(FORTUNE Magazine) – JULIE BATEMAN, 46, WAS AN EXCEPTIONAL EMPLOYEE. After 20 years at National Textiles, most recently in quality control, she had almost inhuman peripheral vision and spatial acuity: "It got to the point where I didn't even have to think about it." Then she was laid off, just like the other three million--plus factory workers who have lost their jobs since 1995. But unlike many of her peers, Bateman has some hope. She is trying to reinvent herself as an X-ray technician with the help of Trade Adjustment Assistance (TAA), the main federal program for workers laid off because of trade-related plant closures. The $1-billion-a-year program offers its 75,000 participants two years of college courses and unemployment benefits over most or all of that period. After that, they're on their own.

Sounds like a great way to help folks who, through no fault of their own, are victims of the new global economy. But does it work? Not exactly. While the TAA doesn't yet track the progress of its alumni, the Labor Department estimates that only 60% of TAA grads are employed. (The national employment rate is 95%, and the Workforce Investment Act, a more general worker-training program for young people, estimates an 80% employment rate.) In interviews, many of the TAA grads told FORTUNE they and their peers ended up in menial jobs in sectors like retail, which pay painfully low salaries and offer few or no benefits. Why the dead-end jobs? Many people in the program have so few portable skills that it would take years to train them for new, highly skilled positions. Some of Bateman's TAA classmates at Patrick Henry Community College in Martinsville, Va., are lifelong factory workers who have as little as fifth-grade proficiency in math, English, and writing. Therein lies a dilemma. The more remediation the students get, the less time they have to pursue college-level work and specialize; the less they get, the weaker the foundation for college-level study. Furthermore if they work even part-time, they lose some of their TAA financial support.

"By and large government retraining programs don't work," says Brookings Institution expert Robert Litan, echoing the views of most academics. "The best training takes place on the job." So is there a better solution? The White House is pushing to concentrate resources on training programs that actually work. Lori G. Kletzer, a labor economics professor at the University of California at Santa Cruz, and Brookings' Litan argue Washington should expand eligibility--and consider more direct temporary income support via wage insurance or wage and benefit subsidies. That, in theory, would encourage moves from economic dead zones to boomtowns and facilitate faster on-the-job training. Gregory Mankiw, a Harvard economics professor and former head of the President's Council of Economic Advisors, and others recommend government-funded reemployment accounts that workers could tap if laid off.

All that may be a bit late to help Julie Bateman. Only seven weeks into the TAA program in Martinsville, Va., she decided to drop a course and pursue a less advanced IT certification. Meanwhile she fights off frequent panic attacks as a result of the pressure to find a good job before her unemployment benefits run out. "I'm trying," she says, "to get my brain to work in a way it never had to before." -- Peronet Despeignes