The Need for Skills and the Need for Funding
It is an interesting paradox that at a time of high unemployment we have an increasing lament from employers that they cannot find skilled workers, bringing to light the mismatch in the labor market. There is longer-term concern that needs to be considered and, while the cost of correcting the current labor market mismatch could be substantial, the longer-term issues, comparatively, raise deeper concerns.
As a nation, we rise to the challenge of a crisis. The Great Recession produced the American Recovery and Reinvestment Act (ARRA) in response to a spike in unemployment to 10 percent in October 2009. Subsequently, the COVID-19 pandemic exacerbated the labor market as the unemployment rate jumped dramatically, with the projected seven million jobs and the four million long-term unemployed exceeding similar numbers from the Great Recession.
However, we have yet to see dedicated workforce development funding in response to the pandemic. We presume, based on early discussions in Congress, that there is an understanding that funding for infrastructure needs to include workforce development funding, particularly if they intend to accomplish their proposed plan.
It’s clear the skill needs for the continuing adoption of more and more sophisticated technology across all industry sectors is paramount. This workforce crisis hasn’t received the attention it deserves in the news media, yet here are some factors we know:
- More than 30 million people in the labor force have deficiencies in their reading and math skills that will need to be addressed for them to be effectively re-skilled;
- Estimates for the number of jobs that are vulnerable to automation vary widely but conservative estimates suggest 30-40 percent of current jobs will be impacted, with some being eliminated, but all impacted and the attendant need for re-skilling in both instances;
- The investment that is needed necessitated by greater reliance on automation has numerous estimates that range as high as $80 billion annually;
- Current funding for postsecondary education and workforce development by the federal government is $58 billion per annum; and
- Subtracting Pell and veterans program funding, the U.S. provides only $16 billion to programs focused on actual workforce development.
Furthermore, it seems highly unlikely that Congress would commit to an $80 billion annual appropriation to workforce development, meaning the workforce development system will need to become creative in financing skill/re-skilling needs for the U.S. labor force. Employers make a considerable investment annually in upskilling their workforce. This is a vital part of the nation’s efforts to maintain a globally competitive labor force, but more is needed to skill and reskill workers.
There is also a significant portion of the labor force, the non-employer attached worker or “gig” worker, that lacks significant support for the cost of skilling/re-skilling. While it's difficult to make precise estimates of the size of the gig workforce, the National Bureau of Economic Research in an August 2018 article, “Measuring the Gig Economy: Current Knowledge and Open Issues,” noted that, “Advances in technology resting on digitization and the inter-connectivity of the internet have made it increasingly attractive for firms to re-organize their activities so that a greater share of work is performed by individuals who are not employees of the firm. These new technologies make it more feasible to organize work on a project-specific basis, utilizing a changing cast of workers with the mix of skills that is appropriate for each project…”
Research of the Contingent Worker Supplement (CWS) to the Current Population Survey done for the U.S. Dept of Labor and reported in a paper, Contingent and Alternative Employment: Lessons from the Contingent Worker Supplement, 1995–2017, presented some interesting data that showed the rise in the numbers of workers who were identified as independent contractors. The data shows there has been a significant increase since 2005 in the use of temporary help workers in manufacturing and also in production and transportation and material moving occupations, which are heavily used in the manufacturing sector. In looking at the data by ethnic group, there was a rise between 2001 and 2017 from 6.7 percent to 7.4 percent for whites, from 3.9 percent to 4.6 percent for blacks and from 4.2 percent to 6.1 percent for Hispanics, with a slight drop for Asian workers from 6.0 percent to 5.1 percent. In light of the pandemic, there is no reason to believe these numbers declined in the period 2017 to 2021. For this growing sector of the labor force, there is no employer to pay the cost of skilling/re-skilling.
Given the need for skilling/re-skilling for the U.S. labor force and the acceptance that Congress is unlikely to fully fund the need, alternative financing is key. NAWB is very pleased to be a core member of the team led by the U.S. Chamber of Commerce Foundation to work with several pioneering organizations, many of them including local Chambers of Commerce and local business-led workforce development boards, to design and test models of financing. A lot rests on their results.