Developing labor force preparedness as a response to major job loss: government, business and education as partners.

• Author: Brenner, Christine Thurlow

Abstract

While extensive research has documented the individual characteristics of displaced workers and the subsequent impact of job displacement on earnings and quality of re-employment, virtually no research focuses on the responses within communities when major job losses occur. This research, a case study of four southwestern cities, documents the efforts of communities to address the challenge of dislocated workers. The combined efforts of the business, government and educational sectors to link workforce training and labor force needs of the community emerge as a strong, viable local initiatives.

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Job-centered economic development has become the buzzword of the 21st century (Giloth 1998). The emphasis of this approach is on good jobs, which pay livable wages (i.e. wages, usually $8-$12 per hour), jobs that can support a family. As Giloth reports,

This eclectic group of strategies and projects combines education, human services, economic development, and employment training. It focuses on identifying and accessing good jobs, networking among employers, support of livable wages (Fitzgerald 1993; Giloth 1995) underscores jobs outcomes, not simply economic adaptation, new business generation, job readiness or workforce attachment (Giloth 1998, p. 2). Globally the economic engine of the 21st century, at this early date is anticipated to be information technology. To effectively compete in this arena, education has become the pivotal piece of local economic development. The 20th century minimal educational threshold of a high school education has been completely supplanted by the need for college education. And not just any college education will do, but rather employers are seeking graduates of a degree program that produces a set of marketable skills, which includes a level of technical proficiency in information technology. Community colleges have moved to the forefront of producing technically skilled students who can move directly into the new information-based economy. The new approach to community economic development requires the partnership of government, business and education in developing labor force preparedness. Communities that are boldly moving forward in the 21st century have recognized the pivotal nature of these relationships; however other communities which find themselves at the threshold of the new century facing declining industries and large numbers of displaced workers are struggling to make this partnership work.

The Challenge of the Displaced Worker

When plant closures or relocations result in job loss for employees who have been working in those positions for three or more years, the subsequently unemployed worker is considered displaced by the U.S. Bureau of Labor Statistics. Since the Japanese began making in-roads into the U.S. automotive industry in the early 1960s, through the economic recessions of each of the subsequent decades, and more recently with the advent of NAFTA and rapid advances in technology coupled with globalization of trade, American workers, primarily in the manufacturing sector, have been impacted by the downsizing and outright closures of their firms. What happens to these workers and why has been the subject of much study. Data on displaced workers' experiences has been chronicled biennially since 1984 in the Displaced Worker Supplements (DWS) to the January Current Populations Survey, which "provide retrospective data on displacements occurring within five years preceding the survey" (Addison and Blackburn, 1994, p. 182). Put simply, the issue is one of comparative advantage and education changes the comparative advantage of workers when displacement occurs.

The vast majority of studies of displaced workers have focused on the impact on the individual, usually through use of time series analysis of the DWS data. Research has documented protracted unemployment that may follow displacement and the subsequent losses of earnings most displaced workers suffer (Fallick, 1996; Gardner, 1995; Kodrzycki, 1996; Stevens, Crosslin and Lane, 1994). Addison and Portugal (1989) found the length of intervening unemployment "emerges as a potent source of reduced earnings on the post-displacement job" (p.282). Ruhm (1991) finds that displaced workers are not permanently scarred by a long period of unemployment; however worker attachments to specific jobs may lead to lasting wage reductions even four years after the initial displacement and in some instances, earnings instability persisted for three to five years after initial job loss (Stevens, 2001). Those at the greatest disadvantage appear to be high-tenure workers leaving distressed firms (Schultze, 1999), who "suffer long-term (wage) losses averaging 25 percent per year" (Jacobson, LaLonde and Sullivan, 1993, p. 697). The importance of pre-displacement job tenure, rather it "should be read as simply indicating that tenure on the lost job raises wages on that job by more than it does on the "second" job" (Addison and Portugal, 1989, p. 282). Other work by Carrington and Zaman (1994) and Farber (1997) place the average long-term weekly wage loss at 13 percent.

Workers who are able to find re-employment in the same industry as their pre-displacement firm are situated to capitalize on the human capital skills of the industry, rather than firm-specific skills, and thus sustain less loss of real wages (Neal, 1995). A displaced garment worker who finds new employment at another clothing manufacturing firm may see some reduction in wages because of loss of seniority, but in general the post-displacement wages will be similar to those earned at the former apparel production firm. Some industries, especially manufacturing and mining, tend to have more firm-specific skill requirements, which are intricately tied to earning power, than other industries such as the service sector (Carrington and Zaman, 1994). When skills are uniquely developed to suit the needs of a specific firm's requirements, it is much harder to transfer those skills to another venue. Stock (1998a and 1998b) finds industry switching is more likely when the local pre-displacement industry share of employment is small and that such switching is associated with greater earnings losses than those experienced by displaced workers who do not change industries. Industry switching is also more likely for more educated workers, while those workers with greater pre-displacement job tenure are least likely to change (Magnani, 2001).

Other studies have focused on the individual characteristics of the workers which may impact post-displacement employment including age, gender and race/ethnicity. "Displaced workers possess observable characteristics associated with heightened joblessness. They are younger, less experienced, less educated, and have lower seniority than non-displaced workers. They are also more often unmarried or nonwhite, earn lower weekly wages, and are more likely to have worked in blue collar or manufacturing jobs," according to Ruhm (1991, p. 519). Kruse (1988) also finds strong evidence "that workers displaced from high-import-change industries have demographic characteristics that are associated with increased labor market adjustment difficulties, including higher proportions of women and blue-collar workers than are found in other groups of displaced workers" (p. 415). As worker displacement shifted from blue collar manufacturing jobs to higher skilled white collar occupations in the 1990-91 recession, the race (black-white) differential in post-displacement employment mitigated and subsequently converged by 1993 (Fairlie and Keltzer, 1996); however, minorities remained unemployed more frequently than whites (Benedict and VanderHart, 1997). In a North Carolina study, Field and Winfrey (1997) noted that black workers were laid off in disproportionately higher numbers, faced increased frequency of layoffs and had more negative earnings impacts upon reemployment than whites. While research by Fairlie and Keltzer (1998) support these findings, they note that differences in educational levels among blacks and whites account for most of the differences in post-displacement employment. While some females found the transition to growth industry positions easier than males (Benedict and VanderHart, 1997), labor force withdrawal serves as a viable explanation for the wide variation in post-displacement unemployment for women (Swaim and Podgursky, 1994). Although black women experienced the most negative displacement impacts in the North Carolina study (Field and Winfrey, 1997), women's absolute earnings in an Indiana study found that their proportional loss was less than men's due primarily to their lower pre-displacement wages (Perrucci and Perrucci, 1997). Considering the quality of new jobs obtained by displaced workers, Clague and Couper (1931) found men fare better than women and youth "made out much better" than older workers.

Lack of geographic mobility is another limiting factor facing many workers who have been displaced through plant closures or relocations. Workers who were in unionized manufacturing jobs, had made commitments to homeownership and attachment to place found seeking employment elsewhere more difficult. Age and gender are often cited as mitigating factors, with younger workers and men more likely to move in search of employment (Clauge and Couper, 1931).

Differentiation between the impacts of displacement on blue vs. white collar workers consistently finds rebounding from job termination easier for white collar workers (Howland and Peterson, 1988; Kruse, 1988). Blue collar workers face more obstacles in...