Hire Power

9/1/2014

STATE LEGISLATURES MAGAZINE | SEPTEMBER  2014

To close the skills gap, states are teaming up with industries that need, but can’t find, qualified workers.

By Jack Queen

The recession officially ended five years ago, but more than 10 million unemployed Americans haven’t gotten the memo. Millions more have settled for part-time jobs or have given up the search altogether.

Intuitively, this should mean there aren’t enough jobs out there. Yet businesses in sectors such as manufacturing and health care that offer “middle skill” jobs—requiring more than a high school degree but less than a bachelor’s—can’t find qualified workers.

Even as middle skills jobs sit vacant around the country, their share of the labor market continues to grow. According to the Georgetown Center on Education and the Workforce, they will account for nearly one-third of all jobs by 2020.

Experts call this the skills gap, and it’s become a huge missed opportunity for businesses and workers alike.

Recognizing this, many states have turned to industry partnerships as ways to train workers and get economies growing. The strategy: collaborate with businesses to better align workforce skills taught with labor market demands.

Help Wanted

Although some skeptics claim the skills gap doesn’t exist—blaming firms for being too lazy or overly scrupulous in their hiring practices—Fred Dedrick of the National Fund for Workforce Solutions disagrees.

“What doubting economists say is, ‘If you look at the data, employers could pay more and attract better people.’ This is great in economic theory, but it has nothing to do with reality.” Although the principle may hold in some cases, Dedrick says, “If you increase wages for jobs like welders, they don’t just pop out of the ground.” A slew of other factors, socioeconomic to geographic, strongly challenge the notion that the skills gap will fix itself.

The gap also shows up in surveys. Thirty-nine percent of manufacturers reported a severe lack of qualified applicants and 79 percent said they found it difficult to fill skilled positions in a study by Accenture, a management consulting firm. Similarly, the Wall Street Journal found 43 percent of small businesses struggling to expand because of job vacancies.

Dennis Parker has seen the shortage firsthand as an expert on workforce development with Toyota, itself facing a labor shortfall that threatens its ability to expand and even maintain U.S. production. “I travel around the country talking to manufacturers,” he says. “From the ground level I have not encountered anyone who’s not ‘very worried’ about their inability to procure skilled technicians.”

Toyota has been steadily building plants in the United States since its first one opened 27 years ago. Now, initial cohorts of workers are approaching retirement, and many older plants face a looming mass exodus of workers for whom there are virtually no replacements. Many educational and training institutions simply aren’t producing enough workers with the right skills for dynamic, 21st century industries.

“We, by and large, have an education and training system that is not tightly connected to the needs of industry,” says Stephen Herzenberg, executive director of the Keystone Research Center. There isn’t enough emphasis on multi-skill programs that produce adaptable, problem-solving workers. And many institutions still teach yesterday’s skills on obsolete equipment. Some, for instance, teach manufacturing automation without robots or with models so outdated the instruction is useless, he adds.

Passing the Torch

For skilled sectors, this isn’t going to cut it. “In today’s globally competitive environment, we need multi-skilled, multi-craft workers—not just welders or electricians,” says Parker. But this type of worker is a rare commodity: “Even in the worst days of the recession, skilled technicians had their pick of jobs. They’d get snapped up full-time anywhere.”

To address the shortage, Toyota reached out to community colleges and developed a training program tailored to modern manufacturing. There are now seven of their Advanced Manufacturing Technician programs across the country, combining formal instruction with paid, on-the-job training at more than 40 employer partner sites.

Although the training is extremely rigorous, requiring 40 hours per week for five straight semesters, it boasts better retention than traditional associate’s programs. Moreover, 95 percent of graduates find full-time jobs starting at around $60,000 a year and rising to as much as $80,000.

The on-the-job component helps students pay their way through. “I’ve talked to about three-fourths of our graduates, and all of them said they graduated with zero debt,” says Parker. Toyota, of course, benefits as well: “Our people on the floor, the supervisors and managers, say it’s the best talent they’ve ever seen.”

Toyota took the initiative developing the Advanced Manufacturing Technician program, but according to Parker, support from legislators is just as crucial. “It really helps to have a champion—someone with a vision who strongly advocates and keeps legislative awareness high.”

Lawmakers' Leverage

Tennessee found just such a champion in Senate Majority Leader Mark Norris (R). In 2013, he helped spearhead passage of the Labor and Education Alignment Program, an initiative to revamp the state’s workforce. “States are particularly well-situated to meet these challenges and embrace these opportunities,” he says. “We are close to our constituents who need jobs and we are accessible to the businesses that have them.”

Norris remembers the program’s origin vividly. Several years ago, consumer goods supplier Unilever decided to expand a Tennessee plant and it needed 400 additional workers. Even though the company received thousands of résumés, virtually no applicants were qualified.

This prompted Governor Bill Haslam to call a meeting with executives of Unilever in which Norris and other lawmakers participated. There, a company manager made a grim confession:  Had he known the inadequacy of the local labor force, he wouldn’t have recommended the expansion at all. At that, Norris recalls, an education official asked, “May I ask the gentleman what exactly he needs?”

This led to collaboration between Unilever and a community college on a custom curriculum. It yielded 400 workers so quickly, the company decided to consolidate its entire North American ice cream operation in Tennessee.

From that success sprang the Labor and Education Alignment Program, which is aligning state agencies, businesses and educational institutions on common workforce goals, and will be distributing $10 million in training grants.

For Maryland Senator Kathy Klausmeier (D), helping make her state’s workers competitive has always been a priority. The recession was like a punch in the gut for sectors already bereft of skilled labor, and this was not lost on her. “The job market was sort of misaligned. We had lots of people out of work, and at the same time businesses were telling us they couldn’t find workers.”

So last year when momentum started to build for an industry partnership program, coined Employment Advancement Right Now (EARN), she got on board immediately.

“Several years ago, I had a community college president tell me, ‘You’ve got to get businesses involved. They have to get on board and help us so we can help them,’” she recalls. “That’s exactly what’s happening with EARN.”

The business community strongly supported EARN, and the bill establishing it passed in 2013 with wide bipartisan support. The program is run by the state’s labor department, which awards grants to partnerships between businesses, educational institutions and nonprofits. In June, EARN announced its first grant recipients: 28 partnerships in areas ranging from biotechnology to health care to manufacturing. The awards—averaging around $180,000—are usually matched by businesses and help them set up training programs that will lead to jobs for completing participants.

Often, these programs are designed to help lower the cost of training new employees or reduce the risk of that investment. In manufacturing, for instance, the cost of bringing on a new employee is around $30,000 after lost productivity and training expenses, with no guarantee the hire will work out. Employers accept this as a business expense, but asked EARN to help them develop a program that reduces the risk.

The Maryland Manufacturing Extension Program is receiving one of the larger grants for its “manufacturing boot camps,” intense, short-term training programs designed to test for grit and commitment while providing hands-on training relevant to participating businesses. This effectively screens for the behavioral problems that can doom new hires while rapidly training and integrating new workers.

The first pilot of the program was a success. The partnership’s firms immediately hired eight of the 10 participants full-time and placed the other two in paid internships. The state’s bill for each trainee-turned-taxpayer: $1,200.

The m-Health partnership, composed of mobile health app developers, faces a similar investment hurdle. Demand for these apps, which allow doctors and patients to share clinical information remotely, is growing. But competitive employees must be competent programmers with an intimate knowledge of the health care industry, a rare intersection of skills.

M-Health plans to make Maryland a national health app hub by placing promising code-writers in paid IT internships at hospitals. Participants will be directed to learn as much as they can of health care’s inner workings, and they will take an exam evaluating their insight at the end of the internship. This, the partnership hopes, will give developers an edge in innovation.

Other states have had success with industry partnerships as well. Oregon’s Back to Work program uses a “hire first” approach, where employers develop on-the-job training programs and the state compensates them for productivity loss during training.

A year after its inception in 2011, the program had placed more than 1,400 unemployed Oregonians into permanent jobs. According to WorkSource Oregon, it actually brought in money for the state, with a $3.28 million investment realizing $3.8 million from personal income tax revenue in a single year.

Michigan’s Skilled Trades Training Fund also awards matched grants for on-the-job training but with an added emphasis on “upskilling,” or training current employees in new skills that earn them promotions and increase productivity.

The program already boasts a number of success stories, including an automotive manufacturer creating 102 new jobs thanks to a $153,000 training grant. The official projections for this year are 1,500 jobs created and 2,500 retained (positions upskilled rather than eliminated).

Counting on Collaboration

A common thread in most of these industry partnerships is an on-the-job component. This addresses a weakness many feel exists in traditional education.

“We don’t do enough apprenticeships, internships, on-the-job training,” says Dedrick of the National Fund for Workforce Solutions. “So people are graduating and getting degrees and certifications with no practical experience. That makes them a lot less attractive to employers.”

Dedrick and the Keystone Research Center’s Herzenberg were instrumental in designing Pennsylvania’s industry partnership program, one of the nation’s first. It has enjoyed wide praise since it began in 2004 and was unanimously placed in statute in 2011. It is credited with helping Pennsylvania’s manufacturers survive the recession, when most were hemorrhaging. It has now trained more than 160,000 workers with the help of nearly 23,000 employers, and according to Herzenberg, “its best days are still ahead.”

Both Dedrick and Herzenberg emphasize the importance of smart, well-qualified staff in industry partnerships. It’s also crucial to attract large groups of employers whose leaders can share the industry intelligence or “stuff you can’t Google,” says Dedrick.

This point was not lost on Scott Jensen. “The first four months of EARN sometimes resembled a campaign. “We were travelling all over, talking to all sorts of people. Now we’re really seeing the kind of ‘snowball effect’ we hoped for. Businesses are coming to us,” he says.

“When companies work together on training issues, you reach a ‘critical mass’ and it becomes much more efficient,” adds Herzenberg. Beyond that, he also notes the spread of best practices that comes with close collaboration between businesses. At their most ambitious, he says, industry partnerships can not only plug job gaps but also improve efficiency across industries by spreading knowledge.

These programs represent a paradigm shift in higher education, from “push” to “pull” strategies. While the former can flood the labor market with low-value skills, the latter help focus training where it is most needed. In the hands of states, they are powerful ways to tap latent growth and connect people with quality jobs that already exist.

“We’re here in the trenches with the companies and constituents. It’s crucial that we take advantage of that,” says Senator Norris. “Workforce development and relevant education are, at once, the great challenges and best opportunities of our time.”

 

Compromise Realized: Workforce Bill is Signed

President Obama signed the Workforce Innovation and Opportunity Act in July after it easily passed both the House and Senate with strong bipartisan support. It represents a compromise between the previously House-passed SKILLS Act and the Senate’s version of a Workforce Investment Act update.

The law reauthorizes the workforce act originally passed in 1998, but which has been due for an update since 2003. It will continue to guide national workforce policy and govern job training and reemployment services for those out of work. It will also continue to support specialized programs for certain populations, such as young people or seniors.

The new law took effect immediately, and its deadlines begin hitting this month. In general, it leaves most of the old workforce development system intact, with some important changes. These include shrinking and reorganizing state workforce boards, restoring the governors’ 15 percent portion of the funding to be used for state workforce projects, standardizing performance measures for evaluating programs, and eliminating 15 programs deemed superfluous or unnecessary.

More generally, the legislation urges state and local boards to coordinate and connect the workforce and education systems better, particularly through the use of data gathered with the new performance measurements. It emphasizes the importance of identifying the needs of local industries and focusing training programs on those needed skills. It also gives states more flexibility to customize training programs and increase the opportunities offered to people with disabilities.

The Workforce Innovation and Opportunity Act is the result of a rare compromise in our nation’s highly polarized capital. To many it came as a pleasant surprise, especially with the mid-term elections right around the corner.     

–Jon Jukuri, NCSL

Seamless training

“Career Pathways” is an initiative designed to encourage greater coordination of career-oriented training programs among the different levels of education and state agencies. Better alignment eases transitions and eliminates redundancies along the road to a college degree.

Oregon started the initiative in 2004, and it has since spread to all community colleges in the state. One important aspect is that it has created more than 300 flexible certificate programs that businesses value. More than 8,000 students have earned certificates since 2008.

In a recent study, 44.5 percent of the certificate holders had found jobs, many earning more than $15 an hour. And around half of those employed had stayed at the same job for more than a year, earning $17.68 an hour on average.

In Virginia, to revitalize what had become a rather large, inflexible and inefficient Workforce Council, lawmakers passed a bill this year establishing a Board of Workforce Development that will bring together representatives from several relevant agencies to improve coordination and focus on results.

Tennessee’s Labor and Education Alignment Program to revamp the state’s workforce also applied aspects from the “Career Pathways” model in its efforts to coordinate state agencies, businesses and educational institutions on workforce goals.

A Business Perspective

Gallup teamed up with the Lumina Foundation to survey business leaders on their attitudes toward higher education. Only about 10 percent of the 623 business leaders interviewed felt colleges and universities were adequately preparing graduates for the needs of their industries. The most important factors they were looking for in applicants were: on-the-job practical experiences such as internships; good communication skills and the ability to write well; basic life skills and real-world common sense; good people skills and the ability to be team player; and a positive attitude and personality that shows respect, adaptability and accountability. A majority of the business leaders favored collaborating with educational institutions, although less than a third were currently doing so.

What Business Leaders Think
  Strongly Disagree Disagree Neutral Agree Strongly Agree

Higher education institutions in this country are graduating students

with the skills and competencies that MY business needs.

17% 17% 34% 22% 11%

Most jobs at my business require a post-secondary

degree or credential to be successful

38% 16% 16% 14% 16%
This country has the highest quality higher education system in the world.  14% 18% 32% 18% 19%

Our business must hire foreign-born workers due to a shortage of

American workers with the skills we need. 

57% 16% 14% 7% 4%

 

 

What Business Leaders Consider Important in Applicants
  Not Important At All Not Important Important Very Important
The candidate’s knowledge of the field    0% 2% 14% 84%
The candidate’s demonstrated skills in the field     2% 2% 16% 79%
The candidate’s major in college  8% 22% 42% 28%
Having a degree or certificate beyond high school  1% 4% 24% 70%

 

Source: Gallup. “What America Needs to Know About Higher Education Redesign,” Feb. 25, 2014.

Jack Queen, a former NCSL intern, is a student at Colorado College studying international political economy.

Additional Resources