By Tony Ditta

Nichola Lowe is Professor of Urban and Regional Planning and Community Economic Development at the University of Minnesota, Humphrey School of Public Affairs and Director of the Master’s of Urban and Regional Planning. Her book Putting Skill to Work: How to Create Good Jobs in Uncertain Times presents an “argument for reimagining skill in a way that can extend economic opportunity to workers at the bottom of the labor market” with particular focus on the institution of workforce intermediation.

Nichola Lowe

Professor Lowe’s work addresses the skills problem in America’s labor market. Many refer to the problem as a “skills gap” and attribute it to skill-biased technological change: advances in technology like computing which increase demand for skills that most workers don’t have. But Lowe sees it as a problem of interpretation: skill and skill development have been too narrowly defined. Employers need to embrace a wider definition of skill — especially thinking outside the box of college degrees — and take on more responsibility in training their workers.

Lowe views the skills problem as part of a more general problem of job quality. Jobs have gotten worse over the last decades, including (but not limited to) the unwillingness and/or inability of employers to develop their employees’ skills. The solution will require action by employers, policymakers, and labor market institutions. In particular, she advocates for workforce intermediation as a way to begin by addressing skills and building from there to correct the general quality problem.

What is workforce intermediation?

Workforce intermediaries are institutions defined by a “dual-customer” approach: “serving both job seekers and employers, in order to enhance employment prospects through organizational or industry expansion.” They provide services such as:

  • Connecting local employers and high schools or community colleges to align education and available jobs
  • Training workers in skills that are applicable to local industries
  • Communicating with employees to identify problems within firms
  • Setting up formal mentoring within firms

There are around 1,000 workforce intermediation institutions in the United States, and they are diverse in both form and function. Working as part of nonprofit organizations, labor unions, or community colleges, intermediaries often specialize by sector, industry, geography, and the size of firms with which they work. For example, Lowe focuses on regional intermediaries that work with small- and medium-sized enterprises (SMEs) in the manufacturing sector.

Why mediate?

Why don’t firms and workers do these things themselves? And why is intermediation a useful tool?

The view from economics

The economic argument for intermediation focuses on the incentives behind evaluating and developing general skills. SMEs want skilled workers, but they face intense labor market competition. A firm that invests in evaluating the skills of prospective employees or training existing employees gains nothing if competitors can poach these workers or if the threat of poaching drives up their wages.

So firms take the cheaper option: evaluating skill with simple indicators like a college degree and providing only what training is necessary for entry-level positions. This puts the onus of demonstrating and building skills onto workers.

However, many workers do not have the time or money for training (for example, to go to college or accept a lower wage during on-the-job training) and have limited access to credit. Or they may not know which skills are worth pursuing. The market fails to provide adequate investment in skills.

Enter workforce intermediaries. Using their knowledge and resources, they can train workers in useful skills or facilitate education at school. And with repeated interaction with firms, they can credibly screen and advocate for prospective employees without college degrees or formal certifications. 

On the other hand

To a certain extent, Lowe agrees that incentive problems can play a role. In particular, she names a lack of power among SMEs (which includes competition for labor) as a major barrier to development. But the economic story is at best incomplete, and may be misleading.

For one thing, Economics largely views skill development as preparation to get a good job, but Lowe contends that it’s part of what makes a job good. On-the-job training makes the job itself better by conferring a sense of growth and competency. So it can be useful for intermediaries to train workers, but it’s even better if they can help a firm set up its own ongoing training system.

On a deeper level, the standard economic story doesn’t include uncertainty about what “skill” is or how it’s produced. Some models include uncertainty about how skilled a particular worker is or their fit for a particular job, but they generally assume that employers know exactly what a skilled worker can do and how skills can be obtained. There’s good reason to doubt this assumption — skill is complicated. It’s multifaceted, and not just in the sense that there are many tasks a worker may or may not be good at. It includes “higher level” attributes like creativity and ingenuity which contribute to productivity and innovation in complex ways. Skill is also collective in that it depends upon and interacts with other people in the workplace. Lowe says skill must be interpreted by actors in the labor market, and they can get it wrong.

That said, uncertainty around skill need not be a problem. In fact, the uncertainty offers an opportunity for intermediaries to engage with firms and encourage them to change from within. For example, by pushing uncertainty in how skills are developed, intermediaries can convince firms to take a multi-pronged approach to training, say a combination of classroom teaching and on-the-job mentoring.

The ability to instigate change within firms allows intermediaries to reach beyond training and hiring into other features of job quality like higher wages, internal promotions, and communication between employees and employers. Broadening the scope beyond just skills and training also informs other policy options. Consider education: economists (and others) advocate for subsidies to higher education. Subsidies would get more people educated, but they wouldn’t fix the fact that less educated people are stuck in entry level jobs which pay poorly and offer little opportunity for advancement.

Equity

From a strictly economic perspective and from the perspective that Lowe endorses, workforce intermediation promotes equity in the labor market. Intermediation benefits people with the least access to training and education: often those with the least wealth. It can also reduce employers’ reliance on social networks or family ties in hiring. These are inexpensive ways for employers to screen applicants, but if owners are rich and white, they can exclude poor people and people of color. More broadly, intermediaries can give voice to people with the least power in the labor market — promoting their interests in the workplace and in political discourse. 

Learning from success

Given the diversity of intermediaries and environments in which they work, there’s no single exemplar institution, but Lowe identified a few that have been particularly effective and may provide useful lessons.

Her major criterion for success was their ability to work with firms beyond just the hiring decision, advocating better policies within the firm. She said that such institutions are not just workforce intermediaries, but also workplace intermediaries. (She was also quick to note that not all intermediaries have the resources necessary to engage with firms this way, so their inability to do so should not be regarded as failure.)

She highlighted three intermediaries:

 

Scale, replicate, and adapt

The next great challenge and opportunity in intermediation is extending beyond their hyperlocal reach.

One method is simply scaling up existing organizations. Many intermediaries are resource- constrained and/or subject to the whims of local politics. With more and steadier funding, they can reach more people and build the deep relationships necessary to engage workforces and workplaces. 

Another method is to replicate existing successes in new places. For example, Lowe discussed a novel project by the Wisconsin Regional Training Partnership in which they partnered with national organizations to create a generalized apprenticeship program in manufacturing. The program (and technical assistance from national organizations) can be picked up by intermediaries in multiple states. 

Of course, it’s rarely possible to purely replicate a program from place to place. Programs must be adapted to fit regional arrangements. Here the hyperlocal nature of intermediation is advantageous; embedded in their local context, intermediaries can suit their work to local needs.

She cautioned against piecemeal thinking in this process. Intermediaries operate holistically, so it’s easy to miss what works by focusing only on small aspects of programs that seem to be the cheapest or most effective.

Intermediaries and unions

To some extent, intermediaries are filling in the vacuum left by the decline in unionization and union power. Lowe attributes much of the skill and job quality problems to the decline of unions. However, she sees a role for intermediaries even if unions grow back.

Intermediaries can facilitate changes demanded by unions. Lowe discussed the recent success of unions in sector bargaining: representatives from unions, industry, and government coming together to set higher wages in sectors like fast food, domestic work, and healthcare. While many workers benefit from these efforts, there will inevitably be firms that cannot afford the change. This matters even though the average effect of minimum wage increases on employment is small (SMEs may not have the labor market monopsony power of larger firms). Rather than let firms fail and their jobs disappear, intermediaries can provide support which makes them and their workers more productive.

Intermediaries can also fill in the gaps that unions leave behind. Many workers are excluded from union coverage because they work in firms that are too small or states without legal protection for unions. These workers would still benefit from the resources and advocacy that a union would provide, so intermediaries can pick up that mantle. 

What can’t intermediaries do?

Although Lowe is optimistic about the capabilities of intermediaries, she was careful to note that they cannot operate on their own, and there are many issues they simply can’t manage. She made it very clear: while most of her work deals with non-governmental actors, there is still a major role for the government to play in education, healthcare, and redistribution — especially in racially minoritized communities. 

Intermediaries can help the government by:

  • Communicating with workers to identify barriers to workforce advancement (like childcare, housing, or transportation)
  • Bringing these barriers and possible solutions to policymakers’ attention
  • Facilitating changes made by law and supporting firms that need help navigating them

However, intermediaries cannot pass policies, and some problems require policy response. 

 

On the Other Hand is a blog series that highlights insights on the economy from outside mainstream economics. We are reaching out to scholars in fields like sociology, history, and political science, for their perspectives on pressing economic issues. We aim to unpack the inequality-perpetuating features of existing institutions, successful institutional arrangements, and alternative institutional trajectories for the future with a particular focus on local labor market, industrial, and development policies.

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