How the ‘Losers’ in America’s Trade Policies Got Left Behind

October 19, 2016

Economists have repeatedly said that trade deals create winners and losers. Yet despite this known dichotomy, America has done little to help the disaffected people across the country whose livelihoods have disappeared.  

Richard Baumcratz is still puzzling over how that came to be. As an officer in the Glass, Molders, Pottery, Plastics and Allied Workers Union, he represents about 400 workers who for decades made glass containers such as beverage bottles and pickle jars in a factory owned by a company called Owens-Illinois located in Clarion, Pennsylvania. In 2010, the company said it would close the plant as part of a move to consolidate inefficient factories in North America and expand into emerging markets.

After the closing, Clarion became one of hundreds of towns across America that lost jobs to cheaper factories overseas. Owens-Illinois wasn’t the first factory to shut down there; a mattress factory and a mining equipment manufacturer nearby had also closed recently. Things looked bleak for the laid-off glass workers. But Baumcratz was determined to help his workers maintain their quality of life. Because the shutdown was partially related to trade deals that led to lower tariffs between the  United States and other nations where Owens-Illinois had plants, Baumcratz applied to get his workers qualified for retraining under a program called Trade Adjustment Assistance (TAA). Created in 1974, TAA provides retraining, income subsidies, and job search assistance for people whose jobs have been displaced by trade.

The government approved his petition, which meant  that all workers from the Clarion plant would be eligible for TAA and its sister program, Trade Readjustment Allowances. But in the six years since the plant went out of business, wresting economic hardship on the town of Clarion, few of his workers have actually gotten retrained. About 35 people went back to college, finished college, or completed vocational school for professions such as truck driving.  Of the rest of the 400 or so workers, a handful—about one-third—retired. A few moved to a plant in another state. The rest have been getting by on odd jobs in the community, Baumcratz told me, where they make about half what they made in the glass plant. It’s been a rough transition. “We thought we were doing a great thing, and it only helped 35 people,” Baumcratz said.

The story of the glass plant in Clarion is not unique. Though TAA is one of the government’s most robust retraining and support programs, it has not been very successful in helping those who lose jobs in manufacturing move on to equally lucrative careers. Though TAA has helped people receive training by providing them tuition, counseling, and information about educational opportunities, “those impacts had not yet translated into labor market gains during the four-year period following job loss,” a study by Social Policy Research Associations and Mathematica Policy Research for the Department of Labor found. The study compared TAA recipients to those receiving traditional unemployment assistance and found that after a few years, TAA recipients had lower earnings than people who had received normal unemployment assistance, and that out of those who received training for certain occupations, only 37 percent were employed in the occupations for which they had trained.


This is perhaps not surprising to people in the policy community: Retraining, as it exists now in America, doesn’t often work.“It’s not just that TAA isn’t working. It’s that the entire portfolio of labor-market adjustment policies in the U.S. isn’t working,” Chad Bown, a senior fellow at the Peterson Institute for International Economics, told me. That means few programs that aim to help people after job loss actually do so.

Why haven’t these programs been successful? The biggest reason, according to Kermit Kaleba, the federal policy director of the National Skills Coalition, is that communities such as Clarion that see factories shutting down are often suffering economically. That leaves few other opportunities for people, no matter what skills they can learn. “Training doesn’t create jobs, training provides opportunities while there are jobs,” Kaleba told me. “If a factory closes down, that doesn’t mean there’s a set of corresponding work opportunities.”

Of course, there may be jobs in other communities. But they present yet another problem: the low likelihood that workers will relocate. That fact that Americans don’t just pick up and move from economically depressed areas to booming ones—like they did during the Dust Bowl—has puzzled economists for decades. One study, from the American Economic Journal, has found that low-skilled Mexican-born immigrants move in response to labor demand, yet low-skilled American-born people do not. For every 10 percentage point decline in employment for Mexican-born low-skilled men, the population of those men dropped 5.7 percent in a community, the study found. A similar decline in local employment led to no measurable decline in the less-skilled native population.


One of the reasons people may not move for better opportunities, according to Bown, is that areas losing lots of jobs see less demand for housing, and home values fall. Workers who may still be paying off mortgages suddenly find they are underwater, meaning they owe more on their homes than their homes are worth. That makes the prospect of moving a financially dubious, or impossible, one. Even those that may be able to afford relocating see little appeal in leaving behind a community where they’ve spent their whole life. I talked to a worker named Jerry Nowadzky, who was laid off from an Iowa factory that made printing presses in the 1990s. He and dozens of other factory workers went to a class where they were retrained to repair computers, he told me. But after the yearlong course, there were no jobs, he said. Nowadzky, his certification in hand, went to work stocking shelves in a grocery store at night. He might have been able to find a job had he went to another city or state, he told me, but “We were in our 50s, and you can’t really pick up and move with all the roots you have.”

There are other reasons that retraining hasn’t worked, too. Sometimes, people don’t know what kinds of jobs are in demand, and so are retrained for professions with few prospects. Other times, workers who have been at factories for decades find the idea of going to college intimidating. Someone who hasn’t done math or compositional English in 30 years may feel too old to begin at age 50. So they avoid retraining, even if it’s free.


In recent years, conservatives have taken the failures of TAA as a clear sign that the program needs to be scuttled. They ask: Why spend so much money on a program that provides retraining that doesn’t work? But this logic is problematic. If trade creates winners and losers in our economy—and many people passively win by gaining access to cheaper products from overseas—isn’t there an obligation to compensate the losers in some way? Giving up on them because retraining hasn’t yet proven to be successful seems short-sighted and indeed, might be what has led to the  discontentment plaguing this election season. Some of the people most affected by trade—white, working-class older men—are those who have eschewed traditional candidates from both parties and supported the anti-trade platforms of Bernie Sanders and Donald J. Trump in the election. Both candidates had pledged to stop trade deals like the Trans Pacific Partnership. “In theory, the winners should repay the losers, but we don’t in our country,” Timothy Smeeding, a professor of public affairs at the University of Wisconsin-Madison, told me, a few months ago.

There are other solutions out there that haven’t been tried in depth. For instance, last December, the writer Henry Olsen penned an essay proposing a new Homestead Act that would subsidize people who want to move to areas with more jobs. People stay put, he argued, in part because many benefits—like cash assistance—are tied to where they live. They also stay put because they don’t know about opportunities in other places, he wrote. That doesn’t make sense, he wrote:

“Millions of low-to-moderately skilled, native-born, and immigrant Americans live in places where they can’t find decent work while a vast new economic frontier unfolds in Southern and Western states such as Texas, Florida, and North Carolina. These wide open spaces are enticing enough to encourage millions of Latin Americans to undertake dangerous and expensive journeys, yet millions of other Americans remain mired in ghettos, depressed steel towns and struggling regions like Appalachia and the Mississippi Delta.”

Olsen’s idea could help overcome one of the biggest obstacles in helping those who lose out in trade deals: that they’re stuck in places where there are few opportunities. Rather than do away with TAA, there might be promise in helping people move to where there are opportunities. This could include retraining, mortgage assistance, and counseling. This isn’t exactly a new concept in American public policy. In the housing sphere, families are moved out of high-poverty areas where there is high crime and not enough access to jobs to better homes in the suburbs, and are provide with counseling in that transition. Why not expand that program to include inter-state moves for the people who are mired in communities where there are no job opportunities?

Of course, helping people move to areas with good jobs could be an expensive proposition. Booming communities like San Francisco are often plagued by high housing costs, the result of people flocking to places where there are jobs. But that could be solved with the right affordable housing policies.

As my colleague Derek Thompson has written, Americans are moving less than they did in the past. This coincides with the rise of an American populace discontent with the opportunities that exist where they are. Perhaps finding a way to help those who’ve lost out during the age of globalization relies less on factors outside America’s borders, and more on policies within them.