DOCUMENT RESUME
ED 278 796
CE 046 26E
AUTHOR
Barton, Paul E.
TITLE
A Better Fit between Unemployment Insurance and
INSTITUTION
National Inst. for Work and Learning, Washington,
D.C.
REPORT NO
ISBN-0-86510-055-1
PUB DATE
86
NOTE
47p.
PUB TYPE
Viewpoints (120)
EDRS PRICE
MF01 Plus Postage. PC Not Available from EDRS.
DESCRIPTORS
Change Strategies; Dislocated Workers,' Federal
Legislation; Labor Force; Labor Legislation; Policy
Formation; Program Implementation; *Pr-sT:am
Improvement; *Public Policy; *Retraining;.*State
Programs; *Training Methods; *Unemployment
Insurance
IDENTIFIERS
*Unemployment Insurance Act 1970
ABSTRACT
An important first step in addressing the issue of
obtaining a better fit between unemployment insurance (UI) and
retraining was taken in 1970 when the federal government enacted a
provision permitting workers to enroll in training without denial of
benefits due to application of the work test. Little was done,
however, to pursue state compliance with the new provision or to
encourage states to view facilitating training as a mission of UI.
Even before 1970, Hawaii, West Virginia, and Massachusetts had
provisions designed to make it easier for clients to avail themselves
of retraining opportunities. Since the 1970 amendments,
an additional
six states have either revised or expanded their efforts in this
area. One problem that persists is a lack of familiarity with the
1970 provisions. Only 23 of the states contacted in
a survey of 30 UI
officials in the states and the District of Columbia, Puerto Rico,
and the Virgin Islands were aware of the 1970 legislation. Although
some strategies for improving current retraining provisions would
require substantial legislative changes,
a good beginning could be
made if states would only reassess their programs in light of the
1970 retraining provisions. Then, after individual states decide how
far they want to support retraining initiatives, they can begin
developing a screening process, undertake lellor market assessment
procedures to identify dislocated workers early in the UI claims
process, and make appropriate referrals. (MN)
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Reproductions supplied by EDRS are the best that can be made
from the original document.
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p.
A BETTER FIT BETWEEN UNEMPLOYMENT INSURANCE
AND RETRAINING
BY
PAUL E. BARTON
U.S. DEPARTMENT OF EDUCATION
Office of Educational Research and Improvement
EDYiCATIONAL RESOURCES INFORMATION
CENTER (ERIC)
This document has Peen teOroauced as
received from the person or organization
onginating
o Minor changes have been made to improve
reproduction quahty
c)
Points of view or opinions slated m this docu.
ment do not necessarily represent official
OERI position or policy
"PERMISSION TO REPRODUCE THIS
MATERIAL IN
MICROFICHE ONLY
HAS BEEN GRANTED BY
h(Ak re-
TO THE EDUCATIONAL RESOURCES
INFORMATION CENTER (ERIC)."
NATIONAL INSTITUTE FOR WORK AND LEARNING
WASHINGTON, D.C.
ISBN 0-86510-055-1
BEST COPY AVAILABLE
2
TABLE OF CONTENTS
PAGE
PEFACE
FOREWORD
I.
INTRODUCTION
1
II.
STATE UNEMPLOYMENT INSURANCE (UI) SYSTEMS AND THE 1970
FEDERAL UT AMENDMENTS
4
III. VOCATIONAL EDUCATION AND THE 1970 UT AMENDMENTS
13
IV.
A POSITIVE APPROACH TO IMPLEMENTING THE 1970 AMENDMENTS
17
V.
THE TRAINING ALTERNATIVE:
WHEN AND FOR WHOM?
26
VI.
BEIrER PROTECTION
32
PREFACE
I have had a continuing interest in the relationship
of unemployment
insurance and retraining throughout my career.
It began when I assumed
responsibilities in this area in 1957 in the U.S.
Office of Management and
Budget (then the U.S. Bureau of the Budget) and
saw unemployment insurance
claims lines snaking for blocks at the height of
the 1958 recession.
It
continued during my service with the Department of Labor, and with the
National Institute for Work and Learning.
In one way or another my interest
in the retraining aspect was furthered and sustained
by three Secretaries of
Labor, Willard Wirtz, George Shultz, and John Dunlop.
All three were
committed to responsible modifications in unemployment insurance law and
administration that would improve workers' skills
as well as feed their
families.
Neither they nor any of my associates along
the way bear any
responsibility for the inadequacy of my education in this area of public
policy, or for any inadequacies in what is here
reported or recommended.
In writing this I am indebted to a large number of state unemployment
insurance, economic development, and vocational education officials who
responded so generously to my requests.
The project, from which this small
volume arises, was supported by Harvard University's
Wertheim Fellowship in
Industrial Relations.
Paul E. Barton
Princeton, New Jersey
FOREWORD
From its beginning, fifty years ago, the unemployment insurance system
lis country has been directed almost exclusively to compensating workers
ome of the losses resulting from temporary layoffs.
The underlying
ption has been that, when the economy picks up again, the laid off
einj
yees will return to their old jobs.
However, more persons are now remaining unemployed for longer periods
of time and are exhausting entitlement to UI due to jobs lost because of
chPnging technology, foreign competition, and other shifts in the economy.
In 1975, an average of 76 percent of the unemployed received unemployment
in.,:urance; in 1985, less than one third of those out of work received
ba,lefits.
This shift in the characteristics of unemployment clearly creates a new
imperative.
Tiding displaced workers over a few weeks isn't enough.
A lot
of them are going to have to be retrained in new skills so that they can
find and fill new and different jobs.
If they aren't, the consequences will
be both human debilitation and an increasing drain on the economy.
Paul Barton has been telling us this for 30 years, making his
characteristic soft spoken suggestions about the changes and extensions of
the unemployment insurance program that are called for.
His paper on A
Better Fit Between Unemployment
Insurance and Retraining pushes the point
further.
Amounting in substance to both an indictment and a bill of
pai-ticulars, it is so low key that there is danger of its message being
lost.
Barton has taken the trouble to find out what the states have done as a
result of the 1970 change in the
federal law designed to encourage
supplementing unemployment insurance with
retraining.
He reports the
results of his survey with professional constraint.
What they add up to is
that the vast majority of states has done nothing at all.
The paper accepts the orthodoxy that no provision for retraining should
be made at the price of any reduction in insurance benefits.
This is
probably sound pragmatics in political
terms.
The costs of retraining
should be add-ons rather than being taken out of benefits that are too lov
and short-termed to begin with.
The trouble is that this insistence becomes
in some way part of doing nothing at all so far as retraining is concerned.
The "coalition constituency that maintains the unemployment insurance
system," increasingly a euphemism for institutionalized inertia, shies away
from attempts to let the system which is already in place be given new
responsibility.
In his closing section, Barton outlines the encouraging initiatives
being taken in Delaware and California to
extend the unemployment insurance
program to include retraining.
He goes on to suggest the promise that lies
in proposals that have been made for "an ear-marked training tax" and for
"individual training accounts" that would provide what he calls Retraining
Risk Protection.
Describing the relatively modest steps that would be
required to incorporate some combination of these principles into the
federal system, he makes almost rhetorical the question of why this isn't
being done.
Perhaps the fairest reading of the available evidence and the current
national mood is that nothing can be expected for the time being so far as
fitting retraining into the federal unemployment insurance program is
concerned.
The Gramm/Rudmann/Hollings straitjacket precludes even innova-
tion that would result in huge savings to the economy.
The contrary
argument, appearing clearly between the lines of Paul Barton's report, is
that worker retraining should be recognized not only as part of the
unemployment insurance system but
as an integral element of the education
program, for which the American public has always
assumed, in its economic
and social interest, major responsibility.
Willard Wirtz
August, 1986
I.
INTRCCUCTION
Unemployment insurance (UI) has developed into the principal method in the
Ubited States for helping unemployed workers.
While there are legitimate
disagreements about who should be eligible, how much the program should cost,
and how muCh the weekly benefit should bc, the central purposes are accepted by
governments, employers, unions, and workers.
This is the 50th anniversary of
the system, and the system has much to celebrate.
This brief volume deals only-with a limited aspect of the system.
It asks
the question:
can there be a better fit between unemployment insurance and
retraining?
This author believes that there can be and there should be.
Wherever we can help solve underlying employment problems as an adjunct to the
principal objective of replacing a portion of wages lost due to involuntary
unemployment, all will benefit:
workers, employers, and the economy as a whole.
However, suCh effbrts should be attempted onlywith full respect for the
central purposes of this mature and successful income support system and without
compromise of the rights which exist for workers in the system.
For example,
some have feared that movement in the direction of greater facilitation of
retraining could result in workers being forced into remedial efforts as a
condition of receiving benefits.
This would be a grave mistake:
the
acquisition of useful skills must be sought, not forced.
Forcing retraining
would be an infringement of basic Ul principles, and a waste of time and money.
If suCh approaches as retraining do speed re-employment, and create more
employment stability in the future, they will not raise the financial burden on
the employers who fund the unemployment insurance system, particularly if a
longer run view is taken.
Progress will be made only as worker rights in the
system are respected and as employer burdens are recognized; the balance is
1
strudk betmemlunmkers and employers every time an unemployment insurance law
winds its way through a legislature.
Section II examines what has happened in state UM systems
as a result of a
little known provision of the 1970 Federal law taking
a small step at adhieving
a better fit.
Section III examines the perticipation in that 1970 initiative an the part
of state vocational education systems.
Section IV offers different levels of positive approahhes within the
context of this 1970 law.
Section V examines the important matter of how .-itate systems can identify
unemployment insurance recipients, early an, who are not likely to be re-
employed without new akilis and further education.
Some sudh system is
important to aahieving the approadhes described in Section III.
Section VI offers some possibilities beyond the legal framework establiShed
in the 1970 Federal le0.
In general, the author is impressed wi.lthe number of cases in whidh
significant efforts have been made as a result of this small retraining
provision embedded in the 1970 Federal Unemployment Insurance AmendMents.
What
has happened in a considerable nuMber of states has happamed because of the
initiative thoce states todk, for technical compliance with the 1970 law could
be adhieved with little real notice or effect.
This report is addressed largely
to those states that have lagged behind lout may have a real interest if they
obtain useful information and learn about what other states have been able to
do.
The time is auspicious for this, with the heightened awareness of
retraining as a result of the Job Training Partnership Act.
The fact that this
Act makes no provision for living allowances increases the need to explore ties
between unemployment insurance and retraininc.
2
What is explored here is not,
and is not intended to be,
the answer to
worker dislocation.
There is no single answer.
But there are many small steps
that can add up to a structure that
facilitates technological and economic
change and avoids resting too much of the burden on individual workers and their
families.
3
1 0
II.
STATE UNEMPLOYMENT INSURANCE (UI) SYSTEMS AND THE 1970 FEDERAL UI
AMENDMENTS
The purpose of unemployment insurance is to insure against the loss of wage
income due to involuntary treopaoyment.
Weekly benefits have been in the form
of cash payments for subsistence durim the search for work.
Beginning with the
1958 recession, the Federal government extended the duration of unemployment
insurance during recessions, first for 13 weeks, and then for longer periods.
Such extensions reached el peak in the middle of the 1970s with many workers
eligible for aver a year of benefits.
Continued entitlement for those covered by the system is dependent an a)
whether the claimant is "available" for work, and b) increasingly aver the
years, 'vhether the claimant can demonstrate that he or she is "actively seeking
work."
These provisions have been one way to identify those who have a strong
attachment to the labor force, who remain irmcauntarilyumemployed, and who are
actually available to accept a job when referred to one.
These provisions have
served the system well in getting the benefit to the people for wham the system
was designed.
For short, this provision of state laws became known as the "work
test."
The 1962 Federal Manpower Training and Development Act raised the
consciousness of the nation to the plight of workers displaced from their jobs.
It provided Federal funds for retraindrgworkers as one approadh to dealing with
displacement due to changing technology and other forces.
This new
consciousness caused some in the Federal government to look more closely at the
ways in which retraining of workers could be facilitated, as well as where
barriers existed to workers' pursuit of the retraining and further education
needed for re-employment.
4
1 1
A worker who had tested the market might well, with proper counseling, have
come to the conclusion that involvement in an adult vocational education program
in a community college or in a proprietary school might be the best means of re-
entering employment.
This decision might have been reached early in the period
of entitlement for unemployment insurance, after a period of unsuccessful job
seardh and being advised that hiring of people with similar skills was becoming
more infrequent.
But, a worker enrolling in full-time training or education
would not, under laws at that time, have been eligible to continue to receive
unemployment insurance payments.
Such workers would not have been considered
"available" for work nor actively seeking work.
Yet, the decision to so enroll
could have been logical in view of a worker's existing skills and labor market
conditions and trends.
The availability of continued benefit payments miaht
have been essential to pay for living expenses while going to school.
The
alternative was to wait until benefits were exhausted and resources were greatly
reduced.
Long spells of unemployment can cause discouragement, loss of
confidence and reduced motivation, and may result in workers drifting into
welfare.
The UT system is a joint Federal-state system.
The Federal partner sets a
few standards the states must follow,
but largely leaves them free to shape the
nature of UT entitlement, benefit, and taxing system.
In 1970, the Federal
government enacted a provision that would permit workers to enroll in training
without denial of benefits due to application of the work test, in effect
suspanding the test until training was completed.
The precise provision of this
Federal amendment is as follows:
(8)
Compensation shall not be denied to an individual for
any week because he is in training with the approval of the
state agency (or because of the application, to any week in
5
12
training, of state law provisions relating to the availability
for work, active seardh for work, or refusal to accept work).
In general, it was not a provision that adhievelluach visibility.
While
compliance was necessary, it was not something actively pursued by thaU.S.
Department of Labor, except as part cf tts normal job of instructing the states
regarding what constitutes compliance.
A2 aight be expected, facilitating
training was not an objective normally in the mission of the unemployment
insurance system.
The first outside effort to find out what was happening to
give substance to this Federal law was reported five years later in the book The
Boundless Resource:
A Prospectus for an Education/Work Policy, by Willard Wirtz
and the National Manpower Institute.1
It reported as follows:
While state laws have been changed, there has been no
follow-up to see whether the spirit of the federal initiative
is being carried out, whether individuals are being informed of
the new cppcmtunities, and how many, in fact, are enrolling in
training courses as a result....Over half the states have
spelled out what "approved training" means....Plainly, as a
first step, claimants should be clearly and positively advised
of their new rights.
This report, a decade later, is in part an attempt to bring that report up
to date.
While incomplete, it will provide a view of the range of state
attitudes and practices.
Letters were sent to state UM systems asking for
information.
TWenty-eight replies were received.
These replies have some
limitations.
Among them is the fact that compliance with this provision is
required by Federal law; any state replying must claim at least technical
1
Published by the New Republic Book COmpany in 1975.
The National Manpower
Institute changed its name in 1980 to the National Institute for Work and
6
compliance.2
While we can get an idea of state apprceches and variation in them
from letters, visits would be necessary to the group that merely claim
compliance, and show what their lal4s and regulations contain,
and say that
claimants are informed about what is In their laws and regulations.
A.
States having a retraining provision prior to the 1970 Federal amendments
Not all states were ignoring ties between unemployment insurance and
retraining.
Of the twenty-eight replying, three already had laws on the books
prior to 1970.
In 1963, Hawaii enacted the following legislation:
Nbtwithstanding any provisions of this chapter to the
contrary, a claimant shall not be denied benefits because of
his regular attendance at a vocational training or retraining
course which the Director of Labor and Industrial Relations has
approved for the claimant.
The director may approve such
course for a claimant only if:
(1)
Reasonable employment opportunities for which the
claimant is fitted by training and experience do not
exist in the locality or are severely curtailed;
(2)
The training course relates to an occupation or skill
for which there are, or are expected to be in the
immediate future, reascnable employment opportunities
in the locality;
(3)
The training course is offered by a competent and
reliable agency; and
(4)
The claimant has the required walifications and
aptitudes to complete the course successfully.
In 1969, Hawaii relieved base period employers of charges to their
experience rai-Pid tax account for former employees who enrolled in training.
In
1976, Hawaii further amended the law to define retraining more precisely, to
require claimants enrolled in training to be available for work during
2
To illustrate, the author visited one state that reported itself as being in
compliance.
However, state officials said that no ore was given "approval of
the state agency" for training and that the state had discretion to refuse
approval.
7
vacations, and to deny benefits for a week in which there are one or more
unexcused absences.
The claimant is informed of these rights at the time the Ul claim is filed,
and opportunities for re-employment are assessed.
A claimant "who is identified
as having unmarketzile skills is advised of the opportunity of maintaining
eligibility for ulemplcyment benefits while attending approved vocational
training.
An interested claimant is then referred to the Employment Service to
further explore a suitable vocational training program."
After referral, "the Employment Service provides the claimant...the
resources available for training purposes.
These resources include other State
or Federal agencies, such as the Veterans Administration Services or the State
Vocational Rehabilitation Agency, also educational institutions within the
community that offer various vocational training courses."
However, "the
Employment Service has no direct linkage with, or arrangements with, any
educational institutiOns to enroll an individual for vocational training."
The above represents a serious effort to make training opportunities
available, although this author has no information about hag it all works in
actual practice.
Linkages between the E.S. and educational providers would
likely be a desirable further step.
The Office of the State Director for
Vocational Education in a separate letter, also said that no working
rele.J.onsbips exist.
West Virginia enacted a retraining provision in 1961, and amended it when
the 1970 Federal law was passed.
An effort is made early on to identify
claimants in need of retraining.
Massachusetts enacted similar legislation in the early 1950s and revised it
a couple of years ago to make it easier for claimants to avail themselves of
retraining opportunities.
The Messachusetts law, in addition, permitted an
8
15
extension of benefits to those enrolled.
In the early 1980s, Massachusetts made
tuition free at community colleges for unemployedworkers.
These two laws might
be thought to work well in tandem; however, the Massachusetts UT law applies
only to enrollments below the postsecondary leve1.3
B.
States that have expanded the scope of retraining arranganents since
initial compliance with the 1970 amendments
Six additional states have revised cr expanded their approach.
A few
examples are provided:
o
Since early in 1984, Arizona has taken a much more positive approach.
Anew provision of law was added "to assure that futuristic,
meardnigful training can be obtained by unemployment insurance
recents."
Both UT and Job Service personnel "are encouraged to advise
claimants of approved training opportunities during periodic
eligibility interviews and [Job Service] counseling."
"Schools in Arizona are aware of the approved training program
and potentially eligible individuals are referred to the
Department [of Economic Security] to initiate a UT/approved
training claim."
The regulations state that "Training is not limited to vocational
training but also may include academic courses which improve an
individual's employment opportunities."
A provision that may be of interest to other states reads
as
follows:
"An employer who is a claimant's only base period
employer, and who has been determined subject to charges for
benefits paid to the claimant, may refer such individuals to
approved training, provided the training meets the criteria..."
In 1984 the Department of Economic Security established the
Arizona Employment and Training Institute to address the training
needs of Arizona through the year 2000 and called upon
irdividuals to submit issue papers in various categories.
The UT
administration submitted a proposal for a small separate tax to
be earmarked for a retraining program, identifying alternative
strategies.
The paper states that "a tax of as little as 1/10 of
3
Information from Massachusetts was obtained in a field visit during the
summer of 1984.
The large growth in occupational training in community colleges
occurred after the 1950s when the original UT provision was enacted.
9
1_6
1% of the existing tax base ($7,000.00) would amount to $7.00 per
employee maximum and would yield approximately $6 million per
year."
o
While regulations issued in 1977 in Montana provide for
disqualification of students during a school year or during vacation
periods, there is an exception for anyone "in training approved by the
department."
Approved training is specifically related to the 1970
Federal amendment.
Also "bas_
education, provided as a necessary
prerequisite for skill training, or other short-termvccationally-
directed academic courses may also be approved for claimants."
The reply from New Jersey stated that approval for retraining had
largely been limited to programs adbinistexedunder state and Federal
laws.
The agency is, however, "now moving towards wider acceptance of
training programs developed by the claimants themselves, through
public or private training facilities.
Insofar as new procedures are
concerned, the state has recognized that the key to successful
training is the uninterrupted receipt, without delays,
of the Ul
benefits.
New Jersey has, therefore, developed a payrent-by-mail
system for trainees so they need not take time from the training to
report in person for their checks."
o
In Tennessee, with the advent of the job Training Partnership Act, the
definition of "approved training" (as a result of the 1970 amendments)
was made broader to.include programs conducted by agtoates other than
state vocational schools.
WaShington, in 1981, expanded its criteria to "include vocational
training required for continued employment and basic educiaticrl within
or pre-requisite to vocational training."
o
Beginning in 1981, a more active appropach was commenced in Delaware to
inform claimants judged in need of training to become re-enployed to
take full advantage of the provision wbidh permits them to continue to
receive benefits while in training.
C.
States reporting compliance with little elaboration as to what is done in
apy positive way to encourage claimants to enter retraining or further
education while drawing unemployment insurance (under the 1970 amendments)
Eighteen of the states responding fall into the above category, based only
on their responses to the author's letter to them.
However, as indicated
earlier, it is very hard to determine how positive an approach states take from
a reply to a letter, because the law requires campliance and no state is going
to write that it is not doing what the law requires.4
In fact, a state has to do very little to satisfy the Federal law.
It Trust
change the state law, or at least the state regulations if the law is broad
enoup for administrative interpretation.
It needs to establish criteria as to
what constitutes approved training and who will do the approving.
As with any
other condition of eligibility, it must inform claimants in some way, either all
of them at the beginning of the process or when an inquiry is made.
A,great
many states put the information in the booklet given to all who apply for Ul
benefits.
In the final analysis, the Federal law, as currentlywritten and as
minimally implemented, does little more than establish a basis for successful
appeal if a claimant is denied benefit because he or she is enrolled in training
and as a result does not meet the work test.
While these 18 States are here lumped together, some may in fact be making
positive and good faith'efforts to help claimants avail themselves of this
training opportunity.
Cthers in this group may have complied on paper but do
not agree with the goal behind the 1970 amendment, and do nothing to give effect
to it.
It is, after all, a Federal requirement imposed on the states and the
states do not have to like it or do more than technically meet it.
There is no
intention in this report to castigate such states because they are'not doing
more.
Rather, the desire is to persuade more states that the goal behind the
amendment is a desirable one and give them information that may help them take a
more active approach to creating a better fit between unemployment insurance and
retraining.
A few examples convey the tone of the repaies from these 18 states:
4
As indicated earlier, one state wrote that it carried out the law.
However,
in a personal visit I was told that no claimants would be approved for training.
It is hard to say whether the Department of Labor would rule the state out of
compliance, for no tefst has been made.
11
1_ 8
"The only policies and procearres which have resulted from the 1970
o
amendment is that [the state] included this provJsion in its state law
and regulations."
o
"It has been a fundamental precept of the Bureau that Unemployment
Insurance is not income maintenance or subsidy.
Accordingly, waivers
from the work search requirement during participation in training
programs have only been allowed as provided by law in limited
circumstances...it must be noted that the 1970 amendments...began a
process whiCh is still evolviiig."
o
"Available data appear to indicate that the 1970 Federal Ul Amendbents
may not have a significant impact upon retraining efforts..."
o
"The...Law...and our policy provides that an individbal who is
otherwise eligible for benefits shall not be denied these benefits for
any week because he is in trainingwith the approval of the
Commission...If there is a training need or interest, the claimant is
referred to the counselor for a more indepth exploration of available
training."
o
While the law previously limited Ul payments to Cbmmission sponsored
training, "it has been changed to comply with federal requirements."
o
Statutes and administrative rules were enacted to insure state
compliance.
Procedures were developed to evaluate training requests,
monitor school attendance, andrmke payments to individuals determined
eligdtae.
As can be seen from the above, there are a variety of responses, ranging
from resiz-,:ance to what appears to be full compliance with the spirit as well as
the letter of Federal law.
It would be unfair to categorize these states
further without a more thorough exploratioti of what, in practice, they actually
do.
12
19
III. VOCATIONAL EDUCATION AND THE 1970 Ul AMENDMENTS
There are a number of different sources of retraining opportunities for
unemployment insurance recipients who need it.
The principal one is the
vocational education system.5 At least since the passage of the Manpumar
Development and Training Act in 1962, vocational education has been a partner
with state and local labor market agencies in the delivery of retraining.
If
there is to be an active, positive approach to expanding opportunities under the
1970 Ul amendMents, or going beyond them, it is critical that state vocational
education agencies be well informed of Ul law, and be in close partnership with
the Uhemployment Insurance/Employment Service/State Labor Department complex.
For this report, a letter was sent to each state's vocational education
agency, pointing out what the 1970 UM a
ndments were and what they meant.
The
letter asked three questions, as follows:
1.
Are you aware of this 1970 provision of Federal Ul law?
2.
Do you have a working relationship with the Uhemployment Insurance
agency to assist claimants in taking advantage of this provision?
If
so, what is the arrangement, and how do Voc Ed and Ul work together?
3.
If you have not been working with Ul,
or your state has not taken an
active approach to helping Ul claimants who need retraining get it
while they are still entitled to Ul benefits, would you be interested
in being involved in such an effort?
Thirty states, the District of Columbia, Puerto Rico, and the Virgin
Islands replied.
The results are summarized below.
5
Another is the community college system.
Often, the two overlap in state
government systems.
No systematic effort has been made to see how community
college systems may be aware of or involved in the implementation of the 1970
amendments.
A.
Awareness by the Vocational Education Department of the 1970 Ul
Amendments
Twenty three states were aware of the 1970 Ul Amendbents.
Nine were not.
Degree of awareness was not clear for one state.
Several states became aware of
the amendments only recently; one, because of the Job Training Partnership Act.
Another state started looking into the provision only after receiving the letter
of inquiry.
B.
Working Relationship with Ul to Implement the 1970 Amendments
In many cases it was hard to tell, withoui- more information, how operative
such relationships really were, although them was enough detail in some replies
to indicate that serious efforts were being made on both sides to help claimants
avail themselves of retraining.
Seventeen states and the Virgin Islands indicated a working relationship.
Twelve.states, the Dibirict of Columbia, and Puerto Rico said that they had none
with regard to this provision.
The reply from one state was unclear.
A few
answers will convey the range of comments about this relationship, where it
eldsted.
o
"The provision of the law that you mention has been discussed briefly.
As yet there is some reluctance on the part of business to utilize the
provision."
o
"It is important to note that in our state a strong relationship has
been built between the various actors in education and training...
Although not all needed policy dhanges come easy - and some come not
at all - we enjoy in this state, among the employment and training
actors, a 'real spirit' of cooperation and partnership."
o
"The Bureau of Vocational Education took an active role with the
[state] Department of Labor to develop and adopt a policy by which
every Ul claimant is apprised of the programs and services available,
and recruitment efforts are a continuous process through D.O.L. local
deliverers of Vocational Education/JTPA programs."
o
"At least one person at eadh sdhool, in the Student Personna Services
area, is fully versed on all avenues of Student Financial Aid.
This
person... has a good working relationship with the Unemployment
Insurance Offices...."
14
21
"Each job Training Partnership Act client receives a booklet on
o
unemployment insurance information and instructions which includes
statements on retraining efforts while receiving unemployment
insurance benefits.
However, the responsibility falls upon the client
to pursue available opportunities if not enrolled in a displaced
workers' program."
o
"The Department of EMployment, which administers the UT program,
refers numerous clients to our postseoondary area vocational-technical
schools."
o
"Unfortunately, some 16cal offices are still strictly interpreting the
provisions which allow training..."
o
"The UT section was quite familiar with the 1970 law, but vocational
education was not aware of the law until the passage of JTPA
legislation."
Five systems that were aware of the amendments had no working relationships
to be a party to their implementation.
C.
Interest in a Mbre Active Approadh
This question elicited considerable interest in greater involvement of
vocational educPian in a more active approadh to implementation of the 1970
amendments.
The degree of this interest varied, and it is hard to judge the
depth of it from the letters received.
There was interest on the part of some
states that have no working relationshipwith UT, and jlare was also
considerable interest among many of those states saying they already had a
working relationship.
Among 14 systems saying they had no working relationship regarding the 1970
amendments, ten have an interest in a more active approadh.
A few quotations
from the letters will illustrate the nature of this interest.
o
"I am interested in further discussion about implementation of the law
and would appreciate receiving your materials and suggestions."
o
"We oartainly are interested in being involved in a retraining program
with.UI recipients."
o
We would b* intenuited in becoming more involved in this effort.
Widening opportunities for education and training among displaced
15
waxkers is a priority for vocational education....
We would
appreciate being informed of your progress...."
"At the present time, most of the programs in vocatibnal sChools in
[the state] do not have long waiting lists.
It would be relatively
easy to serve persons an unemploymnt insurance in the educational
program of their dhoice so that they would be trained for Skilled
employment while they are receiving these benefits...."
o
"We would be very interested .11 being involVed in sudh an effort.
Ybur letter itself has spurred activity to flow this infbrmation to
our local coordinators and teadhers."
Among those states that have some kind of an involvanent with unemployment
insurance regarding the 1970 amendWents, 12 would like to improve these efforts
or receive further information about sudlpossibilities:
o
"I agree that more can be done to make these benefits known to all
displaced workers."
o
"Should you desire to explore this issue frm both a state and
national perspective, paease be assured of my interest."
o
"We believe the linkage is in place. between unemployment insurance
and vocational training.
We also believe staff of both agencies could
use additional information to further implement this program at the
local level."
o
"The Department of Vocational Education Services feels that the
additional assistance provided by a query sudh as you are proposing
would benefit the state system and individualswithin the state to a
great extent.
We would lend support to sudh an effort and vruld look
to your leaderdhip to determine additional areas we maywork [on]
cooperatively with the Department of Ldbor relative to displaced
workers or individuals collecting unemployment insurance benefits."
o
"If the intent of the concept of 'active approadh' or policy advising
displaced workers of the availability of education or training is one
that will continue to increase educational opportunities for displaced
workers, you can count on our involvement in the project."
On the side of vocational education, there seems to be considerable
interest in a more active role in haring unemployment.insurance claimants who
need retraining.
Twenty-two of the 33 systems responding to the inquiry
expressed such interest.
16
23
IV.
A POSITIVE APPROACH TO MKRUMENIT1143 THE 1970 AMENDMENTS
There are marrINeys to approadh a better integration of unemployment
insurance and retraining/education.
Some of these would require significant
changes in state law (or in Federal law) and changes in funding structures.
The
first step for states is to take,full advantage of existing Federal and state
unemployment insurance laws, using them to facilitate needed training and
education.
As explained earlier, such facilitation can be undertaken without
compromise of the principles that have formed unemployment insurance.
Also,
such facilitation can be carried out with safeguards that protect the employers
who pay for Ul from increased cost, and over the long run sudh efforts should
result in savings.
This author believes that there is a good case for new
legislative arrangements to facilitate better access to retraining for displaced
workers; however, useful improvements can be made in a great many states within
the existing legislative and institutional framework.
The 1970 Federal law, which prohibited the denial of unemployment insurance
benefit to persons enrolled "in training with the approval of the state agency,"
is described in detail in Section 11.6 Most states took steps to implement this
Federal standard in the early 1970's and have not since re-examined the
implementation arrangements.
It was one of those dreaded "Federal Standards"
that states usually oppose when under consideration by the Cbngress.
At that
time there was relatively little interest in retraining programs and displaced
wockers.
It was natural that states would do theininimum necessary to comply,
and no more.
Cbmpliance is, as explained earlier, relatively simple and
6
See page 4.
17
r) 4A.,
can be accomplished with rmactically no claimant being affected by the Federal
prevision.
The interest here is in suggesting how states that want to achieve a better
integration can take steps to do so.
Below, an effort is made to outline a
general approach.
State circumstance w411 dictate needed variations.
A.
Step One
The first step is to review the actions taken to comply with the 1970
Federal Amendments to see if efforts were made to give it only the narrowest
possiblE, implementation, and if present arrangements are unduly limiting.
All states, either in law or in regulations, have established the
conditions that constitute "approval of the state agency."
Does this give
narrow or broad scope to the training and education that would speed re-
employment?
For example, who grants the approval of the kind of training and education
that is permitted? Approval is often delegated to a single agency.
It maybe
delegated to the state body handling publically funded adult education that may
not recognize the new opportunities for adults in postsecondary education,
particularly community colleges.
What is desirable is to review all the
training/education opportunities available and include all those that have a
capacity to enhance employability.
Those to be considered are:
The public vocational education system
AdUlt Basic Education
COmmunity colleges
18
25
Retraining programs under JTPA7 and other training/retraining programs
created by states (or localities) to stimulate economic gragth
Colleges and universities that have flexible programs for adults
PrupLietary sdhools
Delegation of the authority to approve training to a single entity may
unnecessarily limit the kind of training that is
approved.
Also, since approval
involves jud4Tents about whether-particular kinds of training/education will
lead to jobs, the labor market agency, usually the EMployment Service and/or the
authority administering 3TPA, needs to be involved.
Assuring comprehensiveness
require: inventorying the range of providers and making jud4.ments about tha
relevance of their programs to conditions in the local labor market.
This is
the case whether approval authority is retained by the Unemployment Insurance
agency or is delegated to another entity.
Procedures for compliance were generally worked out in the early 1970's
when training programs sudh as those under the Manpower Development and Training
Act were most visible.
Many states defined "approved training" along the narrow
lines within which sudh programs operated.
Since then, the structure of
opportunities for adult education and training has been greatly enlarged.
If
the criteria for "approved training" have not been recently reviewed, they are a
good paace to start.
Do the criteria for "approved training" include education beyond narrow,
skill specific training? Many of the early criteria excluded basic education
that a person with insufficient literacy skills might need to become employable.
Basic education may be especially needed by immigrants who have not learned
English.
Basic education and literacy components of re-employment programs have
7
Of course, states are required to continue paying UI benefits to those
claimants who enroll in JTPA.
19
26
become widely accepted.
Are they included in the "approved imainingr criteria
in your state?
Is it clear to all involved that such education is included when
needed for employability?
Beyond such basic education is another level of education that states
Should consider, although it is in a gray area which, after examination,
some
may want to rule out.
If an unemployed person can enroll in a program that
provides a high school diploma (or GED certificate), a greatmany states might
consider sudh a program a valid approach to increasing employability.
But what
if an unemployed person is enrolled in the local community college for an
associate degree? Assuming that this person is judged likely to exhaust UT
benefits without being re-employed, needsafew months to complete the degree,
and the completion of degree requirements is judged to lead to re-employment,
should the person be entitled to UT benefits for the needed months of
enrollment?
It may be a sound financial decision to approve sudh training, but
many states maybe hesitant to take this step.
B.
Step Two
Convey to all UT personnel and to UT claimants ycrar state's positive
attitude toward facilitating training for UT claimants when it is necessary for
re-employment.
Once a state has rethought its position and created new criteria
and new procedUres, training sessions will be required to create a new attitude
on the part of personnel, on both the unemployment insurance and employment
service side.
Claimants will need to be made aware of this option in a clear fashion.
States may ormay not want to actively encourage claimants to seek retraining,
but whatever the state decides should be clearly conveyed in the information
provided.
In some states - probablymaav - the information is buried in the
fine print of the little book given to claimants defining their rights and
20
27
responsibilities.
It becomes one more item in the fine print, and while it puts
the states in compliance with the Federal law, it does little to make the
opportunity come alive for the claimants.
"Training" is not ordinarily the
business of Ul personnel; an alternative may be to have a training agency (such
as the JTPA administering authority) inform the claimant of the options.
It is
conceivable that the state vocational agency would make a guidance counselor
available for this purpose, outstatioped at the Ul claims office.
C.
Step Three
Decide how far the state desires to go in seeking to use retraining in
tandem with unemployment insurance.
The possibilities range from opposition to
doing anything at all to using the training/UI relationship purposely to
increase the skills of a state's labor force, increase worker adaptability,
and
possibly reduce costs to the insurance fund.
It is assumed that a state will, at a minimum, want to complywith both the
letter and spirit of the Federal law.
It may be useful to think of a range of
efforts for facilitating training on the part of UI claimants (under the kind of
carefully defined =editions described in this document).
1.
Reliance on Claimant Initiative
Mbst states that are in merely technical compliance with the 1970
amendments probably rely on claimant initiative.
The majority of states made
the necessary changes in laws and regulations, put scIme fine print in the
materials given to the claimant, and left it at that.
There was little need to
do more if there was no desire to do so; if a claimant pressed the issue it
could be handled.
Few claimants under these circumstances would ever raise the
issue.
But even if a state degires to take a basically positive attitude (and
is not opposed in principle), more reality could be given to the opportunity by
specifically calling it to the attention of claimants and telling them the
process by-which they can enroll in training and still collect their
unemployment insurance.
If a state is interested in taking this ndnimal step it
could start by asking:
what is the claimant told, when,
and by whom, and is
there a simple procedUre for getting the necessary approvals?
2.
Assessment of Claimants' Prospects for Re-Employment
In addition to the clear information about the circumstances under which UM
recipients can enroll in training, claimants could be advised whether they
should consider seeking retraining or other education.
Their applications are
taken by the Employment Service (or whatever its local designation) and that
agency (or the authority administering JTPA) is usually the largest repository
of information about the labor market in the community.
Based on the
characteristics and skills of the claimant and the structure of the local
economy, the agency can make an assessment of the claimant's prospects for re-
employment with existing occupational skills and level of literacy.
The
claimant can be informed as to whether new skills are needed to be successful in
the search for re-employment.
While initiative to seek training is left
entirely to the claimant, the claimant at least has information about the
retraining option under Ul law and about the marketability of his/her existing
skills.
3.
AdVisement and Referral Services
A claimant knowledgeable about the retraining option (in 1) and about the
poor prospects with existing skills (in 2) has a long way to go to connect up
with a training/education opportunity.
Mccept for those programs available
through JTPA, or other special training programs linked to the state employment
security system, an unemployed person will not likely know where to go.
If the
UT period is to be used for training, decisions about it must be made fairly
quickly or the period when income is available will slide by.
It has been the
experience of many programs that displamdworkers delay recognizing the
necessity for retraining or cling to hopes that they will be recalled.
It is
unlikely that significant portions will seek out opportunities without some kind
of advisement and referral services.
Taking an active part in helping the
training option to be realized means having services (in addition to 1 and 2
alone) to:
tell claimants what training/education opportunities ara available in
the community and at What cost;
tell them specifically whan to see at various training/education
institutions;
help them decide among the dhoices available;
help them figure out an approadh they can afford; and
provide paacement services after training/education is completed.
To do this requires close contact with the local trainingieducation
institutions and acting as "broker" or "advocate" for the claimant.8
If UI/ES
does not want to take on this role it might be contracted out to the JTPA
authority, or a local "educational brokering" agency, or the guidance counselors
in the vocational education system.
4.
Cbllaborative Ventures
If a state wishes to pursue retraining/training more aggressively for Ul
claimants expected to exhaust benefits without becoming re-employed, there is a
step beyond (3) above to be considered.
It is creating and leading a
collaborative effort at the state and local levels to bring institutions
8
For a full discussion of sudh services see Chapter 4 of WOrklife
Transitions:
The Adult Learning Connection, Paul Barbm and the staff of the
National Institute for Work and Learning (New York, McGraw Hill, 1982).
together to facilitate retraining/education.
In the last couple of decades a
varied set of training/education opportunities have been created to meet an
adult market, and these have largely been to help further occupational
objectives9.
Arrangenents and costs vary.
The community colleges, in
particular, have been flexible and resoonsive to changes in the market.
While there has been growing sophistication in creating separate programs
of limited size for displaced workers, there has been relatively little effort
to help displaced workers needing retraining by creating collaborative networks
that bring to bear multiple capabilities throughout the ocirmunity. 10
The
Employment Service has matched unemployed workers (and their capabilities) to
available jobs (and their Iequirements).
There has been little comparable
effort to match displaced workers needing training (or further education) with
the full range of opportunities which exist throughout the community.
A large
step in this direction would be to organize a council of all related community
agencies and institutions.
The UI/ES/JTPA would work through it to identify:
existing opportunities, their reguireneats and their costs;
individuals in these institutions to whom displaced workers can be
referred;
barriers that may exist to workers availing themselves of sudh
opportunities; and
sources of funding to help defray tuition costs, and help workers seek
out and take advantage of the financial aid which does exist.
9
For as complete an inventory of types of opportunities as is available, see
Bryna Shore Fraser's The Structure of Adult Learning, Education,
and Training
Opportunity in the United States, National Institute fo± Wdrk and Learning,
1980.
10
For descriptions of two such efforts, funded by the Kellogg Foundation, see
Serving Adult Learners, by Stephanie Lang Barton, 1982, and Toward Local
Collaborative Networks for AdUlt Workers, by Gerard Gold, 1985.
Both are
published by the National Institute for Work and Learning, Wadhington, D.C.
It is hard to anticipate What sudh a network might prodUce.
It would, at a
minumim, heighten awareness of the specific instructional needs of UT claimants
likely to ekhaust benefits and remain unemployed.
It would enable sudh workers
to tap into existing opportunities and may lead same institutions to modify
policies and practices that would facilitate training; e.g. as mentioned
earlier, the cannunity colleges in Massadhusetts suspended tuition dharges to
the unemployed several years ago.
These are merely pointers for how a state can start to think about taking a
more active approadh to facilitating training for UT claimants.
It is not an
effort to specify program details or procedures.
Once policy directions are
dhosen, states will take divergent steps toward their realization.
V.
ThE TRAINING ALUERNATIVE:
WHEN AND FOR WHa47
In the preceding chapter it is reccomended that states, very early in the
processing of an unemplcyment insurance claim, identify those who are displaced
and are not likely to become re-employed without retraining or further
education.
Early identification is necessary to taking any of the positive
steps described to assist in exercising the training option.
It is necessary
for two reasons.
The first is that few claimants will want to undergo
retraining if they have good chances of becoming re-employed with their existing
skills.
The second is that states are not likely to want to waive the work test
for people enrolled in training unless they are reasonably satisfied that those
people could not be placed in "suitable work" without retraining.
With regard to the first, the concern is being able to offer advice about
when training is really needed.
It is often the case that learning new Skills
might be adVantageous, but it is not proposed here that a training adjunct to
the unemployment insurance system be used for general purposes.
With regard to the second, it will be necessary to assure the funders of
unemployment insurance that costs would likely be no more with a positive
approach to the 1970 amendments, and that over the long run there may be
savings.
Few states will likely want to take the approadh of waiving the work
test for anyone who wants to enroll in training or retraining, irrespective of
whether this may be judged beneficial to the re-employability of the individual.
UI insures against wage loss due to involuntary valemployment, but is not
intended to assist in the funding of training for any person who may desire it.
It is here argued that the kinds of positive approaches outlined earlier are
consistent with basic UI objectives, but to be so, means having reasonable
assurance that the work test is waived only when claimants wouldotherwise
exhaust benefits without: becoming re-employed.11
"Reasonable" assurance is used because there can be no certainty;
a
prediction is involved.
But states can choose from a range of alternatives that
give them varying degrees of certainty, depending an how careful and
conservative they want to be.
There are basically two approaches that may be used separately or in
tandem.
The first is a sareenirgrmccess; the seoond is a labor market
assessment.
A.
Screening Process
States 'nave a variety of approaches to sorting claimants into categories to
maximize the chances of early placement.
It is standard for claimants to
register with the EMploymentService and be referred to available jobs.
It is
frequently required (*but not always) that claimants make their own "active
search" for work, and show evidence of it.
Incoreasingly, claimants are being
categorized as "employment ready" or not, with those in the latter category
receiving counseling and entering into classes that teadh them how to seardh for
jobs.
(When those classified as employment ready do not land jobs, they may be
cycled into job seardh classes, as is done in Delaware.)
If the Employment
Service is an active participant in a strong JTPA program, it will identify UI
claimants who are potential candidates for training.
Claimants themselves will
probably already have been testing the market.
11
The discussion here relates to what can be done within the existing UI legal
and funding frameworks, not to situations where that framework may be broadened
to encourage re-training.
Where states have screening processes that go into motion as soon as a
person is declared eligible for Ul, there can be some assurance that a person
still unemployed after six weeks or so does not generally have the Skills or
aiLLibutes in demand, and the probability may be high that unemployment will
continue through exhaustion of benefits.
How effective would these screening processes be in identifying those
likely to ekhaust benefits?
If there is serious doubt, and reservations about
proceeding, a cdhort of unemployment insurance claimants who were identified as
needing training by the screening process could be followed through a complete
benefit cycle.
They would be treated in the regular fashion without training.
At tia end of the period it would be possible to see what percentage were re-
enplryei and remained In jobs.
If a large percent of this group was
successfully re-employed without further help, the first thing to do is lock at
who they are and see if the sareening procedure can be improved.
Perhaps
modifying the sareening process would be the answer, rather than outright
rejection of the targeted training alternative.
While What is 'described above is relatively straightforward,
the author is
aware that there is an additional difficulty to be faced.
It is a well known
fact, from careful studies over the years, that there is a category of claimants
Who ekhaust benefits and then withdraw from the labor market, either immediately
or Shortly thereafter.
There might be disagreement over how many wanted to
continue working but became - to use the carman term - disoouraged and hcmr many
had a weak attadhment to the labor force originally.
Identifying claimants who
have a strong attadhment to the labor force has long been a problem for the
unemployment Insurance system; it cannot be resolved only in the special context
of whether to encourage use of the retraining opticn.
B.
Labor Market Assessmant
The combination of the local Unemployment Insurance and Employment Service
offices contains, in most labor markets, the greatest knowledge of lahor market
conditions.
Over the years these offices have developed a variety of means of
assessing labor market conditions, although few have done it comprehensively or
systematically.
The gradIal decline in the market share of the EMployment
Service has made employer job listings with the EMplcyment
Service an ever less
reliable guide to conditions in the market
as a whole.
However, a variety of
means are available for tracking the labor market, and Federal and state
officials know them well.
These may be reflected in "demand lists" put in front
of unemployment insurance claims processors (supplied by the Employment Service)
to tell them occupational areas where employers are hiring.
If this capability does not exist in the regular offices of the Employment
Service, it may exist, instead, in the administrative unit assigned the
responsibility for the Cobs Training Partnership Act.
The proposition is that there can be periodic surveys and projections of
trends in labor market conditions.
Major trends can be identified.
Some things
can be known with fair certainty; Sharon, Pennsylvania would know that
unemployed workers with certain skills unique to the steel industry are not
going to be re-employed in that area with those skills.
An EMployment Service that is trying to increase its listing of job
openings will be in touch with employers, calling on them regularly.
Old
EMployment Service manuals contain systems for visiting and recording
information from "major market" employers. A system, imperfect as it is, was
developed long ago for making local projections of occupational demand, called
"area skill surveys."
The Economics Departments of universities are regularly
called upon to make local surveys and projections, either for the Employment
Service or for the JTPA prpgram.
In some states, sudh systematic studies are a
required basis for the selectian of courses for the vocational education system.
All these tedhniques can be brought to bear an the question of whether
unemployment insurance claimants with. particular Skills are likely to be re-
employed with those Skills, or whether they will eXhaust their regular (and any
extended) benefits without becoming re-employed.
While these techniques do not provide foolproof answers, their use may
increase the likelihood that target groups can be chosen for the retraining
option.
As discussed under (A) above, these tedhniques can also be subjected to
empirical testing to find out the extent to whidh target populations can be
identified that are likely to eXhaust benefits without re-employment.
C.
In CoMbination
The approadh providing the most assurance that target populations can be
identified early an is to use. A and B in canbinaticn.
When claimants have been identified through the screening process in A,
their akills can be chedked against the labor 'market assessments in B.
Again,
the predictive Ability adhieved in the coMbinatian can be tested empirically.
The results obtained will vary among communities depending an the care with.
wbidh A and B are carried out, the extent to which the lccal labor market is
dynamic, the extent to whidh the industrial mix is stable (or following a
trend), and the swings of the business cycle.
In states with highly developed screening systems and where labor market
studies are commonplace, the above will sound elemental and sophomoric, as it
will to those who have become professionals in labor market and retraining
problems and policies.
It is, of course, not written for them.
Rather, it is
written for those who are becoming interested in closer relationships between
unemployment insurance and retraining, and for those policy officials outside
the ongoing sys-banidho may-want to influence its direction.
Itmay also be helpful to fledgling retraining programs under JTRA that may
desire to reach unemployed workers early cn.
The JTPA system does not have
funds to pay maintenance allowances.
Exploring the possibility of catching
workers in need while they still have unemployment insurance available maybe an
attractive opticn, partic'ufarly since JTPA, by defining its enrollees as being
in training approved under UT law, has the effect of waiving the UT work test.
VI.
Bh:rali paolucum
Prior sections have described ways in which individual states have used the
unemplcyment insurance system to facilitate retraining.
These have been
significant, but rather modest, attempts to broaden the base of financial
support for retraining displaced workers.
In addition, alternative ways have
been suggested for advancing on these fronts within the framework of what is
permitted under existing Federal and State unemployment insurance law.
But, is there a route to greater facilitation of worklife transitions
through retraining that builds on the existing Federal-State system of
Unanployment Insurance?
In exploring that question we do not here intend to
provide an independent analysis of the degree of worker dislocation, the
validity of the retraining alternatives, nor of the unending debate over how
many indivirlials might profit from the retraining approach12.
The mcst
comprehensive review ever undertaken in the United States was publidhed in 1986
by the Office of Technology Assessment,
titled Technology and Structural
Unemployment:
Reemploying Displaced Adults (445 pages and the result of about
two years of work).
Its overall conclusion was:
Over the 5 years from 1979 to 1984, 11.5 million American
workers lost jcbs because of paant dhutdowns or relocations,
productivity, or shrinking output.... In 1984,
1.3 million of
these displaced workers were still unemployed, joining the
millions of others seeking work during a recovery that has not
yet pushed the civilian unemployment rate below 7 percent....
There is broad consensus that displaced workers...should not
have to bear burdens of addustment on their own.... Reports on
the first 2 years of operation show that 3TPA programs are
12 This author has reviewed this area in Wbrklife Transitions:
The Adult
Learning Connection (Chapter 5), MbGraw Hill,
1982.
helping displaced workers find new jobs.
However, it is likely
that no mcre than 5 percent of eligible displaced workers are
being served.
This report is addressedprirc&pally to those who agree with the OTA
conclusion and Who are interested in new ways that retraining efforts can be
encouraged and expanded.
One of those ways may be through relationships to the
unemployment insurance system,.or through application of the basic concepts
whidh undergird it.
There are two sudh possibilities advanced In this section.
However,
neither would go beyond present law in integrating retraining into the
unemployment insurance pystem, although both bear some relationship to it.
Over
the years there have been a few proposals for "adding" retraining to the Ul
sysban, or authorizing the use of Ul trust fund mcneys for remedial efforts,
including training.
They have gathered little support and they would encounter
strong opposition from the Coalition constituency-that maintains the
unemployment insuranCe system.
The principal considerations are these:
o
While there is support for remedial effort as an alternative to just
income support through unemployment insurance, an effective argument
is made that this does not need to be done within the UT system.
Training can be offered through an alternative system, and thiS
approadh can negate the need to draw Ul, if training allowances are
provided in addition to coverage of training expenses.
FUrther, long
run effects of sudh training may lesson the drain on the Ul system.
o
Some proposals, particularly in earlier times, have loOked longingly
at the reserves in the unemployment insurance pystem as a source of
funds for remedial efforts.
There was resistance to sudh a diversion
of UT reserves.
Also, a series of recessions and state borrowing from
the Federal government to stave off insolvency seriously-weakened the
case for any diversion of Ul funds to other purposes.
o
The rights and responsibilities under the UI system were built up over
five decades.
There was fear that injecting retraining would impact
basic rights.
An example was that states might require retraining as
a condition of eligibility for Ul benefits, creating a limitation on
rights as they now exist.
o
The complicated system of financing unemployment insurance and the
experience rating system were not dARionna
allennm*n 44.vm, ^~.+
Reviewing U.S. and foreign experience in 1980, Charles Stewart came to this
conclusion:
The disadvantages do not appear to be those of creating a
larger, and more complex, organizational structure.
Integration might involve simply a better coordination, which
would be desirable, of a set of related functions or services.
The chief disadvantages would appel-r. to arise from the
incompatibility of the Federal-State unemployment compensation
system, with its insurance pretensions, experience features,
and financing by payroll taxes on employers, for paying for
training that might extgnd rather than shorten time spent in
unemployment status...-"'
While it is probably time to abandon any idea of drawing on UT trust funds
for paying training expenses (other than paying UT during the retraining under
specified conditions), there are two aspects of UT that provide possibility for
greatly improving protection from the personal (and family) haxdShip of
displacement.
One is using the UT payroll tax collection system for collecting
an earmarkedpeyroll tax specifically for retraining (and possibly other
employment assistance efforts).
The second, amdmudh more aMbitious, is the
application of the social insurance concept in unemployment "insurance" on a
broader basis.
A.
The Earmarked Tax
While some have talked about "using UT funds to pay for retraining," this
is not possibae in a literal sense, at least under existing Federal and state
unemployment insurance law.
Taxes collected under UT law mpst be used for UT
benefits,
But it is possitae to use the UT tax collection system to collect an
earmarked training tax.
The mechanism is there in the form of a payroll tax on
13 Charles Stewart, Wbrklife Education 'and Training and the Ordeal of Change,
Charles D. Stewart, National Institute for Work and Learning, 1980.
employers.
Whether it is desirable to do this, of course, depends on the
priority assigned to retraining by the state and the benefits recognized by the
employers who would have to pay the tax.
The reaction of a state to the use of the UI tax collection system to
ccLlect a new tax will also depend on whether its Ul system has a surplus or is
in debt to the Federal government through the "borrowing" provision in the
Federal law.
Where the desire exists and where net new taxing is not considered
tenable, there are possibilities in many states along the lines of what has
happened in two state systems.
These states have used two ways to approach the
use of the Ul system for taxing that minimize the effect on employers and, at
the same time, secure supplemental funds for retraining.
The first approadh applies to debtor states (about half the states) where a
federal payroll tax is in effect to force repayment of loans made to the state.
At the time the loan is paid off, an earmarkedtzedning tax could be levied in
an amount less than the special tax employers have been paying because of the
loan, resulting in a net tax reduction.
This was the approach used over a year
ago by the state of Delaware.
Delaware was about to complete repayment of its Federal loan, late in 1984.
lbe special tax on employers for this purpose was .6 percent of the first $7,000
of wages, generating $9 million annually.
The DuPont administration proposed
legislation which would earmark a portion of this reduction, .1 percent, to
establish a permanent $1.5 million training fund.
According to Dennis Carey,
then the Secretary of Labor for Delaware, "The Delaware Private Industry
Council, Inc. would be responsible for the selection of recipients of grants to
assure appropriate use of the funds.
These funds would increase the total
number of dollars available for Private Industry Cbuncil use by 32 percent."14
The funds would be used, Carey said, to help support three employment and
training initiatives:
1) school-towork transitions, 2) industrial training,
and 3) dislocated workers.
In the third area, the funds would be used as
matching funds under the Federal Job Training Partnership Act.
The proposal was
enacted by the Delaware legislature.
California's unemployment insurance finances have been in good shape.
In
1982, California earmarked a portion of revenues collected through unemployment
insurance for retraining.
The law stated its purpose as follows:
(C) Under existing law, all employer taxes paid into the
unemployment insurance system compensate unemployment insurance
recipients for being out of work.
The intent of this chapter
is to use a small portion of employer taxes to put unemployment
insurance recipients to work by encouraging employers to locate
and expand facilities in this state and training unemployment
insurance recipients in skills needed by employers.
(D)
The purpose of this dhapter is to establidh an
employment training program whidh shall foster Jab creation,
minimize employers'. unemployment costs, and meet employers'
needs for Skilled workers by pro4iding Skills training to
unemployment insurance claimants, recent exhaustees of
unemployment insurance Oho have remained unemployed, and
potentially displaced workers Who would otherwise become
unemployment insurance ...Laimants....
The legislation created an Unemployment Training Fund, placing $55 million
in the Fund.
Appropriations are made from the FUnd, and the law yells out a
detailed program for whidh the funds are to be used.
Administration of the program is through an EMployment Training Panel
establiehed in the Californie Employment Development Department, consisting of
seven persons "with experience and a demalatarbad interest in business
14
Speech by Dennis
. Carey, before the Delaware Chamber of COmmerce, April
11, 1984.
management and employment relations,"
TWo members are appointed by the Speaker
of the Assembly, two are appointed by the President pro Tempore of the Senate,
and three lumbers are appointed by the Governor.
One unique feature ties the unemployment insurance system to the funding of
training which employers need for growth.
While direct expenditures can be made
from the Fund, offsetting credits can be applied to the employers'
unemployment
insurance tax liability:
The funding of individbal project gn-,..s by the panel may
take the form of either direct grants to the employer or
training agency, or credits to the employer's liability for
unemplcyment insurance contributions or reimbursements.
Credits to the employer's liability for unemployment insurance
contributions or reimbursements shall be drawn from the
Employment Training Fund.
Where unemployment insurance recipients are involved, the legislation ties
back to the Ul provision required in state law by the 1970 Federal amendments:
A trainee or employee participating in a training program
pursuant to this chapter shall be considered to oe in a
training program having the approval of the director under the
provisions of Section 1274.1 of the Unemployment Insurame
Cbde.
The California and Delaware programs are the most extensive integraticns of
unemployment insurance and retraining undertaken in the United States to date.
B.
Retraining Risk Protection
Over the past three years there has been considerable discussion of, and
writing about, the need to have an assured and sysimmatic way of enabling
workers whose skills become obsolete to be retooled.
Mbst of the thinking that
has been done about this, in recent years, has been by Pat Choate of TRW in his
proposals for an Individual Training Account (ITA), modeled on the IndividnA1
Retirement Account (IRA).
While this concept has been modified and refined from
time to time, the basic proposition is that an amount be established for each
worker, into which employers and workers would make fixed contributions, similar
to the Social Security System.
When workers become displaced they could draw on
this account for the education and training they need.
If they don't use the
account, the funds go to the workers upon retirement.
While the idea has been
attractive to many, it has not advanced in the legislature.
The cost of
building these accounts for all workers is in the lAllions of dollars, depending
on how urdveneal it is to be and how high the ccntritutions would be set.
Atwincipal reason sudh a system is so costly is that education and
training would be funded for all workers, even though only a portion would be
displaced, and only a portion of those would want or need retraining.
In
contrast, the cost of contributions to a system that would insure against the
risk of becoming displaced and needing retraininguculd be relatively modest.
While estimates vary, only a fraction of those who become unemployed need (or
would avail themselves of) retraining.15
For purposes of discussion, I will
call this Retraining Risk Protection (RRP), although I am here advancing a
concept for further explanation rather than a fully developed proposal.
No one, to cur knowledge, has madu estimates of what percent of payroll
would be required to provide such protection.
It is probably a fraction of a
percent.
And, of course, to make such an estimate many assumptions wculd have
to be made about the exact nature of sudh a program, as well as estimates of
displacement, re-employment, and appropriateness of the re-training solution.
There is always legitimate fear that costs of such social insurance
programs would get out of control.
The maximum amount of each worker's
retraining expenditure can be determined end fixed.
Unlike many other such
programs, there is one characteristic of retraining that would tend to hold down
expenditures; unampfloyexiworiters tend to see training as a last resort.
For the
15
Of course, other efforts to become re-employedrw cost rrrney and could be
included in a broader concept of occupational re-adjustment costs.
great majority, going back to school is painful.
The general experience (from
tuition-aid and other adult education programs) is that the lower the level of
formal education, the less the likelihood that workers will choose to exercise
training and education options.
The knowledge that such protection is available could do a lot, however, to
ease fears of the technological changes, structural shifts, and trade policies
that cause worker displacement.
While Americans generally accept the need for
such changes, acceptance will become more complete as individnAl workers know
that they will not bear the total costs of changes that are in the interest of
society as a whole.
And once a structure is in place to provide retraining, its
use can be enoouraged, calling upon a great deal of work that has been done to
identify barriers and reduce resistance,
The general outlines of a Retraining Risk Protection program might be along
the following lines.
1.
Employers and workers would pay a percentage of earnings into a
separate state RRP fund.
2.
The UT system could be used for collection of contributions to reduce
costs of separate collection, but funds would go into a separate state
fund.
3.
Wbrkers would become eligible for withdrawals when they were
determined to be displaced without reasonable prospects for re-
employment without retraining or further education (e.g. byrathods
described in Section V) and:
a.
when they had worked a specified period of time to demonstrate
that they were strongly attached to the workforce,
b.
when they were to be enrolled in institutions of training and
education approved by the state, and
c.
when the course of instruction selected was determined to provide
reasonable prospects of re-employment in view of the occupational
employment trends in the labor market.
This broad outline leaves a great many details that would have to be worked
out.
Hbwever, it is the general princical that, I believe, merits discussion.
To carry it furthar uculd require one of the states, or some organization,
to
make a feasibility assessment.
With the ccnsiderable interest that is building
at the national level in the problem of worker displacement,
the concept of
Retraining Risk Protection merits examination at the Federal level as well.