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Community Development Reports

Understanding the Disconnect between Economic Development and Workforce Development Systems

In 2017, the Federal Reserve System’s Investing in America’s Workforce (IAW) initiative held listening sessions across the country to better understand how public and private entities are investing in workforce development in their communities and how workforce outcomes are being measured. One challenge the session participants identified was the lack of alignment between economic development and workforce development systems. The economic development system is designed to encourage business and job growth, while the workforce development system works to ensure individuals have the education, skills, and training needed to obtain jobs. When the two systems are aligned, job seekers receive training and skill development that employers demand—resulting in higher wages and career advancement—and employers have access to a skilled workforce that enables growth and increased productivity. Beyond benefiting employees and employers, a functional and aligned system has economic benefits to the broader community.

In this brief, we focus on increased alignment of economic development and workforce development systems, given that the strength of the current economy offers a unique chance to examine gaps and opportunities that may not be as visible in an environment of high unemployment. We focus on select regions in the Federal Reserve Bank of Cleveland’s Fourth District, which includes Ohio, western Pennsylvania, eastern Kentucky, and the northern panhandle of West Virginia. Through listening sessions, in-depth interviews, and a stakeholder survey, we collected input from approximately 70 community, economic, and workforce development professionals, educators, philanthropy representatives, government officials, and nonprofit executives. We identify where alignment exists, highlight common barriers, and document opportunities for improved alignment across our metro areas. Further, we identify some best practices to consider when aiming for greater alignment between economic development and workforce development systems. While an overwhelming majority of stakeholders believe alignment is critical to the future, the success of strategies to achieve such alignment is mixed.

The views expressed in this report are those of the author(s) and are not necessarily those of the Federal Reserve Bank of Cleveland or the Board of Governors of the Federal Reserve System.