The relationship between higher education attainment and employment is clear, but is there an even deeper connection between attainment and the economy? Could increasing higher education attainment actually drive economic growth and job creation, particularly in today’s economy?

Economists have examined the unexplained causes of the job market’s slow recovery from the recession. Available evidence suggests that our nation’s inability to match jobs to people with the right skills is a major factor in explaining why employment rates have not increased as quickly as they should have in the economic recovery.1 This mismatch goes beyond the level of specific occupations — i.e., unemployed auto workers needing to be retrained as nurses. The problem goes deeper — a mismatch of general skills across all occupations.

A fascinating study by the Federal Reserve Bank of New York found that, in each U.S. recession since 1980, an increasing share of total unemployment was caused by structural job loss, not by short-term cyclical layoffs.2 This phenomenon is a major factor in the slowing of employment growth after recessions — the so-called “jobless recovery.”

The most recent recession followed the same pattern, only more so. What is now very clear is that, when structural job loss takes place in an economy with increasing skill requirements — such as ours, education and training are essential to putting people back to work. If we can’t supply labor markets with enough people who have the necessary knowledge and skills, economic growth will be choked off.


footnote 1 http://macroblog.typepad.com/macroblog/2010/07/a-curious-unemployment-picture-gets-more-curious.html

footnote 2 The Federal Reserve Bank of New York study is called Has Structural Change Contributed to a Jobless Recovery? and was written by Erica L. Groshen and Simon Potter.
An overview of the research and link to a PDF of the full report can be found at http://www.ny.frb.org/research/current_issues/ci9-8/ci9-8.html

Leave a Reply

Your email address will not be published. Required fields are marked *