Are Low-Skill Workers America's Next Great Economic Resource?
Some economists think that continued GDP growth will require restoring a struggling segment of the labor force to where it was before the recession.
Few workers have suffered as much in the new post-outsourcing, post-automation, post-recession economy as workers without a college degree or high-school diploma. Unemployment, underemployment, and wage stagnation have plagued this class of workers since the start of the most recent economic downturn. But, ahead of an impending shift in the makeup of the labor pool, there’s some reason to believe that conditions may soon improve for these workers, who once comprised the backbone of the American economy.
Perhaps the greatest shift in the labor market over the past several decades has been the portion of Americans entering the workforce with a college degree or higher—a group that is often referred to as highly-skilled workers. This segment of the workforce has more than doubled since 1989, according to a report from Georgetown University’s Center on Education and the Workforce. And in 2016, workers with a college degree made up 36 percent of the labor market, making them the largest group of American workers. That’s a first, the report says.
So isn’t an economy where more and more workers have gone to and completed college technically a good thing?
The answer is a little complicated. Right now, the labor-force participation rate in general has been a cause for concern. According to the Bureau of Labor Statistics, about 62.8 percent of the adult population is currently working. Prior to the recession, that figure was 66 percent. And the most significant declines have been among workers who haven’t been to college.
While a larger population of highly-educated workers has meant greater productivity and quicker growth for the U.S. economy, it’s also resulted in the displacement of workers whose qualifications don’t include a college degree. Accordingly, the workforce has stratified, producing rifts in employment rates, wages, income, and quality of life.
And though that dynamic doesn’t bode well for future economic growth, some economists believe that the market may be ripe for another shift that could help workers at the lower end of the education spectrum recoup some of the ground they’ve lost since the recession. In a new study, Dale W. Jorgenson of Harvard University, Jon D. Samuels of the Bureau of Economic Analysis, and Mun S. Ho of the D.C.-based think tank Resources for the Future write that while an influx of young, educated workers has helped contribute to American economic growth in recent decades, the GDP boost attributed to an increasingly educated population won’t last forever. “The growth rate of the U.S. economy in the next decade will depend critically on the revival of the labor force participation rates that prevailed before the Great Recession,” they write. And the group with the most room for growth is workers without a college degree.
In their study, the authors take a look at the ebbs and flows in the share of Americans working, the education levels of workers, and overall skill levels, among other factors. They predict that even as a large portion of the American workforce attain college degrees (or more-advanced degrees), the growth of this group will soon hit a plateau. In order to stop GDP growth from plateauing too, economists and businesses will look for potential areas of growth. As a result, the authors hypothesize that the continuing recovery will beget an increase of jobs for those who suffered the most in the years following the recession.
How would this happen? Looking at the drivers of growth from the 1940s through today, the authors write that the most significant contributions to economic growth in the future will likely be derived from having more efficient and productive workers. Since there won’t be much growth in the share of workers with BAs or higher, these improvements will instead come in the form of greater hiring and productivity for workers who have a high-school degree or less. These workers will not only be more likely to find jobs, but they’ll also be working longer hours than they are now, likely in service professions. In the next decade, the study estimates that these changes will help produce a 2.49 percent acceleration of GDP, compared to the 2.34 percent GDP growth seen between 1990 and 2014.
This future, in which workers with less education will recoup some power in the labor market, can be hard to envision, especially when some estimates project that within the next few years, about 65 percent of U.S. jobs will require at least some college or an associate’s degree. But the authors are hardly suggesting that the next decade or so will be a golden age for workers who didn’t go to college. Instead, they think that jobs for these workers may never return to the highs seen during the investment boom from 1995 to 2000, yet are optimistic that they could return to pre-recession levels.
There’s already some encouraging news for the workers with the lowest education levels: July’s jobs report saw a drop in unemployment rate to 6.3 percent from 7.5 percent for Americans over the age of 25 who don’t have a high-school diploma. Also, the unemployment rate for those without a college diploma is holding steady at 5 percent, down from 5.5 percent this time last year.
To be sure, there’s still much to be done in terms of job creation, wages, and mobility when it comes to getting many workers not only back into the labor market, but into jobs that will allow them to maintain a basic quality of life. There’s hope, though, that America’s economy will soon take the first crucial steps forward—not by choice, but by virtue of the fact that the share of American workers with college degrees will level off.