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A Perspective from Main Street: Long-Term Unemployment and Workforce

Part III: Considerations and Further Research

Forum participants identified a number of considerations and recommendations to address the labor supply issues and barriers to employment discussed at the forums.

Workforce Strategies Should be Targeted to Local Markets

Because the causes of unemployment are driven by different factors within geographies, broad national and statewide programs may not effectively address high unemployment rates that exist at the community level. Consequently, participants commented that workforce strategies need to be tailored and targeted to specific community (or neighborhood) needs. Additionally, these efforts need to be informed by current and reliable research and data. A more intense local focus will help mitigate a major concern expressed by participants regarding poor coordination and communication among workforce development organizations, industry, and educational sectors.

Considerations and research to support local workforce development efforts:

  • providing data sets and analysis of local labor markets
  • identifying new growth sectors for local markets
  • reviewing identified best practices in workforce development
  • developing strategies to enhance coordination among local workforce development programs and organizations
  • analyzing the unemployment gap for disproportionately impacted groups including minorities, youth, and persons with disabilities
  • identifying opportunities to mitigate the geographic challenges faced by LMI individuals seeking employment

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Sector-Based Approaches Should Focus on Career Ladders

Participants noted that helping individuals out of long-term unemployment should include not only access to employment but an opportunity to improve their future prospects and prosperity. For example, sector development should include structured "career ladders," a workforce development strategy designed to guide workers from basic- to higher-level skills in the workplace. Successful career ladders rely on the expertise of industry leaders to develop appropriate paths. Furthermore, coordinating with educational and workforce institutions to build standard credentials to fill positions across regions and employers would improve the workers' ability to benefit from these programs.

In the health-care sector, nursing programs provide a good example of a career with a ladder that helps workers to maximize both career advancement and income over time. Following this career ladder, new workers can be trained first as lower-skilled, home health workers, then as LPNs, then as registered nurses (RNs), and so on up the ladder. One strategy for developing a segment of the workforce like this is to have funding and programming that is easily accessible and provides stackable credentials, accreditations, or degrees.

Considerations and research for developing career ladders:

  • developing projections of workforce demands for growth sectors of the economy, including skills gaps, potential wages, and opportunities for individual advancement
  • analyzing educational and workforce resources needed to develop identified skills
  • identifying appropriate performance measures for sector-based initiatives
  • analyzing whether sector-based approaches increase the employability and earnings of LMI individuals and other disadvantaged workers
  • identifying private funding streams for workforce certificate programs

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Mitigate Employer Risks

Participants commented on a notable shift in hiring practices. In recent years, hiring practices such as the use of drug testing, background checks, and credit checks have become more widely used in an effort to reduce employer risk. In Maryland, participants noted that stricter regulations and an increase in risk-management practices by employers are negatively affecting populations that are already vulnerable to high rates of unemployment.39 Because the long-term unemployed face a substantial challenge when seeking work, participants recognized that these individuals often require intense services--in some cases, a costly and time-consuming prospect.

Some forum participants suggested that policy changes could mitigate certain risks or provide a financial incentive to the employer, and thereby lead to increased hiring of the persistently unemployed. The suggested policy changes include bonding programs for the long-term unemployed, tax incentives such as the Workers Opportunity Credit, and subsidies for on-the-job training.40

Considerations and research regarding employers risk management:

  • studying the practices of pre-employment screening tools, such as background and credit checks, and their effects on employment decisions for different groups of long-term unemployed
  • evaluating strategies targeted to improve opportunities for populations with particular barriers to employment
  • analyzing the cost to "buy down"/bond the risk of difficult-to-employ populations, by sector

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Clarify Use of Community Reinvestment Act in Workforce Development

Participants said that in order to broaden the use of the Community Reinvestment Act (CRA) for job creation and workforce development purposes, banks and communities need additional guidance from the regulators about how the CRA can be used to support these activities. In Oklahoma, for example, bankers noted the importance of guidance from their regulators when considering CRA investments. They said that clarification of CRA treatment of workforce development support would be useful, especially regarding documentation and consideration of activities outside of assessment areas. These participants added that incentives for supporting workforce development programs need to be clarified and tied to CRA requirements, broader bank goals, or, ideally, both.41

Consideration and research for the CRA:

  • explaining to CRA examiners and financial institutions the usefulness of CRA as a tool to assist with workforce development
  • developing a compendium of examples where workforce development activities have been CRA-eligible
  • convening financial intuitions and workforce development stakeholders to discuss ways in which they can collaborate to support common missions and business practices

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The Federal Reserve System is committed to continuing to examine the issues facing the long-term unemployed. Appendix A to this report provides a list of the local forums hosted by regional Federal Reserve Banks. Appendix B includes a snapshot of key activities that the Community Development offices of the Federal Reserve Banks engaged in during 2012 in response to long-term unemployment and workforce development issues.

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39. Forum in Baltimore, Maryland, on February 13, 2012. Hosted by FRB Richmond. Return to text

40. Forum in Kansas City, Missouri, on January 23, 2012. Hosted by FRB Kansas City. Return to text

41. Forum in Oklahoma City, Oklahoma, on November 16, 2011. Hosted by FRB Kansas City. Return to text

Last update: February 4, 2013

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