By: Marshall Kirby, Public Policy Analyst

The US Department of Labor issued their funding provisions for states in the Trade Adjustment and Assistance Program (TAA) last month, which could affect the benefits Americans receive for unemployment.  However, this year there was an interesting caveat; there are two proposed funding amounts.  One proposed amount gives the amount of money that is guaranteed to the states/territories and the other is the amount which they would get if Congress extends the program expansion put forth under the American Recovery and Reinvestment Act of 2009 (aka the stimulus bill).

TAA, in more detailed terms, is a program funded by the US Department of Labor which gives states funding for assistance, job training/re-training and education programs for workers affected by outsourcing and foreign trade.  It affects the unemployed who fall into the categories of both structural and frictional unemployment.  Without an extension from Congress, the fiscal year program budget will be $220 million for the 50 states, the District of Columbia, and Puerto Rico.  If the program is extended the budget will be $575 million, a $355 million dollar difference.

Some policymakers and critics have given this program a similar review as unemployment benefits – it’s simply another government program given to non-working/earning individuals paid for by taxpayers.  Other policymakers, like Congressman Mike Michaud from Maine, have argued the importance these programs make for workers in their state adjusting to a changing economy.  He is calling on his colleagues from Maine and Vermont to vocally argue for the extension of funding to assist families adjusting to new economic realities.  Additionally, in my own opinion, the nature of the global economy dictates the necessity of this program.

Outsourcing and foreign trade are, for the most part, fixtures in all economies – especially in developed countries.  As an economy becomes more advanced through structural changes and positive shocks (i.e. technological advances), more resources will be diverted into new and more productive sectors causing other sectors to fade away.  [Remember capital flows to where it is most productive!]  Or, in some cases, a combination of labor costs and productivity make operations in the country seem less feasible – therefore the company will move production somewhere where it will be cheaper (outsourcing).  With the economy still sputtering, many commentators on the left and right wings of the political spectrum have also suggested that protectionism and repeal of free trade agreements like NAFTA are the way to go to help workers in certain sectors (i.e. manufacturing).  However, they are either forgetting or not aware of the benefits that foreign trade has in helping our economy by providing for more efficient and cheaper goods and services and spurring innovation.

As mentioned in the paragraphs above, some workers will undoubtedly suffer because of outsourcing and free trade.  This does not mean that outsourcing and trade are bad for the economy or for the workforce.  It does mean that programs should be made available to affected workers to ease their transitions into solidly performing or expanding sectors.  Sometimes this needs to be done through government funded programs.  Even if it is through government funded programs, it’s clear that these programs have a strong economic benefit.  Businesses benefit from re-training programs like these because it allows new employees to gain more skills to help expand their operations and to become more efficient and productive.  Employers cannot succeed in a competitive global economy without the availability of a strong and well-trained workforce.  Additionally, well targeted workforce development programs are many times more of a public investment rather than expense.  They allow people to become productive contributors to the economy (and the tax base!) and reduce government funded transfer payments like welfare and unemployment.

There is a lot for states, workers, business owners, and would-be entrepreneurs to gain from Congress authorizing expanded funding for the TAA program.  For example, Puerto Rico stands to receive $488,909 in funding if Congress reauthorizes the funding, but will receive no money for workforce adjustment programs if not extended.  Concerns over increased spending and the deficit are real, but so are the concerns of workers and employers.  In a sputtering economy, a stagnant workforce lagging in skills and training will be a recipe for future economic decline.  Therefore, this is one program which shouldn’t be cut.

For a more detailed breakdown of funding, visit this website: