GLOBAL PERSPECTIVES OF

INNOVATIVE EMPLOYMENT AND JOB

CREATION INITIATIVES:

AUSTRALIA AND UNITED STATES

20 June 2013

Randall Eberts, President, W.E. Upjohn Institute for Employment ResearchUnited States

Working CommunitiesInternational Conference

20-21 June 2013Sydney, Australia

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Outline

• OECD cross-country study of the contribution of local labor market policy to job creation

• Purpose is to examine practices across countries that are likely to boost quality employment

• Focus on one of four thematic areas: aligning policies and programs to local economic development

• More specifically, offer examples of ways workforce agencies, educational and training institutions, and businesses have partnered to meet business needs

• Background:– Prevalence and consequences of skills shortage and mismatch – Importance of knowledge/skills/training to workers, firms, and regions– Importance of local flexibility and autonomy balanced by local staff capacity

• Examples of successful partnerships• Lessons

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• Employers complain they can’t find enough qualified workers

• Workers complain their jobs do not require the skills for which they were trained

• Without qualified workers, employers can’t fill job openings and thus can’t create jobs

• Critical challenges:• Understanding the skills needs of employers• Increasing the skills employers need• Using workers skills more effectively• Improving the match between the supply of and

demand for skills

Skills Shortage and Mismatch

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Australia and US share the same difficulty in filling job openings

Japan

Austra

liaInd

ia

Taiw

an

MEXIC

O

Turk

ey

Singa

pore

Swed

en

Global

Avera

ge

Colombia

Canad

aIta

lySp

ain0

102030405060708090

Source: 2012 Talent Shortage Survey Research Results, Manpower

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Australia and US share in the types of jobs that are difficult to fill

Australia1. Skilled trades workers2. Engineers3. Sales Representatives4. Accounting and Finance5. IT staff6. Management/Executives7. Technicians8. Drivers9. Mechanics10. Chefs/cooks

US1. Skilled trades workers2. Engineers3. IT staff4. Sales representatives5. Accounting and finance6. Drivers7. Mechanics8. Nurses9. Machinists/machine

operators10. Teachers

Source: 2012 Talent Shortage Survey Research Results, Manpower

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In U.S., larger the skills gap, the lower the job creation

Real Consequences of Skills Gap

Each dot is a US metro area; data provided by Rothwell, 2012

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Larger the skills gap, the higher the unemployment rate

Real Consequences of Skills Gap

Each dot is a US metro area; data provided by Rothwell, 2012

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Regional Benefits of skill attainment

• Increase in skills lifts aggregate wages in a region– A 1% point increase of college graduates in a region’s workforce

increases wages by 1.3% (Moretti, 2004)

– Affects the wages of high school dropouts (1.9%) more than the wages of other college graduates (0.4%)

• Knowledge is a major contributor to productivity growth– Accounts for upwards of 10% of productivity growth (BLS)– A 1% point increase in share of college graduates increases the

number of patents by 0.9% (Glaeser, 2003)

– Reflects the ability of skilled workers to produce and use technology– An increase of 1% in university research increases corporate patents by

0.6% (Jaffe, 1989)• Positive relationship between university R&D and the number

of firm startups in the same metro area (Bania, Eberts, Fogarty, 1993)• Skills may be a crucial part of the reinvention process of cities

and regions (Glaeser, 2003)– Particularly important for regions with declining industries, such as

agriculture

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Disconnect between Education and Business

• McKinsey study illustrates the disconnect between workers (youth), employers, and educational providers

• Differences in perception of job readiness– In US 87% of educators believe new graduates are adequately

prepared for entry-level jobs– Only 49% of employers believe they are prepared

• Lack of communication– One-third of employers say they never connect with education

providers– More than a third of education providers report that they are

unable to estimate the job-placement rates of their graduates– Fewer than half of youth said they understood the job

prospects of the discipline they studied in schoolMcKinsey Center for Government: “Education to Employment, Designing a System that Works, ” 2012.

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Key Finding: Engage business

• Crucial to success at improving outcomes: “education providers and employers step actively into each other’s worlds, interacting intensively, often on a near-daily basis.” – For example, employers may help shape the curriculum and offer their

employees as faculty, while providers can provide workplace-simulation environments for learning

• Key thematic area of the OECD study: aligning policies and programs to economic development.

• Lessons from the US and Australia studies: need to create proper environment with real incentives for all parties to engage– Need to overcome institutional impediments and initial costs – Need to establish continuum from education to employment– Need proper data– Need to focus within sectors– Need to share costs– Engagement must occur where jobs and education take place

U.S. Public Employment and Training

Federal Agency Mandatory Programmes

Federal Fiscal Year 2013

Appropriation($ millions)

Participants (4 quarters

ending June 2012)

Appropriation per participant

Department of Labor

WIA Adult 770 6 979 125 $110WIA Dislocated Worker 1 232 1 138 379 1 082WIA Youth 824 239 605 3 439Employment Services (Wagner-Peyser)

721 19 081 905 38

Trade Adjustment Assistance

1 100 144 659 7 604

Veteran’s Employment and Training Programme

264 142 000 1 859

Unemployment Insurance 3 236 9 171 467 353Job Corps 1 703 97 474 17 471Senior Community Service Employment Programme

448 76 864 5 828

Employment and Training for migrant and seasonal worker

84 19 700 4 264

Employment and training for Native Americans

47 38 822 1 211

total 10 429 37 130 000

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Partner Relationships

WIB

Individuals

K-12 CC/TS EconDev

Businesses

Labor Education

Commerce

Labor Education Commerce

National

State

Local

Customers

Intermediaries

Services

Services

Fund

s

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Partnership held together by aligning strategic plans and accountability measures

• Public workforce system (WIA) is a partnership among federal and state agencies and local entities

• Federal Legislation requires the Governor of each state to submit a five-year plan to USDOL

• The plan has three key components:– State Workforce Strategic Plan: Includes the high-level vision,

goals, economic and workforce analysis, strategies and outcomes that the Governor and strategic partners collaboratively identify for the State’s future

– State Operational Plan: Clarifies how specific workforce programs for targeted populations will operationalize, administer, and implement systems and structures to achieve vision, strategies, and goals identified by the Strategic Plan

– Assurances: State assures the U.S. Department of Labor that it is complying with applicable law

• All entities subject to performance measures and targets

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Partner Relationships

WIB

Individuals

K-12 CC/TS EconDev

Businesses

Labor Education

Commerce

Labor Education Commerce

National

State

Local

Customers

Intermediaries

Services

Services

Fund

s

Local Partnerships

• Similarities– Contract out JSA to private providers– Local providers – Performance outcomes– Initial screening and identification of

needs• JSCI for Australia; WPRS for US

– Reemployment Assessment Plans– Strategic plans– Local and state economic development

efforts

Models of Integration: US and Australia

Australia United StatesNational agency contracts JSA Local WIBs contract JSA and training

Payment based mostly on performance outcome

Payment based mostly on formula, with financial incentives for making/missing targets

National VocEd qualifications Local and/or industry qualifications

Demand-driven training: industry, unions, professional associations at national level define outcomes required from training

Demand-driven training: employers and local community colleges at local level develop training curriculum

More national skills standards, national training products

Few national skills standards; mostly state and local standards16 mandated programs co-located at One-Stop Career Centers

Local Employment Coordinator: identifies needs and match with employers, education and training facilities

Local WIBs offer opportunity to be catalyst for integrating economic development and workforce development at local level

Models: Differences

• Decentralized approach to workforce development in US provides governance mechanism that enables local areas to adjust programs and services to meet business needs– Allows appropriate flexibility and autonomy in

the management and delivery of services– Governance structure of local WIBs provides a

forum for partnerships and integration at the local level

– Key stakeholders, majority of which are local businesses, are members of the Local WIBs

– LWIBs can act as a catalyst for bringing together key stakeholders

U.S. findings

• WIA serves both job seekers and businesses• Business leaders comprise a majority of the LWIB• In California and Michigan, community colleges work

closely with businesses in designing training curricula

• At times, industry experts are used to staff training courses

• Many LWIAs identify strategic sectors and implement strategies to meet needs of businesses within sectors

• Strong evidence-based approach to identifying business needs, designing curricula, and developing strategic plans

• Employers can compete for public funds to train their incumbent workers

Engage business

• LWIBs actively pursue and maintain partnerships among key regional stakeholders– LWIBs in Southeast Michigan is a partner of WIN, a 9-

county consortium that includes 7 LWIBs, 8 community colleges, and numerous economic development organizations

– Six LWIBs have formed a formal partnership through a MOU that establishes joint processes that enable the LWIBs to support regional initiatives

– In Sacramento, four LWIBs developed integrated plans for the broader metro region and strong personal relationships and trust among partner leaders have held the partnership together

• Evidence-based decision making and performance outcome metrics have also been the glue to bond strong partnerships

Form Partnerships

• While many of the appropriate policies and programmatic structures are in place, the system does not have the capacity to serve all those who need assistance

• Staff capacity is also a concern, both in numbers and in qualifications

• Effective partnerships depend upon local leadership, and this varies across regions– Proper incentives and mechanisms are needed to encourage

collaboration and leadership from higher levels of government • Few if any resources for establishing partnership

infrastructure, such as financial assistance for data-sharing and administrative costs

Shortfalls