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Blog Post · June 16, 2022

In a Tight Labor Market, Does a College Degree Still Matter for Employment?

photo - Woman Waiting for a Job Interview

While inflation and stock market declines generate a lot of uncertainty about California’s economy in the near term, unemployment is quite low. The labor market is tight, meaning businesses have a harder time hiring and workers have an easier time finding a job. Though initial job losses during the pandemic were uneven, the recovery has been broad-based to date. In fact, racial and regional gaps in unemployment have narrowed in the last few years. However, labor market conditions have long been more challenging for workers with less education. Are non-college-educated adults also experiencing success in today’s economy, or are they lagging behind?

In this post, we focus on California’s employment rate for “prime working age” adults (age 25–54)—the share of adults in that age group who are working. Given low unemployment rates, meeting the state’s workforce needs requires encouraging as many adults who can work to do so. The employment rate reflects changes in both labor force participation and unemployment.

Overall, about 79% of California adults were employed last quarter (March to May 2022), a similar rate to right before the pandemic (78% in Dec 2019 to Feb 2020).

Employment varies considerably by education: currently 87% of those with a college degree are working, compared to 74% of those without a degree. Employment also varies by race and gender. While many factors affect the choice to work—family care needs, health, household structure, and the availability of jobs, among others—Californians with more education have long worked at higher rates.

Encouragingly, current employment rates reflect a strong recovery for both those with and without a college degree. Even with the difficulties people have faced working during the recovery (including challenges like finding child care), employment for both groups has returned roughly to pre-pandemic levels in the last few months. In the first six month of the pandemic, employment rates had fallen by nearly twice as much for non-college-educated workers compared to college-educated workers (16% vs. 9%). However, since then, the recovery has been stronger for those without a college degree.

Looking more closely at recovery by race and education yields differing trends that are masked in the overall data. Across all racial groups, employment rates fell more during the worst of the pandemic for those without a college degree (for Black and Asian prime-aged adults, the initial gap was particularly large).

For all groups except Asians, the more adverse trends for less-educated adults persist. Among those without a college degree, employment rates are still below pre-pandemic levels for Black and white prime-aged adults (declines of 2.4% and 5.5%, respectively). And employment rates are lower for Latino prime-aged adults without a college degree (growth of 1.6%) than for Latinos with a college degree (3.7%), though both are above pre-pandemic levels. Notably, growth in the employment rate has been significantly higher for Asian adults compared to other racial/ethnic groups, with the largest increase among those without a college degree (11.7% increase).

Increased employment in the accommodations and food sector among Asians in California may be driving growth in employment among those without a college degree. Employment in the professional and scientific services sector, which primarily employs more highly educated workers, is also growing among Asians in the state.

Workers across the age spectrum experienced drops in employment during the pandemic, but declines were more severe for those without a college degree. While all groups have made a meaningful recovery, employment has grown more for college-degree holders than for less educated workers, with one exception: those age 45–54. College-educated adults between 25 and 44 have seen modest employment growth compared to pre-pandemic trends, while employment rates are still slightly below pre-pandemic levels for those without a college degree. Conversely, employment rates have increased for older Californians without a degree—and have only just recovered for those with a college degree.

Similar to the patterns for Asians, employment for those age 45–54 in accommodations and food services has grown substantially compared to pre-COVID, as has work in the transportation and warehousing sector, which has been strong throughout the pandemic.

In recent decades, California’s economy—and the nation’s as a whole—has seen increasing bifurcation of the labor market between those with and without a college degree. Higher wages, higher employment rates, and often better benefits and job features (like paid leave and a consistent work schedule) tend to characterize employment opportunities for college graduates. Larger initial job losses among those with lower education levels at the onset of the pandemic elevated concerns that these gaps could further widen and contribute to rising inequality, both by income and race.

Indeed, while the recovery has been strong generally, employment has grown more for college graduates among most racial and age groups—though there are important exceptions. Even in today’s tight labor market, education levels interact meaningfully with these other demographic dimensions, maintaining longstanding disparities in economic success. Looking further ahead, long-run and broad-based economic prosperity will depend on increasing employment rates for those who have historically struggled in the labor market—supporting not just California’s families but also California’s businesses in their search of a ready workforce.

Topics

Completion coronavirus COVID-19 Economy employment Higher Education jobs racial disparities recovery unemployment workers Workforce Needs
Public Policy Institute of California