensitive technical

systems may come to exercise more influence.

Another possible development is that barriers will come down within management.

Product and production departments, with

managers on the same level in the organization,

will have to work together, much as production and quality control functions have already

been integrated in new-model factories. Products will have to be designed for efficiency in

manufacturing. This requires not only that

product engineers work effectively with manufacturing engineers, but that technical staffs

work effectively with production employees—

learning from them during the design stage and

helping them learn to produce the firm’s goods

or services efficiently and competitively.

Examples of New-Model Plants

A number of American and European countries have successfully adopted the model of

work organization outlined above, and some

of the same principles are at least implicit in

Japanese companies. A Shell Canada chemical

plant at Sarnia, Ontario, shows how the principles were applied in a technologically advanced continuous process manufacturing

facility. 54 Shell Canada’s highly efficient polypropylene and isopropyl alcohol plant started

up in 1979 after 4 years of planning and a $200

million investment. The plant operates 24

hours a day, 7 days a week, with a staff of 210

people. All of its operators have been trained

sqInformation provided by Joel Fadem, Institute of Industrial

Relations, University of California, Los Angeles, under contract

with OTA; L.E. Davis and C.S, Sullivan, “A Labour-Management

Contract and Quality of Working Life,” Journal of Occupational

Behaviour, vol. 1, 1980, pp. 29-41; Norm Halpern, “Novel Organization Working at Shell Canada Facility, ” Oil and Gas Journa], Mar. 25, 1985, pp. 88-93.
Ch. 8—The Effects of Technological Change on the Nature and Availability of Jobs . 359

in equipment maintenance, quality control,

scheduling, and safety as well as in process

operations. (A team of journeyman craftsmen

do the more complicated repair jobs.) Training in multiple skills, marked reduction of distinctions among workers, and a high degree of

self-regulation are key features of the plant’s

operation. There are no job classifications for

operators (termed shift team members), The

pay structure rewards acquisition of new skills

and allows all team members to reach the top

rate.

The design team responsible for Shell Sarnia considered technical and human factors together from the start; representatives of the

union (the Energy and Atomic Workers of Canada, formerly the Oil, Chemical, and Atomic

Workers Union) were active participants. The

team made important changes in the design

originally proposed by the company’s technical specialists, often in the direction of greater

responsibility and control by operators. Studies

of other highly automated chemical plants of

the same type showed that the plants were

often out of operation; the number of variables

in the conversion process is very large, many

causal relationships are poorly understood, and

the final product may not conform to specifications, In a closed loop operation without human intervention, the process may have to be

shut down while adjustments are made, At Sarnia, the computer system gives operators the

information they need to fine-tune the chemical process and respond quickly to malfunctions, without having to shut down.

The Shell Sarnia system does not run on

automatic pilot. To keep it working smoothly

requires continuous training in technical and

social skills. The results, from both the management and labor points of view, appear to

be worth it. Quality control is reported to be

excellent, throughput and on-stream time substantially above average, and absenteeism the

lowest in any Shell Canada plant. In more than

6 years since the plant started up, only 11

formal grievances were filed—none after the

first 31⁄2 years, This compares with 150 grievances in the neighboring Shell refinery during

the same period. The Sarnia experience has

prompted Shell Canada to use a similar organization of work in several other facilities, including a new $1.4 billion oil refinery and

styrene-monomer complex in Edmonton, Alberta. 55

Rohm & Haas Bayport, Inc., a batch process

plant near Houston that makes two lines of specialty chemical products, demonstrates a similar approach.56 Startup operations at the Bayport plant began in 1982 with a line of specialty

monomers. Production of an herbicide called

Blazer began several months later.

Bayport employs about 110 people. Its production technology is conventional but its work

organization differs markedly from that in

other Rohm & Haas facilities, particularly the

jobs of the 52 semiskilled production technicians—28 workers on one product line, 24 on

the other. The plant manager, a veteran Rohm

& Haas employee and the driving force behind

the Bayport organization, stresses open communications and a nonbureaucratic management style. Organization of work at Bayport

embodies the following elements:

● multiskilled technicians, each trained in

five different jobs (most with no prior experience in the chemical industry);

● pay-for-skills through a ladder (as a technician masters each of the five jobs in turn,

his or her pay rises);

● no use of shift foremen; and

• product-centered organization, with clear

lines of responsibility.

Many of the work system features also extend to the secretarial and clerical staff. Technicians are carefully selected to fit the system.

Rohm & Haas uses three levels of screening:

1) aptitude tests given by the Texas Employment Commission; 2) structured interviews

carried out by Bayport managers; and 3) interviews by present technicians, The third level

of screening was added after half of the first

group of technicians left or were discharged

55 Ha]pern, op. Cit., p. 93.

~Based on OTA interviews conducted in February 1984, a telephone interview conducted in November 1985; and R.D, Gilbert,

“What Do You Know About Participative Management?” Chemical Engineering, Apr. 1, 1985.
360 ● Technology and Structural Unemployment: Reemploying Displaced Adults

during plant startup. Current technicians now

have veto power over new hiring and can also

force the firing of someone who does not fit

in. The plant manager chose most of the original management team himself; today, his immediate subordinates would screen new candidates for managerial openings just as the

technicians screen their prospective peers.

performance evaluations are carried out

every 6 months. Group meetings are part of the

process, with peer ratings being a major factor in climbing the pay-for-skills ladder. If a

technician fails an evaluation, he or she must

devise a plan for passing within a specified

time. The extensive screening of potential employees helped to keep worker turnover to 10

percent. While the technicians are all young

(under 40), they are far from homogeneous, including both blacks and women.

So far, the new work organization seems to

have been effective. All parties express a high

level of satisfaction. The principal saving in direct costs has come from cutting out some of

the supervisory labor of foremen. Extra costs

have been associated with training technicians

for multiple jobs.

Recently, the demand for Bayport’s herbicide

Blazer has dropped off, due to falling farm

prices and incomes. Originally, the plant used

contract workers to maintain equipment. To

avoid laying off its own workers, Bayport has

begun to train employees in maintenance, starting with a group of 12 workers and aiming to

train 36 eventually. The full-time training course

takes 4% months to complete, and is provided

by staff engineers and the local community college; some of the instruction is by means of

videotape. Once trained, the workers will add

maintenance tasks to their duties.

Volvo’s automobile assembly plant in Kalmar,

Sweden, has become known around the world

for its group-based assembly processes and unusual Iayout.57 Much of the impetus for the

ST]nformation based m OTA staff visit to the Kalmar plant;

also, see U.S. Congress, House Committee on Science and Technology, Subcommittee on Science, Research and Technology,

The Human Factor in Innovation and Productivity (Washington, DC: U.S. Government Printing Office, 1981), pp. 182-252.

plant design came from the problem of high

rates of absenteeism and turnover which

Volvo, in common with many Swedish companies, experienced in the late 1960s. When

Volvo set out to design a new factory in the

early 1970s, increased efficiency was not the

primary goal; rather the objective was to improve employee satisfaction and motivation

without directly sacrificing productivity. The

company hired experts to interview 1,000 current employees. The survey results guided the

architects and engineers, who also drew on the

advice of two consultative groups, one that included technicians and foremen and another

that included union representatives, safety

officers, and specialists in occupational medicine and ergonomics.

The Kalmar factory is unlike other automobile assembly plants. It is light, spacious, and

quiet, and its star-shaped form gives each work

group a well-defined territory–including changing rooms, lounge, and sauna. The plant is

small, with about 700 employees and a single

shift capacity of 30,000 cars per year. Volvo

management viewed small size as important

for greater flexibility, as well as a better quality of working life through job enrichment and

enlargement.

Both the plant layout and the group-based

organization of assembly jobs create a sense

of factories within a factory. The fundamental design decision was to replace the traditional moving assembly line with a system in

which each car is assembled on its own carrier—essentially a self-propelled platform that

follows magnetic strips in the floor. These carcarriers, designed by Volvo, tilt the entire car

for work on the underside. A central computer

monitors the positions of the carriers as they

move from one workstation to the next. Start/

stop signals for entering and leaving each station come from the computer but can be overridden by workers on the floor. A typical work

area, manned by 15 to 20 workers, has several

workstations and can accommodate six carriers at a time. Each car spends about 20 minutes in the group’s work area.

While the plant’s technical staff use conventional techniques to allocate tasks among work
Ch. 8—The Effects of Technological Change on the Nature and Availability of Jobs • 361

groups and stations, each group has a good

deal of autonomy in carrying out their assigned

tasks. Groups members typically rotate from

job to job for variety, but few want to rotate

from one group to another. One foreman supervises a pair of groups, while quality control

inspectors function as members of the group.

Volvo is clearly satisfied with the results at

Kalmar, The company claims that manhours

per car are 25 percent less than at Volvo’s other

plants, and quality is high.58 Capital costs were

higher than at a more conventional assembly

plant.59 Absenteeism still runs around 24 percent: 10 percent “sickness,” and the rest largely

authorized; the sickness rate is reportedly half

that at several other Volvo plants.60 Surveys

show that most Kalmar workers are satisfied

with their jobs but also feel they have little

chance to use all their skills or learn new ones.

National Policies Supporting Innovative

Organization of Work

Sweden is one of the West European countries where governments have supported workplace innovation. Since the early 1970s,

Sweden’s system of official partnership between government, industry, and unions has

encouraged changes in work organization and

job content in connection with technological

change. Largely a response to demands for

more attractive jobs, the innovations include

small, independent units of production and

work roles that try to engage workers more

fully. The Swedish Work Environment Fund,

supported by industry levies plus government

and private sector grants, provides money for

research, development, training and education

in work environment issues. In a 5-year program in the 1970s, the Fund spent an estimated

$227 million on projects to improve occupational safety and health, broadly defined.61

Sasee s. AgUren, et al., Volvo Kalmar Revisited: Ten Years of

Experience (Stockholm, Sweden: Efficiency and Participation

Development Counci], 1984), p, 12.

SeIbid., p. 28.

~P. Enstrom and K. Levinson, Industrial Relations in the Swedish Auto industry—Developrnents in the Seventies [Stockholm,

Sweden: Swedish Center for Working Life, 1982), p. 36. 61The swedlsh work Environment Fund, Programme of Activities and Budget, 1983/4-1985-86, Summarised Edition, Stockholm, Sweden, pp. 10-11.

Recently, the Fund has shifted its emphasis

toward improving the fit between computerbased technology and work organization. The

Fund is currently supporting efforts which

integrate technical and human concerns in designing advanced manufacturing and office

systems.

West Germany has subsidized improvements

in work organization to a greater extent than

any other country. From 1974 to 1983, the West

German government spent approximately $325

million on its Humanisation of Working Life

Programme. Recently, spending has averaged

about $50 million per year, against a backdrop

of general fiscal austerity.62 Over 1,500 projects

have been completed and documented.

Results of the West German program have

been mixed. It has emphasized engineering design as a major way of improving jobs, and has

had some success in influencing factory design. Features such as modified assembly lines,

buffers, and grouping of machines and work

stations to improve the work environment have

been adopted in many German companies. Human systems innovations, such as job rotation,

job enlargement and enrichment, and semiautonomous groups have been less accepted.

The program’s heavy reliance on behavioral

science researchers, often lacking practical experience in industry, has sometimes led to conflict with managers, and with labor as well.

Until recently, these problems were aggravated by the West German goverment’s policy

of paying most of the costs of work humanization projects. As a result, host companies

tended to view researchers as a necessary nuisance, and not to take their activities seriously.

The policy has changed; companies must now

pay half the cost of design research. Greater

attention is being given to economic efficiency;

work humanization is viewed as compatible

with this aim. Small and medium-sized enterprises now also have greater access to program

—-—--—.—

‘

z David Jenkins, “Germany Engineers Work Humanization,”

QWL Focus, vol. 3, summer 1983, Ontario Quality of Worklife

Centre, Toronto, Canada, pp. 23-25; and Peter Schuh, “Report

From Germany, ” Seminar Report of European Association of

National Productivity Centres, in Work Research Unit, London,

Information System News and Abstracts No, 74 May/June 1985.
362 ● Technology and Structural Unemployment: Reemploying Displaced Adults

funds. In the United States there is no official chines hold the promise of cutting costs and

government support of innovations in work improving products, especially with computerorganization, but interest in newer systems based technologies. If the promise is fulfilled,

which include greater worker participation and participative work organization may become

responsibility appears to be rising. Production a strong factor in improving the competitivesystems that better integrate people and ma- ness of U.S. industry.

APPENDIX 8A: FORECASTING THE EFFECTS OF TECHNOLOGICAL CHANGE ON JOBS

The effect of technological change on jobs

raises concerns of various kinds among many

people. Workers fear that their jobs will be

eliminated, or altered to the point where they

will need additional education or training to

fill them. Managers worry that technological

change will mean greater demands for particular kinds of workers than the Nation’s schools

produce, and educators worry that curricula

will become obsolete. People choosing careers

want to know what course of action will lead

them to a good job; in some cases, changing

technology can alter the picture in only a few

years.

The Bureau of Labor Statistics (BLS) periodically makes and updates 15-year projections of

employment by occupation and industry; these

are widely used by labor market analysts and

by job-training and high school counselors. The

projections detail how many people are expected to be in the work force, and in what occupations and industries. Qualitative changes

that occur within occupations—often as a result of applications of new technology—are not

included in the projections.63 BLS does attempt

to incorporate the effects of technological

change into its occupational/industry forecasts

at several stages in the forecasting process.

—————

63BLS does eva]uate qualitative changes expected in many

different jobs in the Occupational Outlook Handbook, published

every 2 years. The handbook describes the nature of different

jobs, what training they may require, their pay scales, and the

number of opportunities they may provide. The Dictionary of

Occupational Titles, compiled by the Employment and Training Administration (ETA), includes job descriptions for thousands of jobs based on on-site evaluation. While the dictionary

contains a wealth of qualitative information, it is not designed

to capture ongoing or potential changes in jobs.

Given the difficulties inherent in predicting

technological innovation and diffusion, projections of the effects of technology on jobs, or

even of the technologies themselves, have

many uncertainties. For example, major innovations like the transistor and computers were

not widely recognized as commercially important at first. Conversely, some innovations have

failed to meet early commercial expectations;

for instance, in the early days of television,

many people forecast that television would revolutionize education, a promise which has not

been fulfilled. The commercial viability and

diffusion of process innovations are equally difficult to forecast. In 1964, an article in the

American Machinist confidently hailed numerical control as “the one overwhelming metalworking development of the century, ” and predicted that use of NC machines in the future

probably would be limited “more by the capacity to build NC machines than by any other factor.”64 In the succeeding two decades, however, the diffusion rate was much slower than

initially thought.

It is also difficult to judge the ways designers,

managers, and workers will integrate new machines and technologies with people, since

there is not one unique way to combine people and machines. Different organizations will

approach the problem in different ways. Their

decisions affect the number of people in different occupations as well as the skills and training needed in those occupations. For example,

some clinical chemical laboratories, when buying machines to perform blood tests formerly

done by hand, have chosen to keep college-

“

4

’’ The Impact of NC,” American Machinist, Oct. 26, 1964, pp.

NC2-4.
Ch. 8—The Effects of Technological Change on the Nature and Availability of Jobs ● 363

trained medical technologists in the lab jobs.

The technologists are expected to be able to

judge when a test result is suspect or may have

life-threatening implications. Other laboratories have reduced the percentage of medical

technologists and added less skilled medical

technicians to run and monitor the machines,

These labs retain some technologists to judge

the validity of test results, but the number of

positions for medical technologists is reduced.65

The study of occupations that are continually changing is also hampered by poor compatibility of data and changes in job classification systems. New job titles, for example, are

frequently added to improve the detail of occupational data. Both historical figures and

projections of the number of people in given

occupations are available. Comparability suffers, however, as changes in the workplace

alter occupational responsibilities, even if

changes are not made in job classifications.

Thus, identifying skill changes due to technology is at least a two-stage process: first, quantitative changes in occupational categories

must be noted; and second, qualitative changes

within each occupational category need to be

evaluated,

Finally, the use of any technology—and therefore, its impact on jobs—depends heavily on

a number of other factors which are difficult

to forecast even for the immediate future. The

list of these factors includes changes in consumer preferences and purchasing patterns,

economic conditions, the objectives and strategy of labor and management, and the number and kind of competitors (domestic and international) in the field. In turn, many of these

variables are themselves affected by technology; for example, access to the capital needed

to invest in many up-to-date production technologies is a major determinant of what firms

and nations can compete in the market. Isolating the effect of technology from these other

factors is quite difficult, and adds to the uncertainties of forecasting.

—..—.-..——

esBernard Ingster, consultant, persona] communication.

The Bureau of Labor Statistics

Occupational Projections

For decades BLS has compiled and published

data on present and future job prospects for

people seeking employment in a range of occupations. This information, initially designed

to be of service to veterans returning from

World War II, is currently aimed primarily at

high school guidance counselors and students

who are making preliminary career decisions.

BLS must make assumptions about new technology in developing occupational projections;

these assumptions are reflected in their resuits.eo Projections of occupations through

1995, for example, indicate that word-processing equipment will reduce the need for typists,

and that the wider use of industrial robots will

affect the demand for welders, production

painters, and material-moving occupations. In

the BLS predictions of the 20 fastest growing

occupations, the effects of computers are clearly

apparent for many—e.g., computer programmers, computer systems analysts, data processing equipment repairers. However, the 20 occupations where the largest job growth is

expected in absolute numbers are largely traditional; for example, cashiers, registered nurses,

janitors and cleaners, truck drivers, waiters,

and salespeople, and nursing aides and attendants (see table 8A-1).

The BLS Employment Projection System is

a series of five interconnected models that produce occupation-specific forecasts of employment for 378 industries and approximately

1,500 occupations.67 These five models are:

1. labor force model—projects the size of the

labor force based on demographic statistics and other considerations, such as increased participation of women in the

work force;

$Bsee U.S. Department of Labor, Bureau of Labor Statistics,

“BLS Handbook of Methods, ” Bulletin 2134-1, vol. 1, December 1982.

o7John A. Hansen, “Bureau of Labor Statistics Methodology

for Occupational Forecasts: Incorporating Technological

Change, ” contract report prepared for the Office of Technology Assessment, April 1984,
364 ● Technology and Structural Unemployment: Reemploying Displaced Adults

Table 8A-1.—Occupations With the Largest Job Growth and Fastest Growing Occupations

as Projected by the Bureau of Labor Statistics, 1984-95 (numbers in thousands)

Change in employment

Employment

Percent of total

1984-95 job growth

Occupation 1984 1995 Number Percent 1984-95

Largest job growth:

Cashiers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Registered nurses. . . . . . . . . . . . . . . . . . . . . . . . . . .

Janitors and cleaners, including maid and

housekeeping cleaners. . . . . . . . . . . . . . . . . . . . .

Truck drivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Waiters and waitresses . . . . . . . . . . . . . . . . . . . . . .

Wholesale trade salesworkers . . . . . . . . . . . . . . . .

Nursing aides, orderlies, and attendants . . . . . . .

Salespersons, retail . . . . . . . . . . . . . . . . . . . . . . . . .

Accountants and auditors . . . . . . . . . . . . . . . . . . . .

Teachers, kindergarten and elementary . . . . . . . .

Secretaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Computer programmers . . . . . . . . . . . . . . . . . . . . . .

General office clerks . . . . . . . . . . . . . . . . . . . . . . . .

Food preparation workers, excluding fast food . .

Food preparation and service workers,

fast food . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Computer systems analysts, electronic data

processing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Electrical and electronics engineers . . . . . . . . . . .

Electrical and electronics technicians and

technologists ... , . . . . . . . . . . . . . . . . . . . . . . . . .

Guards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Automotive and motorcycle mechanics . . . . . . . .

Fastest growing occupations:

Paralegal personnel . . . . . . . . . . . . . . . . . . . . . . . . .

Computer programmers . . . . . . . . . . . . . . . . . . . . . .

Computer systems analysts, electronic data

processing (EDP) . . . . . . . . . . . . . . . . . . . . . . . . . .

Medical assistants . . . . . . . . . . . . . . . . . . . . . . . . . .

Data processing equipment repairers . . . . . . . . . .

Electrical and electronics engineers . . . . . . . . . . .

Electrical and electronics technicians and

technologists . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Computer operators, except peripheral

equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Peripheral EDP equipment operators . . . . . . . . . .

Travel agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Physical therapists . . . . . . . . . . . . . . . . . . . . . . . . . .

Physician assistants. . . . . . . . . . . . . . . . . . . . . . . . .

Securities and financial services

salesworkers . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Mechanical engineering technicians and

technologists . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Lawyers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Correction officers and jailers . . . . . . . . . . . . . . . .

Accountants and auditors . . . . . . . . . . . . . . . . . . . .

Mechanical engineers . . . . . . . . . . . . . . . . . . . . . . .

Registered nurses. . . . . . . . . . . . . . . . . . . . . . . . . . .

Employment interviewers, private or public

employment service . . . . . . . . . . . . . . . . . . . . . . .

1,902

1,377

2,940

2,484

1,625

1,248

1,204

2,732

882

1,381

2,797

341

2,398

987

1,201

308

390

404

733

922

53

341

308

128

50

390

404

241

70

72

58

25

81

55

490

130

882

237

1,377

72

2,469

1,829

3,383

2,911

2,049

1,617

1,552

3,075

1,189

1,662

3,064

586

2,629

1,205

1,417

520

597

607

921

1,107

104

586

520

207

78

597

607

353

102

103

83

35

113

75

665

175

1,189

317

1,829

95

566

452

443

428

424

369

348

343

307

281

268

245

231

219

215

212

206

202

188

185

51

245

212

79

28

206

202

111

32

32

25

10

32

20

174

45

307

81

452

23

29.8

32.8

15.1

17.2

26.1

29.6

28.9

12.6

34.8

20.3

9.6

71.7

9.6

22.1

17.9

68.7

52.8

50.0

25.6

20.1

97.5

71.7

68.7

62.0

56.2

52.8

50.7

46.1

45.0

43.9

42.2

40.3

39.1

36.6

35.5

34.9

34.8

34.0

32.8

31.7

3.6

2.8

2.8

2.7

2.7

2.3

2.2

2.2

1.9

1.9

1.7

1.5

1.4

1.4

1.4

1.3

1.3

1.3

1.2

1.2

0.3

1,5

1.3

0.5

0.2

1.3

1.3

0.7

0.2

0.2

0.2

0.1

0.2

0.1

1,1

0.3

1.9

0.5

2.8

0.1

SOURCE: George T, Silvestri and John M. Lukasiewicz, “Occupational Employment Projections The 198495 Outlook,<’ Monthly Labor Review, VOI 108, No. 11, November

1985, pp. 51-52.
Ch. 8—The Effects of Technological Change on the Nature and Availability of Jobs ● 365

2.

3.

4.

5.

macroeconomic model—predicts the future level of economic activity based on

assumptions concerning growth in the

gross national product, defense spending,

inflation rate, and other factors;

industry activity model—projects the aggregate demand for goods and services for

each industry;

industry labor demand model—projects

the total labor requirements by industry;

and

occupational labor demand model—provides a breakdown of labor demand in

each industry by occupation.

The fifth model, providing occupational projections, incorporates the results and assumptions of the other four models. If results from

any of the models are inconsistent with initial

assumptions, other model adjustments or new

assumptions are made. These changes are

based on judgments and may affect other

model results. BLS therefore repeats the procedure until all conditions are met. If, for

example, the projected number of aircraft assemblers is assumed to be reduced due to technological change, the growth rate of this occupation can be reduced in the model. To meet

a predetermined staffing ratio other occupations in the same industry would be adjusted

upward. Several of these adding-up requirements may have to be made with respect to a

single technological assumption.68

Virtually all the effects of technological

change encompassed in the modeling system

are introduced through exogenous adjustments

made by BLS staff. The staff is aware of the

importance of technological change and does

make changes in the models to accommodate

them. The BLS staff is conservative about making adjustments to the model based on technological change; unless there is both evidence

that an adjustment is required and evidence

about the appropriate magnitude of that adjustment, BLS assumes that the future will follow

historical patterns,69 However, even with this

conservatism, hundreds of adjustments are

88 Hansen, op. cit.

eel bid.

made. BLS analysts make the adjustments on

the basis of officewide guidelines about the

basic economic assumptions that underlie the

model, and on the strength of their own knowledge of particular industrial sectors. Often, the

changes made to incorporate the effects of

technological change represent the judgments

of one or a few analysts. This is not necessarily

inappropriate; regardless of the forecasting

procedure involved, forecasts must represent

the judgments of individuals about the future,

if they are not to be a simple extension of past

trends. However, because it is difficult to make

accurate judgments about many future possibilities, the most useful forecasts incorporate

sensitivity analyses to show how the outcome

of the forecast depends on the assumptions

used in making the forecast.

Despite the uncertainty about the kinds and

rates of technological change, BLS has performed no sensitivity analyses on the model

with respect to different technological futures.

With budgetary considerations forcing BLS to

reduce the number of occupations reviewed,

it is unrealistic to expect a more formal evaluation of technologies in the near future. BLS

sensitivity analyses are mainly confined to

varying macroeconomic assumptions—e.g.,

GNP growth, personal consumption, imports

and exports, government expenditure, the

growth of the labor force, and worker productivity–to produce estimates of employment

in high, moderate, and low ranges. This sensitivity analysis is useful but limited. As a result,

the 15-year forecasts tend to become outdated

in only a few years, For example, forecasts published in June of 1979 expected exports to grow

more rapidly than imports through the 1980s,

while in fact the first half of the decade has

been marked by record American trade deficits. The same projection expected manufacturing employment to increase to over 23 million

in 1985; in fact, manufacturing employment in

1985 was about 19,4 million—1.6 million below

the actual 1979 level, and 3.6 million below the

projected figure.70 BLS updates its long-term

—.—

70Valerie A. Personick, “Industry Output and Employment:

BLS Projections to 1990, ” Monthly Labor Review, April 1979,

pp. 25-36.
366 ● Technology and Structural Unemployment: Reemploying Displaced Adults

forecasts every 2 years, correcting for the

difference between the projected and the actual; even so, long-term forecasts, without a

great deal more sensitivity analysis, are not

reliable indicators of what will happen.

The Dictionary of Occupational Titles

Many analysts, when looking at qualitative

aspects of jobs, rely on another publication of

the Department of Labor, the Dictionary of Occupational Titles (DOT), published since 1939.71

The DOT attempts to identify the skill and

training requirements of a very large sample

of jobs in the economy. DOT categorizes titles

and descriptions of 12,099 occupations. According to the most recent (1977) edition, DOT

is intended for use in employment counseling,

in career guidance, and in developing public

and private labor plans and training programs,

In analyzing the skill requirements for each

job, DOT first breaks the job down into worker

functions associated with people, data, and

things, and then ranks the job within these categories. For example, in jobs that involve handling data, the highest level is “synthesizing,”

the lowest level “comparing.” Second, job titles are categorized according to traits on computer tapes available to users of DOT. These

traits include education and training requirements, aptitudes, temperaments, interests,

physical demands, and working conditions. In

characterizing thousands of jobs by function

and trait, DOT acts as a large job evaluation

system for the entire U.S. economy. The criteria used in ranking jobs are subjective, but

that is a weakness common to most job evaluation systems. However, the DOT has some

particular limitations of its own.

Specifically, DOT’s job analysis methods are

most suited to jobs that can be broken down

into discrete tasks, particularly manufacturing

jobs. The factors and scales used in rating

worker functions and traits were developed in

the 1950s using a sample of occupations,

mainly those in manufacturing. Since then, em71u.s. Department Of Labor, Dictiontmy of Occupational Tjdes, 4th ed. (Washington, DC: U.S. Government Printing Office,

1977).

ployment growth in the service sector has outpaced growth in manufacturing jobs, and new

technologies have entered the workplace.

These changes have undercut the validity of

some of the DOT skill measures. Additionally,

some DOT job descriptions may be weak because of poor management of the onsite analyses used in compiling the 1977 edition.72 In

addition, the document’s coverage of newly

emerging industries and occupations may be

inadequate, because the 1965 edition of DOT

was used as the sampling frame for jobs included in the 1977 edition.73

Despite its limitations, DOT is extensively

used. Job placement interviewers within the

State-Federal Employment Service rely on the

job titles and definitions to match unemployed

workers with openings in State and local job

banks, and Employment Service counselors

use the information on workers’ traits to help

clients explore vocational options. DOT is also

used by counselors, personnel managers, employment placement officers, and labor market analysts in schools, government agencies,

and private firms.74 The Bureau of Apprenticeship and Training uses it for training, the

Veterans Administration relies on it for rehabilitation and employment counseling, and

vocational educators use it for counseling and

curriculum development. In 1980, following an

extensive study of the 1977 edition, the National Academy of Sciences concluded that

there was a strong and continuing need for the

kind of information that DOT provides. 75

DOT was not designed to depict the influence of technological change, although some

information can be gleaned from individual job

descriptions, As an illustration, box 8C gives

the job descriptions for an injection machine

operator and an injection machine tender for

the manufacture of plastic products. One of the

most noted occupational changes with automatic production equipment is the shift from

TZAnn R, Miller, et al., Work, jobs, and Occupations.’ A Critical Review of the Dictionary of Occupational Titles (Washington, DC: National Academy Press, 1980), p. 146.

TsIbid.

TqIbid., p. 91.

751 bid., p. 214.
Ch. 8–The Effects of Technological Change on the Nature and Availability of Jobs . 367

Box 8C.—Sample Occupations From the

Dictionary of Occupational Titles

656.382-014

Injection-Molding-Machine Operator

(fabric. plastics prod.) injection molder;

molder.

Sets up and operates injection-molding machines to cast products from thermoplastic

materials: Installs dies on machine, according

to work order specifications, using clamps,

bolts, and handtools. Sets machine controls,

regulating molding temperature, volume of

plastic molding pressure and time, according

to knowledge of plastics and molding procedures. Dumps premixed plastic powders or

pellets into hopper, and starts machine. Pulls

lever to close dies and inject plastic into dies

to cast part. Removes finished product from

dies, using handtools. Trims excess material

from part, using knife. May mix thermoplastic materials and coloring pigments in mixing

machine, according to formula. May grind

scrap plastic into powder for reuse.

556.685-038

Injection-Molding-Machine Tender

(fabric. plastics prod.; phonograph; rubber

goods)

Tends injection-molding machines that

form plastic-or rubber products, such as typewriter keys, phonograph records, and luggage

handles: Dumps plastic powder, preformed

plastic pellets, or preformed rubber slugs into

hopper of molding machine. Starts machine

that automatically liquefies pellets, slugs, or

powder in heating chamber, injects liquefied

material into mold, and ejects molded product. Observes gages to insure specified molding temperature and pressure are maintained.

Examines molded product for surface defects,

such as dents and cracks. May heat plastic

material over steamtable or in oven to prepare

material for molding. May remove product

from mold, using handtools. May trim flash

from product, using shears or knife, May

place product in cold water or position it on

cooling fixture to prevent distortion.

controlling to monitoring work tasks. The two

job descriptions demonstrate this shift. Yet the

descriptions do not explicitly reveal that the

machine tender’s job is in a more technologically advanced system than the machine operators. The equipment for each job is not described, and various ways in which tasks are

allocated within these jobs is not apparent,

DOT job descriptions could be made clearer

if closer attention were given to occupational

comparisons and changes within job titles.

Data from additional onsite evaluations and

survey data could help in updating the DOT,

to make it better reflect the nature of existing

jobs. Up-to-date descriptions would help workers in making job transitions, by providing information that would allow matching a worker’s past experience with the requirements of

current jobs.

Source: U.S. Dapartmant of Lak Employment and Training

Administration, DicffonaIY of Oxupatfonal ?’idas, &h ad. (Washington, DC: U.S. Govamment Printing Clfi%X, 1977). pp. 407, @Q.
Chapter 9

The Effects of International Trade

on U.S. Skills and Employment
Contents

Page

Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....................,371

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .....................372

The Effect of Trade on Employment . . . . . . . . . . . . . . . . ..................375

Exports and the Numbers of U.S. Jobs.. . ...................,...,...,376

Exports and the Demand for Skills . . . . . . . . . . . . . . . . . . ...............378

Imports and the Number of U.S. Jobs . .............................381

Imports and the Demand for Skills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....383

Responses to International Competition . .............................385

Improved Technology as a Response to International Competition . ....386

Reorganizing Production on a Global Scale: Manufacturing Offshore ....392

Policy Responses to Employment Decline: The Protection Debate ... ... ...400

The Effect of Protection on Employment: Positive Aspects ., ... ... .., .400

The Effect of Protection on Employment: Costs . . . . . . . . . . ... ....403

List of Tables

Table No. Page

9-1.

9-2.

9-3.

9-4.

9-5.

Labor Content of Trade and Ratios of Production to Total

Employment, by Manufacturing Sector, 1982 . ................,.....377

Occupational Employment in Export Industries . ................,.,.380

Characteristics of Workers and Industries Whose Employment

was Most Affected by Trade Between 1964 and 1975 , ..., ., . . . . . . . . .384

Apparel Industry Wage Rates in Selected Countries, 1982............390

Imports of Semiconductors Under TSUS 807.00, 1983 . ..............395

List of Figures

Figure No. Page

9-1. Ratio of Production Employment to Total Employment in

Export Industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................379

9-2. Semiconductor Employment July 1984 June 1985 ....................381

9-3.

9-4.

9-5.

9-6.

9-7.

9-8.

9-9.,

U.S. Apparel Impoorts. . . . . . . ........ . ..........................382

U.S. Apparel Employment (SIC 23). . . . . . . . . . ......................382

Apparent Labor Productivity in U.S. Motor Vehicle Assembly:

1972-84 (SIC 3711) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............389

U.S. Imports Under Items 806/807 . . . . . . . . . . . . . . . . . . . . . . . .........393

Principal Sources of Imports Under Item 807, 1970 and 1983... .. ....393

806/807 U.S. Imports and U.S. Total Shipments of Semiconductors ....395

Percent of U.S. Imports of Apparel Under Item 807 . ................396
Ch. 9—The Effects of International Trade on U.S. Skills and Employment ● 373

services also increased rapidly, although not

so rapidly as merchandise trade.

In the United States, trade has risen greatly

in the past two decades as a component of the

economy. Between 1970 and 1984, the dollar

value of imports of merchandise rose 16 percent per year, from $39.9 billion to $327.8 billion, or from 4 percent to nearly 9 percent of

gross national product (GNP).3 In the same

period, merchandise exports increased 12 percent annually, from $42,5 billion to $220.3 billion, or from 4.3 percent of GNP to 6 percent.4

The expansion of U.S. trade has many positive

effects on the economy. Increasing trade means,

for consumers and producers alike, that a

wider variety of products is available. In addition, the products and services which are traded

embody knowledge of production processes

and technology, and trade helps to transfer this

knowledge. Such transfers enable people in

poor or developing countries to improve their

standard of living, as they learn how to produce sophisticated products.’

Another result of the rising importance of

trade is that more and more U.S. workers are

affected. This has both positive and negative

impacts: more people owe their jobs to additional demand created by exports and more

people are threatened with job loss or have lost

jobs as a result of import competition, The

difference in the rates of growth between imports and exports means that the number of

workers affected by import competition has

grown faster than the number of workers who

owe their jobs to exports. The United States has

changed from being a net exporter throughout

much of the 20th century to being a net importer on a very large scale. The largest contributor by far to the deficit is merchandise

trade: in 1984, the merchandise trade deficit

was $107 billion. Throughout the 1970s and

1980s, the United States has run services trade

——

ZMerchandise trade includes petroleum and petroleum products, manufactured goods, and agricultural products.

3U. S. Department of Commerce, Bureau of Economic Analysis, Survey of Current Business, various issues.

qIbid.

SRichard M. Cyert, “The Plight of Manufacturing: What Can

Be Done?” Issues in Science and Technology, Summer 1985,

p. 89.

surpluses. Although the surplus fell by more

than half from 1980 to 1984, the services surplus

was still $17.0 billion in 1984.8 However much

of the services trade surplus is in investment

income, unconnected with U.S. jobs. Leaving

this out, the United States will probably experience a serious services trade deficit in 1985.

This is the first year that services trade, exclusive of investment income, will experience a

deficit,

The rapid deterioration of the U.S. international trade balances in the 1980s, both in services and merchandise, is largely a result of the

rise in the value of the dollar against foreign

currencies.7 However, it is also a fact that many

U.S. manufacturing industries have lost competitive ability relative to foreign producers.

Many of these industries began to have competitive problems in the late 1970s, when the

dollar was undervalued, and some had begun

to decline earlier. It will be very difficult for

industries with basic competitive problems to

recover when the dollar falls. The number of

industries with basic competitive problems has

risen, and now includes portions of high-technology sectors. Such industries will have more

difficulty creating new production jobs; it will

be difficult for many to avoid displacement and

employment loss. Even industries which probably are internationally competitive, but for the

overvalued dollar, will have trouble rebounding from the prolonged setback of the 1980s.

Although the value of the dollar has dropped

since spring of 1985, it still has a long way to

fall before affected industries will be able to

reestablish market position. Even then, regaining customers who have built relationships

with foreign suppliers may take time.

Decreasing costs of communication and

transportation have been significant factors in

the expansion of international trade, as well

— — —.—

8Much of this surplus is investment income, unconnected with

U.S. jobs. Leaving out the investment income, the United States

will probably run a substantial services trade deficit in 1985.

7The spectacular rise of the dollar, in turn, has been linked

to high U.S. budget deficits and interest rates. These relationships are complex, and are not addressed in this study. For a

discussion of the deficit issue, see Norman S. Fieleke, “The

Budget Deficit: Are the International Consequences Unfavorable?” New England Economic Revienr, May/June 1984.
374 ● Technology and Structural Unemployment: Reemploying Displaced Adults

in the difficulties many U.S. firms face in international competition. Easier communication means that information on economic and

political trends, fashions and tastes, production techniques, and the like can be quickly and

cheaply shared internationally, giving foreign

producers up-to-date information to plan production and exports. For example, swift style

changes in high-fashion apparel require either

production very close to the market, or communication links which allow producers in

other nations to collapse the time between the

emergence of a fashion trend and delivery of

finished apparel to the market.

Falling transportation costs mean that countries with even modest cost advantages in production are better able to compete on the basis of that cost advantage in foreign markets.

Reduction of either transportation or communication costs accentuates the importance of

other cost factors in determining where products are made. In industries and production

processes which rely heavily on unskilled or

semiskilled labor, labor costs can be a particularly important influence on the competitive

position. Labor costs reflect both the compensation paid to workers (wage rates plus fringe

benefits and payroll taxes) and labor productivity (labor content per unit of output). Thus,

industries and countries with relatively high

wage rates may still be internationally competitive if worker productivity is great enough to

support the high wages. Worker productivity,

in turn, is affected by many factors, including

good management, up-to-date equipment, the

education and skills of the work force, labormanagement relations, and effective work organization.

Industrialized countries with relatively high

wage rates, such as the United States and West

Germany, often respond to competition from

low-wage countries by automating production

to raise worker productivity. While higher

productivity is essential to improving competitiveness, it can also cost jobs, as smaller numbers of workers are needed to produce equivalent output. If demand is rising more slowly

than productivity, jobs are lost. Moreover, in

industries or production processes where labor costs are a large portion of production

costs, automation sometimes cannot offset the

advantage of producers in low-wage areas. Production with automated equipment may be

more expensive than more labor-intensive production in low-wage countries, or automation

may fail to raise productivity enough to make

products competitive. Labor costs have been

a significant factor, for example, in loss of competitiveness of the U.S. apparel industry, commodity semiconductors, motor vehicle parts,

footwear, computer components, consumer

electronics, shipbuilding, and textiles. In these

cases, imports become more attractive, often

displacing domestic production. In many of

these industries, however, wages of American

workers are high only by comparison with

wages in the Third World; workers in the apparel and footwear industries, for example,

made less than $6 per hour, only two thirds the

average hourly wage for all American production workers in September 1985.

Because the labor cost advantage is often

large in industries which rely heavily on unskilled and semiskilled production workers—

a type of labor which is abundant in many developing and Third World nations—the effect

of increasing global competition falls more

heavily on production workers than on skilled

technical and professional workers. Among the

workers displaced between 1979 and 1984, the

group most affected in relation to their numbers was machine operators, assemblers, and

inspectors in manufacturing (see ch. 3),

The expansion of international trade makes

it harder for industrialized nations like the

United States to affect employment using strictly

domestic policies. For example, a tax cut designed to stimulate employment by increasing

consumption has a smaller employment effect

if much of the additional consumption is produced overseas. More and more, the number

and kinds of jobs available in the U.S. economy depend on international trade and competition. This is particularly true in manfactur-
Ch. 9—The Effects of International Trade on U.S. Skills and Employment ● 375 —

ing industries, which can produce goods in one

location for consumption in another.a

For at least the next few years (holding cyclical factors constant), manufacturing employment is likely to remain level or decline. Even

in the long run, if trade continues to gain importance in the U.S. economy, competitive

pressures from a growing number of countries

and industrial sectors is likely to exert downward pressure on manufacturing employment.

Some of the downward pressure will be offset

by rapidly rising demand; for example, growth

in demand for semiconductors is projected to

81 nternat io nal compet i I ion i n services industries can also a ffect employment; however, many services, such as hotel and

lodging services, restaurants, and banking and insurance, require that services be produced and consumed in the salnc locat ion. Competition in services industries, and their effects on the

[J. S. economy and employment, is the subject of an OTA assessment, International Competition in the .%r~’ice Industries, to he

completed in 1985.

be 19 percent per year through 1990, and semiconductor employment is expected to increase.

In other sectors such as steel, apparel, and automobiles, no such rapid expansion of demand

is anticipated to counter the effects of foreign

competition. Of course, if demand growth exceeds expectations, total manufacturing employment may increase.

In the whole economy, the number of workers whose jobs are affected by trade will increase if global trade continues to grow. The

dollar cannot remain overvalued forever; as it

falls, U.S. exports should be stimulated, and

more people will be employed in producing

products for export. While the growth of imports may be slowed by a falling dollar, growth

will probably continue nonetheless, and more

workers’ jobs will be affected by imports. Those

whose jobs are most vulnerable are likely to be

those less skilled, particularly in manufacturing.

THE EFFECT OF TRADE ON EMPLOYMENT

Export markets increase the effective demand for products, which adds to employment.

Export-generated employment includes workers in industries which produce goods and

services for export, upstream employment in

industries making inputs to goods and services

which are exported, and downstream jobs

needed to move products to ports. For example, exports of U.S. aircraft create more jobs

not only in aerospace industries but in the steel,

aluminum, plastics, electrical and electronic

machinery, and machine tools industries as

well. People involved in transporting the aircraft to their destinations are also counted in

export-generated employment.

The relationship between imports and jobs

is a little more complex. In some situations, increasing imports cost American workers their

jobs; in other cases, imports and U.S. employment can grow together, for someone must sell

and service the imported products. Imports are

likely to cost jobs in industries where import

penetration is increasing faster than product

demand, and where import penetration is a major motivating force behind automation. Where

workers are displaced in industries facing

greater pressure from imports, it is overly simple to ascribe displacement either to foreign

competition or to changing technology. In most

cases, both forces are operating. Rising imports, and the technological changes which are

made in response, are responsible for employment declines in sectors such as motor vehicles, consumer electronics, steel, textiles, and

footwear.

Imports and exports also affect the demand

for different types of skills, Many studies have

concluded that the comparative advantage of

the United States lies in skill-intensive products—e.g., aircraft, computers, and complex

electronic circuits—which embody labor with

a higher skill content than the products the

United States imports.9 As a result, the disWeev Hirsch, “The Leontief Paradox in a h4ulti-Country Setting, ” Weltwirtschaftiiches Archi~r, vol. 113, No. 3, 1977, pp.

417-418.
376 ● Technology and Structural Unemployment: Reemploying Displaced Adults

placement resulting from international trade

is heavily concentrated in low-skill occupations

and in industries which rely heavily on unskilled labor. The jobs generated by exports, on

the other hand, are difficult for these lowskilled displaced workers to qualify for.

Examination of the characteristics of displaced workers substantiates this point. Nearly

half of the displaced workers are from manufacturing, with overrepresentation in the least

skilled occupations (see ch. 3). Another source

of support is in data on the labor content of

U.S. trade. A 1983 study by the International

Trade Commission calculated the labor content

(roughly equivalent to the number of jobs) associated with U.S. imports and exports, by industrial sector (table 9-1). The ratio of production

workers (usually representing the highest proportions of unskilled and semiskilled workers)

to total industry employment is an indicator

of skill intensity. In the manufacturing industries where employment is significantly affected by trade, there is a highly significant

direct correlation between skill intensity and

positive balances of trade-related employment.10

That is, industries whose skill intensity was

highest–measured roughly by low ratios of

production workers to total industry employment—had more jobs associated with exports

than were embodied in imports.

From these data, it is clear that there is a high

degree of association between the net labor

content of trade and skills in the labor force,

roughly measured. In general, the heavier the

reliance on less skilled labor (production labor),

the greater the likelihood that the net effect of

trade on employment is negative. Industries

where the availability of a particular natural

resource is more important than a skilled labor force in determining a comparative advantage and industries that trade in noncompetitive specialty items do not follow this pattern.

WTA performed a Spearman Rank Correlation test on the

data in table 9-I, ranking all manufacturing industries (containing more than 100,000 work-years of trade-related employment)

in terms of two factors: net trade-related employment and ratio

of production workers to total employment. The correlation was

significant at the 0.01 percent level.

The following sections discuss the effect of

exports and imports on the number of jobs in

the United States, and on the skill mix of the

American work force.

Exports and the Numbers of U.S. Jobs

The growth of U.S. exports has stimulated

employment in this country. In 1980, when

merchandise exports were $224.2 billion, over

6 million Americans owed their jobs to exports,

according to an estimate made by the International Trade Administration (ITA) of the U.S.

Department of Commerce.11 In 1982, merchandise exports had fallen to $211.2 billion, and

ITA estimated that the number of workers

whose jobs depended on exports fell to 5 million. In 1983, the number of export-generated

jobs dropped further to 4.6 million. Merchandise exports increased by $20 billion in 1984,

but the number of export-generated jobs decreased slightly to 4.5 million, largely because

of increasing labor productivity.

Change in the labor content of exports was

one cause of the decline in export-generated

employment throughout the years from 1980

to 1984, according to ITA. As productivity increased, fewer workers were required to produce equivalent amounts of output. Between

1980 and 1982, the labor content per billion dollars of U.S. exports decreased from 30,300 jobs

to 25,200.12 In 1984, the number of jobs per $1

billion worth of exports was estimated at less

than 25,000.13

Export-related employment tends to fluctuate fairly widely, reflecting the synergistic nature of trade itself. During periods of economic

expansion, U.S. demand for imports usually increases. This stimulates export industries in

other countries, raising their output and employment. These countries are then able to import more products themselves—often from the

IIu.S. Department of Commerce, Domestic l?m~]oyment Gem

crated by U.S. Exports, International Trade Administration, Office of Trade and Investment Analysis (Washington, DC, May

1983), Executive Summary.

IZIbid.

ISU.S, Department of Commerce, “Preliminary Export-Related

Jobs Estimate for 1984,” Office of Trade and Investment Analysis, International Trade Administration, June 1984, mimeo,
Ch. 9—The Effects of International Trade on U.S. Skills and Employment ● 377

Table 9-1 .—Labor Content of Trade and Ratios of Production to Total Employment,

by Manufacturing Sector, 1982a

Domestic labor content

(thousands of work-years) Population

Imports Exports Balance employment

Industry

Office, computing, and accounting machines . . . . . . . . . . . . . .

Aircraft and parts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chemicals and selected chemical products . . . . . . . . . . . . . . .

Construction and mining machinery . . . . . . . . . . . . . . . . . . . . . .

Scientific and controlling instruments . . . . . . . . . . . . . . . . . . . .

Electric industrial equipment and apparatus . . . . . . . . . . . . . . .

Plastics and synthetic materials . . . . . . . . . . . . . . . . . . . . . . . . .

Lumber and wood products, except containers . . . . . . . . . . . .

Drugs, cleaning, and toilet preparations. . . . . . . . . . . . . . . . . . .

General machinery and equipment . . . . . . . . . . . . . . . . . . . . . . .

Miscellaneous electrical machinery and equipment. . . . . . . . .

Special industry machinery and equipment . . . . . . . . . . . . . . . .

Metalworking machinery and equipment . . . . . . . . . . . . . . . . . .

Other transportation equipment . . . . . . . . . . . . . . . . . . . . . . . . . .

Optical, ophthalmic, and photographic equipment . . . . . . . . . .

Household appliances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Rubber and miscellaneous plastic products . . . . . . . . . . . . . . .

Paper and allied products, except containers . . . . . . . . . . . . . .

Electronic components and accessories . . . . . . . . . . . . . . . . . .

Other fabricated metal products . . . . . . . . . . . . . . . . . . . . . . . . .

Broad and narrow fabrics, yarn and thread mills . . . . . . . . . . .

Primary nonferrous metals manufacturing . . . . . . . . . . . . . . . . .

Miscellaneous fabricated textile products . . . . . . . . . . . . . . . . .

Primary iron and steel manufacture . . . . . . . . . . . . . . . . . . . . . .

Radio, TV, and communication equipment . . . . . . . . . . . . . . . .

Footwear and other leather products . . . . . . . . . . . . . . . . . . . . .

Petroleum refining and related industries . . . . . . . . . . . . . . . . .

Miscellaneous manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . .

Motor vehicles and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . .

Apparel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

All manufacturing industries . . . . . . . . . . . . . . . . . . . . . . . . . .

(1) (2) (2- 1)

200 416 216

87 269 182

75 233 159

19 175 156

73 168 95

45 117 72

12 79 67

124 183 59

29 75 46

61 94 33

54 78 24

48 69 21

62 82 20

60 60 0

63 62 –1

55 59 –6

89 72 –17

103 85 –18

204 180 –24

88 59 –29

81 50 –31

182 108 –74

171 24 – 147

228 58 – 170

326 150 – 176

228 22 – 206

306 42 – 264

474 150 – 324

694 245 –449

536 56 – 480

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ratioa

0.40

0.51

0.54

0.63

0.57

0.68

0.65

0.88b

0.55

0.63

0.70b

0.61

0.70b

0.60

0.53b

0.77

0.77

0.74

0.57b

0.74

0.87

0.73

0.81

0.75

0.50b

0.84

0.60b

0.72

0.73

0.85

0.68

aRatlo of ~mployment of produ~tlon workers t. total industry employment These industries al I account for more than 100,000 workyears of trade-related employment

bThese ,ndu@Jrles d. not flt the general pattern of having lower ratios of Production ~orker~ than the all.nlan”facturlng average when there is a net labor COntI?rlt SUrplus In trade, or hawng higher ratios of production workers when the labor content of trade IS negative See text for explanations

SOURCE U S International Trade Commission, U S TradeRe/ated .Ernploymerrf; and U S. Department of Labor, Bureau of Labor Statmtlcs, Supplement to Employment

and Earn/ngs

United States. According to one analyst, economic growth of more than 1,5 to 2 percent in

countries belonging to the Organization for

Economic Cooperation and Development (OECD)

means that non-oil imports of the OECD increase about three times as fast.14 This continuing process stimulates worldwide incomes,

employment, and standards of living. During

downturns, the process reverses. According to

the same analyst, when OECD economic growth

falls below 1.5 percent annually, trade declines

even faster. Falling demand for imports, in

turn, hurts the economies of exporting countries, which then reduce their own demand for

imports, and so on,

llwi]]iam R. C] ine, ‘‘I ntroduction and Summary, Trade P~~-

ic~r in the 1980s, William R. Cline (cd.] (Cambridge, MA: MIT

Press and Institute for International Economics, 1983], p. 5.

Between 1977 and 1980, a time of economic

growth, 1.5 million jobs were generated in all

sectors of the economy by the stimulus of rising exports of manufactured goods. In the manufacturing sector, export-related employment

accounted for 80 percent of the increase in

manufacturing jobs.15 Between 1980 and 1983,

ITA estimated that 1.5 million total jobs were

lost thoughout the economy, largely due to falling export volume (exaggerated to some degree

by rising productivity).

15u. s. Department of Commerce, Domestic EmPfo~rment Generated b~’ U.S. Exports, op. cit., p. 3.
378 . Technology and Structural Unemployment: Reemploying Displaced Adults

Exports and the Demand for Skills

Exports create jobs in many sectors. Merchandise exports (which include manufactured

and nonmanufactured goods16) accounted for

about 4.9 million jobs in 1982. The stimulus for

generating about 80 percent of these jobs in all

sectors, according to the Department of Commerce, was the export of manufactured goods.

These exports accounted for 2.3 million jobs

in manufacturing industries, 0.2 million jobs

in nonmanufactured goods, and 1.5 million

jobs in service sectors—a total of 4 million

jobs. l7

What is the nature of jobs that are generated

by exports? International trade theory, which

assigns great importance to differences in factor endowments—i.e., the amounts of labor,

capital, and resources—of different countries,

concludes that nations which are rich in capital export capital-intensive products, and nations more heavily endowed with labor export

labor-intensive goods. An early investigation

into the capital intensity of U.S. exports and

imports revealed, however, that by at least one

measure, U.S. exports were more labor-intensive than U.S. imports.18 This finding, known

as the Leontief Paradox, stimulated a great deal

of research in the ensuing three decades which

tried to explain the original finding. Several explanations have been put forward; for example, some U.S. imports may be capital-intensive

when produced in the United States, but more

labor-intensive in the countries where they are

produced. One explanation, which has been

substantiated by several investigators, is that

the U.S. advantage in trade lies in skill-intensive goods—i.e., products which require relatively high amounts of human capital and skill

to produce.19 In general, U.S. exports probably

generate a large number of jobs for highly

skilled workers; these jobs are relatively secure

leNonmanufactured goods sectors include agriculture and fisheries, forestry, coal, and other minerals.

YTU.S. Department of Commerce, ~omestic Employment Generated by U.S. Exports, op. cit., p. 5.

16Wassily Leontief, “Domestic Production and Foreign Trade,

the American Capital Position Re-Examined, ” Econornia lnternazionale, vol. 7, Geneva, 1954.

Iesee Hirsch, “The Leontief Paradox in a Multi-Country Setting,” Weltwirtshcaftliches Archiv, vol. 113, No. 3, 1977.

from competition from low-wage nations, where

human capital is more scarce.

This conclusion is supported by findings of

the 1983 ITA study on the kinds of labor embodied in U.S. exports and imports. As shown

in table 9-I, there is a highly significant correlation between high skill content (measured by

lower-than-average ratios of production employment to total industry employment) and

positive balances of trade-related employment.

In addition, industries in which exports account for large numbers of jobs also tend to

have lower-than-average ratios of production

to total employment. According to the study,

the export sectors in manufacturing which embodied the largest labor content in 1982 were,

in descending order of the number of workyears:

10

2.

3.

4.

5.

6.

7.

8.

90

10.

11.

office, computing, and accounting machines;

aircraft and parts;

motor vehicles and equipment;

chemicals and selected chemical products;

lumber and wood products;

electronic components;

construction and mining machinery;

scientific and controlling instruments;

radio, TV, and communication equipment:

—tied with miscellaneous manufacturing;

electric industrial equipment and apparatus; and

primary nonferrous metals.20

Of these 12 industries, 821 had ratios of production workers to total employment which were

below the average for all manufacturing (figure 9-1)0

——— ..- ..——

20U. S. International Trade Commission, U.S. Trade-Related

Employment, USITC Publication 1445 (Washington, DC: USITC),

pp. 37-4o. Exports of these 12 manufacturing industries all embodied more than 100,000 work-years of domestic labor in 1982.

Many of the same industries also showed substantial losses of

job opportunities due to imports.

ZIThe eight am: I) office, computing, and accounting equiPment; 2) aircraft and parts; 3) chemicals and selected chemical

products; 4) electronic components; 5) construction and mining machinery; 6) scientific and controlling instruments; 7) radio, TV, and communication equipment; and 8) electric industrial equipment and apparatus.
Ch. 9—The Effects of International Trade on U.S. Skills and Employment ● 379

Figure 9-1 .—Ratio of Production

Total Employment in Export

30

20

10

0

Employment to

Industriesa

aExports of these 12 industries all embodied more than 100,000 domestic work-years in 1982.

u

cm

SOURCE: US. Department of Labor, Bureau of Labor Statistics, Occupational Employment Statistics Survey of

Manufacturing Industries, 1980

Of the four which had higher concentrations

of production workers, two—primary nonferrous metals and lumber and wood products—

are industries whose advantage, relative to foreign producers, rests primarily on natural resource endowments rather than capital or skill.

Motor vehicles and equipment, which contributed 245,000 work-years to exports, also had

the largest deficit in trade-related employment

of 480,000 work-years. The reason for the industry’s large contribution to export-related

employment is not the skill intensity of production. Nearly three-quarters of U.S. motor vehicle exports go to Canada; the U.S. and Canadian auto industries and markets are highly

integrated. Canada’s domestic automobile industry consists of the major U.S. manufacturers; the Canadian motor vehicle market is

an extension of the American market, and

Canadians buy American cars for the same reasons Americans do.

Miscellaneous manufacturing contributed

150,000 work-years to exports, but also had a

net deficit in trade-related employment of

324,000 work-years, reflecting the $4.8 billion

trade deficit in miscellaneous manufactures.

The industry includes a variety of sectors—e.g.,

jewelry and silverware, costume jewelry, games,

toys, sporting goods, pens, pencils, artists’ supplies, buttons and fasteners, artificial flowers

and Christmas trees—many of which are specialty items. In many of these sectors, the ability to export probably is less related to the skills

needed for production than to the special characteristics of the product.

Another indicator of the relative skill intensity of U.S. exports is in the ratios of managers

and officers, professional, and technical workers in export industries (table 9-2). Data on the

occupational makeup of industries also lends

credence to the idea that industries supporting
380 ● Technology and Structural Unemployment: Reemploying Displaced Adults
Ch. 9—The Effects of International Trade on U.S. Skills and Employment ● 381

large numbers of export-related jobs are more

likely to employ highly skilled people. In printing and publishing, for example, the United

States had a net trade surplus of over $300 million in 1984. Managers and officers constituted

over 10 percent of employment in this sector,

and professionals 9.9 percent, compared to 6.6

and 6.9 percent, respectively, in all manufacturing. In transportation equipment, which includes both motor vehicles and equipment and

aircraft and parts, professional workers accounted for over 13 percent of industry employment, nearly double the average for all

manufacturing, In the chemical industry and

in instruments and related products, all three

of the most skilled types of employment—managers and officers, professional workers, and

technical workers— formed higher percentages

of industry employment than in all manufacturing. 22

Imports and the Number of U.S. Jobs

Increasing import penetration in a number

of industries has been a major factor behind

employment declines, However, increasing imports do not always cost American workers

their jobs.

Imports do not cost job opportunities if the

products which are imported cannot be produced domestically, or can be produced only

in very limited quantities. These products are

called noncompetitive imports, and include

minerals and other natural-resource products

and those based on proprietary or patented

technologies. 23 For instance, imports of diamonds, cobalt, mahogany, and teak do not cost

U.S. jobs, as these things are not produced in

the United States. Petroleum can be produced

domestically in limited quantities, so petroleum

imports also do not mean lost jobs for Americans; in fact, if petroleum imports were cut off,

the effect would be a substantial loss of employment in many sectors. This is a significant ex22u. s. Department of Labor, Occupational Efflp]Oyment jn

Manufacturing Industries, Bureau of Labor Statistics Bulletin

2133 (Washington, DC: U.S. Government Printing Office, September 1982), p. 4.

23H. Peter Gray, “Non-Competitive Imports and Gains From

Trade, ” mimeo.

ample: petroleum imports were nearly 18 percent of all U.S. imports of merchandise in 1984.

Imports do not cost jobs in industries where

demand for the product is growing fast enough

to accommodate both rising imports and stable or increasing levels of domestic production,

For example, while imports of semiconductors

have risen from less than $1.8 billion in 1969

to $7.8 billion in 1984, demand has grown even

more rapidly, and so has employment. Over the

same period, total semiconductor industry employment went from about 75,000 to 273,000.

The long-term outlook for semiconductor employment is upward, despite the cyclical slump

of late 1984 and 1985. Between December 1984

and June 1985, total semiconductor employment has dropped by 8,300 jobs (figure 9-2).

However, where imports are rising more rapidly than demand, American workers can lose

their jobs. If this happens gradually, much of

the employment loss can be handled through

attrition, as employees retire or leave to take

other jobs. This is not always the case.

Figure 9-2.—Semiconductor Employment

July 1984-June 1985

281

280

279

278

Month

SOURCE: US Department of Labor, Bureau of Labor Statistics, “Employment

& Earnings, ” various issues.
382 ● Technology and Structural Unemployment: Reemploying Displaced Adults

Employment in the apparel industry, for example, dropped from over 1.44 million in 1973

to 1.175 million in early 1985, while imports

have captured an increasing share of the U.S.

market. By 1983, one of every four garments

sold in the United States was manufactured in

another country; in 1958, the percentage of imports was near zero. Despite highly structured,

institutionalized protection provided by the

Multifiber Arrangement, the dollar value of imports has risen from less than $300 million in

1958 to about $12 billion in 1984 (figure 9-3),

or, in deflated terms, by a factor of 11.24 Although the percentage drop in apparel employment is moderate compared, for example, with

losses of steel employment in the 1980s, the decline has not been steady. Apparel employment

dropped by about 195,000 from 1973 to 1975,

recovered to 1.33 million, and then again fell

rapidly from 1978 to 1982 (figure 9-4). From

1982 to 1984, it recovered from 1.16 million to

1.196 million. These clumps of employment

loss in the apparel industry were due largely

to increased foreign competition, which caused

many U.S. firms to close. The closures—3,200

over the last decade—were not matched by new

Z4Source for employment figures: U.S. Department of Labor,

Employment and Earnings, various issues. Source for import

data: Carol Parsons, “The Employment Effects of International

Trade in the Apparel Industry,” contractor report for the Office of Technology Assessment, April 1985, p. 8. The MFA did

permit increasing imports of apparel and textiles; however, imports have risen faster than MFA targets.

Figure 9-3.—U.S. Apparel Imports

14,000

12,000

2.000

0

1967 1969 1971 1973 1975 1977 1979 1981 1983

Year

SOURCE: U.S. Department of Commerce Market Expansion Dwision, OTEXA, ITA

Figure 9-4.–U.S. Apparel Employment (SIC 23)

1967 1969 1971 1973 1975 1977 1979 1981 1983

Year

SOURCE U S. Department of Labor Bureau of Labor Statistics, Employment and

Earnings.

entries.25 There has been a net employment loss

in apparel in the 1980s; between March 1980

and February 1985, 116,000 jobs were lost.26

Imports have also been an important factor

in employment losses in consumer electronics,

notably in the television industry. Imports of

black-and-white televisions rose from onefourth to over two-thirds of U.S. sales between

1967 and 1982,27 while employment in television manufacture declined rapidly.28 Several

other factors—including productivity growth

and relocation of manufacturing operations to

low-wage countries—were responsible for employment losses in this industry, but rising imports, as part of a cluster of events, were the

primary cause of job losses.29

The exact number of jobs lost to imports cannot be ascertained. It is too simple to assume

that the number of jobs needed to make all imported products could be captured by U.S.

workers if imports were cut off, for two reaZsParSonS, op. cit., p. 8.

Reemployment figures are seasonally @USted.

ZTJOhn A ~ic and Martha Caldwell Harris, “Employment L=-

sons From the U.S. Electronics industry, ” manuscript; and us.

Congress, Office of Technology Assessment, International Competitiveness in Electronics, OTA-lSC-200 (Washington, DC: U.S.

Government Printing Office, November 1983), p. 112.

2JBLS statistics on employment, used throughout this report,

go back only to 1972 for radio and TV receiving sets (SIC 3651).

Between 1972 and 1984, employment in SIC 3651 dropped from

114,500 to 71,800. Source: U.S. Department of Labor, Bureau

of Labor Statistics, Historical Employment and Earnings and

various supplements.

Z9Alic and Harris, op. Cit.
Ch. 9—The Effects of International Trade on U.S. Skills and Employment • 383

sons, First, many U.S. production processes

are more capital-intensive (and therefore, less

labor-intensive) than comparable production

overseas, meaning that fewer American workers would be required to produce equivalent

outputs. This appears to be the case, for example, in the manufacture of some semiconductors and computer products. Second, one of the

most important reasons imports succeed is

their price; they are often cheaper than equivalent U.S.-made goods, If imports were eliminated, U.S. consumers would have to pay

higher average prices for products, and would

reduce consumption. Thus, if U.S. production

were substituted for imports, the quantity consumed—and therefore, produced—would be

lower than if imports were permitted. The

number of jobs thus “recaptured” would be

correspondingly lower.

Although it is difficult to identify precisely

how many job opportunities disappear or how

many workers are displaced by imports, there

is no question that increasing imports do eliminate American jobs.

Imports and the Demand for Skills

In marked contrast to the case of exports,

manufacturing industries which face the greatest pressure from imports have higher concentrations of relatively low-skilled workers. The

reason is straightforward: low-wage countries

have a comparative advantage in producing

goods which require high concentrations of

low-skilled labor.

One study examined the demographic and

occupational characteristics of workers in 20

manufacturing industries in which trade-related job opportunities had been most adversely

affected, and compared them with 20 manufacturing industries with the most favorable effects on job opportunities from trade between

1964 and 1975. The study found that workers

in favorably affected industries were more

skilled than workers in adversely affected industries. Moreover, workers in adversely affected industries were found to be less skilled

than in manufacturing as a whole.30 Not sur30c. Michae] AhO and James A. Orr, “Trade-Sensitive Employment: Who Are the Affected Workers?” Monthl~~ Labor Re\’iem’,

February 1981, p. 33.

prisingly, the workers in industries most adversely affected were also poorer; this reflected

the decline in parts of several low-wage industries, including apparel, textiles, footwear, and

leather products (table 9-3). It also reflects the

fact that workers with few skills—those most

vulnerable to displacement due to imports—

are paid less.

These findings are consistent with more current information, A study by the International

Trade Commission computed the U.S. labor

content embodied in exports and the U.S. labor content required to produce imports in the

United States (table 9-1).

In 11industries, the amount of U.S. labor required to substitute domestic production for

imports was greater than 100,000 work-years, al

Eight of these industries had ratios of production workers to total employment which were

above the average for all manufacturing (68

percent in 1982). Many of the sectors—including lumber and wood products, paper and allied products, apparel, textile mill products,

leather and leather products (which includes

footwear), and primary metal products (which

includes primary iron and steel) —also have

proportionally fewer managers and officers,

professional workers, and technical workers

than all manufacturing.

Three industries do not fit the general pattern: radio, TV, and communication equipment;

petroleum refining and related industries; and

electronic components and accessories. In petroleum refining, the skill or labor content is

less important in determining patterns of comparative advantage than resources. The United

States depends on other countries for a great

deal of its petroleum; as other countries (e.g.,

Saudi Arabia) develop their own refining industries, refined petroleum products are imported.

Petroleum refining has a low concentration of

production workers, and high concentrations

of managers and officers, professional and

SIThe sectors, shown in tab]e 9.1, inc]ude: 1) motor Vehlc]es

and equipment; 2) apparel; 3) miscellaneous manufacturing; 4)

radio, TV, and communication equipment; 5) petroleum refining and related industries; 6] footwear and other leather products; 7) primary iron and steel manufacturing; 8) electronic components and accessories; 9) office, computing, and accounting

machines; 10) lumber and wood products; and 11) paper and

allied products.
384 • Technology and Structural Unemployment: Reemploying Displaced Adults

Table 9-3.—Characteristics of Workers and Industries Whose Employment was

Most Affected by Trade Between 1964 and 1975

Average of the 20 Overall Average of the 20

favorably affected manufacturing adversely affected

Item industries average industries

Demographic characteristics:

Family income below poverty level . . . . . . . . . . . . . . . 5.8 0/0 7.0 % 9.8 0/0

Annual earnings under $10,000 , . . . . . . . . . . . . . . . . . 72.1 77.4 81.7

High school education (4 years) . . . . . . . . . . . . . . . . . 39.1 36.6 34.0

College education (4 years) . . . . . . . . . . . . . . . . . . . . . 6.9 5.1 3.1

Occupational measures:

Skill measured as a percentage of the average

wage in manufacturing (1937) . . . . . . . . . . . . . . . . . . 104.0 100.0 97.8

Skilled workers as a percentage of

the Iabor force . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55.8 50.0 38.8

White-collar workers as a percentage of

the labor force . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36.3 30.3 21.1

Industrial characteristics:

Technical intensity (scientists and engineers as a

percentage of the labor force) . . . . . . . . . . . . . . . . . 6,87 3.20 2.29

Technical intensity (research and development as a

percentage of sales) . . . . . . . . . . . . . . . . . . . . . . . . . . 5.90 2.36 1.39

SOURCE C Michael Aho and James A Orr, “TradeSensitive Employment Who Are the Affected Workers?” Monthly Labor Rewew, 1981, p 32.

technical workers in comparison to the average for manufacturing, However, the Saudis

and other oil-exporting nations have imported

much of this kind of talent from the United

States in order to develop their own petroleumrelated industries.

In radio, TV, and communication equipment,

the anomalous result probably has a great deal

to do with the industry classification. This industry shows a net employment deficit in trade

(i.e., it would take more American labor to replace imports than is embodied in exports] but

has a low concentration of production workers (only 50 percent). Two industries make up

this sector, and the ratios and trade balances

(and therefore, the labor content of trade) differ significantly. In radio and TV receiving

sets, total employment was 91,300 in 1982 and

the ratio of production workers to total employment is higher than in all manufacturing. 32 Thi s

industry ran a trade deficit in 1982 of over $4, s

billion, which would probably mean a net deficit of trade-related employment as well. The

321n 1982, the ratio of production workers to total industry employment was just over 68 percent, slightly below the all-manufacturing average. However, 1982 was the depth of a recession;

in 1981 and 1983, the ratio of production workers to total employment was significantly higher (7 I and 70 percent, respectively).

other industry, communication equipment, employed over 569,000 workers, of which less

than 47 percent were production workers, significantly below the all-manufacturing average.

The industry ran a small trade surplus of $108

million; the trade-related employment balance

for this industry was probably either roughly

in balance or slightly positive. As a result, when

these industries are pulled apart, both behave

as expected, in terms of skill content and the

effect of trade on employment.

One industry—office, computing, and accounting machines—had a much lower ratio

of production workers than most other industries in which the amount of labor required to

produce imports domestically was over 100,000

work-years. However, this industry had a net

trade-related labor surplus of 216,000 workyears, reflecting the sector’s trade surplus.

Apparently all imports in this sector, in 1982,

were office machines: typewriters, duplicating

machines, weighing machines and scales, and

calculators, These products are generally simpler and require fewer skills of the entire work

force than electronic computing equipment,

which showed a significant trade surplus. In

electronic computing equipment, the ratio of

production to total employment was 38 percent; in office machines, 51 percent. It is clear
Ch. 9—The Effects of International Trade on U.S. Skills and Employment Ž 385

that this sector, like others, fits the pattern of is expected to increase, while the demand for

exporting products which are more skill-inten- less skilled workers will decrease. Displacesive than imports. ment will hit hardest at the unskilled workers

On balance, therefore, as trade increases, the in manufacturing.

demand for skilled workers in the United States

RESPONSES TO INTERNATIONAL COMPETITION

Loss of export markets and increasing imports are among the symptoms of declining

competitive ability of U.S. firms. Losses of competitive ability occur for many reasons, including failure to modernize plant and equipment,

poor management leading to inefficient production, competition from low-wage countries,

U.S. trade restrictions, foreign government policies which favor domestic firms or limit imports, and overvaluation of the dollar. Some

losses of competitiveness may be for reasons

entirely outside the control of individual industries—e.g., increasing comparative advantage in other sectors of the U.S. economy and

rising competitiveness overseas, No matter

what the cause of slipping competitiveness,

however, efforts of firms to respond commonly

cost some jobs, or at least slow the rate of employment growth.

Firms can respond to stiffer competition—

domestic or international—in a variety of ways,

many of which are aimed at reducing costs,

Many firms automate—particularly when they

face competition based largely on low foreign

wage rates, To improve competitiveness, the

firm usually has to raise productivity, and the

method often chosen is to improve process

technology. Changing product technologies—

improving product function and specifications,

improving quality and reliability—is also an important part of a strategy to improve productivity and regain competitiveness; many firms

upgrade both process and product technologies, Yet despite their importance, the employment effects of product improvement and innovation are hard to assess; it is difficult to

predict whether improved product technologies

will increase markets enough to stimulate employment. Improved process technologies, on

the other hand, have a predictable, negative effect on job opportunities. If firms succeed in

raising productivity, fewer American workers

are needed to make the same output as before.

If the displaced workers can be reemployed

elsewhere, the effect of the productivity increase is positive for the economy; moreover,

process innovation can enable producers to sell

at lower prices, increasing demand. In some

cases, increased consumption is enough to

maintain or increase employment, even with

productivity improvement. In other cases, it is

not.

Another strategy to regain competitiveness

is to reorganize production on a global scale,

relocating production of labor-intensive operations in low-wage nations while maintaining

operations that are capital-intensive (including

both human and physical capital) in the United

States, Still another strategy is protection from

imports. Many industries have lobbied for protection, and some have gotten it. If firms make

no response to competition, or make unsuccessful responses, they may eventually go out

of business. Successful responses often involve

job losses too, through increased productivity

or location of some jobs offshore to lower costs.

However, in the long run, successful responses

preserve more jobs than unsuccessful ones, and

may provide the basis for generating new jobs

in the future.

The responses described above, and their employment effects, are normal occurrences in

any dynamic, relatively open economy like that

of the United States. However, with trade becoming increasingly important to the economy

and international competition becoming intense, the decisions that firms make to improve
386 . Technology and Structural Unemployment: Reemploying Displaced Adults

their competitive ability have increasingly profound effects on employment. The employment

effects of the various responses do differ, and

so, as a result, do the interests of policy makers

concerned about the employment effects of international trade.

Improved Technology as a Response to

International Competition

Improving process technology has several

aims: to raise worker productivity to maintain

high wages in industries faced with low-wage

competition; to improve product performance

and reliability; and to lower production costs.

While automation has not always succeeded

in achieving all those ends, a number of industries have chosen the high technology option,

often in combination with other strategies, and

some have come up winners. In other cases,

automation efforts have raised productivity,

but not enough to offset the advantage of producers in low-wage countries. Often, improved

technology cannot alone support the wages of

American workers, some of which are high

only in comparison with developing and Third

World wages, but quite low by U.S. standards.

The following sections explore the effects of

improved technology on employment in four

industries: textiles, televisions, automobiles,

and apparel. These case studies help to illustrate how changing technology can reduce employment as well as preserve some jobs, and

the limitations of technological change alone

in maintaining competitiveness.

Automation in the Textile Industry

Investment in new capital equipment is a

strategy the textile industry has used to respond

to increasing pressure from imports. The textile industry is labor-intensive, and employs a

high proportion of unskilled workers relative

to all manufacturing. Most of its production

technologies are standardized, and require

relatively low capital investments. Thus the industry is a logical choice for industrializing

countries with abundant low-skilled labor and

limited capital.33 The effect of competition from

producers in low-wage countries is apparent:

between 1972 and 1984, textile imports rose

from $1.3 billion to nearly $3.8 billion, or 192

percent, while U.S. industry shipments increased more slowly, from $28.1 billion to

$57.8 billion, or 106 percent.34 The increase in

textile imports has occurred despite import

limits negotiated in a series of agreements with

foreign producers. These began in in 1957 with

a 5-year agreement limiting Japanese exports

of cotton textile products to the United States,

and culminated in the Multifiber Arrangement

first negotiated in 1974.35 Even with this protection, the textile industry has had to adopt

a number of strategies to improve its competitive position. Both technological innovation

and shifts of production to higher value-added

products have been important strategies.36

The textile industry is rapidly moving towards

greater capital intensiveness, particularly in

sectors like manmade fibers, cotton weaving

mills, and manmade fiber weaving mills; capital expenditures in these sectors increased at

compound rates of over 10 percent per year between 1972 and 1982.37 The investments have

paid off in productivity growth. In the textile

industry as a whole, labor productivity rose at

5.2 percent per year between 1974 and 1982,

a greater rate of increase than in any other industry (manufacturing and nonmanufacturing)

except electrical and electronic manufacturSsstan]ey Nehmer and Mark W. Love, “Textiles and Apparel:

A Negotiated Approach to International Competition, ” U.S.

Competitiveness in the WorM Economy, Bruce R. Scott and George C. Lodge (eds.) (Boston, MA: Harvard Business School

Press, 1985), p. 238.

S4U.S. Dep@rnent of Commerce, International Trade Administration, 1985 U.S. Industrial Outlook, Prospects for Over 35o

Manufacturing and Service Industries (Washington, DC), pp. 44-1

to 44-9.

sSDiscUssion of protection in the textile industry can be found

in Nehmer and Love, op. cit., pp. 239-244; and Vinod K. Aggarwal, with Stephan Haggard, “The Politics of Protection in

the U.S. Textile and Apparel Industries, ” American Industry

in International Competition, John Zysman and Laura Tyson

(eds.) (Ithaca and London: Cornell University Press, 1983), pp.

249-312. 3eAggarWa] and Haggard, op. cit., P. 252.

sTlggfi Industrial Outlook, op. cit., pp. 44-8 to 44-12.
Ch. 9—The Effects of International Trade on U.S. Skills and Employment ● 387

ing. 38 U.S. production of manmade fiber and

yarn, in particular, is internationally competitive, and its share of textile output has risen.

While rising capital intensity has helped

parts of the textile industry to remain competitive, it has had the predictable effect on the labor force in an industry where the dollar value

of output, adjusted for inflation, has been

nearly flat for a decade. In manmade fibers, total employment dropped by 30,600, or 32 percent, between 1972 and 1984; the number of

production workers has fallen from 72,800 to

47,900, or 34 percent. Employment in the

textile industry as a whole dropped by over

200,000 during the same period, and production employment fell from nearly 88 percent

of the work force to 86.6 percent—not a dramatic drop by any means, but indicative of future trends. The long-term employment trend

in the textile industry is downward.39 The technological changes which help the competitive

position of the textile industry—aimed at reducing the number of steps involved in manufacturing and reducing the amount of labor

needed—are making inroads into production

jobs. If the textile industry continues to respond

as it has to competitive pressures, fewer workers will be needed, and more of them will be

skilled. 40

Technological Developments in

Television Manufacture

Like the textile industry, the television industry has faced intensifying foreign competition

and rising imports. By the mid-1960s, Japanese

competition in U.S. monochrome (black-and-

—.——

s8Edward Rappaport, “The Textile and Apparel industries:

Economic Status and institutional Environment,” Congressional

Research Service report, mimeo, Mar. 13, 1985, p. CRS-7.

39 Figure5 on textile industry employment are taken from the

1985 U.S. Industrial Outlook, op. cit, pp. 44-1 to 44-12, rather

than the Bureau of Labor Statistics, which does not report separate figures for employment in both sectors of manmade fiber

production, SIC 2823 and 2824. These manmade fiber sectors

are in SIC 28, Chemicals and Allied Products, rather than in SIC

23, Textiles, but are usually included as pert of the textile industry.

qOLukas Michel, G,A. Berkstresser 111, and N.A. Williamson,

Technology for the Textiles and Apparel Manufacture in the

U. S., contractor report submitted to the Office of Technology

Assessment, School of Textiles, North Carolina State University, August 1984, p. 241.

white) television markets was well-established.

Using technologies licensed from U.S. firms,

the Japanese developed lightweight, small

monochrome television sets for export, and

export they did. Between 1961 and 1966, the

Japanese share of the U.S. monochrome TV

market moved from practically nothing to 11

percent.41 By 1982, import penetration of blackand-white televisions in the U.S. market had

grown to 67.9 percent, and American monochrome TV producers could compete only in

very narrow market segments.42

In the 1960s and 1970s, American consumers

were shifting rapidly from monochrome to

color television sets, and so were Japanese

manufacturers. Color television imports, particularly from Japan, expanded rapidly in the

late 1960s and early 1970s. By 1976, imports

had captured nearly 36 percent of the U.S. market by volume (19 percent by value). The trend

toward increasing import penetration reversed

between 1976 and 1982, when imports of color

televisions went from 36 percent of U.S. sales

to only 19 percent, in numbers of units, and

from 19 to nearly 13 percent by value. The

difference between import penetration in 1976

and in 1982 is a direct result of U.S. trade policy. In response to a series of complaints by

U.S. manufacturers, beginning in 1968, an import quota (termed an Orderly Marketing Arrangement, or OMA) was negotiated with Japan, and later extended to South Korea and

Taiwan. After the OMA was adopted, imports

dropped by more than half. The OMA with Japan was lifted in June, 1980, and the OMA with

Korea and Taiwan expired in 1982, Since then,

imports have climbed, although import penetration has not yet reached 1976 levels.

One major factor in the success of Japanese

TVs in the American market was advanced

technology. The Japanese, in order to penetrate

the American market, relied on technical development to help overcome the lingering reputation of Japanese-made goods for poor qualalJames E. Millstein, “Decline in an Expanding Industry: Japanese Competition in Color Television, ” American Zndustry in

International Competition, op. cit., p, 113.

4ZLJ. S. congress, Office of Technology Assessment, Zn@rnationa] Competitiveness in Electronics, op. cit., p. 112.
388 . Technology and Structural Unemployment: Reemploying Displaced Adults

ity. With government assistance, the Japanese

developed solid-state television designs, and

new technologies for stereo sound in televisions. 43 Japanese manufacturers also concentrated on automating their production processes to achieve economies of scale.44

The pressures created by imports, and the

lower production costs of Japanese television

sets, forced American manufacturers to respond. This response took several forms: as

noted above, the industry sought and received

protection; some manufacturers moved production offshore, and many responded by automating production, reducing parts counts,

and shifting to solid-state designs to lower production costs and improve quality and reliability.45 As in the textile industry, labor productivity rose. Apparent productivity increased

from 150 color television sets per worker in

1971 to 560 in 1981. Between 1968 and 1981,

employment in U.S. television manufacture

dropped by more than half, due to the combined effects of increased productivity, offshore manufacture, and imports.46

The experience of the television industry exemplifies the trade-offs involved in strategic responses to international competition. In 1974,

Quasar’s TV operation was bought by Matsushita, a Japanese company. Matsushita made

significant changes in Quasar: it automated

production processes, reorganized work on the

shop floor to emphasize quality control and employee participation, and moved some manufacturing operations to Mexico. While these actions cut into American job opportunities in

Quasar, they did save the company, whose survival was by no means assured. As a result, several thousand U.S. jobs were saved.47

Automation in Motor Vehicles

The textile and television industries are examples of industries in which many firms have

dsIbid., p. 181.

d4Mi]lstein, op. Cit., p. 120.

45u .s. Congress, Office of Technology Assessment, international Competitiveness in Electronics, op. cit., pp. 184-5.

deA]ic and Harris, op. Cit., p. 12.

dTThis paragraph depends heavily on Alic and Harris, op. cit.,

p. 12.

made strategic responses to competition during the last decade or two. The U.S. motor vehicle industry is currently trying to adapt to

the same kinds of pressures. If the motor vehicle industry is successful in regaining competitiveness in some product lines, it will probably face a long period of gradually declining

employment; if unsuccessful, and imports rise

as rapidly as they did in the late 1970s, many

more jobs will be lost.

Between 1972 and 1984, motor vehicle imports rose from less than 20 percent of domestic sales to nearly 29 percent (estimated).48

Nearly four-fifths of all imported passenger

cars came from Japan, and 98 percent of the

imported trucks. Put another way, Japanese

cars accounted for over 20 percent of all cars

sold in the United States in 1983, while all imports amounted to 26 percent. Imported trucks

accounted for 14.8 percent of all U.S. truck

sales. 49 In 1986, import penetration in automobiles is expected to hit nearly 35 percent.50

As in the television industry, Japanese automakers based their advantage on carefully selecting a market niche—originally, subcompact

automobiles—and developing superior products, by automating production, by developing

effective marketing and distribution channels,

and by expanding into other market segments.

For several years, Japanese automakers have

been able to produce equivalent cars more efficiently and with less labor than American manufacturers. This difference is referred to as the

Manufacturing Cost Difference (MCD), and it

is estimated to have grown from $1,500 to

$2,000 per car in 1979-80 to $2,000 to $2,600

in 1985.51 Part of the difference—about $500—is

probably due to the strength of the dollar

against the Japanese yen, but most is due to

—-. —

48 Figures cited in Robert Scott, “Motor Vehicles, ” contract report to the Office of Technology Assessment, Apr. 29, 1985, p. 13.

413u. s. Department of Commerce, The U.S. Automobile ~ndustry, 1983, Report to the Congress from the Secretary of Commerce, December 1984. Pp. 7, 13.

Sopersona] communication with John Hartmann, Automotive

Industry Analyst, International Trade Administration, Sept. 19,

1985.

slscott, op. cit., pp. 2-3; and John Hartmann, Automotive Industry Analyst, International Trade Administration, personal

communication, Sept. 20, 1985.
Ch. 9—The Effects of International Trade on U.S. Skills and Employment ● 389

differences in unit labor costs, which includes

differences in productivity as well as wages

and salaries for white- and blue-collar workers.

The U.S. motor vehicle industry has chosen

several strategies to respond to the competitive

pressure: increased offshore manufacture of

vehicles, parts and subassemblies; efforts to reorganize shopfloor operations and increase employee involvement; asking for (and getting)

trade protection; establishing joint ventures

with foreign producers; reducing labor costs;

putting greater pressure on suppliers to cut

costs; redesigning products; and automating

domestic manfuacturing.

Capital investment in the auto industry is unprecedently high. Between 1978 and 1985, the

U.S. automakers invested $84 billion worldwide in plant, equipment, and special tools (excluding design); from 1970 to 1977, investment

was $32 billion. Most of this investment—it is

not possible to tell exactly how much—has

been in the United States.52 In the next 5 years,

the industry is planning to invest an additional

$100 billion in plant, equipment, special tools,

and design worldwide.53 A major thrust of this

investment is automation: such things as increased use of computer control in vehicle design and development, production, and testing,

increasing the use of robots, and other forms

of assembly automation. General Motors, for

example, recently acquired Electronic Data

Systems (EDS), shifted its own data processing people to EDS, and put EDS to work streamlining and improving GM’s data-processing

systems. 54 These changes have not yet shown

significant results in worker productivity (figure 9-5). The number of vehicles produced per

employee in U.S. auto assembly peaked in

1977, at nearly 37 units per worker, and fell to

only 29 units per worker by 1979; in 1984, the

figure was 35.2 units.55 Part of the reason for

the decline in apparent productivity in the late

1970s was the increase in the complexity of the

average vehicle, as well as loss of much of the

SZHartmann, op. Cit.; and Kerry Lanham, International Trade

Administration, personal communication, Sept. 19, 1985.

S~Ibid.

3

4 Michael Brody, “Can GM Manage It All?” Fortune, July 8,

1985, pp. 22-25.

Ssscott, op. cit,, p. 1 6 .

Figure 9-5.—Apparent Labor Productivity in

U.S. Motor Vehicle Assembly: 1972-84 (SIC 3711)

37

25

1972 1974 1976 1978 1980 1982

Year

SOURCE: Robert Scott, “Motor Vehicles, ” contractor report prepared for the

Office of Technology Assessment, April 1985, p 16.

bottom end of the market–compacts and subcompacts —where vehicles are simpler. Much

of the improvement in productivity between

1980 and 1984 was due to increasing capacity

utilization rather than technological improvement. Technological advance probably was a

factor in raising productivity in automotive

parts and stampings, however, as parts manufacturers shifted to numerically controlled and

computer numerically controlled machine

tools.56 The investments the auto industry has

made are expected to raise productivity in the

future by around 5 percent per year, while domestic production and sales probably will expand more modestly. Employment in automobiles peaked in 1979, at over 1 million workers.

By 1982, due to the combined effects of recession and foreign competition, auto employment had fallen below 700,000, Employment

has recovered to 865,000 by October 1985

(seasonally adjusted), but will likely remain substantially below its peak in the late 1970s, and

probably will continue a long-term, gradual

decline.

The employment decline will affect different

workers differently. Increased use of automated equipment has already increased the

proportion of skilled workers relative to production workers in automobile assembly from

1:5 in 1978 to 1:4 in 1984, a trend which is likely

to continue.57

‘—s’31bid., p. 17’.

S71bid., p. 4 0 ,
390 ● Technology and Structural Unemployment: Reemploying Displaced Adults

Automation in the Apparel Industry

The apparel industry is one of the most laborintensive in all manufacturing. Moreover,

nearly 85 percent of its work force consists of

production workers. Of the total labor force in

apparel (SIC 23), over 40 percent are sewing

machine operators—a job which can be learned

quickly. Partly because of low skill requirements, and partly because of intense competition in the industry, apparel workers’ wages

are very low: in 1984, production workers in

apparel made just $5.55 per hour, compared

to $9.18 in all manufacturing. The work force

in the apparel industry is over 80 percent female, nearly 20 percent minority, and relatively

uneducated. In 1975, one-third of all people in

the apparel industry had not completed the

ninth grade.58

Capital requirements in the apparel industry

are also low relative to other manufacturing.

In 1979, the capital stock per hour worked in

the apparel industry was $2.98, compared to

an average of $16.28 in other manufacturing

industries. 59

This is the kind of industry most vulnerable

to foreign competition. Low capital requirements and heavy reliance on low-skill workers gives poorer countries a distinct cost advantage over American producers. Apparel wages,

by U.S. standards, are not at all generous, and

have declined by 16 percent between 1968 and

1982 in real terms. However, unskilled workers making over $5 per hour in the United

States still look expensive compared to workers in Southeast Asia, Latin America, and other

developing and Third World countries (table

9-4). Productivity differences only partially reduce the gap between the U.S. and low-wage

producers; the American Apparel Manufacturers Association estimates that U.S. productivity is generally 35 to 100 percent greater

than that of workers in less developed countries, while wage differentials are often much

greater. 60

SBFigureS cited in Parsons, Op. cit., P. 6.

50U.S. Department of Commerce, Bureau of the Census, Statistical Abstract of the United States: 1984 (Washington, DC: U.S.

Government Printing Office, December 1983), pp. 542-543.

Figures are in 1972 dollars.

Ooparsons, op. cit., p. 26.

Table 9-4.-Apparel Industry Wage Rates in

Selected Countries, 1982

Hourly Wage +

Country wage fringe Index

United States . . . . . . 5.20 6.50 100

Hong Kong . . . . . . . . 1.80 2.05 32

Taiwan . . . . . . . . . . . . 1.50 1.75 27

Korea . . . . . . . . . . . . . 1.00 1.25 19

Singapore. . . . . . . . . . 0.90 1.35 21

Philippines. . . . . . . . . 0.40 0.50 8

China . . . . . . . . . . . . . 0.20 0.30 5

Jamaica . . . . . . . . . . . 0.75 0.95 15

Costa Rica . . . . . . . . . 0.60 0.80 12

Haiti . . . . . . . . . . . . . . 0.30 0.40 6

Mexico . . . . . . . . . . . . NA 1.68 26

Portugal . . . . . . . . . . . 1.20 1.50 23

Egypt . . . . . . . . . . . . . 0.40 0.55 8

NA—Not available or applicable?

SOURCE: Carol Parsons, “The Employment Effects of International Trade m the

Apparel Industry, ” contractor report prepared for the Office of Tech.

nology Assessment.

Apparel makers have responded to the increase in foreign competition by keeping up the

pressure for protection, moving production to

low-wage nations, shifting to product lines in

which the foreign advantage is least,61 and, to

some extent, automating. However, compared

with the other industries considered above—

textiles, motor vehicles, and televisions—automation in apparel manufacture is not likely to

make as much difference in the competitive position of U.S. manufacturers. It would require

a very substantial labor-saving technical breakthrough to offset the large labor cost advantages of foreign producers. While research

aimed at such a breakthrough is underway in

the United States, the Japanese have invested

much more, leaving the likelihood that the

United States will capture the advantages of

new automation open to doubt. Also, if automated equipment is to confer a great advantage on the United States —enough to offset the

advantages low-wage countries now hold—it

would have to greatly raise labor productivity

and either require skilled people to operate it,

.—

61For example, many types of outerwear, such as women’s

dresses, are very sensitive to fashion changes, and the advantage in these markets often goes to the producer who can get

a new line of clothing to retail outlets most quickly. In this case,

foreign producers may beat something of a disadvantage; while

verbal communication between fashion centers like New York

and production locations like Southeast Asia is very rapid, it

may take somewhat longer to transfer information on the type

and weight of fabric, color, and design details which is more

difficult to do verbally.
Ch. 9—The Effects of International Trade on U.S. Skills and Employment ● 391

or require a large capital investment which

poorer countries could not afford.

So far, technology has done little to offset the

differences in labor costs (wage rates weighted

by productivity) between the United States and

low-wage countries. In the 1960s, new technologies for synthetic fibers, developed in the

United States, lowered material prices and

gave the U.S. apparel industry a short period

of competitive advantage. Synthetic fiber production, however, was adopted fairly rapidly

in low-wage countries, and perversely, the

lower prices of manmade fibers accentuated

international differences in labor costs, further

eroding the competitive position of the American apparel industry.62 Automation in stages

of apparel production other than sewing—

pattern grading or cutting; fabric cutting, and

fabric marking—have helped to raise productivity, but all these activities apply to production processes which account for less than 5

percent of total labor costs.

While some promising technologies are on

the horizon, apparel making will remain relatively labor-intensive for the foreseeable future.

New technologies include computer-aided design of garments and patterns; improved programmable cutting equipment; computer-controlled handling of work in process; computer

networks between suppliers, manufacturers,

and retailers; automated sewing; and automated packaging. Some technological changes

have been made; in the late 1960s, the automatic sewing machine (or numerically controlled sewing machine) increased sewing

speeds and improved the uniformity of sewing—and thereby improved the quality of the

product. These machines made it possible to

reduce significant amounts of labor in some

operations—e.g., automatic inside sewing of

shirt collars reduces labor by 64 percent—but

these machines could handle only certain relatively simple sewing operations. Moreover,

they are dedicated equipment, which cannot

be adapted for new tasks. For these reasons,

automatic sewing machines are used for a minor share of sewing in the U.S. apparel indus62parsons, 0p. cit., pp. 9-10.

try, and the industry has remained very laborintensive. To date, none of the technological

improvements made in the apparel industry

have reduced labor intensity enough to overcome the advantage of the low-wage producers.

Although a major new effort is underway in

the United States to produce a new machine

which will automatically load, fold, and sew

limp fabric, the effort is not very well-funded

compared with a Japanese effort with the same

objective. The project is taking place at Draper

Laboratories in Massachusetts, supported by

the Textile and Clothing Technology Corp.

(TC2

). Corporation members include many textile and clothing firms,63 the Amalgamated

Clothing and Textile Workers Union, and the

Department of Commerce. With about $2 million funding from TC2 since 1981, Draper has

produced a machine which has shown some

promise in a field test.

Whether this machine, or future developments like it, will be successful in boosting the

competitiveness of much of the U.S. apparel

industry is uncertain. A major question about

the eventual impact of TC2 arises because of

its relatively low level of funding ($2 million

dollars over 3 years). In comparison, Levi

Strauss invested $5.5 million in research and

development in 1983 to produce innovations

which automated the sewing of belt loops and

the bottoms of blue jeans legs. This strategy

was not effective for Levi Strauss, not because

of any failure of technology, but because the

demand for blue jeans faded.64 The Draper

project is also underfunded compared with an

effort mounted by the Technology Research

Association of Automated Sewing of the Japanese Ministry of International Trade & Industry (MITI). This project—a Japanese version of

TC2—was begun in 1983; its mission, similar

to that of Draper’s, is to automate apparel manufacture, particularly for small production

quantities. The MITI effort is planned to last

until 1989 and has a commitment of $40 to $60

million behind it.

8SThese firms include Hart Schaffner and Marx, Genesco,

Burlington Menswear, Du Pent, J.P. Stevens, and Surgikos Divison of Johnson & Johnson.

64parsons, op. cit., P. 54.
392 ● Technology and Structural Unemployment: Reemploying Displaced Adults

Past innovations in the apparel industry have

shown no particular attachment to the United

States. In many industries, automation improves the competitive position of American

producers, either because it increases the need

for skilled operators, maintenance people, technicians and professionals in manufacturing

processes, or because the capital investment

required for efficient production is prohibitively high for poorer nations. So far, innovations in the apparel industry have done neither.

Numerically controlled sewing machines are

now used offshore, and the spread of this and

other technologies has helped to reduce the

difference between U.S. and Third World productivity in apparel.65

Whatever the success of the effort to automate apparel manufacture, the long-term outlook for apparel employment is for further

gradual decline at best. With increasing import

pressure, and only slowly growing demand, the

prospects for anything but employment decline

in the long term are dim.

Reorganizing Production on a Global Scale:

Manufacturing Offshore

Another major strategy adopted by firms facing stiffer international competition is to reduce costs by seeking low-cost areas for production. For many companies, this has meant

reorganizing production on a regional or global

scale, locating production facilities in areas

which offer the best chances of sustaining production cost advantages. Locating manufacturing facilities abroad to penetrate foreign markets is nothing new; according to one source,

Samuel Colt located Colt’s Repeating Arms

Manufactory in London in 1852.66 By 1914,

U.S. companies had $478 million worth of investment in foreign manufacturing, mostly in

Europe and Canada.67 What distinguishes past

overseas investment in manufacturing from to6s1bid, pp. SO-ST.

‘Tadakatsu Inoue, “A Comparison of the Emergence of Multinational Manufacturing by U. S., European, and Japanese

Firms, ” in Akio Okochi and Tadakatsu Inoue (eds.), Overseas

Business Activities, Proceedings of the Fuji Conference (Japan:

University of Tokyo Press, 1984), p. 15.

6TTadakatsu Inoue, op. cit., p. 3.

day’s is the motive: in the past, investments

were usually made in order to penetrate foreign markets where exporting would have been

difficult, or in order to take advantage of certain natural resources (e.g., tropical hardwoods) which were unavailable in the United

States. While these motives are still important

reasons for overseas investment, a major reason, increasingly, is to supply the U.S. market

more cheaply. Manufacturing in foreign locations for export either to the home country—

in this case, the United States—or to thirdcountry markets is a relatively new feature in

the landscape of U.S. foreign investment, emerging as a major strategy as late as the 1960s. 68

Moreover, in some sectors, contracting with

foreign firms to supply all or part of products

designed for the home market is becoming a

more common strategy for survival and competitiveness.

One form of offshore assembly, termed outward processing, works as follows. U.S. producers make part of a product, and then ship

it, in unfinished form, to a foreign plant for additional work. The product is then re-imported

into the United States for sale or further processing, with tariffs levied only on the foreign

value-added. This kind of import is often termed

an 806/807 import, after items 806.30 and

807.00 in the Tariff Schedule of the United

States (TSUS) which permits the activity. 69 B e -

tween 1966 and 1983, 806/807 imports increased

in total value 20 percent per year, from $953

million to over $21 billion (figure 9-6). The foreign value-added increased slightly less rapidly,

at 19 percent per year. In 1966, the vast majority—94 percent—of these imports were from

developed countries like West Germany and

Canada. Since then, the newly industrializing

countries have increased their shares of B O G/

807 imports rapidly. From 1977 to 1983, the

share of 806/ 807 imports coming from developed countries accounted for 55 to 57 percent

Ee]oseph Grunwa]d and Kenneth Flamm, The Global Factory:

Foreign Assembly in international Trade (Washington, DC: The

Brookings Institution, 1985), p. 3.

691tem 806.3cI includes only metal items which have been manufactured or processed in the United States, exported for foreign processing, and returned. Item 807.00 includes everything

else.
Ch. 9—The Effects of International Trade on U.S. Skills and Employment • 393

Figure 9-6.—U.S. Imports Under Items 806/807

25,000

r

5,000

0

Foreign value added

1966 1968 1970 1972 1974 1976 1978 1980 1982

Year

SOURCE: U.S International Trade Commission, Imports Under Items 808.30 and

807.00 of the Tariff Scfredu/es of the Urtik?d Sfates, 1980-83, April 198S,

p, 100

of the total. Figure 9-7 also illustrates the increasing importance of production in newly industrializing countries such as Malaysia, Singapore, and Mexico in 807 imports. Japan has

rapidly taken a greater share of 807 imports

into the United States, replacing West Germany as the largest source.

70 Motor vehicle s

predominate among the products imported under TSUS 807, accounting for 62 percent of total 807 imports. Other products making up a

significant share include semiconductors and

parts, televisions and parts, office machines,

and apparel.

The prime reason for foreign assembly of

products meant for home or third country markets is to save on labor costs, especially in production processes that do not require high proportions of skilled labor. In some offshore

locations, lower productivity accompanies the

lower labor costs, which partly offsets the effect of lower wages; but often the wage differentials are great enough to make up for

lower productivity. Moreover, for some operations in some locations, productivity may be

greater than in the United States.

Changing the location of production within

the United States to find lower labor Costs is

not a new strategy; leaving the country to reToFigures cited in this paragraph are from U.S. International]

trade Commission, Imports Under Items 806.30 and 807.00 of

the Tariff Schedules of the United States, 1980-83, USITC Publication 1688, April 1985, pp. 15-29.

Figure 9-7.- Principal Sources of Imports

Under Item 807, 1970 and 1983

Belgium 5 0°/0

Hong Kong 6.00/.

1970

Singapore 4 6°10

Canada 5. 5%

Malaysia 5 6%

1983

SOURCE: US. International Trade Commission, Imports Under Items 808.30 and

807.(Mof the Tariff Schedules of the UnitedStates, 1980-83, April 1985,

p. 23,

duce labor costs is a newer development. In

the United States, for example, textile producers migrated to the South from the industrial

Northeast to find lower wages and non-union

labor. Even in service industries, where “production” is often physically inseparable from

consumption, automation has made it possible
394 . Technology and Structural Unemployment: Reemploying Displaced Adults

to shift certain operations to lower wage areas

to save on labor costs. For example, a California insurance company, in the process of automating claims processing, shifted this job

from a unionized city office to more rural, nonunionized areas of California, where costs ,

especially wages, were lower. Modern telecommunications made the shift possible.

U.S. producers are by no means the only

ones engaged in international reorganization

of production. As the Japanese economy prospered, productivity and wage rates rose, making Japan a high-cost producer relative to much

of the rest of Asia in many labor-intensive processes. In response, the Japanese, too, have

transferred some manufacturing operations to

lower wage countries: in 1978, three of Japan’s

largest firms had assembly operations in Mexico. Interest in Mexican assembly operations

in a variety of industries on the part of many

industrialized nations, including many European nations, is growing.

71

In some cases, American companies—for example, automakers and semiconductor manufacturers —have invested in offshore facilities

and obtained majority or minority interests. In

others, American producers contract with

foreign manufacturers for low-cost products

which are then marketed under the label of the

U.S. company. Automakers and apparel manufacturers have both used this strategy.

There is no question that offshore assembly

and manufacturing of products for home or export markets cost American jobs, although

there is not a one-for-one correspondence between the number of jobs in offshore operations and the number of jobs lost in the United

States. Since it is the operations which involve

the greatest reliance on low-skill labor which

are most likely to go offshore, the workers most

vulnerable in strategic decisions to move production offshore are–like workers affected

both by changing process technology and increased imports-less skilled production workers in manufacturing.

TIGrunwa]d and Flamm, Op. Cit., P. 150.

Like other strategic responses to increased

international competition, however, the decision to move some operations offshore or contract with lower cost foreign producers can

save more U.S. jobs than going out of business

altogether, but only if offshore production is

effective at improving competitiveness. 72 In the

earlier example of Matsushita’s acquisition of

Quasar, one of the several interconnected strategies was to move some operations to Mexico.

This move was probably instrumental in Quasar’s survival, and the preservation of many

jobs in Quasar’s U.S. operations. Offshore production is an important part of a long-term

competitive strategy for American producers

in a widening variety of industries. To the extent that any strategy is successful in improving

competitiveness, there will be more jobs for

Americans than if firms and industries wither.

Offshore Production in Semiconductors

The semiconductor industry is a quintessentially high-technology industry, on which many

hopes for future growth and innovation rest.

Overall, the industry employed over 280,000

Americans in May 1985. It has been one of the

fastest growing manufacturing industries in the

United States. While it experienced a cyclical

slump in late 1984 and 1985, its long-term

growth prospects are solid; demand for semiconductor devices is expected to grow at 19

percent per year through 1990.

73

While its prospects are good, the semiconductor industry has been hurt by the high value

of the dollar and the current downturn in the

nNot al] countries are good sites for offshore production facilities; many operations cannot be moved offshore to save

money. In general, only operations which rely mostly on unskilled labor are good candidates, and even then, productivity

is so much lower in some countries that even very low wages

cannot make up for it,

73 The Ig percent figure includes expected annual growth of

20 percent per year for the worldwide merchant semiconductor market and 15 percent per year in captive semiconductor

production. Merchant production includes semiconductors that

are made and sold as inputs to other firms which produce equipment—e.g., computers, office equipment, and appliances—which

incorporate semiconductors. Captive production refers to semiconductors which are made for in-house use. Source: Carol Parsons and Jay Stowsky, “The Effects of International Trade on

Employment in the Semiconductor Industry,” contract report

for the Office of Technology Assessment, May 17, 1985, p. 3.
Ch. 9—The Effects of International Trade on U.S. Skills and Employment ● 395

market for semiconductors. The current weakness is probably temporary, however, as growth

in telecommunications and computer markets

boost demand for semiconductors. The trade

balance in semiconductors, historically a surplus, became a deficit in 1982, largely because

of offshore production.

7 4

Besides providing rapidly growing employment at home, the semiconductor industry also

pioneered the movement of assembly overseas.

Because of its youth, compared to older industries like motor vehicles, textiles, and apparel, many of the semiconductor industry’s

products mature fairly quickly, and competition from foreign producers is well-established.

However, it was intense domestic competition

that initially caused U.S. producers to move

labor-intensive operations offshore. The move

began in 1964 with the establishment of a plant

in Hong Kong by Fairchild. By the end of the

1960s, over 50 foreign semiconductor manufacturing plants had been established, mostly

in low-wage Asian nations like Hong Kong,

Taiwan, Singapore, and Korea.

Since then, imports of semiconductors—including 806/807 imports from foreign affiliates—have expanded even more rapidly than

U.S. production (figure 9-8). Between 1969 and

1984, U.S. shipments of semiconductors grew

17.5 percent annually, while imports rose by

over 30 percent per year. The portion of imports under TSUS 806/807 went up by 27.7

percent annually .75 By 1984, including 807 imports, the value of the foreign content of 807

imports totaled 28 percent of U.S. shipments.

All semiconductor imports, including 807 imports, totaled 44 percent of U.S. shipments .

About 50 percent of all merchant semiconductors in the U.S. market come from 806/807

imports, mostly from Southeast Asian countries (table 9-5). Low wages in these countries

give producers a cost advantage.

Information on production-worker wages in

other countries is sparse, but some compariT4U.S. Department of Commerce, 1985 U.S. lndustria] OUt~OOk,

op. cit., pp. 32-3 to 32-10.

TSFigures are cited in Parsons and Stowsky, op. cit., p. 15a.

Figures for 1984 production and imports are estimates.

Figure 9-8.—806/807 U.S. Imports and U.S.

Total Shipments of Semiconductors

18,000

16,000

14,000

4,000

2,000

0

1969 1971 1973 1975 1977 1979 1981 1983

Year

SOURCE: Kenneth Flamm, The Global Factoiy (Washington, DC: The Brookings

Institute, 1985), p. 74; and 1982 Census of Manufacturers, preliminary

statistics for SIC 3674.

Table 9+.—imports of Semiconductors Under

TSUS 807.00, 1983

Value of Value of U.S.

imports components

Country ($000) ($ million)

Japan. . . . . . . . . . . . . . . . . . . 11,011 6.3

Malaysia . . . . . . . . . . . . . . . . 1,063,689 649.3

Singapore . . . . . . . . . . . . . . . 371,917 208.2

Philippines . . . . . . . . . . . . . . 633,173 426.4

Republic of Korea . . . . . . . . 487,504 38.6

Taiwan. . . . . . . . . . . . . . . . . . 138,958 56.9

Total, Asia . . . . . . . . . . . . 2,706,252 1,665.7

Mexico . . . . . . . . . . . . . . . . . 160,741 48.9

West Germany . . . . . . . . . . . 5,259 3.4

Canada . . . . . . . . . . . . . . . . . 126,842 83.5

SOURCE: U.S. International Trade Commission, Imports Under ftems 0630 and

807. LZ70fthe Tariff Schedules of the UnitedStates, 19#-&3, USITC Publication 1988, April 1985, pp. 127-156.

sons are possible. By one estimate, total manufacturing costs can be reduced 50 percent by

sending assembly offshore to Far Eastern and

Latin American plants; in 1973, assembly of

one kind of integrated circuit cost less than half

as much if assembled in Singapore than if assembled in the United States. 76 Another estimate from the mid-1970s was similar: total

manufacturing costs of simple integrated circuits or discrete devices, with offshore assembly, were about $0.15 per device at that time,

T6Wi]liam Finan, The international Transfer of Semiconductor Technology Through U.S. Based Firms, National Science

Foundation, 1975, p. 23. Cited in Parsons and Stowsky, op. cit.,

p. 11.
396 ● Technology and Structural Unemployment: Reemploying Displaced Adults

while, with domestic assembly, costs were

$0.35 to $0.60, depending on the ratio of U.S.

wages to offshore wages. ” The cost differential was not as great—15 to 28 percent—for

large-scale integrated circuits; these are currently taking larger shares of the market.

7 8

However, costs still favor foreign assembly,

and some companies have found that it is possible to achieve significant labor cost savings

by sending more skilled types of work offshore.

While labor-intensive operations still dominate

in U.S. offshore affiliates, a few companies

have found that the engineering and technical

support needed to do increasingly complex circuit testing can be obtained offshore at much

lower prices than in the United States. There

has been some speculation that more complex

testing, which requires skilled people to write

software, maintain testing equipment, and execute tests, could bring testing operations back

to the United States, but so far, experience has

shown that this kind of work can be done adequately in countries like Singapore and Malaysia .

7 9

The main advantage of offshore manufacturing, however, is still in labor-intensive operations. This shows up in employment figures;

worldwide, U.S. firms employ only about threequarters as many people as they employ in the

United States, but 80 percent of offshore employment consists of production workers. In

the United States, production workers are only

about 40 percent of semiconductor industry

employment .

80

Offshore Production in Apparel

In 1983, 807 imports of apparel and footwear

totaled $745 million, or 4.6 percent of all 807

imports. Although the apparel industry’s share

of 807 imports is modest, offshore production

is an important part of the strategy of apparel

producers. imports of items under TSUS 807

—..—TTThe lower domestic assembly cost is associated with a ratio

of U.S. wages to foreign wages of 5:I; the higher estimate with

a ratio of 10:1.

TEU.S, Congress, Office of Technology Assessment, Znternationtd Competitiveness in Electronics, op. cit., p. 514.

Towi]]iam Finan, Quick, Finan Associates, personal communication, Sept. 23, 1985.

80A]ic and Harris, op. cit., p. 14.

have increased much faster than apparel imports as a whole, between 1965 and 1974. Since

1974, the share of 807 imports has fallen (figure 9-9).

TSUS 807 allows apparel firms to send fabric overseas for operations like sewing, hemming, or stitching which do not change the

form of the basic product. 81 While the bulk of

U.S. apparel imports come from Southeas t

Asia, most 807 imports come from Latin America, with Mexico as the largest supplier. Of all

807 imports of apparel and footwear, 31 percent came from Mexico, and 19 percent from

the Dominican Republic. Other major suppliers

included Haiti, Costa Rica, the Philippines, Colombia, Honduras, Barbados, and Jamaica. One

reason for the predominance of Latin American countries among the sources of 807 imports is that, unlike Far Eastern producers ,

Latin American countries are relatively highcost producers of textiles. However, their low

wage rates make them attractive apparel producers using U.S.-made fabrics. Asian producers, with their lower textile costs, are more

likely to produce both textiles and apparel domestically and export to the United States. 8 2

Like semiconductor manufacturers, apparel

producers began sending production offshore

in the 1960s. In 1965, the value of 807 apparel

=31parsons, 0p. cit., p. 43.

eZGrunWa]d and Flamm, op. cit., p. 18.

Figure 9-9.—Percent of U.S. Imports of

Apparel Under Item 807

12

10

Year

SOURCE International Ladies Garment Workers Union, Research Department,

February 1985
Ch. 9—The Effects of International Trade on U.S. Skills and Employment . 397

imports totaled $1.7 million; afterwards, these

imports rose nearly 38 percent per year, much

more rapidly than 807 semiconductor imports.

The most labor-intensive operation—sewing—

is most commonly sent offshore to take advantage of foreign labor costs, which are commonly 5 to 10 percent of U.S. labor costs in

many Latin American countries .

Offshore production of apparel is expected

to continue to grow as U.S. producers become

more experienced at managing offshore facilities. In the past, some firms have had mixed

experiences with offshore production. For example, Casualwear, a producer of women’s

clothing, found that a small joint venture made

in Haiti in the 1960s was not paying off. Low

productivity and high labor turnover offset the

advantage of extremely low Haitian wages of

$1 per day, and the cost of clothes produced

in Haiti and shipped to the United States cost

90 percent of what they would have cost if

made in America. Casualwear tried again,

moving to a facility which straddled the U. S.-

Mexican border, and had 20 to 30 percent of

its output sewn in Mexico. This venture was

more successful, and production costs came

down.

Other apparel firms—particularly bigger ones

—have also learned how to manage offshore

production. Several of the largest apparel firms,

including Manhattan Industries, Philips-van

Heusen, Warnaco, and Kellwood—import 30

percent of their products, some from 807 plants

and some from foreign-owned facilities under

contract. Liz Claiborne, the largest producer

of women’s apparel in the world, does not manufacture any of the clothes it sells. production

is contracted out to over 70 domestic and foreign producers, while the company specializes

in design and marketing, Nearly 70 percent of

the company’s products are made abroad,

mainly in Hong Kong, Korea, and Taiwan.

83

While offshore production has been a rewarding strategy for some U.S. apparel producers, the strategy could prove less successful in

the long run than in some other industries. For

asThe information in the preceding two paragraphs is taken

from Parsons, op. cit., pp. 44-45.

example, the front-end operations in semiconductors—research and development of new

products, design, and pilot production—are

heavily skill-intensive, requiring large proportions of highly educated and talented people

(such as electrical engineers). The costs of educating these people are high; it is difficult for

poor countries. Front-end operations in apparel

production also involve design, but the emphasis is less on education than on artistic ability,

talent, and creativity. While these skills are not

commonplace, the United States has no monopoly on them, as the recent international success of Japanese fashion designers illustrates.

It may be easier for foreign manufacturers of

apparel to find talented designers for their own

industries than to find the engineering and

scientific talent needed to erode the U.S. advantage in complex electronic circuitry. Moreover, it is fairly easy for anyone—including foreign manufacturers —to copy the designs of

clothing on the racks in retail outlets, and produce similar clothing quickly.

84

Offshore manufacturing, subcontracting

abroad, and expanding imports all mean fewer

jobs in the apparel industry. Unlike the demand

for semiconductors, demand for apparel is

growing very slowly. In such a market, greater

use of foreign labor will continue to reduce

U.S. apparel employment; the only real question is how rapidly. Without protection, apparel employment probably would have declined more rapidly than it has.

whatever the rate of job loss, the most affected workers are the less skilled, predominantly sewing machine operators. Over 40 percent of the approximately 2 million workers in

the apparel industry—i.e,, nearly 500,000 people in 1984—operate sewing machines .

Offshore Manufacture in Telecommunication

Equipment

Telecommunications is a high-technology

sector which, like the computer and semiconductor industries, has transformed both economic and social life in the United States. In

1983, telecommunication equipment and serv84parsons, op. cit., p. 46.
398 ● Technology and Structural Unemployment: Reemploying Displaced Adults

ices was a $116 billion market (3 to 4 percent

of GNP). It is expected to reach $300 to $4100

billion by the early 1990s. 85 The world market

for telecommunication equipment alone (not

including services) was about $50 billion in

1984, with the United States accounting for

over one-third of world production.

Telecommunication equipment consists of

three kinds of products: 1) terminal equipment

in the customer’s office or house (referred to

as Customer Premises Equipment, or CPE),

which includes telephones and facsimile machines; 2) transmission equipment, such as

coaxial cable or communication satellites ,

which carry signals between terminals and

switching centers; and 3) switching equipment,

which routes signals or calls between terminals. Most switching facilities are located in

telephone company facilities, but some—Private Branch Exchanges, or PBXs—are located

in customer facilities. For example, large offices sometimes have central switchboards to

route incoming and outgoing calls. The United

States produces nearly 39 percent of the world’s

switching equipment, 37 percent of its transmission equipment, and 19 percent of its terminal equipment.

86

Advanced telecommunication equipment resembles other high-technology sectors like

semiconductors and computers in several ways.

The United States was and continues to be a

major source of new innovations and applications, and much of the advanced research and

development is done here. Telecommunication

equipment changes fairly rapidly, and product

life cycles are short compared with some other

manufactured products. Nonetheless, foreign

competition is rapidly becoming an important

consideration.

Between 1980 and 1983, U.S. trade in telecommunication equipment went from a surplus of over $400 million to a deficit of nearly

$650 million. The strong dollar was a major factor in the deterioration of the trade balance, but

“S]ay Stowsky, “The Employment Effects of International

Trade in the Telecommunications Equipment Industry,” contract report for the Office of Technology Assessment, Apr. 19,

1985, pp. 6-7.

~Ibid., p. 6.

low-cost foreign competition in many less sophisticated products, such as telephone handsets, was well-established before the rise of the

dollar. Another major factor in the rapid rise

of imports was the relative openness of the U.S.

market;

87 a series of legal decisions opened the

U.S. market for customer premises equipment.

Foreign penetration of the market began after

1968, when the Federal Communication Commission’s Carterphone decision allowed the

hookup of non-AT&T equipment to the network of the Bell System. This opened the market to foreign producers, although the monopoly that AT&T/Western Electric equipment

then held took some time to dissolve. By the

time AT&T was broken up in January 1984 by

court decision, a result of a Justice Department

Antitrust suit, the competition in CPE had already taken hold. Western Electric, AT&T’s

equipment manufacturer, lost market share in

almost all types of telecommunication equipment in the 1970s and 1980s.

As both domestic and foreign competition

have intensified American telecommunication

equipment manufacturers have used a variety

of strategies to cope with it. Some producers,

in some product lines, have chosen to compete

on a basis other than price, offering sophisticated products with a variety of features (including service) not duplicated by other manufacturers. Many producers have automated

equipment manufacture. Some, particularly

producers of equipment which embody standard electronic components, have moved production of these components to low-wage

areas, or have imported both standardized

components and raw materials from offshore

producers .

Comdial, a manufacturer of high-quality telephone handsets, has done these things. Comdial used its expertise in semiconductors to enter the market for specialized telephones. In

1982-84, Comdial automated its manufacturing

processes to reduce costs, increasing its engi13w.s. duties On rdecornrnunications equipment vary from zerO

to 9 percent, substantially lower than tariff barriers of most of

the rest of the world. Canada and the United Kingdom, which

have liberalized their markets, are exceptions to the general pattern of tight protection. Source: Stowsky, op. cit., p. 62.
Ch. 9—The Effects of International Trade on U.S. Skills and Employment ● 399

neering staff fivefold and reducing its dependence on production labor. 88 Parts of its manufacturing process, however, are still laborintensive. In 1983, Comdial moved its manufacturing operation from Charlottesville, Virginia, to Shenandoah, 40 miles away. Even this

short move allowed the company to reduce its

labor bill while keeping close communication

with Charlottesville headquarters. For several

reasons, Comdial chose not to move production to the Far East. According to a company

representative, quality of Far Eastern handsets

is improving and production costs are lower,

but the advantage is not yet great enough to

justify paying the tariff on Asian imports .

Moreover, customer requirements for quick

servicing and upgrading of equipment also

weigh against Far Eastern producers, for it

would take too long to send equipment back

to Asia for repairs and upgrades. However,

Comdial does buy raw materials and standardized electronic components—e.g., integrated

circuits, capacitors, and resistors—from offshore producers, because the prices are lower

than the cost of Comdial’s manufacturing these

components itself.

8 9

Another illustration of the kinds of decisions

producers of telecommunication equipment

face in locating manufacturing facilities is in

PBX manufacture. PBXs are normally tailored

to fit customer specifications, and most customers for U.S. firms are in the United States.

Although price competition is important, competitive success in the PBX market depends

more on product flexibility, reliability, and features. Software, written to fit the specifications

of individual customers, has become a significant part of the PBX. As a result, when customized features are added, producers almost

always locate final assembly close to the customer. Even foreign manufacturers have set up

final assembly plants in the United States to

serve their American customers. However, like

high-quality handsets, PBXs incorporate standardized parts that can be obtained from foreign

producers at lower costs. One manufacturer,

————

Saslnce November 1983, Comdial has laid off about TOO production workers, partly because of automation and partly because of soft markets.

Eestowsky, op. cit., pp. 51-53.

Rolm, buys many of these commodity product s

90 from outside vendors. Another PBX

manufacturer, Mitel of Canada, makes its custom integrated circuits in Vermont, assembles

printed circuit boards in Puerto Rico, and does

final assembly for the U.S. market in Florida.

The growth in markets for high-quality, flexible telecommunication equipment and the

pressures for locating production close to the

customer should mean continued employment

growth in the United States. However, as products become more standardized and price competition intensifies, the pressures to lower manufacturing costs will increase. The pressure

will be felt most by low-skilled production

workers. Between 1977 and late 1985, with intensifying competition in telecommunication

equipment, the proportion of production workers in the telephone and telegraph apparatus

equipment industry dropped from 68 to less

than 62 percent; the absolute number of production jobs fell by over 16,000. In 1983, the

telecommunication industry experienced its

first trade deficit. The largest portion of the deficit was in CPE, where most imports are lowend, standardized handsets in which labor

costs are a significant factor in the ability to

compete internationally. Even though the telecommunication industry will continue to employ larger numbers of people, most of them

are, and probably will continue to be, well educated and highly skilled. In some standardized

equipment, the effects of low-wage foreign

competition can already be seen. AT&T recently announced that it planned to lay off

24,000 employees from its computer and telecommunication equipment work force in order to cut costs .

91 Over 1,800 of the layoffs

came from a plant in Shreveport, Louisiana,

where AT&T manufactured telephone handsets. One of AT&T’s decisions was to move production of residential handsets (telephones) to

Singapore, which will almost certainly displace

many workers. Although AT&T has announced

that it will try to find new jobs in AT&T for

Oo]ntegrated circuits, printed circuit boards, metal parts and

castings, and commodity peripheral equipment.

olMichael Schrage, “AT&T Announces Largest Layoff in Its

History, ” Washington Post, Aug. 22, 1985.
400 ● Technology and Structural Unemployment: Reemploying Displaced Adults

its laid-off workers, it is unlikely that all of the

24,000 people AT&T is laying off, or even all

of the 1,877 workers laid off from the Shreveport plant, can be placed. The layoffs have hit

managers and professionals as well as production workers, but apparently nearly 69 percent

of the workers AT&T laid off were production

workers, while the average for the overall industry is less than 62 percent. The telecommunications industry as a whole should continue

to create many new jobs, mostly for skilled,

professional people; opportunities for lowskilled or semiskilled production workers will

be much more limited.

POLICY RESPONSES TO EMPLOYMENT DECLINE: THE PROTECTION DEBATE

The combination of high unemployment

rates and record trade deficits has brought

trade protection debates into new prominence.

Many companies and workers hurt by foreign

competition have brought allegations of unfair

trade practices and petitioned for protection.

In some cases, protection has been given, but

generally there has been more pressure for protection than action in the 1970s and 1980s. 9 2

Part of the reason is that action is slow: in most

cases, it takes years to settle questions regarding the fairness of foreign competition. Even

after the Federal Government makes decisions,

according to the terms of U.S. trade treaties,

on the fairness of foreign competition and the

degree of injury to U.S. producers, debate and

pressure often continue.

Protection is almost always viewed by policymakers as a last resort to the problems of

employment decline and displacement in industries pressed by rising imports. Often, the

motives are simply to prevent massive job

losses; in industries like apparel, without protection, a great many American workers would

have been displaced rapidly. In other cases,

protection may be advocated to give industries

facing stiff international competition time to

make the necessary adjustments, including

gradual reduction of the work force so as to

minimize displacement. Recent protection for

the motor vehicle and steel industries are examples of this strategy. 93 Finally, some have adEzWilliam R. C]ine (cd.), Trade Policy in the 1980s (Washington, DC: Institute for International Economics, 1983), p. 8.

as]n their petition for restraints on imports of steel in ]anuary

1984, the United Steelworkers of America and Bethlehem Steel

cited the need for “breathing space” to allow the industry time

to modernize. The subsequent Presidential decision in Septemvocated “infant industry” protection, to give

new industries time to develop products, make

production processes efficient, and develop

markets without the additional strains imposed

by foreign competition. This approach has

been tried in other countries, but not in the

United States. Preservation of jobs and minimizing displacement are often the arguments

made most strongly by those seeking protection. Ironically, some of the most persuasive

arguments against protection also ar e

employment-related. The next section dis -

cusses the advantages of protection, in terms

of employment; the section following discusses

costs of protection.

The Effect of Protection on Employment:

Positive Aspects

The strong commitment of the United States

to free trade is supported by mainstream economic theory, which states that everybody is

better off under free trade conditions. Theory

states that, if each country produces and exports those products which it has an advantage

in producing, and imports products where its

disadvantages are greatest, consumers in all

countries have access to a wider variety of

cheaper products. As a country’s advantage

shifts—when some industries lose their advanber 1984 provided some protection, and directed the International Trade Commission to monitor the efforts of the industry

to modernize. According to one analysis, the steel industry has

met the requirements, stepping up its investments in new plant

and equipment. Sources: American Iron and Steel Institute,

“Steel Industry Continues Long History of Production Process

Innovation, ” excerpts from testimony of David J. Cantor, Congressional Research Service, Aug. 29, 1985; and U.S. Department

of Commerce, 1985 U.S. Industrial Outlook, op. cit., p. 19-20.
Ch. 9—The Effects of International Trade on U.S. Skills and Employment • 401

tage and others grow stronger—labor and capital leave some industries and enter others. For

example, as the U.S. apparel and television industries lose their advantage, labor and capital are shifted out of these industries and into

others where the United States is more competitive. This process of adjustment is a normal part of a dynamic economy, and economic

theory usually assumes that there is ample time

for the process to work. 94 When this is true, it

is easy to see the advantages of free trade.

However, theory also assumes that capital

and labor are fully used—in the case of labor,

this means that there is no structural unemployment—and that they can readily shift from

one sector to another, Both assumptions have

faults. unemployment has been rising in all industrialized countries; in the United States, the

unemployment rate is at a historic high for a

period of prosperity (see ch. 4). There are not

enough new jobs to go around, and some people

displaced from declining industries are unable

to find new ones readily. Moreover, much of

the skill and knowledge that people use in their

jobs are not suitable for new jobs; the same is

true of capital equipment. The capital equipment used in the apparel industry, for example, is not very adaptable to more competitive

industries like computers and aircraft, and neither are many of the workers. When there is

plenty of time for adjustment, capital equipment can be depreciated, and employment can

be reduced through attrition. When there is not,

as is often the case, the transfers are more painful; people are displaced, and industry-specific

skills and capital have no value. 95 The mor e

abrupt the transition, the greater the likelihood

that workers will face prolonged periods of involuntary unemployment and other costs of

displacement, such as taking a new job at much

reduced pay.

Protection can help to reduce the costs of adjustment by prolonging the period of transition,

making it possible to reduce the work force

through attrition rather than layoffs, An example is the apparel industry, which has had some

-——..—- -

9AH. Peter Gray, Free 7’ra~e or Protection? A Pragmatic Analysis (London: The Macmillan Press Ltd., 1985, in press), p. 3.

gsIbid., p. 4.

form of negotiated protection—though not in

all products, or from all countries—for nearly

three decades. Since 1974, the Multifiber Arrangement (MFA) has provided the basis for

managed growth of apparel and textile trade.

The MFA allows signatories (originally, there

were 50) to negotiate bilateral agreements

establishing export quotas in cotton, wool, and

manmade fibers .

96 The United States has such

agreements with 28 countries, as well as agreements with 8 countries which did not sign the

MFA .

97 These agreements were not intended

to stifle imports, but to permit them to rise

steadily, without great disruption of domestic

industries. However, the rate of growth in U.S.

demand for apparel has been lower than the

rate of import growth under MFA, with resulting disruptions in the U.S. apparel industry.

Yet without the MFA protection, employment

losses and displacement would likely have

been, as one analysis puts it, “massive.”98 T h e

MFA is due to expire in mid-1986, but legislation establishing new protection in textiles and

apparel is moving through Congress as this report is being written. If MFA is not replaced

with some kind of protection (which it probably will be) job losses could reach 570,000 by

1990 .

99 protection certainly does not guarantee employment stability, and apparel employment is expected to decline with or without it.

However, slow erosion of employment is more

humane, from the standpoint of workers, than

rapid job loss.

Another industry in which job losses were

slowed by protection is the motor vehicle industry. In the late 1970s, Japanese automobiles

were making rapid inroads into the U.S. market; from 1978 to 1981, the Japanese share of

U.S. car sales accelerated from 12.7 to 21.4 percent, while the U.S. share fell from 82 to 73.1

percent. Employment dropped by over 216,000,

with a loss of almost 202,000 jobs between 1979

~Jeffrey S. Arpan, Jose de la Terre, and Brian Toyne, The U.S.

Apparel Zndustry: international Challenge, Domestic Response,

Research Monograph No. 88 (Atlanta: Georgia State University,

1982), p. 116.

WU.S. Department Of commerce, 1985 U.S. Industrial OUt100k,

op. cit., p. 45-2.

gBNehmer and Love, op. cit., p. 232.

goEStirnate Cited in Parsons, Op. Cit., P. 40.
402 . Technology and Structural Unemployment: Reemploying Displaced Adults

and 1980 alone. In 1980, the Ford Motor Co.

and the United Auto workers petitioned for import relief, which was subsequently denied by

the International Trade Commission. However,

pressure for protection was growing; in 1981,

support was increasing for congressional proposals to restrict Japanese exports of motor vehicles. On May 1, 1981, the Japanese Ministry

of Industry and Trade (MITI) announced a

voluntary restraint agreement (VRA) on exports of motor vehicles to America, limiting

Japanese exports to 1.76 million cars, passenger vans, and utility vehicles. In late 1983, the

agreement was extended until March 31, 1985,

at a level of 1.94 million units. l00

There is wide disagreement on the number

of automobile industry jobs protected by the

VRA. A number of assumptions must be made

in order to estimate the employment impacts,

including assumptions on how many Japanese

automobiles would have entered the U.S. market without protection, how many additional

American cars were made because of the limitations on imports, and how many American

workers were employed to make the additional

American cars. Estimates range from 26,200

to 133,000 jobs saved in the auto industry; assumptions on the rate of Japanese import penetration probably accounts for most of the difference .

101

The higher estimate represents an upper

bound of the number of jobs protected in the

automobile industry alone, assuming that Japanese automobiles would have captured about

39 percent of the U.S. market without the

VRA ,

102 and that this would have meant a reduction of about 1.7 million domestically made

automobiles. The lower estimates are based on

conservative assumptions about the eventual

—_—.—

looThese limits were exceeded every year of the VRA. Between

1981 and 1984, the original period of the VRA, imports ranged

from 1.78 million to 1.84 million units. During the last year of

the VRA, from Apr. 1, 1984, to Mar. 31, 1985, 2.31 million automobiles were imported from Japan.

IolScott, op. Cit,, Pp, 27-33, The lower number was made by

Robert Crandall of the Brookings Institution, and covers only

the first 2 years of the agreement.

IOZThe 39 percent share is based on an estimate that the Japanese could have captured almost all the subcompact market segment, half the compact segment, and about 3.5 percent of other

market segments.

share of Japanese automobiles. For example,

the U.S. International Trade Commission estimate that the VRA averted losses of 44,100 jobs

in automobiles assumed that the growth trends

of 1967 to 1980 would have continued during

the time the VRA was in effect. This estimate

took little account of the rapid acceleration in

the Japanese share in the late l970s.

An estimate from the International Trade

Administration projected Japanese marke t

penetration on the basis of two different assumptions. Under very conservative assumptions, the Japanese share was projected to grow

at 0.6 percent per year without the VRA, or at

the same rate that it grew during the first 2

years of the VRA—meaning, in effect, that the

VRA had no impact on the Japanese share. A

more realistic estimate was that the share

would have increased by 3 percentage points

per year, comparable to the growth between

April 1979 and March 1981. The second estimate yielded an employment gain (or avoidance of loss) of nearly 62,000 jobs in the automobile industry in the last 2 years of the

VRA .

103 ITA also estimated that an additional

43,000 jobs were protected in supplier industries, such as steel, rubber, and glass, bringing

its estimate of protected employment to 105,000.

Neither ITA nor any other analysis has a t -

tempted to measure tertiary impacts—i.e., outside jobs generated in stores, housing con -

struction, and other economic activity by

employment in the automobile or supplier industries. If tertiary impacts are counted, jobs

protected by the VRA might number well ove r

105,000.

In addition to preserving some jobs in American industries, or stretching out employment

losses, protection–or the possibility of protection—may also encourage some foreign

companies to locate manufacturing facilities

in the United States. There is little question that

protection helped stimulate recent Japanese inIOsAccording to ITA, the VRA did not seriously limit Japanese

car sales in the United States until the second quarter of 1983,

largely due to depressed markets during the recessions of 1980

and 1982. Source: U.S. Department of Commerce, International

Trade Administration, “Analysis of the Japanese Auto Export

Restraint,” Executive Summary, mimeo, pp. 5-9.
Ch. 9—The Effects of International Trade on U.S. Skills and Employment ● 403

vestments in television, automobile, and truck

production in the United States. Locating manufacturing facilities here has two advantages

for the Japanese: it helps to soften pressures

for protection, and it allows Japanese producers to gain larger shares of the U.S. market than

they could with exports alone.

The employment gains from foreign producers locating in the United States should not be

overstated. In 1983, Japanese automakers in the

United States employed fewer than 30,000

American workers, or 4 percent of industry

employment. 104 As the number of Japanese assembly plants in America and U.S.-based joint

ventures with Japanese automakers increase,

the proportion should grow. By 1990, Japanese

automakers are expected to have the capacity

to make nearly 1 million autos per year in the

United States.105 However, foreign firms locating production facilities in the United States

do not create as many indirect jobs as do American firms. Japanese automakers and television

manufacturers buy more of their parts from

overseas than do American manufacturers. For

example, the New United Motor Manufacturing, Inc. (NUMMI) joint venture between General Motors and Toyota, producing Chevrolet

Novas in Fremont, California, will buy 70 percent of its parts—including major subassemblies such as engines and transmissions—from

Japan, and only 30 percent from the United

States. 106 Typically, the proportion of domestically produced parts is much higher for

American firms.107

The Effect of Protection on Employment: Costs

Although protection can be effective in preserving jobs for a time and allowing orderly

employment declines, the costs can be high.

.——

IMTOta] employment in motor vehicles and equipment Was

753,700 in 1983, of which 723,000 were employed by Ford, General Motors, Chrysler, AMC, and Volkswagen. Sources: U.S. Department of Commerce, The U.S. Automobile Industry, op. cit.,

p. 19; and U.S. Department of Labor, Bureau of Labor Statistics, Supplement to Employment and Earnings, June 1985.

106 Warren Brown, “Chrysler, Mitsubishi Set Joint U.S. Venture,” The Washington Post, Oct. 7, 1985, p. A14.

l~Danie] J. Schroeter, “Joint Venture Unwrapped, Nova Debuts

at Detroit’s St. Regis, ” Automotive Business, June 17, 1985, p. 1.

IOTJOhn H@rnann, Automotive Industry Analyst, U.S. Department of Commerce, International Trade Administration, persona] communication, Oct. 8, 1985.

Protection raises the price of the protected

product to consumers, either by adding a tariff to the price consumers pay or by limiting

the number of items imported. When import

prices go up, domestic manufacturers also increase their prices. Estimates of the increased

cost to consumers, together with estimates of

the numbers of jobs preserved, are the basis for

the often-quoted figures on “cost per job saved.”

The figures are usually quite high; for example, the International Trade Commission (ITC)

estimates that, from 1981 to 1984, the VRA increased the prices of domestic and imported

automobiles by $15.7 billion (about $800 per

car), and saved 44,100 jobs in the auto industry. The numbers of jobs saved in supplier industries was not estimated because, according

to ITC, “it is believed that estimates of these

additional employment effects would not be

particularly useful.’’108 Dividing the ITC estimates of costs and jobs saved gives a figure of

nearly $357,000 per job over 3 years. Another

estimate, by Robert W. Crandall of the Brookings Institution, concludes that the VRA cost

American consumers about $160,000 per job

in 1983.109 The International Trade Administration estimated that the VRA cost consumers

about $10.1 billion between April 1983 and

March 1985. Costs per job saved over these 2

years were, therefore, about $164,000 to $96,000

per job, depending on whether indirect job

gains are counted.110

These estimates cannot be taken at face

value. First, only one—that of ITA—counts the

number of jobs preserved in supplier industries, and none of the estimates includes tertiary effects. In that sense, all the estimates

overstate the costs per job saved. In some of

the estimates (especially that of ITC) the assumptions on growth of the Japanese share of

—.. .- —-. .—

KWJ.S. International Trade Commission, “A Review of Recent

Developments in the U.S. Automobile Industry Including an

Assessment of the Japanese Voluntary Restraint Agreements, ”

USITC Publication 1648, February 1985, p. 41. No explanation

is given for the uselessness of estimates of related employment.

IOQRobert W. Cranda]l, “Import Quotas and the Automobile

Industry: The Costs of Protectionism, ” The Brookings Review,

vol. 2, No. 4, Summer 1984, p, 16. Crandall estimated that the

VRA had saved 26,200 jobs, and cost consumers $4.3 billion,

not including “additional losses in consumer welfare. ”

I1oITA estimated that both the consumer Cost of the VRA and

the jobs protected were modest until early 1983.
404 ● Technology and Structural Unemployment: Reemploying Displaced Adults

the U.S. auto market are so conservative as to

be unrealistic. Moreover, none of the estimates

includes any analysis of possible long-term effects of protection on competitiveness. If the

long-term effect of the VRA turns out to be improved productivity, product design, and product performance in the U.S. auto industry, the

costs of protection may turn out to be temporary, and may be paid back in the years to

come. Over the short run, however, it is clear

that the VRA cost tens of thousands of dollars

per year per job saved.

Protection can give industries the time they

need to improve their competitiveness. Temporary protection, for example, gave the automobile industry a “breathing space” to improve

productivity and product design and performance; eventually, these changes may help to

preserve more jobs than if the pressure from

imports in the late 1970s had continued into

the early 1980s. The story is similar in textiles.

The industry has invested heavily in new plant

and equipment under the Multifiber Arrangement, raising productivity and competitiveness

particularly in manmade fibers. However, protection does blunt the competition, and may

thereby remove some of the incentive for beleaguered industries to take the steps needed

to compete.

Another of the employment effects of protection that is often overlooked is the shift of competition from protected to unprotected products or industries. For example, some argue

that protection of U.S. natural fiber markets resulted in foreigners shifting more rapidly to

production of manmade fibers. The VRA in automobiles caused Japanese producers to fill

their quotas with more expensive, profitable

cars which competed in the luxury-car market

previously dominated by American and European cars. Bilateral agreements limiting exports of one country can also encourage the

formation of industries in countries without

quota agreements. Early quota arrangements

in textiles and apparel applied only to Japan,

leaving the door open to other countries wishing to export cotton to the United States; Hong

Kong was the first to do so. In the end, the result was pressure for more protectionist arrangements with other countries; the single

country agreement did not effectively limit imports. 111

Employment can be adversely affected in industries other than those protected, as foreign

countries retaliate. For example, threats of protection against natural fibers from China have

evoked threats of countermeasures to limit Chinese purchases of American agricultural products. Since agricultural products figure heavily in U.S. exports, retaliatory protection affects

agriculture disproportionately.

Increasing pressure for protection, as more

industries and countries respond to existing arrangements, threatens more than just a few

workers or industries. If one country limits its

market to foreign producers, exporting countries usually seek new markets, putting unprotected markets at greater risk. The wider protection spreads, the greater the likelihood that

economies which depend on trade will slump,

with serious repercussions for overall industrial performance and employment.

Even if long-term effects are included, and

all primary, secondary, and tertiary jobs preserved by protection are counted, protection

is expensive. It costs consumers money, and

may lead to more pressure for protection. The

alternatives, when industrial decline and job

loss occur as a result of international competition, are for the economy to create enough

new jobs to provide for displaced workers as

well as other job seekers, and for government

programs to provide adjustment assistance to

displaced workers having trouble finding jobs

comparable to those they have lost.

The first alternative—creating enough new

jobs—has proven an unattainable goal for most

of the last four decades throughout the industrialized world. Government policies to stimulate job creation cover a broad spectrum.

They include macroeconomic policies aimed

at stimulating growth of the whole economy,

trade policies which protect domestic markets

or attempt to open foreign markets to domes1llAggarwal and Haggard, op. cit., p. 265.
Ch. 9—The Effects of International Trade on U.S. Skills and Employment • 405

tically produced goods, subsidies to industries

or workers to keep existing workers employed,

and jobs programs for people with particular

disadvantages in the labor market. Some countries employ policies that are termed job creation policies that are really more policies designed to reduce the number of people counted

as unemployed, While most industrial countries have tried policies such as these to stimulate employment, no country can legitimately

claim to have succeeded, Unemployment rates

have been rising throughout the world; one

symptom of the depth of the current problem

is that the United States, with its historically

high unemployment rates of 7 to 7.5 percent

in prosperous 1984 and 1985, is viewed by

many European analysts as a place where answers to high unemployment problems are to

be found. This comes at a time when U.S. policymakers have begun, again, to grapple with

the problem of high unemployment rates.

Adjustment assistance is often viewed as

equitable compensation to workers who bear

a disproportionate share of the burden of policies to promote free trade. The United States

has two adjustment assistance programs: Trade

Adjustment Assistance, for workers who have

lost jobs due to trade; and Title III of the Job

Training Partnership Act, for all displaced

workers. These programs, the services they

provide, and their performance, are the subject of chapters 5 and 6.
Chapter 10

Displaced Homemakers
Page

Overview and Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. .. ... ... ... ..409

Definition and Dimensions of Homemaker Displacement . ..............409

Characteristics of Displaced Homemakers . . . . . . . . ...................,409

Displaced Homemaker Programs . . . . . . . . . . . . . . . . ...............,...410

Design and Performance of Displaced Homemaker Projects .. .. .. ...41l

Population and Needs of Displaced Homemakers . ......................411

Definition and Dimensions of Homemaker Displacement . ..............411

Characteristics of Displaced Homemakers. . . . . .......................414

National Displaced Homemaker Programs . .......................,....417

Levels of Service and Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..,..,418

Sources offending . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....419

JTPA and Displaced Homemaker Projects, . ......................,,..421

The Perkins Act and Displaced Homemakers ..,. . ....................425

Design and Performance of Displaced Homemaker Projects . ............429

Characteristics of Displaced Homemaker Projects . ..............,.....430

Services Offered and Their Effectiveness . ...............,.,.,.......432

Table

1o-1 .

10-2 .

10-3 .

List of Tables

No. Page

Characteristics of Displaced Homemakers, Selected Years., . ......414

Principal Sources offending for Displaced Homemaker Programs,

1980 and 1984 . . . . . . . . . . . . . . . . . . . . . . . . . . . ......................419

Funding for Displaced Homemaker Programs, by Source, 1984 .. ....421

List of Figures

Figure No. Page

1o-1.

10-2.

10-3.

10-4.

10-5.

10-6.

10-7.

Distribution of Family Income of Displaced Homemakers,

by Family Size, 1983 . . . . . . . . . . . . . . . . . . .........................415

Sources of Displaced Homemakers’ Personal Income, 1975..........416

Family Size of Displaced Homemakers, 1983 . .....................416

Number of Children at Home, Displaced Homemaker Families,

1983 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..417

Reported Number of Displaced Homemaker Projects in the

United States, Selected Years.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....418

Services to Displaced Homemakers Under JTPA Contracts,

Dollar Amount of Contract and Women Served, April 1985 . .......423

Services to Displaced Homemakers Under JTPA Contracts,

Numbers Served, April 1985 . . . . . . . . . . . . . . . . . ................423
Ch. 10—Displaced Homemakers ● 411

not specifically require regular reports on

services provided to single parents and homemakers, and the U.S. Department of Education has no such requirement. State officials

are beginning to develop a consistent, national system of data collection for characteristics of clients served in the women’s programs, services provided, outcomes, and

results one year later. If successful, this effort will fill a long-standing need for information about displaced homemakers and the

programs designed to serve them.

Design and Performance of Displaced

Homemaker Projects

Although no systematic evaluations of displaced homemakers programs have ever been

done, a few findings can be drawn from the

experience of women who have received the

services and from experienced project directors. From OTA-sponsored interviews with 20

directors of displaced homemaker projects and

from a few other sources, the following observations emerge:

● Women seeking services from displaced

homemaker programs are a diverse group,

in age, education, and financial background.

Different kinds of services are appropriate to meet the needs of different types of

clients, especially rural women, long-time

recipients of welfare, minorities, widows,

and older women. The groups least served

at present are minority and rural women.

For all groups of displaced homemakers,

a comprehensive program of services is desirable, particularly one which combines

personal counseling with job readiness

and skills training. A considerable number of displaced homemakers need remedial or brush-up courses in reading and

math to qualify for training or good jobs.

Many displaced homemakers cannot take

advantage of the training and education

open to them because of lack of income

support. Most are not eligible for unemployment insurance, and few have income

from other family members. Voc Ed funds

can be used to provide child care and other

support services, and training stipends in

cases of acute economic need, but usually

have not been used in this way in the past,

JTPA funds can also be used for supportive

services and some forms of income support, but little is currently being spent for

these services.

POPULATION AND NEEDS OF DISPLACED HOMEMAKERS

Displaced homemakers, like workers displaced

from factory and office, have lost their accustomed source of income, and face painful readjustment and employment problems. They

are women whose main job has been home and

family, but must now support themselves because of divorce, separation, widowhood, disability or prolonged unemployment of their

spouse, or loss of eligibility for public assistance. 1 Although definitions of displaced homemakers differ from one State, one law, and one

program to the next, and estimates of their

numbers vary accordingly, it is clear that this

group of displaced workers is large and growIAlthough a few men may fit the definition of displaced homemaker, the analysis in this chapter is confined to women.

ing, Estimates of the number of displaced homemakers range from over 2 million to 4 million.

Definition and Dimensions of

Homemaker Displacement

The usual image of the displaced homemaker

is a woman of middle age who has spent most

of her adult life caring for her home and family full time; who has little experience with paid

work, certainly none recently; and who has

been thrust on her own either by widowhood

or by divorce, in an age when divorce after 20

or 30 years of marriage has become socially

acceptable. The term “displaced homemaker, ”

coined by Sommers in 1975, implied forcible
412 ● Technology and Structural Unemployment: Reemploying Displaced Adults

exile of a full-time homemaker into a labor market for which she was ill-prepared. Too young

for Social Security, ineligible for welfare or unwilling to ask for it, with too little work experience to receive unemployment insurance, these

women were seen as falling through the cracks

of government social service and income support systems.2

This picture, while not inaccurate, is incomplete. Many of the definitions of displaced homemakers appearing in State or Federal laws are

more broadly inclusive, especially in adding

women as young as 22 years old; women in

poverty (not necessarily ever married) who are

about to lose public assistance as their main

source of income, as their last child reaches

18 years of age; and women whose husbands

are too disabled to work or have been unemployed for 6 months or more. Some definitions

are quite restrictive about work experience outside the home, ruling out women who have

worked in paid jobs in the past 5 years. Others

limit the definition to women over 35 or 40

years old.

The figure most often cited for numbers of

displaced homemakers is 4.1 million, an estimate developed by the Women’s Bureau of the

U.S. Department of Labor in 1976. Based on

the Survey of Income and Education of 1975

(SIE), the estimate counted women 22 to 64

years old who were widowed, divorced, separated, or married with a disabled spouse; or

who received Aid to Families with Dependent

Children and whose youngest child was 16 or

17 years old; and who had worked less than

500 hours the previous year or had not worked

at all for 5 years or more. The Comprehensive

Employment and Training Act (CETA) Amendments of 1978, which named displaced homemakers as a targeted group eligible for services,

used a similar definition, but changed the employment proviso, requiring that the displaced

homemaker must be unemployed or underemployed and experiencing difficulty in obtaining or upgrading employment.

ZLaurie Shields, Displaced Homemakers: Organizing for a New

Life (New York: McGraw-Hill, 1981).

For this chapter, OTA has used a somewhat

different definition of displaced homemakers

and a database—the Current Population Survey (CRS)—which permits comparisons from

one year to the next.3 The Survey of Income

and Education, though rich in detail, was a

one-time effort, not repeated since 1975. By

using the CPS, OTA was able to provide the

first national estimates of the displaced homemaker population for more than 1 year. Partly

because of differences in definition, and partly

because of unexplained differences between

the CPS and the SIE databases, OTA’s multiyear estimates of the displaced homemaker

population— rising from 1.7 million in 1975 to

2.2 million in 1983—must be regarded as conservative.

Under the definiton used here, displaced

homemakers are women who:

1. are between the ages of 35 and 64 and

● are divorced, separated, or widowed; or

● are married but their husband is absent,

seriously disabled, or long-term unemployed; or

• receive income from Aid to Families

with Dependent Children (AFDC), Social Security, or child support, but expect to lose it because the youngest child

is 17 to 19 years old; and

2. have had serious employment problems.

This definition distinguishes between former

homemakers who encounter real difficulty in

finding work, as they enter or reenter the job

market, from those who do not. Even wives

who have been working may find it very hard

to make the transition from secondary to primary or sole wage earner. Often a wife’s income is relatively meager; in the late 1970s the

average working wife contributed about onequarter of the total family income. For the pursThe definition was provided to OTA in a report prepared by

the Urban Institute, as a basis for estimates of numbers of displaced homemakers. See Carolyn Taylor O’Brien and Demetra

Smith Nightingale, Programs for Displaced Homemakers in the

1980s, report to the Office of Technology Assessment (Washington, DC: The Urban Institute, 1984). Much of the material

here is drawn from the report. Estimates in the report are based

on data in the March Current Population Survey (CPS) of 1976,

1980, 1983, and 1984. The CPS is a monthly survey conducted

by the Census Bureau of a sample of 60,000 households.
Ch. 10—Displaced Homemakers ● 413

pose of defining displaced homemakers, indications of difficulty in finding work are current

unemployment plus having been unemployed

for at least 26 weeks of the previous year or

out of the labor force; working part time when

a full-time job is preferred; receiving pay below the minimum wage; or dropping out of the

labor force because of discouragement about

the prospects of finding a job.

The definition rejects the criterion that a

woman be totally out of the labor force for a

number of years. Most women have some work

experience, particularly once their youngest

child enters school. A woman who works for

a few weeks in the Christmas rush or part time

during school hours to boost the family income

may still be at a loss if she has to provide full

support for herself and her family. To exclude

women with any recent work experience from

the definition would leave out the majority of

former homemakers, especially women of lower

and middle income levels, who are most likely

to have combined some paid work with homemaking. Also included are women who must

seek a job because their husbands are unable

to work—either the husband did not work at

all in the previous year, mainly because of illness or disability, or he was unemployed (looking for a job but could not find one) for at least

26 weeks out of the previous year.

In this definition, the term “displaced” is reserved for women between 35 and 64, on the

argument that both younger and older women

are likely to have more options and resources

than those of middle years. Women over 64 are

generally eligible for some form of Social Security or pension. Younger women, with recent

training or work experience, are often more

employable; if they have young children, they

may qualify for public assistance; and they are

more likely to remarry. On the other hand, it

may be argued that younger women with young

children face even more difficult employment

and income problems than displaced homemakers of middle years. Many displaced homemaker programs do in fact serve women younger

than 35, and many others do not inquire too

stringently into the work history of former

homemakers seeking help in finding a job. Definitions of displaced homemakers constructed

to fit an existing database, and used for the purpose of estimating numbers and characteristics of the displaced homemaker population,

may be different, and perhaps less flexible,

than definitions used by service providers.

On the basis of the definition outlined above,

there were 1.7 million displaced homemakers

in 1975, 1.9 million in 1979, 2.3 million in 1982,

and 2.2 million in 1983 (the most recent year

for which figures were available when this report was written) (see table 10-1). It is quite

likely that these numbers, though large, are

understated. Another estimate for 1975, using

virtually the same definition, but drawn from

the Survey of Income and Education, produced

a figure of 2.2 million displaced homemakers;

this compares with the figure of 1.7 million for

1975 presented here.4 Also, the definition used

here excludes women younger than 35, an arguable point. Even so, the 1983 figure of 2.2 million represents about 6 percent of all women

in the age group for that year. The rise in numbers of displaced homemakers is striking–a 28-

percent increase from 1975 to 1983. At the

same time, the population of all U, S. women in

the age group rose only 11 percent.5

Comparisons with other groups of displaced

or unemployed workers shed some light on the

significance of the displaced homemaker problem. For example, the number of mainstream

workers displaced from paid jobs was probably

about 3 million in 1983. Not all of these workers were displaced in the sense of having serious difficulty in getting new jobs.6 In the same

year, displaced homemakers numbered at least

QBoth estimates were prepared by the Urban Institute, See Jean

E, Vanski, Demetra Smith Nightingale, and Carolyn Taylor

O’Brien, Employment Development Needs of Displaced Homemakers (Washington DC: The Urban Institute, 1983); and O’Brien

and Nightingale, op. cit.

sThis includes civilian women outside of institutions.

6The number of displaced workers eligible for JTPA Title 111

services in 1984-85 is uncounted and uncertain, but an estimate

may be based on numbers in years when a survey was done.

In the 5 years 1979-83, 11.5 adult workers lost their jobs due to

plant closings or relocations, abolition of shifts or positions, or

slack work. Nearly 3.3 million of the 11.5 million lost jobs in

1983, It is likely that most of these workers met the definition

of eligibility in Title 111. There is little evidence that the pace

of displacement slowed markedly in 1984-85. See chs. 3 and 4

for details.
414 . Technology and Structural Unemployment: Reemploying Displaced Adults

TabIe10-1.—Characteristics of Displaced Homemakers, Selected Years (numbers and percentages)

Numbers in thousands Percentages

1975 1979 1982 1983 1975 1979 1982 1983

Marital status:

Married, disabled or

unemployed spouse . . . . . . . .

Divorced/separated/spouse

absent .,..... . . . . . . . . . . . . .

Widowed . . . . . . . . . . . . . . . . . . .

Never married . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . .

Race:

White . . . . . . . . . . . . . . . . . . . . . .

Black . . . . . . . . . . . . . . . . . . . . . . .

Other . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . .

Age:

35-44 . . . . . . . . . . . . . . . . . . . . . . .

45-54 . . . . . . . . . . . . . . . . . . . . . . .

55-64 . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . .

Family income:a

Less than $l00,000/yr . . . . . . . . .

$10,001-$20,000/yr. . . . . . . . . . . .

$20,001-$30,000/yr. . . . . . . . . . . .

More than $30,001/yr . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . .

641.0

653.0

438.4

N/A

1,311.0

392.1

29.2

—

504.5

615.2

612.6

—

734.6

595.0

239.8

163.0 —

1,732.2

739.1

769.2

409.1

3.5

—

1,494.5

385.6

40.5

—

619.7

674.9

626.2

—

755.3

600.2

303.0

262.3

—

1,920.5

911.3

978.1

438.5

11.1

—

1,811.5

453.2

74.1

—

907.8

746,1

685.1

—

1,055.6

698.3

314.4

270.7

—

2,338.6

769.9

1,005.6

433.0

13.4 —

1,750.3

409.6

61.8 —

860.8

701.3

659.8 —

1,033.7

605.6

343.1

239.5 —

2,221.6

37.0

37.7

25.3

N/A

100.0

75.7

22.6

1.7

100.0

29.1

35.5

34.4

100.0

42.4

34.3

13.8

9.4

100.0

38.5

40.1

21.3

0.2

100.0

77.8

20.1

2.1

100,0

32.3

35.1

32.6

100.0

39.3

31.3

15.8

13.7

100.0

39.0

41.8

18.8

0.5

100.0

77.5

19.4

3.2

100.0

38.8

31.9

29.3

100.0

45.1

29.9

13.4

11.6

100.0

34.7

45.3

19.5

0.6

100.0

78.8

18.4

2.8

100.0

38.7

31.6

29.7

100.0

46.5

27.3

15.4

10.8

100.0

N/A—Too few in this category to reestimated from the Current /Jopu/afion Surveys.

a1982 constant dollara.

SOURCE: Carolyn Taylor O’Brlen and Demetra Smith Nightingale, Programs for DLsp/aced Hornernakers lnthe1980s, report to the Office of Technology Assessment

(Washington, DC:The Urban lnstitute,1984~ based on Currerrt Population Surveys, 1976,1980,1983, 1984.

2.2 million, according to the conservative estimates developed for OTA based on CPS yearly

surveys. The average number of unemployed

American workers in 1983 was 10.7 million.

From 1984 through mid-1985, the number of

unemployed workers hovered around 8.2 to 8.5

million.

Characteristics of Displaced Homemakers

Of the estimated 2.2 million displaced homemakers in 1983, over 1 million were divorced,

separated, or had an absent spouse (see table

l0-1). Rapid growth (54 percent) in this group

accounted for much of the increase in numbers

of displaced homemakers from 1975 to 1983.

In 1982, at the depth of the recession, there was

a bulge in the category of married women with

disabled or long-term unemployed husbands;

but with the beginning of recovery in 1983, the

bulge flattened out. Equally striking was the increase (71 percent) in numbers of women at the

younger end of the range, those between 35 and

44 years old. Black women are overrepresented;

18 percent of the displaced homemakers in

1983 were black, compared to 12 percent of all

women in the age group. Finally, many of these

women were close to poverty. In 1982 and

1983, nearly half of them had family incomes

below $10,000 year.

lncome7

Most of the evidence indicates that displaced

homemakers, like other female heads of households, are disproportionately poor. In 1982,

their mean family income was reported to be

$15,000, compared to $25,000 for all families.

However, this figure may well overstate the actual income status of displaced homemakers.

The same is true of the data in table 10-1 which

show the distribution of family income among

groups of displaced homemakers. Reportedly,

25 to 29 percent of these women received family incomes of $20,000 or more per year between 1979 and 1983. This percentage is sur71ncome figures in this section, unless otherwise noted, are

in constant 1982 dollars.
Ch. 10—Displaced Homemakers ● 415

prisingly large considering that, by definition,

these displaced homemakers were unemployed

or underemployed.

One possible explanation is that the income

figures are out of date—that they represent

former, not present, family income. In various

years, some 54 to 58 percent of the women with

incomes in the two upper income brackets

($20,000 to $30,000 and over $30,000) were in

the category of married with husbands either

physically disabled or persistently unemployed.

The reported family income is based on the

previous 12 months, and therefore could include earnings from a period when the husband was still employed.

An additional factor (probably less important) is that some of the higher incomes reflect

alimony or child support payments. Earlier

studies show that quite a small minority of displaced homemakers (about 15 percent) receive

alimony or child support.8 Indeed, of all divorced women in 1975, about 14 percent were

awarded alimony and 47 percent child support

—but fewer than half who were entitled to support ever received regular payments.9 Yet, for

the minority of women who receive them, child

support payments may sometimes be an important source of family income—at least for a

time. Analysis of the CPS data shows that about

half the divorced and separated displaced

homemakers in the upper two income brackets

who were receiving some child support at the

time of the survey were likely to lose that income soon because their youngest child was

approaching 18 years of age. The two factors

described above probably account for a good

deal of the higher-than-expected incomes of

about one-quarter of displaced homemakers;

limitations in the data and analysis of the data

make it difficult to be more precise.

Altogether, it is likely that the reported

figures understate the financial adversity experienced by displaced homemakers. Even so,

the figures indicate that the majority face seriaVanski, Nightingale, and O’Brien, op. cit.

‘Carol Jones, Nancy Gordon, and 1sabel Sawhill, “Child Support Payments in the United States, ” Working Paper 992-03

(Washington DC: The Urban Institute, 1976),

ous problems. In 1983, at least 30 percent of

displaced homemakers’ families were below

the poverty level (then at about $10,000 a year

for a family of four). This compares to a national figure of 15.2 percent below the poverty

level in 1983.10 Figure 10-1 illustrates the distribution of displaced homemaker family income, by family size.

Another indicator of the economic situation

of displaced homemakers is personal income.

An analysis of 1975 data from the Survey of

Income and Education found that the average

personal income of displaced homemakers in

that year was $4,317 (current dollars), which

was $155 less than a full-time job at the minimum wage would have paid.11 Employed women

of the same age and marital status had an aver-

—.—IOThirty percent of displaced homemaker families of four or

more had incomes below the poverty level, which equaled about

$10,000 (1982 dollars) in 1983. It is likely that smaller families

were below the poverty level in at least the same proportion,

although displaced homemaker incomes were not broken out

below the $10,000 level for the OTA analysis. (The poverty level

in 1982 dollars was about $5,000 for a one-person family, and

about $7,5oo for a three-person family.)

IIVanski, Nightingale, and O’Brien, op. cit. The Current population Surveys, on which the present analysis is based, show

family income. The 1976 Survey of Income and Education, on

which the earlier analysis was based, showed personal income.

In 1982 dollars (the basis for most income figures in this discussion), the average personal income for displaced homemakers in 1975 was about $7,73o. Personal income as defined in the

earlier analysis included earnings, public assistance, Social Security benefits for minor children of widows, alimony and child

suu~ort, Surmlemental Securitv Income [SS1) and veterans’ ben- . . . .

efits, interest and dividends, and pensions.

Figure 10-1 .—Distribution of Family Income of

Displaced Homemakers, by Family Size, 1983

100

90

80

Under $10,000 $10,000-

$20,000 ,

Family income

SOURCE: Demetra Smith Nightingale and Carolyn Taylor O’Brien, .Estlrnates of

the Displaced Homemaker Popu/afIorr, report to the Off Ice of

Technology Assessment (Washington, DC: The Urban Institute,

1985).
416 ● Technology and Structural Unemployment: Reemploying Displaced Adults

age personal income of $8,749 in 1975. The

most important source of income for displaced

homemakers is their own earnings, as shown

in the same study. Seventy percent of displaced

homemakers earned money in 1975, and over

half of their personal income came from earnings.l2 Figure 10-2 shows the source of displaced homemakers’ personal income at that

time, based on data in the Survey of Income

and Education.

Some sources of income varied quite substantially among groups. For example, about

one-third of divorced or separated white women

reported receiving some alimony or child support payments in 1975, with the amount averaging about $3,000 per year (current dollars)

per recipient. Only 16 percent of divorced

black women, and 9 percent of separated black

women, got alimony or child support; the average amount they received was about $1,300.

The displaced homemakers most dependent on

public assistance were divorced and separated,

with 24 to 31 percent of white women in these

groups receiving welfare payments, and 40 to

56 percent of divorced and separated black

women. For the group of displaced homemakers as a whole, alimony and child support accounted for about 9 percent of personal income; public assistance provided about the

same share.

]Zlbid.

Figure 10-2.—Sources of Displaced Homemakers’

Personal Income, 1975

SSl/Veterans benefits 7.1 0/0

Public assistance 9.50/0 A

Retirement 3.5°/0

Alimony/child support 9

Interest/dividends 7.6°/0

SOURCE: Jean E. Vanski, Demetra Smith Nightingale, and Carolyn Taylor

O’Brien, Employment Development Needs of Displaced Home

makers, report to the U.S. Department of Health and Human

Services, Administration on Aging (Washington, DC: The Urban

Institute, 1983).

Family Size and Children at Home

Families of displaced homemakers in 1983

were typically small (families are defined as related individuals living in the same household).

About 22 percent were in families of four or

more people; approximately the same number

were the sole family member in their household (figure 10-3). As figure 10-1 indicates, the

smallest families were generally the poorest.

About 70 percent of the one-person families

had incomes below $10,000 a year (1982 dollars). However, 30 percent of the larger families (four people or more) had family incomes

below the $10,000 level.

All of the 2.2 million displaced homemakers

in 1983 were, by definition, at least 35 years

old, and 1.36 million were over 45. Even so,

a majority (61 percent) had children at home.

Figure 10-4 shows the distribution of numbers

of children living at home with a displaced

homemaker mother. Typically, the children in

the families were of school age. Only 3 percent

of displaced homemakers (as defined here) had

children under 6; for 43 percent, the youngest

child at home was 6 to 18 years old, and for

15 percent the youngest was over 18.

Employment

By definition, all of the displaced homemakers were having trouble finding satisfactory

jobs. The Urban Institute study of displaced

Figure 10-3.— Family Size of

Displaced Homemakers, 1983

30

20

10

0

One Two Three Four Five or more

Family size

SOURCE: Demetra Smith Nlghtingaie and Carolyn Taylor O’Brien, Est/mates of

the Displaced Homemakers Population, report to the Office of

Technology Assessment (Washington, DC: The Urban Institute,

1985).
Ch. 10—Displaced Homemakers . 417

Figure 10-4.— Number of Children at Home,

Displaced Homemaker Families, 1983

No

children child

Number of children at home

Two Three Four

children children or more

children

SOURCE: Demetra Smith Nlghttngale and Carolyn Taylor O’Brien, Es?/mates of

the L1/sp/aced Homemakers Popu/at/on, report to the Off Ice of

Technology Assessment (?Vashlngton, DC: The Urban institute,

1985).

homemakers as of 1975 was able to provide

these details about employment at that time:

over half were underemployed, most of them

working full time but below the minimum

wage, and the rest working part time although

they wanted a full-time job. Twenty percent

had been out of work at least half the preceding year, or out of the labor force because of

discouragement. Fifteen percent were currently out of the labor force but intended to

look for work within a year, and another 15

percent were about to lose AFDC or other income related to dependent children.

The jobs these displaced homemakers held

(currently or recently) were by and large poorly

paid. Forty-two percent were service workers,

in such jobs as waitress, hotel maid, or nursing home aide. By way of comparison, only 22

percent of all female workers were in service

worker jobs in 1975. Displaced homemakers

were far less likely to have clerical jobs than

other women workers—17 percent compared

with 35 percent. At the middle and top end of

the job scale, 21 percent of all women workers had professional, technical, and administrative jobs in 1975; only 13 percent of the displaced homemakers were in these occupations.

NATIONAL DISPLACED HOMEMAKER PROGRAMS

Government programs to assist displaced

homemakers are no more than a decade old.

California’s 1975 law established the Nation’s

first program designed specifically to serve

women who had lost their main source of income due to a husband’s death, desertion, or

divorce or to loss of eligibility for public assistance, and who consequently had to find paid

work to support themselves and their families.

The first Federal legislation to assist displaced homemakers was the 1976 amendments

to the Vocational Education Act, which directed that States could use Voc Ed grants provided by the Federal Government to meet the

needs of displaced homemakers. Next, the 1978

amendments to CETA specifically named displaced homemakers as facing disadvantages in

entering the labor market, and made them a target group for employment and training. In

addition, for fiscal year 1980, Congress provided a special $5 million fund under CETA

for 47 demonstration projects serving displaced

homemakers .

JTPA, passed in 1982, weakened Federal assistance to displaced homemakers; it made

services to this group optional, instead of targeting them for special attention as CETA had

done. Two years later, however, in the Carl D,

Perkins Vocational Education Act of 1984,

Congress strongly increased Federal support

for displaced homemaker programs, The new

law authorized about $84 million in fiscal year

1985 for Voc Ed grants that are specifically designated for services to single parents and homemakers—including displaced homemakers—

and thus opened a large new source of Federal

funds to displaced homemaker programs. Yet

even with the increased Voc Ed funding, Federal support for employment and training services targeted directly to displaced homemakers

remains at a very modest level for a program

open to several million eligible people.
418 ● Technology and Structural Unemployment: Reemploying Displaced Adults

Meanwhile, by 1985, 24 States had enacted

their own laws in support of displaced homemakers, with 19 appropriating funds for programs to benefit them. Although information

about funding for displaced homemaker programs is incomplete, it appears that State support has grown over the past few years, and

in 1984 was the major source of money for

these programs.

Levels of Service and Funding

Exactly how many displaced homemaker

projects exist across the country—in community colleges, in vocational technical schools,

in community-based organizations such as

YWCAs, in city or State agencies, or in independent centers—is uncertain, but there appear

to be several hundred. The Displaced Homemakers Network, a national information exchange for the local centers, lists 425 such

centers, but this is not a complete count.13 It

appears that the number of projects is expanding modestly, after a sharp decline in 1981-82.

As figure 10-5 shows, displaced homemaker

projects multiplied between 1978 to 1980; the

number listed with the Displaced Homemakers Network rose from 50 to 407. With a drop

in CETA funding in 1981, projects listed with

the network also fell, to 337. By 1984, the number had once more risen.

The number of people served by the programs each year is likewise uncertain, but is

probably at least 100,000. Displaced homemaker centers replying to a 1984 survey by the Network reported that they serve anywhere from

15 to 3,800 clients per year, with an average

of 200 to 230 per program. According to the

survey, increasing numbers of women are seeking services. A large majority of respondents

said that both their funding and the number

of clients they serve had risen over the previous year.

lsThe 425 centers listed by the Network are those that replied

to a 1984 survey, which was sent to over 900 organizations on

the Network’s mailing list. OTA analyzed the survey results, Of

the projects that replied to the survey, 364 from 46 States and

the District of Columbia provided enough usable data that their

reports could be included in the analysis.

Figure 10-5.–Reported Number of Displaced

Homemaker Projects in the United States,

Selected Years

400

t

100 -

0

1978 1980 1981 1984

Year

SOURCE: Surveys conducted by the Displaced Homemakers Network,

Interviews with directors of 20 displaced

homemaker projects in the spring of 1984

painted a less favorable picture—one of expanding demands for services but no corresponding increase in funds.14 Sixteen of the directors said the number of clients they served

had grown steadily; four reported their client

load had remained relatively stable. Economic

conditions had something to do with the demand for services. For example, one project

director linked the rise in number of participants to layoffs in the steel and auto industries,

which pushed homemakers into the breadwinner role. Four directors noted that outreach efforts were related to the growth in demand for

services. Many displaced homemakers do not

know that they can be defined as such, much

less that there are programs designed to help

them. Publicity in the community about the

programs draws in these women.

As for funds, about equal numbers of the 20

project directors said their budgets had increased, decreased, or remained stable; one

had been on a roller coaster, with budgets fluctuating between $300,000 and $40,000 over the

past few years. Nearly all the project directors

said there were displaced homemakers in their

communities who were not being served, mostly

because funds and staff were lacking. Two directors reported that they have continued to

—- ~he interviews Were conducted by the Urban Institute under contract to OTA. Results are reported in full in O’Brien and

Nightingale, op. cit.
Ch. 10—Displaced Homemakers • 419

serve more clients each year as funding was

cut, but are concerned about the quality of service as staff and resources are stretched thin.

Others turned away applicants, or put them on

a waiting list.

The typical displaced homemaker center

runs on very modest resources. Half of the 307

centers which reported their levels of funding

to the Network survey said they operated on

$41,000 per year or less, and two-thirds on

$62,000 or less. Only one-sixth of the projects

reported receiving as much as $100,000 per

year. Almost certainly, these figures are understated. Many of the projects reported only cash

funding, omitting in-kind contributions from

community colleges or vocational technical institutes where they were housed. Nonetheless,

on the whole, the survey supports the conclusion that these are lean programs, staffed by

one or two full-time and one or two part-time

people, with a few volunteers.

Sources of Funding

From the incomplete information available

about displaced homemaker programs, it appears that Federal funds were their mainstay

a few years ago, that these funds declined from

1981 to 1984, and that other sources—mainly

special State funds—have recently been modestly increasing. With the passage of the Perkins Act late in 1984, a substantial new source

of Federal funds became available for services

to displaced homemakers.

In 1980, CETA was the main source of Federal funds for displaced homemaker programs.

As shown in table 10-2, two-thirds of the displaced homemaker centers surveyed by the

Network in 1980 reported that CETA was a

provider of funds for them. About one-quarter

cited Voc Ed grants (these are generally made

up of two-thirds Federal money and one-third

State). Thirty-one percent named State funds.

In 1984 the funding situation was quite different. Only 16 percent of the centers reported

receiving funds from JTPA, CETA’s successor.

Special State funds were now cited by nearly

half the centers as a source of support, and Voc

Table 10-2.—Principal Sources of Funding for

Displaced Homemaker Programs, 1980 and 1984

Percent of programs reporting

funds from sourcea

Funding source 1980 1984

Vocational education . . . . . 260/o 43%b

CETA . . . . . . . . . . . . . . . . . . . 66 N/A

JTPA . . . . . . . . . . . . . . . . . . . N/A 16

Special State funds. . . . . . . 31 48b

Private c . . . . . . . . . . . . . . . . . N/A 37

Foundations and

corporations . . . . . . . . . 10 N/A

Other public funds . . . . . . . 11 N/A

College . . . . . . . . . . . . . . . . . N/A 8

Other . . . . . . . . . . . . . . . . . . . N/A 25

N/A—Not available or not applicable.

apercentages add to more than 100 because most programs report more than

one source of funding.

bAbout 12 t. 15 programs repofled what were probably VOC Ed funds as ‘tate

funds If these apparent misstatements were corrected, the percentages would

be more even—State funds 44 percent and vocational education 46 percent

C“Private” sources in 1984 included corporations, foundations, and charitable

organizations such as United Way

d“other” in lg84 included such sources as fees for services and informal fundraising activities such as bake sales

SOURCE: 1980 and 19& surveys by Displaced Homemakers Network, OTA analysis of 1984 survey.

Ed funds by more than 40 percent.15 Private

sources—foundations, corporations, and charitable organizations–had gained in importance, and were now mentioned by over onethird of respondents, compared with one-tenth

in 1980.

The actual amounts of funding from various

sources over the past 4 or 5 years are harder

to pin down. The Federal Government has

never tracked either CETA or JTPA funds to

their destination in local displaced homemaker centers, nor is there any information of this

kind available for Voc Ed funds after the 1981-

82 school year. From indirect evidence, it

seems safe to conclude that JTPA/CETA funding shrank absolutely as well as relatively from

1980 to 1984. In the first place, CETA was a

bigger program than JTPA. At CETA’s high

point in fiscal year 1979, appropriations were

$10.3 billion, and were still as great as $7.6 billion in 1981. By contrast, JTPA appropriations

151t 15 probable that special State funds were somewhat overreported as a source of funding and Voc Ed underreported; some

12 to 15 of the respondents recorded what were probably Voc

Ed funds as State-provided. If correction is made for this probable misstatement, it appears that the percentage of programs

receiving Voc Ed funding and special State funding are about

the same.
420 ● Technology and Structural Unemployment: Reemploying Displaced Adults

for 1985 were $3.8 billion. Furthermore, JTPA

does not target displaced homemakers as CETA

did. Nor did Congress ever add to the $5 million it provided for national demonstration displaced homemaker projects in 1980. Indeed,

only 15 of the 35 national demonstration projects operating in 1981 had obtained funds from

other sources (mostly CETA and Voc Ed) to

continue after the demonstration period. During 1981 there was also an apparent overall decline in the number of displaced homemaker

programs, from 407 to 337.

By 1984, Voc Ed grants were the main source

of Federal funds for displaced homemaker programs. This source also probably declined in

amount after the 1981-82 school year. Between

1979-80 and 1981-82 (the last year for which

data are available) the Federal share of Voc Ed

contributions to displaced homemaker projects

rose, from $3.1 to $4.4 million. Afterwards, in

all likelihood, it declined, since total Federal

Voc Ed grants (of which grants for displaced

homemaker services were a small part) were

cut by one-third from fiscal years 1981 to 1983.

The Perkins Act of 1984 represents an important change in direction. Its authorization

of as much as $84 million in one year for services to single parents or homemakers (including displaced homemakers) makes it likely that

Voc Ed grants will be a much larger source of

funding for displaced homemaker projects than

in the past. So far as is known, the Voc Ed

grants for services to this group never before

totaled more than $4.4 million per year. Although the target group for the Voc Ed grants

is now broader,16 it is expected that displaced

homemaker programs will be a major recipient. Moreover, the new law designates where

Federal contributions are to go, in a way not

done before. Previously, States were allowed

16 The drafters of the law used the te rm “homemakers” rather

than “displaced homemakers” to give more latitude to States

in providing services. Women who might foresee the necessity

to find work outside the home can be helped to start training

or a job search, rather than waiting till divorce, widowhood, or

some other factor forces them to do so. The inclusion of “single parents” in the target groups opens the program more emphatically to men, and removes any requirement of marriage

or dissolution of marriage, or of inexperience in the labor market. The effect is to open the program both to all working single

parents and to parents (mostly mothers) on welfare.

to use Federal Voc Ed grants for assistance to

displaced homemakers; some chose to give

virtually nothing to these programs. The new

law imposes mandatory set-asides for single

parents or homemakers. Although displaced

homemakers are not explicitly named in the

set-aside, they are included in the category.

Results from the Displaced Homemakers

Network’s 1984 survey suggest that at that time

no more than about one-quarter of the financial support for displaced homemaker programs was coming from the Federal Government. Table 10-3 shows the amounts and sources

of funding reported by 307 programs in the survey. (Comparisons with 1980 are not possible,

because information on amounts of funding by

source was not collected in the 1980 survey.)

Ten percent of the programs’ funding came

from JTPA, and another 19 percent from Voc

Ed (recall that about two-thirds of this is Federal money). “Other” sources of funding—e.g.,

fees or informal fund raisers such as bake

sales—were reported to provide as much money to these programs as JTPA. States emerged

as the biggest contributors, providing about

half of the projects’ funds.

These figures should not be taken too literally. A few JTPA-funded projects were unable

to distinguish services to displaced homemakers, so their records were not entered and their

possible contributions went unrecorded. Also,

JTPA was still less than 2 years old at the time

of the survey; more recent evidence (discussed

below) suggests that by 1985 a larger number

of projects—but still definitely a minority—

were able to take advantage of JTPA support.

Moreover, some of the funds credited to special State funds in the survey returns may actually be Federal block grant or revenue sharing money. On the other hand, States were not

specifically credited with their share of Voc Ed

money.

It is interesting to note that displaced homemaker projects which reported getting JTPA

funding were quite heavily concentrated in a

few States. Of the 57 projects reporting some

funds from JTPA, nearly half (28) were in just

four States: Ohio had nine, Kentucky eight,

Montana six, and Wisconsin five. This suggests
Ch. 10—Displaced Homemakers ● 421

Table 10-3.– Funding for Displaced Homemaker Programs, by Source, 1984

Amount of funds Percent Number of Average funds per Median funds per

Funding source in $1,000 of total programs reporting program in $1,000b program in $1,000

Vocational education . . . . . . . . $3,787.1 19% 133 $28.5

JTPA . . . . . . . . . . . . . . . . . . . . . .

—

2,025.3 10 45 44.0

Special State funds . . . . . . . . .

—

10,078.7 51 151 66.7

Private. . . . . . . . . . . . . . . . . . . . .

—

1,590.1 8 64 24.8

College . . . . . . . . . . . . . . . . . . . .

—

278.1 1 19 14.6

Other. . . . . . . . . . . . . . . . . . . . . .

—

2,149.6 11 72 29.9 —

Total . . . . . . . . . . . . . . . . . . . . $19,908.9 100 ”/0 307 $64.9 41.0

a“prograrns repofling” in this table Means those that repofled the amount of funds received, by source The sum of programs reporting IS mOre than the total number

of programs reporting, because most programs had more than one source of funds

b,, Average” IS the arithmetical mean.

C“Private” sources included corporations, foundations, and charitable organizations such as United Way

SOURCE: 1984 survey by Displaced Homemakers Network and OTA analysis of the survey

that someone in those States—possibly the

State JTPA director(s) of training projects at the

local level—took early advantage of the options

JTPA offers for supporting displaced homemaker services,

Overall, the survey results probably give a

reasonably accurate impression of where the

money came from in 1984. Information from

other sources was consistent with the survey

findings. Six of the twenty project directors interviewed by the Urban Institute said that they

currently had JTPA support, but of those, three

mentioned sharp reductions in level of funding in the changeover from CETA to JTPA. (At

least one director, however, foresaw an opportunity for increased funding through JTPA.) Six

project directors also specifically mentioned

that their Voc Ed funds had been shrinking, in

some cases drastically. (These comments were

made before the passage of the Perkins Act.)

In general, States seem to have taken over

a major role of provider for displaced homemaker programs. Although support has weakened in some States (e. g., California’s law expired in 1983 and was not renewed), it is rising

in others, In the 19 States providing funds as

of 1985, the typical contribution was something

between $100,000 per year to $500,000, although six States provided more than $500,000

and two over $1 million. The number of projects funded ranged from 3 to 25.17

Some States have found ingenious ways to

fund the programs. For example, Idaho, MonITD1sp]aced Homemakers Network, Displaced Homemaker

State Legislation (Washington DC: The Network, 1985),

tana, and North Dakota have inaugurated several new displaced homemaker centers with

funds derived from a tax on divorce filing fees.

Minnesota and Washington earmark money

from marriage licenses as well as from divorce

filing fees. New Jersey is considering setting

aside $1 million per year from the State lottery

for displaced homemakers. New York has a

funding scheme, begun in 1979, which allocates to displaced homemaker programs

money from a special account in the State’s unemployment insurance trust fund. (The account is made up of interest and penalties on

delinquent taxes due to the fund from employers.) Contributions from this account have

risen steadily, reaching $1,6 million in 1984-

85. The State supports 14 displaced homemaker centers from the account; three of them

opened in 1984,

Some of the States with unusual sources of

funding for displaced homemaker programs

are considering supplementing or perhaps replacing them with regular legislative appropriations, so as to have a more reliable level of

funding. In New York, for example, the special UI account that funds displaced homemaker projects is being depleted. Some States are

finding that divorce filing fees are a rather

small and irregular source of funds.

JTPA and Displaced Homemaker Projects

The two major sources of Federal support for

services to displaced homemakers are Voc Ed

grants and JTPA. Even before passage of the

Perkins Act, Voc Ed grants were the bigger
422 • Technology and Structural Unemployment: Reemploying Displaced Adults

contributor. With the major changes in the new

law, Voc Ed grants are likely to assume still

greater importance. For two reasons, however,

access to JTPA services remains important for

displaced homemakers. First, although there

is a good deal of flexibility in both the JTPA

and the Voc Ed programs, JTPA more strongly

emphasizes job search assistance and prompt

employment, while the primary focus of Voc

Ed is on training. For many displaced homemakers, getting a job as soon as possible is imperative. Projects that have placement as their

central goal may serve their needs best.

Second, despite the increased funding designated for services to single parents or homemakers under the Perkins Act, the amounts involved are still relatively small for a training,

education, and employment program open to

millions of people. No estimate has been made

so far of the number of single parents or homemakers eligible for Voc Ed programs which

were authorized at approximately $84 million

per year, and were funded at about $63 million for fiscal year 1985. The population of displaced homemakers is estimated at about 2 to

4 million; if the two-thirds of the fiscal year

1985 Voc Ed grants for single parents or homemakers were spread over this group alone, they

would amount only to about $10 to $21 per person per year. For comparative purposes, consider the JTPA Title III program for dislocated

workers, funded in fiscal year 1985 at $223 million and open to roughly 3 million workers. If

every eligible person took advantage of the Title III program, the funding would amount to

about $70 per capita. Another comparison may

be made with the general CETA programs

which served a population of about 16 million

disadvantaged workers in 1980 and were

funded at about $4 billion, or approximately

$250 per capita.18

The foregoing comparisons are only illustrative. It is unrealistic to suppose that every eligible person will be served in an employment

InThe funding of $4 billion for fiscal year 1980 refers only to

the general training and employment programs open to all eligible disadvantaged workers; it omits programs for special populations such as the Job Corps and the Native Americans, migrant

and seasonal farmworkers, and dislocated workers programs.

Total CETA funding in 1980 was $8.1 billion.

and training program. (In fact, about 1,377,000

disadvantaged workers participated in CETA’s

general employment and training programs in

1980, at a cost of approximately $2,900 per person. Under JTPA Title III, 132,200 workers participated during the 1984 program year, June

1984-July 1985, at a cost of $895 per worker.)

The point remains however, that despite the

remarkable new infusion of Federal funds for

services to displaced homemakers in the Perkins Act, funding for these programs is relatively thin.

By early 1985, it appeared that use of JTPA

funds to support services to displaced homemakers might be increasing, but was still not

a principal source of support. In the first

months of that year, the Displaced Homemakers Network queried the 425 projects listed in

its directory on their experiences with JTPA.

Replies came from 176 projects, of which 55

reported that they had JTPA-funded contracts

and 121 said they had not.19 This compares

with replies to the Network’s 1984 survey the

previous year, in which 355 projects reported

sources of funding and 57 said they got some

funds from JTPA.

The amount of JTPA money devoted to services for displaced homemakers in the 55 projects is uncertain, because only one-quarter of

the projects’ contracts served displaced homemakers exclusively; three-quarters served other

clients as well, About half the projects reported

they were serving small numbers of displaced

homemakers—l to 20 over the life of the contract, which was usually a year. Figure 10-6

shows the distribution of dollar amounts of

JTPA contracts in the 55 projects, and figure

10-7 the distribution of numbers of displaced

homemakers served.

These data indicate that the typical JTPAfunded project serving displaced homemakers

serves other clients as well. This works well

for some displaced homemakers but, as discussed later in this report, many of these

women benefit from services designed ex19 Displaced Homemakers Network, Services tO Displaced Homemakers Undei JTPA, Preliminary Figures 4/85 (Washington DC:

The Network, 1985).
Ch. 10—Displaced Homemakers ● 423

Figure 10-6.-Services to Displaced Homemakers

Under JTPA Contracts, Dollar Amount of Contract

and Women Served, April 1985

Dollar amount of contract

Over $20C,001

$) ”/o

Displaced

homemakers

only 2 7 %

$20,001-$60,000

30%.

Women served by contract

Group

including

displaced

homemakers

and others

73 ”/0

Note: Total may not equal 1000/. due to rounding.

SOURCE: Displaced Homemakers Network.

pressly to meet their needs. Unlike workers displaced from factories or offices, a great many

displaced homemakers lack recent work experience; often they are less confident, and less

attractive to employers, than someone with a

long stable history at a paid job. The sudden

loss of personal and financial support that displaced homemakers have undergone can also

compound the job readiness problem. They

may do better in special projects than in larger

mainstream employment and training projects,

or in general women’s programs. So far, most

JTPA-funded projects do not serve displaced

homemakers as a special group.

A serious eligibility issue arises in the use of

JTPA Title 11A funds for displaced homemakers. The Title 11A program is intended primarily to serve economically disadvantaged peoFigure 10-7.—Services to Displaced Homemakers

Under JTPA Contracts, Numbers Served, April 1985

60

50

40

30

20

10

0

1 –20 21 –50 51 – 100 101 – 150151 – 500

Number of women

SOURCE: Displaced Homemakers Network.

pie; the problem is how to serve displaced

homemakers who do not qualify as economically disadvantaged. According to the law, the

term economically disadvantaged includes

people who are on welfare or receiving food

stamps, or whose family income in the previous 6 months was either below the federally

established poverty level, or was no more than

70 percent of the lower living standard income

level (whichever was higher). Often a newly

displaced homemaker’s family income for the

previous 6 months, when she still had her husband’s income support, is too high to meet the

JTPA requirement. Even though her income

may have been drastically reduced by the time

she applies for services, she is still ineligible.

Also, many displaced homemakers need assessment, counseling, and job search assistance

services even when their income continues to

exceed the JTPA limits.

It is possible to serve people who are not economically disadvantaged under JTPA. Title 111,

for displaced workers, has no income limits;

but the definition of displaced worker in the

act does not necessarily and obviously extend

to displaced homemakers. Several States do

serve displaced homemakers under Title III,

reasoning that many of them fit the definition

of long-term unemployed, (See ch. 5 for a discussion of eligibility for Title III programs.)

Florida has even included Title III services to

displaced homemakers in the 2-year coordination plan that States must submit to qualify for

JTPA funds. Florida’s plan allows increased

costs per placement for displaced homemak-
424 . Technology and Structural Unemployment: Reemploying Displaced Adults

ers, taking into account their needs for more

extensive training and services.20

Title 11A, which has the largest appropriation of any part of the law, makes some provision for people who are not economically disadvantaged, but face employment barriers.

Roughly 10 percent of Title 11A funds can be

spent for service to these groups. Displaced

homemakers are among the 10 groups named

in the law as examples of those eligible for the

lo-percent-window money. Anecdotal evidence suggests that although some States a r e

in fact using the 10 percent money to serve

hard-to-employ groups (including displaced

homemakers), most are not. Instead, they are

saving the money to pay back the Federal treasury in case any of the people they have already

served as eligible are disallowed on audits. People who are above JTPA’s low-income level

may also qualify for a portion of the employment and training services which State education agencies provide with JTPA money, under

cooperative agreements with JTPA agencies.

Some States (Wisconsin is an example) have

taken an active lead in using this education setaside money for service to displaced homemakers.

Theoretically, all displaced homemakers,

without regard for income, were eligible for—

but not necessarily entitled to–JTPA Title 11A

programs that were funded at about $177 million in fiscal year 1985. The remainder of the

general program for disadvantaged adults and

youth, funded at $1.5 billion, was also open to

those meeting the income limits. Some services

under Title III, funded at $223 million in 1985,

were also available to displaced homemakers,

without regard to income. The JTPA funds actually spent on services to displaced homemakers is not known, but is surely no more than

a small fraction of these amounts. As table 10-

3 shows, projects replying to the Displaced

Homemakers Network 1984 survey reported

receiving $2 million in JTPA funds. This figure is undoubtedly too low; many projects did

zopaula RObertS, center for Law and Social Policy, memorandum to People Interested in Women and JTPA on an analysis,

by the Coalition on Women and JTPA, of the Governors’ JTPA

Coordination Plans for Program Years 1984-86.

not report amounts of funding, and also JTPA

was a new program in 1984. However, the Network’s 1985 survey on experiences with JTPA

indicated that it was still true that only a moderate number of displaced homemaker projects, and a modest amount of services, were

paid for by JTPA funds.

In interviews, directors of local displaced

homemaker projects repeatedly mentioned the

low-income requirement as a drawback of

JTPA funding. They added that in some States

restrictive definitions as to who is a displaced

homemaker puts up more barriers to entry to

JTPA projects. (The Federal Government leaves

it to the States to define displaced homemakers, both for the Voc Ed program and JTPA.)

One displaced homemaker center reported that

it sent 200 income-eligible women to a JTPA

Service Delivery Area for employment and

training assistance, and only 17 were enrolled,

because the State definition of displaced homemaker was so restrictive as to how much the

woman could have earned over the past few

years .21

Answers to the Network’s 1985 survey offer

additional insights into why more projects do

not tap into JTPA as a source of funding. Of

the 121 projects which reported they had no

JTPA contracts, 11 had tried for one and been

turned down. The rest did not bid. The reason

most commonly given was lack of information—a feeling of being too far removed from

the local JTPA system to try for funds. The

main reasons given by the 110 projects which

did

ing

●

●

not bid, and the numbers of projects givthe reasons, are as follows:22

Lack of information: our project is not sufficiently tied into the local JTPA system

(39).

Displaced homemakers not targeted: the

Private Industry Councils (PICs which are

responsible for direction of local JTPA programs are not funding programs for speZl]nformation provided by Displaced Homemakers Network.

ZZDisp]aced Homemakers Network, Services to Disp]aced Homemakers Under JTPA, Preliminary Figures 4/85 (Washington DC:

The Network, 1985).
Ch. 10—Displaced Homemakers ● 425

●

●

●

●

●

●

cial populations but are “mainstreaming”

service delivery instead (36).

Services not being funded: PICs are giving contracts for vocational skills training,

which is not our project’s focus (30).

Eligibility: displaced homemakers are not

being served under the 10 percent “window” for people who face barriers to employment but are not low income (29).

Performance-based contracts: Many JTPA

contracts do not pay the contractor until

the client is placed in a job, but our project

cannot wait that long to be paid (22).

Community-based organizations: these organizations, which often provide services

specifically designed for displaced homemakers, are not getting contracts (20).

Eligibility: displaced homemakers are not

qualifying as economically disadvantaged

(19).

Performance standards: the job placement

rate set by the U.S. Department of Labor

for JTPA training, and adapted by States,

is too high (16).

The Perkins Act and Displaced Homemakers

Under the Perkins Act, Federal Voc Ed grants

may continue to be a larger and more reliable

source of funding for displaced homemaker

programs than JTPA, In the Perkins Act, Congress unequivocally designated funds for the

use of single parents or homemakers, including displaced homemakers. Two programs under the act have mandatory set-asides for this

group:

● 8.5 percent of basic grants to States—the

major program funded by the act, authorization of $835 million for fiscal year 1985

and funded by Congress at $783 million—

must be spent for services to single parents and homemakers;23 and

● 50 percent of the services in a new, smaller

program to encourage retraining and reemployment of adults—authorization of

$35 million but not funded by Congress in

Z3UP t. 7 percent of basic State grants may be used for State

administration expenses. Of the balance remaining, 57 percent

is designated for specific uses, including the 8.5 percent for single

parents and homemakers.

fiscal year 1985—must be delivered to single parents and homemakers.

In addition to the programs that can directly

benefit displaced homemakers, two more provisions of the act are of particular interest:

●

●

3.5 percent of basic State grants must go

to sex equity programs, which are designed to eliminate sex bias and stereotyping in vocational education, to help prepare young women for well-paying jobs,

and to help prevent the emergence of more

displaced homemaker problems in the future; and

community-based organizations, which

often serve displaced homemakers very

effectively, may get special funding—authorized at $15 million but not funded by Congress in fiscal year 1985—to provide Voc

Ed support programs.

The women’s programs in the Perkins Act—

both the set-asides for single parents and homemakers and the sex equity programs for girls

and young women—are tied very specifically

to the goal of helping women overcome barriers to entering or reentering the job market.

To make use of set-aside grants, displaced

homemaker projects presumably will not have

to compete with other worthy aims or target

groups, nor will they have to persuade skeptical PICs or State JTPA managers that there is

a place for employment and training projects

designed to meet the particular needs of former

homemakers. That, at least, is how the program

is supposed to work. In reality, there may be

some hitches.

When the Perkins Act was under consideration by Congress in 1984, most State directors

of vocational education strongly opposed designation of specific uses for Federal Voc Ed

grants. They much preferred contributions on

the block grant model. In the event, however,

Congress reserved 57 percent of basic State

grants for specific uses. Targeted groups and

programs, besides single parents and homemakers and sex equity programs, are the economically disadvantaged (22 percent of basic

State grants), adults (12 percent), the handicapped (10 percent), and criminal offenders i n

correctional institutions (1 percent).
426 . Technology and Structural Unemployment: Reemploying Displaced Adults

In 1985, States were still sorting out how to

comply with these designations. Some State

Voc Ed administrators were planning to establish or add support for projects designed to

serve displaced homemakers. In others, it was

not yet clear what the response would be to the

law’s requirement that States use the specified

part of their Federal grants to “meet the special needs” of single parents or homemakers.

Overall, despite some initial confusion or reluctance on the part of some education officials

to change past ways of allocating funds, the

Perkins Act undoubtedly opens new opportunities to projects serving displaced homemakers. Despite the broadening of the population

to be served, to include single parents as well

as homemakers, there is little question that

States will have more Voc Ed funds than ever

before to serve displaced homemakers. A Maryland official reported, for example, that her

State was allocating $100,000 of Federal Voc

Ed funds to adolescent parents—but was reserving $867,000 for displaced homemakers,

for whom no more than $200,000 had ever been

available in any year before.

Congress appropriated $782.5 million for basic State grants under the Perkins Act for fiscal year 1985; about $63 million of this was set

aside for services to single parents and homemakers. Congress did not provide funds in fiscal year 1985 for the new adult training and

employment program authorized under the act,

half of which would be directed to serving single parents and homemakers, nor did it provide the special funding for community-based

organizations.

Opportunities Under the New Law

Various sections of the Perkins Act spell out

a broad range of fundable activities. In one

place or another, it authorizes the use of Federal grant money to provide most of the services that displaced homemaker program directors see as necessary for their clients. The main

purpose of the law, however, is to support vocational training, and it is training that receives

most emphasis. The bulk of Federal Voc Ed

funds are provided in basic grants to the States,

of which 8.5 percent (after a deduction for State

administration costs) is reserved for single parents and homemakers. States may use this portion of basic grants only for the following purposes:

●

●

●

●

●

●

paying for vocational education and training, including basic literacy instruction,

that will furnish single parents and homemakers with marketable skills;

making grants to educational agencies and

postsecondary schools to expand vocational

education services to single parents and

homemakers, so long as the expansion will

result in providing marketable skills to the

target group;

making grants to community-based organizations that have proven their ability to

provide effective vocational education to

single parents and homemakers;

assisting single parents and homemakers

with child care and transportation expenses;

scheduling programs to be more accessible to single parents and homemakers; and

providing the target group with information about the vocational education and

support services open to them.

The basic State grants that are not specifically designated for target groups may be used

for many other purposes related to vocational

education, such as:

●

●

●

counseling, including self-assessment and

career planning and guidance;

placement services for students who have

successfully completed vocational education programs; and

stipends for students who have “acute economic needs” which cannot be met under

work-study programs.

The new program in the Perkins Act (authorization of $35 million) which offers special encouragement for adult training, retraining, and

employment development programs was not

funded.24 This program was designed with an

ztln a Supplementary appropriations bill passed in August 1985,

the Senate voted to appropriate $15 million in fiscal year 1985

for the adult training and employment program, but the House

did not, and the provision was dropped in conference. Congress

did not fund this section of the act for fiscal year 1986.
Ch. 10—Displaced Homemakers ● 427

emphasis on cooperation with employers and

placement in jobs, and half of it is designated

for single parents and homemakers, Among the

services this new program may support, if and

when it is funded, are:

education and training programs designed

cooperatively with employers, such as

apprenticeships, on-the-job training, customized training;

entrepreneurship training;

counseling and job search assistance; and

information and outreach to encourage

participation by eligible adults, especially

women, older workers, people with limited

English proficiency, the handicapped, and

the disadvantaged.

Finally, the Perkins Act emphasizes training

for young women in secondary and postsecondary schools in nontraditional occupations,

setting aside 3.5 percent of basic State grants

for the program. The purpose is to give young

women an alternative to low-paid, traditionally

female jobs.

Although displaced homemaker projects using

Voc Ed funds are usually located in community colleges or vocational-technical institutes,

they do not have to be. For example, some community-based organizations, such as the YWCA,

receive Voc Ed funding for displaced homemaker projects. Although the Perkins Act authorizes special funding (up to $15 million in

fiscal year 1985) for Voc Ed support programs

to be provided by community-based organizations, Congress did not fund this part of the

act in fiscal year 1985. 25 Even when the section is funded, States are not required to deliver services through community-based organizations. One service authorized by the Perkins

Act which does not seem a likely candidate for

funding by States is stipends to Voc Ed students. The 1976 Voc Ed law, which the Perkins Act replaced, specifically named displaced

homemakers as possible recipients for stipends, but very few were ever provided by the

States.

‘zsA]though congress did not provide funds for support services to be offered by community-based organizations in fiscal

year 1985, an appropriation of $7.5 million was voted for fiscal

year 1986, and was signed into law.

The law requires that every State receiving

Voc Ed grants designate one person to administer the program for single parents and homemakers and the sex equity program, and spend

at least $60,000 per year for administering the

women’s programs. In most States, the administrator is the Sex Equity Coordinator, a middle-level official in the State Voc Ed hierarchy.

How much real authority this official is given,

and how effectively she or he uses that authority, will determine to a considerable degree

whether the opportunities the law opens up are

realized.

Altogether, the list of services that may be

offered under the new Voc Ed act is impressively broad and flexible, yet the focus on vocational training is clear. The services most

prominent in JTPA—training in job search

techniques, job development and job matching,

on-the-job-training—are not emphasized to a

great extent except in the new adult training

program which was not funded in fiscal year

1985. Relocation assistance is not offered at all.

Neither is education toward an academic degree. The fact that most displaced homemaker projects funded by Voc Ed funds are physically located in educational institutions, and

often are run by someone on the school’s staff,

probably discourages many displaced homemakers who urgently need a job from applying

for services. JTPA, insofar as it serves displaced homemakers, plays a different and complementary role.

Data Collection

An issue of special concern to Sex Equity

Coordinators in 1985, as States were gearing

up to implement the new law, was data collection. Information about displaced homemakers and programs set up to serve them is extremely deficient. In 1976 the Women’s Bureau

of the Department of Labor attempted a nationwide count of displaced homemakers, and the

1983 report of the Urban Institute for the U.S.

Department of Health and Human Services,

Administration on Aging, made another national estimate, with additional information on

services available to displaced homemakers, As

mentioned, the estimates developed for OTA
428 ● Technology and Structural Unemployment: Reemploying Displaced Adults

for four selected years from 1975 to 1983 are

the only existing national estimates covering

more than 1 year, In addition, many States

have no idea of how many displaced homemakers they have, or the extent of services that may

be needed.

Systematic evaluations of displaced homemaker programs—some of which are over 10

years old—do not exist. Even noncomparative

reports on outcomes of individual projects—

how many participants went into training, how

many got jobs, what kind of jobs at what kind

of wages—are scarce. Studies of program impacts, similar to those for displaced workers

served under the Manpower Development and

Training Act of 1962, or for disadvantaged

workers under CETA, have never been done.

The largest study in existence was descriptive,

not evaluative; it gave an account of the national demonstration displacement homemaker program (consisting of 47 projects) funded

under the special CETA demonstration grants

in 1980.26

The Perkins Act does not contain specific reporting requirements about single parents and

homemakers. It requires that States submit to

the U.S. Secretary of Education a vocational

education plan, initially covering 3 years and

afterwards 2 years, which includes an assessment of the special needs of target groups, and

assurances that the State will comply with the

requirements of the law in meeting those needs.

The U.S. Department of Education does not require any reports, other than the general assurances contained in the State plans, on what

States are doing to serve single parents and

homemakers.

The Perkins Act directs the Secretary of Education to conduct applied research on aspects

of vocational education specifically related to

the act, including effective methods for providing quality vocational education to single

parents or homemakers (among other target

groups). In 1985, the Department of Education

Z8Deborah Kogan, Lois Greenwood, and Mary Vencill, Assessment of the National Displaced Homemaker Program: A CrossProject Analysis (Berkeley, CA: Berkeley Planning Associates,

1981).

had no plans to carry out a study of this kind.

The department must conduct a long-term national assessment of vocational education under the act (including services to targeted

groups), but the final report is not due until January 1, 1989, 9 months before the expiration

date of the Perkins Act.

Meanwhile, many of the State Sex Equity Coordinators see an urgent need for systematic

collection of information on how many people qualify for services under the women’s programs, how many actually are served, what

their characteristics are, and what happens to

them after they receive education, training, and

employment assistance. The coordinators see

these data as essential for writing State reports,

at the end of the first 3-year planning cycle, to

explain to Congress the effects of the new law,

and the new emphasis on service to single parents and homemakers. Accordingly, at their

1985 annual meeting (which they organized

and convened themselves) a group of State

coordinators laid plans for an unprecedented

program of consistent, nationwide data gathering. The Voc Ed departments of the cooperating States will pay for the program, which is

being developed under the leadership of the

Maryland and Wisconsin Sex Equity Coordinators.

The Maryland Department of Vocational

Education has set aside funds for developing

a computer program which will include these

major items:

●

●

●

●

●

a count of single parent/homemaker/women

clients, including those in regular vocational education classes (so far as possible)

as well as those in special programs;

a profile of clients, including factors such

as age, education, amount and source of

income, number and age of children, adolescent parentage;

an account of the services the client receives—what type, how often, how many

hours of service;

outcomes after service, including details

on quality of employment such as wages,

occupational category, full- or part-time

work; and

a l-year follow-up on outcomes.
Ch. 10—Displaced Homemakers ● 429

Maryland officials expect the system to be

in place by July 1, 1986, and anticipate that at

least 3 States will buy into the program. The

result will be a rich and consistent set of data

covering many if not all States.

At the same time, the national Displaced

Homemakers Network is offering to every State

a relatively inexpensive service, worked out

with the U.S. Bureau of the Census and based

on the 1980 census, to provide a profile of single parents and homemakers within the State

—and within Metropolitan Statistical Areas if

desired. Characteristics of the population to be

covered include age, race, education, income,

type of displacement, number of dependent

children, and labor force participation.

Definition of Displaced Homemakers

In the Perkins Act, “homemaker” is defined

as an adult who has worked as an adult primarily without renumeration to care for the

home and family, and for that reason has diminished marketable skills. The law adds, however, that the U.S. Secretary of Education may

not prescribe the manner in which the States

comply with “the application of the definition. ”

The law further specifies that State plans shall

provide assurances that in serving single parents and homemakers, the State will emphasize assistance to those with the greatest financial need; and in serving homemakers the State

will give special consideration to “homemakers who because of divorce, separation, or the

death or disability of a spouse must prepare for

paid employ merit.” This is the guidance the

law provides as to who gets service as a “homemaker, ” and who is at the front of the queue.

Since the Perkins Act is barely in operation

yet, it is hard to say whether differences in

State definitions of homemakers will make for

marked differences among States in who gets

served. As noted above, anecdotal evidence

suggests that differences in definition are important in determining who receives services

under JTPA. In some States it is proving quite

difficult for displaced homemakers to get assistance under JTPA, because even if they pass

the hurdle of income qualification, they may

still not meet a restrictive State definition of

displaced homemaker.

DESIGN AND PERFORMANCE OF DISPLACED HOMEMAKER PROJECTS

Displaced homemakers entering the job market need all the same services as workers displaced from paid jobs, and often more. Generally, these women lack the long stable work

history of displaced workers, and some have

no work experience at all outside the home.

A substantial number (about 15 percent) are

mothers receiving public assistance who are

about to lose their eligibility because their last

child is nearing the age of 18. Some of these

women are seriously handicapped in getting

a job because of lack of skills or education.

Other displaced homemakers have held good

jobs or had an excellent education, but their

skills may be rusty or obsolete, or they may lack

confidence after a long spell out of the job market. Many who have developed valuable skills

in volunteer jobs need help in exploiting those

skills for a paid job. In addition to the practical difficulties of finding work, many displaced

homemakers must struggle with feelings of

abandonment and personal inadequacy. The

majority have gone through divorce or separation, or are widowed.

Anecdotal evidence suggests that the displaced homemaker projects of the last 10 years

have helped many of these women gain confidence, learn job search skills, get training, and

find jobs. Because systematic studies of the

project results are lacking, this kind of evidence

is the best we have. Likewise, knowledge about

what program elements are most important

and successful in assisting displaced homemakers comes mostly from accounts of women

who went through the programs and observations of project directors, The national Displaced Homemakers Network, which is in
430 . Technology and Structural Unemployment: Reemploying Displaced Adults

touch with hundreds of individual projects

throughout the country, has distilled information on what constitutes a comprehensive program of services to displaced homemakers (see

box 10-A). State officials dealing with displaced

homemaker programs (often the Sex Equity Coordinators in the States’ vocational education

systems) are also sources of information on

what works best in helping these women find

adequate jobs.

OTA has added some recent informed observations to these accounts. In 1984, an OTA contractor interviewed by telephone 20 directors

of selected local displaced homemaker projects

throughout the country, discussing the kinds

of services the projects offer and their effectiveness. Although they were not a true statistical sample, the projects were of different

types and sizes in a variety of geographic locations. OTA’s contractor also conducted brief

telephone interviews with the person responsible for overseeing displaced homemaker programs (usually the Sex Equity Coordinator) in

each of 16 States. Another source of information about the operation of displaced homemaker projects is the 1984 survey conducted

by the Displaced Homemakers Network and

analyzed by OTA.

From these various sources it is possible to

draw a few conclusions, at least tentative ones,

concerning displaced homemakers and the

programs designed to serve them.

Characteristics of Displaced

Homemaker Projects

In size and structure, the projects vary a great

deal. The range of funding among programs

in the Network’s survey is from $2,000 per year

to $862,000, and clients served range from 14

to 3,800. In some States (e.g., Texas and Oklahoma), services are offered mostly through

the State vocational-technical school systems.

Others fund programs in many kinds of organizations, including women’s groups and YWCAs.

Some, like New York and New Jersey, encourage the development of special purpose projects targeted to such groups as Hispanics, Haitians, rural women, and older women. Some

concentrate on outreach. For example, Wisconsin makes special efforts to reach women on

Indian reservations and in black neighborhoods. Washington State has a toll-free number where women can call for help.

The greatest points of similarity among these

projects are in defining the clients they wish

to serve—women whose main job has been

homemaker but must now take on the role of

family provider–and in providing the special

help that their clients need to bridge the gap

between home and work.

Location of Project

Half of the projects in the survey were located in educational institutions—community

colleges or vocational-technical schools—where

they could draw directly on the educational

and training programs of the host institution.

Community-based organizations such as women’s centers or YWCAs housed approximately

one-quarter of the projects. The rest described

themselves as “independent” or “other” (e.g.,

a university counseling program, or a State

agency).

Characteristics of Clients

The population is quite diverse. The 20 directors of local projects reported in interviews

that the age of their clients ranges from 16 to

67, with the majority between 35 and 55. The

average age tends to be lower in the south and

in rural areas, where women tend to marry

younger. According to half of the project directors, their typical client has a high school

education. Others reported a wide range of

education, some serving clients who mostly

have some college or a degree, and others serving disadvantaged women, half of whom have

not completed high school. The clients also

come from all kinds of economic backgrounds,

from poverty to affluence. However, at the time

these women come to the projects for assistance, most are trying to survive on very low

incomes. The affluence is usually former, not

current.

Project directors consider it important to offer services that are comprehensive and flexi-
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432 ● Technology and Structural Unemployment: Reemploying Displaced Adults

ble enough to meet the needs of many types

of clients; most do not offer separate program

components for different subgroups. There are

exceptions however. Three projects have set

up separate counseling and support groups for

widows and for divorced or separated women.

The groups did not work well together. Widows

were offended by the other women’s negative

attitudes about their former husbands, and

tended to drop out of the program, until they

were given a group to themselves.

A few projects have recently begun special

programs, usually supported by State funds, for

women who are receiving Aid to Families with

Dependent Children (AFDC, or welfare). One

center in Texas is providing intensive prevocational and job training for AFDC mothers.

Another in Massachusetts is sponsoring a program for welfare mothers who never completed high school which combines personal

and job-related counseling with classroom instruction in general educational development

(GED), leading to a high school diploma.

Most of the project directors felt the need to

reach out more effectively to groups of displaced homemakers who are not being adequately served, especially rural and minority

women. A project in Connecticut was able to

involve Hispanic women in project activities

through a Hispanic outreach counselor. Other

project directors expressed a desire for bilingual counselors, and also for staff who can

reach black and other minority women who

might not know about the projects, or might

be reluctant to go for help to a white, suburban college campus.

Rural women are not only hard to reach, but

have special needs for service. Many have no

local public transportation and few if any local job opportunities. Some may benefit from

special assistance in creating their own jobs

or businesses.

Eligibility

Most of the project directors interviewed reported that their eligibility requirements for

clients are informal. The Network’s survey underscored the point: only about half the respondents reported any eligibility requirements. If limitations existed, the ones most

frequently cited were that the client had spent

some years primarily as a homemaker, and had

lost her main source of income support. Some

projects responded that participants had to

meet either a definition laid down by a State

law, or requirements of a funding source.

As discussed previously, clients of projects

funded under JTPA usually have to meet the

economically disadvantaged criterion which

applies to Title 11A programs. Several of the

project directors who receive funding from

JTPA expressed concern because they have to

turn away displaced homemakers in need of

assistance who do not fit the definition. Despite

the exceptions under JTPA to the income limitations, projects that have JTPA funding are

bound by the terms of their individual contracts, which may not make any exceptions.

Under the Carl D. Perkins Vocational Education Act, Federal funding to displaced homemakers has no income limitations, although

States in their vocational education plans must

provide assurance that they are serving displaced homemakers who are in financial need.

Services Offered and Their Effectiveness

The range of services provided by different

displaced homemaker projects varies from

counseling and referral only to comprehensive

multi-component programs which cover all

aspects of the home-to-work transition, from

intake and assessment to follow-up after placement in a job. As a guide to project managers,

the national Displaced Homemakers Network

has compiled a comprehensive list of the services that it considers to meet the unique needs

of displaced homemakers (see box 10-A).

Services provided in displaced homemaker

programs overlap and interconnect, but for the

sake of simplicity can be grouped as follows:

●

●

Personal counseling; includes one-to-one

or group counseling, peer support groups,

and workshops on self-awareness and assessment.

Job readiness: includes skills and aptitude

assessments, job counseling, academic
Ch. 10—Displaced Homemakers Ž 433

counseling, provision of labor market information, referrals to other local job

search, agencies, assistance in preparing

resumes and filling out job applications,

and mock interviews.

Education and training: includes courses

in brush-up on the basics, GED preparation, English as a second language, onsite

skills training, on-the-job training, work experience, career internships, and referral

to educational or training programs.

Job placement: includes maintenance of

job banks, job development, job matching

and referrals to local job openings, and

follow-up.

Support services: includes seminars on

topics of practical interest (e.g., money

management, taxes, insurance), child care,

transportation assistance, emergency loans,

training stipends (if any are available), and

scholarship funds.

Most of the 20 project directors agreed that

a comprehensive program including everything but onsite training is ideal, but the

majority had neither the staff nor funding to

do it all. They had to save their efforts for what

they could do best, and what they believed to

be most successful. Most did not claim to know

what works best for their clients. In the absence

of any national full-scale program evaluations,

they rely on their own experience (the majority

of the projects are 5 or 6 years old) and the experience of others, which they share through

regional conferences and through the Displaced Homemakers Network,

There follow some notes on how services to

displaced homemakers may be delivered most

effectively, based on the observations of these

experienced project directors plus the findings

of a few studies27 and year-end reports from

a few States with displaced homemaker programs of their own.

ZTSee especially Kogan, et al., op. cit., the descriptive study

of the 47-project national demonstration displaced homemaker

program.

Personal Counseling

Nearly all of the program directors emphasized the importance of this component; all of

them offer it. The Berkeley Planning Associates study of the national demonstration displaced homemaker projects especially noted

the need of displaced homemakers for restoration of a sense of self-worth and confidence

building.

peer support is almost universally considered

a highly effective form of counseling. Most of

the directors observed that peer support or

other forms of counseling need to be continued

throughout the program, in conjunction with

other services such as job readiness and skills

training. A very few program directors disagreed;

they believed that the most urgent requirement

for displaced homemakers is to find a job, after which other problems tend to take care of

themselves. The majority, however, considered

it essential to provide continuing emotional

support,

An example of a successful program based

on continuing support is the Safety in Numbers program sponsored by the Displaced

Homemaker Program at the Mississippi Gulf

Coast Junior College. Designed for students 25

and older, the program’s classes are composed

entirely of beginning adult students of similar

age so they can help one another with the necessary home and school adjustments. Included

in the basic curriculum are English, math,

reading and study skills, and the psychology

of personal adjustment.

Job Readiness

This is another essential service, provided by

all 20 projects. Small, modestly funded projects

may not be able to do their own job development or job matching, but they all help to prepare their inexperienced clients for the world

of paid work. Offering job readiness training

in a classroom format appears to be very successful. It is not only an efficient use of staff

resources, but also draws on the benefits of

peer support. Further, the organized instruction—having a class to go to—helps give many

displaced homemakers a sense of purpose,
434 ● Technology and Structural Unemployment: Reemploying Displaced Adults

countering feelings of helplessness and isolation.

Education and Training

Most displaced homemaker centers do not

offer skills training or education, but refer their

clients to the appropriate educational institution. A few (5 of 20) have offered skills training for such jobs as word processor, clerktypist, nurse’s aide, and food manager, and

brush-up courses for nurses and secretaries.

Referring clients to other institutions for

training has not always worked well. Berkeley

Planning Associates found that more than half

of the projects in the national demonstration

program experienced serious difficulty in getting displaced homemakers into CETA training programs, despite their own CETA sponsorship. There were two problems: CETA had

few training slots not reserved for other target

groups; and many displaced homemakers were

confused by the red tape and delays during the

CETA intake process. The red tape problem

may also arise with referrals of displaced homemaker clients to larger JTPA projects, especially around questions of income-eligibility.

Project directors would like to offer more

training themselves, or have more influence on

design of training courses. One director mentioned the need for short-term or refresher

training in clerical skills; many displaced homemakers have far too little income support to

undertake a 6- or 8-month course. Scheduling

of courses to meet the needs of displaced homemakers is also important. For example, the

Safety in Numbers course for displaced homemakers at the Mississippi Gulf Coast Junior

College offered the core curriculum in classes

2 days a week, freeing the student for family

responsibilities on the remaining days.

Many project directors expressed a desire to

encourage or offer more training in nontraditional fields; in fact two projects recently sponsored training courses in electronics and in

plastics mold injection. Needs for remedial

education were stressed; some displaced homemakers must upgrade reading and math competencies before they can enter any kind of

skills training, or even look for a job.

Five projects that were able to establish onthe-job training, work experience, or career internships were impressed with their effectiveness. Short-term work experience was especially important for women who had either

never had a paid job, or had not had one for

years.

Job Placement

The Displaced Homemakers Network, and

project directors in general, consider job placement “a top priority and ultimate goal of program service.” Nonetheless, limited staff and

funds make it difficult for many projects to provide all the placement services that they see as

desirable.

The majority of project directors interviewed

(17 out of 20) said their projects do some kind

of placement work, even if only informally.

Several maintain job banks and keep in close

touch with local employers or employment

agencies about possible openings. Only four

have staff job developers, who work on turning up job openings that have not been advertised or listed. Several directors indicated the

need for more staff in job development and

coordination of job placement, especially for

older clients. Projects that are able to get additional funding, either from Perkins Act

grants or from other sources, may choose to

add staff job developers or to obtain the service for their clients by contract. A number of

JTPA projects have contracts with the local

Employment Service (ES), under which ES

staff develop jobs specifically for the project’s

clients. The typical displaced homemaker project does not have the funds to offer this special service to its clients.

The kind of jobs that clients of displaced

homemaker projects find are varied, but on the

whole are weighted toward traditionally female, generally low-paid jobs in the clerical,

retail sales, and service fields. For example, a

fact sheet from the State of Minnesota indicates

that of the displaced homemaker program cli-
Ch. 10—Displaced Homemakers ● 435

ents who are placed, 42 percent are in service

jobs, 30 percent in clerical work, and 14 percent in sales. This particular group actually had

better average pay than other working women

in Minnesota: the median wage was $5 per

hour for former program participants, compared to a median wage of $3.38 per hour for

other Minnesota women. Very little other information exists on wage rates for participants

in displaced homemaker programs compared

to other groups. One study of a past program

in Massachusetts found that wage gains

achieved through the program were minimal;

most clients who worked before entering the

program received the minimum wage, and so

did most who completed the program. Of the

project directors interviewed, most reported

that their clients’ wages were generally low,

hovering around minimum wage.

The most obvious explanation for displaced

homemakers taking traditional women’s jobs

at low pay is that these are easy jobs to fill, with

few skill requirements and frequent openings.

As one director acknowledged, it is not clear

that these are the right jobs for the project’s

clients, but at least they do get placed.

Another explanation is that many displaced

homemakers seem to gravitate toward traditional jobs when asked their preferences. Few

older women are interested in nontraditional

jobs, and they generally reject training because

they believe they will not be able to compete

with younger, better-educated women even after training. In any case, displaced homemakers often have little choice. Many need a source

of income immediately. Without training stipends or loans, they are forced to accept lowpaid jobs with little prospect of advancement.

For women at very low income levels, public

assistance may be the best choice financially,

although many resist going on welfare.

On the other hand, some of the placements

are in a variety of nontraditional occupations.

Some women have been helped to start their

own businesses, sometimes unusual ones; for

example, a group of women developed a cab

service in an area that did not have one, One

director reported that women used to heavy

work at home were not afraid of competing

with men in physically demanding, nontraditional occupations—for instance, one woman

took a job as a UPS delivery person.

One of the best auguries for successful placement is a sympathetic employer, familiar with

the needs of displaced homemakers and able

to provide feedback to an inexperienced worker on her performance. Previous acquaintance

with an employer through on-the-job training,

work experience, or an internship often results

in a permanent job.

Support Services

Many projects provide specialized workshops

or counseling on matters not directly related

to job search—e,g., money management, taxes,

insurance, housing and mortgages, legal rights

of women, health care, single parenting, even

automobile repair and maintenance. Few are

able to offer substantial help in the forms most

needed by many displaced homemakers—child

care, transportation, and financial assistance.

Some women who could most benefit from

training are unable to take classes without

some form of financial assistance—possibly

loans, if not grants, Unlike displaced workers,

most displaced homemakers have no unemployment insurance. Few can rely on other

family members for support,

A few project directors said they have some

resources, mostly through grants and private

donations, to provide limited financial assistance to their clients, Four programs offer

transportation assistance; three, scholarship

programs; three, limited emergency loans; two,

limited training stipends; and two, child care

at the displaced homemaker centers. In addition, some referred clients to local community

colleges for financial aid, and to the community colleges or social service agencies for child

care available to low-income women,

The Perkins Act of 1984 promises assistance

in some of these areas. Under the previous Voc

Ed law, child care, transportation assistance,

and even training stipends in limited situations

were authorized for displaced homemakers. It
436 . Technology and Structural Unemployment: Reemploying Displaced Adults

appears they were rarely made available, possibly because Federal Voc Ed funds for displaced homemakers were limited, and State administrators did not choose to use them in this

way. With the increases in funds targeted to

homemakers in the 1984 act, support services

might be more feasible. The new law specifically allows funds to be used for child care and

transportation assistance. It also authorizes

training stipends for Voc Ed students in general (not single parents and homemakers in particular) but only in cases of “acute economic

needs which cannot be met under work-study

programs, ” The consensus so far among Sex

Equity Coordinators is that little if any Voc Ed

grant money will be used to provide training

stipends.

JTPA is no more promising as a source of income support for displaced homemakers undertaking training or education in search of a

job. In passing JTPA in 1982, Congress put limits on supportive services (e. g., child care,

transportation allowances, and health care)

and any form of income payment (including

needs-based payments, under Title 11A, and

training allowances or stipends, under Title

III). Spending for these purposes, plus administrative spending, was generally limited to 30

percent of JTPA funding. Administrative expenses, in turn, were limited to 15 percent

which, in effect, kept spending for income support and supportive services to no more than

15 percent. Private industry councils and JTPA

program directors have generally kept a still

tighter rein on supportive services and income

payments than the law requires. In the JTPA

1984 program year (June 1984-July 1985), spending for supportive services and needs-based

payments in Title 11A was 11 percent, and for

similar services in Title III, 7 percent. Nothing is known of how much of these payments

went to displaced homemakers, but since JTPA

spending overall for this group is limited, the

amount was certainly very small.

A possible source of income for displaced

homemakers during education or training is

one of the Federal aid programs for postsecondary students. As chapter 7 discusses, these

programs are designed primarily for financially

dependent young people, not for adults—even

low-income adults. Some changes that have

been proposed in the student aid programs (discussed in chs. 2 and 7) might make this source

of income more easily accessible to displaced

homemakers. However, the competition for

student aid is extremely keen; whatever goes

to a displaced homemaker would be subtracted

from the pool available to young students (unless, as seems unlikely, the program were enlarged).

Another possibility for some displaced homemakers is part-time studies at night. The Perkins Act offers funds to allow scheduling of

vocational education courses to make them

more accessible to single parents and homemakers. Night studies may be a useful option

for some, especially those without young children at home. On-the-job training, even though

it often does not offer genuine transferable

training but rather is a placement device (see

ch. 6), may still be very useful to some displaced homemakers.

The problem of income support for people

who need training to get a decent job with

chances of advancement is not an easy one.

There were abuses under CETA, with some

people signing up for courses mainly for the

purpose of collecting training allowances. Yet

the dilemma of a woman who has no source

of support but what she can earn, yet with too

little preparation for work to get better than a

marginal job, is a painful one. Many of these

women cannot undertake the triple job of earning a living, caring for a child, and training for

a better job. It may be in the interest of society, as well as the personal interest of women

such as these to make use of programs which

already exist for income support of serious

adult students, or to develop ones which fit

their needs.
Index
Index ● 441

early action (see rapid response and early action)

education (see also adult education, and instructional

technologies)

labor force demography and adult training 272, 276

years of school and employment 276-277

years of school and income 277-278

Educational Products Information Exchange Institute

(EPIE) 296

Educational Testing Service (ETS) 89, 278

Electronic Information Display System (EIDS) 301

Empire-Detroit steel plant closing 262, 264

employer-provided services to displaced workers 19,

26, 225, 240-241, 242

employer-provided training 22, 43, 87-88, 93-96, 166,

208, 272, 275, 284-285, 303-306

employment

international 144-145, 148-153

sectoral 9-13

trends 26, 153-158

Employment Retirement Income Security Act

(ERISA) 119

Employment Service (ES) (see also Interstate Job

Bank, labor market information, and State Employment Security Agencies) 41, 58, 166, 172,

198-204, 262-264, 266

automation 199-201

job banks 21, 37, 59-61, 199-201

Job Training Partnership Act, relation with 198

Energy and Atomic Workers Union of Canada 359

European countrie s

economic structure 148, 151

employment 146, 151-153, 158

job creation 148, 149-150

Experimental Functional Skills Program (XFSP)

300-301

exports 373, 376

demand for skills 378-381

employment 141, 371, 376-377

Fairchild Industries Inc. 395

Federal Interagency Committee on Education 89

Federal Mediation and Conciliation Service (see U.S.

Department of Labor)

Federal-State Cooperative Labor Market Information

Programs 202, 203

Federal Unemployment Tax Act 257

First National Bank of Boston 353

Flexible Manufacturing Systems (FMSs) 351-353

Florida State University 300

Ford Motor Co. 19, 22, 25, 65, 166, 206, 237, 241,

258, 306, 402

France

banking industry 348

employer-provided training 96

employment 145, 147, 150

labor force 145

functional illiteracy 18, 88-89, 272, 278-280

Fund for the Improvement of Postsecondary Education (see U.S. Department of Education)

General Agreement on Tariffs and Trade (GATT) 32

General Electric Co. 323-324

General Motors Corp. 22, 127, 166, 206, 208, 229-230,

254-255, 357-358, 389

Great Britain 137-138

employment 145, 146, 147, 151

exchange rates 150

labor force 145

guaranteed student loans 40, 91, 316

Haiti 396-397

Hazeltine Corp. 300

Higher Education Act 63, 90, 91, 101, 316

high-technology industries

competitiveness 13, 157-158

employment 11-13, 130, 156-158

wages 130

Hong Kong 395

Hughes Corp. 207

Human Resources Development Institute, AFL-CIO

242

illiteracy (see functional illiteracy)

imports 32, 373

demand for skills 383-385

employment 141-142, 381-383

income support during training (see under displaced

homemakers and under services to displaced

workers)

Individual Retirement Accounts (IRAs) 266-267

Individual Training Accounts (ITAs) 265-267

Industrial Adjustment Service (see Canada)

Industrial Training Corp. 298

instructional technologies 27, 50-51, 96-101, 272-273,

290-302, 308, 312-313

adult basic education (ABE) 4, 43, 99-100, 273-274,

293-294, 312-313

computer-assisted instruction (CAI) 27-28, 43, 96,

272-273, 290-291, 292-297

computer based education (CBE) 292

computer managed instruction (CMI) 290-291

cost effectiveness 294-296

delivery systems 290-292

evaluations of 43, 100-101, 273, 292-293, 294, 296

Federal role in research and development 27, 43-44,

50-51, 96-101, 273-274, 290, 299-302

industry training 273, 297-299, 312-313

instructional television fixed service (ITFS) 291, 308

interactive videodisk systems 27-28, 96, 98, 272-273,

291, 297-298, 301

learning centers 293-294, 295, 29&297

television 291-292, 302

transfer of training technologies 43, 51, 96-99

vocational and technical training 28, 273, 274,

297-299

International Association of Machinists and Aerospace Workers 241

international trade (see also apparel industry, automobile industry, exports, imports, television
442 ● Technology and Structural Unemployment: Reemploying Displaced Adults

manufacture, textile industry, telecommunication equipment industry, semiconductor industry) 31-33, 372-375

automation related to 371, 374, 385, 386-392

balance of payments 32, 141, 371, 373

comparative advantage 385-386, 400-401

direct foreign investment 392

effects on employment 32-33, 141, 371, 375-376,

402-403

exchange rates 373

labor costs 374, 386, 393

labor intensity 378

Leontief paradox 378

offshore production 372, 385, 392-400

outward processing (TSUS 806/807 imports)

392-393, 395, 396-397

protection 32-33, 388, 400-405

advantages 400-403

costs 403-405

theory 400-401

skills 372, 376, 394

International Trade Commission (ITC) 402-403

Interstate Conference of Employment Security Agencies 60, 201

Interstate Job Bank 21-22, 37-38, 59-61, 166, 199-201,

263-264

Jamestown, New York 211

Japan

automation in apparel 391

competition in automobiles 28-29, 388-389, 401-403

competition in television manufacture 387-388

competition in textiles 386

employment 145, 146, 147, 150, 151

lifetime employment 215

offshore manufacture 394

job design 81-82, 349-354, 358

job development (see under services for displaced

workers)

job matching (see under services for displaced

workers)

job quality and technological change 30, 353-354

Job Search and Relocation Assistance Pilot Project

262-264

job search assistance (see under Job Training Partnership Act Title 111 and under services to displaced workers)

Job Skills Education Program (JSEP) 300

Job Training Partnership Act (JTPA) (see also under

displaced homemakers) 36, 77, 170-172

disadvantaged workers, Title II 193, 315

Job Training Partnership Act Title III (see also services for displaced workers) 3, 5, 15-20, 47, 135,

136, 163-165, 168, 169, 171-172, 173-196, 205

administrative costs 171, 181, 191, 235

creaming in participant selection 193

discretionary grants 48, 177, 188

eligibility 73-74, 75, 76, 106, 163, 174, 192-194

entered employment (see placement)

Federal guidance 16, 63, 67, 68-69, 165, 194-195

funding and spending 18, 19-20, 47-48, 136, 163,

164, 172, 176-177, 181, 186-189

Individual Training Accounts, comparison with 266

information collection 20, 39, 51, 62-63, 128, 165,

178-179, 189-190

job search assistance 182

job search skills training 182

matching funds 195-196

number and location of projects 163, 173, 177-178

on-the-job training 68, 182-183, 184, 185, 195

outcomes 15-16, 163, 174-176, 229-230

participation 3, 16, 163, 173-174, 180

performance standards 54, 65, 183-184, 228,

229-230

placement 163, 164, 174-176, 180, 183-184

plant-based projects 225, 234-235

pre-layoff assistance 4, 36-37, 48, 52-55, 190-191,

234-239

Pre-layoff Assistance Coordination Team (PACT),

Arizona 191

Private Industry Councils (PICs) 55, 65, 71, 73, 80,

170, 171, 180, 187, 191, 204, 266

reemployment wages 163, 175-176

relocation assistance 264

remedial education 18-19, 54, 64-66, 67, 68, 164,

185-186

service mix 66-68, 164, 178, 179-180, 182-185

supportive services 64, 171, 181, 257

vocational skills training 16-18, 38-39, 49, 54, 66-67,

164, 180, 182, 183, 184-185, 189

Johnson & Johnson 234, 236, 241, 249

Kimberly-Clark Corp. 304

Korea 387

labor-management cooperation 25, 167, 211, 225,

241-242

area labor-management committees (ALMC) 211

labor market information 22, 40-41, 51, 77-79, 166,

201-204

LaSCAI 300, 302

Laubach Literacy Action 87, 286

laundry equipment plant closing 111-112, 115, 121

Lehigh Valley, Pennsylvania, displaced worker

project 228, 249

Levi Strauss & Co. 391

Lifelong Education and Development (see Service

Employees International Union)

Literacy-85 306

Literacy Volunteers of America 87, 286

Liz Claiborne, Inc. 397

Lowell Institute School, Massachusetts Institute of

Technology 283-284

Lowell, Massachusetts 309

LTV Steel Co. 206, 246, 260

lumber and wood products industries 379

Mack truck plant closing 115, 121, 123

Malaysia 395-396

Manpower Development and Training Act (MDTA)

15, 48, 135-136, 168, 169-170, 174, 231, 238
Index ● 4 4 3

manufacturing employment 3, 11, 29, 30, 33, 130-131,

151, 154, 155-158, 330, 374-375

Massachusetts industrial service and stabilization

trust 211-212

Matsushita 388, 394

meatpacking plant closings 111-112, 115, 121

medical technologists 342, 344348

Midland Center for Career Development 66, 206, 246,

260

Mid-Willamette Valley, Oregon, displaced worker

project 228, 261

Milpitas employee reemployment and retraining

project 19, 25-26, 65-66, 236, 237, 241, 246, 249,

254, 255-256, 260, 306

Milwaukee, Wisconsin, displaced worker project 228,

229, 231

miscellaneous manufacturing industry 399

missing middle 131-132, 140-141

Missouri Employment Security Agency 201

Mitel of Canada 399

motor vehicle industry (see automobile industry)

Multifiber Arrangement 142, 382, 386, 401, 404

Nabisco Brands, Inc. 304

National Adult Literacy Campaign (see adult literacy

campaign )

National Alliance of Business (NAB) 69, 194, 242

National Apprenticeship Act (Fitzgerald Act) 288

National Assessment of Educational Progress (NAEP)

84, 89, 278-279

National Center for Employee Ownership 213

National Center for Research in Vocational Education 81, 296, 315

National Center on Occupational Readjustment, Inc.

242

National Commission for Employment Policy 259

National Commission on Excellence in Education 280

National Commission on Libraries and Information

Science 302

National Direct Student Loans (NDSL) 91

National Governors’ Association (NGA) 20, 69, 177,

187, 188, 194

National Institute of Education (see U.S. Department

of Education)

National Research Council, National Academy of

Sciences 281, 309

National Science Foundation 41-42, 78, 81-82, 98,

299, 301, 302

National Steel Corp., Weirton, West Virginia Steel Division 213

New England blue-collar displaced women workers

118, 124

New York State plant closings 113, 118

nickel-an-hour and dime-an-hour funds 206, 208, 257

Northwestern Bell 209

Northwest Regional Educational Laboratory 296

numerically controlled (NC) machine tools 334-335,

350-352, 362

Occupational Employment Survey (OES) 202

occupational forecasts 41, 79-81, 131, 204, 332-333,

362-366

Occupational Outlook Handbook 80-81

occupational shifts 330-335

Office of Educational Research and Improvement

(see U.S. Department of Education)

Omnibus Budget Reconciliation Act of 198169

on-the-job training (see under Job Training Partnership Act Title 111 and under services for displaced workers)

Organisation for Economic Co-operation and Development (OECD) 145, 147, 148, 151, 213, 377

Packard plant closing 112-113, 121, 123

papermaking, machine tender 340-341

Pen grants 91, 287-288, 316

Pennsylvania thermostat control plant closing 124

performance measures for displaced worker projects

228-233

costs and benefits 230-231

earnings 230

job retention 230

long-term impacts 231-233

placement 229-230

social costs and benefits 233

Perkins Act (see Carl D. Perkins Vocational Education Act of 1984)

petroleum refining and related industries 381, 383

plant-centered displaced worker projects 225, 226,

234-236

plant closings (see also advance notice of plant closings and large layoffs, pre-layoff assistance

under Job Training Partnership Act Title III,

and services to displaced workers) 15, 25,

111-121, 188, 189, 209-213, 239-240

community and government assistance to prevent

closings 23, 166-167, 191, 209-213, 239

data concerning 52-53, 66-68, 127-129

ripple effects 10, 125-127

plastics industry 329-330

injection molding machine operator 329, 366-367

PLATO 291, 293, 296, 297, 299, 300

Pontiac Retraining and Employment Program 176

Portsmouth, Ohio, displaced worker project 262, 264

Potato Services, Inc. 214

primary nonferrous metals industry 379

Private Industry Councils (see under Job Training

Partnership Act Title III)

production workers (see also aerospace, apparel, automobile, semiconductor, telecommunication

equipment, television, and textile industries) 4,

10, 13, 14, 332, 333-335, 376, 377, 378-381,

383-385, 389, 400

employment trends 4-5, 330-332

wages 115, 336

productivity 29, 139, 147, 149, 154, 325-330, 386, 374

Project ABLE 293
444 . Technology and Structural Unemployment: Reemploying Displaced Adults

project Options 297

proprietary schools 287-288

protectionism (see international trade)

Quasar 210, 388, 394

radio, television, and communication equipment industry (see also television manufacture) 384

rapid response and early action 19, 36-37, 49, 52-57,

167, 191, 212, 225, 234, 236-240

relocation assistance (see under services to displaced

workers)

remedial education (see under adult education, under

displaced homemakers, under instructional

technologies, under Job Training Partnership

Act Title 111, and under services for displaced

workers)

Remediation and Training Institute 293, 294, 295-296,

297

retraining (see vocational skills training under Job

Training Partnership Act Title III and under

services for displaced workers)

retraining of active workers (see also adult education

and employer provided training) 42-43, 93-96,

166, 191, 204, 207-209, 239, 272, 275, 284-285

riveting—airplanes 342, 343-344

Rohm & Haas Bayport, Inc. 359-360

semiconductor industry 394-396

employment 15, 158, 381, 394

international trade 157-158, 381

labor costs 395

offshore manufacture 157, 394-396

Service Employees International Union (SEIU) 285

service industries

employment 10-11, 30, 130, 151, 154-156

job quality 30, 155, 157

wages 11, 30, 130-131, 155

services for displaced workers 26, 48-50, 179, 243-265

costs of various services 243-245

counseling, personal and financial 247-248

course selection for vocational training 250-251,

252, 253, 255

design and scheduling of training courses 256-257

different emphases in different economic conditions 189, 226, 242, 259-260

full range of services 26, 226, 227, 242

health care during training 64

high-technology training courses 16, 251-253, 255

income support during training 16-18, 38, 63-64,

69-70, 226, 227, 256-259, 266

job clubs 248

job development 248-249

job matching 59, 60, 249

job search assistance 16, 69, 226, 244-245, 248-249

job search skills training 248

on-the-job training 244-245, 249-250

orientation 246

outreach 19, 48, 246

performance-based contracts 253-254, 260

pre-layoff assistance 48, 52-57

relocation assistance 37, 57, 58-61, 261-265

remedial education 4, 16, 18, 38-39, 64-66, 67, 68,

226, 256, 260-261

screening 246-247

selection of trainees 254-256

testing 254

vocational skills training 4, 16, 38, 62-64, 66, 67, 68,

69-70, 226, 227, 250-260

Shell Canada Limited 358-359

Shenandoah Life Insurance Co. 353-354

Singapore 395-396, 399

skills—effects of technological change 30, 41-42,

81-82, 140-141, 335-337, 348-349

small business 13-14, 158-160

South Carolina Rapid Response Team 212

Southeastern Michigan Educational Television Consortium 308

Southgate (California) displaced worker project

254-255

Space Time Army Reconnaissance System (STARS)

301

Spatial Data Management System (SDMS) 301

Sprague Electric Co. 304

State Employment Security Agencies 59, 60, 61, 202

steel industry 28, 148

competitiveness 28

displacement 28, 128, 418

employment 28, 140, 148-149

wages 28

Stevenson-Wydler Technology Innovation Act 99, 302

St. Paul Foundation 306

St. Paul Technology for Literacy Center 296-297

Studebaker plant closing 121

sugar beet plant closings 113, 115

Supplemental Educational Opportunity Grants 91,

316

supplemental unemployment benefits (SUBS) 62, 232,

255, 257, 258

Sweden 167, 215-218

adult education and training 167, 216-217

advance notice of plant closings 216, 218

employment and unemployment 145, 147, 151, 167,

215

government employment service 216

government support for innovative work organization 361

inflation 167, 215

labor policies 23, 167, 215-218

National Labor Market Board (AMS) 216-217

role of employers and labor unions in labor policies

217-218

UTOPIA project 338

wage subsidies 167, 216-217

Taiwan 387

telecommunication equipment industry 397-400

automation 398-399

employment 399-400

international trade 398
Index ● 4 4 5

labor costs 399

offshore manufacture 398-400

private branch exchanges (PBXs) 398, 399

telephone services industry 326-329

television manufacture 387-388

competitiveness 157

employment 382

international trade 382, 387-388

new technologies 387-388

Orderly Marketing Arrangement (OMA) 387

Textile & Clothing Technology Corp. 391

textile industry 386-387

capital intensity 386-387

competitiveness 387

employment 139, 387

international trade 142, 386

new technologies 334, 386

wages 117, 393

Trade Act of 1974 (see Trade Adjustment Assistance)

Trade Adjustment Assistance (TAA) 20-21, 47, 48, 57,

58, 59, 69-70, 118, 135, 136, 165-166, 169,

196-198, 257, 264

trade schools (see proprietary schools)

training (see vocational skills training under Job

Training Partnership Act Title III, and under

services to displaced workers)

Training magazine surveys 284, 298, 299

unemployment

cyclical 15, 28

international 144-147, 150

minority 123

“natural rate” 143-144

structural 144

trends 15, 136-138, 144, 153

unemployment insurance (UI) 16-18, 21, 37, 38, 62,

63, 65, 79, 95, 96, 172-173, 238, 257-259, 266-267

United Auto Workers of America (UAW) 19, 22, 65,

166, 206, 208, 237, 254, 258, 306, 308, 357, 402

United States Steel Corp. 127

United Steelworkers of America 206, 260, 262

University of Idaho Computer Literacy for Rural

Adults Project 307

University of Maryland 301

University of Wisconsin Center for Research on

Learning and Teaching 292

U.S. Congress 36, 188

Congressional Budget Office (CBO) 118

General Accounting Office (GAO) 128, 187, 288

House Committee on Appropriations 188

House Committee on Small Business 5

Joint Economic Committee (JEC) 143

Senate Committee on Appropriations 188

Senate Committee on Finance 5

Senate Committee on Labor and Human Resources

5, 6

U.S. Department of Commerce 97, 98, 99, 302, 378

Bureau of the Census 278

International Trade Administration 376, 377, 378,

383, 402, 403

National Technical Information Service (NTIS) 98,

302

U.S. Department of Defense 81, 98, 99, 283, 299-302

Army Research Institute 98, 300, 301

Naval Personnel Research and Development Center

98, 300

U.S. Department of Education 71-72, 75-76, 98, 100,

101, 299, 302, 310, 315, 428

Fund for the Improvement of Postsecondary Education 307

Office of Educational Research and Improvement

(National Institute of Education and National

Center for Educational Statistics) 100

U.S. Department of Labor 48, 49, 59, 62-63, 66-68,

277, 310, 315, 412

Bureau of Apprenticeship and Training 288

Bureau of International Labor Affairs (ILAB)

107-108, 115, 119

Bureau of Labor-Management Relations and

Cooperative Services 194, 241

Bureau of Labor Statistics (BLS) 41, 42, 77, 79-81,

105, 131, 153, 202-203, 325, 362-365

Division of Cooperative Labor-Management Programs 211

Employment and Training Administration (ETA)

59, 68, 69, 80

Federal Mediation and Conciliation Service 240

U.S. Small Business Administration 129

vocational skills training (see under adult education,

under displaced homemakers, under displaced

workers, under Job Training Partnership Act

Title III, and under services to displaced

workers)

Volvo Kalmar plant 360-361

wage supplements 37, 57, 61-62

Wayne State University 308

Weirton Steel plant (see National Steel Corp.)

West Germany

apprenticeship programs 215, 288, 353

education 288

employment 145, 146, 147, 150, 151, 152

Humanisation of Working Life Programme 361

industry subsidies 149

West Virginia Institute of Technology Center for

Adult Education 306-307

worker ownership 213

work organization 350, 354-362

characteristics of new model organization of work

356-358

examples 358-361

government policies 352-353, 361-362

relation to computer-based technologies 354, 358

Yakima, Washington, displaced worker project 228,

229, 245, 247, 261

Youngstown, Ohio 126-127