Workforce development programs — funded through public-private partnerships — appear to bridge the skills gap by helping companies to scale and expanding opportunities for less skilled workers, according to recent research published by the National Bureau of Economic Research.
After training, organizations had longer employment growth and down-skilling in job posts, as compared to a matched control group, the researchers found. They looked at 18 states with grant subsidies for training.
“The evidence we present suggests these grants resolve a skills gap which previously prevented firms from operating at optimal scale,” the researchers wrote. “The fact that labor inputs change post grant receipt means that these grants are not purely crowding out private sector funds.”
Typically, the researchers wrote, these workforce development programs operate with explicit goals of upskilling the state’s workforce, especially in transferable skills that could apply across employers. In practice, the grants are more likely to be used in competitive labor markets, particularly based on the concentration of hiring firms or market tightness.
In addition, the grants seem to be disproportionately allocated to larger and higher-paying firms and labor markets, as well as companies seeking to hire more skilled workers, the researchers found. Grants aren’t typically used to even out prospects across neighboring markets or target emerging markets, they wrote.
After receiving a training grant, companies tended to experience higher employment levels and reduce education and work experience requirements, the researchers found. Grants appeared to help companies shift to a long-term higher growth trajectory, potentially resolving specific skill shortages that blocked growth or training investments, they wrote.
Notably, most organizations’ training plans targeted professional skills, such as leadership and process management, which opened up recruitment for lower skilled roles post-training. This could mean that firms needed managerial skills to accomplish institutional change, and once achieved, they could focus on productivity growth through low-wage expansion, the researchers wrote.
Beyond that, training focused on production-related skills, particularly pivoting employees to work with automation technology. In these cases, training likely helped with worker retention or avoided layoffs, the researchers wrote.
