|Chapter 8 | ...in 2010 | Endnotes|
Texas at Work:
A recent survey by the American Management Association found that 36 percent of job applicants tested by major US firms in 1998 did not possess the basic skills employers require; up from 19 percent in 1996. These results, however, were interpreted to mean not that the workforce has become less skilled—but that employers’ expectations are rising.
Another survey by the National Association of Manufacturers indicated that six out of ten companies feel the current workforce has serious deficiencies in basic job aptitudes. More than 50 percent of the companies responding to the survey stated that workers have shortcomings in basic math, written language, and reading comprehension skills. John Stephens of the Texas Business and Education Coalition, told us that “Businesses are willing to train in their own processes, but they need a foundation.” According to a Coopers and Lybrand study, 69 percent of US employers in 1999 reported that skill shortages were a barrier to growth, compared to just 27 percent in 1993.
Skill requirements for jobs are increasing, and at the same time those skills are becoming obsolete at least every four years. Explains Federal Reserve Board Chairman Alan Greenspan:
Despite the tightest labor markets in a generation, more workers currently report they are fearful of losing their jobs than similar surveys found in 1991, at the bottom of the last recession. The marked move of capital from failing technologies to those at the cutting edge has quickened the pace at which jobs skills become obsolete.
And according to the Bureau of Labor Statistics and occupational projections for Texas, with the exception of professional degrees, all of the categories requiring at least an associate degree are projected to have faster-than-average employment growth over the 1998-2008 period. All the categories requiring less education and training are expected to grow more slowly than average. By the year 2008, nearly 30 percent of all Texas jobs will require some college training.
Retraining millions of Texas workers every year to ensure that their job skills remain current will be an enormous undertaking. Many smaller companies are simply unable to afford such training or the accompanying loss of worker hours, even though such small companies are the nation’s main engine of economic growth.
According to a recent study conducted by Rutgers and the University of Connecticut, 82 percent of the working poor and unemployed recognize that they need more education to get the jobs they want. However, fewer than a fifth of the respondents have ever received financial support from an employer to attend education or training outside of the workplace; just over one-fourth have received government assistance for this purpose. If their employers would offer such assistance, 81 percent said they would enroll in an education or training program.
In the early 1980s, there were 400 corporate “universities” designed to meet companies’ training and educational needs; today there are 1,600, and 62 percent of them have established alliances with four-year colleges.
Cisco Systems, for instance, operates Networking Academies to teach students the necessary skills for technology jobs. The program offers training and potential Cisco certification by partnering with school districts, high schools, and colleges. The program supports almost 4,000 academies in all 50 states, the District of Columbia, and more than 50 countries.
A survey by the Corporate University Xchange, a corporate education research and consulting firm, indicates that by the year 2003, 75 percent of the training offered by corporations will be delivered by one of five key technologies: the Internet, company Intranets, satellite transmission, videoconferencing, and CD-ROMs.
These two trends—the rise of corporate universities and the increased use of high technology for education—imply a huge, continuing expense for business. According to some projections, the private sector will have to invest $15 billion between 1999 and 2006 simply to maintain its current training commitments.
While corporations have increased their investment in training, Bureau of Labor Statistics (BLS) research indicates that most of this training targets employees who already hold at least a bachelor’s degree. This may explain why the Rutgers study of the poor and unemployed shows such a large percentage of individuals who had not received any financial support for formal training from their employers.
In 1950, the labor force participation rate for all persons aged 16 and older was 59 percent; by 1998 the figure had risen to 67 percent. Such historically high levels suggest that most of the people who can participate in the labor force already are, leaving fewer untapped groups to draw upon. As a result, the source of new ideas and new skills will be incumbent employees, and not from an infusion of “new blood” into the existing labor market.
The US Department of Labor (DOL) expects labor-force participation rates for workers aged 45 or older to rise dramatically, from 28 percent in 1990 to 41.5 percent in 2015. As the baby boom echo fades, employers have to retain older employees longer because of the lack of new workers entering the labor force. In addition, the expected extension of mandatory retirement ages to 70 or 75 years will lengthen working careers. The consequences of this trend and the pace of skills obsolescence means that employee training demands have a substantial future.
US Worker Productivity
According to the United Nations’ International Labor Organization, the US leads all other industrialized countries in productivity. American productivity per worker rose from more than $40,000 in value added in 1980 to just under $50,000 in 1990. While the US outpaces Japan by nearly $10,000 in value added per worker, Japan has been closing the gap. Korea and some European countries also are gaining on US productivity levels.
Productivity increases usually are attributed to rapid technological advances that allow fewer workers to produce more work. However, some evidence suggests that increased working hours also contributed to the increased productivity.
According to the United Nations’ International Labor Organization, US workers put in more hours on the job than those in all other major industrialized countries, including Japan. In 1997, American workers logged an average of nearly 2,000 hours each, compared to just under 1,900 hours in 1980, an increase of nearly four percent. With the exception of the US, working hours have been steadily decreasing around the world. Recently, Business Week noted that “on average, workers are putting in 260 more hours a year than a decade ago—many without overtime pay.”
According to the US Census Bureau’s Current Population Survey, median job tenure—the length of time an employee stays with a single employer—for the total workforce remained level. However, for men it fell from 4.1 to 3.8 years between 1983 and 2000. Middle-aged and older men are changing jobs and employers more rapidly than before. For workers in the 55-64 age group, tenure fell from 15.3 to 10.2 years. A 1999 DOL report, Futurework, states that:
Reductions in job stability in the first half of the 1990s were greater than those of the 1980s. More significantly, in the first half of the 1990s, more-tenured workers experienced declines in job stability. This contrasts with the 1980s, in which the declines in job stability were concentrated among young, less-skilled, less-tenured workers.
In other words, job stability in the 1990s was lower than it was in the 1980s and affected even more senior employees.
In a 1999 study by BridgeGate LLC, 14.1 percent of employees surveyed had changed employers to obtain more flexible work schedules. DOL’s Bureau of Labor Statistics found that the percentage of workers on flexible schedules rose from 15 percent in 1991 to 28 percent of full-time workers in 1997.
DOL reports that in 1997, the number of workers who were agency temporaries, on-call or day laborers, contract company workers, or independent contractors totaled 12.5 percent of total US employment. Key factors for the increasing popularity of flexible staffing include savings on wage and benefit costs and sporadic needs for special skills. Increasing competitive pressures and improved technologies will persuade more companies to adopt “just-in-time” staffing strategies.
A 1996 article in Compensation and Benefits Review claimed that by 2015, employee pay will be based to a much larger degree on a share of the value created by the employee, rather than on irrelevant factors such as job titles. Dow Chemical and Motorola have already adopted competency-based pay, an attractive managerial tool that encourages employees to develop their skills and keep them current.
According to DOL, minorities will make up about 47 percent of the national workforce in 2050, compared to just 26 percent in 1995. The increasing diversity of the workplace means that employers must develop appropriate responses to the racial, ethnic and cultural differences of their workers. Employers must provide more information to their employees about how to deal with persons of different cultures from all parts of the world.
The EnterTech Project
The EnterTech Project is a collaborative effort of 71 Texas businesses, educational institutions, and community organizations to create a job-skills training program to prepare prospective workers for entry-level manufacturing positions in technology industries. Its goal is to create a training program based on industry needs that can be delivered to large numbers of people and teach transferable skills and knowledge through simulated work environments. The project targets skills, not occupations or job titles, that participating businesses listed as their most critical needs.
The EnterTech training program is computer-based and delivered via the Internet; it engages learners through work simulations and compelling narratives. Each participant becomes a “virtual” employee in the EnterTech company, engaging in tasks and exploring the world of work. The support of an instructor, workbook activities, and group projects also are key components of the training program.
The EnterTech Project is managed by the IC Institute of the University of Texas at Austin and funded by a grant from the Governor’s office. Production and initial testing of the software and learning environment were completed at the end of 1999. Pilot sites are currently operational throughout Texas and by September 2000, the program was ready for full-scale distribution to local workforce development boards and anyone else wishing to make use of the program.
Texas’ efforts in the arena of workforce issues must strive to foster continued growth in worker productivity and ensure Texans receive the education and training they need to succeed in the 21st century workplace.
Until he recently retired, Mike Sheridan had been with the Texas Workforce Commission and its predecessor for 30 years. He started out in the mailroom and eventually managed to work his way all the way up to executive director of one of the state’s largest agencies.
Strategies in Brief
As you might expect, with his background, Sheridan is a big believer in the state workforce system. But at the same time he recognizes that changes in the economy and in employers’ expectations require a rethinking of the state’s role in workforce development. “Because of all the federal rules and bureaucracy we put them through, the private sector doesn’t want to play ball with government so they set up their own training systems,” explains Sheridan. He cites a recent employer survey conducted by Angelou Economic Advisors, Inc. that shows that only eight percent of all Texas employers have used the system. Reasons cited for the unpopularity of the system include a lack of contact information and a general concern that employer training needs may be too specialized for the system to provide.
The state also needs to do much more to form partnerships with private companies. “We are not capitalizing on public/private partnerships,” says TWC commissioner Ron Lehman. “We do okay with public/nonprofit partnerships but not [public/for-profit partnerships], especially regarding transportable skills for workers. [Yet] some of the best technical education is offered by companies such as Microsoft, IBM, etc.”
It is not only employers who complain about excessive paperwork and bureaucracy throughout the system. Higher education institutions have similar beefs. Rodney Bradshaw, the director of the Gulf Coast Workforce Board explains:
Universities have said they won’t play ball because this process is too much trouble. Houston Community College has 700 programs and had to submit a separate application for each program at each site ...an example of how bureaucratic the process is. All signatures must be in blue ink; not black ink, blue ink, with original signatures...TWC used to certify trainers electronically, but it is all back to paper now.
Not to be left out, local workforce board members expressed similar frustrations to us: “Documentation requirements preclude community-based organizations and faith-based organizations from participating [in the workforce development system], even though the board is supposed to work with them, because the process is so complex,” notes Mary Ross, executive director of the Abilene Local Workforce Development Board.
Employers who do use the system often complain that workers referred to them by their local career center lack even the basic skills needed to perform their jobs. Many employers say they can teach technical skills to new employees only if the system will provide candidates who can read, write, perform simple math, and display a good work ethic.
Ron Lehman points out a related problem: “Community colleges are expected to take the load of workforce education, especially remedial education. Yet they are funded on the basis of contact hours—seat time—versus the basis of learning gain. It doesn’t jibe with the concept of reduced cycle times that businesses everywhere must adopt.”
Clearly, most of the stakeholders involved in the workforce system believe some changes are needed to improve Texas’ workforce system and make it more responsive to employers. What should these changes entail?
A Message to the Feds: Devolve the Federal Unemployment Tax Act Authority to the States
For more than 60 years, American employers have paid two separate unemployment taxes: federal and state. Employers pay state unemployment taxes to finance unemployment insurance (UI) benefits paid to jobless workers. Employers also pay a federal tax under the Federal Unemployment Tax Act (FUTA), whose proceeds are dedicated by law to finance the operating costs of state UI administrative agencies, state employment services, and the US Department of Labor’s Unemployment Insurance Service. Unlike unemployment insurance benefits, which are an entitlement, the funds the states need to operate the UI system are considered “discretionary” under the federal budget. This means they must go through the appropriations process.
There is a substantial surplus of FUTA revenue. Currently, only about 54 percent of FUTA revenue paid by employers is actually used as it was intended and required by law – to help workers get rehired and to prevent fraud. In Texas, the situation is far worse: only 39 cents of every FUTA tax dollar paid by employers is returned to the state. The balance sits in federal coffers. However, despite this growing FUTA surplus, a “temporary” 0.2 percent FUTA surtax set to expire in 1997 was extended through the end of 2007. This 0.2 percent surtax means that America’s employers pay almost $1.5 billion a year in unnecessary taxes.
The FUTA tax is designed to keep much of the money collected from the states in Washington for discretionary use by Congress. For example, in fiscal year 1995, a total of $5.7 billion was collected under FUTA, yet only $3.5 billion was returned to the states. While 80 percent of the total amount was designated to be returned to the states for administering the system, each year less and less of the funds “dedicated” for the administrative account are actually being returned to the states. The federal government keeps the rest of the money to be used for items other than FUTA purposes.
The first step toward making the unemployment insurance system more efficient and effective for America’s workers and fairer to employers is for Washington to shift more responsibility for employment services to the states. States should be given the authority to operate efficient employment security systems that meet the needs of their workforces and employers alike. In recent years, Congress and the White House have given the states more flexibility in designing their welfare programs. There’s no logical reason why the states should not be allowed to tailor their employment services to the unique needs of their citizens and businesses. While Texas employers would still be required to foot the bill for the state’s employment security system, the state would be able to design and collect taxes to finance its own employment security system. This likely could be done at a substantial savings closer to home.
Right now the workforce system tries to be all things to all people. The state is the system designer, a service provider, a funder, a partner, and a regulator. In fact, its many missions sometimes even contradict one another. For example, local workforce boards have been given the authority to design and implement strategies for meeting the unique workforce needs of their region. However, while TWC is supposed to support local boards in their role and advocate for them in discussions with federal agencies, it must also serve as the federal government’s “police” over local boards.
“Maybe what we should be doing is saying to employers, ‘you know the job skills you need workers to have, you set the curriculum, you do the training’ and the government will match you dollar for dollar,” says former TWC Executive Director Mike Sheridan.
In other words, the state’s role would shift fundamentally from system designer, coordinator and provider to a partner in funding. Dr. Bob McPherson of the Ray Marshall Center for the Study of Human Resources—one of the key architects of Texas’ new workforce development system—concurs with Sheridan:Get the services as far away from government as possible. Market the system to employers. For example, Gulf Coast Careers [a service of the Gulf Coast Workforce Development Board] doesn’t show their affiliation with government. Employers don’t think government can respond fast enough.
Sheridan and McPherson are right. Texas’ workforce development system should be focused on brokering information and relationships, while allowing more flexible entities, such as businesses and community-based organizations, to provide the ever-changing menu of skills training required in the global economy.
For most college graduates, private companies are providing the training their workers need to succeed in the new economy. Not surprisingly, this training tends to be more closely tailored to employers’ workforce needs than that offered by the state. Unfortunately, research demonstrates that non-college educated and unemployed workers are not getting all the training they need. Filling this training gap should be the main focus of the workforce system, but as Sheridan, Lehman and McPherson have pointed out, making sure such training is available to workers does not necessarily mean the state should be the one providing it on its own. One option: Texas could form partnerships with the private sector to allow unemployed workers to attend corporate training, or make use of corporate training materials. These partnerships could be in the form of memoranda of understanding between the local workforce development board and corporations in the area, with no funds needing to change hands. Instead, the corporate training program would provide “in kind” contributions by notifying the local workforce development center when they have vacancies in their own training classes. Further research could be conducted to determine if such an in-kind service could be a valid deduction under the company’s federal taxes.
Transforming the workforce system will require a profound culture change within state government. “One of the main hindrances to true public-private partnerships is that for-profit companies are considered taboo by many people in the public sector who have been groomed for years to think that only government-run programs can do good,” explains Sheridan. “We need to clear the deck of all the rules that now inhibit these partnerships.”
Any government effort also must contain a strong local component allowing communities to identify their needs and develop a workforce to meet them—either through collaborations between public and private entities or through state-brokered collaborations among employers. Government also can help to integrate public education and job training. When we asked Dr. Bob Glover, also of the Ray Marshall Center, to identify the most alarming trends in workforce issues, he responded:
The speed of change in industry. We need to reduce education cycle times for schools to catch up with industry cycles. For example, in 1992, there was an announcement by Motorola and AMD to build in Austin. In 1995, Austin Community College announced their new courses [tailored to skills needed by Motorola and AMD].47
At present, the state’s workforce system doesn’t always conduct employability assessments of prospective candidates. To make the workforce system accountable to employers’ concerns, some states use employability testing to emphasize the job skills employers are seeking. Texas’ local workforce boards could increase employer participation by profiling the skills needed by area employers for entry-level positions and assessing job seekers for these skills. Training efforts then could be focused on the skills needed for specific jobs.
Texas’ Skills Development Fund
The Texas Skills Development Fund, originally proposed by the Texas Performance Review, provides grants to community and technical colleges and the Texas Engineering Extension Service to provide customized training to businesses. The program is designed to cultivate a local workforce with the type of training area businesses need. The college or extension service must bring a business partner to the table who agrees to hire a specified number of trainees once the training is completed.
The Smart Jobs program, currently housed at the Texas Department of Economic Development (TDED), provides grants to businesses for worker training. The money goes directly to the business and the contract between the business and TDED is monitored by Smart Jobs program staff. In January 2000, the State Auditor’s Office issued a report on the Smart Jobs program that cited TDED for “gross fiscal mismanagement” of funds. In April 2000, the Sunset Commission recommended that Smart Jobs be moved to the Texas Workforce Commission. We concur. This move would fully integrate the program into the state’s workforce development system and improve public/private training partnerships. Smart Jobs and the Skills Development Fund should be merged into a single program that is completely funded by the Smart Jobs fund.
In 1996, Texas paid out more in Unemployment Insurance (UI) benefits than all but five other states. However, the state’s percentage of fraudulent overpayments was well below the national average. While this could be due to a strong fraud deterrence system the more likely reason is the inadequate detection of fraud. While Texas is a leader in the automation of its UI system, the state can and should do a better job of identifying and recovering fraudulent benefit overpayments by adopting specific strategies proven successful in other states, such as garnishing overpayments from workers’ wages or from Workers Compensation benefits.
A driving principal in both the Texas workforce reforms of 1995 and the federal workforce reforms of 1998 has been customer service, where customers include employers and employees. This means not just those individuals successfully connected to the labor market, but potential employees and laid-off workers as well—everyone over the age of 16 capable of work. In Texas, the state’s civilian labor force now numbers 10.4 million strong. This is a powerful and valuable asset and deserves serious investment and planning from the state.
The purpose of the Workforce Investment Act (WIA) of 1998 was “to provide workforce investment activities...that increase the employment, retention, and earnings of participants, and increase occupational skill attainment by participants, and, as a result, improve the quality of the workforce, reduce welfare dependency, and enhance the productivity and competitiveness of the nation.” While WIA represents just one piece of Texas’ workforce development system, the philosophy underlies every facet of the system.
More than ever, Texas employers and employees need the data, analysis, and technical assistance government can offer, especially concerning demand for skills, training, wages, and benefits. Government can provide both labor market information and information about training opportunities. Government also can help workers and businesses find each other, matching skills to jobs that need to be filled. This sort of effort, another example of the customized government principle outlined earlier in this report, could draw upon well-developed products from the private sector. When the Arkansas Economic Development Commission decided to create its “whatajob.com” site, for instance, the commission acquired services from NationsJobs.com: “We didn’t want to do it ourselves because it is not a state agency core competency.”
ERISS is a private company that conducts comprehensive local workforce surveys and circulates the information with interactive, Web-based applications. The information can be made specific to the level of individual zip codes and includes occupational demand, wage rates, benefits provided, and maps giving employers’ locations. It also can indicate whether employers hire welfare recipients, have Internet access, and are planning to relocate in the foreseeable future.
ERISS’s occupational information includes preferred hiring methods, availability of on-the-job training, attrition rates, and the relative difficulty in finding experienced and non-experienced applicants. ERISS uses information from the US Department of Labor’s (DOL) Occupational Handbook to provide a description of the occupation and nature of the work in question, typical working and employment conditions, and the training and qualifications required. ERISS also links to the US DOL “America’s Job Bank” search site. One example of the use of ERISS information was an analysis showing that most Ohio healthcare companies with 500 or more employees offer childcare. Such data can provide an important tool to aid local workforce development boards in placing welfare recipients and help unemployed workers quickly find an appropriate occupation and job.
Texas’ workforce development system includes a number of state agencies, public universities, and community colleges, community and nonprofit organizations, schools, labor unions, and other local service providers. This system touches on issues including education, taxes, economic development, and human services. Given the system’s importance and complexity, each agency within the workforce development system must establish effective data collection processes. Program performance outcome data should be provided through an entity, such as the State Occupational Information Coordinating Committee. The Coordinating Committee could conduct follow-up research on participants in all workforce programs and prepare outcome reports for local workforce providers, the Legislature, and the public at large, in a consistent, readable format that can be used for cross-program analysis—a sort of report card on the state’s workforce development system. Projections of future needs and analysis of trends in system-wide performance and their impact should be conducted by the Texas Council on Workforce and Economic Competitiveness.
The Katy Mills Project
Some workforce training focuses not on how to do a specific job, but simply on how to work. One such program teaches prospective employees who have had little job experience dependability, punctuality, courtesy, communication skills and the importance of a neat appearance.
The Mills Corporation offers the training in “soft skills” at its 200-shop mall in Katy, 25 miles west of Houston. Katy Mills mall opened in October 1999. “We are dealing mostly with young women, many with children, who have low employment skills and are low on experience,” says Sue Lovell, director of the program. “So most of the training is in soft skills that employers want.”
The program also includes training in filling out a job application and conducting themselves during a job interview. “Part of the training program is to come out to the mall to be interviewed,” she says.
“Mills Access to Training and Career Help” (MATCH) is a pilot welfare-to-work program that coordinated the training of more than 200 of the mall’s retail employees in intensive two-week sessions at Houston Community College and other training facilities. The program was funded with a grant form the Texas Workforce Commission’s Self-Sufficiency Fund. MATCH helps the company find the 3,500 to 5,000 employees it needs per mall project, Lovell says.
Mills Corporation, based in Arlington, Virginia, owns and operates shopping centers in 12 states. It expects more than 16 million visitors to Katy Mills annually. “Our goal is to create a new, skilled source of applicants for Katy Mills by offering training and jobs to individuals leaving public assistance,” says Jim Dausch, senior executive vice president of development for Mills. “We are convinced that thousands of area residents would seek retail jobs, but have relied on public assistance because they lack skills, reliable transportation or child care.”
Workers from the MATCH program are placed with stores in the mall, which then provide their own training. “They want the employees to be a blank slate,” Lovell says. “The employers want to teach them the selling skills they use.”
Employers who hired applicants from the MATCH program are eligible for tax incentives.
While soft skills training is important before and after hiring, the most important factor in retaining the new workers is a mentoring program linking employees with counselors and other volunteer contacts outside the mall. “New employees need support and help in dealing with problems and a person to share their accomplishments with,” Lovell explains. “Mentoring is the safety net.”
Mills Corporation operates its own four-stop shuttle bus system to downtown Houston to help program participants solve transportation problems. The company also is building a daycare center at the mall.
Tomorrow’s workers must learn how to turn information into knowledge, and this ability must be honed over many years. An increasing number of jobs require some education beyond high school.
Basic adult literacy is critical to the improvement of Texas’ workforce. Ethnic minorities and the poor are the hardest-hit by illiteracy. More than one in four Texas workers lack the literacy skills necessary to take advantage of skills training or even on-the-job training. The lack of meaningful accountability information on adult basic education programs means that precious resources cannot be targeted to the most effective providers. In addition, organizational separation between the state’s adult basic education system and workforce development system creates problems for individuals trying to learn basic workplace skills while also working to improve their literacy. Adult education programs must become more effective for those individuals who failed to reap the benefits of improvements in public education.
The Texas Education Agency (TEA) has little data on the effectiveness of Texas’ adult education programs. TEA should compile and analyze solid data on results through a system that requires providers to devote minimal time and resources to reporting data to the state. The easier the system is to use, the greater the number of providers that will use it, and the better the information on program success will be. Moreover, no group in Texas conducts comprehensive research on the state, federal, local, and private funds used to support adult basic education and adult literacy programs designed to prepare individuals for postsecondary education or workforce training opportunities. Once we know the source and amount of these funds, we will have a much better understanding of the functions and activities of Texas’ adult education system and can better craft solutions to improve the system.
Texas can optimize its training resources by linking literacy programs to the workforce development system. TWC operates some literacy programs, but most adult basic education programs remain at the Texas Education Agency, making it difficult to link literacy and workforce development training effectively. All adult basic education programs should be housed at TWC to ensure full integration with local workforce development board efforts.