Address Income Inequality through Investing in CTE Skills Training

Income inequality is rising across the United States. There are many ways to measure this growing gap in pay, but there is broad-based evidence that it is real. California is an interesting laboratory for examining innovative ways to address the income inequality challenge. Many states and cities, including California, are raising the minimum wage as a policy lever. While raising the minimum wage can assist in addressing some of the income disparity, other market-based measures are required to have a meaningful, long-lasting solution in California and throughout the nation.

Boosting the skills of California workers, and for workers in other states, will pay dividends over the long term. Specifically, cost-effective opportunities in reducing income inequality and promoting economic growth in California can be developed by working with the California Community Colleges System and other postsecondary institutions by increasing postsecondary career technical education (CTE) through associate degree and certification programs.

Many factors underpin the expanding income gap. Globalization has exposed low-skilled California workers to foreign competition from Asia and other emerging economies; technological change has placed a greater value on highly skilled workers, lifting their wages relative to lower-skilled workers; institutional changes, such as the weakening of private-sector unions, have reduced workers' bargaining power; and the inflation adjusted minimum wage in California declined.

In 1979, the premium of having attended college or obtained an associate degree, compared to less than a high school education, was 34.3 percent, as measured by median weekly earnings in 2014 dollars of people 25 or older. By 2014, that same premium had widened to 55.9 percent.

The state's community colleges play a vital role in providing workplace skills. Students can enroll in certification and degree programs in 350 fields of study. Additionally, the community colleges offer short-term training synchronized to third-party credentials, apprenticeship programs, and incumbent worker training to update skill sets in a variety of industrial sectors.

The California Community Colleges system was given an important assignment under the California Master Plan: preparing students for transfer to a four-year university. However, this legacy has left the system struggling to gain traction in garnering a similar level of support for its CTE and workforce mission.

The need for workers with such CTE training will grow. If current trends prevail, 1.9 million jobs, or 30 percent of all job openings in California by 2030, will require postsecondary education below the level of a four-year degree. California's middle-skills education channel is falling behind relative to the skills and education demanded by employers now and for the future.

Herein lies the opportunity. The role that well-aligned CTE programs can play in reducing wage inequality is illustrated by a comparison of wages earned by workers with CTE degrees versus those with more general associate degrees. Based on information from the California Community Colleges, a CTE associate degree (AA) on average results in annual wages of $66,000 five years later, while a general AA yields just $38,500, a premium of 71.4 percent.

Given the vast differences in the composition of industry clusters around the state, it is essential to base CTE programs on regional needs. For example, the entertainment cluster in Los Angeles requires programs in such areas as graphic design and special-effects production while the information and communications technology sectors of the San Francisco Bay Area demand CTE programs aligned with their needs.

Although lawmakers and other senior policy officials are aware of the critical need for CTE offerings, efforts to increase funding to expand CTE programs have been insufficient. In many respects, CTE courses are discouraged because they usually are more expensive due to equipment requirements such as machine tools, medical equipment, digital editing bays, etc.

The funding formula for California community colleges is based on a constant rate per full-time-equivalent student and includes required annual enrollment targets. The result: A financing disincentive is institutionalized for CTE programs because a similar dollar allocation is extended across more non-CTE courses. This funding imbalance has clearly played a role in restriction of CTE course offerings.

It is necessary to institute a funding mechanism that sustains community colleges' capacity to create, adjust, and maintain CTE courses and programs that are responsive to regional industry market requirements. Adequate funding of equipment and facilities must be provided through a new, sustainable funding stream by partnering with industry cluster representatives. A formula could be developed where regional industry businesses match any increase in state CTE funding above the average of non-CTE programs. Additional financial incentives may need to be provided to institutions based on the percentage of graduates hired by regional firms.

California's community colleges have a strong career technical education mission and, with added emphasis and sustained funding support, are well positioned to close the existing and impending wage and skills gaps. Along with efforts to improve California community college transfer success, we must adjust how the state communicates with nontraditional students, adult learners, and their families on the value of CTE/workforce programs to their short- and long-term career objectives.

An increase in funding for CTE funding in California and throughout the county would be among the highest rates of return for reducing income disparity, boosting economic growth and future tax bases. We need our elected officials and businesses to provide leadership.