September 27, 2021
Center for the American Worker
Center for the American Worker - Center Overview
September 27, 2021
WHERE IS AMERICA NOW
The Economic Boom
From 2017 to early 2020, the United States experienced an economic boom. The unemployment rate fell to 3.5 percent—the lowest in a half-century. Job gains and poverty reduction were the most inclusive in modern history, with almost 160 million Americans employed (FRED, 2021) and more than 6.6. million Americans brought out of poverty (Council of Economic Advisers, 2021). Millions of Americans also left the economic sidelines and reengaged in the workforce in the pre-pandemic 2017-2019 period due to the economic boom and pro-worker policies. The Nation saw unemployment at a 50-year low, and incomes increased in every metro area across the country for the first time in 30 years. During this period, the female unemployment rate hit its lowest rate in nearly 70 years. American households in the bottom 50 percent of the socio economic scale saw a 40 percent increase in their real net worth, while wages grew fastest for low-income and blue-collar workers (Council of Economic Advisers, 2020) (Council of Economic Advisers, 2021). In 2019, there were more jobs available than there were individuals unemployed (U.S. Chamber, 2021). In response to the thriving economy, the Trump Administration developed innovative policies, strategies, and initiatives to benefit and prepare the American workforce for the available jobs.
Under the historic 2017 Tax Cuts and Jobs Act (TCJA), a family of four earning $75,000 per year saw their tax bill slashed by 50 percent, and over 6 million workers experienced wage increases, bonuses, and increased benefits (Council of Economic Advisers, 2019). Small businesses, the backbone of this Nation’s economy, could deduct 20 percent of their business income (2017) (Tax Foundation, 2021). According to the Census Bureau, in 2017– 2020, new business applications per month were 29 percent higher than any of the 8 years prior to 2017. In comparing January 2013–December 2016 and January 2017–February 2020, business applications were 23 percent higher in the latter years (U.S. Census Bureau, 2021). Data has also shown us that the opportunity share for business entrepreneurs in the 2017– 2019 time frame versus the 8 previous years was 85.8 percent and 78.6 percent, respectively (Ewing Marion Kauffman Foundation, 2019). Another provision of TCJA—the Opportunity Zones (OZ) program—brought about a 29 percent increase in equity investments in designated low-income communities (The Council of Economic Advisers, 2020). Other research has also found that OZ’s accelerated employment growth by 3 to 4.5 percentage points, which implies over half a million new jobs for the most economically distressed areas (Arefeva, Davis, Ghent, & Park, 2021).
A key component to bringing hardworking Americans back into the labor force are pro- family policies that make it easier for families to achieve their dreams at home and in the workplace. The Trump Administration proved this to be successful through their focus on “making sure the U.S. is the best place in the world to conduct business, work, and raise a family.” Working families through the TCJA benefited from the doubling of the Child Tax Credit (CTC) from $1,000 to 2,000 per child and expanded its reach to include low-income working families that had previously been forgotten (LaJoie, 2020). Almost 40 million working families benefitted from the CTC and received an average of $2,200. Another example of good pro-worker and pro-family policy was the largest increase in Child Care and Development Block Grants, which empowered states to expand families’ access to quality, affordable child care to over 800,000 low-income families (Council of Economic Advisers, 2020). Additionally, by signing into law paid parental leave for the federal workforce, the Trump Administration led by example in a long-debated issue , enacting 12 weeks of paid parental leave for federal workers for the first time in our Nation’s history, as our Nation’s largest employer (Public Law 116-92). Furthermore, the TCJA created a first-ever paid family leave tax credit for employees earning $72,000 or less in income (2017). Supporting working families is good policy and strengthening them means increasing access to affordable, high- quality child care and establishing paid family leave. (The White House, 2019).
The Biden Administration’s American Families Plan allocates $15 billion in Child Care Development Block Grants to support child care, expands the size of the CTC while removing the earnings eligibility criteria and transforming it from an annual refund to a monthly rebate, creates an additional child care credit for families, and provides a paid leave credit for employers. While these efforts respond to the child care need, policies must be in place that create an atmosphere of support and economic prosperity to benefit American families over the long term. The current plan, unfortunately, does not meet expectations. For example, the monthly CTC payment to eligible families allocates $300 per month for children 6 and under and $250 per month for children between ages 6 and 17. The White House claims that this will help impoverished families (The White House, 2021). According to the American Enterprise Institute, the monthly payment transfers $101 billion of income to U.S. households overall, but only $36 billion is slated for low-income households, making the program expensive and untargeted (Strain, 2021). By severing the link between the CTC and earnings and drastically increasing the deficit, these policies also risk slowing the economic recovery by undermining work incentives. For example, making it easier for families to remain outside the workforce and encouraging them to rely on government CTC checks as income rather than a tax break fuels potential inflation, which has already begun to materialize (York & Li, 2021).
The Economic Impact of COVID-19
When the global economy shut down in response to the COVID-19 pandemic and government lockdown measures, the United States experienced unemployment rates not seen since the Great Depression, peaking at 14.8 percent in April 2020 (Falk et al., 2021). However, unlike during the Great Depression, the country turned the economic corner rapidly and set records for job and gross domestic product (GDP) growth in the second half of 2020 on the road to recovery (Council of Economic Advisers, 2021). This robust rebound has been the product of strong pre-COVID economic fundamentals that remained intact thanks to decisive federal intervention during spring and summer 2020. In particular, the swift provision of emergency financial support to American workers, families, and small businesses helped drive down the unemployment rate to below 6 percent in just over a year (U.S. Bureau of Labor and Statistics, 2021). Pro-family policies, more than ever before, are crucial to increasing the labor force participation rate. In December 2019, women made up roughly 50 percent of jobs in America (U.S. Bureau of Labor and Statistics, 2019). Roughly 2 million women are still out of the workforce, according to the April 2021 jobs report (U.S. Bureau of Labor and Statistics, 2021).
Among its many disruptive impacts, COVID-19 exacerbated the skills gap crisis by creating a tremendous shift in the jobs available and the general nature of the workforce and work itself. According to the McKinsey Global Institute, the shift toward more automation and technology in work will challenge the United States to prepare around 17 million Americans for the future of work by 2030 (Lund et al., 2021). To date, 8.7 million Americans are unemployed, and (U.S. Bureau of Labor and Statistics, 2021) there are more than 3.1 million fewer people in the labor force compared to February of 2020 (FRED, 2021). Despite many Americans still out of work, there is no shortage of available jobs. As of June 2021, there were 10.1 million job openings, representing an all-time high and roughly 44 percent higher than pre-pandemic numbers in February 2020 (FRED, 2021).
With so many jobs available, in spite of high unemployment, the changing nature of work, and the need for a more technically skilled workforce, too many Americans may be left behind during this recovery and on the economic sidelines. The Trump Administration recognized the importance of the changing work landscape even before COVID-19, which motivated it to reimagine its approach to workforce development. In particular, over the previous 4 years, the federal government engaged at a deeper level with the private sector— which best understands the skills needed in their industries—and challenged industry leaders to invest in their own workforce alongside assistance from the public sector to address the growing skills-gap crisis. This public-private partnership drove the agenda and set the country on a path toward putting hardworking Americans first as the government was no longer the primary answer for innovation and economic opportunity. Building upon this modernized approach to rethinking workforce development, we can resume constructing multiple, high-quality pathways that provide opportunities for success and upward mobility for the diverse American workforce. In the short term, one of the first steps at the heart of ensuring a robust post-COVID-19 economic recovery is to remove obstacles and disincentives that are keeping Americans from getting back to work and impeding businesses’ ability to grow.
In response to the current worker shortage, in May, the U.S. Chamber of Commerce surveyed local and state chambers and found that more than 90 percent of them attribute these shortages to slowing economic growth in their local areas. Additionally, 67.3 percent found it very difficult to hire in their local businesses (U.S. Chamber, 2021). While 71 percent of businesses the Chamber surveyed claimed that they are having a more difficult time hiring employees than they were 5 years ago.
According to the National Federation of Independent Business (NFIB) quarterly report on small businesses, 48 percent of employers reported that their job openings could not be filled. Small businesses have reported to NFIB that 40 percent of them have skilled labor openings, and 27 percent have unskilled labor openings. When looking at the construction small business industry, they have reported that 51 percent of their job openings are for skilled labor, and 66 percent have said that they have little to no workers applying. As noted earlier, the reskilling crisis continues, and millions of Americans will need to be reskilled or trained to fill the jobs that exist today. Employers are struggling to find employees that meet the skills required to fulfill the job, in addition to a lack of willingness among many workers to return to work post-pandemic. Of the 93 percent of small businesses with open positions, 57 percent of employers have said they have little to no job applicants who can fill these jobs (NFIB, 2021). As worker shortages continue to plague businesses, employers are challenged to find ways to attract qualified workers. Among these small businesses, the two most cited concerns are labor costs and labor quality, with 9 percent and 26 percent, respectively, reporting this as their top business concern (NFIB, 2021). For further evidence, figure 1 indicates the labor force participation rate was only 61.7 percent in July, remaining stubbornly below the level of 63.3 percent it achieved before the pandemic.
The shift in the economic landscape driven by COVID-19 has also caused a rapid increase in measures of entrepreneurship, and any departure of workers to self-employment has the potential to exacerbate the job recruiting difficulties faced by employers. According to a Kauffman Indicators report, the rate of new entrepreneurs leaped in 2020, more than in previous years. This jump is thought to have been a response to the economic impact of COVID-19. The opportunity share—the percentage of those who started their businesses because of opportunity, not necessity—declined considerably to a 25-year low of 69.8 percent for those new entrepreneurs who started their business in 2020, relate to 86.9 percent in 2019 (Fairlie & Desai, 2021). This drop is a sign that an increasing share of entrepreneurs started their business not out of a hopeful pursuit of new opportunities but rather out of necessity to make ends meet in the face of severe disruptions during COVID- 19. While entrepreneurship is one of the key engines of American economic growth, it does not bode well when people feel like they have no choice but to give up on getting a job.
The Importance of Bringing Americans Back to Work
The longer Americans remain out of work or collect unemployment benefits and federal government cash transfers, the less likely they are to return to work. As the duration of unemployment lengthens, the likelihood of future employment is reduced. This economic phenomenon is often referred to as negative duration dependence (Kroft et al., 2019).
Research has found that while the probability of finding a job after 1 month of unemployment is well above 20 percent, as the length of unemployment approaches 1 year, the likelihood of finding a job drops to roughly 10 percent (Kroft et al., 2019). Further research indicates that long-term unemployment reduces the probability of finding a job 1 to 2 years in the future by as much as 40 percent relative to short-term unemployment (Krueger et al., 2014). Long-term unemployment is also associated with labor force exits, threatening to return millions of workers to the economic sidelines (Yagan, 2018). The scarring effects of long-term unemployment are a threat to the continued pace and strength of the economic recovery. Incentives that keep individuals from returning to work or searching for a new job can have persistent effects, meaning that such scars from long-term unemployment may cause the labor market not immediately to recover even after such anti-work incentives phase-out. For that reason, time is of the essence to get policy right.
While enhanced pandemic Unemployment Insurance (UI) from the federal government is extended until September, many states with tighter labor markets than the national average have taken proactive steps to address worker shortages. Across the Nation, 36 states have reinstated or announced that they will reinstate, work search requirement for UI beneficiaries (Hansen, 2021). This requirement was waived due to the pandemic. Furthermore, 26 states announced they would end participation in the enhanced federal pandemic UI benefits that have been paying jobless workers $300 per week on top of their usual state benefit amount, resulting in many of these workers earning more from not working than from working (Ewall-Wice, 2021). Legal challenges in four of those states— Indiana, Maryland, Arkansas, and Oklahoma—have resulted in the reinstatement of the $300 supplement (Gonzalez & Davis, 2021). In the first week after the first three states—Iowa, Missouri, and Mississippi—ended the federal pandemic supplement to unemployment benefits, new claims for UI in those states fell by 28 percent in one week alone while new claims in the states who have not announced plans to end the supplement earlier than legislated saw new claims rise by 1 percent in that same one week period (Foundation for Government Accountability, 2021). Removing policies that prolong joblessness is a promising avenue to reducing the duration of unemployment, accelerating the return to work, and limiting the extent to which scars form that diminish employment opportunities for American workers. More importantly, those states who have rolled back unemployment benefits earlier than legislated experiencing a stronger labor market recovery, growing and opening their local economy, and proving the most effective recovery efforts from COVID-19 as compared to those states that are continuing to provide supplemental pandemic-related unemployment benefits (U.S. Department of Labor, 2021).
WHY AFPI IS ESSENTIAL
AFPI is putting hardworking American families first. America has long been the leader in innovation fueled by the skills and fortitude of our students and workers. AFPI will cultivate strategic research, policies, and pathways that enable greater outcomes for workers, destigmatize vocational education, and create opportunity and multiple pathways for upward mobility. State leadership will be a critical component in bringing back our workforce and cultivating innovative opportunities to ensure they are prepared for the millions of jobs that exist. Preparing our workforce for the jobs of today and tomorrow will restore hope for the futures of countless hardworking Americans.
BUILDING ON A TRANSFORMATIVE AGENDA
Investment in education and workforce development activities without economic expansion rearranges the economic deck chairs without substantively increasing economic opportunity. The Trump Administration adopted a deliberate strategy of prioritizing economic growth to increase labor market demand. Improved employment opportunities and increased wages followed economic expansion supported by tax reform and deregulation. From passing TCJA and creating the lowest unemployment rate across nearly every demographic to leveraging the private sector in training and upskilling our workforce, the Trump Administration reformed and established an effective framework for the future of the American workforce. It is important to remember this statement by President Trump, “Americans of all backgrounds that we’re talking about, to have the chance...to learn and to build a successful career. We want to train Americans and we want to hire Americans” (The White House, 2020).
The American Workforce Policy Advisory Board—a diverse group of the private sector, education, and government leaders created by the Trump Administration—focused on solving the skills gap crisis and preparing workers from high school aged to those mid-to- late in their careers for the jobs available, especially in the booming economy. Before COVID- 19, millions of Americans had been brought off the sidelines and into the workforce due to these pro-worker policies and the robust economic growth that provided significant employment opportunities. Following the onset of COVID-19, the administration, in rapid response, and the private sector, launched the Find Something New advertising campaign (Martin, 2020). It directed individuals to FindSomethingNew.org, where they could explore pathways to develop in-demand skills, including flexible options like apprenticeships and online certification programs. The site also includes information on careers to consider in growing areas of the economy and a directory of support resources, like childcare (U.S. Department of Commerce, 2020).
By leveraging the private sector, the Trump Administration, on a large scale, was tackling critical issues around workforce development and preparing our workforce for the jobs that exist. Through the launch of the Pledge to America’s Workers, the administration was able to secure commitments from over 460 companies and trade associations to provide education and training opportunities for over 16 million Americans (The White House, 2020). President Trump once said, “by signing the Pledge to America’s Workers, these great companies are affirming their commitment to train American workers for American jobs because America’s strength, America’s heart, and America’s soul is found in our people” (The White House, 2018).
There was a continued push to leverage the private sector in a multifaceted approach to expand opportunities for the American workforce. By fast-tracking private sector-led prototypes called Learning and Employment Records (LERs), companies could formally capture the skills and education employees gain on-the-job and in-the-classroom, to help them better demonstrate their skills and competencies and reduce friction in the hiring process. In September 2020, IBM, Walmart, and Salesforce publicly demonstrated their LER prototypes, demonstrating the technical feasibility of the LERs. The results of the pilots were clear: LER technology is viable and can reduce labor market frictions. Each of the pilots demonstrated the use of common or open achievement frameworks—this shared language of achievements used within each of the pilots collectively laid the foundation for interoperable, scaled LER technology (U.S. Department of Commerce, 2020).
Building upon this leadership, the former Administration also made significant advancements through the launch of Industry-Recognized Apprenticeships Program (IRAPs), which provided more Americans the opportunity to earn while they learn in new and emerging fields (U.S. Department of Commerce, 2017). President Trump signed the Strengthening Career and Technical Education for the 21st Century Act, which provided over 13 million students with high-quality vocational education and extended more than $1.3 billion each year to states for critical workforce development programs (2018). This Administration also took strides in modernizing job candidate recruitment, hiring, and training practices across the federal government through Second Chance Pell Grants and historically black universities and minority-serving institutions (The Future Act, 2019) (Executive Order 13932).
This Nation must prepare for the future of work because it is here, and it is now. The United States has the drive and determination to fill the jobs that exist in this current environment. We must continue to prioritize providing our workers with the tools and skills necessary to succeed.
AFPI WORKFORCE POLICY PRINCIPLES
AFPI aims to advance the America First Agenda through pro-American working family policies and research. AFPI will review, research, and push policies that put hardworking Americans and their families first, bolster programs that provide opportunities for multiple pathways to good-paying careers and ensure that the private sector and the public sector work together to prepare high-school to mid-to-late career workers for the work that exists. AFPI understands the importance of ensuring Americans of all ages and backgrounds are positioned for opportunity and upward mobility. The greatest avenues to providing a robust and inclusive economy that encourages the dignity of work and opportunity for all, AFPI believes is through the following four main policy priorities:
1) Workforce Development Modernization and the Creation of Multiple Pathways to Family-Sustaining Careers: Due to the seismic shift in work resulting from COVID-19, millions of Americans need to be reskilled or retrained by 2030. AFPI understands the importance of modernizing American education and training by accelerating reskilling and the facilitation of innovation in workforce development. AFPI will develop policies and research focusing on opportunities and metrics to expedite American workers’ return to employment and upward mobility. States will play an important role in creating multiple pathways to good-paying jobs and implementation of skills-based hiring practices. The following approaches can help achieve this:
- Expand apprenticeships to new and emerging industries to provide increased skills-based training and opportunities for good-paying job careers without having to receive an expensive, often debt-inducing, 4-year degree
- Increase short-term, workforce-focused Pell grants to provide more options to students to acquire skills needed by in-demand industries
- Implementation of tax credits for lifelong training and education
- Enhance intergovernmental collaboration with Governors and local leaders to identify skill gaps using real-time, industry-relevant data and design policies to close such gaps
- Create and build upon existing public-private partnerships to enhance upward mobility by tailoring policies to evolving economic conditions and industry needs
- Reform occupational licensing within the states to help workers obtain portable credentials and quickly locate to where their skills are in high demand
2) Destigmatize Vocational Education: AFPI will drive Career and Technical Education (CTE) policies that expand and destigmatize vocational programs. The goal of these policies is to establish vocational education in every high school across the country. In 2018, over 30 million jobs were available and did not require a bachelor’s degree (Fishman, Ekowo & Ezeugo, 2017). NFIB also found that 89 percent of their surveyed employers had major labor quality issues as it pertained to hiring in 2018. Expanding CTE can enable students to pursue alternative pathways should they choose to and enter good-paying careers without earning an expensive and may be unnecessary 4- year degree. The following approaches can help achieve this:
- Prioritize investments in CTE
- Increase work-based learning across all industries—beyond building and trades
- Incentivize high schools and community colleges to partner and provide postsecondary credits to students enrolled in CTE
- Address the decline in youth unemployment and the financial barriers within higher education
3) Engage the Private Sector: Transformation happens beyond the government, which is why AFPI will educate and work with the private sector to commit to expanding programs that educate, train, and reskill American workers from high-school age to near-retirement so that they can be prepared for the jobs of now and the future and also be in a more resilient position to succeed in a constantly evolving economy. AFPI will provide research on how the public sector can leverage the private sector to increase job opportunities and upward mobility for all Americans. AFPI will educate employers and states on the importance of layoff aversion and the need for employer incentives to reinforce it. The following approaches will be critical for its success:
- Be a resource and partner to states who launch their own initiatives that leverage the private sector to train, reskill, and provide job opportunities for their workforce.
- Educate individual Americans, state, and federal leadership on the Find Something New Campaign and how platforms like this can help more Americans be aware of opportunities and the skillsets needed for the ever- changing job space.
- Highlight the importance of work-based learning opportunities as a model to improve youth employment rates
- Work with private sector leaders to support and grow successful models
4) Increase Data Transparency: AFPI will provide research on the need for better data to help individuals and employers make better-informed decisions regarding careers and hiring employees.
- Bureau of Labor Statistics Job Openings and Labor Turnover Survey (JOLTS), a national survey, can better determine job vacancy and skills data by location
- Beyond JOLTS, there is a need for high quality, granular panel data that captures disaggregated trends by industry, demographic, geography, and more LER technology is viable and can reduce labor market frictions, and governors could leverage this through public-private sector partnerships
- Advocate for credentials around employability skills
- Improve the transfer of credit and recognition of prior learning
AFPI will address these policy priorities through research, education, and engagement by:
- Targeting legislation that encourages and advances opportunities for vocational education, retraining/skills development, and lifelong learning, especially for low- and moderate-income workers
- Highlighting regional economic clusters and partnerships that provide best-in-class industry-focused training and skills development
- Leveraging initiatives such as the Pledge to America’s Workers—highlighting the best small/mid-size businesses and practices implemented to retain and retrain workers during the economic recovery
The United States has among the most resilient and most robust workforces in the world. In order to maintain and strengthen this resilience, AFPI understands the importance of preparing American students and workers with the necessary skills to fill the jobs that exist and prepare for the jobs of the future. This is not a role for the government alone; both the public and private sectors must come together to achieve greater outcomes for the future of work and education institutions and training providers must approach this challenge with new solutions. AFPI will provide substantial evidence of the advantages of vocational education and multiple pathways that lead to family-sustaining careers. Through public- private sector partnership and investment, AFPI will amplify how we can collectively cultivate pro-growth, pro-worker, and pro-family policies and effectively implement them to benefit and sustain our greatest asset—the American worker.
Linda McMahon serves as Chair of the Board for the America First Policy Institute (AFPI) and Chairman for AFPI’s Center for the American Worker. McMahon served in President Donald J. Trump’s Cabinet as Administrator of the Small Business Administration.
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