Weathering the storm: How Congress can help businesses and workers get to the other side of this pandemic and beyond
By: Katie Brown, Senior Federal Policy Analyst at National Skills Coalition and Amy Shields, Director of Community Advancement at the Association of Chamber of Commerce Executives (ACCE)
This piece is one in a series addressing the overlapping policy response necessary to respond to both Covid-19 and its economic impact and to developing technological change in the workplace. For framing of the recommendations overall, see our initial blog here. This blog is also a preview of a policy paper National Skills Coalition will release in full in June 2020.
It is undeniable that the pandemic we are currently facing has done short and long-term damage to the economic viability of our nation’s businesses — particularly the small and mid-sized businesses that are the backbone of our nation’s economy. As a direct result of Covid-19, millions of employers have had to close their doors to protect workers and consumers. Countless others have had to quickly upskill their workforce, equipping them with the skills they need to pivot to digital or remote services. And businesses in charge of delivering essential pandemic-related services or products have had to onboard and train thousands of new workers to meet the needs of the communities they operate in.
Congress has worked quickly over the last six weeks to pass a series of Covid-19 response bills — which have provided real-time relief for businesses and workers. While these legislative vehicles are helping businesses and individuals weather the storm that is before them today, Congress and the Administration must now rally around policies that will help small and mid-sized businesses be successful as the economy shifts to long-term recovery.
Our economy will change in the aftermath of Covid-19, and it is more important than ever for workers to get the training they need to be prepared for the future.
Without investments in workforce training, businesses will not have enough skilled employees to meet critical needs, and workers will not be able to secure jobs that pay family-sustaining wages.
Luckily, there are several policy changes Congress can consider that would support businesses and workers as we adjust to the new realities of the post-pandemic world. Ideally, these policy changes should connect small and mid-sized businesses to public resources, support industry partnerships to scale high-quality training and provide additional incentives for businesses to upskill workers.
Connect small and mid-sized businesses to public resources
In the wake of COVID-19, small and mid-sized businesses providing essential services, including those in healthcare, retail, sanitation, and transportation are in desperate need of public resources that can help them obtain vital supplies and equipment, adopt best practices and adjust to new economic circumstances.
In the past, Congress has taken steps to address pressing, industry-specific needs driven by economic changes. For example, Congress launched the Manufacturing Extension Partnership (MEP) program in the 1980s to help small manufacturers adapt to emerging technologies and remain competitive. Given the number of industries that are and will be impacted by Covid-19, as well as the nature of services that will be needed by businesses to operate in the aftermath of this pandemic, policymakers should consider expanding programs like the MEP, which has a proven track record of success.
Congress should scale MEP-like programs to other Covid-19 impacted industries by authorizing a new series of industry-specific partnership programs through the Department of Commerce. These partnerships would serve as “resource-hubs” for small and mid-sized businesses, connecting them with industry experts and stakeholders who can advise them on strategies to recruit skilled workers, support and upskill incumbent workers, and further adapt to economic shifts caused by the current health crisis and technological change. This approach would allow small and mid-sized businesses impacted by this pandemic to collaborate with others and access robust resources designed to maintain and revitalize their industries.
Support industry partnerships to scale high-quality training
Already, small and mid-sized businesses across the U.S. actively participate in industry partnerships to help them build skilled worker pipelines. Training provided through industry partnerships leads to better outcomes for workers and businesses, including increased wages and higher rates of retention. While we know that industry partnerships are successful workforce development strategies at all levels of government, no federal policy currently provides dedicated funding to expand these partnerships. This limits the number of businesses that can participate in this effective model.
In addition, without targeted federal funding, stakeholders like businesses, education and training providers, and community-based organizations rely on a combination of state and private funding to sustain industry partnerships, which can be unpredictable and unsustainable, particularly in times of economic downturn. This approach can also prevent under-resourced industries from starting and scaling new partnerships, due to a lack of capacity.
Congress should include targeted funding for industry and sector partnerships in future pandemic-related relief packages. Businesses and non-profit organizations in essential industries like healthcare and manufacturing are relying heavily on training providers in their communities — including community and technical colleges — for help preparing workers to fill vital positions. Additionally, millions of unemployed Americans will need unhindered access to education and training for in-demand jobs as well as valuable support services as they prepare to return to the workforce. By investing in these partnerships now, Congress can maximize their value for communities, businesses and workers in need.
Provide incentives for businesses to upskill workers
As our economy shifts to pandemic recovery over the next several months, resource-strapped small and mid-sized businesses may not be able to hire new employees or train current workers. To support upskilling, businesses will need to access a variety of programs to support training. Congress should consider both amending the tax code to support businesses who prioritize skills training and providing additional direct funding for incumbent worker training.
Many businesses currently take advantage of the Work Opportunity Tax Credit (WOTC) which provides credits of up to $9,600 to companies for hiring workers from certain populations such as veterans, the long-term unemployed, and Supplemental Nutrition Assistance Program (SNAP) and TANF recipients. While WOTC is a heavily-used tax credit, it is most often claimed by companies for workers who enter jobs without a pathway to increased skills or higher wages — leaving COVID-19 impacted individuals who will be seeking family-sustaining jobs at a disadvantage.
Evidence has shown that work-based learning provides an opportunity to bridge workers’ skill levels and meet the needs of small and mid-sized businesses. In light of this, Congress should consider updating WOTC to include financial incentives for businesses who provide high-quality, work-based learning to workers who need access to skills the most. Businesses who invest in work-based learning and upskilling opportunities for their new and incumbent workers should be eligible for the maximum WOTC tax credit of $9,600; creating an incentive for businesses to offer training opportunities for all workers, with all skills levels.
Outside of direct tax incentives, existing federal workforce policies like the Workforce Investment and Opportunity Act (WIOA) have resources for upskilling and reskilling embedded in them. For example, states receive federal funding through WIOA that can be used for Incumbent Worker Training (IWT) services, which allow businesses to provide training to select workers who have been on-the-job for six months or more. However, competing demands for WIOA funding mean that there is often minimal funding available for IWT, and the process for an employer to access these funds can be a disincentive — particularly for businesses that are new to navigating the process. In the current environment, it will be virtually impossible for states and businesses to take advantage of this program at the necessary scale without additional, dedicated federal assistance.
To this end, Congress should establish a new title in WIOA to finance training opportunities for incumbent workers, beyond currently available Incumbent Worker Training (IWT) services. This new title should provide flexible funding to allow businesses and nonprofit organizations to draw down funds to support investments in reskilling and upskilling workers in order to respond to the COVID crisis, it’s economic impacts, and to prepare for general workforce needs once our country recovers.
One thing is clear; we cannot afford to perpetuate the status quo if we want to ensure businesses and workers are equipped with the tools they need to weather this current storm. With strategic collaboration and targeted federal investments, we can emerge from this crisis stronger than ever before and ready to tackle the challenges ahead.