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Clues to the Cure For Unemployment Begin to Emerge One-Stop Career Centers And Cash Incentives Yield Successful Job Searches By DAVID WESSEL Staff Reporter of THE WALL STREET JOURNAL Three years ago, John Maynard lost his $10-an-hour job at a Belfry, Ky., coal mine. "They sold the mine and didn't give us any warning," he says. He asked his wife to inquire about night classes at the local community college. None were available, but there was a daytime program in servicing electronic and electrical equipment. "She said we'd try to make it on one income if I'd go back to school," he says. So he did. But first he stopped by Pike County JobSight, one of 1,900 "one-stop career centers" across the U.S. created by Congress in 1998 to serve as worker first-aid stations. The center steered him to a "dislocated workers" program that covered two years of tuition and books at the community college, plus about $5 a day for gas and food, for a total of $4,156. After finishing school in May 2002, he took a night job tending the electricity at an industrial bakery, then found a day job at a hospital. Then last fall, the college called -- with a job offer. "I thought they were joking," he says. "I'm just a country boy." Today, Mr. Maynard, 39 years old, earns $31,000 a year teaching electronics at the Big Sandy Community and Technical College program from which he graduated. Sometimes, the system works. A dynamic economy continually throws off workers as industries are made obsolete because of evolving technology, globalization or changing consumer tastes. It constantly creates new industries and jobs. But even in good times, the displaced workers often aren't the ones who find new job opportunities. These are not good times. The U.S. economy is growing again, yet it has been unusually slow to add new jobs. The Bureau of Labor Statistics says new and expanding businesses added fewer jobs in the
fourth quarter, 7.75 million, than in any quarter since 1995. Shrinking or shuttered businesses cut 70,000 more jobs than that. One in every five unemployed Americans has been out of work for more than six months. The result is an economic recovery that doesn't feel like one to many workers and increasing pressure on politicians to do something about "the jobless recovery." There are some winners, such as Mr. Maynard. But there are plenty of losers. Among them are the people profiled in this series: the 57-year-old laid-off steel worker without health insurance, the 30-year-old executive who lost a $94,000 job and took one that pays half as much, and the Pennsylvania factory workers who can't find a factory to work in. Perhaps the best cure for their woes would be a return to the unusually strong economy of the late 1990s, when unemployment fell so low that employers couldn't be picky. President Bush and Federal Reserve Chairman Alan Greenspan are working on that, arguing that tax cuts and interest- rate cuts are more effective remedies than government worker-aid programs. Because that medicine is working so slowly, others seek to protect workers by blocking job-threatening advances in trade, technology or competition. But that strategy would arrest the very forces that have improved the lives of Americans over the past 50 years. So the pressing questions are these: Besides getting the economy going again, what can society do to help workers who played by the rules but are victims of economic progress? How can it help them find good jobs and learn the skills to do them? How does it assist workers too old to learn new trades? Decades of experimentation offer plenty of examples of failed government programs. Federally run training programs, often created in response to the government's own flawed projections of job vacancies, don't work well. They proved easy to start, expensive to operate, discouraging in results and politically tough to kill.
Each bill was described as a move to consolidate redundant programs, move decision-making to state and local levels and forge closer ties with employers. Today, the congressional General Accounting Office says, the federal government has 44 separate training programs administered by nine federal agencies that spend about $12 billion on employment and training each year. The one consistent government lifeline to the jobless is unemployment benefits, which in the fiscal year that ended Sept. 30 cost about $52.7 billion. Economists and others have expended considerable effort trying to figure out the optimal amount of unemployment insurance. If benefits are too generous, people don't look for work or accept available jobs. That's the lesson learned in Europe, where unemployment is persistently higher than it is in the U.S. "In Europe, we've tended to allow people to live on benefits for too long without putting enough pressure on them to take existing vacancies," says Richard Layard of the London School of Economics. The other option is to make benefits miserly and "starve people back to work," as Mr. Layard puts it, which is what he believes the U.S. does. In this country, roughly a quarter of those who quit their jobs or are laid off are ineligible for unemployment benefits, often because they've worked part-time or haven't earned enough to be part of the system. Most people who are eligible collect an average of about $250 a week for up to 26 weeks in ordinary times, often longer in times of high unemployment like these. A few experiments by states suggest that workers find work a bit faster, and thus save the government money, if offered a bonus of between $500 or $1,000 for finding a job. But few states are doing that now.
President Bush, as part of his economic-stimulus plan, earlier this year proposed giving workers deemed most likely to remain unemployed as much as $3,000 to spend on counseling or training -- or to keep if they found a job quickly. But Congress didn't bite, largely because of arguments over details, financing and whether it was the sort of stimulus that the economy needed at the moment. Less controversial is a bipartisan push to merge unemployment-benefit offices with those that provide job-hunting advice or training. The idea is to create one-stop career centers, like the one Mr. Maynard visited in Pikeville, Ky., which is among 14 identified by the General Accounting Office as a model. Mable Duke, director of the nonprofit organization that runs the Pikeville center, says that federal law offers flexibility that many other programs haven't taken advantage of yet. When a new restaurant fretted that it had trouble keeping workers because it required them to work rotating shifts, Ms. Duke's agency devised a way to find workers comfortable with such a routine. The organization asked applicants to attend orientation and job-shadowing sessions -- at 6 a.m. one day, 2 p.m. another and 10 p.m. on a third. That quickly winnowed out those who couldn't handle the work schedule. One significant, and largely unforeseen, development over the past decade is the growing role of temporary-help firms, as a way for the unemployed to find work and for employers to try out prospective hires. Mary Whalen, 53, lost her job as an accounting assistant at a five-person Milwaukee accounting firm the day before Thanksgiving 2002. Her firm needed to cut costs after its health insurer raised premiums more than 30%, she says. Through a brochure publicizing a job-hunting seminar, she found a one-stop career center in Milwaukee. A job counselor offered to call Manpower, the temporary employment agency, for her. "I don't think I would ever have considered that," Ms. Whalen says.
That's why some economists are encouraging programs that give jobless workers a seat in a community college or other training programs. In Oregon, Portland Community College has added intensified training programs for dislocated workers to its curriculum. When times were good, Sue Caswell earned $65,000 a year as a sales engineer for various electronics companies on the West Coast. Then in March 2002 she was laid off by Radar Electric Co., a regional distributor of electromechanical parts. At age 50, she had a hard time finding a job, especially in the depressed electronics business. An aptitude test she took at a one-stop career center pointed her to health care, one of the few industries that seem to be hiring. Ms. Caswell, who is separated from her husband and raising a 12-year-old daughter, was intrigued, but says she told the counselor that she didn't have a lot of time to devote to training. The counselor sent her to Portland Community College's phlebotomy program, so she could learn how to draw blood. She qualified for federal dislocated-worker grants to pay tuition and collected $400 a week in unemployment benefits while in school. Ms. Caswell finished the 12-week class and a three- week internship in June, only to find that prospective employers demanded a year's experience. But she was persistent, taking her résumé along when her daughter had blood drawn at a local hospital. After months of silence, the hospital called. She began work on Sept. 29 at Tuality Community Hospital in Hillsboro, Ore. The job pays only $11.31 an hour, "pretty much the bottom of the pile," she says. "If I was not so motivated to change fields, I'd be discouraged. I'm not." Once she finishes probation, she'll be eligible for tuition assistance and she plans to return to school part time and move into a higher-paying job. Several states are paying more attention to protecting existing jobs. For the past decade in Rhode Island, a small fraction (0.21% of wages) of the unemployment tax collected from employers has been diverted
to a fund overseen by the state's Human Resource Investment Council. Employers can tap that $ million-a-year kitty for training. Like many small manufacturers, Pilgrim Screw Corp., a Providence, R.I., maker of aerospace fasteners, did barely any training a decade ago, says Gary Grove, its president. But, he says, "We needed to figure out how to compete in a world in which manufacturing jobs are leaving the country in droves." When Lockheed Martin Corp. insisted that suppliers such as Pilgrim train their workers statistics-based quality-control techniques, Pilgrim and a few other companies banded together to hire a consultant to save money. That led to the creation of a manufacturers' training consortium, funded in part by $700, from the state over the past five years. Even optimistic observers doubt that much can be done to help many workers approaching retirement who lose their jobs and are looking for comparable work. One option is to offer them a kind of "wage insurance." The idea is to supplement their wages if they take a job that pays much less than their old one. Another possibility is to subsidize health insurance that often disappears with a job, and essentially help these workers get by until they reach retirement age. The government took a step in this direction last year with the creation of the Health Coverage Tax Credit, which pays 65% of health-insurance premiums for workers who lose their jobs because of trade or whose pension plans have gone bust. Proponents see it as a big step toward a strengthened safety net for older, displaced workers. The program is making a big difference to Kenneth Kyle, a 59-year-old disabled former employee of the railroad at Bethlehem Steel Corp.'s Sparrows Point plant in Baltimore. For the first few months he was out of work, the company charged him $346 a month for health insurance. Then Bethlehem was sold, and it stopped paying its share of his insurance as of March 30. As required by law, it allowed him to buy it for $1,064 a month, but that's a lot for a worker with a $1,134 a month pension and a wife who
