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How Trump Can Help Cure the Blue-Collar Blues

Paula Dwyer writes editorials on economics, finance and politics for Bloomberg View. She was London bureau chief for Businessweek and Washington economics editor for the New York Times, and is a co-author of “Take on the Street: How to Fight for Your Financial Future.”
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If Donald Trump is serious about helping the blue-collar workers who helped put him in the White House, how should he proceed?

Jawboning Carrier Corp., Ford Motor Co. and others into keeping jobs from moving to Mexico isn't the answer. Employers who meet Trump's demands will quickly find that their labor costs and product prices are higher than those of their competitors. Ultimately, they will have no choice but to move jobs offshore or to use robots.

Instead, here are five ideas that might help restore the economic vitality of those who have been left behind: 

Build skills. If Trump wants to pressure U.S. companies, he should ask them to produce plans to retrain their workforces. Many blue-collar workers lack the technical skills needed to maintain and program the machines that run factories, for example. Such jobs are in demand, and employers are having trouble filling them.

Old-line jobs, including electricians, plumbers and welders, are also in demand, as my View colleague Justin Fox has written. But even those require technological skills that many workers lack.

Apprenticeships have long been suggested as part of the solution. They have been around for centuries but have never taken off in the U.S. They work in Europe because employers and governments understand that, if they want ready-to-work talent, they must prepare people for specific jobs. U.S. employers see that as the role of government or college, and are less willing to foot the bill. Europeans also accept that it's fine to choose a vocational rather than a professional track in high school.

For mid-career workers, the problem is that apprenticeships tend to pay low wages. The American Enterprise Institute gets around this by coupling a lower wage with a government-paid earnings subsidy for apprentices. This would give companies an incentive to hire apprentices, and workers wouldn't feel as if they are being exploited.

Trump should consider scrapping, or at least consolidating, the 50 or so federal job-training programs that are spread across nine agencies and that cost taxpayers more than $15 billion. He could redirect this money to an earnings subsidy.

Community colleges can also be useful. Trump could encourage them with federal grants to provide work-based courses tailored to the needs of local manufacturers.

Connect workers with jobs. In recent months, the U.S. has had about 5 million job openings and 7 million unemployed people. Companies that need workers can't just hire the ones who apply because they say there is often a skills mismatch.

A ManpowerGroup study found that 42 percent of employers said they had difficulty filling available slots. Workers in skilled trades topped this year's hard-to-find list, followed by technicians, sales representatives and machine operators.

The Trump administration could connect those looking for work with companies advertising jobs by creating a national system similar to Germany's online database, which connects thousands of job seekers with about 1,600 employers every week.

Get workers to workplaces. It would help if local governments offered solutions to reduce commuting times. They might be encouraged to do this if some of Trump's hoped-for infrastructure budget goes toward expanded bus service from the outer suburbs into and within commercial centers via dedicated bus lanes.  

The federal government might even consider assistance to encourage workers to move to where the jobs are. Australia reimburses people up to $6,000 if they relocate for work reasons.

Because unemployment insurance is state-based, recipients who move out of state might lose some of their benefit. Here, the American Enterprise Institute has another suggestion: Allow the unemployed to replace their jobless benefits with relocation grants, possibly in combination with low-interest loans whose repayments would be capped as a share of future earnings.

Expand wage insurance. Whether it's in the form of an expanded earned-income tax credit, or subsidies to make up some of the difference in pay from what they were earning before, this kind of help might lure people back into the work force. Both parties are debating this idea.

Because previous expansions of the earned-income tax credit, a federal subsidy for low-income households, increased labor-force participation, House Speaker Paul Ryan wants to extend the credit to childless adults. A household with three or more children receives about $6,100, but a childless worker gets less than $200. Congress and the new president could close that gap and make it easier to claim the credit.

Fix the disability program. Between 1994 and 2014, the share of working-age adults receiving Social Security disability checks grew to 4.8 percent from 2.8 percent. Some call this blue-collar welfare.

Disability should be a safety net for those who need it and not discourage able-bodied adults from working in some kind of job.

One answer may be to ease up on the so-called earnings cliff, in which payments abruptly end if a recipient earns more than $1,130 a month. By more gradually phasing out benefits, people could dip more than a baby toe into the job market without losing their income security. 

For decades, politicians did not give enough consideration to the households that paid a steep price for the long-term economic benefits of free trade and increased automation. The new administration and Congress will have a chance to even the scales. Quick movement in these areas would show how serious the new president is in keeping his promises to the working class.    

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Paula Dwyer at pdwyer11@bloomberg.net

To contact the editor responsible for this story:
Katy Roberts at kroberts29@bloomberg.net