The Missing Element in Job Training: Jobs
Three years ago, the Reagan Administration cheered the death of President Carter’s massive job training program and hailed its own new program as a marvelous system that would be far less costly but far more effective than Carter’s.
Both programs were designed to help prepare millions of economically disadvantaged and displaced jobless workers to play a productive role in society.
The basic thrust of Reagan’s plan was to put to the test his seemingly unlimited faith in private industry employers. They would be the chief component in his Job Training and Partnership Act (JTPA). The theory was that employers know what skills they need, and, in partnership with the Administration, they would plan the training programs necessary to meet those needs.
The President and his supporters furiously denounced the Carter Administration’s handling of the Comprehensive Employment and Training Act (CETA). CETA was actually passed under President Nixon in 1973, but as it grew during the Carter Administration, it became what Reagan officials derisively labeled a Democratic “big spending boondoggle” that ignored the real needs of employers and the jobless.
The Reagan plan is cheaper than CETA under Carter. But there is no convincing evidence that it is succeeding any better than, or even as well as, Carter’s CETA programs. The problems both programs set out to help solve are as massive as ever.
The trouble with both plans is their failure to take into account the most critical factor of all: There are not enough jobs for those already qualified for work, much less those disadvantaged, undereducated, inexperienced would-be workers who are far from what the government calls “work ready.”
Unemployment is still hovering around the unacceptably high level of 7%. Millions more are working part time even though they are looking for full-time jobs. Additional millions are not even seeking work because they have little if anything to offer employers, or because they have become so discouraged about their job prospects that they have dropped out of the work force.
If all of those targeted for help under the job training programs could somehow be reached and made “work ready” with the help of employers who know their own employment needs, the official jobless rate would be far higher than it is now because there are just not enough job openings for them.
It is something like Congress deciding on a revenue-producing system without considering how much money it is going to spend. That lack of coordination between spending and taxing is primarily responsible for the current federal budget deficit that is the largest in history.
In a primitive way, Gramm-Rudman was adopted to force Congress to coordinate its spending and taxing measures. In the same way, there should be coordination between the number of workers trained for jobs and the number of jobs available. The deficit here, however, is one of jobs. What is needed to reduce that deficit is an employment-generating program.
After decades of debate, Congress made an attempt to create such a program in 1978, when it enacted the Full Employment Act, a ghost of a proposal originally made by the late Sen. Hubert H. Humphrey and Rep. Augustus F. Hawkins (D-Calif.). If it were working as Humphrey and Hawkins planned, then the government efforts to train workers would be matched by government efforts to find or create jobs for them.
As finally adopted, the Full Employment Act contained general, non-binding goals of reducing unemployment to 4% and inflation to 3%. But it does not mandate government action to meet those goals. It ignores the heart of the original Humphrey-Hawkins proposal, which said that every American willing and able to work has a right to a job. The private sector would be the prime source for jobs, but the government would have become the “employer of last resort,” providing work for those private industry does not hire.
The idea that a top priority of government should be to make sure all of us who want jobs can get them seems old-fashioned now. The major goal of both the Reagan Administration and a majority in Congress is to reduce the size of government. No consideration is being given to the idea of spending enough to train workers to make almost everyone “job ready” and then making sure they have jobs.
The original full employment proposal had flaws, but it should not be viewed contemptuously as a pipe dream. After all, every 1% reduction in the jobless rate would mean a gain of more than $30 billion in tax revenue plus the savings in welfare and jobless benefit costs, not to mention the powerful psychological value on individuals having paid jobs.
While California’s workfare program, Greater Avenues to Independence (GAIN), is an encouraging step toward getting the poor off welfare, it does not create jobs. It trains more job seekers, often with the help of the new national job training program.
The current federal program isn’t cheap. At a cost of $3.2 billion a year, the Reagan plan is reaching about 1 million Americans who are unable to get jobs because they are not “work ready” and need training or retraining to fit into the work force. There are no exact figures, but at least 10 million more workers are eligible for help from Joint Training Partnership, which doesn’t have enough money to take them in.
At its peak during the Carter Administration, CETA enrolled about 4.3 million workers a year at a cost of $9.5 billion annually. But that included a stipend of at least $3.35 an hour to help the workers live while in training. The Reagan plan does not include any direct pay to workers. Employers who hire someone for on-the-job training are paid 50% of the worker’s wages for two months.
Reagan Administration officials claim their program is effective and point to the fact that it has a job placement rate of more than 60%. But the unemployment rate stays stubbornly high at close to 7% because not enough new jobs are being created to absorb the growing work force.
A just-completed study by Edward J. Smith, a consultant for the Los Angeles schools, found substantial flaws in the Reagan program. Among other things, a survey made for the study found that despite Reagan’s faith in private enterprise, most employers are not interested in the government job training program:
“Employers fear (that) participation in government programs will result in heavy demands on their time and increased interference with their operations. Few employers see these programs as reliable sources of labor.”
This doesn’t mean government job training programs aren’t badly needed.
It does mean the current one is badly underfunded, and, even more importantly, that government cannot ignore the bottom line: It must make sure “job ready” workers have work.
A New Boost for ESOPs
It is often difficult to generalize about the economic value of setting up a stock ownership plan (ESOP) for workers or giving workers a significant voice in a company’s decision-making process.
But a new study contends that both ESOPs and worker participation plans create a substantial increase in jobs and sales.
The Arlington, Va.-based National Center for Employee Ownership found in a new study that over a 10-year period, companies with ESOPs generated 46% more jobs and 40% greater sales growth than they would have without such a plan.
It was a complex study designed to answer the question of whether a company with an ESOP improved its performance because of the ESOP or whether it would have improved its performance even without the ESOP.
Performance data was collected on a group of ESOP and non-ESOP firms over a 15-year period. Their growth was compared, along with the growth of each ESOP company compared to its pre-ESOP performance.
Annual sales of ESOP firms grew 5.4% after they began the program, compared to a 1.8% growth rate before. The ESOP companies grew 5% faster than their non-ESOP competitors, compared to only a 1.2% advantage before the plans were started.
Companies with employee participation plans showed even greater improvement: 8% to 11% annual growth, compared to 3.5% for the average ESOP company that does not involve workers in the decision-making process.
