A white paper report issued by a group of major financial company CEOs July 30 calls for revamping federal unemployment benefits to cover more workers in between jobs and ease fears of job losses due to trade.
The Financial Services Forum, including executives from 17 U.S. and three European banking and investment firms, commissioned the paper written by former government economists and academics.
John Dearie, the Washington-based forum’s senior vice president for policy and research, told GlobalAtlanta while visiting the Georgia capital for Emory University’s July 11 globalization conference that the paper would be released this month.
The report says that job losses due to trade account for 3 percent of U.S. unemployment, but fear of joblessness and lack of government benefits cause many Americans to oppose free trade.
“Our open trade and investment policies have significantly enhanced the economic well-being of American citizens, although not everyone has shared in the benefits of globalization,” said Rob Nichols, the forum’s president and chief operating officer.
“This white paper offers innovative policy proposals to help displaced workers make a smoother transition back to work.”
The authors propose replacing what they say are outdated government programs to help Americans transition to new jobs, reducing resistance to open market policies despite the inevitable loss of some jobs.
The report says that unemployment insurance, instituted during the Great Depression in the 1930s, and trade adjustment assistance, passed in the 1960s designed to compensate workers who lose jobs because of trade, do not address employment concerns in a 21st-century economy.
It says that less than a quarter of qualified workers applied for trade adjustment assistance last year, and the federal government spent about $1 billion on unemployment programs.
The report suggests rolling the benefits of the older plans into a new initiative, the adjustment assistance program, with the estimated $22 billion price tag paid entirely by raising state and federal taxes to fund unemployment programs.
The proposal includes a wage-loss insurance program, by which employers would pay all laid-off workers age 45 and older half of their salary for two years or until they find a new job.
This would cost $7 billion and replace the current system, which pays half wages to workers 50 years old and up, if they can prove they lost their jobs to trade.
A second element of the program recommends continuing employer-provided health insurance for former employees, mitigating the added penalty of losing health coverage when unemployed. Employers would also be allowed to make that coverage tax deductible at a cost of about $10 billion.
The report also suggests allowing unemployed people greater penalty-free access to savings and retirement accounts.
The final recommendation is that federal job retraining and relocation programs be made available to all workers, regardless of employment status. This also eliminates the stipulation that only workers who lose jobs to trade are eligible. The price on these expanded programs could be $5 billion.
To pay for the new program, the report suggests imposing a flat 1.32 percent tax on all wages, 1.2 percent to the state and 0.12 percent to the federal government. Employers are responsible for the taxes, but sometimes pass the payment on to their workers.
The report was co-written by Grant Aldonas, former Commerce Department under secretary for international trade, now at the Center for Strategic and International Studies and an adviser to Sen. John McCain’s presidential campaign; Robert Lawrence, a former member of the President’s Council of Economic Advisors during President Clinton’s administration, now teaching at Harvard University; and Matthew Slaughter, a former member of the Council of Economic Advisors in President Bush’s administration, now an associate dean at Dartmouth College.