In early June, workers at a Sykes Enterprise call center in Morganfield, Ky., sought federal assistance after the Florida-based firm announced it was moving 96 telemarketing jobs abroad. In the 34 years since its founding, the publicly-traded company has grown into a billion-dollar enterprise with 83 call centers in 24 countries.
Last month, the Morganfield workers received the government’s response: denied. The workers, who have no union representation , would not be eligible for extended unemployment benefits while enrolled in job training programs, nor for temporary wage supplementation if they took a lesser-paying job.
The Labor Department based its swift ruling on the fact they were service employees, and ineligible for a Trade Adjustment Assistance program originated in 1972 to help manufacturing workers displaced by trade or outsourcing. The 2009 stimulus act had extended trade adjustment assistance (TAA) to service industries like call centers, but Republicans in Congress – including Rep. Ed Whitfield, who represents Morganfield, and Senate Minority Leader Mitch McConnell, who represents the state – scaled back the program as part of the last deficit reduction package.
More cutbacks to TAA are on the way as part of a compromise reached in June between Republicans on Capitol Hill and President Obama that should lead to approval of long-pending trade agreements with South Korea, Colombia and Panama. Those deals had been stymied in a dispute over demands by labor groups and Democrats to maintain trade adjustment assistance to displaced workers.
Proponents of the treaties say that a reduction in the federal benefits to cushion the blow of job losses to other countries is a small price to pay for the large overall increase in jobs in this country that the treaties will produce. However, there’s little evidence that three deals about to move forward in Congress will create anywhere near the 250,000 jobs spanning all sectors of the economy claimed by the treaties’ most fervent backers. The International Trade Commission puts the estimate closer to 70,000 jobs.
While passage has become a rallying cry for Republican presidential candidates on the campaign trail, even the more expansive claim of nearly a quarter million jobs over the next five years would be a drop in the bucket in the unemployment. The U.S. needs that many jobs created every month for four or five years to return to pre-recession job levels.
The new limits on trade adjustment assistance aren’t a done deal. In early August, Senate leaders agreed to separate the trade deals from the TAA bill, and bring the latter up for a vote first. While that should pave the way for compromise on a slimmed down version of the program, the Tea Party-influenced House is still demanding “significant cuts and concessions” in TAA before reauthorizing the program, according to a statement from Ways and Means Committee chairman Dave Camp, R-Mich.
He’s seeking a reduction in the number of weeks workers are eligible for training assistance from 156 weeks to 117 weeks, with some exceptions, and expiration of the program in 2014. The House is also demanding that all spending on the program’s three-year reauthorization be offset with cuts to Medicare and unemployment insurance. While Congress authorized nearly $1 billion for the TAA program in 2010, displaced workers claimed only $617 million from the program. Under the compromise, the funding would be reduced to $300 million per year for the next three years, when the program is ended.
The Republican commitment to renew TAA in some form for at least two years opens the door for the president during his prime time jobs speech on Thursday evening to announce his support for the trade deals, even though many of his supporters in organized labor and liberal think tanks say the deals will actually destroy jobs. “Most of the analysts who talk about trade only look at jobs created by exports. They ignore the impact of imports,” said Robert Scott, the chief trade expert for the left-leaning Economic Policy Institute, which estimated the net loss from the three trade deals would be 215,000 jobs by 2017. “It’s like reporting the score of a baseball game and only counting the score of the home team.”
While the pending trade deals can’t be blamed for the lost call center jobs in 14,000-person Union County, which is 120 miles southwest of Louisville, the pain of reduced TAA benefits will certainly be felt. The Morganfield workers unsuccessfully filed the petition seeking trade adjustment assistance on their own behalf since they have no union representation.
The local unemployment rate of 9 percent in July – slightly below the national average – will likely rise in the months ahead as the impact of disappearing call center jobs is fully absorbed.
“We’re a very small community,” said Morganfield city administrator David Presser, who said the county is also reeling from the loss of an auto parts plant that moved overseas earlier this year. “Anytime you lose that in a community our size, it hurts.”
Spokesmen for McConnell, Whitfield and Sykes Enterprises did not respond to phone calls and emails seeking comment.
The TAA program draws scorn from conservative think tanks, even though it has its big business backers. The Heritage Foundation earlier this year called for its total elimination dismissing it as an “ineffective and costly program” that provides “generous benefits for only a small fraction of laid-off workers.”
Yet even free trade advocates like the U.S. Chamber of Commerce back TAA, recognizing that there are winners and losers in global commerce and softening the impact on the losers is critical to maintaining political support for reduced tariffs and greater protection for U.S. intellectual property abroad. “The Chamber has supported TAA for generations and will continue to support the program,” a spokesman said.
The jobs impact from these three trade deals, whether positive or negative, will be minimal. The government trade commission projects that U.S. exports to South Korea, the most significant trading partner among the three countries, will rise by $11 billion over the next seven years through lowered tariffs.
South Korean exports to the U.S., on the other hand, will rise by about $7 billion, with the largest sector being auto parts destined for the Hyundai and Kia assembly plants that recently opened in the U.S. The $4 billion surplus forms the basis for the government’s estimate that the deal will create 70,000 new jobs over the next half decade.
Labor leaders dismiss claims there will be a positive balance for the U.S. from the deal. “Korea is a particularly dangerous party for a free trade agreement because this is a country with an aggressive export strategy,” said Thea Lee, deputy chief of staff for the AFL-CIO. “Taking tariffs down to zero, as this agreement does, does nothing to remove the massive informal barriers in Korea that keep U.S. goods out. There are not a lot of companies planning to make more products in this market hiring U.S. workers to export to Korea.”
The impact of the Colombia and Panama deals are even less significant. Total trade between Colombia and the U.S. was just $27.6 billion in 2010, with the $12 billion in U.S. exports led by corn and chemicals offset by the $15.6 billion in Columbian imports led by coffee, textiles, cut flowers and sugar.
The ITC estimates exports might increase by $1.1 billion under the deal, while imports might increase by about $487 million. That change would represent less than a 0.05 percent (five one-hundredths of one percent) increase in economic growth. Even if a net positive for the U.S. in terms of balance of trade, it would create less than 10,000 new jobs over the next half decade – barely a ripple in an economy that needs 150,000 new jobs a month simply to stay even with population growth.
The attention given minor trade deals exasperates analysts who want Congress and the president to do something major on the jobs front. “If what you’re trying to do is create jobs, free trade deals are a pretty stupid way to go about it,” said Scott of EPI.