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Commentary By Steven Malanga

The Job-Training Charade

Even as the ranks of the unemployed and of those no longer looking for a job grow, the media are suddenly discovering more and more businesses which say they want to hire workers but can’t find enough qualified people. The Wall Street Journal earlier this week featured the stories of manufacturing companies having a tough time getting applicants with the right expertise to fill skilled jobs. A few weeks ago a technology headhunter from Silicon Valley created a stir when he said he couldn’t fill some job searches despite the still growing ranks of the unemployed. Economists, meanwhile, point out that the number of unfilled job openings in the economy has been rising for most of the last 13 months, but even so unemployment stays high.

While labor market research suggests at least some of this disparity is attributable to successive extensions of unemployment benefits, which keep at least some workers from taking new jobs, the bigger problem may be the mismatch between the skills of those seeking jobs and the jobs themselves. And that mismatch, which only appears to be growing wider, is a reminder of the continuing failure of government-sponsored job training and retraining programs, which are a signature part of labor policy in Washington these days.

It’s not as if the disparity between jobs and skills suddenly arose out of nowhere and surprised us. It’s been building for decades, and federal and state government have rolled out an alphabet-soup of training and retraining programs under legislation ranging from the Manpower Development and Training Act, to the Comprehensive Employment and Training Act, to the Job Training Partnership Act, to the current Workforce Initiative Act. Congress passed a number of these programs specifically because what preceded them was ineffective, and the new programs were supposed to replace them with something better. No such luck. Click here to find out more!

Although worker training is as fashionable as mom and apple pie among politicians, these programs consistently fail because they bear all the weaknesses typical of government social programs. They are frequently handed to politically connected groups to run without regard to expertise. The programs often focus on retraining for jobs in industries that politicians and bureaucrats favor now, not necessarily for industries that are most in need of workers. Meanwhile, journalists and policy makers often make the mistake of touting small programs (often run with private money) that do seem to succeed, assuming the model can work nationally, even though upsizing small, successful programs often fails.

In the 1980s, research on programs run under the Job Training Partnership Act, the key training vehicle for government programs at the time, found that they had virtually no impact on employment or wage levels among those who completed them. This was not surprising considering that the programs placed people in training for jobs with companies that were rapidly expanding at the time, like McDonald’s, which freely admitted they would have hired the workers even without the federally sponsored training. Money also went to train workers who were being hired by companies that had shut down plants in one location and reopened them somewhere else, providing a neat relocation subsidy to firms but no job gains. One commission looking at agencies running job training under the partnership legislation in New York City noted that they “do not consistently teach the right skills and overall are not of sufficient quality.’’

Still, convinced it could do the job, Congress moved on in 1998 to a new program, the WIA, which was supposed to focus on training for higher skill jobs and to deliver better services to training applicants. But old patterns are hard to break in Washington. The feds designated some $900 million to design the new system and then, according to a Government Accountability Office study, let out contracts to reshape the system largely through a no-bid, no-competition system of handing out grants. Seven years after Washington set up the system, the GAO reported, the feds had little idea of whether it had achieved what they hoped for, namely to “shift the focus of the public workforce system toward the training and employment needs of high-growth, in-demand industries.”

As a candidate, President Obama made renewing WIA a centerpiece of his labor agenda, though the GAO reported that some 60 percent of funding for a key WIA program to retrain workers never made it to the workers themselves but was eaten up in program administrative costs. Such utter lack of apparent concern for results perhaps explains why, as a GAO official testified before Congress, “We have little information at a national level about what the workforce investment system under WIA achieves.” Later he declared that the government doesn’t know “what works for whom” in the program.

Naturally, these failures didn’t prevent the government from including job training and retraining money in the 2009 federal stimulus package (an effort to include the money in the previous 2008 stimulus failed). A big chunk of the money went to retrain workers to work in “green” industries. In other words the government spent tax dollars to prepare workers for jobs in industries that are only growing because they are subsidized by tax dollars. Somewhere in all of that is something called the private sector, but it’s hard to find.

An ineffective job training program is worse than nothing. Beyond the tax dollars it wastes, such a program misleads the unemployed and ultimately demoralizes them. Today, for instance, many of those without a college degree who go to government retraining programs are routinely told by counselors that they need to “upgrade their skills” via government-financed classes that teach skills such as how to use basic word-processing or spreadsheet programs. But the unemployed soon find out these new skills make little difference in landing a job in today’s market.

About the most that these job training programs are accomplishing is to give jobs to politically connected insiders who otherwise might be out on the street with the rest of the unemployed.

This piece originally appeared in RealClearMarkets

This piece originally appeared in RealClearMarkets