Workforce development policy in the US

Introduction

Economic change from automation, artificial intelligence (AI), climate change, an aging population, and shifting trade and geopolitical risks pose novel challenges for U.S. industry and labor markets. These challenges are structural; they are not caused by macroeconomic fluctuations but by a persistent misalignment of resources. For example, the U.S. lacks sufficient electricians for new clean energy jobs and does not have enough home health aides to take care of the aging population.¹ Meanwhile, continued automation and advancements in generative AI will impact where and how people work, what they do, and what skills organizations value. While these changes may eliminate some classes of jobs, they also create new ones with new skill requirements. To address some of these structural challenges, the Biden administration pursued industrial policy paired with funding and administrative efforts for workforce development. These efforts ranged from large, legislative initiatives like the CHIPS and Science Act, focused on advanced industries, to smaller, agency-led initiatives such as the Department of Health and Human Services’ “HHS Health Workforce Initiative” to “support, strengthen, and grow the health workforce.”²

As policymakers grapple with these challenges, relationships between organizations and their workforce are changing as well. Today’s organizations are composed of interconnected, extended, networked structures of workers operating in “workforce ecosystems,” moving beyond straightforward employer-employee relationships.³ Employers think more strategically about how to orchestrate the appropriate mix of full- and part-time employees, long- and short-term contractors, gig workers, consultants, and technological assets to accomplish their goals.⁴ Still, in many cases, standard employee-employer relationships, often characterized by longer-term and reciprocal commitments and investments in each other, remain an essential part of organizations. Managers focus on the need for workforce development including on-the-job training, rotational experiences, and reskilling within and across organizations. As workforces become more complex and encompass workers of all kinds, leaders are increasingly thinking beyond standard, somewhat static job descriptions and focusing more specifically on specifying roles that need to be filled and work that needs to be accomplished to achieve stated strategic objectives.⁵ More and more, project-based, interdisciplinary, and time-bound tasks are becoming the norm. Additionally, workers move more quickly between opportunities within and among organizations such that ongoing worker development is becoming more prevalent and pressing. Yet, it is also becoming increasingly less attractive and more difficult for organizations to provide appropriate worker training.⁶ As workers move more frequently, organizations become less inclined to invest in developing individual, often short-term workers. Additionally, workforce ecosystems pose specific challenges for developing a skilled workforce because there are legally defined distinctions between hired employees (i.e., W-2 employees in the U.S.) and independent contractors and the protections and benefits afforded to each. Labor laws are often misaligned with organizational reskilling needs as they affect how an organization can provide worker training. For example, the Fair Labor Standards Act (FLSA) provides guidance for whether a worker should be considered an independent contractor or employee, and this distinction then impacts the investment level an organization can make in job-specific training for that worker.⁷ 

With structural and organizational challenges facing the U.S. economy and businesses, policymakers—including members of Congress, state legislators, and regulators—invoke workforce development as a priority. For example, states are shoring up workforce initiatives through existing workforce institutions and new programs focused on specific sectors, while the federal government has pursued workforce development alongside industrial policy. Through these programs, organizations can use government resources to train workers or provide information to workers and encourage them to take advantage of government-funded development opportunities.

The rest of the paper is structured as follows: In section 2 we provide background and historical context for workforce development in the U.S.; in section 3 we describe federal programs and explain the impact of legislation that provides funding for workforce development as part of a larger industrial strategy; in section 4 we categorize workforce development programs; in section 5 we explore workforce development in Michigan, Ohio, Texas, South Carolina, California, and New York; in sections 6-7 we provide implications for employers and workers; in section 8 we provide considerations and recommendations for policymakers; and in section 9 we provide concluding comments.

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