Economy – Page 11 – Public Policy Institute of California

Testimony: The Need for College Graduates in California’s Future Economy

Hans Johnson, director and senior fellow at the PPIC Higher Education Center, testified today, November 1, 2017, before the Assembly Select Committee on the Master Plan for Higher Education in California. The master plan defined a strategy to meet the state’s education needs in 1960—but today, California faces new challenges. The topic of today’s hearing: ensuring that the master plan meets workforce needs.

Here are his prepared remarks.

PPIC has produced a series of reports on California’s future population and economy. Our report Will California Run Out of College Graduates?, provides projections of the demand for and supply of workers by educational attainment to 2030. Our primary finding is that California faces a shortage of highly educated workers. Specifically, economic projections to 2030 show that about two in five jobs will require at least a bachelor’s degree, while demographic projections suggest only about one in three Californians will have at least a bachelor’s degree. This shortfall equates to 1.1 million workers.

In this testimony, I first describe how California’s population and economy are changing, and then identify how the state and its higher education institutions can increase college enrollment and completion to produce more college graduates.

California’s economy is increasingly demanding highly educated workers

To develop our economic projections, we apply trends in educational attainment levels within occupations to occupational projections developed by the California Employment Development Department. We examine changes in labor market demand that are occurring due to shifts in the distribution of occupations and changes in educational attainment within occupations. Our primary finding is that the state’s economy will continue along a well-established trajectory, with a growing share of jobs requiring at least a bachelor’s degree.

The two key drivers of increasing demand for college graduates are: 1) faster growth in occupations that commonly require a college degree (e.g., computer technology occupations), and 2) increases in demand for highly educated workers within occupations (e.g., nursing). While both drivers are important, in recent years most of the increased demand (74%) for highly educated workers has occurred because of faster job growth in occupations that commonly require a college degree. Among large occupations (with at least 100,000 full-time year-round workers), those with especially rapid growth rates over the past five years include software developers (56% increase between 2010 and 2015), computer scientists and systems analysts (42% increase), and managers (35% increase). These and other highly skilled occupations have experienced faster growth than most less skilled occupations.

The second key driver of demand has been an increase in educational attainment within occupations. For example, the share of registered nurses with a bachelor’s degree has grown from 57% in 2000 to 68% in 2015. Altogether, over a five year period (from 2010 to 2015) about 26% of the increase in jobs for college graduates has occurred as demand for highly educated workers has grown within specific occupations.

Are college degrees really necessary for these jobs? We examine a number of labor market outcomes to answer this question. Within and across occupations, we find higher labor force participation rates, lower unemployment rates, and higher wages for workers with a bachelor’s degree than for those without. And in general, as educational attainment increases, wages also increase. Overall, the wage premium for college graduates relative to less educated workers has grown. By 2015, the average annual wage for full-time year-round workers was more than twice as high for workers with a bachelor’s degree than for those with a high school diploma.

Within each of 51 occupational groupings we see higher wages for college graduates than for high school graduates. Among registered nurses, for example, those with a bachelor’s degree earned 12% more than those with an associate’s degree.

California’s educational institutions are not keeping up with demand

Too few Californians are graduating from college. At current college enrollment and completion rates, only 30.5% of 9th graders in California will eventually earn a bachelor’s degree either in California or elsewhere in the United States. Compared to other states, California ranks 47th in the share of high school graduates that enroll in four-year colleges and 5th in the share that go to community colleges. Low rates of transfer from community colleges to four-year colleges exacerbates the problem.

A critical challenge is the retirement of the large and relatively well-educated baby boom. Called the “silver tsunami” by some, this aging out of the labor force of millions of older adults is the first time in the history of California that such a large and well-educated group is exiting the labor force. In contrast, the number of young adults in California is projected to increase only modestly.

Not all degrees are equal

On average, college graduates have very strong labor market outcomes. While at any point in time, some college graduates are working in jobs that do not necessarily require a college degree, over the course of their careers the vast majority of college graduates will move into occupations that reward their educational training. Our estimates show that students who earn bachelor’s degree in engineering and computer science fare very well in the labor market, but even those in less remunerative majors such as education and the liberal arts will still earn far more in wages than less educated workers, even after taking into account all the costs of going to college.

How to close the degree gap

To close the gap, California and its higher education institutions will need to establish new policies and practices to enroll more students, especially in our four-year colleges and universities, and ensure greater success of students already in college. In previous testimony, PPIC has identified targets for each of the state’s public systems with respect to admission, transfer (from community colleges to four-year colleges), and improved graduation rates. Improving access and success among groups historically underrepresented in higher education, including low-income students, first-generation college students, Latinos, and African Americans is essential if we are to close the degree gap.

The good news is that new goals adopted by the California State University (CSU) system and the California Community College system are entirely consistent with PPIC’s identified targets. New initiatives, including remediation reform at the community colleges and at CSU, have the potential to substantially increase student success. CSU’s new graduation initiative aims to substantially increase graduation rates and eliminate gaps between groups of students. Strong increases in college preparation among the state’s high school graduates are also a positive sign, with the share of students completing the college preparatory requirements of UC and CSU reaching an all-time high.

Finding ways to accommodate all these students remains a central challenge, but one we must meet in order to ensure a better future for all Californians.

Learn moreVisit the PPIC Higher Education Center

Housing Costs and Higher Education

Owning a home has long been part of the American dream. But with the state’s high housing costs, homeownership is difficult for many Californians to achieve. In a recent PPIC Statewide Survey, more than half of renters say the cost of housing is making them seriously consider moving away from the part of California they live in now, with most of those indicating that they are thinking of leaving the state.

Homeownership rates are substantially lower in California than in the rest of the United States (54% vs. 63% in 2016, according to the American Community Survey). But one group in California fares relatively well with respect to homeownership: college graduates. Among heads of household with at least a bachelor’s degree, almost two-thirds own rather than rent, compared to less than half of high school graduates. The higher rates of homeownership among college graduates are a consequence of their economic success. As shown in other PPIC research, college graduates have much higher incomes and lower unemployment rates than other Californians, enabling many of them to purchase a home. Owning a home, in turn, often leads to greater wealth. Indeed, the higher net worth of college graduates in California is strongly tied to homeownership.

Of course, housing markets are regional, and the coastal areas of California are less affordable for everyone. The five counties with the lowest homeownership rates are all in coastal areas with high housing prices. But even in those counties—with the notable exception of San Francisco—over half of college graduates own a home. At the other extreme, counties with the highest homeownership rates are primarily suburban counties, including some with high housing costs. About 70% or more of college graduates in these areas own a home.

California policymakers have recently enacted a series of measures designed to increase the supply of housing, with a focus on affordable housing units. Certainly, the state’s housing crisis cannot be alleviated without building more housing. But while higher education is not often considered part of a housing agenda, it has played an important role in shielding many Californians from the state’s dramatic increases in housing costs. Because of the labor market advantages experienced by college graduates, many have been able to purchase a home, giving them more stability in their housing costs and allowing many of them to build wealth.

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Read Higher Education in California: Addressing California’s Skills Gap
Visit the PPIC Higher Education Center

Video: How Californians View National Issues

With the nation focused on a range of contentious issues, the September PPIC Statewide Survey provides a California perspective. Dean Bonner, associate survey director, shared the key findings at a Sacramento briefing last week.

Among them:

A record-high share of Californians have a favorable opinion of the Affordable Care Act, and most want Republicans to work with Democrats to improve the law. While most Californians say it is the federal government’s responsibility to make sure that all Americans have health coverage, just a third favor a single-payer, government-run national health insurance system.
Three-fourths of Californians—also a PPIC record high—view immigrants as a benefit rather than a burden. There is broad and bipartisan support for protections provided by DACA, which shields from deportation some undocumented immigrants brought to the US as children and allows them to get a work permit if they pass a background check.
Half of Californians say they are very concerned about the possibility of North Korea having a nuclear missile that could reach the state.
Two-thirds of Californians view possible Russian interference in the 2016 as a serious issue.
Half of Californians say race relations have gotten worse in the United States over the last year. They are less pessimistic when it comes to race relations in the state.

Learn more
Read the September PPIC Statewide Survey: Californians and Their Government
Find out more about the PPIC Statewide Survey

PPIC Polling and the Immigration Debate

This post is excerpted from a presentation to the PPIC Board of Directors and guests on September 12, 2017, in Los Angeles.

One of the most important issues for Californians in the first year of the Trump administration is changing federal immigration policy. Immigrants are a significant presence in California, and even more so in Los Angeles County. Los Angeles, the state’s most populous county, is home to more than 10 million people, including more immigrants than any other California county. Twenty-seven percent of California’s population is foreign born—about twice the US percentage—while 35% of Los Angeles County population is foreign born. Moreover, about 2.6 million undocumented immigrants—about a quarter of the total number in the US—live in California. More than 800,000 of these undocumented immigrants live in Los Angeles. Major shifts in federal immigration policy that are under way thus have profound impacts on California and Los Angeles.

Since January, PPIC has been monitoring state and local responses to changing federal immigration policy through our public opinion polling. We have asked 11 questions about federal immigration policy in four monthly surveys, each involving 1,700 California adults, including more than 400 adults from Los Angeles County, interviewed by landline and cellphone in English or Spanish. The margin of error is +/-3% for California and +/-6% for Los Angeles. While the country is politically divided on immigration issues, we have found some bipartisan agreement in California. Here’s a sampling of our findings this year:

Undocumented immigrants living in the US: In our January PPIC Statewide Survey, 85% of Californians and 89% of Los Angeles residents agreed that undocumented immigrants who are living in the US should be allowed to stay legally. These results are consistent with earlier PPIC surveys. Moreover, solid majorities were in favor of state and local governments making their own policies and taking actions, separate from the federal government, to protect the legal rights of undocumented immigrants in California (65% California, 73% Los Angeles).
Border wall, travel ban on residents of six Muslim-majority nations: In our March PPIC survey, when asked about building a wall along the entire Mexico border, more than 7 in 10 were opposed (72% Californians, 76% Los Angeles). In the same survey, about 6 in 10 (58% California, 63% Los Angeles) opposed the president’s revised travel ban involving six Muslim countries.
Immigration enforcement and schools: In our April survey, 46% of Californians and 55% of Los Angeles residents said they are very concerned that increased federal immigration enforcement efforts will impact undocumented students and their families in their local public school districts. More than 6 in 10 (65% Californians, 73% Los Angeles) favored having their local public school district designated as a sanctuary safe zone in order to protect its undocumented students and their families from federal immigration enforcement efforts.
Worries about deportation, impact of enforcement on business and jobs: In our May PPIC survey, 30% of Californians and 34% of Los Angeles residents said they worry a lot that someone they know could be deported as a result of increased federal immigration enforcement. About half said that increased federal immigration enforcement will have a negative impact on businesses, jobs, and the economy in their part of California (49% California, 53% Los Angeles).

As the federal policy landscape shifted this year, PPIC Statewide Surveys continued to find majority support for a path to citizenship for undocumented immigrants who are living in the US: in our March survey, 68% of Californians and 71% of Los Angeles residents remained supportive. In contrast to the political divide in the rest of the nation, strong majorities across parties in California continue to agree that undocumented immigrants who are living in the US should be allowed to stay legally.

California’s path forward on immigration is a work in progress, as is the case in other areas that are undergoing federal and state policy changes. Moreover, there are uncertainties about federal actions such as the fate of the DACA program—which protects young undocumented immigrants brought to the US as children from deportation—the imposition of fiscal sanctions on sanctuary states and cities, the ban on travel from Muslim countries, and the construction of a wall along the US-Mexico border. As we have seen, California’s immigration policymaking is occurring in the context of strong public opposition to federal shifts, high levels of public concern about how these shifts are affecting undocumented immigrants and our regional economies, and strong support for actions by state and local governments to protect the legal rights of undocumented immigrants. At PPIC, we hope to foster conversations about immigration that lead to a better future for all Californians.

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Find out more about the PPIC Statewide Survey.

DACA and California’s Future

President Trump’s administration has announced the end of the Deferred Action for Childhood Arrivals (DACA) program, which allowed some undocumented immigrants who were brought to the United States as children to avoid deportation, obtain work permits, and continue their schooling. California is home to about 223,000 “Dreamers,” as DACA recipients are known, more than one-fourth of the national total. According to estimates cited by EdSource, about 70,000 Dreamers and other undocumented immigrants attend public colleges in California. The president gave Congress six months to come up with a legislative solution to address the issue before the decision takes full effect. Because California is home to a large share of the nation’s immigrants, including undocumented immigrants, changes in federal immigration policies are particularly important in the state.

In California, as in the rest of the nation, a central economic challenge over the next couple decades will be to ensure an adequately sized and skilled workforce to meet the demands of a growing economy. This challenge is especially daunting in the face of unprecedented increases in the number of retirees. As the baby boomers—a large group that is highly educated—exit the labor market, California and the nation will be hard pressed to find an adequate supply of workers to replace them and help provide for their healthcare and other needs. According to the California Department of Finance, over the next 15 years, the number of people age 65 and over will increase by 3.4 million, while the number of young adults age 20 to 34 will decline by almost 200,000. Requiring the Dreamers to leave the country will deepen this decline. Many of the older adults, about one-third, have a bachelor’s or graduate degree. Largely as a consequence of this demographic certainty, PPIC has projected that the state will see a shortfall of 1.1 million workers with at least a bachelor’s degree by 2030. Were it not for highly educated immigrants, the skills gap would be even larger.

The solution to this demographic, economic, and educational challenge is to make sure that more young Californians acquire the skills necessary to replace those exiting the labor market and to ensure that California’s economy can continue to grow with high-skilled and high-wage jobs. Increasing the number of young Californians going to and graduating from college is essential to closing this workforce skills gap. Because DACA recipients must be high school graduates or attending school, the program helps increase the number of Californians who are on the educational trajectory we need. The large number of Dreamers in college is evidence that they hold promise for helping the state meet its future need for educated workers.

Learn more

Read Higher Education in California: Addressing California’s Skills Gap

Visit the PPIC Higher Education Center.

Is College Worth it? What Graduates Say

As college registration deadlines approach, thousands of Californians are making important decisions to invest in their education and long-term career prospects. The vast majority of parents (85%) hope their child earns at least a bachelor’s degree, according to the PPIC Statewide Survey. But how do graduates see it? And how well-informed are their decisions?

The good news is that most people who earn degrees believe their investment was worth it. According to national survey data, 71% of those who earned an associate degree and 73% of those with a bachelor’s degree agree their education was worth the cost. Going beyond the economic value, a large share also find engagement in the work they do. In fact, a sizeable share of associate- and bachelor’s-degree holders report deep interest in their work (41% and 38%, respectively) or say that they have the ideal job (29% and 26%, respectively).

Although having an “ideal job” may be a very high bar to achieve, these results suggest that a majority of degree earners are not terribly satisfied or engaged with their work. Indeed, in a wider-ranging national survey conducted recently, a majority of college graduates indicate that they would change their degree, their college, or their major if they could do it again. Among associate-degree holders, 23% would seek a different degree—more than double the share of bachelor’s-degree holders who say the same. But graduates with bachelor’s degrees are not entirely satisfied with their choices either: 40% would study a different major (compared to 36% among associate-degree holders). And the survey finds curiously similar responses regardless of a person’s income level. Though higher-income Americans are slightly less likely to regret their college choices, a large fraction of them (35–45% for those with income over $100,000) would still make a different choice.

These results confirm that while college pays off, there is room to improve how well-informed prospective students are about their colleges, majors, and degrees. On this blog, we’ve written about the economic value of college credentials and how it varies across fields of study. We’ve also highlighted the need for data to inform student choices, given the sizeable financial commitment entailed.

Among the state’s public colleges and universities, California’s community colleges are ahead of the curve in providing information online about institutional performance, future salary, and more. Other institutions should follow suit. However, the survey results above suggest it is perhaps equally important to design courses and programs that ensure students can efficiently and effectively identify the degrees and majors best suited to them. Indeed, this is one of the tenets of the guided pathways movement taking place at community colleges across the country and in California. To inform and improve the college decisions of Californians, it is critical that these practices expand beyond community colleges, so that K–12 schools and four-year universities are also working to ensure students have comprehensive information when choosing their pathway into a career.

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Visit the PPIC Higher Education Center

College Graduates Have Higher Net Worth

Compared to less educated adults, college graduates generally see much stronger labor market outcomes, including greater labor force participation, more employment, and higher wages. This holds true across every demographic group—age, gender, ethnicity, and nativity. These differences are well-measured and well-documented.

But what about wealth? Wealth is one of the most important indicators of economic well-being, but it is difficult to measure and therefore information on wealth is much less widely available. Using recently released data from the US Census Bureau’s Survey of Income and Program Participation (SIPP), PPIC has developed new estimates of wealth for Californians. We focus on household net worth, the difference in value between all assets (including retirement accounts, savings accounts, investments, and real estate) and all liabilities (including mortgages, loans, and credit card debt).

The estimates show that Californians are wealthier than adults in the rest of the nation. In 2013, median household net worth among adults age 25 and over was $135,000 in California compared to $105,000 in the rest of the United States. While many have expressed growing concern about income inequality, the distribution of wealth is even more uneven—a fact that is especially apparent when we examine wealth by educational attainment. In California, median household net worth is almost four times higher for adults with at least a bachelor’s degree ($356,000) than for high school graduates ($95,000). (In the rest of the nation, the difference is slightly more than threefold.) One in four college graduates in California is a millionaire, compared to one in fourteen high school graduates.

For most people, wealth accumulates over time. As college graduates consistently earn relatively high incomes year after year, their wealth grows. One in five young college graduates (age 25–34) in California has negative net worth—meaning they have more debt, including student loan debt, than assets. But over time, debt recedes and wealth increases. Among college graduates who recently retired (those age 65–74) in California, half are millionaires.

Higher education has long been key to economic progress for individuals and for the state. In future research, PPIC will explore the role of higher education in promoting social and economic mobility. Ensuring that higher education continues to put people on the path toward economic well-being is a central policy issue.

Learn more

Read Higher Education in California: Addressing California’s Skills Gap
Visit the PPIC Higher Education Center

Next Steps in Implementing California Marijuana Law

Despite uncertainty at the federal level, California is making steady progress toward creating a system to regulate the legal use of marijuana. In many ways, the most interesting activity in marijuana policy is taking place at the local level, as counties and towns wrestle with how to define the role of the industry in their communities.

This year’s state budget includes a trailer bill designed to address a number of implementation issues raised by the passage of the Medical Cannabis Regulation and Safety Act in 2015 and Proposition 64 last fall. The biggest challenge was reconciling the two laws to create a single regulatory framework for both medical and recreational marijuana, a recommendation put forth in a recent PPIC report. The trailer bill also includes other provisions that aim to clarify and fill in details around implementation. For example, the bill:

Enhances environmental protections and specifies organic standards.
Makes it possible for smaller growers to form co-ops to enable them to compete with larger producers.
Allows for the designation of appellations, similar to the wine industry.
Supports a study of driving under the influence and creates a task force to make recommendations about enforcement. It also creates a new “open container” definition for cannabis and driving, making it an offense (with a $100 fine) to have in a car marijuana that is loose or in a container that is open or has a broken seal.
Establishes a method to collect the cultivation and excise taxes imposed by Proposition 64.

Although Californians have supported the legalization of both medical and recreational marijuana, possession of the substance remains illegal under federal law. In past years, Congress has passed legislation that makes enforcement of federal marijuana law a low priority. However, Attorney General Jeff Sessions, who has opposed relaxing restrictions on marijuana, has reportedly sent a letter to Congress asking that it rescind that directive. Like so many federal-state issues at that moment, it is very difficult to predict future decisions concerning enforcement of federal marijuana law.

The relationship between the state and local jurisdictions is clearer. One section of the trailer bill reaffirmed that the new regulatory structure does not limit the authority of cities, towns, and counties. But the clarity of that relationship doesn’t mean that there isn’t controversy. Conflicts have emerged within communities as they try to balance different local interests.

For example, Proposition 64 allowed for the cultivation of up to six plants per individual. In January, the city of Fontana passed an ordinance requiring any resident who wanted to grow up to six plants purchase a $411 permit. Getting a permit required that the applicant have no prior drug convictions or overdue fines. The ACLU (American Civil Liberties Union) and the advocacy group Drug Policy Alliance have joined together to file a lawsuit claiming the ordinance is too restrictive.

Calaveras County also illustrates the challenges of implementing marijuana regulations at the local level. At the same time that Proposition 64 received support statewide, 67% of Calaveras voters approved a county tax on marijuana production. The tax vote appeared to signal the county’s support for the marijuana industry. This past spring, however, after four of the five seats on the county board turned over, that body began considering a ban on commercial cultivation. With more than 1,000 registered growers (who each paid $5,000 in fees to operate) in a county of 45,000 people, the proposed ban is controversial.

Findings from the PPIC Statewide Survey support the idea that cannabis becomes divisive when the issue moves closer to home. When asked about the federal role, 60% of California adults and 66% of likely voters in our May survey said that the federal government should not enforce federal marijuana law in states that have decided to allow marijuana use. And though a majority of California adults (56%) say marijuana should be legal, state residents are divided when it comes to retail sales of marijuana in their communities. While 48% favor retail sales of recreational marijuana in their city or community, a similar proportion (47%) are opposed. Regionally, opposition to retail sales is highest in Orange/San Diego Counties (53% oppose). As cities across the state determine the regulatory standards for marijuana sales, they may find divergent views within their communities.

Federal, state, and local governments all have a say in marijuana regulation. It is clear from the issues yet to be resolved that the statewide election was just the beginning of a complex process to build the regulated, legal market for cannabis that California voters supported.

Federal Data Could Help Students Choose a College

Every year, hundreds of thousands of California high school seniors make significant financial decisions about whether and where to attend college. But students and their families currently have few options when it comes to knowing the financial costs and benefits of attending certain colleges and choosing certain majors.

A new federal bill would allow for a nationwide data system that could provide earnings information by college and major, among other data. The bipartisan bill, called the College Transparency Act, would allow student records from individual colleges to be submitted to the federal government and combined with earnings and financial aid information from the IRS (Internal Revenue Service) and the US Department of Education. Currently, the Higher Education Act prohibits connecting student-level information kept by colleges, such as a student’s enrollment and major, to earnings and aid data kept by federal agencies. This leaves students and parents in the dark as they try to weigh the economic benefits of colleges and majors against the rising costs of attending college.

What could a new federal data system mean for California?

California currently lacks a longitudinal statewide data system that can track students from college to work, and the information that is available to students has limitations. For example, the California Community Colleges Chancellor’s Office provides the Salary Surfer, a helpful tool that presents salary information on community college graduates by program of study, using a combination of student data and data from the California Employment Development Department. But the Salary Surfer only includes those students who attended a community college and subsequently work in California, there’s no indication of whether students transferred to a four-year college to obtain a bachelor’s degree (which would likely affect earnings), and there’s no campus-level information.

A new federal data system could have some advantages over a state-run system. The market for higher education has become more national, and more Californians are choosing colleges outside of the state. In addition, some graduates of colleges in California leave the state to work, and their earnings can’t be recorded by a state-based system. A comprehensive federal database could help students compare schools across state lines and give a more complete picture of graduates’ earnings, even if they work in another state. Currently, the federal College Scorecard offers a helpful but limited look at earnings. The scorecard only has earnings information for those who receive some sort of federal financial aid and does not show earnings by major.

The proposed data system could fill existing blind spots in California’s databases and the current federal scorecard, providing information across state lines and earnings estimates for both colleges and majors within those colleges. Such a system could help students and parents more accurately weigh the costs and benefits associated with the important and sometimes expensive decision of whether and where to attend college.

Learn more

Visit the PPIC Higher Education Center

Video: Villaraigosa on His Priorities

When Antonio Villaraigosa was asked to name the top issues most important to the state’s future, he started with the economy. His key concerns are poverty and the state’s business climate, its “byzantine and bureaucratic regulatory framework.”

Villaraigosa, candidate for governor and former mayor of Los Angeles, spoke at the Speaker Series on California’s Future sponsored by the Public Policy Institute of California (PPIC). As part of the series, PPIC is inviting all major candidates for governor to participate in a public event. Other highlights of his remarks:

Health care: He believes in universal health care but is skeptical about how to pay for the current plan before the legislature: “You’re selling snake oil when you say that single payer is something that’s going to happen any time soon.”
Infrastructure: He emphasized his long-term support for high-speed rail. He sees it as an economic development strategy to transform the Central Valley by connecting it to the two big centers of the economy, Los Angeles and the Bay Area.
Higher education: He said the state needs to look at how community colleges are funded and marshal its resources to make sure students get through the system and transfer to four-year colleges. But he’s not an advocate for making community college free to all: “It’s already free for poor people, and that’s who it should be free for.

Watch all candidate videos.