Moving Workers from Low-Wage Jobs to Family-Sustaining Careers
Fifteen million workers in the US earn less than $10 an hour, more than half of whom are over the age of 25. While fast food or retail often come to mind when we think of low-paying jobs, the reality is that many sectors, including healthcare, education, childcare, and manufacturing, have large numbers of low-wage jobs. And though most low-wage workers have limited formal education, around 40 percent have at least some post-secondary education. Too many of these workers are stuck, moving between low-wage jobs and unable to gain a foothold that allows them to move up.
Over the last several decades, a macroeconomic shift in the national economy has dramatically reduced the number of mid-level positions available in Greater Philadelphia and across the country. To make matters worse, many of the mid-level jobs that are available today require increased skill levels and education that too many of our region’s residents lack.
At the same time, the percentage of Americans participating in the labor force is dropping. While this decline can be attributed in part to the advancing age of the overall population, a drop in labor participation rates among younger people and less-educated Americans is cause for concern. Decreasing labor force participation and fewer opportunities for workers to earn a middle-class living translate into increasing inequality, place a strain on public resources, and limit regional growth.
To address these issues on a broad scale, it is important to understand the scope of the challenge – from the labor perspective as well as the jobs perspective. Effectively addressing challenges on both sides of the equation requires strategic planning and action that simultaneously increase and the skills and education levels of un- and underemployed residents so they match the needs of employers and use public policies and funding to support the development of well-paying jobs.
Greater Philadelphia’s employment challenges stem from deep-rooted, pervasive educational deficits and poverty. Overcoming these challenges is daunting, but there is good news. These issues are getting more and more attention from government at all levels and from business leaders – both as employers and as civically-engaged community leaders. Across the nation and here in Greater Philadelphia, practitioners and policymakers are partnering with employers on innovative and effective efforts to move people from poverty to family-sustaining jobs.
Too many Greater Philadelphia residents aren’t working.
At the most fundamental level, the region’s workforce challenge boils down to the fact that too many people are not working. Hundreds of thousands of the region’s residents are simply not engaged in the labor force. This problem is especially acute among those with less education and young people.
While Greater Philadelphia’s labor force participation rate is in line with the national average, among the largest ten US metros, we rank seventh. This rate masks great variation across communities in the region.
Low educational attainment limits opportunity.
Residents with lower education levels are less likely to participate in the labor force.
In Greater Philadelphia, more than 440,000 residents over the age of 25 do not have a high school diploma or equivalent. Just 55.7 percent of these people are in the labor force – the lowest rate of labor force participation for this cohort among the ten largest US metros.
LABOR FORCE PARTICIPATION BY EDUCATION LEVEL IN GREATER PHILADELPHIA AND TOP 10 METROS
Greater Philadelphia is also on the lower end of the spectrum for labor force participation among those with only a high school diploma (76 percent); however, the variation among metros is much smaller as education levels rise. For residents with a bachelor’s or higher, Philadelphia’s rate of 87.4 percent trails only Washington DC and Boston.
And those less-educated individuals who do participate are more likely to experience unemployment than their better-educated counterparts.
LABOR FORCE & UNEMPLOYMENT BY EDUCATION LEVEL IN GREATER PHILADELPHIA
The number of youth not in school and not working is high and rising.
In 2014, approximately 116,000 youth in Greater Philadelphia ages 16 to 24 were not enrolled in school or employed. This so-called “youth disconnection” is a major impediment to regional growth and opportunity, as the impacts of disconnection from work and school often follow young people throughout their lives. They miss out on the opportunity to acquire work experience and skills needed for success, negatively affecting longer-term employment prospects and career success. Not surprisingly, they are more likely to be unemployed later in life.
The impact of this disengagement on the economy is staggering. In 2013, the 5.5 million disconnected youth in the US cost taxpayers $26.8 billion. This total accounts only for direct costs - incarceration, Medicaid, public assistance payments, and Supplemental Security Income payments – and does not account for indirect costs like lost tax revenues, impacts on victims of crime, and lost earnings and market productivity.
Nationwide, the number of disconnected youth jumped by nearly one million between 2008 and 2009, illustrating the impact of the Great Recession on many young people. And while the national rate as well as those in most large US metros have declined as the economy has improved, Greater Philadelphia’s rate has actually increased slightly.
Perhaps most troubling are the racial disparities in youth disconnection rates in this region and around the US. In Greater Philadelphia, the rate of disconnection for white youth is 9.2 percent, while the rates for African-American and Latino youth are a staggering 23.1 and 22.6 percent, respectively.
These young people, as well as their older disconnected counterparts, are not likely to overcome the challenges they face in reconnecting with employment and/or education without help. Too often, they’ve missed the opportunity to build a strong educational foundation, and the post-secondary education and workforce systems charged with serving them are not equipped to overcome these obstacles and prepare them for success in the workforce.
Too many workers in the region are earning too little.
Even among those who are working in the region, too few are earning wages that allow them to support themselves or their family without public assistance or financial hardship that threatens their stability and well-being.
Self-sufficiency standards and family-sustaining wage calculators have been developed by economists and other social scientists. They take into account family composition, including the age and working status of household members, and regional variations in the cost of living. They find that a single adult with no children needs to make about $24,000 to meet their needs in Greater Philadelphia. A single parent with one child needs double that – around $48,000.
Unfortunately, household income data indicate that far too many of our residents aren’t earning enough to be self-sufficient. In the region, 21 percent, or more than 460,000 households, earn less than $25,000 a year, and one-third of households live on less than $40,000.
38,000 people in the region work full time and still earn wages that leave them below the poverty line
Further, real median household income has dropped in recent years, and today approximately 285,000 households in the region (12.8 percent) have income levels below the poverty line. While a majority of households in poverty do not include a member who works full time, just over 38,000 people in the region work full time and still earn wages that leave them below the poverty line.
Good jobs are increasingly out of reach.
With a sense of the labor force participation landscape and household income in the region, we turn to the jobs and economic landscape. What do jobs look like in this region? How many well-paying jobs exist, regardless of skill, and how many are accessible to those without a four-year degree?
Across the US, there has been a hollowing out of the middle when it comes to employment opportunities. Analysis of job trends since the mid-1980s shows that the share of workers in middle-skill occupations has declined while low- and high-skill jobs have grown in the country. Between 1983 and 2012, the share of workers in middle-skill jobs dropped by 14 percent – from 59 to 45 percent. Most of that loss shifted to high-skill occupations, which increased from 26 to 37 percent of employment. During the same time, the share of low-skill jobs rose from 15 to 18 percent.
JOBS SHARE BY SKILL LEVEL IN GREATER PHILADELPHIA (1983, 2012)
Across every education level the share of US workers in middle-skill jobs has dropped. Most striking, workers with an Associate degree or some college saw similar declines as those with only a high school diploma or less – a drop of around 10 percent – with most of the shift toward low-skill jobs.
Referred to as “job polarization,” this trend is often assumed to be the result of contractions in specific sectors – like manufacturing. While this explains some of the loss, shifts within sectors have had an even larger impact as technology has eliminated middle-skill jobs across all industries.
About half of the jobs in the region pay less than $40,000 annually and 12 percent pay less than $25,000
While this data is not available at a regional level, we know that Greater Philadelphia faces similar challenges related to job quality and increasing education requirements. According to Bureau of Labor Statistics estimates, about half of the jobs in the region pay less than $40,000 annually and 12 percent pay less than $25,000. Because these estimates are based on hourly rates and assume a 40-hour work week, the number of workers actually earning $40,000 is likely lower.
Information on job openings in the region from the Pennsylvania Department of Labor and Industry illustrate the need for advanced education to compete in the regional job market. As of July 2015, 46 percent of online posted openings in Greater Philadelphia require a Bachelor’s degree, the most commonly-requested education level requirement. And yet just 34 percent of the region’s residents have a Bachelor’s or higher.
It's clear that workforce and employment dynamics have changed dramatically within the past few decades. A high school diploma and a good work ethic are no longer enough to secure a middle-class job. In the new, increasingly competitive and advanced economy, the traditional approaches taken by educational institutions, workforce training providers, and economic development professionals are not as effective at expanding opportunity and driving economic growth as they once were. While changing the way these entities work – and work together – takes significant time and effort, there are some promising practices showing success in helping individuals overcome obstacles to good employment.
Defining a path to broader opportunity
Faced with a large number of residents who lack the skills to embark upon successful careers and an increasingly competitive job market in which most decent-paying jobs require some kind of post-secondary training and advanced skills, there is a pressing need to provide greater assistance to workers to help them successfully navigate a career path. This includes identifying “opportunity” sectors in which jobs – especially good jobs – are available and support obtaining the skills needed to enter and advance in specific sectors and occupations.
Accommodating the needs of the ever-changing employment landscape will require deconstructing the silos that have traditionally existed between k-12 and post-secondary education, workforce training, and economic development. Integrating these efforts has the potential to unlock individual and regional opportunity by supporting the development of family-sustaining jobs and increasing the skills of the current and future workforce to ensure that good jobs are broadly accessible.
TARGETING SECTORS
The first step in developing effective solutions to these challenges is to identify where the well-paying jobs are for workers without a four-year degree. In Greater Philadelphia, analysis of regional trends and growth projections for large economic sectors reveals construction, administrative, security and waste management services, transportation and warehousing, health care and social services, and accommodation and food services to be among the most promising opportunity sectors in the region, meaning that they have significant job opportunities for workers without a four-year degree and are expected to grow.
In addition to these, there are sectors that don’t jump to the top of lists based on size or growth that have been identified by economic and workforce development practitioners as holding real promise for good jobs in the region, in particular, advanced manufacturing.
The extent to which these growing sectors provide family-sustaining jobs varies, as does the opportunity to advance within sectors. Because the path to career advancement is often unclear and includes obstacles, workforce training providers are working in close partnership with employers to map out “career pathways” within sectors.
CAREER PATHWAYS AND SECTOR-BASED STRATEGIES
Career pathways are a type of sector-based workforce strategy. Sector-based workforce strategies organize the training of workers in the context of a specific industry and tailor efforts to the regional economy. While not a new concept, more recently practitioners have had success using these strategies as a way of moving people out of poverty and into family-sustaining jobs.
Career pathways clearly articulate routes to well-paying jobs and provide support and guidance to individuals moving along the path. Individuals gain specific skill sets and achieve progressive levels of education and credentials that lead to a better job. Well-designed pathways are flexible, with multiple entry and exit points to meet the needs of individuals with different skill levels, career goals, and changing family or other personal responsibilities.
Employer engagement and leadership is a core component of career pathways and other sector-based strategies. Employers lead the “mapping” of career pathways illustrating how workers typically advance from position to position and the education and training needed to make those transitions. They work with education and training providers to develop appropriate curricula for courses and credentials. To ensure continued employer engagement, partnerships must have tangible value for employers such as building a better talent pipeline or providing improved training resources for their existing workforce. In the most successful examples of these partnerships employers invest money and other resources, making public investments go further.
IMPROVING THE JOB POOL
Beyond career pathways and related workforce efforts aimed at helping un- and under-employed individuals attain the skills they need for improved employment prospects, there remains the need for more “good” jobs. Good jobs are generally defined as paying a family-sustaining wage, providing benefits such as paid sick leave, and offering opportunity for advancement.
While these jobs are ultimately created by the private sector, public economic development and workforce development programs can work together to ensure that programs are aligned and responsive to regional economic and human capital strengths and gaps. Such partnerships should focus on those sectors that have a large share of good jobs as well as working with employers to improve the quality of jobs in sectors where low-skill, low-paying jobs dominate. This can include identifying ways to decrease turnover in entry- and lower-level positions, which creates substantial costs for employers, and increase pay and advancement opportunities.
Rather than just measuring the number jobs created or people employed as these programs traditionally have, combined efforts focus on supporting and sustaining industries that generate a spectrum of jobs with opportunities for advancement and successfully preparing people to take advantage of good employment opportunities. This has the potential to not only improve outcomes for economic development and workforce development, but makes better use of the limited public resources available for this work.
Funding streams and different metrics of success have historically made it harder for economic development and workforce development to work in tandem, but changes at the national and state level have made alignment easier. Agencies at the local and regional level, where partnerships must be built, are getting better at working together.
Leading efforts in the region
There are a number of organizations and programs in Greater Philadelphia that rely on sector-based strategies and active employer engagement. The region is home to a funders’ collaborative, the Job Opportunity Investment Network (JOIN), which works to increase the number of Greater Philadelphia workers earning family-sustaining wages. Toward this end, JOIN supports industry-led partnerships that bring together businesses, social service organizations, job training organizations, and educational institutions to create pathways out of poverty and into long-term careers for lower-skilled adults. These partnerships speak to employer needs to fill talent gaps and address human capital challenges.
Examples of current partnerships supported by JOIN include the West Philly Skills Initiative, which works with major employers in the neighborhood to identify job vacancies and prepare West Philadelphia residents for those jobs and the Southeastern Regional Workforce Development Partnership (SRWDP), which brings together employers, job training organizations, and schools to create a pipeline of skilled workers for the region’s advanced manufacturing, food processing, logistics and transportation, and rotorcraft industries.
JOIN is currently partnering with the Economy League to identify additional industries where career path maps would be of use, draft those maps, and pilot job training programs modeled on the maps. JOIN and the Economy League began the project with a focus on the food service industry given the size and growth of the sector, as well as the concentration of entry-level positions that are accessible to individuals with very limited skills and work experience.
The SRWDP is led by Philadelphia Works and receives funding from the Commonwealth of Pennsylvania through the Industry Partnerships program. Pennsylvania was among the first states to develop this type of program, which is an innovative sector-based strategy that relies on active employer engagement and investment. Industry Partnerships use economies of scale to address common skill challenges within industry clusters. Educational partners develop curricula for college courses and/or high school career and technical programs. A 2013 report on the program in this region notes that “Industry Partnerships are also gaining traction as a way to help low-wage earners and job seekers improve their short and long-term employment opportunities by providing access to entry level and advanced job opportunities aligned with employer’s career ladders.”
The SRWDP Advanced Manufacturing Industry Partnership is a success, having grown to include more than 50 employers who are providing leadership and investing training dollars and other resources. In fact, employers provide half the funding for the partnership, a testimony to the value they see in it. Recently, the partnership has established internships and co-ops for high school students to expose young people to the modern manufacturing sector and help build a pipeline of talent. More broadly, Industry Partnerships provide a way for employers to better get to know the workforce system and build closer, more collaborative relationships that benefit job seekers and industry.
Looking forward
These efforts represent the promising direction that workforce and economic development efforts are taking in this region, as well as at the federal level, which provides much of the funding for state and local workforce systems. The recent reauthorization of the federal Workforce Innovation and Opportunity Act allows programs to establish innovative, cross-system partnerships to more effectively serve individuals facing significant barriers to entering and thriving in the workforce. Ensuring that these approaches actively engage employers in key sectors, as many programs in Greater Philadelphia are doing, will not only increase opportunities for individual workers, but strengthen the regional economy.
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