Inadequate demand and inadequate education, relative to available occupations, are both hampering economic recovery in U.S. metropolitan areas. With a still weakened private sector, strategic public investment and regional economic diversification can help address the first problem. Yet even when the economy recovers, longer-term “structural unemployment” will linger in some metropolitan areas because of mismatches between the supply of, and demand for, educated workers. Solutions to that problem include boosting educational attainment, enhancing the skills of workers, and increasing demand for less educated workers by providing public goods needed by industries like manufacturing and the “green” economy.
An analysis of the gap between the supply and demand for educated workers, and its relationship to unemployment, particularly for the 100 largest metropolitan areas in the United States, finds that:
The years of education demanded by the average U.S. job grew slowly but steadily from 2005 to 2009 and slightly outpaced growth in educated labor supply during the recession. At the height of the recession in 2009, the average U.S. job required 13.54 years of education, up from 13.37 in 2005. The increase reflected layoffs in less-education intensive industries such as construction and manufacturing, amid job gains in industries like health care, education, and professional services that demand more education.
Metro areas with larger “education gaps”—shortages of educated workers relative to employer demand—had consistently higher unemployment rates than other metro areas from 2005 to 2011. Metro areas with larger education gaps experienced unemployment rates an average of 1.4 percentage points above metro areas with smaller such gaps. The difference widened to 1.7 percentage points by May of 2011, suggesting that better educated metro areas had a slightly larger advantage in the wake of the recession than they did before.
The types of industries in which a metro area specialized also influenced its unemployment trajectory from 2007 to 2009. Unemployment rates in metro areas with more jobs in industries resilient to the recession increased an average of 1.4 percentage points less than rates in metro areas with more jobs in economically vulnerable industries.
Both industry composition and the education gap help explain the differences in unemployment rate increases across metropolitan areas. In metro areas with both resilient industries and low education gaps like Washington, D.C., unemployment rates rose by roughly 2 percentage points less than in metro areas with vulnerable industries and high education gaps, like Riverside, CA.
Metro areas with larger education gaps exhibit greater differences in unemployment rates between highly educated and less educated workers. In large metropolitan areas, the difference in unemployment rates between workers with bachelor’s degrees and those without high school diplomas ranged from 2.8 percentage points in Poughkeepsie, NY to 14.7 percentage points in Detroit.