Keeping up with the Danes

A no-brainer for Democrats: Go on the warpath for wage insurance.


Andrew Leonard
March 22, 2006 1:31AM (UTC)

The Wall Street Journal has a depressing story this morning on the success of job retraining in Denmark. Denmark, it turns out, spends more on job retraining, as a percentage of its gross domestic product, than any other nation on earth. And, not surprisingly, Danish workers feel far less stress about getting laid off than do workers in other nations. The program is costly, but it also appears to work.

I found the story demoralizing because lately I've been researching the nuts and bolts of what the U.S. government does to compensate workers who may have lost their jobs for trade-related reasons. And while I realize it is never a smart idea to compare the United States to small, mostly homogeneous Scandinavian nations, it's still painful to review the record. We do a pathetic job of taking care of our workers, and under the Bush administration, the Department of Labor appears to go out of its way to prevent laid-off workers from even knowing what programs exist to assist them.

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Of late, the words "wage insurance" have been appearing frequently in How the World Works discussions of how best to compenste the "losers" in a free trade world. Wage insurance refers to a program for compensating workers whose new jobs pay less than their old jobs. As proposed by Lori Kletzer and Robert Litan in their 2002 paper "A Prescription to Relieve Worker Anxiety," workers who found a new job within six months of losing their old one would be eligible for 50 percent of the difference between their old wages and new wages for two years. In the same paper, Kletzer and Litan also recommended subsidies for health insurance payments.

Guess what? Since the 2002 passing of the Trade Act, both wage insurance and a healthcare assistance credit have been added to the long-standing Trade Adjustment Assistance program. But according to a General Accounting Office report released in January, few laid-off workers know about the programs, and only about 40 percent of those who do petitition for assistance are approved by the Department of Labor. And in any case, the wage insurance program is limited to such a small pool of eligible workers that it is essentially useless. According to one press report, only 800 workers had received wage insurance assistance by mid-2005.

To make a real difference, as Kletzer and co-author Howard Rosen note in "Easing the Adjustment Burden on U.S. Workers," eligiblity for both the wage insurance portion and healthcare credit should be vastly expanded. To simplify the bureacratic nightmare of the petition process, workers shouldn't even have to prove that they lost their job because of foreign competition -- all workers who lose their jobs because of forces beyond their control should automatically qualify. One of the key aspects of a wage insurance program is that it only kicks in if workers get a new job -- which offers a strong market incentive.

As Kletzer and Rosen note, Republicans tend only to support trade-related assistance when they are trying to get a new free trade pact passed, and then do their best to get away with as little help as possible, or write the laws in such a way that, say, workers who lose their jobs because of competition from India or China don't qualify! Meanwhile, many Democrats, and organized labor, are loath to push for serious expansion of trade assistance programs, because they are afraid to look soft on the issue of trade liberalization.

Memo to the left: Competition with the rest of the world is not going to go away. Aggressively supporting programs that help laid-off workers should be front and center on any progressive platform, and is a perfect way to distinguish Democrats from Republicans in the upcoming midterm elections. Take a cue from Democratic Sen. Max Baucus, who has been aggressively pushing legislation that will expand the Trade Assistance Act.

And if you're wondering how we're going to pay for this? Well, that's easy. Over the weekend, another pair of long plane rides gave me the time to read Jeffrey Sachs' inspirational "The End of Poverty." And I found myself once again gnashing my teeth at a statistic that should be shouted from every mountaintop this campaign season. The collective net worth of the 400 wealthiest Americans -- who, by the way, benefited disproportionately from Bush's tax cuts -- is $1.13 trillion. Last year, the U.S. budgeted about $800 million for trade-related assistance to laid-off workers.

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You do the math.


Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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