The cost of housing was one of the top concerns of voters throughout this past 2024 election season. Both leading candidates proposed to remove regulatory barriers to building new homes and to implement tax incentives to support first-time homebuyers. Any serious effort to increase the supply of houses in the United States, however, will need to strengthen the construction workforce. Many factors compound this need across the country, including waves of retirement, safety concerns, and a lack of diversity and inclusivity in recruitment. As construction firms struggle to fill open positions, it becomes inevitable that they will see skills gaps among their workers.
One solution to this problem is for employers to invest in on-site job training, though many frontline workers report receiving no formal training from their employers. Incumbent worker training programs help fill these gaps in workforce training by offering the opportunity to offset employers’ training costs. This policy aims to keep businesses competitive while providing workers with opportunities to gain new skills and advance in their workplace.
A 2023 study by Marian Negoita and Annelies Goger investigates the impacts of an incumbent workforce training program, California’s Employment Training Panel (ETP),[1] on participating employers and workers from 2012 to 2017. During this period, just over half of ETP’s new contract funding went to employers in manufacturing and construction industries. The study shines light on how states and workforce intermediaries can collaborate to support construction and other industries.
Key findings
- Participating companies grew their workforces and revenues. Two years after receiving funds and successfully training employees, companies tapping funds from the ETP had an average of 22 percent more employees than a comparison group of similar companies that did not receive ETP funding. The companies also saw an increase in sales relative to the comparison group, though estimates vary widely. Employers attributed this success to improved productivity, employee motivation, and competitiveness.
- Experiences with California’s ETP model varied based on a company’s age and size:
- The model appeared to work best with medium-sized companies (19– 100 employees), and companies had been in business between 10 and 30 years. These firms reported using the funds to build and formalize in-house training and career ladders. In such cases, the funding had a greater impact than on larger companies and empowered businesses to hire more employees and increase revenue.
- Larger businesses (more than 100 employees) saw very little impact from the training funds, perhaps because they may have already established well-run internal training systems.
- Small companies (those with fewer than 19 employees), as well as younger ones (less than 10 years old), benefited the least from California’s ETP model. In some cases, they were worse off. This may be due to limited organizational capacity and burdensome compliance requirements of the program. While employers in general lamented that eligibility rules and reporting requirements can be confusing, the reimbursement structure posed a significant barrier to access for these smaller and younger businesses.
- Women were underrepresented among ETP trainees, making up only about one-third of those trained through funded programs between 2012 and The construction and manufacturing sectors, both of which have disproportionately male workforces, received the majority of ETP contracts and the largest funding allocations at this time. The share of women trainees increased to 44 percent from 2012 to 2013, when the healthcare sector received a larger share of ETP funds.
Policy and practice implications
The authors identify the following implications for policy and practice:
- State-run incumbent worker training programs should make efforts to reach and recruit employers in sectors with a greater representation of women States can also adjust the criteria for approving funding applications to reflect priority populations to boost training for veterans, people with disabilities, and businesses in places experiencing high unemployment.
- Resource pooling to fund incumbent worker training can help address the issue of employers underinvesting in employee training, butthere is a need to shape programs to accommodate a variety of firm sizes and ages. States implementing programs similar to California’s ETP program should pilot ways to reform the pay-for-performance structure so that small firms are not burdened by waiting for reimbursement. A central access point for resources on the public workforce system, and how to improve internal training systems, would help younger companies make the most of incumbent worker training funding.
- States might see the greatest return on public training funds by allocating a majority share of funding to companies that are medium sized (19–100 employees) and have been in business for 10–30 years. These companies experienced the largest impacts on job creation and preservation, competitiveness, and productivity. Additionally, they contribute to greater diversity in local and regional economies.
California’s longstanding ETP aims to help businesses create high-wage jobs and retain workers while providing workers with new opportunities for career advancement. This study finds promising outcomes associated with the program from 2012 to 2017. California’s labor market was tight during this time, however, so more research is needed to understand how current labor market conditions affect the outcomes of this training model, and how it can be adapted to better serve small businesses. As communities across the country plan significant housing projects and update aging infrastructure, incumbent worker training programs may prove useful for upskilling the existing construction workforce and creating pathways to good jobs for new workers.
[1] California’s ETP is funded by an Employment Training Tax and is run by an eight-member panel representing labor, the business community, and the state government. This panel determines what types of training are eligible, the rates of reimbursement, and the documentation requirements for the program’s pay-for-performance structure. Funding contracts can be awarded to single employers or an intermediary, such as a community college, union, or workforce board, on behalf of multiple employers. The state program allows employers to determine their own needs and training methods, from classroom-based instruction to on-the-job training. To be reimbursed, employers must show that workers completed the planned training and were retained at the agreed-upon wage rate for 90 days post-training.