Incentives among proposed reform options for economic adjustment programs

The US Government Accountability Office (GAO) recently released a report describing reform options for federal economic adjustment assistance (EAA) programs for workers. EAA programs are designed to respond to widespread job loss associated with plant closures, certain types of policy changes, the effects of disruptive business models and technologies, and other economic forces that affect employment. 

The potential reforms include several incentives and subsidies.

• Subsidize employers to provide incumbent worker training
• Establish a tax credit to help incentivize employer to retrain rather than lay off employees 
• Provide employers with tax incentives to provide training in high-demand skills that will increase workers’ employability
• Incentivize workforce reentry and career advancement through temporary income support and supportive services

Many of the proposed ideas revolve around worker training and skill development, including incumbent worker training. California’s Employment Training Panel (ETP) is cited as a promising approach to promoting incumbent worker training, especially among small and mid-size businesses. ETP was created in 1982 to retain businesses and jobs in the state, increase the competitiveness of California companies, and enhance workforce skills. Employers are reimbursed for approved training, which is funded through a special payroll tax. A July 2020 assessment found that ETP “had positive and significant impacts on company sales and firm size” while ETP itself reports the “successful training and employment retention of 1.3 million workers” and an average post-retention wage in FY18-19 of $33.45/hour. 

The report also explains that EAA programs are siloed and lack a system-wide strategic approach. Individual EAA programs “serve workers based on the cause of dislocation rather than need and are not designed to keep pace with the dynamic needs of the economy.” As economic disruption becomes more pervasive, a more flexible and integrated approach would better serve affected workers. 

For more information, please see the full report, Economic Adjustment Assistance. Experts’ Proposed Reform Options to Better Serve Workers Experiencing Economic Disruption.