California’s Need for Skilled Workers

California Faces a Gap in Skilled Workers

By 2025, California is likely to face a shortage of workers with some postsecondary education but less than a bachelor’s degree. In fact, the future gap among “some college” educated workers may be as high as 1.5 million-even larger than the projected one-million-worker shortage of college graduates.¹ This portends missed opportunities for the state economy and also for California’s workers. To close the gap, the state needs information with which to better target its support for training, and students and workers need information for evaluating educational choices. Focusing on wages and in-demand occupations, this analysis looks at the type of jobs and skills that hold the most promise for “some college” workers.

“Some college” workers is a label necessitated by survey data used in this analysis and includes associate degree holders, those with one- or two-year technical certificates, and anyone who attended college but did not receive a credential.² Though private colleges-particularly for-profits-play a role in providing training,³ these workers with some college training primarily attend California’s community colleges. An entry point to postsecondary education for more than two million Californians,⁴ the community college system is a potential gateway to the jobs of the future.

The projected shortage of educated workers with some college stems from a mismatch between the share of the workforce projected to have some college education by 2025 (29%) and the share of jobs that will require workers with those skills (36%, Figure 1). This mismatch is driven by major educational and economic trends. On the education side, workers entering the labor market are less likely to have completed postsecondary education than retiring workers.⁵ This trend, in turn, is related to the increasing share of Latinos in the workforce, a group with traditionally lower rates of college enrollment. While schooling has increased among Latinos in California-especially at the “some college” level-educational attainment is not projected to accelerate enough to meet future employer skill needs. Adult education-postsecondary training later in life-could mitigate the skills gap, but not enough adults currently seek retraining to have a discernible impact.

Lower educational attainment levels among the workforce is problematic because economic forecasts point to the increasing demand for skill by the state’s employers. Training beyond high school has become increasingly valuable in the labor market,⁶ and forecasts of the composition of industries and jobs indicate that this trend is likely to continue over the next decade.

Projections of workforce skills shortages are best used as a window onto how the state’s future is likely to look, rather than a prescriptive set of facts.⁷ Markets work by adjusting to shortages or excesses, and the labor “input” is no exception: wages typically rise for workers whose skills are in high demand and fall (or stagnate) for the rest and thus create an incentive for workers to train for in-demand jobs. A workforce that cannot meet or attain sufficient training for in-demand jobs is thus unable to take advantage of economic opportunities. Moreover, the skills of the state’s workforce will have an impact on California’s national and international competitiveness: the failure to meet workforce needs could limit or alter the state’s economic growth.

Postsecondary Schooling Affords Opportunities for Workers

The majority of California’s workers have some education beyond high school (Figure 2). About one-third of California’s workers have some college experience but less than a bachelor’s degree; most of these workers also do not have associate degrees.

In general, a higher level of education means more job opportunities. In particular, the unemployment rate is strongly correlated with educational attainment: unemployment is lower at higher educational levels. Among workers with some college training, 10 percent are unemployed-this rate is more than 2 points lower than the unemployment rate for high school dropouts and about 3 points higher than the rate for bachelor’s degree holders. But there is variation among “some college” workers as well: workers with associate degrees have lower unemployment (8.5%) than those with other technical certificates or no certification at all (10.6%).⁸

The latest data also suggest that California workers with some college earn about 20 to 30 percent more than otherwise similar workers with only a high school education (Figure 3). And for those with associate degrees, this wage premium is at the high end of that spectrum-about 32 percent.⁹ For comparison purposes, the returns to bachelor’s degrees are even higher, on the order of wages 60 percent higher than those of high school graduates.

Given these high returns, especially for college graduates, one might conclude that more education is always better. However, it is worth noting that there is substantial variation in wages within educational categories-indeed, some college graduates earn less than workers with markedly lower levels of education. Also, the significant variation in educational costs-both financial and non-financial-makes more education a less-than-optimal goal for some students. In general, more training is preferable to less, but there is no “one size fits all” recommendation. Even training short of a bachelor’s degree can have positive labor market returns for California workers.¹⁰

Of course, an individual’s current labor market standing reflects a variety of factors-not just individual skills and educational credentials, but also the health of the state’s-and the region’s-industries and economy. On that front, the job opportunities for workers with some college training have improved since the beginning of the Great Recession but are still not back to pre-recession levels.¹¹

Opportunities for Workers with Some College Training

A third of California’s workforce-and an increasing share of young, Latino Californians-have training beyond high school short of a bachelor’s degree. But the demand for workers with similar training is likely to exceed the supply over the next decade.

California’s Employment Development Department (EDD) estimates that by 2020, employment in the state will have grown by 16 percent, which amounts to about 2.6 million new jobs.¹²

More than half of these new jobs will be in four industries that already constitute a third of the state’s jobs: health care and social assistance; accommodation and food services; professional, scientific, and technical services; and retail trade. Overall, most industries will grow, some faster than others; some manufacturing sectors will shrink.

To better understand future educational needs-and the labor market opportunities for a large share of Californians-we need to look more closely at specific occupations. Table 1 shows that over the next decade, the share of new jobs requiring some college will equal the share requiring a bachelor’s degree (both are estimated to be 32%). Roughly two-thirds of the share of new jobs for “some college” workers will require less than an associate degree. These estimates may actually understate the educational requirements of future jobs: they are based on the educational credentials of current workers, but educational attainment has been rising in most occupations over recent decades.¹³

Nearly 70 percent of new jobs over the next decade will be in high-growth occupations (defined as constituting a larger share of overall employment in 2020 than in 2010). An estimated 30 percent of new jobs in high-growth industries will require some college, and nearly the same share will require at least a bachelor’s degree. While low-growth sectors (by definition) will create fewer new jobs, three-quarters of the jobs that do emerge in those sectors will require training beyond high school. It is clear that education beyond high school will play a pivotal role in preparing workers for the jobs of the future.

Not all occupations that require some college training-and not all jobs in fast growing fields-offer high wages. Similarly, it pays to seek training beyond high school for some occupations but not others. In order to help students and policymakers make strategic decisions about training, it is important to assess the intricacies of job opportunities and earnings potential for “some college” workers. In this brief, we have chosen to focus on how the return to postsecondary training varies across occupations; however, such returns likely vary across California’s regions as well. Though the data utilized here preclude such an analysis, a regional-occupational lens on wage and job opportunities could inform strategic decisions at a local level and are thus worthy of future research.

Figure 4 shows two measures of opportunities and rewards in both high- and low-growth sectors for “some college” workers from 2010 to 2012. For each broad occupational group, the top bar shows the standardized hourly wage¹⁴-an indicator of current earnings potential-and the bottom bar shows the wage premium for workers with some college relative to high school graduates¹⁵-an indicator of the labor market return for training. Occupational groups are listed from highest hourly wages to lowest.¹⁶

It is evident that opportunities vary substantially across occupations in both high- and low-growth sectors. Workers with some college training in the fast-growing health care practitioner and technician sector earn, on average, about $27 per hour-about 34 percent more than they would earn with only a high school diploma. The personal care and services and food preparation and serving sectors are also fast growing, but they offer much lower wages ($11.70 and $13.40 per hour, respectively) and smaller returns for workers with some college. To improve its chances of achieving the joint goal of meeting workforce needs and providing opportunities for workers, the state needs to target educational opportunities in high-growth fields that afford both good wages and returns for schooling.

These opportunities are not limited to high-growth fields. For example, jobs in protective services are not expected to grow significantly, but these jobs do pay relatively high wages-and provide a particularly high return to education-to workers with some college training. Some high-wage and high-return occupations that are projected to grow slowly will nonetheless afford job opportunities due to the need to replace retiring workers.

The high returns for some college training in both protective service and health care practitioners and technician sectors reflect credentials that are required for entry. Protective services occupations such as firefighting and law enforcement require certifications and/or academy training. In the health care practitioners and technicians sector, entry-level registered nurses and dental hygienists are required to have an associate degree or community college certificate. A PPIC report released this fall analyzes the growing need for “some college” workers in these fields in further detail. In other occupational groups, the value of particular credentials is less obviously tied to wage premiums measured here. In general, research has found evidence of larger returns to associate degrees and long-term certificates compared to short-term credentials.¹⁷ But returns for standard credentials vary significantly across programs of study. In fact, recent research finds that the program of study and particular coursework may be more important (in terms of labor market outcomes) than the credential itself.¹⁸

In which jobs does some college pay off? Figure 5A shows specific occupations where workers with some college earned both higher-than-average wages and saw larger-than-average returns to their education. Figure 5B shows the large number of occupations where the opposite is true. Of the 170 major occupations that are identifiable in this data, 20 are on the “high wages and high returns’ list. Only a handful are in the high growth health care and construction sectors, which include registered nurses, radiologic technicians, and electricians. More are in large but slow-growing occupations such as policing, graphic design, and various mechanic and repair jobs.

Quite a number of high-growth occupations offer relatively low wages and low returns to “some college” workers. For example, many high school graduates and Californians with some college training work as personal care aides, but these jobs pay poorly and do not provide any earnings advantage for education beyond high school. Nursing, medical, and dental assistants with some college training earn lower-than-average wages-but training gives nursing assistants a slightly bigger advantage. Similar examples abound across both high- and low-growth sectors for workers with some college training.

It is important to remember that not all workers end up in jobs for which they trained, and that both labor market conditions and individual choices help determine the payoff to postsecondary schooling. However, the state’s higher education system can have a positive impact on the future job opportunities of Californians by ensuring access to higher education.

Taking on the Challenge of Meeting Future Workforce Needs

Strategic decisionmaking by both students choosing to invest in schooling and policymakers concerned about future workforce needs relies on a good understanding of workforce needs and labor market returns for postsecondary training. The data assessed in this brief point toward labor market sectors that offer the greatest opportunities to workers with some college training. While these data cannot be explicitly linked to specific educational programs, the value of postsecondary training is clear. It is also clear that not all occupations and educational investments are wage winners for some college workers.

Many public and private organizations focus on aligning workforce opportunities with training programs. Public groups like the Workforce Investment Boards and the California Community College Division of Workforce and Economic Development, private organizations supporting Linked Learning programs, and legislators focusing on career pathway initiatives¹⁹ make steps to connect students, training, and employer job needs. These efforts often align workforce needs, training programs, and students at a very detailed level-for example, matching educational program offerings to the needs of key employers in regional economies. The data here present a broader picture, looking statewide at long-term workforce skills and opportunities. And as the data here show, not all high-growth fields afford substantial returns to workers with postsecondary training. Students and policymakers alike need access to this kind of information. The California Community College Chancellor’s Office has taken a step in the right direction with the “Salary Surfer,” an online application that provides information on potential earnings associated with a range of programs and credentials.

To meet workforce needs, the state may need to expand access to in-demand career training programs. But doing so via public institutions is not without challenges. The system of financing community colleges indirectly disadvantages colleges from expanding access to expensive programs, since it is based on a per-student formula, and in-demand technical courses tend to be more costly to offer.²⁰ In addition, substantial year-to-year fluctuations in community college budgets are common, since funding is tied to the state General Fund and tax revenues. During the recent recession, courses were cut substantially and access was especially constrained, despite college efforts to protect key academic and technical training missions.²¹ Ensuring access to education goes hand in hand with closing gaps in college going among minority and disadvantaged socioeconomic groups within the state.²²

Another key challenge is to improve both the odds of completion and the time it takes to obtain a credential at California’s community colleges. Successful outcomes are jeopardized when students have trouble enrolling in high-demand courses and identifying efficient pathways through the system. The Student Success Task Force acknowledged these and other hurdles, and recommended ways for policymakers to address them. A number of the task force’s recommendations have been or will soon be implemented; it will be important to measure and learn from their impact on student success.²³ For example, requirements that students complete success-related services such as assessment, orientation, and educational planning-as well as the incentive to do so in the form of higher priority in course enrollment-will take full effect by fall 2014.

Policymakers are increasingly attuned to the need to create a workforce skilled enough to meet the demands of the economy.²⁴ For decades, our economy has increasingly been demanding-and rewarding-higher skills, and the Great Recession brought this trend into stark relief. Workers with less education experienced the greatest decline in job opportunities and have seen the slowest recovery.²⁵ Recovery has been slower in some regions of the state than others, in part due to the educational mix of job opportunities and available workers.²⁶ However, it is clear that future jobs in California will require most Californians to have training beyond high school. Improving access to postsecondary training and creating conditions that allow students to complete their education should be foundational goals for California’s public higher education system. Targeting investment toward in-demand sectors and those with demonstrated labor market advantages for workers holds the most promise for economic returns to both the state and students.