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What’s Missing from the CHIPS Act

The glaring absence of adjustment assistance—and what it means for communities, consumers, and the future of trade.
August 17, 2022
What’s Missing from the CHIPS Act
US President Joe Biden signs into law the CHIPS and Science Act of 2022, on the South Lawn of the White House in Washington, Tuesday, August 9, 2022. Left to right: Founder and CEO of SparkCharge Joshua Aviv, US President Joe Biden, Speaker of the House Nancy Pelosi (D-CA) and Secretary of Commerce Gina Raimondo. (Photo by Demetrius Freeman/The Washington Post via Getty Images)

When the CHIPS and Science Act became law last week, it was missing a key provision meant to support workers impacted by trade: Trade Adjustment Assistance (TAA), a program created during the Kennedy administration to ease work transitions for workers who lose their jobs due to trade deals. For over half a century—and especially since trade liberalization accelerated in the early 2000s—TAA has helped hundreds of thousands of workers get back on their feet through a blend of direct support, wage subsidies, and skills retraining.

Growth in trade has been an unambiguous good for the U.S. economy and American families. It has catalyzed whopping U.S. GDP growth since the 1960s, raised American wages and incomes, and provided consumers with ever-wider varieties of goods. The long-term benefits of trade to living standards, however, have come at a price that has been borne disproportionately by communities that once formed the heart of the U.S. manufacturing sector. TAA was part of the answer to this trade-off, providing transition assistance and retraining for individuals who lost their jobs due to shifts in production and lower-cost foreign labor.

Despite, or perhaps because of, its longevity the program has suffered from neglect on two fronts. First, the appetite for TAA renewal and reform has historically tracked with developments in new or existing trade deals. This has left TAA poorly adapted to evolving worker needs. Second, the benefits of TAA suffer from a time-lag in measurement. A 2021 report authored by a team at Harvard’s Wiener Center for Social Policy (and published by our program at the American Enterprise Institute) found that while the short-term payoff of TAA has tended to be small, the longer term impact on earnings has been significantly positive as the full benefit of increased skills training shows up in higher earnings. TAA has proven to be a good long-term investment in workers even if its ROI hasn’t manifested in the lives of workers immediately.

By failing to reauthorize TAA as part of the CHIPS and Science Act, Congress has removed one of the mainstay programs for helping workers manage the thorny and difficult challenges posed by trade-driven employment shifts. Such a move could scarcely be more ill-timed. As the pace of technological change increases, driven by artificial intelligence and robotics, human labor will be under increasing pressure and worker skills at an ever-higher premium. Rather than ditching TAA, it’s arguable that the federal government should be looking for ways to expand the TAA concept—transition assistance for workers who lose their jobs due to trade or automation which historically has been a much bigger contributor to declining wages among lower-skill workers and job displacement than offshoring and trade.

This kind of willful neglect of the effects of trade and automation is inexplicable, the consequence of a kind of “beggar-thy-neighbor” politics in which the price of any legislative compromise is reduced to a “what’s in it for us,” zero-sum exchange. In this instance, it appears that the price of passing the CHIPS and Science Act was the elimination of a program seen as benefiting union members.

The decision to let TAA lapse will reverberate in a variety of ways, almost all negative. The withdrawal of support from working-class voters impacted by trade will weaken public support for the exchange and innovation that are the core drivers of American prosperity. The resulting loss of growth and income is likely to harm our economic future and further polarize and destabilize American society and its politics.

Brent Orrell and Jake Easter

Brent Orrell is a senior fellow at the American Enterprise Institute studying workforce development. Jake Easter is a research associate at AEI.