By Grace Harrison
For government leaders at the state and national levels, some of the most important metrics of their success in office are economic conditions, such as unemployment levels or job growth. Market conditions and workforce characteristics are often determined by macro-level circumstances, though, and are beyond the control of a single U.S. representative or governor. Despite trends toward an increasingly educated workforce, states still face labor shortages. Governors in Alaska, Colorado, Maryland, New Jersey, North Carolina, Pennsylvania and Utah are advocating for changes in education and skill requirements to bridge this gap.
EDUCATIONAL ATTAINMENT OVER TIME
Since the mid-20th century, the number of workers with a postsecondary degree has increased significantly. For workers aged 25 and older, the proportion of those with a higher education degree increased by around 30 percentage points from 1960 to 2021. As the education level of the U.S. population has increased, researchers have begun to question how educational attainment, income and unemployment are interrelated.
In 2014, Pew Research Center published a report detailing the “rising costs of not going to college” for millennials. Combining Pew and U.S. Census Bureau data, the report highlights three areas of disparity based on levels of educational attainment — annual earnings, unemployment rates and the share of individuals living in poverty. Though there have been differences in the earnings and general economic outcomes of college and high school graduates across generations, the annual income gap has increased from $7,449 in 1965 to $17,500 in 2013.
Underlying this trend is the general divergence of earnings, indicating rising median earnings of college graduates coupled with falling median earnings of high school graduates.
THE CURRENT STATE OF THE LABOR MARKET
Despite fluctuations throughout COVID-19, the economy stabilized to a point where analysts can determine the current state of employment for various demographics. There was a 13.6% decrease in employment during the first month of the pandemic, which is the largest one-month decrease since 1939. Since then, employment fluctuated across sectors as overall economic growth remained volatile. Now, three years later, in the context of interest rate hikes and contractionary spending, the labor market faces the opposite problem: rapid growth in job postings, with not enough applicants to fill open roles.
In January 2023, employers created 517,000 jobs. Economists want to know why, despite low unemployment levels and the increasing population of highly educated workers, labor force participation is around one percentage point lower than pre-pandemic rates. A working paper from the National Bureau of Economic Research found this trend is due to “less hours worked” rather than “less workers.” Males aged 25-55 with bachelor’s degrees experienced the greatest decrease in work hours. Exactly why this voluntary decline in hours worked took place is undetermined, but authors suggest a desire to create a better work-life balance could explain this trend, which, if true, will have further implications for societal roles and future efforts to curb unemployment.
Similar research offers an alternative explanation as to why open roles continue to go unfilled. The relationship between higher education and higher wages is a primary factor, particularly in fields like retail and health care.
“As long as the benefits of obtaining a college degree exceed the cost for an increasing number of Americans, we should expect to see the number of Americans with a college degree continue to steadily climb."
— Kory Kantenga, LinkedIn senior economist, to S&P Global
People who would traditionally fill low-wage positions are pursuing higher education and increased wages or otherwise seeking more competitive employment. This trend could shift if employers modify their hiring practices and requirements. For instance, skill-based assessments, rather than degree requirements, might slow the growth of individuals pursuing higher education. Governors across the U.S. supported replacing degree requirements with skills and experience assessments.
EXECUTIVE ACTIONS TO ADDRESS LABOR SHORTAGES
Public sector employment, responsible for government and public services such as education and transportation, faced some of the largest labor shortages in the last few years. Despite the increased demand for public services due to growth and infrastructure investment, state and local governments struggle to attract college graduates to fill these crucial positions. Competitive employment, as well as job and social mobility, are not typically characteristics of state and local government employment, despite the offerings of stable income and benefits.
The need to fill these public sector positions, combined with efforts of workforce development across states, has recently led governors to remove degree requirements — typically a bachelor’s degree — for government jobs.
Maryland Gov. Larry Hogan announced in March 2022 a “first in the nation” program to strengthen the state’s workforce. It was determined that more than half of the nearly 40,000 state jobs did not require four-year degrees, but rather relevant skills, work experience or community college education.
In April 2022, Colorado Gov. Jared Polis signed an executive order “directing state agencies to consider job applicants skills and experiences as substitutions for educational degrees.” On Pennsylvania Gov. Josh Shapiro’s first day in office, a similar executive order was passed.
Other governors implementing similar skills-based hiring practices within the past year include Alaska Gov. Mike Dunleavy, New Jersey Gov. Phil Murphy, North Carolina Gov. Roy Cooper and Utah Gov. Spencer Cox.
Implications of these Practices
This advancement in employment accessibility and development has now extended past executive actions. In the first few months of 2023, the Georgia Senate proposed and passed SB 3, the Reducing Barriers to State Employment Act of 2023. To date, eight states reduced the requirements of public sector employment, serving as examples for other states looking to do the same.
Because it is still early on in this transition, concrete impacts are yet to be determined. However, predictions for the future of educational attainment and state workforces are becoming clear. Employment expansion to skilled individuals without a degree provides economic stability and growth to not only the state and its constituents, but those individuals now receiving salaries and benefits that were previously unattainable.
Skills-based hiring practices and newly-created state programs also benefit individuals with disabilities, who often face higher barriers to education and employment. Though the steady increase in individuals obtaining postsecondary degrees likely will not disappear, state governments are making strides in promoting employment accessibility and combatting labor shortages.
