Gordon Hanson

Community Colleges and Regional Labor Market Adjustment

Abstract:  The economic performance of US local labor markets has diverged sharply in recent decades. Regions with more highly educated workers have had strong earnings and employment growth, while former industrial regions have seen manufacturing jobs disappear and elevated joblessness become endemic. Although the causes of regional job loss are now well understood, why regions adjust poorly to adverse shocks is not. We examine the role of community colleges in regional workforce development and labor market adjustment. Community colleges provide the vast majority of career and technical education to those not attaining a four-year degree. First, we show that whereas the demand for training by community colleges is countercyclical (enrollments rise following projected local job loss in manufacturing), instructional funding is not (consistent with community-college funding formulas that are based on lagged enrollment and current state tax revenues). Second, even without countercyclicality in community-college funding, degrees in career and technical fields (but not in academic fields) expand following adverse labor demand shocks. Thus, the failure of state budgets to accommodate contraction-induced increases in demand for training does not prevent colleges from delivering training (partly because of increased federal grants to low-income students). Third, we explore how career and technical degrees may aid local adjustment to adverse shocks and why colleges appear to vary in their training capacity.

Gordon Hanson (Harvard and NBER) and Harry Holzer (Georgetown and Brookings)​​​​​​​