Reform this Workforce Law & Bring On State Policy Entrepreneurs

Reform this Workforce Law & Bring On State Policy Entrepreneurs
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The House and Senate committees overseeing the U.S. Department of Labor are preparing for a possible reauthorization of the Workforce Innovation and Opportunity Act (WIOA) in the midst of unprecedented challenges resulting from the COVID-19 pandemic. Depending upon the course Congress chooses, reauthorization will be a boost for workers or another letdown from DC lawmakers as people look to the nation’s publicly-funded workforce system for assistance with skills training, job placement, and supportive services.

WIOA allocates resources to states to fund reemployment and training services. Just as important, WIOA also institutes mandates for states to coordinate a variety of employment, education, and social services programs through “American Job Centers.” The system has been criticized for decades, across administrations of both parties, for failing to deliver on the promise of better skills and higher wages. The Government Accountability Office (GAO) has issued multiple reports about the WIOA system, citing its redundancy, duplication, and ineffectiveness in delivering workforce services.

These failures are particularly problematic right now when unemployment data shows that low-wage, entry-level, and disadvantaged populations are facing one of the most difficult labor markets in recent history. The COVID-19 economic shutdown hit these workers and the sectors they disproportionately work in — hospitality, health, and retail — the hardest. As the economy gradually reopens this spring and summer, such jobs will be among the slowest to come back. Increasing automation of these jobs likely means fewer positions even when the economy fully reopens.

This suggests that a misaligned and inefficient WIOA system is ill-prepared for current and future demand for retraining and re-skilling services. Congress’ temptation will be to tweak the existing system, adding dollars to better coordinate a morass of under-performing programs without a plan to promote deeper, structural changes in how services are delivered. We think there’s a better way.

Our recommendations are informed by two important premises. First, that the WIOA programs and system, the latest iteration in a six-decade history of such attempts — the Comprehensive Employment and Training Act (Carter Administration), the Job Training and Partnership Act (Reagan administration), and the Workforce Investment Act (Clinton administration) foremost among them — remains ill-suited to bolster the skills needed by today’s workers.

Second, we should not be surprised by WIOA’s failure. Given the size of our country and its economic and social diversity, we should expect that almost any centrally-planned, top–down approach cannot effectively account for or adjust to regional and local needs. Economic recovery due to the year-long COVID pandemic makes the unnecessary and arbitrary mandates of the WIOA law even more untenable.

Given this constellation of constraints — economic recovery, an under-performing system, and a preference for federalism — we believe the starting point for a reformed employment and job training law begins by removing barriers to worker and state flexibility. This is accomplished by incentivizing experimentation with workforce reform at the state and local levels. The historical model for this approach — innovation leading to wholesale improvements — is 1996 bipartisan welfare reform.

In response to rising welfare caseloads, costs, and worsening family and employment outcomes, Congress and presidential administrations encouraged state experimentation in welfare reform beginning in the 1980s. The Reagan, Bush, and Clinton administrations all approved waivers to states for the Aid to Families with Dependent Children (AFDC) program to test new approaches to fostering work and self-sufficiency among recipients. These experiments were closely monitored and evaluated, generating a body of evidence and program practices showing it was possible to improve employment and earnings among welfare recipients. These state-based reforms culminated in the biggest change to public assistance programs since the New Deal and Great Society eras. The results: dramatically lower caseloads, higher rates of employment, and reduced child poverty.    

This is the model of reform Congress should consider when it comes to WIOA reauthorization. The U.S. economy is recovering from multiple economic and social traumas associated the COVID shutdowns, disease mitigation policies, and a rising tide of automation. The public workforce system is ill-designed to respond to these conditions, so new demonstration authority allows state and local officials to design and implement programs that speak to their worker and employer constituencies. As with welfare reform, no state would be required to implement a demonstration, but entrepreneurial governors and legislators would be free to seize the moment and create an employment and training support system that better serves workers by eliminating administrative and programmatic inefficiencies.

Members of Congress could support reform agendas for states by specifically incentivizing practices that encourage worker and system flexibility. Increased demonstration funding for Personal Reemployment Accounts to help with flexible, worker skills training; increased funding for partnerships between the workforce system and community colleges targeting regional economic development priorities; and funding to upgrade labor market systems to better inform workers of emerging industries and occupations are all examples of targeted assistance.

Time is of the essence if we are to fix the WIOA system so workers benefit immediately. Over two decades ago, governors and state legislators paved the way for national welfare reform. Now is the time to reopen those state laboratories of democracy to improve the lives of unemployed and dislocated workers, giving them hope and an economic future.

Mason Bishop and Brent Orrell work at the American Enterprise Institute where they conduct research on workforce development policy and innovation.

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