Lisa Kahn | University of Rochester

Do Workforce Development Programs Bridge the Skills Gap?

Abstract:  Most U.S. states have workforce development programs that offer firms grants to train their
own workers. We create unique data linkages between participating firms, employment, and
vacancies to explore the determinants and consequences of such programs. Training grants
are more prevalent in markets where firms face greater employee poaching risk, suggesting
these programs help overcome a market failure in updating worker skills. After training, firms
experience prolonged employment growth and downskilling in their job posts, relative to a
matched control group. Training appears to help firms move toward optimal scale and expand
opportunities for less skilled workers.