This article was written by Regan Price, Economic Development Research Intern, Center for Regional Economic Competitiveness and Smart Incentives.
Since the onset of the COVID-19 pandemic, millions of workers have experienced job loss or have left the workforce entirely. The unemployment rate in the U.S. reached 14.8% in April of 2020 following the spread of the COVID-19 virus and subsequent economic shutdowns. And while the unemployment rate has been trending downward since April 2020, unemployment rates remain almost double the rate prior to the pandemic.
Figure 1: Monthly Unemployment Rates (December 2019-June 2021)
Note: Figure 1 shows the average citizen unemployment rate from December 2019 to June 2021 for all demographics. Data source: U.S. Census Bureau.
Additionally, data by the U.S. Bureau of Labor Statistics shows the rate of job openings across the country is increasing, despite high levels of unemployment. For June 2021, the rate of job openings across the nation was 6.5 percent, compared to 4.2 percent in December of 2019. State governments must now grapple with uncomfortably high rates of unemployment and address industry-reported “labor shortages.”
State Government Intervention
One economic tool in a state government’s proverbial toolbox is to implement state workforce development incentive programs as a method of spurring workforce development and mitigating unemployment in its respective state. The State Business Incentive Database tracks these initiatives and provides insights into the mechanisms states use to support employers and workers in developing the workforce necessary for economic success, to satisfy both the needs of workers and their families and industries.
Historically, state incentive programs designed specifically for workforce development have been implemented at a much lower rate compared with programs designed to address other business needs, such as capital access and tax relief (see Figure 2).
Figure 2: New State Business Incentives (Workforce vs. Non-Workforce/Other State Incentives)
New State Workforce Development Incentive Programs
In 2021, Maine, Colorado, Utah, and Florida are among the states that implemented new workforce development incentive programs to manage high unemployment rates, the adverse economic effects of the COVID-19 Recession, and address worker and employer needs.
The 2021 Back-to-Work Program in Maine offers qualifying businesses of all industries a one-time $1,500 grant for new full-time hires and a $750 grant for new part-time hires. The new hires must have been receiving unemployment benefits at the time of hiring.
Colorado also passed a new grant program in 2021: The “Investments in Reskilling, Upskilling, and Next-Skilling Workers Program” appropriates $25 million to the Colorado Workforce Development Council to invest in unemployed and underemployed workers. The appropriated funds will support individuals in need of:
- “Reskilling, which supports unemployed and underemployed workers to change industries to return to work or obtain more appropriate work based on their skills.
- Upskilling, which assists workers in increasing skill levels to retain or advance in their employment; or
- Next-skilling, which supports workers in developing future-ready skills necessary for employment in the twenty-first century,” according to the new state law.
Similarly, the Utah State Legislature passed legislation in 2021 appropriating funds to create a new talent development program for eligible businesses that create new incremental high paying jobs in the state. Program administrators may award up to $10,000 per new job created. The program is currently in development and will be administered by the GO Utah Office (the Governor’s Office of Economic Development).
Likewise, the Florida 2021 Open Door Grant Program, “will provide grants to school districts’ postsecondary technical centers and Florida College System institutions to cover up to two-thirds of the cost of short-term high-demand programs for eligible students upon successful completion and award of a credential of value,” according to the legislative language. The new program is a component of the “SAIL to 60 Initiative,” a state strategic effort to increase economic self-sufficiency and lower unemployment in Florida. The program is currently in development and will be administered by the Florida Department of Education.
New programs in 2021 seem to be following historic trends in workforce development incentive program design. Most new (and older) workforce incentive programs are grant-focused, meaning the state has a particular sum of money for the program, and grants are administered either to community colleges, technical schools, workforce intermediaries, or workplaces in exchange for the accomplishment of some general policy goal. For example, x amount of the total grant money will be given to the grantee in exchange for one new job created.
As state governments work to recover from the COVID-19 recession, incentive programs remain a policy option for governments looking to lower unemployment rates and build a skilled and satisfied workforce. When designing an incentive program, states must consider the labor needs of industries, the capacity of workers, and tailor each workforce development program accordingly to administer relevant, effective, and financially efficient workforce development programs.
As states work to manage high unemployment rates and decide how to spend federal COVID-19 stimulus money, Smart Incentives and C2ER will continue to monitor the economic recovery and state business incentive trends. For more information, please visit the State Business Incentive Database.