The sub-baccalaureate labor market–the labor market for those with less than a baccalaureate degree but at least a high school diploma–constitutes about three-fifths of employment. It has been growing steadily in the past two decades, and the relative earnings of those with “some college” have also been increasing, suggesting increasing demand. This is also the labor market for which high schools as well as community colleges and technical institutes (the fastest-growing segments of postsecondary education) prepare their occupational students.

Despite the importance of the sub-baccalaureate labor market, we know relatively little about the way it works. A relatively small body of statistical analysis indicates that the economic returns to community colleges and technical institutes are quite varied and that the many individuals who begin postsecondary education but fail to complete credentials are unlikely to benefit much. However, the process by which individuals with sub-baccalaureate education make their way into the labor force has not been carefully examined.

To add to our information, this report presents the results of interviews with employers and education providers in four local labor markets. The four labor markets were chosen to provide some variety: one, which we call Frankton, has concentrated on agriculture and agricultural processing; a second (Palmdale) has emphasized high-tech development and manufacturing; a third (Rosefield) has a highly diversified economy with considerable government and service employment as well as some high-tech manufacturing; and a fourth (Cotooli) is a center for the manufacture of machinery and machine tools. To enable our interviews to be more precise, we concentrated on six occupations/occupational areas typical of those in sub-baccalaureate labor markets and widely represented within high school and postsecondary vocational programs: electronics technician, machinist, drafter, accountant, business occupations, and computer-related occupations.

The Characteristics of Sub-Baccalaureate Labor Markets

Occupations in the sub-baccalaureate labor market have been affected by several organizational and technological trends: the shift to firms with flatter hierarchies with greater responsibilities for individual workers; the ubiquity of computer applications; and the slow and uneven pace of technological innovation, which often requires workers to be capable in various production processes. Educational institutions have responded with increases in computer-related courses and with total quality management (TQM) as a reflection of the expanded responsibilities production-level employees now have. These changes also mean that the conventional occupational divisions are blurring and that certain capacities–communication skills, initiative and motivation, and problem-solving abilities–are increasingly important.

The sub-baccalaureate labor market is plagued with cyclical variation. Employment opportunities vary substantially over the business cycle, and the intermittent employment undermines incentives to accumulate extensive training and experience. Enrollments in community colleges and technical institutes also expand substantially during downturns, increasing the numbers of students just at a time when there is little demand for graduates.

A third characteristic of the sub-baccalaureate labor market is that it is almost entirely local. Firms search for their employees locally and informally, and individuals search for work locally; community colleges, technical institutes, and area vocational schools orient their programs almost entirely to local employers. The only exceptions arise in cases of severe local labor shortages or when an employer has established a close relationship with a particular nonlocal educational provider. The local nature of these markets may make adjustments to changing labor demand slower and less certain.

Entry into the sub-baccalaureate labor market seems to be dominated by small firms; those in search of better positions move to larger firms or perhaps to more sophisticated middle-sized firms. The providers of education and training are also small in the sense that at a particular time there are relatively few completers in any one occupational area. The fact that both demand and supply are dominated by small institutions may thwart the development of the information necessary for markets to operate efficiently.

Not surprisingly, there are notable differences among local labor markets. Frankton, with its origins in agriculture and processing, is technically much less sophisticated than Palmdale and Cotooli, for example. The dominance of high-tech development and manufacture in Palmdale has affected its economy much more than the diversified economy of Rosefield. The high costs in Palmdale and the relative isolation of Frankton have caused somewhat idiosyncratic problems in attracting well-trained workers. However, the commonalities across different communities in the characteristics of sub-baccalaureate labor markets are more striking and allow us to generalize based on these four case studies.

The Providers of Education and Their Connections to Employers

The community colleges, technical institutes, and area vocational schools that prepare individuals for sub-baccalaureate labor markets are themselves quite varied, and their students have many different purposes. Uniformly, they have established several mechanisms to connect their programs to employers, potentially providing linkages that help students into employment and ensure that educational programs have the appropriate content. In practice, however, the mechanisms vary in the way they operate:

• Advisory committees provide some information about labor market demand and help institutions establish new programs. However, in many cases, they meet only infrequently or are institution-wide rather than occupation-specific and thereby provide very little information.
• Placement offices are understaffed in most institutions and usually concentrate on part-time, “stay-in-school” jobs rather than linking occupational programs with employment opportunities.
• Placement by occupational instructors does occur in some institutions, but in most cases, it is uneven and sporadic.
• Student follow-up and tracking mechanisms, which provide information about the subsequent employment of students, can allow instructors and institutions to analyze the strengths and weaknesses of their programs. However, these information systems are poorly developed in most postsecondary institutions, so that in practice instructors and administrators have no idea where their occupational students go.
• Contract education, or firm-specific customized training, is clearly booming and is another potential source of information to educational providers about the skills necessary in employment. However, most institutions establish contract education in divisions separate from regular vocational programs, limiting contract education’s value in establishing links to employers.
• Work experience and co-op programs, combining school-based instruction with on-the-job experience, can also link employers and providers and offer students complementary approaches to learning. In three of our labor markets, these programs are rare. In Cotooli, however, well-developed co-op programs have indeed fostered close working relations between local firms and education providers; employers speak knowledgeably and positively about the educational system and without the indifference we observed in other areas.
• Student demand affects postsecondary providers, which are funded based on enrollment (through state aid plus tuition) and are therefore highly sensitive to enrollment changes. If students were well-informed about labor market demand, this would be a mechanism for bringing vocational offerings into line with employment opportunities. However, students are not always well-informed; educational institutions often respond to changes slowly; and the incentives against funding high-cost programs (e.g., in electronics, health, and other technical areas) mean that high employment demand may still not lead to expanded enrollments.
• Licensing requirements, predominantly in health occupations, specify the content of educational programs as well as hiring requirements employers must follow, establishing a congruence between employers and providers that is missing in other occupations areas. These requirements therefore establish organized labor markets in contrast to the unorganized occupations more typical of sub-baccalaureate labor markets. While there are not many other examples of licensing requirements, the skill standards now being discussed would have similar effects.

We conclude, then, that many of the mechanisms linking employers and educational providers work poorly with certain exceptions, especially the co-op programs in Cotooli and the licensing requirements in health occupations.

Skills, Hiring Standards, and Promotion Policies

Repeatedly, employers mentioned a common list of skills they look for in their middle-skilled employees: highly job-specific skills; motivation and interpersonal skills to enable them to work cooperatively; aptitude and “common sense,” especially the ability to apply knowledge in complex situations; basic skills, whose deficiencies generated more complaints than any other subject; and computer-based skills. However, one inconsistency among employers became glaringly obvious: At the same time that some stress the specific skills necessary for entry-level work and bemoan the presence of extraneous theoretical and “academic” requirements in educational institutions, others emphasize broader and more “academic” capacities–those more necessary for promotion than for entry-level jobs.

Because of the importance of very specific skills and personal attributes like motivation, most employers in sub-baccalaureate labor markets rely on experience in hiring. Formal schooling may provide an edge among applicants of similar experience, but it is difficult to compensate for the lack of experience with additional schooling. As a result, sub-baccalaureate credentials are not valuable except for the skills they provide–skills which can be learned in several alternative ways. There are some exceptions: In most areas, electronics technicians require associate degrees; health workers require certain credentials to be licensed; employers in Cotooli typically hire substantial fractions of their workers through co-op programs; and some employers have established good working relations with particular community colleges. However, the dominance of experience means that the value of sub-baccalaureate education in gaining individuals access to stable employment is varied and uncertain.

Partly because of the reliance on experience rather than formal schooling, a majority of employers were not knowledgeable about local education providers and were indifferent to them. The exceptions were Cotooli, where the co-op programs have structured close working relations, and a few other cases (notably in technical fields like electronics) where employers rely on local community colleges. Short-term job training programs and proprietary schools fared even less well: From the vantage of employers, they are virtually invisible.

Once employed, promotion takes place informally and entirely because of on-the-job performance. This places a great premium on performance and on the ability to master the additional skills necessary for promotion. It also clarifies the role formal education can play in sub-baccalaureate labor markets. It can under certain conditions gain access for individuals to entry-level jobs from which they can move upward with experience and on-the-job training; however, but there is no substitute for having the wide range of capacities required in modern production.

Several trends in sub-baccalaureate labor markets are disquieting: the increasing use of temporary employment; an inflation in the requirements for “entry-level” jobs; shorter job ladders; the inflation of education requirements, with the best jobs now requiring baccalaureate degrees; and the emergence of customized training, a possible harbinger of a two-track employment system.

Conclusions and Recommendations

In several ways–particularly because of the lack of information, students’ weak connections to employers, and uncertain employment benefits–sub-baccalaureate education does not work very well for its students. With some exceptions, it does not work well for employers either since employers rely on sub-baccalaureate credentials only in certain well-defined conditions and because they complain relentlessly about the sorry state of basic skills. Evidently, there is considerable room for reform and in four areas in particular:

1. There is a crying need, at both secondary and postsecondary levels, to improve the teaching of basic academic skills.
2. Information about the employment effects of various education and training programs is almost completely missing in most local areas and could be improved in many ways. This would benefit students seeking to improve their employability, administrators and instructors trying to improve their programs, and policymakers seeking more effective public programs.
3. Educational institutions can strengthen their connections to employers. This will involve scrutinizing the weakness in the various mechanisms which now exist, like advisory committees, placements efforts, and student follow-up. Co-op programs appear to be especially promising ways of linking employers and providers and of providing students with the appropriate variety of preparation.
4. Skill standards have great potential for creating organized labor markets from the unorganized relations characteristic of sub-baccalaureate labor markets and for bringing employers and education providers together in a common task.

While conventional analyses place the burden on education providers to reform, it is clear that employers are also partly to blame for the sorry state of sub-baccalaureate labor markets. Their unstable employment patterns, lack of incentives for mastering basic skills, and inattention to schools have created some existing problems. More generally, their employment policies can undermine any reforms that education providers make. Therefore, it becomes necessary to ask what responsibilities employers should bear in reconstructing the relation between education and employment. While this is a relatively novel question, there are several obvious responses:

• Employers should participate actively with both high schools and postsecondary providers, providing better information about the requirements of work to students and educators alike and cooperating in the development of co-op programs and skill standards.
• Hiring decisions and wage structures should be more responsive to educational accomplishments and skill differentials in order to provide greater incentives for prospective employees to learn those capacities which employers say are in short supply.
• Employers should preserve and enhance career ladders and reduce the cyclical variation in employment in order to provide additional incentives for the accumulation of skills and knowledge.

Even though the tradition of laissez faire in this country has prevented much attention to the responsibilities of employers, addressing this question is crucial. Because markets operate through the interaction of demand and supply, improving the operations of the sub-baccalaureate labor market in the interests of employers and employees alike will require the reform of both educational policies and employment practices.

Grubb, W. N., Dickinson, T. Giordano, L., & Kaplan, G. (1992, September). Betwixt and between: Education, skills, and employment in sub-baccalaureate labor. Berkeley, CA: National Center for Research in Vocational Education.

Download the report (PDF)