Working It Out - christopher reardon

Working It Out
Can new alliances
between job seekers and
employers help bring
prosperity for all
BY CHRISTOPHER REARDON
There’s no easy cure for the slumping U.S. economy, but this
much appears certain: Growth will continue to lag unless the
nation tackles what some experts describe as “an impending
workforce crisis.”
A big part of the crisis is a looming shortage of skilled labor.
This was the focus of discussion earlier this year when 75 leading
figures from business, labor, government, academia and the
Christopher Reardon writes for The New York Times and other major
publications.
nonprofit sector met for the 102nd American Assembly, a public
policy forum affiliated with Columbia University. As eight
inches of snow fell outside their meeting room at Arden House,
a sprawling granite manor in Harriman, N.Y., participants
looked back on the 1990’s boom.
The bull market, they noted, was fueled by the end of the
cold war, rapid advances in computer technology, lower trade
barriers and declining federal deficits. But it also benefited from
a demographic bubble. Over the past 20 years, baby boomers
reached their peak earning years and women and college grad-
24 Ford Foundation Report Summer 2003

PHOTOGRAPHS BY M.J. SHARP
uates entered the workforce in record numbers. Those trends
have peaked, participants agreed, and in the coming decades
the nation’s prosperity will hinge increasingly on the strength
of its workforce.
“There is a great deal at stake,” they said in Keeping America
in Business: Advancing Workers, Businesses and Economic Growth,
a report summarizing the four-day dialogue. (Copies are available
online at www.opportunitiesatwork.com.) “Without aggressive
action to expand the labor force in ways that increase
productivity for employers, the nation’s long-term economic
health will be challenged.”
In the last 10 years, a growing number of organizations around
the United States have embraced new workforce development
approaches that help employers, job seekers and training providers
find common ground and act upon shared interests. Some of
these efforts began with community-based organizations. Others
took root within employer groups, labor unions, community
colleges, public agencies and staffing firms. Collectively, they
came to be known as workforce intermediaries, a name that
reflects their dual allegiance to job seekers and employers.
Traditionally, many Americans spent their whole working
life with a single employer, where job security and on-the-job
training let them move up the career ladder. But those days are
gone, and employers, educators and workers often struggle to
find each other, interact in meaningful ways and gather resources
for training. Increasingly, though, workforce intermediaries are
helping to broker this process.
Their work has begun to dispel the notion that federal and
state support for employment training and placement is just
an exercise in social policy, if not simply a handout to the poor.
Increasingly, creating opportunities for low-income job seekers
is gaining recognition as a matter of economic policy.
For much of the last decade, the Ford Foundation has tested
the proposition that workforce intermediaries can help revitalize
the nation’s ailing and fragmented workforce system. One
line of grants supports programs that train workers for targeted
industries with plenty of job openings and opportunities for
advancement. For example, Focus: HOPE in Detroit is training
low-income residents for promising careers in machine work and
information technology. Another line of grants, known as the
WINs initiative—short for Workforce Innovation Networks—
is exploring ways that employer groups can help small and midsize
companies meet their staffing needs while helping low-skilled
workers find stable jobs that can sustain their families.
WINs grew out of the foundation’s Corporate Involvement Initiative,
which seeks to engage the private sector in community
and economic development in ways that benefit both low-income
people and businesses. It seems to be catching on. Last winter the
U.S. Department of Labor made a $4.2 million grant allowing
12 additional local workforce intermediaries and three statewide
teams to join the WINs initiative. The new sites will be announced
Opposite Aisin AW’s Toyota
transmission plant in Durham,
N.C. The firm expanded the
plant in part because the
community was ready to prepare
workers for the new jobs.
The Changing
later this summer.
Jobs for the Future, one of
three national organizations
leading the initiative, is concentrating
on efforts to erect
career ladders: training and
other supports that help workers
advance through a progression of jobs in a single field. The
Greater Cleveland Growth Association, for instance, is trying to
streamline opportunities for training, placement and advancement
in health care, a burgeoning local industry. Similar efforts
are under way in Pittsburgh and San Francisco.
The National Association of Manufacturers, another WINs
affiliate, aims to improve job retention and advancement at
companies in Detroit, Pittsburgh and Hartford, Conn. Basil
Whiting, a senior fellow at the association’s Manufacturing
Institute, sees these efforts as a logical next step for the workforce
system. “In the 60’s we trained employees,” he says. “In
the 90’s we trained them, placed them, found them transportation
and arranged child care. But still nobody went inside
the firm and asked: How good are the supervisors Can they
lead Can they communicate”
Welfare reform has brought this blind spot into focus, Whiting
says. If the goal is not just to reduce caseloads but to help
people find gainful employment, there should be closer attention
to what happens after they enter the workplace. Small and
midsize companies are often reluctant to hire low-income workers,
in part because they lack the in-house resources to train
them. Through WINs, the association is helping such firms
develop personnel handbooks, set up orientation programs,
assign mentors and train supervisors—proven ways to boost
productivity and job satisfaction.
The U.S. Chamber of Commerce is the third national WINs
affiliate. Through its Center for Workforce Preparation, the
chamber is working to integrate the needs of job seekers and
business leaders in Holyoke, Mass.; El Paso, Texas; and Durham,
N.C. “We’re all asking the same question,” says the center’s executive
director, Beth Buehlmann, who helped organize the assembly
last winter. “What can we do to create an environment where
low-income people can build careers—not just find jobs—
and meet employers’ needs for a skilled workforce”
One answer lies with employer groups like the Greater
Durham Chamber of Commerce, which seeks to promote economic
growth in ways that benefit people from all walks of life.
Another comes from community groups like Detroit’s Focus:
HOPE, which is testing new ways to pay for its highly successful
training programs.
Durham: Fighting Poverty in Prosperity’s Shadow
In 1998 a Japanese firm called Aisin AW decided to build a
new plant in the United States to make transmission components
for Toyota Camrys assembled in West Virginia. After looking at
100 communities in eight southern states, it picked Durham,
N.C. Even in that flush era, it was a nice catch for the city. Aisin
invested $100 million in land and production facilities and created
350 jobs. But that wasn’t all. Two years later the manufacturer
decided to expand its U.S. presence. Again it picked
Durham, investing an additional $160 million and creating
another 450 jobs.
Why Durham Like many of the proposed sites, it had good
infrastructure and affordable labor. But one thing made it stand
out: its readiness to prepare workers for the new jobs. “A lot of
factors came into play,” says Will Collins, manager of human
resources for Aisin’s local subsidiary, AW North Carolina. “One
was Durham Tech, our community college. Their faculty has
Workplace
Ford Foundation Report Summer 2003 25

designed individualized programs based on the openings we
have, and that has proven very successful.”
Durham’s reputation for pioneering new approaches to workforce
development dates back more than 20 years. In the early
1980’s, leaders from the public and private sectors joined forces
to help women on welfare gain access to well-paying jobs in the
electronics industry. More recently, through WINs, the city has
been forging closer links between economic development and
employment training. The Greater Durham Chamber of Commerce,
which is coordinating these efforts, recognizes that an
adaptable workforce can be a valuable asset. “Our specialty is
helping to recruit new industry and helping existing industry
to expand,” says Thomas J. White, the chamber’s president and
C.E.O. “It just seems like a logical extension of that function to
include job training.”
White, who came to Durham 31 years ago to attend Duke
University, says the city is blessed by its proximity to Research
Triangle Park, a cluster of 140 high-tech firms that share a 7,000-
acre campus 10 miles from downtown. Along with Duke and
its medical center, the park has turned the city into a technological
dynamo. But the economic climate remains grim downtown,
where many tobacco warehouses and textile mills have
closed in recent decades, putting more than 10,000 local residents
out of work.
“We still have a lot of poverty in Durham,” White says. “Nineteen
percent of our children and 12 percent of our adults live
below the poverty line. The really disturbing thing about that is
that in the 1990’s, when we led the state for a number of years
in new industry, few inner-city residents got access to those jobs.”
Through WINs, the chamber is exploring ways that dislocated
workers, people on public assistance and at-risk youth can
contribute to—and benefit from—the region’s vital economy.
Making the workforce system more responsive to employers
may go a long way in creating
such opportunities, says White.
Efforts are under way to
increase the number of companies
that use the system,
bridge gaps in service delivery
Trainees at Durham Tech learn
to use a lathe. The faculty has
designed individualized programs
based on local industry
openings, which has proved
very successful.
and minimize duplication of efforts. The chamber, for example,
is preparing a workforce resource guide for employers as
well as an orientation package encouraging them to join the
local workforce investment board, which works with elected
officials to oversee the job-training system. Among its newest
members is Will Collins from AW North Carolina.
This spring Collins began hiring workers to staff the manufacturer’s
expanded plant. About 40 trainees will join the staff
each month until all 450 new positions are filled. “Our goal is
to maximize the number of TANF and WIA participants who
get access to those jobs,” says White, referring to two federal
programs (Temporary Assistance for Needy Families and the
Workforce Investment Act) that fund employment training for
low-income people. “But getting entry-level jobs at $11.50 an
hour is just the start. I envision people taking advantage of the
tuition-reimbursement plan, enrolling at Durham Tech and
getting associate degrees. That gives them promotional opportunities.
Maybe some will go on and get a baccalaureate degree
in mechanical engineering.”
Earlier this year, White testified before a House subcommittee
about American competitiveness in the 21st century. He spoke of
the chamber’s overlapping interests in promoting capital investment,
expanding the tax base, creating jobs and reducing poverty.
“Our communities, our states and our nation are far more
competitive and more productive when we design and operate
a workforce system that includes business and government as fullfledged
partners,” he said. “When our nation’s workforce sys-
26 Ford Foundation Report Summer 2003

Durham’s Chamber of Commerce is
helping to recruit new industry and
helping existing industry to expand.
‘It just seems like a logical
extension to include job training,’
says Thomas J. White, who
heads the chamber.
tem is fully integrated with our economic development
system … our citizens can take advantage of
and reap the benefit from the economic opportunities
created by new and expanding industry.”
White says the best measure of progress will not
be the number of jobs created or the rise in average
household income. “By 2010 I hope to see Durham’s
poverty rates slashed by a few percentage points,” he says. “Then
we’ll know we’re getting somewhere.”
Detroit: Covering the Cost of Success
One of the most ambitious—and successful—job-training
programs in the United States prepares teens and young adults
in Detroit for careers in the manufacturing trades. Since 1981
more than 2,500 students have graduated from the Machinist
Training Institute at Focus: HOPE, a community development
corporation formed soon after the 1967 riots.
Students at M.T.I. use lathes and grinders to create their own
sets of tools, including hammers and clamps, while learning
about precision machining and metalworking. They also take
courses in blueprint reading, computer-aided design and computer-aided
manufacturing. The average starting salary for graduates
is $11 an hour, but many alumni earn salaries of $40,000
or more after a few years with firms like General Motors and
Northwest Airlines.
In 1995 Focus: HOPE conducted a study to see if society was
benefiting, too. The study found that it took an average of 3.1 years
for graduates to pay in taxes an amount equal to the cost of their
training. After factoring in the savings in food stamps, but not
other forms of public assistance, it calculated the annual return
on investment at 41 percent since the program’s inception.
“That’s not too bad,” says Kenneth Kudek, Focus: HOPE’s
assistant director of education, with great understatement. “If
only PaineWebber or Merrill Lynch could guarantee that kind
of a return for 13 years running!”
Nevertheless, since welfare reform took effect six years ago,
government funding has been driven by a “work first” approach
that favors rapid job placement over pre-employment training.
That leaves Focus: HOPE holding much of the bill for M.T.I. and
its newer Information Technologies Center, which began offering
computer instruction in 1999. Its courses range from a twoweek
program in keyboard and mouse skills to a 40-week
program in network administration. Graduates typically find jobs
starting at $13 an hour.
Both programs have proven successful in launching productive
careers, but covering the costs has not been easy. Tuition
for 31 weeks of instruction in the machining program runs
$9,250, while 40 weeks of half-time training in network administration
costs $9,000. Focus: HOPE spends $5 million a year to
run the two programs.
Grants from foundations
and other private donors pay
for about 25 percent of the
training costs. State and federal
agencies used to reimburse
Focus: HOPE for much
of the rest, but this support
has been falling sharply. In
recent years government programs
like TANF and WIA
have covered only half the
cost, causing Focus: HOPE’s
education program to run up
a $1.1 million deficit.
Focus: HOPE covered the
shortfall with money from its
general funds, but its staff knew that wasn’t a long-term solution.
So three years ago they set up a revolving student loan
fund in hopes that graduates and their employers would contribute
to the cost of training. The Ford Foundation made a $3
million program-related investment to help capitalize the fund.
Other private foundations, banks and individuals contributed
another $8.8 million.
Now students sign a loan agreement upon enrolling at M.T.I.
or I.T.C. After graduating, they repay the loans through regular
payroll deductions. So far the fund has issued more than
$16 million in loans. Fees from government agencies have covered
$7 million of this amount, leaving 3,100 borrowers with a
total obligation of $9.3 million, an average of $3,000 per person.
Recent graduates have already paid back more than $1 million.
“We were looking for a sustainable way to cover the rest of
our training costs,” says Kudek. “Now, as students graduate and
become successful, they can invest back in their younger brothers
and sisters.”
Focus: HOPE is trying to coax employers to contribute, too.
General Motors and Northwest Airlines now pick up half of
the outstanding balance when hiring M.T.I. and I.T.C. graduates,
usually by matching their loan payments dollar for dollar.
But the recession has hit Michigan hard, preventing other companies
from following suit. That, along with hiring freezes and
layoffs at many local firms, has put a strain on recent graduates,
nearly half of whom are behind in their payments.
The high number of delinquencies and defaults is not altogether
surprising, given that Focus: HOPE lends to people other
creditors avoid. But they could threaten the fund’s long-term viability.
To help boost the repayment rate, Focus: HOPE is studying
the impact that different co-payments, interest rates and
repayment schedules have on loan outcomes. It is also adding
courses in financial management and household budgeting and
considering assigning a financial mentor to each borrower as a
condition of the loan.
In the coming years, Focus: HOPE will look for ways to make
the fund efficient enough that other training programs around
the country will follow its lead.
“This design brings all of the stakeholders to the table,” says
Kudek. “It lets taxpayers, employers and students share the costs
as well as the benefits of developing a skilled workforce.” ■
Ford Foundation Report Summer 2003 27