The Future of Education, Employment and Training Policy
A Conversation with Tony Carnevale

A Forum — July 27, 2001

Demographic shifts of near seismic proportions will hit the US economy as the Baby Boom generation leaves the workforce over the next twenty years. If these demographic trends and the increasing demand for skilled workers are not factored into education, employment and training policy, the skill gap in our labor market may widen into a chasm. Tony Carnevale, noted author and researcher on education and workforce development, offered these provocative predictions at a meeting sponsored by the American Youth Policy Forum on Capitol Hill in the hopes of spurring a conversation among policymakers about the future of education and employment policy.

The author of several books, including The American Mosaic: An In-depth Report on the Future of Diversity at Work and America and the New Economy: How New Competitive Standards are Radically Changing American Workplaces, Carnevale has been researching and writing about workforce development for many years. Yet Carnevale is no armchair quarterback when it comes to policy planning and research. He has held several high-level positions in the federal government including Chair of President Clinton’s National Commission for Employment Policy and the Senior Policy Analyst in the Office of the Secretary of Health and Human Services. Currently, Carnevale is the Vice President for Public Leadership at the Educational Testing Service (ETS). In this capacity, he has been conducting research on trends affecting the education of 16-24 year olds.

Carnevale sees reversals in three trends that will directly influence education and employment policy over the next two decades. First, he argues that there has been a reversal of the "education premium" in the American economy. From the 1950s through 1970s, the value of a college degree in terms of post-graduate earnings was on the decline. In other words, blue-collar workers with a high school education were doing better relative to college-educated white-collar workers at the end of the 1970s than they had been in the 1950s. At this same time, the number of college-educated workers was growing as the well-educated Baby Boom generation (born 1946-1964) entered the workforce. This glut of well-educated Boomers resulted in increased competition for skilled jobs, further reducing the education premium. The share of college educated workers grew even faster in the eighties and nineties. However, in spite of this increasing supply of well-educated workers, the college wage premium has nearly doubled since 1980 in large part because of the added value of a college education in the new economy. "In the knowledge economy," Carnevale argues, "education allocates earnings; work alone is not enough."

The second important trend reversal that Carnevale sees as having a major influence on education and employment policy is the declining growth rate of the American labor force that demographers predict will accompany retirement of the Baby Boomers. Given the relatively small number of workers from successive generations that are slated to fill the shoes of these retiring Boomers, Carnevale warns that shortages of workers with at least some college education will be a growing problem over the next two decades. He estimates that 46 million college-educated Boomers will retire over the next 20 years. Even though 49 million college-educated workers will enter the labor force in the coming decades, conservative estimates indicate that there will be 12 million new skilled positions opening over that same period, leading to a skill shortage of nine million college educated workers by the year 2020. This skill shortage will increase earnings differential between skilled and unskilled (college-educated and high school-educated) workers, further raising the education premium.

Carnevale points out that "social policies" such as raising the retirement age, increasing the Earned Income Tax Credit (EITC), or providing access to childcare and transportation will not solve the problem of the skill shortage. These policies, if implemented without additional education supports, will simply increase the supply of less skilled (non college-educated) workers. In Carnevale’s opinion, education and training programs will be the only way to solve the problem.

The final trend reversal that Carnevale suggests will be especially important for education policymakers to consider in the coming decades will be the shift from the relatively small Generation X (born 1965-1981) to the much larger Generation Y (born 1982-1996) in the 16-24 year old population. Generation Y will bring 4.6 million new 16-24 year olds into high school and college by the year 2015, causing a fiscal bottleneck in the education pipeline. Providing funds for the 1.6 million members of Generation Y who will go on to college immediately after high school will cost almost $20 billion in public funds. Providing education and training for the 3 million who do not go directly into college after high school will be even more expensive. With the retirement of skilled Baby Boomers and the ensuing skill shortage, there will be a great deal of pressure on America’s colleges and universities to produce more Generation Y graduates with higher skills.

After outlining these economic and demographic trends for policymakers to consider, Carnevale suggested the ways that these trends may interact with current political movements relating to education and employment. He argues that the government will need to step in to address the looming skill shortage that will hit when the Boomers retire, but he sees a tension between two different strains of thought on employment and education policies to deal with this issue. The tension lies between a need to fund programs to "make work pay" and to provide income support, child care, and short term training to raise the skill levels and employability of the least advantaged Americans. In the first case, Carnevale points to some of the lessons from welfare-to-work reforms of the 1990s that can guide education and employment policy in the new millennium. Since many of the people who left welfare to go to work continued to earn less than the poverty level wages, Carnevale thinks it is clear that "work alone is not enough, especially when education is so crucial for a livable income." He argues that jobs and social services for low-income families must be accompanied by support for continuing education and employment training. Carnevale warns that these policy proposals may also have to compete with a growing demand for support of financial aid for the children of middle class families going to college. The changing workforce and looming skill shortages will require a mix of both types of policy initiatives to fill the demand for well-educated workers over the next two decades.

Carnevale also noted that the pressure of looming skill shortages in the American labor force may hasten the expansion of the educational standards movement up into the ranks of colleges and universities. As Generation Y enters the postsecondary education system, the pressure to produce skilled graduates ready to fill the shoes of retiring Boomers may lead to stricter accountability standards. This could have important implications for the overarching philosophy of higher education, which has traditionally been geared toward personal development and creative thinking rather than specific skill criteria. Additional pressure for accountability in higher education may come from the state legislators who allocate funds for public postsecondary education and who also feel political pressure both from employers and standards advocates.

At the conclusion of his talk, Carnevale quipped that one of the best things about discussing future trends in public policy is that even if these trends do not turn out the way he predicted, few people will remember what he proposed twenty years from now. Of course, the American Youth Policy Forum hopes that policymakers do remember Carnevale’s predictions as important considerations when planning future education and employment policy.

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