Industries Economic Development

Study warns of low-wage/low-skill economic cycle in the South

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Much of the South is trapped in a low-wage/low-skill economic cycle, according to a Georgetown University study. Virginia, however, is one of the few exceptions.

The Georgetown University Center on Education and the Workforce says that by 2020, 65 percent of all jobs in the United States will require some form of postsecondary education and training, while the 17 states of the South will require 57 percent.

The only exceptions to this trend, the study says, are Virginia, Maryland, North Carolina and the District of Columbia.

Postsecondary demand for jobs in the South ranges from 72 percent in Washington D.C.,  to 43 percent in West Virginia.

While job growth in the South (20 percent) is relatively strong compared to the nation (17 percent), many parts of the region are trapped in an economic cycle known as a low-wage/low-skill equilibrium. 
In this equilibrium, high-skill, high-wage industry lacks the incentive to locate in the region, and incentives for workers to pursue postsecondary education and training are weakened commensurately.

Once an economy falls behind in producing high-wage, high-skill jobs, it can be difficult to catch up, the study says, and the South will need to invest in education and postsecondary training in order to break the cycle.

The study found that educational attainment levels are improving in the South, but the rate of growth is declining. Between 1970 and 2010, the demand for postsecondary education within occupations for the South grew at an average annualized rate of 4 percent (compared to 3 percent for the nation).

However, between 2010 and 2020 the demand for postsecondary education within occupations is forecast to grow at an average annualized rate of 0.6 percent for the South (compared to 1 percent for the nation).

The study also finds that jobs in the South requiring high school or less were lost in the recession and are not coming back. The South is unlikely to see a full recovery in blue collar construction jobs and retail.

This is because the more conservative credit market will ensure that construction and other credit-driven industries will not return to their former employment levels until after 2017. As employment and earnings growth in these industries slow, there will be a commensurate slow growth in consumer-led industries like retail trade.

Jobs in many southern states are also concentrated in old-line industries like manufacturing and natural resources, where productivity gains will continue to slow job creation.

The study finds that government, retail and health care will continue to be the biggest employers in the South.  The region is home to more than 41 percent (nearly one million) of the jobs in coal mining,
natural gas and petroleum extraction. Analysts predict these areas to be the fastest growing job-creators, but they only represent 3 percent of the jobs in the South in the coming decade.

The Georgetown University Center on Education and the Workforce is an independent, nonprofit research and policy institute that studies the link between individual goals, education and training curricula and career pathways.


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