CD360 Notebook

How much opportunity is embedded in your economy?

New research answers the question for sub-baccalaureate workers

Keith Wardrip | Community Development Research Manager, Federal Reserve Bank of Philadelphia
Kyle Fee | Senior Policy Analyst, Federal Reserve Bank of Cleveland
Lisa Nelson | Community Development Research Manager, Federal Reserve Bank of Cleveland

Published April 17, 2019

Introduction

College-educated workers typically have greater success in the labor market than do workers without a bachelor’s degree (hereafter “sub-baccalaureate workers”), as measured by both earnings and rates of employment. In light of research indicating a “polarization” of the labor market in favor of higher- and lower-wage jobs,1 it is worth asking the question: Do certain regional economies offer greater opportunity than others for the more than two-thirds of adults without a bachelor’s degree?

Our research

Our research explores the jobs available in 121 of the largest metro areas in the U.S. In each, we divide employment into one of three categories based on the annual median wage and the educational expectations of employers hiring to fill open positions:

  • Opportunity employment is accessible to sub-baccalaureate workers and typically pays above the national annual median wage ($37,690), adjusted up or down to reflect the local cost of living (i.e., the local wage threshold). Occupations characterized by a high level of opportunity employment are referred to as “opportunity occupations.”
  • Equally well-compensated jobs that aren’t accessible to sub-baccalaureate workers are classified as higher-wage employment requiring a bachelor’s degree.
  • Lower-wage employment can be found in occupations that pay below the local wage threshold.

The remainder of this post briefly summarizes our findings for two metro areas in the Ninth Federal Reserve District: Minneapolis-St. Paul-Bloomington, MN-WI; and Sioux Falls, SD.

Ninth District findings

Opportunity employment takes many different forms. As shown in the white cells in Table 1, some of the largest occupations across all the metro areas analyzed also rank in the top ten in Minneapolis and Sioux Falls, including registered nurses, carpenters, and heavy and tractor-trailer truck drivers. However, the character of a regional economy emerges in some of the other occupations unique to each area (shown in the gray cells). For example, Minneapolis’s largest opportunity occupation is customer service representatives, which does not rank in the top ten overall. Sioux Falls also includes several occupations (e.g., cement masons and concrete finishers) that distinguish it from the typical metro area.

Table 1. Ten largest opportunity occupations, 2017

Table 1. Ten largest opportunity occupations, 2017

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In spite of some of the occupational similarities shown in Table 1, we find that the share of opportunity employment varies substantially from one metro area to the next. As Figure 1 indicates, opportunity employment constitutes a larger share of total employment in both Minneapolis-St. Paul-Bloomington (28.0 percent) and in Sioux Falls (24.1 percent) than in the 121 metro areas overall (21.6 percent). However, the balance of employment favors higher-wage work for degreed workers in Minneapolis, whereas the economy in Sioux Falls has a disproportionate share of lower-wage work.

Figure 1. Distribution of employment by wages and education, 2017

Figure 1. Distribution of employment by wages and education, 2017

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Our research also allows us to disentangle the effects of several factors that influence a regional economy’s level of opportunity employment, including the mix of occupations, the level of education that employers seek when filling open positions, and the area’s cost of living. By comparing actual opportunity employment shares with hypothetical levels that are based on the national averages for these factors, we can discern the effects of each factor.

Table 2 suggests that by more frequently seeking sub-baccalaureate workers for some opportunity occupations, employers’ educational expectations slightly expand opportunity employment in both Minneapolis and Sioux Falls. However, its higher cost of living and its mix of occupations slightly reduce opportunity employment in Minneapolis, whereas these factors have fairly large, positive effects in Sioux Falls.

Table 2. Effect on opportunity employment share

In percentage points

Table 2. Effect on opportunity employment share

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For an analysis of opportunity occupations at the state level in the Ninth District, see the CD360 Notebook post, "Identifying opportunity occupations."

How can opportunity employment be expanded locally?

A regional economy’s level of opportunity employment is influenced by the types of jobs available, the level of education that employers seek when filling job openings, and the relationship between wages and costs. The multifaceted nature of this issue means local opportunity employment could be expanded through any number of approaches, such as:

  • Economic development strategies that prioritize industries characterized by high levels of opportunity employment. For example, a strategy could include providing targeted job training or other business services to small and mid-sized manufacturing firms.2
  • A reconsideration by employers of their hiring requirements and a commitment to objectively assessing the skills of workers from a variety of educational backgrounds.
  • An expansion of both private sector and public sector programs for postsecondary skills development.
  • Efforts to better align regional wages and costs, possibly through modest wage increases for lower-wage workers or through efforts to expand the supply of affordable housing.

For more information on the two metro areas discussed here and on all 121 of the largest metros in the U.S., please see “Opportunity Occupations Revisited: Exploring Employment for Sub-Baccalaureate Workers Across Metro Areas and Over Time.” In addition, one-page fact sheets describing the ten largest opportunity occupations in each of the 121 metro areas are available here.

1 David H. Autor, Lawrence F. Katz, and Melissa S. Kearney, “The Polarization of the U.S. Labor Market." American Economic Review, 96:2 (2006), pp. 189–94.

2 Michelle Miller-Adams, Brad J. Hershbein, Timothy J. Bartik, Bridget Timmeney, and Amy Meyers, Building Shared Prosperity: How Communities Can Create Good Jobs for All. Kalamazoo, MI: W.E. Upjohn Institute for Employment Research, 2019.