President Trump released his first budget today. The budget promises “a new foundation for American jobs.” Instead, it enacts major cuts to proven bipartisan Department of Labor (DOL) programs that help Americans get back to work, cutting the department’s overall budget by 19.8 percent.
Major Cuts to Federal Training Dollars
The DOL’s Employment and Training Administration takes the brunt of the cuts, especially in the signature Workforce Innovation and Opportunity Act (WIOA). WIOA funding provides a wide array of services including career information and job placement assistance at a network of American Job Centers across the country, as well as rapid response to layoff announcements and retraining. Overall, the budget proposes to slash spending on low-income adults, youth, and dislocated workers to $1.8 billion, which represents a whopping 33 percent cut from the 2.7 trillion budget agreed to by Congress earlier this month. These reductions would come on top of $1 billion cuts to training that have been made since 2010.
Much has been said about President Trump’s commitment to workers hard hit by economic dislocation and trade. Yet, his budget takes an equal opportunity ax to dislocated worker programs, shedding spending by $321 million—a 31 percent cut. To his credit, the president Budget allocated $90 million to promote apprenticeship training, in line with the $95 million allocated by Congress for FY 2017. While Labor Secretary Alexander Acosta has joined the bipartisan bandwagon in support of apprenticeship programs, this federal funding represents a drop in the bucket compared to the cuts to core workforce dollars. Employers have yet to embrace the potential of apprenticeships. With only 500,000 Americans in registered apprenticeships in 2016, we can’t rely on that pathway for the needs of the broader workforce. That compares to 6.5 million Americans who rely on WIOA programs.
The president justifies cuts to job training programs by citing mixed results in formal evaluations of laws enacted by WIOA’s predecessor, the Workforce Investment Act (WIA). Congress addressed critical flaws in WIA in its $3 billion dollar authorization of the WIOA in 2015, specifically directing states to use funds to invest in sectoral partnerships. The aims of these partnerships were to ensure that retraining meets the needs of industry, and to promote evidence-based career pathways programs that combine basic education, skills, and support services to unlock opportunity for disadvantaged adults. To make matters worse for older job seekers who struggle the most with long-term joblessness, President Trump has proposed zeroing out the Senior Citizen Community Service Employment program, which provides modestly paid paid service positions to 67,000 seniors per year.
Cuts to Bedrock Employment Services
The cuts to reemployment programs go beyond WIOA, and here there is a dangerous slight of hand at work. The president’s budget includes a slight increase in funding for reemployment services and eligibility assessments (RESEA) from the enacted level of $115 million dollars in FY2017 to $130 million. These programs, tested during the recession, cut UI benefit durations by 3.13 weeks resulting in nearly $900 less per client in UI benefits. But, at the same time, the budget proposes a drastic $255 million cut to the Wagner-Peyser Employment Service program. Established after the Great Depression, these dollars ensure that there is a public labor exchange in every state. So, while the Trump Administration has stated the goal of reaching more UI claimants with job matching services, they’ve enacted a net cut to those services and to more intensive efforts to help dislocated workers.
So, while the Trump Administration has stated the goal of reaching more UI claimants with job matching services, they’ve enacted a net cut to those services and to more intensive efforts to help dislocated workers.
The Wagner-Peyser program employs merit-staffed public servants (government employees not private contractors) who match unemployed job seekers (including but not limited to unemployment insurance, or UI, recipients) to jobs that fit their skill set. The services are low cost (just $50 per client) and numerous studies have found them to be cost effective. For example, economist Lou Jacobson’s evaluation concluded, “we have produced clear-cut evidence that PLX job-matching systems provide highly effective reemployment services to [Ui] claimants.” This unsung hero of the workforce system has been flat funded since 1984 (when funding was $740 million) and cutting it further would run counter to growing efforts to engage more workers sooner with job-matching and job search assistance.
A Missed Opportunity to Reform UI Benefits
The U.S. Department of Labor oversees the unemployment insurance system but it is mostly operated by the states. They are doing a deplorable job of minding the store. Only one in four jobless workers currently collects unemployment benefits, near a historic low set several years ago. Only twenty-one states have been able to save up adequate reserves in the case of the next recession.
President Trump’s budget turns to this ailing system to administer a new benefit, six weeks of paid family leave, with no new dedicated revenue. The budget claims that this is a budget neutral expansion. The trick here is that they put forward an Obama era proposal to automatically increase UI taxes on states that don’t save enough for UI benefits. The budget assumes that the $13 billion raised by that proposal will cover a big share of the cost of paid family leave. The rest of the funding comes from aggressive estimates to further tighten up on UI overpayments ($2.23 billion). States already collect $1 billion per year out of the $3.2 billion in UI fraud and only 25 percent of overpayment are actually caused by fraud. In addition, Trump plans to plow $4 billion in savings by getting workers back to work sooner into his $18 billion paid leave program.
It’s not clear that these reforms would generate $18 billion in revenue and savings. Even if they did, the UI system desperately needs those funds to shore up its core financing—which still has not recovered even after an unprecedented seven-year economic recovery In times when unemployment is low, it’s easy to think that we can afford to plow UI funds into tax cuts or into a venerable idea like paid family leave. But when the business cycle comes out on the other side, those choices can lead to benefit reductions and increased federal debt to pay out higher levels of claims. As paid leave advocates have already concluded, we can’t pay for paid family leave by taxing a UI program that still can’t pay its own bills.
Like many others have stated today, the Trump budget cuts at the populations and communities who voted to put him into Washington. Manufacturing workers and industrial communities in the Rust Belt continue to be more vulnerable to job loss, and rely on bedrock job placement and unemployment programs. The path for revitalizing communities requires smart use of the very resources that this budget threatens to take away.