DOES TRADE ADJUSTMENT ASSISTANCE MAKE A DIFFERENCE

1. INTRODUCTION For over 30 years, the U.S. Trade Adjustment Assistance (TAA) program has provided workers who can show that they have lost their jobs due to increased imports with income support, training, job search, and relocation benefits. The United States spent $855.1 million to assist approximately 150,000 TAA beneficiaries in 2007. This amount is expected to increase dramatically in the future as the program was significantly expanded by the American Recovery and Reinvestment Act of 2009. The TAA program receives a great deal of support from policy makers; one of the unstated goals of the program is to decrease political resistance to new trade liberalization efforts and Congress has approved additional funding for the TAA program with virtually every new free trade agreement that has been implemented since the program's inception.(1) There is little evidence, however, regarding whether workers have actually been helped by the TAA program. On the contrary, in 2007 the Office of Management and Budget (OMB) rated the program "ineffective" because it failed to demonstrate the cost effectiveness of achieving its goals. The Department of Labor reports simple statistics that measure, for example, the percentage of beneficiaries who are able to find employment following their participation in the TAA program. Statistics such as these fail to take into account the fact that these participants may have found the same employment absent participation in the TAA program. The more appropriate measure of a program's effectiveness is to what extent the program changed the employment outcome of TAA participants. This paper provides an in-depth statistical evaluation of the effectiveness of the TAA program. Summary statistics suggest that the TAA program successfully targets displaced workers who have greater difficulty finding new employment, but we find no statistical evidence that the TAA program actually improves the employment outcomes of beneficiaries. We do find strong evidence, however, suggesting that those workers who participate in TAA-funded training opportunities are more likely to obtain reemployment, and at higher wages, when compared to TAA beneficiaries who do not participate in training. The results suggest that policy makers should require that the TAA program undergoes a comprehensive evaluation as to how it can more effectively assist displaced workers. II. THE TRADE ADJUSTMENT ASSISTANCE PROGRAM The U.S. TAA program, first developed in 1962 and amended repeatedly since that time, compensates workers harmed by increased import competition. (2) The goals of the program are threefold: encourage the rapid reemployment of participants; provide training and income support to allow participants to achieve reemployment; and assist participants to obtain reemployment in fields where they are "likely to remain employed and earn wages comparable to their prior jobs." (3) To be eligible for the TAA program, a company affiliate must file a petition with the Department of Labor alleging that workers in the firm lost their jobs (or suffered a reduction in hours and/or wages) as a result of increased imports or shifts in production outside of the United States. (4,5) The Department of Labor must then decide whether the firm is eligible for the program under current guidelines. Once a firm is certified, any worker from the firm laid off up to I year before or 2 years after the petition was filed is eligible for TAA benefits. TAA benefits fall into five categories: training, income support, relocation allowances, job search allowances, and a health coverage tax credit. (6) Specifically, the TAA program will pay for up to 104 weeks of any basic training program, or up to 130 weeks if the worker is in need of remedial education. Participants are eligible for an additional 26 weeks of unemployment insurance, known as the Trade Readjustment Allowance (TRA). …