Individual Training Accounts: Testing Models of Paying for Job Training

Prepared for
U.S. Department of Labor, Employment and Training Administration

The unemployed and underemployed in the United States can improve their ability to secure high-quality jobs by participating in training funded through the Workforce Investment Act of 1998 (WIA). Under WIA, job seekers and workers who need training can go to an American Job Center (previously known as a One-Stop Career Center) and receive a voucher—called an Individual Training Account (ITA)--to pay for training from a wide variety of state-approved programs and providers. States and local areas have broad flexibility in implementing ITAs—they set the value of ITAs and the extent to which job seekers receive guidance on how to use them.

Mathematica conducted the most comprehensive study to date of the long-term impacts of different ITA models. Nearly 8,000 job seekers eligible for training were randomly assigned to one of three models. The study followed these individuals in eight local workforce investment areas and tracked their outcomes six to eight years after they were offered training. The models included:

  • Guided Choice: Job seekers were offered the same capped amount and required to participate in counseling to help guide their training decisions. On average, local workforce agencies capped the ITA at $3,500, and the average amount awarded was $2,861. This option can be viewed as the status quo—most agencies currently implement a similar model.
  • Structured Choice: This model offered a more generous cap, and counselors determined the specific amount awarded to each job seeker, based on individual needs. The average cap was $7,625, and the average amount awarded was $4,625. Like Guided Choice, Structured Choice also required job seekers to participate in counseling to help guide their training decisions.
  • Maximum Choice: This model also provided a fixed cap of $3,500, and the average award was $2,888. This model did not require job seekers to participate in counseling. However, they could voluntarily request counseling, and many had received some counseling on their reemployment or service needs prior to being found eligible for training.

The study showed that moving away from the status quo to provide more flexible, higher value training awards, like those provided under Structured Choice, would be cost-effective and have large, positive impacts on long-term earnings. Switching to larger, more flexible awards with counseling could generate $46,600 per ITA job seeker in net social benefits. Individuals who receive larger, more flexible training awards and counseling could earn an additional $41,000 through retirement age, and the government could save $5,000 per job seeker by switching to these awards. These savings are driven by increased tax payments, which more than offset the costs from higher ITA awards and counseling under Structured Choice, compared to Guided Choice.

Relative to the status quo, larger training awards and counseling could also improve training and employment outcomes. Structured Choice job seekers were more likely to complete their training, to earn a credential in the field of their training, and to be employed in the occupation for which they trained. These individuals also spent more time in high-wage jobs that paid $20 hourly or more.

In contrast, making counseling voluntary would neither save money nor benefit job seekers. When counseling on training decisions was voluntary, many ITA job seekers opted out. Only four percent of Maximum Choice job seekers participated in counseling, compared to about 60 percent for the other two groups. Maximum Choice job seekers were more likely to participate in training, but the training selections they made independently did not increase their employment or earnings, relative to Structured or Guided Choice job seekers.