In the midst of another wildly partisan and gridlocked political season, workforce training policy has seen an unusually productive year. For instance, Ivanka Trump has pushed through several initiatives, including an Executive Branch-led project to sign on a slew of large U.S. employers to commit to employee training, as well as plans to consolidate and fund new federal training programs. So, when the influential think tank, The Aspen Institute, published a new policy paper for a worker training tax credit, it was worth taking seriously.
The motivation for Aspen’s policy is that businesses are systematically underinvesting in education. According to Aspen’s white paper, since 1996, on-the-job training has declined a whopping 42%. Even worse, training tends to be disproportionately given to the best employees, leaving out the low and middle-income workers who need education the most.
Among other details, Aspen recommends a tax credit of up to $250,000 for small businesses to invest in workforce training and have it be targeted to lower-wage workers (defined as those making less than $120,000 a year).
The hope is that with enough financial incentive, businesses will fill the gap that higher education has left in the workforce, both because many people can’t afford tens of thousands of dollars in student debt or can sacrifice their prime working years to get re-skilled. It’s hard to tell what kind of impact such a policy would have. A review of research by the Department of Labor found that worker retraining initiatives have a mixed record and there is little systematic analysis of on-going programs. However, on-the-job training, like that proposed by Aspen and the White House, seems to be among the best-known strategies.
However, while the nature of work has changed, the worker training has not kept up; the one thing that all of these new training policies seem to miss is the growing legion of independent self-employed “gig” workers, who constitute somewhere north of 1 in 10 U.S. workers–a number that will continually grow for the foreseeable future.
(Disclosure: I am contracted with the policy nonprofit Tech4America to do research on ‘future of work’ policy. See more about Tech4America’s funders here.)
As I’ve written about before, the gig economy is a huge opportunity for education–both for existing gig workers and for those who want to transition to new careers. Typically, gig work isn’t thought of as “training”, but for many of the most successful high-skilled workers, it functions as a kind of school. When I arrived in Silicon Valley in 2012, it was common for people to start out towards a new career through a “side hustle”. So many people I met were freelancers. For relatively privileged workers, high skilled freelance “gig” work is a remarkably efficient way to gain on-the-job training without having to exit the workforce for school.
Existing policy recommendations miss out on this opportunity. If a retail salesperson at risk of being automated wants to learn how to become an electrician, tax credits for the business won’t do much good. The business doesn’t have the technical know-how to teach employees anything beyond the core functions of their industry.
But, as that salesperson’s hours decline, financial support to do freelancing work on the side would allow a much greater portion of the workforce to gain valuable job experience in any industry in which freelancing is common (which includes many of the fastest growing occupations, from computer programming to healthcare).
I reached out to Aspen Institute to get their perspective and they acknowledged that their proposal is “intended to address a relatively narrow problem: businesses are investing too little in their employees, and we want them to invest more,” said Ethan Pollack, the Associate Director for Research and Policy at Aspen’s Future of Work Initiative.
They believe a separate policy, Lifelong Learning and Training Accounts (LLTA) would help a broader set of the workforce to save and pay for a variety of educational opportunities (not just two and four-year degrees). I do think that lifelong learning accounts would be a significant step in helping even freelance workers get schooling, but I think these policies still miss the mark on freelancing-as-training.
For one, it is often difficult for regulated savings accounts to keep up with new training opportunities. Coding boot camps and other new startups are often excluded from government or state-sponsored benefits because they don’t fit into pre-existing school categories.
Second, schooling is a very smart part of the training curve: most learning happens on-the-job. This is the magic of freelancing; a new programmer can gain valuable experience by doing a few assignments a month and building up a portfolio of work. This isn’t traditionally considered “education”, even though workers are learning valuable skills in the process of earning money.
To take advantage of this, workers need to somehow get renumerated for freelance work, or be able to take off hours in their existing job to spend the time getting job experience in their preferred field. An expansion of the Earned Income Tax Credit, a refunded wage subsidy, could help with these issues, since the government would match income, no matter where the person works.
So, as the government decides between various funding mechanisms, a wage subsidy, or some kind of cash benefit that incentivizes high-skill freelancing, should be part of the solution.
As of now, there are no policy programs targeting this sizable opportunity. As the traditional single-employer, 9-5 working day model becomes less mainstream, policymakers will have to start thinking of gig workers in most–if not all–economic policy.
I hope that policymakers begin looking at this soon.