Opinion: Taxpayer subsidized workforce development is a lemon
Gov. Gretchen Whitmer has emphasized the need for “better skills, better jobs.”
Recently, she joined Detroit Mayor Mike Duggan to publicize a state-led effort to encourage more students to seek skilled trade occupations. Her first proposed budget includes over $400 million for programs related to workforce development.
That’s a worthy cause for sure, but when you look under the hood, the state’s effort to improve workforce development is actually quite underwhelming.
Michiganians need to think carefully about the state’s role in workforce development.
When they hear "workforce development," most people think of training in high-demand fields, like health care, technology, computer-based services, advanced manufacturing and construction. But the majority of these state and federal programs provide no such training. Instead, most focus on counseling, job placement services and soft skills development. That's well and good, but taxpayers shouldn’t be misled about the nature of these programs.
Who is best suited to provide workforce training? Nearly all the training that is funded by the state takes place at community colleges and public high schools. While it's difficult to measure the effectiveness of these programs, these schools have been operating these programs for decades, and there’s supposedly a skills-gap crisis in Michigan. It’s hard to see how more of the same could be the solution.
Community colleges and school districts have no obvious incentives to assess and meet the labor demands of Michigan employers. They get paid only for enrolling students; not for landing them successful careers.
Most new programs the state has launched primarily funnel new resources to school districts and community colleges. So, while state programs sound innovative, they do little more than increase spending on programs that have proved inadequate. This is true for the state’s Pure Michigan Talent Connect and Michigan Works! programs, former Gov. Rick Snyder’s Marshall Plan for Talent, and Whitmer’s proposed Michigan Reconnect Program.
Finally, what is the proper role of the state in workforce development? If there is indeed a skills gap, such that employers cannot find enough skilled workers to hire, why should taxpayers be responsible for fixing it? Taxpayers obviously benefit from having more skilled workers in the economy, but only indirectly. Employers hiring skilled workers, however, benefit directly. They should be the one's to solve this problem.
Employers have much better tools at their disposal to attract skilled workers and incentivize more people toward training. One is wages. Wherever there is a shortage of skilled labor in a particular field, offering a higher wage is sure to attract workers. Higher wages can attract workers from other lower-paying jobs or other geographic locations. If workers lack necessary skills, a large enough pay increase can make getting the skills both attractive and feasible.
Since they know exactly what skills their new or existing laborers need, it's more efficient for businesses to train them themselves. State-run programs will never have such precise information to guide their spending on training programs.
Workforce development problems should be handled by the people who have the most skin in the game, the best knowledge of the actual problems and the incentives to make sure their efforts work.
Sarah Estelle, author of "Workforce Development in Michigan," is a professor at Hope College in Holland and is a member of the Mackinac Center for Public Policy’s Board of Scholars.