Side effects of U.S. 'peace dividend.' (defense industry cutbacks)

The dissolution of the Soviet Union last year effectively ended the Cold War and all but banished the threat of global nuclear conflict, observes a new report by the congressional Office of Technology Assessment (OTA). "While future U.S. defense needs are still unclear, they will surely require less money and fewer people," points out OTA Director John H. Gibbons. Indeed, he notes, defense spending may soon drop to its lowest level in 40 years. Politicians often refer to this savings as the "peace dividend." Defense workers, however, may see it as anything but: OTA projects that some 2.5 million defense-related jobs will disappear during the next nine years.

In an analysis released last month, "After the Cold War," OTA points out that the cutbacks may not affect states equally or occur evenly over time. Moreover, losing 275,000 defense jobs per year -- on top of the already high rates of U.S. unemployment -- "could be stressful on a national scale."

The armed forces, which provide good jobs, training and advancement to high positions "hardly available to minorities elsewhere," have become "the most color-blind large institution in the United States," OTA notes. Defense spending on research has also benefited civilian industries -- even spawned entirely new fields, such as semiconductors and computers. Unless other institutions step in to pick up these responsibilities, OTA argues, "the nation will be the poorer."

Finally, the new report concludes, the coming cutbacks may hit engineers especially hard. Roughly 37 percent of the nation's 342,000 defense engineering positions may evaporate within four years. Because these engineers embody the skills needed to boost U.S. commercial competitiveness, OTA says, "it is in the national interest to integrate these workers into the civilian sector as quickly and fully as possible."

Though all displaced workers benefit from the same help -- such as skills assessment and retraining -- blue-collar workers and engineers "may require a different mix and duration of services, since the engineer's job search is likely to take longer and range more widely." Aggravating the engineer's problems, efforts such as the federally supported Economic Dislocation and Worker Adjustment Assistance (EDWAA) program focus on blue-collar workers. Why? Often from the belief that more highly educated workers "are better able to fend for themselves -- but sometimes simply from inexperience . . . with professionals," OTA reports.

The report offers recommendations for countering these problems. For instance, it argues that Congress may wish to provide EDWAA greater flexibility in its training budgets and to recommend explicitly that EDWAA finance the upgrading of skills. Congress might also look to the National Science Foundation and other federal agencies to design continuing-education programs for defense engineers. Last, OTA describes potential new tax breaks and grant programs that Congress might device to help defense companies -- especially smaller firms -- make the transition to civilian products and services, thereby reducing layoffs and boosting the U.S. economy.