The Federal Reserve Bank of Philadelphia’s Community Outlook Survey (COS) monitors trends affecting the well-being of low- and moderate-income (LMI) households and communities in the Third Federal Reserve District, which encompasses Delaware, southern New Jersey, and the eastern two-thirds of Pennsylvania. Each quarterly survey focuses on one of four topical areas: housing and neighborhood development; workforce and economic development; health, wellness, and family services; and household financial stability.
The 2Q2017 COS, focusing on the theme of Workforce and Economic Development, was sent to participants in April 2017. Survey responses were welcomed from representatives of organizations engaged in expanding economic opportunity for LMI individuals and communities through job training, workforce development, employment placement services, economic development planning, commercial development, and community development finance. A total of 27 organizations responded, with 81 percent servicing Pennsylvania, 15 percent servicing New Jersey, and 11 percent servicing Delaware. Respondents were asked to describe the most pressing workforce and economic development challenges in the communities they serve in a series of open-ended questions. Qualitative research methods were used to identify key challenges and promising solutions reported by survey respondents. The findings are summarized here and include direct quotes from the respondents.
The most common concern cited by survey respondents was that, despite a generally improving local economy, there is a lack of skilled workers available to fill vacant jobs. Respondents specifically noted the high demand for employees in middle-skills occupations, such as customer service, bookkeeping, and mechanical operations, many of which require experience or education beyond a high school diploma. While formal educational attainment may not be a perfect indicator of job seekers’ skill levels, the lack of basic credentials often constitutes a barrier to even entry-level employment. Figure 1 illustrates the share of adults aged 25 years or older with a high school diploma or less as their highest level of education in a selection of Third District metropolitan statistical areas (MSAs) from 2011–2015. In each of these MSAs, a large portion of these adults has not attained the postsecondary credentials that would position them competitively for existing employment opportunities. Notably, in the Atlantic City, Lancaster, and Reading MSAs, more than one of seven of these adults lacked a high school diploma or equivalent credential.
Although many survey respondents mentioned inadequate educational attainment as a key challenge, even more expressed concern over the lack of “soft skills” among those seeking employment in their local economy. Soft skills encompass a broad range of competencies and behaviors that enable effective interpersonal communication and collaboration.1 Nationally, many of the fastest-growing occupations are in the health-care field and include a broad range of entry-level positions in both home-based and institutional settings.2 Since many of these jobs involve highly sensitive client interactions, it is likely that there will be an ongoing demand for workers with strong interpersonal skills.
Survey respondents reported that a wide range of nonskill barriers impede many workers from obtaining and maintaining employment. Some job seekers find themselves disqualified from available positions as a result of background checks and drug screenings. In particular, involvement in the criminal justice system can have a long-lasting negative impact on an individual’s ability to secure employment. While it is difficult to estimate the total reentry population, Figure 2 depicts the relative prevalence of adults living under community supervision in Third District states in 2015, representing a minimum estimate of the population total. Of the three states, Pennsylvania had the highest rate of adult supervision, with one in 34 adults under parole or probation, compared with one in 53 nationally. For many formerly incarcerated citizens, the prevalence of criminal background checks compounds existing skills-related barriers as those with a high school degree or less are much more likely to have been incarcerated at some point in their lives compared with those with four-year degrees.3
For other job seekers, the tradeoffs associated with available employment opportunities constitute barriers. When transportation and child-care arrangements are costly or impractical, low-wage or variable schedule employment may seem unattractive. Respondents also noted that, in certain circumstances, workers and families can face a net decrease in household income when transitioning from public benefits to employment in low-paying jobs, increasing the strain on household resources.
The short supply of highly skilled workers exacerbates the challenges currently facing employers as many incumbent workers near retirement age. Figure 3 depicts industries with relatively large shares of workers 50 years or older in Third District states in 2015. Whereas about 37 percent of workers overall were in this age group across the three states, older workers were clearly concentrated in these four areas. For manufacturing in particular, older workers may have highly specialized skills that require years of experience to develop.
The issue of imminent retirements was raised in the 2Q2016 COS on workforce and economic development,4 suggesting that viable solutions to this challenge have not yet been widely identified. Still, some respondents shared that many local employers are recognizing the need to train incumbent workers and develop new talent pipelines to replace those leaving the labor force. As in the prior year’s survey, respondents cited apprenticeships and other types of on-the-job training as potential strategies.
Several respondents mentioned self-employment as a path being pursued by many of their clients, specifically formerly incarcerated individuals for whom traditional employment arrangements may be harder to secure. Technology and the growing “gig economy” facilitate opportunities for individuals to take on contract work or start their own businesses, as either a supplement to or replacement for full-time employment. Figure 4 illustrates the share of tax filers in a selection of Third District counties who reported income from an independent business in 2014. This includes income from both incorporated sole proprietorships and independent contractor work (e.g., driving for a rideshare service) but of course does not capture informal cash-based arrangements unless the individual opted to report the income. Across the District, rural areas of Pennsylvania, such as Juniata and Potter counties, had some of the highest shares of residents reporting independent business income.
Despite the expanded opportunities available through self-employment, survey respondents mentioned that a lack of soft skills can inhibit individuals from being successful in these endeavors. Since these arrangements are more likely to depend on professional and customer relationships, strong interpersonal skills and business networks are essential. With respect to formerly incarcerated individuals, for whom rejoining the workforce may be one component of their broader reintegration into society, this facet of self-employment may be particularly challenging.
Respondents expressed a great deal of concern over the future of federal funding for workforce and economic development, with major cuts to existing programs under discussion in ongoing budget negotiations. According to the National Skills Coalition, federal funding for the Workforce Innovation and Opportunity Act declined 45 percent from FY2000 to FY2015,5 suggesting that resources have been declining for some time. Relatedly, the ongoing decline in federal funding for general community development activities6 further constrains available resources for local economic development and community services, raising concern among respondents that barriers to employment will be exacerbated for many workers. At the state level, support for community colleges was perceived to be in jeopardy.
When asked, “Over the past year, have you seen any promising trends or changes?” the following were cited as promising opportunities for improvement by survey respondents.
Several survey respondents shared that local industry employers are partnering on transportation and workforce development efforts, which will create positive benefits for those seeking employment. Additionally, as the labor market improves, employers are more actively training incumbent workers and focusing on employee satisfaction to improve retention rates.
As local economies improve, respondents have noticed more companies are now willing to hire those who may have faced barriers to employment in the past. Jobs are being created and companies are hiring, but, as mentioned, some employers and job seekers still struggle to find a match between the skills needed and the skills available.
For a more in-depth look at topics discussed in this report, see the following publications from the CDS&E Department of the Federal Reserve Bank of Philadelphia: