In Harry Holzer’s book Where Are All the Good Jobs Going?: What National and Local Job Quality and Dynamics Mean for U.S. Workers, the Georgetown economist argues that “good” jobs aren’t going away—they’re just changing in character. In particular, good-paying jobs now require more analytical communication skills than in the past and thus are being filled by more highly skilled workers.
Policymakers interested in reducing poverty have thus been interested in finding ways to improve the skills of low-income residents of their community. Unfortunately, many job training programs have not been found to be effective as reported in a Council of Economic Advisers study earlier this year. So what strategies are available for local policymakers interested in effectively increasing access to training for residents experiencing poverty?
One tool we have to answer this question is the Washington State Institute for Public Policy (WSIPP), the most sophisticated cost-benefit analysis institute in the country. WSIPP has been commissioned by the Washington State legislature to study over three hundred different public policy interventions and to estimate the monetized impact of each of these interventions. While WSIPP’s estimates are prepared for policymakers in the state of Washington and thus have limitations for extrapolation to other contexts, they still can be informative for policymakers in other states considering workforce strategy.
Below is an overview of the per-participant net benefits of the ten workforce development programs WSIPP has analyzed. The programs WSIPP has studied fall into four major categories: career academies, job search and placement, case management, and training/work experience. As can be seen below, WSIPP has found significant differences both between and within these categories of interventions. Let’s take a look at each of these categories one by one.
Career Academies
Career and technical education academies have been described as “school within a school” high school programs that foster connections between schools and local employers. They are designed to build both vocational and academic skill sets for students to apply in workforce and postsecondary settings. WSIPP analyzed the results of studies of California’s Career Academies and Linked Learning program for its cost/benefit estimates.
These estimates suggest that career and technical education academies yield the highest net social benefits of all the workforce interventions studied, amounting to nearly $9,600 in net benefits per participant. Benefits mainly accrue from improved labor market earnings associated with employment, about two-thirds of which accrue to participants and one-third accruing to taxpayers. Career and technical education academies also yield $2.70 per $1 invested in the program, so provide an attractive tool for policymakers working under a firm budget constraint.
The drawback of these programs is that benefits accrue over a long time horizon, estimated to take almost a decade for the program to break even, compared to instant payoff for job search and placement and case management programs and 3-5 year payoffs for training/work experience programs. Career and technical education academies are also fairly expensive, costing an estimated $5,700 per participant, ten times the cost of job search and placement programs and thirty times the cost of low-cost case management programs. This means that career and technical education programs would cost more to assist the same number of people, though the return on that cost would be larger.
Job Search and Placement
Programs that focus on job search and placement are brief interventions lasting from a few hours to two months comprised of supervised job search, job search workshops, or job clubs for unemployed individuals. These programs are usually targeted towards unemployment insurance claimants or TANF (welfare system) participants.
Job search and placement programs yield $2,000 in benefits per participant and $4.71 per dollar invested in the program, making them moderately cost-effective from a net benefits perspective and very cost-effective from a cost/benefit ratio perspective. Benefits also accrue immediately compared to the 8-year lag for career and technical academies and are cheap at about $500 per participant.
The drawback of these programs is that benefits mainly accrue to taxpayers, with taxpayers enjoying nearly three times the benefits of program participants between increased tax revenue and decreased public assistance spending. While the average participant in a job search and placement program walks away with $1,100 in increased labor market earnings, she also loses $400 in public assistance, decreasing the effectiveness of the program as an antipoverty tool.
Overall, job search and placement programs are quicker but less effective tools than career and technical academies. That being said, they represent a better tool than a status quo of inaction since they do yield benefits for both participants and taxpayers.
Case Management
Case management services usually comprise counseling and job search and retention services and referrals to work supports such as child care subsidies, transportation, education, and training. Case management can be conducted via orientations, assessments, interviews, or telephone calls in individual or group sessions.
Interestingly, WSIPP’s estimates for the cost effectiveness of case management hinge strongly on the characteristics of the participants. Unemployed individuals benefit greatly from case management, accruing $2,700 in labor market benefits at the cost of only $200 per participant. Current or former welfare recipients, in contrast, only only accrue an average of $200 in labor market earning benefits at a much higher cost of about $3,000 per participant.
The takeaway from these findings is that case management programs can be quite effective, but only if targeted towards unemployed individuals and not current or former welfare recipients.
Training/Work Experience
Training and work experience are what we usually think of when we talk about workforce development. These services may comprise job search and placement assistance, adult education, English as a second language, GED, vocation training, child care, transportation, and paid and unpaid jobs. Programs can start with training and then move to work experience, consist of an individualized employment plan from an employer, or just consist of job training or work experience.
Work experience on its own is a moderately effective intervention, yielding a net of $1,600 in labor market earnings per participant after subtracting benefit reductions. Adding training to a work experience program makes the benefits per participant higher (a net of $5,100 after subtracting benefit reductions), but the higher costs associated with training lead to lower net benefits than work experience on its own. Targeting work experience/training interventions towards welfare recipients can lead to higher social yields, though, due to decreased spending on public assistance. This makes this sort of targeting attractive to state and federal policymakers, but potentially less attractive to local policymakers who have less to gain from reductions in public assistance spending.
Targeting work experience and training interventions towards youth yield substantial net costs to the tune of over $10,000 per participant. This is because these interventions are especially costly when targeted towards youth and have very low yields to the tune of only about $150 per participant. Training without work experience has large labor market benefits per participant of $6,000 per participant, but are incredibly costly, making the approach much less attractive than work experience-focused interventions.
Takeaways
Overall, WSIPP’s analysis leaves us with some good guidance for policymakers looking to reduce poverty through workforce interventions. First, career and technical academies are incredibly effective but long-term investments in workforce. Policymakers looking for cheaper, quicker interventions can invest in case management specifically targeted towards unemployed individuals and job search and placement programs. As far as training/work experience programs go, work experience is a key ingredient and should generally be supported, except when targeted towards young people, who do not tend to benefit from such programs. A mixture of short- and long-term interventions could be a good formula for improving skills to reduce poverty.