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Education
Job Training Policy

For state and local policymakers, the issue of job training requires a significant amount of rethinking. North Carolinians spend a vast amount of money on training, but the benefits are difficult to quantify. In the 1999-2000 fiscal year, total expenditures for job training and placement services were about $270 million, spread wastefully and somewhat haphazardly over nine major departments and agencies. Adding state expenditures for community college and university education, North Carolina’s total commitment to postsecondary education and training routinely exceeds 10 percent of the state budget.

But the private investment in post-secondary education and training is itself massive. The largest system of employment training in the state may well be employers themselves. One study found that in any one year, as many as 20 percent of employees are undergoing some form of company-provided training. In North Carolina, where the workforce approaches four million, that means about 800,000 people receive training from employers each year — far exceeding the number of full-time students in universities, colleges, or training programs.

Government Programs Fail

Most government training programs provided specifically to disadvantaged or other targeted populations fail to provide significant, long-term benefits. One study of the Job Training Partnership Act (JTPA) found that the program had no statistically significant effect on either the average earnings of young females or their employment, and even had a large (7.9 percent) negative effect on the earnings of young males. Likewise, virtually the only serious study of the federally funded Job Corps found that it did not significantly help single mothers obtain employment. In North Carolina, these programs have also provided little benefit. Records from JTPA showed that in 1993, 41 percent of participants either got no job, or jobs paying below the minimum wage. A 1995 study of another job training program found “it is not cost effective, and it needs to be changed to carry out those program elements that do work.” Recent outcome data continue to show modest benefits (see graph).

Why don’t these well-intentioned programs work? Many analysts believe that government training programs, regardless of their design, are doomed to failure because they lack the incentives that a private-sector trainer — or a public college competing for students, for that matter — has to successfully place trainees in jobs. Government is also less likely than other training institutions to keep up with the latest occupational trends and needs.

Skills, regardless of where or how they are acquired, show the strongest correlation with economic success. If one wants to improve the employment and earnings potential of workers while getting the best return on postsecondary education and training expenditures, the key is to match occupational choices with an appropriate provider of job training which is, more likely than not, an employer rather than a school or training center. Studies show that many workers learn their most valuable skills on the job, and are thus best served simply by having good job opportunities available rather than access to government-run training programs.

Recommendations

1. State leaders should consolidate state training programs as much as possible to reduce redundancy and increase oversight. Employees and contractors should be compensated according to performance, such as by paying them a percentage of the income their clients subsequently earn. Those eligible for training should have the option of converting some of their aid into cash to subsidize private employment at a (low) training wage.
2. All North Carolinians should be allowed to save money tax free in an educational savings account (ESA) for future post-secondary education and training investments, including retraining after a job loss.

To view higher quality graphs, download Agenda 2004 [560KB Acrobat].