U.S. Department of Labor 

Employment and Training Administration Occasional Paper 2005-15 

 

Community College Training and the 

Workforce Investment System

Duane E. Leigh 

Washington State University 

This report has been funded, either wholly or in part, with Federal funds from the U.S. 

Department of Labor, Employment and Training Administration under Contract Number 

AF-12985-000-03-30. The contents of this publication do not necessarily reflect the 

views or policies of the Department of Labor, nor does mention of trade names, 

commercial products, or organizations imply endorsement of same by the U.S. 

Government. 
U.S. Department of Labor 

Employment and Training Administration 

Table of Contents 

1.0 Introduction ........................................................................................................... 1 

2.0 Key Elements of WIA ............................................................................................ 2 

3.0 Research Questions ............................................................................................. 4 

4.0 Basic Facts about Community Colleges and the Workforce Investment System . 5 

5.0 Community Colleges and Local Labor Market Efficiency ...................................... 5 

5.1 Effect on Labor Market Outcomes .................................................................... 6 

5.2 The DoED Community College Labor Market Responsiveness Initiative .......... 7 

5.3 Job Placement .................................................................................................. 8 

5.4 Contract Training Programs .............................................................................. 9 

6.0 The Effect of WIA on Incentives Faced by Community Colleges ........................ 10 

6.1 Incentive to Change the Mix of Program Offerings ......................................... 11 

6.2 Incentive to Enroll Fewer Disadvantaged Students......................................... 13 

6.3 Incentive to Opt Out as a Training Provider .................................................... 14 

6.4 Incentive to Participate on Workforce Boards, Operate One-Stop Career 

Centers, and Serve as Intensive Service Providers ................................................... 16 

7.0 WIA and the Demand for Community College Programs ................................... 17 

7.1 Number of Participants Receiving Training ..................................................... 17 

7.2 Competition with For-Profit Career Colleges ................................................... 18 

8.0 Summary and Recommendations ...................................................................... 19 

8.1 Redesign of WIA Performance Standards ...................................................... 19 

8.2 What Is the Proper Balance Between Training and Other Services and 

Between ITA and non-ITA Training?.......................................................................... 21 

8.3 Who Are ITA Recipients and What Choices Do They Make? ......................... 22 

8.4 Payoffs to Alternative Fields of Study ............................................................. 22 

8.5 Applicability of Experience Gained from Contract Training ............................. 23 

Endnotes ....................................................................................................................... 24 

Appendix A: Tables ...................................................................................................... 25 
U.S. Department of Labor 

Employment and Training Administration 1

1.0 Introduction 

 The rapid pace of technological change in the U.S. economy means that doors to job 

opportunities in growing sectors are continuously opening, while job opportunities in stagnant 

sectors are declining. The implication for American workers is the importance of an education 

and training system that must be first, accessible, and second, targeted to real employment 

opportunities. Community colleges are the principal provider of training services to adults 

looking for employment or seeking to retain existing jobs, as well as to traditional students in the 

18-22 year age category. In terms of accessibility, community colleges typically offer open 

admission and charge low tuition. This makes community colleges the principal gateway to 

postsecondary education for minorities and first-generation college students and for immigrants 

seeking language skills and a better understanding of American culture. 

 As far as providing the training needed for today’s jobs, community colleges have over 

the years broadened their missions beyond the traditional “transfer function” to include a heavy 

emphasis on occupational skills training as well as adult basic education. In addition, community 

colleges perform an important economic development function by supplying “contract” training 

to local business firms and government agencies. In his February 2004 State of the Union 

Address, President Bush recognized their critical role in the employment and training system by 

proposing $250 million in additional funding to community colleges that partner with local 

employers to provide training in high-demand skills. 

 The purpose of this report is to examine areas of research that might be of interest to the 

Employment and Training Administration (ETA) from the perspective of increasing the 

participation and effectiveness of community colleges in our national employment and training 

system. Currently, the Nation is operating under the workforce investment system established in 

1998 by the Workforce Investment Act (WIA). Section 2.0 of the report sketches the main 

elements of WIA and outlines the organization of the workforce investment system. Following in 

section 3.0 are nine research questions involving the role of community colleges in the 

workforce investment system. These questions are organized under three headings: (1) 

community colleges and local labor market efficiency, (2) the effect of WIA on incentives faced 

by community colleges, and (3) WIA and the demand for community college training.1

 The bulk of this report discusses the evidence available to answer these research 

questions. To provide context for the discussion, section 4.0 presents summary data comparing 

community colleges and the workforce investment system in terms of size, services delivered, 

and student and participant characteristics. With this background, section 5.0 then considers 

evidence relating to the effect of community colleges on the efficiency of local labor markets. 

WIA’s effect on community college incentives is examined in section 6.0, while section 7.0 

addresses the effect of WIA on the demand for community college programs. 

 Section 8.0 outlines some important issues that have not been adequately addressed in the 

existing literature and suggests several policy questions that appear to warrant ETA 

consideration for future research support. 
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2.0 Key Elements of WIA 

 WIA maintains separate funding streams for three major targeted population groups—

dislocated workers, disadvantaged adults, and youth. However, services for dislocated workers 

and disadvantaged adults are combined into a single program model. The guiding principles of 

the Act are the following: 

• Universal access to services 

• Hierarchy of services 

• Consumer choice and individual responsibility 

• Accountability of service providers 

• Decentralization of authority 

This section discusses, in turn, how each of these guiding principles is implemented. 

 Beginning with the principle of universal access, WIA replaced the Job Training 

Partnership Act (JTPA) that had guided the Nation’s employment and training system since the 

early 1980s. JTPA limited access to services to adult participants who were economically 

disadvantaged and who faced at least one significant barrier to employment.2 Most eligible 

participants received training services including adult basic skills and occupational skills 

training. WIA removed these restrictions on access to services reflecting the underlying 

philosophy that in a dynamic economy virtually all Americans may find themselves needing one 

or more workforce services at some point in their working lives. 

 WIA established a three-level hierarchy of services consistent with the “work-first” 

philosophy of welfare reforms of the 1990s. To expedite movement of the unemployed into jobs, 

all eligible workers receive “core” services that consist of short-term interventions including job 

search assistance, career counseling, and labor market information. Core services are typically 

delivered in a self-service environment. 

 A second level of services, called “intensive” services, is available to unemployed 

workers unable to obtain employment through core services. These services include assessment, 

individual employment plans, case management, and short-term prevocational services. In 

addition, intensive services are also available to employed workers (termed “incumbent 

workers”) in need of additional assistance to retain their jobs. Intensive services are usually 

delivered with staff assistance. 

 The third and final level of services is training. Training services include classroom 

occupational skills training, on-the-job training, customized training, job readiness training, and 

adult basic skills. Training services are available only to participants unable to obtain or to retain 

employment through intensive services. Moreover, training-eligible participants must meet the 

following tests: (1) they must possess the skill prerequisites for the training selected, (2) training 

programs selected must be linked to local job opportunities, and (3) training services must be 
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Employment and Training Administration 3

unavailable under Pell grants. Local One-Stop Career Center operators make the decision on the 

appropriate level of services. 

 The principle of consumer choice and individual responsibility is implemented through a 

training voucher provided to individual participants called an Individual Training Account (ITA). 

ITAs represent a substantial departure from past practices. Rather than program operators 

contracting with community colleges or other service providers for training courses, ITAs 

empower eligible participants to choose and pay for their own training program among those 

offered by approved providers termed “Eligible Training Providers” (ETPs).3

 Use of training 

vouchers is intended to enhance competition among training vendors, thereby increasing their 

responsiveness to participants’ needs and the overall quality of their offerings. Information 

assisting participants in making their choices is collected in a Consumer Report System (CRS) 

and disseminated by One-Stop Career Centers. 

 WIA addresses the accountability of service providers by establishing a number of 

performance standards. Most training providers, including community colleges, are initially 

eligible for program participation for a period of up to 1 year. Following that first year, 

subsequent eligibility requires meeting state-level performance criteria specified for each 

approved program. For all individuals participating in approved programs, these performance 

criteria include: (1) program completion rates, (2) percentage of program completers employed, 

and (3) wages at placement in employment. For individuals receiving WIA funding who 

participated in an approved program, additional performance criteria include: (1) retention in 

employment measured 6 months after being placed in a job, (2) wages received after 6 months of 

employment, and (3) if applicable, the percentage of individuals who obtained a license or 

certificate, an academic degree, or another measure of skills. There are a total of 17 core 

performance criteria. State officials negotiate performance standards with the Federal 

Government, and then negotiate, in turn, with local area officials. Data collected and reported by 

training providers, in addition to determining provider eligibility, are disseminated by One-Stop 

Career Centers as consumer information. 

 The final WIA principle of decentralization of authority is accomplished through the 

three-tier organizational structure of the workforce investment system. At the top of the 

structure, each state is to establish a state Workforce Investment Board with the major 

responsibility of developing a 5-year strategic plan. Membership of the state board includes the 

Governor, two members of the legislature, business representatives (who are to constitute a 

majority of the board’s membership), and representatives of other organizations that might 

include community colleges. In the second tier, local Workforce Investment Boards play a key 

policymaking role, including designating One-Stop Career Center operators and local providers 

of training services. A majority of local board members must be members of the local business 

community, but community college officials may also serve. 

 The third and most important tier of the workforce investment system is the One-Stop 

Career Center delivery system. Each local Workforce Investment Board is to establish at least 

one One-Stop Career Center. Local One-Stop Career Centers typically provide core employment 

services and determine access to intensive and training services. Community colleges may 

compete to serve as One-Stop Career Center operators. 
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3.0 Research Questions 

 This discussion of the major provisions of WIA raises nine questions involving the role 

of community colleges in the workforce investment system. These questions are as follows: 

1) Because training is to be linked to local job opportunities, is there evidence that 

attending a community college enhances earnings prospects, and do estimated returns 

differ across alternative fields of study? 

2) How effective are community colleges in placing exiting students in jobs in local 

labor markets? 

3) How involved are community colleges in supplying contract training and what can be 

learned from the contract training experience to make regular occupational skills 

curriculums more relevant to local employers? 

4) Do community colleges under WIA place greater emphasis than before on 

occupational skills training? 

5) Do community colleges under WIA have an incentive to raise admission standards 

resulting in enrollment of fewer disadvantaged students? 

6) Given challenging WIA performance standards, how can Federal and state 

government agencies encourage community colleges to participate as training 

providers in the workforce investment system? 

7) How common is it for community colleges to serve as One-Stop Career Center 

operators, to participate on local Workforce Investment Boards, and to provide 

intensive services? 

8) How does the number of individuals receiving training under WIA compare to the 

number of training recipients under JTPA? 

9) Does the ITA subsidy adversely affect the market share of community colleges? 

 Beginning in section 5.0, the evidence available to answer these questions is organized 

under three broad headings. Research questions 1-3 are grouped under the heading of community 

colleges and the efficiency of local labor markets. Research questions 4-7 involve the effect of 

WIA on incentives faced by community colleges, and evidence on these four questions is taken 

up in section 6.0. Finally, research questions 8 and 9 relate to WIA and the demand for 

community college training programs; section 7.0 addresses the available evidence on these two 

questions. 

 Before turning to the evidence, section 4.0 provides some background information on 

community colleges and the workforce investment system. 
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4.0 Basic Facts about Community Colleges and the Workforce Investment 

System 

As indicated in table 1, U.S. community colleges currently provide academic services to 

approximately 10.4 million students from nearly 1200 campuses, most of which are in state 

community college systems. About 45 percent of all first-time college freshmen attend a 

community college, and 44 percent of all undergraduates attend a community college. 

Community college students tend to be older on average than 4-year college students, and nearly 

two-thirds of community college students are enrolled on a part-time basis. While geographic 

proximity, open admission, and low tuition policies make community colleges the gateway to 

higher education for individuals who would otherwise have little or no access, it is worth noting 

in the table that nearly one-third of students receive some form of aid. The primary sources of 

revenue for public community colleges are state funds, tuition and fees, and local funds. Federal 

funds comprise only 5 percent of community college budgets. 

The number of individuals receiving WIA services is a small fraction of nationwide 

enrollment in community colleges. Program Year (PY) 2000 (July 2000–June 2001) data from 

the Workforce Investment Act Standardized Record Data (WIASRD) data set indicate that a total 

of 238,203 participants completed either WIA intensive or training services (Frank, Rahmanou, 

and Savner 2003). Shown in table 2 are data disaggregated for 85,081 adults and 76,401 

dislocated workers who received some form of service. (WIA also served 76,721 youth.) For 

these two participant categories, receipt of training services is somewhat more common for 

dislocated workers than adults. About 56 percent of dislocated workers received training as 

opposed to 49 percent of adult participants. Among those who received training, in addition, 

occupational skills training clearly dominates on-the-job training (OJT) and adult basic skills 

training for both categories of participants. It is also interesting to note in table 2 that the number 

of ITA accounts is small in comparison to WIA recipients who received training. Among 

dislocated workers, ITA accounts represent only 35 percent of individuals who received training 

services and 38 percent of workers who received occupational skills training. For disadvantaged 

adults, ITAs represent only about 41 percent of individuals who received training services. 

Comparing tables 1 and 2, WIA participants and community college students tend to be 

considerably older than the traditional college student age bracket of 18-22. In addition, females 

are more likely than males to enroll in a community college and to receive WIA services. In 

terms of education, table 2 shows that high school dropouts represent just 15 percent of adult 

WIA participants and that only 7 percent of participants have limited English proficiency. 

Percentages of high school dropouts and participants with limited English proficiency are even 

lower for dislocated workers. 

5.0 Community Colleges and Local Labor Market Efficiency 

 Labor market efficiency typically refers to speeding up the matching of individuals 

seeking employment to vacant jobs in the local labor market. Training providers can increase 

labor market efficiency by: (1) putting in place training curriculums responsive to local employer 

needs, and (2) assisting trained workers in the employment search process. This section begins 

with an examination of the empirical literature measuring the impact of community college 
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training programs on labor market outcomes. Considered next are interim results from the U.S. 

Department of Education’s (DoED) Community College Labor Market Responsiveness 

Initiative. Section 5.3 reviews a small number of studies that look at the performance of 

community colleges in placing their students. Concluding this section is an overview of the 

contract training literature. Table 3 summarizes the evidence on the three research questions 

addressed in this section, as well the as evidence on the remaining six questions to be examined 

in sections 6.0 and 7.0. 

5.1 Effect on Labor Market Outcomes 

 Kane and Rouse (1999) provide a survey of the limited literature, relative to that 

available for 4-year colleges, that supplies estimates of the labor market payoffs to community 

college programs. Studies using national data such as Kane and Rouse (1995) and Leigh and Gill 

(1997) demonstrate that a year’s worth of credits earned at a community college is associated 

with a 5 to 8 percent increase in annual earnings, about the same impact as a year’s worth of 

credits at a 4-year college. These studies also indicate that although there is a sizable premium 

for earning a degree or certificate of program completion, the average community college student 

who enrolls but does not complete a degree or certificate still earns 9 to 13 percent more than the 

average high school graduate. 

 This literature suggests that on average enrolling in a community college does enhance 

earnings prospects. Nevertheless, positive average earnings effects may disguise quite different 

effects estimated for different programs. Grubb (1996, ch. 3) makes the point that because 

occupational skills programs tend to be job-specific, the economic returns may be low or even 

zero if an individual cannot find training-related employment in the local labor market. In other 

words, data specific to alternative fields of study for a particular geographic area are needed to 

determine the benefits of occupational skills training. This, in turn, requires data sets that include 

a large number of community college students so that credible estimates can be produced for 

alternative fields of study. As indicated by Grubb and others such as Mueser, Troske, and 

Goreslavsky (2003), the most promising approach to obtaining a large enough sample of 

community college students is to make use of administrative data available at the state level 

matching community college student records, which contain field of study, to individuals’ 

earnings records obtained from Unemployment Insurance (UI) earnings histories. Grubb 

summarizes results of a study of two California community colleges that use data matching 

student records with UI wage records. Cross tabulations presented show substantial differences 

in economic returns by field of study and by receipt of a degree or certificate. 

 A larger scale study using student records matched with UI wage records is Jacobson, 

LaLonde, and Sullivan’s (2003, 2004) examination of the labor market payoffs to programs 

offered at all 25 campuses in the Washington State community college system. Their sample 

contains data for over 65,000 dislocated workers who lost their jobs during the first half of the 

1990s. For each dislocated worker, 14 years of quarterly earnings records are available for 

analysis. Making use of the longitudinal nature of the data, Jacobson, LaLonde, and Sullivan 

reach four main conclusions. First, they find that the estimated results to a year of community 

college credits are substantial—about 9 percent for men and 13 percent for women. Second, 

these earnings gains are comparable in size for older and younger dislocated workers. Third, 
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earnings estimates are initially negative during the first year after leaving school, but they grow 

over time and show no sign of deteriorating after 10 years. 

 The final, and possibly most important conclusion for this report, is the authors’ finding 

that earnings estimates differ substantially by major field of study. Specifically, large long-term 

quarterly earnings gains on the order of $550 for men and $830 for women are obtained for 

academic courses in science and mathematics as well as for more technically oriented 

occupational skills courses, including courses in health occupations. For all other community 

college courses, long-term earnings gains are much smaller. 

 Other than the major study by Jacobson, LaLonde, and Sullivan, studies are rare that use 

matched administrative data sets to investigate returns to alternative community college fields of 

study. However, a related study by Hollenbeck and Huang (2003) is of interest because it uses 

matched administrative data to evaluate three targeted workforce development programs that are 

based on community college occupational skills curriculums. Using Washington State data, the 

three targeted programs are Community and Technical College Job Preparatory Training, 

Community and Technical College Worker Retraining, and the Adult Basic Education Program.4

The Job Prep and Worker Retraining Programs are designed to provide technical skills saleable 

in local labor markets, with Worker Retraining targeted to dislocated workers. 

 Matching program data with UI wage records, Hollenbeck and Huang obtain short-term 

employment and earnings net impact estimates for participants who exited from education or 

training programs in fiscal year 1999–2000 and longer-term estimates for individuals who exited 

earlier in fiscal year 1997–98. Both the Job Prep and Worker Retraining Programs have sizable 

short-term impacts on employment (about 8 percent). Only Job Prep, however, has a positive 

short-term impact on quarterly earnings (about $1,470). In the short term, the Adult Basic 

Education Program is found to decrease both employment and earnings.5 A more optimistic 

picture emerges in the longer run, especially for earnings. In the longer run, both Job Prep and 

Worker Retraining have positive effects on quarterly earnings—$1,185 and $423, respectively. 

In addition, the Adult Basic Education Program is found in the longer run to have a small 

positive effect on employment while having essentially no effect on earnings. 

5.2 The DoED Community College Labor Market Responsiveness Initiative 

 More evidence on the linkage between community college training programs and 

employer needs will be forthcoming in a large-scale project funded by the DoED called the 

Community College Labor Market Responsiveness Initiative. The initiative has four phases. As 

part of phase I, Harmon and MacAllum (2003) provide a literature review intended to identify 

the characteristics of market-responsive community colleges. Their reading of the literature 

indicates that market-responsive community colleges share the following key characteristics: 

• A leadership committed to the market-responsive mission of the college. This 

includes top college administrators interested in pursuing contract training 

opportunities with local employers. 

• An established internal response mechanism dedicated to the rapid development of 

training curriculum to meet changing workforce demands. Such internal response 
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mechanisms often take the form of separate divisions (sometimes called 

“entrepreneurial colleges”) that are assigned the task of responding rapidly to changes 

in local economic conditions and training needs. 

• Partnerships with businesses and local workforce and educational organizations to 

develop curriculums appropriate to local employer needs. 

• Development of close ties to the community in order to stay current on local 

employer skill requirements, detect sudden shifts in training needs, and offer targeted 

and contract training. 

 The second component of phase I is an empirical study of factors associated with colleges 

with exemplary market-responsive programs. Jacobson (2003) describes characteristics of 50 

community colleges identified as exemplary that distinguish them from other colleges among the 

nearly 1,200 community colleges in the U.S. Exemplary community colleges tend to be 

institutions: (1) with large enrollments, (2) located in affluent areas of large cities, often suburbs, 

and (3) that receive substantial revenue from local sources. 

 Phases II, III, and IV of the DoED initiative are currently being carried out. Phase II 

involves site visits to at least 3 colleges in each of 10 labor markets. The objective of the site 

visits is to identify policies and practices that are effective in promoting labor market 

responsiveness. Building on the Jacobson, LaLonde, and Sullivan study, phase III consists of 

analyzing matched administrative data from transcript files and UI wage records to estimate the 

effect of community college attendance on employment and earnings for states other than 

Washington. Finally, phase IV will develop a handbook for use by colleges and local 

communities that summarizes results of the technical analysis. 

5.3 Job Placement 

 Turning to the placement of program graduates, community colleges can clearly enhance 

labor market efficiency by establishing relationships with local employers. Grubb (1996, ch. 6) 

describes that community colleges develop a variety of such linkages including advisory 

committees largely consisting of local employers, placement offices, informal placement by 

instructors, student followup and tracking, contract education, and various work experience and 

co-op programs. In his study of four local labor markets (Cincinnati, Fresno, Sacramento, and 

San Jose), Grubb concludes that while these linkages are common, they often work imperfectly. 

For example, he notes that placement offices at most community colleges are woefully 

understaffed, with the limited resources that are available devoted to finding part-time jobs for 

students rather than to assisting students leaving the institution to find permanent employment. 

Similarly, Deil-Amen and Rosenbaum (2003) contrast unfavorably the performance of 

community colleges relative to for-profit career colleges in providing placement services for 

graduates and finding part-time employment for students that is related to career goals.6

 Macro, Almandsmith, and Hague (2003, ch. 8) mention that WIA performance standards 

may encourage community colleges to increase the resources they devote to job placement. 

Judging from the evidence collected in their site visits, however, only a few colleges have 
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increased their hiring of job developers and placement staff. (More detail on the Macro, 

Almandsmith and Hague (2003) WIA implementation study is presented in section 6.0.) 

5.4 Contract Training Programs 

 Contract training programs differ from regular community college curriculums in three 

respects. First, courses are tailored or customized to meet the training requirements of particular 

employers. Second, the cost of training is paid for directly by the employer or by a government 

entity on behalf of the employer. Contract training thus may supply an important incremental 

source of revenue for financially hard-pressed community colleges. Third, contract training 

courses are typically designed to improve the skills of incumbent workers or those of 

unemployed workers seeking employment with the particular employer. 

 Virtually all community colleges provide contract training to local employers. Dougherty 

(2003) points out, however, that the level of contract training activity varies substantially across 

colleges. In particular, contract training varies with the size and industry mix of local employers. 

Measuring establishment size by number of employees using national employer data, Dougherty 

reports that utilization of community colleges for formal training ranges from 26.5 percent for 

establishments with less than 100 employees to 57.0 percent for establishments with 500 or more 

employees. The positive relationship between employer size and utilization of community 

college training is expected for a number of reasons. These include the observations that: (1) 

large firms are more likely to provide formal as opposed to informal training opportunities, (2) 

large firms are more likely to offer a formalized occupational structure that aids in employee 

retention, (3) large firms can spread the fixed costs of training programs over a greater number of 

trainees, (4) large employers are more aware of community college training programs and better 

able to leverage government subsidies, and (5) working with larger employers is more attractive 

to community colleges because of the larger enrollment base and the greater potential for future 

economic and political payoffs. 

 With respect to industry mix, Dougherty reports rates of community college utilization as 

low as 24.1 percent and 9.4 percent, respectively, for employers in wholesale trade and retail 

trade. At the other extreme, community college utilization rates for employers in durable goods 

manufacturing and finance, insurance, and real estate are 47.1 percent and 47.0 percent, 

respectively. Dougherty points out that while establishment size and industry composition are 

related, the large differences in community college utilization he observes also arise because 

state subsidies for workforce training tend to favor certain industries such as manufacturing over 

others. 

 Turning from the incidence of contract training to its effectiveness, Isbell, Trutko, and 

Barnow (2000) summarize the results of a DOL-funded assessment of nine exemplary contract 

training programs supported under JTPA. Industry affiliations of the nine employers involved in 

these programs include manufacturing, health care, banking, retail sales, temporary services, 

utilities, and transportation. Training services, which include classroom and on-the-job training 

as well as adult basic skills, were designed to prepare workers for specific job openings at the 

company sponsoring the training. Providers of training included community and technical 

colleges, for-profit career colleges, non-profit community-based organizations (CBOs), and 
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employers themselves. Participants are individuals eligible for JTPA assistance who were 

screened according to company employment criteria. 

 Isbell, Trutko, and Barnow indicate that contract training yields a number of benefits. 

These include (1) a high rate of program completion, (2) almost all training completers obtain 

jobs, (3) hourly wages that exceed average wages for similarly skilled workers in the local area, 

(4) uniform receipt of fringe benefits, and (5) high retention rates. 

 Given the benefits of contract training, the authors raise the question of why contract 

training is not more widely used. They suggest that there are four main barriers. First, local labor 

markets must be tight so that employers face an excess demand for workers possessing 

occupational skills. Second, small and mid-sized companies may lack the critical mass of 

workers and resources needed to undertake contract training programs. Third, the time and effort 

involved in negotiating and designing a contract training program can be considerable for both 

the employers and the local government agency. Finally, wariness of government red tape and 

uncertainty of future government support cause employers to have reservations about the wisdom 

of committing to contract training. 

 A second study by Krueger and Rouse (1998) is also worth discussing because it is 

specific to contract training supplied by community colleges, and it provides a quantitative 

assessment using college administrative records and employer personnel files. The governmentsubsidized community college training was offered to incumbent workers at two mid-sized 

companies in New Jersey, and the content of the training was largely adult basic education 

targeted to low-skilled workers. Krueger and Rouse find modest employment effects for training 

participants, although there may have been negative selection into both programs. For the service 

company studied, there is no significant effect of the program on wage changes of participants 

relative to nonparticipants. However, participants were more likely to be nominated for or to win 

a performance award following training. For the manufacturing company examined, average 

wage growth for trainees is higher than that for nontrainees, and trainees are more likely to bid 

for new jobs and to receive promotions than comparable nontrainees. 

 A final issue concerning contract training is the possibility of transferring lessons learned 

from community colleges’ contract training experiences to the general college curriculum. The 

point is that reaching a contract training agreement with local employers provides an important 

opportunity for college administrators to acquire concrete information about the skills employers 

require. The primary barrier preventing the communication of these lessons learned is, as noted 

by Harmon and MacAllum (2003) and Grubb (1996, ch. 6), the separation of contract training in 

many colleges in its own independent office with its own distinct course offerings and 

instructors. As a result, these authors suggest that a valuable opportunity is lost for making use of 

information gained through a college’s contract training operation to make regular occupational 

skills course offerings more relevant to employers.

6.0 The Effect of WIA on Incentives Faced by Community Colleges

Important provisions of WIA may have the effect of changing the incentives faced by 

community college administrators regarding decisions on admissions, curriculum mix, and 
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participation in the workforce investment system. In this section, research questions 4-7 are 

examined using evidence generated by four WIA implementation studies: D’Amico et al. (2001); 

Macro, Almandsmith, and Hague (2003); Barnow and King (2003); and Shaw and Rab (2003). 

Evidence developed in D’Amico et al. is based on data collected from site visits to 13 

grantees that participated in a demonstration project. Six of these grantees are local workforce 

investment areas including Baltimore, Indianapolis, Macomb/St. Clair, Portland, Southeast Los 

Angeles County, and Southwest Connecticut. The other seven grantees are states including 

Georgia, Missouri, Nebraska, North Carolina, Ohio, Pennsylvania, and Texas. These site visits 

were carried out in the late summer and fall of 2000. D’Amico (2002, 2003) reports on 

subsequent visits to each of these sites during 2001 and 2002. 

 Evidence presented by Macro, Almandsmith, and Hague (2003) is based on case studies 

of 16 local Workforce Investment Boards in 8 states (2 per state). States included are Florida, 

Massachusetts, Nevada, New Jersey, Oregon, Pennsylvania, Texas, and Wisconsin. The case 

studies were carried out for PY 2001 (July 1, 2001 to June 31, 2002). The authors (2003, ch. 8) 

note that the sites studied are “early implementers” of WIA because all received One-Stop 

Career Center implementation grants and several also received ITA demonstration grants. 

 The interim report by Barnow and King (2003) presents evidence obtained from site 

visits beginning in the summer of 2002 to 8 states, 16 local workforce areas (2 per state), and 

over 30 One-Stop Career Centers. States studied include Florida, Indiana, Maryland, Michigan, 

Missouri, Oregon, Texas, and Utah. 

 Shaw and Rab (2003) made site visits to three community colleges in each of six states 

(Florida, Illinois, Pennsylvania, Massachusetts, Rhode Island, and Washington). Interviewed at 

each site are faculty members and administrators and welfare and WIA caseworkers. Shaw and 

Rab also carried out interviews with state government officials and conducted focus group 

sessions with groups of low-income workers. The timing of their site visits and interviews is not 

indicated. The D’Amico et al. (2001), Macro, Almandsmith, and Hague (2003), and Barnow and 

King (2003) reports are based on larger studies that received DOL funding. In contrast, the Shaw 

and Rab study is part of a larger research project funded by three private sector foundations: the 

Atlantic Philanthropic Foundation; the Russell Sage Foundation; and the Annie E. Casey 

Foundation. 

6.1 Incentive to Change the Mix of Program Offerings 

Under WIA there are two incentives for community colleges to alter the mix of programs 

they offer. The first stems from the WIA requirement that continued certification of a community 

college as an ETP means satisfying 17 core performance criteria. It is important to note that for 

each community college all of its approved programs must meet these criteria. Hence, as 

emphasized by D’Amico et al. (2001, ch. IV), the ETP list is actually a list of training programs, 

rather than a list of training vendors. Section 2 summarized the 17 criteria which include rates of 

program completion and subsequent employment and earnings. 

 As noted by D’Amico et al. (2001, ch. IV), an important issue in this context is the usual 

design of community college programs as sequences of courses. The concern is that completion 
U.S. Department of Labor 

Employment and Training Administration 12

and employment rates might look quite low, especially in comparison to rates calculated for forprofit career colleges, if some students take the first course in a program on the ETP list without 

any intention to complete the entire program. Such students might be seeking only to gain 

exposure to the field. Other students, such as retirees, might be interested in completing the 

program but have no interest in subsequent employment in a related field. In either of these 

cases, a community college may decide to restrict the list of programs it submits for approval to 

only those that will produce the best outcome measures. These programs, in turn, are likely to be 

programs taken by students interested in occupational skills training that allow them to qualify 

for local job openings. 

The second incentive affecting mix of program offerings recognizes the influence of 

external factors such as the work-first philosophy existing at the creation of WIA, the influence 

of the business community on state and local Workforce Investment Boards, and the interest of 

state legislatures in encouraging economic development. As a consequence of these factors, a 

political climate may be created giving community colleges an incentive to alter their mix of 

programs, with occupational skills programs gaining in importance at the expense of traditional 

academic programs and adult basic skills. 

Gumport (2003) reports on the insights gained from focus group sessions with 

community college presidents in which they describe their responses to changing external 

pressures. One of the points to come out of these discussions is the importance the presidents 

attach to guarding what they view as core educational values. In the context of adult basic 

education, a core value is the democratic principle of open access through low-tuition, open 

admissions policies. Another core value the presidents emphasize is availability of a 

comprehensive array of programs. Referring specifically to workforce training, the presidents 

expressed concern that the provision of contract training to local business firms might move 

workforce development from a periphery activity to becoming central to a college’s identity. 

Shaw and Rab (2003) present additional evidence for Florida and Illinois of a changed 

political climate under WIA. In Florida, a highly integrated workforce development system 

limits WIA clients attending any of the state’s community colleges to only those programs listed 

on a statewide targeted occupations list. According to the authors, this list is determined by an 

occupational forecasting conference that considers employment, job openings, program 

placement, and earnings potential to determine a ranking of high-demand occupations for each of 

Florida’s 24 regions. New programs developed by community colleges are tailored to meet the 

skills required in targeted occupations which in practice are largely associated with high-tech 

companies. Often the training offered is short term and nondegree because that is what is 

required for targeted occupations. Note the similarity of these training course options to 

programs typically supplied by for-profit career colleges.7

 Shaw and Rab emphasize the 

inconsistency of the state’s increased emphasis on workforce development with the WIA guiding 

principle of consumer choice. 

In Illinois, Shaw and Rab suggest that WIA and the influence of the business community 

has led some community colleges to embrace workforce development as a primary mission of 

equal if not more importance than the academic mission.8

 Their evidence is limited but still 

suggestive. Drawing on an interview with an administrator of one Illinois community college, 
U.S. Department of Labor 

Employment and Training Administration 13

the authors note that workforce development appears to be gaining a more prominent place in 

college administrations. At this particular college, in addition, enrollment in occupational skills 

programs increased in the post-WIA period from 24 percent of all students in 1999 to 32 percent 

in 2001. 

6.2 Incentive to Enroll Fewer Disadvantaged Students 

 JTPA allowed for performance standards to be adjusted using a regression model that 

takes account of differences across colleges in participant characteristics and local economic 

conditions. WIA dropped the regression adjustment and, instead, mandated that performance 

standards are to be negotiated and adjustments made only if an appeal is filed. A major concern 

is that lack of an adjustment procedure will lead to “cream skimming” in the selection of WIA 

participants. For One-Stop Career Center operators, cream skimming takes the form of enrolling 

only those clients who are likely to contribute to positive results on required performance 

measures. 

 For community colleges, two incentives exist that may lead to cream skimming expressed 

in higher admissions standards. The first is that while cream skimming at One-Stop Career 

Centers may lead to higher quality enrollees in community college programs, WIA performance 

criteria apply to all students enrolled in approved courses rather than just WIA participants. 

Hence, overall community college admission standards may be adjusted upward to satisfy 

performance standards. A second incentive leading to higher admission standards is that the 

political climate established under WIA may lead community colleges to deemphasize adult 

basic skills as they emphasize occupational skills programs that lead to more immediate 

employment. With fewer adult basic skills courses to offer, it may make sense for community 

colleges to limit the demand for these courses by raising admission standards. 

 The available literature looks at cream skimming at the level of program operators rather 

than at the level of service providers like community colleges. Hence, only a brief overview will 

be provided of this substantial literature. In a recent paper examining cream skimming under 

JTPA, Heckman, Heinrich, and Smith (2002) summarize the state of the existing literature and 

report new evidence. Two of their findings stand out. First, they present evidence of cream 

skimming at the enrollment stage where program staff members have the most influence. 

Conditional on application and acceptance, blacks, high school dropouts, persons from lowincome families, and those without recent employment experience are found to be less likely to 

be enrolled than others. Second, the authors question the usefulness of JTPA performance 

standards because the short-term outcomes on which they rely appear to have essentially no 

relationship with desirable long-term impacts on employment and earnings. In connection with 

the first finding, Barnow and Smith (2004) draw the immediate implication for WIA: The 

absence of a regression model to adjust standards for serving individuals facing labor market 

barriers should make the incentive to cream skim even stronger under WIA than it was under 

JTPA. 

 Cream skimming under WIA is addressed in the evaluation reports by Shaw and Rab 

(2003) and Barnow and King (2003). Drawing on interviews carried out in Rhode Island and 

Florida, Shaw and Rab describe the pressure exerted on One-Stop Career Center operators to 
U.S. Department of Labor 

Employment and Training Administration 14

meet performance targets by enrolling only participants expected to produce successful outcome 

measures. The most disadvantaged applicants, in other words, tend to be denied needed 

education and training services because they are never enrolled in the workforce investment 

system and are not eligible for ITAs. Barnow and King (2003) add that in a majority of the states 

they studied (specifically Indiana, Maryland, Michigan, Missouri, and Texas), local Workforce 

Investment Boards took steps to enroll individuals predicted to do well on performance measures 

and to terminate from programs individuals expected not to do well.

6.3 Incentive to Opt Out as a Training Provider 

 Sections 6.1 and 6.2 raised the possibilities that community colleges will respond to WIA 

by changing the mix of programs offered or by raising admissions standards. However, the 

possibility also exists that colleges will make neither change but instead will decide to stop 

submitting performance reports; thus, voluntarily opting out as an approved training provider. To 

clarify the incentives involved, briefly consider the costs and benefits of meeting WIA 

performance standards. There are two primary cost considerations. The first, already described, 

is that pressure to meet stringent performance standards may oblige a community college to 

emphasize occupational skills training programs and to raise admissions standards. If the college 

feels that it is already appropriately responding to the needs of its local community, it will be 

reluctant to make either or both of these changes. The second is the significant out-of-pocket cost 

of developing and implementing a tracking system to collect data needed to satisfy performance 

requirements. 

 On the benefit side, the primary benefit of continuing as an approved training provider is 

additional student enrollment. Of course, this benefit hinges on the number of WIA-funded 

students a college anticipates that it will attract. If this number is expected to be small because 

little money remains for training services after taking care of core and intensive service needs, 

the college has little incentive to shoulder the costs of maintaining eligibility. 

 Evidence on the effect of WIA on the demand for community college programs will be 

considered in detail in section 7.0. To anticipate this discussion, it is clear from the WIA 

implementation reports that community colleges (correctly) expected the new law to lead to a 

sharp reduction in the number of WIA-funded students. Given this expectation, it is reasonable 

for community colleges to refrain from committing scarce resources to collect and report 

performance data for their programs. In Texas, for example, D’Amico et al. (2001, ch. V) report 

that the number of approved programs dropped statewide by about 80 percent from initial 

eligibility, when no performance information was required, to subsequent eligibility. The authors 

suggest that nearly all of the drop was the result of Texas community colleges deciding not to 

participate. Macro, Almandsmith, and Hague (2003, ch. 8) also report that a number of long-term 

training providers in Oregon refused to go through the ETP process because the expected number 

of WIA-funded students was too few to warrant the effort to satisfy data collection and reporting 

requirements. 

 The WIA implementation studies discuss in detail the concern of state-level officials that 

community colleges may opt out as approved training providers. A major problem for states is 

that limited community college participation directly impinges on the scope of consumer choice 
U.S. Department of Labor 

Employment and Training Administration 15

called for by WIA. D’Amico et al. (2001, ch. IV) describe the deliberations that took place in 

several states as state officials struggled to specify performance standards lenient enough to 

retain community colleges in the system but stringent enough to insure a minimum level of 

quality among training providers. D’Amico (2002) adds more detail for 11 of the 13 states for 

which vendor eligibility requirements were examined in 2002. Of these 11 states, 2 requested a 

DOL waiver to defer subsequent eligibility considerations until at least 2004 or 2005. Two more 

states intended to establish requirements for subsequent eligibility but had not yet done so at the 

time of the site visits. 

 Of the remaining seven states, D’Amico (2002) reports that all had reached decisions 

about what their performance requirements would be for vendor eligibility but only after 

protracted and often contentious discussion and debate. Two states set standards on just a few of 

the core measures of program performance. Three states set performance criteria on all or most 

of the core measures but expected vendors to meet the standards on just some of the criteria. 

Finally, two states established standards on all of the core measures and expected vendors to 

meet them all. Hence, the states surveyed varied considerably not only on their general approach 

to establishing performance standards but also on the levels of performance that vendors were 

expected to meet. To illustrate how performance levels varied for a particular performance 

variable, D’Amico (2002) reports that some states required vendors’ programs to record a 

program completion rate as low as 25 percent, while other states required a completion rate of 70 

percent. 

 Still another area in which states are attempting to work with training providers is in the 

collection of labor market information. It was mentioned in section 2.0 that WIA performance 

criteria include wage and employment data measured after 6 months on the job. These data are to 

be generated by matching administrative data from community colleges and other program 

providers with UI employment history records. Two studies using matched data of this type 

discussed earlier in section 5 are Jacobson, LaLonde, and Sullivan (2003, 2004) and Hollenbeck 

and Huang (2003). To lighten the burden on training providers to deal with large and complex 

administrative data sets, D’Amico et al. (2001, ch. IV) and Macro, Almandsmith, and Hague 

(2003, ch. 8) report that most states visited are working on procedures to centrally gather training 

provider performance data. The idea is that, with their greater resources and access to 

technology, the states are in a position to relieve community colleges of these data management 

problems. 

 Macro, Almandsmith, and Hague (2003, ch. 8) indicate, however, that few states have 

data currently available on training provider performance measures. Two states that appear to 

have made the most progress in this direction are Florida and Texas. In Florida, Macro, 

Almandsmith, and Hague (2003, ch. 8) describe that WIA participants are followed using the 

community college tracking database called the Florida Education and Training Placement 

Information Program. This database is linked to UI wage records allowing labor market 

outcomes to be measured for WIA participants and community college students alike. In Texas, 

D’Amico (2001, ch. IV) describe that training providers who are approved by the Texas Higher 

Education Coordinating Board are allowed to use data on program completion rates required for 

certification from that body in lieu of providing WIA-mandated performance data.9
U.S. Department of Labor 

Employment and Training Administration 16

 In still another approach to simplifying mandated performance requirements, Barnow and 

King indicate that Florida, Maryland, Oregon, and Texas are considering the idea of eliminating 

the difficulties involved in evaluating performance by individual program by moving to a 

concept of “system measures.” Under this approach, performance is measured on a geographic 

basis (for the entire state or for a local area) rather than on a program basis. Of course, 

eliminating performance measurement by program has the downside of restricting the 

information that could be made available to ITA recipients as they seek to make informed 

choices between programs offered by the same vendor and between alternative vendors offering 

the same program. Moreover, measuring performance across a geographical area that includes 

more than one community college fails to allow for the possibility that individual community 

colleges differ in their missions. Gill and Leigh (2004) examine this issue for the 108 community 

colleges in the California community college system. They reach two main conclusions. First, 

community colleges do appear to differ in the program mixes they provide suggesting important 

differences in their missions. Second, inter-college differences in program mix can be reasonably 

explained by differences in college-specific characteristics such as proximity to a 4-year college, 

demographics of the local community, and characteristics of the local labor market. In other 

words, observed differences in missions across colleges appear to make sense in terms of local 

community needs. 

6.4 Incentive to Participate on Workforce Boards, Operate One-Stop Career Centers, 

and Serve as Intensive Service Providers 

Section 3.0 indicated that community colleges may participate in the workforce 

investment system, in addition to their role as training providers, by serving as a member of state 

or local Workforce Investment Boards, as operators of One-Stop Career Centers, or as providers 

of intensive services. Barnow and King (2003) discuss the relative importance on state and local 

Workforce Investment Boards of business leaders, union officials, community college 

administrators, and state and local government officials such as Employment Service (ES) 

employees. Board membership would seem to offer community colleges the potential for gaining 

influence in setting polices regarding the assignment of WIA-enrollees to alternative services, 

including training, and in negotiating performance standards. Nevertheless, there seems to be 

little evidence that community college leaders are active on state and local boards. A surprising 

result in view of WIA’s emphasis on business community participation is Barnow and King’s 

finding of a relatively modest role played by business at the state and local levels.10 

Macro, Almandsmith, and Hague (2003, ch. 5) note that local Workforce Investment 

Boards have considerable flexibility in selecting One-Stop Career Center operators. For the 16 

sites they examine, the most common category of operators is nonprofit organizations, followed 

by consortia of partner agencies. Nonprofit organizations operated seven One-Stop Career 

Centers at the study sites, and consortia of partner agencies operated five additional One-Stop 

Career Centers. Community colleges operated One-Stop Career Centers at three sites, including 

both Oregon sites and one site in Florida. Community colleges are more commonly represented 

among the partner agencies in consortia operators. The authors note that community college 

participation is valued because of: (1) their experience in delivering employment and training 

services in their localities, and (2) their well-established administrative and billing departments. 
U.S. Department of Labor 

Employment and Training Administration 17

Results described by Barnow and King (2003) reinforce the impression that community 

colleges play an important but not dominant role as One-Stop Career Center operators. They 

report that among states studied, community colleges have a presence at One-Stop Career 

Centers in Florida, Michigan, and Texas; and other states have established satellite One-Stop 

Career Centers at community colleges. In Florida, community colleges initially operated OneStop Career Centers for 10 of the 24 local boards in the state. However, the authors report that at 

the time of their site visit, community colleges administered One-Stop Career Centers for only 

three local boards. 

Relatively modest community college participation on Workforce Investment Boards and 

as One-Stop Career Center operators appears to carry over to the role of intensive service 

provider. Macro, Almandsmith, and Hague (2003, ch. 7) report that community colleges place 

fourth in their ranking of four providers of intensive services. By far the most important category 

of provider is nonprofit organizations, followed by government agencies including ES, and then 

for-profit career colleges. 

7.0 WIA and the Demand for Community College Programs 

WIA is likely to have two effects on the demand for community college programs. First, 

the number of participants receiving training services may be lower than was the case under 

JTPA. Second, the ITA subsidy may change the relative cost of community college programs in 

comparison to those of other training providers leading to a change in the composition of 

demand. 

7.1 Number of Participants Receiving Training 

The implementation studies by D’Amico et al. (2001, ch. V) and Shaw and Rab (2003) 

indicate, at least in the early years of WIA, that fewer clients received ITAs entitling them to 

purchase training services than was the case under JTPA. D’Amico et al. suggest two reasons for 

this reduction in training opportunities. First, the hierarchy of services imposed by WIA meant 

that One-Stop Career Centers had less money available for training than previously. Second, 

successful job placement of clients receiving core and intensive services reduced the need for 

training services. Referring specifically to Illinois, Shaw and Rab add that the work-first 

philosophy of WIA was so clearly impressed on One-Stop Career Center operators that very few 

clients received ITAs during the initial years of WIA implementation. 

D’Amico (2002) provides evidence on the magnitude of the decrease in training 

opportunities for adults and dislocated workers under WIA. Using nationwide WIASRD data for 

PY 2000, he compares receipt of training services between JTPA “carry-overs” and WIA 

registrants, where JTPA carry-overs are individuals who enrolled in workforce programs prior to 

the date the state formally began WIA implementation. Among disadvantaged adults, training 

rates are found to drop from 73.8 percent for JTPA carry-overs to 37.1 percent for WIA 

registrants. The decrease in training rates for dislocated workers is also substantial—from 70.7 

percent for JTPA carry-overs to 39.0 percent for WIA registrants. 

D’Amico et al. (2001, ch. V) raise the issue that the large reduction under WIA in the 

number of ITA recipients is potentially only a transitional issue because, in the first couple of 
U.S. Department of Labor 

Employment and Training Administration 18

years of WIA’s implementation, few participants had a chance to progress through the first two 

levels of services to get to training. Barnow and King (2003) also address this issue. The authors 

report that as state and local workforce boards gained experience with WIA requirements, they 

moved beyond the work-first policy orientation that was typical of the late 1990s. In particular, 

many staff members interviewed stressed the importance of responding flexibly to the needs of 

clients and employers. Staff also cited recent evaluation findings that point to the longer term 

effectiveness of balanced strategies that rely on a combination of labor force attachment and 

human capital development. D’Amico (2003) adds that the local areas he visited moved from a 

work-first approach in WIA’s early years to a more balanced approach of providing services that 

program operators feel best meet the needs of clients and the community. 

Another consideration to add to this discussion is a point made in section 4.0 in 

connection with the surprisingly low ratio of ITA accounts to individuals receiving training 

under WIA. Table 2 reveals that in PY 2000, only 41 percent of adults enrolled in training and 

only 35 percent of dislocated workers enrolled in training received ITAs. Commenting on the 

widespread use of non-ITA alternatives, D’Amico (2002) remarks that as with the provision of 

training services in general, local variation in the use of ITAs is considerable. Many local areas 

use ITAs almost exclusively to fund training services, while many others rarely use ITAs. In 

local areas in which ITA funding is seldom used, D’Amico (2002) observes that non-ITA 

alternatives are preferred because they are thought to better service the needs of targeted 

customer groups such as those with limited English proficiency, and to better serve local 

business firms in meeting local economic development requirements. 

7.2 Competition with For-Profit Career Colleges 

 The WIA principle of consumer choice suggests that community colleges may be subject 

to greater competition from other training providers as they seek to enroll potential students 

empowered with ITA training vouchers. The primary source of competition is for-profit career 

colleges, since the training services provided by community-based organizations are generally 

restricted to targeted groups of economically disadvantaged adults.11 In competing with other 

training providers, community colleges have a number of advantages. These include low tuition, 

breadth of offerings, access to degree programs, and close geographic proximity. On the other 

hand, for-profit career colleges have some advantages in comparison to community colleges that 

may offset their higher tuition. These include shorter, more intensive programs and greater 

flexibility in scheduling classes and admitting new students. As noted in section 5.3, in addition, 

for-profit career colleges are generally thought to do a better job relative to community colleges 

in providing their students with counseling and job placement services and in maintaining 

contact with graduates. 

 Two issues arise concerning the competition of community colleges with for-profit career 

colleges. The first is the question of whether ITA training vouchers that cover the higher tuition 

of proprietary colleges will offset the cost advantage of community colleges with the result that 

community colleges’ share of ITA recipients is adversely affected. As a practical matter, there 

does not seem to be much reason for concern that community colleges will lose market share 

because ITAs lower the relative price of competitors. A primary consideration is that resourceconstrained One-Stop Career Center operators continue to have an incentive to hold down 
U.S. Department of Labor 

Employment and Training Administration 19

overall tuition costs by placing ITA recipients in community colleges as opposed to more costly 

proprietary colleges. D’Amico (2002) describes that state and local boards typically set dollar 

limits on ITA awards they will support in order to increase the number of participants that can be 

served and to impose some measure of financial discipline on the choice of programs by clients 

and on prices charged by vendors. 

 The second issue involves the complaint of community colleges that WIA performance 

standards put them at a disadvantage relative to for-profit colleges because of the diverse 

educational objectives of their students. In particular, section 6.1 noted that community college 

students include individuals seeking only an exposure to a particular field as well as students, 

such as retirees, who may seek to complete the requirements in a field of study but without any 

intention of looking for employment. The objective of the typical for-profit career college 

student, in contrast, is to complete an occupational skills training program with the intention of 

obtaining a job in the local labor market using those skills. 

 Rather than a concern about the ability of community colleges to compete for ITA 

recipients, section 6.3 indicated that the real concern of policymakers is whether community 

colleges have the desire to compete. As discussed earlier, the expectation of a smaller number of 

students equipped with ITAs coupled with burdensome WIA performance requirements has led 

to a serious problem of community colleges deciding to opt out as approved training providers. 

Evidence on the distribution of ITAs across categories of training providers is instructive in this 

respect. Macro, Almandsmith, and Hague (2003, ch. 8) show that fully 44 percent of ITAs in PY 

2001 were used at for-profit career colleges and 49 percent at educational institutions. (The other 

7 percent went to nonprofit organizations.) Among categories of educational institutions, 

moreover, community colleges are the top provider of ITA training but with only a 33 percent 

market share. Other important categories of educational providers are colleges and universities, 

technical schools, and private colleges. Hence, in PY 2001 community colleges supplied training 

to only about 16 percent (= 0.33 * 0.49) of ITA recipients. 

8.0 Summary and Recommendations 

 This final section builds on evidence from the WIA implementation studies to suggest 

topics for future research from the perspective of better utilizing community colleges in the 

workforce investment system. These research suggestions are discussed under five headings, 

beginning with redesign of WIA performance standards. At the end of the discussion of each 

heading, a specific recommendation or recommendations (highlighted in bold print) is made for 

ETA consideration. 

8.1 Redesign of WIA Performance Standards 

 A major concern of the states discussed in detail in all four WIA implementation studies 

is that current performance standards applied to training providers are overly complex, expensive 

to satisfy, and ignore differences in institutional missions, local economic conditions, and student 

characteristics. The objectives of WIA performance standards are laudatory. These objectives are 

two-fold: (1) to impose uniform minimum standards of performance that give providers an 

incentive to eliminate weak programs, and (2) to generate detailed information by program for 
U.S. Department of Labor 

Employment and Training Administration 20

each provider that allow ITA clients to make informed comparisons of the same program across 

providers and of alternative programs for the same provider. 

 Nevertheless, current performance standards emphasizing program completion and 

subsequent labor market outcomes create three incentives for community colleges that may not 

be desirable. One is the incentive to emphasize occupational skill training programs at the 

expense of traditional academic or adult basic education programs. A second is the incentive to 

depart from traditional open-admissions policies by raising admissions standards to the detriment 

of disadvantaged applicants. Given the perception that the number of ITA recipients is limited, 

the third incentive is for community colleges to avoid entirely the effort and expense required to 

meet performance standards by choosing to opt out of the workforce investment system. 

 As described in section 6.0, evidence that community colleges make important changes in 

the composition of programs they offer is relatively thin; and the issue of cream skimming 

appears to apply primarily to One-Stop Career Center operators rather than to community 

colleges. At the same time, all of the WIA implementation reports strongly emphasize the 

difficulties community colleges face in developing and implementing tracking systems for 

collecting data needed to meet performance standards. The implementation reports also suggest 

that community colleges differ from other training providers because of the heterogeneous 

academic objectives of their students. Particularly in response to the difficulties involved in 

developing student tracking systems, states have taken a variety of actions intended to retain 

community colleges within the workforce investment system. These include waiving 

performance standards, negotiating standards that are easier to meet, and taking on centrally the 

functions of collecting and reporting required data. 

 The Federal Government has responded to the issues posed by WIA performance 

standards in two ways. First, in a recent advisory letter the ETA has sought to reduce the burden 

on states and training vendors by reducing the 17 WIA performance measures to a set of 8 

“common” measures (U.S. DOL/ETA 2003). Four of these apply to adults and four to youth 

programs. The four adult measures include job placement, job retention, increases in earnings, 

and “efficiency.” Efficiency is defined as the program appropriation level divided by number of 

program participants. However, the ETA cautions that cost per participant is only a starting point 

for analysis. Cost is to be considered in the context of outcomes achieved, characteristics of 

participants, and types of services provided. In addition to efficiency, youth measures include 

placement in employment or an educational program, receipt of a degree or certificate, and 

literacy and numeracy gains. UI wage records are to be used as the primary source of data for 

measuring job placement, retention, and wage growth for both adults and youth. 

 Also at the Federal level, the U.S. House of Representatives, building on a Bush 

administration proposal, recently crafted and passed a WIA reauthorization bill (H.R. 1261). 

Four provisions of this bill should be mentioned. First, use of ITAs to support training is 

expanded by permitting funding from sources other than the adult WIA program. Second, the 

current 17 WIA performance indicators are replaced by the 8 common indicators of performance 

developed in the 2003 ETA guidelines. Third, Governors are given authority to add additional 

performance measures for use within their states, including the consumer satisfaction measures 
U.S. Department of Labor 

Employment and Training Administration 21

dropped from the ETA common indicators. Finally, the Secretary of Labor is authorized to 

expedite the process for extending approved waivers to states. 

 The provision of H.R. 1261 reducing to eight the number of common performance 

measures is a desirable move toward simplification. At the same time, it is unclear whether the 

performance standards apply to each academic program offered by community colleges, and 

whether State Governors will choose to exercise their authority to expand the number of 

performance indicators beyond those specified in the bill. Furthermore, the issue of which party 

(training provider, local program operator, or the state) is responsible for developing and 

maintaining administrative data sets matching student records with UI wage records is still 

unclear. 

 As the WIA implementation reports indicate, differences between states in performance 

criteria, coupled with community colleges responses to these criteria, represent an important 

source of information on how to achieve the difficult balance between enforcing minimum 

standards of performance and developing performance standards that providers can live with. 

Recommendation 1: The ETA should consider funding a project or projects that 

involve(s) site visits to selected states to examine how—with several years of experience 

under WIA—state officials have modified performance standards and how community 

colleges have reacted to these modifications. 

Recommendation 2: In view of important differences between community colleges and 

other training providers in missions and student academic objectives, the ETA should 

examine the possibility of establishing a community college-specific set of performance 

standards. 

8.2 What Is the Proper Balance Between Training and Other Services and Between ITA 

and non-ITA Training? 

 Section 7.0 pointed out that the number of individuals receiving training fell dramatically 

in the early years of WIA. This reduction in WIA-funded training is clearly part of the reason 

community colleges have a reduced incentive to continue as approved training providers. 

Furthermore, while training services under WIA are typically to be supported by ITA vouchers, 

evidence was presented for selected states and the Nation as a whole that non-ITA training is at 

least as common as ITA-funded training. 

 The WIA implementation reports indicate that as One-Stop Career Center operators 

gained experience with WIA, they increased the availability of training as part of a more 

“balanced” approach to service provision. An important question, consequently, is the extent to 

which WIA-funded training has rebounded to a higher “steady-state” level. Moreover, little 

information is currently available to answer the further question of why, despite the WIA 

emphasis on consumer choice implemented through ITAs, use of non-ITA training appears to be 

so common in local areas. 
U.S. Department of Labor 

Employment and Training Administration 22

Recommendation 3: The ETA should fund a study examining: (1) whether WIA-funded 

training has risen and is now at a steady-state level, and (2) the factors that at the local 

area level determine the mix of ITA-funded and non-ITA-funded training. 

8.3 Who Are ITA Recipients and What Choices Do They Make? 

 The ETA is currently funding the ITA Experiment, which is a random assignment 

evaluation that tests the relative impact of three distinct ITA approaches (Perez-Johnson and 

Decker 2003). The three ITA approaches range from a highly structured approach (participants 

are steered to the highest return training options) to a true voucher approach (participants are 

offered a lump sum and allowed to choose any state-approved training program). The evaluation 

carried out by Mathematica Policy Research (MPR) will examine the impacts of the three ITA 

approaches on participation in training and related services, participant satisfaction, employmentrelated outcomes, and dependence on public assistance. Also included is an analysis of the 

returns on investment for each of the approaches. The ITA Experiment is being conducted at 6 

sites using a sample of about 8,000 disadvantaged adults and dislocated workers eligible for ITA 

assistance. The six sites are: Phoenix; Bridgeport, Connecticut; Jacksonville, Florida; Atlanta; 

Northern Cook County, Illinois; and Charlotte. 

 As part of the ITA Experiment, MPR is currently conducting a followup survey of about 

4,800 participants in the experiment. Included in the survey instrument are questions that ask 

respondents whether they selected an education or training program, type of program selected, 

training provider selected, length of the training program, sources of support in addition to the 

ITA, and much more. It is expected that the ITA followup survey will yield a wealth of 

information on the training choices made by participants in the ITA Experiment. Nevertheless, 

this information is not nationally representative geographically, and it is based on the responses 

of a relatively small number of individuals, a majority of whom are making choices in an 

experimental setting that differs from standard practices used in most local areas. 

Recommendation 4: Building on the results of the ITA Experiment, the ETA should 

consider funding a nationwide survey of ITA recipients to obtain information on: (1) their 

characteristics including age, race and ethnicity, gender, and disadvantaged 

worker/dislocated worker status, and (2) the choices they make between vendors and 

alternative training programs. 

8.4 Payoffs to Alternative Fields of Study 

 As described in section 2.0, WIA performance standards require that approved training 

providers report, by program, employment rates and initial wages. For WIA clients, in addition, 

performance criteria include retention rates and wages, both measured after 6 months of 

employment. Training providers are to develop the required data by matching the student records 

they maintain with UI wage records. The directive to use student records matched with UI wage 

records presents an interesting contrast to the lack of studies in the literature that use matched 

data to estimate labor market payoffs. In section 5.1, in fact, the only study cited that uses 

matched data to supply payoffs by program is Jacobson, LaLonde, and Sullivan (2003, 2004); 

and even this study provides a limited amount of information. Payoff estimates are specific to 
U.S. Department of Labor 

Employment and Training Administration 23

dislocated workers residing in Washington State who enrolled in two broad categories of 

community college programs. 

 The point is that matching large administrative data sets is a substantial undertaking, 

whether by community college institutional research staff members seeking to comply with WIA 

performance standards or by labor economists seeking to provide more detailed estimates of the 

payoffs to community college programs. Yet, it is important that we have program-level payoff 

estimates for states other than Washington and for client groups in addition to dislocated 

workers. 

 As an example, the size of its community college system and the racial and ethnic 

diversity of the state would make California an interesting state to study using matched 

administrative data. In particular, the large number of students passing through California’s 

community colleges each year provides plenty of observations for obtaining program-level 

payoff estimates for population groups of interest categorized by gender and age. Moreover, the 

diversity of the state’s population would allow specific payoff estimates to be obtained for 

Hispanics—a critically important demographic group because of its rapid growth and relatively 

low average educational attainment. Gill and Leigh (2004) in a study mentioned in section 6.0 

have already pulled together the substantial volume of information on curriculum available at the 

campus level for community colleges in the California system. 

Recommendation 5: The ETA should consider supporting research that uses matched 

student records/UI wage records for several states to obtain estimates of the labor market 

returns to alternative community college fields of study for different worker groups 

including disadvantaged adults and dislocated workers. 

8.5 Applicability of Experience Gained from Contract Training 

 A key WIA objective is to support training that provides skills required by employers in 

the local economy. Clearly, an attractive approach for community colleges to acquire 

information about local labor market training needs is to make use of information they gain in 

reaching contract training agreements with employers. In principle, this information can then be 

used in revising regular occupational skills curriculums. As noted in section 5.3, however, such 

transfer of information is inhibited by the separation of contract training in many colleges in its 

own independent office set apart from the rest of the college. But the value of being able to 

transfer employer demand information between units is sufficiently great that it seems likely that 

at least some community college administrators will develop efficient transfer mechanisms. If 

this is the case, one would expect that colleges will differ in the existence and efficiency of their 

information transfer mechanisms. 

Recommendation 6: The ETA should consider funding a “best practices” study of the 

mechanisms exemplary colleges use to transfer information gained from their contract 

training operations. 
U.S. Department of Labor 

Employment and Training Administration 24

Endnotes 

1

 Public technical colleges are another public training provider that services WIA participants, but this report 

focuses primarily on community colleges. 

2

 Prior to 1988, JTPA included a dislocated worker program called Title III. In that year, Title III was shifted from 

JTPA and absorbed into the then new Economic Dislocation and Worker Adjustment Assistance Act (EDWAA). 3

 As was done under JTPA, contracting directly with training providers may still be used in the following situations: 

(1) on-the-job or customized training, (2) insufficient number of providers to meet the competitive purposes of 

ITAs, and (3) programs offered by community-based organizations or other private agencies that serve special 

populations facing multiple barriers to employment. 

4

 Hollenbeck and Huang examine six other targeted workforce development programs. Two of these are designed to 

serve youth: JTPA Title II-C Programs and Secondary Career and Technical Education. Three other programs serve 

job-ready adults including JTPA Title III Programs, Apprenticeships, and Private Career Schools. The Private 

Career Schools Program utilizes training programs provided by for-profit career colleges. The final program 

examined is directed to adults facing employment barriers—JTPA Title II-A Programs. It is interesting to compare 

the net impact estimates obtained for the Private Career Schools Program to those estimated for the Job Prep and 

Worker Retraining Programs utilizing community colleges. Hollenbeck and Huang find that the short-term impacts 

on employment and quarterly earnings of proprietary college training are much smaller (2.6 percent and essentially 

zero, respectively) than the corresponding estimates reported in the text that are obtained for the two community 

college-based programs. Unfortunately, longer term estimates are not available for the Private Career School 

Program. 

5

 A negative impact of adult basic skills training on employment and earnings is expected since successful 

outcomes of these programs include subsequent enrollment in occupational skills training or academic programs, 

both of which may keep trainees out of the labor force. 

6

 The Deil-Amen and Rosenbaum study is the first of several referred to in this report that are published in a special 

volume devoted to community colleges in The Annals of the American Academy of Political and Social Science. As 

indicated in the Preface, the broad theme of papers in this volume is the view that Federal policy and broader 

societal pressures are causing community colleges to shift away from their traditional mission of academic 

preparation for transfer to 4-year colleges, particularly for poor and minority students. Instead, community colleges 

are increasingly being pressured to adopt a market-driven mission that focuses on providing occupational skills 

training programs that are demanded in the local economy. 7

 Differences in programs and in relative costs of community colleges and for-profit career colleges are discussed in 

greater detail in section 7.0. 

8

 The anonymous reviewer of this report offers an interesting alternative hypothesis suggesting that community 

college academic programs may gain in importance relative to workforce development programs. The reviewer’s 

point is that the rising costs of 4-year colleges and universities push academically oriented students to start at a local 

community college, complete their general undergraduate course requirements, and then transfer after 2 years. 

Hence, rising costs at the 4-year college level result in pressure on community colleges to expand, rather than 

contract, their academic course offerings. 9

 A complicating factor involved in matching community college student records with UI wage histories is the 

stringent April 2003 reinterpretation of Federal legislation regarding educational privacy, the Federal Educational 

Rights and Privacy Act (FERPA), that severely restricts access to student records. 10 Barnow and King (2003) note that concerns expressed by business leaders include the size of state and local 

boards, the bureaucratic nature of the boards, and the perceived lack of value-added from their participation. 11 Under JTPA, community-based organizations (CBOs) primarily provided training services to economically 

disadvantaged adults. D’Amico et al. (2001, ch. V) note that CBOs are placed at a disadvantage under an ITA 

system because of their narrow customer base. Moreover, their reliance on contract training does not lend itself well 

to a competitive marketplace, and CBOs are usually thinly capitalized and are likely to have difficulty coping with 

an irregular flow of ITA-funded students.
U.S. Department of Labor 

Employment and Training Administration 25

Appendix A: Tables 

Table 1. Overview of Community Colleges (CCs) and Their 

Students, 2002 

Scope of CCs

Number of CCs 

 

Public 997 

Private 145 

Tribal 31 

Total 1173 

Student enrollment (in millions) 

Credit 5.4 

Noncredit 5.0 

Total 10.4 

Annual degrees and certificates (in thousands) 

Associate degrees 450 

Two-year certificates 200 

Ratio of all U.S. undergraduates attending a CC 44% 

Ratio of all first-time freshmen attending a CC 45% 

Student characteristics

Average age in years 29 

Female students 58% 

Part-time students (less than 12 credit hours) 63% 

Student cost and aid

Average annual tuition $1518 

Student aid 

Any aid 32.8%

Pell grants 14.9 

State aid 6.1 

Federal loans 6.0 

Sources of revenue for public CCs 

State funds 42% 

Tuition and fees 23 

Local funds 18 

Federal funds 5 

Other 12 

Source: American Association of Community Colleges (no date) 
U.S. Department of Labor 

Employment and Training Administration 26

Table 2. Overview of WIA Services Provided and WIA Participant 

Characteristics, Adults and Dislocated Workers, PY 2000 

 Adults Dislocated workers

Total exiters 85,081 76,401 

Types of services received 

Training 49.3% 55.5% 

No training 48.2 40.6 

Data missing 2.5 3.9 

Types of training services1 

OJT 5.0% 4.2% 

Occupational skills 42.4 51.7 

Adult basic skills 4.0 3.6 

Number of ITA accounts established 17,053 14,938 

Participant characteristics 

Age: 

Less than 22 7.4% 3.5% 

22-32 40.3 20.6 

33-42 27.5 30.0 

43-54 18.2 34.5 

55 and older 6.5 11.3 

Female 60.8% 53.1% 

Race/ethnicity 

White 44.2% 61.4% 

Black 27.5 13.3 

Hispanic 13.6 19.2 

Data missing 14.7 6.1 

Highest grade completed 

Less than 12 15.3% 9.4% 

High school degree 39.5 42.0 

GED (General Equivalency Diploma) 5.2 2.9 

Some college 13.5 19.7 

B.A. degree and post-graduate 3.4 10.4 

Data missing 23.1 15.7 

Limited English proficiency 7.3% 6.4% 

 

1

Training categories are not mutually exclusive. 

Source: Frank, Rahmanou, and Savner (2003) 
U.S. Department of Labor 

Employment and Training Administration 27

Table 3. Community College Research Questions and a Summary of 

Existing Evidence 

Research question Summary of evidence 

1. How large are labor 

market returns to CC 

training, and do these 

returns differ across 

alternative fields of 

study? 

National data indicates substantial labor market returns to 

CC training. Evidence for Washington State dislocated 

workers reinforces this finding and adds that long-term 

earnings gains are much higher for academic courses in 

science and math and for more technical occupational skills 

courses than they are for other CC curricula. 

2. How effective are CCs 

in placing exiting 

students in local labor 

markets? 

Current evidence is fragmentary, but suggests that CCs’ 

performance compares unfavorably to that of proprietary 

colleges. A U.S. Department of Education funded project 

will hopefully shed more light on the characteristics of 

“market-responsive” CCs. 

3. How active are CCs in 

supplying contract 

training and what can be 

learned from providing 

these courses? 

Nearly all CCs offer contract training, but the level of 

contract training activity varies with the size and industry 

mix of local employers. Transfer of information gained from 

contract training to regular occupational skills training 

courses tends to be limited because of the separation of 

contract training operations from the rest of the CC. 

4. Do CCs under WIA tilt 

their curricula toward 

occupational skill 

training? 

This incentive receives limited attention in the Workforce 

Investment Act (WIA) implementation studies. There is 

some evidence indicating that occupational skills training is 

receiving more prominence in CC curricula. 

5. Do CCs under WIA 

have an incentive to 

raise admission 

standards resulting in 

enrollment of fewer 

disadvantaged students? 

A substantial literature provides evidence of “cream 

skimming” under the Job Training Partnership Act (JTPA), 

and cream skimming is even more likely under WIA because 

it drops a regression model that adjusts for differences in 

participant characteristics and local economic conditions. 

However, evidence on cream skimming under both JTPA 

and WIA focuses on the behavior of program operators 

rather than service providers like CCs. 
U.S. Department of Labor 

Employment and Training Administration 28

Table 3. Community College Research Questions and a Summary of 

Existing Evidence 

Research question Summary of evidence 

6. Do CCs have an 

incentive to opt out from 

participating in the 

workforce investment 

system? 

A very serious concern of states. The WIA implementation 

studies report that states are responding to this concern in a 

variety of ways including temporarily waiving performance 

standards, relaxing WIA requirements or not expecting 

training vendors to meet all requirements, agreeing to 

centrally process administrative data, and reporting 

performance on a system rather than program basis. 

7. Do CCs often serve as 

members of Workforce 

Investment Boards, 

operate One-Stop Career 

Centers, or serve as 

intensive service 

providers? 

Limited evidence indicates that it is unusual for CCs to move 

beyond their training function to involve themselves in 

serving on local Workforce Investment Boards, to directly 

operate One-Stop Career Centers, or to provide intensive 

services. 

8. Does WIA result in 

fewer individuals 

receiving training 

relative to JTPA? 

Receipt of training appears to have dropped sharply from 

JTPA levels in the early years of WIA. However, local areas 

are moving to a greater willingness to provide training 

opportunities as part of a more balanced approach to 

supplying services. 

9. Does the ITA subsidy 

adversely affect the 

market share of CCs? 

It does not appear likely that the Individual Training Account 

(ITA) subsidy adversely affects the cost advantage of CCs 

relative to other training providers. It is interesting to note, 

however, that training under WIA appears to be commonly 

funded by non-ITA alternatives and by training providers 

other than CCs.