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Customized Waste

Here's a state-funded program we can do without.

By Duke Cheston

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January 17, 2013

The state of North Carolina’s Customized Training Program (CTP), run by the state’s community colleges, has come under fire lately, and with good reason. The program is—at least in part—a wasteful way to promote economic development in the state. It’s been around for 50 years and, while there may have been some justification for it originally, that justification has totally disappeared.

North Carolina’s new governor, Pat McCrory, has said he is looking for government waste to trim. He would do well to start with the Customized Training Program’s “realistic job previews” or “pre-employment training.”

Overall, the CTP program spends $12.4 million in state tax money each year to train North Carolinians to work at specific companies. The training is conducted at community colleges and consists of two parts. One trains employees who already work for the companies, working to improve their efficiency, knowledge of safety procedures, or other skills.

The second part, “pre-employment training,” is for people who are not working at the company; it is part training and part extended job interview.

Potential employees are trained to work for companies that may or may not decide to hire them. Both types of CTP projects typically last 12 to 24 hours—two to four hours per day spread over one to two weeks. Most of the time, community college instructors conduct the training sessions, but outside contractors are sometimes called in when special expertise is needed. According to program officials, the average cost per trainee last year was $370.91.

Each time CTP sets up a “realistic job preview” to assist a company, it assigns a training budget assuming that only one in four trainees will be hired. This has led critics such as Triangle Business Journal editor Sougata Mukherjee and John Locke Foundation president John Hood to complain that because many potential employees are trained but never hired, both tax dollars and the time of the trainees are being wasted. “If an official says that a 25 percent success rate is the best the program can do,” wrote Mukherjee, “that official loses all credibility with me.”

It turns out that a slightly higher proportion ends up being hired, but not by much. According to Maureen Little, associate vice president of the Customized Training Program, roughly 3,500 North Carolinians attended pre-employment training last year, and fewer than 1,200 found employment—a 34 percent hiring rate.

This means that thousands of North Carolinians are being trained every year to work in jobs that they will never get. It’s an expensive way of selecting employees, especially considering that it’s tax-funded.

The “realistic job previews” represent a small part of the CTP program. In her December 14 Triangle Business Journal guest column responding to Mukherjee’s criticism, Little pointed out that only 19 companies (out of 261 involved with the program) used the “realistic job preview” service last year.

The larger part of the program is post-employment training. Here too one does have to wonder if this is an appropriate state subsidy. Without such programs, companies would have to hire consultants to train their employees.

Mel Collins, vice president of human resources at Pharr Yarns in Gaston County, praises the program highly. Pharr Yarns has worked with the Customized Training Program for about 20 years, a time of dramatic improvements in manufacturing technology. Collins said Pharr Yarns’ collaboration with Gaston Community College has helped the company keep up with technological improvements and the industry’s best practices. “It was just amazing, the level of cooperation, collaboration,” Collins told the Pope Center.

Because of this close association, Collins contends that the value his company (and, by extension, the state economy) gets from CTP is greater than it would be if Pharr Yarns paid a private company to train its employees.

Not surprisingly, other businesses also enthusiastically support the CTP program. In fiscal year 2012, 98 percent of surveyed companies rated the Customized Training Program as “very good” or “excellent.” Collins also said that North Carolina’s Customized Training Program is superior to similar programs in other states. Pharr Yarns has operations in North Carolina, South Carolina, and California, but he said North Carolina’s program has been most helpful.

In sum, it seems clear that cutting the pre-employment training part of the program would have few negative consequences. Only a few companies use this feature. If it were not provided for them, they would be forced to obtain their own hiring applicants, give them the essential information to make them decent applicants, and make hiring decisions themselves. They would do so in a way that would almost certainly be more cost-effective.

They would then have to train the new employees themselves, but if the post-employment part of the program is kept, they still won’t have to pay for that.

Given the extensive subsidies that North Carolina gives to some companies, providing training through community colleges may be far from the worst. But the “realistic job previews” have to go. Not only do they subsidize business but they create false hopes among applicants. And despite claims by proponents of the program that it is key to luring businesses to the state, not a single one has yet said that CTP had a significant influence on their decision to locate in North Carolina.

 


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