Hurricanes like Katrina destroy more than just homes. Thousands of businesses get wiped out as well. What this means for the workers of affected communities is something Professor Robert LaLonde has spent a lot of time thinking about. As economies shiftÑeither suddenly, as with Katrina, or more slowly over timeÑworkers must adjust to the changing job market. However, as the saying goes, teaching old dogs new tricks is sometimes a difficult proposition.

ÒIf youÕve had a job for 20 years as a worker in manufacturing making $15 an hour,Ó says LaLonde, Òand the establishment is destroyed in a hurricane, you might as well get used to making a lot less money.Ó The odds of that plant being rebuilt in the New Orleans area are pretty slim, he says. Meanwhile, workers who were making $15 are now looking at $8 an hour at Wal-Mart. Clearly they would hope to be reemployed at higher wages, but there arenÕt that many high-paying jobs for workers with these skills. Moreover, even though they are older workers, Òthey will likely fall down in the pecking order when hired by a new firm,Ó says LaLonde.

In a recent study, LaLonde and colleagues found that while going back to school to be retrained sees some return on the investment, it is not enough to return the older worker to pre-job-loss earnings. ÒA year of school just doesnÕt do that much to restore older workers to their old level of earnings,Ó he says. ÒFor starters, the older you are, the less time you have to reap the benefits of that schooling. Plus it costs money to go to school; and there are other costs, namely, the money you would lose from not working in the lower-paying job while you go back to school to be retrained.Ó

LaLonde found that the value of a year of school for an older worker (about age 45) is worth the equivalent of a lump sum payment of about $10,000 to be used over the rest of his or her work life. This amount was about half the benefit that a younger displaced worker gets from a year of training. ÒOne way of looking at it is to either give a person a check for $10,000 and say, ÔDo what you can with it;Õ or tell them instead to turn down the $10,000 and complete a year in community college. The end result, it turns out, is about the same. One year of school is just not enough to fix the problem.Ó

ÒLosing a job when youÕre 25 is one thing, but when youÕre over 40 on average itÕs a disasterÓÑand a disaster without insurance. While unemployment insurance is available for workers, it is meant as short-term support only.

ÒWe have to rethink the way we insure against permanent job loss as you get older,Ó LaLonde says. Perhaps New Orleans, with its likely significant worker displacement, is a good place to begin.

Barbara Ray

Louis Jacobson, Robert J. Lalonde, and Daniel Sullivan, ÒThe Impact of Community College Retraining on Older Displaced Workers: Should We Teach Old Dogs New Tricks?Ó Industrial and Labor Relations Review, 58 (April 2005).