Improving Prospects for Displaced Workers

1
Improving Prospects for Displaced Workers

• Robert J. LaLonde
• The Irving B. Harris Graduate School of Public
  Policy Studies
• The University of Chicago

2
The Bottom Line

• Does Retraining Work?
• YES
• NO

3
What are the Questions?

• Is retraining displaced workers a productive
  investment for society and for workers?
• Yes
• Does retraining substantially reduce the costs to
  displaced workers of losing a job?
• No

4
Defining Displaced Workers

• Fact most people who lose a job have not held
  the job for very long.
• Job loss is not especially costly.
• Do not consider these displaced workers.
• Fact on average job loss is very costly for
  people who have held a job for a long time.
• BLS reports 3 years prior tenure.
• Some firm specific skill/attribute is lost.

5
Pattern of Displaced Workers Earnings
Losses(Why is Job Loss Costly?)
Earnings
date of job loss
B
A
Time
s -2
s
6
What Retraining?

• Reemployment Services
• Job Search Assistance
• Retraining
• Programs designed for displaced workers.
• Regular courses in community colleges and private
  technical/vocational schools.(CT)
• On-the-Job training with private employers. (OJT)
• Low intensity participation.

7
Experimental Evidence

• Texas Worker Readjustment Demonstration
• Houston El Paso 1984 - 85.
• Average pre-displacement tenure 3 - 4 years
• White collar job holders 2/3 Houston men
• Cost per participant (2001) 5,000 1,700.
• JSA followed by CT (Houston) or OJT (El Paso).
• Mean weeks of training 20 weeks.
• Participation rates 70.
• Earnings Impacts (first follow-up year)
• Men 800 (5) Women 1,675 (28)

8
Non-Experimental Evidence

• An evaluation of returns to community college
  schooling in Washington State
• Jacobson, LaLonde, and Sullivan
• Nearly 100,000 displaced workers 1990 - 1994
• 20 enroll in community college
• 11 complete at least one (for credit) course.
• Average age 36 (men) 37 (women)
• Completers complete 2/3 of an academic year
• Earnings Impacts (long-term impacts)
• Men 1,100 (7) Women 972 (8)

9
Can We Teach Old Dogs New Tricks?

• Compare under and over 35 year olds.
• Earnings Impacts
• Under 35
• Men 730 Women 930
• Over 35
• Men 1,140 Women 720
• Older displaced workers less likely to enroll in
  and complete community college courses.

10
Why Yes and No?

• Gains for displaced workers from community
  college schooling are similar to those
  experienced by younger persons from formal
  schooling.
• Keep in mind private cost of attending school is
  higher for older workers.
• Impacts are modest compared to likely earnings
  losses due to displacement.
• About 60 of completers complete 4 or fewer
  courses.