Category Archives: Labor & workforce

What the Obama Giveth, the Trump Taketh Away

Slash and burn

The federal budget sequestration may have kept a lid on escalating federal budget deficits, a good thing, but it was a disaster for Virginia’s economy. The cap on federal spending hammered a Northern Virginia economy built largely around the Pentagon. The ascension of Donald Trump to the presidency signaled a possible return to the region’s glory days as the new president promised to increase defense spending by $50 billion.

But the president has created massive uncertainty with a vow to slash discretionary spending in civilian programs and bureaucracies. The Washington Post is all in a dither:

The cuts Trump plans to propose this week are also expected to lead to layoffs among federal workers, changes that would be felt sharply in the Washington area. According to an economic analysis by Mark Zandi, chief economist for Moody’s Analytics, the reductions outlined so far by Trump’s advisers would reduce employment in the region by 1.8 percent and personal income by 3.5 percent, and lower home prices by 1.9 percent. …

Trump’s emphasis on defense spending might provide a buffer for Northern Virginia, although, as noted previously on this blog, there are some within his administration who believe that the Pentagon civilian bureaucracy needs to be whacked down to size in order to free more resources for fighting forces. Under a serious effort to rebuild the U.S. Navy, Hampton Roads’ military bases and shipbuilders could be big beneficiaries.

We can’t say anything with certainty until Trump releases the details of his plans later this week. But at this moment in time, it looks like the new budgetary policies could be a mild plus for Virginia with boosts in defense spending offsetting cuts in other areas. Conversely, Maryland and Washington, D.C., with their large non-military exposure, could be in for a world of hurt

Adding to Washington’s woes…. The metro area’s job performance in 2016 has been revised downward. Reports the Washington Business Journal: “The D.C. region added 55,600 jobs in 2016, according to final data released Tuesday by the Bureau of Labor Statistics — about 16,800 fewer than the agency had initially counted.”

“We are talking slashing and burning several different agencies on the discretionary, non-defense side. That could have a pretty chilling effect for the local economy,” said Clifford Rossi, a professor of the practice at the Robert H. Smith School of Business at the University of Maryland-College Park.

Rossi agreed that the revised job growth numbers reveal an economy that was weaker than it originally appeared, and that the federal spending cuts proposed by Trump could have a compound effect on the regional economy.

Bacon’s bottom line: Actually, the loss of 1.8% employment and 3.5% income is no worse than what dozens of other metros experienced in the last recession. But have compassion! Washington has never been through anything like this before.

(Hat tip: Rob Whitfield)

For-Profit Colleges and the Student Debt Apocalypse

Graduates from for-profit colleges account for a disproportionate share of student loan defaults.

Graduates from for-profit colleges account for a disproportionate share of student loan defaults.

Tressie McMillan Cottom worked as an enrollment officer at two for-profit technical colleges before she went on to earn a PhD., join the faculty of Virginia Commonwealth University, and write a book, “Lower Ed: The Troubling Rise of For-Profit Colleges in the New Economy.”

Cottom says that for-profit colleges get one important thing right: They invest resources in the front-end process of helping students enroll: everything from applying for financial aid to having their textbooks waiting for them on the first day of class. But she, like many other critics of for-profit education, is concerned by the high indebtedness and high default rate of students. Those who attend for-profit colleges represent only 26% of all borrowers but account for 35% of federal loan defaults.

The high default rate is a sign of the trouble graduates have finding quality, high-paying jobs, Cottom told Karin Kapsidelis, higher ed writer for the Richmond Times-Dispatch. For-profit colleges are a varied lot. While some deliver value for the students’ investment, others are marketing machines designed to enroll students and collect revenue with little heed to results. “The profit motive changes everything. It means that instead of helping students, you’re selling students.”

The industry took off when the financial sector figured out how to make money from it, Cottom says. Wall Street underwrote for-profit educational enterprises to “monetize” peoples’ aspirations and their faith in education as the way to improve their lives.

Writes Cottom in the introduction to her book:

Lower Ed refers to credential expansion created by structural changes in how we work, unequal group access to favorable higher education schemes, and the risk shift of job training, from states and companies to individuals and families, exclusively for profit. Lower Ed is the subsector of high-risk post-secondary schools and colleges that are part of the same system as the most elite institutions. In fact, Lower Ed can exist precisely because elite Higher Ed does. The latter legitimizes the education gospel while the former absorbs all manner of vulnerable groups who believe in it: single mothers, downsized workers, veterans, people of color, and people transitioning from welfare to work.

Bacon’s bottom line: No question, the high default rate is a huge problem — student indebtedness is creating a new class of Americans who have little hope of paying back their tuition and, as the law stands now, little chance of discharging their debts through loan forgiveness or bankruptcy like overextended homeowners can do. But I am concerned by how many people, including, Ms. Cottom, it seems, blame the problem on for-profit institutions and the profit motive.

As the Kapsidelis story points out, for-profit colleges account for 35% of all federal loan defaults. But 65% can be traced to non-profit colleges! The driving force behind high defaults isn’t the for-profit status of the school, I would suggest, but the socioeconomic status of the student. Students from poor families are more likely to drop out and default on their debt than students from better-off families. Historically Black Colleges and Universities (HBCUs), which are non-profit, have high default rates, too, as do institutions that cater primarily to lower-income whites and Hispanics.

For-profit institutions are motivated to accept marginal students in order to fill seats and generate revenue. But guess what, so are many non-profit institutions. They, too, have expenses to cover, salaries to pay, and bonds to finance.

The problem, I would suggest, isn’t for-profit versus non-profit, it’s the erosion in lending standards. Anyone who wants a student loan can get one. Because the repayment risk is transferred to the federal government, the college (be it for-profit or non-profit) has no skin in the game. If a college student is unprepared for college, defaults after dropping out, or fails to find a job, the institution suffers no ill consequence. Why would we expect any other result?

 

The Northam/Perriello Rural Poverty Plan

Let there be higher wages! Ralph Northam (left) and Tom Perriello on the campaign trail in Northern Virginia where they promoted a $15 minimum wage.

Let there be higher wages! Ralph Northam (left) and Tom Perriello on the campaign trail in Northern Virginia where they promoted a $15 minimum wage. (Photo credit: Washington Post)

Both Democratic candidates for governor, Ralph Northam and Tom Perriello, have endorsed a statewide $15-per-hour minimum wage, a sign, says the Washington Post, of how much momentum the national “Fight for $15” is achieving. (Virginia hews to the federal minimum wage of $7.25 per hour, which has not increased since 2009.)

Perriello backed the $15 minimum wage shortly after declaring his candidacy, and Northam followed the next day. Both candidates reiterated their support earlier this week when aligning themselves with striking workers at Reagan National Airport. Reports the Post:

“I would challenge anyone out there to go try to support themselves and support their families on $7.25 an hour,” Northam said Wednesday after his meeting with workers. “It is impossible. You can’t do it.” He said he would push to raise the minimum wage as governor by campaigning to unseat Republican lawmakers opposed to it.

“We know we have a long way to go,” Perriello told a wheelchair handler during his Thursday visit, wearing a purple Fight for $15 scarf. “This is about the dignity of work, but it’s also about economic growth in our community.”

Bacon’s bottom line: Economists have haggled endlessly for decades over the effects of the minimum wage, with neither side dealing a knockout blow. But it’s safe to say that the minimum wage would have the greatest impact on labor markets in areas where prevailing wages are the lowest — and in Virginia, those are rural areas.

Start by asking the following question: Why not raise the minimum wage to $30 an hour? Or $100 an hour? Because, even liberal economists will concede, employers will lay off workers who don’t deliver $30 or $100 in economic value. At some point the wages lost by those who lose their jobs will exceed the wages gained by those who received a pay raise. At that point the minimum wage becomes indisputably destructive. The question is at what hourly wage that threshold is crossed.

It is conceivable that a $15 minimum wage will work in the Washington metropolitan area in the sense that wage gains for lower-income workers will exceed the wages lost from employees who lose their jobs. That’s because Washington is already a high-cost-of-living, high-wage labor market, and the differential between prevailing market wages and the $15-per-hour minimum wage is relatively modest. The picture is very different in economically depressed Southside and Southwest Virginia communities where one of the few competitive advantages in the economic-development arena is a lower cost of living and a lower wage base.

The Virginia Employment Commission publishes labor market profiles of the Southwest Virginia Workforce Investment Area here and the Northern Virginia Workforce Investment Area here. Below, I extracted the average weekly wages for the largest occupational categories in Southwest Virginia (excluding government and mining/oil and gas/extraction).

For purposes of comparison, someone earning the current minimum wage and working 40 hours a week would earn $290 per week, while a $15-per-hour minimum wage would equate to $600 per week.

Clearly, such a minimum wage would have a greater impact on SW Virginia workers than NoVa workers where the average weekly wage (and by implication the average hourly wage) is 50% to 75% higher. On the plus side, the pay of SW Virginians would jump more… if they could hang onto their jobs. And there’s the rub. How many could hang onto their jobs after such a massive disruption to labor markets? While some SW businesses might survive by laying off marginal employees, one has to ask, others couldn’t even stay in business. Would a Pizza Hut franchise be able to keep the doors open if its cost of labor doubled? If not, how many business owners, store managers and others earning above the minimum wage also would lose their jobs?

Beyond the immediate impact, what would be the consequences for long-term job development? Would any corporation consider investing in SW Virginia, a region in which 11% of the workforce has an 8th grade education or less and another 12% has “some” high school, if the minimum wage were $15?

The idea of a $15-per-hour minimum wage was born in affluent urban areas with a high cost of living. It is totally inappropriate for poor rural areas with low living costs, low wage structures and high unemployment. I can think of no economic policy that would be more disastrous for Virginia’s rural regions.

Owens & Minor Goes for Millennials, Walkable City

Owens & Minor wants Millennials,and Millennials want 15-minute, livable communities. Graphic credit: Institute for the Future

Good economic news for the Richmond region: Medical supply giant Owens & Minor Inc. announced plans Thursday to open a client engagement center in downtown Richmond that will employ 500 people. Jobs will average about $53,700 in annual pay.

In making the announcement Governor Terry McAuliffe made much of the fact that Richmond competed against 60 other cities in a year-long search process. Less was made of the fact that Owens & Minor, which is located in the Mechanicsville suburb of Richmond, chose to locate in the central city rather than one of the region’s outlying counties.

The reason? “We want to attract the millennial generation,” CEO Cody Phipps told the Richmond Times-Dispatch. “We did our research. The millennial generation is going to be 50-plus percent of the workforce in the next few years, and they want to live in urban areas. They want to be downtown. They want to work in a state-of-the-art space. We like that we can draw from the universities around here.”

Owens & Minor will make Riverfront Plaza in downtown Richmond its newest home.

Owens & Minor will make Riverfront Plaza in downtown Richmond its newest home. Photo credit: Richmond Times-Dispatch

I don’t know who conducted Phipps’ research, but I know of one outfit in town that does specialize in generational marketing — The Institute for Tomorrow, which is affiliated with the Southeastern Institute of Research (SIR). (I worked for SIR about ten years ago.) Two days before Owens & Minor’s announcement, Managing Partner Matt Thornhill tweeted presciently, “Winning communities of tomorrow are 15-minute livable communities.”

By way of elaboration, he blogged about recent research conducted for the Virginia Secretary of Transportation. In a survey of 600 people around the U.S. who had just moved or were considering moving more than 100 miles, four out of five agreed with the statement, “Having access to stores, restaurants, and services close to my home (within about 15 minutes) is very important to me.” Almost as important was living withing a 15 minute commute of work.

It is often said that Millennials want to live “downtown” where it’s hip and cool and there are coffee shops and microbreweries. According to a recent Urban Land Institute study, though, only 37% of Millennial consider themselves to be a “city person,” wrote Thornhill; 36% classified themselves as “suburbanites” and 26% as “small town/country” people.

While there is nothing inevitable about Millennials wanting to live and work downtown, they are “hard-wired to be in community with each other,” Thornhill observed. “Thanks in part to doing school projects in teams from their middle school years onward, Millennials like to collaborate and trust in decisions made by the wisdom of the crowd. … They want neighborhoods where they can walk, bike, and use transit to get around.”

This community mindset, opined Thornhill, will drive the growth of “activity centers” of 15-minute livable communities. Activity centers don’t have to be in traditional cities (although most are).  “Builders, developers, urban planners, and government officials are now catching up to the changing preferences of consumers and looking for ways to in-fill activity centers across their metropolitan landscape.”

Thornhill stops his analysis there. But as I think about the Owens & Minor decision, it’s not clear that urban planners and government officials actually have gotten the message. While most of the City of Richmond fits the definition of a 15-minute walkable community, there are only flyspecks of walkability in neighboring Henrico and Chesterfield counties. In Henrico County the one area that potentially has the critical mass to compete with downtown Richmond, the Innsbrook Office Park, was rezoned for urban mixed use back in 2010. But re-development has stalled for more than six years due to inflexible application of the zoning code.

Absent a dramatic change of thinking and practice in the suburban counties, it looks like the future of the Richmond metropolitan region belongs to the city. Everything old is new again: Richmond possesses the key elements of walkability — moderate density, mixed uses, grid streets and timeless architecture — inherited from a past era of urban grandeur. The counties are stuck with suburban sprawl. Expect to see more headlines like Owen & Minor’s in the region’s future.

Alternate Facts Regarding Virginia Employment

Gallup's Good Jobs Rate for Virginia is 49.2%. Despite sequestration, Virginia employment numbers are robust.

Gallup’s Good Jobs Rate for Virginia is 49.2%. Despite sequestration, Virginia employment numbers are robust. 

Virginia’s economy  may be down in the dumps by Virginia standards, but it still looks buoyant compared to many other states, according to Gallup Organization data based on tracking interviews with nearly 355,000 U.S. adults.

The official state unemployment was 4.1% in December 2016, lower than for 33 other states. But the unemployment rate does not include the under-employed, discouraged workers not looking for jobs, people on disability, or those who have retired early. While four percent has long been regarded as “full employment,” we all know that hundreds of thousands of Virginians who would like to work can’t find full-time jobs.

Gallup compiles what it calls a “Good Jobs” rate which expresses the total number of 18-and-older adults with full-time jobs (more than 30 hours) as a percentage of the adult population. The metric excludes part-time and self-employed time workers. Virginia scores 49.2%, which means that almost half of all adults are working in full-time jobs.

Gallup views the Good Jobs rate as an indicator of economic vitality. It’s important to note, however, that a state with a large population of the elderly and retirees will look worse by this measure. Thus West Virginia, a state with an aging population where only 36.6% of adults are fully employed, fares the worst in the country. Likewise, Florida and Arizona, states with otherwise robust economies, also rank in the bottom 10 states by this measure.

Still, a high Good Jobs rate indicates that a high percentage of the adult population is contributing to economic activity.

Nationally, there are two clusters of very high Good Jobs scores — one in the northern plains states and the other in the two states bordering Washington, D.C.: Virginia and Maryland. Whatever harm sequestration has inflicted upon Virginia’s economy, the employment rate remains high by national standards.

Gallup also compiles an “underemployment” metric, which adds both unemployed people looking for jobs and those working part time but desiring full-time work. This number is expressed as a percentage of the adults in the workforce (not the entire adult population, as with the Good Jobs indicator).

Gallup did not publish the Virginia number for this metric, but in the map reproduced below, the company classified Virginia among the “low” underemployment states, meaning that it scored between 11th and 20th — ahead of Maryland, heh, heh.

Bacon’s bottom line: By both these alternative measures, the Virginia employment picture looks better, relatively speaking, than the official unemployment rate. They may be “alternate facts,” but they’re real facts. The economy is not as vibrant as it should be… but as a working man, I’d rather be in Virginia. (Hat tip: Tim Wise.)

Many Virginians Prefer Training over Incentives

Graphic credit: VCU

The Douglas Wilder School of Government and Public Affairs has published a public opinion poll delving into Virginians’ attitudes toward a wide range of issues relating to K-12, higher ed, and workforce training. The poll appears to be methodologically sound. I will use the poll results as stepping stones to address several topics.

Workforce training: When asked how to prioritize the spending of state economic development dollars, according to the poll results shown above, Virginians were evenly split between expanding workforce training and education programs over providing financial incentives to recruit new business or retain existing business.

I construe these results as evidence of potentially strong public support for my proposal, elaborated upon here, to scrap the Commonwealth’s Opportunity Development Fund, which is used to dish out financial incentives to corporations expanding in Virginia, and beefing up the state’s targeted workforce training program. The idea: Instead of attracting corporations with cash, we entice them with a skilled workforce.

As I noted in that column, addressing the jobs-skills mismatch is arguably the greatest economic challenge facing Virginia today. If a corporation can’t find the workers it needs, it won’t consider a community no matter how big the incentives. Furthermore, it makes more sense to invest in Virginia workers than subsidizing out-of-state companies that may or may not be willing to make a long-term commitment to the state.

Invest in Virginia Workers, Not Corporate Subsidies

Replace economic-development incentives with workforce training.

Replace economic-development incentives with workforce training. Photo credit: Richmond Times-Dispatch

(The Richmond Times-Dispatch published my op-ed this morning.)

The Virginia Economic Development Partnership (VEDP), once one of the most respected economic development teams in the country, has been taking it on the chin. A year ago, a Chinese company bilked the partnership for a $1.4 million incentive payment in a deal that never transpired. The scandal prompted the departure of VEDP’s CEO and sparked a legislative inquiry that unearthed “systemic deficiencies” in its management.

In December, Gov. Terry McAuliffe proposed reforms to improve oversight of incentives, which amounted to $384 million over the past decade. Among his recommendations: Create new divisions within VEDP, one to administer the incentive programs and another to audit VEDP activities and report the findings directly to its board of directors.

I have a simpler idea. Instead of adding new layers of bureaucracy, eliminate the incentives altogether and use the money for workforce training.

Virginians have long had a love-hate relationship with economic development incentives, viewing them as an ugly necessity for competing with other states, most of which offer subsidies and tax breaks to lure corporate investment. The Old Dominion was one of the first states to make incentives contingent upon the recipient meeting benchmarks for dollars invested and jobs created. If a company fails to keep its promises, the state will claw back its payments.

But there’s a bigger problem that tighter administration of state incentive programs cannot solve: There is no way to tell if subsidies and tax breaks actually work.

Site location in the United States has evolved into a racket. When a corporation decides to expand, it typically hires a site consultant to scout the ideal location. It is common practice to narrow down the choice to two or three localities in different states and then to set them bidding against one another to offer the sweetest incentive package.

So many states dangle subsidies, grants, tax breaks and other kinds of bribes that companies would be negligent to not try to extract the biggest, fattest concession possible.

The trouble is that economic developers are bidding in the dark. The VEDP can make educated guesses, but it has no way of knowing exactly how much money it will take to sway a particular corporation to invest in Virginia, no way of knowing whether it gave away too much, indeed no way of knowing if a company would have invested in Virginia without an incentive package at all.

As it happens, the timing is perfect to re-think incentives. The VEDP board has hired Steven Moret, Louisiana’s former economic development chief and a superstar in the field, to run the organization. Key to his success was FastStart, a program he built into one of the nation’s premier workforce development initiatives. Moret should be given the resources to replicate the program in Virginia.

Once upon a time, VEDP had a respectable job-training program, which it offered as a perk to companies investing in the state. But the Virginia Jobs Investment Program (VJAP) has undergone considerable restructuring and reorganization over the past 20 years, and not to its benefit.

Between 2010 and 2014 it shrank from 16 operational and support personnel to six. While Louisiana was building a best-in-class workforce development initiative, Virginia was dismantling its own.

In an era of abundant capital and near-zero interest rates, reputable corporations can easily and cheaply borrow the money they need to expand. A much tougher task is finding a skilled workforce.

Many communities are out of the running for a wide range of economic development projects because their workers lack industry-specific skills. In Martinsville, for instance, the 6.8 percent unemployment rate is higher than almost anywhere in the state, yet in November local companies were complaining that they were having difficulty filling some 1,325 job openings.

If local companies can’t find the workers they need, what chance does Martinsville have in attracting out-of-state industry?

Addressing the jobs-skills mismatch is arguably the greatest economic challenge facing Virginia today. If a corporation can’t find the workers it needs, it won’t consider a community no matter how big the incentives.

Virginia’s colleges, community colleges and universities can do most of the heavy lifting on education and training, but they are not equipped to provide a fast-response, turnkey workforce solution like Louisiana’s FastStart program.

While the General Assembly ponders how to reform VEDP, it also needs to re-think the state’s economic-development incentives: Virginia needs to emphasize workforce development over subsidies and tax breaks.

Given the state’s current budget constraints, the most logical pot of money to fund a program like FastStart is the Commonwealth’s Opportunity Development Fund. We can continue doling out payola to out-of-state corporations or we can invest in Virginia’s workers, likely with a better result. It’s not a difficult choice.

Forget Globalization. Worry about Automation.

Automation is taking more American jobs than Mexicans are.

Automation is destroying more American jobs than Mexicans are.

Watcha gonna do… watcha gonna do… whatcha gonna do when robots come for you?

Robots aren’t science fiction. You need to start thinking about them — and so does Virginia’s political establishment.

The 2015 Oxford automation study, “The Future of Employment: How Susceptible Are Jobs to Computerisation,” concluded that 47% of all U.S. jobs in 702 occupations are at “high risk” of decimation by automation. If it’s any consolation, an Organization for Economic Cooperation and Development (OECD) study found that a mere 9% of jobs are at risk. But don’t get complacent. A 2016 McKinsey study predicts that 60% of all U.S. occupations could see 30% or more of their work activities automated.

Using the same methodology as the Oxford study, Dr. James V. Koch, an Old Dominion University economist, calculates that nearly 1.9 million jobs are at risk in Virginia — about 51% of all jobs, four percentage points higher than the national average.

Seeking refuge in a college education will not necessarily save your job from robots or artificial intelligence. A hair stylist in Harrisonburg stands better chance of surviving the job carnage wrought by our robot overlords than, say, a tax preparer in Danville.

The deciding factor, says Koch in an essay in the “2016 State of the Commonwealth Report,” sponsored by the Virginia Chamber Foundation, “is the extent to which jobs require creative and and social intelligence and the ability to manipulate as opposed to being dominated by repetitive, routine tasks capable of being learned by machines fueled by artificial intelligence.”

So, in the immortal words of 19th-century Russian revolutionary Nikolai Chernyshevsky, “What is to be done?”

Writes Koch:

Wise public policies in this arena should focus on “riding the wave” of technological change rather than encouraging resistance movements that are destined to prove futile. Astutely constructed public-private partnerships between governments and firms have the potential to develop programs designed to compensate and redirect job losers, who in many cases are relatively innocent victims of dynamic economic forces beyond their control.

Koch, a former Old Dominion University president, argues the state should work to increase the skills, flexibility and mobility of the workforce. By skills, he means proficiencies that count in the marketplace. “This is not the same thing as generating massive numbers of additional bachelor’s degree holders, or STEM-degree holders,” he says. “There is relatively little rigorous economic evidence available that a significant shortage of job candidates exists in STEM-related occupations.”

By flexibility, Koch means “suppleness in thinking and approach” — critical thinking. And by mobility, “wise public policy will reduce barriers that discourage people from moving geographically and/or telecommuting to jobs that may be located thousands of miles away.”

What the empirical evidence tells us, says Koch, “is that the current range of public policies is insufficient to deal with the occupational ferment that Frey and Osborne (the authors of the Oxford study) have identified. We are forewarned.”

New VEDP Chief Brings Workforce Training Credibility

Steven Moret, Louisiana's economic development and workforce training guru

Steven Moret married economic development and workforce training in Louisiana. Photo credit: The Advocate

Steven Moret, an economic development executive from Louisiana, has been selected to run the Virginia Economic Development Partnership (VEDP) on the strength of his track record of attracting private investment to Louisiana by building one of the most respected workforce training programs in the country.

The VEDP board approved the hire in a special meeting yesterday against the backdrop of a devastating report by the Joint Legislative Audit and Review Commission (JLARC), which charged that VEDP suffered from “systemic deficiencies” in administration and management.

Moret, selected from among six finalists after a nationwide search, will receive a base salary of 340,000 with benefits and, he would be eligible for an annual incentive bonus up to 15% tied to performance. He has strong family connections to Virginia. His mother lives in Richmond, and his in-laws are planning to move to the city.

Among all of Virginia’s economic development programs, VEDP is the most important. VEDP itself administers a $27 million budget, and it is influential in dispensing tens of millions of dollars more in incentives through the Commonwealth’s Opportunity Fund.

In an interview with Virginia Business, VEDP Chairman Dan Clemente explained the board’s rationale behind the pick:

Clemente said that hiring a new, highly qualified leader will help shepherd through changes resulting from JLARC’s review. Saying that he had consulted with legislative leaders before calling Monday’s meeting, Clemente noted that Moret was hired to head up Louisiana’s economic development efforts in 2009 under conditions similar to those facing VEDP today. “He came in and straightened that out and brought in billions in new capital investment, “ Clemente said.

What really impressed him, Clemente added, is that Moret traveled to Georgia to study its workforce development initiative, developing a similar model in Louisiana called FastStart. “He hired the No. 2 guy in Georgia and brought him to Louisiana to make the program work,” Clemente said. “He’s good at executing ideas.”

Clemente said Moret —who was not present at Monday’s meeting — has read JLARC’s 132-page report. “He looked at it and said, ‘Dan, this is all administrative. I can take care of it. ’” Clemente said Moret wanted to come to Virginia because “ ‘your location draws Fortune 500 companies, and that creates a lot of opportunities for me.’ ”

Bacon’s bottom line: Moret seems like a promising choice for the job, and it will be interesting to see where he takes VEDP. An experienced executive should be able to address the managerial issues raised by JLARC. Of greater import will be his ability to connect corporate recruitment with workforce development.

The number one driver behind corporate investment today is gaining access to a skilled workforce. As we have blogged on Bacon’s Rebellion repeatedly, tens of thousands of jobs across the state are going unfilled because of the inability of existing employers to find employees with the necessary qualifications. Needless to say, staffing is an issue to out-of-state company considering an investment in Virginia as well. The skills gap tells us that a massive disconnect has developed between the workforce, employers and the educational/ training institutions that impart needed skills.

Since 1965, the Virginia Jobs Investment Program (VJIP) has provided training to companies creating new jobs. That program has undergone considerable bureaucratic turmoil over the past 20 years, shuffling in whole or in part between the old Department of Economic Development, the Department of Business Assistance, the Department of Small Business and Supplier Diversity, and then back to VEDP, according to a 2014 VEDP presentation.

Between 2010 and 2014, the program shrank from 16 operational and support personnel to six. In other words, while Louisiana was building a best-in-class workforce development initiative, it appears that Virginia was decimating its own program.

From a philosophical perspective, investment incentives such as special subsidies and tax breaks smack of corporate welfare. The beneficiaries are corporations, often highly profitable ones. There is no moral justification for such transfer payments, only the practical justification of bribing an out-of-state company to locate in Virginia. By contrast, workforce training benefits both the corporation and the employees benefiting from the training. While some such skills imparted in highly tailored training programs may be company-specific, employees often acquire skills they can apply elsewhere. Viewed another way, workforce training is an investment in Virginians, not out-of-state corporations with no demonstrated long-term commitment to the state.

Given a choice between bribing companies with subsidies and tax breaks or subsidizing their workforce training, I would choose training in a heartbeat. Indeed, if one of Mr. Moret’s priorities is to recreate his Louisiana workforce-training success here in Virginia, I would suggest that the General Assembly could provide him with all the money he needs from the Commonwealth’s Opportunity Fund.

Workforce Training that Focuses on Unfilled Jobs

Workforce training in Martinsville, Va.

Violet Mabe, of Martinsville, participates in a Certified Production Technician class at the local community college. Photo credit: Roanoke Times

The Martinsville area, a manufacturing powerhouse as recently as the 1980s, has become the poster child for Virginia’s rust belt. Unemployment hit 20% during the bottom of the last recession, and still lingers at 6.8%. Ironically, the Martinsville-Henry County area simultaneously suffers from a labor shortage — a shortage of labor with the right skills, that is.

I addressed this issue back in August in “Is It Time to Blame the Victim,” which described the difficulty local authorities had in finding people willing to undergo the training required to fill hundreds of vacant jobs. Now the Martinsville Bulletin has published an in-depth look at the workforce dilemma.

There is a serious mismatch between workforce skills and the jobs available. As of last week, there were 1,325 jobs open in Martinsville and Henry County. Factors influencing the difficulty in filling the positions include the need for daycare, lack of transportation, and the inability of applicants to pass drug tests. “But a skills mismatch and need for training is the problem area officials most often cited,” states the article.

Patrick Henry Community College (PHCC) and the New College Institute (NCI) battle a perception that education is unaffordable. Adults with families to support must make significant sacrifices even to earn a two-year degree.

One possible solution is to award certifications geared to the needs of particular employers, such as the Center for Advanced Film Manufacturing that grooms students for jobs at Eastman Chemical Co. That program offers a paid internship with Eastman and a guaranteed interview with the company. The company has hired more than 90% of the graduates of the program.

PHCC has launched a similar program with Radial, a logistics and distribution company. Kim Smith-Glisson, director of operations in Martinsville, explains the motivation:

As we grew the business in Martinsville/Henry County we did not want to have to continue to relocate our supervisors, our managers, our senior managers externally from outside of the area. We wanted to be able to develop the talent locally and continue to promote from within.

Drake Extrusion, a polypropene fiber manufacturer, announced a $6 million expansion in Henry County earlier this year, creating 30 jobs. CEO John Parkinson said additional job training is a necessity:

We’ve got a lot of people who are willing to apply for jobs, but they don’t really have the technical skills, the problem-solving skills, the ability to use computers on the shop floor and things like that, which is what we’re really looking for these days. Gone are the days when you’re just looking for people who can press buttons and watch machines.

Bacon’s bottom line: Two-year programs have their place, but they often take too long and impose too high a cost on adults who support families while acquiring new workplace skills. Community colleges and career colleges need to develop programs that deliver employers the specific skill sets their employees need. Likewise, employers need to get over the idea that job training is mainly a public responsibility. They need to partner with community colleges and help underwrite the cost of training programs that benefit them.

Meanwhile, Virginia needs to look at the panoply of job training programs — Nine state agencies distribute more than $340 million in federal and state funds for employee assistance and training — to see how effectively their programmatic models align with labor market realities. Are there obsolete and/or ineffective programs that can be shut down and their resources reallocated to programs proven to work?

The McAuliffe administration has sponsored creation of the Go Virginia program to develop a collaborative approach to workforce development involving business, local government and higher education. Whether Go Virginia delivers a focused approach to workforce training and education, or just adds another layer of bureaucracy, remains to be seen. But one thing seems evident: Training Virginians to fill unfilled jobs that already exist should be a lot easier than solving unemployment by recruiting new businesses to invest in the state.

Update: Patrick Henry Community College already has numerous certification programs that require less than a two-year course of study. See comments of PHCC’s Jim Bove here.