Extending Trade Adjustment Assistance (TAA) to Service Workers: How Many Workers Could Potentially Be Covered?
Order Code RS22761
Updated January 30, 2008
Extending Trade Adjustment Assistance
(TAA) to Service Workers: How Many Workers
Could Potentially Be Covered?
John J. Topoleski
Analyst in Income Security
Domestic Social Policy Division
Summary
Trade Adjustment Assistance (TAA) provides income support and training
assistance to workers who become unemployed for certain trade-related reasons. Only
workers who make an article (i.e., manufacturing workers) are eligible for TAA. Under
current law, service workers who become unemployed for a trade-related reason (e.g.,
outsourcing) are ineligible for TAA. Several bills in the 110th Congress (S. 1848, H.R.
910, H.R. 3589, H.R. 3920) would expand TAA to include service workers and public
sector employees. The available data indicates that the number of displaced
manufacturing workers in offshorable occupations from 2003 to 2005 (489,000) roughly
equals the number of TAA-certified manufacturing workers over the same period
(450,000). There were 840,000 workers displaced from offshorable nonmanufacturing
occupations from 2003 to 2005, suggesting that the pool of TAA-eligible workers could
have increased by over 170% if service workers had been eligible for TAA. In January
2006, nearly three times as many employed nonmanufacturing workers were in
offshorable occupations (20.7 million) than employed manufacturing workers in
offshorable occupations (7.7 million), suggesting a large increase in the pool of
potentially eligible TAA workers. This report will be updated as circumstances warrant.
TAA Background
TAA provides income support and training assistance to certain workers who lose
their jobs for a trade-related reason. For example, manufacturing workers who are laid
off either due to a company shifting production to a country with which the United States
has a free trade agreement or a manufacturing company switching to a supplier in any
foreign country would be eligible for TAA. Manufacturing workers who lose their jobs
due to a general economic decline are not eligible for TAA. TAA was most recently
reauthorized by the Trade Act of 2002 (P.L. 107-210) and was set to expire on September
30, 2007. P.L. 110-89 extended TAA until December 31, 2007. P.L. 110-161, signed on
CRS-2
December 26, 2007, fully funds TAA through September 30, 2008. The Department of
Labor has indicated that this is sufficient to continue the program, including issuing new
certifications of eligible workers.1
Currently, TAA eligibility is generally limited to workers in firms that make an
article, which excludes most nonmanufacturing workers in the United States. In the 110th
Congress, several bills (S. 1848, H.R. 910, H.R. 3589, H.R. 3920) would expand TAA
eligibility. For example, S. 1848 and H.R. 3920 would extend TAA to workers in service
sector firms or public agencies. The bills also eliminate the requirement that the shift in
production be to a country with which the United States has a free-trade agreement. So,
for example, workers whose jobs are “offshored” to any country regardless of whether
they produce a product or a service would be eligible for TAA under S. 1848 and H.R.
3920.2
TAA Benefits and Financing
TAA has two primary benefits: Trade Readjustment Allowances (TRA) and training,
job search, and relocation benefits.
TRA provides up to 130 weeks of income support if a TAA-eligible worker is
participating in an approved training program. TRA is a mandatory spending program.
Because TRA benefits are provided to all who meet the eligibility requirements, under
current financing provisions, no workers would lose TRA income support benefits if there
were an increase in the pool of TAA eligible workers. An increase in TRA expenditures
would be paid for — like all mandatory funding — through some combination of
borrowing, increased revenues, or spending cuts.
In contrast to TRA, the training, job search, and relocation assistance aspect of TAA
is a capped entitlement. The Trade Act of 2002 specifically limits training expenditures
to $220 million per fiscal year. In FY2007, an additional $39 million was appropriated
for job search and relocation expenses. S. 1848 would increase the amount of training
funds to $440 million in FY2008 and increase the annual appropriation by 10% if states
had obligated or expended 90% of the previous year’s authorization. H.R. 3920 would
increase training funds to $440 million in FY2008 and FY2009 and $660 million in each
fiscal year thereafter. An expansion of TAA to include service workers might present
additional challenges to the management of training funds. TAA funds are allocated to
states on the basis of worker participation and expenditures for the prior two and a half
years. However, a state that experiences unexpectedly large layoffs might find training
funds insufficient to meet the demand and so have to ration the available training funds.
Both S. 1848 and H.R. 3920 adjust the funding formula used to allocate training funds to
address these funding concerns.
1 For more information see CRS Report RS22718, Trade Adjustment Assistance for Workers
(TAA) and Alternative Trade Adjustment Assistance for Older Workers (ATAA), by John J.
Topoleski.
2 For more information on offshoring see CRS Report RL32292, Offshoring (a.k.a. Offshore
Outsourcing) and Job Insecurity Among U.S. Workers, by Linda Levine.
CRS-3
Impact
To examine the impact of offshoring on the number of potential TAA-eligible
workers, this report examines workers in occupations that have the potential to be
offshored. The report examines the offshorability of displaced or employed workers’
occupations and categorizes the number of workers, first, by the offshorable potential of
their occupations and, second, by whether the workers are employed in the manufacturing,
nonmanufacturing, or government sectors. The report analyzes two sets of data: (1)
long-tenured displaced workers from January 2003 to December 2005 and (2) workers
who were employed in January 2006.
Data
This report uses employment data from the Current Population Survey (CPS). The
CPS is a monthly survey of about 50,000 households conducted by the Bureau of the
Census for the Bureau of Labor Statistics (BLS) and is the primary source of information
on the labor force characteristics of the U.S. population. We use the January 2006 CPS
to examine the number of workers employed in January 2006. In addition, this report also
uses the Displaced Workers Survey (DWS), a supplement to the January CPS in even
years. The January 2006 DWS provides information on workers who were displaced
from their jobs between January 2003 and December 2005. This report does not include
agriculture workers and members of the armed forces.
Variable Definitions
To determine which occupations were potentially offshorable, this report uses a list
created by Princeton University economist and former Vice Chairman of the Board of
Governors of the Federal Reserve System Alan S. Blinder.3 Blinder classifies occupations
as “highly offshorable,” “offshorable,” “non-offshorable,” or “highly non-offshorable” on
the basis of the occupation’s description in the Department of Labor’s O*NET database.
By offshoring, Blinder means “the migration of employment from the U.S. and other rich
countries to other (mostly poorer) countries.”
Conforming to the BLS definition of manufacturing occupations, this report uses
occupations listed as Production Occupations by the Census Bureau. Government
workers may be from any occupation but are employed by a local, state, or federal
government.
Displaced workers are persons 20 years of age and older who lost or left jobs because
their plants or companies closed or moved, there was insufficient work for them to do, or
their positions or shifts were abolished. This report uses the BLS definition of “long-
tenured” displaced workers. These are workers who had worked for their employers for
three or more years at the time of displacement. Whereas TAA eligibility only requires
that a worker be employed at the firm for 26 of the 52 weeks preceding the layoff, using
long-tenured workers may better approximate the number of TAA-eligible workers.
Although this likely slightly underestimates the number of TAA-eligible workers, using
3 See Alan S. Blinder, How Many U.S. Jobs Might Be Offshorable?, CEPS Working Paper No.
142, March 2007, available at [http://www.princeton.edu/~blinder/papers/07ceps142.pdf].
CRS-4
all displaced workers, including “short-tenured” would likely greatly overestimate TAA-
eligible workers. Support for using “long-tenured” displaced workers can be found in a
recent Government Accountability Office (GAO) report that found 91.7% of TAA-
eligible workers from five plant closings had been at their place of employment for at
least five years.4
Caveats
This methodology may overestimate or underestimate the number of workers whose
jobs are outsourced and who would potentially be eligible for TAA. Unfortunately,
neither the Census Bureau nor BLS collects data on the number of jobs that have been
offshored. Some important caveats include the following.
! Not all job losses in the “highly offshorable” or “offshorable” categories
would be eligible for TAA as it currently exists or as it might be
expanded to service workers. For example, it is entirely possible for
workers in a manufacturing plant in an “offshorable” occupation to lose
their jobs because of a plant fire or a general downturn in the economy.
Such workers would not be eligible for TAA.
! The estimates in this report represent a sort of upper limit on the number
of workers potentially eligible for TAA. An assumption is that workers
in non-offshorable or highly non-offshorable occupations will not lose
their jobs to offshoring. A worker in a non-offshorable occupation may
be offshored in the future, particularly if technology changes the nature
of work in an occupation.
! Blinder’s list is of “potentially offshorable occupations.” It makes no
prediction as to the actual number of jobs that will be offshored. Blinder
rates the ease with which a job could be offshored on the basis of the job
description. For example, the physical presence required by janitorial
staff suggests a lower probability of being offshored than call-center
workers who could perform their jobs from any location.
! It would be very difficult to predict the number of nonmanufacturing job
losses that would be eligible for TAA. Although it appears that the
number of displaced manufacturing workers in highly-offshorable and
offshorable categories closely matches the number of workers on
petitions that were TAA certified, this may or may not be the case with
nonmanufacturing and government workers. Therefore, extrapolating to
the nonmanufacturing sector is difficult.
! This report does not calculate standard errors. Therefore, the difference
between manufacturing and nonmanufacturing workers may or may not
be statistically significant (i.e., the results could be due to chance).
4 GAO-06-43, Trade Adjustment Assistance: Most Workers in Five Layoffs Received Services,
but Better Outreach Needed on New Benefits, available at [http://www.gao.gov/new.items/
d0643.pdf].
CRS-5
Results
Generally, the results show manufacturing occupations have a much greater
percentage of offshorable employed and displaced workers than private non-
manufacturing occupations but that the number of private nonmanufacturing offshorable
employed and displaced workers is considerably higher than manufacturing workers. As
a group, manufacturing occupations are more likely to be (or to have been) offshored, but
there are many more nonmanufacturing employed and displaced workers in offshorable
occupations. If proposed legislation were enacted, the pool of potentially TAA-eligible
workers could increase anywhere from two to four times the current number.
Table 1 indicates the number of potentially offshorable, long-tenured displaced
workers within three major categories of occupations: Private Nonmanufacturing,
Government, and Production.
There were 3.8 million displaced workers from 2003 to 2005, of which 1.4 million (36%)
were in potentially offshorable positions.
! Nearly all (93%) displaced production workers were in offshorable
occupations. In contrast, only 28% of private, nonmanufacturing
displaced workers were in offshorable occupations. Finally, only 12% of
displaced government workers were in offshorable occupations.
! Nearly two-thirds of displaced workers in offshorable occupations were
from nonmanufacturing and government occupations. These displaced
workers would not have been eligible for TAA under current law, but
might be under proposed legislation.
! There were 489,000 displaced production workers in offshorable
occupations. For comparison, there were 446,000 workers certified for
TAA from 2003 to 2005.
Table 1. Number of Long-Tenured Displaced Workers
by Potential Offshorability of Occupation
Total of Both
Occupation
Highly
Non-
Highly Non-
Offshorable
Highly Offshorable
Total
Category
Offshorable
Offshorable
Offshorable
and Offshorable
Total Private
385,042
452,689
837,736
504,954
1,704,175
3,046,861
Nonmanufacturing
(12.6%)
(14.9%)
(27.5%)
(16.6%)
(55.9%)
(100.0%)
11,594
13,736
25,330
21,446
158,269
205,045
Government
(5.7%)
(6.7%)
(12.4%)
(10.5%)
(77.2%)
(100.0%)
Production
60,749
428,238
488,986
23,579
11,379
523,944
(Manufacturing)
(11.6%)
(81.7%)
(93.3%)
(4.5%)
(2.2%)
(100.0%)
457,385
894,663
1,352,048
549,979
1,873,823
3,775,850
Total
(12.1%)
(23.7%)
(35.8%)
(14.6%)
(49.6%)
(100.0%)
Source: CRS calculations from the January 2006 Displaced Workers Survey refer to workers who were displaced from
their jobs between January 2003 and December 2005. We use Alan Blinder’s definitions of offshorability.
Note: For emphasis, the bolded column combines the workers in the highly offshorable and offshorable categories.
The four categories of offshorability sum to 100% (shown in the last column).
CRS-6
! Most nonmanufacturing occupations are non-offshorable, although
within private, nonmanufacturing occupation categories there is
considerable variation in offshorable potential. For example, although
100% of legal occupations are considered offshorable, only 7% of
information occupations are potentially offshorable.
! Had displaced nonmanufacturing workers been eligible for TAA from
2003 to 2005, the number of TAA-eligible workers potentially could
have more than doubled from 490,000 to 1.4 million.
Table 2 contains data on the number of workers employed in January 2006.
! There were 32 million (24.5%) workers employed in offshorable
occupations.
! For most employment categories, the percentage of potentially
offshorable current workers is less than the percentage of displaced
workers in offshorable occupations. For example, 20.5% of employed
nonmanufacturing workers are in potentially offshorable occupations
(from Table 2) compared with 27.5% of displaced nonmanufacturing
workers (from Table 1).
! Although there were 1.7 times as many displaced private,
nonmanufacturing workers as displaced manufacturing workers (from
Table 1), there were 2.7 times as many private, nonmanufacturing
workers employed in offshorable occupations in January 2006. If
government sector workers are included, this suggests that the pool of
potentially TAA-eligible workers could more than quadruple from 7.7
million to 31.7 million in the future if TAA is expanded to include
service and government sector employees.
Table 2. Number of Employed Persons in the United States as of
January 2006 by Potential Offshorability of Occupation
Total of Both
Occupation
Highly
Non-
Highly Non-
Offshorable
Highly Offshorable
Total
Category
Offshorable
Offshorable
Offshorable
and Offshorable
Total Private
9,047,153
11,663,215
20,710,368
12,329,994
68,103,345 101,143,707
Nonmanufacturing
(8.9%)
(11.5%)
(20.5%)
(12.2%)
(67.3%)
(100.0%)
1,146,632
2,163,486
3,310,118
2,060,678
14,599,462 19,970,259
Government
(5.7%)
(10.8%)
(16.6%)
(10.3%)
(73.1%)
(100.0%)
Production
508,106
7,212,651
7,720,757
287,952
795,611
8,804,319
(Manufacturing)
(5.8%)
(81.9%)
(87.7%)
(337%)
(9.0%)
(100.0%)
10,701,892
21,039,352
31,741,244
14,678,624
85,353,928 129,918,285
Total
(5.2%)
(16.2%)
(24.5%)
(11.3%)
(64.2%)
(100.0%)
Source: CRS calculations from the January 2006 Current Population Survey. We use Alan Blinder’s definitions of
offshorability.
Note: For emphasis, the bolded column combines the workers in the highly offshorable and offshorable categories. The
four categories of offshorability sum to 100% (shown in the last column).