Skills and training
Research Summary

People Experiencing Short-Term Unemployment May Benefit the Most from Publicly Subsidized Training Programs

Madeleine SiroisJune 28, 2023
Source: Labour Economics Title: RCT Evidence on Differential Impact of US Job Training Programmes by Pre-Training Employment Status Author(s): Matthew D. Baird, John Engberg, Italo A. Gutierrez Original Publication Date: February 2022 Read Full Research Article

A key driver of inequality in the labor market is increasing polarization between jobs that require highly specialized skills, require advanced training or a credential, and generally have a higher barrier to entry and those requiring more general skills, no advanced training or credential, and with lower barriers to entry. Jobs in high-wage sectors demand specialized training and skills but are also more likely to provide other job quality elements such as control over one’s work schedule, health insurance and other benefits, and a clear pathway for earnings growth and career advancement. As wage disparities between high- and low-wage workers grows, policymakers must prioritize creating sustainable pathways to economic security and mobility for unemployed and underemployed workers through high-quality, evidence-based workforce training programs.

Publicly subsidized training programs have a long history in the United States and Europe, and many studies demonstrate their ability to improve earnings and employment for workers. But there remains much inconsistency in their ability to deliver results. Two main issues hinder their effectiveness: high attrition among participants and training programs that are mismatched to local employer needs. With this in mind, the New Orleans Office of Workforce Development developed a training program in partnership with local employers. Designed as “demand-driven training,” the Career Pathways Program training program aimed to improve earnings and employment outcomes for people in advanced manufacturing, health care, and information technology sectors.

This RCT study, published by RAND Corporation researchers, adds to our understanding of the differential impact of job training programs by the employment status of participants. Researchers grouped participants into three categories: those with a job at the start of training, those without a job but who had been employed for less than six months (short-term unemployed), and those who had been unemployed for more than six months (long-term unemployed). The findings are particularly important for governments and training providers that seek to help the most vulnerable segments of the population and workers who wish to understand the value of these programs.

Key findings

  • Participants experiencing short-term unemployment showed strong gains in earnings and employment probability. Among the three employment groups, short-term unemployed workers—who had the highest average quarterly earnings of all three groups and were more likely to be employed before their current spell of unemployment—were found to be 14 percentage points more likely to be employed than the control group and were the only group with statistically significant treatment effects for employment probability. As for quarterly earnings, the short-term unemployed workers still had the largest treatment effect, with a 50 percent increase over the control group average. These results indicate that screening for the short-term employed may improve the efficiency of such training programs and help policymakers target this population.
  • By contrast, the two other groups—those who were employed at the time of training and those experiencing longer-term unemployment—did not experience significant gains in earnings or employment. The treatment group that had a job at the start of training were 3 percentage points less likely than their control group to be employed. The long-term unemployed, on the other hand, were 4 percentage points more likely to be employed than their control group. However, neither of these were found to be statistically significant. The authors suggest several explanations for this finding, including employer preferences for those with a recent work history and the negative impacts of combining the pressures of training with a current job.
  • People in the treatment group were more likely to work in the target industries, suggesting that the gains were occurring through improvements in industry-specific human capital. Strong evidence shows that individuals training in advanced manufacturing and health care were more likely to end up working in the related target industries than the control groups. This finding was at least partially driven by movement out of low-skill industries, which suggests that the training program helped move them into better careers.

Policy and practice implications

Based on the findings of this study, WorkRise identifies the following implications for policy and practice.

  • Local and state policymakers and workforce development providers and funders can leverage this research to improve the success of skills training programs. The authors suggest that rigorous screening of applicants and demand-driven features of the curriculum could be applied to other programs, including those for dislocated workers. Furthermore, embedding personal and wraparound supports such as child care and transportation into training programs may help reduce attrition. Screening allows policymakers to identify good candidates for job training programs versus good candidates for other public programs and assistances.
  • Local employers can benefit when they actively collaborate with workforce training providers to design industry-specific and demand-driven curriculum to train the workforce that they need. Additionally, employers can make commitments to hire program graduates and fulfill job quality standards such as predictable scheduling, opportunities for advancement, and a family-sustaining wage.

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