Displacement-Related Earnings Losses

Abstract

The author examines the effectiveness of stylized versions of the Trade Adjustment Assistance (TAA) and Alternative TAA (or wage insurance) programs in reducing displacement-related earnings losses. Wage insurance subsidies and returns to TAA-funded training are applied to estimates of proportional earnings losses, reported by White, that were generated using National Longitudinal Survey of Youth 1979 data spanning the period from 1979 to 2000. Wage insurance reduces the typical worker's losses by 14.4 percent, while TAA-funded training is estimated to reduce losses by 23.7 percent. However, variation in the time paths and magnitudes of losses produces considerable variation in the effects of these programs across worker types.