Workforce 2.0

Cultivating a local ecosystem to unlock the potential of workforce reskilling

2 | Workforce 2.0 Cultivating a local ecosystem to unlock the potential of workforce reskilling

The media, many elected officials in Washington, and state and local governments continue to dedicate significant attention to the “skills gap.” The discussion centers on preparing graduates for jobs of the future, a role traditionally reserved for colleges and universities. However, given the volume and nature of the nation’s workforce needs, the current skills gap in the US is not a problem that can be solved by higher education alone. Innovative models for workforce reskilling are cropping up in the private, governmental and nonprofit sectors, and many are providing low-income adult workers with the training to move into upwardly mobile positions in high-demand fields. While efforts are still nascent, these initiatives show promise for bridging the skills gap, as well as increasing social mobility.

What can be learned from current initiatives? There are numerous participants within the broader ecosystem: employers, K-12 systems and schools, higher education institutions, alternative education providers, elected officials, workforce and economic development organizations, and the nonprofit sector. What role can they play to deliver on ambitious aspirations? Existing models can serve as valuable templates and suggest that developing local ecosystems of stakeholders, with a unique set of aligned incentives, will be essential for models to scale in cities, states and across the US.

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3Workforce 2.0 Cultivating a local ecosystem to unlock the potential of workforce reskilling |

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4 | Workforce 2.0 Cultivating a local ecosystem to unlock the potential of workforce reskilling

The phrase “skills gap” is often used to describe the mismatch between workers’ abilities and the changing demands of employers. According to a survey conducted by Adecco,i 92% of senior executives think American workers aren’t as skilled as they need to be. To date, the conversation about addressing the skills gap has largely focused on preparing graduates to meet the demands of an increasingly higher-skills labor market, where automation, artificial intelligence and other digital innovations are eliminating the need for human capital for specific activities. Equally important, however,

are efforts at “reskilling” the current labor force. Reskilling workers, which involves targeted training in new skills that enable them to take on new roles in high-demand fields, has the potential to not only help meet labor market needs but also to provide increased job security and higher wages to a large swath of the workforce.

A 2018 report from Burning Glass Technologies and the U.S. Chamber of Commerce highlights the magnitude of the skills gap, particularly in certain fields.ii Through an analysis of Bureau of Labor Statistics (BLS) job turnover

$64,000

$67,710

$84,560

$79,180

$31,600

$31,310

$28,710

$64,510

$28,840

$24,390

$27,070

$44,520

$27,270

$38,070

$23,610

$48,230

$44,370

Health care practitioners

Business and financial operations

Computer and mathematical

Architecture and engineering

Transportation and material moving

Health care support

Grounds cleaning and maintenance

Life, physical and social science

Office and administration support

Farming, fishing and forestry

Sales

Installation, maintenance and repair

Personal care

Production

Food preparation and service

Arts and media

Construction extraction

Supply exceeds demand

Demand/supply ratio by occupation familyFigure 1

Demand exceeds supply

Median salary

44%21%

17%15%13%

9%9%

5%5%5%5%

2%0%

-3%-13%

-17%-20%

surveys and job posting data, the report compares employer demand and labor supply across 12 BLS occupational families. Figure 1 shows that occupations related to health care, business and financial operations, and computer and mathematics functions are facing significant supply shortages. Conversely, fields such as construction extraction and food preparation and service are facing an oversupply of workers. Unsurprisingly, fields with the highest ratio of demand to supply tend to have higher median incomes and are often associated with higher skill levels.

Defining the skills gap today

Low-wage jobs

Mid-wage jobs

High-wage jobs

US job openings by skill level2017

Figure 2

48%

32%

20%

Middle-skill

Low-skill

High-skill

5Workforce 2.0 Cultivating a local ecosystem to unlock the potential of workforce reskilling |

Note: Middle-skill jobs are defined as those that require education beyond high school but not a four-year degree.

Data: National Skills Coalition

This surplus of low-skill workers presents an opportunity to support the reskilling of workers into fields that have a higher demand for labor. The National Skills Coalition conducted a study on demand for labor by skill level, and the mix is shown in Figure 2. Middle-skill jobs — roles that require education beyond a high school diploma but not a four-year degree — are estimated to comprise nearly half of all job openings from 2014 to 2024. Middle-skill jobs are also estimated to face the biggest worker shortage — 53% of US jobs are estimated to be middle-skill jobs, while only 43% of workers are middle-skill workers.iii Transitioning workers from low- to middle-skill positions requires a new and innovative training and credentialing system that is more job-focused and that requires less time than traditional bachelor’s programs. Unfortunately, low-skill workers have access to significantly less training than other groups. Just 5% of workers who did not complete high school and 13% of workers with only a high school diploma received formal employer-provided training in the past year. Conversely, 25% of workers who completed college received on-the-job training.iv

6 | Workforce 2.0 Cultivating a local ecosystem to unlock the potential of workforce reskilling

While some innovative reskilling efforts are underway, the “ecosystem” of participants necessary to make such initiatives succeed at scale is complex, making coordination and achieving scale difficult. Some key challenges facing state and local leaders, including higher education leaders and employers, are:

• No universally agreed-upon definition of the skills and competencies necessary for many high-demand, middle-skill jobs. In Europe, for example, industry associations make it a priority to identify career pathways and competencies required for advancement in their respective industries. They work closely with education providers to incorporate these skills into curricula.

• No efficient system for employers and education providers to work together in systematic ways. Individual employers and individual higher education institutions and alternative providers are making headway, but partnerships tend to be one-to-one rather than many-to-many. Some states have begun to take measures to create more systemic approaches to these partnerships.

• No strong, aligned financial incentives for employers and education providers to jointly develop new pathways. Education providers can access a variety of federal funding sources to support reskilling efforts. Many employers offer tuition reimbursement programs, but interviews with their HR departments indicate that many

Turning today’s challenges into opportunities

are concerned that these programs are viewed primarily as benefits and are not deployed strategically to both advance employees’ careers and meet companies’ future work needs. Together, these funding sources could have a significant positive impact on reskilling our workforce.

• No clear pathway for prospective students to find the programs that will best meet their goals and link to good jobs. Prospective students are often left to “figure things out” on their own to identify and select education programs. Based on incomplete information about potential benefits and links to jobs, they are often left to their own devices to determine the degree of alignment between their goals and the programs.

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In the last decade, stakeholders across the government, private and nonprofit sectors have started to recognize the potential of reskilling, and many innovative models for retraining workers have cropped up. These models can

What models exist for trying to close the skills gap?

1

2

3

South Carolina state-sponsored training and apprenticeship programs

AT&T’s Workforce 2020

Massachusetts Pathways to Economic Advancement

ReadySC and Apprenticeship Carolina are state-sponsored training and apprenticeship programs in South Carolina. ReadySC works with employers with hiring demand to create tailored workforce training programs. Typical ReadySC applicants are in their early 30s and underemployed.v ReadySC had nearly 100 employer partners in 2017–18. Apprenticeship Carolina incentivizes employers to create apprenticeships by offering tax credits and administrative assistance. Since its inception in 2007, the program has grown exponentially, creating over 30,000 apprenticeships in technical manufacturing or other middle-skill jobs. The program currently has hundreds of registered apprenticeship programs and partners with 16 state higher education institutions. The initiative has been recognized by the U.S. Department of Labor as a national model for apprenticeship expansion.vi Both of these examples highlight the importance of engaging multiple stakeholders. Both programs were developed by local workforce development government agencies and involved direct involvement and engagement of employers.

The private sector has also taken strides to provide reskilling opportunities to the workforce. Faced with a scarcity of workers with technical skills such as cloud-based computing, data science and coding, and with the realization that many employees worked in roles supporting technologies that were quickly becoming obsolete, AT&T launched an initiative titled Workforce 2020 to retrain current employees. Since then, AT&T has spent more than $250 million on employee education. By 2020, more than 140,000 AT&T employees will have been actively engaged in reskilling; in 2016 alone, reskilled workers accounted for 47% of all promotions in the company’s technology organization.vii Most training is delivered online, and credentialing is done through virtual badges.

Another model for addressing the skills gap has recently emerged in the nonprofit sector, led by an international organization, Social Finance. In 2017, Social Finance launched a project called the Massachusetts Pathways to Economic Advancement, a Pay for Success (PFS) initiative aimed at providing workforce training to immigrants. Jewish Vocational Services, a community-based workforce and adult education provider will provide training, ranging from 4 weeks to 15 months, tailored to employer needs. Training focuses on high-demand occupations, such as pharmacy technicians and nursing aides. Participants can learn English and other vital job skills, and if they move on to jobs with higher salaries within three years, investors in the program will be repaid at a profit by the state. If not, they will lose their investment.xiii The program will serve 2,000 English-language learners, and initial results show a 50% earnings gain for those placed in jobs.ix

serve as a blueprint for those looking to find solutions and develop programs for their communities. Here, we detail three case studies of early, innovative models.

8 | Workforce 2.0 Cultivating a local ecosystem to unlock the potential of workforce reskilling

The three case studies for transforming the workforce to meet the requirements of the jobs of the future. While very few models exist at scale, numerous localized initiatives signal the potential of what could be accomplished if there were stronger, more coordinated collaboration across the “reskilling ecosystem.”

Unlocking the full potential of reskilling within a fragmented and localized employment and education landscape will require increased coordination and collaboration along numerous dimensions. In each state, there must be efforts to: identify employers willing to participate, encourage employers to bring high-opportunity jobs to local communities, locate and align educational programming — traditional and nontraditional — with these high-opportunity needs, and help prospective students navigate the reskilling options available to them.

America’s skills gap is a reality for which we all pay a price — in higher costs to consumers, greater strain on public resources, unfulfilled careers for many workers and lost productivity for industries. But this challenge presents an opportunity for each stakeholder to develop solutions that can help close the skills gap on a larger scale. Table 1 identifies a set of questions for each key participant in the broader ecosystem to consider.

What can be done to close the skills gap going forward?

9Workforce 2.0 Cultivating a local ecosystem to unlock the potential of workforce reskilling |

Stakeholder • Key questions to consider

Elected officials (state and local)

• How can state and local leaders facilitate the process and help convene the right participants to create the right ecosystem for the state?

• How can government provide the structures and incentives to accelerate the closing of the skills gap?

• How can we use longitudinal data for better policymaking?

Workforce and economic development agencies

• How can the agency and workforce investment boards be a catalyst for existing workforce programs, employers, education organizations and workers to create pathways to new skills and opportunities?

Employers

• How can employers better forecast their medium- and long-term hiring needs, identify high-opportunity jobs, and help define the skills and competencies necessary for success in these jobs?

• What funding could employers potentially provide (e.g., tuition reimbursement funds and corporate training funds)?

• How can employers engage with educators and governments to make investments in the community to ensure an adequate supply of skilled workers to fill high-quality jobs?

Post-secondary education providers

• How are education providers, be they community colleges or four-year public or private institutions, or even alternative providers of education programming (e.g., coding or data science boot camps) partnering with employers today to understand their needs and develop aligned academic programs?

• How could they better align with the needs of employers or their home state?

• Could they deliver educational programming in collaboration with employers that transcends state lines with online learning?

• How can they reengage adult learners who may no longer be engaged with traditional higher education?

K-12• Are there opportunities for K-12 districts and schools to develop, collaboratively with employers, workforce

investment boards, and, potentially, higher education institutions, to develop pathways for K-12 students that are aligned with, and lead to, good jobs in upwardly mobile careers?

Prospective students (working adults)

• How can students take advantage of these new learning and reskilling opportunities?

• Can students access these opportunities? Are opportunities delivered in modalities that make participation easy for working adults?

Support organizations and intermediaries

• What supports might working adults need to identify the right pathway for themselves and to match educational programs to their goals?

• What other supports might they need to succeed in the program of their choosing? Can these supports be supplied by education providers or employers, or are third parties required?

• Is there a need for an intermediary to help coordinate activities across all stakeholders? Are there existing nonprofits that could play that role?

Standing up a scalable, sustainable reskilling initiative within a state will likely require investment that is laser focused on plugging the middle-skills gap with shorter, credential-based training programs. Efforts should focus on identifying jobs that are in growing industries, are upwardly mobile, offer middle-skill wages and face low risk of automation. Jobs in health care and

tech support are two current examples. Historically, training programs have not met the needs of the middle-skill job market, largely because there are no agreed-upon definitions of competencies necessary for middle-skill jobs and no strong financial incentives for employers and education providers to work closely together. Stakeholders across the workforce ecosystem have

the potential to change that, however. With the increasing urgency to address skills gaps, employers and elected leaders are being incentivized to work across sectors and to provide the structures, incentives and operational expertise to develop large-scale, transformative programs that provide their communities with high-quality reskilling training.

Table 1

10 | Workforce 2.0 Cultivating a local ecosystem to unlock the potential of workforce reskilling

Ultimately, deploying reskilling initiatives at scale can help ensure that labor market needs are met, while also providing increased social mobility and a better livelihood for American workers.

As shown in the three case studies, there are many examples of small groups of stakeholders coming together to create reskilling pathways. However, most of these custom solutions

are currently siloed and unscaled. Expanding the ecosystem with additional stakeholders introduces both increased opportunity and increased complexity and risk, but the success or failure of reskilling programs at scale is dependent on broad stakeholder engagement and who is at the table.

Ernst & Young LLP has supported broad stakeholder groups coming together to identify and implement solutions

to help workers access the training and reskilling they need to succeed in an ever-changing economy. As the framework in Figure 3 illustrates, there are many entry points into an effort of this magnitude, and some may be more suitable starting points than others, depending on where the state finds itself today.

A path forward

11Workforce 2.0 Cultivating a local ecosystem to unlock the potential of workforce reskilling |

• For example, some states may be interested in better understanding their current landscape — from both an economic and educational perspective — to determine high-opportunity occupations and then to align existing educational programs with these opportunities.

• Other states may have already identified the occupation areas and are now interested in: convening employers to define the competencies that are needed along those career trajectories, and inviting higher education to participate in these discussions to develop aligned educational programming.

• Perhaps other states have already aligned programming with workforce needs but are struggling to attract working adults into the programs. These states may need a technology solution that makes enrollment and access to programs easier for future learners, or they may need an online infrastructure solution that allows these students to learn at their convenience, in asynchronous modalities.

• Some states may need a better mechanism or system for monitoring and reporting on progress. To do that, they may need to identify ways in which data can be captured

and shared more seamlessly across disparate organizational systems.

• Finally, some states may need the full solution. In one state, we engaged with the governor and a steering committee composed of cross-sector stakeholders to support the development of a human capital strategy. We provided a comprehensive analysis of economic trends in the labor market and higher education across the state. The results informed numerous recommendations, including several strategies for economic growth, local job creation and university and employer partnerships.

• Forecast hiring needs

• Define skills and competencies and partner with educational institutions to ensure they are taught

• Pay for well-trained recruits

• Develop education programs aligned with in-demand skills

• Provide students with necessary social supports to programs

• Create career pathway programs by partnering with post-secondary education providers and employers

• Identify and select programs aligned with interests and career goals

• Enroll in and complete educational programs

• Develop policy and initiatives to facilitate and incentivize the convening of stakeholders

• Provide access to funding

• Conduct research to inform workforce development efforts

Support organizations

Prospective students

Employers

Post-secondary education providers

K–12 systems and schools

State and local

government

• Provide noneducational student supports while students are enrolled

• Coordinate across other stakeholders

• Conduct monitoring, data collection and accountability reporting

Figure 3

Local reskilling ecosystem

12 | Workforce 2.0 Cultivating a local ecosystem to unlock the potential of workforce reskilling

i Infographic: Analysis of the American Workforce | Adeccoii Different skills, different gaps — Burning Glass Technologiesiii United States’ Forgotten Middleiv Addressing America’s Reskilling Challengev readyscvi ApprenticeshipCarolinavii AT&T’s Talent Overhaulviii Massachusetts Pathways to Economic Advancement Projectix The Massachusetts Pathways to Economic Advancement Pay for Success Project

ContactFor more information on how EY can help, contact Brad Duncan.

Brad DuncanUS State, Local & Education Leader Ernst & Young LLP brad.duncan@ey.com +1 404 817 5371

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