Education, Job Openings, and Unemployment in Metropolitan America

A new Brookings Institution study on metropolitan labor markets documents a gap between the job demand for those with higher education and the low supply of workers with that level of education. It also explains how this education gap might be limiting job creation. http://www.brookings.edu/research/papers/2012/08/29-education-gap-rothwell – M10420 This is further evidence to support the need to educate adults so that they are well prepared for higher education and so they can succeed once they enroll.

Findings from the Study

An analysis of labor markets using data on adult educational attainment, occupations, and job openings in the 100 largest metropolitan areas from January of 2006 to February of 2012 finds that:

  • Advertised job openings in large metropolitan areas require more education than all existing jobs, and more education than the average adult has attained. In the 100 largest metropolitan areas, 43 percent of job openings typically require at least a bachelor’s degree, but just 32 percent of adults 25 and older have earned one.
  • Metro areas vary considerably in the level of education required by job openings posted online. Roughly half of openings in San Jose, San Francisco, and Washington, D.C. require
a bachelor’s degree or higher, while fewer than one-third of openings require a bachelor’s degree in metropolitan McAllen, TX and Youngstown, OH.
  • Unemployment rates are 2 percentage points higher in large metro areas with a short- age of educated workers relative to demand and have been consistently higher since before the recession. The gap between education demand and supply is small in Madison, Washington, Raleigh, and Minneapolis, and large in metro areas throughout California’s Central Valley. Both less educated and younger workers are much more likely to be working if they live in metropolitan areas with a smaller education gap.
  • Declines in industry demand and housing prices explain most of the recent cyclical increases in metropolitan unemployment rates, but education gaps explain most of the structural level of metropolitan unemployment over the past few years. Changes in house prices (prompting a reverse wealth effect) and industrial demand explain roughly three-quarters of the trend in unemployment rates across large metropolitan areas since the recession began. However, metropolitan education gaps explain roughly two-thirds of variation in the level of unemployment across metro areas, posing a longer-run challenge for many regional labor markets.
  • Metro areas with higher education gaps have experienced lower rates of job creation and job openings over the past few years. Educational attainment, overall and relative to existing demand, benefits metro areas by making workers more employable and firms more competitive and entrepreneurial—thus leading to more job openings for less educated workers. By contrast, education gaps do not appear to be related to employer difficulty in filling job openings in metro areas. In the short-term, unemployment rates are unlikely to come down to their pre-recession lev
els without improvements in housing markets and consumer demand. Yet high educational attainment is essential for the health of metropolitan labor markets before, during, and after recessions. Educational attainment makes workers more employable, creates demand for complementary less educated workers, and facilitates entrepreneurship. To better train less educated adults, non-profit organizations, community colleges, and governments can use detailed job openings data to align training curricula and certifiable skills with employer demand.
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