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World Economies

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Wai Yi Yiu

on 27 February 2013

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Transcript of World Economies

World Economies Assignment 1 Theme Agenda Question: U.S.A employment status A) Background
B) Brief Introduction of TAA
C) Details of TAA
D) Arguments about effectiveness of training programs
E) Conclusion Training programs benefit unemployed people? Retrain Workers with Better Trade Assistance Programs

Howard F. Rosen What is the relationship between education and employment? High educational attainment low unemployment rate Unemployment rate Conclusion Americans are willing to support trade liberalization

Improving TAA program is needed
Spend more appropriation on TAA program

Create more job opportunities and enhance the skills of workers U.S spending on labor market polices is not enough A) Background American public: Bad feeling for the participation in WTO
>Reduce American wages
>Eliminate jobs
>>Almost half of the Americans believes that participation in the WTO is bad for the country

Proposals to ease negative impact of the global economy on workers:
•Retrain Workers with TAA program: Help workers transit from declining industries to expanding industries
•Redistribute income with a more progressive income tax system Who is eligible for TAA ? Workers generally must have lost their job or be threatened with job loss

Two criteria:
1.increased imports
2.a shift in production by the workers' firm to foreign countries Benefits of TAA Increase national productivity
Raising living standard
Enhance U.S. competitiveness
Share some of the benefits of trade with those workers and communities paying a heavy price for that policy What is TAA program? Trade Adjustment Assistance is a program which helps workers transit from declining industries to expanding industries C) Details of TAA 1.Milestones before reforms
2.The 2002 Reforms
3.The Next Round of Reforms 1. Milestones before Reforms Created by the Trade Expansion Act of 1962
Substantially modified by the Trade Act of 1974
Special program, NAFTA-TAA for Workers program (just for workers affected by trade with Canada and Mexico) set up in 1993 2. The 2002 Reforms Merge the TAA and NAFTA-TAA
Expand the eligibility criteria
Increase the training appropriation cap
Extend the income support payments
Postpone the entry into TAA for workers undertaking remedial education
Adjust the job search assistance and relocation assistance for inflation *ATAA & HCTC
-Differed from traditional income transfers
-More cost effective assistance 2. The 2002 Reforms Establish the Alternative Trade Adjustment Assistance (ATAA) and Health Coverage Tax Credit (HCTC) ATAA: Wage Insurance 40% of the dislocated workers found new jobs with earnings loss or no improvement in earnings
Aim: assist them by giving half of the difference between their old and new wages
Shortcomings: for workers over 50 years old only (eligibility); 26-week deadline for eligibility; inability to enroll in training while receiving wage insurance HCTC Maintaining health insurance can be one of the largest expenses during unemployment for many workers
Aim: provide 65% advanceable, refundable tax credit to offset the cost of maintaining health insurance for up to two years
Shortcomings: Little awareness raised; still unaffordable despite the credit B) Brief introduction of TAA B) Brief introduction of TAA B) Brief introduction of TAA The average number of petitions applied and approved increased. These mean the awarensss had been increased and more workers were helped by TAA. Recent economic developments not fully addressed
several technical problems were discovered while implementing the reforms. But, why the author still proposed a second reform? Avg no. of petitions submitted
Before reforms (95-99): 2034.166
After reforms (02-07): 2627.3333 Avg no. of peitions certified
Before reforms (95-99): 1312.5
After reforms (02-07): 1505.3 Some statistics: TAA Petitions submitted or approved before and after reforms Benefits brought by the 2002 Reforms Imperfectness of the 2002 reform The Next Round of Reform 1) Service Workers
2) Industry Certification
3) Training Appropriations
4) Health Coverage Tax Credit (HCTC)
5) Wage Insurance (ATAA)
6) Self-Employed
7) Outreach Service Workers - Unemployment of Service Workers
- DOL (U.S. Department of Labor) denies assistance to workers who lose jobs from service sector
- TAA restricted to workers employed in manufacturing industries - TAA should cover workers who lose their jobs from service industries
- no data to measure the importation of services
- The administration and Congress need to consider alternative methodologies for determining trade impact
- Covered service workers Industry Certification - Petitions for TAA eligibility according to firm-related layoffs
- Multiple petitions must be submitted by different groups of workers employed in the same firm - Industrywide certification is needed
- increase the efficiency of petition process and remove arbitrary discrimination between workers within same firm
- automatically eligible for TAA without going through the bureaucratic petition process Training Appropriations - Large range of training allocations among the states
- 13 states spent <1%, 9 states spent >95% of training funds in 2006 (GAO 2007b)
- DOL allocates 75% of TAA training funds based on states' spending over the previous two and a half years
- States that experience large layoffs in a subsequent year may receive an inadequate amount of training funds to meet the needs of all eligible workers
- States that experience large layoffs in perious years may receive more training funds than needed in a subsequent year
- Difficult for states to utilize the funds Training Appropriations - DOL should increase the disbursements
from 2 (one at the beginning and one at the end of the years) to i.e. 6 months based on shorter look-back periods
- The global cap of $220 million for training expenditures under TAA should be adjustable according to - DOL should increase the disbursements from 2 (one at the beginning and the other at the end of the year) to i.e. 6 months based on shorter look-back periods
- The global cap of $220 million for training expenditures under TAA should be adjustable according to inflation, changes in the economy, or major plant closongs Health Coverage Tax Credit (HCTC) - 70% workers could not afford to maintain their previous health insurance
- With 65% tax credit, the cost of maintaining health insurance is 25% of worker's monthly UI (unemployment insurance) payment
- Workers are required to be enrolled in training to be eligible to receive HCTC - Increase credit, enable more workers to use it
- The HCTC to all TAA-certified workers for up to two years or until the workers find a new job, avoid workers getting expensive assistance that they may not need Wage Insurance (ATAA) - restricted to workers aged over 50 - The age requirement for ATAA should be lowered or eliminated
- make more workers eligible Self-Employed - The current program discouraged workers from pursuing self-employment - Continue providing income support, training, and possibly wage insurance to workers starting their own business Outreach - Many eligible workers are unaware of the assistance provided by the TAA (GAO 2006)
- The program take-up rates are low - Put more effort to inform workers about TAA and other forms of assistance for dislocated workers
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