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Blog Post

Can Workforce Development Programs Improve Labor Force Participation?

American Enterprise Institute

January 22, 2024

Harry Holzer, a Senior Fellow at Brookings and a key contributor to AEI’s Workforce Futures Initiative (WFI), published a recent analysis of the potential of the publicly-funded US workforce system to reduce unemployment and boost labor force participation. To my mind, he makes a strong argument for increasing basic supports for work engagement as a way of getting chronically disconnected workers back on the job.

In a WFI report last year, Holzer emphasized the importance of apprenticeships, sector-based training, and community colleges. This new contribution provides a distilled literature review on the effectiveness of Workforce Investment and Opportunity Act (WIOA) and its predecessor, the Workforce Investment Act (WIA), programs that show mild positive impacts for WIOA services. As he noted last year, this low resource-low outcome equilibrium is a key reason policymakers are reluctant to spend more on workforce development.

Holzer’s new report adds to our knowledge through a statistical simulation testing the effect of universal access to quality workforce development programs. Such investments, he found, would reduce unemployment by half a percent, significant but not earth-shattering, especially in the context of what appears to be a chronically tight labor market. More importantly, the simulation found expanded workforce development programming would increase labor force participation by three percentage points. That change would be highly significant in light of the long-term decline of American labor force participation, particularly among men.

The labor force participation estimate is consistent with other research showing that WIA/WIOA “core” and “intensive” services—now called “career services”—including job search assistance, workforce preparation, career development, and classroom and work-based learning, show positive returns to employment and wages. If these successful workforce development programs were more generously funded (the US is second lowest among advanced economies in terms of spending on workforce programs) it’s plausible such spending would more than pay for itself in higher GDP and reduced dependence on disability and other public welfare programs.

Of course, there are many caveats to the results of Holzer’s simulation. Our analyses and plans do not usually withstand contact with reality, and programs are never implemented with the same levels of quality everywhere. Individual worker and community experiences would likely vary a great deal. Further, not everyone who comes to a WIOA Jobs Center needs these kinds of supports. Providing too many career services to the wrong workers might slow transitions for people who could manage well without them. Careful triaging of workers would be essential.

It’s also true, however, that in a hot economy with a tight labor market, the workers who remain on the sidelines frequently require enhanced services in order to successfully transition to employment similar to the kinds of supports we provide for those on the Temporary Assistance to Needy Families (TANF) program. Goodwill Industries of Columbus, Ohio recently began “door-to-door” outreach to try to identify out-of-work adults and coax them into job training and employment programs; it would not be surprising if this kind of person-to-person effort would be helpful elsewhere. In our current labor market, greater public investment in effective workforce development approaches and programs may be one of our best bets for helping workers and addressing the labor shortage.