September, 2011 Policy Spotlight: Higher Education and Business Investment

As the United States economy continues to struggle and unemployment remains stagnant at around 9 percent, individuals are questioning where their next pay check will come from and how they can improve their chances of employment. Many employed and unemployed Americans alike are turning to higher education to improve their chances of selection. This additional education strengthens the skills of the American workforce, begins to fill gaps in workforce demand, and help make the United States more competitive in the global economic market.

As the global market becomes more competitive, foreign competitors are surpassing the United States in education level. The United States has dropped from 1st to 14th in the world in the share of adults aged 25 to 34 who have a postsecondary degree. The degree of competition does not only occur on a global scale but domestically as well. The U.S. economy is continuously changing and the demand for higher education is growing. By 2018, nearly two-thirds of new and replacement jobs will require some postsecondary education. More than half of those jobs will require a bachelor’s degree or higher. The American workforce already shows signs of a higher education shortage: only slightly more than 40 percent of U.S. young adults hold an associate or high college degree.

The growing need for skilled and educated workers has not gone unrecognized by employers. Half of U.S employers report a sizable gap between their current needs and the skills of their employees. The National Association of Manufacturers (NAM) points out some of the barriers to accessing higher education such as cost, complex student financial assistance forms, lack of transparency in college pricing, lack of cooperation between businesses and colleges to develop services and support to nontraditional students and workers. The NAM supports their point of business-college cooperation by encouraging lifelong learning and continuous education.

Cost barriers can be seen in how the United States measures up against other developed nations. In the United States, a student spends an average of $9000 a year on tuition. German students spend approximately $2000; in France, $1700; and in Sweden $852 a year on tuition. This may make education cost-prohibitive to Americans looking to become more competitive in the job market or change career paths. However, according to Business & Legal Resources, a human resources research firm reported that 85 percent of firms surveyed offer tuition assistance plans. Many constituents may be unaware that their employers may offer these programs. Encouraging constituents to inquire about their employer’s tuition reimbursement policies may help them as employees and job candidates and strengthen the businesses in the state.
Tuition reimbursement programs have been used by employers to retain staff. It has been shown that participation in such a program reduces the odds of an employee leaving within five years by 50 percent. In order to decrease their risk on investment, firms typically have eligibility requirements, a maximum reimbursement amount, and reimbursement policies based on academic performance; 90 percent of firms have a minimum grade standard, typically a “C” or better.

There is further funding for employed and unemployed individuals looking to further their education. Kentucky’s Ready-To-Work Program, supported through the state’s temporary Assistance for Needy Families agency, supports students pursuing postsecondary education through career coaching, and work-study positions. Washington Opportunity Grants are intended for low-income students earning associate degree level or below. These funds can be used for tuition, books, and supplies. Some local and state programs, such as Capital IDEA Austin Community College and Michigan’s No Worker Left Behind, go one step further and offer financial assistance for child care, transportation, and emergency living expenses.

There are many things to consider when one decides to go back to school. It is important for constituents and local firms to be educated about their options and potential future benefits from investing in higher education.