A Call for “Good Jobs” AND “Good Workers”

Harry J. Holzer is a Professor of Public Policy at Georgetown University

In the aftermath of the “Great Recession,” much of the world continues to focus on the quantity of jobs being generated in industrial and developing countries, and on how they affect employment and unemployment.

But, over the longer term, we also need to the raise the quality of jobs produced in our economies and the skills of workers who might fill them. I have done a great deal of empirical work on U.S. job quality and what these trends mean for education and workforce development policies. While this work focuses almost exclusively on U.S. labor markets, some general principles and policy implications emerge that I believe are applicable to industrial countries and to those now industrializing.

What are these principles? First that job quality – as measured by pay levels and benefits, and the degree of permanence over the longer-term – matters independently of the quality of the workers who fill these jobs. For a given level of skills, some firms choose “high road” practices and create “high performance workplaces,” consistently paying higher wages and providing better benefits, and not just because of regulations or unions. But in a world in which product and factor markets are becoming ever more competitive (owing to growing globalization and digital technologies), high-road compensation practices must coexist with high worker productivity for firms to survive and thrive. Indeed, if workers do not have basic skills that merit investments in training or if it is difficult to find workers with these basic skills, firms will instead create low quality jobs.

The second principle is that job quality is increasingly more positively correlated with worker skills. In previous generations, high-quality U.S. jobs in durable manufacturing and elsewhere could be substitutes for worker skills. Now job and worker quality are becoming complements. And that implies higher levels of income inequality across workers of different education and skills levels than would be generated only by skills differences. Thus, when high school dropouts could get good jobs in durable manufacturing, differences in job quality across workers tended to limit inequality; today, when only workers with postsecondary credentials can get good jobs in health technology or the information technology sector, differences in job quality exacerbate inequality between those with and without those credentials (see my recent book, Where Are All the Good Jobs Going?)

Thoughts for Labor Market Policy

What do these observations mean for labor market policy? Policies that incent or assist employers to create high-quality jobs – such as increases in the minimum wage, higher rates of unionization, or government efforts to target new and growing firms – must also make sure that skilled workers are available to fill them. But rather than focusing only on academic skills and higher education separately from the labor market, the U.S. evidence suggests a need for education and workforce policies that more effectively link to labor demand and to sectors and employers where good jobs are generated. Education institutions (like U.S. community colleges) and other training providers must work more closely with employers and industry associations, targeting high-demand and higher-wage sectors and firms.

This can be done through high-quality career and technical education at both secondary and postsecondary schools – which combine strong academic and occupational training – and through “sectoral” workforce development programs for disadvantaged and dislocated adults. Indeed, U.S. evidence suggests that such efforts are often the most successful and cost-effective training programs for such workers. And employers can be encouraged, through tax credits or subsidies and technical assistance, to create workplaces and jobs that generate and reward these skills. In fact, I recently advocated a set of competitive grants from the U.S. federal government to the states that would fund training partnerships between employers in key industries, education providers, workforce agencies, and intermediaries at the state level (see the Hamilton Project at the Brookings Institution).

Of course, in a dynamic world where labor demand shifts occur frequently and in unanticipated ways, workers must receive strong general training as well as occupation-specific skills. And our training systems must be nimble enough to allow for workers to be retooled and retrained. Workforce development systems must be created that can engage employers on a large scale, so that they find it practical and affordable to retrain their incumbent workers or new hires, when necessary.

Taking such steps will not be a panacea for the large increases in income inequality that we observe in globalizing labor markets, but it almost certainly would help.

This post was first published on the Jobs Knowledge Platform.