Executive Summary There is little question that trends in the New Economy have changed the way business is done, and knowledge and skills now determine one’s competitive edge. Research shows that more and more jobs are requiring higher levels of skill than in the past. Research also shows that the labor force, as a whole, has not adapted to the changes, resulting in low-skilled, low-waged workers. As it stands, businesses lack qualified workers, employees lack the ability to get quality jobs, and governments are faced with the challenges of both. Best Practices The Workforce Investment Act of 1998 (WIA) provides a foundation for state and local workforce development systems, particularly in the creation of One-Stop Centers. The goal of the One-Stop is to provide businesses and job seekers with convenient access to employment, education, training, and information services in a localized area. States at the forefront of workforce development change have gone beyond the framework of the WIA and demonstrated innovative measures in skills assessment and training. From these innovations, several trends in successful workforce transformation have surfaced. First, strong leadership and active involvement from the governor is necessary for successful workforce transformation. Second, states must create a unified workforce development system. Approaches to unifying systems include program consolidation, program coordination, developing and implementing performance indicators, and the creation of One-Stop Centers. Third, workforce development must be recognized as a core economic growth strategy. States must redefine the roles and focus of key agencies and departments, directing attention to training, retraining, attracting and keeping a qualified workforce. Adopting a dual customer approach to workforce development is another trend in successful workforce development transformation. Employers and jobseekers must be treated as equal customers in the workforce development system. Many employers have a negative view of state workforce systems. In a “Jobs for the Future” survey of employers actively working with public employment and training systems, fewer than half responded that the local Workforce Investment Boards engaged local employers in meaningful ways and just half said they would recommend their local one-stop center as a valuable resource to other employers. Changing employers’ views and involving them in workforce development systems is necessary for successful workforce systems. Skills partnerships have arisen as a proven strategy in assisting low-income, low-waged workers in gaining employment and moving into higher level positions. Skills partnerships are industry-based partnerships that combine companies, educational institutions, training programs and interested community parties in an effort to address local and regional problems such as skill or worker i shortages and a lack of career advancement opportunities for low-skilled workers. Types of skills partnerships include single-firm, single industry, sector-based and cross-sector partnerships. Successful skills partnerships require significant planning and consideration. Creation of partnerships should be incremental, starting simply with only one firm, industry or skill level and adding components as the need, resources and interest increases. Three stages in the development of skills partnerships are: (cid:1) Assessment and Planning (cid:1) Partnership Building and Program Development (cid:1) Operation and Sustainability/Expansion Once in operation, a skills partnership will greatly benefit local, regional and state workforces. Employers will have access to the newly skilled workers. Meanwhile, workers will begin to view low-skill, entry-level positions as entry points into a workforce development system that provides opportunities to increase their skill levels and advance their careers. Over time, a skills partnership will result in a system that is both more responsive to employers and that gives workers clear pathways for advancement through the labor market. Plan of Action Missouri’s workforce development system has a variety of programs available for target groups with employment needs including Adult, Dislocated Worker, Veteran and Youth Programs. There are thirty-two career centers in fourteen Workforce Investment Regions in the state to facilitate the workforce development system. Employers have an opportunity to receive tax credits for the hiring of individuals from targeted groups. Additionally, employers have the opportunity for assistance with training programs, primarily aimed at new job creation. The Missouri Rapid Response Team aids businesses and employees faced with closings or layoffs. Missouri has also recently launched Toolbox, a computer-based system to integrate records from state and local partner agencies, in an effort to help streamline services. Missouri has made strides in workforce development. Missouri met or exceeded many WIA performance measures for Program Year 2000, missing only three of the seventeen criteria. Despite these efforts, Missouri still has room for improvement, ranking in the bottom half of the country in two key indices measured by the Progressive Policy Institute. Further, according to the resources sited for this report, current Missouri practices are not acknowledged as national best practices. ii Based on this study’s findings, Missouri should consider the following action plans: (cid:2) Establish a dual customer focus, addressing employer needs and allowing them to be active in the workforce development process; (cid:2) Develop skills partnerships. MERIC’s Target Missouri II analysis is a tool Missouri can use to set up these partnerships; (cid:2) Cross train staff and build seamless integration of services to eliminate duplicative services and create a more customer-oriented environment; (cid:2) Market and promote Missouri’s workforce system to change misperceptions about the services offered. Creating informative, easily navigable, crosslinked websites is an easy way to promote programs; (cid:1) Improve accessibility to Career Centers. While Missouri has thirty-two career centers, there are areas of the state outside of easy access to any of them. Several areas are more than 35 miles from a full-service center, particularly in southeast Missouri, where unemployment tends to be high. Missouri must redefine workforce development to remain competitive. The economy is changing and Missouri must adapt. A highly educated, trained workforce would allow Missouri to more easily respond to changes. The suggestions and best practices in this report outline ways Missouri could improve its workforce system, thereby improving the quality of its workforce and economic vitality of the state as a whole. iii WWoorrkkffoorrccee TTrraaiinniinngg iinn tthhee NNeeww EEccoonnoommyy Table of Contents Importance of Workforce Training 1 Benefits of Workforce Training 2 Workforce Investment Act of 1998 5 Successful Workforce Transformation 7 Skills Partnerships, A Proven Strategy 15 Workforce Training in Missouri 24 Suggestions for Workforce Development in Missouri 27 Conclusion 32 iv Importance of Workforce Training The nation’s workforce is not keeping up with the changing economy. According to a report by The Conference Board in 1999, more than 40 percent of the U.S. workforce and more than 50 percent of high school graduates do not have the basic skills to do their job.1 The National Federation of Independent Business reported that 71 percent of small employers recently seeking employees say qualified employees are hard to find. Also, the National Association of Manufacturers reported that 80 percent of manufacturers continue to experience a moderate to serious shortage of qualified job candidates, despite the slowing economy. With the transition of the world from industry to information, human skills and knowledge are the keys to competitiveness. The largest growing categories of jobs require more education than in the past. For example, managerial and professional jobs increased from 22 percent of all jobs in 1979 to 36 percent in 1999.2 Nearly two-thirds of the new jobs expected between 1996 and 2006 will require some skills or education beyond high school. Estimated New Jobs by Skill Level, 1996-2006 40% 35% 38% 30% 25% nt 26% ce 20% 24% er P 15% 10% 12% 5% 0% Minimal Skills Basic Skills Competent Skills Advanced Skills (HS Dropout) (HS Graduate) (Some postsecondary) (BA or higher) Source: Council on Competitiveness3 Further, the wage gap between those with varying levels of education indicates that the current labor force is not meeting skills demanded by the job market. The disparity in earnings between a high school and college graduate between 1979 and 1998 increased from 38 to 71 percent. 4 1 Bloom, Michael R. and Lafleur, Brenda. “Turning Skills Into Profit: Economic Benefits of Workplace Education Programs.” The Conference Board (1999) p 3. 2 Atkinson, Robert A. “Building Skills for the New Economy: A Policymaker’s Handbook.” Policy Report. Progressive Policy Institute. (April 2001) p. 2. 3 As quoted by Van Opstal, Deborah. “The Skills Imperative: Talent and U.S. Competitiveness.” Issues in Science and Technology. (Fall 2001) Volume 8, Issue 1, p. 52. 4 Van Opstal, p. 52. 1 Some of the events that have led to this need for higher skills include changes in technology, globalization, and demographics. Technological advances have changed the economy and the way business is done. The use of machines and new technology not only reduced the need for low-skilled workers who once performed those tasks, but also created a need for a more highly skilled labor force to maintain and operate them. Globalization has also created a demand for a skilled workforce. There is now direct competition between low-skilled workers in the U.S. and low-skilled, and often, lower-waged workers in other countries. Changing demographics of the U.S. are also contributing to the new labor force demands. By 2030, with the aging baby boomers, almost 30 percent of the workforce will be over the retirement age, leaving large gaps in the experience and skills of the labor market.5 The speed of the New Economy is redefining the labor market as well. As new businesses are constantly forming and established businesses are changing in response to new competition, employee turnover rates are high. On average, a person entering the workforce today is likely to change jobs seven to ten times.6 Fewer people stay in one job or with one company for their entire career. The Bureau of Labor Statistics finds that between the ages of 18 and 32, a person holds an average of 8.6 jobs. As a result, companies are generally less willing to invest in training, only to lose it to a competitor. Between 1988 and 1999, business investment in training, as a share of GDP, fell 18 percent.7 A workforce lacking necessary skills demands response from both businesses and government. In the New Economy, development of an educated, trained workforce is essential to avoid the risk of being left behind the rest of the world. This report will clearly show that the benefits of workforce training outweigh the costs, financial and otherwise, for employers, workers, and state and local communities. Benefits of Workforce Training Benefits for Employers A one percent increase in worker skills has the same effect on output as a one percent increase in the number of hours worked.8 Various types of employee training and skills enhancement can greatly benefit an employer. Even the most basic skills training, such as in reading and math, can be instrumental in the success of a company. The National Association of Manufacturers’ Center for Workforce Success reports in The Skills Gap 2001 that manufacturers find the top 5 Van Opstal, p. 52. 6 “Life Advice About Changing Your Job.” MetLife Consumer Education Center <www.pueblo.gsa.gov/cic_text/employ/change-jobs/changjob.htm> 7 Atkinson, p. 1. 8 As quoted by Van Opstal, p. 53. 2 deficiency for both current hourly positions and applicants for hourly positions is a basic lack of employability skills, such as attendance, timeliness, and work ethic. In a study by The Conference Board on Workplace Education Programs (WEPs), many direct and indirect benefits of workplace training were identified. The Board lists a number of direct economic benefits, including increased output of products and services, reduced time per task, reduced error rate, a better health and safety record, reduced waste in the production of goods and services, and increased customer and employee retention. Indirect benefits, though difficult to measure, were also observed. Some of these were better team performance, improved capacity to cope with Excel Corporation change in the workplace, and improved quality of work.9 Workplace Education Program For example, the Chicago Family Health Center cut time Workplace Education Programs per task by 30 percent by training employees to converse resulted in increased employee with clients in Spanish and also in medical terminology. retention for the Excel Corporation, a subsidiary of Cargill. Seventy-seven Companies willing to utilize workers’ skills and provide percent of longstanding employees training and responsibility can increase productivity and who participated in WEPs remained save money. The Miller Brewing Company’s brewery in at the company for at least another Trenton, Ohio produces 50 percent more beer per worker year, versus only 58 percent of non- participants. Also, 70 percent of new than the company’s next-most-productive facility, in part hires that took WEP classes stayed because a small, 13-member crew was trained to work in with the company at least one year, teams to handle the overnight shift without oversight.10 compared to only 23 percent of those who did not. As noted in the previous examples, workforce training can yield many benefits for employers, including greater employee retention, increased productivity, and better quality of life in the workplace. From the worker’s perspective, however, training can improve more than just skills in the workplace. Benefits for Workers It is often the disadvantaged, discouraged, or low-skilled worker that needs the most assistance to find and retain a self-sustaining job. However, only one-third of the billions of dollars companies spend on training is intended for less-skilled workers. As a result, those who can benefit most from training do not receive it. Even relatively small advances in education and skills can greatly enhance the quality of life of someone struggling with economic disadvantage. Participants in a Los Angeles County welfare-to-work program who chose to receive education and training were earning 16 percent more than other participants after 3 years and 39 percent more after 5 years.11 9 Bloom, p. 4. Workplace education programs (WEPs) develop basic skills. They may target basic workplace skills exclusively (e.g. the ability to read and apply documents, the ability to use numbers, English as a Second Language), or may incorporate technical and job-specific training within a broader training framework. 10 Atkinson, p. 2. 11 Van Opstal, p. 54. 3 While workers’ benefits from training and education include increased wages, the ability to compete for better jobs, and becoming self-sufficient, there are many other benefits as well. Employees experience improved self-esteem, a greater adaptability and flexibility within and outside of the workplace, and the ability to take on more responsibility.12 A sense of motivation and commitment to a job can encourage an employee to work harder and make additional advancements. The cumulative effect of these benefits is to produce not only a better worker with the opportunity to earn higher wages, but also a better community citizen. Benefits for Community and State States and communities have much to gain from an educated, highly skilled workforce. With a skilled workforce comes economic prosperity and a stronger community. Workforce training leads to better wages for workers, allowing them to leave public assistance programs. An area with a strong workforce is more attractive to incoming businesses and entrepreneurs seeking workers. Businesses can maintain operations within the state and will not have to seek qualified employees elsewhere. Also, the intangible benefits that employees receive from training, such as confidence, a sense of responsibility and increased morale, can reflect upon the community. Employees may participate in areas outside of work such as school organizations or voluntary service programs, creating a stronger community. These positive effects are then transferred to the state as a whole. On the other hand, being left behind in the wave of the New Economy could have regrettable effects. States risk high unemployment rates, as workers would not be qualified for the types of jobs that are available. Those left behind may require some sort of public assistance in order to survive. The wage gap between skilled and unskilled workers could grow as the demand for knowledge and skills pushes the skilled wage higher. Employers would be forced to overpay those with skills, or extensively train those without, creating unnecessary costs and reducing productivity. Worse still, companies may seek workers elsewhere in an effort to save money. Thus, job seekers would have limited access to jobs. The jobs available to low-skilled workers would not provide financial resources for self-sufficiency, compelling them to seek additional sources of income or rely on public assistance. An unskilled workforce in the information-rich New Economy is a problem that states and businesses must address. Technology and globalization have changed the economy, and the U.S. workforce has fallen behind. Training and preparation of today’s workforce requires a new approach. Any new workforce development system must meet the needs of both employers and workers, and work within the constraints of limited resources. The Workforce Investment Act of 1998 was created as a foundation for state workforce development systems. The federal act addresses streamlining services offered by states, 12 Bloom, p. 12-13. 4 accessibility of services, and partnering businesses, government, and other employment-related organizations to construct a comprehensive workforce training and development system. Workforce Investment Act of 1998 The Workforce Investment Act (WIA) provides a framework for a workforce training and employment system that focuses on the needs of businesses for skilled workers and the training, education and employment needs of job seekers. Required One-Stop Partners The Act outlines both a state and local system of workforce development. The WIA replaced the Job (cid:1) Adult Programs Training Partnership Act of 1980 (JTPA). (cid:1) Dislocated Worker Programs (cid:1) Youth Programs Under the Act, each state will have both state and (cid:1) Employment Service local Workforce Investment Boards (WIBs). The (cid:1) Adult Education (cid:1) Post-secondary Vocational state board will consist of the Governor, two members of each chamber of the State legislature, Education (cid:1) Vocational Rehabilitation and representatives appointed by the Governor, (cid:1) Welfare-to-Work consisting of businesses (majority of board), elected (cid:1) Title V of the Older Americans Act officials, labor organizations, state agency heads, and (cid:1) Trade Adjustment Assistance individuals having experience with youth programs. (cid:1) NAFTA Transitional Adjustment Among the duties of the state board is development Assistance of the state long-term strategic plan and oversight of (cid:1) Veterans Employment and Training local board activities. Programs (cid:1) Community Services Block Grant The state is divided into Workforce Investment (cid:1) Employment and training activities Areas (WIAs), each with a local WIB. The board by the Dept. of Housing and Urban members are appointed by an elected official, and Development (cid:1) Unemployment Insurance the majority of the board must be made up of (cid:1) Job Corps business representatives. It must also include (cid:1) Indian and Native American representatives of education providers, labor Programs organizations, community-based organizations, (cid:1) Migrant and Seasonal Farmworker economic development agencies, and one-stop Programs partners. Others may also be appointed. Furthermore, each board must appoint a local Youth Council made up of members of the local board, youth service agencies, local public housing authorities, parents of youth seeking help, youth, the Job Corps, and others. The Youth Council is a subgroup of the local board that develops parts of the local plan relating to youth, recommends providers of youth services, and coordinates local youth programs and initiatives. Each local WIA has at least one “One-Stop” Center. The local WIB selects the operator of the one-stop, either through a competition process or a designated agency consortium. Eligible operators include post-secondary institutions, employment services, private and non-profit 5 entities, government agencies, and business organizations (such as the chamber of commerce). The goal of the One-Stop Center is to provide businesses and job seekers with convenient access to employment, education, training, and information services in a localized area. The Workforce Investment Act specifies three streams of funding to the state and local areas: adults, dislocated workers, and youth. The WIA three-stream funding is allocated to federal, state and local areas. The majority of each stream is distributed to local areas. States may merge the 15 percent from the three sections for statewide activities. For example, funds from the statewide youth stream may be used for dislocated worker programs if the state chooses. Funding allocation is shown in the following chart. Source: USWorkforce.org Services for adults and dislocated workers are basically the same, despite separate funding. All adults, regardless of need, are able to receive “core” services, which consist of job search and placement assistance, labor market information, initial assessment of skills and needs, information about services, and some follow-up services. If one fails to find employment using the core services, “intensive” services are available. Intensive services involve specialized assessments, individual counseling and career planning, case management, and follow-up services. Those with weak skills or employed with low earnings are eligible for intensive services. Finally, those unable to find work with intensive services are eligible for training vouchers provided by the WIA. Training vouchers are used in the development of job seekers’ weaknesses and areas of personal preference, but are directly linked to job opportunities in their area. Training must be from an approved training provider. Vouchers can be used for a variety of training: basic skills; occupational skills training; on-the-job training; customized training; programs that combine workplace training with related instruction; private sector training; skills upgrading and 6