The Gaps: Inefficiencies in Workforce Development

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Published on Virgil LLC.

As rent prices are skyrocketing and the costs of healthcare are taking the money out of Americans’ pockets, many workers are anxious about their place in the workforce. Despite the narrative of low unemployment rates, fundamentally speaking, with few prospects available to workers, workforce issues are amongst the most vulnerable links in this vast economy.

The expansion of automation, technology, and the introduction of artificial intelligence, the persistent challenges regarding workforce are arising, but with a different tone. The modern age brings along issues of employment deficiencies and inhibitors of employment that can obstruct efforts to alleviate the challenges faced by the common worker.

With regard to inefficiencies in the workforce, inequalities are exacerbated in the complicated mess of challenges. ‘Spatial mismatch’ and ‘skills mismatch’ are terms thrown around in the topic of debate. Spatial mismatch describes the inconvenience of employees who hold potential skills, but are unable to geographically access jobs that cater to his or her skillset.

Likewise, skills mismatch refers to someone who resides in a flourishing area for job opportunities but lacks the skills required for the available job prospects — almost the inverse of spatial mismatch. Both terms allude to reasons why, although unemployment is decreasing at a steady rate, there may not be job opportunities presented to unemployed, job-seeking, or workers; with these mismatches being most acutely felt by low-wage workers.

Urban denizens who reside in marginalized areas are often the victims of these two mismatches, such as those who live in the South Side of Chicago. The I-90/I94 highway serves as the malevolent barrier between the homes of the low-wage, job seekers in impoverished communities and the areas where economic and workforce opportunities reign strong with prospective job opportunities. There is an ineffective transit system that marginalizes those workers and stymies their ability to get to jobs. In essence, they cannot effectively pursue their financial advancement and livelihood needs, because of the great distances they must travel to reach available locations of work.

The University of Minnesota’s Center For Transportation Studies published a study entitled ‘Spatial and Skills Mismatch of Unemployment and Job Vacancies’ written by Yingling Fan, Andrew Guthrie, and Kirti Vardhan Das. The study discusses the details behind the two major obstacles for urban employment and the improvements needed to provide equal job opportunities for those who possess the right skill set.

In addressing spatial mismatch, they argue that although there are work-training programs, potential employees are still obstructed by the transit design between the inner-city and the suburbs. “However, broad-based car access promotion programs face serious difficulties due to funding and political constraints, while the effectiveness of conventional transit service in alleviating spatial mismatch is hampered by suburban built forms” (Fan, Guthrie, Das, Spatial and Skills Mismatch of Unemployment and Job Vacancies, Center For Transportation Studies, May 2016).

The authors map out the correlation between job vacancies and unemployment rates in North and South Minneapolis and Saint Paul. Measured four times since the year 2000, the 2011–2014 job vacancy survey demonstrates the strongest indicator of spatial mismatch. “Unemployed workers, are heavily concentrated in the inner cities, including North and South Minneapolis and the Midway and Eastside areas in Saint Paul. While

Figure 3–4 shows the central city to be important centers of opportunity for job seekers, large concentrations of job vacancies in the suburbs, along with the residential patterns of the unemployed workers align closely with the archetypal pattern of spatial mismatch” (Fan, Guthrie, Das, Spatial and Skills Mismatch of Unemployment and Job Vacancies, Center For Transportation Studies, May 2016). Although the rest of the data showed minimal consistency between job vacancies and areas of vast unemployment, the areas of Minneapolis and Saint Paul still show a correlation between the two, exemplifying locations of spatial mismatch.

If work-training programs and urban and suburban transit systems were to both be enhanced in their efficiency, there would be a strong impulse for those trapped in low wage jobs or those under financial distress to escape their circumstances and pursue higher wage positions and move towards greater financial stability while also decreasing unemployment and underemployment rates.

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Image from the American Census Survey Measuring the Concentrations of Job Vacancies and Unemployment from 2011–2014. (2011–2014 job vacancy survey and 2014 American Community Survey 5-year estimates, Fan, Guthrie, Das, Spatial and Skills Mismatch of Unemployment and Job Vacancies, Center For Transportation Studies, May 2016).

It seems that even with the issue of automation in the back of employers’ minds, many work-training programs are inefficient in fulfilling their objective to help potential workers to adapt to the modern, technology-driven economy. A skills-mismatch is present in the modern economy, with job-training programs ineffectively training their employees the right skill-set for their required job opportunities. Indications of this include the need for narrow, specialized skill sets and the elimination of domestic job positions if a company automates, relocates, or moves certain functions overseas.

Kevin Bauman’s and Cody Christensen’s article Improving Skills Through America’s Workforce Development System, in the American Enterprise Institute, briefly lays out the criticisms of modern workforce training programs with federal, state, and private funding and action. The authors indicate, ”fifty-three percent of jobs that require middle-skilled labor is available, but only forty-three percent of U.S. employees are qualified”. (Bauman, Kevin, Christensen, Cody, ‘Improving Skills Through America’s Workforce Development System, American Enterprise Institute, September 2008).

The authors continue to argue that to adapt to automation, employees must be sufficiently trained for specialized areas of the changing job market. Most notably, they must be upskilled in jobs that require training based on working with software or hardware. To help address these issues, Congress reauthorized the Workforce Innovation and Opportunity Act (WIOA) in 2014. WIOA includes funding for both the Department of Education and the Department of Labor to prepare workers as the ever-evolving economy moves towards mid-century. WIOA has six core pillars: 1. Youth services, 2. Literacy, 3. Career guidance, 4. Rehabilitation Services, 5. Vocational, and 6. Dislocated services.

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Image from CareerOneStop, “Workforce Development Board Finder.” (Table A1. Number of Local Workforce Development Boards, by State, Bauman, Christensen, Improving Skills Through America’s Workforce Development System, American Enterprise Institute, September 2018).

Along with the support of federal and state funding, most of the investment towards job training programs are provided by private employers. According to Bauman and Christensen, “Seventy percent of US firms offering some type of formal employee training, collectively costing them $177 billion per year” (Bauman, Kevin, Christensen, Cody, ‘Improving Skills Through America’s Workforce Development System, American Enterprise Institute, September 2008).

Although there are significant public and private investments made in workforce development training, there are still significant flaws and shortcomings that result in poor overall outcomes. With federal and state programs, bureaucratic requirements can be mismatched with employer needs or workforce skills.

Regardless of the funding mechanism (i.e. whether public or private), required training comes down to the market and economic needs. In the private sector, the traditional tools used to manage firms skills programs, are through either internships or job training. The quality of training varies vastly and depends on the specific practices and workforce philosophy of the individual company, its leadership, and the management team.

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Image from Georgia Workforce Provisions “WIOA Training Provider Initial and Continuing Eligibility Determinations Provisions.” (Table 5. Eligible Training Provider Requirements from Select States, Bauman, Christensen, Improving Skills Through America’s Workforce Development System, American Enterprise System, September 2018).

A critique with the autonomy in the design of privately funding training programs means that there are no standards that address workforce issues at the macroeconomic or systemic levels. Smaller firms tend to have greater issues of lack of organizational standardization where managerial oversight is limited, leading them to design reactive shortsighted workforce training that has ineffective long term outcomes and minimal skills strengthening.

Therefore, workers are left with skills that are no longer applicable or obsolete for the current workplace and/or cannot be transferred to the other opportunities as the workplace and opportunities evolve. There needs to be clear objectives or standards implemented by the firm for a stable work environment, and a clear motive for workers to pursue in their respective fields.

The lack of standardization which results in the training and skills misalignment is borne out in a 2018 Gallup survey. The survey indicated that only about 26% of working adults with college experience strongly agreed that their education is relevant to their work or daily life. To resolve this issue, several states approach potential solutions in different ways. Examples include increased funding for direct interventions (e.g. New York, Virginia) and task forces aimed at outcomes and needs alignment (e.g. Missouri). The recent passage of the Strengthening Career and Technical Education for the 21st Century Act at the federal level illustrates a clear focus on workforce development.

In 2018, 32 states introduced at least 166 bills related to workforce development. Enacted legislation covers multiple areas, including career pathways and skills, financial incentives, workforce data, partnerships, and working groups that center on three specific themes: i) collaboration and coordination amongst agencies/departments; ii) alignment between training/education and workforce needs; and iii) financial incentives for students receiving training for high-demand fields. At least half of the 2018 legislative activity created or increased incentives for students and institutions with alignment in high-demand fields.

Seeing strong legislative trends and increased media attention around workforce development, the Education Commission of the States sought to hear from states on how they align postsecondary credential outcomes with employer needs and economic development. A recent report indicates that 65% of jobs in 2020 will require some level of postsecondary education and skills training.

As states begin to gain a greater understanding of the landscape they are increasing workforce initiatives, policies, and strategies, to improve workforce development outcomes and to meet specific economic needs. Given different governance structures and political landscapes, states tackle this topic in many ways to fit their individual political realities.

Whatever the approach, workforce development is a critical issue that is being actively and widely discussed in traditional and social media. Despite the active engagement, most people continue to ignore the intricate details that make this a complicated issue that needs to be studied thoroughly to develop effective policies and investments. Virgil’s work with the Institute of Work and the Economy’s Achieving the Promise of Work project can lend some insights into some of that research and potential solutions.

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