For a Competitive Economy, We Need a Skilled Workforce

By Rebecca Blank

As we imagine a science policy that can rise to the challenges of the next 75 years, worker training and education must be at the center of our efforts. America’s workforce is central to our country’s long-term economic growth and productivity. Labor force trends have changed dramatically over recent decades, while the need for highly skilled and innovative workers has grown, along with the need for workers with strong technical skills. Higher education institutions of all types must provide affordable and quality education to ensure these workers are available. Research universities are particularly important in educating people who will advance the boundaries of scientific knowledge. The United States must make sustained investments in worker training and higher education to make sure it can meet the shifting needs of a scientifically productive society for the twenty-first century.

Workforce challenges

For much of the last 50 years, the US workforce has been growing. Multiple factors have been driving this change: the large Baby Boomer population moved into their working years; the share of women working for pay increased rapidly; and the United States welcomed a large number of new immigrants.

A larger workforce, by itself, can drive economic growth, and indeed that is what we have seen: since 1970, 25% of US economic growth has been driven by an increase in hours worked, largely due to workforce growth. The remaining 75% of economic growth has been driven by a rise in productivity, due to rising skills among workers, shifts in technology, and deepening capital investment. Of course, these changes are also fundamentally related to the workforce, since productivity improvements typically require higher levels of education, innovative research and development efforts, entrepreneurial skills, and intellectual curiosity, all of which are needed to produce new products and processes that change the ways we work and live.

America’s workforce is central to our country’s long-term economic growth and productivity.

Over the past decade, however, the United States has had to contend with a variety of workforce challenges. Some of these relate to changes in the availability of workers, due to shifts in the numbers of those entering or leaving the workforce. Many companies have complained that they find it difficult to hire the personnel they need at the skill levels required. Three trends, in particular, affect the number of workers available.

First is the aging into retirement years of the Baby Boomers—those born between 1946 and 1964. From the 1970s through the 1990s, Baby Boomers were moving from their teens into their most productive earning years. But in the past decade members of this group have been retiring, working less, or perhaps working less productively as they face new technologies they understand less well than younger workers. While labor force participation among those over age 65 was slowly rising in the last 20 years, it has fallen during the COVID-19 pandemic and has yet to recover. One important consequence of this trend is a greater burden on current workers to pay for Social Security and Medicaid.

A second trend affecting the size of the workforce is that women’s participation in the labor force has shifted in the past decades. After 50 years of steady increases in paid work, the percentage of women in the labor force grew from 38% in 1960 to 60% in 2000, but then stagnated after 2000 and has fallen during the pandemic, now standing at 56%.

A third trend is a reduction in the number of immigrants entering the United States, markedly reducing the growth of the workforce. US policy changes have severely restricted the ability of immigrants to get visas, even those who complete their education here. Some of the reductions in immigration are due to economic growth in other countries, such as Mexico, and to higher unemployment and slower growth in the United States, which make moving here for work less attractive. This shift in immigration affects industries that hire low-skilled labor, but it also affects industries that hire very high-skilled labor: indeed, the United States has historically attracted some of the most high-skilled workers who did not see opportunities in their home countries.

US policy changes have severely restricted the ability of immigrants to get visas, even those who complete their education here.

These three trends shaping the size of the workforce must be reckoned with. But the challenges facing employers in the United States go beyond the number of available employees. In many cases, the mix of worker skills has not matched employer demands. Ongoing trends have widened wage inequality, as demand for more educated workers has grown while demand for less-skilled ones has fallen, particularly in traditional manufacturing jobs that often paid relatively high wages.

Over the past 40 years, there has been a growing demand for very highly skilled personnel in engineering, technology, and health. Much of recent world economic growth has been due to the spread of new technologies and new products. Developing, marketing, and expanding these technologies requires a highly skilled workforce. Rising demand for this group of workers has driven up their wages. Furthermore, demand for them has increased around the world, so that they are now competing in a global labor market that values their skills. This fact is very evident in higher education, where our most productive scientists often get job offers from universities in both the United States and abroad.

While demand for highly skilled workers has grown, US demand for less-skilled workers has fallen. One factor driving this change is that new technologies have reduced the number of jobs for less-skilled workers through increasingly sophisticated robotics and automated processing. These changes have been reinforced by evolving international trade patterns resulting in jobs being shifted overseas. Over the past two decades, the opening up of China and other countries in Southeast Asia has presented many firms with production opportunities outside the United States that include a ready supply of lower-cost workers who are often willing to work long hours. The cumulative effect of these changes has been to reduce jobs and demand for less-skilled workers in the United States and to contribute to widening wage inequality.

Indeed, wage inequality has exploded. Adjusted for inflation, average wages among those with a four-year college degree or more have risen about 16% since 1979; but among those with only a high school degree, wages have fallen about 12%. These trends are particularly salient for men: indeed, men with a high school degree or less have largely lost access to jobs that allow them to be financially secure. In order to support their families, save for retirement, or buy houses, they need a spouse who is also working steadily. Meanwhile, relative wages among college-educated workers are higher than they have ever been, and particularly high among those with graduate or professional degrees.

One factor driving this change is that new technologies have reduced the number of jobs for less-skilled workers through increasingly sophisticated robotics and automated processing.

These trends have been key to understanding racial wage gaps. Declining wages among less-skilled men have particularly affected Black men, whose educational levels are lower than those of white men.  

These trends also interact with gender inequalities. Women’s college completion rates have risen much faster than men’s. Since the 1990s, more women than men have been graduating from college, a trend particularly notable for Black women in contrast to Black men. The service-sector jobs in which women have often been employed are not easily outsourced to other countries, so women have not experienced as much of a rise in wage inequality by skill level as men have. This situation has meant that women’s position in the labor market has improved relative to men, especially among those without college degrees.

These labor market trends have implications far beyond the world of work. Changes in wage inequality and wage-earning ability by gender have been linked to reductions in marriage, increases in opioid addiction, and deterioration in health and life expectancy among less-skilled men. A number of commentators link these shifts to rising political fragmentation and disaffection, particularly among those who have faced greater economic instability while watching (typically) urban and better-educated populations experience economic gains. And beyond the social implications, these labor market trends pose stark challenges for both basic and applied scientific research, technology development, and long-term economic growth.

As we emerge from the COVID-19 pandemic, we thus face a strained labor market in which employers are struggling to attract workers of all types. In the near term, this trend should particularly advantage some of those less-skilled workers whose wages have fallen in recent decades. But it remains to be seen whether the current labor market is anything more than a very short-run phenomenon.

What should higher education be doing to respond to these challenges?

There are no easy answers to resolve these workforce and economic challenges. The United States needs a growing pool of high-skilled, highly educated workers, but it must find ways to provide stable employment at reasonable wages to all.

Changes in wage inequality and wage-earning ability by gender have been linked to reductions in marriage, increases in opioid addiction, and deterioration in health and life expectancy among less-skilled men.

While addressing these challenges requires the involvement of many groups, institutions of higher education have an especially large role to play, since education is so important for the skills that today’s labor market increasingly demands. These institutions range from community colleges to four-year colleges to research institutions that provide graduate training.

Community colleges and less-skilled workers. Most workers will need more than a high-school degree to prepare themselves for long-term steady employment. But that does not mean everybody needs a four-year college degree. Both community colleges and vocational training schools provide technical training for many high-demand jobs. These are also the institutions that employers often work with to ensure a steady stream of workers with the specific training needed, and they are where older workers often turn for retraining.

As an entry point into many jobs, community colleges must seek to expand access and affordability—for younger workers acquiring an initial set of skills as well as for older workers seeking retraining. Graduation rates at community colleges remain too low. A variety of recent experiments have shown that retention and graduation at these colleges can be increased by smart institutional policies. While financial aid is important, it is only part of an effective strategy, which should also include academic coaching and proactive frequent contact with advisors, as well as attention to remedial course requirements.

In the long run, if we want to raise the wages of less-skilled workers, the surest way is to raise their education and training levels, giving them access to a wider range of higher-wage jobs in sectors of the economy where jobs are growing. But raising education levels is a decades-long process, and it will require more than adjustments to higher education pipelines. Also needed are improvements in urban and rural K–12 schools, which too many students leave having been poorly educated and unprepared for gaining higher-wage jobs or earning a community college degree.

Institutions of higher education have an especially large role to play, since education is so important for the skills that today’s labor market increasingly demands.

In the short run, if economic trends continue to reduce jobs for less-skilled workers, raising wages for them is likely to require policies that subsidize earnings. For instance, we could expand the Earned Income Tax Credit for low-wage workers without children or provide ongoing child allowances for low-income parents. Expanding these policies to enrich income among less-skilled workers may be our best short-run option to stabilize their economic situation.

Of course, increased worker activism, through unions or other worker organizations, can also raise wages for less-skilled workers in certain industries. And in some areas such as health care—which will see demand increase for home health aides and nursing home assistants to care for aging Baby Boomers—the demand for less-skilled workers could increase in the future, thereby raising their wages. At the moment, as we emerge from the pandemic, a shortage of workers is raising wages in many lower-wage jobs, but that may be a very short-run phenomenon.

Four-year colleges and online degrees. Four-year colleges and research universities remain key to training the skilled workers for whom demand is steadily increasing. Access to these schools for individuals from all income levels is important. But getting students to start college is only step one; they must then complete their degrees and graduate. A college degree opens access to jobs that provide substantially higher lifetime earnings.

Much of the public debate over access to college has focused on financial assistance. This aid is important, particularly for students from lower-income families. Too often, students and their families do not understand what is required to finance college or what types of assistance are available and are discouraged by the complexities of financial aid applications. Increases in Pell Grants and other mechanisms to guarantee access for lower-income students are essential to any higher education agenda for the twenty-first century.

Cost alone, however, is only one component of completing a degree. Good advising—both academic advising for coursework and career advising—is a particularly under-discussed issue in higher education. Advisors need to help students select courses, evaluate their interests and skills, and decide on a major. A targeted plan can speed time to graduation, which also reduces debt. Students who run up excessive student debt often take more than four years to complete their degrees because they were not effectively supported on a path toward completion.

At the moment, as we emerge from the pandemic, a shortage of workers is raising wages in many lower-wage jobs, but that may be a very short-run phenomenon.

Career advising is also important. Many students—particularly liberal arts majors—are unclear about what jobs their academic work will make available. And they often lack information about the financial implications of different degree choices. Career advisors should help students in their sophomore and junior years think about job possibilities and the coursework and internships they need to prepare for these jobs.

Expanded and high-quality online education can provide a viable alternative for highly motivated individuals who want to complete a degree or certificate. In 20 years, most major universities will be running extensive online courses along with more traditional residential education for 18-year-olds. Particularly for nontraditional students seeking to complete a degree program, or for those seeking professional credentials beyond an undergraduate degree, the demand for online education will continue to expand. Online learning provides flexibility to students, allowing them to complete coursework on demand, when they have the time for it. It is also likely that online education will become less and less focused on traditional degrees and more flexible with “mix and match” options. Schools may offer badges or areas of certification that students can complete with three or four courses. In that way, students can earn a more limited credential or can combine badges into a traditional degree over time.

Graduate research training. Graduate programs at research universities train the workers who keep the US economy at the forefront of innovation and discovery. Providing students with both the funding and the support to successfully complete their degrees at the graduate level is just as important as it is at the undergraduate level. It is crucial that we continue to attract both US and international students to US universities for this training. And we must change visa policies that send away highly trained students who want to work in the United States. We can’t afford to lose this top talent to other countries.

Research universities are the primary source of basic research and innovation in the economy. Almost every new technology that has emerged in the past 40 years has had its genesis in scientific research done decades earlier. This research is typically purely exploratory, designed to explain how the world works rather than to develop any particular product. But it is often a necessary foundation that applied researchers in industry utilize when they look to develop new technologies or products. The basic research undertaken at universities is largely funded by the federal government. If we want to continue to stay on the front edge of technology in areas such as health, engineering, and data science, we must continue to grow support for basic research—as well as for the graduate student training that produces top-flight researchers.

The future of higher ed

Putting all this together, what should higher education look like if it is to serve the needs of US science and society over the next several decades? Community colleges will hopefully be serving more students, with even greater flexibility to complete their training in-person or online. Perhaps more of this training will be integrated into high schools, so that there is less distinction between a high school and a college course. I expect that what we now consider two-year associate degrees will increasingly become the equivalent of high school degrees in past decades, acquired as part of public education and free of charge to most students.

Four-year public colleges will continue to face challenges as state dollars for higher education are unlikely to grow and may well continue to decline. Furthermore, demographic shifts are reducing the number of high school graduates in many areas of the country. Some smaller schools—both public and private—will need to create partnerships with each other or even merge and consolidate.

If we want to continue to stay on the front edge of technology in areas such as health, engineering, and data science, we must continue to grow support for basic research—as well as for the graduate student training that produces top-flight researchers.

Most four-year colleges—particularly the larger public schools—will offer an increasingly flexible set of options, providing both traditional residential college experiences and a host of online or hybrid options that allow students to move at their own pace. A four-year college degree may no longer be the norm. This change will hopefully attract more older students into completing degrees or acquiring additional credentials that advance their careers.

Least changed will be the research activities at major research universities. US universities have become the model for the modern research university, and this model continues to perform well, although it needs ongoing support for the increasingly interdisciplinary big science projects that will shape the future. Ongoing public investment in new knowledge is essential for the United States to remain at the leading edge of the global economy.

Many factors are important for economic competitiveness, of course. But among the most important are the skills and availability of a nation’s workforce. For several decades, the United States benefited from a growing workforce with expanding skills, but that has been less true in the last 20 years. It will take explicit attention to this issue to ensure that the nation has the workers it needs in future decades.

This need means giving attention to policies that can enhance both the numbers and skills of workers, as well as the adequacy of their wages and benefits. We must make continued public investments in K–12 education and increase our investment in higher education to ensure access for all students. In turn, universities must do their part, becoming increasingly flexible in how they teach skills and provide credentials to a broader mix of students. Both the public and private sectors need to partner with universities to deliver the highest quality of education to their students. To be sure, worker training is only one prong of any educational program for science policy over the next 75 years, but it is an essential one. There can be no science policy—and no science—without workers. We must commit today to training and supporting them for the generations to come.