The Jobs Problem

We’re suffering a period of remarkably low labor-force participation. The national unemployment rate was only 4.4 percent in August, but just 62.9 percent of the U.S. population is working or looking for work. Ten years ago, before the recession, the number was 65.8 percent. There are around 7 million prime-age men disengaged from work right now. Women’s labor-force participation has dropped, too. The Bureau of Labor Statistics recently reported that just 56.7 percent of U.S. women were working or looking for work in 2015, down from 60.0 percent in 1999.

What’s anomalous is that, according to federal data released in August, there are 6.2 million open jobs in the United States. How can so many people be out of work while so many jobs are available? Part of the explanation is the “skills gap,” the mismatch between what employers need and what the out-of-work possess. In June, the Business Roundtable reported half of its members were having difficulty finding applicants with “employability skills” like math, the ability to read technical manuals, and complex problem-solving. Similarly, the July survey of the National Federation for Independent Businesses found that 35 percent of its members were unable to fill openings—the highest rate since 2001.

There is a debate about the skills gap. Economist Paul Krugman calls it a “myth” invented to “blame workers for their own plight.” More modest antagonists make a case that the skills gap is limited to specific industries (especially information technology); that level wage rates show that employers aren’t really trying to fill positions (wages would be rising if there were a tight market for employees); and that business groups have incentives to overstate the problem (e.g., to justify off-shoring).

Wharton School professor Peter Cappelli, a skeptic, has written that employers just need better hiring practices and more on-the-job training. James Bessen, an economist at the Boston University School of Law, though, believes the skills gap is more difficult to solve. In an article in the Harvard Business Review, he discussed the disruption of computers in numerous industries over the last two decades: “new technologies frequently require specific new skills that schools don’t teach,” he wrote, “and that labor markets don’t supply.” Despite the different interpretations of the jobs problem among economists, there is a consensus that a combination of factors—too many people out of work, jobs moving abroad, automation, new types of jobs emerging, retiring baby boomers—makes it essential that the nation take seriously career-focused education.

Subsidiarity in Action

The federal government has intervened in similar situations in the past. Several major New Deal programs, including the Civilian Conservation Corps (which explicitly focused on young, out-of-work men) and the Works Progress Administration, had job-training components. There were a number of federal job-training initiatives during the Kennedy and Johnson administrations, such as Job Corps. The 1962 Manpower Development and Training Act (MDTA) sounds especially relevant today. According to the Department of Labor’s historical office, the MDTA was designed to train “workers unemployed because of automation and technological change.” President Kennedy lauded the law for educating those “denied employment because they do not possess the skills required by our constantly changing economy.” In 1973, Richard Nixon signed the Comprehensive Employment and Training Act (CETA) into law, saying it would “help individuals adjust productively to changing economic conditions.” CETA was then replaced by the Job Training Partnership Act of 1982, aimed by the Reagan administration at helping the young and unskilled enter the workforce.

An energetic federal approach can seem particularly enticing at this moment given that the tangled roots of our predicament—there are arguments that opioids, video games, immigration, Americans’ unwillingness to relocate, the abuse of disability programs, and a lack of entrepreneurialism all contribute to our work problems—seem to call for comprehensive intervention. The “Better Deal” pitch to voters unveiled by Senate Democrats in July, for instance, promised to create jobs through infrastructure spending and new trade policies and offered workers benefits such as paid family leave and a higher minimum wage. It also included workforce-education initiatives like doubling federal spending on apprenticeships; tax credits for businesses that provide education programs that meet federal criteria; and federally supported “partnerships” among employers, training providers, and education institutions. Senator Bernie Sanders has separately proposed $5.5 billion in federal funds for new job-training programs, and he and other Democrats back free tuition at public colleges.

Nor is it just Democrats eager to act. This summer, Republican senator Susan Collins joined Democratic colleague Maria Cantwell to introduce the Apprenticeship and Jobs Training Act to provide federal tax credits to employers. Collins said it would “better align the needs of our nation’s employers with potential employees” and “bridge that skills gap.” Donald Trump is another fan of vocational training. On the campaign trail, he promised “to start it up big league.” At an April event, the president said, “Vocational education is the way of the future” and “vocational schools are going to be a big factor in the Trump administration.” In June, he declared “Workforce Development Week” and issued an executive order directing his administration to expand federal support for apprenticeship programs.

Yet if the previous federal forays into education and training demonstrate anything, it is the risks associated with empowering Uncle Sam. Nixon believed CETA would tidy up the federal government’s sprawling approach to training and pass authority to the states. His signing statement hailed the law for “putting an end to the patchwork system” of programs and cutting “federal strings.” “State and local governments,” he promised, “will be the decision makers.” But in 1981, reporting on the Reagan administration’s reform plans, the New York Times noted CETA’s “public service employment” provisions had directed most of the funding to “create federally subsidized jobs . . . that grew in wild spurts.” This had “led to scandal and abuse, mostly by municipal governments using CETA funds to pay their regular workers.”

George W. Bush intended his No Child Left Behind (NCLB) legislation to create a national framework for school accountability while leaving key decisions about standards, school ratings, and improvement strategies up to states and districts. “We believe strongly the best path to education reform is to trust the local people,” he said signing the law in 2002. But in 2015 Congress was compelled to dramatically scale back the federal role in schools via the Every Student Succeeds Act (ESSA) after protests that NCLB had warped public education’s approach to instruction and testing. Even well-intentioned federal education interventions distort local activity in unfortunate ways.

Local Issues, Local Solutions

Another reason to reject the federalizing tendency is that the contemporary job-training challenge is screaming for nimble solutions. Jobs demand varies widely by place. In a recent study of state workforces, Rachael Stephens, a senior policy analyst at the National Governors Association, found that Washington, D.C., and Missouri had an oversupply of construction engineers and lower-level construction workers, respectively, while Connecticut needed carpenters and Utah needed electricians and masons. LinkedIn’s June workforce report showed Austin had a shortage of accounting and finance skills while Atlanta needed mechanical and aerospace engineering.

An August report from Burning Glass Technologies, a firm specializing in job-market analysis, found that manufacturers are advertising more openings for software developers in Maryland and Virginia while those in Indiana and Wisconsin need production workers. Burning Glass further suggests that while many future jobs will require the skills currently existing in our workforce, they will require them in new combinations. The challenge is helping a displaced worker acquire the specific skills demanded by a specific job market. This requires knowledge of local labor demand and an agile ecosystem of training providers. Jobs will change over time, and they will change in different ways in different regions. Bulky federal programs seldom have the responsiveness and flexibility to meet varied demand. Indeed, a 2011 Government Accountability Office report found that nine federal agencies were then administering 47 training programs, nearly all of which were required to track multiple national outcomes.

But the most important reason not to pursue a centralized approach is that state and local governments and civil society are already hard at work on the problem. As Brookings Institution labor economist Harry Holzer noted in 2013, “At the state and local levels, new workforce initiatives have been developed in the past decade that are mostly independent of federal programs or funding”—though Holzer remains strongly supportive of efforts to increase federal funding and accountability for these and other workforce initiatives. According to the National Governors Association, these systems serve more than 22 million job seekers each year. It is estimated that employers spend close to $600 billion annually on formal and informal training.

In the last three years, every state has made some change to vocational-education policy. And it’s happening in many different areas: 43 states changed policies on industry-education collaboration; 37 changed rules related to high school students’ earning postsecondary credentials and credits; and 32 changed how vocational training (aka “career-and-technical education,” or CTE) programs are governed.

There are numerous examples of innovation. Nonprofits are using state charter school laws to create CTE high schools, like San Diego’s High Tech High. New Jersey’s county-based technical high schools operate outside of the traditional school-district structure and collaborate productively with local employers. Five of the top 10 high schools in New Jersey, according to the 2017 rankings in U.S. News & World Report, are county-based technical schools. For-profit education providers like Coursera and Strayer University are teaming with employers to offer job-specific training. Purdue University acquired Kaplan University, a large online provider, so it could better meet the education needs of non-traditional students. “Boot camps,” like those run by the education company General Assembly, provide bursts of tech training to help workers acquire desirable skills—typically without any federal aid. Lake Area Technical Institute in South Dakota has created tight partnerships with local business leading to higher employment rates and earnings for graduates.

Many of these efforts are designed to help individuals land “middle skills” jobs, those requiring more than a high school diploma but less than a bachelor’s degree (e.g., a certificate or an AA degree). A July report out of Georgetown University’s Center on Education and the Workforce found the United States has 30 million good jobs, averaging $55,000 in salary, that do not require a college degree but only some type of postsecondary training—jobs spanning manufacturing, health care, finance, and beyond. This is a quicker, less-expensive track at a time when there is growing public doubt about the value of a college degree.

A recent PPRI/The Atlantic survey found 54 percent of the white working class believe a college education is a “gamble that may not pay off in the end.” The August WSJ/NBC survey reported 60 percent of poor or working-class voters view a four-year college degree as “not worth it.” A June report by Gallup and the Strada Education Network found those who completed a vocational, trade, or technical program were more positive about their education decisions than those with a bachelor’s degree. The annual survey by PDK, a professional association for U.S. educators, found 86 percent of Americans want high schools to offer career-related courses leading to professional certificates or licenses, and 51 percent want high schools to offer more job-skills classes (only 4 percent want fewer).

Pushing Power Downward

The federal government can help local initiatives. The major federal education law, the Every Student Succeeds Act of 2015 that replaced No Child Left Behind, offers some lessons. It loosened rules and let states experiment with new accountability systems. This freedom helped foster fresh thinking about vocational training. Under ESSA, states have to submit plans for how they will use federal dollars and comply with the law. An analysis by Education Strategy Group and Advance CTE found that of the 17 states to submit plans to Washington this spring, 11 are proposing approaches that link high school studies to careers—giving students credit for earning an industry-recognized credential, for example, or for passing the military’s entrance exam.

Decentralization can equally help empower individuals. Funding could be handed directly to those seeking training, and the tax code can be tweaked to encourage employers to support employees’ continuing education. Equally workers should be able to take federal student-aid dollars to a wider array of providers (such as a boot camp that teaches coding or a community-based group offering re-skilling courses) instead of relying on the traditional higher-education institutions. As higher-education scholars Andrew Kelly and Kevin James noted in a recent report on innovation in higher education for the American Enterprise Institute, “Well-intentioned federal policies designed to limit fraud often serve as key obstacles that discourage innovation in post-secondary education.” In 2016, the Department of Education launched a pilot program—the Educational Quality Through Innovative Partnerships, or EQUIP—to enable some nontraditional providers to participate in federal-funding programs., an online university, for example, has partnered with New Jersey’s Thomas Edison State University to create a self-paced, primarily online correspondence program for business administration and liberal studies, and the Dallas County Community College District is working with StraighterLine, an alternative course provider, to offer associate-degree programs.

While ESSA scaled back much of NCLB, there remain vestiges of the old law that limit flexibility. States would have more room to experiment on career training if NCLB’s rules on standards, tests, and charter schools had never been created. Similarly, we wouldn’t need to struggle to relax eligibility criteria for federal student aid programs were today’s rules on accreditation and program requirements not in place. The 2014 Workforce Innovation and Opportunity Act (WIOA) attempted to decentralize authority, but there are still remnants of federal intrusiveness—the mandatory state and local plans to be filed with Washington, the rules related to consolidating service delivery through the nationwide system of “one-stop” centers, and the uniform performance metrics.

The federal government casts a long shadow when it insinuates itself into education policy. At a June hearing, the chairman of the House subcommittee on higher education and workforce development, Brett Guthrie, noted how the WIOA “streamlined the confusing maze of workforce development programs,” and the Congressional Research Service wrote that it was “enacted to bring about increased coordination and alignment.” Forty years earlier, Nixon believed the exact same thing of CETA.

The Apprenticeships Vogue

We should be similarly skeptical of Washington’s current fascination with apprenticeships. Popular in many countries, apprenticeships are long-term training programs enabling individuals to earn an income while learning a trade. Some view them as the ultimate bridge from school to career. Issuing his apprenticeships executive order in June, President Trump said he wants them offered in every high school: “Apprenticeships are going to be a big, big factor in our country.”

But apprenticeships are expensive and slow to take effect. It’s not clear that they should be prioritized above boot camps, community college, or other nimbler approaches to our present problem. But it is clear that a big Washington program would hog resources and create a host of ossifying federal rules. As if on cue, research from the economists Eric Hanushek, Guido Schwerdt, Ludger Woessmann, and Lei Zhang on “General Education, Vocational Education, and Labor-Market Outcomes over the Lifecycle” raised a red flag. Studying 11 nations with sizable vocational education systems—including Denmark, Germany, and Switzerland, which prioritize apprenticeships—they found vocational education can increase workers’ labor outcomes in the short-term but diminish their long-term prospects as the skills they acquired become obsolete. A more general academic education is the better investment, they argue. A big federal bet on a single approach to CTE might seem attractive in the moment but prove a bust down the line.

Will Washington make a big federal job-training push? It’s hard to tell. On the one hand, President Trump has never been a disciple of localism. Whether declaring “I alone” at the GOP convention or promoting a $1 trillion federal infrastructure program, he seems to covet strong central initiatives. And the last time a GOP president had a GOP-controlled Congress, two distressing domestic problems (the “achievement gap” and seniors without prescription coverage) were met with big federal initiatives (No Child Left Behind and Medicare expansion). Trump’s antagonism toward congressional Republicans, support for a federal family-leave policy, and the recent debt-ceiling deal with Democrats make it unwise to assume he’d only pursue conservative reform.

On the other hand, Trump’s budget proposed cuts to federal job-training programs, and this summer the House’s education committee followed ESSA’s and WIOA’s decentralizing approach when passing a reauthorization of the Carl D. Perkins Career and Technical Education Act, a law providing federal support to CTE programs. The bill garnered strong bipartisan support even though it would limit the powers of the Department of Education and give more authority and flexibility to states and local governments. So maybe grand federal activity isn’t in the offing.

We’re in an era of deep frustration with Beltway cronyism, elites, and administrative-state bossiness, not to mention swirling social and economic change and federal budget deficits. Handing power to state and local governments, individuals, employers, and an array of civil society entities is the right course of action for our career-education challenge. It might even be the playbook for a host of other domestic policy challenges.

Andy Smarick is Morgridge fellow in education studies at the American Enterprise Institute.

Source: The Jobs Problem

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