Half of Local U.S. Labor Markets Won’t Meet Future Workforce Needs

More Americans than ever are now educated beyond a high school diploma.

And yet, half of all local labor markets are not on track to meet their own labor demands by 2031, according to a recent report titled “The Great Misalignment” from Georgetown University Center on Education and the Workforce (CEW).

The analysis measured 565 local labor markets in the U.S., all of which have at least one provider of certificates or associate degrees — also known as middle-skills credentials. Researchers found that, in half of all local economies, the number of middle-skills credentials conferred will fall short of meeting expected labor demand through 2031. It projects that at least 50% of all types of middle-skills credentials issued in these markets would need to change to meet those demands.

To provide more insight into the analysis, NerdWallet spoke with one of the authors of the report, Zack Mabel, research professor of education and economics at Georgetown University’s CEW and co-author of the report "The Great Misalignment."

The following interview has been edited and condensed for length and clarity.

NerdWallet: What happens when middle-skills credentials and the local labor market don't align?

Zack Mabel: Employers struggle to recruit skilled workers for the jobs that they need. Individual graduates are at risk of being trained in fields that they actually can't find work in so they may find themselves underemployed or over-employed. Local economic growth is likely to be stymied as a result of these inefficiencies. Not to mention the fact that alignment, by itself, doesn’t guarantee the expanding of economic opportunity.

In many cases, much of that credential underproduction is also leading to underproduction in programs that provide pathways to quite high-paying jobs for middle-skills workers.

NerdWallet: Did you see trends in any specific middle-skills jobs that aren’t being met across job markets?

Zack Mabel: We know, for example, that middle-skills credentials that are aligned with blue collar jobs tend to be underproduced. So nationally, we expect that about 23% of job openings available to middle-skills workers over the next several years will be blue collar.

Middle-skills providers collectively are producing only 12% of their credentials in those fields. We know that there are some dramatic shortages in many of the programs that are training people for these workers.

NerdWallet: On the flip side, are there certificates and degrees from middle-skills jobs that are overly conferred?

Zack Mabel: We see that many students are sort of drawn to enter business programs — even for folks who are in certificate and associate degree programs. As a result, among middle-skills providers, 13% of their credentials are being awarded in management and professional programs. Whereas, less than 10% of the jobs available to middle-skills workers over the next several years are in those occupations. So there's a sort of overall credential overproduction there as well.

One of the major contributors that we see to the overall levels of misalignment is actually programs that are awarded in general studies programs. These programs, oftentimes, are designed specifically with the intention of helping students to transfer to bachelor's degree programs. But due to well-known challenges with transferring from two- to four-year schools, fewer than half of the students who graduate from those types of general studies programs successfully transfer to bachelor's degree programs within six years.

NerdWallet: So what happens to those general studies students who plan to transfer, but don’t?

Zack Mabel: Those programs don't have a direct, occupational path in the workforce, but the reality is that many of the graduates coming out of those programs are, in fact, finding themselves looking for work in local economies with those credentials. And so that's a major driver of the overall misalignment that we see.

It’s a major challenge for the graduates with those credentials, because oftentimes employers don't recognize those individuals as necessarily having the skills to be able to secure the work that they're looking to hire for.

We also know that if you look at the earnings returns for workers with middle-skills credentials with these general studies programs, their earnings are quite low — especially early in their career.

NerdWallet: In terms of location, where does misalignment tend to proliferate?

Zack Mabel: We tend to see quite a lot of variation in alignment across labor markets even if we look at very large major metro areas. We also see quite a bit of variation across predominantly rural labor markets.

We do, however, tend to see that there is an urban-rural divide where urban areas tend to exhibit stronger alignment than rural areas. One of the major explanations for that is the fact that urban areas tend to have a lot more providers serving the area.

NerdWallet: Can you speak more to how some providers intentionally design programs by collaborating with local employers?

Zack Mabel: That’s the sort of best practice and we need to see a lot more of it. Right now, what we tend to see is that these institutional-employer partnerships, oftentimes, are one-off. So there's a single institution that's partnering with a single player and they're focused on providing “externship” opportunities for students in one particular program.

What we and others in the field really think we need to move towards is finding ways to engage multiple institutions and multiple employers in sector-wide collaborations. So really, this is a question of scale and coordination across multiple entities in a local area to address the needs of providers and to ensure that graduates coming out of those programs both have the skills and competencies that local employers are asking for.

NerdWallet: How common or uncommon is it for students to stay within their local labor markets after they achieve that degree or certificate?

Zack Mabel: It's certainly not always the case, but nationally, about 85% of middle-skills graduates will be working within their state within the first year. We also know that many middle-skilled students are attending institutions within 10 miles of their home. And so we, unfortunately, need a lot better data when it comes to what the post-college movement patterns of graduates are. That's true across the board, both for middle-skills graduates as well as graduates from bachelor's degree programs.

We know that middle-skills graduates are much more likely to be working in their local economy than the graduates of many bachelor's degree programs. There's a lot more uncertainty when it comes to where bachelor's degrees are headed after they earn their degree, but we know that there's a lot more movement there.

NerdWallet: Some states have free tuition programs specifically to fill areas of skills gaps. Basically, the state will pay for a students’ tuition if they’re studying in a certain high-need field, and in exchange, students are then required to work for a certain amount of time in that local area. Is there a need for more of those policies?

Zack Mabel: I think it could be one of many strategies. These place-based policies are a more straightforward win for the local economies and local employers and probably more uncertain for individuals themselves. And the reason I say that is because if you're a student who is incentivized by one of these programs to enter a particular program, you graduate and now you have an obligation to stay in the local area.

Let's say it's a rural area — that means that you're earning less and your purchasing power is lower than if you had moved to a different labor market where your earnings are higher and your earnings relative to your cost of living is higher.

NerdWallet: Can you speak to some of the racial and ethnic disparities in training and outcomes that the report explores?

Zack Mabel: We know that opportunity is often so closely tied to where you live, where you learn — it’s the geography of opportunity.

We find that just having access to a middle-skills provider in your local economy differs by race and ethnicity. In particular, American Indian and Alaska Native individuals are anywhere from three to 18 times more likely than individuals of other racial and ethnic groups to live in an area that's not served by middle-skills providers.

Then, if we look among working adults who do have access to a local middle-skills provider, we actually see that Latino and Hispanic adults are the least likely to live in labor markets that are strongly aligned.

NerdWallet: What does moving toward greater alignment actually look like? And what are some of the challenges that lay ahead?

Zack Mabel: Funding is a real challenge for middle-skills providers. Public community colleges receive very little funding per student compared to four-year institutions. Their missions are much more multifaceted and complicated than any other types of institutions. We need to be sort of clear-eyed about what it will take in terms of providing these institutions with the resources for them to achieve outcomes that look different than they do today.

Oftentimes we build accountability measures that are trying to incentivize institutions to do things differently, but we don't actually provide the resources that are necessary to enable them to do things differently.

NerdWallet: What are some of the limitations of achieving alignment for the individual in terms of opportunity and financial security for workers? The report mentioned that alignment, even if it is important, is definitely not a cure-all.

Zack Mabel: Absolutely not. Alignment is in no way an assurance of securing economic mobility, high earnings or any of these sort of outcomes that we hope to cultivate for individuals.

Alignment provides a snapshot of how well supply and demand are coming together. In many cases, we see that skilled providers are producing enough credentials in programs that are aligned with particularly low-paying occupations, including personal services.

Where I think alignment can be particularly helpful is as a tool to understand where there is an under-production of credentials in programs that are particularly valuable and have really strong pathways to high-paying occupations. Because that's really where there is low-hanging fruit — untapped potential economic opportunity — that is being lost.

If we can find a way to expand credential production in those programs and help get more students into those programs, that provides the best chances that both employer needs are being met and individuals are going to come out of those programs ahead of where they started.

(Photo by Justin Sullivan/Getty Images News via Getty Images)