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Linking Workers to the Skills Employers Need

Investments in postsecondary education are huge today. Federal, state, and local governments allocate tens of billions of dollars each year to subsidize institutions through Pell grants, federally-backed student loans, and direct payments to colleges and universities. Private philanthropy provided $38 billion in direct giving to higher education in 2014. There is, however, rising dissatisfaction with traditional college education. Here are some reasons why:

Rising costs

The price tag for four-year colleges and universities has risen much faster than inflation for years, making it the most rapidly inflating major sector of the economy. As a result, student debt has become a big problem. The heavy loans carried by the millennial generation (ages 16 to 34 as this book is written) are pushing up national default rates, and delaying marriage, childrearing, and the purchase of major assets such as homes and cars by young households.

Without quality gains

Soaring tuition prices have not produced corresponding rises in the quality of academic instruction. Most of the budgetary expansion has been administrative bloat and increased capital costs for construction and renovation, rather than for improved teaching.

High dropout rates

While almost 70 percent of high-school graduates enroll in college within two years of graduating, only 40 percent have obtained either an associate or bachelor’s degree by their mid-20s. Just getting young people enrolled in college shouldn’t be a priority, argues Drexel University economist Paul Harrington. Completing schooling with a credential is what produces a better economic life. “It’s finishing college training that matters,” he notes, and today’s students and institutions are doing poorly on that front.

Degrees without obvious value

Even millennials who graduate are having trouble securing and maintaining employment. Many are overcredentialed for the jobs they accept. “This generation has been really cheated by having to take jobs in fields they’re not trained for,” states Bret Halverson, a member of the New York City Workforce Funders. “A college degree is not a career,” notes Kent Misegades of the North Carolina Triangle Apprenticeship Program, an initiative profiled later in this guidebook. “It can be part of a career, but we tend to put the cart before the horse on that.”

Skills mismatches with employers

Among “recent college graduates,” report the authors of the labor study Bridge the Gap, “underemployment is rampant.” “Too few have highly marketable skills; too many have pursued courses of study for which there is little demand.”

“One of my favorite sayings is, ‘Educated for what?’” says Mary “Penny” Enroth, president of the Palmer Foundation. “I think a lot of educators can’t answer that question. They don’t know the end goal.”

Lack of practical skills

There is evidence that most employers now value practical work experience more highly than a high GPA or time at an elite college. A Chronicle of Higher Education analysis, for instance, showed that employers evaluating graduates for hiring gave more weight to internships, employment during college, college major, volunteer experience, and extracurricular activities than they did to GPA or college reputation. Yet conventional higher education pays scant attention to these sorts of practical experiences.

The price tag on four-year colleges and universities is the most rapidly inflating sector of our economy.

Failure to keep pace with social change

Today’s postsecondary student body includes rising percentages of working adults, who require schedule flexibility and convenient learning environments. It includes a growing proportion of first-generation college attendees coming out of weak public schools who need serious remedial help. It includes many students who want training in something other than liberal arts. “All available evidence suggests undergraduates simply aren’t learning very much, even as they are being charged ever larger amounts of money and becoming increasingly burdened with debt,” writes Kevin Carey in The End of College.

Training after high school is needed

Even as the return on investment at conventional colleges becomes dubious for many students, Americans who wish to succeed in our modern economy need training beyond high school. That remains an integral step to achieving a middle-class standard of living. The challenge is to create new forms of useful, cost-effective postsecondary education and credentialing.

Georgetown University’s Center on Education and the Workforce recently reported that workers who gained comparatively quick and inexpensive practical credentials in high-demand technical fields outearned many counterparts with four-year degrees. Among young workers holding licenses and certificates, 43 percent out-earned holders of associate degrees, and 27 percent out-earned holders of bachelor’s degrees.

While recipients of bachelor’s degrees will still often have higher lifetime earnings than those who obtain certifications or two-year degrees, these higher earnings never materialize if the student picks a field that is not in demand, or, worse, fails to complete a degree at all—as many millions of college entrants do today. Given the right opportunities and support, many of these failed four-year students could be trained in a career where they would be eminently useful, and personally successful.

One crucial aspect of effective career education is identifying the sectors of the regional economy that most need productive workers. This will vary somewhat across the country, so philanthropists and business leaders and local educators need to stay in close contact to monitor needs over time. But there are certain broad trends.

A recent McKinsey Global Institute report identified economic sectors where middle-skill jobs are likely to be in demand in many places. The industries included health care, IT and similar business services, leisure and hospitality, construction, and manufacturing. These areas plus retail jobs “account for 66 percent of employment today” and by 2020 will “account for up to 85 percent of new jobs created.” Another analysis by the National Center for Career and Technical Education identified health care and hospitality as the two swiftest growing CTE career clusters. The same report found that STEM and IT jobs are paying the best wages.

More specific examples of jobs where employers report shortages of talented workers to the U.S. Bureau of Labor Statistics include these:

  • Cybersecurity specialist, Web developer, graphic designer, architect, IT support associate, network administrator, paralegal.
  • Registered nurse, lab and diagnostic technician, phlebotomist, medical coder, ultrasound tech, dental assistant, physical therapist assistant, physician assistant, biotechnology lab associate, personal care aide, home health aide, medical secretary, occupational therapy aide.
  • Plumber, electrician, auto mechanic, welder, mechanical insulation worker, brick or stonemason, machinist, warehouse associate, woodworker, aircraft and avionics technician.
  • Industrial engineering technician, robotics engineer, mechatronics engineer, electrical engineering technician, nuclear technician, aerospace engineer, petroleum technician, chemical technician.
  • Air-traffic controller, shipping and receiving associate, fleet manager, cargo and freight agent, flight attendant.
  • Equipment technicians and operators, irrigation engineer, soil scientist, surveyor.

Training workers for available jobs: A checklist

Recognizing that opportunities are plentiful for middle-skill jobs, how can philanthropists help match workers to these positions? The goal of this guidebook is to identify the most promising strategies to connect people with good positions in these booming fields. So we interviewed dozens of donors, experts, and practitioners and asked one central question—what attributes make a career and technical education program successful? The most common answers included the following attributes:

  • Align the training to the specific job needs of high-demand industries operating nearby.
  • Make sure the programs are flexible, responsive to changing labor markets, and constantly updated for new technology, learning, and practices.
  • Provide many convenient ways, times, and places for students to enter training, and to sequence their collection of credentials.
  • Closely integrate academic learning with technical skills and real-world job training.
  • Provide direct routes from high school to training to employment.
  • Ensure the teaching is good.
  • Ensure the training and equipment are up-to-date.
  • Ensure the curriculum is tied to the latest best practices and approaches.
  • Confirm that students leave with all of the skills necessary to do a real job well.
  • Offer built-in counseling and coaching, particularly during transition points, and help as much as possible with practical matters like transportation and child care.
  • Provide stackable credentials that allow participants to accumulate skills gradually and sequentially, each building on past training and experience.
  • Track graduates and make sure they get jobs, succeed in their first year, progress occupationally, and ultimately manage to support families on their wages.

Partnerships with nonprofits, schools, and businesses

In addition to identifying the middle-skill jobs most in demand in their region, and deciding what makes for an effective training approach, donors must find partners. The best career and technical education usually grows out of alliances among nonprofits, schools, and employers. Sometimes philanthropists will have to lead their partners from those other sectors.

At times, educators start out with objections to the idea of helping feed workers to for-profit companies. “The notion of becoming a ‘supplier’ may be alien or even objectionable to educators,” notes Harvard University’s Bridge the Gap report. In particular, warns Dennis Parker of Toyota’s Advanced Manufacturing Program, it can be difficult to get academic institutions to understand one necessary perspective-shift behind effective CTE education: “The old customer was the student. The new customer is the employer.”

Some academic institutions still have the perception that CTE programs are subpar, don’t produce high-quality results, and consign students to the margins of the workforce. It’s crucial to knock down these misperceptions, say Plinio Ayala, president of the New York City-based training nonprofit Per Scholas (profiled later in this guidebook). The best way to help academics get over these objections, the Bridge the Gap authors suggest, is to remind them that “providing a basis for the students they serve to achieve success in life” is the foremost task of any ­educator—and CTE education linked tightly to job markets is emphatically an excellent way to do that, particularly among at-risk students.

On the flip side, there are employers who will object to being asked to train the next generation of workers. Some feel they are under no obligation to build programs to develop the talents of a new generation of Americans—that’s the job of education, they object, funded in part by their own corporate taxes. Still others are concerned that their competitors will siphon away the workers they train. Donors can help businesspeople move beyond this, into ­understanding of the enormous upside of having new streams of productive people flowing through their community.

The employer’s alternative, writes Nancy Hoffman in Schooling in the Workplace, is the more-and-more ineffective old way: “Hire on the basis of level of schooling completed, major field of study, and personal characteristics, and then provide the job-specific training needed.” A 2011 report by Harvard University’s Graduate School of Education entitled Pathways to Prosperity: Meeting the Challenge of Preparing Young Americans for the 21st Century argued there is a smarter route:

In recent years, [business leaders] have been at the forefront in championing such reforms as choice and accountability. But for the most part, they have left the job of educating and working with young adults to educators. True, they do provide extensive training to young adults once they have left school and been hired…. But the pathways system we envision would require them to become deeply engaged in multiple ways at earlier stage—in helping to set standards and design programs of study; in advising young people; and most importantly, in providing greatly expanded opportunities for work-linked learning. In the process, employers would become full partners in the national effort to prepare young adults for success.

In a Harvard Business School report that came out three years later, researchers Michael Porter and Jan Rivkin further underscore the importance of employer involvement in education and training:

We see a need for business leaders to act—to move from an opportunistic patchwork of projects toward strategic, collaborative efforts that make the average American productive enough to command higher wages even in competitive global labor markets. Without such actions, the U.S. economy will continue to do only half its job, with many citizens struggling. And in the long run, American business will suffer from an inadequate workforce, a population of depleted consumers, and large blocs of anti-business voters. Businesses cannot thrive for long while their communities languish.

Donors can become the catalyst for breaking down these barriers and expanding collaborations between nonprofits, schools, and for-profit employers. What’s more, wise givers can make the difference that will help CTE and middle-skill training revolutionize the economy.

Philanthropists grab the flag of career and technical education

Helping lead and coordinate a national shift toward collaborative career and technical education is prime territory for philanthropists. In many places it is a task that will lack other natural advocates, because it falls between the stools of education and work, between the interests of the public sector and the private sector. And it is natural charitable work, in that it will bring benefits to individuals, communities, and nation alike.

While almost 70 percent of high-school graduates enroll in college within two years of graduating, only 40 percent have obtained a degree by their mid-20s.

“It’s going to require a lot of money, but ultimately it will be less money than we spend to subsidize, feed, house, and incarcerate those who fall out of the traditional education structure,” says David Fischer, a ­workforce-development expert at the Center for an Urban Future in New York City. In his 2015 book America Needs Talent, Lumina ­Foundation president Jamie Merisotis argues that philanthropists and others should push for a thoroughgoing reorientation of our system of higher education in order to make it serve the interests of students rather than the institutional needs of colleges and universities.

“We must ask ourselves what type of product we want to be sold and produced by the nation’s colleges and universities and other providers of postsecondary learning,” he urges. “In the ideal scenario…every student will know where he or she is going, how much it will cost to get there, how much time it will take, and what to expect at journey’s end—both in terms of learning outcomes and career prospects.” Very little of that is possible under today’s reflex toward a state-college liberal-arts degree for all.

Thankfully, many enterprising donors and foundations—both large and small—are picking up a modernized vision of what postsecondary education should include. Merisotis’ Indianapolis-based Lumina Foundation is one of the most influential examples. Lumina is using its endowment of more than a billion dollars to try to raise the percentage of Americans who have achieved a high-quality postsecondary degree or credential to 60 percent by 2025. The current figure is around 40 percent.

Lumina emphasizes the importance of a high-quality credential that ­provides practical knowledge and skills immediately applicable in the marketplace. In later chapters we’ll further explore Lumina’s leadership in this area. This includes through publications that spread information about the most promising models and examples of career and technical education.

Another philanthropy active in this area is the Bill & Melinda Gates Foundation. Gates has been beating the drum for some time now on the importance of postsecondary success, particularly for low-income enrollees. We must not get distracted by figures on college enrollment, Bill Gates himself has been urging, but always keep an eye on rates of completion of usable credentials and degrees. His foundation is working on different aspects of improving postsecondary outcomes, including expanding personalized learning. Creating better pathways to completion. Improving the reliability of completion data. Creating software that tracks student progress. Strengthening financial aid. And strengthening the public image of career and technical education, including by supporting organizations such as Jobs for the Future and the ACT Foundation.

Regional donors take the lead

Family philanthropies are also making a difference. One example is the Morgridge Family Foundation, which averages $10 million in annual giving. The foundation began in this area when Carrie Morgridge noticed that some low-income children in her community needed eyeglasses. From that humble beginning, the foundation now devotes nearly two thirds of its grantmaking to education and ­poverty-fighting organizations, many of them involved in vocational education and workforce development.

The Morgridge Family Foundation specializes in providing seed money to get initiatives off the ground and then stepping back so that support from other funders and self-sufficiency are pursued. “Every person we partner with knows they have a three-year runway and then we’re out,” says Carrie Morgridge. In addition to a rainbow of nonprofits, the foundation consistently funds community colleges and technical schools, viewing career education as the best pathway to success for many lower-income Americans. Foundation official John Farnam explains that they prioritized career and technical education after discovering that “getting kids to just finish high school or college is the wrong finish line. Providing opportunities for a family to earn a livable-wage job is the right goal.”

Operating mainly through giving by her company and individual giving from her personal wealth, donor Karen Buchwald Wright has funded a network of technical and trades-oriented public colleges and training programs in central Ohio. Along with her four grown sons, Wright owns the Ariel Corporation, a leading manufacturer of gas compressors. Ariel’s workforce offers a nearly perfect profile of the kind of middle-skill workers that are now crucial to our economy.

Wright has worked with area schools—including Stark State, Central Ohio Technical College, Zane State, and the Knox County Career Center—to develop curricula useful for technical education. One of her most significant gifts came when she donated $1 million to the Knox County Career Center to replace aging equipment in its machining lab. Through the nonprofit foundation she established in 2009, Wright has also funded engineering and nursing scholarships at Mount Vernon Nazarene University, and supported STEM efforts in the local public-school system, including a grant to a local high school for an engineering program.

Another notable example of local support for career and technical education is the Pinkerton Foundation. It provides $14 million of annual giving in the New York City area to support career internships, ­industry-specific certifications, and rigorous job training that teaches both hard (technical) skills and soft (social) skills needed to advance in the workplace. Focusing on at-risk youth, Pinkerton works closely with regional employers so that the right skillsets are provided and the right jobs are available to graduates. The foundation has made significant investments in nonprofits such as Jobs for the Future, Year Up, the Paraprofessional Healthcare ­Institute, and Stride for Success.

Also in New York City, foundations like Tiger, Achelis, Annie Casey, Clark, and JPMorgan Chase, and others have made important investments to build middle-skill for young adults through a nonprofit called JobsFirstNYC. Donors and businesses have also worked closely with some administrators within the New York City public schools who understand the importance of career and technical education. Creative approaches to supporting CTE took root during the Bloomberg administration. Some of these involve ­providing public-school students with opportunities to learn technical jobs ­within the film and video ­production industry, or to train in aviation mechanics at the New York airports.

Other foundations are making a difference in their home areas. The Claude Worthington Benedum Foundation is headquartered in Pittsburgh but serves southwestern Pennsylvania and the entire state of West Virginia. Funded by Michael Benedum, an early entrepreneur in the oil and gas business, the philanthropy makes $3 million of grants each year to CTE projects in K-12 schools and community colleges. About a decade ago the foundation decided to focus on reigniting its region’s blue-collar workforce by building up valuable credentialing programs and associate degrees. Funding career academies within high schools, to integrate career-based training right into the core academic curriculum, has been one emphasis.

Across the country in Silicon Valley, the Sobrato Family Foundation has been another regional paragon for career and technical education. Real-estate mogul John Sobrato is supporting organizations that build ladders to middle-skill jobs for low-skilled workers in the San ­Francisco Bay Area. The need to qualify for higher-wage work is particularly acute in this region because it has one of the most expensive costs of living in the country, yet a third of local workers earn less than $18 per hour. Initiatives like Job Train, the Stride Center, the Bay Area chapter of Year Up, and training from the McKinsey Social Initiative have been recent targets of Sobrato family investments.

A college degree is not a career. It can be part of a career, but we tend to put the cart before the horse on that.

In the City of Brotherly Love, the Lenfest Foundation recently decided that instilling career-readiness skills in youths was one of the most significant ways it could improve the long-term health of the Philadelphia region. This foundation created by Gerry and Marguerite Lenfest out of their cable television fortune has so far been responsible for more than $1.2 billion in giving. The foundation is pursuing its latest goal through three related efforts—career and technical education, supporting industry-specific experiences for youths, and funding broad workforce development. It has invested in such nonprofits as YouthBuild Philadelphia, and Penn Medicine’s medical internship program.

The family foundation established by Starbucks founder Howard Schultz announced in 2015 it was committing $30 million to workforce training for young people with support for many different nonprofits, training initiatives, and collaborations with employers. The Starbucks company also now offers, in collaboration with Arizona State University, a tuition reimbursement plan for all of its part- and full-time workers to help them acquire career training that will allow them to step beyond the coffee house to higher opportunities. Most of their employees say that is part of their eventual life plan after beginning at a lower-skill job with Starbucks.

Philanthropic-minded companies are also seeing the benefits of bridging the gaps that leave too many middle-skill jobs unfilled today. JPMorgan Chase has committed $250 million over five years to create career pathways nationally and internationally. Companies like IBM and Applied Software have created what they call “boot camps” where young computer programmers can build their skills and acquire credentials they can take to employers, without expensive or time-consuming formal education. Similar “competency-based” programs are being created across the country by a mix of businesses and educators.

A national vocational-ed effort which completely intermixes businesses and philanthropies is the recently launched 100,000 ­Opportunities Initiative. Companies like Alaska Airlines, Hilton, J. C. Penney, Macy’s, Microsoft, Starbucks, Taco Bell, Target, and Walmart will provide jobs, internships, and apprenticeships to 100,000 young people over a three-year period. Donors such as the Schultz, Kellogg, JPMorgan Chase, Rockefeller, and Joyce foundations are providing crucial support to the effort. More on that in Chapter 4.

Many savvy observers within American philanthropy, business, and education are seeing the dire need today for more points of entry into career and technical education. In the next four chapters we’ll explore more specific ways that donors can reach both young people about to enter the labor force and adults who are already working, to help them become as productive and successful as their energies allow.

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