Use of Market Mechanisms in U.S.
Workforce Programs: Lessons for WIA
and the European Social Fund
Christopher T. King
University of Texas at Austin
Burt S. Barnow
Johns Hopkins University
What the European Social Fund Can Learn from
the WIA Experience Conference
Washington, D.C.
November 7, 2009
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Outline
• Background
• The 8-State WIA Study
• Key Market Mechanisms Findings
• Conclusions
• Recommendations
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Background
Major changes authorized under WIA of 1998:
• Fostering more coordinated, longer-term planning for
workforce programs
• Institutionalizing One-Stop Career Centers as the
cornerstones of the local workforce delivery system
• Sequencing job seekers’ services from core to
intensive to training services
• Implementing universal eligibility for core services via
One-Stop Career Centers
• Increasing reliance on market mechanisms
Last set of changes, market mechanisms, is the main
focus of this paper.
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Background …
WIA built upon more than a decade of state
experimentation with some of these elements. For
example,
•WI, PA, TX & others with One-stop Centers in the late
1980s and early to mid 1990s
•MI with its emphasis on empowering customer choice
starting in the 1980s
•FL, MI, OR, TX, UT & WA developing more
comprehensive workforce systems, often with systems
performance measures and management approaches to
accompany them
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The WIA Study
• USDOL/ETA-funded
• Conducted 2002-2005
• Led by Richard Nathan of the Rockefeller Institute of
Government, with Johns Hopkins University’s IPS
and the University of Texas at Austin’s RMC, and
colleagues at other universities
• Purposive selection considered region, urban/rural
and organizational approach, emphasizing “leadingedge” states
• Sites: 8 states, 16 local areas, 30+ One-Stop Centers
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WIA Study Sites
Florida—First Coast (Region 8); Citrus, Levy & Marion
Counties (Region 10)
Indiana—Ft. Wayne; Indianapolis/Marion County
Maryland—Baltimore City; Frederick County
Michigan—Lansing (Capital Area); Traverse City (NW)
Missouri—Kansas City area; Central Region
Oregon—Marion, Polk & Yamhill Counties (Region 3);
The Oregon CSRT/Workforce Alliance
Texas—Austin (Capital Area); Houston (Gulf Coast)
Utah—Salt Lake City (Central); Moab/Price (SE)
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WIA Market Mechanisms
Four main mechanisms of interest:
Labor Market Information (LMI)—Promoting and
facilitating better labor market choices and operations
for employers and jobseekers
Eligible Training Provider (ETP) Certification—States
establish ETP criteria and procedures to determine and
maintain lists of ETPs jobseekers select from
Individual Training Accounts (ITAs)—Voucher-like
accounts used to finance training for jobseekers
Performance Standards/Incentives—New version of
performance management with standards and incentives
for workforce programs, including state-level ones
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Key Findings: LMI
Minimal LMI emphasis in the WIA study:
• All states have LMI units, largely BLS funded,
producing current and projected data (e.g.,
employment by occupation, industry, wages).
• States have greatly improved LMI quality, tools and
presentation.
• Some local WIB complaints/concerns about needing
more detailed job vacancy data than was available.
• O*NET occupational and related data improving and
likely to be even better in the future.
A number of LMI shortcomings can only be addressed
with added funding, support and development over
time.
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Key Findings: ETP Certification
ETP new in US workforce programs. Big shift toward a
market-like system. States establish and maintain ETP
systems, based on extensive provider outcomes reporting
for all enrollees in all occupational training programs, not
just WIA. Provider eligibility reviewed every 12-18 mos.
•Experience among states varied. A few found ETP useful
and minimally burdensome (e.g., FL, UT, OR). Others had
initial and/or continuing problems (e.g., TX, MD, MI, MO).
•Concerns about ETP implementation discouraged
community colleges from providing training for WIA.
•Questions raised about whether, as implemented, ETP
provided sufficiently valid information to justify its costs
and inconvenience.
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Key Findings: ITAs
Another new market-oriented shift under WIA. ITA
exceptions include OJT, customized training and special
populations. Only limited prior experience with vouchers
and voucher-like approaches.
• Evidence on effectiveness of vouchers for
disadvantaged, low-literacy populations mixed to date.
• Provider — esp. community and technical colleges —
uncertainty over filling classes and maintaining capacity
consistently with ITAs.
• ITAs somewhat successful to date. They are popular
with participants and accepted by WIBs, who are mainly
using a ‘guided-choice’ approach.
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Key Findings: ITAs …
• States often left ITA implementation decisions (e.g.,
training time, cost limits) to the local WIBs, which
usually used a guided-choice approach.
• ITA cost ceilings tended to become cost floors in local
areas.
• Actual provider choice with ITAs tended to be limited
either because providers opted not to join ETP list (e.g.,
MD) or due to low numbers of providers generally (e.g.,
UT).
• States with the fewest problems implementing new WIA
ITA provisions were those with prior experience (e.g.,
MI).
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Key Findings: Performance
Standards & Incentives
Initially, 17 core performance measures established for
adults, dislocated workers and older youth: entered
employment rate, 6-month employment retention,
earnings change and others, including customer
satisfaction for employers and jobseekers. Other
measures applied to younger youth.
WIA’s performance management system seen as a big
step backwards from that under JTPA in major respects:
• Lack of adjustment mechanisms to account for
participant characteristics, local economic conditions
• No real standards negotiations by federal ETA staff.
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Key Findings: Performance
Standards & Incentives …
• Vague data definitions (e.g., entry, exit, services) and
poorer data collection and reporting systems.
• Too many federal performance measures — though
half of states added measures either to gauge system
performance or to support day-to-day program
management.
Some boards responded by ‘gaming’ local program
performance, timing participant exits to maximize
reported outcomes and other activities.
Key developments since 2005 include better ETA
guidance on negotiations and adjustments, the OMB
“common measures”, the IPI effort to develop system
measures (WA, FL, TX, OR) and others.
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Conclusions
Market mechanisms play a far more important role and
largely accepted system-wide. Practical and conceptual
issues about their appropriateness, effectiveness:
• LMI often incomplete, sometimes inaccurate;
immediate outcomes poor proxies for impacts.
• Information often imbalanced, asymmetric: sellers tend
to know more than buyers.
• Disadvantaged, low-literacy participants may not be
well suited to taking full advantage of ITAs.
• Use of ITAs under WIA minimal due to combined effect
of de-emphasis on training, cumbersome ETP process
and reduced WIA funding.
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Conclusions …
• States and localities have embraced newly devolved
authority and responsibility for workforce development
under WIA; system increasingly varied nationwide.
• Current approach to measuring/managing
performance under WIA doesn’t fit well with
intergovernmental approach to US workforce policy as
it’s evolved.
• Market mechanisms under WIA appear to be working
better than expected (e.g., ITAs, ETP), but could be the
result of low demands placed on them.
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Recommendations for WIA
• WIA should improve and tighten data collection and
reporting by states and local WIBs, systemwide.
• WIA should fund, develop and foster use of LMI and
related tools for use by WIBs, employers, participants
and state planners.
• WIA should do more to encourage/support provision
of skills training in growth sectors, through ITAs or
other means.
• Congress should broaden ETP process beyond WIA.
• Congress should establish a mechanism for carefully
and comprehensively reviewing the “Common
Measures.”
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WIA Recommendations …
• WIA should explicitly provide for and support
development of performance adjustment models or
other less complex but effective approaches to ensure
encouraging services to hard-to-serve groups.
• WIA should provide for more systematic capacity
building across the system to foster best practices
and professional development, e.g., institutional
grantees.
• WIA should continue to support evaluations using
random assignment in conjunction with research on
less expensive, intrusive quasi- or non-experimental
estimation.
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Recommendations for the
European Social Fund
Detailed recommendations premature. Issues to
consider include:
•Context is all important. One-size-fits-all solutions using
market mechanisms are unlikely to work well in Europe
given its institutions and traditions.
•Over-reliance on market mechanisms should be
avoided unless/until LMI and outcomes data are more
robust and its major customers have ready access and
are able to use them effectively.
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Contact Information
Christopher T. King, Director
Ray Marshall Center, LBJ School of Public Affairs
University of Texas at Austin
ctking@austin.utexas.edu
512.471.2186
Burt S. Barnow, Associate Director for Research
Institute for Policy Studies
Johns Hopkins University
barnow@jhu.edu
410.516.5388
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