The United States began massive spending on government-sponsored training programs decades ago. After 30 years, that nation has spent billions of dollars on thousands of local job training programs. However, a large and growing body of research overwhelmingly suggests that such "active" labour market policies do not improve the labour market prospects of workers with low skill levels and little education.

For instance, in the US, among programs designed to target single parents, earnings were increased by a maximum of $19.96 per week and a minimum of $2.18 per week, while the largest increase in employment was only 13.6 percentage points. In half of all cases, these training programs did not result in reductions in receipts from one of the main components of the American welfare system, Aid to Families with Dependent Children (AFDC), and when they did, reductions ranged from only 1.1 to 5.2 percentage points. Meanwhile, public expenditures on these programs ranged from US$689 to US$4,895 per program participant. Clearly, US taxpayers are not getting value for money on these training initiatives.

"Active" labour market programs targeted to disadvantaged adults and out-of-school youth in the US show equally dismal results. Programs such as GAIN, SWIM, and Ohio JOBS for disadvantaged adults only succeeded in increasing earnings by a maximum of US$9.65 per week; employment increases were also modest, ranging from 4.0 percent to 7.8 percent, while AFDC payments only fell by a maximum of $13.23 per week. Meanwhile, the Job Training Partnership Act (JTPA), directed at out-of-school youth, registered no positive outcome for earnings, no reduction in Food Stamps or AFDC payments, and no increase in educational attainment for male youth. Costs per participant in these programs ranged from US$2,717 to US$15,300. The amount being spent on these programs is quite unrelated to success rates. Additional funding is obviously not the answer.

The real reason for the failure of US training programs lies in the low educational levels of program participants. Between 41.3 percent and 65.4 percent of single parents who participated in training programs had less than 12 years of formal schooling. As many as 82.9 percent of disadvantaged adults who participated in training programs had less than 12 years of education. The corresponding figure for out-of-school youth was 48.4 percent. Training programs fail because there is little—if anything—that can be done to compensate for neglecting the first 12 years of schooling. If these individuals are functionally illiterate and innumerate, then is it any surprise that training programs fail in achieving their basic objectives?

Despite the sizable investment in public schools, an alarming number of Canadian students drop out before graduating from high school. The ability of firms and labour markets to adjust to change, to innovate, and to improve productivity depends upon the population's knowledge and skills. It is important to recognize that different literacy indicators suggest that public education is failing to equip a large number of Canadian students with necessary skills. In light of this, a more effective educational system, not more government-sponsored training initiatives, is the best way to improve the labour market prospects of the disadvantaged and unskilled in Canada.

Increased spending on public schooling is definitely not the answer. Per student educational spending is already higher in Canada than in most OECD countries. The crisis in Canada's education system is not one of insufficient expenditures per pupil, but rather, one of inappropriate school structure, since schools are organized according to a bureaucratic and monopolistic model that does not benefit students.

Schools must be given the freedom to innovate and the requirement to do so. The way to do this is to introduce competition into the school system through a voucher scheme. By allocating funds directly to the consumers of education, rather than to the suppliers, schools will be compelled by competitive forces to teach skills which are in demand in the market place. This, more than any government-sponsored training initiative, will work to improve both the education level and employment prospects of young and disadvantaged workers.