Job Training Programs: The Formula for Measuring Value

When do job programs reduce unemployment, vs. just filling slots? 4 factors to assess value Tweet This

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An organization providing job training prepares a client job seeker, phones an employer and sets up a job interview. The job seeker walks into the personnel office of the employer, past several other individuals filling out applications, does the interview and is offered the job the next day.

Question: Did the jobs program decrease regional unemployment that day?

Maybe—but maybe not. If the employer’s job had been open for a lengthy period of time and the firm couldn’t find anyone else to fill it until the trainee walked in, then unemployment was reduced by the program. However, if the firm would have hired one of the people who were already filling out applications in the waiting room, then the answer is probably “no”: the job training organization did not reduce net unemployment.

The work of job training and placement organizations can be very valuable for reducing unemployment of specific populations that they might target—public housing residents, residents of a particular neighborhood, members of a specific immigrant group, to name just a few examples. But it doesn’t reduce unemployment if those hired substitute for others who might have been.

We might argue that hiring a long-term unemployed person rather than someone moving from one job to another is a good policy choice. But substituting an unemployed person in Englewood for someone else from Lawndale might be less so.

There are at least four major interests in play whenever a job placement and training organization works to place someone in a job:

  1. The value to the job seeker, net of what that individual might have attained on their own
  2. The value to the general public, in the form of reduced costs of public benefits or crime, and the value of neighborhood sustainability owing to employment
  3. The value to the employer of increased productivity and reduced cost of employee search
  4. Minimizing the cost to other job seekers with whom the provider’s trainee may be competing

Under this formulation, the greatest total value is created when workforce development organizations help “hard-to-place” clients achieve skills that add productivity to firms, in occupations that firms find hard to fill. These days those opportunities often lie in advanced manufacturing and information technology.