Des Moines Register
03/12/06
New job, new paycheck
Retrained workers' new jobs often pay less
WILLIAM RYBERG
REGISTER BUSINESS WRITER
Hundreds of Iowans who lost their manufacturing jobs to foreign competition took
huge pay cuts when they found new work — even though many retrained for new
careers under a federally funded program, reports show.
For every $1 the Iowans made in their old factory jobs, they made 62 cents in
their new jobs, according to a federal study of the Trade Adjustment Assistance
program. That puts Iowa near the bottom among all states.
Brandi Landuyt, 29, was laid off from her $20-an-hour factory job at Maytag in
Newton in 2002. She took courses in computer programming and networking, but
hasn't been able to find a job in the field. Her fiance, also a former Maytag
worker, is studying criminal justice.
"We're still struggling," Landuyt said.
The loss of factory jobs has rippled through Iowa's economy, which is more
heavily dependent on manufacturing than most states.
Iowa lost nearly 34,000 manufacturing jobs between 1998 and 2003, before
regaining some lost ground. The state had about 230,400 factory jobs in January,
down about 23,500 from 1998. And it's still losing jobs: Last month,
Electrolux/Frigidaire announced it would cut 700 jobs at its 2,000-employee
washer/dryer plant in Webster City beginning next year.
Smaller paychecks for former manufacturing workers have wide-ranging effects.
Fewer people are able to afford homes, new cars and a college education for
their children. Lower incomes means less tax money for the state.
Searching for a solution to the job loss, politicians from both parties have pointed
to retraining. Some have proposed expanding the program to service-sector
workers who have lost jobs to offshore outsourcing.
In a 2004 presidential debate, President Bush pointed to the Trade Adjustment
program as a way to help workers "gain the skills necessary to fill the jobs of the
21st century."
But even some supporters of the program question its effectiveness. National
surveys show that workers, on average, earn less after getting help from the
program, although the gap between old and new wages may narrow as workers
gain seniority in their new job.
In Iowa, about 10,000 workers have become eligible for the Trade Adjustment
program in the past five years, said Carol Paulus, the state's trade act
coordinator. About 4,000 to 5,000 have used some part of the program, from
major benefits such as tuition assistance to helping with expenses to get to a
long-distance job interview.
Despite the assistance, Iowa workers lost more ground than those in other
states, according to the most recent study of the program.
The federal study found that Iowa ranked 42nd among the 50 states in "wage
replacement" — the amount workers make now compared with their old wages.
In Iowa, workers who found new jobs made 62 percent of their old salary.
Nationally, the rate was 74 percent.
Program officials and economists point to several reasons for Iowa's low rate:
• It's difficult to find an Iowa job that pays as well as manufacturing. The average
Iowa job paid 62 percent of the amount earned in the average manufacturing job,
according to David Swenson, an economic scientist at Iowa State University
in Ames. The percentage is the same as Iowa's "wage replacement" rate in the
federal study of the Trade Adjustment program.
• Earnings in Iowa have eroded over the past 25 years compared with the nation
as a whole, said Swenson. Iowa's average weekly wage among all workers,
except federal employees, ranked 35th among the 50 states in 2004, according
to figures from the federal government and Iowa Workforce Development. The
Iowa average weekly wage: $613.04, or $31,878. The national average was
$38,808.
• Laid-off factory workers often have 20 years or more of experience, receiving
periodic raises over many years. Even with further education, workers must often
take entry-level positions with a new employer, Paulus said.
The assistance program has had other problems, including temporary funding
shortages. Iowa's Trade Adjustment program has run short of money on
occasion when the number of workers who lost their jobs was more than the
money available, Paulus said.
But sometimes, retraining helps ease the pain.
Bruce Kentner, 48, of Osceola was laid off from a now-closed Siemens factory
that made switches and controls used by other manufacturers.
He went back to school to become a registered nurse, found a job that paid as
much as his old one and was able to remain in his hometown. He also found his
new career more rewarding.
"I feel like I'm helping people," said Kentner.
Another Trade Adjustment graduate, Wesley Cobb, 28, makes about twice as
much money as he did in his old job at the O'Bryan Brothers garment company in
Leon. He now works in Des Moines, drawing precise plans showing where to cut
holes for bolts in steel beams.
The Trade Adjustment Assistance program was intended to soften the blow of
free trade. Consumers have enjoyed less expensive furniture and appliances
made in China and Mexico, for example, but that has meant job losses at Iowa
companies such as Flexsteel in Muscatine and Maytag in Newton.
While the program helps American workers, it also helps win support for
loosening U.S. trade laws to permit expanded global trade, said Howard Rosen,
executive director of the Trade Adjustment Assistance Coalition, a group for
businesses, labor and academics interested in improving the program.
"Since that trade can contribute to job losses, we have an obligation to help these
people," Rosen said.
Most economists feel strongly that the gains to international trade outweigh the
losses, said Chuck Whiteman, director of the Economic Research Institute at the
University of Iowa.
The gains, however, "are spread over hundreds of millions of people in the form
of access to new and better products at lower prices," Whiteman said. The losses
are concentrated on a much smaller group of displaced workers for whom the
retraining failed to find comparable jobs."
Economic gains from international trade should go toward helping preserve U.S.
manufacturing, said Mark Smith, president of the Iowa Federation of Labor.
A portion of American corporate gains from trade could be used to help fund a
national health insurance program, relieving U.S. manufacturers of high health
care costs, Smith said. He said laid-off workers who go to school to get a whitecollar position face another fear: Those jobs are moving overseas, also.
"Ten years ago, we were going to send all the dirty jobs to Mexico and we were
going to get retrained," said Smith. "The reality is that you've got well-trained
people out there, well-educated people who are competing with people in China
or India who are just as competent. . . and who work for 20 percent or a third of
the wages they work for here."
Rosen, head of the Trade Adjustment Assistance Coalition, acknowledged the
federal retraining efforts aren't perfect. The program must find better ways to link
retraining and jobs, such as promoting job creation or asking workers to line up a
job before getting retraining help.
Workforce Act helps Iowans
Foreign competition is only one of the forces that have left Iowans unemployed.
New technologies, industry consolidations and shifts in consumer tastes account
for job losses, too.
The federal Workforce Investment Act Dislocated Worker program is designed
for workers who lose their jobs for reasons unrelated to trade — a plant closed
because the work is moved to another state, for example.
The program, designed for a broad range of industries and workers, serves about
5,000 people annually in Iowa, offering help ranging from beefing up job hunting
techniques to paying for schooling or training to learn new skills.
In central Iowa, the federal allotment of money for dislocated worker services has
run out each year for the past three years, said Ramona Cunningham, executive
director of the Central Iowa Employment and Training Consortium, which
administers the program. The eight-county central Iowa region serves about 400
people a year, on average, and usually has 20 to 30 people on the waiting list,
Cunningham said. Those on the waiting list will get help when more money
becomes available in the new year. "We don't turn anyone down," Cunningham
said.
The region could have up to 400 applicants this year because of layoffs at
Maytag operations in Newton and other anticipated plant closings and layoffs,
Cunningham said.
The Bush administration has proposed changes in the national Workforce
Investment system, including a cut in funding, state officials say.
The administration says the new system would direct more money for training.
State administrators, however, say the changes would strip the system of money
for career counseling and would effectively dismantle a statewide delivery system
for employment services, causing some employment service centers to close.
The changes would require congressional approval.
Compared with the Trade Adjustment program, Iowa's Workforce Investment
program ranks better in "wage replacement." Workers on average found new
jobs paying 89.4 percent of their old wage, putting the state at No. 31 among 48
states, Puerto Rico and the District of Columbia, according to a federal study.
Iowa's Trade Adjustment wage replacement rate ranked 42nd, with workers
making 62 percent of their old wage.
The differences in rates for the two programs can be explained by the types of
jobs lost, said Tony Dietsch, a division administrator at Iowa Workforce
Development. Trade Adjustment helps workers who, for the most part, have lost
good-paying manufacturing jobs, Dietsch said.
Workforce Investment helps employees in a broad range of industries and
includes many who were laid off from low-paying jobs, Dietsch said. Those
workers had less difficulty in finding a job with comparable pay.
Assistance
The federal Trade Adjustment Assistance program, paid for by the federal
government and administered by the state, provides benefits primarily to
manufacturing workers who lose their jobs because of imports or because jobs
are moved out of the country. About $3.8 million was allocated to Iowa for parts
of the program, primarily retraining, for federal fiscal year 2005. The figure
doesn't include money paid for living allowances.
Benefits include:
• Up to $15,000 to pay for up to two years of training, often at a community
college.
• Up to two years of weekly paychecks. Workers collect their normal
unemployment insurance. When that runs out, the federal program kicks in with
payments at the same weekly rate. In Iowa, the maximum for a family of four with
one wage-earner is $367 a week.
• A tax credit to offset the cost of maintaining health insurance for up to two
years.
• Financial help with moving expenses if workers have to relocate to find new
work; help with expenses if workers have to travel to a job interview.
• A partial wage reimbursement to employers who provide on-the-job training
after hiring a laid-off worker.
• A benefit designed for laid-off workers older than 50. The Alternative Trade
Adjustment Assistance program provides a wage insurance benefit for these
workers.The program pays 50 percent of the difference between old and new
salaries, up to $5,000, for two years.
Results
Iowa ranked 42nd among the 50 states in "wage replacement" — the amount
workers make now compared with their old wages — but better in other
measures of the Trade Adjustment Assistance Act.
The state ranked 24th for the percentage of workers able to find jobs after
receiving retraining or other help from the program. Sixty-nine percent were able
to find new jobs in the three months after ending their use of the program, the
report shows.
Those who found jobs did not necessarily find a job in the field for which they
took retraining.
Iowa's best ranking — sixth — was in the percentage of workers who kept their
new jobs. Among workers who found new jobs, 95 percent still had them when
them six to nine months later, the time period covered by the report.
The study looked at a 12-month period in 2003 and 2004. The research was
conducted by the U.S. Department of Labor's Employment & Training
Administration, which oversees the program.
The survey also included workers who had not retrained, but had found jobs after
using other benefits such as money for long-distance job searches.
Those who retrained usually took courses at community colleges or private
business schools.
Criteria
To receive retraining assistance under the Trade Adjustment Assistance
program, a worker must meet certain criteria:
• There is no suitable employment for the worker.
• The training is appropriate for the worker.
• There is a reasonable expectation of employment following training.
• Training must be reasonably available to the worker.
• The worker is qualified for the training.
• The training is available at a reasonable cost.
Benefits
Benefits under the Workforce Investment Act Dislocated Workers program are
determined by 16 regional boards in Iowa, and can vary.
In central Iowa, benefits include:
• Up to $10,000 over two years for retraining.
• Up to $4,000 over two years for support services such as child care to allow the
worker to attend classes.