Trade Adjustment Assistance: Experiences of Six Trade-Impacted Communities
Published: 2001-08-24T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: This report reviews trade adjustment assistance and other assistance programs, such as the North American Free Trade Agreement Transitional Adjustment Assistance (NAFTA-TAA) program, to determine if they have helped distressed communities deal with the adverse impacts of trade. GAO conducted case studies in six such trade-impacted communities, all of which experienced major trade-related plant closures and layoffs in the mid- to late-1990s.
section_title: What GAO Found
paragraphs: Two communities lost a large percentage of local jobs in sudden plant closures and experienced economic crises. The other communities experienced rolling layoffs or a series of smaller plant closures that dislocated as many or more workers but did so gradually. Experiences in the communities GAO visited indicate that Temporary Adjustment Assistance (TAA) and NAFTA-TAA assistance to dislocated workers, although substantial, could be implemented more effectively. Program administrators and training providers in each community said that the programs have structural problems that impede effective service delivery. One factor that influenced the implementation of training benefits in many communities is that a significant percentage of dislocated workers needed to earn a high school equivalency degree or take remedial courses before they could even start a training program. Case study communities' experience with economic adjustment showed that the assistance available to them was limited and that there are no easy answers to community recovery, even when funds are available. These communities had relied on low-skilled manufacturing jobs, which are disappearing, and now face the difficult task of diversifying their economies while addressing fundamental human capital issues. These communities' experiences with efforts to assist dislocated workers and adjust to changing economic conditions offer several lessons. Program administrators and training providers said that bureaucratic rigidities in dislocated workers programs limited their flexibility in addressing dislocated workers' diverse training needs. Also, local officials believe that dislocated worker training programs are more effective and job placements much higher when strong links exist between training and local business needs.

section_title: Letter
paragraphs: The rapid pace of economic change due to the globalization of national economies has heightened concerns about the efficacy of federal trade adjustment assistance. While the transition to the “new economy” has meant an increase in technology and service sector jobs, it has also resulted in the loss of many manufacturing jobs as companies that cannot compete with lower-priced imports close or relocate to lower-wage countries abroad. The federal government recognizes that while the benefits of free trade are widely dispersed across the economy, the costs of worker dislocation effects are more localized. Accordingly, federal trade adjustment assistance programs are designed to target aid to dislocated workers through the Trade Adjustment Assistance (TAA) and North American Free Trade Agreement Transitional Adjustment Assistance (NAFTA-TAA) programs. There are also assistance programs to mitigate the adverse impacts of trade for businesses, the Trade Adjustment Assistance for Firms program, and for communities, the Community Adjustment and Investment Program. At the Committee’s request, we completed evaluations of these programs in 2000.
As you requested, this review builds on our previous work by providing distressed communities’ perspectives on how trade adjustment assistance and other assistance programs have helped them deal with the adverse impacts of trade. We conducted case studies in six trade-impacted communities where we examined (1) the impact of trade-related layoffs on these communities, (2) the experiences of these communities with trade- related dislocated worker assistance, (3) their experiences with trade- related economic adjustment and other assistance, and (4) the lessons learned from these communities’ experiences.
Between January and March 2001, we conducted case studies in Watsonville, Calif.; Coushatta, La.; Owosso, Mich.; Washington and Chocowinity, N.C.; El Paso, Tex.; and Martinsville and Henry County, Va. We chose these locations using a number of criteria designed to identify communities particularly hard hit by trade-related layoffs, including the numbers of workers certified for federal adjustment assistance between 1995 and 1999, local unemployment rates, and diversity of industry and geographic location. The communities we selected based on these criteria thus likely represent more difficult cases than typical communities that have experienced trade-related job losses. We visited each selected community and interviewed local government officials, community leaders, training providers, and workers receiving benefits from trade adjustment assistance programs. We also met with federal and state officials that administer trade adjustment assistance programs for workers and economic assistance programs for communities, and analyzed the data available on these programs. Appendixes I through VI contain profiles of the six case study communities. For further information on our scope and methodology, see appendix VII.
subsections: section_title: Background
paragraphs: Trade adjustment assistance programs provide federal assistance to dislocated workers, firms, and communities. Economic adjustment assistance programs are also available for distressed communities, regardless of what has caused the adverse economic condition.
subsections: section_title: Trade Adjustment Assistance for Dislocated Workers
paragraphs: The TAA and NAFTA-TAA programs assist U.S. workers displaced by foreign trade and increased imports. The current TAA program was created by the Trade Expansion Act of 1962 (P.L. 87-794). It was substantially modified by the Trade Act of 1974 (P.L. 93-618) and the North American Free Trade Agreement Implementation Act of 1993 (P.L. 103- 182). The TAA program covers workers who lose their jobs because of imports from any country, while the NAFTA-TAA program covers only workers who have lost their jobs because of increased imports from or shift of production to Mexico or Canada. These programs provide benefits such as trade readjustment allowances (extended income support beyond normal unemployment insurance benefits), services such as job training, and allowances for job search and relocation. The Department of Labor administers both programs and makes determinations regarding worker group eligibility. Groups of workers or their representatives can petition the Department of Labor for certification of eligibility to apply for services or benefits under the program. The Department then conducts an investigation to determine if increased imports or a shift in production to Canada or Mexico have contributed to their loss of employment. Once a TAA or NAFTA-TAA petition is approved covered workers must meet several tests regarding the timing of their layoff and their length of employment with the trade-impacted firm. Workers can be certified as eligible for both programs but can claim benefits from only one. The states play a major role by providing program services and benefits, such as job training and reemployment services. The TAA and NAFTA-TAA programs together received about $407 million in fiscal year 2001 funding.
Generally, TAA and NAFTA-TAA income assistance for a dislocated worker is equal to the weekly benefits of the state’s unemployment insurance program and may be paid for up to 52 weeks after the initial 26 weeks (30 weeks in Massachusetts and Washington State) of unemployment insurance benefits have been exhausted. Thus, eligible dislocated workers may receive up to 78 weeks (18 months) of cash payments if enrolled in approved training.  Dislocated workers also are eligible for up to 104 weeks (2 years) of training. Therefore, workers do not necessarily receive income assistance during their entire period of training.
The process by which workers receive assistance is often triggered when a company gives 60 days’ notice of plant closure or layoffs. Generally, a state Rapid Response Team, comprised of employment service officials, meets with plant managers to obtain information about the prospective layoff or closure and the profile of the affected workers. If appropriate, the Rapid Response Team will suggest that the company apply for TAA or NAFTA- TAA certification, so that workers can receive these benefits after separation. The Rapid Response Team generally returns to the plant after the layoff or closure announcement to give workers information about available services. In some states, training providers may join the team. After separation, the dislocated workers can receive job placement assistance, and if suitable employment is not found, they can enroll in training. TAA and NAFTA-TAA provide extended income support and pay for training, within certain time limits and restrictions.  Figure 1 illustrates the timeline for receipt of TAA and NAFTA-TAA benefits.
section_title: Trade Adjustment Assistance for Firms and Communities
paragraphs: The federal government has also established programs to assist trade- impacted firms and communities suffering job losses due to changing trade patterns. The TAA program for firms, established in 1962 and administered by the Department of Commerce’s Economic Development Administration (EDA), provides assistance to firms that can demonstrate that increases in imports have contributed importantly to layoffs and declines in sales or production. The TAA for firms program was funded for $10.5 million in fiscal year 2000. The Community Adjustment and Investment Program was established as a result of the 1993 North American Free Trade Agreement Implementation Act. Under the program, loan guarantees, loans, and grants are provided to businesses and grantees in eligible counties to help stimulate private sector employment and growth. An interagency committee chaired by the Department of the Treasury administers this program. Loan guarantees to local businesses have accounted for the preponderance of financing commitments to date. The program was established with an initial capitalization of $22.5 million and has received $20 million in additional appropriations to support and expand program activities. The Congress did not appropriate any additional funds for the program in fiscal year 2001.
section_title: EDA’s Economic Adjustment Assistance
paragraphs: The federal government also offers assistance programs for any distressed community, regardless of whether the economic problems are trade related, through EDA. EDA’s mission is to help generate jobs; retain existing jobs; and stimulate industrial, technological, and commercial growth in economically distressed areas. EDA assistance is generally available to rural and urban areas of the nation experiencing high unemployment, low income, and severe economic distress. In addition to EDA assistance, a variety of other federal programs provide assistance to economically distressed areas.
section_title: Trade-related Layoffs Hurt Case Study Communities
paragraphs: The six communities we selected for our case studies varied in size, demographics, and location, but they all had experienced major trade- related industry and job losses in the mid- to late-1990s. The firms that these communities lost represent a cross section of the types of industries that have been affected by increased trade, as shown in figure 2.
Although many layoffs in these communities occurred gradually as companies downsized to remain competitive with offshore producers, each community experienced at least one major plant closure that had an immediate impact on the local workforce and economy. For example, Tultex, an apparel manufacturer and one of the largest employers in Martinsville, Va., declared bankruptcy in December 1999 without prior notice and immediately closed all operations, leaving more than 2,000 workers without jobs. Likewise, in December 1996, Coushatta, La., lost 500 jobs when the Sunbeam small appliance plant, the city’s only manufacturing concern, closed as part of a corporate restructuring that moved many production operations offshore. Table 1 shows the total number of workers certified under the TAA program when threatened by job loss in these communities, as well as the numbers certified in major layoffs.
Trade-related plant closures and mass layoffs had serious economic impacts on these communities. In the short term, their unemployment rates rose dramatically. For example, as a result of the Tultex closure in Martinsville, the city’s unemployment rate went from about 9 percent to almost 20 percent in 1999. Similarly, in Coushatta, the closing of the Sunbeam manufacturing plant in 1996 caused the city’s unemployment rate to rise to almost 24 percent in 1997. Where the layoffs were particularly severe, the communities were not prepared to deal with the workers’ immediate needs, and local social service agencies were overwhelmed with requests for assistance. In Martinsville, many displaced Tultex workers were not eligible for assistance, such as food stamps, because they owned vehicles and other assets and could not meet requirements for assistance. These workers, who had also lost medical coverage as a result of the Tultex bankruptcy, were forced to find employment or seek assistance from charitable organizations such as the Salvation Army.
Plant closures and layoffs also impacted local government revenues and hurt local businesses. Government officials in some communities said that they lost significant business tax revenues when companies abandoned their plants. For example, according to Martinsville officials, as a result of its bankruptcy, Tultex defaulted on more than $1 million in property taxes owed in 1999, and the city will continue to lose tax revenue from the property. In addition, Martinsville was forced to raise water and sewer service rates to compensate for the $1.4 million Tultex had paid annually for these services. The loss of income suffered by displaced workers also affected local businesses. Coushatta officials said that Sunbeam’s $10 million annual payroll represented about one-fifth of Red River Parish’s gross income. Such losses of income had a negative impact on retail sales in trade-impacted communities. Businesses that supplied or subcontracted for plants that closed also felt the impact. For example, in Martinsville, a plant that generated steam for the Tultex factory was forced to close after Tultex went bankrupt.
Many dislocated workers found new jobs in their area, but most were paid lower wages, according to community officials. In Owosso, Mich., community officials said that many workers who lost their jobs in the trade-impacted automobile accessory industry eventually found lower- paying service sector jobs. In Washington, N.C., some workers who were displaced when Hamilton Beach/Proctor-Silex, Inc. moved its small appliance operation to Mexico found work in the local furniture-making industry, but at significantly lower wages. Similarly, in Coushatta, many former Sunbeam workers who were hired at a nearby compressor plant that had recently opened were paid less. In El Paso, the city had been successful in attracting some new manufacturing businesses, but many displaced apparel workers were not qualified for the jobs and either found employment in the service sector or remained unemployed. Based on available but incomplete Department of Labor data, nationally only 61.5 percent of dislocated workers who responded and entered new employment reported that their new jobs paid at least 80 percent of their old job’s wages.
Some communities feared that the loss of relatively well-paying, but low- skilled jobs could lead to a decline in the standard of living for a large segment of the population. Food processing jobs in Watsonville, California, and apparel manufacturing jobs in El Paso, Texas, have been considered a means of upward mobility for recent immigrants with limited English skills. Workers who had these jobs were paid union-scale wages and received fringe benefits, which provided an opportunity to buy homes and send their children to college. Officials in Watsonville and Washington said that, until recently, young people could count on a factory job after high school where they might stay for most or all of their working lives. However, workers who have lost manufacturing jobs in these communities have limited prospects for obtaining new jobs with similar wages and benefits, since the jobs now available require higher skills or more education, according to community officials.
Communities we visited were also concerned about the threat of additional trade-related layoffs and plant closures. Washington and Martinsville community leaders said that they expect their textile and apparel industries to continue to decline because of increased foreign competition. Martinsville leaders also fear that the furniture industry, another large employer in their community, will begin to feel the impact of increased furniture imports. Watsonville leaders also expected that the city would continue to lose food processing jobs as more companies shift operations to Mexico.
section_title: Assistance to Dislocated Workers Can Be Substantial, but Structural Problems Impede Service Delivery
paragraphs: The communities we visited had experienced serious adverse impacts from trade-related layoffs. The primary source of trade adjustment assistance they received came from Labor’s TAA and NAFTA-TAA programs for dislocated workers. TAA and NAFTA-TAA are widely available and can provide substantial assistance to trade-impacted dislocated workers through extended income support and training benefits. However, local program administrators told us that these programs have structural problems that hinder the effective delivery of services. The states also varied in how they implemented training benefits. Furthermore, it is difficult to evaluate the efficacy of the varied training or job placement approaches used across communities or states, because Labor’s outcome data for these programs are incomplete.
subsections: section_title: Most TAA and NAFTA-TAA Assistance Was Income Support
paragraphs: The trade adjustment assistance that our case study communities received primarily came through the TAA and NAFTA-TAA programs for trade- impacted dislocated workers. These are entitlement programs, available to dislocated workers whose eligibility had been certified by Labor.  TAA and NAFTA-TAA provide substantial assistance, primarily by supplying extended income support after unemployment insurance is exhausted, as well as training benefits.
TAA and NAFTA-TAA program data show that the largest benefit delivered to displaced workers was in the form of extended income support, primarily for partial wage replacement while in training. As shown in table 2, the two programs paid a total of just over $66 million in income support to individuals in these communities over 6 years. Of this amount, almost $44 million was for “basic” allowances, or payments made in the 26 weeks after unemployment benefits are exhausted. About $22 million was for “additional” allowances made after basic allowances are exhausted, if the dislocated worker is in training or has a training waiver. Thus about 78 percent of TAA and NAFTA-TAA assistance that went to workers in the case study communities was used for income support. In these communities, training courses, which can last up to 104 weeks, cost $19 million over the 6-year period, which was about 22 percent of total funding. Forty-four percent of all program recipients in these communities enrolled in training. Total payments for income support and training was $85 million. Among the communities, El Paso had by far the highest number of recipients—8,581—and the highest total payments—at almost $70 million. Watsonville, which received $390,000 in assistance payments for 27 recipients, received the lowest amount of income support and had only 48 individuals enrolled in training.
section_title: Structural Problems Hinder Effective Delivery of Services and Benefits
paragraphs: The effectiveness of the TAA and NAFTA-TAA programs is hampered by a number of problems in the way the programs have been structured, according to state program administrators and program participants. In the communities we visited, we consistently heard concerns expressed about problems related to inconsistency between the length of income support and training benefits, which resulted in hardships and increased numbers of dropouts; funding problems resulting in training delays; maintaining two separate trade-dislocated worker programs; and programmatic requirements that hinder efficient delivery of services and benefits to workers.
subsections: section_title: Length of Time for Income Support Limits Training Options
paragraphs: Program administrators, training providers, and workers in training consistently said that the TAA and NAFTA-TAA programs needed to close the gap between extended income support payments, which are provided for up to 18 months, and training, which is provided for up to 24 months. Although there are mixed views and little data on the outcomes associated with shorter and longer training programs, as discussed below, the gap in income support is believed to create difficulties for workers in 2-year training programs because when income support payments stop, dislocated workers generally drop out of training because they cannot afford to remain in classes without financial assistance.
The local administrator for the TAA and NAFTA-TAA programs in Washington, N.C., said that he and his staff advised workers to enroll in a course of study that would take no more than 18 months to complete, unless they had other sources of income. Dislocated workers we spoke with, most of whom were currently enrolled in training, frequently referred to workers who had to drop out of training due to financial constraints. Family responsibilities and the need to make mortgage or car loan payments had made it impossible for them to subsist without income support. Some workers we interviewed said they could afford to continue because they had a spouse who was working, but others said that they chose training that lasted 18 months or less. This choice precluded them from pursuing a 2-year Associate of Arts degree program, which could result in higher earnings or better skills, or any 2-year course of study involving initial remedial courses.
section_title: Funding Problems Lead to Training Delays
paragraphs: Another problem cited by local program administrators with program structure was the lack of a stable funding stream for training benefits. Although training is a key part of a worker’s benefits, some states had difficulties providing consistent funding for training due to budgetary problems in the Department of Labor. The amount of funding the Department of Labor can provide is governed by legislatively set caps on training funds, with an annual limit of $80 million for TAA and $30 million for NAFTA-TAA.  According to the Trade Act Coordinator in North Carolina, funding the trade programs has been an “administrative nightmare” and that state funds frequently must be used. Generally, federal funding is provided to states quarterly and is based on prior expenditures. Because TAA and NAFTA-TAA certifications fluctuate, in some cases, states may not have received sufficient funding to cover workers enrolled during a quarter. In addition, state and local officials reported that insufficient federal funds are available for the programs toward the end of the fiscal year (Department of Labor officials said these problems primarily occur in the first and last quarters of the fiscal year). High levels of certifications from unanticipated layoffs and plant closures have resulted in states—Texas and North Carolina, for example—with large numbers of workers enrolled in training at the same time that program officials were informed that no additional federal funds remained. As we noted in our recent report, although Labor has issued formal guidance that states should not stop enrolling workers in program services and benefits when funding is temporarily unavailable, agency officials report that few states have done so.
In some cases, when federal training funds are depleted, states use Workforce Investment Act(WIA) or other state monies. According to officials from case study communities, dislocated workers were frequently enrolled in training under WIA and then shifted to TAA or NAFTA-TAA after Labor approved their petitions and certified them as eligible for benefits.
section_title: Difficulties Stemming From Maintaining Separate Trade Programs
paragraphs: A basic structural problem exists from maintaining separate TAA and NAFTA-TAA programs, resulting in inefficiency, problems in administration, and confusion, according to state program administrators and program participants. Officials in every state administrative office and case study community we visited stated that the certification and training enrollment procedures of the two programs are different. They claimed this hinders effective program administration—particularly because many workers are certified for benefits under both programs and must select one under which to take benefits. Officials said standardized requirements would make the program easier to administer. This reaffirms what state administrators from the 20 states with the largest TAA and NAFTA-TAA programs told us in 2000. Maintaining two separate trade programs, with differing timeframes and provisions for training waivers (available under TAA but not NAFTA-TAA) is confusing to both program administrators and dislocated workers. Dislocated workers in El Paso and Owosso stated that the explanations about the differences that were provided by program officials before they had to choose between programs were inadequate and did not sufficiently clarify their questions. Officials in every state administrative office and case study community we visited thus consistently supported the consolidation of the TAA and NAFTA-TAA programs. These officials believed that consolidation would simplify program administration and rules and would be more efficient. The Department of Labor agreed with this position in its letter of October 5, 2000, commenting on our evaluation of these programs, stating that it supported measures to harmonize the requirements of the two programs.
section_title: Other Program Requirements Hinder Delivery of Benefits and Services
paragraphs: Other program requirements can also impede dislocated workers from successfully completing training, according to state program administrators and program participants. For example, to obtain income support assistance, the NAFTA-TAA program generally requires that the dislocated worker enroll in training by the last day of the 16th week following their layoff or by the last day of the 6th week after publication of the certification, whichever is later. State program administrators said this requirement can limit training options for workers seeking to study at community colleges because training courses may be semester-based and not begin within the enrollment deadline. As a result, according to program administrators, workers must sometimes enroll in less suitable courses to retain their eligibility for income support. The TAA and NAFTA- TAA programs also prohibit dislocated workers from receiving income support if there is a break in training exceeding 14 days. Program administrators we interviewed explained that community colleges generally have semester breaks lasting longer than 14 days, which means that dislocated workers cannot receive any financial assistance during that period.
Other factors complicating service and benefit delivery include certification delays at the Department of Labor and federal paperwork requirements. As noted in our recent report, Department of Labor delays in certifying TAA and NAFTA-TAA petitions or state program administrative office delays in approving workers’ training plans can limit workers’ options. Dislocated workers we interviewed in El Paso said that acquiring approval for their training plans had taken months. Training providers in North Carolina and Texas told us federal administrative and paperwork requirements were cumbersome, rigid, and highly bureaucratic. In North Carolina, the Trade Act Coordinator at the state Employment Security Commission must approve any request for a dislocated worker to change a community college class. Department of Labor officials said that nearly all states have centralized approval of workers’ training plans because local officials have less experience with TAA and NAFTA-TAA regulations.
section_title: Communities Face Significant Challenges in Improving Dislocated Workers’ Skills
paragraphs: A number of challenges influenced implementation of TAA and NAFTA- TAA training benefits in our case study communities. One issue is related to the profile of the dislocated workers, a significant percentage of whom were in their 40’s, had not finished high school, and needed remedial courses before they could start a degree or certificate program. Many in El Paso, Tex., and Watsonville, Calif., also had limited English proficiency. Given this dislocated worker profile, there was a debate in most communities about whether workers should enroll in 2-year degree programs or take shorter certificate programs and return to the workforce as quickly as possible. These issues were particularly challenging in El Paso, which had to contend with overwhelming numbers of dislocated workers, many of whom had low educational levels and limited English proficiency.
subsections: section_title: TAA and NAFTA-TAA Dislocated Workers Present Training Challenges
paragraphs: The profile of dislocated workers that emerged from our visits and discussions with program administrators, training providers, and small groups of dislocated workers is consistent with the Labor Department’s available national data on TAA and NAFTA-TAA dislocated workers. The Department’s data on these programs suggest that, nationwide, almost two-thirds of the participants were women, with an average age of 43, and generally low levels of education. Twenty-five percent had less than a high school education when laid off. According to available data and discussions with program administrators in El Paso and Watsonville, many program participants in their communities also had limited English proficiency. Officials in these two communities told us that the majority of these workers were Hispanic, spoke little or no English, and many had not gone much further than elementary or middle school. In Owosso, Mich., most dislocated workers were high school graduates. However, in Coushatta, La.; Washington and Chocowinity, N.C.; and Martinsville, Va., significant numbers of the dislocated workers had not finished high school, according to local officials.
Many dislocated workers had been with their employers for a considerable number of years. We interviewed some dislocated workers in El Paso who had worked for Levi-Strauss—one for almost 30 years. Similarly, many workers at the Sunbeam plant in Coushatta and the Hamilton Beach/Proctor-Silex, Inc., plant in Washington had worked there for more than 20 years when they were laid off. Program officials and training providers stated that these dislocated workers generally had an excellent work ethic and wanted to reenter the workforce as quickly as possible. However, many did not have a high school diploma or a General Equivalency Degree (GED), and few businesses would hire them without one or the other. Thus, many dislocated workers needed GED classes and sometimes English as a Second Language classes before entering occupational training and obtaining a job.
As a result of these factors, moving these workers further on the educational or job skill continuum is a challenge. Moreover, considering that the participants who did complete high school may have been in the workforce for 2 decades, it is difficult for them to reenter the educational system. Given these factors and the maximum 2 years of training available, earning an Associate of Arts degree would represent a considerable achievement yet may still leave these participants short of the skills required for the new economy jobs.
section_title: Communities Debate Training Alternatives Without Adequate Outcome Data
paragraphs: While program and training officials in most communities we visited were debating the best method for retraining trade-dislocated workers, limited outcome data on wages and employment outcomes make it difficult to assess which methods are most successful. Specifically, the debate centers on enrolling dislocated workers in 2-year degree programs to pursue an Associate in Arts, Science, or General Education, which may give them more options for a new, higher-skilled career, or enrolling them in short- term certificate programs that provide specific occupational skills training. In El Paso, the County Judge and the director of a community-based training advocacy group told us that they believe the central problem facing these workers was underemployment and that training should ensure that dislocated workers have basic language skills and a 2-year degree so that they can get a better job with a living wage. They saw training as a way to help dislocated workers climb the employment ladder, rather than ending up in another low-skilled, low-wage job with little hope of advancement. The training advocacy group official said training should be viewed as an investment that would provide a good return to the local economy.
Others pointed out that many dislocated workers need remedial courses to earn a GED, and in some cases they also need courses to gain proficiency in English, which would take up most, if not all, the allotted training time. They also pointed out that most dislocated workers need to complete training in 18 months, rather than the 24 months allowable, because income support ends at 18 months. They stated that it was important to ensure that dislocated workers could complete their training program and that shorter programs resulting in certification, such as those for certified nursing assistants or truck drivers, were more practical. Finally, an instructor we interviewed at El Paso Community College said it was best to take a flexible approach in meeting workers’ needs. Some workers could manage a 2-year degree program, but most needed a realistic assessment of what they could accomplish in 18 or 24 months. For most, she believed a shorter certificate course was the best option.
Program data suggest that most dislocated workers in these communities are taking shorter training courses. While 11,945 workers enrolled in training during fiscal years 1995 through 2000, only 3,536 workers (30 percent) received additional allowances, which provide income support during the 12 to 18 months of program participation.  (See table 2.) According to program administrators and training providers, workers generally do not continue training after income support benefits have stopped.
Determining how well various training alternatives assist dislocated workers is difficult, due to the lack of outcome data on wages and reemployment. Although the Labor Department instituted a system to measure performance in fiscal year 1999, the level of responses from workers who have left the TAA and NAFTA-TAA programs has been low. To address the low response rate, the Labor Department changed its reporting system in fiscal year 2001, requiring all states to match data on dislocated workers with state wage records to determine whether dislocated workers have reentered employment and at what wage.
section_title: Some Officials Saw Supplemental Funding as Ineffective in El Paso’s Challenging Situation
paragraphs: El Paso, Tex., faced a particular challenge in providing trade adjustment assistance training benefits to dislocated workers because of the large numbers involved. In 1994, nearly half of El Paso’s 50,000 manufacturing jobs were in the apparel and textile industry. According to Texas Workforce Commission data, from January 1994 to February 2001, a total of 17,069 workers in El Paso were certified by the Labor Department for the TAA or NAFTA-TAA programs, with the majority of these jobs in the apparel and textile industry. Trade adjustment assistance program administrators in El Paso said that the sheer number of dislocated workers overwhelmed the system. In addition to the other types of assistance provided, about half of these workers enrolled in training during fiscal years 1995 through 2000. There were not enough case managers to handle the inflow, which averaged 475 cases per case manager in fiscal year 1998 and 325 in fiscal year 1999. All the dislocated workers we interviewed in El Paso were critical of the service they received, saying they were given inconsistent information, little respect by case managers, and no vocational counseling. El Paso’s training providers did not have enough seats for all the dislocated workers at the peak of the layoffs, according to an El Paso Community College official, and the college was not prepared for the bilingual training most workers required. These dislocated workers eventually ran out of trade adjustment benefits but were no more employable than they had been before entering these programs, according to local program officials.
In June 1998, the Labor Department awarded El Paso a $45 million grant to assist 4,500 workers displaced between January 1, 1994, and December 31, 1998. This grant was used for the El Paso Proactive Reemployment Project (PREP), which was to provide retraining, readjustment services, and income support for workers who had not yet received occupational training under their initial TAA and NAFTA-TAA benefits. However, some officials said that PREP instead extended income support without requiring sufficient accountability for their progress. The result, according to the El Paso Community College official, was that the college was basically “warehousing dislocated workers” who needed to attend classes to obtain income support.
section_title: Adjustment Assistance Does Not Match Communities’ Challenges
paragraphs: Case study communities face fundamental challenges in restructuring economies, while the available adjustment assistance is limited, targeted, and short-term. Human capital challenges appear formidable, particularly helping workers in their mid-40’s with a high school or less education to find employment in the new economy. Physical infrastructure needed to renew economic growth is a related obstacle. While each community we visited experienced adverse economic impacts as a result of trade-related layoffs, the severity of these impacts and the communities’ responses varied. Martinsville, Va.; El Paso, Tex.; and Watsonville, Calif., have embarked on economic adjustment strategies aimed at diversifying their economies and attracting jobs to replace those that were lost. Alternatively, in Coushatta, La., and Owosso, Mich., where most trade- displaced workers have found similar but lower-paying jobs in the area, community leaders have not settled on an economic adjustment strategy, although they recognize that in the long run such strategies may be necessary.
subsections: section_title: Communities Face Challenges to Economic Growth
paragraphs: As the communities we visited work to recover from the trade-related job losses they sustained, many face fundamental challenges that will make it difficult to attract new businesses. These challenges encompass the need to develop both their human capital and physical infrastructure in order to complete the economic adjustment of their communities.
subsections: section_title: Communities Have “Old Economy” Workforce
paragraphs: One challenge consistently cited by government and civic leaders in the communities was the issue of human capital. They said that they needed to improve local educational systems, which often had high school dropout rates much higher than the national average. In several communities, local leaders said that school facilities and curricula needed to be improved to better prepare students for high-skilled jobs and to develop a more attractive environment for companies that they would like to recruit. In some communities, local officials said that they were caught in a difficult situation in which local residents who graduate from college leave for better jobs elsewhere. At the same time, they were hampered in recruiting firms that needed a college-educated workforce, in part, because they had low numbers of such workers in their area.
Table 3 illustrates another aspect of the human capital challenge facing these communities. The table compares trade-dislocated workers nationwide to the total U.S. workforce. Trade-dislocated workers include a higher percentage of women, who had lower educational levels and lower average wages in the jobs they held before dislocation. While 42 percent of the nation’s total workforce has a high school education or less, 80 percent of trade-dislocated workers fall into this category. Among trade-dislocated workers, the average age was 43, and 59 percent were over the age of 40. These data suggest, and community leaders we interviewed confirmed, that trade-impacted workers tend to be less mobile and face difficulties reentering a workforce that increasingly requires more skills and training.
Another challenge faced by the communities was the lack of access to major transportation arteries and inferior transportation infrastructure. Officials in three of the communities, Washington, Martinsville, and Coushatta, believe that their economic growth was hampered because their communities are not located near interstate highways. There are no four-lane highways in Coushatta or Red River Parish. While Virginia and North Carolina are considering interstate extensions that would run near Martinsville and Washington, both projects are still in the early proposal phase and, even if approved, are years away.
Local land-use policies pose additional challenges to economic development and growth in Watsonville and Owosso. Watsonville is surrounded by prime agricultural land, and Santa Cruz County has imposed stringent restrictions on the conversion of this land to other uses, including manufacturing and housing. Watsonville officials said that only a limited amount of land zoned for manufacturing is currently available in the area. To expand its manufacturing base to provide employment opportunities for displaced workers, Watsonville officials believe the community must annex agricultural land, which local officials said is rarely approved. Owosso also has limited land available for new industries within its city limits. Independently governed townships, comprised of residential neighborhoods that surround the city, want to limit industrial expansion. Owosso officials said that there has been limited collaboration on economic development among area jurisdictions. Recently, however, a local development corporation has initiated an effort to promote cooperation among business and civic leaders in Owosso and surrounding areas.
section_title: Communities Have Differing Economic Adjustment Strategies
paragraphs: These communities are struggling with difficult choices needed to rebuild their economic base and retool to better compete in the national and global economies. Watsonville, Martinsville, and El Paso have what could be termed “middle path” strategies that aim for economic diversification while preparing their workforce for the high-skilled, well-paying jobs that they hope to attract. However, these communities realize that they still need jobs suitable for low-skilled displaced workers who will not qualify for new economy jobs. The other three communities have yet to come to grips with which economic adjustment course to pursue.
subsections: section_title: El Paso, TX
paragraphs: El Paso received a $275,000 EDA grant to develop an economic adjustment strategic plan, which was adopted by the city in December 1999. The strategy encompasses a 10-year horizon and is linked to three principles: the value of human capital, access to Mexican and Latin American markets, and the radical transformation of the economy through technology. El Paso’s strategic plan recommends following a middle path between recruiting lower-wage industries to employ displaced workers and recruiting those that offer higher-wage employment. The plan’s authors argue that recruiting only lower-wage industries that could employ the current group of displaced workers would expose the city to companies concerned entirely with low-cost labor and risk further business closures if they relocate to Mexico. On the other hand, offering incentives only to higher-wage industries would create few opportunities for currently displaced workers and further strain the community’s social infrastructure. The strategy emphasizes the importance of making workforce development programs employer-driven and linking these efforts to businesses.
section_title: Martinsville/Henry County, VA
paragraphs: In Martinsville/Henry County, the Patrick Henry Development Council, which is the local economic planning board, received a $350,000 grant in 2001 from the U.S. Department of Housing and Urban Development to develop an economic development strategy. The strategy seeks to diversify the area’s economic base by recruiting both high-paying technology and heavy manufacturing companies. The strategy also focuses on human capital, and the council contracted for a worker profile survey to determine what skills the local workforce needs to develop to attract high- paying companies and to assess the local educational system’s ability to produce that workforce. Martinsville/Henry County is also part of an EDA- designated Economic Development District and received a $60,000 grant in 2000 to prepare a regional strategy that focuses on mitigating adverse trade impacts. Both strategies propose and prioritize projects, such as industrial parks and business incubators, qualifying for state and federal assistance.
section_title: Watsonville, CA
paragraphs: Watsonville officials concluded that efforts to train many dislocated food processing workers have resulted in limited success. Their economic adjustment strategy thus has two goals: (1) to attract labor-intensive manufacturing jobs for which these displaced workers can qualify and (2) to improve job opportunities for the city’s youth by providing training in computer and other skills required by high-wage employers. In addition, the county and community college are collaborating on a project to support the creation and retention of quality jobs. There is also a business incubator to facilitate new business start-ups.
section_title: Owosso, MI
paragraphs: Owosso city officials have done little economic adjustment planning, although local business leaders have taken steps to attract new jobs. Because of Owosso’s proximity to the industrial centers of Lansing and Flint, where automotive industry jobs are available, the city has not developed an economic adjustment strategy. However, the private sector in the Owosso area has taken some steps to address job loss. Business and community leaders have begun work on a plan that looks to the area’s future economic development, part of which is to develop an industrial park.
section_title: Coushatta, LA and Washington, NC
paragraphs: Coushatta and Washington have taken some action to improve their local economies. Coushatta officials said that the town, which has only 2,299 residents, has limited resources for development, and has not developed a comprehensive economic plan. The town, however, has spent $1 million to renovate the city-owned Sunbeam building and leased it to a pillow and mattress manufacturer that employs about 200 workers, including many former Sunbeam employees. The town has also contracted with a consultant to help attract new companies. In Washington, local officials said the Beaufort County Planning Commission would begin developing an economic adjustment strategy when it filled its Executive Director position. In the meantime, the Commission is considering acquiring a building to serve as a business incubator.
section_title: Assistance Available for Communities’ Economic Adjustment Efforts
paragraphs: Officials from the communities we visited generally reported that they had received modest assistance from federal and state governments, mostly federal loan guarantees. Table 4 shows that a total of $59.5 million in economic adjustment funding was received by the communities from federal assistance programs from fiscal year 1995 to the present. Reflecting the varied sizes of the communities and the impacts they experienced, this assistance ranged from $413,000 to Coushatta, La., to $44.5 million for El Paso, Tex.  In addition, the largest source of adjustment funding for these communities—$42.3 million—was provided by Community Adjustment and Investment Program (CAIP) guaranteed business loans, most of which were made in El Paso ($38.7 million). The second largest source of funding was from EDA, which provided $10.5 million to the communities.
Each community received some economic development assistance from its state government. The most common forms of state assistance were business tax abatements and refunds available to new and expanding businesses in economically distressed areas. A Martinsville city official said that, since 1996, when the city was designated a State Enterprise Zone, all businesses that located or expanded in the city have taken advantage of these incentives. Some communities also received state economic development grants and loans. In Coushatta, the Louisiana State government helped fund improvements to the former Sunbeam building to make it more attractive to potential manufacturing tenants. Likewise in Martinsville, after the Tultex closure in 1999, the state of Virginia loaned the city $945,000 to construct a shell building in its industrial park and provided a $250,000 grant to convert Tultex’s former headquarters building into a business incubator.
subsections: section_title: Federal Trade Economic Adjustment Assistance Mainly Provided by CAIP
paragraphs: The communities received limited assistance from the two federal programs designed to mitigate the adverse economic impacts of tradethe Trade Adjustment Assistance program for firms and CAIP. The program for firms provides consulting services to trade-impacted firms to make them more competitive. According to Department of Commerce records, only one firm in the six communities, an El Paso wood cabinet company, received assistance from the program. While the program helped the company to develop an adjustment plan, the company did not implement it and did not receive funding, according to program records.
Three of our case study communities received assistance from CAIP. Since 1997, businesses in El Paso have applied for and received about $38.7 million in guaranteed CAIP loans, more than any other community in the country. CAIP has also made two direct loans in El Paso, one in May 1999, for $1 million to the El Paso Workforce Collaborative to renovate a former Levi-Strauss factory to be used as a Workforce Development Center and a Business Resource Center. The second loan was made in March 2001, for $180,000 to La Mujer Obrera, an advocacy group for dislocated women workers, for equipment and working capital for a restaurant that is also a training facility. El Paso also received two CAIP grants of $450,000 aimed at improving workers’ skills, one to a plastic injection molding training and contract center, and the second to retrain workers for health field jobs. In Watsonville, CAIP has guaranteed three loans totaling $2.6 million for plant nursery businesses. A business in Martinsville obtained two CAIP guaranteed loans totaling $600,000. Near Coushatta, a portable building business received a CAIP guarantee for a $413,000 loan. Owosso was ineligible for the CAIP program because of its low unemployment rate, and while Washington was eligible, no businesses there received CAIP-guaranteed loans. Officials in most communities we visited said that CAIP assistance is not sufficient to spur economic recovery. We noted in our recent report that CAIP adds marginal benefits to trade-impacted communities because it guarantees loans that would likely have been made under existing Small Business Administration programs.
section_title: Some Assistance Available From Other Federal Programs
paragraphs: Other federal programs, although not targeted specifically at trade- impacted communities, offer assistance to economically distressed areas. For example, EDA provides grants to communities in economic decline to upgrade or expand their economic infrastructure and to design and implement economic adjustment strategies. Most of our case study communities received some economic adjustment assistance from EDA and other federal agencies, but community leaders believed more was needed.
In Martinsville/Henry County, a team of federal officials from several agencies, working under the coordination of the President’s National Economic Council, went there after the Tultex bankruptcy in December 1999 to explain the federal assistance available and to assist the communities in filing grant applications. In 2000, the community was awarded about $800,000 in EDA and Department of Agriculture grants for a business incubator.  In 2001, a $840,000 EDA grant for a water line for a new plant was approved.  In addition, the West Piedmont Planning District received a $60,000 EDA grant to prepare its economic adjustment strategy.
Regarding El Paso, the city was awarded about $2.6 million in EDA economic adjustment assistance during the period 1995 to present. This amount included a $1.4 million grant to aid in converting the former Levi- Strauss plant and a $1.2 million grant to La Mujer Obrera, an advocacy group for dislocated women workers.
section_title: Enterprise Community and Empowerment Zone Funding Also Used
paragraphs: Watsonville and El Paso, cities that historically have had high percentages of low-income residents, have had sections declared federal Enterprise Communities on the basis of their high poverty rates and low per capita income levels. Enterprise Communities received $3 million in block grants through this program, which is administered by the Departments of Agriculture or Housing and Urban Development. Businesses in these communities are eligible for tax-exempt bond financing to build or expand facilities. Enterprise Communities’ applications for other competitive federal economic and community development grants are given special rankings by the agencies that administer the grants. Watsonville, which was designated an Enterprise Community in 1995, devoted much of its grant, provided by the Department of Agriculture, to fund youth training programs. It has used other federal grants and loans to finance a downtown business incubator, two motels, and the expansion of a community college branch campus. El Paso, which also received its Enterprise Community designation in 1995, is using its funds for human capital efforts such as job training and has offered tax-exempt bond financing as an incentive to attract and encourage business expansion.
El Paso was also designated an Empowerment Zone by the Department of Housing and Urban Development in 1999, based on criteria similar to those used by the Enterprise Community program. As an Empowerment Zone, the city thus far has received $19 million. The funds are being used to promote projects similar to those under the Enterprise Community program.
section_title: Local Views on Trade-Impacted Communities’ Access to Federal Funds
paragraphs: Officials in the communities believe that they are limited in their ability to obtain federal economic adjustment assistance and cite a number of reasons. Some officials said that, without a central source of information on available economic adjustment programs, they are not always aware of those for which their communities might qualify. For example, officials at the West Piedmont Planning District, which includes Martinsville, said they are familiar with EDA and Department of Agriculture Rural Development programs but have limited knowledge of other federal programs. Officials also cited the lack of financial resources to meet the federal grant matching requirements. El Paso officials said they primarily have sought assistance from programs with no or low matching requirements. Some officials described the grant application process as time-consuming, technical, and expensive. Officials in Owosso, Coushatta, and Washington said that their communities lacked the personnel and expertise necessary to secure federal grants. Local officials believe that the scope of programs targeted at trade-impacted areas is too limited to make a difference in their communities.
section_title: Lessons Learned From Trade-Impacted Communities’ Experiences
paragraphs: The six case study communities in our study pose a particularly severe test for the trade adjustment assistance programs since we used criteria that were designed to identify hard hit communities. As a result, these experiences may not be typical of communities affected by trade-related layoffs. Nevertheless, the lessons learned by these communities may be applicable to other hard hit communities, as well as to other communities where the impact of trade-related layoffs was not so severe. These lessons may also be relevant for communities where technology or other forces have led to significant job losses.
These communities face long-term challenges in improving job skills and human capital of dislocated workers and developing physical infrastructure needed to attract new businesses. Those involved in worker adjustment assistance programs in the communities pointed to the need for more flexible training programs linked to the employment needs of local businesses. Community leaders working at economic adjustment efforts had a harder time drawing lessons from their experiences and have faced difficult choices and found few off-the-shelf answers. One of the fundamental challenges facing trade-impacted communities is helping dislocated workers—generally older workers with a high school degree or less—adjust to an increasingly globalized economy that requires different skills than were needed when these individuals entered the workforce. Trade adjustment assistance program administrators and training providers in the communities said that program rules regarding income support benefits limit their flexibility in addressing dislocated workers’ training needs. Although administrators believed that limiting income support to 18 months presented financial hardships that discouraged workers from completing 2-year training programs, available data indicate that most workers leave training after 1 year. However, even if these programs were more flexible, these relatively short-term training programs may not bridge the gap between these workers’ current skills and the skills they need to enter the new economy workforce. Our discussions with training providers and workers indicated that enormous sacrifices are necessary for dislocated workers — many of whom have been out of school for 20 years or more — to be successful in an educational system that has become significantly more challenging while maintaining family and other responsibilities.
Still, additional funding does not mean that these challenges are easily addressed, as indicated by El Paso’s experience with a $45 million supplemental grant from the Department of Labor. Local officials learned that the necessary training infrastructure must be in place to meet dislocated workers’ needs. According to community leaders, supplemental grant funds were used to place many workers in training programs that had not been evaluated. Further, insufficient bilingual training designed for adults was available. With no clear sense that training would improve their job prospects, some workers stayed in training to continue receiving income support benefits. Eventually, grant managers began offering workers monetary incentives to leave training and take available low- skilled jobs.
One of the lessons that emerged from our discussions is the central role of education and training, which included training to provide basic language skills to laid off workers, strengthening the links between business and educational institutions, or emphasizing education for the next generation of workers. In Martinsville, the local planning authority, in conjunction with businesses, has contracted for a workforce survey that will identify the human capital needed to attract and retain businesses. The survey results will serve as the basis for developing training courses at the local community college. In Owosso, the local training provider, a private college, has local business leaders sit on an advisory board to ensure that the college’s curriculum includes needed job skills training. In El Paso, a training provider that specializes in training displaced workers has worked with local businesses to develop an internship program to give students work experience. Such efforts to define local needs, establish priorities, and link education and training with jobs is a common theme among our trade-impacted communities.
Finally, one of the lessons that appeared in our discussions with many community leaders was that helping the dislocated workers is the immediate challenge but does not lead to—and may even detract from— the efforts to address the longer-term structural problems. Watsonville, Martinsville, and El Paso appear to have chosen the path of economic diversification and are emphasizing the importance of education for the generations now entering the workforce, since it is often much easier for them to acquire the skills that are necessary for higher-paying jobs in the new economy. However, leaders in these communities acknowledge that they also need jobs suitable for low-skilled displaced workers who will not qualify for new economy jobs. Balancing these competing demands will determine how successfully these communities will adjust to changing national and global economic conditions.
section_title: Agency Comments and Our Evaluation
paragraphs: We received written comments on a draft report from the Departments of Commerce and the Treasury.  The Department of Commerce said that the report fairly and accurately describes EDA assistance programs.  The Department of the Treasury said that the report makes an important contribution to understanding the issues that a community faces when an abrupt change takes place in its economy as a result of job dislocations attributable to changing trade patterns.  The comments we received and our evaluation of them are contained in appendixes VIII and IX.  In addition, the Department of Labor provided technical comments, which we incorporated in the report as appropriate.
The Department of Commerce said that our characterization of the difficulties of Martinsville, Virginia in obtaining economic adjustment assistance did not fully reflect EDA’s eligibility or competitive selection criteria for its Public Works and Economic Adjustment programs.  We have revised the report to reflect EDA’s clarifications.
The Department of the Treasury, while not disagreeing with our characterization of CAIP funding as limited, stated that more CAIP financing for communities was available if the communities requested it. We clarified the report by stating that businesses and potential grantees must apply for CAIP financing.  CAIP does not provide funding directly to eligible counties, but rather offers access to competitively awarded grants or enhanced access to credit through loans and loan guarantees.  The Treasury also disagreed with our statement that CAIP loan guarantees made in partnership with the Small Business Administration would likely have been made anyway without CAIP’s participation.  We based these statements on our recent evaluation of CAIP.  Our position, which remains unchanged, is that outcome measures and a monitoring system are needed to demonstrate the benefits CAIP has brought to communities.
We are sending copies of this report to appropriate congressional committees. We are also sending copies of this report to the Secretary of Commerce; the Secretary of Labor; and the Secretary of the Treasury. Copies also will be made available to others upon request.
If you or your staff have any questions about this report, please contact me on (202) 512-4128. Additional contacts and staff acknowledgments are listed in appendix X.
section_title: Appendix I: Watsonville, California, Case Study Profile
paragraphs: Located in the center of the El Parajo Valley, in Santa Cruz County, Watsonville is on the central California coast, 48 miles from San Josè. Latinos comprise 75 percent of the population, most of whom are recent immigrants who came to work in the area’s agricultural sector. The second largest city in the county, Watsonville has an unemployment rate that is twice that of the county. Table 5 provides more details on the community’s characteristics.
subsections: section_title: Impact of Trade- Related Job Losses
paragraphs: Watsonville’s economy has been severely impacted by increased imports of frozen vegetables and natural disasters over the last two decades, according to local officials. Imports of low-cost vegetables from Mexico, Guatemala, and other countries have resulted in the reduction of Watsonville’s frozen vegetables industry. Thus, the industry’s decline was already well under way before the North American Free trade Agreement (NAFTA) was enacted in 1994. According to the University of California, Los Angeles, North American Integration and Development Center, 510 permanent and 440 seasonal processing workers lost their jobs between 1983 and 1994. This was followed in 1996 with the closure of Dean Foods plants and the loss of 600 jobs. Natural disasters have also hurt the community, which is still recovering from the Loma Prieta earthquake of 1989. Further, in 1995, the community experienced a major flood and suffered agricultural losses.
The closures of the frozen vegetable plants have had a major impact on Watsonville. Since the mid-1980s, Watsonville has lost more than 5,000 frozen food and cannery jobs, many of which were mid-level union positions that paid about $8 an hour and provided fringe benefits. For the community’s many migrant farm workers, these jobs provided an opportunity for upward mobility but were replaced with poorly paid seasonal or part-time work. The unemployment rates in Watsonville for the last 10 years (1990 through 1999) has been in the double digits, averaging 16.5 percent. In 1993, the unemployment rate peaked at 20.8 percent and declined to a low of 11.9 percent in 2000, when the annual average for the United States and Santa Cruz County was 4 percent and 5.6 percent, respectively. Nevertheless, the food processing and production industry still remains the largest employer in the area, providing employment for more than 18,000 workers. However, since 1994, the number of jobs in food processing has declined at an average annual rate of 6.8 percent. Many residents and leaders believe that unless the city can reduce its dependence on low-skilled, low-income, seasonal jobs, the community will see further economic decline.
section_title: Assistance to Dislocated Workers
paragraphs: Watsonville has not experienced a large, trade-related layoff of workers since 1996, and the results of efforts to assist earlier trade-impacted workers are limited. Several local officials said that one of the main problems with the Trade Adjustment Assistance (TAA) program was that the allowance of 2 years of training might not be long enough when dealing with workers who only speak Spanish or are illiterate in their native language. They said that considering these individuals’ remedial education needs, it would probably take 3 to 5 years to train them for new jobs.
For workers who had enrolled in a local training school or community college, local officials had no data on wages earned after graduation and did not know the number of workers who had found jobs in areas of their training. Rather than relocate, however, most dislocated workers have chosen to remain in the Watsonville area. Some share homes with multiple families and have found employment in plant nurseries, farms, or small businesses. To help reemploy these people, city officials said that they have focused on attracting assembly jobs that are appropriate to the local population’s skill level. They recruited a company that makes bike and snowmobile parts, which opened in 2001.
section_title: Economic Adjustment Efforts
paragraphs: The city of Watsonville has received a wide range of federal, state, and county economic adjustment assistance to help implement its strategic plan. Federal agencies have worked to deliver a variety of assistance to Watsonville. The Department of Agriculture has assisted the city with loans and grants through local partnerships with financial organizations and local economic organizations. It has also provided loans for several business projects, such as the Red Roof Inn and Holiday Inn Express hotels, a small business incubator building with office and retail space (see fig. 3), and a warehouse facility. The city was also awarded almost $200,000 from the Department of Agriculture and $500,000 from the Department of Health and Human Services to help the El Pajaro Community Development Corporation with development of the business incubator building. The El Pajaro Development Corporation is one of several local corporations working with federal agencies to improve Watsonville’s economy.
Watsonville was included in the first round of cities the Department of Agriculture designated as Federal Enterprise Communities in January 1995. This designation will result in about $3 million in federal grant funds over the next 10 years and will improve the city’s ability to qualify for additional federal program funds. In its Enterprise Community application, Watsonville officials listed unemployment and the school dropout rate as their most severe community problems. Local officials also acknowledged that most training efforts are targeted at the younger population, conceding that they have largely given up on training older workers now unable to work in the local agricultural industry, primarily with strawberry production.
Watsonville also has participated in the Community Adjustment and Investment Program (CAIP). Under this program, Watsonville received about an additional $2.6 million in guaranteed loans in fiscal years 1998 through 2000 to support several plant nursery business projects.
Watsonville has also received more than $6 million in grants from the Economic Development Administration’s (EDA) Public Works and Economic Development Program. The funds can be used to support (1) new building construction, (2) business incubators, (3) industrial parks, (4) roads and streets, and (5) water and sewer systems. Watsonville applied for the EDA program under the Santa Cruz County Economic Adjustment Strategy plan. The projects are funded with federal, state, and local agency funds. Some of the projects EDA has approved include a new Cabrillo College satellite campus (see fig. 3), a youth training center, and a parking garage in a downtown commercial building.
Watsonville’s designation as one of 39 state Enterprise Zones located throughout California went into effect in 1997 and will be active until 2012. As a state Enterprise Zone, the city’s industrial area will receive a wide array of incentives to retain, expand, and attract businesses, to diversify the community’s economic base.
However, local land use decisions are frequently contentious and sometimes challenged by farmers and environmental groups in the area. According to Watsonville officials, Santa Cruz County has an ordinance prohibiting the conversion of agricultural land to industrial uses or housing developments. The county ordinance is used to encourage new development efforts to locate in urban areas to protect agricultural land and natural resources in the rural areas. Also, environmental groups are against the development of the area because of the potential effects on the Monterey Peninsula and Bay.
section_title: Appendix II: Coushatta, Louisiana, Case Study Profile
paragraphs: The town of Coushatta in Red River Parish in northwest Louisiana is approximately 50 miles southwest of Shreveport (parishes are comparable to counties). Red River Parish has a small industrial base and no multilane highways or public port facilities. Table 6 presents a demographic and economic profile of Coushatta.
subsections: section_title: Impact of Trade- Related Job Losses
paragraphs: In late 1996, the Sunbeam-Oster Corporation, a manufacturer of small appliances such as toasters and irons, announced the closure of its Coushatta, Louisiana, plant after 31 years of operation (see figure 4). The closure, effective December 31, 1996, was part of a nationwide downsizing by Sunbeam that cut more than 6,000 jobs due to increased imports. With the closure of the Sunbeam plant, a major employer in Coushatta, the unemployment rate for Red River Parish rose to 23.7 percent in 1997. A total of approximately 520 workers lost their jobs, many with more than 20 years of service. According to local officials, most workers affected by the closure were white, female, and approximately 40 years of age. The closure of the Sunbeam plant also meant the loss of a $10 million annual payroll, a decrease by one fifth of Red River Parish’s gross income, and the erosion of its tax base. Coushatta’s unemployment rate was 9.1 percent in 2000.
section_title: Assistance to Dislocated Workers
paragraphs: The workers who were laid off from the Sunbeam plant received a severance package and health insurance coverage for 26 weeks. Some dislocated workers have since reentered the workforce and are employed at the same wage or higher. Some found jobs in the service sector, including retail stores or restaurants, while others found jobs in manufacturing plants in nearby towns. For instance, soon after Sunbeam closed, another company opened a plant in a nearby town hired 80 dislocated workers. Company officials said that more dislocated workers would have been hired if they had applied. Because the company requires a high school diploma or General Equivalency Degree (GED), it offers a computer-based training program to aid interested applicants in preparing for the GED and other training geared at third grade through the first year of college. Company officials said they have a strong incentive to train workers well. Local officials also said that the local education system is very poor, so some companies prefer to conduct on-the-job training for workers. As noted in table 6, in 1990, about 52 percent of people 25 years and over had graduated from high school.
The TAA and NAFTA-TAA programs made one-on-one vocational counseling and career assessments available to participants by the TAA and NAFTA-TAA programs. After the Sunbeam plant closure, about 130 workers attended various classroom training programs during 1996 to 1997. Eleven of the former Sunbeam workers began on-the-job training, and 54 received Certificates of Continuing Eligibility forms, which can be redeemed for training for 2 years. The local training provider is a state technical college that provides vocational training in certificate and diploma programs and offers an associate degree program. Local program administrators told us that there is a clear trend that dislocated workers will drop out of training as soon as they can find a job rather than waiting to complete training at this school, which they said is not well regarded and has a low job placement rate. Another training provider, a private institute, located more than 50 miles from the impacted community, also trained some of the dislocated workers (see fig. 4). This school offered training in tractor-trailer driving and clerical skills and reported a 96- percent job placement rate. School officials attribute their success to the students’ commitment, stating that dislocated workers who commute to attend the institute are serious about wanting to be reemployed.
After June 1997, active enrollment in training programs declined because those who had completed their training programs had found employment. Enrollment continued to fluctuate as more of the Sunbeam workers’ income support benefits ended. Some dislocated workers interested in on- the-job training were referred to companies that had active on-the-job training contracts. According to officials, most of the Sunbeam workforce requested referrals to a new company that opened in Natchitoches in early 1997.
Economic and community development needs in Coushatta are met by the Coordinating and Development Corporation, a nonprofit entity that provides specialized services to northwest Louisiana’s parishes, municipalities, other industrial and economic development groups, and public organizations. The Coordinating and Development Corporation also provides assistance to individuals, especially dislocated workers. It conducted local workshops on job relocation, job skills, interviews, and resumes with the Louisiana Department of Labor. The corporation invited various training vendors to participate by presenting programs on the training options available to displaced workers. These programs were held throughout December 1996 and continued as needed over the next year. When the Sunbeam closure occurred, the Coordinating and Development Corporation provided emergency assistance by setting up an office for 2 years in the Coushatta courthouse, because its closest permanent office was 35 miles away.
section_title: Economic Adjustment Efforts
paragraphs: Coushatta does not have its own comprehensive economic development plan but is included in the Red River Parish plan. Although no single organization focuses on economic development in Coushatta, numerous officials and entities are involved in economic development efforts. For example, the Coordinating and Development Corporation prepared a needs assessment for northwest Louisiana for the year 2000 that identified barriers to economic development for each parish. Some new plants in the vicinity need water and sewer lines extended or expanded. In addition, following the Sunbeam plant closure in Coushatta, Louisiana Tech University prepared an estimated impact analysis for the corporation as a public service. The report estimated the probable economic impact of the plant’s closure on the economies of northwest Louisiana at almost $30 million. It said that Red River Parish will bear over $16 million of the burden and will likely lose 35 “secondary” sector jobs, 175 trade and service sector jobs, and 81 government sector jobs.
The Sunbeam facility was owned by the town of Coushatta and leased to Sunbeam. When the plant closed in 1996, the town took the building back and maintained it until another business was brought in to take over the facility. In 1999, a mattress and pillow factory opened at the Sunbeam site. Economic development officials and the Mayor were instrumental in getting the factory to locate in Coushatta. The company now employs approximately 200 workers from the Coushatta area.
Many communities within Red River Parish—including Coushatta—are located within the state’s Enterprise Zones, which provide economic incentives to businesses that locate there, including tax credits and sales and use tax rebates to businesses hiring at least 35 percent of their new employees from targeted groups. In addition, a $2,500 tax credit is generated for each new job created. An additional $2,500 tax credit may be generated in the second year of employment, if the new employee is certified as removed from state financial assistance rolls.
section_title: Appendix III: Owosso, Michigan, Case Study Profile
paragraphs: Owosso is located in Shiawassee County between two major cities, Lansing and Flint, and near major interstate highways connecting Canada to Mexico. About 20 percent of Owosso’s workforce works in manufacturing. Service sector growth has been concentrated in lower- paying jobs, particularly the retail sector, the second lowest paying sector in the state. Table 7 provides a profile of Owosso.
subsections: section_title: Impact of Trade- Related Job Losses
paragraphs: Owosso lost several automobile parts manufacturers to Mexico in the mid- 1990s. A total of 583 workers lost their jobs and were certified for TAA benefits. The owner of an airbag and seatcover manufacturing company closed his Owosso plant and laid off 362 workers because his firm was unable to compete with Mexican competitors. He also closed other manufacturing facilities in Michigan, laying off a total of 2,000 workers. He believed that NAFTA-related trade was a contributing factor to the closures.
Civic and business leaders we interviewed said that the jobs lost did not have a major impact on Owosso’s economy because the jobs lost were replaced by retail and food service jobs. However, a civic leader we spoke to was concerned with the decline in wage rates in Owosso. For example, according to this official, someone who once made $12 to $14 per hour in the automotive parts industry now may be earning $6 to $8 per hour. People wanting better wages must commute to Lansing or Flint, Mich.
section_title: Assistance to Dislocated Workers
paragraphs: Owosso has a satellite office of Career Alliance Inc., headquartered in Flint, Mich., which is designated by the state of Michigan to administer the TAA, NAFTA-TAA, and other dislocated worker programs in the area. The state’s Rapid Response Team informs dislocated workers that Career Alliance Inc., representatives are available to help them with job counseling, assessment, placement, and supportive services. In addition, Career Alliance staff visit companies where there are expected layoffs and brief workers about the types of assistance they offer.  Figure 5 provides photos of downtown Owosso and the sign for the One Stop Career Center that served the dislocated workers.
A local, private nonprofit college in Owosso also provides training services for the TAA and NAFTA-TAA programs. When they are notified that a plant intends to close, college personnel go to the plant to inform the workers about the occupational training programs they operate at the college and help them prepare resumes and applications for unemployment compensation. The college offers academic degree and certificate programs. A college official told us that the college’s primary goal is to make students employable. The college has an advisory board comprised of business leaders who help the college determine the training individuals need to obtain employment in the area. According to college officials, they place 100 percent of their students in jobs when they graduate, and about 87 percent obtain jobs in the field for which they were trained.
In addition, a trucking company in nearby Corunna operates an on-the-job training program for the college to train dislocated workers to drive trucks. The 26-week training course provides students with a combination of classroom training at the college and hands-on training at the trucking company. The company owner said that trainees who completed this program have been successful in finding jobs.
section_title: Economic Adjustment Efforts
paragraphs: According to an Owosso civic leader, the community is enjoying a low unemployment rate and does not see a need to develop an economic development or job growth plan. Moreover, there have been difficulties in getting the local, township, and county officials together to develop joint and comprehensive approaches to economic development. He said that people do not organize at the local level to apply for assistance from the state and federal governments. In addition, there is no one entity at the local level that identifies and seeks out financial assistance. An Owosso business leader told us that about 3 years ago, several business and government leaders joined together to plan and develop an industrial park in Owosso. It has taken 3 years to bring parties from neighboring Corunna and Owosso to the point that they can work on a project that would benefit them all. This group will be receiving financial assistance from the Michigan Economic Development Corporation to help fund water, sewer, and road connections to the park.
Owosso’s community development director said that the town has taken advantage of federal and state grants and tax incentives to help stimulate economic growth in the community over the last 5 years. For example, Owosso received federal Urban Development Action Grant funds to improve the city’s retail sector and a $3 million loan from a Department of Agriculture Natural Resource Conservation Service program to build a downtown hotel. Owosso also uses local and state tax incentives to attract new businesses. To help promote economic development in Owosso, companies are offered tax abatements when they locate in Owosso or increase the number of employees they employ. They also have a tax increment and financing program, in which the community takes certain corporate taxes and uses them to upgrade the city’s road, sewer, and water systems.
section_title: Appendix IV: Washington and Chocowinity, North Carolina, Case Study Profiles
paragraphs: The communities of Washington and Chocowinity are located on the Pamlico River in Beaufort County in eastern North Carolina (see fig. 6). Washington, the largest town in the county, has a population of just over 10,000. Chocowinity, its immediate neighbor, has a population of less than 1,000. The unemployment rate for Beaufort County is 7.6 percent. Between 1997 and 1999, 3,880 workers were certified by TAA or NAFTA-TAA due to layoffs and plant closures at several companies, including Singer Furniture in Chocowinity (see fig. 6) and Hamilton Beach/Proctor-Silex, Inc., in Washington. About 85 percent of dislocated workers from these companies lived in Beaufort County. Table 8 provides more details on the community characteristics.
subsections: section_title: Impact of Trade- Related Job Losses
paragraphs: Between 1997 and 1999, Beaufort County experienced massive trade- related layoffs of workers. The closure of two manufacturing companies resulted in the displacement of more than 1,500 workers, many of whom were female, between 40 and 50 years of age, with minimal skills and low educational levels. The community’s unemployment rate rose immediately following these layoffs and has since declined. Community officials said that many workers have obtained employment, generally at a lower wage in service sector businesses such as retail stores or restaurants. Economically, Beaufort County ranks lower than most North Carolina counties, with a lower per capita income, lower educational levels, higher unemployment, and higher poverty rates.
section_title: Assistance to Dislocated Workers
paragraphs: In the past few years, Beaufort County has experienced plant closures and layoffs in excess of 1,500 workers. Several manufacturing companies or their employees filed petitions with the U.S. Department of Labor and were certified for NAFTA-TAA and TAA benefits following initial certification by the North Carolina Department of Commerce Employment Security Commission. Singer Furniture employees were the first to file a TAA petition in Beaufort County. Hamilton Beach/Proctor Silex, Inc. workers shortly followed. Once the petition was approved, dislocated workers met with a group of community and program officials to discuss financial assistance and employment and training options. However, program officials in Beaufort had not dealt with the Department of Labor’s trade adjustment assistance programs prior to these layoffs, and initially they were unsure what benefits were available to workers or how to administer the programs. As a result of these problems and the length of time it takes for certification, many workers were provided benefits under other programs such as the Workforce Investment Act dislocated workers program.
In Beaufort County, the local one-stop service center, or JobLink Career Center, located in Washington, provides counseling services, resume writing, needs assessment, training, labor market information, and employment opportunities. The JobLink Career Center houses and coordinates services provided by numerous agencies in North Carolina. JobLink officials strongly encourage dislocated workers to enroll in GED programs or adult basic skills training as soon as possible.
Officials stated that approximately 22 percent of dislocated workers enroll in training; however, little data are available on the number of individuals that complete training. Officials estimated that only about 25 percent of the dislocated workers that enter GED programs ever continue further. One reason for this high dropout rate is that the local community college requires students to obtain their GED before entering any other type of training at the college. However, Beaufort County Community College does provide GED training and adult basic skills training free of charge prior to entering certificate or associate degree programs. Another reason for the high dropout rate is that income support benefit payments do not coincide with the period allowed for training, and dislocated workers drop out of training as soon as their income support benefits are exhausted. Numerous officials in Beaufort County stated that a major problem with TAA and NAFTA-TAA is that the program allows for 104 weeks of training, but financial benefits are provided for only 78 weeks. They said that this situation contributes significantly to dislocated workers dropping out of training before completing the course.
Officials said that they strive to train dislocated workers for new occupations because, in their view, dislocated workers are no better off taking another job in industries threatened by increased trade, like textiles. However, opportunities to train for new occupations are limited because the community does not have any private training institutes, and Beaufort County Community College is the only training facility within a reasonable commute for county residents. The community college has developed courses to meet the needs of the dislocated workers for training to enter other occupations. However, many of the programs offered are for college students earning associate degrees and are semester based. In addition, an estimated 25 percent of the dislocated workers from Hamilton Beach/Proctor-Silex, Inc., and more than 50 percent of the dislocated workers from Singer Furniture did not have high school degrees or GEDs; however, many of these individuals were reemployed immediately following the layoff at very low-paying, low-skilled jobs, according to local officials.
section_title: Economic Adjustment Efforts
paragraphs: Economic development is the most important issue for Beaufort County, according to county economic development officials, because the industrial base is changing. Community officials recognize the need to bring in other types of industries, since much of their business has been manufacturing. This is shifting due to changes in the global economy. Yet, the area has few economic development efforts currently under way. However, the county has recently created the Beaufort County Economic Development Commission to begin addressing emerging needs. The commission does not yet have a strategic plan.
Beaufort County has received state Industrial Recruitment Competition Funds, which are designed to provide incentives for companies to locate in economically distressed areas. Specifically, four companies in the county received a total of $400,000 in commitments that provided $1,000 for each job created.
Beaufort County did not apply for any Community Development Block Grant funds over the last few years even though, as the Director of the state Department of Commerce’s Finance Center explained, Beaufort may have been eligible for them. He told us that these funds frequently come with “too many strings attached,” citing the stringent requirements that generally accompany these funds and the fact that community officials want more flexibility than the funds offer. In addition, the Community Development Block Grant application is about 40 pages long, is extremely time consuming, and is difficult to prepare. Generally, small communities such as Beaufort County hire a contractor to write the grant application. Community officials said that Beaufort County applied for but was denied a CAIP grant. Officials also said they did not have sufficient staff resources to adequately develop the CAIP grant proposal.
Officials stated that Beaufort County’s most pressing economic development needs are infrastructure and natural gas. Insufficient roadways to carry vehicles and trucks through Beaufort County, combined with the long distance from Interstate 95, contribute greatly to the slow economic development of Beaufort County. In addition, the county needs to build additional gas lines for industries before they will move into the area, according to local officials.
One avenue of potential economic development is that the community of Washington and Chocowinity is becoming a popular area for retirees from northern states. Officials explained that both towns are located along the Pamlico River, which has drawn a great number of boaters. The community has built a major retirement community with large and expensive homes, a marina, a golf course, and a restaurant. As a result, the community is now also building a supermarket and drugstore to meet the needs of these new residents.
section_title: Appendix V: El Paso, Texas, Case Study Profile
paragraphs: Located at the western tip of Texas, El Paso borders New Mexico and the Mexican state of Chihuahua. It is the fourth largest city in Texas (see fig. 7), with a population of 563,662, 77 percent of whom are Hispanic or Latino. Ciudad Juarez, El Paso’s sister city across the border, has about 1.2 million in population. In 2000, their combined population was an estimated 1.9 million. Additional community characteristics are shown in table 9.
subsections: section_title: Impact of Trade- Related Job Losses
paragraphs: In 1994, nearly half of El Paso’s 50,000 manufacturing jobs were in the apparel and textile industry. Since January 1994, 17,069 workers in El Paso have been certified as dislocated by NAFTA, with the majority having lost jobs in the apparel and textile industry. Jobs were also lost in other sectors, such as electronics assembly and plastic injection molding, which, like apparel, involved labor-intensive, low-skilled jobs. El Paso’s proximity to Mexico further accentuated this nationwide trend. As a result, El Paso has the unfortunate distinction of having experienced the greatest number of NAFTA-related job losses in the United States.
While El Paso has experienced a net increase in jobs since 1994, these new jobs have required skill levels and language abilities beyond the capacity of most dislocated workers in El Paso, who were Hispanic, female, single heads of household, over the age of 40, with less than a high school education and limited English proficiency. Most had worked for years in the apparel industry, earning relatively good wages and benefits at companies like Levi-Strauss (see fig. 7). When their factories closed and relocated abroad, they could not get similar jobs to replace them. At the same time, they were not qualified for the new jobs being created in El Paso, most of which required high school or postsecondary degrees and English proficiency. One dislocated worker told us that he had been earning $13.65 an hour plus benefits at Levi-Strauss and it was difficult to find another job at that pay rate with his limited education and English. In this regard, El Paso faced its greatest challenge in assisting its dislocated workers: it was not just a matter of training dislocated workers for new occupational skills. Many workers first had to attain basic English proficiency and make up for many years of missed education to earn a GED before they could start to learn a new occupational skill.
section_title: Assistance to Dislocated Workers
paragraphs: By the end of 1996, more than 7,000 dislocated workers had filed for TAA or NAFTA-TAA benefits. At the same time, concern was growing that many dislocated workers who were coming to the end of their TAA or NAFTA-TAA benefits were still trying to learn English and earn their GED and had not received any occupational training that would help them get another job. These concerns escalated in 1997 and 1998 as the layoffs and plant closures continued, becoming “traumatic” as Levi-Strauss closed four El Paso plants in 1997, displacing 1,959 workers, and another two plants with 796 workers in 1999. At the same time, Sun Apparel, American Garment, and other apparel firms also closed plants in El Paso. The Chief Executive Officer of the Upper Rio Grande Workforce Development Board said that in prior years, garment workers had always been able to get a job in another plant. By the summer of 1998, he said that there was virtually nowhere to go for a new apparel job.
In April 1997, the Texas Workforce Commission instituted the El Paso Re- employment Pilot Project to address the needs of massive numbers of dislocated workers. It served 450 dislocated workers who had been identified as needing intensive case management, job development, bilingual vocational training, intensive work-based language training, and needs-related payments (extended income support) as elements of a program that would increase the likelihood of employment for these workers. The project was designed to serve workers who had exhausted their trade benefits but had never entered vocational skills training. It also identified the need to bring employers into the project. However, with 72 trade-certified closings between January 1, 1994, and March 1, 1998, affecting 8,173 workers, it soon became clear that a far larger effort than the Texas state Pilot Project would be needed.
In March 1998, the Upper Rio Grande Workforce Development Board submitted a grant application for a Department of Labor National Reserve Account Grant. It was for 2-year funding in the amount of $55.5 million to provide administration, retraining, readjustment, supportive services, and needs-related payments to 3,500 eligible trade-dislocated workers in El Paso. The El Paso Proactive Reemployment Project, as finally approved, provided $45 million over 3 years for 4,500 dislocated workers. Workers who had been laid off between January 1, 1994, and December 31, 1998, and who had not yet received occupational skills training were qualified.
The other component of the community’s response to the overwhelming numbers of dislocated workers was to develop the former Levi-Strauss Lomaland plant as a comprehensive One-Stop Workforce Preparedness Center and a One-Stop Capital Shop. The Greater El Paso Chamber of Commerce took the lead in this physical infrastructure project, which had broad community support and participation. The Chamber Foundation purchased the facility from Levi-Strauss in 1998 and converted it into the One-Stop Center. In addition, the Chamber also received a $1 million direct loan from the Community Adjustment and Investment Program and a $1.4 million grant from the Economic Development Administration to rehabilitate the building. In addition, Levi’s also gave the Chamber a $250,000 grant to fund its Workforce Development Division, which would oversee the implementation of the strategic plan for the center.
The results of the efforts in El Paso to assist the trade-dislocated workers were mixed at best. Local officials said the trade adjustment assistance programs were overwhelmed by the large numbers of workers that continually entered the system. According to these officials, the Texas Workforce Commission did not have enough case managers to handle the inflow, and when they hired new case managers, they were not experienced enough to handle their heavy caseloads. Another problem was that all training had to be approved by commission headquarters in Austin, causing delays. In 1997, the commission finally delegated approval authority to the commission’s local El Paso Trade Unit when it became logistically impossible to refer every case to Austin for approval. El Paso’s Trade Unit is the only one to have this approval authority, and the waiting time for approval of training declined from 12 weeks to 4 to 6 weeks. Commission officials said the current wait is about 3 weeks, which is due to the funding flow. Officials said that the funding stream available to El Paso could not keep up with their needs and that they frequently ran out of training funds.
Perhaps the greatest criticism of assistance efforts we heard related to the ineffectiveness of the training. According to program officials, El Paso’s training efforts were hindered by the lack of sufficient training infrastructure to meet the needs of its displaced workers. Many of these workers had low educational levels and little English proficiency. They needed bilingual training designed for adults. One private training institute we visited, cited as a model bilingual training provider by Texas Workforce Commission officials, used a training method of intensive English as a Second Language classes and GED classes in Spanish in the mornings, and occupational skills training in the afternoon. The occupational training started out in Spanish and shifted gradually to English as students’ proficiency increased. However, there were few such bilingual training programs in El Paso, and many dislocated workers languished in English as a Second Language and English-language GED courses without making enough progress to move on to occupational training courses, according to local program officials.
section_title: Economic Adjustment Efforts
paragraphs: El Paso received a $275,000 grant from EDA in 1998 to have an economic adjustment strategic plan developed by an economic consulting company. The plan, published in December 1999, confirmed that El Paso was following the national trend in making a transition to a service economy. The plan focused on encouraging job growth in the near term in demand- related industries such as retail trade, healthcare, services, and construction, all industries that could potentially employ displaced workers. Over the longer term, the plan focused on the need for skilled workers and access to technology, especially information technology, as the principal components of adding value to the city’s economy.
The city also received other assistance from EDA. EDA had previously awarded a grant of $500,000 for a revolving loan fund that had lain dormant. Working together with a newly elected mayor, this grant was reactivated, and matching funds of $167,000 were obtained from El Paso County. The revolving loan fund has provided 6 loans to small businesses, helping to create or retain 45 jobs, according to city economic development officials.
The EDA grant of $1.4 million to the Greater El Paso Chamber of Commerce Foundation to rehabilitate the former Levi-Strauss Lomaland plant, mentioned above, was the centerpiece of its economic adjustment assistance efforts in El Paso. The EDA Regional Director stated that this project was a successful model of a public-private partnership that addressed important economic adjustment needs. EDA, CAIP, the Greater El Paso Chamber of Commerce, and Levi-Strauss all participated in this effort.
In addition, EDA also awarded a grant of $1.2 million to a local advocacy group for dislocated women workers, La Mujer Obrera, that had initiated its own community development corporation, based on a community self- help model. The group obtained the needed matching funds from the city of El Paso and the Rural Development Finance Corporation to acquire and rehabilitate the building. CAIP also provided a $180,000 direct loan to this group for equipment and working capital for a Mexican restaurant they started in part of the building. The group also plans a business incubator, a Mexican market, and other initiatives designed to create training opportunities and new jobs for displaced workers. In addition, the Hispanic Chamber of Commerce received a grant for $750,000 over 5 years from the Small Business Administration for a Women’s Small Business Border Center, which will be located at the group’s facility.
CAIP has been very active in El Paso. Besides the two direct loans already mentioned, since 1997 it has provided more than $38.7 million in loan guarantees made in El Paso through its partnership with Small Business Administration loan guarantee programs. Of this amount, CAIP provided 145 loan guarantees with a gross loan amount of $36.6 million under the Small Business Administration 7(a) program and 4 loan guarantees under the Small Business Administration 504 program valued at $2.1 million. El Paso also received two CAIP grants of $450,000 for two private training programs to train dislocated workers in locally needed occupations and place them in private sector jobs.
section_title: Appendix VI: Martinsville and Henry County, Virginia, Case Study Profiles
paragraphs: The city of Martinsville, which lies in Henry County, is located in southwestern Virginia near the North Carolina State line.  In Virginia, cities and counties are separate governmental entities.   The economies of Martinsville and Henry County are highly dependent on the manufacturing sector, which mostly offers low-skill jobs in the textile and furniture industries.   Table 10 presents a demographic and economic profile of Martinsville and Henry County.
subsections: section_title: Impact of Trade- Related Job Losses
paragraphs: The manufacturing sector in Martinsville and Henry County has been in decline in recent years due in large part to increased foreign competition, which has resulted in a large number of job losses.  Since 1993, Martinsville and Henry County have lost more than 6,000 jobs, the majority of which were in manufacturing.  Most of these job losses were trade- related, as indicated by the fact that more than 3,500 of the laid-off workers were certified as eligible for TAA or NAFTA-TAA benefits.
The manufacturing decline in the Martinsville and Henry County economy culminated in December 1999 when one of the area’s largest employers, the Tultex Corporation, unexpectedly went bankrupt and closed its operations.  Tultex, which manufactured knit goods, employed over 1,700 workers in Martinsville, all of whom lost their jobs.  Most workers were given only a few days’ notice.  None of the workers received severance packages, and most lost their health benefits. The Virginia Employment Commission sent its Rapid Response Team to assist the Tultex workers, making sure they were quickly enrolled for unemployment insurance and informed of available benefits (see fig. 8).
The Tultex and other plant closings and layoffs have had a tremendous impact on the local economy.  Unemployment in Martinsville went from 9.3 percent before the layoffs to 19.7 percent immediately afterward. Henry County also experienced a spike in unemployment, although not as severe as in Martinsville.  In addition to massive job losses, the Tultex closure also significantly impacted Martinsville’ s finances.  For example, according to a city official, as a result of the Tultex bankruptcy, Martinsville lost $1.1 million in tax revenues in 1999.  According to a local real estate agent, the housing market also declined, because homeowners have left the area for new jobs, and there are few buyers for these homes. In addition, local community leaders said that decreased incomes have had a negative effect on retail sales in the area.  Local businesses that supplied Tultex and other closed plants also suffered.
section_title: Assistance to Dislocated Workers
paragraphs: We found that many trade-impacted workers did not enroll in training. According to our analysis of Virginia Employment Commission data, less than 20 percent of workers certified for TAA and NAFTA-TAA benefits in the Martinsville/Henry County area during 1999 and 2000 had enrolled in training.  Virginia Employment Commission officials said that some workers decided to forgo training to search for new jobs to support their families.
A number of trade-impacted workers who enrolled in a training program did not complete it.  Most workers took classes at Patrick Henry Community College in Martinsville, which offers 1- and 2-year programs (see fig. 8).  According to officials at the Virginia Employment Commission and the community college, some workers who enrolled in 2-year programs were forced to drop out when their extended income support benefits ended after 18 months.  Other workers, many of whom had never completed high school, were required to take remedial classes before entering occupational training.  Several of these workers could not complete remedial classes and 1-year occupational training before their income support benefits ran out.
To give employers an incentive to hire unskilled workers eligible for trade adjustment assistance who do not participate in classroom training, the Virginia Employment Commission offers an on-the-job training program.
Under this program, employers are reimbursed for half of a worker’s wages for a training period of up to 26 weeks.  Employers eligible for the program must agree to employ the worker for at least 26 weeks after the training period has been completed. Virginia Employment Commission officials told us that few workers have chosen such on-the-job training. One reason they cite for low participation is that many of these positions are in the furniture and textile industries, where long-term job security is a concern.
Virginia Employment Commission officials and several community leaders told us that there are few jobs in the area for workers who complete training.  In some cases, workers who trained for traditional jobs such as bookkeeping could not find work, because all existing jobs were filled.  In other instances, workers received training in high-tech occupations that do not yet exist in Martinsville and Henry County.  Workers we interviewed who are currently enrolled in training said that they were resigned to the fact that they may have to seek jobs in their chosen professions in larger cities such as Greensboro, North Carolina, which is about 50 miles from Martinsville.
section_title: Economic Adjustment Efforts
paragraphs: Martinsville and Henry County have undertaken a number of economic development efforts to help the community recover from the massive layoffs of recent years.  As part of an Economic Development District designated by the Economic Development Administration, the community is required to prepare an annual comprehensive economic development strategy.  It also received extensive attention from the National Economic Council, which coordinated visits to the areas by federal officials.  The Economic Development District also has received a $60,000 grant from EDA to prepare a regional economic adjustment strategy that focuses on the adverse impacts of trade.  Both strategies propose and prioritize projects, such as industrial parks and business incubators, that qualify for state and federal economic assistance.  Since 1999, Martinsville and Henry Country have received $1.7 million in EDA and Department of Agriculture grants.  The communities also have been awarded $1.6 million in state grants and loans, and they qualify for special state tax incentives for businesses to locate or expand in the area.  In addition, the local economic planning board, the Patrick Henry Development Council, has developed a strategy to promote economic development in Martinsville/Henry County that centers on recruiting and retaining industries, attracting new capital investment, and increasing tax revenues.
A number of efforts to implement plans for economic development are ongoing in Martinsville and Henry County.  The Patrick Henry Development Council recently contracted with two consulting firms to develop a profile of the local workforce. The profile is intended to promote the workforce skills currently available in the area to prospective new businesses and to point out skill gaps that need to be filled to bring in new businesses offering stable, well-paying jobs.  The council also has an ongoing campaign to attract new businesses, including running an ad in the Wall Street Journal and distributing a CD-ROM that promotes the area. The council has financed these projects through a $350,000 grant it received from the Department of Housing and Urban Development.
Martinsville and Henry County have seen a net increase in jobs in recent years, according to the Economic Development District, but local officials are quick to point out that many new jobs are low skilled and low wage. Since 1993, Martinsville and Henry County have lost 6,364 jobs, mostly in the textile and furniture industries.  During the same period, 7,043 new jobs were announced for a net gain of 679.
section_title: Appendix VII: Objectives, Scope, and Methodology
paragraphs: The Chairman and Ranking Member of the Senate Committee on Finance asked us to follow up on our prior evaluations of federal trade adjustment assistance programs with case studies focused on the experiences of trade-impacted communities. Specifically, we examined (1) the impact of trade-related layoffs on these communities, (2) the experiences of these communities with dislocated worker assistance, (3) their experiences with economic adjustment assistance, and (4) the lessons learned from these communities’ experiences.
To address all of these objectives, we conducted case studies in six communities. Between January and March 2001, we visited Watsonville, California; Coushatta, Louisiana; Owosso, Michigan; Washington and Chocowinity, North Carolina; El Paso, Texas; and Martinsville and Henry County, Virginia. We chose these locations on the basis of criteria designed to identify communities hardest hit by trade-related layoffs. First, we identified the total number of workers certified for trade adjustment assistance for fiscal years 1994 to 1999. We then analyzed the top industry sectors and divided cases by community, state, economic sector, and number of certified workers from fiscal years 1994 to 1999. We then added the number of workers certified across communities for these fiscal years; this yielded a list of about 300 communities that had more than 500 workers certified to receive TAA benefits. Next, we obtained 1999 population data for these communities from the Bureau of the Census Web site and calculated the percentage of individuals potentially affected by trade-related layoffs. Then by considering this factor, as well as region, industry sector, and presence of federal program activity such as CAIP, we pared the list to 48 communities. After that, we obtained city and county unemployment data for fiscal years 1994 to 1999 and October 2000 from the Bureau of Labor Statistics Web site in order to determine whether the trade-related layoffs had influenced local unemployment levels and the current local unemployment level. We then ranked the communities on three dimensions: (1) the current unemployment rate, (2) the percentage of the local population that was covered by a Department of Labor certification, and (3) the communities with the biggest change in their peak unemployment rate following a trade-related layoff from 1994 to the present. We called state and local officials to verify the nature and extent of trade-related job losses in these communities and the types of assistance that had been used, that is, training, community assistance, or grants provided by Commerce’s Economic Development Administration, CAIP, and the Department of Labor. We dropped one community from our list because their employer had recalled the trade-certified workers.
When we visited each community, we interviewed local government officials; community leaders; training providers; and, if available, workers receiving benefits from trade adjustment assistance programs. During our visit to Watsonville, we also interviewed Department of Agriculture field officials regarding Agriculture’s economic assistance in the area. We also obtained in each of these communities, if available, information on worker training programs, economic planning documents, and documentation regarding state and federal economic assistance.
To further address the first three objectives, we met with federal and state officials who administer trade adjustment assistance programs for workers and economic assistance programs for communities and reviewed reports on worker and economic adjustment assistance. In Washington, D.C., we met with officials from several agencies, including the Department of Labor, which administers the TAA and NAFTA-TAA programs; the Department of the Treasury, which is the lead agency administering CAIP; and the Economic Development Administration, which administers the Trade Adjustment Assistance program for firms and provides economic assistance to distressed communities. We also discussed economic adjustment efforts in communities affected by military base closures with staff from the Office of Economic Adjustment in the Department of Defense to determine lessons learned that could be applied to our case study communities. In addition, we met with the Director of CAIP’s Los Angeles office to discuss CAIP assistance to potential case study sites. We also interviewed a number of state officials to discuss their administration of the TAA and NAFTA-TAA programs, as well as the state economic assistance available to case study communities. We reviewed our prior reports on trade adjustment assistance to workers and economic assistance to communities, as well as reports by other organizations on the impact of trade on workers and communities.
In addressing the first three objectives, we also obtained and analyzed data from several sources. For the first objective on the impact of trade-related layoffs on the case study communities, we first obtained and analyzed Department of Labor data on the number of workers certified for TAA benefits in the six communities from 1995 through 2000. These data only represents workers potentially displaced for trade-related reasons, not actual jobs lost. However, it is the best indicator available on the potential effect of trade on workers. As an indicator of the impact of trade-related layoffs on the communities, we examined Bureau of Labor Statistics unemployment data for the periods before and after trade-related layoffs in the communities. For the second objective on the experiences of the case study communities with dislocated worker assistance, we obtained and analyzed information from two other Department of Labor databases. To determine the number of recipients and costs of trade readjustment allowance payments and training under TAA and NAFTA-TAA in the six communities, we obtained and analyzed Department of Labor data on services provided to participants under the programs for fiscal years 1995 to 2000. We also obtained participant outcome data for the six communities and nationwide collected by Labor for 1999 and 2000 and analyzed it, focusing on demographic characteristics, wages, training, and reemployment. For the third objective on the communities’ experiences with economic adjustment assistance, we obtained and analyzed information from EDA, the Department of Agriculture, and Department of Housing and Urban Development on the amount and types of assistance that the agencies provided to each community. We did the same with information from the Treasury on CAIP assistance to the communities.
We conducted our work from November 2000 through June 2001 in accordance with generally accepted government auditing standards.
section_title: Appendix VIII: Comments From the Department of Commerce
paragraphs: The following are GAO’s comments on the Department of Commerce’s      letter dated August 17, 2001.
subsections: section_title: GAO Comments
paragraphs: 1.  The statement in the draft report on page 29 said that this grant was pending as of May 2001, which was consistent with the information provided to us by EDA.  We have updated the text to reflect that it has       since been awarded.                   2.  Based on clarifications provided by EDA, we have dropped this             statement from the text.
section_title: Appendix IX: Comments From the Department of the Treasury
paragraphs: The following are GAO’s comments on the Department of the Treasury’s      letter dated August 16, 2001.
subsections: section_title: GAO Comments
paragraphs: 1.  The Department of the Treasury agreed with our characterization of CAIP funding as limited, but pointed out that more CAIP financing for communities was potentially available, if the communities requested it.  We             clarified the report by adding a statement that businesses and potential             grantees must apply for CAIP financing. CAIP does not provide funding             directly to eligible counties, but rather offers access to competitively              awarded grants or enhanced to credit through loans and loan guarantees.                   2.  We revised the text to add that the restaurant was also being used as a            training facility.                   3.  The Treasury disagreed with statements in the draft report that are                   based on our recent evaluation of CAIP, that CAIP loan guarantees made in                   partnership with the Small Business Administration would likely have been                   made anyway without CAIP’s participation.  Our position, which remains                   unchanged, is that outcome measures and a monitoring system are needed                   to demonstrate the benefits CAIP has brought to communities.
section_title: Appendix X: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the person named above, Leyla Kazaz, Ed Laughlin, Chris Shine, Larry Thomas, Bill Hansbury, Bob DeRoy, Kathleen Joyce, and Lynn Cothern made key contributions to this report.