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Is Retraining the Unemployed Actually a Good Idea?

Obama, Romney, and Ryan all endorse retraining for the jobless—but are they right?

| Mon Oct. 15, 2012 5:03 AM EDT

The Bright Side of Lower Pay

Mike Vaughn has learned first-hand that a new job does not necessarily bring back old pay. A plain-spoken man of 44 with close-cropped dark hair and an earnest manner, he was the chief union officer at Lear Seating, a factory with nearly 800 people whose work was to make seats for General Motors, delivered three hours before they were bolted into the SUVs and trucks that the Janesville plant produced in its final years. The day GM closed, Lear shut down, too.

Vaughn's grandfather Tom worked at General Motors for 30 ½ years. His father, Dave, started in 1967 as a spot welder and retired nearly four decades later. They also held offices in United Auto Workers local #95, making Vaughn part of one of only two families in town with three generations on the local's executive committee. GM wasn't hiring when Mike Vaughn came along, so, after a brief try at college and a stint as a hospital cook, he took a job at Lear. He worked there for 18 years. He met his wife, Barb, there. With three years less seniority than him, she lost her job, bolting a hinge to the back of the seat frame, when GM and Lear let go one shift the July before they shut down for good. As the unit chairman, Vaughn stayed on until April 2009, as a score of maintenance workers took the factory apart. It meant that, by the time it was his last day, he had really gone through four last days with round after round of layoffs over 16 months, answering scared workers' questions each time, as best he could. "I told them…they had to remember that we'd been very proud people, hard-working people, and you have to make the best of what comes next and start formulating your plan." From Christmas 2008 until that April, he told me, "I watched every day as the plant was dismantled, piece by piece, assembly line by assembly line, and at one point the whole plant was just empty, which was kind of how I felt."

Throughout those months, his wife had enrolled at Blackhawk. He watched her study hard enough to get As—and he formulated his own plan. The work for which his union role had best suited him, he decided, would be in human resources management. He looked for a job through the spring and summer and, when none came, turned to his backup idea. Blackhawk, as it happened, was starting a new human resources program. The fall of 2009, he became one of its first students—just 14 of them, almost all dislocated workers, like him. Employment law. Payroll systems. Health and safety. Leadership. "At first, it was scary, intimidating," he recalls. But he had a knack he'd lacked after high school, he realized, for classroom learning.

And he was lucky in another way. Because some of Lear's jobs had gone out of the country, Vaughn qualified for a generous form of federal training help through the Trade Adjustment Act. In fiscal 2010—the year he started back at school—TAA gave out $575 million nationwide that helped nearly 10,000 dislocated workers, including 544 at Blackhawk, paying for tuition, books, gas, day care and other support, while they collected unemployment benefits.

The cool May 2011 night that Vaughn took his last exam, 26 months after he'd left the empty Lear factory, he walked from the classroom building to his white Chevy truck, the backpack over his shoulder light, with just a few sheets he'd used to finish studying. "I had a feeling of pride. I had done it. I had pulled 21 As, an A-, and a B."

Within weeks, he was working the overnight shift in the human resources department at the Janesville plant of Seneca Foods Corp., a manufacturer of canned and frozen vegetables. "I have to think I'm one of the best-case scenarios," he told me, "I love what I'm doing now…I'm working in my field. I'm working in town."

There is a catch. His new salary is about half of the "high two-figures" he earned at Lear. His wife works with people with developmental disabilities and is now studying towards a bachelor's degree. Together, their income is slightly more than what one of them earned before. "The old times…it's not that I don't think of them," Vaughn says. "But I don't sit and dwell on the negatives of the fact that I make less money…You accept them and move on."

The drop in pay that we found among Blackhawk's retrainees mirrors what has been happening around the country. According to a recent study for the Brookings Institution, dislocated workers laid off in the United States between 2007 and 2010 can expect to lose at least $220,000 in lifetime earnings, compared with with what they would have been paid if their job had survived.

Perplexing Puzzle: Why the Retrained Fare Worse

What is more surprising—because no one else has looked at this question lately anywhere in the country—is that the laid-off people around Janesville who went to Blackhawk are faring worse than their laid-off neighbors who did not. We discovered this striking fact by comparing the dislocated workers who retrained with a larger group of about 28,000 residents, from the two counties where most Blackhawk students live, who had collected unemployment benefits recently and not gone to the college.

For one thing, the people who didn't retrain are working more. About half of them had wages every season of the year, compared with about 1 in 3 who went to Blackhawk. An even bigger gap exists in how much those who have jobs are earning. Before the recession, we found, the two groups—the dislocated workers who went to school and the ones who didn't—were, on average, getting paid about the same. Afterwards, the ones who didn't retrain are earning more. Their pay has fallen by just 8 percent—about one-fourth the size of the pay drop among the people who went to school. This startled us so much that we dug deeper. We looked at only people working the most. We factored out a few hundred who were still in school. And we looked at just the dislocated workers who had graduated from Blackhawk, rather than dropping out. No matter how we looked at it, those who had retrained were worse off, at least for now, than those who had not.

Taken together, what we discovered—that laid-off people who retrained at this small Wisconsin college are not faring very well, that they are faring worse, in fact, than their laid-off neighbors who didn't go back to school—raises more questions than it answers. What is going on?

One possibility is that the laid-off people best able to get another job did, while those who were less desirable to employers went to Blackhawk. Or it could be that the advantages from retraining are just slow to materialize; in other words, people such as Mike Vaughn, who go from senior positions to entry-level jobs, might need years to catch back up. Another possibility is that people who didn't invest a year or two in education snapped up jobs that were gone by the time those who went to Blackhawk began searching for work.

"The old times…it's not that I don't think of them," Vaughn says. "But I don't sit and dwell on the negatives of the fact that I make less money…You accept them and move on."

At least part of the answer, though, is the stark reality that, at least in places like Janesville, work is still very hard to find. "It isn't that training is good. It isn't that training is bad," Dresser, the University of Wisconsin labor economist, mused one day during one of our many phone chats. "If you don't have enough jobs…you cannot train your way to victory." Perhaps no one in town has as clear a view of these complexities as Sharon Kennedy. A smart, energetic woman in her 60s with a blond bob and a quick smile, she is Blackhawk's chief academic officer—"vice president of learning" is her title. "I kind of came to the conclusion," she confided to me over dinner one spring night, that turning former factory workers into college graduates with good jobs is "harder than many people think. Because of the people. Because of the lack of jobs. Because of the tension between business and education. We have probably as good a relationship with business as anybody, and it still isn't easy."

Even at a school like Blackhawk Tech and in a city like Janesville, which have been trying like hell.

The Glory and Pain of 90 Years With GM

On the way into town from the interstate along Racine Avenue, two small American flags flutter from each median streetlight. On the right is pretty Palmer Park, one of 64 big patches of green that give Janesville its nickname, "Wisconsin's Park Place." And a few blocks before South Main Street, the Italian House—"Home of the Famous Gondola and Pasta" and voted the best Italian restaurant last year by readers of the Janesville Gazette—does a brisk business for dinner and lunch. For all the economic hardship that has arrived since 2008, Janesville is resilient. When the middle class falls out of the middle class, it does not look like places worn out by ingrained poverty. Still, if you look closely, the pain is there.

In the months after so many jobs went away, boats for sale became common sights in driveways. Payday loan places have cropped up along Milton Avenue, a commercial spine that runs north from downtown. At Rivers Edge Bowl, co-owner Chris Jones, whose family has run bowling alleys in town since the 1950s, told me that lanes are uncharacteristically open now most nights since fewer people can afford to be in leagues. In December 2009—a year after General Motors closed—United Auto Workers local #95 could not, for the first time in a quarter century, support its tradition of buying and bagging food for needy families over the holidays. The public school system has taken over the food drive.

This reversal of fortune is unlike anything in Janesville's history as a place that, if not affluent, has prided itself on being comfortable—and innovative—for a long time. A decade before the Civil War, it was the site of Wisconsin's first state fair, to showcase new farming techniques. Two years after the war ended, the state's first organization to promote women's suffrage formed in Janesville. It was where George Parker, in 1888, founded Parker Pen. Down through the decades, the executives of its corporate headquarters, on the corner of East Court Street and Parker Drive, provided a major source of local philanthropy until the company was bought out, and, eventually, the vestigial Janesville workforce of 140 was laid off a week after New Year's of 2010.

All that was eclipsed by General Motors. In 1918, GM's founder, W.C. Durant, eager to branch into mechanized farm equipment, summoned a gifted local businessman, Joseph A. Craig, general manager of the Janesville Machine Company, to Detroit to try to hire him. By the end of the meeting, Craig had persuaded Durant to take over his Janesville factory and merge it with the Samson Tractor Co., of California, which GM already owned. Durant had such faith in Janesville that, in February 1919, he sent a check for what was then a fortune—$100,000—to the Janesville Improvement Association to help build housing for the workers who would be needed as the company grew. "I am pleased to say," Durant wrote in a letter with the check, "that in my entire experience, I have never seen in a city of modest size a better spirit or a more commendable accomplishment. I predict for Janesville a splendid future."The tractor business faltered, and on Valentine's Day 1923, GM's Janesville plant turned out its first car there—a Chevrolet. The plant grew to 4.8 million square feet with 7,100 workers at its peak in the late 1970s. Families pulled in relatives, one generation to the next, because of pay and benefits so generous they stoked resentments around town. The plant had survived the Great Depression, although it closed in 1932 for two years and sent a few hundred workers to build cars at the Chicago World's Fair. The plant was one of the sites of the 1937 General Motors "sit-down strike," an important moment in US labor history. During World War II, it was part of the home front, producing more than 16 million artillery shells. And during Vietnam, it added a shift to produce pick-ups for the military, with paint mixers making special colors for the Army, Navy and Air Force. In 1967, General Motors' produced its 100 millionth US-made vehicle, a blue Caprice coupe assembled in Janesville. The company's choice of Janesville for that milestone reflected the plant's reputation for a top-flight workforce. On a cool spring morning, when I ran into Mike Vaughn's father, Dave, the vice president of what remains of the UAW local, he was wearing a green, zippered fleece with a patch on the sleeve. "JD Power Highest Initial Quality. SUV 2004." He told me that he has in his closet sweatshirts and jackets with patches for other awards. "Every time we won one," he recalled, "the company took orders from the workers for sizes."

Today, the plant is a carcass behind chain link, weeds growing up through the cracks in its vast parking lots. Technically, it is "on standby," not permanently closed. Yet the revival of GM's fortunes lately has not helped the people of Janesville. The plant already had shut months before the Obama administration rescued the company so that it could restructure. By a year ago, when the company negotiated a new labor contract with the United Auto Workers, it agreed to reopen the only other U.S. plant that it had placed on standby, a facility in Spring Hill, Tennessee, built in 1990. The Janesville plant, many decades older, remained closed.

Even though it is antiquated, even though nearly four years have gone by since its last vehicle—a black Tahoe LTZ, raffled off for charity to a GM retiree—came off the assembly line, rumors occasionally circulate that it might reopen, bringing back jobs to GM and the companies that collapsed along with it. Rachel Jorgenson, one of Blackhawk's small crew of counselors, still hears such talk. "I want to slap people," she says. "It's the oldest plant in the company. They are not going to reopen the plant. I'm thinking, you need to move forward."But the people who turned to Blackhawk have, after all, been trying to move forward. Why aren't more of them succeeding?

To Hell—and Back—With Jeremy Kath

The main campus of Blackhawk Technical College is a single, sprawling building of beige brick that sits along County Road G, surrounded by cornfields, a few miles south of downtown. This is where Kennedy arrived as the chief academic officer, the college's second-in-command, in the winter of 2008, months before the mass layoffs began. What she and the college have been through has led her to pursue her own research on assembly line workers, in Janesville and other Midwestern communities, who have lost jobs and gone to school. A central reason retraining is so difficult, she has come to believe, is the complicated transition from a factory culture to college life.

At Blackhawk, this culture clash has shown up in small ways: Guys arriving a half-hour early with the thermoses they used to bring to work, to shoot the breeze as they did before their shifts. And in bigger ways—students, upset with a grade, who complain to deans, expecting them to respond like the union shop stewards who always advocated for them. The laid-off workers formed study groups, telephone trees, and Facebook pages to coax each other along. The student government suddenly had members with gray hair. But old workplace rivalries and cliques also resurfaced. "That is the stuff," Kennedy told me. "Businesses don't understand how hard it is to bring them a good workforce."

"You have people coming in who are devastated," said Jorgenson. She cried along with a woman who'd had to train workers from Mexico to take over the job she was losing that was moving out of the country. "It's like a death," she said.

In the spring of 2010, a six-foot-two 36-year-old named Jeremy Kath came to see Pody, who runs the college's career center. He was almost in tears. It had been more than a year since he'd taken a buyout, rather than face the likelihood of losing his job of a dozen years at a Chrysler plant not far over the Illinois line. He'd been trying to start a restaurant when his wife, whom he'd met at 16 and married at 20, told him she was leaving. She was working as a registered nurse and better able to keep up their house payments, so he was living in his parents' basement, debating whether to use government retraining money he knew he could get. "Here I am in the beginning of a divorce I didn't want," he recalled admitting to Pody. "I didn't want to go to school. I never liked school. I didn't think I had any intelligence at all…This is a big shit sandwich, and I have to take a bite out of it."

Pody told him something she had become practiced at saying: "I have a feeling you are smarter than you think. You are going to be okay." They talked about Blackhawk's business management program—maybe to lead him to run a restaurant, after all. He took the COMPASS test, a check the college requires of all new students to gauge their proficiency at reading, writing and math. To get into business management, he needed a math score of at least 43; he got a 76—and a 99 each for reading and writing.

Many of the people who'd lost jobs arrived on campus with a single-minded desperation to find something—anything—that would pay them the most money in the least time, whether the field suited them or not. Back on the assembly line, "they were working all day and not talking to anybody," Kennedy said, "and now they want to be a nurse? That's all about communication." Complicating matters, at Blackhawk, as at two-year colleges around the country, nursing, which pays well, is so popular a field of study that it takes two or three years to get into required courses—longer than someone without a job often can afford to wait.

Blackhawk's counselors all have stories of students who chose a program for the potential pay down the road—only to reappear after a few weeks of classes for advice on finding a more appropriate direction. Those, that is, who got in to see a counselor. The college hired one mental health counselor temporarily. For academic advising, it has three counselors at its main campus, plus Jorgenson at a small satellite in a town called Monroe, 40 miles to the west. Of the laid-off people who arrived from 2008 to 2010, Kennedy estimated, perhaps 10 percent to 15 percent saw a counselor one-on-one. "We had group orientations with 200 people in them," she said. "We had no capacity to serve these people."

Of all the strains on the college as laid-off workers rushed in, the one that surprised Blackhawk's staff the most was that so many were unable to use a computer—didn't know how to turn one on. There were students, Pody said, who dropped out within days of realizing they could not submit hand-written class papers. "I didn't want anything to do with that devil machine," recalled Kath, whose ex-wife had always done anything that required a computer at home. Before starting classes, he bought a laptop but had still never sent an email. In one of its many adaptations, Blackhawk started a sort of computer boot camp.

Kath is to graduate next spring. Between classes, he calls his eight-year-old daughter, Dayle. "Did you work on your spelling? Did you work on your math book?" he asked her one afternoon. He wants Dayle to see her father graduate. He's had a plan to go in with a friend who has an Italian beef shop but is no longer sure that will work out. So far, he's found only an unpaid internship at a company that makes bottles for Coca Cola. Still, his grades have been so good that he will get his associates' degree with honors. "I'm tickled pink," he said.

Fighting the Failure to Graduate

When Kath gets his degree, he will become, like Mike Vaughn, part of a minority. Just one-third of the dislocated workers who enrolled at Blackhawk managed to graduate, our analysis found. Low as that is, it happens to be exactly the rate at which students graduate from community colleges nationwide, according to recent estimates. And that is another reason that retraining laid-off people doesn't always work.

People who graduated were no more likely to be working, we found, than those who did not—probably because of a quirk in which some dislocated workers who had been in school left if they were fortunate enough to find a job. Still, completing an academic program is widely recognized to be useful, and Kennedy is mindful of the pressure on two-year colleges around the country to graduate more of their students. And try as Blackhawk has, she thinks that such recommendations, issued lately by various think tanks and advocacy groups, "are not appropriate for the student population we have. I'm sorry, I would love to have better graduation rates," she told me, "but look at who the students are. We get some very smart students—but they have not been academically successful in the past…We have a lot of first generation students who reluctantly come."

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