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Making Bootstraps: A Mid-Career Break to Boost Wage Growth

Computer room

(Stux/Pixabay)

Summary

15 March 2015. Finding a solution to stubborn wage stagnation in the U.S. has so far eluded policy makers, with most ideas aimed at lower-pay workers, such as raising the minimum wage. A remedy needs to be found for working people at all wage levels. One solution to consider is providing workers with a mid-career break for a year to build skills for higher-paying jobs. Crafting such a program, called Universal Sabbatical for Advancement or USA grants, would be modeled after the G.I. Bill and benefit both employers and employees, as well as the country as a whole. Taxpayers would fund training for the workers and basic living expenses, but since the training is designed to qualify recipients for higher-paying jobs, the costs would be paid back in higher income tax revenues. Public colleges and universities would play a central role in delivering the course work, but would also find a new pool of highly motivated mid-career students.

Introduction

The rebounding U.S. economy in 2015 may be creating hundreds of thousands jobs every month, but there is little celebration among workers. While more jobs are being created, wages and salaries paid to most workers have barely budged in purchasing power since 1979. An analysis by the Pew Research Center in October 2014 cites data from Bureau of Labor Statistics showing median weekly earnings rose from $232 in 1979 to $782 in 2014. But when accounting for inflation over that period, median weekly earnings in 2014 dollars stayed about the same, below $800. In the most recent (February 2015) monthly employment report, BLS shows average weekly earnings in the U.S. at $703.04, up about 2 percent from $686.08 a year earlier.

Pew’s analysis points to several possible reasons for the stagnation in earnings: rising fringe-benefit costs such as health insurance, fewer jobs in higher-wage industries and thus a shift toward job growth in low-wage industries, and educational achievement falling behind workers in other countries. Most solutions to this problem proposed so far focus on lower-wage jobs, such as increasing the minimum wage and increasing access to community colleges. Other macroeconomic solutions involve more government spending to fix roads, bridges, and schools, or building new facilities, such as high-speed rail services.

But we can also try solutions that give individual workers the tools to improve their own earning power, in effect giving workers their own bootstraps to pull up their careers. The plan proposed here — called Universal Sabbatical for Advancement grants, or USA grants — aims to give workers a year off in the middle of their careers to improve their current skills or change careers, and thus qualify for higher-paying jobs.

Modeled on the G.I. Bill

This plan would incorporate elements of the G.I. Bill, a law with a solid track record of success going back to World War II, not only for individuals but the U.S. economy and society overall. If designed and executed properly, taxpayer funds invested in individual worker development would pay off many times over in higher worker and employer productivity. Moreover, taxpayers would also get their investment back many times over in higher income tax revenues.

Long-term mid-career training is not unknown in some sectors of the economy. Many academic institutions allow for sabbaticals for their faculty and some government agencies provide for mid-career training opportunities. Both the author and his wife, for example, took advantage of these opportunities offered by their employers.

The latest version of the G.I. Bill, known as the Post-9/11 G.I. Bill, provides a one-time opportunity for up to 36 months of education benefits, payable for 15 years following service members’ release from active duty. Benefits include full tuition and fees for in-state students at public colleges and universities, as well as stipends for housing, books, and supplies. Benefits for veterans going to private or foreign schools are capped at a national maximum rate, but some private institutions or out-of-state schools have a Yellow Ribbon program that provides financial help to bridge the gap between in-state tuition rates and those charged to the student.

Like the G.I. Bill, USA grants for mid-career workers would be a one-time opportunity, but with more prerequisites and tighter limits on benefits. The program would be available to workers from age 30 to 55, and would enable them to take training classes, get an advanced degree, or enroll in online courses full time for 12 months. Recipients would get their course work, books, and fees paid up to the equivalent of in-state tuition at their state universities. Workers would also get unemployment benefits for the 12 months to defray their living costs.

Planning is critical

One goal of USA grants is to integrate the opportunity into the recipient’s career plans and employer’s business needs. Workers and employers would first plan out the skills the employees need to qualify for a higher paying job with the company or organization. Timing of the one-year sabbatical would also be negotiated between workers and their employers.

Given that USA grants are a one-time only opportunity, both workers and employers have incentives to think through carefully the best way to use the opportunity. If done right, both parties can come out ahead: workers gain new skills and a better job, while employers gain more productive and loyal employees. The program would also include tax credits for companies to offset expenses, such as temporary help, to cover for their employees on sabbatical.

Planning for the one-year sabbatical would aim for gaining the greatest possible skill-building experience. The more detailed the enumeration of skills to be developed in that one-year period, the better the worker will be able to find sources for meet those skill-building goals. And just as important, the detailed list of skills would provide colleges and universities with an agenda to deliver the required training.

For some, maybe many, participants, USA grants could provide a way to change jobs or careers. In those cases, individuals would need to plan their sabbaticals independently of their employers, and would most likely mean leaving their jobs. In these situations, the worker would be taking a risk with a sabbatical. With the right preparation, however, the recipient would find a new job that meets the skills developed during the sabbatical year, particularly in advanced technology industries.

At a conference in February 2015 at Brookings Institution in Washington, DC – reported in Science & Enterprise — several industrial employers talked about their problems finding high-skilled employees to fill many high-paid engineering and manufacturing jobs. At the meeting, CEOs of Stanley Black and Decker and Siemens-USA told how their companies established training and apprenticeship programs with local community colleges to train people in their communities for these hard-to-fill jobs. With USA grants, companies with these staffing needs could advertise for and recruit grant recipients who want to develop the skills needed for these higher paying jobs.

Public colleges and universities play key roles

A key feature of USA grants is the role of public universities, 4-year, and community colleges that would organize individual learning programs for grantees. USA grant recipients would go first to a public university or college in the states in which they reside, where counselors would help grantees find classes, training programs, online courses, and internships to build the skills spelled-out in their sabbatical plans. Those educational experiences could be at the counselors’ schools or other sources, including online courses.

Putting public colleges and universities as the main point of contact for USA grantees would for many of these schools be an added responsibility, but it would also provide them with a large pool of mid-career students for their classes. Given that USA grantees would have specific learning needs and be highly motivated to build their skills, many public universities, 4-year, and community colleges would likely welcome these many students to their ranks.

The public colleges would also be responsible for finding classes and courses that effectively deliver the learning they claim. Having these institutions as the first point of contact would prevent unscrupulous for-profit colleges from targeting USA grantees, as many commercial schools have done with G.I. Bill recipients. A U.S. Senate report in July 2014 showed 8 of the top 10 recipients of G.I. Bill benefits in the 2012-13 academic year were for-profit colleges, grabbing $1.7 billion in that academic year alone. Of those 8 companies, 7 were under investigation by state or federal authorities for misleading recruitment practices and other violations.

In addition, the average cost for veterans attending for-profit colleges was twice that of public institutions. Of the student veterans graduating from their institutions, 3 out of 4 went to public universities or colleges, while about 13 percent went to for-profit colleges. Clearly, for-profit colleges have shown they’re not fit to take part in programs like USA grants.

While the G.I. Bill provides the model, USA grants would not replace the G.I. Bill. Veterans would still have their G.I. Bill benefits, as one of the ways this country expresses its gratitude for their service. But as their careers develop, veterans could also take part in USA grants at the appropriate time.

Perhaps the biggest long-term benefit of USA grants is the recognition that learning has value at many points in a person’s life, not just early on. How many of us have said, “If I had to do it all over again ….” With USA grants, that opportunity would not be so far-fetched.

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