Statement of Experience Wave and the Council for Adult and Experiential Learning

Summary

When amending the higher-education tax incentives package, Congress should take into consideration the unique needs of workers at all stages of their careers, including those nearing traditional retirement age, who need to continue their education or retrain for a new career in a different field.  Workers of all ages are facing challenges due to a number of factors, including shifting economic conditions, family obligations, and jobs going overseas. The Country's education-related tax policy should be crafted to provide opportunities for workers to overcome these challenges.

Lifelong Learning Accounts ("LiLAs") are one way to address these training and education needs. LiLAs are employer-matched, employee-owned individual educational accounts used to finance workers' education and training.  With LiLAs, mature and older workers would have funds available so that they can continue to be productive even though their jobs or personal circumstances have changed. Younger workers would be able to save for education and training to upgrade their knowledge and skills to better position themselves in the labor market. In addition, LiLAs would provide a mechanism for individuals to pursue "encore" careers that will last during retirement.

Learning new skills can open doors to more fulfilling and potentially lucrative career opportunities. But the ability to do so is often limited, especially for workers who may not qualify for assistance that is traditionally available for younger traditional college-age students. 

Background

This testimony is being submitted by Experience Wave and the Council for Adult and Experiential Learning (“CAEL”).  Experience Wave is a national initiative designed to advance federal and state policies that will facilitate the continued engagement of older adults in work and civic life.  Experience Wave, funded by the Atlantic Philanthropies, focuses on the interests of mid-life and older people by promoting policies that

• remove barriers and provide wider opportunities for older people to continue working when they are willing and able, or re-enter the workforce if they have already retired,
• enhance lifelong learning for older people and consider the unique needs of mature and older workers who want to advance in or change careers through accessible high quality and affordable education and training, and
• open doors for older people to engage in meaningful charitable or "pro bono" work.

CAEL is a national, non-profit organization whose mission is to expand education and training opportunities for adults.  CAEL works to remove policy and organizational barriers to learning opportunities, identifies and disseminates effective practices, and delivers value-added services.  Since its founding in 1974, CAEL has been providing colleges and universities, companies, labor organizations and state and local governments with the tools and strategies they need for creating practical, effective lifelong learning solutions.  CAEL’s clients include major employers such as Verizon Wireless, Starbucks, CVS Pharmacy, Pennsylvania State University, and Kentucky Community and Technical College System.

Need for Change

A significant portion of the Subcommittee's hearing on education tax incentives (May 1, 2008) was devoted to educational opportunities for traditional aged children and their families. However, it is equally important to expand postsecondary education and workforce development opportunities for working adults. 

During the hearing, Congressman McDermott asked the panel what education-related tax incentives would work best for a hypothetical, single mother of two children; whom he described as a 30-year old secretary making $30,000 and having one year completed at the local community college towards her legal assistant degree. The panelists before the Subcommittee did not have an answer.  Congressman McDermott followed up his question by saying that the tax credits and other incentives generally do not work for someone trying to get into a new line of work, just those trying to get ahead within the same industry.  The point of Congressman McDermott's hypothetical was to illustrate that tax-related education incentives are too complex.  He also highlighted the inadequacy of current education-related tax incentives for working adults: who need training or retraining to increase their future prospects or to adapt to shifting economic conditions.  As detailed below, LiLAs would make it possible for that working mother to go back to school and get the credentials she needs to advance in her career and support her family.  

Recently, while discussing the Trade Adjustment Assistance Act, Senator Baucus lamented the lack of investment and training opportunities available to today's workforce.  He said,

[T]he new global economy conjures images of competition in European, Chinese and Indian markets . . . [W]e can do more to invest in our workforce and make training available to our workers.  We can do more to be creative and innovative.  We can do more to think about what the competitiveness of our economy and [what our] workers should look like five and 10 years down the road.  Challenges posed by globalization and technological change require new workforce strategies.[1]

However, as the American Society for Training & Development stated in their Fall 2006 publication entitled, "Bridging the Skills Gap: How the Skills Shortage Threatens Growth and Competitiveness . . . and What to do About It," U.S. businesses are finding themselves ill-equipped to compete in the 21st-century economy because too many workers lack the necessary skills to help their business grow and succeed.  A part of the solution involves individuals taking responsibility for their own skill development and career development and being proactive in acquiring skills, furthering their education, and committing to lifelong learning.  In addition, businesses and the government need to provide support and develop programs that encourage individuals to adapt to the changing landscape. 

Post-secondary educational attainment is tied to improved employability and higher earning power.  Among citizens aged 18-64, for example, those who earn an associate's degree can expect on average an additional $7,000 in annual earnings, and in states like California and Texas, an additional $10,000.  Attaining a bachelor's degree adds, on average, $15,000 in annual income, and in some states as much as $18,000.  This increase in income level also translates to increased state and federal tax revenues, and a higher skilled workforce that can staff positions of critical importance to the economy, national security, and public health.[2]

Once a global leader, the United States is losing its historic world dominance with respect to higher levels of education attainment for its adult citizens.  According to figures released by the Organization for Economic Co-operation and Development, several countries have already surpassed or are close to surpassing the United States in proportion of 25-64 year olds who have attained a tertiary credential.  These countries include Canada, Norway, Finland, Sweden, Japan, Korea, the United Kingdom, Spain, Australia, Belgium, the Netherlands, and France.  In a world economy that depends more than ever on knowledgeable workers, as well as the possession of advanced literacy and problem-solving skills among line workers, the imperative could not be greater for U.S. leaders and policymakers to recognize and strategically address challenges to expanding adult learning.[3] 

But more important that our standing, vis-à-vis other countries, is our ability to staff positions that are of critical importance to the economy, national security, and public health.  If our current workforce does not gain new skills and credentials, we may not have enough skilled workers for the growing need.  It is estimated that 15 million new U.S. jobs requiring a college education will be created by 2020, but based on current attainment rates, projections show a net gain of only 3 million new workers with college credentials.  To meet the skill demands, we cannot only focus on traditional-aged college students—there will not be enough of them.  The nation must also place strategic priority on educating the large number of adults in the workforce who have earned high school credentials, but for one reason or another have not previously entered or completed postsecondary study.[4] These individuals are more likely than their peers to live in poverty and to be unemployed or working in a low-wage service sector job.  Any while many workers are interested in increasing their skills and knowledge, those that do enroll in postsecondary programs are twice as likely to be enrolled part-time and three times as likely as traditional-age students to be enrolled less than half time.[5]

Another source of workers is older Americans. The United States' workforce demographics are undergoing a tremendous shift. In the next decade, the number of workers over 55 will grow at more than five times the rate of the overall workforce.[6]  But most baby boomers are not planning on going the way of traditional retirement. According to an AARP survey, 79% of baby boomers plan to work in some capacity during their retirement years.[7] The shifting economic conditions will force many baby boomers to continue to work because their jobs have been downsized or they have not saved enough for retirement. However, others will want to change to less demanding careers or will just want to give back to their community. With the wisdom and experience older Americans bring to table, investing in their education could be a boon for evolving businesses and distressed labor sectors, such as education and health care.[8] 

With those challenges in mind, we urge the Subcommittee to consider passing tax legislation to stimulate the creation of lifelong learning accounts.

Lifelong Learning Accounts

As mentioned above, LiLAs are employer-matched, employee-owned individual educational accounts used to finance workers' education and training. The vision is for all workers to contribute to LiLAs and have those contributions matched by their employers—much like a 401(k), but for education and training.  LiLA contributions could also be matched by third parties, including philanthropic, federal, state, and local government resources.  LiLA's have the following features:

• Universal Eligibility.  All individual workers are eligible for accounts.
• Broad Use of Funds.  Eligible expenses include tuition and fees, supplies, materials, and books.  Allowable educational activities include, but are not limited to, studies related to a worker's job or industry and training for a new career.
• Portability.  LiLAs stay with the employee regardless of the person's current employer or employment status.
• Voluntary Participation. Individuals and employers have the option of participating.
• Matched Funding.  LiLAs are funded through individual contributions, employer matches, and potentially third party funds. 
• Informed Choice.  Individual participants choose the training and education they need to meet their career goals that are grounded in an individual learning plan developed with educational/career advisors.

CAEL and Experience Wave have been working with leaders across the country to advance policy in support of lifelong learning accounts—in particular federal tax incentives for employer and employee LiLA account contributions.

On January 4, 2007, Senator Cantwell introduced a "demonstration project" version of this proposal under which up to 200,000 taxpayers who are residents in 10 designated states could participate. The bill, S. 26, has two co-sponsors, Senator Snowe and Senator Collins.  Congressman Allen introduced companion legislation, H.R. 2901, on June 28, 2007, which was co-sponsored by Congressman Michaud. 

The bills are very similar.  Both bills establish tax incentives for Lifelong Learning Accounts.  The accounts are funded through employee and employer contributions. The employee and the employer both are allowed an income tax credit not to exceed $500 for their account contributions.  The account funds would be excluded from taxable income if the funds are spent on higher education expenses.  Any amounts withdrawn in excess of the individual's higher education expenses would be included in income and assessed an additional 15 percent tax. 

In addition, Congressman Emanuel and Congressman Ramstad just introduced a national lifelong learning accounts bill (H.R. 6036).  The bill provides tax incentives to participating employees and employers, including a refundable tax credit equal to 50% of the first $500 contributed and 25% of the next $2,000 contributed by the employee.  The employee can use the funds in his or her account at any time for education or courses of instruction (including training and apprenticeship programs). These bills are a model of what can be done; the Subcommittee and its Members are free to fashion their own legislative solution.

The Success of LiLAs

Since 2001, CAEL has launched several pilot LiLA projects in partnership with LiLA champions across the country.  These projects have been located in Chicago, northeastern Indiana, San Francisco, Kansas City, and the states of Illinois and Maine.  The pilot programs have transformed many participants’ lives  Here are some examples:

• Paul Kelvington, a participant in the Chicago demonstration site, set money aside for college while he waited tables.  After eighteen years out of school, he is now earning his bachelor's degree with the goal of working in the area of alcohol and drug counseling.  "There are a lot of young kids out there that don't have a positive role model in their lives," he says.  "I want to be that type of person and in order to impart wisdom I have to education myself.  I want to be able to help people and point them in the right direction."  The LiLA program helped Paul reach his education goals affordably: "People should never stop learning.  The LiLA program helps you financially and it won't break the bank."
• Becky Miller, a married mother of 9-year-old twin boys, found saving for education difficult before the LiLA program.  She was promoted from an assembler to an inspector at ITT Aerospace Industries in Fort Wayne, Indiana while participating in the LiLA demonstration.  She says, "I never had the money to finish [my degree] until the Lifelong [Learning] Account program came around.  When I found out I could finish my degree, I was thrilled!"  Becky is now inspired to continue to save—this time for her retirement.
• Fanni Munoz stated taking English as a Second Language courses from City College of San Francisco as soon as she was accepted into the LiLA program.  By improving her language skills, Fanni earned a promotion shortly after she began her classes.  After observing Fanni's improved work performance ahd her high motivation level for increasing her skills, Fanni's supervisor nominated her for the Outstanding Employee Award at UCSF Medical Center. She has achieved two promotions in two and half years. Fanni completed her Human Resource Management Certificate at San Francisco State University, Extended Learning.  "Thanks for LiLA!  Without the program, I would not be where I am right now.  I can see many more career opportunities in front of me after I have completed the certificate.  [It] is such a fantastic program that helps me advance my career!"[9]
• At age 54, Vicki went back to school with the help of a LiLA to pursue her Teaching Certificate. She completed her program in 2004 and is currently pursuing a full-time elementary school teaching position. She says, "[T]he program is wonderful . . . . [the] LiLA program helped me keep my head above water."[10]
• Christie, at age 57, used a LiLA to enroll in numerous French language classes because she wanted to add to the authenticity of her French restaurant.  Now that she is semi-fluent in French, Christie is in the process of taking other classes, including accounting and a computer course in Lotus, that will help her in the future.  Christie says, "I haven't been back to school for 30 years and going back to any classroom can be intimidating . . . . [O]nce you put your foot in the door and have success, it motivates you to do more.  [A LiLA] made this much easier for me."[11]

With a LiLA, the mother working as a legal secretary in Congressman McDermott's hypothetical could have a similar success story as Paul, Becky, Fanni, Vicki, and Christie. And who knows, maybe after working as a legal assistant she will decide to continue her educational pursuits like Christie.  Whatever she decides, a LiLA can help her fulfill her dream.

Conclusion

LiLAs provide employees with the opportunity to increase their future prospects, whether by attaining a higher level of education or by acquiring new skills to meet the demands of a changing economy.  We strongly urge the Subcommittee pass legislation to encourage the creation of LiLAs and help adult learners fulfill their dreams.

[1] Congress Daily, "Baucus, Panel Say National Agenda Is Needed To Compete," May 1, 2008.

[2] Tate, Pamela, "Testimony on Higher Education in the United States and the Needs of Adult Learners: Recommendations for Strategic Directions," January 31, 2006.

[3] See id.

[4] See id.

[5] See id.

[6] The Washington Post, "One More Time, With Meaning," January 27, 2008.

[7] The Wall Street Journal, "Second Acts: Career Paths for Worn-Out Executives," April 9, 2008.

[8] See id.

[9] Yahoo! News, "Senators Cantwell and Snowe Introduce Education Account Bill to Make American Workers More Competitive," January 8, 2007.

[10] Due to time constraints, we could not reach the individual for consent to use her story, so a fake name has been substituted.

[11] Due to time constraints, we could not reach the individual for consent to use her story, so a fake name has been substituted.