INDUSTRY ANALYTICS FOR THE CITY OF PHILADELPHIA'S WORKFORCE STRATEGY

Review of labor data suggests that over the past decade, middle-skill employment has not seen the same gains as low-skill and high-skill employment in Philadelphia—but there is variation between sectors.
 

At a macro level, reports on the trajectory of middle-skill employment opportunities have demonstrated cause for concern. Studies have shown a long-term decline since the 1970s in the number and share of middle-skill jobs across the United States as technological advancement and globalization have contributed to the general polarization of the workforce around low-skill and high-skill jobs.

Review of labor data suggests that this trend has played out in Philadelphia as well. Job growth within the seven target sectors in the city between 2006 and 2016 was driven entirely by gains in the number of low-skill, low-wage jobs and high-skill positions with extensive educational requirements. The number of middle-skill jobs in these sectors in Philadelphia actually dropped by 2,500 over the past decade. It is worth noting that some of the disparity in growth between low-skill and middle-skill employment during this period may be attributable to differential impacts of the Great Recession. Despite this overall trend, middle-skill jobs have grown modestly in some sectors, and strong overall growth in sectors that rely on middle-skill workers suggests that there will continue to be opportunities for these individuals. However, the landscape of middle-skill employment is quickly evolving as the broader economy continues to transform. This evolution presents both challenges and opportunities from a workforce development perspective, as educational and training requirements change, new occupations emerge, and cross-sector career pathways become increasingly viable.

With scale, growth, and job opportunities across skill levels, the Healthcare sector presents a unique opportunity to support growth with equity.
 

As the largest sector by employment in Philadelphia, the Healthcare sector presents a range of opportunities across skill levels. Healthcare added the most jobs of the target sectors over the past decade, including net growth of 3,000 middle-skill positions.

What is more, Healthcare proved to be a relatively stable sector during the recession. While it is not immune to economic downturns—and is subject to the effects of regulatory uncertainty and changes—healthcare employment is driven more by demographics than cyclical economic conditions. Looking ahead, the growth of the aging population in our region is likely to drive growth in demand. Combined, these factors translate into a relatively stable environment for applying long-term workforce strategies.

While Healthcare has seen growth in middle-skill jobs, the preponderance of job creation in the sector over the past decade was in low-skill, low-paying jobs. The fastest-growing subindustry has been services for the elderly and disabled and the occupations adding the most jobs are personal care aides and home health aides, which together account for 22,000 jobs but pay between $20,000 and $22,000 per year.

Although pay is low for these two large and growing occupations, they require little in the way of education or training. And the scale of employment in these occupations provides reason to further explore the investment and infrastructure needed to help individuals in these personal care occupations move into middle-skill jobs throughout the Healthcare sector. Our city and region already benefit from strong Healthcare training infrastructure built around clearly demonstrated career pathways. With employment growth projected to continue, there is opportunity to expand the good work already being done to connect individuals to opportunity both in growing middle-skill jobs as well as low-skill jobs that could serve as on-ramps to career advancement.

Some sectors present opportunities at scale, but face limitations for intra-sector career pathways.
 

The Retail & Hospitality sector and the Business & Financial Services sector employ a significant number of workers and are home to some large and growing low-skill occupations that provide opportunity for many Philadelphians. In Retail & Hospitality, 83% of jobs are low-skill and an even higher share of new job creation in recent years has been concentrated in these low-skill occupations. However, with low-skill jobs accounting for such a high share of sector employment—and a corresponding small share of middle-skill and high-skill jobs within the sector—the prospects for career advancement within the Retail & Hospitality sector are limited. While training can help some individuals advance to managerial positions, the small number of middle-skill jobs in the sector presents some challenges in creating intra-sector career pathways at scale.  

A related challenge manifests in the Business & Financial Services sector. During the past decade, the largest absolute job gain was among security guards. Employment in that occupation increased from 3,392 in 2006 to 6,998 in 2016, even as sector-wide employment declined during that span. However, as in Retail & Hospitality, the career pathway for security guards within the Business & Financial Services sector is not entirely clear, and employment has declined in many of the traditional middle-skill jobs in that sector during the past decade.

Still, the sheer scale of job growth in low-skill occupations creates an impetus to consider broader, flexible approaches. Low-skill jobs do not necessarily have to be dead-end jobs. More robust partnerships between workforce development groups, labor unions, and model employers in the city could yield more low-skill jobs with higher pay and benefits, coupled with additional training. Furthermore, career pathways that enable workers to advance from low-skill jobs to middle-skill opportunities do not necessarily have to be confined to a single sector. With supplemental training and education, foundational job experience in hospitality or as a security guard can provide critical skills in communication and problem-solving that employers across sectors seek in employees.

Early Childhood Education and Technology Services, while small, are fast-growing sectors that provide middle-skill opportunities and benefit from considerable support and momentum.
 

Early Childhood Education and Technology Services, which combine for nearly 24,000 jobs in Philadelphia, do not provide the same scale of opportunity as Healthcare or Retail & Hospitality, but both are high-growth fields that stand to benefit further from growing attention and support.  Both sectors provide opportunities for middle-skill workers—tech supported 4,800 middle-skill jobs in 2016 and early childhood education supported 2,900—and the number of these opportunities is expected to rise as both sectors continue to grow.

What is more, the City’s commitment to PHLpreK is likely to result in significantly higher growth and demand for workers in Early Childhood Education than estimated in official projections. And while this will translate into more opportunities for low-skill and middle-skill workers, average pay for childcare workers and preschool teachers is relatively low. Workforce efforts in this sector will need to focus on providing support for these workers to progress along career pathways into jobs that provide family-sustaining wages. As the sector grows, it will be important to better articulate viable career pathways for early childhood workers.

On the other hand, Tech Services is the focus of much activity and research in the city and region, as the sector has been among the fastest-growing in the city and region over the past decade. Tech Services does support a considerable base of middle-skill jobs, but most job creation in the sector over the past decade has been concentrated at the high end of the skill spectrum. As a whole, hiring in tech is often subject to upcredentialing, as many job postings include far more in the way of educational and technical requirements than actually needed to perform the job. To address this, there is opportunity to work with employers and HR professionals to expand recruitment, screening, and hiring practices to allow for the consideration of qualified but non-traditional candidates for middle-skill and high-skill positions. Reducing upcredentialing could help mitigate both the difficulties that tech employers are having filling positions and challenges in connecting more middle-skill workers to well-paying jobs. The City’s “City as Model Employer” initiative could be fertile ground for this approach.

Traditional blue-collar sectors remain strong sources of middle-skill jobs, but face headwinds that will present challenges in achieving scale.
 

Construction & Infrastructure and Manufacturing & Logistics are the only target sectors that support more middle-skill jobs than low-skill or high-skill jobs, as about 45% of positions in each sector are middle-skill. And average pay in both sectors is well above the citywide average, at $87,700 for Construction & Infrastructure jobs and $73,500 for Manufacturing & Logistics jobs.

But while they remain solid sources of well-paying, middle-skill jobs, both sectors have contracted over the past decade. Employment has rebounded in recent years, though the macroeconomic forces of automation and globalization are expected to continue exhibiting downward pressure on sectoral employment. The early effects of automation on manufacturing jobs are already evident and expected to grow, and the full impact on logistics jobs of the growth of autonomous vehicles is not yet fully understood but expected to be significant.

Despite limited projected growth, replacement openings will provide opportunities for new workers to enter the workforce in both sectors. While the Manufacturing & Logistics sector is expected to experience modest job loss through 2024, projections anticipate that the sector could see just over 1,100 replacement openings annually during this period. Nearly half (45%) of these openings are projected to be for middle-skill positions. With a smaller employment base, fewer replacement openings (413 annually) are projected for Construction & Infrastructure. Approximately one-third of these openings are projected to be for middle-skill positions.

Furthermore, these sectors have strong and well-structured training infrastructure that may be well positioned to provide targeted support for individuals to take advantage of replacement openings, even as net job growth in these sectors stagnate or decline. And in considering the broader workforce strategy, the existing training infrastructure in these two traditional middle-skill sectors may well serve as models for other sectors. Apprenticeships, for example, have long been part of the training approach employed for manufacturing and construction jobs, but are still relatively limited in other sectors.

In 2016, the seven target sectors accounted for 472,000 jobs in the city of Philadelphia, representing 71% of all jobs in the city. Employment is dominated by the Healthcare, Retail & Hospitality, and Business & Financial Services sectors, which each account for more than 100,000 jobs. Combined employment in these three sectors represents 80% of all jobs in the target sectors. On the other side of the spectrum, three small sectors—Early Childhood Education, Construction & Infrastructure, and Technology Services—account for a combined 45,000 jobs, or 10% of all jobs in the target sectors. Manufacturing & Logistics is the lone mid-sized sector, with 50,000 jobs.

The target sectors vary in the composition of employment across skill levels. Traditional blue-collar sectors like Manufacturing & Logistics and Construction & Infrastructure still have the highest share of middle-skill jobs among sectors, with slightly more than 40% of jobs in each sector classified as middle-skill. Approximately one-third of the workforces in Technology Services, Business & Financial Services, Early Childhood Education, and Healthcare are employed in middle-skill jobs. Retail & Hospitality supports the lowest share (13%) of middle-skill jobs among the target sectors.

Philadelphia employment increased in four of the seven target sectors between 2006 and 2016. The Healthcare sector added the most jobs over this period, creating an average of 2,400 new jobs every year. The Retail & Hospitality sector added the second-highest number of jobs during the same period, with an average of 1,400 new jobs each year. The two smallest sectors in size—Technology Services and Early Childhood Education—also grew, adding a combined 700 jobs per year during the past decade. Three sectors—Business & Financial Services, Manufacturing & Logistics and Construction & Infrastructure—experienced net job losses during the past decade, following similar long-term trends at the metro, state, and national levels. For comparison, the annual average of net new jobs added across all of Philadelphia was around 3,000 during the past ten years.

Narrowing analysis of labor data to the three years between 2013 and 2016—and thereby avoiding the most direct effects of the recession—reveals more robust growth across all target sectors. Technology Services saw the greatest change between ten-year and three-year growth trends, with 1,110 jobs created per year between 2013 and 2016 despite being the smallest sector in size. Business & Financial Services rebounded significantly, shifting from net loss over the 10-year period to adding an average of 1,500 jobs per year since 2013. Construction & Infrastructure and Manufacturing & Logistics also added jobs during the past three years, in contrast to net losses experienced for both sectors over the ten-year period. For comparison, the annual average of all net new jobs added in Philadelphia was around 10,000 during the past three years.

While traditional blue-collar sectors like Manufacturing & Logistics and Construction & Infrastructure still have the highest share of middle-skill jobs among sectors, more than half of job losses in these sectors over the past decade was concentrated among middle-skill jobs. In Technology Services, Business & Financial Services, Early Childhood Education, and Healthcare job growth during the past decade was largely concentrated in low-skill and high-skill jobs, rather than middle-skill jobs. Still, in absolute terms, the Healthcare sector added the most middle-skill jobs among target sectors during the past decade. And despite its small size, Early Childhood Education added the second-most middle-skill jobs during the same period.

Going forward, projections indicate that six of the seven target sectors should grow through 2024, but the number of jobs added annually is expected to ease slightly from the figures in recent years. Healthcare and Retail & Hospitality—the two largest sectors—are expected to lead the way in job creation in the city, followed by Business & Financial Services and Technology Services. Only the Manufacturing & Logistics sector is expected to lose jobs, though the pace of job loss is projected to slow to just 10% of losses experienced over the past decade. Construction & Infrastructure employment is expected to grow slightly, but not nearly at the pace of the past three years.

In addition to net new job growth, job openings will arise in the target sectors as current workers change careers and retire. Retail & Hospitality, known for substantial turnover, is projected to see the largest number of replacement openings. Beyond Retail & Hospitality, the projected number of replacement openings per sector is largely a function of total employment in the sector. Healthcare is projected to see the second-most replacement openings, followed by Business & Financial Services, Manufacturing & Logistics, and Construction & Infrastructure. While replacement openings add to projected robust net new job creation in sectors like Healthcare, Retail & Hospitality, and Business & Financial Services, they also provide workforce opportunities in sectors projected to contract or grow slowly, such as Manufacturing & Logistics and Construction & Infrastructure.

PROJECTED REPLACEMENT OPENINGS, PHILADELPHIA (ANNUAL AVERAGE, 2016-2024)

In 2016, the overall mean annual wage for individuals working in Philadelphia was $62,600, slightly higher than the mean annual wage of $59,400 at the metro level. On average, five of the seven sectors pay above average wages at both the city and metro levels. Technology Services jobs pay the most, on average, with a mean annual wage of $126,700 in the city, followed by Business & Financial Services at $118,300. After those sectors, there is a drop-off to a second tier of sectors—Healthcare, Manufacturing & Logistics, and Construction & Infrastructure—in which the mean annual wage ranges from approximately $69,900 to $87,800. The remaining sectors of Retail & Hospitality and Early Childhood Education are the lowest-paying target sectors, with a mean annual wage of $35,900 and $32,100, respectively, both well below the overall average wage for the city.

AVERAGE ANNUAL WAGE, PHILADELPHIA (2016)

Real wage growth over the past decade has been slow, with the overall average wage for workers in Philadelphia increasing by an annual average of 0.5% between 2006 and 2016. In Philadelphia, wage growth in Business & Financial Services, Technology Services, and Manufacturing & Logistics outpaced the overall growth rate during the past decade, although the remaining target sectors lagged the overall wage growth rate in the city. One sector—Retail & Hospitality—experienced a slight decline in real wages between 2006 and 2016.

REAL WAGE GROWTH, PHILADELPHIA (10-YEAR ANNUAL AVERAGE, 2006-2016)

Wage growth accelerated in most sectors during the past three years. Wages grew most quickly in Manufacturing & Logistics and Construction & Infrastructure. Wage growth in three other sectors—Retail & Hospitality, Early Childhood Education, and Healthcare—outpaced the 0.8% overall annual average wage increase for workers in Philadelphia, and wage growth in Business & Financial Services accelerated compared with growth in prior years. Following rapid growth during the past decade, average wages were flat in Technology Services during the past three years.

REAL WAGE GROWTH, PHILADELPHIA (3-YEAR ANNUAL AVERAGE, 2013-2016)