RALEIGH – Just as you don’t evaluate the performance of a mutual fund simply on the basis of how much it costs, you shouldn’t evaluate the performance of a government program simply on the basis of how much tax money is spent on it. What you should want to know instead is your rate of return – how much you get back for every dollar you put it.
In the case of job-training programs, the rate of return doesn’t look too good. As JLF analysts have observed in the past, the available evidence suggests that government programs to train workers often fail to produce significant gains in their clients’ rate of employment, their future wages, or both.
Job training is no small part of what North Carolina state government does. According to a story in the latest Triangle Business Journal, North Carolina will spend nearly $1.4 billion this year on more than two dozen separate job-training programs and accounts. Some programs focus on particular groups of potential workers, such as veterans or the disabled, while other focus on particular industries or regions of the state.
North Carolina’s budget for job training is up 15 percent over the past six years, TBJ reports. Just over half of the $1.4 billion comes from state revenues, with federal revenues accounting for a quarter and the remainder come from local or other sources.
Now, keep in mind that these figures reflect only government spending on discrete job training programs. They don’t include public or private expenditures on high school or higher education that are directly related to preparing students for careers. And they don’t include the vastly higher sums that employers and employees spend themselves on formal and informal job training.
Employers are, in fact, the most common provider of and setting for job training. Most new workers, be they teenagers learning how to operate a drive-through window or electrical engineers learning how to design new theatrical-lighting systems, gain most of the knowledge and skills they need to perform particular tasks through on-the-job training, not through classroom instruction.
That’s not to say that career education is unimportant. Far from it. JLF analysts have argued that North Carolina’s education system should put a greater emphasize on career and technical education, and that parents should be empowered to choose among competing educational providers that might best suit the academic and vocational needs of their own children.
We have also argued that tax reform can offer additional help by offering tax-free savings accounts for adult workers or parents to use to save and invest money in education and job training.
To the extent that the public sector goes beyond education and tax reforms to support worker training, JLF recommends that North Carolina policymakers begin by bringing some rationality to the current panoply of programs and funding sources.
As needed, we should seek permission from Washington to combine programs into larger, more-efficient pots of money, from which the state should fund job-training programs based on their rates of success in job placement and wage growth, with some appropriate adjustments for the difficulty of the caseload (e.g. workers with disabilities or other special needs).
Rather than endlessly repeat the mantra that the solution to North Carolina’s current economic malaise is more government spending on education and job training, state politicians need to recognize that we already spend a large amount of money on both functions. As I previously noted, if North Carolina were a nation, our level of education spending would be ranked among the highest in the developed world.
It’s good to invest money for retirement. It’s good to invest for education and training. But it’s not good to waste scarce resources on investment vehicles with a poor rate of return. Time for some portfolio rebalancing here.
Hood is president of the John Locke Foundation.