By Patricia Mangeol

Analyst, Higher Education Policy, OECD Directorate for Education and Skills

The COVID-19 pandemic has resulted in a sharp rise in unemployment across OECD countries. While it is too early to tell how many and which jobs will be lost for good and where employment opportunities will rebound after the crisis, this sudden change in the economic and labour market outlook creates concerns for all new labour market entrants and for educational institutions who play a key role in educating tomorrow’s workforce – with higher education institutions at the forefront.

In a new report, Labour Market Relevance in Four US States: Ohio, Texas, Virginia and Washington, the OECD looked at how graduates fared in the labour markets of four diverse states. While the research was carried out before the COVID-19 crisis, the key findings and policy recommendations in the report are even more relevant in the post-COVID recovery period, as countries seek to harness the potential of higher education to help citizens upskill and reskill.

More advanced skills are needed to meet employer needs

The United States was the first OECD country that saw the opening up of higher education to the general population after the Second World War. Yet the share of people with a post-secondary credential among 25- to 34-year-olds in the US has been rising slower than in other OECD countries in recent decades. At the same time, the expanding knowledge economy continues to create greater demand for workers with a post-secondary education – a trend that accelerated after the 2008 Global Financial Crisis, and that may accelerate further following the COVID-19 crisis.

US states have responded by setting ambitious higher education attainment targets. Despite their efforts, the low rate of post-secondary enrolment and completion among disadvantaged populations in particular has made it difficult to meet these goals. Across the four states, employers in sectors including health, education, information and communications technology (ICT), and advanced manufacturing have struggled to find enough graduates, or graduates with the right mix of skills, to fill open positions.

A worthwhile investment, but large differences in outcomes among students

The average individual financial return on investment in higher education is larger in the United States than in most OECD countries. But the average hides a nuanced reality: Not all graduates obtain rewarding employment and earnings, suggesting that not all graduates have skills that meet the needs of employers. The study shows that the level and field of study are strongly associated with earnings. Graduates with a bachelor’s degree (and above) obtain a distinct employment and earning advantage in US states compared to graduates with shorter credentials, a gap larger than in most other OECD countries.

Some students – especially women, and Black/African American and Hispanic/Latino students are consistently under-represented in high-earning fields.

Short credentials can deliver good earnings in vocationally-oriented, male-dominated fields, and when graduates work in the field they studied. Graduates in Science, Technology, Engineering and  Mathematics, and ICT do much better than graduates from Education or Arts and Humanities. However, some students – especially women, and Black/African American and Hispanic/Latino students are consistently under-represented in high-earning fields.

Understanding what drives differences is critical: the high demand for specialised skills explains high wage premiums in ICT; rules concerning teacher pay in public schools explain low wages for education graduates – a factor outside the reach of higher education policy; low wages in arts and humanities result, in part, from a perceived – if not always real – lack of work-relevant skills among graduates.

How can outcomes for graduates and employers be improved?

Improving alignment between higher education and the labour market requires a concerted effort between state agencies, higher education institutions, employers, non-profit organisations and other stakeholders. States face growing budget pressures, but they have policy levers to encourage institutions to deliver work-relevant opportunities to meet the needs of the many young people and adults entering or returning to employment. State agencies working on higher education, workforce development and other areas relevant to student success should work together more closely to minimise the barriers that limit participation and completion of credentials leading to good jobs, especially among disadvantaged students.

States should incentivise institutions to provide labour market-relevant experiences to students across all levels and fields. They can help identify and scale up supports that work to help students succeed academically and prepare for a career. They can provide state-wide frameworks for pathways between institutions and progammes, so that all learners know and can take advantage of opportunities to transfer in and out of the higher education system – and between higher education programmes – smoothly. As funding becomes more scarce, it will be important to ensure two-year institutions – the most reliant on public funding and with the largest share of disadvantaged students – can continue to offer quality education.

States can also continue to improve data on the employment, earnings and debt of graduates and develop better information on the skills needs of employers. Making sure this information is not just accessible but easy to navigate and effectively used by students who would benefit from this information is a key challenge well worthy of a strong policy focus.

Ohio, Texas, Virginia and Washington have all undertaken initiatives to better align their higher education sectors with today’s labour market. This should be a policy priority for countries as they recover from the coronavirus crisis to ensure that young people and adults returning to higher education are being taught the skills they need to succeed in an increasingly competitive workforce.

Read more:

• Labour Market Relevance in Four US States: Ohio, Texas, Virginia and Washington
• Resourcing Higher Education: Challenges, Choices and Consequences
• Benchmarking Higher Education System Performance
• School-to-work transitions during coronavirus: Lessons from the 2008 Global Financial Crisis
• OECD 2020 Employment Outlook
• Lessons for education during the coronavirus criThe OECD coronavirus (COVID-19) policy hu