Literature Review and State Policy Landscape
Over the past decade, short workforce training programs have received increased attention from policymakers, commentators, and the general public as potential paths out of unemployment or dead-end work without the time and expense of a conventional college degree.1 Certificate programs, which lead to non-degree college credentials after a few semesters of coursework, have seen surprisingly strong enrollments through the pandemic.2 Arguments in favor of policies that support such programs tend to focus on their potential benefits for the economic productivity of the private sector and for the labor market success of workers.3 This “win-win” for job seekers and employers is not easy to achieve in practice, however. State workforce training incentives must be designed with realistic expectations, attention to past experience, and concrete success metrics in mind.
A growing body of literature on the economic returns to certificate programs can inform discussions of state workforce training policies. A 2021 paper by Sandy Baum, Harry Holzer, and Grace Luetmer provides a comprehensive review of research on short certificate programs and, using regression analysis of the 2016 Adult Training and Education Survey, finds that average earnings of certificate holders are 10 percent higher than those of high school graduates when controlling for demographic characteristics.4 This finding is consistent with a 2017 analysis of eight state-level studies by Belfield and Bailey, which found that certificate attainment measurably increased earnings, albeit much less than associate or bachelor’s degrees.5 By contrast, an evaluation of workforce services under the federal Workforce Investment Act (WIA) found no significant increases in earnings among participants who received workforce training relative to those who received only “core” job-search services.6 Additionally, a recent analysis of Washington State data by New America’s Lul Tesfai found that short-term training programs lasting three months or less tend to lead to post-completion incomes that are above the state minimum wage but below the level necessary to sustain a family.7
Though postsecondary job training and certificate attainment appear to confer slight economic benefits relative to similar workers who have a high school diploma alone, research also shows that the returns to such programs vary widely by participant demographics and field of study. A study of certificate attainment in Michigan found negligible returns for women who obtained certificates. Separately, analysts at New America have shown that non-degree credentials pay off less for women than for men, reflecting sectoral wage inequalities.8 In general, workforce training targeted at “technical” fields such as construction, manufacturing, and certain health care occupations produces much higher economic returns compared to programs in humanities, business, or service industries,9 where credential attainment may have negligible or even negative effects. Although longer non-degree programs are associated with higher earnings than very short ones, Baum, Holzer, and Luetmer concur with a 2012 study by Anthony Carnevale, Stephen Rose, and Andrew Hanson that identified program length as a much less significant factor in post-program earnings than participant demographics or field of study.10
Research on the outcomes of certificate attainment or other job training shows inconsistent and often disappointing economic returns, especially for women and workers in less technical fields. However, training models that focus on demonstrably in-demand occupations, and which incorporate direct engagement of employers as well as supportive services for trainees, produce more impressive results. Sector strategies are one such model: these partnerships aggregate talent demand from multiple employers in order to develop training programs to help workers into high-quality unfilled jobs.11 Sector strategies began to proliferate in the 1990s and have been the subject of several randomized evaluations, with some showing strong and durable earnings effects for program completers.12 Career pathways initiatives, which share features of sector strategies such as supportive services and a focus on long-term career progression through credential attainment, but typically involve less direct employer participation,13 have also been shown to confer some economic and educational benefits.14
Compared to certificate programs delivered without substantive employer connections, sector strategies and the career pathways model are more promising attempts at the “win-win” balancing act between the needs of job seekers and businesses.15 The evidence in favor of employer-connected models is crucial, because, despite the generally unimpressive economic returns to short certificate and job training programs for participants, expanded availability of workforce training programs has remained a politically popular policy objective. As of 2019, 44 states had developed credential attainment goals, embracing workforce training options alongside traditional degree programs.16 Higher education institutions—attentive to state policymakers’ promulgation of these credential attainment goals and to calls from students and businesses for quicker job-training options—have concurrently expanded their certificate offerings.17 Most recently, the economic crisis triggered by the coronavirus pandemic has intensified calls from some researchers and national advocacy organizations to expand and elevate workforce training, and has spurred some state policymakers to launch new workforce training initiatives or ambitiously expand existing ones.18
State policies can powerfully support effective workforce training, establishing a shared strategic vision and drawing on knowledgeable agencies and actionable data systems to ensure that training reliably connects residents to employment and further education.19 As researchers from the Urban Institute showed in a 2018 report, state policies that establish regular incentive structures may supplement or even substantially exceed federal investments,20 creating opportunities to build large, sustained training ecosystems that deliver quality programs aligned with broader economic priorities. However, the variety of workforce training programs, the particular characteristics of regional labor markets, and the administrative differences from state to state mean there is no one-size-fits-all approach to workforce training. All successful state policies to support workforce training programs must address issues of program development and alignment, financing and incentives, and outcomes and accountability, but will do so with different methods.
Three Ways to Fund Workforce Training
Because the basic objective of the sector strategies and career pathways models of workforce development is to help learners quickly develop the skills necessary to perform available jobs, such programs must support learners, prospective employers, and training providers. State policies that support workforce training function by allocating public funds to better connect these three key stakeholders through training programs. However, state training policies and programs tend to focus on one stakeholder group as the principal target of financial support, taking the form of participant-focused, provider-focused, or employer-focused initiatives.
Participant-focused state grants and scholarships provide learners with additional funding that they can spend directly on tuition, fees, and other expenses associated with training. Examples include the Work Ready Kentucky Scholarship; Georgia’s HOPE Grants, Zell Miller Grants, and HOPE Career Grants; Iowa’s Kibbie Grant and Future Ready Iowa Last-Dollar Scholarship; Michigan Reconnect and the Michigan Skills Scholarship; and California’s Cal Grant C award. Participant-focused policies each have their own eligibility requirements, both for participants and for the programs where financial aid can be used. Georgia’s programs, for example, have GPA requirements, and the Cal Grant C award features income thresholds. The Work Ready Kentucky Scholarship has neither. The Michigan Reconnect community college scholarship is open to students enrolling in any program provided they are over 25 years of age, while Georgia’s HOPE Career Grants and Iowa’s Kibbie Grant have no age requirement but are available only for certain programs of study. Participant-focused supports are typically not available for learners who already have an associate degree or higher.
Provider-focused funding streams encourage higher education institutions and other training providers to develop and implement programs that meet the needs of learners and employers. While large portions of participant-focused grants and scholarships invariably find their way into institutional coffers, provider-focused policies directly support providers’ capacity to create and sustain career-focused training programs. Examples of provider-focused workforce training policies include Florida’s Career and Professional Education Act funding, Washington’s Worker Retraining Program, California’s Strong Workforce Program, and Michigan’s New Jobs Training Program, which was itself modeled on Iowa’s Industrial New Jobs Training Program.21 Virginia’s FastForward program combines elements of participant-focused and provider-focused aid in a unique cost-sharing arrangement.22
Whereas some participant-focused state aid may be spent on training from private providers (and some, as in Iowa and Michigan, have dedicated workforce grants for attendance at private institutions), state provider-focused training incentives generally target public community colleges. Eligible uses for funding include instructor salaries, employer engagement in curriculum design, and student supportive services. In some cases, as in Washington’s Worker Retraining (WRT) program, pass-through funding may help cover student tuition or living costs. Although WRT functions as a formula grant, provider-focused aid initiatives may also be structured as reimbursement models, where interested employers pay up front for training, and are reimbursed by colleges serving as fiscal agents for public funds once training is complete. In Michigan’s New Jobs Training Program, for example, colleges receive state loans of up to $500,000 to deliver customized training for employer partners, who then repay the state using new employees’ income tax withholdings.
A final set of state policies provides employer-focused funding, and directly supports the organizations that will employ learners during or after their skills training. Examples of employer-focused initiatives include Washington’s Job Skills Program, Indiana’s Employer Training Grants and Skills Enhancement Fund, and California’s Employment Training Panel (ETP). The ETP, for example, is a massive skills fund that provides between $60 million and $100 million annually, funded by a payroll tax on eligible employers, to reimburse training for new and incumbent workers at California companies.23 Companies may provide training in-house, or contract with community colleges, private trainers, or workforce development boards to provide training for them. For companies to be eligible for reimbursement, trainees must be retained and paid a regionally determined minimum wage for at least 90 days after they complete training.24
Employer-focused skills funds
A common complaint about workforce training initiatives among employers—and a common critique among researchers and evaluators—is that programs do not reliably deliver the specific skills that businesses seek, leaving businesses with unfilled job vacancies and participants with no better job prospects than they had before. Although participant-focused and provider-focused workforce training policies can be designed to include best practices from the sector strategies model that help ensure employer relevance, employer-focused policies that support corporate training can go a step further, assigning some program development responsibilities to employers themselves.
Corporate training has several important benefits. It contextualizes education in real-world applications; participants are paid for working hours, and often for their training hours, too, which can take place at the same location where they work; and it can improve relationships and collaboration between businesses and training partners such as community colleges.25 Well-designed employer training subsidies incentivize businesses to conduct corporate training for incumbent workers as well as new hires, allowing businesses to upskill current employees, support reemployment of displaced workers, and obtain company-level employment and productivity benefits.26 Employer-focused training policies may also may also support multiple employers training for shared skills needs, effectively replicating the sector strategies model on a smaller scale.
Some employer-focused policies, such as Indiana’s Employer Training Grants, are funded by state appropriations. Others, including California’s Employment Training Panel (ETP) and programs in Delaware, Louisiana, and Minnesota (see note 30) are funded using a dedicated payroll tax. This model diverges significantly from typical higher education financing practices, and more closely resembles the federal unemployment insurance (UI) tax. Like federal UI taxes, the Employment Training Tax, which funds California’s ETP, is paid by employers and only applies to the first $7,000 of each employee’s annual income. This type of payroll tax provides an especially strong incentive for businesses to participate in workforce training: businesses can use the money, or they lose it.
State workforce training incentives of any structure—participant-, provider-, or employer-focused—can be designed to align with good job opportunities, offset stakeholders’ training costs, and maintain high standards in program quality and equity. In Indiana and Washington, states with significantly different economies and politics, different types of workforce training incentives combine in a comprehensive strategy. The similarities and distinctions between these two state approaches are instructive for policymakers considering new or expanded workforce training supports.
Citations
- The long history of short, career-focused training programs in the U.S. is reviewed in a recent report by Wesley Whistle, Short Memories Lead to Long-Term Consequences (Washington, DC: New America, January 13, 2021), source. The Great Recession in particular raised the public profile of training programs as a remedy for unemployment. In May 2009 remarks, President Barack Obama called for “every American to commit to at least one year or more of higher education or career training.” “Remarks by the President on Job Creation and Job Training,” Office of the Press Secretary, The White House, May 8, 2009, source
- Hari Sreenivasan, “How the Pandemic is Propelling Demand for Short-Term College Programs,” PBS NewsHour, January 26, 2021, source; and Heather Long, “Millions of Jobs Probably Aren’t Coming Back, Even after the Pandemic Ends,” Washington Post, February 17, 2021, source
- See, for example, Katie Brown, Powerful Partners: Businesses and Community Colleges (National Skills Coalition: July 18, 2021), 4, source; and Aspen Economic Opportunities Program’s UpSkill America initiative, “About UpSkill America,” Aspen Institute, source
- Sandy Baum, Harry J. Holzer, and Grace Luetmer, “Should the Federal Government Fund Short-Term Postsecondary Certificate Programs?” (IZA Institute of Labor Economics, February 2021), 18–26 (literature review) and 33 (regression analysis), source
- The report uses an individual fixed effects methodology to estimate quarterly earnings returns to credential attainment while controlling for both measurable and unmeasurable personal characteristics. The authors find a quarterly earnings impact of $530 or $740 for certificate attainment over no college (men and women, respectively), compared to a $1,160 or $1,790 quarterly earnings impact for an associate degree relative to no college. Clive Belfield and Thomas Bailey, “The Labor Market Returns to Sub-Baccalaureate College: A Review,” (Columbia University Teachers College Center for Analysis of Postsecondary Education and Employment: March 2017), 8–9, source
- “Providing Public Workforce Services to Job Seekers: 15-Month Impact Findings on the WIA Adult and Dislocated Worker Programs” (Mathematica Policy Research, May 30, 2016), source. Though this evaluation did not find positive earnings impacts for training services under the federal Workforce Investment Act of 1998 (WIA), the authors caution that at the time of publication it was “too soon to judge the effectiveness of training.” Additionally, significant changes to federal workforce training have since occurred under the reauthorized Workforce Innovation and Opportunity Act of 2014 (WIOA). See “New Study Finds Positive Impacts of Staff Assistance, Inconclusive Evidence of Training Effectiveness for Participants in Two Large Publicly Funded Employment Programs,” Mathematica, January 17, 2019, source
- Lul Tesfai, Training as a Path to an Equitable Post-Pandemic Recovery (Washington, DC: New America, June 2, 2021), 18–23, source
- P. R. Bahr, S. Dynarski, B. Jacob, D. Kreisman, A. Sosa, and M. Wiederspan, “Labor Market Returns to Community College Awards: Evidence from Michigan. A CAPSEE Working Paper” (Columbia University Teachers College Center for Analysis of Postsecondary Education and employment, March 2015), 26, source; and Lul Tesfai, Kim Dancy, and Mary Alice McCarthy, Paying More and Getting Less: How Nondegree Credentials Reflect Labor Market Inequality Between Men and Women (Washington, DC: New America, September 13, 2018), source. In Training as a Path to an Equitable Post-Pandemic Recovery, 21–22, Tesfai finds that programs for early childhood educators and nurse assistants, two female-dominated occupations for which short-term training is common in Washington State, tend to lead to hourly earnings that are at or slightly below the state’s minimum wage.
- Baum, Holzer, and Luetmer, 5–7.
- Anthony Carnevale, Stephen Rose, and Andrew Hanson, Certificates: Gateway to Gainful Employment and College Degrees (Washington, DC: Georgetown University Center on Education and the Workforce, 2012), 4, source
- Presenting evidence from randomized evaluations suggesting 11 to 40 percent earnings gains for completers of sector training programs, L. F. Katz, J. Roth, R. Hendra, and K. Schaberg propose three causal mechanisms for the effectiveness of such partnerships: that they remedy systemic under-provision of training by employers; that they are more responsive to changes in skills demands in different sectors; and that they provide wraparound services that support participant success. The authors do not conclusively identify one mechanism and suggest that all three may be at play in the returns to sectoral training strategies. “Why Do Sectoral Employment Programs Work? Lessons from WorkAdvance,” NBER Working Paper 28248 (NBER: December 2020), source. For case studies of different sector strategies, see Kyle Fee, Matt Klesta, and Lisa Nelson, Addressing Employment Needs through Sector Partnerships: Case Studies from Across the Federal Reserve’s Fourth District (Federal Reserve Bank of Cleveland: August 15, 2016), source
- See Kelsey Schaberg, Meeting the Needs of Job Seekers and Employers: A Synthesis of Findings on Sector Strategies (MDRC: September 2020), source
- Christopher T. King and Heath J. Prince, “Moving Sectoral and Career Pathway Programs from Promise to Scale,” in Transforming U.S. Workforce Policies for the 21st Century, eds. Carl Van Horn, Tammy Edwards, and Todd Greene (W. E. Upjohn Institute for Employment Research: 2015), 199, source
- Deena Schwartz, Julie Strawn, and Maureen Sama, “Career Pathways Research and Evaluation Synthesis” (Abt Associates: February 2018), 14, source
- See Suresh Naidu and Aaron Sojourner, Employer Power and Employee Skills: Understanding Workforce Training Programs in the Context of Labor Market Power (Roosevelt Institute: December 4, 2020), source. Though the authors emphasize the low effectiveness of workforce training in the U.S. relative to other countries, and caution that “the scale of income inequality [in the U.S.] outmatches training programs’ potential to reduce it,” they find sector strategies to be promising because they include prescreening, job-matching, and job retention supports alongside training.
- According to Lumina Foundation, 45 states had credential attainment goals. National Report 2019: A Stronger Nation, 4, source
- The number of non-degree certificates conferred annually by postsecondary institutions nearly doubled between 1999 (555,883 certificates) to 2018 (954,738 certificates), peaking with over one million conferred in 2010. “Table 320.20: Certificates below the associate's degree level conferred by postsecondary institutions, by race/ethnicity and sex of student: 1998–99 through 2017–18,” Digest of Educational Statistics (National Center for Educational Statistics: 2019), source
- In April 2020, Michigan Governor Gretchen Whitmer used $24 million in federal CARES Act funding to launch Future for Frontliners, a free community college program for state residents who worked in essential jobs for the first three months of the pandemic. In February 2021, the initiative was extended and expanded as Michigan Reconnect grant, which will be funded with state appropriations. In Indiana, CARES funding was also used to expand workforce training opportunities. See Sara Weissman, “Free College Offer Lures Thousands,” Inside Higher Ed, May 5, 2021, source and
- See State Guide for Preparing the Future Workforce Now: Workforce Policy Reimagined (National Governors Association: July 2020), source. The project provides 10 policy “pathways” for states to adopt in order to transform their workforce systems to support lifelong, adaptable, and well-resourced training, with examples of policy strategies implemented by 28 states.
- Kelly S. Mikelson and Ian Hecker, Public Funding for Job Training at the State and Local Level: An Examination of Massachusetts, Texas, and Washington (Urban Institute: June 2018), 22, source. In Massachusetts, for example, state job training spending is equal to 128 percent of WIOA Title I funding.
- Craig Thiel and Erin Grover, The Economic Benefits of the Michigan New Jobs Training Program (Anderson Economic Group: April 25, 2013), 9, source
- Sunny Deye, “Virginia’s FastForward Credentialing Program,” National Conference of State Legislatures, December 17, 2018, source
- The Employment Training Tax that funds California’s ETP is assessed as a component of the state’s unemployment insurance taxes at 0.1 percent of the first $7,000 of employee income. “Rates, Withholding Schedules, and Meals and Lodging Values,” California Employment Development Department, source. Similar taxes are used to fund skills programs in Delaware (Blue Collar Training Program), Louisiana (Incumbent Worker Training Program), and Minnesota (Workforce Development Fund), among other states.
- Kevin Potter, Bruce Kessler, and Lesley Miller, Credits & Incentives Talk with Deloitte: California Employment Training Panel (Deloitte Tax LLP: January 2017), source. For current regional wage requirements, see “Employment Training Panel—Trainee Wages: Minimum Wages for Calendar Year 2021,” California Employment Training Panel, source
- Robert Sheets and Stephen Crawford, State Strategies for Using Employer Investment to Increase Postsecondary Credential Attainment, National Commission on Financing 21st Century Higher Education, white paper 5 (University of Virginia Miller Center: August 2016), 16, source
- For a review of the limited research on employer benefits from corporate training, and a recent mixed-methods evaluation of California’s Employment Training Panel, see Marian Negoita and Annelies Goger, State-level Policies to Incentivize Workplace Learning: Impacts of California’s Incumbent Worker Training Program (Brookings Institution: July 22, 2020), source