Mismatch in the Labor Market: The Supply of and Demand for "Middle-Skill" Workers in New England

Over the past decade, policymakers and business leaders across New England have been concerned that the region's slower population growth and loss of residents to other parts of the country will lead to a shortage of skilled labor--particularly when the baby boom generation retires. Prior to the Great Recession, the concern was that an inadequate supply of skilled workers would hamper future economic growth by creating barriers for companies looking to locate or expand in New England. More recently, the worry is that the lack of skilled workers will make it difficult to fill jobs that are in high demand as the economy recovers--many of which are likely to require postsecondary education and training--thereby slowing the region's recovery. That means having not only a sufficient "number" of skilled workers but also a workforce with the right "mix of skills" to fill the jobs that are likely to be generated by the region's economy. Indeed, a potential mismatch between the level of skill among the population and the demand by employers over the next two decades may already be underway. The structure of the U.S. economy has changed dramatically over the past few decades, leading to an increase in the demand for more highly educated workers. The reduced role of the manufacturing sector, the increased importance of the professional service and knowledge sectors, advancements in technology, and the spread of globalization are evidence that the ways in which people "do work" have fundamentally changed. As a result, employers are demanding that workers obtain more formal education and training--often requiring some type of postsecondary degree or certificate--in addition to greater technical proficiency and interpersonal skills than in the past. However, it is unclear how large this potential labor mismatch might be and whether this issue is unique to New England or is pervasive across the nation. Simulations indicate that there is likely to be a potential mismatch between the level of education and skill among the population and that which will be demanded by employers in the coming decades--particularly among middle-skill jobs that require some postsecondary education but less than a bachelor's degree. And although any potential mismatch is likely to be alleviated to some degree by a variety of market responses, the magnitude and nature of the problem suggests that there is still a role for public policy. In particular, rethinking how best to invest in education a