Policies to reduce high-tenured displaced workers’ earnings losses through retraining

High-tenured displaced workers often experience significant earnings losses that persist for the rest of their working lives. A well-targeted training initiative has the potential to substantially reduce permanent earnings losses for those displaced workers who have the academic preparation, work experience, and interest to complete high-return retraining, with a rate of return on par with, if not larger than, that reported for formal schooling of young people. Current governmental training programs do not provide adequate resources to finance the long-term training needed by displaced workers to meaningfully offset their losses, nor do they provide the right incentives to get longer-term retraining. This paper presents five comprehensive reforms targeted specifically at retraining displaced workers experiencing significant earnings loss: (1) establish a Displaced Worker Training (DWT) Program to provide sizeable grants for longer-term training; (2) use honest brokers to assess and counsel grantees; (3) provide incentives and performance standards for participants and institutions; (4) evaluate training programs and disseminate best practices; and (5) shore up community colleges’ capacity to provide high-quality training, especially during tough economic times.