How Education Plays a Role in Utah’s Labor Shortage


By Michael Jeanfreau, Regional Economist

A TIGHT LABOR MARKET

Preceding the pandemic, Utah’s unemployment rate was 2.5%, with 41,000 unemployed persons across the state. Now, it’s back to a low unemployment rate of 2.7% in May 2021 with 45,000 unemployed persons.¹ Even though both the unemployment rate and number of unemployed people are similar to pre-pandemic conditions, the average educational level of unemployed people today will be, on average, lower than the educational level of unemployed people before the pandemic.

The uneven impact on workers of different education levels during the pandemic has caused a tight labor market strained by the incredible level of demand for educated workers.² In Figure 1 we see there were about 88,000 jobs posted online in Utah in the six months prior to the pandemic. In the last six months, there have been 120,000 jobs posted. Both time periods have a little over 40,000 unemployed people. The two largest desired educational levels in the job postings are high school diplomas and bachelor’s degrees, and demand for both has increased since the start of the pandemic.


EDUCATION’S ROLE

The unemployment rate varies between education levels, with higher education positively related to low unemployment as seen in Figure 2. In other words, the more educated one is, the more likely it is to be employed. Anecdotally, when companies have to lay workers off, they’re going to keep the ones that are hard to replace.


Jobs that require a high school diploma, like retail workers or customer service representatives, usually only require on-the-job training. In low-specialization occupations it requires minimal additional training for someone to switch from food service to accommodations. The ease of transition creates competition between several industries. As the pandemic disproportionately affected workers in high-contact industries, they were forced to reevaluate their position in the market. It’s become apparent that, particularly in the case of high-contact industries, many former employees have found new higher paying opportunities in other lines of work or haven’t found suitable opportunities to entice them back into the job market.³

On the other hand, jobs requiring a bachelor’s degree face difficulty filling their roles since the pandemic had a lower magnitude of effect on people with bachelor’s degrees. Instead of becoming unemployed and looking for a new job, many were able to transition to work-from-home fairly easily. Over 50% of workers with a bachelor’s degree were working from home in May 2021 when surveyed by the Bureau of Labor Statistics.⁴ There are more jobs available for those with a bachelor’s degree than before the pandemic, yet relatively few workers with a bachelor's degree were laid off during the pandemic.

Businesses are facing a disparity between employers' needs and employee qualifications. The employment opportunities available in Utah contribute to positive in-migration, with workers of higher education levels incentivized by jobs. In addition, Utah has one of the highest birth rates in the nation, bolstering the workforce with young workers. However, they are young and may not have yet attained the education level required for many of the open jobs. For now, neither of these have had enough of an impact to close the gap between the increasing demand for an educated labor force and the dwindling availability.

While difficult for employers, this is good news for the average Utahn. The labor market is tight, and employers tend to respond with higher wages, sign-on bonuses, training opportunities, and increased benefits.⁵ The availability in education and skills of unemployed people have changed, shaped by the unique impact of COVID over 2020, and wise businesses will adapt to the fluctuating landscape as they try to keep up with the economic boom.

HISTORICAL IMPACT

This isn’t the first time education has played a role in unemployment. In fact, the disparity between unemployment and different educational levels is at its highest during times of economic downturn. This effect is highlighted in the aftermath of the 2008 Great Recession.
  • In 2008 and 2009, the unemployment rate for those with less than a high school diploma moved from 7.7% to 15.6%.
  • In the same period, the unemployment rate for those with a bachelor’s degree and higher only rose from 2.1% to 4.8%.
  • Before the Great Recession, the unemployment rate between those with less than a high school diploma and those with a bachelor’s degree and higher differed by 5.6 percentage points.
  • By the end of the Recession, the difference had doubled to 10.8 percentage points.
While these are national figures, the relationship indicated applies to Utah as well: workers with higher education have a higher chance at finding employment, if desired, than those with less education.

The gap between educational groups, so apparent at the end of the Great Recession, started to close over the 2010s. In January 2013, Utah reached the 4.5% unemployment rate some believe signals a healthy labor market. Utah’s rate continued dropping thereafter until April 2021, the first month which reflected the effects of the pandemic. During that time, as employers continued to try to find workers, opportunities for training and education became common; businesses helped create the workers they needed.

Low unemployment can signal great opportunities for potential job seekers, or to those wishing to find higher pay or a different industry. In order to have the workers they need, businesses begin to raise wages to entice potential employees away from current positions, or offer incentives such as sign-on bonuses. Employers desperate for workers may be willing to pay to educate or train employees in necessary qualifications. As these incentives grow, people currently not looking for a job may change their mind. Companies with the ability to attract new talent and savvy at retaining current employees will excel.