ADJUSTMENT ASSISTANCE FOR WORKERS Prepared by the Department of Labor I. INTRODUCTION. II. TRADE ADJUSTMENT ASSISTANCE BENE- I. INTRODUCTION In considering the proposed Trade Expansion Act of 1962 the Congress recognized that although expanded trade would generate a net employment gain, attention had to be directed to the situation of those workers who might be displaced by increased imports. The Ways and Means Committee report on the bill stated: "Their displacement will be the price of the national gain from expanded trade and in those cases where it would be inappropriate to assist these workers and their employers by increasing tariffs or otherwise restricting imports, they should be helped to adjust to the new international competition-to become able to enjoy its benefits themselves." The trade adjustment assistance concept was generally recognized as a method of facilitating the more efficient achievement of a liberal reciprocal trade policy. It was directed towards the individual firm or group of workers immediately affected and was not necessarily considered to be a means for handling a situation in which an entire industry was "injured" by increased imports. The Act of 1962 retained the industry-wide escape clause procedure though adjustment assistance was one of the alternative remedies available to the President under that procedure. The purpose of the adjustment assistance program was to offer Federal assistance to particular businesses and individuals until economic adjustment to the effects of the liberal trade policy set forth in the Trade Expansion Act was attained. Such assistance was intended to reach only those interests which, but for increased imports, could operate successfully in the competitive economy. Adjustment assistance was seen as offering an alternative to restrictive trade measures. Adjustment assistance while recognizing that some "injury" might be a consequence of our trade policy, was intended to alleviate adverse economic effects through active government participation in the solution or prevention of the problem and sharing in the cost of the dislocation. However, it was made clear that compensation or cost sharing was not the basic aim of adjustment assistance. The concept of assistance calls for a number of devices to provide a temporary means of facilitating adjustment by segments of the domestic industries to the results of national trade policies compensation is only one of these devices. The concept of adjustment assistance to industries affected by imports has, at various times, been claimed to be discriminatory. The answer to this is that technological changes, normal business competition, changes in consumer preferences and the like are incidents of our free enterprise system where all components are subject to the same general "ground" rules. Economic displacement resulting from increased imports results from the national policy choice to permit increased imports. Increased imports, frequently produced under conditions which would not be permitted in the U.S. economy, reflect positive governmental actions to provide the climate for increases; the resulting injury is, in this sense, due to such action. It may also be noted that many importaffected industries have, in effect, been encouraged to enter or remain in a particular line of activity through past governmental action to restrict imports by tariffs or other import barriers. Adjustment assistance benefits are larger than unemployment insurance and the Congress imposed severe restrictions on eligibility for these benefits. First, there was a requirement that there be a finding, either by the Tariff Commission or in some cases by the Secretary of Labor, that the major factor adversely affecting the group of workers was increased imports resulting in major part from a tariff concession. Then, the individual worker must have been found to have been a member of the group; to have become unemployed or underemployed because of lack of work in the affected establishment; to have been gainfully employed for at least half of the 3 years prior to his unemployment; and to have been employed in an adversely affected firm for at least half of the 52 weeks prior to layoff. Also required is a determination of the date at which the unemployment which is attributable in major part to increased imports actually began and, when appropriate, the date when the unemployment ceased to be due to imports. Only individuals whose dislocation began between these 2 dates are eligible for assistance. These requirements are stricter than those for unemployment insurance. The Congress also imposed the condition that displaced workers must take and make acceptable progress in training if appropriate training is offered. This is in recognition of the philosophy that assistance is designed to enable workers to "adjust to the new international competition." II. TRADE ADJUSTMENT ASSISTANCE BENEFITS The stricter standards of eligibility for adjustment assistance in comparison, for example, with those for unemployment insurance are based on the higher level of benefits for adjustment assistance. Adjustment assistance consists of: 1. Trade readjustment allowances which replace unemployment insurance. The weekly allowances are set at 65 percent of the worker's previous average weekly wage (as defined for unemployment insurance) with a ceiling of 65 percent of the average weekly wage in manufacturing. Currently the ceiling is about $85.00 per week. Readjustment allowances are payable for 52 weeks (not necessarily consecutive) but may be extended 26 weeks to complete a training program. If the worker had his 60th birthday prior to his original layoff he automatically is eligible for 65 weeks of benefits. No worker may receive more than 78 weeks of benefits. Once a worker establishes his eligibility for readjustment allowances he will continue to draw these allowances instead of unemployment insurance until the full 52 weeks are used up or expire (which can take 5 or 6 years). If the worker has drawn unemployment insurance and is later found eligible for readjustment allowances the State is reimbursed for the insurance paid out and the worker gets the difference between the insurance and readjustment. The individual cannot draw both readjustment allowances and unemployment insurance for the same period. The trade readjustment allowances are entirely from Federal funds so that the employer's experience rating is not affected by such payments. 2. Full access to counseling, job referral, testing and training programs available in his area. 3. If the worker is head of a family, if there is no suitable job for him in his own locale and there is a suitable job in another city, he will receive payment for the full moving expenses of him and his family plus a cash amount equal to 21⁄2 times the average manufacturing wage. No worker can be compelled to move-refusal to move is not like refusal to accept appropriate training and not a reason for losing eligibility for assistance. A comparison of adjustment assistance and unemployment insurance 1 indicates that in only four states is the maximum unemployment insurance weekly payment greater than the ceiling on trade readjustment allowances-Alaska, Connecticut, Massachusetts, and Michigan-and these are due to dependents' allowances being added to the base unemployment insurance. Only 4 states have a basic duration of benefits longer than 30 weeks, with the maximum 39 weeks in Oklahoma. III. EXPERIENCE UNDER TRADE EXPANSION ACT, 1962-1965 In the first year after passage of the Trade Expansion Act of 1962 5 petitions for assistance were filed with the Commission by groups of workers, all of which were denied. The Tariff Commission reports as well as statements by some Commissioners during the course of hear 1 Based on 1967, latest available data for unemployment insurance. ings relevant to the investigations led to a tacit acceptance by organized labor that adjustment assistance was a chimera and the requirements of the law could not be satisfied. As a result no further cases were filed until after the end of the Kennedy Round of tariff negotiations. This inability to receive assistance on the part of firms, workers, or industries was directly reflected in the modified adjustment assistance criteria and procedures contained in the Automotive Products Trade Act of 1965. IV. AUTOMOTIVE PRODUCTS TRADE ACT The U.S.-Canadian Automotive Agreement, which provided the basis for duty-free trade between the U.S. and Canada in new vehicles and original automotive equipment or parts was implemented by the Automotive Products Trade Act of 1965. The Auto Agreement was designed to make feasible the rationalization of the North American automotive products industry by immediately permitting duty-free trade flows in these products between the 2 countries. The rationalization was expected to create some dislocations of firms and workers. These dislocations would arise not only from increased imports into either country but also from decreased exports and from internal shifts within each country. Special adjustment assistance criteria were therefore indicated. As finally approved, the Automotive Products Trade Act provided that firms or groups of workers were eligible to apply for assistance if the President determined that the operation of the Agreement was the primary factor causing the dislocation. It also listed certain economic criteria (production and trade) which, when met, generated the presumption that the dislocation was caused by the Agreement. The Tariff Commission was assigned the responsibility for carrying out the factual investigations on each petition but not for making the basic determinations. The basic levels of benefits and the requirements which the individual worker had to meet were not changed from the Trade Expansion Act. The Act thus differed in several significant ways from the Trade Expansion Act. The required casual relationships were decreased from "major" to "the primary"; "the operation of the Agreement" replaced "increased imports resulting in major part from tariff concessions"; the determination function was given to the President rather than the Tariff Commission. The President delegated his responsibility to a Board consisting of the Secretaries of Commerce, Labor and Treasury, chaired by the Secretary of Labor. The Board, in turn, created a Committee of Assistant Secretaries to give them advice and recommendations on each case, but reserved the final determination to itself. Because there was an expectation that the rationalization process would take place over a comparatively short period of time, the special adjustment assistance provisions were made transitional. The Act provided that petitions under these provisions could not be filed after June 30, 1968, thus giving them an effective life of a few months less than 3 years. In the period between October 1965, when the Act became effective, and June 30, 1968, petitions were filed with the Board by 21 groups of workers; no petitions were filed by firms. The 21 worker petitions covered all aspects of the automotive business from parts and components through final assembly and shipping operations. The Board approved 14 of the 21 petitions and in the other 7 found that the operation of the Agreement was not the primary factor causing layoffs. The 14 certifications issued by the Board covered approximately 2,500 workers. However, less than 2,000 individuals actually applied for the received benefits-some never applied probably because they got new jobs immediately and others who did apply were turned down because, as individuals, they did not meet requirements of the law. The average worker drew 20 weeks of readjustment allowances and a small amount of training benefits. Total expenditures amounted to $4.1 million. About half of the certifications involved workers who became unemployed when operations in relatively small plants of major independent parts producers were shifted to Canada. There were also several comparable dislocations in parts plants of the major auto producers. The other certifications involved assembly (including bodies) operations of the auto companies directly related to the rationalization process. Canada also has a similar provision for making transitional adjustment assistance benefits available to workers dislocated in the rationalization process. Both relative to the Canadian automotive industry work force and in absolute terms, dislocation in Canada was much larger than in the U.S. in the first years of the Agreement. This reflected the temporary closing of many major Canadian plants to retool for more. efficient operations-concentrating on fewer models with increased total output. To date, the Canadians have declared approximately 8,000 workers eligible for special transitional assistance. For reasons related to features of the Canadian law with regard to the supplementary unemployment benefits written in the United Auto Workers contracts with major producers, relatively few workers actually have received benefits. V. EXPERIENCE UNDER THE TRADE EXPANSION ACT SINCE 1965 Despite the positive assistance rendered under the provisions of the Automotive Products Trade Act there was almost no activity under either the adjustment assistance or escape clause provisions of the Trade Expansion Act between 1965 and late 1969. Two worker petitions were filed in 1968, but one was withdrawn during the investigation and the other was denied. In late 1969, the Commission acted on 3 petitions for worker assistance filed by the United Steel Workers and made determinations that the unemployment was due in major part to increased imports |