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Chairman Kennedy, Senator Kassebaum, and distinguished Members of the
Committee:
I am proud to have the opportunity today to put before you President
Clinton's proposed Reemployment Act of 1994, and to explain the role of this Act
in equipping all Americans to prosper in the new economy.
In many ways, the economic picture is clearly improving. Production has
surged in recent quarters. Two million jobs have been created in the past
thirteen months--1.9 million in the private sector. Accompanying this job
growth has been a significant decline in unemployment. And thanks to the
discipline and determination of you in Congress, as well as President Clinton's
commitment to fiscal responsibility, we have finally begun to regain control of
our financial destiny. Next year's deficit has been reduced by forty percent,
and future deficits have been firmly set on a downward path.
But recovery is not enough. Budgetary discipline, macroeconomic
improvement, production increases, and job growth are all critical elements of
national prosperity. But without a workforce strategy explicitly geared to
preparing all Americans for productive, rewarding work, we risk leaving some of
our fellow citizens behind as the economy moves ahead. And this we cannot, and
need not, accept.
Long-term Joblessness and the Skills Gap
The welcome decline in overall joblessness masks a continuing problem of
long-term unemployment. Despite the recovery, in 1993 the average duration of
unemployment nearly equalled its postwar peak. Only fourteen percent of the
workers who lost their jobs in the most recent recession expected to be called
back. The rest recognized that their old job was gone for good--the highest
percentage of permanent job loss ever recorded.
Permanent job loss and long-term unemployment--especially against a backdrop
of recovery--are symptoms of structural change in the economy. The main thrust
of this structural change involves the increasing importance of skills, a shift
in favor of workers with high-level skills and against those without them. More
than ever, what you earn depends on what you learn. If you have the skills that
come with a college degree, an associate degree, an apprenticeship certificate,
training provided by an employer, or other education beyond high school, your
odds for finding a job paying a middle-class wage are good.
Meanwhile, unskilled workers, or those whose skills have become obsolete,
find their options shrinking as the old economy of stable mass production and
unchallenged American economic preeminence disappears. The days when a worker
could walk to the factory gates right out of high school and claim a lifetime
middle-class job are fading into history. For both men and women, and at every
level of educational attainment--college degree, some college, high school
graduate, high school dropout--the earnings gap between the skilled and the
unskilled is widening. A typical college graduate, for example, earns seventy
percent more than a worker with similar demographic character-istics, but who
has only a high-school diploma. Comparable trends apply for the risk of
unemployment, and for access to pensions and other benefits: Those with skills
do well; those without them are increasingly vulnerable.
While traditional paths to the middle class for workers without college
degrees appear to be narrowing, new routes are opening--sometimes even in the
same industries. For example, auto plants are beginning to hire again after
years of layoffs. But rather than tapping the unskilled and semiskilled workers
who once filled entry-level jobs tending the assembly lines, the auto companies
are turning to better educated workers. They must. Because the increasing
sophistication of production technology and the flattening of the management
hierarchy mean that production workers are required to take initiative, make
decisions, and exercise discretion. The old distinctions between manager and
managed are breaking down. Overall, this is a hopeful development for America.
It offers the prospect of less drudgery and routine, more opportunity for all
Americans to work with dignity and to develop their potential. But it also
means that workplace skills become the ticket of entry into a wider range of
careers, including those that used to be open to the unskilled.
About a third of recent production-line workers hired at Ford, for example,
had some training beyond high school. (Ninety-seven percent of Ford's recent
hires hold high-school degrees; compared to only eighty percent of its overall
workforce.) Elsewhere in Detroit, a city still plagued by staggering levels of
long-term joblessness, nearly a thousand precision-machining graduates of the
Machinist Training Institute have found jobs with local businesses. Across the
country in San Jose, California, where workers with obsolete skills are
suffering from relentless waves of layoffs, the Center for Employment Training
provides intensive skills training, coupled with basic education, to mostly
disadvantaged clients and dislocated workers. Companies like San Jose's Touche
Manufacturing, which builds computer shells, hire as many of the Center's
graduates as they can get.
In industry after industry, managers recognize the importance of high-level
skills. The Business Roundtable has adopted as one of its guiding principles
the precept that investment in workforce training is an urgent priority for U.S.
competitiveness, and that America must be as "willing to invest in
upgrading people as we are in upgrading machinery."1
While ultimately each American has to take responsibility for his or her own
economic destiny, we must bolster our individual efforts with a national
response to the challenge of economic change, and business and government each
has its role to play in forging that response.
Americans are used to economic challenges. Less than a century ago, for
example, we mastered the move from the farm to the factory. Today, many
Americans confront the challenge of moving from the factory to the computer
workstation. I have no doubt that today's Americans are as determined and
resilient as their predecessors four generations ago.
What is different today, however, is the scale and speed of economic change.
Global competition, defense downsizing, technological advances, and corporate
restructuring are combining to produce new levels of anxiety about job security.
In the first two months of this year, large companies announced plans to
eliminate more than 140,000 jobs, to set a record-breaking pace of corporate
downsizing. And last week, a New York Times poll revealed that nearly four out
of ten employed Americans fear that they might be laid off, or forced to take a
pay cut or reduced hours, within the next two years. No segment of American
society is immune to job anxieties, and industrial upheavals affect top
executives, mid-level managers, and frontline workers alike. But those
hardest-hit by economic change, and those who stand to benefit most from a more
effective reemployment system, are the most vulnerable members of our economic
community--women, minorities, and the unskilled. African-Americans and Hispanic
Americans face higher-than-average risks of dislocation, and over one-fifth of
the workers displaced from jobs in 1990 and 1991 came from families living below
the poverty line.
Government policy and programs must recognize and reflect these new
realities. We must not offer Americans the false hope of burrowing into a
single job for life. Instead, we must equip them to find security through the
skills and flexibility that will let them face a changing economy with
confidence.
The widening gap between the winners and losers from economic change is
neither inevitable nor unbridgeable. Because even amidst long-term unemployment
and job anxiety, the new economy is generating a strong, steady demand for
workers with high-level skills. And workers are not born skilled. They earn
their skills, and they earn them through processes that policy can affect and
improve. The Reemployment Act of 1994 reflects a recognition of this fact, and
a commitment to make government play its role, responsibly and efficiently, in
equipping the American workforce to succeed in the skill-based modern economy.
The Reemployment Act's Key Principles
Our current array of unemployment programs was designed in an earlier time,
to meet the needs of a simpler economy. The system must be fundamentally
reshaped to meet the very different requirements of today's workers facing
today's challenges. It must be transformed from an unemployment system to a
reemployment system.
The Reemployment Act of 1994 is meant to accomplish this transformation.
Once it is fully implemented, it will serve about 1.3 million dislocated workers
each year--the full population estimated to want and need reemployment services.
(Today's dislocated worker program reach fewer than 400 thousand workers.) The
Act's design is based on a rigorous assessment of what workers need to prosper
in today's changing economy, and on systematic study of what works for getting
them into new and better jobs. The Reemployment Act reflects four core
principles:
- First is access and program consolidation. The current patchwork of
programs for dislocated workers is inefficient, confusing, and frequently
unfair. The Reemployment Act will immediately consolidate all major
dislocated-worker programs into an integrated service system geared to deliver
what workers need to get their next job, regardless of why they lost their last
job. Six programs, including Economic Dislocation and Worker Adjustment
Assistance (EDWAA); Trade Adjustment Assistance (TAA); NAFTA Transitional
Adjustment Assistance; the Defense Conversion Adjustment Program; the Clean Air
Employment Transition Assistance Program; and the Defense Diversification
Program--will be folded into a single program with uniform eligibility standards
and streamlined delivery.
Instead of forcing customers to waste their time and try their patience
going from office to office, the new system will require States to provide
services for dislocated workers through career centers. It also allows States
to compete for funds to develop a more comprehensive network of one-stop career
centers to serve under one roof anyone who needs help getting a first job, new
job, or better job, and to streamline access to a wide range of job training and
employment programs.
The immediate move to consolidated service for dislocated workers will ease
the frustration they suffer with the current system and accelerate their
progress to reemployment. The gradual creation of universal one-stop career
centers, as States opt into the system, will have even more profound
consequences. It will counteract past tendencies to create wholly different
services and access channels for different sets of workers--often segregating
the disadvantaged into separate delivery systems--and encourage moves toward
mainstream programs serving all citizens. It will reinforce the incentives for
streamlining and consolidation set up by other provisions of the Act. And it
will offer new opportunities for innovation, experimentation, customer
orientation, and service excellence.
One-stop service--coupled with new authority to waive rules and regulations
that block innovation and impede efficiency--creates a sturdy framework for
building more and more customer-level consolidation into America's employment
and training system. As the one-stop component of the Reemployment Act is
implemented state by state, it will catalyze continual progress toward less
duplication and overlap, simpler rules, leaner administration, lower overhead,
less bureaucracy, and more efficiency.
- The second principle is customer focus, giving workers a range of options
and letting them choose the services they need to get the next job. The system
the Act establishes offers a rich array of alternative services, to meet the
needs of a diverse workforce in a complex economy. Once the Act is fully
implemented for dislocated workers in fiscal year 2000, we estimate that about
eight percent of its resources will be devoted to worker counseling and
assessment; about twenty percent to job-search assistance; about eight percent
to pay for support services; about thirty-six percent for training; and about
twenty-eight percent for income support for workers whose reemployment plans
indicate that long-term training is needed.
Most dislocated workers want and need only information and some basic help
in assessing their skills and conducting their job search. These services are
relatively inexpensive, and have been shown to pay off immediately in less time
spent unemployed. Research and pilot projects have demonstrated that basic
reemployment services are excellent workforce investments, for the worker, for
employers, and for the taxpayer. These basic reemployment services help
dislocated workers do what they want to do -- get back to work. The
Reemployment Act will ensure that these services are delivered early, when they
can do the most good, and are targeted on workers best able to benefit from
them.
Better information is what makes the Act's customer focus meaningful. Too
often, workers must look for a new job without enough data, or with the dubious
guide of outdated or low-quality information. The difficulty of gaining a
complete picture of labor market conditions and trends can make job prospects
seem misleadingly bleak, and cause workers to miss opportunities to put their
skills to use, or to upgrade their earning potential through relatively simple
skill investments. The current system--where responsibility is scattered
through multiple programs, and where there are few incentives or institutions to
integrate information--squanders much of the potential of modern information
technology.
The Reemployment Act will bring jobs data from the age of the horse and
buggy into the age of the information superhighway. It will combine job data
systems and expand access to good data on where jobs are and what skills they
require. By bringing the nation's workforce information up to modern standards,
it will effect a relatively inexpensive improvement with potentially major
results.
- The third principle is market-driven retraining for workers who need it to
get their next job. While most dislocated workers need only job-search
assistance to find where best to use their skills, some--we estimate about
thirty percent--need to learn new skills. Past retraining programs have had
limited effect in part because they failed to ensure that workers were trained
only for skills in demand; because they had inadequate provisions for customer
choice and quality control; and because they relied too heavily on short-term
training programs that have proven ineffective at changing the prospects of
typical dislocated workers. Retraining, for workers who need it, often means a
sustained program lasting a year or more.
Training that doesn't lead to a job cheats the worker, the taxpayer, and
everyone with a stake in a productive, flexible American economy. The
Reemployment Act links training with jobs in three ways: By giving customers
choices about where to get their training, it gives suppliers powerful
incentives to tailor their curriculums to labor-market trends and to guarantee
results. By building up the nation's labor-market information system and
offering all customers access to performance information on training providers
and jobs data, it empowers workers and employers to make better decisions, and
strengthens the links between training programs and the working world. And by
requiring a high-level business majority on the board overseeing local training
programs (private-sector representatives must be chief executive officers, plant
managers, or business owners) it ensures that market perspectives will shape
every aspect of the system.
The Reemployment Act includes provisions for income support for workers who
need it to complete their retraining programs. A combination of grants, and
where appropriate, student loans will fund training programs. Income support
during training will be delivered through the Unemployment Insurance system.
- The fourth principle, which fortifies the other three, is accountability.
The Reemployment Act of 1994 restructures the incentives facing all those who
make up the system--public officials, program managers, center operators,
service suppliers--to make them treat workers as customers. Those who do right
by their customers, who deliver high-quality services leading to positive
workforce outcomes, will prosper in the new system. Those who fail to do so
will see their funding dry up.
Accountability means devoting resources to what works, and getting rid of
what doesn't work. It means streamlining and consolidating wherever possible,
so that workers don't need to spend their time navigating administrative mazes,
and so that taxpayers don't need to support unproductive bureaucracies.
Accountability is a universal principle. But the principle of
accountability must be realized differently in different settings. The
Reemployment Act avoids the error of mandating a single approach to
accountability to fit a complex and diverse nation. Instead, it seeks to ensure
that no part of the system is exempt from the imperative to deliver value to
customers, while leaving room for local experimentation and diversity in serving
that imperative. It requires funding decisions to be divorced from program
delivery, so that conflicts of interest do not erode accountability. It allows
States and localities to create competitive systems with multiple suppliers, if
that approach to accountability fits their circumstances. But it also allows
States and localities which have developed collaborative approaches to
accountability to continue down that path, so long as customers are well-served.
The Reemployment Act neither specifies nor bars particular models for service
delivery, but puts the emphasis on results.
And accountability, finally, means budgetary discipline. The Act is
designed with a keen awareness of fiscal limits. Of the total $13 billion in
5-year costs, only $5.6 billion represents a net increase, and fits within the
caps on discretionary spending. A large part of the discretionary financing
comes from consolidating separate dislocated worker training programs into this
integrated system. Additional discretionary funds come from reductions in other
Federal programs. The mandatory component is financed by offsets from
consolidation, and by extending and rededicating Federal Unemployment Insurance
revenues to income support to individuals and job training. This component is
the only non-discretionary spending in the Reemployment Act, and it is firmly
capped in the legislation.
An Overview of the Reemployment Act
Title I of the Reemployment Act establishes a comprehensive program
for dislocated workers, regardless of the cause of dislocation. It consolidates
the six current Labor Department dislocated-worker programs into a single
integrated system. Outreach efforts, including State rapid response programs
and stepped-up efforts to identify early on workers at risk of long-term
joblessness, will improve the deployment of program resources. This Title
requires local programs to organize Career Centers for dislocated workers, and
specifies the range of reemployment services the Centers will deliver or
arrange. Career Centers may be run by the Employment Service, the Job Training
Partnership Act administrative entities, community colleges, vocational schools,
community-based organizations, or other non-profit or for-profit organizations
which can demonstrate the capacity to deliver.
Title I also outlines the requirements for high quality training and
retraining, and sets up systems of performance standards and information to
ensure the accountability of training providers and to inform customer choices.
Finally, it includes provisions for governors to devote a portion of State
reserve funds to skill-upgrading programs aimed at job retention, and for the
Secretary of Labor to manage a national discretionary grant program.
Title II establishes a program of income support, delivered through
the Unemployment Insurance system, for permanently dislocated workers while they
are pursuing courses of retraining. It also specifies the funding source for
that income support, and ensures that once the system is fully implemented
retraining income support will not be subject to the annual appropriation
process. At the same time, it puts effective caps on income-support spending.
And it adds adaptability to the whole system by giving states new options on
unemployment insurance, including letting them pay "reemployment bonuses"
to workers who find new jobs quickly, "short-time" insurance to
promote alternatives to layoffs, and self-employment assistance to encourage
entrepreneurial efforts by jobless workers.
Title III establishes a national program of grants and waivers to
encourage and enable States to develop networks of One-Stop Career Centers.
These Centers, which substantially extend the one-stop approach of Title I,
offer a common point of access to employment, education, and training
information and services for employers, and for all citizens who need help
getting their first job, a new job, or a better job. Local Workforce Investment
Boards will be selected by local elected officials to serve as the "board
of directors" for all workforce programs. These Boards will have
high-level business representatives comprising their majorities, but will also
have balanced representation of labor, education, and other community groups.
The Private Industry Councils set up under JTPA may become Workforce Investment
Boards, but only if they meet all the new requirements.
The One-Stop Career Centers may be run by a consortium of organizations,
including the Employment Service, the State UI agency, and agencies
administering JTPA Title II and the dislocated worker program authorized under
Title I of the Reemployment Act. Alternatively, States and localities may opt
for a competitive approach under which the Employment Service and other
organizations are chartered to run One-Stop Career Centers. Under either
option, these One-Stop Career Centers will be required to meet customer-oriented
performance measures, and will be evaluated annually.
One-Stop Career Centers will provide basic services to anyone who needs help
getting a job, and will provide more intensive services to dislocated workers as
well as other clients as appropriate. They will also coordinate and integrate
the delivery including not just of dislocated worker programs and the
Wagner-Peyser Act but also Title II of JTPA, veterans' employment and training
programs, the Senior Community Service Employment program under Title V of the
Older Americans' Act, and programs authorized under a range of Federal and State
Unemployment Insurance laws. The Centers may also integrate other programs such
as JOBS, the Job Corps, and adult and vocational education.
Under Title III, States may apply for both planning and
implementation grants to build one-stop networks, and can also request waivers
of a range of statutory and regulatory requirements for specific Labor
Department programs, when such requirements unnecessarily constrain the
development of innovative, integrated State workforce strategies.
Finally, Title III requires participating States to establish Human
Resource Investment Councils to advise Governors on the coordination and
consolidation of all workforce programs and policies. It also requires local
Workforce Investment Boards, local elected officials, One-Stop Career Center
operators, and participating programs--along with the Governor--to enter into an
operating agreement to govern the one-stop networks, and requires State-level "customer
service compacts" to set a framework for accountability throughout the
system.
Title IV establishes a National Labor Market Information system to
provide universal access to timely, accurate, and comprehensive information
about where the jobs are, the skills and experience needed to secure and perform
good jobs, the location and performance of training programs, and other
workforce data. The system will also provide employers with information on job
candidates, and will give all clients data on job, career, and skill trends so
they can make more-informed decisions that will collectively improve the labor
market's efficiency.
Title V extends the themes of flexibility and innovation to title II
of the Job Training Partnership Act, by giving the Secretary of Labor authority
to waive Federal statutes and regulatory requirements to empower States and
localities as they seek to refine, streamline, innovate, and integrate job
training programs for disadvantaged adults and young people.
The Reemployment Act of 1994 is about giving Americans the tools they need
to take control of their own careers. It is inspired by the themes of customer
choice, accountability, and universal access. And it is informed by systematic
attention to empirical evidence, and a deep commitment to what works. The
evidence shows that skills pay off. The evidence shows that skills can be
learned. The hard-won experience from decades of economic change, and from too
many programs that failed to deliver as they should for workers and taxpayers,
shapes the structure of the Reemployment Act. Through respect for the evidence,
and through persistence in pursuit of the American tradition of broadly-shared
middle class prosperity, we can help prepare Americans to succeed in the
skill-based economy taking shape all around us today. There is no excuse for
leaving a single person behind.
This concludes my prepared remarks. I would be glad to answer any
questions.
1Workforce Training and Development for U.S.
Competitiveness, August 1993
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