Is There a Role for Public Support of Incumbent Worker On-the-Job Training?

Abstract

States have begun to use training subsidies as a policy tool for employment retention and business competitiveness. This paper summarizes a survey of states concerning their investments in incumbent worker training. Altogether, states are investing about $550 to $800 million, which is perhaps one percent or less of total private sector training costs. The paper further discusses a study conducted for one state in which we found significant fiscal returns implying that underinvestment of public funds for incumbent worker training may be occurring. In this state, primary sector jobs were created or retained at a public cost of less than $9,000 per job; a cost that rivals or bests most economic development initiatives.

Taking Stock of Programs to Develop Socioemotional Skills: A Systematic Review of Program Evidence

“…Finally, several studies of apprenticeship training in European countries find high rates of return for participants, in the range of 9 percent to 15 percent (Adda and others 2013; Bougheas and Georgellis 2004;Clark and Fahr 2002;Winkelmann 1996). Consistent with those findings, Hollenbeck (2008) estimates that in the state of Washington (United States), social and governmental returns (for example, taxes received on earnings and reductions in spending on unemployment insurance, Temporary Assistance for Needy Families, food stamps, and Medicaid benefits) to apprenticeship programs administered by the state's Department of Labor and Industries are greater than 20 percent within the first 2.5 years after apprentices leave the program.…”

Chapter 11. Creating Effective Education and Workforce Policies for Metropolitan Labor Markets in the United States

“…For displaced as opposed to disadvantaged workers, the best evidence on education and training comes from Jacobson, LaLonde, and Sullivan (2003), who find quite sizable returns in more technical fields and/or those facing strong labor market demand. For incumbent workers, somewhat less rigorous evidence strongly suggests that state-level tax credits raise the amount of such training and provide costeffective returns to less-educated frontline employees who get such training (Holzer et al 1993;Hollenbeck 2008). Finally, for low-income youth, we have some recent evidence from the Youth Opportunities program at the U.S. Department of Labor, which provided grants to 36 low-income neighborhoods to generate comprehensive education and employment programs for youth.…”

Untitled

“…For example, customized job training is a very effective incentive. Research suggests that, per dollar, customized job training might be 10 times more effective than tax incentives in encouraging local business growth (Hollenbeck [2008]; Hoyt, Jepsen, and Troske [2008]; see also Holzer et al [1993]). Other effective customized services include manufacturing extension programs, which have been shown to improve productivity (Jarmin 1998).…”