In April, the Future of Work Initiative released a report, Automation and a Changing Economy, which highlighted a number of proposals to help workers and businesses meet automation’s challenges and seize its opportunities. States, and governors in particular, are on the front lines of understanding and responding to how work is changing.
This week, governors from across the country will gather in Salt Lake City for the National Governors Association Summer Meeting and have the opportunity to consider the full range of ideas that could help prepare their constituents for a changing work landscape. In addition to technology and automation, work is being shaped by domestic and foreign outsourcing, global competition, and climate change. Together, these trends are transforming jobs and sectors, as old products, roles, and industries are replaced by new ideas and companies. While these changes have brought economic benefits, they have also contributed to stagnant wages, declining benefits and training investments, weakening workplace protections, and, in some cases, job loss.
State policymakers, employers, education and training institutions, and other critical stakeholders must work together to create solutions that are responsive to the specific conditions in each state. These solutions should help workers take advantage of new and changing jobs, while providing the necessary supports that workers will need to weather the disruptions from changes in technology, trade, and organizational structure. Drawing from our automation report, below are six options that governors and state legislators could act on to better prepare for an increasingly automated economy.
1. Create a Worker Training Tax Credit
Employers play a crucial role in helping their workers develop the skills necessary to adapt to change. Unfortunately, data suggests that private sector investment in workers has been declining over time. To reverse this trend, state policymakers should provide an incentive for companies to increase their investment in worker training by developing a Worker Training Tax Credit. This tax credit, which the Aspen Institute Future of Work Initiative proposed in a 2018 issue brief, would mirror the policy design of the popular Research & Development Tax Credit.
Under the proposal, businesses would establish a base expenditure level for qualified training expenses, which would be determined by averaging the amounts spent in each of the three years prior to the current tax year. The value of the tax credit would be 20 percent of the difference between the current year qualified training expenditure and the base expenditure level. The credit would only cover training for non-highly compensated workers (less than $120,000 per year), the standard currently used in the Internal Revenue Code. Eligible activities include employer-provided training that leads to an industry-recognized credential, or training programs eligible under the Workforce Innovation and Opportunity Act.
In fact, several states already provide businesses with tax incentives to encourage training investments, including Connecticut, Georgia, Kentucky, Mississippi, Rhode Island, and Virginia. These incentives range between 5 percent and 50 percent of eligible training expenses. In New Jersey, State Senator Troy Singleton has introduced a version of a worker training tax credit, and in Virginia, a proposal by House Delegate Kathy Byron to reform the state’s existing Worker Retraining Tax Credit in line with this proposal was signed into law this year.
2. Expand Apprenticeships
Students and workers need access to programs that provide in-demand skills that lead to good jobs and stable careers. The apprenticeship model is an effective approach because it includes local business participation, the ability for participants to earn income while learning a new skill in a work setting, and a pathway to a relevant job upon completion.
State policymakers should consider three complementary approaches to encouraging apprenticeship programs: (1) create a state department or office dedicated to actively encouraging and assisting businesses in establishing apprenticeship programs; (2) provide a tax credit to encourage businesses to establish apprenticeship programs; and (3) provide marketing assistance to boost awareness of apprenticeship opportunities.
A number of states are leading the way in successfully promoting apprenticeships. According to the U.S. Department of Labor, 12 states offer tax credits to employers that hire apprentices, and another 12 states offer tuition support for registered apprentices. For example, in Montana, employers who hire workers through the Montana Registered Apprenticeship unit are eligible for a $750 tax credit. Massachusetts now offers a tax credit for employers who sponsor apprenticeship programs equal to $4,800, or 50 percent of wages paid to each apprentice.
South Carolina has successfully expanded apprenticeship enrollment from roughly 800 in 2007 to 30,000 today by alleviating administrative hurdles as well as costs through a combination of tax credits, apprenticeship consultants who help businesses with the registration process, and an engaged community college system. North Carolina has recently launched a new online portal to help connect educators with local businesses and improve awareness of apprenticeships and other work-based learning opportunities.
3. Support Sector Partnerships
Upskilling and reskilling the workforce requires local stakeholders, such as employers, educational institutions, training providers, labor organizations, and workforce experts, to work together to identify current and future skills needs in their area or region. Through sector partnerships, stakeholders can address these challenges by developing education-to-employment talent pipelines.
There are a variety of encouraging examples of successful sectoral partnerships. In 2010, a Toyota plant near Lexington, Kentucky partnered with the Bluegrass Community & Technical College to create KY FAME, a work-based learning program to provide a pipeline of manufacturing technicians. The program has since expanded across the state. Other successful sectoral partnerships include Jewish Vocational Service–Boston (JVS–Boston), Per Scholas, Wisconsin Regional Training Partnership (WRTP), and Capital IDEA.
As the National Skills Coalition proposed, state policymakers should support sector partnerships with funding, technical assistance, and program initiatives. To do this, states can use federal funds provided for the WIOA Governor’s Reserve, or they can use their own funds. For example, Massachusetts uses state funds to provide competitive grants to partnerships and provides technical assistance through staff support, peer-learning opportunities, and data measurement.
4. Create Lifelong Learning and Training Accounts
Enrolling in an education or training program can be expensive, and despite many supports to help students save and pay for college, relatively few supports exist to help workers save and pay for short-term programs. State policymakers should create worker-controlled Lifelong Learning and Training Accounts (LLTAs)—which the Future of Work Initiative proposed in a 2018 issue brief—to help people pay for education and training opportunities over the course of a career. LLTAs would be co-funded by workers, employers, and government.
Beginning at age 18, state residents would be eligible to contribute up to $2,000 per year into their LLTA on a pre-tax basis, which would be matched by means-tested state government contributions. Lower-income workers could receive up to a 50 percent match. In addition, employers would also be eligible to contribute up to $2,000 annually to these accounts, with contributions for low- and middle-income workers excludable from taxable income. Contributions would not be permitted once the account balance reaches $10,000, which is enough to pay for tuition and fees for most two-year community college programs. The cap is a way to encourage workers to regularly use the funds throughout their careers. LLTA funds could be used to pay for any education and training programs that result in a recognized post-secondary credential—including industry-recognized certificates and state-regulated licenses and certifications—as well as testing and application fees.
Lifelong learning account demonstration programs have been implemented in Maine, Washington state, Chicago, and New York City. Washington has a voluntary employee benefits program where employers agree to match their employees’ contributions to a portable Lifelong Learning Account. In Massachusetts, State Senator Eric Lesser has proposed legislation to establish a similar program.
To help workers choose effective education and training programs, policymakers should complement LLTAs with (1) better data and analysis of labor market trends; (2) better and more accessible analysis of education and training program effectiveness; and (3) expanded career counseling services.
5. Expand the Earned Income Tax Credit and Raise the Minimum Wage
Ensuring that workers have the right skills and training is important but not enough if jobs are low-paying and don’t offer a path to the middle class.
The Earned Income Tax Credit (EITC) is considered one of the most effective tools that policymakers have to increase incomes for low-wage workers. State policymakers in states without their own EITC programs should consider creating them, and those in states with EITCs should consider expanding them. Twenty nine states supplement the federal EITC with a state EITC, and in 2019 three states—Minnesota, New Mexico, and Ohio—expanded their EITCs. In addition, policymakers should consider making payments monthly instead of annually and expanding eligibility further into the middle class.
Policymakers should couple an EITC expansion with an increase in the minimum wage. This would help raise wages for millions of low-wage workers, which have stagnated as the federal minimum wage and many state minimum wages have failed to keep up with inflation (adjusted for inflation, the federal minimum wage in 1968 was 40 percent higher than it is today). Raising the minimum wage doesn’t just raise the wages of the lowest-wage workers—workers that make slightly more than the minimum wage also see their wages increase in response.
6. Remove Restrictions to Work
Workers need the freedom to move between jobs, companies, occupations, and industries, and to become entrepreneurs by starting their own businesses. A dynamic and flexible labor market will help workers not only adjust to new technology, but allow them to take advantage of the new economic opportunities that technology will create. But in recent decades, legal restrictions on whom workers can work for and what kind of work they can engage in have proliferated. These include non-compete clauses, no-poach agreements, and occupational licenses. These restrictions have contributed to the steady decline in job mobility and stagnation of wages over the last 25 years.
In order to give workers the freedom to choose where to work, including as entrepreneurs, state policymakers should prohibit non-compete clauses for low-income workers and ban no-poach agreements, including those between separate franchises with a single chain. Similarly, state and local policymakers should review their licensure requirements to ensure that they are not unnecessarily burdensome.
California has a long-standing ban on the enforcement of non-competes, which some academics credit for the success of the state’s tech industry. In recent years, at least ten states—including Hawaii, Idaho, Illinois, Maine, Maryland, Massachusetts, New Hampshire, Rhode Island, Utah, and Washington—have passed laws that restrict non-compete clauses, while other states—including Indiana, New York, and Virginia—have considered legislation. Last year, a coalition of 11 state attorneys general investigated no-poach agreements at several chains, and under threat of legal action, numerous fast food chains agreed to end the practice.
Conclusion
The challenges and opportunities presented by increased automation and the emergence of new technologies will vary by region, and thus, the appropriate solutions for each region will vary as well. Although governors are operating with different policy structures and priorities in place, they share many common goals for the prosperity of their states’ workers. By acting on the above proposals, as well as the broader list of proposals in Automation and a Changing Economy, governors can prepare workers for future transitions.
