Creating better work opportunities for Americans, building a well-educated and trained workforce for American employers, and enacting a better set of public policies to support work will require action from governments, businesses large and small, labor unions, nonprofit organizations, and others. It also requires a United States willing to learn from the best examples across the country and around the world. The Task Force recommendations are a launching point for this crucial national effort. They form a suite of options that governments at all levels, employers, educational institutions, and others can enact.
The Task Force recommendations are aimed at rebuilding the links among work, opportunity, and economic security. There need to be clear, understood, and achievable paths by which Americans can pursue better lives for themselves and their families through work. Meeting this challenge requires a commitment at every level of society to invest in and develop the nation’s most valuable asset—its people. As President Trump said at the World Economic Forum in January 2018: “To be successful, it is not enough to invest in our economy. We must invest in our people.”147
The recommendations set out options for local and state governments, the federal government, and other actors, including employers, educational institutions, and nonprofits. Action is critically needed to address each of the challenges detailed above, but the specifics will vary from state to state and institution to institution; different approaches should be encouraged. The Task Force ultimately calls for an overarching national initiative to build and maintain momentum on this vital set of issues.
Three principles should guide the U.S. response to the workforce challenge:
- Flexibility: It is difficult to forecast with high confidence how large the scale of workplace disruption will be in the future, or which sectors and occupations will be most affected. Governments, employers, and others should have the flexibility to pursue different approaches and learn from what works best. Initiatives at the state and local level are particularly important to test out new ideas.
- Transparency: Although new technologies disrupt traditional work patterns, they also enhance Americans’ ability to adapt successfully to change. In particular, big data and other new capabilities, properly harnessed, will allow for better understanding of labor market opportunities, better matching between employees and job opportunities, and better choices on the paths from education to well-paying jobs and careers. New data analysis and more timely and effective data sharing should also allow governments, employers, educators, and individuals to learn more quickly which approaches are the most effective, and to respond accordingly.
- Resources: Both governments and companies have failed to invest the resources needed to address these challenges, and they have sometimes targeted resources poorly. The worsening federal budget deficit, which will be exacerbated by the December 2017 tax cuts and the congressional budget agreement, will unfortunately further handcuff the United States in meeting these challenges.148 Some other advanced economies have responded more successfully to the disruption of work because they have made it a priority and committed resources to address the challenges facing their people. While the particulars of the U.S. response will differ, significant resources are needed to prevent the United States from falling farther behind global competitors. Those resources should be targeted to approaches that have proven successful through experience.
Local and state governments and the federal government should adopt an explicit goal of creating better jobs and career paths for Americans. Initiatives should aim especially at attracting investment and revitalizing entrepreneurship.
Good jobs require a good investment climate. Many large employers today have the ability to locate production facilities anywhere in the world, and the United States is competing with other countries for job-creating investments. Building and maintaining an attractive investment climate should therefore be a priority at all levels of government. The private sector should also undertake initiatives to strengthen the United States as a top global location for business.
Reiterate the United States' commitment to maintaining open trade and investment policies. The United States should lay out the welcome mat for foreign investors and underscore its commitment to treating all investors in a fair and equitable manner. Foreign-owned multinational companies have investments worth nearly $3 trillion in the United States, the most of any single country in the world. These firms directly employ more than six million U.S. workers at salaries an average of 25 percent above the U.S. average (about $80,000 per year), and more than one-third of these jobs are in manufacturing. These companies also carry out more than 16 percent of private-sector R&D in the United States.149 The commitment to openness is vital for U.S.-headquartered multinational corporations as well. U.S.-headquartered multinationals currently employ nearly twenty-seven million Americans at an average annual salary of $77,000. These companies also purchase nearly 90 percent of the inputs from American-based suppliers, creating millions of other good jobs, and account for nearly 90 percent of the private-sector R&D that is critical for maintaining U.S. leadership in innovation.150 The president should issue a statement committing the United States to maintaining an open investment policy, as every president since Gerald Ford has done.151
Maintain a competitive corporate tax rate. The tax reform bill passed by Congress and signed by President Trump reduced the top corporate tax rate from 35 percent to 21 percent, putting the United States in a much better position vis-à-vis its major competitors in the OECD nations. The lower rate—which is now similar to Canada’s when federal and state or provincial rates are combined—should help attract more investment to the United States.152 The United States should, for investment purposes, ensure in the future that its corporate tax rates remain in line with those of its competitors.
Pass a major infrastructure package. This is a stated priority for the Trump administration and should be a priority for Congress. The most urgent needs include expanding broadband coverage and developing “smart cities” and high-speed transportation, as well as maintaining and upgrading existing roads, bridges, and water and sewer systems. The administration has proposed $200 billion in additional federal spending, and hopes to see some $1.5 trillion invested from additional state, local, and private-sector sources, but has also proposed cutting Department of Transportation and other infrastructure funding.153 Congress will need to find new sources of revenue for infrastructure; it could consider both public-private partnerships and an increase in the gasoline tax, which has not been raised since 1993. The Chamber of Commerce has backed a twenty-five-cent-per-gallon increase in the tax, which would raise about $375 billion over the next decade.154
Support U.S. exporters. The Export-Import Bank and other agencies should increase financing for U.S. exporters, with a particular focus on small business. The United States should embrace a renewed, outward-looking trade agenda, and in particular expand export opportunities into fast-growing, developing economies and encourage lower-cost and easier customs processing for access to foreign markets. Digital platforms through companies such as Amazon and eBay can be especially helpful for smaller companies in identifying and serving new overseas customers.
Negotiate with other governments to set parameters for investment competition. While the United States should be aggressive in attracting and promoting investment, there are real dangers of a “race to the bottom” as countries continue to cut corporate tax rates and offer other financial inducements in an effort to attract investment. The United States should cooperate with efforts underway in the OECD, including its base erosion initiative, to establish basic parameters for investment competition.155 The United States should also move forward with negotiations on stalled bilateral investment treaties, especially with China. This would set clearer terms under which Chinese investment will be welcomed in the United States and when it may be resisted to safeguard national security or prevent an economically harmful transfer of technology. Such a treaty should also be premised on reciprocal access for U.S. companies to pursue investment opportunities in China.156 As governments around the world consider tightening review mechanisms for foreign investment, the focus should be on identifying true national security concerns so as not to deter job-producing investments.
State and local governments
Adopt best practices in local economic development. All state and local governments should have ambitious local economic development initiatives designed to both attract new investment and build from within. The National Governors Association has spelled out a series of best practices for economic development, including emphasizing job creation from within, supporting local entrepreneurs, strengthening advanced manufacturing, harnessing local universities to help bridge the gap between research and commercialization (often called the “valley of death”), and promoting exports from the region. The goal should be to create hubs that “bring together the critical ingredients for innovation—smart people, research institutions, entrepreneurial training and mentors, and professional networking.”157 These best practice recommendations include the following:
- Regional economic development organizations should develop regional economic strategies that align objectives at the state, regional, and municipal levels and outline a clear path forward. Examples of these strategies include ProsperityNOLA in New Orleans, AdvanceKC in Kansas City, Missouri, and the Metro Phoenix Global Investment Plan.158
- Local communities should have business retention and expansion programs to support existing companies in their market. The best estimates suggest that as much as 80 percent of net job growth comes from existing businesses in a city or town; nurturing those businesses and helping them expand is likely to have bigger payoffs than focusing on luring new companies.159
- Regions should focus on attracting new companies from the United States and abroad through regional economic development organizations with clear strategies by sector, focusing on sectors in which the region can develop competitive scale.160
Other priorities should include an active role in workforce development (discussed in more detail below) and investments in public infrastructure—including amenities such as parks, bike paths, theaters, and other community spaces—to improve the attractiveness and competitiveness of the region as a business investment location.161
Test, evaluate, and benchmark investment incentive schemes. States and cities continue to offer tax and other incentives to encourage companies to site their job-creating activities in those locations, though the outcomes of such incentives are usually disappointing for the states.162 Many states, however, are developing a more sophisticated capacity for ensuring that companies deliver the promised benefits. Model approaches should include transparent reporting on the costs to taxpayers, job-creation outcomes, and quality of jobs created in terms of wages and benefits. Deals should include evaluation criteria and withdrawal and reimbursement of incentives if companies fail to deliver on their job-creating promises.163
Build capacity in investment locations. Decisions to invest in a new city or region, or to expand operations, are a big commitment for companies. They are in effect a bet on the continued economic viability of that investment location. That means companies have a stake in building the competitiveness of these locations—including through an educated and skilled populace, world-class infrastructure, and a commitment to research and innovation. Harvard Business School has termed such resources the “commons” from which all companies benefit. Business has a central role, working with local governments, educational institutions, and nonprofits, in building these local capacities.164
Reverse the slowdown in entrepreneurship
Small companies remain an important engine of job growth, and the United States needs to reverse the slowdown in new-company formation. The reduction in tax rates for small businesses as part of the December 2017 tax bill is likely to encourage new start-ups, but further steps are needed.
Expand access to capital. The number of community banks in the United States has declined by one-third over the past decade. Historically, community banks have been an important source of funding for new businesses.165 Disparities also remain in the type of small-business credit or loans available to women, minorities, and people in economically distressed communities.166 Expanded funding for community-development financial institutions (CDFIs) would be helpful in addressing these capital gaps. CDFIs have proven particularly effective in delivering capital to minority and rural small-business owners. Large banks should also expand their own initiatives. JPMorgan Chase and Wells Fargo have established programs and funded activities that have targeted “CDFIs of color”: JPMorgan’s Partnerships for Raising Opportunity in Neighborhoods (PRO Neighborhoods) has created diverse collaborations that bring together disparate organizations to implement innovative programs that support housing and small-business opportunities in underserved communities. Wells Fargo has implemented the Diverse Community Capital program, which seeks to invest $75 million into Latino and African American communities to leverage greater small-business lending. Both programs seek to identify minority-serving CDFIs and community lenders to create greater capacity and borrower results.
Revise the Community Reinvestment Act (CRA). This act should do more to encourage banks to make investments that are more concentrated, coordinated, and focused on job creation. Currently, banks can get CRA credit for investing in or lending to entities that create only low-wage jobs that do not offer a path out of poverty. The CRA could be a much more powerful tool to facilitate community development by focusing on the quality of loans (and in particular small-business loans) to the low- to moderate-income community and on the types of jobs these loans create.
Leverage public funds more effectively to increase working capital lending. The Small Business Administration’s lending programs can and should help provide start-up capital, but new private capital sources are needed in struggling communities. It is difficult to know the effectiveness of community small-business financing systems without continuously measuring and tracking successes and challenges over time. The Federal Reserve recently recommended that the Consumer Financial Protection Bureau (CFPB) implement section 1071 of the Dodd-Frank Act to collect data from banks on their small-business lending. Local officials and the private sector could create small-business development corporations to attract private venture capital and offer working capital to small companies.167 Where possible, state and local leaders should strengthen and expand smaller, local banks and credit unions.
Create an immigrant entrepreneur visa. Immigrants remain a noteworthy exception to the decline in new-company formation in the United States. Immigrants are roughly twice as likely as native-born Americans to start a new business; in 2014, 28.5 percent of new start-ups were founded by immigrants, up from just 13 percent in 1997, and one-quarter of new engineering and technology start-ups had an immigrant founder.168 Congress should pass legislation that permits immigrants, many of whom are recent graduates from U.S. universities, to live and work in the United States if they can raise funds to start new companies. Among the proposals that have significant bipartisan support is the Startup Act, which would create an entrepreneurial visa to permit seventy-five thousand immigrants annually to remain temporarily in the country if they have raised enough seed capital to launch a new company, and to remain permanently if the company succeeds.169 Such a visa could add 1.6 million U.S. jobs over the next decade.170
The United States needs to remain a world leader in technology and innovation. This should be supported through increased public and private R&D, support for commercialization of new research, an open door to highly skilled immigrants, and steps to prevent the forced transfer of U.S.-developed technologies to competitors.
If the history of the modern global economy has taught any lesson, it is that those who hesitate to embrace and encourage new technologies will get left behind. The United States is facing growing competition for leadership in innovation, investment, and technology from countries with different economic models. For instance, the Chinese government’s direct role in shaping industrial policy and steering companies with financing and other government support contrasts with the U.S. model of open innovation and relaxed regulation. The global race to develop, own, finance, dominate, and disseminate artificial intelligence and other emerging technologies will permeate the business competition of the future and further divide nations based on their ability to capture these gains in a competitive global landscape. Talent is critical—the United States needs to develop or attract the scientists, engineers, and creative talent to lead in this competition. China’s drive to dominate these technologies of the future, including big data, quantum computing, artificial intelligence, and autonomous systems, is an economic, educational, and strategic challenge to the United States.
Increase support for basic research. While total R&D spending has been rising in the United States, the share devoted to basic research—which comes mostly from federal support—has been falling, from roughly 1.2 percent of GDP in the 1970s to less than 0.8 percent today.171 President Trump’s proposed 2019 budget would hold the line on research spending (though the administration had proposed deep reductions before the February 2018 congressional budget deal that increased spending caps). The administration is, however, pushing for deeper cuts in such critical areas as renewable energy research.172 This comes at a time when other countries, including Brazil, China, Singapore, and South Korea, have been increasing their investments sharply. The federal government needs to continue to be a driver of basic research, particularly as development of artificial intelligence becomes a competitive race with nations such as China, which has massively increased its research funding. China has overtaken the United States, for example, in the volume of published journal articles on deep learning.173 While AI developers can often attract venture capital investors, basic science research is still needed, and the government is best placed to fund it. Government-funded research tends to encourage rather than discourage private-sector R&D, which is far more focused on the development of marketable new products than on advancing the underlying science.174 And government R&D spending also has the strength of being spread widely around research universities across the country, which can help spur local economic development efforts. The U.S. government should set and meet a target of investing at least 1 percent of GDP in R&D activities.
Maintain the permanent tax incentive for private-sector R&D. The United States was the first country to establish an R&D tax credit, in 1981, and it has proven to be one of the most effective federal tax incentives. It addresses a basic market failure—companies that invest in research do not reap the full benefits of their investment, even though the broader social benefits are enormous.175 In recent years other nations have adopted similar or greater incentives, so the United States no longer enjoys a significant edge. The December 2017 tax bill maintained the credit but will diminish its benefit by requiring companies to write off the costs of R&D investments over five or more years instead of in a single year. Congress should now assess what significant incentives remain for commercial investment and determine whether additional measures might be beneficial from a competitive standpoint.
Encourage regional and sectoral partnerships in developing and commercializing new research. Such targeted partnerships have proven effective in moving research from the laboratory to production and in establishing successful technology clusters. Manufacturing USA (formerly the National Network for Manufacturing Innovation), for example, which involves the Departments of Commerce, Defense, and Energy, has set up a series of public-private partnerships aimed at the commercialization of new manufacturing technologies, modeled after the German Fraunhofer Institutes. Nine new centers have been launched that cover additive and digital manufacturing, lightweight and composite materials, next-generation integrated circuits, and advanced fabrics.176 Congress should expand support for this initiative to fund the completion of the fifteen centers originally planned when the program was launched in 2012.177
Maintain Small Business Innovation Research (SBIR) funding. The SBIR program, created under President Ronald Reagan in 1982, has been highly successful at encouraging innovative start-ups at modest cost to taxpayers.178 The program awards roughly $2.5 billion in competitive grants each year to small companies that have shown promising research breakthroughs but have not yet developed the track record to attract venture capital. Apple, Compaq, and Intel are among the companies that received SBIR grants in the 1980s.179
Open doors to more highly educated immigrants. Highly skilled immigrants help the U.S. economy. Immigrants are significantly more likely to participate in scientific research leading to patents and to found new companies. U.S. openness to immigration has been a significant contributor to the U.S. lead in innovation.180 The United States needs to increase its openness to high-skilled immigration, and in particular make it as easy as possible for graduates of U.S. universities in scientific and technical fields to remain and work in the United States. Congress has considered, but not approved, legislation that would give priority to highly educated immigrants, especially students who graduate from U.S. universities, and passing such measures should be a top priority.181 The administration should also reconsider measures that have created new obstacles for many foreign students and foreign workers on temporary work visas such as the H-1B.182 Allowing companies to bring talented employees to the United States reduces the incentive to move research and other corporate activities offshore. Steps should also be taken to link immigration more directly with U.S. labor market challenges; Microsoft, for example, has proposed that companies should pay higher fees for H-1B applications, provided the funds are reinvested in U.S. computer science education.183
Prevent forced technology transfers. The United States should work with its allies to stop the forced transfer of technologies to foreign competitors. The problem is particularly acute with respect to China, which often demands that foreign investors share proprietary technologies with Chinese competitors as a condition for investing and expanding in the larger Chinese market in sectors such as automobiles, chemicals, and renewable energy. In automobiles, for example, foreign companies are required to manufacture only through joint ventures, and General Motors was required to share the intellectual property of the Chevrolet Volt in order to qualify for subsidies for electric car purchases. Under the Made in China 2025 plan, China is seeking to supplant imports with domestic production in ten advanced-technology sectors, including semiconductors, aircraft, electric cars, and 5G mobile telecommunications.184 The Trump administration has targeted aspects of the problem through an investigation under section 301 of the Trade Act of 1974. The United States should work with allies in Japan, Europe, and elsewhere that are similarly harmed by Chinese practices. The issue should also be addressed through bilateral investment negotiations and regional and multilateral forums.
State and local governments
Promote innovation clusters. Cities and states need to build on their economic strengths by promoting innovation in sectors where they enjoy local advantages, including universities and other institutions conducting relevant research, a workforce with skills in specific areas, and a cluster of suppliers. The goal of this approach is to identify and leverage the economic strengths of a city or region.185 The Global Cities Initiative, a project of the Brookings Institution and JPMorgan Chase, has been a leader in identifying best practices for urban and regional economic planners and helping regions build on their strengths to succeed in the global economy.186
Choose the United States for research and innovation. The United States offers companies enormous benefits for locating their R&D in the United States, including top scientific and engineering talent, a high level of intellectual property protection, and generous tax write-offs. Given the challenges that many companies are facing in protecting intellectual property offshore, companies should look to locate their R&D activities in the United States to the maximum extent feasible.187
Governments at all levels should develop and implement policies aimed at maintaining strong growth and demand for labor. Employers should commit themselves to creating a “high-road workplace” that offers employees decent pay, training, scheduling, and benefits. Special measures are needed for communities struggling to attract investment and jobs.
Set the conditions to maintain full employment. The best way to generate and sustain wage growth is to have an economy in which employees are in high demand and employers face pressure to bid up wages in response. Congress should preserve the Federal Reserve’s dual mandate of maintaining the maximum sustainable employment and stabilizing prices, and resist calls to target low inflation without concern for employment levels. Congress and the Trump administration should also use fiscal policy prudently to maintain strong growth and employment.
Pass and implement a Make Work Pay tax credit. The Earned Income Tax Credit, created by President Gerald Ford in 1975 and expanded under President Bill Clinton in 1993, provides a refundable tax credit to low-income working individuals. It has been one of the most effective anti-poverty programs in the country and is aimed directly at low-income workers. In 2016, a family with an income of less than $50,000 could claim a refundable tax credit of up to $6,300. Roughly ten million Americans are lifted out of poverty each year by the combination of the EITC and the Child Tax Credit.
The credit should be rebranded and updated for the challenges that exist in the current labor market. It should be renamed the Make Work Pay tax credit, to make it clear that its goal is to help rebuild the link between work and economic security. Several proposals have been made to expand and improve the EITC, which could be fashioned into a new Make Work Pay incentive. First, the credit is currently paid out in a lump sum each year at the time of tax filing, which is less beneficial for individuals and families struggling to make ends meet on a monthly basis. It could easily be modified to pay out on a quarterly or even more regular basis.188 Other ideas include expanding the EITC to childless adults and increasing the payout significantly to do more to offset low wages.189
Expand the national service program. Young people remain among the most economically vulnerable populations; the youth unemployment rate is 9 percent, roughly double the national average. This is one problem that state and local governments, working with nonprofit groups, should tackle directly through expanded service opportunities. Civilian services should be targeted at specific public needs, such as tutoring students from disadvantaged backgrounds, helping the elderly, or working on outdoor projects such as building or maintaining parks and other public spaces. Expanded service programs could also help bridge some of the deep social and political divisions in the United States by allowing young people to work directly with those from different backgrounds. The positions should include modest stipends and preferred access to educational financing after completion of service. Two existing service programs, the Peace Corps and AmeriCorps, currently enroll roughly eighty thousand young people annually. General Stanley McChrystal, who has become a strong advocate for national service, suggests a target of one million new annual positions.190 Those service programs should also focus on training young people in skills that will have future job-market value. The programs would not be particularly expensive; the Aspen Institute estimates that total taxpayer costs are currently less than $1.5 billion annually, with a fourfold return on investment in terms of skills for the individuals and broader social benefits. Expanding service to one million positions would cost roughly $20 billion, with commensurately larger gains.191
State and local governments
Make targeted minimum wage increases consistent with local conditions. The federal minimum wage has fallen in real terms since the late 1960s, from roughly $11 in current dollars to $7.25, a one-third reduction in earnings. The last increase in the federal minimum was eight years ago. While there are certainly good arguments for raising the federal minimum, the large differences in state and local labor markets around the country argue for leaving these decisions up to state and local governments. Twenty-nine states and the District of Columbia have higher-than-national minimum wages, and about forty municipalities have set their own higher minimums. Many cities, including Buffalo, Los Angeles, New York, San Francisco, Seattle, and Syracuse, have adopted or are moving toward a fifteen-dollar-per-hour minimum. On balance, the evidence suggests that higher minimum wages do push up earnings for the lowest-paid workers, including those who were already making slightly more than the minimum, and do little to dampen employment. It also makes sense to raise the minimum wage in conjunction with an expansion of the Make Work Pay credit in order to limit the cost of the subsidy.192
The wage level clearly makes a difference; there is some evidence in Seattle—which has already increased its minimum to thirteen dollars an hour—that employers have reduced hours and delayed hiring, though more data are still needed.193 State and local governments should be left to experiment and adjust to find the optimum level. Too little is known about the effect of higher minimums on employment, especially for younger workers.
Establish Make Work Pay credits. Some twenty-nine states and the District of Columbia currently have their own tax credits for low-income working people, and most are administratively simple because they are set as a percentage of the federal EITC. Many of the states without an EITC are among the poorest in the country, where the benefits would be greatest. Every state should move to adopt some similar tax credit for low-income workers. City and county governments could also offer credits. A pilot project in Atlanta and New York, which increased the credit to $2,000 at tax time, showed that employment rates rose for individuals—especially women—who received the bonus.194
States and cities should also experiment with quarterly payouts. Chicago in 2014 pilot tested a program to provide more than two hundred EITC recipients with quarterly payouts based on their expected end-of-tax-year refund. The participating households reported considerable improvements in their household financial stability, including less reliance on credit cards and payday loans and greater ability to save some of the end-of-year refund rather than use it to pay overdue bills.195
Commit to high-road strategies. Employers are increasingly discovering that a high-road workforce strategy—including decent pay, employment benefits, predictable scheduling, and opportunities for training and advancement—can produce better returns and a more loyal, productive workforce than do strategies focused solely on cost savings.196 While the opportunities will differ from sector to sector, employers would be wise to get ahead of this curve by taking steps to make themselves more attractive places to work and doing more to support the careers of their employees. BlackRock, the $6 trillion investment fund that is one of the largest in the world, is demanding that each company it holds in its portfolio “not only deliver financial performance, but also show how it makes a positive contribution to society.” In his recent letter to CEOs, BlackRock Chairman and CEO Laurence Fink wrote: “We see many governments failing to prepare for the future, on issues ranging from retirement and infrastructure to automation and worker retraining. As a result, society increasingly is turning to the private sector and asking that companies respond to broader societal challenges.”197
One initiative that has been passed into legislation by thirty-three states encourages willing companies to reorganize as benefit corporations (B Corps), meaning they commit to pursuing general benefits such as responsible workplace practices, community growth, and environmental stewardship in addition to return to shareholders.198 Governments should look for other ways to encourage, recognize, and reward companies that follow high-road strategies.
Encourage investment in distressed communities
Employment opportunities in the United States have become increasingly unequal geographically. The big cities, largely along the coasts, are growing more prosperous, while smaller cities and towns in the heartland of the country face diminishing job prospects. Fifty-two million Americans, some 17 percent of the population, live in “distressed communities” in which sizeable percentages of the population have not finished high school, are absent from the workforce, and face a diminishing number of job opportunities.199 The highest concentration of these communities is in the South and Midwest, though there are pockets across the country.
Regional disparities seem to be a feature of the two drivers of the modern economy—technology and globalization—both of which reward concentration in the larger urban areas, with their access to highly educated and skilled employees and good connections to global markets.200 The United States and other countries have pursued a range of policies—from direct corporate subsidies to tax incentives to the creation of enterprise zones (EZs)—to encourage investment in these regions, with mixed success. Most states and many city governments have established economic development organizations whose primary goal is to attract job-creating investments. Australia and Canada have pioneered a model that encourages new immigrants to locate outside their three major cities in order to bring new human capital to places that need it most.201
Bringing more investment and job creation to distressed communities is going to require attention to the broader set of recommendations in this report—in particular education and skills training, at local universities (where present) and community colleges working in close conjunction with local employers. But there are specific initiatives that could help.
Federal, state, and local governments
Expand, revitalize, and reinvest in broadband access. The ability to access advanced telecommunications, including high-quality voice, data, graphics, and video, is becoming the standard entry point for the digital world. In 2016, the Federal Communications Commission (FCC) issued a report on broadband access and found that thirty-four million Americans lacked access to high-speed broadband, a majority of whom live in rural areas or tribal lands. More strikingly, nearly 41 percent of schools, representing 47 percent of American students, lack high-speed connectivity to meet the FCC’s benchmark of “connectivity capable of supporting digital learning applications.”202 It is difficult to envision bringing lucrative technology jobs to middle parts of the country if these areas lack reliable broadband access. It will be impossible to use the power of the internet to help workers build skills through digital platforms and online training programs if dial-up is their only connection to the web. It is costly for the private sector to provide access to sparse rural populations or other areas with depressed consumer demand. The FCC should continue to support private deployment through the Connect America, Mobility, and Tribal Mobility funds. The FCC should also maintain a minimum speed requirement for companies to qualify for Connect America support and continue to support discounted broadband access to vulnerable populations through the Lifeline program.
Such initiatives do not need to emanate from Washington alone. Chattanooga, Tennessee, for example, used its own municipally owned electricity company to roll out broadband connections with a speed of one gigabit per second, about fifty times the U.S. average. That has attracted billions of dollars in new investment and young entrepreneurs, helping to continue the revitalization of what had been a struggling industrial city.203 Federal regulators should encourage similarly ambitious experiments in other cities and towns.
Create new enterprise zones. The creation of federal enterprise zones to encourage investment in distressed communities, especially in the inner cities, was a 1990s initiative championed most vocally by the late Jack Kemp, the Republican housing secretary under President George H.W. Bush. The federal government in the 1990s initiated various EZ schemes that offered tax credits tied to the employment of local residents in these communities. While not sufficiently studied, these initiatives may have paid significant returns in terms of higher employment levels and stable or rising housing prices.204 Critics have argued, however, that the idea was never fully embraced and that the evidence on effectiveness is varied.205 In the 2017 tax bill, Congress approved a new national community investment program known as Opportunity Zones, which offers tax benefits to encourage long-term investment in low-income urban and rural communities.206 The program could free up significant investment capital, and its effects should be closely monitored to ensure that funds are going into projects that generate significant economic value in struggling communities.207
Authorize state-based immigrant visas. Immigrants can be an important source of new economic demand and entrepreneurial energy in places suffering from slow economic growth. But absent other incentives, new immigrants will tend to follow employment opportunities, which are clustered in the largest cities. In the late 1990s, Canada launched its Provincial Nominee Program in an effort to encourage migrants to spread out beyond the three main cities—Montreal, Ottawa, and Toronto. Provinces are allowed to select immigrants directly—consistent with federal priorities and admissions criteria—to prioritize those with education and skills aligned with local economic needs. Australia has a similar program. The evidence suggests these immigrants have been more economically successful than federally sponsored migrants.208 Michigan has been advocating changes to U.S. immigration law that would permit similar state nomination of migrants.209
State and local governments
Build on existing skills and capacities. Many of the hardest-hit regions in the country depended heavily on the old industrial economy, but it is possible to build on that legacy. Akron, Ohio, for example, has built on its legacy as the tire-making capital of the country to become a leader in polymers. Even with the decline of the tire industry, Akron had a wealth of trained scientists and engineers working with rubber, synthetics, and steel. The University of Akron established the College of Polymer Science and Polymer Engineering, which has become a world leader in the application of polymers for the auto, aerospace, and defense industries and spun off an array of local commercial start-ups.210 Health and medical research has been an engine of growth in places like Buffalo, Cleveland, and Pittsburgh. North Carolina has made similar strides with modern synthetic fabrics, building on the legacy of its textile and apparel industries.
Attract recent college graduates through low-cost housing. The low cost of housing in many of the older or smaller industrial cities and towns is potentially a magnet for recent college graduates looking to get settled and start families. Many of these places also have potentially valuable old industrial properties that can be refurbished and repurposed. Federal initiatives could help by, for example, offering some student-loan forgiveness to young people who locate in these communities.
The United States should set and meet a goal of bringing postsecondary education within the reach of all Americans and linking education more closely to employment outcomes.
Much as high school education became the benchmark for success in the early twentieth century, postsecondary education should be the benchmark for the twenty-first century. But success will not simply mean increasing the numbers of students entering and completing two- or four-year college programs, though that is important. Instead, the goal should be to link educational offerings more closely with employment outcomes, in particular by expanding apprenticeships, work-study programs, and internships to strengthen the link between education and work. New initiatives are also needed to improve affordability and access to postsecondary education, and to encourage lifelong learning.
The efforts should be led primarily by business and educators, mainly at state and local levels. There is no one-size-fits-all solution to the challenge of better linking education and the labor market, and there is room for experimentation involving companies, educators, nonprofits, and state and local governments. Systematic organized efforts are needed, however, to share what is being learned and to scale up successful smaller-scale initiatives.
A society-wide effort is also needed to increase public respect for and acceptance of work-based training programs. While just over 30 percent of Americans ever complete a four-year degree, the default assumption among many parents and educators, reinforced by the media, is that going to a traditional college is the only acceptable path to a good career. As a result, many young Americans overlook the multiple available, and far more affordable, paths to acquiring the education and training needed for well-paying jobs. The country needs to work to remove the assumption that a four-year college degree or beyond is the only path to employment success, and to overcome the stigma that too often dissuades young people from making other educational choices.
Language matters here: the use of the phrase “middle skills” to describe many of these jobs explicitly places them below the “high-skill” jobs that are supposedly available only to graduates of four-year programs. That is misleading, because many of these jobs involve complex abilities to work with computers and other machines and may pay much better than some other supposedly high-skill jobs. Companies, educators, and political leaders should be talking about these as skilled, technical jobs that can require learning and “upskilling” throughout a career.
Such language also reinforces the notion of binary educational and career choices. Many young people who begin work in a technical field after an apprenticeship or work-study program may well wish (and should be encouraged) to return to school to finish four-year or more advanced degrees as their careers progress. Stacked credentials and other innovations that allow individuals to upgrade their education over time and while working can also help.
Develop talent pipelines. Employers, including many small- and medium-sized firms, need a strategy for filling their talent needs. The record number of job openings and persistent complaints among employers about skills shortages are part of a growing body of evidence that employers need to change their strategy—instead of sitting back and hoping that schools will graduate employees with the skills they need, or that they can poach them from other companies, they need to work proactively to develop the talent they need. That means working with local and state governments, and with community colleges and other educational institutions. It also means working with other employers within a particular sector, collaborating to build talent within a sector even as companies compete for that talent. Employers are starting to take this issue far more seriously. In addition to individual company initiatives, the Business Roundtable—the national umbrella group of chief executives—has launched the National Network of Business and Industry Associations to provide impetus for new models of work-study and hiring.211
Employers seeking to build the best workforce should also keep in mind that reaching nontraditional employees requires significant outreach and recruitment. Plans to recruit women and minorities, for example, should not be an afterthought once programs and staff are in place. Employers need to be willing to hire knowledgeable, diverse, and well-connected recruiters with ties to local communities, schools, and civic organizations; this should be a priority for company management. There is growing evidence that diverse and inclusive workplaces are a source of competitive advantage for companies.212
Expand apprenticeships and other work-study initiatives. American companies are increasingly coming to recognize—later, unfortunately, than competitors in Germany, Japan, Switzerland, and other countries—that nurturing a properly skilled workforce is central to their competitive success. That means that companies need to invest in developing and training the employees they want at early stages and throughout their careers. Apprenticeship models, which can be adapted to many different sectors and skills, involve a mixture of formal education and work-based learning.213 In Germany, Switzerland, and some other European countries, apprenticeships are an expected and ordinary path into the workforce and do not preclude or discourage students from returning to higher education. They also offer a far more secure path to employment for young people. Good corporate models are already in operation that U.S. companies should examine. German and Swiss companies investing in the United States have been able to bring with them their apprenticeship and workforce training models. BMW in South Carolina, Brose in Michigan, and Volkswagen in Tennessee are among the German companies that have established apprentice programs, working in close association with local German chambers of commerce that bring together other employers. The best models are open models, like the ones established by Toyota, that allow participation by other employers that are willing to offer apprenticeships.
Expanding the scale and benefit of apprenticeships will also require broader industry leadership and adequate attention to address the particular needs of local labor markets. Industry associations such as local chambers of commerce are ideally placed to bring together multiple employers; local workforce development boards should also play a more active role (and are encouraged to do so under WIOA).214 In traditional apprentice fields such as the building trades, companies should work closely with labor unions that have historically led such training for their members.215 The model should be a system with multiple options and pathways for students. The intention is not to track students but to open up new possibilities for both education and work.216
Improve quality and transparency with respect to industry credentials. There is often great uncertainty over the relationship between the credentials students earn and the employment prospects for graduates with those credentials. Transparency initiatives such as Credential Engine are designed to provide greater transparency and consistency, to allow students, educational institutions, and employers to do a better job of aligning credentialing with workplace opportunities.217 Many sectors, such as retail, have no standard credentialing system in place at all, which makes it difficult for employees to move freely within the sector. Improvements in credential quality and transparency will also feed back into young people's educational choices, which will in turn help companies develop the talent pipelines they need.
State and local governments
Undertake detailed skills assessments of the population and the workforce needs of local employers. State and local governments need stronger analysis of the education and skills levels of their populations. Devising and implementing appropriate educational options depends on a solid assessment of the workforce needs of local employers and the education and skills level of the state workforce. Policymakers should identify and focus their efforts on priority sectors that offer the likelihood of expanded employment in well-paying jobs.218
Work closely with large employers and educational institutions on skills-pipeline initiatives, including expansion of apprenticeships and other work-study experiences. While some large employers have the capacity to work directly with educational institutions to build the talent pipelines they need, success in workforce development generally requires close collaboration among state governments, educational institutions, and employers. States should not simply wait for employers to act but should take the lead in fostering such partnerships. In Colorado, for example, the state’s CareerWise Colorado initiative—a partnership involving the state, employers, industry associations, community colleges, public schools, and private foundation funders— launched in 2017 and aims to place twenty thousand students in apprenticeships by 2027. Modeled loosely after the Swiss apprenticeship system, the program is focused on linking education and workplace training in fields including information technology, advanced manufacturing, financial services, and hospitality. It begins in the junior year of high school and runs for three years of combined work and study; at the end, students graduate with an industry-recognized credential, no debt, and, likely, a job offer, as well as a year of college credit that can be transferred to a four-year program.219
There are numerous different state models for expanding education-to-work initiatives. The Pathways to Prosperity Network, which was launched in 2011 by the nonprofit Jobs for the Future and Harvard University’s Graduate School of Education, is currently operating in fourteen states. Beginning in middle and high schools, the initiative offers early and sustained career counseling to students and workplace-learning opportunities with employers.220 Many of the skills that lead to success in the workforce are not taught in a classroom but learned while actually doing work.
Connecticut and Iowa offer grants to employers, industry associations, and labor-management partnerships to expand programs; California directs its funds to educational institutions; and South Carolina has a more comprehensive model that includes an employer tax credit of up to $1,000 per apprentice, consultants for employers wanting to establish or expand apprenticeship programs, and close cooperation with the state’s technical colleges.221
Help small- and medium-sized companies in particular. Smaller companies face challenges in working with governments and educational institutions to meet their workforce needs. This is an area where state and local government involvement can be particularly helpful. Again, Colorado has been a leader here. The state, working with the Markle Foundation’s Skillful initiative, LinkedIn, and Microsoft, developed a partnership with employers, educators, and the public workforce development system to help steer students into relevant training programs and to encourage employers to expand their talent pool. The goal is to give educators and students a clearer idea of which skills are in demand, and give smaller employers in particular better access to those skilled workers. In February 2018, twenty U.S. governors announced their collaboration on the Skillful State Network, marking the national expansion of this initiative.222 The Incentives for Industry Credentials pilot in Colorado, which has the goal of preparing students for jobs in health care, information technology, and advanced manufacturing, also offers a $1,000 bonus to schools when students receive an industry credential tied to an in-demand job or complete a workplace training program.223
Expand career counseling in high schools, community colleges, and universities. More and better career counseling—starting in high school or even earlier—is going to be a critical component of preparing young Americans for the jobs of the future. Guidance counselors will need to be aware of the full range of potential employment options for students, including different apprentice and work-study opportunities and community college offerings, as well as university entrance requirements.
Developing online platforms like Journeys, based out of San Diego, should help in this regard and would be strengthened by better access to outcomes data, as discussed below. Companies can also do more to make young people aware of career opportunities. Manufacturing Day, for example, is an initiative of the federal Commerce Department in partnership with companies designed to build local interest in advanced manufacturing careers among middle and high school students. In early October each year, employers open their factory floors and invite local students and educators to visit, test, and learn about modern manufacturing. Igniting interest at an early age, even as young as ten, can help students understand how their studies can directly lead to good jobs later.224
Academic guidance is especially important for community college students. As Harry Holzer and Sandy Baum argue, without such guidance, “students can meander aimlessly through courses and fields without purpose or direction, and this can be very costly to students in two-year programs.” Given the enormous difference in labor market outcomes between focused programs leading to recognized credentials in high-demand fields and general studies programs, better counseling is especially important for community college students.225
Adopt workplace readiness standards as part of middle and high school curricula. While many relevant workplace skills are learned in community colleges and beyond, waiting until students reach that level is simply too late. Few states currently have standards that are tied in any clear way to workforce readiness. These workforce readiness standards fall into two categories: skills readiness standards and capacity standards. Skills readiness standards would be aligned with skills that are or will be in demand for quality jobs in the future or present. These should change over time and be continually revisited by standard setters. Examples of using such standards include the current push toward universal computer science education in K-12.226 Capacity standards would be aligned with habits of mind required for students to be successful in the workplace. Many of these are already embedded explicitly in other standards in math and reading, but they need to be highlighted and consistently assessed to relate directly and currently to people of different backgrounds and cultures. These capacities are timeless and allow students to more easily adapt to different workplace opportunities.
Create lifelong learning accounts. Most financial assistance for students is aimed at young people seeking education prior to starting careers. Ideally, companies should be funding the bulk of mid-career retraining, as AT&T and some others are doing, but many companies will be reluctant to make these investments. Because the benefits also accrue to the employee in terms of higher salaries and prospects for new jobs, it is reasonable that employees bear some of the burden. Maine was the first state to pilot lifelong learning accounts, in conjunction with the Chicago-based nonprofit Council for Adult and Experiential Learning; Washington State has created similar accounts. In such accounts, employers agree to match the savings their employees put into individual savings accounts, which can then be used for future education.227 The accounts are portable, allowing employees to take the accrued savings with them if they change jobs. A federal approach, as discussed below, would increase the reach of these accounts significantly.
Regularly update and modernize workforce development legislation and regulations. WIOA, passed by Congress on a bipartisan basis, made a number of improvements to workforce training, including requiring better coordination at state and local levels, encouraging a more active role for employers, and updating performance and accountability requirements. But WIOA was passed sixteen years after the previous iteration of the act. Given the rapid changes in technology and workplace needs, federal workforce systems need far more regular updating.
Focus and increase resources in a transparent fashion. Federal and state funding for community colleges and public universities is simply not keeping pace with the need or the demand. Real spending has fallen by roughly $9 billion, or an average of 16 percent per student, over the past decade; tuition has risen steeply at most institutions to try to cover the costs.228 Community colleges, which are especially important in opening advanced educational opportunities to lower-income Americans, should be a particular priority. The funding should be focused on improving completion rates for students, which will likely require more resources devoted to academic and career counseling.229 Private for-profit colleges will continue to play an important role but should be carefully regulated to protect students against aggressive marketing. The impending reauthorization of the Higher Education Act, last reauthorized in 2008, offers an excellent opportunity to tackle many of these issues on a bipartisan basis.
Expand financing options for mid-career retraining, including lifelong learning accounts. The federal government should follow the lead of some states and create a national program to help finance mid-career retraining. Federal participation would amplify such schemes by, for example, allowing individuals to make tax-free contributions to the plans (as with retirement accounts) and offering tax credits to employers for their contributions. The tax benefits should be weighted toward lower-income workers who face greater challenges in saving; Washington could also consider direct contributions to lower-income employees, following examples in France, Singapore, and other countries.230 An additional or alternative approach would include lifetime career loans that would allow workers to borrow for education and training throughout their careers, with the loans repayable on an income-contingent basis tied to future earnings.231 The focus here should be on shorter-term training programs. Many mid-career workers are not in a financial position to earn a two-year degree; expansion of stackable credentials and nano-degrees is one encouraging approach, allowing individuals to continue working while earning credentials and building on those credentials over time.232
Allow more flexible forms of financing for career-oriented educational programs. Pell Grants are the biggest federal source of student financing, but the support is currently unavailable for most career-focused education and short-term programs. Currently, loans are only available for programs that run for at least fifteen weeks, disqualifying many short-term skills-based training programs. Bipartisan legislation has been introduced that would help fill this gap and support emerging industry-education partnerships, and should be included in the Higher Education Act reauthorization.233
Expand federal apprenticeship programs and implement visa reforms to encourage apprenticeship sharing. President Trump’s goal of doubling the number of registered apprenticeships is a good place to start, though the administration favors other cuts to training programs. The apprenticeship initiative builds on similar efforts from the end of the Obama administration that provided a boost in funding; the Trump administration has proposed $200 million in funding for fiscal year 2019.234 Specific visa reforms would also help in bringing European best practices to the United States. European and other foreign-owned companies have been among the leaders in bringing their apprenticeship models to the United States, but U.S. immigration restrictions prevent these firms from bringing apprenticeship trainers to the United States for all but short stints. Changes to immigration law or regulations to expand exchange programs for apprenticeships would help address this barrier.
Make better use of labor market data
The Task Force recommends a large-scale effort to improve gathering and disseminating data on labor market needs, trends, and outcomes. Unleashing the full potential of labor market data though the creation of an open public-private data infrastructure would do an enormous amount to empower students and employees and reduce labor market frictions.
The growth in data about the labor market has been enormous and will only accelerate. Harnessing that wealth of data to produce better outcomes should be a top priority of governments, employers, and educational institutions. While the federal government in particular continues to be a critical source of labor market information through its annual randomized surveys, a growing portion of the data is now in the hands of the private sector, including companies such as Burning Glass, Indeed, LinkedIn, and Monster. The goal should be to link this disparate data—which include demographics, job openings, credential and experience requirements, education levels, wages, and other relevant information—and make it widely available to researchers and application developers. It should become increasingly possible to follow with precision individual education and career pathways and allow individuals and employers to make better choices. The aim should be to create a data ecosystem that can be used to improve employment outcomes for Americans.
Preserve and expand government survey data. These include the American Community Survey and the Current Population Survey. While private-sector data offer a powerful new tool for understanding the labor market, they will never replace the large-scale surveys produced by the federal government. Those surveys, however, have been undermined by the public’s declining rate of response to mail and phone surveys.235 The government needs to revitalize its survey methodology, which will require a boost in resources.
Partner with private companies to enhance the accuracy and utility of labor market data. Government survey data remain extremely valuable to researchers, policymakers, and educators, but as the job market grows more complex and the hiring needs of companies more specific, general survey data have become less useful in helping identify and respond to skills shortages. The federal government should partner with companies that are harnessing labor market data to ensure the timeliest updating and release of relevant labor market information.
Develop an open, shareable national standard for online job postings. Online job postings have not yet begun to reach their potential as a reliable and timely signal for real-time labor market information. For that goal to be realized, the United States needs open, consistent standards for hiring announcements that would make the information easy to access and query, and easy for third-party providers to share through targeted applications. Achieving this goal will require close cooperation among the federal government, employers, and companies that offer online job listings or aggregate labor market data.236 The National Institute of Standards and Technology (NIST) should be tasked with working with private-sector partners to create these standards.
Promote transparency and accountability in educational institutions. The Obama administration advocated strongly for greater data transparency. It pioneered new efforts to improve accountability from universities and colleges that receive federal aid, though it backed away from its more ambitious plan to develop a nationwide rating system for postsecondary institutions.237 The federal College Scorecard offers students the ability to compare institutions with respect to tuition, graduation rates, starting salaries for graduates, and student debt loads, though it lacks other important data such as job placement rates.238 Washington should move ahead with additional initiatives to promote transparency and accountability. The bipartisan proposed College Transparency Act, for example, would lift restrictions in current law that limit the use of federal data for tracking and reporting student graduation rates and employment outcomes.239 It enjoys broad support among educational institutions and should be included in the reauthorization of the Higher Education Act.
State and local governments
Encourage data sharing by the private sector. In the absence of federal leadership, state governments could also take the lead in fostering the sharing of public and private labor market information on a statewide basis. Virginia’s Open Data, Open Jobs initiative is an example of one such effort.240
Strengthen labor market outcome reporting by colleges and universities. Most community colleges survey students graduating from their CTE programs, but only on a limited basis and generally looking at the earnings in just the first year following graduation. It is expensive for colleges to do the labor market analysis required to assess the likely outcomes for students in certain programs, which may inhibit them from launching new offerings even when there appears to be growing employer demand.241 States should help expand the reach of these surveys.
Share labor market data more broadly to support public policy. Burning Glass, LinkedIn, and other companies have compiled a wealth of data on local job markets, employer demands, skills gaps, and other challenges.242 These and other data-gathering companies should continue to look for ways to collaborate with educational institutions and governments to share that information as broadly as possible.
Unemployment insurance should be overhauled to reflect the realities of the current economy, and mid-career retraining programs should adopt the best features of the European "flexicurity" models.
While many of the challenges facing the U.S. workforce are shared among all the advanced economies, U.S. performance is especially weak in helping those who lose jobs find their way back into the labor market. Several detailed cross-national studies into these programs have found the United States lagging significantly.243
There are three broad models of transition support: the laissez-faire model, with minimal job security and minimal unemployment benefits, in which most of the costs of adjustment fall on individual workers themselves; the job protection model, characterized by high levels of job security and large, unconditional unemployment insurance for those who lose their jobs; and an active labor market, or flexicurity model, which also has minimal job security but is coupled with generous unemployment insurance supplemented by classroom and on-the-job retraining.244 The first two models—characterized by the United States and France, respectively—have both proven deficient. The U.S. model places too much burden on the individual and leads too many to exit the labor market (through, among other things, SSDI claims). University of Toronto Professor Michael Trebilcock also argues that the laissez-faire model is “politically perverse in intensifying opposition to trade, technology, and other factors affecting the demand for labor in developed economies.” The French model, on the other hand, has focused on preserving full-time employment at the expense of part-time workers and the chronically unemployed. France suffers from extremely high youth unemployment, close to 25 percent, and overhauling France’s rigid labor market has been the top priority for President Emmanuel Macron.245
The advantages of the third model have been demonstrated by the Nordic countries of Denmark, the Netherlands, and Sweden and also increasingly by Germany, following a series of reforms to its labor market policies.246 The approach provides a robust system for returning employees to the job market.
Build on WIOA and expand the available resources. Under WIOA, Congress has championed a long-overdue employer-centered approach to job retraining. However, the federal funds available under WIOA are minimal, and the Trump administration has proposed deeper cuts. Federal funding for adult education has been cut by 20 percent over the past fifteen years, while CTE has been cut by 30 percent and state job-training grants by 40 percent.247 The United States should invest more heavily in retraining to see successful outcomes, but those expenditures should be evaluated far more closely than in the past to reward initiatives that are successful at returning displaced workers to good jobs. WIOA’s focus on accountability and evaluation is an important step forward and should be reinforced. Finally, replacing the TAA program with a broader program that covers displaced workers regardless of the causes of their job loss (except for voluntary quitting or justified dismissals) should be a top federal priority. Implementation, however, should be at the state and local level.
Increase flexibility in unemployment insurance. In most states, UI eligibility rules require displaced workers to be actively seeking full-time employment, which discourages individuals from seeking part-time work or starting their own businesses. Given the growth of nontraditional work and the importance of getting displaced workers back into jobs as quickly as possible, such restrictions should be eased.248
Experiment at scale with wage insurance for displaced workers, focusing on older workers who are less likely to be able to retrain for entirely new careers. Workers who lose their jobs are often forced to take new ones at lower levels of pay, and the longer they are out of the labor market the deeper the pay cut is likely to be. An expanded subsidy program could encourage employers to rehire displaced individuals more quickly. Economic research suggests that on-the-job training is often more effective than outside programs, and wage insurance acts as a kind of training subsidy for employers. Wage insurance normally makes up half the lost wages a worker faces for some specified period of time, normally two years.249 The program has to date been tested on only a small population of older workers eligible for TAA, and its broader efficacy remains unclear; it should be tested on a larger scale for older workers as part of reforms to the UI system.250 While wage insurance can act as a subsidy allowing employers to hold down wages, it is likely to be offset by the much higher societal costs of long-term unemployment, including increased use of SSDI, which is far more expensive. Because wage insurance and the EITC have similar effects (expanding income for lower-wage workers and keeping them in the labor market), changes to the two programs should be designed in conjunction.
Allow more generous relocation support for displaced workers. Current federal support programs provide little incentive for displaced workers to move to search for new jobs. Under the TAA program, for example, relocation support is capped at just $1,500. Mihir Desai of Harvard Business School has recommended a $15,000 relocation tax credit (rather than a tax deduction) that would begin to phase out for Americans with incomes above $75,000 and for anyone over sixty.251
State and local governments
Provide greater career counseling and guidance. Students, families, and employees need advice and guidance to understand how to navigate a rapidly changing employment landscape. Professional counselors provide a macro overview of the job market and can advise workers on the skills needed to make themselves more competitive within their own occupations or for openings in entirely different occupations. Colorado has led the country by hiring new “career navigators” to assist both students and those facing job transitions.252 The successful reemployment systems in Denmark and Sweden rely heavily on career counselors to advise individuals on the best options for reentering the workforce. Counselors should also help individuals identify skills and experiences they have developed in one industry or sector that may be easily adapted to other sectors.253 Identifying such skill adjacencies should become more central to retraining efforts.
Offer advance notice of layoffs and other significant disruptions. Time is an important asset for employees; sudden layoffs can leave individuals scrambling to cover lost income, acquire additional training, and find new employment. Under the 1988 Worker Adjustment and Retraining Notification Act, companies that employ more than one hundred workers are required to give sixty days’ notice in the event of any mass layoffs. All employers should strive to give their employees the longest possible warning in the event of layoffs.
Develop employee skills on the job. Employers should follow the high-road examples discussed above by supporting new educational and training opportunities for their employees, even if those programs are not directly connected to their current jobs. This will make it easier for employees to find new jobs in the event of layoffs and will strengthen the overall capabilities of the U.S. labor force, which is a competitive advantage for the United States.
Governments and employers should work to reduce barriers to labor mobility for Americans, including high housing costs, occupational licensing restrictions, and inflexible hiring practices.
Americans move much less for jobs than they once did, and the decline has been especially steep since 2000. This has limited the historic flexibility of the U.S. labor market, leaving skills shortages in some places and a dearth of work in others. While there are many reasons to think that mobility will never recover to its historic highs—including an aging population and the growth of two-income households—governments should be working actively to address the more easily removable barriers to mobility. Employers can also do far more to improve the hiring process and open opportunities to employees they might otherwise overlook.
State and local governments
Align, recognize, and reduce state occupational licenses. The enormous growth in the number of licensed occupations has shone a light on the incompatibility among state licensing regimes. A massive 2017 national study suggested that the growth of these licensing regimes has stifled competition and opportunity, and in many cases the schemes do not protect consumers against valid health and safety concerns.254 Once licensed, occupations are rarely delicensed by governments, creating a ratchet effect of greater restrictions.255 The National Governors Association, in cooperation with the Council of State Governments and the National Conference of State Legislatures, has launched a new effort to improve the portability and reciprocity of occupational licensing across state borders.256 The project involves eleven states and thirty-four licensed occupations, from barbers to plumbers to real estate agents. The project is scheduled to run for three years from its start in 2017, in recognition of the complexity and political sensitivity of the undertaking. But that timetable is too slow, given the burdens created, and the effort should be accelerated and should include the elimination of unnecessary licensing restrictions.
Support and expand access to affordable housing and job opportunities. The high cost of housing is a considerable deterrent to people moving to the cities that are creating jobs the fastest. Fast-growing cities should pay close attention to the labor market barriers posed by high housing costs. Options for addressing this issue include affordable housing subsidies, lessening of zoning restrictions that discourage high-density development, and improvements in public transit to speed up longer commutes.
Reform hiring practices to open opportunities for people without degrees. Employers should have a strong self-interest in expanding their hiring pipeline to ensure they are getting the best talent at the best price. Instead of defaulting to four-year graduates, hiring should focus more effectively on the competencies and experience needed to fill positions, which would bring benefits to both companies and overlooked employees. Initiatives such as Genesys Works, Skills for Chicagoland’s Future, Tech Hire, and Year Up offer encouraging models that help create new opportunities for Americans to develop the skills needed for the technology workforce and for employers to find and hire those individuals.257 Governments should also find ways to support these initiatives through grants and partnerships.
The United States should create portable systems of employment benefits tied to individual employees rather than to the jobs themselves. Employers should also help fill the gap by expanding benefits for their part-time and contingent workers.
The Task Force believes that work is important not only for people’s economic success but also for its ability to provide purpose and meaning, self-respect and dignity. However, the dislocations that have already taken place in the job market, and the potential for far larger ones to come with the maturing of digital technologies, robotics, and artificial intelligence, have set off a debate over whether the United States should pursue policies that delink income from work. The most far-reaching of these is the idea of paying a universal basic income (UBI) to all Americans above a certain age. That income would provide a floor through which no individual or family would fall.258 The arguments for UBI cannot and should not be dismissed lightly. One of the reasons for the proliferation of low-wage work is that too many Americans have no other choice—if they refused such work, there would be few other sources of legitimate income. UBI would provide greater security for workers to pursue occupations that are appealing to them, rather than simply take jobs out of necessity. That might force employers to find ways to make work more attractive. UBI also has the great virtue of bureaucratic simplicity; it requires no complicated analysis of need but instead involves the government cutting and mailing checks every month, something it does efficiently. This simplicity is one of the features that has united some thinkers on the right and the left behind UBI.259
Despite its merits, however, the Task Force does not recommend moving in that direction. The Task Force members believe that both the enormous cost and the potential disincentives to work are strong negatives of UBI. What advocates of UBI do rightly recognize, however, is that the current system in the United States for supporting its workforce is outdated and inadequate. It ties most employment benefits to full-time jobs that are gradually being replaced or augmented by more flexible forms of work, but those flexible work arrangements often come without the basic benefits that are needed to turn precarious work into more secure work.
Establish portability of work-based benefits. With the growth of the gig economy, contract work, and people working multiple jobs, the United States needs to move toward delinking benefits (health care, retirement, sick leave, vacation time) from single employers and full-time work. The OECD, the World Economic Forum, and others have argued that the move toward portability of benefits would not only provide a better and more secure safety net for workers but would also allow employers to hire in more flexible ways and permit employees to work in more flexible ways.260 Correctly designed, a portable system of benefits could unlock significant value for the United States by allowing both employers and employees to organize work in ways that best suit their needs and interests.
Any system of portability should have three essential features. First, the benefits should be tied to the employee and be available as they move from one job to another. Second, the system should be universal in order to eliminate incentives for employers to hire part-time workers to escape the obligation to offer benefits. Third, benefits should be prorated so contributions to a worker’s benefits are tied to the hours worked for each employer. A number of countries have been experimenting with these sorts of systems. For example, France’s Compte Personnel d’Activité, or personal activity accounts, launched in 2017, is a pilot program in linking occupational benefits directly to the worker rather than the workplace.261
Various proposals have been made on how to construct such a portable benefits scheme in the United States. Nick Hanauer and David Rolf have argued for the creation of what they call shared security accounts as a way to address this challenge.262 Employers would pay benefits to employees on a prorated basis—for example, an employee with two twenty-hour-per-week jobs would get half benefits from each of her employers. The benefits would accrue in an individual account that would be portable to future jobs as well. The Aspen Institute’s Future of Work Initiative has laid out other possible models—none of them mutually exclusive—including multiemployer plans, single industry schemes, and group insurance plans.263 The question of how contributions should be made, and the share of the burden that should fall on employers versus employees, is obviously challenging with all these schemes.
Senator Mark Warner (D-VA) has introduced legislation to launch a small pilot project that would offer grants for institutions willing to experiment with different approaches. In theory, portable benefits programs could be run by state governments, labor unions, or other nonprofit organizations.264 Several European countries have instituted prorated benefits for part-time and contract workers, with partial benefits and contributions to retirement adjusted accordingly. In the Netherlands, for example, half of the workforce is currently in some sort of part-time work, a situation that is sustainable in part by the prorating of work-related benefits.265
Creating a new benefits system that supports the way Americans actually work today, and the way employers need and wish to hire to maximize their competitive efficiency, is perhaps the most urgent task for the U.S. government today. As the Aspen Institute's Future of Work Initiative report argues: “Right now, we have an unprecedented opportunity to create a new working world, one in which workers have the ability to choose how and when they work, and do not have to sacrifice social insurance to do so.”266
State and local governments
Experiment with portability pilot projects. State and local governments should pilot portable benefits programs, perhaps starting with their own state and municipal workforces. Lawmakers in several states, including New York and Washington, have considered schemes to establish portable benefits.267
Private sector and other employers
Broaden benefits for employees. Any portability scheme should acknowledge that a majority of employers already provide benefits for their employees, such that no remediating government action is necessary. Some employers that require large part-time and flexible workforces—companies as diverse as Costco, REI, Starbucks, UPS, and Whole Foods—already provide most or all workplace benefits for their part-time employees.268 Starbucks recently announced an expansion of its benefits program to included paid sick leave, time to care for ill family members, and additional maternity or paternity leave.269 The more employers do on their own to fill this gap, the easier the challenge will be to overcome.
To underscore the urgency of the task of building the workforce of the future, the president and the nation’s governors should create a National Commission on the U.S. Workforce to carry out research, share best practices, and conduct public outreach on workforce challenges. This should be the start of an ongoing effort to put workforce issues at the center of the national conversation.
The challenges discussed in this report will confront the United States for many years to come. While some of the recommendations can be implemented quickly, others will take years or even decades to come to full fruition. Just as important as the specific recommendations is the broader need to put these issues—which are critical not just to U.S. domestic prosperity but to the country’s future standing in the world—front and center as a national priority.
Federal and state governments
Create a National Commission on the U.S. Workforce. Such a commission would put much greater research and political muscle behind this agenda, going well beyond such existing and helpful initiatives as the National Governors Association Center for Best Practices and the Mayors Business Council of the U.S. Conference of Mayors.270 The commission should be composed of the secretaries of commerce, defense, education, labor, transportation, and the treasury; the head of the Small Business Administration; the director of the White House National Economic Council; three Democratic and three Republican members of Congress, selected by leadership; six governors, selected through the National Governors Association; and six mayors, selected through the U.S. Conference of Mayors. It should also have representation from business, educational institutions, labor, and the leading nonprofit, youth, and civic groups working on workforce development. The commission should have a full-time research staff sponsor to lead ongoing research on work force challenges, and it should become a clearinghouse for sharing across the country the best practices currently being adopted by companies, state and local governments, unions, foundations, and others. The commission should issue a Quadrennial Jobs and Workforce Review, similar to those currently being produced in the Departments of Defense and Homeland Security, which would serve as an ongoing evaluation and strategy document detailing progress and offering future strategies for the issues addressed in this report.
Adopt high-profile metrics for assessing and measuring progress. The commission should develop—working with the country’s best labor market economists and other experts—a set of publicly compelling measurements for tracking and reporting progress in building the workforce of the future. The most closely tracked measures of economic performance—including GDP and the unemployment and inflation rates—are not especially useful for assessing progress on workforce issues. Three possibilities, not mutually exclusive, include an employability rate, a good jobs index, and a human capital metric. The employability rate or, alternatively, skills deficit index would assess how many Americans have the skills needed to fill the available jobs. The skills deficit index would be the number of workers needed in occupations versus the number who have developed the skills for those positions. The good jobs index would look at the prevalence and growth of good jobs by industry, occupation, and region (with “good jobs” being defined as those that pay a decent, family-supporting wage and offer some combination of benefits). Georgetown University’s Center on Education and the Workforce is currently developing such an index, focused only on jobs that do not require a bachelor’s degree, as part of its new Good Jobs Project.271 The human capital measure was developed by the World Bank. The definition of human capital is the estimated present value of the future earnings of a country’s labor force. This is broken down into two components: the probability that various individuals will be working, and their likely future earnings. Investment in education, training, and other initiatives that increase the likelihood of employment and higher future earnings would boost a country’s human capital index.272
Create a new award, modeled after the successful Baldrige Awards, to recognize and promote companies that follow high-road workplace practices. The Baldrige Award, named after the late Secretary of Commerce Malcolm Baldrige, was established by Congress in 1987 to recognize U.S. companies that implemented successful management systems. The award was created in response to the crisis in U.S. competitiveness in the face of rising competition from Japan, to encourage U.S. companies to emulate and surpass the highly effective Japanese quality control and management systems in such sectors as automobiles and consumer electronics (ironically, the Japanese learned much of this from the United States initially).273 The award is credited with focusing U.S. companies on the ongoing need for quality improvement. In 1990, the New York Times called it “a glittering prize for many top executives who see it as an official recognition of their behind-the-scenes efforts to improve quality.” IBM Chairman John Akers said the award “helped rally business around a common objective.”274
A similar award should be created to recognize companies that implement high-road workplace strategies—including ongoing training and education for employees, decent pay, flexibility in scheduling, family-friendly benefits, responsible management of the supply chain, and cooperation with local communities. The goal should be to drive a corporate revolution similar to the one encouraged by the Baldrige Awards.
Establish a crowdsourced challenge to tackle future workforce problems. This challenge should incentivize Americans to generate ideas, create conversations, and develop solutions at the grassroots level on specific problems facing the future workforce. Such a challenge could be modeled after crowdsourced platform challenges such as HeroX, Solve at the Massachusetts Institute of Technology, and Tongal, and should include prizes.275
Establish an ongoing public outreach strategy on workforce issues. The commission should hold ongoing, geographically dispersed public hearings to learn from young people at the start of their careers, those in struggling communities, and workers in transition. There should also be advertising campaigns, particularly on social media—enlisting public figures from entertainment, the media, and the sports world—to highlight the available resources and to encourage young people to make the best possible educational-to-work choices.
Cooperate with other countries through the Group of Twenty (G20) and other forums to share best practices. The future of work is one of the three priority items for the 2018 G20 summit in Argentina and is likely to remain high on the agenda for many years to come. The United States should work with other countries to create a mechanism to share best practices internationally. Such cooperation should also be pursued through the International Labor Organization and the OECD, and through NAFTA with respect to continental workforce challenges.276