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. Beginning in 2016, 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 2Q2016 COS, focusing on the theme of Workforce and Economic Development, was sent to participants in April 2016. 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 40 organizations responded, with 80 percent servicing Pennsylvania, 15 percent servicing New Jersey, and 5 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.
Respondents’ most commonly cited challenge was that, despite generally improving local job markets, many of their clients do not possess the skills or educational credentials required for existing employment opportunities. Examples given of positions that employers struggled to fill included middle- to high-skill jobs in construction, health care, technology, and manufacturing. As Figure 1 illustrates, in a number of Third District cities, only a small share of residents were employed locally in 2014.
Source: Authors’ calculations using U.S. Census Bureau Longitudinal–Employer Household Dynamics accessed via the OnTheMap Application.
The explanations for this mismatch ranged from institutional and policy factors down to firm practices and individual qualifications. Some respondents felt that local economic development efforts had not taken into account the needs and abilities of the existing local workforce. Others expressed concern over employer hiring practices, suggesting that requested credentials sometimes exceeded what was necessary for a position. Further, some respondents expressed that employers with specialized skills needs should assume more responsibility for training employees given resource constraints on the public workforce system. Still, many acknowledged that the LMI communities they serve face substantial skills gaps, noting that youth and long-term unemployed residents often lack sufficient work experience, that rates of high school completion and postsecondary attainment are low, and that a significant number of their clients struggle with literacy and numeracy.
With little access to local employment opportunities, many residents must look elsewhere in their regions for work. A number of respondents cited long commutes and limited transportation options as barriers to employment, particularly for transit-dependent households. Further, the lack of affordable housing options near entry-level employment opportunities was repeatedly identified as an impediment to job access.
Source: Adapted from Keith Wardrip, “Identifying Opportunity Occupations in Pennsylvania, New Jersey, and Delaware,” Special Report by the Community Development Studies & Education Department, Federal Reserve Bank of Philadelphia, September 2015.
Numerous respondents reported that the jobs their clients are able to obtain are typically low-wage and do not foster economic security, particularly for individuals with families. Figure 2, adapted from a recent report from the Community Development Studies & Education (CDS&E) Department of the Federal Reserve Bank of Philadelphia, titled “Identifying Opportunity Occupations in Pennsylvania, New Jersey, and Delaware,” illustrates the underlying challenge for less-skilled workers. An opportunity occupation is defined as one that pays workers on average at least the national annual median wage, adjusted for differences in local costs of living, and is generally considered accessible for workers without a bachelor’s degree. As Figure 2 illustrates, while opportunity occupations constituted a significant share of employment in many Third District metropolitan statistical areas (MSAs) in 2014, this share was consistently exceeded by the share of jobs that were lower-wage.
Some respondents noted that, for low-wage workers, the pursuit of more gainful employment can lead to difficult tradeoffs. While job training and postsecondary education can open the door to higher-wage opportunities in the future, the need for income in the present makes it difficult to divert time away from their current jobs. Further, one respondent working in a high-poverty Philadelphia neighborhood suggested that some clients fear that if they pursue higher-paying opportunities, the potential loss of needed supports (such as food assistance and subsidized child care) would outweigh their wage gains.
Source: Authors’ calculations base on U.S. Census Bureau 2010–2014 American Community Survey, Tables B1001, B15001, S1810, and B16003.
Even as the broader job outlook improves, respondents shared that certain segments of their communities continue to face substantial barriers to employment. The most commonly cited included lack of a high school diploma, disability, limited English proficiency, homelessness, and prior criminal convictions. Figure 3 illustrates the prevalence of some of these barriers in Third District states from 2010–2014. Overall, disability and high school noncompletion were more common, though the share of adults in limited English–speaking households may understate the total share with limited proficiency in English.
Respondents cited a number of challenges they face supporting individuals with these barriers. Many were skills-based, such as low educational attainment and limited workplace experience. Others saw the need for greater engagement with private employers to encourage them to consider nontraditional employees. Some noted that while individuals who secure employment often needed ongoing support, funding typically only covers job placement activities.
Source: Authors’ calculations using U.S. Census Bureau Quarterly Workforce Indicators. Accessed via the QWI Explorer application.
As the baby boomer generation approaches retirement age, a large portion of experienced employees may soon exit the workforce. In particular, respondents from mid-sized cities in Pennsylvania expressed concern that advanced manufacturers in their region may soon face skill shortages unless they invest in talent development and retention for younger workers. While this challenge may be more acutely felt in certain industries, the demographic trend is widespread. As shown in Figure 4, in each of the Third District states, workers aged 55 years or older made up roughly one-quarter of the workforce in mid-2015.
Index values: DE, 100 = $0.57 billion; NJ, 100 = $3.95 billion; PA, 100 = $6.14 billion (2014 dollars)
Many respondents identified entrepreneurship and small business development as key economic development priorities. However, others noted that small business owners often have difficulty managing day-to-day operations, planning for expansion, and accessing financial capital appropriate for their needs. Figure 5 shows relative changes in the volume of lending to businesses with less than $1 million in revenue across the three Third District states, illustrating that volume declined substantially from 2007 to 2010 and has not recovered. Several respondents noted a recent rise in predatory small business lending and a growing use of online lenders, though none explicitly connected these trends to the decline in lending by conventional banks. Other impediments to creating a supportive environment for small business development included lack of infrastructure investment and limited coordination among economic development stakeholders.
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.
Many respondents expressed cautious optimism about the implementation of the Workforce Innovation and Opportunity Act (WIOA) of 2014, the most significant federal workforce legislation in recent years. Under WIOA, states were required to develop plans that prioritize serving individuals with barriers to employment, implement new performance metrics, and integrate best practices (such as career pathways strategies) and sector partnerships into their programming. State plans have been submitted to the federal government and are scheduled to take effect on July 1, 2016.
Local workforce boards were also required to develop WIOA plans, for which respondents expressed varying degrees of enthusiasm. Some reported that their local boards had seized on the opportunity to implement more innovative programming. Others felt there had been some improvements but that opportunities for more substantial reforms had been missed. A number of respondents shared that their new plans would expand on-the-job training, apprenticeships, and work-based learning programs that enable participants to maintain their income as they increase their skills.
Several respondents emphasized the importance of implementing career and technical education (CTE) in high school and postsecondary programs, which serve as natural access points for job training and career services. They noted that effective CTE programs both connect individuals to career opportunities and meet the skills development needs of local employers. Respondents cited the willingness of companies to invest time and resources into these programs — including providing individual tuition assistance, sharing training facilities, and participating in curriculum development — as evidence of the value they produce for private employers.
While the fragmentation of local economic development stakeholders was cited as an ongoing challenge by some respondents, others identified growing interest in collaboration as a promising trend. Many recognized the limitations of working in silos and felt that greater coordination of these stakeholders was critical for scaling programs and maximizing impact. Some reported that large private employers were increasingly motivated to work with public and community-based organizations to develop staffing and training pipelines. On the public sector end, process enhancements facilitated by the adoption of shared online platforms and case management systems were improving access to services as well as the capacity for collaboration across public agencies.
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: