Late last year, Congress came close to reauthorizing the Workforce Innovation and Opportunity Act (WIOA), the law authorizing the nation’s workforce development system. WIOA reauthorization has already come up in the House Committee on Education and the Workforce as a priority agenda item in the 119th Congress; it’s essential that any revisions to the Act are aligned to outcomes that matter: training for in-demand, good quality occupations that offer secure wages and professional opportunity. The 2024 proposed reauthorization, A Stronger Workforce for America Act (ASWA), included a number of provisions that would bolster the use of evidence and data and promote better outcomes across the workforce development system, including:
• Defining evidence of effectiveness to drive federal workforce dollars toward interventions proven to advance labor market outcomes;
• Codifying the Workforce Data Quality Initiative grant program, which helps integrate education and workforce longitudinal data systems and greatly improves the timeliness and relevance of labor market data;
• Allowing states to leverage the National Directory of New Hires, strengthening data linkages between program participants, training providers and employers; and
• Increasing focus on employer-connected training through incumbent worker training, on-the-job training, apprenticeships, Critical Industry Skills Funds and the Strengthening Community Colleges Workforce Development Grant Program.
In an effort to increase WIOA dollars going toward skills training, ASWA also included a provision requiring local workforce boards to spend 50 percent of Adult and Dislocated Worker funding on training, with supportive services allowed to count toward 8 of the 50 percent. To be sure, the U.S.’ investment in skills training pales in comparison to other advanced economies, as well as to our own investment in traditional higher education. The lack of investment in skills training means too many Americans get trained for low-paying occupations with limited career advancement opportunities, because a major driver of training programs funded by WIOA is cost. The 50 percent threshold, however, is an imperfect and imprecise solution that would not necessarily promote better investment of individual training accounts (ITAs). For example, workforce boards may spread Adult and Dislocated Worker funding over a larger pool of people and still meet a 50 percent threshold, but this would not ensure trainees benefit from higher-quality training or improved access to quality jobs. Another issue with the 50 percent threshold is that it treats all training programs as equal. This is problematic, as many eligible training programs don’t map to growing occupations, and different training models have different returns on investment. By way of illustration, more than half of WIOA training participants in the Adult and Dislocated Worker programs enroll in occupational skills training, but the median wage is much higher for WIOA participants in registered apprenticeships. Indeed, a recent research report from the America First Policy Institute’s Center for the American Worker noted that “most workers do not experience better pay or outcomes after participating in WIOA training programs,” and “states and governors often do not use WIOA funding to its full potential.”
To expand access to training, ensure efficient use of resources and improve workforce system outcomes as part of WIOA reauthorization, a 50 percent skills training threshold should be accompanied by reforms to expand and incentivize outcome-based contracting, which currently has extremely limited utilization across the workforce development system.
The short shelf life of WIOA funding, in contrast to the longer runway that eligibility determination, training completion, and placement/earnings progression requires, presents a major barrier to outcome-based contracting in the workforce system. At present, local workforce boards must spend their allocations within two years, and in the third year any unused funds revert to the states for statewide activities or for reallocation to eligible local areas for expenditure in that year. This time horizon is too short to complete an outcome-based contract and assess longer-term outcomes, outside of the Pay for Performance (P4P) provisions in WIOA. Unfortunately, P4P is an important concept whose full potential remains unrealized due to shortfalls in design. The reality of P4P is that, while well-intended, it is so administratively unfeasible that in the 11 years since WIOA first allowed for it, no local workforce area in the country has managed to execute and sustain a P4P contract, and only one even proffered an attempt. This is not surprising; as the America First Policy Institute noted in its research report, WIOA suffers from layers of bureaucracy and inflexibility. While ASWA would have alleviated some of the P4P inoperability, it did not go far enough, and there is a simpler way to expand use of outcome-based contracting across the workforce system than continuing to rely on P4P.
To truly remove red tape and make outcome-based contracting more viable and appealing across the workforce development system, Congress should include language in WIOA reauthorization that does the following:
1. Explicitly encourages (not just allows) state and local workforce boards to enter into outcome-based contracts;
2. Allows all WIOA funds obligated for outcome-based contracting to remain available until expended;
• Currently, WIOA funds used for outcome-based contracts that do not qualify as P4P are subject to the 2-year expiration date of WIOA local dollars.
• As an alternative, Congress should allow third-year dollars to continue to be available locally if obligated for outcome-based contracts. Under this scenario, if funds cannot be awarded because outcomes are not obtained, these dollars could revert to state-managed Innovation Funds to support innovative approaches to career training.
• State Innovation Funds should not expire, but states should report on the use of these funds to USDOL, thereby ensuring accountability in the system.
3. Allows Governor’s Reserve funds to be used to create state-managed Performance Incentive Funds that can help make outcome-based contracting more appealing for both local workforce boards and training providers; and
4. Directs USDOL to provide technical assistance to local workforce boards to help them write outcome-based contracts.