Connecting Education and the Labor Market

The 21st century workforce is shaping up to look quite different from the workforce of the 20th century. The U.S job market has seen a steady decline in well-paid, secure jobs, such as in manufacturing, and an increase in demand for cognitive knowledge, skills, and abilities. This change in the job market has meant a shift from jobs that require no more than a high school diploma to jobs that require at least some postsecondary education. As evidence of this shift, in the aftermath of the recession, college-educated workers continue to fare significantly better than those without a postsecondary degree.¹⁴

Connecting education and the labor market is increasingly important for young workers. With the labor market's growing demand for formal educational attainment, choosing a postsecondary program is the first substantial investment decision many young people will make. Young adults need to understand the risks and rewards associated with their choice of postsecondary institution and field of study. As the cost of certificates and degrees grows and the labor market demands shift, prospective students need more information to guide their choices and to ensure higher returns on their investment. Furthermore, aligning education more closely with careers promotes student success, as people with a sense of where they are going are more likely to achieve their desired goal.¹⁵

As described further below, the survey responses supported the notion that postsecondary degrees are associated with greater optimism about the labor market, early career planning, and higher earnings.

Rising Demand for Educational Attainment

Given the changing nature of the labor market, many workers are not confident that their current level of education is suitable for the job market. For example, in 2011, a Pew study found that just under half of the general population believes they have the necessary training to be successful in a career.¹⁶ In the same study, high school graduates were less clear about what they needed but mainly agreed on the importance continued education at some level.¹⁷

In the Survey of Young Workers, 37 percent of the respondents believe they have the level of education and training needed for the type of job that they would like to hold in the next five years. As expected, the respondents' confidence in their education increases with each level of attainment, with 32 percent of those with a high school diploma, 42 percent with an associate's degree, 60 percent of those with a bachelor's degree, and 73 percent of those with a master's, professional, or doctorate degree reporting that they have the necessary level of education. (For a discussion of confidence and gender, see box 1.)

Respondents to the survey are continuing to increase their level of education and training in response to labor market demand. Nearly one-third (32 percent) of the total respondents are enrolled in an education or training program. The student respondents include 42 percent of those who reported they lack the necessary level of education. Notably, of those who reported they do have the necessary level of education for their desired job in the next five years, 26 percent are students.

Nearly three-fourths (73 percent) of the student respondents are enrolled full time, while one-fourth are enrolled part time. Most of the students are enrolled in a degree program, including 20 percent working toward an associate's degree, 44 percent working toward a bachelor's degree, and 14 percent working toward a graduate or professional degree.

According to a study by Georgetown University, certificates are the fastest-growing postsecondary credential awarded over the past several decades, as they are relatively cheap, can be completed quickly, and may lead to industry-based certifications. Georgetown University reports that certificates have grown from 6 percent of postsecondary awards in 1980 to 22 percent in 2012.¹⁸

In the Survey of Young Workers, 7 percent of respondents are enrolled in a vocational program. Although the survey does not measure total certificates earned, it appears that this group is underrepresented in the sample.

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Alignment of Education and Career Path

In order for students to get the most out of their education, it is important that educational programs and goals align with the needs of the labor market. This alignment is key, as workers attempting to satisfy the labor market's increasing demand for education must also identify a field of study that that will offer career opportunities. For individual workers, the connection between education and the labor market should occur during their educational process.

In the Survey of Young Workers, 63 percent of respondents reported that they received information about jobs and careers during high school (figure 4). Although the survey does not measure the value or accuracy of this information, nearly two-thirds of students are obtaining labor market information during their high school years. High school staff is a key source of job information, as three-fourths of those who received this information credited their high school counselors and teachers as the source
(figure 5). While in high school, respondents who received information about jobs also noted personal networks, including parents (57 percent) and friends and family (48 percent) as the source.

Some high school students (21 percent) reported that the information they received helped them find a job. Without knowing whether the high school students are seeking a job, it is difficult to assess the implications of this number.

That said, 25 percent of respondents reported that they did not receive any information about jobs during high school. An additional 11 percent are not sure if they received such information or not. This represents a substantial number of respondents who exited the K-12 educational system without formal or informal communication about planning for a job or career.

The Survey of Young Workers found that college students received job and career information at similar rates as high school students. Among respondents who attended any college, 66 percent received information about jobs during these years. Likewise, for those who received information, 73 percent reported receiving this information from school counselors and teachers. College students are more likely to rely on online resources when seeking job information (61 percent).

Again, similar to the high school students, 22 percent of those who attended college reported that they did not receive information about jobs and careers at this time. An additional 10 percent were not sure. Per the previous comment, this represents a sizable number of respondents who participated in postsecondary education without receiving formal or informal information about jobs and careers.

College students offer a striking difference from high school students when considering whether the information they received helped them obtain a job. Forty percent of the respondents who received information from their college reported that the information helped them find a job.

The current gaps in alignment between education and the labor market may contribute to the number of young workers who have not found paid work in their chosen field of study. Accordingly, more than half (51 percent) of working respondents in the survey do not have a job that is closely related to their field of study. Respondents who invest in higher levels of education have been more likely to find a job in their field of study. To that point, 26 percent of workers with a high school education, 67 percent of workers with a bachelor's degree, and 84 percent of workers with a master's degree or greater reported that they are working in their chosen field.

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Cost of Postsecondary Education

The ability to pay for postsecondary education affects a young adult's decision to enroll in a training or educational program. The cost of higher education has grown more rapidly than median family income, leaving many students and families with little choice but to borrow money.¹⁹ Moreover, the average debt is substantial, which could also limit career choices, as students may need to take jobs that allow them to pay off their loans.

In the Survey of Young Workers, students reported that they are financing their education with cash, loans, and scholarships (figure 6). At 41 percent, personal loans are the form of financing most commonly used by students who are currently enrolled in school, while 9 percent of student respondents have parents that took out loans for their education. Thirty percent of student respondents have parents that are paying for their education with cash, and 17 percent are paying with their own cash. Thirty percent of students have academic scholarships. And, finally, 8 percent of respondents have employers paying for their education.

Students may use more than one source of financing to pay for their postsecondary education. A survey by the Heldrich Center for Workforce Development found that 65 percent of recent college graduates relied on two sources of financing, namely government loans (56 percent) and family savings (49 percent).²⁰

Financial barriers top the list of reasons that nonstudents who are interested in additional education do not enroll. Half of the nonstudents in the survey are interested in additional education. However, 63 percent of nonstudents who are interested in additional education do not want to borrow money and 58 percent reported that they are not able to afford an educational program.

The value of additional education in the current job market is also important for these respondents. Forty-four percent of respondents interested in additional education reported being concerned about not being able to land a job after completing the program and 39 percent reported that they do not know which program would improve their job opportunities. These challenges to enrollment again speak to the importance of reliable information about postsecondary education outcomes.

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Valuing Postsecondary Education

Survey respondents were asked whether they believe the lifetime financial benefits of their most recent educational program outweigh the program's financial cost.²¹ In the survey, 41 percent of respondents reported that their educational investment is greater than the cost of their education ("high valuers")
(figure 7). Meanwhile, 23 percent reported that the financial value of their education is smaller than the cost of the education ("low valuers").

High valuers are more likely to have an educational experience that aligns with both their current job and their employment aspirations. They are more likely to be working in a career that is closely related to their field of study (72 percent) than low valuers (39 percent). In addition, high valuers tend to be more confident that their education is sufficient for the type of job they would like to hold in the next five years (58 percent) than low valuers (39 percent).

High valuers are also more likely to have employment with more stability and opportunities for upward mobility. For example, these respondents are more likely to have full-time employment (77 percent) than low valuers (71 percent). High valuers are more likely to be in a "career" (46 percent) with a salary (48 percent) than low valuers (24 percent and 25 percent, respectively). Finally, high valuers are more likely to believe there is opportunity for advancement at their current job (66 percent) than low valuers (44 percent).

In the survey, respondents who are currently enrolled in an educational or training program were asked how they are financing this undertaking. High valuers are more likely to be paying for their education with upfront cash and scholarships, while low valuers are more likely to have loans to be paid after they enter the workforce. High valuers are more likely to be paying for their education with their own cash (26 percent) or cash from their parents (26 percent) than low valuers (12 percent and 13 percent, respectively). High valuers are also more likely to have a scholarship (32 percent) or an employer to cover tuition (20 percent) than low valuers (22 percent and 15 percent, respectively). One possible explanation for this finding is that because these respondents are less likely to have student debt, their perceived return on investment is high.

Meanwhile, low valuers are more likely to be paying for their education with personal loans (68 percent) than high valuers (42 percent). Because these respondents took on student debt, they may have to earn more to feel that they received an appropriate return on their investment.

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Importance of Early Work Experience

National data show that 66 percent of all students balance a full- or part-time job while attending school, including work-study.²² According to the Bureau of Labor Statistics (BLS), 20 percent of high school students are employed and 50 percent of college students ages 16 to 24 are employed while attending school.²³ Although some students work to meet their financial needs, students also maintain jobs to gain early work experience before embarking on a longer-range career. In the Survey of Young Workers, 57 percent of all full-time students and 55 percent of all part-time students are working and attending school. (For a discussion on racial and ethnic early work experience, see box 2.)

In a 2014 study by the Brookings Institution, teen employment is associated with improved employment and earnings' outcomes later in life. Although problems finding work affected all young people in the past decade, those with work experience, those with higher levels of education, and those from higher income households have been more successful in the labor market. Therefore, for teens and young adults, employment history is a strong predictor of current employment. Because teen and young adult unemployment is concentrated among less-educated and low-income individuals, this phenomenon threatens the upward mobility of already vulnerable populations.²⁴

Consistent with the Brookings findings, respondents to the Survey of Young Workers who had a paid job during high school are more likely to be currently working (69 percent) than those who did not have a paid job during high school (48 percent). Furthermore, respondents who worked during high school are more likely to have a full-time job (70 percent) than those who did not work during high school (60 percent). Some of this relationship may be explained by those who did not work while in high school being more focused on preparing for college. Nevertheless, even among persons who went to college, the survey indicates that those who complemented their study with work experience had better job outcomes.

The Survey of Young Workers indicates that high school and college students who complemented their study with work experience had better job outcomes. For example, respondents who gained work experience during school are more likely to be working in a job related to their educational field (49 percent) than those who did not work during school (31 percent). Likewise, respondents who combined work experience and education are more likely to be working in a job they perceive as a career (29 percent) or a stepping stone to a career (39 percent) than those who did not (19 percent and 29 percent, respectively).

The Survey of Young Workers suggests that the Great Recession affected the percentage of high school students in the workforce. Post-recession graduates, those age 18 to 21 years old, are less likely to have worked in high school (39 percent) than respondents graduating during the recession, ages 22 to 25 years old (57 percent) or pre-recession, ages 26 to 30 percent (62 percent).

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References

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