NCPA - National Center for Policy Analysis


November 2, 2009

The federal government plans to spend more than $1 billion this year on job retraining programs for Americans suffering layoffs during the recession.  But a late 2008 government-funded study found that job retraining might not really work.

The study, commissioned by the Department of Labor and performed by the social science research firm Impaq International, looked at the effects of a 1998 federal job retraining initiative in 12 states, following 160,000 total participants who started with the program from 2003 to 2005.

According to researchers:

  • In the short term, earnings prospects for many groups of workers actually got worse after they participated in job retraining.
  • This implies that those who participate in the program experience lower earnings during the first five quarters after program participation as a result of their program participation.

Part of that effect may be due to concentrating on retraining rather than trying to find new jobs, but the assessment of the program's long-term benefits was no brighter, says Reason:

  • It took two years for the earnings of those who received job retraining to catch up to those of their non-participating counterparts.
  • The growth in earnings, relative to nonparticipants, slows at that point.
  • Overall, it appears possible that ultimate gains from participation are small or non-existent.

Why might the programs be ineffective, asks Reason? Job retraining is irrelevant without job creation, especially job creation in the particular fields for which people are being trained.  Predicting where the next employment boom will take place is difficult enough for entrepreneurs.  It certainly isn't a specialty of government bureaucrats, says Reason.

Source: Brian Doherty, "Layoff Blues," Reason, November 2009.

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