Helping Workers Adjust to Permanent Job Losses

In my U.S. News & World Report blog post this morning, I explain why U.S. policies are inadequate to help workers adjust to losing jobs that will never return and why addressing that inadequacy is critical to enable us to compete in a fast-changing global economy and achieve broad-based prosperity.  As I note, the case for such policies reflects the fact that even generally beneficial economic change generates winners and losers

Globalization and technological change remain important contributors to long-run increases in U.S. living standards.  But what’s good for the average American is not necessarily good for every American.  In fact, the gains from trade and technology tend to be quite diffuse.  The losses, in contrast — while usually smaller than the gains in aggregate — tend to concentrate among particular workers, firms, and communities.

I cite a new study on the economic impact of rising imports from China on local U.S. labor markets, which finds that real world adjustments to economic change can be much slower and more painful than textbook economic models assume.  The study also finds that while most of the government transfer payments triggered by these developments cushion the blow of job loss, they are not designed to help the affected workers find new jobs.

The case for better programs to help workers who lose jobs that will never return does not reflect a criticism of unemployment insurance (UI), and policies to help those workers transition to new jobs should not come at UI’s expense. Adjustment assistance and training are, however, valuable complements to UI — and we are not doing enough in that area.