The story is part of Richmond: The legacy of poverty, an ongoing Storyline series on the city’s ambitious plan to combat poverty and confront its past.
There was little publicity in July when President Obama signed the Workforce Innovation and Opportunity Act, the first major update in over a decade to how the U.S. trains workers and helps them find jobs. The Department of Labor gets around $3.3 billion each year to fund these services, a pittance compared to what many European countries spend.
The new law does some nipping and tucking—streamlining here, increasing accountability there—but not much to address the program’s small and dwindling budget. This chart from the Kansas City Fed gives some perspective:
Between 1998 and 2008, the U.S. spent about 0.5 percent of GDP on labor force policies, the Kansas City Fed report finds. Most of the money, around 70 percent, went toward what are called “passive” programs, which support people who have lost their jobs—unemployment insurance is the main example of this kind of program. Only 30 percent of the money went toward “active” programs, which intervene to help the unemployed find work.
In the U.S., that means job centers that offer career advice, counseling, and for those in greatest need, a small stipend to spend on training courses at community colleges or private vocational schools. These services have at times been criticized for being ineffective—most recently, a story in The New York Times reported that the workforce program did not do a good enough job of steering people away from expensive training courses with poor employment prospects.
Yet the best evidence suggests that workforce development programs have a positive effect, if not for everyone, certainly for people who have less education and spotty work histories. “They really do see some pretty decent returns both in employment and earnings,” said Carolyn Heinrich, a professor of public affairs at the University of Texas at Austin.
This is all good news for Richmond, which has made job training a cornerstone of its anti-poverty project.
A randomized evaluation of the Workforce Investment Act (which was rechristened in July as the Workforce Innovation and Opportunity Act) is still in the works. But in one of the largest studies so far, Heinrich and her co-authors compared 160,000 participants to control groups of people who had similar backgrounds and work histories.
Among disadvantaged adults, they found that the earnings boost was highest for female participants, who ended up making $600 more per quarter than their counterparts. Male participants made $400 more per quarter.
Both men and women were also about 6–8 percentage points more likely to have a job:
The benefits of workforce training remained for the four years that the study tracked the participants. In other words, those who got help from a job center seemed to get a persistent $1,600–2,400 increase in their annual earnings on average. This is a considerable amount, given that the workers in this group were making an average of $8,000 a year before the program.
In Richmond, the goal is not only to train workers, but also to loop in local companies so that workers are learning the right skills for the right job openings. The Obama administration has increasingly emphasized the importance of coordination between companies and job-seekers, which is called a sector-based approach. “It is wasteful and inefficient to provide workers with skills training and then pray that a suitable job exists,” Labor Secretary Tom Perez wrote in his confirmation statement last year.
A landmark study from 2010 looked at the effects of three job programs that offered training specifically tailored to local industries, with local employers giving input on the skills they needed. This was a randomized trial; applicants were randomly selected to participate, and after about eight months, people who underwent training were earning more than the control group. At the end of 24 months, they were making about $400 more per month, and were over 10 percentage points more likely to be employed.
“It’s not just about the skills, it’s also about the social and employment networks,” said Sheila Maguire, one of the authors on the study. A successful program will not only help participants gain new skills, Maguire said, but also guide them toward specific job opportunities.
This is the missing link at many job centers around the country, and the Obama Administration hopes to make sector-based strategies more popular—though it also takes significantly more effort to coordinate between businesses, workers, and training providers, and a lot more trial and error. It’s easier to “train and pray,” an approach that has seemed to work all right so far. But budgets are so tight for these programs that any way they can be smarter about carrying out their mission will make a difference.