Policy Summary 

Under this umbrella, we find a range of approaches that would make targeted reforms and resource investments into the nation’s workforce development system to align it with the challenges of the modern economy and the needs of the workforce. The policy focus would target dislocated workers transitioning to new industries, long‐term unemployed individuals updating their skills to catch up with emerging technologies, and low‐income and entry‐level workers seeking to start their careers. Policies in this arena also provide dedicated funding to support expanded on-the-job training activities by strengthening current policies and increasing the number and ability of employers to use on-the-job training. 

 

Case for Equity

The economy is undergoing significant disruption. The accelerating pace of technology and the continued rate of globalization have wreaked havoc on labor markets and contributed to a growing skills gap (Lerman 2015). Our economy is bifurcating into two segments with tremendous growth in the upper and lower-income groups, and a hollowing out of the middle class (Pew 2015). These trends have had a disproportionately negative impact on rural communities and workers of color. The evidence is clearly visible in the wage gap between white workers and workers of color, the gender gap, and the growing wealth gap which is compounded by these labor market trends (Pew 2016). The effects on rural America are compounding as waves of successive downturns have erased the mobility prospects for generations of workers of all racial groups.

 Workforce investment on a massive scale could potentially be a catalyst to increase the labor force participation and productivity of millions of workers and eliminate those gaps. Simultaneously, productivity would unleash a level of economic growth and prosperity that would translate into wealth creation and opportunities for all of America. Citigroup estimates that the racial wage gap costs $2.7 trillion in lost GDP annually, and over the past 20 years, the white gender gap alone has cost the US economy $5 trillion (Peterson, 2020).   

 

Issues to Resolve & Lingering Questions

  • Whereas there are no major cons to this policy, adoption would require a fundamental shift in how we view workforce investment. As a nation, we have created a culture that devalues career paths that don’t start with a four-year degree.

 

Return on Investment

Return on Investment for this policy is rated as MEDIUM. The range of outcomes (returns) from investment strategies with varying outcomes contributes to the scoring of this policy.

 

The nation’s workforce development system is a complicated set of programs. There are a limited number of high-quality studies that have attempted to measure the actual cost-benefit of these programs. Evidence is somewhat mixed as to whether individual programs provide an overall positive return to society for the program costs (Lerman 2019). Those examining narrow definitions of societal benefit tend to conclude that programs do not pay for themselves, whereas studies that account for a broader set of social outcomes tend to show more favorable returns (see Hollenbeck and Huang 2017 for an example). 

But there is consistent evidence that there are positive returns to the individual participants in the form of earnings, skills acquisition, and employment tenure. The discrepancy between social benefit versus individual benefit is due in part to the relatively high costs per participant of many of these programs.  Apprenticeships are one example of a program that shows consistently positive results, although, there are significant racial and gender disparities in those outcomes (Hanks et al). One study by the Department of Labor concluded that apprenticeship program participants had substantially higher earnings as compared to nonparticipants.

They averaged $5,839 more in earnings at the nine-year post-program mark and earned an average of $240,037 more over their career than non-participants. According to one study, social benefits exceed program costs by $49,000 (Reed et al 2012). Another study of a state’s entire suite of workforce programs concluded that 10 out of 12 programs demonstrated a positive social benefit as measured over the course of a participant’s lifetime. Benefits ranged from a 2.3x to a 15.5x multiplier on the initial investment depending on the program (Hollenbeck and Huang 2017). 

Research Base

The research base is rated as being HIGH for this policy area.  

Generally, this field of research has produced high-quality research and we have a wealth of information to pull from for insights and deliberations. However, there are a number of gaps in the research that are noteworthy. In particular, there is a need for more research into the dynamics of the long-term unemployed, dislocated workers, low-wage workers, ex-offenders, unemployed youth, aging workers, workers of color, and those with limited English proficiency (Van Horn et al). 

These groups have the greatest potential for increased productivity and benefit from this policy change, yet we know less about how best to serve them. Assessments of the field note that there is a need for more quasi-experimental and randomized control trial approaches (ibid). Moreover, there is a lack of research that examines how workforce systems operate as opposed to the overfocus on researching individual programs. As noted above, there is a dearth of cost-benefit studies that lay out the relationship between investments and social returns. Despite those gaps, the field has produced a relatively strong base that illuminates the connection between workforce inputs and individual worker outcomes (Nightingale and Eyster 2020). 

State & Local Ease of Implementation

This policy is rated as having EASY feasibility. The devolved nature of workforce systems provides a degree of autonomy and the ability to implement reforms at multiple levels. The current political climate favors an agenda focused on the interests of working-class and struggling workers. However, the entrenched interests and siloed nature of the system could present a challenge to implementing significant policy reform in this arena.

Exploratory Steps for State and Local Leaders  

Engaging System Actors Across the Spectrum — The City of Austin’s 2018 overhaul of its workforce system is a great example of an equity focused system reform that was built upon a high level of engagement with both the community, employers, and system stakeholders.   

Assessing Workforce System — Each community’s labor market is different. As such, a necessary first step is to examine the dynamics of your local system and to identify the system assets and opportunities as well as its challenges. The State of North Carolina’s workforce inventory is illustrative to this point. The Urban Institute also has a valuable framework for approaching this work that provides a good entry point, as well as a guide from the RAND Institute.  

Innovations Across America

Austin, Texas | The Master Community Workforce Plan 

Action Space:  

Cost: $3.2 million  

Mechanisms: Numerous MOUs, Ordinances, and State Plan Adjustments (See Plan Summary) 

In the wake of the pandemic, the Austin community sought to reimagine its approach to workforce development by focusing on rapid retraining in a digital environment. The city and county worked together to update its Master Community Workforce Plan. It is a workforce system aimed at connecting economically disadvantaged residents to middle-skill jobs via tech-enabled remote learning. These learning opportunities will target the area’s fast-growing tech sector and jobs in information technology and advanced manufacturing along with healthcare. This plan serves as a supplement to the community’s innovative tax incentive and economic development model that incentivizes employers to train and hire disadvantaged residents into high-income job opportunities.  

 

Boston, Massachusetts | City Academy

Action Space: Local (City) 

Cost: Unknown 

Mechanism: Numerous MOUs, Ordinances, and State Plan Adjustments (See Resource Page)  

The City of Boston has created a training academy to fill the city’s public service positions. The training program is free of charge to participants who, upon graduation, are hired into jobs that pay at the level of the city’s living wage (with some paying substantially more). The program has two separate tracks: CDL/hoisting and emergency medical services. In addition to a living wage, the jobs provide health benefits, pensions, union membership, and opportunities for advancement. 

CONNECTING WORKFORCE AND K-12 

  

Southern Regional Education Board. 2020.  

Partnerships to Align Education and Careers.  

 

System Reform 

Van Horn, C. Edwards, T. Green. T. 2015.  

Transforming U.S. Workforce Development Policies for the 21st Century. Aspen Institute  

Financing

Bonds, J. 2019. Pay For Success: How Emerging Finance Tools Are Supporting Workforce Development Richmond. Federal Reserve Bank Of Richmond. Federal Reserve System   

Andreason, S. 2016. Financing Workforce Development in a Devolutionary Era. Federal Reserve Bank of Atlanta.  

References and Further Study

Lerman, R., Loprest, P. and Kuehn, D. 2019. Training for Jobs of the Future Improving Access, Certifying Skills, and Expanding Apprenticeship. Urban Institute 

Lerman, R. 2015. “Are Employers Providing Enough Training? Theory, Evidence and Policy Implications.” National Academy of Sciences.    

Reed, Deborah, Albert Yung-Hsu Liu, Rebecca Kleinman, Annalisa Mastri, Davin Reed, Samina Sattar, and Jessica Ziegler. An Effectiveness Assessment and Cost-benefit Analysis of Registered Apprenticeship in 10 States: Final Report. Washington, D.C.: U.S. Department of Labor, Employment and Training Administration, 2012.   

Hollenbeck, K., Huang, W. 2017. Net Impact and Benefit-Cost Estimates of the Workforce Development System in Washington State. Upjohn Institute  

Nightingale D. and Eyster L. 2020. Results and Returns from Public Investments in Employment and Training. In Investing in America’s Workforce: Improving Outcomes for Workers and Employers. W.E. Upjohn Institute for Employment Research 

Hanks, A.; McGrew, A.; Zessoules, D. 2018.  The Apprenticeship Wage and Participation Gap. Center for American Progress.  

Van Horn, C.; King, C.; Smith, T. 2011. Identifying Gaps and Setting Priorities for Employment and Training Research. John J. Heldrich Center for Workforce Development 

Peterson, D. 2020. Closing The Racial Inequality Gaps: The Economic Cost of Black Inequality in the U.S. Citi GPS: Global Perspectives & Solutions 

Pew Research Center. 2015. “The American Middle Class Is Losing Ground: No longer the majority and falling behind financially.”Washington, D.C.: December  

Pew Research Center. 2016. Racial, Gender Wage Gaps Persist In U.S. Despite Some Progress. Washington, DC. July 

Immigration Reform

Universal Health Coverage