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Press Release · December 7, 2008

California Faces Growing Shortage of College-Educated Workers

SAN FRANCISCO, California, December 7, 2008 — California’s need for college-educated workers is outpacing the state’s ability to produce them, and the gap is expected to widen in the future, a report released today by the Public Policy Institute of California (PPIC) concludes.

Four in 10 (41%) California workers will need a bachelor’s degree to meet the state’s projected economic demand in the year 2025 if current trends continue. But changes in the workforce make this an unlikely outcome. Although the percentage of college-educated workers has increased significantly in recent years — from 28 percent in 1990 to 34 percent in 2006 — that growth is expected to slow. There are two main reasons:

  • California workers who are now age 50 to 64 have the highest levels of education of any age group in the state. They will reach retirement age by 2025.
  • Latinos, a group with low levels of education, make up a growing share of the state’s workers. They made up 29 percent of the working-age population in 2006 and will make up 40 percent by 2020. Just 7 percent of Latinos had a bachelor’s degree in 1990, a percentage that increased to 10 percent in 2006 and is projected to reach only 12 percent in 2020.

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. The results: Lower wages and fewer job opportunities for these workers, and higher wages for college-educated workers as demand for their skills increases. The growing mismatch between the needs of the economy and the education levels of the workforce is likely to put pressure on state social programs, increase economic inequality, and limit the path of the state’s economic growth.

“California may not be able to close the workforce skills gap, but the state’s leaders should look for ways to reduce it,” says economist Deborah Reed, author of the report and a senior fellow at PPIC. “By focusing on the quality of education at all levels, from preschool to the state’s universities, policymakers can improve opportunities for Californians and create a workforce to fuel future economic growth.”

The report, California’s Future Workforce: Will There Be Enough College Graduates? , points out that in 1980, a California man with a bachelor’s degree earned 39 percent more than a man with a high school diploma. By 2006, the difference was 86 percent— an indication that the demand for college-educated workers grew faster than the supply. This trend is expected to continue.

In the past, the migration of college-educated workers to California has helped reduce the gap. In the future, this may not be the case. A major expansion of international immigration 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. Even if this trend changes and migration to California returns to high levels, the numbers would not come close to filling the projected gap between supply and demand.

The report points to the need to find ways to invest in education that feed workforce development. “California’s fiscal emergency is keeping leaders focused on the immediate future,” Reed says. “It’s important for leaders to end the crisis soon so that they can begin to focus on the long-term needs of the state and its workers.”

This report was supported by funding from The William and Flora Hewlett Foundation.


The Public Policy Institute of California is a private, nonprofit organization dedicated to informing and improving public policy in California through independent, objective, nonpartisan research on major economic, social, and political issues. The institute was established in 1994 with an endowment from William R. Hewlett. PPIC does not take or support positions on any ballot measure or on any local, state, or federal legislation, nor does it endorse, support, or oppose any political parties or candidates for public office.