Higher Ed and Education & Workforce Development

Some laid-off workers qualify for lucrative benefits

June 15, 2009

Jim Kinman knew foreign competition was draining the U.S. furniture industry, but he hoped the trend that was shutting down factories would somehow spare the salesmen.

"I'd hoped that I could sneak out a retirement," said Kinman, a 58-year-old Greenwood resident.

Kinman was regional sales manager for ATC Panels, a particle-board maker based in North Carolina until December. The company closed its Franklin, Va., plant, which made the products Kinman sold to furniture makers in southern Indiana.

Kinman didn't get severance or retirement pay from the company, but he has more government support than most of his jobless peers. Thanks to a little-known federal program, he will receive extra income as he goes back to school, or if he takes a new job for less pay.

"I've got eight or nine years before I plan to hang it up," he said.

The U.S. Department of Labor found that ATC Panels was harmed by foreign trade. That means Kinman and his former colleagues qualify for a rich package of cash, education and health insurance benefits under the Trade Adjustment Assistance Act.

The federal program, called TAA, or "Trade," is relatively small and hardly known outside labor circles and manufacturing. About 50,000 people enroll each year nationwide. Nearly 10,000 are enrolled in Indiana.

As the recession decimates Indiana manufacturing, the program is extending the safety net under some high-profile displacements, including Chrysler LLC operations in Kokomo and the Navistar International Corp. plant in Indianapolis.

President Obama recently expanded the program to cover the service sector. Jobs moved to any foreign country, not just Canada and Mexico, will be eligible, too. That could mean more Hoosiers will learn about the program--and clamor for its benefits.

The Department of Labor predicts the program's budget will grow from $1 billion this year to $1.8 billion in 2010. Mickey Kinder, dislocated workers director for the state Department of Workforce Development, could not predict how much Trade might grow in Indiana.

However, department spokesman Marc Lotter said, "Generally speaking, we're seeing an increase in demand, across the board, for all our training services."

Rich benefits

Congress created the program in the 1970s as a lifeboat for people who lose their jobs because of free-trade policies. On a swollen sea of unemployment, that lifeboat looks more like a yacht.

Most states, including Indiana, allow the unemployed to draw payments for a maximum of 26 weeks, unless the federal government offers an extension. Under the federal Workforce Investment Act, a limited number of qualified workers may attend trade school while continuing to draw the standard benefits.

Only Trade offers more than two years of income support, plus free training during that time.

"The Cadillac model of the two programs is obviously Trade," said Lynn Minick, a work-force development specialist for the New York-based National Employment Law Project. Minick lives in the Indianapolis area and advises dislocated workers in Indiana and Ohio.

Once the Labor Department determines foreign trade played a role in a company's downsizing or plant closing, every affected worker qualifies for program benefits. That can include the plant manager or contracted janitors, as well as people on the assembly line.

Obama's enhancement, which took effect in May, expanded income support from two years to 2-1/2 years. Training went from 104 weeks to 130 weeks.

The program also offers a tax credit for health insurance, which has been beefed up from 65 percent to 80 percent.

If an eligible worker is 50 or older and takes a lesser-paying job, the program will pay as much as $12,000 over two years to cover the wage difference.

Although the cash benefits are supposed to be tied to retraining, many enrollees get waivers because of their age, or because they have marketable skills. Of the 9,994 Hoosiers currently enrolled, only 2,461 are in training.

Because the program will narrow the gap in pay, Kinman said he'll consider jobs that pay less than half the $100,000 a year he earned at ATC. At the same time, he's formulating a plan to learn a new technical field. The program limits most participants to trade schools. Kinman already has an associate's degree, so he's appealing for permission to attend a state university.

Kinman attends weekly professional networking events and, he said, "Most people are pretty envious of me when I mention the TAA. It's a pretty substantial program."

Subject to interpretation

Navistar earlier this year decided to close its diesel-engine plant in Indianapolis after ending a 30-year contract with Ford Motor Co., the plant's main customer.

Navistar and Ford canceled the contract to settle a long-running dispute that had nothing to do with foreign trade. Nevertheless, about 1,400 people who are affected by the closing qualify for program benefits.

"The Trade act is the one positive thing that's come out of this whole closing," said James Smith, Navistar labor relations specialist and co-chairman of the labor-management committee formed soon after the January announcement.

The committee operates out of a "war room" in United Auto Workers Local 226 hall on Brookville Road. The 1.1-million-square-foot plant across the street has cranked out diesel engines since the 1930s. A few hundred senior workers will remain until the last day, July 31.

The committee's mission is to help their colleagues with all aspects of the transition. Smith said the members had "no idea" whether foreign trade was indeed a factor in Navistar's closing.

"It was just something we felt we had to provide to the employees to get them back into the work force," he said.

Navistar qualified because the Labor Department found that at least 20 percent of its production here served an undisclosed customer that had been adversely affected by foreign trade.

The Trade act was amended in 2002 to allow such "secondary" certifications. It's just one of the ways the program has expanded over the years. In the 1980s, a company's use of imports was the only qualifying factor. After President Clinton signed the North American Free Trade Agreement, the program expanded to cover jobs shipped to Mexico.

Minick, the work-force specialist, advised Navistar's employees, and said he's witnessed the decline of steel, timber, textiles and ship-building over the years.

"What I've seen happening now in Indiana surpasses anything I've ever been involved in," he said. "I've never seen so many plant closings, so many downsizings."

In 2008, the Labor Department certified 52 Indiana employers as affected by foreign trade. That number could be surpassed this year, as 19 have been certified, and 29 applications are pending.

Rick McHugh, a Trade act expert with the National Employment Law Center, doesn't think the collapsing auto industry will cause a jump in program certifications.

"It's just much more difficult to make a case that increased imports are causing layoffs," he said. "What's causing layoffs is a recession."

Cloudy record

Labor and industry rarely agree on benefits for workers, but their criticisms of the program sound strikingly similar.

Ed Roberts, Indiana Manufacturers Association vice president and unemployment expert, said the questions industry has raised about state-run worker training programs apply to the Trade act.

"How do we know that we're getting our money's worth here?" Roberts said. "It's taxpayers' money at one level or another."

The National Employment Law Center, which is funded chiefly by foundations, has pushed to make workers, employers and state bureaucrats more aware of the program's existence.

"We're starting to see outcomes that are troubling," McHugh said. Workers took the time to engage in training, he said, "and there is no job for them."

Lack of jobs in general could be a factor, but McHugh said he's found that many people go into fields like cosmetology or commercial truck-driving simply because the certification process is quick. "Some of them get trained in areas that are ill-advised."

McHugh would rather make do than scrap the program.

"We'd like to see more done on the outcomes end," he said.

In its last report on the Trade program in 2006, the Government Accountability Office found widespread inconsistency in states' reporting to the Labor Department, which is supposed to track re-employment rates and wages.

The most recent data available is from the fiscal year ended Sept. 30, 2007. Indiana reported that, of 1,500 people exiting the program, 75 percent found jobs right away. Of the people who found jobs, 89 percent still had them two quarters later.

Average earnings were $16,414 a year.

Marquita Walker, an assistant professor of labor studies at IUPUI who specializes in dislocated workers, said program participants generally end up earning less because the jobs that are available for their education levels are in the service sector.

"There's no doubt that, in any academics' minds, the program is inadequate and needs to be changed," Walker said.

Most participants in Indiana are over 40 and have no more than a high school diploma, or GED.

Walker, a former factory worker herself, said that, to replace the middle-class wages of auto workers, the government would have to pay for people to earn four-year degrees. She would like to start by simply allowing participants to attend colleges and universities, instead of only trade schools.

"That would be the one thing I would pick," she said.

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