Editore"s Note
Tilting at Windmills

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November 10, 2005
By: Kevin Drum

WAGE INSURANCE....So how should we help workers who are hurt by trade agreements? In the current issue of the Washington Monthly, Gene Sperling says, first of all, that the answer is to help all workers, not just those hurt by trade agreements. Second, here's how to do it:

The most promising way to accomplish this is wage insurance. Under a basic 50-percent wage-insurance program, dislocated workers who find new work would receive 50 percent of the difference between their new wage and the wage in the job they lost if it paid more. If a worker took a one-third pay cut say, from $30 to $20 an hour wage insurance would bring their hourly earnings up to $25, recovering half of the $10 gap between their old and new pay.

This design empowers workers directly and encourages work....In 2002, Congress created a small wage insurance pilot program....But the program is too limited. Only the few workers who can prove they lost their job because of trade are eligible and even amongst that small group, only those over the age of 50 and making less than $50,000 can receive the insurance benefit. In 2003, only 42 workers even used the program.

Sperling has a few suggestions that would make wage insurance more effective, but the basic idea remains the same: a limited-time helping hand to workers who are displaced from their jobs for reasons outside their control, including outsourcing, layoffs, or plant closures.

This is an idea worth considering, even more so because it's a genuinely work-friendly and family-friendly proprosal. If you recall this post from a couple of months ago, you'll remember that not only do workers who lose their jobs to a plant closure suffer a permanent income decline, but 20 years later the children of these families suffered lower incomes too. Surely those of us who benefit from free trade and an information age economy ought to be willing to forego a small part of that benefit in order to avoid the kind of multi-generational poverty that's caused by the things that benefit us in the first place?

Kevin Drum 1:18 PM Permalink | Trackbacks

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