Do Workforce Development Programs Bridge the Skills Gap?

Eleanor W. Dillon (Microsoft Research)
Lisa B. Kahn (University of Rochester)

Abstract: Most U.S. states have a workforce development program that offers firms grants to fund training of new hires and existing workers. These training programs may help close skills gaps or may primarily serve local development goals. This paper explores the determinants and consequences of such programs. We describe the characteristics of program participants and estimate the effect, if any, on the amount and skill requirements of job vacancies posted by these firms. We create a unique data link between participating firms and the near-universe of online job postings collected by Burning Glass Technologies (BGT). If these programs overcome a market failure in updating worker skills, we expect to see a marked change in vacancy postings following receipt of a grant. If there are no such changes, then these programs may serve local development goals, but are likely zero sum across states. This research will provide a better understanding of whether and under what circumstances these programs can contribute to narrowing skills gaps. This agenda can then inform policy questions surrounding falling employment and stagnant wages for low- and medium-skill workers.