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Press Release · May 23, 2007

Out-Of-State Labor No Panacea: California Can’t Import Its Way Out Of Shortage Of Educated Workers

Economy More Reliant on Skilled Immigrants, But State Less Attractive as a Destination

SAN FRANCISCO, California, May 23, 2007 – California shouldn’t count on importing workers from other states and countries to deal with its looming skilled-labor shortage, according to a study released today by the Public Policy Institute of California (PPIC), with funding from the William and Flora Hewlett Foundation. Given recent trends, the state probably won’t be able to attract enough college-educated workers to meet current, skill-driven, economic projections—and thus may have to rein in expectations about what the economy will look like in 20 years.

Building on previous PPIC research, the study projects that by 2025, only 32 percent of the state’s working-age adults will have a college degree—up a single percentage point from 2005 (31%). However, the latest economic projections indicate that two of every five jobs (41%) will require a college degree—up from one-third in 2005. “Inevitably, if education levels in the state don’t catch up, the economy will adjust in one way or another,” says PPIC director of research and economist Deborah Reed, who co-authored the study with PPIC research fellow and demographer Hans Johnson. “The workforce of 2025 will be skilled, but not be as skilled—and the economy not as productive or high-income—as current projections imply.”

The analysis reveals that filling the projected skills gap with workers from out-of-state is an unlikely proposition. In the past decade, net gains in skilled workers from other parts of the U.S. have diminished, and even gone negative, because California is increasingly unable to retain its own college graduates: Between 2000 and 2005, 612,000 college-educated migrants came to California from other states but 658,000 college-educated California residents moved out—a net loss of 46,000 college graduates.

More and more, migration from abroad (immigration) has provided the state with skilled labor, but that, too, is unlikely to close the gap. According to the study, the arrival rate of skilled immigrants would have to more than double to meet projected economic demand. And this is despite already robust numbers. The population of immigrants with college degrees has grown almost thirty-fold since 1960, and foreign-born residents now make up 31 percent of all California’s college graduates ages 25 to 64. Recent immigrants are also among the best educated ever to arrive in California: One-third of those who came between 2000 and 2005 had college degrees. While these immigration trends could continue, they’re unlikely to accelerate significantly.

“For either foreign or domestic migrants to fill California’s skills gap would require migration of unprecedented magnitude,” says Johnson. “That seems implausible, if not impossible.” The report, Can California Import Enough College Graduates to Meet Workforce Needs?, says the realities working against increased migration to California include difficulty in changing federal immigration law, fast-growing competition for skilled workers from other states and countries, and California’s exceptionally high housing prices.

The policy implication? The state would be ill-advised to rely solely on migration to fulfill projected labor demands and, more than ever, should redouble its efforts to raise college entrance and graduation rates among its own residents. Together with immigration, elevating Californians’ education levels has the greatest potential for easing the gulf between workers and jobs of the future. “Public policy has a critical role to play because the vast majority of California’s college students are attending public institutions,” says Johnson. “The state has significant latitude to implement policies that could directly address participation and completion rates—and if there was ever a time to do that, it’s now.”

The Public Policy Institute of California is a private, nonprofit organization dedicated to 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.