EconSouth (Third Quarter 2001)
The sudden and dramatic acceleration of economic growth that began in 1996 was made possible by an accompanying surge in productivity growth. Output per hour increased, driving unit costs down and allowing companies to improve profitability, pay their employees more or reinvest in additional productivity-enhancing technologies — all without raising prices substantially. But if productivity is to continue to improve, workers’ skills must too. As policymakers at every level realize that economic growth — as well as their own communities’ competitiveness — cannot be separated from skills growth, workforce development initiatives are drawing more attention.
or the three decades preceding the 1990s, only one other interstate competition rivaled the intensity of the South’s college gridiron matches: the competition for jobs. In every Southern state and at every level of government, officials pursued new investment with a zeal rarely witnessed outside late November Saturdays.
But in this competition, much more than bragging rights was at stake. The South was the nation’s chronic laggard in nearly every measure of economic development. What it needed was jobs.
States’ first campaigns to attract outside investors generally focused on the rural South’s comparative advantage over the rest of the country — namely, cheap labor. Development officials distinguished their states with land deals, tax abatements, offers of financial assistance and other investment incentives.
The strategy worked. Development officials may argue about the state investment scorecard, but it’s now clear that the real winner of the interstate development competition was the entire region. The South led the nation in job creation, in-migration and individual income growth throughout the 1990s.
But now the game has changed.
Tradition: Gone with the wind
The fall of financial, legal and geographic barriers over the last decade meant that plants and machinery could be set up anywhere in the world, thus mostly eliminating the South’s labor cost advantage relative to foreign competition in many industries. Also, communities grew increasingly wary about the long-term costs of incentives they were asked to provide investors. Moreover, with unemployment near record lows throughout the second half of the 1990s, there simply wasn’t as much pressure for elected officials to land new jobs for their communities since most of their constituents were already employed.
At an even more basic level, the economy and the skills needed to work in it changed. While parts of the Southeast remain a leader in agriculture and forest products, these industries account for a much smaller share of economic activity and employment than they have in the past. Likewise with manufacturing: carpet, textiles and household goods are still important to the Southeastern economy, but they’re no longer the principal engine of growth.
What’s largely replaced these traditional industries in the Southeast and the nation is skills- and technology-based services and manufacturing. Industries like health care, logistics, tourism and business services still require what may be considered manual labor, but many are technology-based. Similarly, manufacturing industries — with auto and computer assembly being two conspicuous examples — still require legions of hourly workers. But constantly changing product cycles, flexible manufacturing techniques and regular upgrades of production equipment mean that workers have to be able to use technology and to learn.
From this environment, a new economic development strategy has begun to emerge in states: workforce development.
Skilled help wanted
Far more than forming just a strand in a state’s social safety net, workforce development is now widely regarded as an essential strategy for state economic growth. Building up human capital, investing in skills, producing knowledgeable workers — all are critical if a state is to remain competitive in a high-tech, information-based economy. Also, because well-trained, productive workers can’t simply be relocated overseas — indeed, because employers will relocate to recruit them — workforce development seems to offer the promise of more stability than the “any jobs at any cost” approach.
“We want Tennessee to be the kind of place where our citizens are prepared to compete for tomorrow’s good jobs and where companies will come and grow, knowing that the smart, skilled, adaptable workforce they need can be found here,” Tennessee Governor Don Sundquist has said. No doubt other governors want exactly the same for their own states.
But what is workforce development? Who’s responsible for it? And what does it mean for workers who need to acquire new skills and the businesses who need their services?
These questions are being answered as states enter the early stages of implementing federal legislation that will substantially influence workforce development policies.
Enacted in 1998, the Workforce Investment Act (WIA) consolidated and refocused dozens of training programs to reflect a more market-oriented approach. State agencies and the U.S. Department of Education still offer many other programs that are also related to workforce development (see the sidebar). But when individuals are laid off, when they want information on the job market and how to develop their skills, their first stop will most likely be a local “one-stop” career center operated under the auspices of the WIA.
The WIA represents a substantial departure from the 1973 Comprehensive Employment and Training Act and its replacement, the 1982 Job Training Partnership Act.
Under the WIA, the money for retraining and unemployment services still comes almost entirely from the federal government. What is new is the WIA’s requirement that delivery of those resources be determined by their ultimate “clients” — the businesses that need workers and understand local labor markets and the individuals who need employment and skills improvement.
At the grand opening of Georgia’s first WIA Career Center in June 2000, Georgia’s State Labor Commissioner Michael Thurmond said, “We are building an entirely new system, and every aspect of it will be designed around the needs of our customers. When customers enter one of our new career centers, they will realize very quickly that they are not in a typical government office.”
Give ’em what they want
To ensure that a state’s programs succeed in preparing individuals for the workplace, the WIA requires state and local governments to establish workforce investment boards; at both state and local levels, these boards’ chairs and the majority of board members must be from business.
A state workforce investment board is responsible for working with the governor to develop a five-year strategic plan detailing the state’s workforce development objectives. Local boards are responsible for making sure that the strategic plan is executed at the grassroots level. At both levels, this employer-oriented structure is designed to ensure that development programs prepare individuals for the workplace.
In keeping with its client-focused, market-driven orientation, WIA also makes available an entirely new benefit: the individual training account. Such accounts allow individuals to purchase additional workplace training with funds provided by the federal government. The accounts are administered by local workforce investment boards, which set individual qualifications and determine which service providers are eligible to offer training.
Several elements of the WIA do resemble features of previous workforce initiatives. Under the provisions of the 1982 Job Training Partnership Act, for example, local employers were well represented on the Private Industry Councils that supervised training programs. And longstanding government-provided employment services remain available under WIA: unemployment insurance benefits, skills assessment, job placement assistance and other services. What distinguishes WIA from its predecessors is the relationship between employers, job seekers and the state. And nowhere is this link intended to be more apparent than at the point of service.
Under the WIA, employment and training services are offered at “one-stop” career centers, rather than “offices” or “branches,” and the employees who staff these centers are now considered “client service representatives” rather than “case managers.”
But changes under the WIA are intended to be more than just cosmetic. WIA one-stop centers are administered by their respective local workforce investment boards. Local boards are responsible for developing and executing a plan, including client eligibility and service criteria, for all career centers in a geographically defined area. This operating structure is a move away from a top-down, one-size-fits-all approach. It’s intended to ensure flexibility for clients and service providers and that services meet the needs of local businesses and individuals.
One-stop centers provide three levels of services: core, intensive and training services. Core services are made available to everyone: skills assessment, labor market information, job search and placement assistance, training program costs and eligibility requirements, and information about local support services such as child care and transportation providers.
In keeping with the WIA’s market-oriented, “work-first” approach, only individuals who are unable to secure employment after receiving core services qualify for intensive or training services. Intensive services include counseling, testing, career plan development and other basic job skills training.
To qualify for training services, an individual must have received at least one intensive service and be deemed (by the career center or the “partner” that provided the intensive service) sufficiently qualified to complete additional training. Also, the training program the individual selects must be approved by the local workforce investment board and linked to employment opportunities in the local workforce investment area. In general, training services are paid for with funds from individual training accounts; again, specific eligibility requirements and limitations — dollar limits, time limits, specific occupational training offered and so on — are determined by local boards. Also, to ensure quality, states are required to collect cost and performance information from training providers and to make that information available to clients.
Just as the WIA requires accountability from its clients and service providers, the act also provides performance measures to gauge its own effectiveness. For adults, dislocated workers and youths, states are required to measure whether these clients gain unsubsidized employment and retain such employment for at least six months and to gauge their earnings at this six-month point. States must also monitor clients’ attainment of a recognized credential relating to educational achievement, including a secondary school diploma or its equivalent or occupational skills. WIA also requires states to measure participant and customer satisfaction indicators.
Too soon to judge success
It’s still too early to know whether the WIA will work as well as its proponents have hoped: states have completed only the first year of their respective five-year plans (WIA went into effect July 1, 2000). But it does seem increasingly clear that the enactment of the WIA in 1998 coincided not only with a general, national reassessment of what constitutes economic development but also with a rise in corporate layoffs. In this rapidly changing economic environment, the WIA’s effectiveness may be revealed much sooner than expected.