7
Improving Federal Programs

Before returning to our analysis of how the federal government can encourage systemic reform, it is important to stress that the federal government must make sure that its own programs work as well as possible. The current array of programs supporting postsecondary training reflects the different training needs identified in this report, as well as the diversity of financing mechanisms available to the federal government to meet those needs. In Chapter 5 we argued that there is no ''one size fits all'' approach to matching federal policy instruments and program designs to the needs of postsecondary training's clientele. This chapter explores the reasons behind that conclusion more fully and analyzes the kinds of changes that might make existing programs work better.

POLICY INSTRUMENTS FOR PUBLIC PURPOSES

Economists and political scientists have identified a number of ways that government can provide or spur the provision of services the public needs (Savas, 1987; Weimer and Vining, 1989). Several of these figure prominently in education and training policy: vouchers, contracts, grants, direct provision, and tax expenditures.1

Vouchers

Federal student aid is provided in the form of a voucher. A voucher is a certificate issued by a government that can be used by the recipient to pay



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Preparing for the Workplace: Charting a Course for Federal Postsecondary Training Policy 7 Improving Federal Programs Before returning to our analysis of how the federal government can encourage systemic reform, it is important to stress that the federal government must make sure that its own programs work as well as possible. The current array of programs supporting postsecondary training reflects the different training needs identified in this report, as well as the diversity of financing mechanisms available to the federal government to meet those needs. In Chapter 5 we argued that there is no ''one size fits all'' approach to matching federal policy instruments and program designs to the needs of postsecondary training's clientele. This chapter explores the reasons behind that conclusion more fully and analyzes the kinds of changes that might make existing programs work better. POLICY INSTRUMENTS FOR PUBLIC PURPOSES Economists and political scientists have identified a number of ways that government can provide or spur the provision of services the public needs (Savas, 1987; Weimer and Vining, 1989). Several of these figure prominently in education and training policy: vouchers, contracts, grants, direct provision, and tax expenditures.1 Vouchers Federal student aid is provided in the form of a voucher. A voucher is a certificate issued by a government that can be used by the recipient to pay

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Preparing for the Workplace: Charting a Course for Federal Postsecondary Training Policy for some service or commodity. Although institutional details vary, in essence the voucher is a certificate that can be redeemed by the supplier of the service for cash. Postsecondary education vouchers may also be used to compensate students for part of their living costs, as well as to meet direct education expenses. The primary appeal of vouchers is their reliance on the private marketplace for the delivery of goods and services. They can be a means of providing public financing while avoiding the alleged failings of government delivery (bureaucratization; inflexibility; inefficient production; over-regulation) and preserving the presumed advantages of markets (competition among suppliers; efficient production; consumer choice). It is worth noting, however, that vouchers always require the identification and definition of a qualifying commodity or service, such as food in the case of food stamps or education in the case of educational vouchers. Thus, some minimal regulation to ensure that the provided good or service meets the definition is always implicit. In that sense, vouchers are not a pure alternative to regulation. Two kinds of vouchers play an important role in postsecondary education and training. Pell grants subsidize education and training expenses up to the full face value of the grant. Federally subsidized guaranteed loans are also, in effect, vouchers, although the subsidy they provide is less than their face value, because students must repay them. We consider these loans a type of voucher because they, along with student aid grants, can be used at a wide range of approved educational institutions. We usually think of vouchers as entitlements: any candidate who meets certain standards will automatically be entitled to voucher support. 2 In some cases, however, vouchers may be allocated by some mechanism among potential recipients. Contracts Governments can also ensure the provision of services by contracting directly with private suppliers. The government must establish a mechanism (often competitive bidding) to select among candidate suppliers for the service. Thus, government is more directly involved in weighing the quality of alternative suppliers than in the case of voucher support, and programs delivered through contracts typically restrict consumer choice much more. This usually requires government to establish some system for allocating potential recipients among available programs. Contracting is widespread in the Job Training Partnership Act (JTPA) and Job Opportunities and Basic Skills (JOBS) programs.

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Preparing for the Workplace: Charting a Course for Federal Postsecondary Training Policy Grants Governments may provide grants directly to other levels of government or to private or nonprofit agencies that supply services. Unlike vouchers, such grants are not tied to individual recipients; unlike contracts, grants are not tied to the performance of specified services by recipient agencies or institutions. In education, grants that are given to colleges and schools are often referred to as institutional aid. (For examples of grant programs, see the discussion of Supplemental Educational Opportunity Grants, work-study programs, Perkins loans, and the Carl D. Perkins Vocational and Applied Technology Education Act in Chapter 2.) Direct Provision Governments can choose to provide services directly. All states, for example, own and operate postsecondary education institutions. With the exception of military academies, however, this is not a major part of the federal government's education effort. In the education and training arena, direct service delivery is primarily found at the state and local rather than federal level. State governments play a major part in work-related training by creating and subsidizing colleges and area vocational-technical training schools. Tax Expenditures Tax policy represents another means at governments' disposal to influence the supply of and demand for education and training services. Tax preferences can be directed at individuals (students and their parents; employees) by making educational expenditures or the interest on educational debt tax deductible. Alternatively, tax preferences can be directed at the suppliers of educational services; for example, by making the income of colleges and universities tax exempt. Still a third option is to provide tax preferences for employer investments in the training of their workers. Tax exemption for nonprofit colleges and universities is a significant form of federal institutional subsidy, similar in many ways to a grant. The federal government has in the past provided a major form of support for skills improvement training by not including employer reimbursements for employee training expenses in the taxable income of the employees. CHOOSING AMONG POLICY INSTRUMENTS Deciding whether student aid should continue to play such an important role in federal policy on postsecondary training depends in part on how

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Preparing for the Workplace: Charting a Course for Federal Postsecondary Training Policy good an instrument vouchers are. Questions have been raised about the utility of student aid vouchers for all the people who are currently eligible for them. In addition, proposals are sometimes made to "voucherize" second-chance and other federal programs that currently deliver services through contracts and grants. Conversely, it is sometimes suggested that student aid vouchers should be bundled with other kinds of federal support for education and training and given as block grants to states. In comparing the advantages of various policy instruments, it is again useful to recognize that distinctions among them are not hard and fast and that the differences may be more in degree than in kind. 3 Our discussion will focus on the two most prominent mechanisms for federal subsidy of postsecondary training, vouchers and contracts. Both the voucher model and the contracting model work best if certain underlying assumptions are satisfied. For vouchers, three seem especially important. Availability of a straightforward definition of the qualifying commodity or service. Vouchers carve out an arena within which consumers' own judgments about program quality are sovereign. This works best if there are clear and easily administered criteria for determining which products or services qualify for voucher support. Confidence in consumer knowledge and judgment. This is surely the central assumption in the voucher approach. The consumer has a strong stake in the outcome. Even well-informed consumers may not make good choices with public dollars unless their decisions carry a significant opportunity cost for themselves. Thus, in areas like medical care or housing, consumers themselves largely bear the costs of poor choices of providers. They will seek out the best housing or medical care their scarce resources will provide. In the case of education vouchers for disadvantaged populations, the opportunity cost to clients of spending time in a training program may be quite low, especially if the voucher helps support living costs. Given the difficulty of judging the worth of alternative investments of their time, recipients may have little incentive to avoid enrolling in unpromising programs. The contracting model has its own ideal assumptions: Clear criteria for governmental award of the contract. Strong ability of government to assess the performance of contractors. Strong ability of government or its agents to place clients in a suitable program. The obvious conclusion is that, in the context of postsecondary training, neither contracting nor vouchers is the best all-purpose approach.

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Preparing for the Workplace: Charting a Course for Federal Postsecondary Training Policy In light of the ideal conditions just discussed, the best case for vouchers is likely to be found in the following circumstances: Relatively long-term training, which increases the consumer's stake and consumer investment in the program. A further advantage of longer-term programs is that the revenues of suppliers depend on repeat business, so there is a direct market test of consumer satisfaction. Relatively well-qualified recipients, where there is more reason for confidence in their knowledge and judgment. Moreover, more qualified recipients will generally have higher opportunity costs of their time, which increases their incentive to invest only in effective training programs. Traditional educational programs. A clear and easily administered criterion for defining eligible programs for vouchers is probably best met by educational programs offering academic degrees. Academic degrees are relatively well-defined entities, with a long tradition behind them. Moreover, degree programs serve a number of purposes beyond those of the federal aid system, and therefore are not responsive exclusively or primarily to the incentives generated by that system. It is striking that these indicators of voucher effectiveness fit fairly well the original target population and target programs of federal student aid. The best circumstances in which to use contracts are probably the following: Intense programs that promise far-reaching effects. It should be relatively easy in such programs both to evaluate contract proposals and to monitor contractor effectiveness. Programs targeted at students whose needs are readily identified. Perhaps the clearest example here would be in programs for persons with disabilities. Programs targeted at recipients who are already closely connected to case workers or placement officers. Within the general area of education and training, this suggests that the contracting approach should work best in programs to deal with physical disabilities and in highly intensive programs for highly disadvantaged recipients. The clearest example of the latter is probably the Job Corps. The unfortunate but indisputable fact is that not much postsecondary training for the workplace falls clearly into either of the ideal areas for using contracts or vouchers. Thus, much of the vocational training that is currently supported by grant and loan vouchers is relatively short term, serves a population that is probably not well informed about training alternatives and does not face large opportunity costs for making poor choices about training alternatives, and is provided by institutions whose product is

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Preparing for the Workplace: Charting a Course for Federal Postsecondary Training Policy often hard to define and is not standard. Much of the training provided through contractors via JTPA and JOBS is low intensity and hard to evaluate. It also involves dealing with clients whose ideal placement is not obvious. Yet neither is it clear that the clients currently served by voucher programs are ideally suited to being served through contractors, nor is the reverse the case. This suggests that simple solutions, such as "voucherizing" all support for postsecondary training or converting all programs to contracts with service providers, are unlikely to prove satisfactory. It also suggests that policy makers should be open to considering the advantages of hybrid forms of support. 4 The absence of strong arguments for design changes in training programs dovetails with our findings about how little is known about the effects of many current efforts and with our conclusion that many proposals for major changes in training fall into the "justification-by-faith" category. For these reasons, we do not recommend a radical restructuring of federal postsecondary training programs. As in Chapter 6, we instead argue for continuous improvement and propose a variety of first steps. QUALIFYING TRAINING As discussed in Chapter 2, the student financial aid programs authorized by Title IV of the Higher Education Act represent the largest source of federal funds for postsecondary training. We examine them first and then ask what else the federal government ought to do in support of qualifying training.5 Student Financial Aid Through Pell grants and guaranteed student loans, the federal government provides roughly $20 billion annually to students in postsecondary training. (The other Title IV programs provide a comparatively small amount of aid to postsecondary training students, and we do not consider them further here.) While a variety of issues are currently being debated about the future of these programs, we concentrate on three that have significant consequences for training policy: student eligibility, institutional eligibility, and the problem of low-return programs of study. Student Eligibility The summary of federal programs in Chapter 2 makes it clear that student aid programs have evolved considerably since their inception. In particular, the growing use of federal student aid by nontraditional students and institutions has raised several new issues and problems; in recent years, it has also made the programs controversial. Funding for the programs has

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Preparing for the Workplace: Charting a Course for Federal Postsecondary Training Policy never expanded to reflect the broadened eligibility that has occurred over time. As a result, the inflation-adjusted value of grants and loans to individual students has tended to shrink and is likely to shrink further. In this regard, we believe that it was a mistake to extend Pell grant eligibility to less than half-time students in the 1992 reauthorization of the Higher Education Act. Pell grants are a remarkably cumbersome and inappropriate way to assist such students. The administrative burden of providing what will often be relatively small awards will be substantial. Moreover, without increases in funding, this extension of eligibility will reduce funding available for other students. Built into the structure of student aid programs is the assumption that students are progressing toward completion of some program, but this will often not be true for this group of students. Chapter 3 cites evidence that individuals do not appear to receive significant benefits (at least economically) from limited courses. A much more reasonable way to provide support might be through permitting some funding from the campus-based programs for less than half-time students, at the discretion of an institution's financial aid officers. Constraints on awards due to funding limits have also created tensions when administrators of other programs (such as JTPA) are perceived as utilizing student-aid-eligible training programs as a way of conserving their own resources.6 Our own judgment is that opposition to such cost-shifting is misplaced, so long as federal law makes postsecondary training programs eligible for student assistance (see below). Student aid, especially Pell grants, were in fact created to be a foundation of support for students in postsecondary programs. Any increased use of student-aid-eligible training programs by JTPA or other administrators worsens the competition for limited resources if student aid funds are not increased accordingly. But this per se is no reason to apply a different set of rules about who qualifies for student aid to someone who happens to be a participant in another federal program. A concern that has troubled some federal officials is that federal aid delivered for training in the form of student aid vouchers may result in significant duplication of services among various federal programs, which might be inefficient. This concern appears to have grown as the nontraditional population in student aid has grown. The limited data (see Chapter 3), coupled with the evident differences in services provided in student-aid-eligible programs versus second-chance programs, suggest that the amount of program overlap is not large. Moreover, the virtual absence of cost data made it impossible to assess whether individuals assisted through student aid receive more or less subsidy than those in similar programs of study funded through federally supported contracts or direct provision of federally funded services.

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Preparing for the Workplace: Charting a Course for Federal Postsecondary Training Policy Institutional Eligibility Another troublesome result of the spread of student aid to nontraditional settings, and the one that has caused major controversy, can be explained in terms of the policy instruments argument (see discussion above). Over the years, student aid grants and loans have been increasingly utilized by students enrolling in programs and institutions for which the assumptions of the voucher approach discussed in the previous section fit poorly. The student aid programs at their inception relied principally on an existing accrediting system for academic institutions that had a long history and considerable independence from the whole student aid process. The rapid growth of a largely new sector of profit-oriented institutions that lacked this history and were much more dependent on student aid funds has changed this picture markedly; it has also led to serious regulatory difficulties for the student aid programs. The federal programs have not stood still in the face of these important changes. In particular, the 1992 reauthorization of the Higher Education Act introduced a number of ambitious and, for the most part, promising changes to the operation of the student aid programs. These include an effort to involve states more fully in overseeing institutions receiving federal student aid, a greater emphasis on making institutional performance a criterion in determining aid eligibility, and a new willingness to recognize that different types of institutions, with different financing structures and missions, may require different regulation. The new rules also embody a flexibility that is consistent with the arguments made about public management in Chapter 6: institutional failure to meet specified criteria will trigger state review of the institution, not an automatic determination of ineligibility for federal funds. These new efforts deserve a chance to work and will bear close scrutiny in the years ahead. Under the new rules, states will be required to establish or designate a single agency responsible for assessing the eligibility of institutions for participation in the federal student aid programs. The legislation establishes a number of criteria, which will trigger scrutiny of an institution (see Table 7-1), and spells out a number of dimensions of institutional activities that must be assessed (Table 7-2). Potentially, these initiatives may increase considerably the level of accountability of states in overseeing aid-eligible institutions. It seems to us that this is a desirable direction in which to move. It is hard to imagine the federal government overseeing thousands of institutions directly, and there seems little doubt that the oversight of institutions through the existing accreditation mechanism is inadequate. Two major questions must be kept in mind in judging the future effectiveness of this effort. First, do the new requirements give the states a

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Preparing for the Workplace: Charting a Course for Federal Postsecondary Training Policy TABLE 7-1 Criteria Triggering State Review of Higher Education Institutions • Institution has a cohort default rate equal to or greater than 25 percent. • Institution has a cohort default rate equal to or greater than 20 percent and either (1) more than two-thirds of the institution's total undergraduates receive federal student assistance or (2) two-thirds of the institution's educational and general expenditures are derived from federal aid provided to students. • A limitation, suspension, or termination action has been taken by the Secretary of Education against the institution during the preceding 5 years. • There has been an audit finding during the two most recent audits resulting in the institution being required to repay amounts greater than 5 percent of the student aid funds it received. • The institution has been cited by the Secretary of Education for failing to submit audits in a timely fashion. • The institution experiences year-to-year fluctuations of more than 25 percent in the amount of Pell grant or student loans received by its students. • The institution fails to meet certain financial responsibility standards specified in the Higher Education Act. • Ownership of the school changes hands. • The institution is not affiliated with a public system of higher education and has participated in specified student aid programs for less than 5 years. • The institution is the subject of student complaints sufficient in the judgment of the Secretary of Education to justify an institutional review.   SOURCE: Higher Education Amendments of 1992, Section 494C(b). sufficient incentive to oversee these institutions effectively? In effect, the federal government is requiring the states to oversee the use of federal dollars. Experience will undoubtedly vary among states, and we recommend learning from that variation. Second, most of the standards against which the states must review institutions are procedural in nature rather than related to program quality. Will increased attention be given to quality? This is discussed in the next section. The 1992 legislation does not require the states to take on this new oversight role unless federal funds are appropriated. In the months following passage of the law, it was uncertain whether Congress and the U.S. Department of Education would find funds for this effort. We strongly urge that the necessary monies be made available, because this new approach to oversight of institutional eligibility is worth a serious effort.

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Preparing for the Workplace: Charting a Course for Federal Postsecondary Training Policy TABLE 7-2 Review Standards to Be Used by States Conducting Institutional Reviews • Availability of catalogs, admissions requirements, course outlines, schedules of tuition and fees and other rules and regulations of the institution. • Assurance that the institution has a method to assess a student's ability successfully to complete the course of study for which he or she has applied. • Assurance that the institution maintains and enforces standards relating to academic progress and maintains adequate student records. • Compliance by the institution with fire and health standards. • The financial and administrative capacity of the institution. • For institutions financially at risk, the adequacy of provisions to protect students in the event of closure. • For institutions whose stated purpose is to prepare students for employment, the relationship of tuition and fees to the remuneration that can reasonably be expected by students and the relationship of the course of study to providing the student with quality training and useful employment. • The availability to students of information regarding such things as market and job availability for students in employment-oriented programs and the relationship of courses to standards for state licensure. • The appropriateness of the number of credit or clock hours required for the completion of programs or of the length of 600-hour courses. • Assessing the actions of owners, shareholders, or persons exercising control over the educational institution that may adversely affect eligibility for student aid programs. • The adequacy of procedures for investigating and resolving student complaints. • The appropriateness of advertising and promotion and student recruitment practices. • The presence of a fair and equitable tuition refund policy. • The success of the program as measured by graduation rates, withdrawal rates, placement rates and the rates at which graduates pass licensure exams (for vocationally oriented programs), and the achievement of other student goals such as transfer, full-time employment in the field of study, and military service.   SOURCE: Higher Education Amendments of 1992, Section 494C(d).

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Preparing for the Workplace: Charting a Course for Federal Postsecondary Training Policy We also recommend that the progress of this effort be monitored and evaluated, because its success is by no means ensured. Aside from the question of funding, the new requirements raise a host of unanswered questions. They call for states to create standards, subject to disapproval by the Secretary of Education, for performance in the areas described in Table 7-2. As stated in Chapter 6, standard setting is not an easy task in postsecondary education. Moreover, the fact that the new federal requirements apply only to schools that ''trip'' one or more of a designated set of "triggers" means that whatever standards are used in the review process may be different than those applied by states to other postsecondary institutions. Furthermore, since the standards are to be state-based, there will almost certainly be differences in the performance requirements that schools will be expected to meet, depending on where they are located. Overall, we see a series of feasibility, equity, political, and possibly legal questions, the outcomes of which we cannot predict. On the other hand, successful implementation of the new oversight provisions for schools that "trip the triggers" may have interesting and important implications for broader quality assurance efforts of the sort discussed in Chapter 6. The 1992 Higher Education Act reauthorization also introduced or tightened a number of federal rules. For example, the ceiling on permissible default rates has been lowered, and correspondence schools were eliminated from the loan program. An interesting set of initiatives has introduced the notion that the diversity of an institution's funding sources should affect how it is regulated. Schools that receive more than two-thirds of their funding from federal student aid, or that have more than two-thirds of their undergraduates enrolled half-time or more supported by federal student aid programs, are subject to a higher level of scrutiny than other schools. This seems to us a sensible principle, and one that might be developed further. There is also language in the reauthorization act that made programs lasting less than 6 months ineligible for student loans, unless such programs meet new quality standards to be determined by the Secretary of Education. At a minimum, these programs will have to have verified rates of completion of at least 70 percent and verified placement rates of 70 percent.7 This too seems a worthwhile initiative. It is important to appreciate that these new initiatives may go a long way toward eliminating some of the worst and most visible abuses of the student aid system. In fact, initiatives of the last few years are already having some of this effect. Given the demonstrated political barriers to more radical solutions that have sometimes been proposed (such as dropping proprietary schools from student aid programs entirely or developing a separate set of programs for them), the federal government should fund and otherwise fully support these new approaches and carefully gauge their effects.

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Preparing for the Workplace: Charting a Course for Federal Postsecondary Training Policy school system's ability to create special courses related to the workplace training. The ability of the system to deal effectively with issues of liability, contracting, certification, and the training of trainers may well depend on the scale of the programs. We recommend, therefore, that the federal government fund a set of large-scale demonstration projects, rather than distribute smaller amounts of money to many school districts. To mount the demonstrations, the federal government can draw on its experience with a previous large-scale youth demonstration, the Youth Incentive Entitlement Pilot Projects (YIEPP). The U.S. Department of Labor held a competition for the awarding of large resources to selected sites. This process proved effective in concentrating funds so that the country could learn about the feasibility of providing job guarantees to poor high school-age youth in an entire community and about the effect of such jobs on high school graduation rates, employment levels, and the earnings of poor youth. The federal government could adopt a similar approach to choose sites for large-scale youth apprenticeship demonstrations. As a by-product, the very offer of federal sponsorship could mobilize communities and states in the competitive process to establish agreements among employers, schools, students, and labor organizations. If so, even communities that did not win large grants would have begun developing closer and probably more effective linkages between employers and schools. While experimenting with youth apprenticeship, however, the federal and state governments, along with localities and businesses, should also continue to develop other promising career-oriented approaches to preparing young people for work. An important part of the task is learning how to meld youth apprenticeship, Tech-Prep, career academies, cooperative education, and other strategies into a coherent set of options that will give young people a clear map of structured pathways to follow in moving from school to the workplace. SKILLS IMPROVEMENT TRAINING AND WORKER RETRAINING Despite widespread agreement that skills improvement training in the United States is available to too few workers, especially front-line workers, we do not find consensus among the experts on whether this calls for major federal intervention. Clearly, though, the federal government can help foster new employer attitudes and practices. On the question of retraining workers who are displaced from their jobs by changing economic conditions, there is far more agreement that federal action is appropriate, though no unanimity about whether enough is known to design effective federal

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Preparing for the Workplace: Charting a Course for Federal Postsecondary Training Policy interventions. At minimum, though, the federal government should consolidate its raft of existing worker retraining activities, as discussed below. Developing public policy aimed at improving the skills of the current work force is beset by several dilemmas. It was noted in Chapter 1 that firm decisions about training are influenced in complex ways by the labor market system in which they operate. There and in Chapter 3 we identified a series of reasons why many U.S. firms appear reluctant to invest in their employees. But, as Osterman (1990:273-274) points out, it is difficult to decide whether these reasons justify public intervention. If there is a problem, and the problem impedes the firm's productivity, then we should expect the firm to remedy the situation. If the firm does not act, then the reasonable inference is that the problem is not serious enough to justify additional resources, either financial or organizational. To the extent that underlying labor market institutions and policies affect firm calculations about the benefits of training, there are likely to be complex tradeoffs inherent in any proposals for change. Osterman goes on to point out the absence of good models that indicate how government can best influence private decisions about employment practices, a major shortcoming in designing public policy, even if there was an agreement that such policy is warranted. Even where the case for public policy is conceptually strongest, the underlying evidence about the seriousness of the problem is often weak. For example, government intervention is often an appropriate remedy in situations where economic externalities exist, such as in the case of the firm that trains an employee, only to have that employee leave the firm. We saw in Chapter 1 that labor mobility is higher in the United States than abroad. We do not know, however, how much of their investment in trained workers employers actually lose because of higher mobility levels or the extent to which this mobility really deters employers from providing training. For all of these reasons, we are not prepared to endorse a major federal effort to require increased training by firms. Certainly, the federal government should encourage further investigation into the need for and the likely effects of such a policy. One of the issues that needs to be pursued is whether a stronger case can be made that market failures exist that inhibit firms from providing optimal amounts of training from a societal point of view, and if more robust models for effective public intervention can be found. Also needed is continuing analyses of how the implementation of training taxes and subsidies to firms for training is proceeding at the state level and in other nations and about the lessons that could guide the design of federal policies should they become warranted. Meanwhile, the federal government should take steps to awaken firms to the competitive advantages of new forms of workplace organization and

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Preparing for the Workplace: Charting a Course for Federal Postsecondary Training Policy to make them aware of training options and how best to utilize them. Such a role can be carried out through such mechanisms as awards for exemplary firms (modeled after the U.S. Commerce Department's Malcolm Baldrige Award, for example), evaluation and dissemination, and assistance for system- and capacity-building initiatives. The federal government should develop a strategic plan for implementing such a program and exploiting to full advantage related federal activities scattered around the various agencies.10 We propose a mechanism for doing this in Chapter 8. The federal government should also sponsor experiments and demonstration projects with new labor-market structures that might help overcome the sluggishness of American firms in adopting a transformed or high-performance model of workplace organization. Kochan and Osterman (1991:51-52) and Rogers and Streeck (1993) suggest existing joint union-management training programs (such as those in the auto and communications industries) and some kind of American variant of the works councils found overseas as models that could be developed. Such models offer another advantage as well: by giving employees a significant voice in firm human resource policies, they could serve as a counterweight to the tendency of employers to offer firm-specific training rather than training that increases the general skills and mobility of their employees. (For evidence that joint training programs are more concerned with the broad career needs of workers than are company training programs, see Ferman et al., 1990.) Bassi (1992:48-49) provides evidence that small firms would be encouraged to undertake workplace education programs (emphasizing basic skills) if there were a greater availability of networks or forums among businesses to discuss training, employer-sponsored education, and training consortia. In addition, the federal government could take steps to encourage workers to undertake training on their own. There are several reasons why this would be desirable, in addition to the obvious one that too many workers fail to receive formal training from their employers. We have just mentioned the fact that firm-sponsored training tends to be narrowly focused on the needs of the business, while employees have an interest in broader training that will enhance their mobility in the labor market beyond the firm. Society, too, has an interest in fostering labor mobility, since it lessens the shocks of economic change. Furthermore, the American labor force is characterized by a growing number of so-called contingent workers (Belous, 1989) who are not eligible for employer-sponsored benefits. These workers cannot expect to have their training needs met by the companies for whom they work. There are various ways in which the federal government could encourage individual workers to pursue training. They could involve significant spending, however. We did not analyze them in depth and so are not in a position to recommend them, but further investigation might suggest that

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Preparing for the Workplace: Charting a Course for Federal Postsecondary Training Policy they would provide benefits that justify the costs. Two options relate to income taxes. An individual now can deduct education expenses only insofar as they relate to his or her current work; even then, expenses are not deductible if the education is needed to meet the minimal requirements for the job or would prepare the individual for a new line of work. This provision might be changed. The second tax-related option involves the exclusion from income (for employees) of employer-paid educational expenses, such as tuition reimbursements. This exclusion has repeatedly been extended on a temporary basis but is currently scheduled to lapse at the end of 1994. Workers might have more inducement to take advantage of employer-paid benefits if the deduction were certain. It could be limited to lower-income earners to limit the costs to the federal government. Finally, proposals have been made at various times for individual training accounts to which government would contribute or for programs that would guarantee everyone a certain number of years of training after high school, to be used whenever the individual chose (e.g., Hovey, 1985). Before such a system could be justified, however, we believe that much needs to be done, as this report documents, to develop the kind of quality training system that would make such an enormous investment worthwhile. While the arguments for federal investment in skills improvement training for the general work force are mixed, a stronger case can be made for so-called dislocated workers. These are unemployed workers who lack the necessary basic and occupational skills for reemployment or are workers displaced from their jobs by factory closings or large-scale job cutbacks. Firms obviously will not have the same self-interest in workers they are about to let go as they might be expected to have in their continuing work force, so it is not feasible to expect them to be the primary sponsors of retraining. Furthermore, worker dislocation is sometimes the direct result of federal actions. Reductions in defense activities affect many communities, for example, and new trade agreements like the pending North American Free Trade Agreement can also lead to job dislocation as economic activity lessens in some sectors and increases in others. We did not have enough evidence available to make a comprehensive set of recommendations about federal policy on worker retraining. There are complex issues involved, including the relative effectiveness of job placement versus retraining efforts, the interaction of dislocated worker programs and provisions, and how relatively new federal legislation requiring early warning of plant closings affects the implementation of strategies to help the workers who will be displaced. We do believe, however, that two clear problems are apparent from the evidence reviewed and the principles laid out in Chapter 5. First, federal dislocated worker programs need to be reduced in number and consolidated.11 Second, as pointed out in Chapter 3, experience with the Trade

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Preparing for the Workplace: Charting a Course for Federal Postsecondary Training Policy Adjustment Assistance Act shows that meaningful access to reemployment training is impeded by requirements that such training can be provided only to workers dislocated by a particular cause. Not only is training for such workers delayed by the time it takes to demonstrate that unemployment resulted from the appropriate cause, but other dislocated workers living in the same community and having equivalent needs cannot receive training because they cannot demonstrate that their unemployment was directly due to that cause. While we cannot make specific recommendations for remedial action based on our analyses, we suggest that this would be a good topic for the federal government to take up in the near future. SECOND-CHANCE TRAINING Our belief in the importance of experimentation and evaluation is nowhere stronger than in our recommendations on federal support for second-chance training. Figuring out what works is both extremely important and exceedingly difficult. Through JTPA and JOBS, we have learned much over the past decade, but we need to learn much more before we can confidently prescribe wholesale changes. Fortunately, as we saw in Chapter 3, over the last 20 years there has been a serious federal-, state-, and foundation-funded effort to raise the quality of evaluations. However, as it relates to postsecondary education and training for the workplace, the evidence is still very partial. Many of the welfare-to-work programs of the 1980s, for example, did not emphasize education and training services, and several relevant studies are still under way. Nonetheless, available findings are already affecting policy by enabling programs to be improved continuously. This has been particularly striking in welfare employment programs, where lessons from studies of state initiatives in the 1980s were actively used in the development of state and federal legislation (e.g., in California's Greater Avenues for Independence, or GAIN, program and in Congressional debate preceding the passage of the Family Support Act of 1988, containing the JOBS program) (Baum, 1991; Haskins, 1991). In particular, the evidence that low-cost services were not effective for the most disadvantaged welfare recipients contributed to the push for more intensive education and training in JOBS. More generally, the relatively consistent evidence that welfare-to-work programs had positive effects and were cost effective for single parents (mostly women), prompted Congress to increase the funding available for JOBS, compared to the resources provided for the predecessor WIN program of the 1980s (Wiseman et al., 1991). At this time, there is only partial evidence on the success of JOBS (Friedlander et al., 1993). While these results are encouraging, it is too

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Preparing for the Workplace: Charting a Course for Federal Postsecondary Training Policy soon to know whether JOBS' emphasis on education and training will in fact have higher payoffs and succeed with more disadvantaged, long-term welfare recipients. However, one problem is currently clearly affecting the potential payoff from JOBS: the less-than-full participation by the states. Unfortunately, JOBS implementation began just as the economy went into a decline and budgetary pressures on state governments became intense. At least partly for this reason, federal funds are not being fully utilized. (Only 65.5 percent of funds were spent in fiscal 1992 [U.S. Congress, 1992].) Given the available record of success, we believe that the incentives and matching rates in JOBS should be altered to increase the federal contribution and encourage more state activity. While we conclude that there is very reliable and relatively encouraging evidence on the effectiveness of programs for adult women, and a weaker record for adult men, the evidence is much less positive for second-chance programs for out-of-school youth. Here, many approaches have been tried, few rigorously studied, and fewer still found to have positive results. The case for a major federal response is strong. With the exception of the Job Corps, most programs that have been seriously studied have been found wanting. We draw several conclusions from this discouraging record, along with the evidence in Chapter 3 that we do not know how to fix youth programs. First, the most critical challenge is to make the first-chance system work better for the young people it now fails. Second, it is time for the federal government to dedicate resources to testing more innovative and far-reaching second-chance strategies and to do this on several fronts at the same time. We make the second recommendation based on our conviction that society cannot walk away from these young people or from the challenge of building a system that serves them better. We do not expect first-chance, qualifying training programs at least in the short run to succeed with all young people; we must have a second-chance system that effectively picks up where first chance programs leave off. But the evidence to date suggests that the answer is not to expand the existing services or earmark a growing proportion of JTPA funds to at-risk youth until it is clearer that programs are worthwhile. First of all, because of the magnitude of changes to services for youth required by the 1992 amendments to JTPA, we should determine whether the design elements contained in the new JTPA youth program are more effective than the program designs that were in effect in 1987-1989 and were evaluated by the National JTPA Study.12 In addition, the federal government should launch a major effort to implement and research more innovative programs for young people. Eight years ago, the National Research Council published a report on youth pro

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Preparing for the Workplace: Charting a Course for Federal Postsecondary Training Policy grams and studies (Betsey et al., 1985) pointing to the limited knowledge on effective programs and calling for tests of new ideas coupled with random assignment evaluations to determine their impacts. We reiterate this plea and urge that some JTPA youth program resources be redirected to finance tests of a variety of new approaches to second-chance programming for youth. We note that, too often, such studies have been conducted serially. At this time, we urge that the government not await the final outcome of one study to launch another, nor await the completion of all studies to act on improving the system. A number of radically different strategies warrant systematic testing. Such approaches include: Long-term, holistic, developmental programs. The intention would be to build young people's self-esteem, cognitive abilities, social responsibility, and leadership skills, and promote their involvement in their communities. In addition to providing academic remediation and job training, such programs would focus heavily on providing youth with opportunities to engage in community service, develop one-on-one relationships with responsible adults, and participate in regular, positive, structured, and supervised, peer-centered activities. Ideally, such programs would be part of a continuum of services starting in the early school years. This would be difficult to put into effect. However, many of the concepts are implemented in interventions for young dropouts, such as YouthBuild,13 a project for 16-to 24-year-olds currently operating in eleven sites. Post-placement follow-up. JTPA services normally end when a participant finds a job. However, many studies have shown that, once working, young people often encounter problems—for example, child care, housing, transportation; inappropriate work behavior or attitudes—that result in them returning to the streets or going on welfare (Olson et al., 1990; Pavetti, 1992). Residential programs. A comparison of the findings on the Job Corps (a residential program) and JOBSTART (a nonresidential and less intensive version of the Job Corps) points to the potential importance of the residential factor. Concurrent and integrated versus sequential education and training. The findings on JOBSTART and the Minority Female Single Parent Demonstration raise important issues about the relative effectiveness of these two ways of organizing education and training services. Work experience linked to other services. The JTPA and JOBSTART studies pointed to the high opportunity cost, in terms of lost earnings, that youth faced by participating in these programs. Combining paid work experience with education and training could address this issue and make those services more relevant through their extension to a real-world setting.

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Preparing for the Workplace: Charting a Course for Federal Postsecondary Training Policy Variants could include the conservation or service corps, a combination of training and work experience, or the YouthBuild model. Variation in the intensity and duration of service. JTPA provides relatively short-term services, which are often also not very intensive. It would be important to identify whether there is a threshold of intensity after which larger impacts appear. Family-centered strategies. These programs could seek to build on the positive experience with family literacy programs and other intergenerational programs targeted to reach younger children. Such programs would be designed to help young parents fulfill their responsibilities by fostering community-based partnerships with families. Services might include life skills, parenting education, education and employability services, recreation, primary health services, counseling, case management, peer tutoring, mental health services, and referrals to other services, such as substance abuse treatment. Self-help strategies. These programs would actively involve young people in solving their own problems through individual and communal action. Youth would be involved in designing the program and would play a central role in its governance. Such an approach might involve the use of vouchers and other strategies for individualizing or customizing services. Small programs with high-quality services. In testing any of the above approaches, a special emphasis could be placed on smaller programs that create a family environment and make special efforts to provide intensive, high-quality services. We believe that the commitment to research, evaluation, and continuous improvement that is evident in JTPA and JOBS needs to be extended to the second-chance remediation programs for adult education. It was noted earlier how little is known about these programs.14 Two recent studies (Grubb et al., 1991; Chisman, 1989) both decried the paucity of available research and evaluation. According to these studies, too little evidence exists against which to judge current programs or to provide a foundation upon which to base future efforts. Both reports place a high priority on increased allocation of resources for research and evaluation of adult basic education, and both call on the federal government to take the lead in providing these resources (Grubb et al., 1991:102-103; Chisman, 1989:24). In 1991, Congress created the National Institute for Literacy to provide a national focal point for research, technical assistance and research dissemination, policy analysis and program evaluation across the various programs and research efforts concerned with adult literacy. Though it is too early to evaluate the work of the institute, we consider its creation to have been a step in the right direction. We are not aware, however, of any existing evaluations of adult education that involve random-assignment experimental research be

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Preparing for the Workplace: Charting a Course for Federal Postsecondary Training Policy yond those being carried out as part of the JOBS evaluation. We recommend that the federal government undertake such research to learn about the impacts of adult education programs and to provide information on effective practices that can be used to spur program improvement. In addition to the need for improved research and evaluation, both Chisman and Grubb et al. point to program fragmentation as a serious problem. Chisman (1989:6-7) finds that, at an institutional level, the diversity of agencies and programs involved with providing basic skills education has meant ''a pattern of institutional fragmentation in which basic skills are a low-level priority for almost everyone.'' According to Chisman, this pattern holds at the federal, state, and local levels. Grubb et al. (1991:55-56) discovered that individuals frequently are referred from job training and vocational education programs to the adult education system, with little cohesiveness between the programs, a general disregard for the quality of program to which an individual may be referred, and little or no tracking of individuals. The result is that individuals in job-training and vocational education programs are often referred to low-quality programs and frequently drop out or become lost to the system. Chisman and Grubb et al. call for improved coordination among adult education programs to fix what Chisman (1989:9) calls the "jumbled system of funding, service delivery, and responsibility." Whether this coordination could be accomplished by adopting improved policies within the current structure (Grubb et al., 1991:100) or whether new federal oversight structures are needed (Chisman, 1989:20) is a subject we did not have time to investigate. This would be an appropriate issue for early consideration by the federal government. NOTES 1.   There are few, if any, pure examples of policy instruments. Actual programs often represent hybrids that draw features from more than one category. Nonetheless, the general categories can be useful in sorting things out. 2.   Pell grants are not an entitlement in a budgetary sense, since funding for Pell is subject to annual appropriations. Pell legislation ensures that all qualifying applicants will receive funding, however, by adjusting the size of grants to accommodate budgetary limits. 3.   Vouchers, grants, contracts, and tax expenditures all share, for example, a reliance on the private market (including private, nonprofit organizations) for service delivery. Vouchers, which are usually thought of as being comparatively free of governmental regulation, always have some restrictions on qualifying forms of training or education. As these restrictions become tighter, the range of qualifying suppliers becomes more narrowly defined. In the extreme, there may be little difference to an institution between being awarded a federal contract to perform services and being on a short list of qualified recipients of vouchers. At the same time, a system of contracting may be operated in a way that gives students some latitude about which contracted supplier to work with; their range of choice could sometimes approach that which vouchers would provide. Similarly, a targeted tax preference for indi

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Preparing for the Workplace: Charting a Course for Federal Postsecondary Training Policy     viduals may appear to have the effect of a voucher; a tax preference for suppliers may be similar to a grant; and so on. 4.   It may, for example, be more feasible to improve the effectiveness of voucher-supported programs by providing more standardized information about the products and performance of institutions eligible for voucher use than by wholesale replacement of vouchers with other forms of support. Or it may be possible to make contracting mechanisms work more effectively by introducing better methods of monitoring and quality control than by voucherizing them. 5.   We chose not to examine the Perkins Vocational and Applied Technology Education Act in depth, because the funds it provides to postsecondary training are small compared to the student aid programs and to the funds provided from other sources (e.g., states) for postsecondary training; and a major evaluation of the act is currently under way, with a final report due in 1994. Though the principal purpose of the Perkins Act is program improvement, a goal consistent with our emphasis on the importance of enhancing quality, we note that Perkins has historically focused more on secondary vocational education and has not been a strong force for improvement of postsecondary training programs. This may change with the new emphases on Tech-Prep programs and performance measures and standards built into the 1990 Perkins legislation. We hope that the Perkins evaluation will give attention to what program improvement might mean for postsecondary institutions and to the effects of the 1990 changes. 6.   The U.S. Department of Labor received a number of letters from higher education representatives opposed to a 1991 set of proposed rules (Federal Register 56(2):296-300) that encouraged JTPA administrators to make maximum use of student aid before allocating JTPA funds for postsecondary schooling expenses. 7.   As the committee finished its report, the regulations needed to implement these new rules had not been issued; and schools offering programs of study of between 300 and 600 clock hours in length (roughly 3 to 6 months) remained eligible to participate in student loan programs regardless of their completion and placement rates. 8.   Ineffective training means several things. Training may not result in economic benefits to individuals if the quality is poor or if the trainee drops out before completing the program. Even good training will not pay off, however, if there are no jobs available for which that training is suitable, or if the available jobs pay poorly. We believe these factors are part of the reason for high default rates among students enrolled in postsecondary training. 9.   Unemployment insurance (UI) wage-record data are increasingly used in the JTPA performance management system (National Commission for Employment Policy, 1992); some states are beginning to explore the usefulness of UI data in vocational education as well (Amico, 1993). We believe that many states would therefore find it comparatively easy to extend the use of UI to the student aid arena. We prefer not to mandate the use of these particular data, however; some states might have their own information systems that would accomplish similar purposes or would prefer to use other wage records, such as those from Social Security. 10.   One such related activity is the network of manufacturing technology centers supported by the National Institute of Standards and Technology. A report of the National Research Council (1993) addresses, among other things, how these centers can assist smaller manufacturers meet their training needs. 11.   The National Governors' Association (NGA) has identified eighteen different federal dislocated worker programs, each with different eligible grantees, administrative structures, eligible participants, allowable services, and performance goals. NGA reports that a state that recently sought to address worker dislocation due to reductions in defense spending found itself applying to and receiving funding from eight federal programs administered by three federal agencies. 12.   The amendments were intended to address many of the criticisms of JTPA youth programs. They established a separate youth program, stipulated that 50 percent of the youth

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Preparing for the Workplace: Charting a Course for Federal Postsecondary Training Policy     served must be out of school, targeted services toward those with multiple employment barriers (including drop-outs, pregnant and parenting youth, ex-offenders, and youth with low basic skills), required comprehensive assessments and individualized service strategies, reformed on-the-job training practices, mandated that service delivery areas address the full range of young people's needs, encouraged long-term services, and authorized work experience, community service, and mentoring. 13.   YouthBuild offers education, skills training, paid work, leadership development, and counseling. Programs are small, with the emphasis on high-quality services, support staff, and structuring activities in ways that respect and empower the young people in the program. 14.   This is a situation that will be partially remedied by a 44-month study to evaluate existing adult education programs, now under way under the auspices of the U.S. Department of Education. For the interim report of the National Evaluation of Adult Education Programs, see U.S. Department of Education (1992); the final report is due to be completed in the spring of 1994 and should begin to fill a research vacuum in the field of adult basic education. Because of the focus of the JOBS program on improving the basic education of welfare recipients, the evaluation of the JOBS and California's Greater Avenues for Independence programs will also provide relevant information.