Improving Opportunity Through Better Human Capital Investments for the Labor Market

Harry J. Holzer

Abstract While education levels in the U.S. have risen in recent years, students from disadvantaged backgrounds have fallen behind other Americans in college attainment amid increasing college dropout rates. The causes of this growing gap include weaker academic preparation in their K-12 years (and earlier); lower wealth and liquidity that make it harder to pay tuition and other costs; worse information about and lower familiarity with higher education; and pressure to work full-time while being enrolled to help support their families. In addition, disadvantaged college students are heavily concentrated in weaker and under-resourced institutions such as community colleges, which generate fewer graduates. Even when students gain credentials like associate degrees, the degrees often do not have strong labor market value because of students' poor labor market information and the weak incentives of public institutions to respond to the labor market by creating more classes in high-demand fields. And high-quality career and technical education opportunities in the U.S., such as “sectoral” training and work-based learning, have not been developed to the extent possible to provide students a wider range of pathways to careers from which to choose. Efforts to improve these outcomes must therefore focus on three goals: (1) improving completion rates at our public colleges by strengthening student supports; (2) expanding postsecondary options, at the bachelor's level or below, that have labor market value; and (3) developing additional pathways to good-paying jobs through work-based learning and high-quality career and technical education, beginning in secondary schools.

Keywords Human capital • Labor market • Economic opportunity • Educational opportunity • Educational attainment • Career and technical education (CTE) • Apprenticeship • Career academies • Career pathways • Sectoral training • Worker skills • Dropout prevention • Two-year colleges • Four-year colleges

Introduction

Since about 1980, labor market inequality has increased quite dramatically in the United States. Gaps in earnings between highly educated workers—such as those with college diplomas or graduate degrees—and those without them have roughly doubled in magnitude. The high labor market “return” to education creates strong incentives for workers to invest in various kinds of “human capital,” such as higher education degrees. Indeed, attaining some type of college credential is perhaps the strongest predictor of upward mobility for young people from low-income families, both across generations or within them, so the incentives for the poor to invest in higher education should be as strong as, or even stronger, than for anyone else.

It is therefore somewhat surprising that, during much of the past 35 years, the growth of higher education credentials among young Americans has been quite modest, especially among those from lowerand middle-income families, while gaps in higher educational attainment between children from poor and nonpoor families have actually grown wider during this period. Though there has been a surge in postsecondary educational attainment among young Americans since 2000, and especially since the Great Recession began in 2007, poor children continue to lag behind in such attainment, and earnings gaps between college graduates and others remain very high.

In this chapter I review the factors that limit postsecondary skills attainment among low-income students. I argue that, although the incentives are very strong for poor students to obtain these degrees, a range of personal and institutional barriers as well as market failures often prevent them from doing so.

To improve economic opportunity in the job market, we must therefore enhance the ability of low-income students to obtain college degrees and other credentials that reflect skills that are valued in the labor market. I will argue for a range of policies and practices that should improve the odds that poor young people attain some type of college credential—such as a bachelor's (B.A.) degree and higher, an associate (A.A.) degree, or an occupational certificate. I will also argue that improving a range of other skill-building pathways for poor students—including high-quality career and technical education; various models of work-based learning, such as apprenticeship; and other approaches, such as career pathways and training in particular employment sectors (sectoral training) —would improve their opportunities in the labor market as well.

 
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