technology and structural unemployment: reemploying

Contents

Page

overview and Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..........225Common Ingredients of Success . . . . . . . . . . . . . . . . ..., . . . . . . . . . . . . . . . .225Issues in Project Design , . . . . . . . . . . . . . . . . . . ., . . . . . . . . . . . , , ., , , , ., , .226Areas for Federal Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..., . . . . . . ,226

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ., ..., ....227A P i o n e e r P r o j e c t : T h e A r m o u r A u t o m a t i o n F u n d . . . . . . . . . . . . . . . . . . . . 2 2 7

Measuring Success . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..........228Common Ingredients of Success.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ......233

Plant-Centered Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....234Timing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . , .236Employe r Respons ib i l i t y and Labor -Managemen t Coope ra t i on . . . . , . . . . . 240Differences in Situation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . , ...242

Issues in the Design of Displaced Worker Projects . . . . . . . . . . . . , . , , . . . .243Getting Into the Program . . . . . . . . . . ~ . . . . . . . . . . . . . . . . . . . . . . . . .......246Financial and Personal Counseling. . , . . . . . . . . . . . . . . . . . . . . . . . . . . .. ...247Job Search Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........248On-the-Job Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ., , .249Vocational Skills Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..........250Remedial Education. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. ....260Relocation Assistance . . . . . . . . . . . . . , . . . . . . . . . . . . . . . . . , . , . . . . . . . . . , .261

Proposals to Assist Individual Retraining Efforts . . . . . . . . . . . . . . . . ., .....265

List of TablesTable No. Page

6-1. Program Outcomes, Displaced Worker Demonstrat ion Projects ,1982-83. ....., . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..., . . . ..229

6-2. Costs and Placement Rates by Type of Service, DemonstrationDisplaced Worker Projects, 1982-83 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .245

6-3, Entered Employment Rate and Reemployment Wage by Typeof Service, Sample of JTPA Title II Projects, July-March 1985. ....., ..245

6-4. class Size Training provided in Displaced Worker Projects . . . . . . . . . . .2526-5. Examples of Vocational Training Offered in JTPA Title III Displaced

W o r k e r P r o j e c t s , 1 9 8 4 - 8 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 5 36-6. Class Size Training provided by the Ford/UAW Program at

Milpitas, CA, 1983-84 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............2556-7. Individual Retirement Accounts, by Size of Adjusted Gross Income,

1983 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........................266

FigureFigure No. Page

6-1. Downriver Community Conference Economic Readjustment Program. .244

Ch. 6—Design and Performance of Displaced Worker Projects ● 227—

INTRODUCTIONExperience with modern displaced worker

projects is s t i l l quite l imited. Few in thiscountry have been in existence long enough toprovide a good idea of whether they are work-ing as intended, or whether some elements inthem are more successful than others. But byputting together insights drawn from projectsof the past, findings from the few evaluationsof more recent projects, and observations ofcurrent ones, it is possible to sift out usefulguidance to good project design. Of particularinterest are findings that relate to governmentpolicies, and how they may help, or perhapsunintent ional ly hinder , the offer ing of em-ployment and training services to displacedworkers .

The findings discussed below are not con-clusive: they are not based on irrefutable evi-dence. They are , however , something morethan suggestions. They represent the collectivewisdom of many experienced people, a fewwell-designed studies on what works best inhelping displaced workers find productive newjobs, and early returns from the JTPA displacedworker program,

A Pioneer Project:The Armour Automation Fund

During the automation scare of the early1960s, one of the best and most thoroughly doc-umented efforts to retrain and reemploy dis-placed workers was the Armour AutomationFund. The product of collective bargaining inan industry noted for its stormy labor history,it established a cooperative tripartite commit-tee made up of management (the Armour com-pany, then the second largest U.S. meatpackingcompany), labor (the two unions representingthe company’s workers), and two impartial co-chairmen (Clark Kerr, then President of theUniversity of California, and George P. Shultz,then Dean of the University of Chicago Schoolof Business).

From 1950 to 1965, Armour overhauled itsoperations nationwide, closing big old plantsand opening smaller, leaner ones with modern

equipment in new locations. Altogether, thecompany closed 21 plants employing 14,000workers, and laid off almost half its workers.In 1959, halfway through, with nine plants em-ploying 6,000 workers already closed, Armourannounced plans to lay off 6,000 more work-ers and shut down six more major plants. Atthis point, in the course of negotiating a newlabor-management contract, Armour and thetwo unions established the Automation FundCommittee. Armour supplied $500,000 for thecommittee’s operations. Its duties were tostudy the problems of displacement and rec-ommend solutions.

A 1966 study by Shultz and Weber summedup 5 years’ research and experience of theAutomation Fund Committee. ’ Twenty yearslater, the insights of this report have not losttheir value.

Some major conclusions of the report:●

●

●

●

There is no single, simple approach to theproblems of worker displacement. Differ-ent people have different needs. The ad-justment program must provide a varietyof options, including placement, training,transfer , and early ret irement, togetherwith careful and patient individual coun-seling,Advance notice of a plant closing or ma-jor layoff is a prerequisite for constructiveaction. Notice of at least 6 months allowstime for recovery from the shock and thentime for planning, choice, and action.Placement efforts should be on a specialproject basis; routine State EmploymentService procedures are inadequate to han-dle the problems of mass layoffs.Workers with limited education can profitf rom retraining for occupat ions in de-mand; appropriate training can be foundfor most interested, motivated workers .Overly rigid screening can rule out goodcandidates .

I George P. Shultz and Arnold R. Weber, Strategies for the II~s-placed t%’orker (Westport, CT: Greenwood Press, 1966),

228 ● Technology and Structural Unemployment: Reemploying Displaced Adults

● Workers in training must have adequateincome support, from unemployment com-pensation, part-time work, or a combina-tion of sources. Without adequate finan-cial support, trainees will be forced to dropout before training is completed.

The report recognized that no program forthe placement, training, or transfer of per-manently displaced workers—however wellfunded or energetically administered—can es-cape the dominating influence of the labormarket. Where unemployment is high or thelocal labor market is thin, job opportunities fordisplaced workers simply may not exist. Anotherfinding was that most displaced workers, evenwith help, lost ground. The Automation FundCommittee’s performance must be judged inthis context; its successes were only relative.It did help hundreds of ex-meatpackers to findnew jobs, or get retraining, or transfer to otherArmour plants. Although the record is incom-plete, it clearly indicates that workers assisted

MEASURINGBefore discussing lessons from the successes

or failures of more recent displaced workerprograms, it is well to consider first whatconstitutes success. The most obvious answeris, simply, finding a new job. The Job TrainingPartnership Act adopts “placement and re-tention in unsubsidized employment” as theonly measures of performance under Title III,which created the displaced worker program.

The purpose of writing this measure of per-formance into the law was to make operatorsof jobs projects accountable for their successesor failures. Projects that meet specific perform-ance standards set by the States (based on thecriteria in the law) are rewarded with con-tinued funding. Those that fail must accountfor their failures, and bring their performanceup to standard within 2 years or face loss offunding.

While job placements have the virtue of sim-plicity and ease of measurement as indicatorsof success, they are not without complications.First, there is the fact that the economic climate

by the committee fared better in finding newjobs than those who had no such help. Evenso, most of the displaced workers sufferedlosses. For example, workers who chose re-training made slightly better wages on new jobsthan those who did not; yet their hourly earn-ings declined drastically from the level atArmour—25 to 35 percent for men and 50 to60 percent for women.

Displaced worker programs, Shultz andWeber concluded, must cultivate a “sense ofmobility” —an awareness on the part of theworker of opportunities and how to capitalizeon them. This calls for a variety of services:counseling, instruction in job-seeking tech-niques, information about possible jobs in awide market, and information about prevail-ing wage levels and occupational training. Gov-ernment and private programs can help thejobless help themselves, but self-help starts withthe knowledge the programs can impart.

SUCCESS

is a predominating influence on the ability ofany project to place workers in jobs. Also, thebackgrounds and abilities of the workers servedand the range of services provided may beimportant factors. These complexities are rec-ognized in JTPA. The law allows States to varytheir performance standards to take accountof economic, geographic, and demographicfactors, the characteristics of the populationsserved, and the types of services offered.

A few examples drawn from six displacedworker demonstration projects of 1982 and1983, sponsored by the U.S. Department of La-bor, illustrate the point. The projects, locatedin different regions and experiencing differenteconomic conditions were in Alameda County,California; Buffalo, New York; Lehigh Valley,Pennsylvania; Mid-Willamette Valley, Oregon;Milwaukee, Wisconsin; and Yakima, Washing-ton.2 Table 6-1 summarizes some characteris-

zMaterial in this secticln on the six demonstration projects isdrawn from evaluation reports conducted by Mathematical PolicyResearch, Inc., for the Employment and Training Administra-

Ch. 6—Design and Performance of Displaced Worker Projects ● 229

Table 6-1 .–Program Outcomes, Displaced Worker Demonstration Projects, 1982-83

Project site

Lehigh Mid-WillametteOutcomes Alameda Buffalo Valley Valley Milwaukee Yakima

1.2.3.4.5.6.

7.

8.9.

Participants a . . . . . . . . . . . . . . . . . . . .Placements . . . . . . . . . . . . . . . . . . . . .Recalls. . . . . . . . . . . . . . . . . . . . . . . . .Transfers to other programs . . . . . .Placement ratea (2+1). . . . . . . . . . . .Entered employment rate[(2+3)÷1] . . . . . . . . . . . . . . . . . . . . . .Adjusted entered employment rate12+3)÷(1 -4)] . . . . . . . . . . . . . . . . . . .Average placement wage . . . . . . . . .Percent decline . . . . . . . . . . . . . . . . .

3,134549610

1,641180/0

37 ”/0

780/o$7.40

360/o

798523

270

660/0

690/o

690/o$6.62

340/0

1,285411

26200

320/o

34%

40 ”/0$6.70

240/o

305185

03

61 0/0

61 0/0

61 “/o$7.37

300/0

2,713231

008.50/o

8.50/o

8.50/o$6.60

250/o

243198

08

81 0/0

81“h

830/o$8.11

19 ”/0asee text for a dl~~”s~lon of the factors, such as screening of applicants, which affected the number of Paflici Pants, and thus Placement rates

SOURCES Mathemat!ca Policy Research, Case Study of the A/arneda County and Souttrgate LX#ocated Worker Demonstration Projects, Jack Wichita, Case Studyof the Milwaukee Dislocated Worker Program, Case Study of Operation Jobsearch: The Lehigh Valley Dislocated Worker Demonstration Project, and CaseStudy of Project S. A. V. E.: The Y’akima, Washington Dislocated Worker Demonstration Program; L.M. Wright, Jr., Case Study: Buffalo Worker ffeemploymenfCenter, Buffalo, New York and Case Study kf/d-Wi//amette Va//ey Job Assistance Network, Sa/em, Oregon (Princeton, NJ: Mathematlca Policy Research,19S4); Marcia Jerrett, et al., Serving the Dislocated Worker: A Report on the Dislocated Worker Demonstration Program (Cambridge, MA: Abt Associates,1963); and Walter Corson, et al , Process and Implementation Issues (n the Design and Conduct of Programs to Aid the Reemployment of Dislocated Wor-kers Findings Based on the Dislocated Worker Demonsfratfon Project (Princeton, NJ. Mathematical Policy Research, 1984).

tics and results of these six projects, includingplacement rates and earnings on the new jobscompared with the old jobs,

Among the six projects, the one in Yakimaattained the highest placement rate, 81 per-cent—a remarkable achievement during aneconomic recession and a credit to the projectoperator. But the high rate of placements alsoreflected Yakima’s fast recovery from severeeconomic stress (at one time the local unem-ployment rate reached 16 percent, with theshutdown of construction of a nuclear powerplant). It also reflected the character of the par-ticipants, who had been rigorously screened formotivation and “serviceability.” Those consid-ered hardest to place were weeded out in a

tion, U.S. Department of Labor: Mathematical Policy Research,Case Study of the Alameda County and Southgate DislocatedWorker Demonstration Projects; Jack Wichita, Case Study of theMilwaukee Dislocated Worker Program, Case Study of Opera-tion Jobsearch: The Lehigh Valley Dislocated Worker Demon-stration Project, and Case Study of Project S.A. V. E.: The Yakima,Washington Dislocated Worker Demonstration Program; L, M.Wright, Jr., Case Study: Buffalo Worker Reemployment Center,Buffalo, New York and Case Study: Mid-Willamette Valley JobAssistance Network, Salem, Oregon (Princeton, NJ: Mathemat-ical Policy Research, Inc., 1984). See also Marcia Jerrett, et al.,Serving the Dislocated Worker: A Report on the DislocatedWorker Demonstration Program (Cambridge, MA: Abt Associ-ates, 1983); Walter Corson, Rebecca Maynard, and Jack Wichita,Process and Implementation Issues in the Design and Conductof Programs to Aid the Reemployment of Dislocated Workers:Findings Based on the Dislocated Worker Demonstration Project(Princeton, NJ: Mathematical Policy Research, 1984).

series of interviews; of 1,350 applicants, only243 actually enrolled. Many of the participantswere skilled construction workers, accustomedto job changes and willing to relocate.

At the other extreme was the project inMilwaukee, which placed only 8.5 percent ofparticipants (231 out of 2,713 enrolled). At thetrough of the recession, Milwaukee’s unem-ployment rate was 11.9 percent, well above thenational average; but the area quickly reboundedin the recovery, Probably the local unemploy-ment rate was not a major factor in Milwau-kee’s placement record, More significant wasthe fact that this project did no screening what-soever; anyone who registered was enrolled.(About 1,200 workers completed job applica-tions; if only these are considered participants,the placement rate rises to 20 percent.)

As discussed in chapter 5, the concept of“entered employ merit,” which States use inreporting outcomes of JTPA projects, calls foreven more cautious interpretation. Whereas“placement” counts only the new jobs foundby participants, “entered employment” countsrecalls as well. This sometimes producespuzzling results. For instance, the JTPA TitleIII program in Pontiac, Michigan, reported anastonishing entered employment rate of 93percent in 1984; however, practically all of thejobs this figure represented were recalls of Gen-

230 • Technology and Structural Unemployment: Reemploying Displaced Adults

eral Motors employees. a Many of the workersenrolled in the project had been on layoff for3 or 4 years, and were rightly regarded as dis-placed workers; the extent and rate of reem-ployment at General Motors took everyone bysurprise.

Another aspect of the entered employmentrate that could easily be misunderstood is thatit is based on “terminations,” people who haveofficially ended their participation in the proj-ects, Placement rates that are based on totalparticipants—everyone who enrolled in theproject—are not comparable; they are almostalways lower. More detailed discussion of thereported outcomes under JTPA appears inchapter 5.

Job retention, the other statutory measure ofperformance under JTPA Title III, can only beevaluated after the passage of time. Few dis-placed worker projects have followed partici-pants systematically enough or long enough tofind out whether clients keep their new jobs,“Entered employment” in JTPA reports refersto l-day retention on the job. In an OTA tele-phone survey of State managers of Title IIIprograms, conducted in 1984-85, only two (inWashington and Wisconsin) said they consid-ered retention on the job as part of the stand-ard of performance. Q Some projects do followparticipants after placement, but usually for nomore than 90 days. In the absence of a long-term followup, a possible indicator of whetherjobs the displaced workers enter will be lastingis the quality of the job, including livablewages, chances for advancement, and reason-able job security.

tRobert Cook (cd.), “Dislocated Worker Projects Under Title111 of the Job Training Partnership Act,” report to the U.S. De-partment of Labor Employment and Training Administration(Rockville, MD: Westat, I~c., 1985).

4JTPA directs the Secretary of Labor to establish performancestandards for both Title 11A programs (for disadvantaged work-ers) and Title 111 programs (for dislocated workers). At the timeof the OTA telephone survey, the department had not yet setnumerical standards for Title 111 programs, but governors hadbeen required to establish a standard for the entered employ-ment rate for terminees for the 1984 program year (beginningJuly 1, 1984). The Labor Department is developing performancestandards for Title 111, in consultation with representatives ofbusiness, labor, and States.

The period of unemployment is another use-ful measure of success, but again caution is inorder. Some displaced workers, especially ifthey are covered by extended supplementaryunemployment benefits (SUBS), may not lookfor work seriously for a long time. Even theaverage worker, with only 6 months of UI tofall back on, may not begin the search for workimmediately. An initial period of unemploy-ment may simply be a period of adjustment.Prolonged unemployment or repeated bouts ofunemployment are signs of more serious trouble.

A significant measure of success is earnings,in particular earnings on the new job comparedwith the old. Most displaced workers do notimmediately find jobs that pay as much as theirold ones; their skills and experience may notbe very attractive to new employers. But pro-grams that help workers find better jobs thanthey can find on their own, and help to keepearnings losses to a minimum, have achievedsubstantial success.

JTPA does not mention earnings as a mea-sure of performance for Title 111 programs, al-though it does for Title 11A, for disadvantagedworkers. s California’s Employment Trainingpanel, which provides reemployment and re-training services for displaced workers, em-phasizes the importance of the earnings mea-sure. It requires that trainers, unless they placetheir graduates in jobs paying at least $5 anhour, do not get paid. A number of projectsfunded by JTPA Title III are making similarstipulations in their contracts with trainers.The average reemployment wage for partici-pants in Title III programs in 1984 was re-ported to be $6.15, and in most States wasmoderately lower than the wage on the old job.6

Measures of success, while taking benefitsinto account, cannot ignore costs.7 The sim-——

5JTPA states that “the basic measure of performance for adulttraining programs under Title 11 is the increase in employmentearnings and the reductions in welfare dependency resultingfrom participation” (JTPA Sec. 106 (b)). In 1984, a wage of $4.91per hour was part of the national performance standard for Ti-tle 11 programs.

%ee ch. 5 for details.7JTPA mentions costs in connection with Title 11: “The Sec-

retary (of Labor) shall prescribe performance standards relat-ing gross program expenditures to various performance meas-ures” (JTPA Sec. 106 (b)(4)).


plest way to include costs is to calculate themper placement. The drawback to this simplecalculation, however, is that the only value, orbenefit, weighed against the cost is that ofgetting a job, without regard for the quality ofthe new job, earnings both immediate andfuture, the breadth of choice offered to partici-pants, the character of workers enrolled in theprogram, and local economic conditions.

The demonstration displaced worker pro-grams of 1982-83 are again illustrative. Thelowest costs per placement among the six proj-ects were Milwaukee’s ($l,503); the next tohighest were Buffalo’s ($3,014, or about twiceas high).8 Milwaukee offered only two services,job development and placement—no testingand assessment, no job search skills training,no classroom training. Only 231 jobs wereturned up for the 1,200 or so who completedapplications and expected to get service fromthe project. Reemployment wages in Milwau-kee were among the lowest of the six projects($6.60 per hour), but since pre-layoff wageswere also comparatively low (about $8.80 perhour), the decline in wages was 25 percent, notthe largest among the projects, Although Mil-waukee’s unemployment rate was temporarilyhigher than the national average, the area re-covered faster than the Nation as a whole.

Buffalo, by contrast, has been a distressedlabor market for years , wi th unemploymentpersistently above the national average. Mainlyserving displaced steel, auto, and rubber work-ers, the Buffalo project offered a full range ofservices, from outreach through assessment,training, and placement, Nearly half the par-ticipants took classroom or on-the-job training.Buffalo’s placement rate was a creditable 66percent (523 for 798 participants). Ultimately,the placement rate may have been still better;the project and recordkeeping ended whenmore than half the workers taking classroomtraining had only recently (within 90 days orless) completed their courses. Reemployment

— . ——BOf the six programs, the most expensive by far, in terms of

placing workers, was that in Alameda County, California, ser\-ing mainly workers laid off from a General Motors assembIyplant. Further discussion of the results in Alameda Country ap-pears at a later point in this chapter.

wage rates in Buffalo were low, $6.62 per houron average, %1 percent below the pre-layoffwage of approximately $10.00 per hour.

These vignettes make the point that no sim-ple, single measure such as cost per placementfully captures the performance of a displacedworker program, Such measures are useful .They highl ight achievements or disappoint-ments that might not otherwise be apparent.But they are aids to understanding, not sub-stitutes for it.

Long-term impact evaluations offer a morecomplex and sophisticated way to measure thesuccess of displaced worker programs, bytracking results over several years, comparingearnings of workers who part ic ipated withthose of s imilar workers who did not , andanalyzing costs and benefits, to the individualsinvolved and to society. g Judging by thesemeasures, the training programs of the 1960sf u n d e d u n d e r t h e M a n p o w e r D e v e l o p m e n tT r a i n i n g A c t ( M D T A ) w e r e b y a n d l a r g esuccessful. Long-term followup studies showedthat participants’ earnings were substantiallyhigher than those of comparison groups, andthe return on public investment was large andrapid (see ch. 5). For modern displaced workerprojects, the oldest of which date back to 1980,the results are not yet in. The U.S. Departmentof Labor intends to evaluate the impact of JTPAtraining programs, but f i rs t resuI ts are notexpected until 1988.

Meanwhi l e , two l a rge mode rn d i sp l acedworker projects have been studied for theiroverall effects: the Downriver Community Con-ference employment and training program andthe Buffalo dislocated worker demonstrationprogram. Downriver, the first to be studied,showed favorable results in 1980-81, but nopositive impacts in 1981-83. Buffalo, operatingfor one year in 1982-83, showed large, favor-able effects on both employment and earn-i n g s .l0

gFor a he]pfu] discussion of the evaluation of employment andtraining programs, see Michael E. Borus, A4easuring the Impactof Ernplo~rment-Re/ated Social Programs (Kalamazoo, MI: TheW.E. Upjohn Institute for Employment Research, 1979].

lo]ane Ku]ik, D, Alton Smith, and Ernst W. Stromsdorfer, TheDoh’nriier Communit~r Conference Economic Readjustment: Fi-

(cont]nufd on next pagt’]

232 . Technology and Structural Unemployment: Reemploying Displaced Adults

Photo credit: Downriver Community Conference

Drafting is one of the training courses offered todisplaced workers by The Downriver Community

Conference.

The Downriver Community Conference, a pub-lic agency serving 16 communities southwestof Detroit, began its displaced worker projectin 1980, offering reemployment and retrainingservices to approximately 1,500 workers wholost their jobs in the shutdown of BASF andDana, two auto supply plants. Results of thisPhase One Downriver project, lasting from July1980 to September 1981, were favorable. Com-pared with similar workers involved in two sim-ilar plant closings in the Detroit area, Down-river participants were reemployed at rates 13to 20 percentage points higher, and with earn-ings $77 a week more, than would be expected.In Downriver’s Phase Two, lasting from No-vember 1981 to September 1983 and servingabout 600 workers laid off from the Ford Mo-tor Co. ’s Michigan Casting Center, no positiveresults were evident. The workers served byDownriver did no better, and in fact by onemeasure (reemployment rate) did worse, thanwould be expected if they had received no serv-ices.11

(continued from previous page)nal lkduation Report, report to the U.S. Department of Labor,Employment and Training Administration (Cambridge, MA: AbtAssociates, Inc., 1984); Mathematical Policy Research, Inc., AnImpact Evaluation of the Buffalo Dislocated Worker Demonstra-tion Program, report to the U.S. Department of Labor, Employ-ment and Training Administration (Princeton, NJ: Mathemat-ical Policy Research, Inc., 1985).

llKu]ik, et a],, op, cit., and Jane Kulik, D. Alton Smith, ErnstW. Stromsdorfer, The Downriver Community Conference Read-

Several explanations have been put forwardfor these divergent results. One factor mayhave been that most of Phase Two took placein the depths of the 1981-83 recession, and thatno displaced worker project, however well de-signed and well run, could make a differenceat that time. Also, the Ford workers had moresources of financial support (supplementaryunemployment benefits and Trade AdjustmentAssistance, as well as UI) while they were un-employed than the Phase One workers did;they may have been less eager to accept the jobsavailable through the project. The most com-pelling explanation, the Downriver study con-cluded, was “unmeasured differences” be-tween the workers in the first and secondphases—factors such as “motivation, attitude,and maturity” that affect the morale of a plant’sentire work force and shape their reemploy-ment experience.12 In any case, it is risky todraw general conclusions from the experienceof one group of workers, from one plant, at atime when the local unemployment rate was16 to 18 percent.

The Downriver study concluded, overall, that‘‘it is indeed possible to design and operate ef-fective programs for dislocated workers,” thatthe programs “can produce positive impactson participants’ employment and earnings, ”and that “these benefits can exceed the costsof operating such programs.”13

The results of the Buffalo project, also oper-ating in conditions of deep recession, were un-equivocally favorable. The project served 798workers, the majority (510 people) from ninetarget plants, mainly in the steel and auto in-dustries, plus a smaller, varied group (288 peo-ple) from several hundred area employers. Thestudy estimated that in the 6 months after theproject ended, participants from the targetplants were employed, on average, 60 percentof the time instead of the 30 percent that would

justment Activity Program: Impact Findings From the FirstPhase of Operations, report to the U.S. Department of Labor,Employment and Training Administration (Cambridge, MA: AbtAssociates, Inc., 1983). The authors of the impact study had nocomplete explanation of the negative impacts on the Ford work-ers’ reemployment rates, but speculated that participants mayhave been more selective about job offers than the comparisongroup of workers,

IZKu]ik, et al., op. cit., 1984, pp. Xv-XVi.Wbid.

Ch. 6—Design and Performance of Displaced Worker Projects • 233

be expected, based on the experiences of acomparison group. The participants worked anaverage of 24 hours per week, instead of the10 hours a week expected, and had averageearnings of $174 per week, versus the $59 ex-pected ($290 versus $197, if only employedworkers are included). In the nontarget plantgroup, the results were also uniformly positive,although the effects of participation were judgedto be relatively smaller. In the 6-month periodafter the project ended, these participantsworked, on average, 27 hours per week com-pared to an expected 19 hours, and were earn-ing $194 dollars per week versus $96.

Summing up the overall net impacts of theproject on employment and earnings, theBuffalo study concluded that “even in a pooreconomy, job-search assistance and retrainingservices can significantly facilitate the readjust-ment of dislocated workers.”14 A caveat wasthen added about the uncertainties of gener-alizing results from one area and one project,The authors pointed out that the Buffalo projectnot only offered a comprehensive array of serv-ices, but also had a strong organizational struc-ture and a highly experienced staff.

The discussion so far has mostly concernedmeasures of success that are based on benefitsto displaced workers. Also important are ben-efits to employers and to society at large. Em-ployers benefit when publicly financed retrain-ing programs supply them with workers whohave learned special skills required for jobs thathave to be filled. Employers also benefit fromthe worker screening and job matching thatdisplaced worker projects can provide. Someof these benefits are hard to quantify, and may

——IA Mathematica Policy Research, Inc., op. cit. (1985), p. 18.

not be explicitly counted in evaluating the per-formance of displaced worker programs. Butthey count for a good deal in public acceptanceand political support for such programs, andare at least implicitly present in simpler meas-ures of success.

The same is true of benefits to society, Suc-cessful performance of a displaced worker pro-gram implies a host of benefits, ranging fromones that can be quantified—e,g., reduceddrains on unemployment insurance trust funds,lower payments for welfare or food stamps,and increased tax revenues from reemployedworkers—to ones that cannot—e.g., fair treat-ment of workers who bear the heaviest burdenof adjustment to technological change andworld competition.

For the displaced worker projects of the1980s, there has so far been very little investi-gation of the payback on the public investmentin retraining and reemployment services. TheBuffalo impact study looked at spending forfour income support programs–unemploymentcompensation (UI), SUBS (which are providedby employers, not the public), food stamps, andpublic assistance—but pointed out that noneof these programs were much used by theBuffalo workers. Many of the workers had beenlaid off for a year or more before the displacedworker project began, and had exhausted theirUI and SUBS. The project tended to reduce theamounts that workers received from these twoprograms, but the impacts were not significantstatistically, mainly because usage was low.Relatively few of the Buffalo workers receivedpublic assistance or food stamps either, How-ever, for the participants from target plants, thestudy did find statistically significant reduc-tions inefits as

COMMON INGREDIENTS OF

food stamp and public assistance ben-a result of taking part in the project.

SUCCESSSeveral key ingredients of success seem to available and with the commitment of manage-

be common to many kinds of displaced worker ment, in cooperation with labor, to provide ef-projects, whatever the details of their individ- fective services. Finally, the best projects areual designs. These common ingredients have designed specifically to fit their own economicto do with where and how soon services are situations, regions, and people.


Plant-Centered ProjectsSome of the best-run displaced worker proj-

ects are those centered in plants that are clos-ing or undergoing large layoffs, and are oper-ated by people who work at the plant on boththe labor and management sides. Plant-cen-tered projects have several advantages in theirfavor: the people who run them have a personalstake in the outcome, know many of the indi-vidual workers involved, and are acquaintedwith the local business community where thehidden job market (openings that are neverpublicly announced) is found. Also, such pro-grams fill a special need, which is to serve largenumbers of workers with similar skills andwork histories who are all dumped on the la-bor market at once. Even in good times, it isdifficult for local labor markets to absorb agreat many similar workers at the same time.

Several examples illustrate the worth of theplant-centered approach; one is the Johnsonand Johnson project in Chicago in 1983, de-scribed in box 6A. In most of the plant-centeredprojects that have worked well, the companiesinvolved were large, the workers were repre-sented by unions, labor-management relationswere good to excellent, and labor-managementteams were in charge. In almost every case, theteam leaders were exceptionally resourcefuland dedicated. Can plant-centered programswork without these special assets?

Two decades of experience in Canada sug-gest that they can. Since 1963, a small Federalagency, the Industrial Adjustment Service(IAS, formerly the Manpower ConsultativeService) has set up thousands of labor-manage-ment reemployment committees in virtuallyevery major plant closing or layoff in Canada.IAS moves in quickly, usually before any lay-offs occur, to establish the committees andprovide them with technical advice, modest fi-nancial help, and experienced, independentchairmen. The committees’ job is to mobilizecommunity resources for reemploying the dis-placed workers. They get in touch with areaemployers in similar lines of work, unions thatmay know of job openings, and more distantemployers who may need the laid-off workers.Most committees finish their work by the endof year, and go out of business, Typically, they

find jobs for two-thirds of all the workers dis-placed, and for most of the workers who signup to participate in the program.15

There is no real analog of the Canadian IASin this country. The closest are the rapid re-sponse teams some States have created in theirJTPA Title III programs, which bring jobsearch assistance services to plants whereworkers have been given notice of layoff. A fewStates, including Arizona and South Carolina,have put considerable effort into rapid re-sponse or pre-layoff assistance. They believethat by finding new jobs for many workers be-fore they are laid off, and thus avoiding anyinterruption in employment and any paymentof unemployment insurance, the effort morethan pays for itself. (Ch. 5 discusses these ef-forts further.) However, some features of theCanadian IAS that contribute to its consistentsuccess and low cost are not usually found inJTPA rapid response programs; that is, theestablishment of labor-management commit-tees within the plant, with the plant’s workersand managers directing it, under the leadershipof an independent chairman. The IAS-assistedcommittees usually stay in existence for at leasta year, rather than disappearing or changingtheir locus and sponsorship when the plantcloses, as is true of some of the rapid responseefforts mounted by States,

Wherever they exist, plant-based labor-man-agement committees can take advantage ofJTPA Title III funds and, in some cases, canget additional support from State programs orthe private sector. Sometimes employers lay-ing off workers bring in consultants to advisethem how to set up adjustment committees,often with union participation. These com-mittees, once established, can apply for JTPAfunds. However, as of 1985, none of the Stateshad created an institutional mechanism underJTPA to help create labor-management adjust-ment committees in plants undergoing closureor layoffs.16 Part of the problem may be that

15A more detailed description of the Canadian Industrial Ad-justment Service appears in ch. 5.

loin late Ig8!j, the Department of Labor was considering a pi-lot project, in cooperation with selected States, to provide tech-nical assistance to plant-based projects, possibly on the modelof the Canadian IAS.

Ch. 6—Design and Performance of Displaced Worker Projects Ž 235

Box 6A.—Labor-Management Committee at Johnson & Johnson PlantFinds Jobs for Displaced Workers

When Johnson & Johnson decided in 1982 to close an antiquated Band-Aid plant in Chicago,it was faced with laying off half the plant’s 700 employees in a deeply depressed labor market.(The rest of the workers were moved to a modern Johnson & Johnson plant nearby.) Under its con-tract with Amalgamated Clothing and Textile Workers Union, the company provided generousseverance pay, extended health benefits, early retirement for those who wanted it, preferentialhiring in other company plants, and at least 3 months’ notice to any employee slated for layoff.

The company and union together also undertook to help the laid-off workers find jobs. At anearlier Johnson & Johnson plant closing in downstate Illinois, a consulting firm teaching job searchmethods had failed to help the hourly workers. This time, the plant’s personnel manager and thepresident of the union local formed a committee to do the job themselves. “We decided not to paya lot of money for people who didn’t understand our employees as well as we did,” said one ofthe committee co-chairmen.

The committee’s job development efforts began with a lunch invitation to representatives ofzoo companies and employment agencies, allowing them to get acquainted with the Johnson &Johnson employees. The response was uniformly positive; companies that were not hiring offerednames of others that might be, and so the network grew. Another committee effort was a directmailing to 500 companies, selected from business directories by location and type of business, whichincluded brief sketches of categories of workers available from Johnson & Johnson. The recipientshad only to check the category of workers they were interested in. This brought zoo replies within4 weeks. In addition, Johnson&Johnson offered to train some of their workers to fit new employers’needs. In addition to job development, the committee also offered counseling and job search skillsworkshops.

A year later, 70 percent of the hourly workers seeking new jobs had them–and this includedworkers who had been laid off at least a year earlier and came back to take advantage of the pro-gram. Skilled workers were usually snapped up quickly with no loss in pay, but the semiskilled,on average, took pay cuts from about $8 to $6 per hour, Chicago’s unemployment rate was over12 percent at the beginning of 1983, when the reemployment efforts for Johnson& Johnson work-ers began, and was still 8.5 percent at the end of the year. In light of all the evidence (see ch. 3)that displaced workers experience unusual and prolonged unemployment—even in communitieswith low unemployment rates—this project achieved a good measure of success.

State administrative costs under JTPA are lim-ited to 5 percent of Federal grants. Many Stateshave no more than two or three officials work-ing full time on the JTPA Title III program;often they are ill-equipped to give technicalassistance to companies or unions that wantto set up plant-based services for displacedworkers .

The great majority of displaced worker proj-ects in the United States are operated by con-t inuing outside organizat ions, not by plant-based committees. In fact, JTPA’s provision ofrewards and sanct ions for performance as-sumes that whoever is running the projects will

be back the next year. There is one importantadvantage to this approach, which is that a con-tinuing project can serve a broad population.In most communities suffering mass layoffs orplant closings, other businesses feel ripple ef-fects. For example, in Buffalo in 1981-82, morethan half the worker displacement, followinglarge layoffs and closings of steel and autoplants, occurred in numerous small establish-ments, especially retail stores. Workers wholose their jobs in twos and threes, or even tens,usually cannot be served effectively by a plant-based committee. Moreover, even when an ef-fective plant-based effort has served workersin a plant closing or large layoff, a continuing


project can serve workers who have not yetbeen satisfactorily placed when the committeegoes out of business.

Another advantage of a continuing organiza-tion is that, if it is effective in finding jobs andmatching workers to them, it can build a repu-tation, both with area employers and with theworkers it serves. This kind of reputation isself-reinforcing; employers list good jobs withprojects that send them well-qualified workers,and workers sign up with projects that offergood training and list good jobs.

To sum up, plant-based labor-managementcommittees have unique advantages in servingworkers from their own plants; that is, personalacquaintance with the workers and their abil-ities, and personal networks for turning up jobopportunities in the community. No Federal orState program is designed specifically to en-courage the formation of such committees, al-though they can be supported under JTPA.Permanent displaced worker projects have adifferent major advantage, in that they canserve displaced workers both from target plantsand from the wider community. Both kinds ofprojects are needed. There is no reason whythey cannot coexist.

Timing

The best time to start a displaced workerprogram is before the layoffs begin. Althoughnot every worker will take advantage of theprogram early, having it available is importantto boosting morale, avoiding bitterness andapathy, enabling people to plan their future,and offering training to those who need it whilethey still have before them the basic 26 weeksof unemployment insurance plus any availablesupplemental programs.

An outstanding example of the value of earlyaction was the displaced worker program at theFord Milpitas plant near San Jose, California,described in box 6B. Other displaced workerprograms also got off to an early start withgood results. For example, in phasing down itsChicago Band-Aid plant, Johnson & Johnsongave every displaced worker at least 3 months’notice, and some as much as 2 years’ notice.

The Brown & Williamson Tobacco Co. an-nounced the coming closure of its Louisvilleplant, with the loss of 3,000 jobs, in 1979. Asrequired by its union contract, the companygave 18 months’ notice before the first layoff,but it was 3 years before the plant shut down.The idea of the 3-year lead time was to reducethe work force gradually, allowing a staggeredinflux of workers into the local labor market.17

It should be noted that in all these cases, earlynotice of a closing or layoff was accompaniedby a program of high-quality adjustment serv-ices to the workers being laid off. Advancenotice of layoff without the provision of suchservices is much less useful.

Most directors of displaced worker projectsare convinced of the value of early interven-tion, not only in fairness to the affected work-ers, but also as a way to keep constructiveaction going. “People need structure,” said onedirector. Without a program of services inplace at the time of layoff, the usual sequenceis “the first month, they complain. The secondmonth, they take a trip with the family. Thethird month they fix up the house. The fourthmonth, depression sets in. ”

The employment and training project of theDownriver Community Conference found thatif services are available before the plant closes,half the workers take advantage of them. Upto a year after closing, 35 percent sign up. After2 years, 17 percent participate.18 Does thismean that workers simply find jobs on theirown, without help, as time passes? Yes, ofcourse, many do. The Buffalo impact studyconcluded that the majority of displaced work-ers interviewed [of whom 35 percent partici-

~TOther projects that gave advance notice of layoffs and be-gan services to displaced workers early include those of the DanaCorp. (Edgerton, WI, four-wheel drive axle plant); Empire-DetroitSteel (Portsmouth, OH, plant); and Goodyear Tire & Rubber (LeeTire of Conshohocken, PA). All were plant-based projects oper-ated by labor-management committees. For details of several ofthese projects see U.S. Department of Labor, Labor ManagementServices Administration, Plant Closings: What Can Be LearnedFrom Best Practice (Washington, DC: U.S. Government Print-ing Office, 1982),

IsKathleen Alessandro and W. Robert Schnieders, “caseStudy—Retraining Workers Displaced From the Automotive In-dustry Into Robotic Technicians, ” paper presented to the Soci-ety of Manufacturing Engineers (Dearborn, Ml: Society of Man-ufacturing Engineers, :[984).

238 ● Technology and Structural Unemployment: Reemploying Displaced Adults—

pated in the reemployment/retraining project)found jobs on their own, but only after a naverage duration of unemployment after lay-off of 14 to 15 months, and at substantiallylower pay than on the old job. The point of pro-viding adjustment services, and providingthem early to a larger number of workers ratherthan later to a smaller number, is to help theworkers get jobs sooner, stay employed moresteadily, and earn more than they would with-out such help. The Buffalo study, the Down-river study to some degree, and the earlier long-term impact studies of MDTA all concludedthat readjustment assistance can indeed helpdisplaced workers accomplish these things.Another argument for ear ly intervent ion isbased on anecdotal evidence, which suggeststhat many displaced workers who are longunemployed lose the habit of, and confidencefor, work. Some get by on repeated cycles ofworking just long enough to be eligible for UI,then collect UI while working at odd jobs forcash or barter in the underground economy.

Employers, as well as displaced workers, canbenefit from early intervention, A prompt starton reemployment can save outlays from theState’s unemployment trust fund, which em-ployers pay for through an earmarked tax.Also, it enhances a company’s reputation bothwith the public and with their remaining work-ers (in cases where the plant does not shutdown completely) if those who are laid off areseen to get effective help.

Having services available early for displacedworkers does not imply that every participantmust begin ear ly . Workers themselves , oneresearcher observed, do a pretty good job ofdetermining at what point af ter their layoffthey are likely to gain from the program. l9 T h eCanadian IAS has found that a program lengthof 1 year or a bit more is about right to servemost workers.

So far, research studies on the relation be-tween advance notice and subsequent employ-

IQRebecca Maynard, “LeSSOnS From the DOL-SpOmred WOrk-ers Demonstration Program, ” paper presented at the NationalAlliance of Business Conference on Displaced Workers, Detroit,M1, June 1984.

ment and earnings of displaced workers arelimited and inconclusive. A study of Maineplant closings found that unemployment in lo-calities affected by the closings was signifi-cantly lower when advance notice was given.This included indirect or ripple effects on em-ployment in the community, as well as directeffects on workers laid off in the plant clo-sure .20 Another study, looking at 30 plant clos-ings from 1969 to 1972, found that advancenotice did not seem to reduce earnings lossessignificantly, but a number of shortcomings inthe data were noted. 21 Neither study took intoaccount what services, if any, were offered toworkers expecting to lose their jobs in the plantclosings.

This point is critical. Advance notice of lay-off will be of less value if no services are offeredto the workers during the lead time the noticeprovides. without constructive action, moralecan deteriorate during the notice period (al-though it can be argued that uncertainty, com-pounded by rumors, can be even more dam-aging to morale) . Action ei ther by a cr is isintervention entity like Canada’s IAS, or by ex-isting labor-management committees, or by aproject operat ing under JTPA auspices, canmake positive use of early notice.

Another key point is that notice of a plantclosing must be unequivocal if possible. work-ers who have put in 15 or 20 years at a plant,and many times have gone through temporarylayoffs, often find it incredible that the plantis really closing. The bad news is easier to be-lieve when company managers disclose the rea-sons in detail, including information on thecompany’s financial position, If a company an-nounces, before layoff, that it will help provideservices for displaced workers, that also helpsto bring home the reality of the situation,

ZONancy R. Folbre, Julia L. Leighton, and Melissa R. Roder-ick, “Plant Closings and Their Regulation in Maine, 1971 -1982,”Industrial and Labor Relations Review, January 1984.

ZIArlene Ho]en, Christopher Jehn, and Robert P. Trost, Earn-ings Losses of Workers Displaced by Plant Closings, report tothe U.S. Department of Labor, Bureau of International LaborAffairs (Alexandria, VA: The Public Research Institute, 1981).


JTPA provides that displaced worker serv-ices may begin before layoff, as soon as theworkers are given pink slips, A number of Statedirectors of JTPA Title III programs have ex-pressed strong interest in an early warning sys-tem so they can offer pre-layoff assistance morereadi ly. 22 Some employ ingenious methods tofind out in advance about plant closings andmass layoffs. For example, Rhode Island col-lects information via its business-retention pro-gram, in which State staff visit each firm in theState every year. Several States, including Ar-izona, Colorado, South Carolina, and Texas,encourage companies to give voluntary ad-vance notice of impending layoffs; they alsor e l y o n n e w s p a p e r a c c o u n t s a n d w o r d o fmouth. Arizona program leaders, particularlyactive in pre-layoff assistance, encourage com-panies that benefit from this service to dis-placed workers to make it known to other com-panies .

An issue that concerns many States with re-spect to early warning is how and whether theycan use Title III funds to prevent plants fromclosing, Some State-funded programs offer re-training and other kinds of assistance to try toprevent closings and worker layoffs.23 So doesthe Canadian Industrial Adjustment Service.JTPA, however, defines displaced workers whomay be served under Title 111 as those who arealready unemployed, or have received noticeof termination. A brief discussion of policiesto prevent worker displacement appears inchapter 5.

Considering the advantages of early action,is it reasonable to require advance notice ofplant closings and large layoffs by law? Thisproposal is highly controversial. The two mainarguments against it are, first, that such a re-quirement overburdens business, forcing com-panies to keep ailing plants open longer thanthey otherwise would, and longer than is eco-

ZZAn OTA-t~]eph~ne survey of State ~ i rectors Of JTPA Title111 pro~rams, ~ondu~ted from October 1984 to January 1985,found that ~re-layoff assistance to displaced workers and earlywarning of plant closings were among the directors’ top con-cerns. See ch. 5 for results of the survey and further discussionof the early warning issue as it affects JTPA programs.

Z3TW0 examp]e5 are the California Employment Training paneland South Carolina’s Rapid Response Team, both discussed inch. 5.

nomically efficient; and second, that the re-quirement can have a perverse effect, forcingthe closure of some plants that might otherwisehave remained open. It is argued that the an-nouncement of a planned closing or mass lay-off can seal the firm’s fate, as workers takeother jobs (or perhaps lose interest in theirwork), and creditors, suppliers, and customerschange their terms of doing business. Oppo-nents also say that government- imposed re-quirements for advance notice are quite dif-ferent f rom such requirements in col lect ivebargaining agreements, since in the bargain-ing the labor union presumably trades someother advantage for the advance notice.

Some European countries, most of Canada,24

the State of Maine, and the city of Philadelphiarequire advance not ice of plant closure orlarge-scale layoffs. 25 Proponents of plant clos-ing legislation point to the compliance of busi-ness, including I-J. S.-based firms, with Cana-dian and European advance not ice laws asevidence that the laws can work without be-ing too burdensome, Mandatory advance no-t i ce l aws usua l ly i nc lude an e scape ha t chwhich allows firms not to give notice whenbusiness circumstances make it impossible,

Several States and some local governmentsare considering plant-closing legislation thatrequires advance notice. Some are deterred,however, by the argument that plant closinglaws will drive business away to other Statesor localities. In addition, State and local plantclosing laws might be challenged in court ongrounds that Federal law preempts them, or theConst i tut ion prohibi ts them.2 6

Zqslx of ten Canadian provinces, including the most POPU1OUS,

require advance notice of plant closings or layoffs affecting 50or more workers; the notice required \aries from 8 to 16 weeks,depending on the number of workers affected. The Canadiannational government has a similar plant closing law coveringcertain classes of workers,

ZsSouth Carolina requires advance notice of layoffs only fromemployers who require their employees to give notice of theirintention to quit work.

Z13A Pennsylvania State court invalidated a Pittsburgh plantclosing ordinance in 1983, mainly on the grounds that a Statelaw prohibits municipalities from imposing duties and require-ments on businesses, The court also relied in part on the argu-ment that the ordinance was preempted by a Federal law, theNational Labor Relations Act, though the court did not thorough-

(continumi On nt~lt page)


Michigan, Massachusetts, and Wisconsinhave laws encouraging employers to give ad-vance not ice of layoffs and plant c losingsvoluntarily. An earlier Wisconsin law, repealedin 1983, made advance notice mandatory; thenew law establishes voluntary guidelines andincentives. The Massachusetts law, adopted in1984, established a “social compact” that en-courages companies to give 90 days’ notice ofa plant closing; firms that are financed, in-sured, or subsidized by quasi-public State agen-cies must agree to accept the “voluntary stand-ards of corporate behavior” stated in the law,which include advance not ice.

Relatively few American workers are cov-ered by collective bargaining agreements thatrequire employers to give advance notice ofplant closings or major layoffs. Only about 18percent belong to unions, and the percentageis declining. Moreover, in 1980, only 15 per-cent of major collective bargaining agreements(those covering more than 1,000 workers) con-tained language either requiring advance no-tice or authorizing union participation in theprocedure of plant closing. 27 Some companiesvoluntarily provide advance notice of layoffs,but many do not. An example of the latter wasa Silicon Valley firm which reportedly calledemployees off the afternoon shift, told themthey were fired, escorted some off the propertythrough back doors, and locked and chainedthe premises.28 Of 5.1 mil l ion adul t workerswho were displaced from their jobs between1979 and 1984,29 2.2 million reported that they

—.—(continued from previous page)ly explain its reasoning. No other court has yet ruled on thepreemption claim, or claims that State and local plant closinglegislation may be unconstitutional. For details of the arguments,see Richard P. Swigart (cd.), Managing Plant Closings and Oc-cupational Readjustment: An Employer’s Guidebook (Washing-ton, DC: National Center on Occupational Readjustment, 1984),pp. 123-129.Z7U.S Department of Labor, Bureau of Labor Statistics, “Ma-

jor Collective Bargaining Agreements: Plant Movement, Inter-plant Transfer, and Relocation Allowances, ” bulletin 1425-20(Washington, DC: U.S. Department of Labor, July 1981).

‘“Tamar Lewin, “Workers’ Rights in a Closing Tested,” TheNew York Times, July 19, 1984.

ZoTheSe are people who lost jobs they had held for at le=t 3years because of a plant or business closing, abolition of a posi-tion or shift, or slack work; the job losses occurred between Jan-uary 1979 and January 1984. The data were collected in a spe-cial survey of the U.S. Census Bureau in January 1984 for theBureau of Labor Statistics, U.S. Department of Labor. For de-tails of the survey results, see ch. 3.

did not receive advance notice or expect thelayoff. The rest (2.9 million), who said they gotadvance notice or expected the layoff, did notspecify what “advance notice” amounted to. 30

plant closing legislation has been introducedinto congress from time to time over the past10 years, including, in addition to advance no-t ice of layoffs , such features as mandatoryseverance pay, continued health insurance cov-e rage ,31 and transfer rights for workers. Otherfeatures sometimes included are Federal loansand technical assistance to communities, busi-nesses, or groups of workers who may wantto buy out a plant and keep it open. No bill withthese other features has ever been reported outof a ful l congressional committee, al thoughsome have been the subject of hearings.

In March 1985, Rep. William Ford (D-MI)joined with Representatives William Clay (D-MO) and Silvio Conte (R-MA) to introduce asimplified, bipartisan plant-closing bill (H. R.1616). It would require all employers to give90 days’ notice before laying off 50 or more em-ployees, unless ‘business circumstances makethis impossible. The bill would also require em-ployers to discuss alternatives to closure withunions (where they exist) during the noticeperiod, and would encourage such consulta-tion with employees in non-union shops. Plantclosing notices would go to the Federal Medi-ation and Conciliation Service, which wouldbe authorized to provide assistance in plantclosing disputes. This bill was reported out ofthe full House Committee on Education andLabor in July 1985, and defeated by a narrowmargin by the full House late in the year.

Employer Responsibility and Labor-Management Cooperation

A number of companies, faced with the ne-cessity of closing a plant or permanently lay-ing off large numbers of workers, have taken

SoInformation provided by the Bureau of Labor statistics.JIThe Worry uppermost in the minds of many workers faced

with layoff is the loss of company-provided health insurance.A number of major union contracts call for 3-month to z-yearextensions of health insurance benefits for displaced workers,as well as severance pay, an early retirement option, and prior-ity consideration for jobs in other plants owned by the company.


responsibility for tempering the impacts. Usu-ally, in these cases, union contracts call for ad-vance notice of a plant closing and provisionof some kind of assistance for the displacedworkers, with union participation if appropri-ate. Some companies fulfill these obligationsrather perfunctorily, for example by hiring con-tractors to offer the workers a few days ofcounseling. Others have gone far beyond whatthe union contract called for.

At the Ford assembly plant in Milpitas, forexample, the contract called only for advancenotice, for a meeting between company andunion to discuss the matter, for provision bythe company of counseling and placement as-sistance, and for preferential hiring in otherFord plants . What the Ford Motor Co. did,however, was to give the plant’s industrial re-lations manager a free hand to “do what wasright. ” The plant was kept open for 16 monthsafter production ended, housing all programservices except for vocational skills trainingand thus giving the displaced workers a one-stop shopping center in familiar surroundings.A company-paid skeleton staff stayed onto runthe services.

The experience at Milpitas and other out-standing projects in which the companies tookleading parts highlights several unique contri-butions that private employers can make. Theycan make space i n p l an t s f o r emp loymen tand training centers and for suitable trainingcourses (e.g., remedial education]; provide staffto run the employment and training centers;allow employees time off from work to attendcounseling and job search workshops; and pos-sibly keep the employment centers open afterthe plant is closed. Of course, not all employerscan provide such a full range of services. In-dependently owned companies that are forcedto close probably cannot afford most of them;but many large companies that are closingbranches in the course of restructuring theirbusinesses can help to provide top quality serv-ices for their ex-employees.

In several cases of best practice in closinga plant, the union was involved as actively asthe company in planning and running the serv-

ices for displaced workers. In most instances,these joint efforts were built on preexistinglabor-management cooperation. For example,the Dana Corp. ’s four-wheel drive axle plantin Edgerton, Wisconsin, closed in 1980, hadnever had a strike in 8 years, and had an em-ployee turnover rate of 1 percent, Both theDana Corp. and Johnson & Johnson, as well asthe Ford plant , had employee involvementteams actively cooperating in improving theplants’ productivity and product quality. TheBrown & Williamson Tobacco Co. was a pi-oneer in establishing, together with its two un-ions (the Bakery, Confectionery and Tobaccoworkers Union and the International Associa-tion of Machinists and Aerospace Workers),joint labor-management committees to handlethe phase-out of 3,000 jobs and the creation ofemployment and t raining services .

Labor-management cooperation is a strongplus, Workers are likely to trust and use serv-ices that are planned, directed, or endorsed bytheir unions or representatives. Where labor-management teams do not already exist at thetime a plant is closed, cooperative direction ofthe services can still be developed, as the Cana-dian IAS experience shows. This was the caseat the Ford Motor Co.’s Oakdale, Ontario as-sembly plant, where more than 2,000 workerswere laid off in two stages, in November 1979and May 1980. A task force appointed by thepresident of Ford of Canada called in IAS (thencalled the Manpower Consultative Service, orMCS) . The l abo r -managemen t commi t t ee sformed at Oakdale under MCS turned up jobsso effectively that within 8 months 94 percentof participants were placed. Of all the laid-offworkers, (participants and nonparticipants) 80to 85 percent had found jobs.

In the United States, government support forlabor and management efforts to create effec-tive displaced worker programs is mostly in theform of information sharing. A small office inthe Department of Labor, the Bureau of Labor-Management Relations and Cooperative Pro-grams, publishes material on best practice inplant closings, holds workshops, and responds


to calls for help from States, companies, andunions .32

On the private side, both business groups(e.g., the National Alliance of Business and theNational Center on Occupational Readjust-ment, Inc.) and labor (e. g., the Human Re-sources Development Institute of the AFL-CIO)are active in collecting and imparting informa-tion on practical ways of helping workers andcommunities hurt by plant closings.

Differences in Situation

The nature and condition of the local econ-omy are dominating influences on the successof displaced worker projects, and also on theirdesign. Projects that offer a full range of serv-ices are generally desirable; they are best ableto meet the needs of the whole spectrum of dis-placed workers, not just those easiest to serve.However, different services may need specialemphasis, depending on the local economic sit-uat ion,

In a diversified urban industrial economy,most displaced workers will find jobs, giveneffective job search assistance that helps themcrack the hidden job market, and training innew skills for those who want it and can ben-efit from it. Except in the troughs of recessions,there are usually jobs to be found in a deep,diversified labor market, even though it maytake some time to find them. For example, evenin Buffalo, with its long history of unemploy-ment rates above the national average, the dis-placed worker project operating in 1982 and1983 was able to place two-thirds of its clients.

Szpublications of the Bureau (formerly the Labor-ManagementServices Administration) include U.S. Department of Labor,Labor-Management Services Administration, Plant ClosingChecklist: A Guide to Best Practice (Washington, DC: U.S. Gov-ernment Printing Office, no date), and Plant Closings: What CanBe Learned From Best Practice (Washington, DC: U.S. Govern-ment Printing Office, 1982).

More isolated urban centers with very nar-row industrial bases—one-plant or one-industrytowns—are in worse trouble when the plantcloses or the industry declines. Steel towns likeYoungstown and Portsmouth, Ohio are exam-ples of industrial areas with shallow labor mar-kets that have not come back to robust life withthe resurgence in the economy. Rural areas de-pendent on mining, such as the Appalachiancoal country or eastern Utah since the coal anduranium mining bust, may be very resistant tothe best efforts of displaced worker projects.In areas that show no evidence of economicrevival and seem too hopeless to provide newjobs, vigorous relocation programs may helpsome displaced workers,

In a prosperous local economy, many work-ers fare quite well with nothing more than rela-tively brief, inexpensive assistance in search-ing for a new job. In addi t ion, a thr ivingeconomy may favor the acquisi t ion of newskills. Opportunities are plentiful, so that dis-placed workers, with only modest retraining,can move in to entry positions as more experi-enced skilled workers move up. The advan-tages of forgoing an immediate job in favor oftraining may not be obvious, however, to adultworkers accustomed to br inging home pay-checks. Where there is a choice between train-ing and a job, displaced workers often benefitfrom help in realistically estimating their earn-ing potential with and without training,

In a depressed economy displaced workersmay be more inclined to opt for training in newskills. When there are few jobs to be had, manyworkers find retraining more productive thanidleness. From the perspective of public pol-icy, funding needs for displaced worker pro-grams may rise and fall with the state of theeconomy, not only because more workers ap-ply for services during hard times, but also be-cause training—-the most expensive service—will likely be in greater demand,

Ch. 6—Design and Performance of Displaced Worker Projects ● 243— —

ISSUES IN THE DESIGN OF DISPLACED WORKER PROJECTS

A brief description of a typical displacedworker project will serve to introduce the ele-ments of project design. Because Downriver isthe oldest of current projects and has oftenserved as a model for others, it is chosen forillustrative purposes here,

The first step is outreach: making projectservices known to displaced workers and in-vi t ing them to part icipate. Then, those whosign up must attend orientation, take a se r i e sof basic education and aptitude tests, and takepart in a 4-day job-seeking skills workshop. Theworkshop helps workers ident i fy their ownskills and experience, learn to identify poten-tial employers, produce resumes, and practicejob interviews. The sequence in this first phaseof Downriver’s program is mandatory. Thosewho do not follow it are dropped. The inten-tion is to screen out workers who are not com-mitted to a whole-hearted job-seeking effort.

Once they are enrolled, participants followdifferent paths depending on their abilities andinterests, Those who have salable skills mayneed only some sharpening of their abilities tosearch for jobs, or they may take advantage ofjob openings that the project’s job developersfind, Others, with good reading and mathe-matics skills, but without job skills that are cur-rently in demand, may be referred to trainingcourses. The idea is to reserve training forthose who need it most and can benefit fromit. A third choice is on-the-job training (OJT),in which employers receive a subsidy for hir-ing new workers, usually amounting to 50 per-cent of wages, and lasting for 1 to 6 months.At Downriver, OJT is not considered training—the acquisition of new skills required for anew occupation—so much as a placement tool,

The hardest workers to serve are those wholack marketable skills and are seriously defi-

cient in basic educational abilities. For theseworkers , Downriver has exper imented f romtime to time with remedial education, or lookedfor suitable OJT slots. Finally, Downriver in-cludes in its package of services relocation andout-of-area job search assistance, for those whoare able and willing to move.

The Downriver program follows a sequencein wh ich t he l ea s t expens ive s e rv i ce s a r eoffered first. putting the job search workshopearly in the sequence tests participants’ com-mitment and enables them to look for a jobpromptly, if they do not want or need the moreexpensive training or relocation services thatcome later in the program. Figure 6-1 showsthe sequence of Downriver services, as pre-sented to participants.

The hundreds of displaced worker projectsrecently created under JTPA Title III differ sub-stantially; not all include the complete menuof services outlined above, although all theseactivities can be funded under the law. Nor doall of the projects follow the same sequence asDownriver , or require the same mandatorysteps. Some, for example, require all partici-pants to spend a few weeks in job search be-fore they become eligible for any form of train-ing. Some (probably a minority) do not requireattendance at a job search workshop. Some of-fer financial and personal counseling as an in-tegral part of project activities.

The experience of the s ix demonstrat ionprojects of 1982 and 1983 is a guide to com-parative costs of the different services offeredto displaced workers. These projects recordedoutcomes as well as costs by type of service.In addition, the U.S. Department of Labor col-lected data on outcomes (entered employmentrates and reemployment wages) by type of serv-ice from a sample of JTPA projects serving dis-


Figure 6-1.— Downriver Community Conference Economic Readjustment Programa

—How The Program Will Work With You—

Step by step Activity Explanation

You have been scheduled for a groupkick-off session with DCC Staff

To expose you to general informationOrientation and services this program can and

2 hours cannot provide

You have been scheduled for grouptesting— we call it “Assessment ForExperienced Workers”

Individual appointments have been setup for each person. We know a lot ofinformation is required—thanks foryour cooperation

These tests will give our staff an idea“Assessment for of your interests and abilities

Experienced Workers”

This session verifies your eligibilityIntake and Enrollment and formally enrolls you into the

Certification program1 for each participant

You will be scheduled for a specializedgroup workshop to fine-tune yourJob Seeking Skills

You get a day off—DCC Staff meets toreview your case files

I Classroom Training I

Job Seeking Skill Workshop4 days 8:30-4:00 p.m.

Monday-Thursday

AssessmentThen, an individual or group

meeting with you will bescheduled this week

This workshop will expose you to thelabor market. Tells you how to useresource material. Helps you toprepare for an interview. Helps youto develop a resume.

Counselors and job developers willreview your skills, interests andaptitude and schedule an individualor group session to meet with you todiscuss your options

On-the-Job Training r Resource Center(OJT) Direct placement into jobs

placed workers in the 9 months from July 1984through March 1985 (tables 6-2 and 6-3).

Results reported by type of service must bejudged with a good deal of caution. As dis-cussed previously, placement rates and enteredemployment rates are not the only measuresof success, nor always the best. For the dem-onstration projects, most of the outcomes wererecorded soon after classroom training hadended, so that reported placement rates for thisservice may be too low. In addition, the favora-ble effects of classroom vocational training onearnings should become more apparent overtime—not necessarily in the first job aftertraining.

Conversely, reported placement rates for OJTmay overstate the effectiveness of the service,because they are early reports; OJT contracts

often require employers to retain the traineesfor 30 days or more in order to receive pay-ment. In the case of the Labor Departmentdata, all outcomes are reported for just 1 dayafter placement. Another important caution,in comparing results by type of service, is thatmany projects (like Downriver) send their mostjob-ready clients directly into the job market,reserving training for those who need morehelp.

Keeping these caveats in mind, the results in-dicate that of the major types of service, jobsearch assistance is least expensive; both OJTand classroom training cost considerably moreper participant. Costs per placement for class-room training were far out of line in two dem-onstration projects, especially in AlamedaCounty, where the project placement rates


Table 6-2.–Costs and Placement Rates by Type of Service, Demonstration Displaced Worker Projects, 1982-83

Project site

Lehigh Mid-WillametteMajor type of service Alameda Buffalo Valley Valley Milwaukee Yakima

Placement rates (percent):Job search assistance only . . . . . . . . . 17.2 62.4 27.1 68.0 5.3a 80.8Job search assistance and

on-the-job-training . . . . . . . . . . . . . . . 32.4 75.8 47.5 NA 87.0 92.5Classroom training. . . . . . . . . . . . . . . . . 16.5 57.1 38.9 47.7 46.7

Total . . . . . . . . . . . . . . . . . . . . . . . . . . .—

17.5 65.5 32.0 60.7 8.5a 80.7

Cost per participant:Job search assistance with and

without on-the-job training . . . . . . . . $1,132 $1,697 $ 533 $1,133 $ 128a $1,882Job search assistance only . . . . . . . . . NA 851 407 1,133 73a 1,387On-the-job training only . . . . . . . . . . . . NA 2,319 975 — 1,387 2,481Classroom training with job

search assistance . . . . . . . . . . . . . . . . 4,117 3,282 1,303 1,935 4,851Classroom training only . . . . . . . . . . . . NA

—2,431 896 802 3,464

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,951 $1,975 $ 720 $2,349 $ 128b $2,009

Cost per placement:Job search assistance and

on-the-job training . . . . . . . . . . . . . . . $ 6,389 $2,521 $1,716 $1,665 $1,503 $2,198Job search assistance only . . . . . . . . . 6,234 1,363 1,499 1,665 1,384 1,716On-the-job training , . . . . . . . . . . . . . . . . 11,219 4,181 2,829 — 1,678 4,181Classroom training. . . . . . . . . . . . . . . . . 25,671 5,744 3,309 4,052 10,396All participants . . . . . . . . . . . . . . . . . . . .

—11,306 3,014 2,256 2,349 1,503 2,504

aThi~ figure is not comparable with th~~e for other ~ite~, be~au~e the ~nl~ services offered in Milwaukee were job development and on-the-job-training.bThis figure IS driven by the large number of workers in the placement POOI (See fOOtnOte a).NA= Not available.— =Service was not provided.

SOURCE” Walter Corson, et al., Process and Implementation /ssues in the Design and Conduct of Programs to Aid the Reemployment of Dislocated Workers FindingsBased on the Dislocated Worker Demonstration Project (Princeton, NJ: Mathematical Policy Research, Inc., report to the U S. Department of Labor, Employ-ment and Training Administration, 1984).

Table 6-3.—Entered Employment Rate andReemployment Wage by Type of Service,

Sample of JTPA Title Ill Projects,July-March 1985

Entered Average hourlyemployment reemployment

Major type of service ratea wage

Classroom trainingb . . . . . . 650/o $6.31On-the-job training . . . . . . . 84 5.92Job search assistance . . . . 70 6.42Other servicesc . . . . . . . . . . 62 5.80

Overall . . . . . . . . . . . . . . . . 70% $6.15aThe entered employment rate is based on participants terminating from theproject’s services.

bclassroom training includes &@c education, vocational training, or acombination of the two, conducted in schools or training institutions.

cother services include vocational or pW30rId Counseling, SS.SeSS171eflt SefViCeS,preemployment skills training, and support services such as transportation.

SOURCE: U.S. Department of Labor, Employment and Training Administration,“Summary of JTLS Data for JTPA Title 11A and Ill, Enrollments andTerminations During January-March 1985, ” August 1985.

were extremely low. In the other, Yakima, only15 out of 243 participants were enrolled inclassroom training, probably too small a num-ber to yield meaningful results. The results ofjob search assistance, in terms of immediateplacements and wages on the new job weregood; for many displaced workers, this serv-ice appears to provide effective reemploymenthelp at modest cost. OJT shows high placementrates but lower reemployment wages than theother major services. This may reflect a selec-tion factor (e.g., participants who are most job-ready get job search assistance and those whoscore well on aptitude and basic skills tests areselected for classroom training); or it may sim-ply mean that OJT is used more heavily inlower wage sections of the country.


The discussion that follows does not coverevery element of program design in a detailedor comprehensive way; instead, it treats issuesthat are of most interest to policy makers at alllevels of government.

Getting Into the Program

Outreach

Often, displaced workers who could profitfrom reemployment and retraining programsnever hear about them, Many adults withsteady work histories are not accustomed to ap-plying for government help (except for unem-ployment insurance), and may not be aware itexists. The surest way to reach the eligibleworkers affected by plant closings or masslayoffs is to offer assistance at the plant site be-fore the layoffs begin. Other methods for reach-ing eligible workers include notices in the me-dia, letters to individual workers, and personalcontact. For example, when the LTV Steel Co.acquired a closed-down Crucible steel plant inMidland, Pennsylvania, it offered reemploy-ment and retraining services to former Cruci-ble workers, many of whom had been out ofwork for 2 years or more. The outreach methodthe Midland project chose was to knock ondoors.

In times of prolonged economic distress, dis-placed worker projects may have no troublereaching applicants. In fact they may be over-whelmed. In 1982, the Buffalo demonstrationproject was so swamped with applications thatparticipants had to be chosen by lottery. Dela-ware had the opposite problem when it openedits displaced worker program in 1984. Dis-placed workers were scattered, rather thanconcentrated in large plant closings, and it tooktime for workers to become aware of the serv-ices, The local Employment Service (ES) rarelyreferred unemployed workers to the program.Not until the displaced worker project staffmade positive recruitment efforts (e.g., placingposters, application cards, and drop boxes inES offices) did eligible workers discover theservices available to them. Delaware’s De-partment of Labor has since established closerlinks between the ES and its displaced workerprogram,

Orientation

workers are introduced to the project’s ex-pectations at orientation, This is the time tomake clear what the project can and cannot of-fer, No one can offer assurance of a new jobwith as good pay and benefits as the old one.A fortunate few workers, usually the highlyskilled, will do as well or better, but most willhave to start new jobs at a sacrifice, even afterretraining. If this fact is not clearly understoodto begin with, everyone suffers; participants aredisappointed or bitter, project staff are frus-trated, and placement rates are low as work-ers wait for good jobs that do not materialize.

It should also be clear from the start that noteveryone needs or can benefit from training.Some of the most disappointing outcomes ofrecent displaced worker projects were those inwhich training was oversold, or where partici-pants were not tested and carefully matchedwith training opportunities.

At the same time, the project must offerworkers better prospects than they have ontheir own. Downriver emphasized the staffcommitment to finding jobs that offer accept-able wages to participants, keeping loss of earn-ings to a minimum, The Ford Milpitas project,in the heart of California’s high-tech SiliconValley, emphasized opportunities for advance-ment with retraining. One co-director (manage-ment) said:

We told them, you’ll start at lower wages(than the $12 an hour Ford paid). Your abilityto rise will be based on your own skills; itwon’t be collective, through the union.

The other co-director (labor) said:

Workers were hammered with the reality offacing options. You don’t have to take train-ing if you want an assembler’s job at $4,.50 anhour,

Screening

Some displaced worker projects, like the oneat Ford’s Milpitas plant and the Midland proj-ect sponsored by LTV, try to serve every work-er who signs up, (In fact, the Midland projectserves displaced workers’ families as well as

the workers themselves,) Others, like the dem-

Ch. 6—Design and Performance of Displaced Worker Projects ● 247— —

Photo credit UAW.Ford Employee Development and Training Program

The UAW-Ford Employee Development and Training Program has established several centers that offer a range of testing,job placement, and training services to displaced workers. Here, laid-off workers are attending an orientation session

at a Detroit center.

onstration project at Yakima, Washington,screen applicants rigorously, saving their ef-forts for those considered most able or moti-vated to find jobs. Downriver and the projectsmodeled on it take an in-between position,weeding out applicants who do not attend themandatory initial steps of the program.

Rigorous selection of participants has some-times been criticized as creaming, that is, se-lecting for service the workers best preparedand most likely to get jobs on their own. Theperformance standard set forth in JTPA TitleIII–placement and retention in the job—mightbe thought to encourage creaming, but thereis little evidence of this so far in JTPA-fundeddisplaced worker projects, except for entry into

some highly selective skills training courses.(See ch. 5 for further discussion of this issue.)

Financial and Personal Counseling

Many displaced workers benefit from coun-seling on their financial and personal situationas early as possible after losing their jobs, Peo-ple who have worked all their adult lives mayhave little idea how to cope with the emotionalshock of losing a job or the financial adjust-ments they have to make. Typically, displacedworkers are unaware of what community so-cial service programs have to offer, and arereluctant to ask for help. Counseling can ac-quaint workers with community resources that


they may need, and can help them make finan-cial plans to avoid losing their homes or otherirreplaceable assets.

Displaced worker projects do not commonlyprovide personal or financial counseling them-selves, but may refer clients to communityagencies that do offer counseling. In a recentsurvey of 120 displaced workers at 10 sites inthe northeast and midwest, the workers com-mented that not enough projects offer themhelp in contacting creditors, reorganizing theirfinances, and seeking financial aid to carrythem through till they find a new job.33

Job Search Assistance

Job search assistance is offered in two forms:1) job development and job matching, whichare provided by the project staff; and 2) train-ing the individual worker to find his or her ownjob. Job development by the project is valuablebecause so much of the real job market ishidden; jobs are filled by word of mouth ornetwork, not through newspaper ads, privateemployment agencies, or the public Employ-ment Service. Training for workers in findingtheir own jobs is valuable because so manydisplaced workers do not know how or whereto look. Often, displaced workers have had justone job in their lives, and they got it by showingup at the plant gate.

Building Workers’ Job Search Skills

Job search workshops are intended to givepeople skills in finding their own jobs, an as-set that will last throughout their working lives.The aims of the workshops are to build confi-dence and motivation, as well as to teach prac-tical job-hunting skills. Typically, the workshoplasts 20 hours, over 4 or 5 days, with the firstsession often spent in “skills identification. ”This exercise, in which workers list all the tasksthey have performed and skills they have de-veloped in their worklives, is intended to givepeople an emotional jump start, helping to raise

ssGa]e Zahniser, William L. Ashley, and Lawrence W. Inks,Helping the Dislocated Worker: Employer and Employee Per-ceptions (Columbus, OH: The National Center for Research inVocational Education, Ohio State University, 1985).

the low self-esteem that so many workers feelafter being laid off. The rest of the workshopsessions are devoted to learning skills in re-sumé writing, job interviewing, and locatingpotential employers,

Following the workshop, most programs pro-vide a resource center for self-directed jobsearch, outfitted with a telephone bank, tele-phone and business directories, newspaperclassified advertising sections, and a bulletinboard with listings of job openings from localgovernment offices and the local EmploymentService, and often from program participantswho wish to share information they have un-covered. Resource centers work best when theyare located on the same premises as the restof the program, and when they have a full-timeknowledgeable staff.

Highly structured job clubs, often the subjectof favorable publicity, did not work very wellfor the demonstration projects that tried them.They were expensive and usually not verypopular. In the most rigid version of the jobclub approach, a group of a dozen people meet8 hours a day for 4 weeks, spending the first2 weeks in classroom preparation and the next2 intensively working the phones. Members ofthe club continuously cold call employers forjob leads, relying on support from each otherto keep going through discouragements,

Downriver tried job clubs, found they dimin-ished the participants’ initiative, and aban-doned the high-pressure system in favor of alower key, self-directed job search, using thehelp of the resource center, One demonstrationproject, Lehigh Valley, also reported good re-sults with a more relaxed version of the jobclub.

Job Development

One of the most useful forms of assistancea displaced worker project can offer is to dis-cover job openings that are never publicly an-nounced. Plant-based projects, as the CanadianIAS experience demonstrates, are especially ef-fective in finding jobs in the hidden job mar-ket. In the United States, the sweep of area em-ployers performed by the Johnson & Johnson


team (see box 6A) was typical; the Dana Corp.team, the Ford Milpitas team, and a numberof others have used similar techniques,

Plant-based job development is especiallyhelpful to unionized displaced workers look-ing for jobs in a non-union environment. Dis-like and fear of unions can be a powerful de-terrent to hiring. This was true in Plainfield,New Jersey, in 1961, when the Mack truckplant closed. It was true in Cortland, NewYork, in 1977, when the Brockway truck plantclosed (indeed much of the town blamed theunion for the closing); and it was true in Edg-erton, Wisconsin, in 1981, and in Chicago andSan Jose in 1983.34 The Johnson & Johnsonteam invited neighboring company managersto lunch to meet displaced workers “to showthem, ” said the co-director of the team, “thatour union folks are not ogres, ”

Continuing displaced worker programs canalso achieve good results in job development,especially when they earn the confidence of lo-cal employers in their ability to screen work-ers for job openings. Successful job developerskeep in personal touch with local employers,selling their services by offering to save em-ployers the trouble and expense of interview-ing numerous applicants. With the project do-ing the screening and referral, the employerneed see only a few well-qualified people.

Faced with a depressed job market (either cy-clical or structural), some displaced workerprojects have tried unconventional ways offinding jobs. Lehigh Valley, in the depths of therecession, hired advertising agencies to mar-ket the program to the business community.The staff believed that this marketing effort didelicit calls from employers. Several projectsconsidered enlisting private employment agen-cies, but only Buffalo tried it. Unfortunately,it produced no jobs. Possibly, the agencies’ in-

o4John W, Dorsey, “The Mack Truck Case: A Study in Unem-ployment, ” Studies in the Economics of Income Maintenance,Otto Eckstein (cd.) (Washington, DC: The Brookings Institution,1967]; Robert Aronson and Robert McKersie, Economic Con-sequences of Plant Shutdowns in New York State (Ithaca, NY:Cornell University, New York State School of Industrial Rela-tions, 1980); and OTA interviews with directors of reemploy-ment programs of the Dana Corp., Johnson & Johnson, and theFord Milpitas assembly plant.

experience with blue-collar workers accountedfor the lack of results, In 1982, when unemploy-ment in the Detroit area was above 18 percent,the Downriver project staff attempted to cre-ate jobs. They provided assistance to small andmedium-sized plants in getting military con-tracts—the only new business available at thetime.

Job Matching

This essential service can be provided in anumber of effective ways, from simple hand-sorting of files to elaborate computerized sys-tems, For example, Downriver is experiment-ing with a highly automated keyword system,which breaks down job titles into relevantskills, codes participating workers’ skills, andthen matches workers with job openings on thebasis of the skills match, While preparing toadopt the automated system, Downriver job de-velopers simply sorted clients’ forms into 27occupational categories, and stored them in filefolders.

Some projects have found that modest home-made automated systems work quite well. TheFord Milpitas project, for example, began byentering every worker’s test scores, interests,and background on the plant’s large mainframecomputer, When the plant closed and the main-frame was moved out, project staff found theycould store enough information on a smallpersonal computer to sort and pick out likelycandidates for new jobs or training courses,Similarly, the Mid-Willamette demonstrationproject found a personal computer quite ade-quate for storing and sorting clients’ files.

On-the-Job Training

In practice, on-the-job training is often aneffective tool more for placement (and some-times for economic development) than for theacquisition of new transferable skills. Thetypical subsidy to employers for trainees is 50percent throughout the training period, whichmay last from 1 to 6 months. Often, OJT con-tracts require that the worker remain on thejob for 30 to 90 days, with some of the paymentcontingent on retention; in some cases, how-


ever, there is simply an understanding thatworkers are to be kept on.

High initial placement rates make OJT anattractive option to many service providers,and also to workers who want to get back onthe job as soon as possible. In the JTPA Title11A program, OJT is increasingly popular.35

Information is less complete for Title III. MostState programs report that OJT is included intheir service mix; probably about one-fourth ofclients use it.36 Some projects do not offer itat all.37 Possibly the reason is that the experi-enced adult workers served by Title III pro-grams can often be placed without an OJTsubsidy. The subsidies seem to be most effec-tive in placing workers in small and medium-sized businesses.

Vocational Skills Training

For 25 years, many experts have prescribedtraining as the sovereign remedy for structuralunemployment of displaced workers. With thecomputer revolution of the late 1970s, and thesimultaneous increase in worker displacement,prescriptions for training became more insis-tent. The idea gained currency that if peoplewere being displaced by robots, they had betterlearn to tend the robots.

A few years of recent experience with dis-placed worker programs have made the pointthat the training idea, in this form, was over-simplified and oversold. Whatever part tech-nological advance may have in the displace-ment of workers (there are other factors of atleast equal importance, as discussed elsewherein this report), new jobs to replace those per-manently lost are not necessarily high technol-ogy and do not always involve retraining.

Experience so far also teaches that a minor-ity of displaced workers—perhaps 20 to 30

g5&ry walker, Hilary Feldstein, and Katherine SOlow, An In-dependent Sector Assessment of the Job Training PartnershipAct, Phase 11: Initial Implementation (New York: Grinker, WalkerAssociates, 1985), pp. 25-26.

~esee ch. s for details.‘7Robert F. Cook, et al., “Transition Year implementation of

the Job Training Partnership Act,” a report prepared by Westat,for the U.S. Department of Labor, Employment and TrainingAdministration, 1985, pp. 9-40 to 9-41.

percent in well-run projects—are likely tochoose and to benefit from vocational skillstraining. This is not, however, an inconsider-able number. While vocational training may attimes have been overemphasized, it remains anessential part of the service mix for displacedworkers. For many semiskilled blue-collarworkers whose old jobs have permanently dis-appeared, training in new skills is the bestchance to recapture the ability to commandgood wages. Displaced worker projects canopen that opportunity to many people whowould not find it on their own.

Course Selection

One of the most demanding tasks in settingup a skills training program is choosing theright courses—ones that teach skills that are indemand. As chapter 5 discusses in more detail,information about the occupations in demandin local labor markets is likely to be incomplete.

In the six demonstration projects, despiteattempts by the staff to choose training coursesrealistically, most graduates did not get jobs re-lated to their training. These projects were allshort-term, lasting just 1 year, so there was notime for a survey of employers to discover whatoccupations were locally in demand. Typically,the project staff first tried to identify occupa-tions in demand by using State labor marketinformation, which usually turned out to beinsensitive to local job markets and somewhatout-of-date, By necessity, most of the projectsthen turned to information from the project’sjob developers, training providers, and PrivateIndustry Councils, which represent local busi-ness. The fact that trainees in these projectsgraduated in the depths of the recession wasno help.

Downriver had time for a more systematicapproach. The planning staff studied tradejournals, reviewed economic forecasts fromlocal universities, and analyzed labor marketdata collected by State agencies to identify localtrends, Job developers checked the planners’results, interviewing local employers and query-ing trade associations. Downriver did not re-port specifically on training-related placements,although the overall record for placements


Photo credits Downriver Community Conference

Training courses for displaced workers include a wide range of occupations, from repair of electronic equipmentto landscaping.

after classroom training appeared favorable inPhase One. (In Phase Two, nothing workedvery well.) High-technology training, however,did not come off very well. Workers who tookspecially designed programs in numerical con-trol machine operation and electronics faredsubstantially worse in finding jobs than traineesin more traditional skills. One reason may havebeen that the high-technology courses werenew and the trainers inexperienced. In addi-tion, however, Downriver program staff be-lieved they may have been ahead of the marketin developing some of their classroom pro-grams. Demands for some skills grew moreslowly than anticipated.

In Buffalo, results of three out of four high-technology training courses were dismal. Incourses on copy machine repair, microproc-essor/microcomputer repair, and digital tele-phone maintenance, placements related totraining were below 20 percent. Training-related placements for medical word process-ing, on the other hand, were nearly 60 percent.

Table 6-4 summarizes the subjects offered inclass-size training (i.e., courses set up especiallyfor the displaced workers) in the six demon-stration projects and Downriver’s Phases One

and Two, More than half the classes offeredwere in some kind of repair and maintenance,both traditional (e.g., truck engines) and high-technology (computers, microprocessors, ro-bots). Training in the high-technology area wasprominent in all the projects. These skills werethought to be in demand, and also to offer thebest chances for advancement. In addition,there was probably an element of fashion inthe course selection. In the absence of any verycertain knowledge about the labor market(especially while the economy was stalled indeep recession), planners tended to selectsomething new.

With more experience, projects are changingtheir course selections. Downriver has droppedits highly demanding robotics course, findingthat the auto manufacturers are mostly trainingrobotics technicians drawn from among theirown active work forces.38 Simpler, but still

taln fact, much of the worker training involved in the use ofnew technologies may be occurring in the workplace, with ac-tive workers (not new hires) the trainees. The California Em-ployment Training Panel, which helps the State’s employersretrain active employees as well as supporting training projectsfor unemployed workers, reports that more than half the projectsit funded in 1983 and 1984 involved some form of computer tech-nology.


Table 6-4.—Class Size Training Provided in Displaced Worker Projectsa

National De,pmstratopm Projects, 1982-83

Alameda:Air-conditioning/refrigeration services

technicianAutomatize technicianCable TV installerCAD/CAM drafting technicianCertified weldingComputer technicianDigital technicianElectronic technicianMicrowave technicianWelding technicianWord processing

Buffalo:Computerized numerically controlled

machinesCopy repair technicianFloor mechanicHeating, ventilation, air-conditioning

repairMicroprocessor/microcomputer

technicianSmall engine repairTelephone repairTruck mechanicWord mocessing (medical)

Lehigh valley:Computer servicesComputer technicianComputers and business systems

marketingFloor covering

Mid-Willamette Valley:Computer-assisted draftingComputer operationsElectronics technicianWelding

Southgate:Air-conditioning and refrigeration repairAutomotive and diesel mechanicsCable TV installerComputer operations and serviceDietetic technicianIndustrial computer maintenanceMachiningMotorcycle mechanic

Y a k i a :Industrial computer maintenance

Downrlver CommunityConference, 1980-82:

Phase One (1980-81):ElectronicsEnergy auditorHeating and coolingMachinistNumerical controlPipe weldingScrew machine

Phase Two (1981-82):AccountantBuilding operations managementComputer/data processingDrafter detailerElectronic technicianIndustrial salesMachine toolRoboticsTechnical preparationWelding/welder-fitterWord processing management

a{iclass size training” is training in classes that are designed especially for participants in dis~laced worker Drolects.bL’TeChnlCal prepar~lon” Was a-q-week course in reading-and math, to prepare workers for skills training COurSe~.

SOURCES: Mathematical Policy Research, Case Study of the Alameda County and Soutlrgate Dislocated Worker Demonstration Projects, Jack Wichita, Case Studyof the Milwaukee Dislocated Worker Program, Case Study of Operation Jobsearch: The Lehigh Valley Dislocated Worker Demonstration Project, and CaseStudy of Project S.A. V. E.: The Yakima, Washington Dislocated Worker Demonstration Program; L.M. Wright, Jr., Case Study: Buffalo Worker ReemploymentCenter, Buffalo, New York and Case Study.’ Mid-Wi//ametfe Va//ey Job Assistance Network, Salem, Oregon (Princeton, NJ: Mathematical Policy Research,1984); Marcia Jerrett, et al., Serving the Dislocated Worker: A Report on the Dls/ocated Worker Demonstration Program (Cambridge, MA: Abt Associates,19S3); and Walter Corson, et al,, Process and Implementation Issues in the Design and Conduct of Programs to Aid the Reemployment of Dislocated Workers:F/nd/ngs Based on the Dislocated Worker Demonstration Project (Princeton, NJ: Mathematical Policy Research, 1984).

exacting courses in repair of electronic devices(office computers, copiers, vending machines,radios and TVs) are being offered in a numberof projects with good placement results.

For example, the Delaware Technical Com-munity College offers an 18-week concentratedcourse in electronic repair that begins withbasic electrical circuitry and proceeds to elec-tronics. In a graduating class of 15 displacedworkers in 1984, all had jobs within a monthat an average wage of $7.02 (the average wageon previous jobs was $10.33). Both large andsmall firms were hiring these graduates of ashort, intensive course, at lower wages thanthey would pay a graduate of a 2-year associ-ate degree course, and then training them fur-ther on the job with possible pay advances inthe future. One reason for the success of thiscourse is that the director was careful not totrain too many candidates at once. It would be

easy to flood the receptive but limited localmarket for these modestly trained technicians.Short courses in telecommunication installa-tion and repair are also working out well. Withderegulation of the telephone system, there isa proliferation of small telecommunicationfirms, many of whom are willing to take ongraduates of short courses at modest wages.

Downriver, though it is now emphasizinghigh-technology training less than in its earlierdays, continues to offer a 27-week trainingcourse in electronics and computer repair.Graduates generally make no more than $4.50to $6 an hour to start, but usually can workupto $8 or more within a year.

Several projects in addition to Buffalo havefound that training in high-technology clericalskills appears to pay off. For example, in 1983,when the San Francisco Blue Cross-Blue Shield


office decided to move 400 jobs (mostly claimsp r o c e s s o r s ) to low-cos t , low-wage towns i nCalifornia’s central valley, a labor-managementadjustment committee arranged several op-tions for training the laid-off workers. Thirtyworkers selected a 4-month course in wordprocessing, offered by a private training con-tractor. All graduates were placed, at wages

averaging $7.44 per hour, compared with $7,46to $9.55 per hour on the old jobs .

The vocational training offered in JTPA TitleIII projects for displaced workers covers a verybroad range of skills and occupations, somehigh-technology but many in quite traditionalfields. State directors of Title III programs,surveyed in 1984-85, mentioned 50 or morekinds of training as examples of what theirprograms were offering. 39 As table 6-5 shows,the list ranges from landscaping and uphol-stering to data processing and computer repair.

JTPA’s statutory requirement of performancestandards has led some projects to adopt a new

mode of course selection. Project staff makethe initial choice of courses, either togetherwith the local Private Industry Council (PIC)or with the PIC’s approval. Then, the trainingcontract is put out for bids, with the provisothat trainers themselves must meet perform-ance standards. In a sense, this transfers theperformance requirement to the t rainers . Atypical contract may require that, for the trainerto receive final payment, 75 percent of gradu-ates find full-time jobs, with all but 10 percentof the job training-related; that the star t ingwage be no lower than $4 to $5 per hour; andthat trainees be retained on the job for at leastso days .4 0

About half the States (24 of 46 responding tothe question in OTA’s telephone survey) useperformance-based contracts in their JTPATitle 111 programs, and 11 use them predomi-nan t ly , Re l i ance on t h i s k ind o f con t r ac tappears to be growing. In a sample of 40

Sesee ch. 5 for further discussion of survey resuhs.4ocontract5 requiring 1OO-percent placements are rare. The

California Employment Training Panel requires them, but inpractice allows some flexibility, If the 100-percent rule is rigidlyenforced, trainers must include some leeway in their contractprice.

Table 6-5.—Examples of Vocational Training Offeredin JTPA Title Ill Displaced Worker Projects, 1984-85

Aircraft mechanicaloperations

Airline attendantAir-conditioning and

heating mechanicAsbestos handlerAuto mechanicBank tellerBoat buildingBookkeeperCabinet makerCable splicingCarpentryCasino workerChemical operatorClerical and office workComputer repair,

maintenanceConstructionCulinary artsData processorDay-care workerDraftingDiesel mechanicElectronicsEnergy conservation workFisherman

Golf course mechanicHealth and medicineHeavy equipment operatorHotel-motel managerIndustrial maintenanceIndustrial sewingInstitutional attendantIron pourerLab technicianLandscapingMachine tool and dieMachinistMechanical, electrical

engineerOffice machine servicePrinting and publishingReal estateRetail tradeSecurity guardsStatistical process controlTelephone technicianTruck drivingTourism occupationsUpholstererWeldingXerox technician

SOURCE OTA telephone survey

Service Delivery Areas providing JTPA TitleIIA services to disadvantaged workers, 27 re-ported in late 1984 that they used performance-based contracts to ensure accountabil i ty oftraining institutions. Six of the twenty-sevensaid they had only recently adopted this kindof contract ing.4 1

So far , i t appears that performance-basedcontracting is an effective way to make surethat ski l ls taught in t raining courses are indemand, and that the trainers do a good job ofteaching the skills. It also reassures studentsof the worth of the program. It also has a pro-nounced effect on selection of students, Train-ers who do not get paid if they do not find jobsfor their graduates have a powerful incentiveto select s tudents with care. Both commonsense and experience teach that it is a greatmistake to admit people to training if they lackthe necessary basic educational skills or apti-tudes. Yet selection that is too rigid amountsto creaming. Some projects try to guard againsttoo-rigid selection criteria by requiring trainers—. —.. .— - .-

Alcook, et al., op. cit., P. 10-21.


to explain their reasons if they reject applicantswho were approved for training by the projectcounselors .

Selection of Trainees

In most projects, selection criteria for peoplegoing into training are that they need it (do nothave marketable skills), can do the work (havepassed the requisite tests), and will not haveto drop out for lack of income support. Somewell-financed projects do not impose the firstrequirement. The Ford Milpi tas project , forexample, encouraged everyone to take appro-priate education or training, whether Englishas a second language, remedial reading ormathematics, or a demanding g-month coursein mask design (computer-aided etching of cir-cuits on microchips, through the sequential useof stencil-like masks).

Projects that drop the second requirement—test ing for appropriate placement—do so attheir peril. This does not mean that only a se-lect few can be admit ted to t raining. Someprojects that are committed to training havebeen able to devise an array of vocational train-ing courses —combined, where necessary withremedial courses in reading and math—thatsuit a broad range of skills and aptitudes. Nordoes it mean that projects must immediatelyconfront displaced workers with a battery oftests. Academic tests can be extremely intimi-dating to adult workers who are years awayfrom classrooms. Projects that are successfulin providing training first orient their clientsto all aspects of the project, including an ex-planation of why testing is necessary for properplacement of workers who are interested in vo-cational skills training.

An example of training with little attentionto selection was the Southgate project in theLos Angeles area. Begun with the best of in-tentions, the project ended in stress, waste, andfor many workers, bitter disappointment.

The General Motors assembly plant in South-gate closed in March 1982, laying off 4,300hourly workers. A modest retraining and re-employment project, begun a few months afterthe closing, was greatly expanded in September

1982, when General Motors, the United AutoWorkers, and the State of California signed anagreement to underwrite the project.

T ra in ing was a major element of the ex-panded project; 45 percent of the 1,682 partici-pants enrolled in the 28 classes offered. But itwas hurriedly put together, in an attempt tocomplete training while workers still had un-employment insurance and Trade AdjustmentAssistance (TAA) income maintenance. As aresult, classes started with teachers unpreparedand books and equipment missing; at least 10of the classes had to be extended. Most of thecourses were technical , in f ields in whichemployers require credentials such as work ex-perience or a certificate from a credible train-ing institution. Southgate’s program was notable to provide either.

The demanding content and fast pace ofmany of the courses required substantial home-work and good basic ski l ls in reading andmathematics. Unfortunately, most of the stu-dents, although hard working and highly moti-vated, were unprepared. They had not beenscreened for their basic educational skills; fur-thermore, trainers were eager to enroll studentsand were not very selective.

In the end, 30 percent of classroom traineesdropped out. Few of the trainees who stuckwith it got jobs related to their training. Al-together, by September 30, 1983, the Southgateproject had placed only 60 workers in jobs—3.6 percent of the participants. (Another 366,or 22 percent , were recal led to other GMplants.) This may not be a fair indication of theproject’s results, since it continued past thatdate. However, it had been in existence for 12months at the time the results were reported.

In a project in Alameda County, California,serving mostly workers displaced from the GMassembly plant at Fremont, the dropout ratefrom training courses was even higher thanSouthgate’s–50 percent. Like Southgate, theAlameda County project was not selective inplacing workers in training courses; the coursesalso were set up hurriedly, and trainers werenot required to place graduates.


Alameda County’s placement rate was 17.5percent, with another 19 percent getting re-calls. Other factors probably contributed to thepoor results: the GM workers had high supple-mentary unemployment benefits during the lifeof the project, and rumors persisted that theplant would reopen. In fact, GM and Toyotadid eventually form a joint new venture (NewUnited Motor Manufacturing, Inc., or NUMMI),which opened a refurbished assembly plant atthe Fremont site in 1985.

According to State of California records, theSouthgate and Alameda County projects com-bined spent $8,3 million in the year November1982 through October 1983. 42 During that time,511 of 3 ,448 par t ic ipants found new jobs;another 983 were recalled to other GM plants.The cost per placement in both projects com-bined (omit t ing recal ls) was approximately$16,000. This compares with a range of $1,500to $3,000 per placement in five demonstrationdisplaced worker projects operating at approx-imately the same time in other parts of theN a t i o n .4 3

The Southgate and Alameda County experi-ences are sometimes ci ted as evidence that“training doesn’t work” for displaced workers,especially semiskilled workers. This conclusionis not warranted. It can only be concluded thattraining was ineffective under the circumstancesof those projects. One of the major circum-stances was failure to test and screen partici-pants adequately.

Experience in the Ford Milpitas project pointsto some quite different lessons. This project

4ZFor data comparing the Alameda project with the five otherdemonstration projects, the period October 1982-September 1983is used. Sources are reports by Abt Associates and Mathemat-ical Policy Research. See table 1. A different source, records ofthe State of California cited below, provides details on costs ofboth the Alameda and Southgate projects; these records covera slightly different time period {November 1982-October 1983),and show slightly different figures for participants and outcomes.

%tate of California, Health and Welfare Agency, Employmentand Development Department, “General Motors/United AutoWorkers/State of California Reemployment and Retraining Pro-gram, November 1, 1982-October 31, 1983,” report prepared forJoint Legislative Budget Committee (Sacramento: 1984). See alsoMathematical Policy Research, op. cit.; and Jay Mathews, “Re-training ‘83—The Class in Room E221, ” The Washington Post,NOV. 6-9, 1983.

was just as committed to training as Southgate,but took pains to match workers with suitabletraining. Everyone who wanted training wastested. Those adequately prepared could godirectly into skills training, but still had to beselected by trainers. Most of the training wasunder performance-based contract, and trainerscould be highly selective. For example, whenSan Mateo Community College offered a coursefor microwave technicians, more than 100people applied for it; 25 were selected. Theproject staff later established another micro-wave technician class in a private technicalinst i tute.

Table 6-6 summarizes the skills courses of-fered by the Ford Milpitas program. Not all thecourses required a high level of basic educa-tion; for example, courses in landscape garden-ing did not. Some were high-technology (suchas mask design and CAD-CAM drafting), butmany were in more traditional areas, SiliconValley has a great many small metalworkingjob shops doing work to order for high-technol-ogy firms; the shops were willing to hire entry-level machinists , t rained in the project’s 6-month course, at $6 per hour. With experienceand further training, many of these machinetool operators could expect to workup to verygood wages (the better paid machinists in Sili-con Valley make upwards of $18 per hour).

Table 6.6.—Class Size Training Provided by theFord/UAW Program at Milpitas, CA, 1983-84a

Auto service technicianBus driverCAD draftingComputer repairElectronic technicianHeating, air-conditioning, refrigerationHeavy equipment operatorLandscapingMachinistMicrowave technicianPlant maintenance mechanicSemiconductor mask designTruck driverWelding

a{4Class size training” is training in classes that are designed especially fOr Par.ticipants in displaced worker projects.

SOURCE: The Local UAW.Ford Employee Development and Training Committee,Milpitas, CA.


participants in the project who did not getinto skills courses at first had another chance.Of the 770 people who took part in the project’sunique remedial education program, 341 laterwent into skills training. Altogether, 748 people,or 37 percent of all those who signed up to par-ticipate in the program activities, took voca-tional skills training courses.

Although overall placement results of thetraining program are not all recorded, the drop-out rate for training courses was low—about8 percent, and most of those left to take jobs.Only about 2 percent were real dropouts fromthe program. Project staff were satisfied thatmost trainees would be placed in training-related jobs. The only failure they knew aboutwas a welding course; placements from it werelow, possibly because of the recession.

The Ford Milpitas project demonstrates howit is possible to be selective in assigning peopleto training courses without being overly exclu-sive. The extensive range of courses offered,and the excellent remedial courses for peoplewho lacked basic skills, made it possible forworkers who wanted training to get it,

Design and Scheduling of Courses

Many displaced worker projects try to offersome skills training courses that are compressedinto periods of less than 1 year, Displacedworkers are adults, and most are responsiblefor earning a living for themselves and theirfamilies. Few have the luxury of more than thestandard 6 months’ eligibility for UI to spendin full-time training courses—less the time ittakes for admission to a displaced worker proj-ect before training, and placement afterwards.It is for this reason that Downriver persuadeda local community college to compress its 2-year associate degree in electronics into 9months; that the standard training course fordisplaced workers in Illinois is 22 weeks; andthat the Delaware Technical Community Col-lege has created an 18-week course in elec-tronics repair.

The shortening of technical courses gener-ally means that the trainee cannot cover asmuch ground as a full-time student can in the

usual 2-year course for an associate degree ora technical certificate. Displaced workers fin-ishing brief courses usually cannot commandentry wages as high as young techniciansarmed with degree or certificate, but they canget back to work sooner.

A common observation by the staff in sev-eral projects and in several training institutionsis that displaced workers do better with theirpeers, in class-size courses designed specifi-cally for them, than in established classes withyouths just out of high school.44 The displacedworkers tend to go at a slower pace, need moreexplanation and repetition, and appreciate therapport with and support of their coworkersfrom years past. In addition, class-size coursesdesigned for displaced workers may be moreconveniently scheduled than academic courses,A number of community colleges, however,now offer training modules which individualstudents can enter once a month or even moreoften.

In the Ford Milpitas project, which hadmuch greater participation in training thanmost projects, workers definitely preferredclass-size over regular courses. This was nota foregone conclusion. Community collegesabound in the San Jose area. Factory workersdo not seem intimidated by them; often theirsons and daughters go there. Tuition was nota problem; it was mostly free at that time inCalifornia and where there were fees, the proj-ect had money from the Ford/UAW fund to paythem. However, of the 1,997 workers whosigned up for services, only 205—about 10 per-cent—chose established courses in educationalor training institutions; 543 or 27 percent,chose class-size courses offered either by pri-vate trainers or local community colleges.

Income Support

JTPA programs discourage stipends for train-ees. Even though stipends are mentioned in thelaw as an allowable expenditure, they are

qqclass.size courses are established for workers in displacedworker programs and are open only to them. They are usuallydesigned for about 15 to 25 students; trainers generally requirean agreed-on minimum enrollment before offering the courses.

Ch. 6—Design and Performance of Displaced Worker Projects ● 257—- —

Photo credit:

Displaced workers in California are learing torepair tractors.

rarely provided in Title III programs. Adultdisplaced workers who desire training mustfind some other way of supporting themselves;indeed, in most projects one of the criteria forselecting displaced workers for training is thatthey have income to see them through. Otherfamily members, or part-time jobs, may providesome of the necessary support. For the dis-placed workers who are eligible for it, UI isusually an essential part of the package, Fewcan count on more than the basic 26 weeks ofUI. Extended benefits, providing an extra 13weeks, were in effect in 1985 only in Alaska,West Virginia, and Puerto Rico. Federal sup-plemental compensation, enacted during therecession, has been ended. Moreover, for theaverage worker, UI may provide less than abare minimum income, considering that in1984 the average weekly benefit was $119.

The Trade Adjustment Assistance (TAA) pro-gram provided income support for workers inapproved training for up to 18 months, but wasopen only to workers certified as having losttheir jobs because of foreign competition. TAAauthorization lapsed in 1985, and may be re-vived (see ch, 5). A minority of workers areeligible for supplementary unemployment ben-efits (SUBS) under union contracts, but eventhose eligible sometimes do not collect. SUBSare paid only until funds set aside for them run

out, which has happened in a number of in-stances when plant closings were preceded bylong layoffs.

It is not easy to set up worthwhile trainingcourses that coincide with the 6 months thatUI benefits last. Participants have to enter thedisplaced worker program early; assignmentsto training must be made expeditiously; coursesoften have to be truncated or compressed.Some projects, managing to do all this, werestill beset by additional problems of keepingworkers on the UI rolls, at least in the earlydays of the Title III program. JTPA unequiv-ocally directs States to maintain UI benefits fordisplaced workers who take advantage of “train-ing opportunities” the States have identified;the Department of Labor has underscored thismandate with one of its few directives to Stateson JTPA. Most, if not all, States understand theplain meaning of the law and directive, whichis that workers enrolled in a training courseunderwritten by JTPA funds do not have to be“available” for work but are eligible to keep onreceiving UI while in training, Still, in somecases, local ES offices misunderstood the di-rective and cut trainees off the UI rolls.

When JTPA funds are not involved, the sit-uation is not so clear. In the 1970 amendmentsto the Federal Unemployment Tax Act, Con-gress directed States to maintain UI eligibilityfor workers attending training courses ap-proved by the State. Some States escape therequirement by not approving training coursesthat are paid for by non-JTPA money—privatesources such as the 5-cents-an-hour funds thatare set aside for training under GM and Ford/UAW contracts, or possibly the workers’ ownfunds. Other States, while they do not posi-tively deny UI benefits to workers in training,do not draw the workers’ attention to the factthat they may be eligible. Of 44 State Title IIIprogram managers responding to OTA’s tele-phone survey, 20 said their States allow UIeligibility for unemployed workers in full-timetraining not funded by JTPA, 17 gave a condi-tional answer, and 7 said their States do notallow it.

Some States are reluctant to approve UIeligibility for workers in full-time training


because they believe they must be conservativein managing their UI funds. During the threerecessions of the past 10 years, many Stateswent heavily into debt to the Federal Govern-ment to keep their trust funds solvent. At thebeginning of 1985, 21 States still owed $9.8billion in Federal loans (down from $13.2 bil-lion a year before). Congress has directed theStates to repay their loans expeditiously.

A bill (H.R. 1947) to encourage States toapprove training for workers collecting UI ben-efits was introduced by Representative Kennellyand four cosponsors in the 99th Congress. Thebill would allow UI payments made to work-ers in training to be credited against any in-terest a State owes the Federal Government forloans to their UI trust funds. The bill wouldalso direct the Secretary of Labor to help Statesdevelop criteria for approval of training pro-grams open to people receiving UI benefits.

Unlike many States, California has had asurplus in its unemployment trust fund foryears. For a time, California workers enrolledin training courses were permitted to receiveUI benefits for 52 weeks, so long as they werein approved training courses. Taking advan-tage of these extended UI benefits, plus SUBS,the ex-Ford Milpitas workers taking a tough 9-month class in mask design were able to staythe course. Twenty-two of the original 24 grad-uated. A bill in the 99th Congress (S. 395) wouldallow any State to extend unemployment in-surance for workers in training an extra 10weeks, at Federal expense.

prolonged income support can, however,also have perverse effects. A common obser-vation by project staff is that workers who areexpecting recall, or are collecting generousSUB payments, are not likely to participate indisplaced worker programs. Instead of usingthe time that income supports last for an in-tensive job search or retraining, some workerssimply wait for something to turn up. Depend-ing on the jobs available, some workers haveto make quite a financial sacrifice in going backto work. Consider, for example, the situationof a worker who formerly made $10 or $12 perhour, can now find nothing better than jobs

paying $4 to $6 per hour, and is covered by UIand SUBS that replace (for a time) 90 percentof his old wage.

Some collective bargaining contracts includea provision that makes it less costly for sucha worker to start a new low-paying job. TheFord UAW contract, for example, allows work-ers to collect SUBS to make up most of thedifference between their old wages and thelower wages in new jobs, until their SUBS runout. This arrangement has the advantages ofgetting people back to work, giving them ex-perience in new jobs from which they can ad-vance, and allowing them time to recoup someof their earning power. Directors of the FordMilpitas project urged workers to use this strat-egy, and they believed that it worked, sinceparticipation in training was so high. Similarin purpose is a suggested scheme for a newworker insurance system, to compensate work-ers for a part of the difference between wageson old jobs and lower wages on new ones. Thecompensation would last only for a fixed tran-sition period, and participation might be lim-ited to older, more experienced displacedworkers. 45

In the 99th Congress, a bill (H.R. 758) intro-duced by Representative Stark would allowvarious forms of extra income support from theUI system for workers in training. First, itwould authorize States to pay partial UI bene-fits to part-time workers enrolled in approvedtraining courses: this “short time” compensa-tion would be available only to workers in in-dustries with declining employment. If theworker in training were on the job half time,for example, he would be eligible for half hisfull weekly UI payment. The bill would alsoallow States to extend the amount and periodof UI payments, for workers who elect to takeapproved training. In addition, it provides forsupplemental payments from the UI fund toworkers who take jobs at a lower wage thanis required under the State’s UI law. The pay-ments could amount to as much as 80 percent

qSAlice M. Rivlin (cd,), Economic Choices 1984 (Washington,DC: The Brookings Institution, 1984), p. 150. See ch. 2 for a dis-cussion of this and similar proposals.


of the total UI benefits the worker could collectif he were unemployed, and could last as longas 1 year. The aim of the last provision is toease the transition from a higher paying job toone that pays less, but gets the worker back onthe job and, possibly, in a position to recoupearning power.

Another approach to income support for dis-placed workers in training was proposed byMalcolm Lovell, a former undersecretary of la-bor and guest scholar of the Brookings Insti-tution. 46 His proposal is, first, to define dis-placed workers as laid-off employees who have4 years of employment covered by a State UIsystem and is certified by their former employ-ers as being unlikely to return to work for thatcompany in the next 6 months. Then, the cer-tified displaced worker would be offered achoice between proceeding independently tofind a new job (in which case he or she wouldbe eligible for regular UI benefits and otherState or private assistance plans) and takingpart in a new displaced worker program. Theworker would have 4 weeks to decide betweenthe two options,

The new program would consist of a re-quired sequence, in which the worker wouldfirst go through several months of job counsel-ing and job search assistance and training. Ifno suitable job were found during this period,the participant could then go on to educationor training, with a voucher providing full tui-tion for short courses and partial tuition forlonger ones. Some extended income supportwould be provided beyond regular UI; it wouldbe paid from a special trust fund, supportedby a l-cent-an-hour tax on employers and em-ployees. Income assistance would be limitedby the amount in the trust fund.

An approach tied more closely to existingsystems was proposed in a staff paper of theNational Commission for Employment Policy .47

~Malcolm R. Love]], Jr., “An Antidote for Protectionism,” The13rookings Review, fall 1984.

47 Stephen E. Baldwin and Ann Donohue, “Displaced Work-ers: New Options for a Changing Economy, ” paper presentedat the Fifth Annual Research Conference, Association for Pub-lic Policy Analysis and Management, October 1983 (Washing-ton, DC: National Commission for Employment Policy, 1983).

It suggested that by the 13th week of coveredunemployment all UI claimants should beinterviewed, and those identified as displacedworkers would enter a sequence of servicesstructured to encourage reemployment. Work-ers determined to need training could entertraining courses any time after the assessment,and would be eligible for 13 weeks of extendedUI benefits for income support—even if theState’s unemployment rate was not high enoughto trigger the extended benefit program.

The potential of government-provided finan-cial aid to students to help provide incomesupport for displaced workers, or other adultswho need to prepare for job or career changes,is discussed briefly in chapter 7.

Availability of Jobs

Some projects have observed greater inter-est in skills training during economic hardtimes than in prosperity. For example, inDownriver’s Phase One (1980-81), 45 percentof participants entered training. In Phase Two,during the 1982-83 recession, 75 percent signedup for courses. Participants in the two phasesdiffered little in age and education. With re-covery, in 1984, the proportion of Downriverclients taking skills training dropped to about30 percent. There may well have been otherreasons for the changing service mix at Down-river, but anecdotal evidence from other proj-ects tends to confirm that, when no jobs areavailable, many workers are more inclined toconsider training,

What this suggests for Federal policy is that,in recession, displaced worker projects may en-counter an upsurge of requests for vocationalskills training by clients. Since classroom train-ing tends to be more expensive than other serv-ices, higher funding would be needed to servethe same number of workers, assuming that re-quests for training were granted for all theworkers able to benefit from it. It may well bein society’s interest to grant such requests, Dis-placed workers who spend a period of unem-ployment learning new skills—or in remedy-ing basic skills deficiencies—rather than simplycollecting UI benefits, may considerably im-


prove their chances of finding a satisfactorynew job when the economy recovers.

Remedial Education

In Downriver’s first two phases, 60 percentof participants had a high school or post-highschool education; at the same time, 20 percentof the participants scored below sixth-gradelevel on standard reading and mathematicstests. Likewise, in the Alameda County pro-gram, most participants were high school grad-uates, but their scores on a standard educationtest were comparable to those of sixth- andseventh-grade students. At the Ford Milpitasplant, 11 percent of those tested were belowsixth-grade level, and another 16 percent beloweighth-grade level.48 Some of these test scoresindicate rustiness; some people can gain con-siderably in tested ability in relatively briefbrush-up courses. For others, the scores reflecta more fundamental lack of educational com-petencies. People who lack basic reading andmathematics skills are not just unprepared forskills training. They are often seriously handi-capped in finding new jobs; even filling outapplication forms can be a formidable task.

The staff of many displaced worker projectsrecognize the needs of their clients for re-medial education. A few projects, notably theMilpitas project, have provided it very effec-tively. Another with a strong emphasis on re-medial education is the Midland, Pennsylvaniaproject, operated jointly by LTV Steel andLocal 1212 of the United Steelworkers of Amer-ica. The Midland center sponsors special re-fresher classes, daytime and evening, open tocommunity members as well as displaced work-ers and their families. Classes are held in theunion hall, where all the other project activi-ties except vocational skills courses take place.In addition to an instructor who spends fulltime on the adult education program, teachingclasses and offering individual help whenneeded, the center provides a self-paced audio-visual tutorial system. This unusual program,

%ee Kulik, et al., op. cit., 1984 for the Downriver project, andMathematical Policy Research, op. cit., for the Alameda project;for Milpitas, data provided by Milpitas Adult Education depart-ment, Milpitas Unified School District,

termed a refresher program by the project staff,has evoked an exceptional response. Of 590 dis-placed workers and family members participat-ing in the Midland project from October 1983through March 1985, 88 took adult educationcourses. In addition, 36 members of the com-munity took part.

Both the Midland and Milpitas projects re-lied strongly on group support and esprit decorps in their successful adult education courses.These, plus skilled teaching, helped to over-come the reluctance-even shame—that manyadults feel about admitting the need for helpin basic skills.

Not many displaced worker projects havebeen able to fill the need for remedial educationas successfully. At Downriver, for example,staff members refer clients with low mathe-matics and reading scores to the adult educa-tion courses available in public school nightcourses. Some go, but many do not. In its earlydays, Downriver worked with community col-leges to add 4 weeks of technical preparation,(i.e., a refresher course in mathematics andreading) for clients entering skills training.Today, like a number of other projects, Down-river relies mostly on performance-based con-tracts. Contractors are not required to spendtime on remedial education. Most do offer afew hours of brush-up in the basics at the be-ginning of a technical course, but workers se-lected for admission to these courses havealready tested at the ninth-or tenth-grade levelin mathematics.

In Illinois, where most displaced workerprojects are based in community colleges, vo-cational training courses are typically designedwith 4 weeks of brush-up in technically ori-ented mathematics and reading at the begin-ning. Many project staff feel that 4 weeks is notenough, but this is all the State allows underits definition of training for JTPA purposes.Moreover, the vocational training courses arealready compressed into 22 weeks; if any moretime is spent on the basics, the vocationaltraining suffers.

Directors of State Title III programs surveyedby OTA in 1984-85 added evidence that reme-

Ch. 6—Design and Performance of Displaced Worker Projects . 261—

dial education, thus far, plays a relatively smallpart in projects serving displaced workers. Al-though 28 of 47 States reported that remedialeducation gets some Title III funding (eitheras an independent course or as part of anothercourse such as vocational training), the per-centage of workers receiving this service issmall, and the share of funding going into theservice is still smaller.49

Relocation Assistance

Relocation has long appealed to policymakersas a way of assisting displaced workers. In fact,the option has not been used much so far indisplaced worker programs, The reasons areseveral, but a leading one is that many work-ers tend to view moving away as the last re-sort, For middl-aged and older workers, thecosts of moving can be particularly high: sell-ing one’s home at a loss in a depressed market,uprooting families and abandoning communityties, embarking on an uncertain venture in anunfamiliar town where high prices may quicklywipe out whatever assets are left after themove, Even assuming things go well in the newlocation, older workers have relatively fewworking years ahead in which to make up thelosses of moving with higher earnings. In re-cent years, with the increase in two-incomefamilies, the loss of a spouse’s job is anotherdeterrent to relocation.

Blue-collar workers generally are more hesi-tant to move than managers or professionalworkers, Usuallthey do not have a job wait-ing at the other end, and most have little prac-tice in finding one. Because layoffs are sucha common feature of semiskilled workers’ lives,they are less inclined than professionals to giveup the positive values of community and rootsfor the uncertainties of new jobs in distantplaces. Another important difference is that theindividual qualities of workers applying forsemiskilled blue-collar jobs are not likely to beso decisive as those of people applying for tech-

qoForty.nine of fifty States replied to the survey, but not all ofthem answered all the questions. For some questions, especiallyon details of the various services provided, information wasscanty. More detailed discussion of the results of the survey ap-pear in ch. 5.

nical and professional positions; this makesrelocation a more chancy proposition for semi-skilled workers.

Downriver, for example, encouraged reloca-tion in its early days, but later came to regardit as a high-risk, low-payoff approach. Only 8percent of participants in Downriver’s first twophases relocated, and one-fifth of those re-turned. Of the six demonstration projects in1982 and 1983, four offered relocation assis-tance. Only 51 workers, or 3.8 percent of place-ments in the four programs, moved to newareas. By far the highest proportion of work-ers opting for relocation—amounting to 11 per-cent of placements—were in Yakima and Mid-Willamette Valley, both small projects in thePacific Northwest. Many of the projects’ par-ticipants in these projects who moved wentonly as far as the nearest city (Salem or Port-land). Most were young, or were graduates ofhigh-technology skills training courses, or wereconstruction workers, accustomed to movingto find new work. It should be recalled, how-ever, that the demonstration projects took” placeduring the recession, when workers probablyhad reason to doubt that they would find jobsif they moved.

Under the most favorable circumstances—that is, transferring to a new job within thesame company—a substantial number of dis-placed blue-collar workers may elect to move.The Armour Automation Fund, in its pioneer-ing displaced worker program in the 1960s, ini-tially found that only 4 of 1,200 workers trans-ferred from plants closing in Birmingham andFort Worth to other plants in distant cities. Re-sults were quite different, however, in the laterclosing of Armour’s Sioux City, Iowa plant.The company offered its employees jobs at newplants only 50 to 200 miles away. Workers whotransferred were able to take their seniorityrights with them, and also were given the op-tion of going back home within 6 months withno loss of severance pay (so-called flow-backrights). Under these circumstances, 234 of1,150 displaced workers opted for the transferand stuck with it.50 more recent example is

sOShultz and Weber, op. cit.


that of the Brown & Williamson Tobacco Co.,which set aside 350 noncraftsman and 45craftsman jobs in its new Macon, Georgia,plant for workers laid off in Louisville andPetersburg, Virginia, in the early 1980s.51

A number of large companies, such as Gen-eral Motors and Ford, help workers to relocateby offering preferential hiring, under their col-lective bargaining contracts with unions. Thisgives displaced workers first priority for jobsopening up in existing plants, but usually doesnot allow the workers to bring with them fullseniority rights for layoffs and recalls. It doesallow transfer of seniority for benefits such aspensions and SUBS. The lack of seniority in thenew location is a major deterrent to manyworkers in weighing the costs of moving. How-ever, flow-back rights, which preserve sever-ance pay if the worker quits or loses the newjob, may make the venture more attractive. Cir-cumstances differ, but if employees are givensome financial assistance and assurances ofseniority, as many as 20 percent may acceptinterplant transfer offers.52

In situations other than transfer, it may takeexceptional effort to encourage a substantialportion of displaced workers to relocate. Theeffort can be worthwhile when the displacedworkers live in isolated, shallow labor markets,where the prospects of new job opportunitiesare poor even with a prosperous national econ-omy. In some severely depressed areas, relo-cation may be the most promising alternativeto prolonged poverty, and perhaps to welfaredependency.

The Portsmouth, Ohio, displaced workerproject, which started up in 1980 after the clo-sure of the Empire-Detroit Steel plant, was anoutstanding example of effective relocation.The company, the union local (of the UnitedSteelworkers of America), and Federal, State,and county agencies underwrote the effort. Thecooperation of the State and local governments

u~u.s, Department Of Labor, LabOr-Mma8erntm services Ad-ministration, op. cit., pp. 37-41,

sZMarC Bendick, “worker Mobility, ” Managing plant clOShgS

and Occupational Readjustment: An Employer’s Guidebook,Richard P. Swigart (cd.) (Washington, DC: National Center onOccupational Readjustment, 1984).

was exceptional; more often, local governmentleaders want to rebuild their community, notsend away stable, experienced workers. Ordi-narily, it is not a politically palatable choice toconcede that workers will be better off inanother State or community than the one thatState and local government officials represent.

About 1,000 workers were still employed atthe Empire-Detroit plant when it closed. Theyreceived an unusual and innovative array ofrelocation services, from job development outof town and out of State to modest assistancewith the costs of moving. The project lookednationwide for jobs, especially in the South andWest; each response got a followup request forinformation on stability of employment, wagerates, local acceptance of workers from outof the area, and information about the com-munity.

A unique feature of the project was grouprelocation. For the primary relocation site,Longview, Texas, the project staff arranged forgroup interviews through the local Employ-ment Service office, and hired a bus to take theworkers to Texas. The group move that re-sulted had some drawbacks; if one worker be-came dissatisfied and went back to Ohio, othersreturned too. But most stayed, enjoying theadvantage of comradeship and a transplantedcommunity. By mid-1982, 2 years after the proj-ect began, about 200 workers and their fam-ilies had moved from the Portsmouth area,mostly to east Texas.

Another successful experiment in the relo-cation of blue-collar workers was more exten-sive and longer lasting, but was not targetedto displaced workers.53 For 4% years, from1976 to 1980, the U.S. Department of Laborsponsored the Job Search and Relocation Assis-tance pilot project, to see whether variouskinds of assistance encouraged unemployedworkers to make worthwhile moves for jobs innew locations. Local Employment Service of-

BsMaterial on th e relocation experiment is drawn mostly fromJohn K. Herzog and Cilla J. Reesman, job Search and Reloca-tion Assistance Pilot Project (JSRA), report prepared for the U.S.Department of Labor, Employment and Training Administra-tion (Rockville, MD: Westat, Inc., 1981).


fices in eight southeastern States took part inthe experiment. After an initial phase in whicheligibility was restricted to long-term unem-ployed, eligibility rules were relaxed so that theproject was open to any unemployed or under-employed person registered with the ES officewho could not find, or could not be expectedto find, suitable employment within reasonablecommuting distance from home, From begin-ning to end, 6,644 applicants were enrolled;1,858 (28 percent) relocated.

Remarkably, relocation rates were highest forworkers usually considered least likely to mi-grate. Of those with less than 12 years of edu-cation, 45 percent moved, compared with 16percent of the college-educated. Blue-collarworkers such as nonfarm laborers, craft work-ers, and operatives had the highest relocationrates among occupational groups—38 to 44 per-cent, compared to 13 to 16 percent for profes-sional, technical, and managerial workers, Al-though older workers relocated at lower ratesthan younger ones, their rates were still farhigher than among workers in general. Experi-enced workers who relocated showed earningsgains of about $2,500 a year; their counterpartsin a comparison group, who were not offeredspecial assistance and did not relocate, sufferedlosses of about $1,000 a year.

Workers eligible for relocation assistance inthe experiment were applicants registered withtheir local ES office who could not find suit-able jobs within commuting distance of theirhomes. Different groups were offered specialassistance at three different levels: 1) informa-tion about out-of-area jobs and long-distancetelephone referral to prospective employers; 2)the same as Level One, plus up to $500 to coverthe costs of traveling to a job interview, withno limit on the number of job search grants;and 3) the same as Level Two, plus a maximumof $2,000 cash assistance toward the costs ofrelocating to a new job in a new community,

Overall, benefits to participants in the pilotproject—i.e., increased earnings in the first 12months after relocation assistance, over andabove what would have occurred without theassistance—were 2.3 to 3.3 times the total costof the program, In addition, the tax payback

was extremely rapid. Federal taxes paid by par-ticipants on their additional first year earningswere estimated at 66 and 83 percent of totalprogram costs. The whole cost to the taxpayers,according to the estimate, was paid back inabout 18 months—and this does not take intoaccount savings in income transfer programs,or in unemployment compensation.

In most ES offices, Level Two was the mosteffective service, delivering benefits to partici-pants that were at least 60 percent greater thanthe cost. But in two very high-volume low-costoffices, Level Three was the best performer,with benefits to participants of at least threetimes the cost of these quite generous services,Level One—information and telephone refer-ral only—was not effective, Although theseservices cost the least, they did not producemany placements.

Results of this pilot project cannot be gener-alized in a simple way to the ES system as awhole, or to displaced worker projects. Therelocation experiment operated in just one re-gion (the Southeast), which at that time hadsubstantial immigration and centers of eco-nomic prosperity. Eighty percent of the relo-cations took place within the region, whichtended to limit job search and relocation costsand to reduce culture shock for participants.Still, the pilot project achieved remarkable suc-cess in encouraging relocation among groupsof workers who are usually reluctant to move,and did so at costs well below benefits, bothto participants and, in a remarkably short time,to the taxpayers.

One of the less satisfactory aspects of the re-location project was an attempt to use the Em-ployment Service’s monthly summary of joborders throughout the Nation to find job open-ings out of the area. This did not work well.The sheer bulk of listings was overwhelming,and even with a special effort to update themweekly in the Southeastern region, many of thejob orders were out of date, having been filledor canceled. As authorized by JTPA, the U.S.Department of Labor has improved the systemof interstate job clearances in recent years. AnInterstate Job Bank, located in Albany, NewYork, and beginning operations in July 1984,


is intended to serve workers considering relo-cation. 54 However, listings in the interstatebank are far from complete, being limitedmostly to higher paying and hard-to-fill profes-sional and technical jobs; nor is the system fullyautomated. Listings may or may not be current,and they are available only in the ES officesthat pay to get them. Currently, about 47,000job orders appear in the Interstate Job Bank peryear.

Displaced worker projects may be able to im-prove on out-of-area job information by estab-lishing good working relationships with ESoffices elsewhere, as the Portsmouth, Ohioproject did with the Longview, Texas ES of-fice. However, with 25-percent cuts in ES staff,the likelihood of special services by a distantES office to displaced workers out of its ownarea has probably declined. As for more gen-eral information about employment opportu-nities, some States’ ES systems have gooddetailed data about occupations currently indemand in local labor markets, but many donot. Workers considering relocation also needup-to-date information, which displaced work-er projects may be able to provide, on costs ofliving, housing availability, schools, amenities,and crime rates in other communities.

Financial assistance for out-of-area job searchand moving costs is allowed under JTPA TitleIII; but relocation assistance is expensive, andit has to compete with other program activi-ties. So far, it is playing a minor part in the mixof Title III services. In OTA’s telephone sur-vey of State managers of Title III programs, 22provided information about relocation assis-tance. Thirteen reported that none of theirclients received the service, and only three saidthat as many as 5 percent of clients receivedit, or that as much as 5 percent of programfunds were spent on relocation assistance.

Even in the States that emphasize relocation,financial assistance is modest. In Arizona, forexample, where 60 percent of Title III clientslost jobs in the deeply depressed mining indus-

Sqsee ch. 5 for a more Cornp]ete description and evaluation Ofthe interstate Job Bank system and a discussion of local labormarket information.

try, relocation to such thriving areas as Phoe-nix and Tucson is a much-favored option; 15percent of participants are reported to receiverelocation services. Program officials feel theycannot afford more than a $650-per-worker al-lowance for job search and relocation costscombined, even though they would like to en-courage more clients to consider this alter-native.

The Trade Adjustment Assistance programprovides much more explicitly for relocationassistance, and sets relatively generous levelsfor funding it–up to $800 for out-of-area jobsearch and another $800 maximum for mov-ing expenses. These limits are less, however,than the Labor Department’s relocation projectin 1976 to 1980 allowed. In fact, assistancefrom public funds rarely covers the full costsof relocating. In the Portsmouth project, work-ers who relocated got $100 a week for up to4 weeks, plus a modest $100 for moving ex-penses. By contrast, Empire-Detroit Steel paidfull relocation costs for employees (mostlymanagerial) who were transferred to new jobswithin the company; the average payment was$25,000. 55 The costs of transporting people andhousehold goods are only a small fraction ofa relocation allowance this generous. The bigfinancial costs involved in relocating from adepressed area are low sales prices for homesowned by the workers, and high mortgage ratesfor a new home, compared with low rates onold mortgages. Only where employees are ex-ceptionally valuable are companies willing topay for all these costs of relocation.

The Federal income tax law and regulationsmake substantial allowance for moving costs.Even taxpayers who do not itemize their de-ductions, but take the standard deduction, may

~SThis cost seems to be fairly typical of payments for emplOyer-paid moves. For example, costs were about $25,000 per workerwhen the American Electric Power Co. moved 800 employeesfrom New York to Columbus, OH, in 1983. The Employee Relo-cation Council of Washington, DC, estimated the cost of relo-cation per worker at $26,000 to $30,000 in 1983. This estimateincludes very generous benefits, such as compensation for thedifference between the sales price and assessed value of theworker’s home or interest-free loans for a down payment andcompensation for higher mortgage rates in the new home fora few years.


adjust their taxable income by subtracting costsof moving expenses when the move is relatedto a new job, or a change in job location. Mov-ing expenses can include travel for househunt-ing, temporary living expenses in the new loca-tion, and travel, meals and lodging during themove, as well as transportation costs for house-hold and personal goods. A deduction fromtaxable income is of course worth more to peo-ple in higher tax brackets than to workers oflow or average income. Tax credits, appliedagainst the tax bill itself, are a greater benefitto all taxpayers, but proportionately more topeople in the lower brackets.

For many workers, the financial and sociallosses in moving from a depressed area maybe so high that even generous relocation al-lowances or tax deductions are not adequaterecompense. For workers to undertake reloca-tion, they must be convinced that potentialreturns from the new jobs are worth more thanattachment to the old communities. Most dis-placed workers, even in very stressed commu-nities, probably will not make that calculation.Given effective assistance, however, as manyas 20 percent have done so, and that is a con-siderable number.

PROPOSALS TO ASSIST INDIVIDUAL RETRAINING EFFORTSSome of the retraining proposals introduced

in recent sessions of Congress could be of sig-nificant benefit to people who, on their owninitiative, seek training for career changes; theextent to which they would help displacedworkers faced with the necessity of finding anew job is less clear. An example is the ideaof Individual Training Accounts (ITAs) as pro-posed in H.R. 26, introduced by Representa-tive Durbin with many cosponsors in the 99thCongress. S. 934, introduced in the Senate bySenator Hart and cosponsors, is similar.

The ITA plan is to establish a semivoluntaryprogram of special accounts, to be used fortraining or relocation expenses for anyone whois unemployed through no fault of his own andis eligible for unemployment insurance, orwhose employer certifies that he will be dis-charged permanently within 6 months. The ac-counts would be setup in State UI systems, andwould be financed by matching tax-deductiblecontributions from workers and employers.Employees could choose whether to set up anITA; employers who did not choose to contrib-ute would be subject to an extra tax.58 The ITAs

Seunder H. I?. 26, employers with 25 or more employees wouldbe required to contribute to ITAs, or be subject to a continua-tion of a $14-per-employee surcharge on their Federal Unem-ployment Tax, imposed in the 1970s to replenish one of the UIsystem’s trust funds and due to expire about 1987. States wouldhave to make authorization of ITA a part of their UI legislation

would mount up to a modest limit ($4,000 inH.R. 26) but could continue to accumulate in-terest. Unemployed workers could tap theiraccounts for payment of tuition and fees to cer-tified training facilities, after getting job coun-seling in local ES offices. The accounts couldbe also used to defray a limited portion of relo-cation expenses. If the workers never usedtheir accounts for training, they could collectwhat they contributed on retirement, and em-ployers could recover their shares.

Proponents argue that an ITA system wouldprovide an assured source of funding for theretraining of displaced workers in an economyundergoing rapid structural change, and wouldassign the financial responsibility to the threemost interested parties—government, employ-ers, and workers. Critics contend that the sys-tem could cost the U.S. Treasury substantialamounts in lost revenue, with benefits goingonly to the workers actually displaced—whocould amount to a much smaller number, ora different group of people, than those partici-pating. The risk of displacement differs amongfirms and industries, so that a generic approachmay be inappropriate.

to qualify for the employer tax credit against the Federal Un-employment Tax. Loss of the credit ($378 per employee as ofJan. 1, 1985) would approximately triple the average employer’sUI tax bill.


The ITA proposal is essentially a plan forfinancing adult education and training, on anindividual basis, for involuntarily unemployedworkers. It might supplement, but would notreplace a comprehensive displaced worker pro-gram such as JTPA Title III, which offers anarray of services for the majority who do notundertake retraining as well as for the minor-ity who do. Nor would it take the place of thetraining component in Title III programs. Forthe workers most vulnerable to displacement—unskilled and semiskilled manufacturing work-ers—the most effective means for deliveringtraining is probably a skillfully administereddisplaced worker project. The unmet need intraining for displaced workers is not so muchtraining expenses (tuition, fees, books and soon), which can be provided under JTPA, as in-come support during training. ITA proposals,as currently drawn, would not allow use of theaccounts for income support.

The people most likely to take advantage ofITAs are those who already are inclined to seekadult education and training on their ownintitiative—i.e., those who are more educated,more affluent, and more often in professional,managerial, and administrative jobs. (See ch.7 for a discussion of who participates in adulteducation.) For higher income people, favora-ble tax treatment of contingency savings ac-counts could be a useful way to encourageretraining. Tax deductions are worth less, how-ever, to lower income workers. In addition,many low and middle income people may feelthat they cannot afford to put money aside fora contingency that may never arise. In fact, lowand middle income taxpayers hold much lessthan their proportionate share of tax-shelteredIndividual Retirement Accounts (IRAs). As ta-

ble 6-7 shows, half of the 96 million people whofiled Federal income tax returns for 1983 re-ported $15,000 or less in adjusted gross income,but they accounted for less than 8 percent ofall the money put into IRAs that year. Another20 percent of taxpayers reported adjusted grossincomes of $15,000 to $25,000; their contribu-tions to IRAs amounted to 15 percent of thetotal.

Another aspect of the ITA plans as proposedis that they put most of the responsibility forchoosing appropriate training on the individ-ual worker. Neither full-time project plannersnor local PICs have found it easy to determinewhat skills are currently in demand, much lesswhat will be in demand a few years hence. Oneexperienced project director, in fact, opposestraining vouchers that give displaced workerstoo much choice. “We can’t leave clients totheir own devices, ” says this director. “Peopletend to pick courses in a vacuum. We make nobones about helping them make better deci-sions.” Whether overburdened ES offices couldfulfill this counseling function adequately isquestionable. Currently only a very small por-tion (7 percent in 1981, lower thereafter) of job-seekers coming 10 ES offices receive job or ca-reer counseling.

Another proposal to cover training expenses(H.R. 759, Representative Stark) would allowworkers eligible for unemployment insuranceto take training or education allowances in lieuof UI payments. A bill to encourage readjust-ment of displaced workers in a different way(H.R. 1690, Representatives Wyden, Gephardt,and Schumer) proposed a demonstration pro-gram in 5 or 10 States, in which displacedworkers could take a lump sum equivalent to

Table 6-7.—individual Retirement Accounts, by Size of Adjusted Gross Income, 1983

Number of returns Individual Retirement Accounts

Size of adjusted gross income (thousands) Percent Amount (thousands) Percent

<$15,000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,435 50.3 $2,492 7.7$15,000 to $24,999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,662 20.4 4,960$25,000 to $49,999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

15.322,939 23.8 15,692 48.5

> $50,()()() . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,257 5.5 9,205 28.5Total 98,294 100.0 32,348 100.0

SOURCE: U.S. Treasury Department, Internal Revenue Service, “Preliminary Income and Tax Statistics for 1983 Individual Income Tax Returns,” Sta(lstlcs of ImorneBu//et/rr, winter 19S4-S5, p. 28.

Ch. 6—Design and Performance of Displaced Worker Projects . 267

their maximum UI benefits to go into businessfor themselves. The amounts involved perworker would probably be modest. The aver-age weekly benefit for UI claimants in 1984was $119; at that rate, a lump sum payment for26 weeks would amount to $3,094.

H.R.1219, introduced by RepresentativeJohnson and 45 cosponsors in the 99th Con-gress, would give favorable tax treatment totraining accounts for displaced workers but,unlike the ITA plan, would require no contri-bution from employers. Instead, it would allowdisplaced workers to make early withdrawalsfrom their IRAs with no back taxes or tax pen-alty, if the money were used for tuition, fees,book expenses, and the like in training pro-grams approved by the Secretary of Labor.Workers who used their IRAs for training ex-penses would have less from that source whenthey retire. There is a precedent for allowingearly withdrawal from tax-deferred retirementfunds for other purposes, Retirement funds setup under Section 401(k) of the tax code maybe tapped for several purposes, including pay-ment of college tuition, purchase of a home,or payment of unreimbursed medical costs,

Because it is based on the existing IRA sys-tem, the plan proposed in H.R. 1219 would notrequire any new system for collection of con-tributions, and would not remove additional

revenue from Federal income taxes. Anotherpart of H.R. 1219, however, would provide a25-percent tax credit to employers who spendmore on training employees than their 5-yearhistorical average, This tax credit, which couldreduce Federal tax revenues, is patterned af-ter the existing research and development taxcredit, and is intended to encourage employersto invest in upgrading the skills of their activeworkers on the job, (See ch. 2 for further dis-cussion of the proposal.)

Under both H.. 1219 and the ITA proposals,only workers who have lost their jobs (or re-ceived notice of layoff) would be eligible towithdraw funds from their training accounts.It may well be that these training voucher sys-tems would serve best to encourage lifetimeeducation and retraining, rather than as a cri-sis response to the needs of displaced workers.To work most effectively for the purpose ofencouraging worklife transitions, tax-exempttraining accounts might be open to employedas well as unemployed workers. For peoplewho are planning ahead, foreseeing the neces-sity of training for a new job or career, settingup a fund to draw on later for tuition could bea major help—especially if they could use itwhether or not they are employed, whicheveris most feasible in their own circumstances.

technology and structural unemployment: reemploying

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