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A Sector Approach to Federal Workforce Development: An Analysis of

the High Growth Job Training Initiative and SECTORS Act

By Aaron Smith

January 21, 2009

Proposal:

I propose replacing a flawed Bush administration workforce development grant

program, the President’s High Growth Job Training Initiative, with a new and

more effective grant-based sector program that targets low-income Americans.

The High Growth Job Training Initiative was created by the Bush Administration

in 2001 and through the Department of Labor (DOL) has given out almost $300 million

in grants for workforce development projects. Yet it has suffered from several high-

profile problems in administration that have been the subject of critical reports and

Congressional hearings. One excellent option for replacing this flawed program has

already been proposed, the Strengthening Employment Clusters to Organize Regional

Success Act of 2008 (“SECTORS Act”), S. 3368, introduced in July 2008 by Senator

Sherrod Brown, and likely to be reintroduced in 2009. The SECTORS Act retains the

positive elements of the High Growth Job Training Initiative, the up-front collaborations

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between industry and government that ensured a relatively efficient pipeline between

training and placement, while making a number of major improvements. Yet the

SECTORS Act falls short because if fails to directly target incumbent and unemployed

low-income individuals, those most in need of federal assistance, and it should be

amended when reintroduced in the new Congress to reflect this priority.

This paper will begin by exploring the research on the High Growth Job Training

Initiative, explaining its deficiencies and suggesting areas of improvement. As a GAO

report1 and a Congressional Committee hearing2 have documented, the President’s High

Growth Job Training Initiative has faced fundamental administration problems, from

non-competitive grants to inadequate metrics for measuring results that have only

recently been addressed by the Department of Labor. A report in 2007 by the Urban

Institute3 also highlighted the failures of the program as administered to collaborate with

the existing Workforce Investment Act infrastructure; local Workforce Investment

Boards sometimes did not hear about a major grant in their area until after the training

program has begun. The lack of metrics also made it difficult to determine to what extent

the program has benefited low-income workers, those in the most need of retraining, who

should be the focus of federal funding. Research indicates that little effort was made to

target low-income individuals overall although some grants did so incidentally.

1 GAO Report, “Employment and Training Program Grants”, Sept 23, 2008 2 US Senate Committee on Health, Education, Labor and Pensions: Subcommittee on Employment and Workplace Safety- “Investing in a Skilled Workforce: Making the Best Use of Tax-Payer Dollars to Maximize Results”, Sept 23, 2008 3Urban Institute Report, “Implementation and Sustainability: Emerging Lessons from the President’s High Growth Job Training Initiative Grants”, April 2007

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Second, this paper will describe the sector approach, which has been successful at

local and national levels as a workforce development strategy, and describes the strengths

of the SECTORS Act. The SECTORS Act is an improvement over the High Growth

program in two major respects:

• Grantees must engage Workforce Investment Boards- As a condition of

receiving a grant, grantees must consult with local workforce investment boards

as part of grant process, with preference given to programs that efficiently utilize

the existing infrastructure in the area

• Top-notch Oversight- All grant applicants must go through a competitive

process, DOL must put in place metrics for all grantees to track key data, and the

bill requires aggressive oversight of grant outcomes by the DOL.

The final part of the paper will describe how the SECTORS Act falls short

because by failing to explicitly target low-income Americans and how that problem can

be fixed. The High Growth program teaches us that without a requirement to serve low-

income Americans it will happen sporadically or not at all. I will propose that the

SECTORS Act be amended to require that 50% of grants awarded be targeted primarily

at low-income populations, a condition that can be met without sacrificing innovation or

effectiveness. After years of an administration that has cut funding to workforce

development by $9 billion since 20014, the time has arrived to restore the promise of

workforce development for workers, employers, and the economy.

4 The Workforce Alliance, Recommendations to the Obama Transition Team, http://www.workforcealliance.org/atf/cf/%7B93353952-1DF1-473A-B105-

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Introduction:

In November 2008, the month President Obama was elected, 533,000 Americans

lost their jobs.5 Unemployment claims rose to 573,000, the highest number in 26 years.6

More recently, President Obama described the economic downturn as “a crisis unlike any

we've seen in our lifetime” before stating that 2.6 million Americans lost their jobs in

20087. Yet, surprisingly, some areas of the economy continue to grow despite the

downturn. The education and health services sector grew by 45,000 jobs in December

2008.8 Over the last year, service occupations have added over 820,000 jobs.9 In fact,

The Bureau of Labor Statistics estimates that between now and 2014, jobs in

professional, business, educational, and health care services will grow by around 2.5% a

year.

The economic data suggests that even amidst the downturn, new positions in fast

growing industries will continue to be created, providing opportunities for unemployed

and low-income workers that badly need decent jobs. Moreover, the $800 billion plus

economic stimulus package being debated in Congress is expected to add millions of new

jobs in growing industries like health care, alternative energy, and construction.

However, both the economic transition, from old industries to new, and the work

7713F4529EBB%7D/ERP_RECOMMENDATIONS_OBAMA_TRANSITION_TEAM_12.08.PDF 5 Bureau of Labor Statistics, http://www.bls.gov/news.release/empsit.nr0.htm 6 USA Today, http://www.usatoday.com/money/economy/2008-12-11-jobless_N.htm 7Washington Post, Eli Saslow, Obama Returns to Ohio to Pitch Stimulus Plan, 1/16/09, http://voices.washingtonpost.com/44/2009/01/16/obama_speaks_on_american_recov.html?hpid=artslot 8 Bureau of Labor Statistics, http://www.bls.gov/news.release/empsit.nr0.htm 9 Bureau of Labor Statistics, http://www.bls.gov/news.release/empsit.t10.htm

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transition, from traditional occupations to new, will not be easy without workforce

development strategies that are flexible and quick enough to adapt to new economic

demands. The unemployed and underemployed need training and professional services

now to help them transition into good jobs and get the economy back on track.

Moreover, those innovative and socially positive industries that we want to promote also

need a well-trained workforce to grow. For example, workers are needed in “green jobs,”

like installing solar panels and building transmission lines to wind farms, not only for the

economic benefits but to help make us more energy independent.

The most promising strategy available in terms of speed and effectiveness is a “sector

strategies” approach to workforce development that combines industry, government and

labor groups to train and put people to work. Actively involving industry groups in

training efforts helps ensure that the programs reflect current workforce needs and

increases the chance that businesses will quickly put trainees to work. However, speed

and effectiveness in workforce development are not enough for a progressive

administration that has promised to do more to help low-income Americans. Workforce

development can be a tool for expanding the opportunities of the economic bottom-half

of this country but we must tailor our programs with those low-income workers in mind.

General Background

Workforce development as administered by DOL has two major components- the

nationwide workforce service system created by Title 1 of the Workforce Investment Act

(WIA) in 1998 and the independent grant programs. WIA created a nationwide system

of Workforce Investment Boards to advise the states and counties in which they operated

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on how best to implement workforce development programs. WIA also required the

formation of hundreds of one-stop centers where workers could receive career

counseling, find out about job openings, sign up for government assistance, and receive

training. Funding for Titile 1 of the WIA is about $3 billion each year and covers the

one-stop centers and state workforce development programs, with states getting an

allocation based on their services for three distinct populations: Adults, Dislocated

Workers, and Underprivileged Youths.10 While one-stop career centers do have some

flexibility, they are generally encouraged to offered a tiered level of service, starting with

“core” services (access to job listings, sign-ups for assistance programs), then “intensive”

services (workshops, case management, development of an employment plan) and finally

“training services.” Grant programs generally can be more flexible in their approach.

Training in the Title 1 program is generally paid for with a voucher that can be used at

eligible local training facilities, both public and private.

The second major component of DOL’s workforce development effort is three

independent grant programs, the High Growth Job Training Initiative (“High Growth”),

Workforce Innovation in Regional Economic Development (“WIRED”), and Community

Based Job Training (“Community Based”), which together have received about $869

million in funding since 2001.11 Funding comes from the H1-B visa program, where

employers pay a fee to get visas for highly skilled non-native workers. The WIRED

Initiative, created in 2005, provides grants designed to facilitate coordination and

planning of workforce development needs for a specific region, with a focus on

10 Gwen Rubenstein & Andrea Mayo, Training Policy in Brief: An Overview of Federal Workforce Development Policies pg 10 (2007) 11 GAO Report, “Employment and Training Program Grants”, Sept 23, 2008, pg 6

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competitiveness and regional economic development.12 So far, 41 regional grants have

been awarded for a total of $324 million.13 The Community Based program is designed

to strengthen the capacity of community colleges to train workers for key industries by

providing grants to fund collaborations between community colleges, the workforce

investment system, and employers.14 142 Community Based Grants have been awarded

totaling $250 million.15

The High Growth Job Training Initiative (“High Growth”)

The High Growth program is a sector-based model that provides grants to fund

private and public sector partnerships that give workers the skills needed for targeted

high-growth industries.16 The High Growth program was authorized by section 414(c) of

the American Competitiveness and Workforce Improvement Act of 1998 which allowed

DOL to develop workforce development grant programs funded through H1-B visa fees

paid by employers.17 The separate H1-B visa account set aside in section 414 for use by

the Secretary of Labor has provided a steady source of funding for the High Growth

program and gives DOL some flexibility in program design. The High Growth program,

like the other grant programs, is specifically administered by DOL’s Employment and

12 US Dept. of Labor, Employment and Training Administration, http://www.doleta.gov/wired/ 13 GAO Report, “Employment and Training Program Grants”, Sept 23, 2008, pg 6 14 US Dept. of Labor, Employment and Training Administration, http://www.doleta.gov/Business/Community-BasedJobTrainingGrants.cfm 15 GAO Report, “Employment and Training Program Grants”, Sept 23, 2008, pg 6 16 US Dept. of Labor, Employment and Training Administration, http://www.doleta.gov/Brg/JobTrainInitiative/ 17 Public Law 105-277, http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=105_cong_public_laws&docid=f:publ277.105

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Training Administration. Aside from training workers, the High Growth grants are

designed to serve as demonstration projects that other worker training initiatives can

replicate. Grants are targeted at fourteen industries defined as sectors expected to add

significant new jobs in the future and where technological change or innovation are

driving demand for skilled labor. The fourteen industries are health care, education,

information technology, advanced manufacturing, geospatial technology, aerospace,

homeland security, biotechnology, hospitality, construction, retail, transportation,

financial services and automotive. Since the program’s creation in 2001, DOL has made

166 High Growth grants for a total of $295.6 million.18

The Urban Institute has published two reports for the DOL Employment &

Training Administration that assess the strengths and weaknesses of current High Growth

grant recipients’ programs and analyze common characteristics.19 The 2008 report shows

that the industries on which the grants focused were most commonly Advanced

Manufacturing (33% of grants), Health Care (33%), and Biotechnology (16%).20 The

most common types of organizations to receive grants were industry groups/associations

(20% of grants), community colleges (17%), non-profit training providers (11%), and

state workforce agencies (10%).21 Geographically, the grants were spread across the

country, with Texas benefiting from the most grantees, and high numbers in California,

18 GAO Report, “Employment and Training Program Grants”, Sept 23, 2008, pg 6 19 Urban Institute Report, “Implementation and Sustainability: Emerging Lessons from the President’s High Growth Job Training Initiative Grants”, April 2007 20 Urban Institute Report, “Implementation Analysis of High Growth Job Training Initiative (HGJTI) Programs”, June 2008, pg 3 21 Urban Institute Report, “Implementation Analysis of High Growth Job Training Initiative (HGJTI) Programs”, June 2008, pg 6

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Pennsylvania and Florida.22 Grant amounts varied but 32% of the grants were for

between $1 to $2 million, followed by 28% between $2 and $4 million, and then 16% at

less than $500,000.23

Grantees vary considerably but common participants include industry groups,

major local employers, community colleges, and labor unions. One common model was

to have a community college or non-profit training institute receive the grant and partner

directly with a specific local industry that had indicated a strong demand for new skilled

workers, and had agreed to put up considerable matching funds. Most importantly, the

local businesses agreed to collaborate in designing the curriculum of the training to make

it most useful and give trainees through the program preference in interviewing and

hiring. Ideally, a pipeline is created from training programs into decent jobs.

In one of the more effective grants, the Oklahoma Department of Career and

Technology Education, a state technical education agency, and the High Plains

Technology Center, a non-profit training provider, partnered to receive High Growth

grants totaling about $4 million for 2003 through 2007. The grant funded a project which

provided hands-on training and safety courses for floor hands and derrick hands in the oil

and gas industry, which had problems with retention and recruitment of high skill

employees.24 About thirty oil and gas companies with operations in Oklahoma, Kansas,

Texas, and Arkansas contributed financially and in the development of the curriculum.

22 Urban Institute Report, “Implementation Analysis of High Growth Job Training Initiative (HGJTI) Programs”, June 2008, pg 8 23 Urban Institute Report, “Implementation Analysis of High Growth Job Training Initiative (HGJTI) Programs”, June 2008, pg 6 24 Urban Institute Report, “Implementation Analysis of High Growth Job Training Initiative (HGJTI) Programs”, June 2008, pg 20, 36, 66

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Over 2,100 people finished the training course from 2003 to 2006, with 76% finding

employment in the industry at wages ranging from $14 to $18/hr for floor hands and

$26/hr for derrick hands. The workers trained were a mix of incumbent and new

workers. The grant was successful in so far as it considerably improved the earnings for

at least 1,500 workers (as much as $17/hr for incumbent workers) at a relatively low cost

of $4 million. More precise cost-effectiveness analysis cannot be done because of the

very limited data on trainees and outcomes that the grantee is required to report, a

problem that will be discussed later. The weaknesses of the High Plains Technology

Center grant were common to most of the High Growth program grants. Specifically, the

local Workforce Investment Boards had relatively little involvement beyond referring

trainers and distributing brochures, there was no attempt to target low-income or low-

wage workers and the original grant was awarded non-competitively.

However, as the Inspector General’s Report makes clear, the success of the grants

in getting workers trained and hired varied quite a bit and for some grants was not even a

priority. To be fair, many grants were designed to build capacity for broader workforce

development efforts in a specific industry by developing models, training curriculum and

outreach tools like a website. For example, the Geospatial Information and Technology

Association was awarded a $695,000 grant to develop consensus geospatial occupation

definitions and to disseminate key information about the geospatial industry and

employment opportunities to Denver Workforce Investment Boards and other training

organizations using a newly designed website.25 There will often be a challenge in such

25 Urban Institute Report, “Implementation and Sustainability: Emerging Lessons from the President’s High Growth Job Training Initiative Grants”, April 2007, pg 53

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capacity-building grants in assessing effectiveness or quantifying impact, yet certainly

DOL could have done more in this regard.

DOL did not condition High Growth grant on targeting of services to benefit low-

income workers, and targeting of underprivileged groups appeared to be only a minimal

factor. The DOL website lists priorities for the High Growth grant program which

include training new and incumbent workers in high growth industries, and formation of

public-private training partnerships, but contains no mention of the specific populations

to be targeted.26 The official grant announcement in the Federal Register for High

Growth grants in the Energy Industry does not contain any language suggesting that DOL

encourages applicants that serve low-income populations.27 The grant announcement

does encourage grant applicants to target “untapped pools of labor” which it defines to

include “dislocated workers, individuals with disabilities, women, veterans, military

spouses, ex-offenders, new Americans, and out-of-school and at-risk youth who are

eligible to work” but it makes no mention of low-income individuals.28 The grant

announcement also does not encourage grant applicants to target people without a high

school degree or without a post-secondary degree, presumably those most likely to need

training.

The broader picture presented in looking at the 166 grants awarded, the numerous

IG, GAO, and Urban Institute reports, and the DOL’s grant announcements, shows a

program focused first on meeting employer labor needs and second on the needs of

26 US Dept. of Labor, Employment and Training Administration, http://www.doleta.gov/Brg/JobTrainInitiative/#InitiativeOutcomes 27 Federal Register, Vol. 73, No. 15, Jan 23, 2008, pg 3998 28 Federal Register, Vol. 73, No. 15, Jan 23, 2008, pg 4002

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workers in general. In a letter responding to the IG’s highly critical report in 2007, DOL

described the process by which it formulated the first round of grants.29 It first

identified high-growth industries which were transforming as a result of technology and

which were critical to the foundation of the economy. Next, it conducted Industry Scans

to identify key trends and needs for the given industry. The next step was hosting 37

Industry Executive Forums in which it invited CEO’s from companies in the relevant

industries, often with the help of industry trade associations, to expand their knowledge

about the industries workforce needs. Then, DOL hosted 15 Workforce Solutions

Forums, again with industry leaders but also incorporating pre-selected representatives

from education, labor, and the workforce system. Out of these forums, DOL explained,

came many unsolicited proposals, the vast majority of which became grants awarded

without a competitive process. However, as GAO documented, the solutions forums

were in fact dominated by industry groups with little to know involvement by Workforce

Investment Boards, and only limited involvement by unions or non-profits.30 Out of the

more than 800 participants in these forums, only 26 of the 650 workforce boards

nationwide were represented. As the Urban Institute report makes clear, the focus of

these grants was primarily on the needs of the employers.

29 Office of Inspector General, “High-Growth Job Training Initiative: Decisions for Non-Competitive Awards Not Adequately Justified”, Nov 2, 2007, pg 38 30 GAO Report, “Employment and Training Program Grants”, Sept 23, 2008, pg 15

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Problems Identified with the High Growth Job Training Initiative:

Most Grants Awarded Non-Competitively:

As documented extensively in a 2008 GAO report, the vast majority of the High

Growth grants and the majority of the money spent on the grants was awarded without a

competitive process. GAO found that 137 of the 168 grants awarded were non-

competitive or 83% of all the grants.31 As a result, $263.8 million out of the total $295.6

million spent went to non-competitive grants, or 89%.32 In contrast, the Community

Based and Wired grants were awarded competitively. As a result of the GAO report and

congressional pressure, DOL now awards all High Growth grants competitively.

Unclear Data on Program Effectiveness

As GAO also found, there was no uniform system for reporting on the results of

High Growth grants33, particularly with regard to their impact on the earnings of workers.

For example, the service and hospital workers union, SEIU, received a grant of $192,500

from the High Growth program to match $176,695 in outside resources, to fund a

program of pre-LPN training that would prepare current health care workers to pass the

Licensed Practical Nurse (LPN) entrance exam. SEIU conducted nine pre-LPN courses

with a total of 162 students. As a result of their work, 16% of the SEIU members passed

31 GAO Report, “Employment and Training Program Grants”, Sept 23, 2008, pg 11 32 GAO Report, “Employment and Training Program Grants”, Sept 23, 2008, pg 11 33 GAO Report, “Employment and Training Program Grants”, Sept 23, 2008, pg 7

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the test, more than double the 7% who had passed previously (but well short of the 50%

passage rate which was the program’s objective).34 Yet data is not available on whether

these trainees went on to pass the LPN course, whether they found jobs, and whether

their earnings increased from their previous level.

The WIA requires that a formal assessment be made of an initiative’s general

effectiveness and this is generally good practice, yet no such assessment has been made

for the High Growth program and the agency has not stated any plans to do so in the

future.35 As a result, policy makers must rely on the reports from the GAO, Inspector

General, and Urban Institute in assessing the program’s effectiveness.

Failure to Involve Multiple Industry Partners

While strong relationships with employers are key, grants were sometimes

exclusively targeted for one employer raising the question of whether federal dollars

should subsidize a single companies’ training needs. For example, a $136,000 grant was

awarded to the U.S. Hispanic Chamber of Commerce Foundation to promote career

opportunities in the automotive industry among Latino communities nationwide and to

address national shortages in automotive technicians, in partnership with BMW of North

America.36 The Foundation trained 22 students to receive automotive service

certifications, 20 of whom received positions at BMW dealerships as automotive 34 Office of Inspector General of DOL, “Selected High Growth Job Training Initiative Grants: Value not Demonstrated”, April 29, 2008, pg 14-15 35 Office of Inspector General, “Selected High-Growth Job Training Initiative Grants: Value Not Demonstrated”, April 29, 2008, pg 27 36 Office of Inspector General, “Selected High-Growth Job Training Initiative Grants: Value Not Demonstrated”, April 29, 2008, pg 53

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technicians, making at least $14 an hour. The grant clearly suffered from administrative

and oversight problems: the program did not specifically target Latinos for training, did

not document participant outcomes, and failed to produce a bi-lingual career education

website as promised. More broadly however, the basic structure of the grant was deeply

flawed in that it only went to one company. Sector grants should ideally engage many

companies within an industry, spreading key information and models of workforce

development to many relevant players in the hopes that it will foster future projects. The

federal government risks the appearance of unfair corporate favoritism when it provides a

training grant that exclusively benefits one company. Finally, the grant was awarded

non-competitively,37 which is not illegal, but runs contrary to government best practices

and again risks the perception of favoritism.

Failure to Engage Workforce Investment Boards

The process described above for planning sector partnerships and formulating

grant programs often excluded Workforce Investment Boards. GAO reports that many

workforce boards that were pursuing similar demand-driven approaches did not become

aware of the grants until after they were awarded. Yet, the Workforce Investment Boards

(“WIBs”), at least as envisioned under the WIA, are supposed to be the centerpiece of

programs to combine worker training and employment services with support services

offered by other agencies. Without the engagement of the WIBs in the grant-making

process, workers were less likely to connect with other worker-oriented services through

37 Office of Inspector General, “High-Growth Job Training Initiative: Decisions for Non-Competitive Awards Not Adequately Justified”, Nov 2, 2007, pg 3

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the grant and low-income workers would be less likely to hear about support services,

which in turn led to higher dropout rates.38 More generally, collaboration between WIBs

and grant programs ensure that programs are not duplicative and that any government

spending is leveraged for maximum impact. Some of the High Growth grantees reported

difficulties in finding sufficient numbers of workers to train, reducing the impact of their

programs. Presumably, engagement by WIBs could also help to recruit more workers

who would be appropriate for a particular training program. Strategically, local WIBs

may also be well suited to seek out opinions from a variety of interest groups: labor,

community colleges, One-Stop Centers, and business, and would have an understanding

of regional development in the area that would be very useful in designing grant

programs.

Failure to Target Low-Income Workers

As documented above, targeting of low-income workers was not a priority for the

High Growth program. It is true that a number of training programs involved low-

income people recruited from one-stop centers, community colleges, or community non-

profits. However, even these grant programs often failed to provide support services that

would help low-income workers to succeed in the programs. The Urban Institute

documented in its 2007 report that many grantees had difficulties with retention of low-

38 Urban Institute Report, “Implementation and Sustainability: Emerging Lessons from the President’s High Growth Job Training Initiative Grants”, April 2007, pg 15

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income workers in training programs when they did not address issues like child care,

transportation, or referral for family services.39

Amazingly, even grants that directly involved one-stop centers and low-wage

workers often did not have a plan for connecting those workers to supportive services.

For example, the National Retail Federation Foundation received two grants totaling

about $5 million, the first to develop retail skills centers to train and provide services to

retail workers and employers, and the second to work with retail employers to develop,

distribute and test competency and training curricula models for each level in industry

career ladders.40 The programs were often co-located in local one-stop centers. This

grant would have been ideal for expressly targeting low-income workers, since many

low-income workers already have some experience with the retail industry and the skills

required may be less than other industries. However, the program did not make any

concerted effort to target low-income workers, nor did it make an effort to connect

workers to support services. Some low-wage workers were likely helped incidentally by

the program, but no data is available to show the extent to which that occurred.

Keeping What Works: The Sector Strategies Approach

In light of all the problems listed above, it is time to eliminate the High Growth

Job Training Initiative, which could be done at the discretion of the new Secretary of

39 Urban Institute Report, “Implementation and Sustainability: Emerging Lessons from the President’s High Growth Job Training Initiative Grants”, April 2007, pg 15 40 Urban Institute Report, “Implementation and Sustainability: Emerging Lessons from the President’s High Growth Job Training Initiative Grants”, April 2007, pg 67

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Labor. Yet, some aspects of the program are attractive and should be retained in new

grant programs, particularly its sector approach. The Workforce Strategies Initiative in a

report on the benefits of sectors strategies for low-wage workers list five key

characteristics of a sector strategy:

1. Targets a specific industry or cluster of occupations

2. Intervenes through a credible organization, or set of organizations

3. Supports workers in improving their range of employment-related skills

4. Meets the needs of employers

5. Creates lasting change in the labor market system to the benefit of both workers

and employers41

From a theoretical perspective, the sectors approach is an attractive complement

to traditional government or non-profit run workforce development in that it more

actively involves the businesses who will do the hiring and that it allows for a more pro-

active, strategic approach to workforce development strategy. As demonstrated by the

results of numerous High Growth Job Training grants, such as with the High Plains

Technology Center, businesses involved in sector programs feel more invested in the

workers being trained and help ensure that the training received is most relevant, leading

to high rates of placement for trainees. Sector programs also create linkages between

organizations that train workers, employ workers, and provide assistance to low-income

workers that will help future workforce development efforts to flower. These future

41 Workforce Strategies Initiative, Strategies in Brief, November 2007, pg 2

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collaborations may be hard for federal agencies to predict but they represent the greatest

leverage for federal spending.

Moreover, sectors strategy can allow the federal government, through DOL, to

think about where jobs are likely to be created and provide grants specifically in those

areas, rather than merely responding after the jobs become available. For example, we

know that the number of “green jobs” related to the expansion of renewable energy

technology will boom in the near future, both for economic reasons and because the

Obama administration and Congress plan to expand subsidies for alternative energy

sources like wind and solar. In the slow-to-respond WIA system, one-stop centers and

job placement services would discover in a year that businesses needed more workers

with green skills, and then would take six months to develop a training program. During

that time employers would be short on workers, slowing economic growth, and potential

employees would be left unemployed or stuck in worse-paying jobs. In contrast, the

government can use a sectors approach to be pro-active. If it knows that green jobs will

peak in a year, it can provide grants now to create training programs in those growth

industries, allowing workers to be hired earlier and benefiting both labor and

management.

Another benefit of a sectors approach is that it focuses on direct training for jobs

that are already available, waiting to be filled, rather on developing general skills. It is a

mistake to argue that the jobs of the future will only depend on a college degree. We

should not forget that millions of jobs still only require a high school degree or less, and

that much of future economic growth will be in these middle-skill jobs. In fact, as Harry

Holzer highlights in his report on “America’s Forgotten Middle-Skill Jobs”, about “half

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of all employment today is still in the middle-skill occupations,” meaning jobs requiring

more than high-school but less than a four-year degree.42 Some of the fastest growing

occupations, for example Health Technicians or Construction workers or Solar Panel

Installers, fall into the middle-skill category. Moreover, the Bureau of Labor Statistics

predicts that 45% of all job openings between 2004 and 2014 will be in middle-skill

jobs.43 Providing direct occupational skill training through a sector approach is the best

way to help unemployed and low-income workers find these middle-skill jobs.

Finally, sector strategies encourage programs that provide training for low-income

workers who are employed but need greater skills and training to advance. Employers

are less likely to invest their own resources in training low-wage, low-skill workers,

contributing to a negative cycle where workers go from one low-wage job to the next.

Yet, studies have also found that poor job retention among low-wage employees is a

significant drain on the economy and costs employers millions. For this reason, some

have argued that retraining of incumbent low-wage workers become a priority of national

workforce development policy44, a vision that fits in well with sector strategies’ emphasis

on meeting employer needs. A strategy that focuses on industries where workers can

acquire skills that allow them to advance to a higher-paying, high-skill job would help

both industry and low-wage workers.

Empirical data also supports the use of sector strategies. For example, an Aspen

Institute study found that working participants in six well-established sector-based

42 Harry Holzer, America’s Forgotten Middle-Skill Jobs, 2007, pg 3 43 Harry Holzer, America’s Forgotten Middle-Skill Jobs, 2007, pg 4 44 John Wallace, A Vision for the Future of the Workforce Investment System, 2006, pg 7, www.mdrc.org/publications/440/concept.html

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programs increased their median personal earnings from $10,486 to $18,875, as a result

of increases in hourly earnings and hours worked. 66% of the participants worked year

round by the second year of the program, up from 23% prior to training. Finally,

participants found jobs with higher quality benefits. Two years after training, 78% of the

participants had jobs that provided access to health insurance and 58% had jobs that

provided paid sick leave, up from 49% and 35%, respectively, prior to training.45

A Promising Alternative: The SECTORS Act

The SECTORS Act retains the sectors strategy described above while addressing

many of the deficiencies of the High Growth program. While the SECTORS Act was not

intentionally designed to replace the High Growth program, that is a potential outcome

should the legislation pass. Moreover, because the two have similar approaches,

experience with the High Growth program should inform our expectations for how the

SECTORS Act will work. Officially titled the “Strengthening Employment Clusters to

Organize Regional Success Act of 2008”, it amends the Workforce Investment Act and

establishes a new Sector Partnership Grant program to be administered by the DOL.46

The grants would help to create or expand industry-specific partnerships to coordinate

workforce planning and training programs across multiple firms to benefit current and

future workers in the given industry. Available grants range from a $250,000 one-year

planning grant to a three-year $2.5 million implementation grant, with the potential for a

renewal grant. Grantees are given priority based on four factors, including grantees that 45 Workforce Strategies Initiative, Strategies in Brief, November 2007, pg 3-4 46 The Workforce Alliance, Sectors Act Summary, pg 1

22

work with “high-road employers” and those that coordinate with state and local

workforce investment, economic development, or educational organizations.47 However,

no priority is given to grantees that target low-income workers for training or services.

The SECTORS Act specifically addresses some of the administrative and

reporting problems of the High Growth initiative. It only awards grants competitively

and requires grantees to submit annual reports on their progress and activities with data

on pre-defined performance measures and whether specific benchmarks have been

reached. The benchmarks and performance measures are not described in the legislation

itself but would be established by the DOL. The Act also requires DOL to provide

technical assistance to grantees to ensure recording of key performance data and the

sharing of best practices with others in the field. In contrast to the High Growth program

which gave multiple grants to programs serving one large company, the Act gives

preference to sector partnerships that include multiple firms, including small and

medium-sized firms.48

Unlike the High Growth program, the SECTORS Act does not require that the

DOL focus on specific high-growth industries, preferring a more bottom-up approach

driven by the grant applicants themselves. However, the legislation does give priority to

grants that serve industries with a regional economic impact and “immediate workforce

development needs” so the program will likely serve similar industries to the High

47 The SECTORS Act, S 3368, Section 2, amending Section 174A of the Workforce Investment Act (introduced July 2008) 48 The SECTORS Act, S 3368, Section 2, amending Section 174A of the Workforce Investment Act (introduced July 2008)

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Growth program.49 A crucial difference with the High Growth program comes in the

funding mechanism. While High Growth was funded specifically by the H1-B Visa

program, a steady source of revenue set aside for the High Growth grants, the SECTORS

Act will be funded by general appropriations. I would suggest that that this funding

mechanism be changed in the reintroduced legislation once it becomes clear that H1-B

funds will be freed up with the possible elimination of the High Growth grant program,

and since the SECTORS Act would be a natural fit for the H1-B funding. Finally, a

looming issue for the new Congress is reauthorization of the WIA, which has been

simply extended since its creation in 1998. It is possible that any new grant program, like

the SECTORS Act, could be a part of the broader effort to revamp workforce

development, perhaps as attachment to the reauthorization of WIA.

Improving the SECTORS Act by Targeting Low-Income Populations

The SECTORS Act is important workforce development legislation that should be

passed. However, one improvement would make the legislation significantly strongly.

The legislation must be more directly targeted at low-income Americans. Helping low-

income workers, those who tend to have the least economic flexibility and least skills,

should be the basic principle of workforce development. Low-income workers have less

education to start with- only 46% have some education beyond high school, compared to

49 The SECTORS Act, S 3368, Section 2, amending Section 174A of the Workforce Investment Act (introduced July 2008)

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60% of workers overall.50 The middle and upper-income are more likely to have higher-

skills or advanced degrees that make it easier to transition to higher-paying, more stable

jobs. Moreover, those with economic wealth can afford to take more time off looking for

a decent job or to pay for specialized training or a degree, and are less likely to fall into

poverty after becoming unemployed. Most people, after all, find new and decent jobs

without any help from a workforce development program. Therefore, the goal of

workforce development spending should be to assist low-income people, those who

would not necessarily advance or find decent work under normal market conditions.

There is also a strong economic argument for making low-income people a

priority under the SECTORS Act. The basis of our economic growth historically, and

particularly during the 90’s, was consistent increases in labor productivity. Millions of

low-income people are underemployed and undertrained, and therefore less productive

than they could be. Low-income workers particularly tend to get caught in a cycle of

low-wage, low-skill jobs from which they struggle to advance. These workers represent

a vast untapped resource for our economy if they are trained in high-growth middle-skill

professions that need workers. For example, the 2005 Skills Gap Report of the National

Association of Manufacturers’ found that 90% of the manufacturers who responded to the

survey cited a shortage of skilled workers in a variety of occupations, a major drag on

future growth.51 Similar shortages of skilled workers have been found in the health care

50 The Urban Institute, Gregory Acs & Austin Nichols, Low-Income Workers and Their Employers: Characteristics and Challenges, May 2007, pg 4 51 The Aspen Institute, Sectoral Strategies for Low-Income Workers: Lessons from the Field, 2007, pg 22

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industry.52 As the Holzer report and the Bureau of Labor Statistics data cited above

showed, significant job growth will take place in middle-skill jobs over the next six years.

Furthermore, economic research has shown that the low retention rates for low-wage

workers represents a huge economic cost that can be alleviated by training and better

connection to services for low-wage incumbent workers.53 By addressing low

productivity and poor retention among low-income incumbent and unemployed

individuals, and by helping to fill middle skill job shortages, we can reduce economic

waste and spur our economy to future growth.

Some may argue that targeting low-income people makes grant programs harder

to implement, less efficient, and less business-friendly. It is true that it will be slightly

harder for grant-based sector programs to find workers that businesses will want if they

must first select from a smaller and less well-educated pool of labor. There will also be

an added cost as the selection and screening process become more difficult. Low-income

workers may also be more likely to drop out of training programs without supportive

services. Yet, evidence from sector programs that do serve primarily low-income

workers shows that it can be done successfully. A 2007 Aspen Institute report highlights

numerous examples of sector programs that have successfully targeted low-wage

workers, meeting the needs of employers and workers, and many of these programs lack

federal funding.54 The High Growth grant program also had many instances where

52 The Aspen Institute, Sectoral Strategies for Low-Income Workers: Lessons from the Field, 2007, pg 22 53 John Wallace, A Vision for the Future of the Workforce Investment System, 2006, pg 7, www.mdrc.org/publications/440/concept.html 54 The Aspen Institute, Sectoral Strategies for Low-Income Workers: Lessons from the Field, 2007

26

training programs successfully served low-income individuals, as in the SEIU program

mentioned above that provided pre-LPN training.

Federal government assistance programs, such as Medicaid, TANF, food stamps,

etc. are generally designed to help low-income people, those most in need of help.

Workforce development used to have a similar focus. In fact, one of the criticisms of the

1998 WIA was that it had no explicit targeting requirement, unlike the program it

replaced, the Job Training Partnership Act, which required that 90% of funds for adults

be required to target low-income people. It is widely known that the Bush

Administration put less funding into overall workforce development and specifically Title

1 of the WIA. As a result the total number of workers trained each year declined by 17%

from 1998 to 2003.55 However, the reduction in service has been especially severe for

low-wage and low-income citizens. Between 2000 and 2003, the number of low-income

adults receiving training declined by 14%.56 In comparison, in 1998, the last year of

JTPA, 96% of trainees were low-income.57 There have been recent attempts to

reauthorize WIA, with some proposed bills including language that makes serving low-

55 Abbey Frank & Elisa Minoff, Center for Law and Social Policy, “Declining Share of Adults Receiving Training under WIA are Low-Income or Disadvantaged”, Dec 2005, pg 1 56 Abbey Frank & Elisa Minoff, Center for Law and Social Policy, “Declining Share of Adults Receiving Training under WIA are Low-Income or Disadvantaged”, Dec 2005, pg 1 57 Abbey Frank & Elisa Minoff, Center for Law and Social Policy, “Declining Share of Adults Receiving Training under WIA are Low-Income or Disadvantaged”, Dec 2005, pg 3

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income people a high priority, however nothing has passed and it remains to be seen how

the current Congress will address low-income individuals in WIA reauthorization.58

It would be easy to say that an Obama DOL would be more naturally inclined to

support training for low-income people, yet this view overlooks the pressure imposed on

government officials and grantees to show particular results. As stated above, the High

Growth program also has no requirement for targeting low-income workers and the

experience with that program shows that without explicit prioritization of grants targeting

low-income people, they are unlikely to get much attention. In the High Growth

program, grantees often failed to provide services to low-income people even when

convenient, as in the National Retail Federation Foundation grant described above.

When grantees know that grant renewal depends on other factors, such as number of

trained workers, they will focus on those factors instead of the population served.

Reports on the impact of WIA similarly show that because one-stop centers are evaluated

based on the numbers of workers trained and placed, staff have a strong incentive to

prefer more-educated, higher income people who might have fewer challenges in being

employed.59 This is one of the reasons why far fewer low-income people are trained now

than in the late 1990’s under JTPA.

58 Abbey Frank & Elisa Minoff, Center for Law and Social Policy, “Declining Share of Adults Receiving Training under WIA are Low-Income or Disadvantaged”, Dec 2005, pg 6 59 Abbey Frank & Elisa Minoff, Center for Law and Social Policy, “Declining Share of Adults Receiving Training under WIA are Low-Income or Disadvantaged”, Dec 2005, pg 5

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The SECTORS Act should not repeat the mistakes of the High Growth program

in forgetting low-income individuals. It is economically wise and a smart use of limited

government resources to focus this new workforce development program on low-income

workers, and we should not rely on good intentions in lieu of clear statutory language in

striving to achieve that goal.

Amending the SECTORS Act to target low-income Americans

Three relatively simple fixes to the legislation would improve the SECTORS Act

by placing an emphasis on low-income workers. First, grantees should be required to

record the before and after wages and incomes of trainees, as well as whether and what

public assistance they receive before and after the program. The legislation currently

only requires recordkeeping on the number of workers with increased wages, the

percentage of workers with increased wages, and the average wage increase.60 These

new metrics are essential for measuring the success of the program, not only because they

might show how many trainees were lifted out of poverty, but also whether training

programs save the government money by getting people off public assistance.

The second fix is in the priorities section used to give preference in judging grant

applications. As the legislation is currently written, DOL would be required to give

priority to programs that: 1) work with “high road” employers within a targeted industry

cluster, 2) help workers move toward economic self-sufficiency, 3) address the needs of

60 Strengthening Employment Clusters to Organize Regional Success Act of 2008, S 3368, Section 2(A)d(2)F

29

firms with limited resources, and 4) coordinate with other state and local groups doing

workforce development and economic development. These aims are admirable, although

very general, and they could potentially coincide with training programs that target low-

income individuals. Yet, a lesson of the Workforce Investment Act’s implementation is

that without explicit focus on serving low-income people, even the best intentions are

often forgotten by agencies eager to approve programs that show progress within the

existing metrics.

A fifth priority should be added to the legislation to give priority to grant

programs that focus training efforts on low-income populations. The text should say

“populations,” not individuals, because the intent is not for programs to aggressively

weed-out middle-income trainees but rather to start with a focus that will naturally draw

in low-income applicants. Programs that state they will focus trainee recruitment on

referrals from local food stamp recipients, or underutilized low-wage workers, or that

target specific low-income neighborhoods or low-income racial or ethnic minorities will

be given preference. The new metrics on income cited above will be used to ensure that

the grantees follow through on their promises, and will be a basis of grant renewal

decisions.

Finally, the legislation should mandate that 50% of the grants awarded meet this

fifth priority for serving low-income populations, in order to ensure that the DOL does

not merely pay lip-service to the goal of focusing on the neediest. This is significantly

lower than the 90% low-income targeting requirement in the JTPA and reflects the fact

that sector programs are somewhat harder to target than individual-focused programs and

require greater flexibility. The DOL will still have sufficient flexibility in awarding

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innovative grants. In fact, targeting low-income populations is not the end of the grant

applicant’s challenge; he must also compete to have the best proposal on priorities one

through four. And 50% of grant applicants will not have to target low-income

populations at all.

However, one of the purposes of these sorts of grant programs is to spur

innovation and models for how government dollars can be best leveraged to reach our

goals. This challenge is greatest when it comes to the need effective programs for

serving low-income people, the group that is the most frequent recipient of government

aid. For example, one of the big difficulties in training programs that serve low-income

populations is in designing screening procedures that find the right trainee for the

position and avoid wasteful dropout. Grants that develop more efficient screening

protocols would provide invaluable models to state and local governments and non-

profits serving low-income individuals around the country. By making low-income

populations a priority, the SECTORS Act can spur development of new models for

training of low-income populations, as well as improve the effectiveness of future

spending and cut overall costs. However, this sort of needed innovation only happens

when we explicitly target government training dollars at programs that serve low-income

individuals.

Conclusion:

It is commonplace for agency initiated grant programs, such as the High Growth

Job Training Initiative, to fade away as a new administration takes charge. In light of the

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documented problems in administration and targeting of High Growth grants, the Obama

DOL would be wise to let this program die. However, that does not mean we cannot

learn from the High Growth program or that the positive aspects of the program should

simply be lost as the new administration seeks to make its mark. The High Growth

program showed that a sector strategies grant program administered by DOL can be

successful at quickly and effectively training workers to fit current labor market needs

through public and private collaborations. It also showed that worker and business

interests can be aligned-- in the successful grants, workers were quickly placed in

businesses needy for their expertise and increased their wages and job quality as a result.

The SECTORS Act, S 3368, has the potential to be the ideal replacement for the High

Growth program, retaining the strengths of its sector approach while addressing its

weaknesses by improving grant administration and increasing interaction with WIBs.

The SECTORS Act has to be reintroduced but with the support of Democratic Senators

Sherrod Brown and Patty Murray, and Republican Senator Olympia Snowe, and allies

like the Workforce Alliance, it may be able to build the coalition needed to pass.

However, it would be a mistake for Congress to enact this legislation without ensuring

that grant money will be focused on those most in need of training, low-income

individuals seeking to break out of a cycle of working poverty. Simple changes to the

legislation, a prioritization of grants serving low-income populations, new metrics on the

incomes of the people served, and a 50% goal for low-income targeted grants would

achieve the desired end. By creating programs that help train and place low-income

people in better jobs in high-growth industries we not only start to turn around the

economy but fulfill President Obama’s promise of shared prosperity for all Americans.

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Thank you to all those who were willing to speak to me about the High Growth Job

Training Program, the SECTORS Act, and workforce development generally. Special

thanks to: Kermit Kaleba, Senior Policy Analyst at the Workforce Alliance; Lauren

Eyster, Researcher at the Urban Institute; Allegra Baider, Policy Analyst at the Center

for Law and Social Policy; and Jeff Grabelsky, Director of Construction Industry

Program, Cornell School of Industrial and Labor Relations.