Workers Need Benefits, Not Veto-Bait : Advance Notice Clause is No Solution to a Serious Problem

Congress is about to send an omnibus trade bill to President Reagan with a “veto-bait” clause intact: a labor-backed requirement that businesses give 60 days notice of layoffs or plant closings.

The purpose of the clause is to soften the devastation that occurs when workers are abruptly told that their jobs will be ended.

Business lobbyists oppose advance notice, arguing that it would make U.S. firms uncompetitive and less willing to create new jobs if the price of exit is so high. Most manufacturers now give little notice of layoffs, which quickly follow loss of customer orders. As firms meet foreign competition by adopting “quick response” strategies or “just in time” inventory systems, they will have even less warning of a need to shrink or close a plant.

The notification provision amounts to a requirement of up to 60 days’ severance pay in lieu of notice, with an additional penalty of $500 a day levied on executives. When most firms, especially labor-intensive ones, provide less than 20 days’ paid time off a year (for vacations and holidays), a requirement of 60 days’ pay could be significant.

On Thursday, congressional Democratic leaders refused to drop the advance-notice requirement from the trade bill, setting the stage for the President’s promised veto.

With the battle lines now drawn, the real issue may be lost: Advance notice is a poor solution to a serious problem. It has become a symbol, replacing demands for adequate unemployment insurance, adult education, job retraining and employment development programs. It is excessive “privatization,” asking failing businesses (which can often least afford it) to provide society’s safety net. It lets Reaganomics off the hook for its seven-year attack on public programs that assist workers in moving from jobs in failing businesses to positions in growing ones.

Unemployment insurance is one example. The maximum benefit now is $166 a week in California; benefit eligibility begins after a “waiting week” of no income at all. This does not protect wage earners from sudden income loss. In California, the maximum benefit declined from 46% of the average weekly wage in 1983 to 40% in 1986. Benefits can be drawn for 26 weeks, with extensions triggered in periods of higher unemployment when new jobs are scarce. But the triggers have been restricted: In 1980, 34% of those unemployed after 26 weeks received benefits. In 1987, only 1% did so.

Workers would care less about advance notice if unemployment-insurance benefits began on the date of layoff, at 85% of the previous wage. This level should continue while the displaced worker is enrolled in a job retraining or educational program. It could then be reduced to no less than 50%, continuing for up to one year after layoff or plant closure.

As for job training, we now spend $3 billion annually, half the level of 1981. The average enrollee now receives 14 weeks of training, four weeks less than during the Carter Administration. Government barely monitors its private contractors, resulting in fraud, abuse and “creaming”--using federal funds to “train” potential employees who are nearly qualified, and ignoring those whose previous skills are most inadequate and for whom the program was designed.

Improving unemployment insurance, adult education and job-training programs cost money. But unlike layoff notice, unemployment insurance creates jobs by maintaining consumer purchasing power; job-training programs enhance American competitiveness by improving work-force skills.

Unemployment insurance is financed by an experience-rated employer tax. Larger corporations that close a single plant need not be subsidized under a nationally reformed unemployment-insurance system; their contribution rate for remaining plants should be increased to fund the jobless benefits necessitated by their plant closing, or the parent corporation could be assessed to cover the deficiency in its subsidiary’s account.

Yet most plant closings and layoffs occur with little or no publicity at smaller firms that could not assume a 60-day obligation as the cost of doing business. The omnibus trade bill exempts the very smallest firms--those with fewer than 100 employees--and also exempts firms that fail to give notice while struggling to avoid closure. But employees of small and marginal firms need protection even more than those of large ones. Improved unemployment insurance is a better alternative, protecting all workers without the anti-competitive risk.

Business premiums for unemployment insurance could double (they now average 2.3% of payroll in California) if benefits were substantially increased. While businesses would vigorously oppose such reform, this increase would not make American industry uncompetitive or discourage new plant openings or expansion of existing ones. An adequate compensation program would have offsetting savings since unemployment’s consequences claim a big share of our family service, poverty, police and welfare expenditures. Higher unemployment-insurance costs would be less burdensome, less frightening and more productive than saddling a failing business with a 60-day severance-pay requirement.