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Commentary/Op-Ed - July 2013

Building the American Workforce

Employers need more workers with middle skills qualifications, but the supply of applicants with more than a high school diploma and less than a bachelor’s degree doesn't match the demand. In a Council on Foreign Relations report, CUF senior fellow Tom Hilliard argues that policymakers can narrow this gap by overhauling the national workforce development system.

by Tom Hilliard

Tags: economic opportunity workforce development human capital higher education community colleges

Unleashing the U.S. Workforce

Programs to develop human capital potential are potent engines of regional economic development. What saps their potential is that the parties involved—service providers, community leaders, agency officials, and employers—have not been given the tools or resources to keep up with the changing economy.

The majority of states and localities continue to oversee isolated programs that respond to conflicting performance outcomes. They are discouraged from innovating to meet the most urgent needs of the “dual customers” they serve: employers and individual clients. Too many one-stop centers engage with employers only as competitors to private staffing companies, and struggle to meet overwhelming demand for job-seeking assistance with few resources. Too many community colleges allow students to drift through remedial classes on an avoidable path toward dropout. Too many education programs ignore opportunities to connect their instruction to career and college readiness.

In some regions, however, new ways of educating, training, and connecting to middle-skill employers are taking shape. Regional innovators recognize that workforce development has become a hybrid field comprised of public agencies and private stakeholders, so they knock down organizational silos and explore new strategies to build collaborative relationships. Furthermore, they develop new strategies to enable employer demand to drive workforce investments. That means structuring a leading role for employers and taking advantage of real-time data on job postings in the labor market.

The U.S. workforce system should be transformed into a kind of informal partnership between the federal government and regional innovators. Federal agencies should align their program strategies and outcome measures, provide support and accountability for evidence-based innovation at the local and state level, and then encourage the spread of interventions that are shown to be effective.

Such a partnership is already quietly beginning in the form of the Trade Adjustment Assistance Act for Community College and Career Training grants (TAACCCT). This program, created in the same legislation that enacted the Affordable Care Act, directs grant funding to consortia of community colleges. Some consortia are in the same labor market or state, and some are connected by their sectoral focus. But the Department of Labor is supporting these colleges to try new and innovative strategies, collect evidence of their effectiveness, and share that information with other colleges—along with open-source curricula and other materials. As the program managers learn from the experience of each round of grantees, they overhaul the terms of the next round. Many of the best partnerships between community colleges, employers, and workforce providers may come out of the little-noticed TAACCCT initiative.

The main failures of the current U.S. human capital system—ineffective targeting of high-needs clients, weak employer engagement, and inadequate and compartmentalized funding—can be fixed. The following recommendations point the way.

To more effectively target high-needs clients

Ramp up support for adult education. Although workforce training investments should be driven by labor market data and direct employer input, a labor-surplus economy is bound to lead to some wasted training dollars. One strategy to minimize such waste is to ramp up investment education and training that is general and portable across sectors. The best example of such an investment is adult education. Helping adults improve their literacy, numeracy, and English-language proficiency will prepare them for stable employment in almost any sector. However, adult education needs to be more closely connected to college and career readiness, and new investments should reflect that priority.

Reward providers for “milestone” services, not just job placement. Some clients are harder to serve than others. This simple reality is often obscured by the imperative workforce and educational providers feel to meet government-imposed performance standards. High school dropouts, foster youth, ex-convicts, adults with disabilities—these are just some of the clients whose needs are poorly met because they cannot be quickly and easily connected to jobs, careers, and college credentials. Since performance-based contracting is not going away anytime soon (and for good reason), the outcomes used ought to reflect the distance traveled by clients with barriers to employment. Factoring in milestone achievements that contribute to the final outcomes would reward providers who assist in preparing clients to achieve career goals. Those milestones might include successful completion of an internship, a workplace skills module, a high school equivalency, or a gateway course at a postsecondary institution. They should balance rigor and realism in recognizing the achievements of highly disadvantaged clients.

To strengthen employer engagement

Develop a national Learning Exchange database. The Georgetown Center for Education and the Workforce has proposed an ingenious strategy to connect high school and postsecondary programs with the labor market: the Learning and Earning Exchange. Several states have already created “data warehouses” that link high school and college enrollment data with the wage-earning data employers provide to unemployment insurance. The Learning and Earning Exchange would take this strategy further, by creating a national data warehouse that includes transcript data on certificates, employer-based training, industry-based certifications, apprenticeships, and associate’s degrees, and linking them to wages earned in the labor market. Such an innovation could transform the workforce field by providing both prospective students and institutions with hard information about which training strategies boost earnings most effectively, for whom, at what cost in time and money, and what the cost of dropping out might be. A shorter-term goal would be for states to develop administrative and wage-matching data warehouses and make them available for public policy research and analysis.

Fund competitive grants to explore most promising human capital models. The TAACCCT program has demonstrated the potential of boosting innovation through competitive grants to community colleg-es. There should be more competitive grant programs that bring together employers and all of the main participants in workforce development—one-stop centers, community-based organizations, colleges and universities, labor unions, and others—to shape new strategies for meeting human capital needs in local labor markets. These grants are highly cost-effective in driving systemic change, since a relatively small appropriation can have disproportionate effects in spreading innovative practices.

To rebuild and integrate federal human capital development programs and funding

Overhaul the Workforce Investment Act to become the core of a purposeful federal workforce system. The fragmented and outdated aspects of the federal workforce system will not be solved by rolling workforce programs into a large block grant. Instead, federal funding should support the development of best practices in every state. That means revising the Workforce Investment Act to reward and incentivize collaboration across service sectors. For example, Congress should empower the U.S. Department of Labor to develop a set of performance measures that span workforce development, postsecondary education, and adult education. One model can be found in Washington State, where policy-makers have developed an “Integrated Performance Information” system that identifies momentum points to achieving productive careers and obtaining jobs that pay family-supporting wages.

Rework postsecondary education policy to meet the educational needs of the workforce. Postsecondary institutions need to become more responsive to adult students and employers. Adult-friendly provisions in Pell grants that were abolished should be restored: notably year-round eligibility, which enabled students to accelerate their education and graduate sooner; the “ability to benefit” test, which allowed students without a GED to enroll in college by proving their ability to benefit from college; and longer lifetime limits on completion. In addition, the federal government should consider developing a system of competitive grants to support innovations around student success and linkages with adult education, workforce development, and nontraditional financial aid.

Restore federal funding cuts to workforce development. As the American economy has grown and grown more complex, the skills gap has widened as funding to close that gap has dwindled. When Congress reauthorizes WIA, it should substantially boost support for the nation’s workforce-development system. The political environment in Washington, DC, strongly tilts against new funding. Still, the U.S. government is supposed to support strong claims rather than strong interests, and the imperative to provide skilled workers for the U.S. knowledge economy should be a strong claim. New funding should be structured to incentivize states to build out statewide sectoral initiatives, career pathway models, and integrated education and training programs, as well as other strategies to connect disadvantaged adults to career and postsecondary success.

Conclusion

The United States cannot afford to let the system for building and retraining U.S. human capital wither away. It is too vital to the nation’s competitiveness and to the future of disadvantaged communities around the country.

It is telling that both candidates for the presidency in 2012 strongly supported expanding and integrating the nation’s workforce-development system, despite the willingness of the political parties they represented to disinvest in that system over the past decade. The emerging knowledge economy is pitiless toward individuals who lack the education and the skills to contribute to employers in their local labor market, and equally pitiless toward employers who cannot find the skilled workforce to grow and sustain their businesses.

Ensuring continued prosperity into the next generation requires placing a high priority on strengthening human capital. That means creatively restructuring the funding and governance of workforce delivery systems. But workforce training can no longer exist as a domain apart from primary and secondary education, postsecondary education, social services, and economic development. The most effective strategies will be collaborative, with the federal government playing a powerful coordinating role.

Copyright © 2013 by the Council on Foreign Relations Press.

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