Does Job Retraining Work?
It’s popular. It’s bipartisan. But will it really help you restart your career?
Democrats and Republicans in Congress, who agree on almost literally nothing these days, do agree about one way to jump-start the economy: They support job retraining programs. But this raises a question that’s critical for both the legislative debate and for Slate's Invent Your Future project about the best ways to restart your career: Does job retraining actually work?
The most honest answer is: It depends. There are certainly some programs that effectively usher workers into jobs. Take “Georgia Work$,” which the Obama administration used as inspiration for one of its retraining proposals. It matches potential employees with local businesses for on-the-job training. The state pays the worker a sub-minimum-wage stipend and allows her to keep her unemployment benefits for the duration of the program. The employer gets to try the worker out for free.
Politicians from both sides of the aisle have critically lauded it, and at least three other states have copycatted Georgia Work$. Yet, the numbers are not that impressive. Businesses have kept on just 1 in 4 of the 23,000 workers who have completed on-the-job training, according to the Wall Street Journal. It is better than nothing. But it is not much.
Broader studies of American retraining programs are not much more encouraging. In December, 2008, the Labor Department released an independent assessment of displaced worker programs funded by the Clinton-era Workforce Investment Act. The analysts followed thousands of workers who underwent retraining, starting between 2003 and 2005. It found that “it appears possible that ultimate gains from participation are small or nonexistent.”
But does that mean that the programs are not worth the hassle and the expense? Workforce experts and labor economists still say no: Retraining is no panacea, but applied correctly, it can certainly help to heal some of what is afflicting the jobs market. The question is what problem you are trying to fix. Are you trying to lower unemployment? Or are you trying to better prepare workers for the modern economy?
Retraining helps with the latter goal, but not so much with the former. To understand why, it is useful to delve into some econo-speak. Wonks like to describe unemployment as either “structural” or “cyclical.” An economy might have a problem with structural unemployment if it suddenly shifts from exporting cakes to exporting cars: Your bakers might not be ready to take on engineering and metals manufacturing.
That is a problem retraining can tackle. To use a more relevant example, the United States has an oversupply of construction workers, as least judging by their rate of unemployment. A successful retraining program might target former homebuilders and teach them a new, growing trade, like home health work.
So what should the United States be focused on teaching its 20 million under- and unemployed? Science, engineering, plumbing, and various health trades. Despite the crummy economy, many sectors are growing. The Manufacturing Institute and Deloitte recently released a survey, for instance, asking managers about the availability of qualified workers. Two-thirds of manufacturers had a “moderate to severe” shortage of workers.
“These unfilled jobs are mainly in the skilled production category—positions such as machinists, operators, craft workers, distributors and technicians,” Emily DeRocco, president of the Manufacturing Institute, said in releasing the study. “Unfortunately, these jobs require the most training and are traditionally among the hardest manufacturing jobs to find existing talent to fill.” In light of that, throwing federal dollars at the problem seems like a great idea.
But retraining will not help with what economists call “cyclical” unemployment—the joblessness caused by an economy-wide lack of demand. And that’s the kind of unemployment that we have right now. Retraining might change who gets a job, but it does not change how many jobs there are.
The administration seems cognizant of all these dynamics, and has tailor-built its retraining programs to get the biggest bang for the buck. One of its initiatives, Bridge to Work, would let jobless participants try out for a real gig, like Georgia Work$. It has also offered something called Skills for America’s Future, an initiative that brings together community colleges and corporations such as Gap and McDonalds, so the former could educate workers for the latter.
These are all good ideas that might help retrain the long-term jobless for growing industries, whatever they might be. But don’t expect them to have much impact on the broader unemployment rate.
Slate's Invent Your Future project is collecting your best real-world ideas about starting a business or reinventing a career. Share the best tip you got about starting your own business, the best advice for cobbling together gigs, the remarkable story of how you turned a hobby into a career. Read this introduction for more details and submit your story or tip below.
Annie Lowrey, formerly Slate’s Moneybox columnist, is economic policy reporter for the New York Times.