By Deborah Reed, senior fellow, Public Policy Institute of California
This opinion article appeared in the San Diego Union-Tribune on January 9, 2009
As state leaders grapple with the budget crisis, short-term solutions are eclipsing long-term priorities in higher education. Budget cuts and resulting fee increases are expected to reduce admissions and enrollment in community colleges and in the California State University and University of California systems.
Even as these cuts ease the budget crunch, they work against California's long-term economic health. California's need for college-educated workers is outpacing the state's ability to produce them, and this gap will only get wider.
In our recent analysis for the Public Policy Institute of California, we find that 41 percent of California workers will need a bachelor's degree to meet the state's projected economic demand in 2025, if current trends continue. At first glance, that number may seem easy to attain. Today, roughly 34 percent of workers have a bachelor's degree, up from only 28 percent in 1990. If growth in the share of college-educated workers continued at that rate, we would get to 41 percent by 2025.
But we can't expect college education levels to grow nearly as fast over the next 20 years. For one thing, the baby boom generation has the highest level of bachelor's degrees of any age group in the state. This appears to be partly because men in their late 50s now were of prime draft age during the Vietnam War, and a number of them opted for college over military service. These workers will be reaching retirement age, to be replaced by young workers who have fairly low rates of college graduation. Fewer than 30 percent have a bachelor's degree.
In addition, Latinos, a group with rising but still low levels of college graduation, will make up a faster-growing share of the state's working-age adults, from 29 percent today to more than 40 percent by 2025. Their college-graduation levels are expected to be in the range of 12 percent at that time.
In the past, migration of college-educated workers to California from other states and countries has helped fuel growth. In the future, this may not be the case. A major influx of educated workers from abroad is unlikely because of increasing global competition for skilled labor and relatively restrictive U.S. immigration policy.
Furthermore, since 2000, more college graduates have left California than have arrived from other states. Even if this trend changes and migration to the state returns to high levels, the numbers would not come close to filling the projected gap between supply and demand.
At the same time as the growth in college-educated workers slows, the supply of workers with a high school diploma or less is projected to exceed economic demand. These workers will see an erosion of their earnings and other compensation and a decline in job opportunities, leading to unemployment and underemployment. The projections are bleak for the state's low-income families, which will mean more demands on state programs to support them and thus, more demands on the future state budget.
Of course, for workers with a college degree, economic demand will drive up earnings and employment opportunities. Income inequality will grow as a result of these earnings trends. Indeed, California has already seen the rich getting richer and the poor getting poorer partly because of rising wage premiums for college-educated workers.
California will not stay on the same long-term economic growth path that we've seen over the last few decades. That path will simply be unattainable due to slower growth in the supply of college-educated workers.
While our projections suggest a work force skills gap that is too big to close, the state's leaders can work to reduce it. Cutting budgets to higher education is a step in the wrong direction. We need lasting solutions to the state's budget crisis so that leaders can focus on long-term investments in education. We need to improve college graduation rates, reduce the time it takes many students to graduate, and increase the number who transfer to four-year universities from community college.
But it isn't only about higher education. We need to reduce the number of high school dropouts and create a K-12 system that really prepares students to succeed in college. Even preschool investments have been shown to improve college enrollments.
Our study focused on the skills gap in bachelor's degrees. But even with a projected demand for college-educated workers of 41 percent, the majority of jobs will not require a bachelor's degree. Improving the skills of workers who do not attend college is another key component of work force development.
The economy of the future will require a skilled work force. We need effective reforms and investments today that will create a work force to fuel future economic growth and enhance opportunities for all Californians.