Not Really a Custom Job | Eastern North Carolina Now

   Publisher's note: The article below appeared in John Hood's daily column in his publication, the Carolina Journal, which, because of Author / Publisher Hood, is inextricably linked to the John Locke Foundation.

    RALEIGH     North Carolina spends $12 million in state tax dollars every year on a program called Customized Training. Run by the state community college system, it provides job training for employees of particular firms, focusing specifically on the skills required to produce goods or services at those locations. Essentially, the program compels taxpayers to subsidize the human-capital costs of North Carolina companies.

    Is this a good idea? Set aside the question of whether you think it is appropriate for taxpayers to subsidize post-secondary education and training in the first place. The North Carolina state constitution required such a subsidy. Most politicians, including most conservative politicians, plan on retaining a major role for the state in funding and administering higher education and job training programs.

    Given all that, the question remains: Should tax dollars be spent solely on generalized education and training that can be used at any workplace? Or should job training customized for particular firms be part of North Carolina's educational portfolio?

    On the one hand, there is pretty good evidence that generalized job training is ineffective. Of the tens of billions of federal, state, and local tax dollars spent on job training nationwide - including about $1.4 billion here in North Carolina - the vast majority is spent on programs that do not train individuals to work at particular job sites. Most of these government programs have pathetic results. A comprehensive analysis by the U.S. General Accounting Office in 2011 concluded that "effects of participation were not consistent across programs, with only some demonstrating positive impacts that tended to be small, inconclusive, or restricted to short-term impacts."

    In North Carolina, for example, most participants in generalized job training fail to find a subsequent job in their field. This is not a phenomenon of the recent, weak economy. Low rates of job placement and retention have been common for many years. In some cases, success is so rare that no one bothers to compute the rates anymore.

    Job training in the private sector, by contrast, is far more successful. "Returns to firm-sponsored training are positive and large while returns to government-sponsored training are low or even negative," according to a 2012 study by researchers at the University of Toronto. What makes the difference, it seems, is job mobility. Private firms typically train their own current or prospective workers, while graduates of government programs move on to a variety of job settings for which their training may not be directly relevant. (Private job training is also a vastly larger enterprise than government job training, by the way. Formal and on-the-job training together costs North Carolina employers and workers approximately $15 billion, or 10 times what government spends.)

    So if generalized job training tends to be of questionable value, and customized training by employers is a good investment of private dollars, that might lead one to conclude that the state ought to spend its dollars more like companies do - by training particular employees for particular jobs at particular workplaces.

    Which is what the community college system's Customized Training program does. The problem is that once you substitute tax dollars for company dollars, you still build in some distance between recipient and destination. As Triangle Business Journal reported a couple of weeks ago, only 25 percent of applicants involved in Customized Training actually end up working at the targeted company.

    That is, of all the potential employees who sign up for the program and receive training, only a quarter end up being hired. The remaining participants receive training customized for jobs they don't get.

    There doesn't appear to be any concerted effort to track what happens to this large majority of program participants. But if the return on investment for them is comparable to that of participants in other job training programs, North Carolina is misspending a lot of tax money here.

    We can't afford to do that anymore.

    Hood is president of the John Locke Foundation and author of Our Best Foot Forward: An Investment Plan for North Carolina's Economic Recovery.