Colorado’s Workforce Woes Should Spell Opportunity for Economic Mobility

Summary

Colorado's labor force is facing an unprecedented shortage, and conventional trends alone won't resolve the issue. The state's tight labor market, with 2.7 jobs for every unemployed person, is resulting in a significant $46 billion loss in annual GDP. A substantial portion of the unemployed and marginally attached to the labor force are people with barriers to employment, such as disabilities, past incarceration, lack of childcare, and educational attainment challenges. To address these issues, employers, educational institutions, and the workforce system need to innovate and better align with the jobs of the future. Integrating basic education with job training, as seen in Washington State's I-BEST program, and adopting Utah's One Door policy for improved data sharing and support services are potential solutions. By addressing these barriers, Colorado can bridge the gap between labor demand and supply, leading to economic growth and improved opportunities for its workforce.

Key Findings

Colorado’s labor force is the tightest on record, with 2.7 jobs for every unemployed person. The labor shortage and skills mismatch in Colorado is costing $46 billion in additional state Gross Domestic Product (GDP) this year. Therefore, if workforce needs were met this would result in a 10 % increase in state GDP. The problem will not be resolved by in-migration or natural population growth under current projections.
Many of the unemployed experience barriers to employment or are marginally attached to the labor force. Employers, education and training providers, and the state’s workforce system must innovate to help remove barriers to employment and to better align skills acquisition with the jobs of the future.
Basic education for adults should be integrated with job training. Washington State’s I-BEST program offers a model to remove basic literacy barriers that many still face.
Another model worth replicating is Utah’s One Door policy which simplifies how individuals navigate multiple public agencies and improves interagency data sharing.
Colorado should develop a more centralized method, potentially through a workforce scorecard, to better understand the impact of the workforce development system on participants, especially individuals facing barriers to employment.

Colorado’s Workforce Shortages Will Not Be Resolved by Natural Demographic Trends and In-Migration

The demand for labor in Colorado, relative to the supply, is the most lopsided it has been in a long time. In April, there were just 0.4 individuals unemployed for every one job opening, the lowest number in 20 years, the extent of the data series. The inverse of that statistic is that with 243,000 job openings and 89,371 individuals unemployed, there are 2.7 job openings relative to every unemployed worker in April. As shown in Figure 1, Colorado’s labor market trend tracks the US rate and both trends show a tighter labor market than the start of 2020. Figure 1

Despite the growing gap in job openings and the number of unemployed, expanding the labor force from the existing population is challenging. The labor force participation rate (LFPR) is the percentage of all people of working age (16 and above) who are employed or actively seeking work. Colorado’s labor force participation rate for 16-55 year olds was 68.6% in May. Colorado’s LFPR is the fourth highest in the US, 6 percentage points above the US rate of 62.6%. As shown in Figure 2, while the overall LFPR is significantly lower than it was 20 years ago, the LFPR for prime age workers between the ages of 25 and 64, is essentially flat. This difference is primarily due to the aging of the population rather than a significant decline in participation in any single labor group. Figure 2

Historically, Colorado has relied on newcomers to help fill open positions, however, the 2022 Talent Pipeline Report predicts a decline in in-migration through 2050.[i] Evidence from the last few years, as shown in Figure 3, indicates that a slowdown in in-migration has already begun. In-migration and natural population increase as a share of the total population has decreased since 2015, especially in the past two years. Figure 3

A tighter labor force positively impacts workers by increasing pressure on wages and increasing opportunities for advancement. However, it can negatively impact the state GDP because with fewer workers to fill openings, critical jobs remain unfilled and economic output declines. Even if every unemployed worker took a job, reducing the unemployment rate to zero, there would still be 153,000 unfilled jobs in the state. If these jobs were filled, the state would reap an additional $46 billion in economic activity and increase its GDP by 10%. In May 2023, there were 94,700 individuals without a job who wanted one, putting the official unemployment among those seeking employment at 2.9%.[ii] Therefore, to fill more open positions, employers must broaden their recruitment efforts to reach all unemployed workers, including those who are discouraged from seeking employment, marginally attached to the labor force, and employed part-time for economic reasons. Yet even that population may be limited. The broadest measurement of unemployment, known as the U6 unemployment rate, estimates the total unemployed, plus those marginally attached to the labor force plus those employed part time for economic reasons, as a share of the civilian labor force plus all individuals marginally attached to the labor force. At the end of 2022 the U6 rate was 6.5%. This amounts to 207,993 individuals. The series low was in 2018, at 6.1%. Therefore, even if the U6 unemployment rate returned to the 2018 low of 6.1%, it would only draw 12,800 more people into the labor force. With fewer workers on the sideline, and fewer expected workers coming to the state, both employers and the institutions supporting economic mobility, must adapt to address the labor shortage. There should be an expanded focus on helping younger workers enter the workforce, keeping older workers engaged, and getting the chronically unemployed the assistance they need. For many that means broadening recruitment efforts to reach unemployed and underemployed workers, including those who are discouraged and left the labor market and those employed part-time for economic reasons. In May, the state demographer made similar recommendations. She urged employers to focus on traditionally marginalized workers to ensure there are enough people for the jobs available. [iii]

Barriers to Employment- When Jobs are Abundant: What Gets in the Way of Work?

Even when there are job openings, some people remain unemployed. Working age adults who are underemployed, or not in the workforce at all report they experience one or more barriers to obtaining and keeping employment that hamper their economic mobility.[iv] Some of the largest barriers include disability status, past incarceration, childcare needs, and level of education.

Disabled Workers

Overall, 8.5% of Coloradans ages 21-64 have at least one disability and are not institutionalized. Nearly 48% of these individuals are employed, with just over 30% of this group employed full-time.[v] An additional 10% are actively looking for work. Nationally, people with disabilities are less likely to have four-year degrees and more likely to work part-time in low-wage service occupations.[vi] Veterans with service-connected disabilities experience a 35.3% unemployment rate. In 2019, there were 209,600 working-age civilian veterans in Colorado. Of these 74,000, 35.3%, had a VA service-connected disability.[vii]

Formerly Incarcerated

Each year about 8,500 citizens return to our Colorado communities from prison. More than 27% of these formerly incarcerated individuals are unemployed. That rate exceeds the total US unemployment rate in any period, including the Great Depression.[viii] Many of these individuals want to work but face both legal and cultural barriers to securing employment. This is particularly true for women and minorities. A high percentage of unemployed men of all ethnicities have either been arrested (64%) or arrested and convicted (46%).[ix] The labor market clearly excludes formerly incarcerated workers from opportunities enjoyed by their peers without criminal backgrounds.

Childcare Challenges

Though the female labor force participation rate has returned to pre-pandemic levels in Colorado, childcare continues to be a challenge for many women. In May 2023, women were 49.8% of employees in the US, and were more likely to be in low wage jobs than men.[x] Low wage workers are less likely to receive employment benefits such as paid leave and maternity leave. The Center for American Progress reports that 51% of Coloradans live in a childcare desert, where there is a shortage of childcare providers.[xi] Childcare challenges have become a barrier to work for parents, predominantly affecting women, who are inclined to take on more unpaid caregiving responsibilities. Families without access to reliable childcare work fewer hours or not at all. Nationally, the estimated cost of lost earnings, productivity, and revenue due to childcare challenges is estimated to be $57 billion each year. Through surveys, mothers have indicated that if they had more access to affordable childcare, they would be able to increase their earnings either by having the ability to seek jobs, or experience career progress by working more hours and applying for promotions, which would lead to higher paying jobs.[xii]

Educational Attainment

Education is a key determinant of employment and income. In 2022, individuals over 25 without a high school diploma were less likely to be employed than individuals with higher levels of education. Figure 4 shows that the employment rate increases with each successive level of educational attainment. Figure 4

Educational Attainment in Colorado
	Unemployment Rate	Number of Coloradans
Less than HS diploma	4.2%	370,728
HS graduate, no college	2.6%	999,264
Some college/associate degree	3.2%	1,329,799
Bachelor’s degree and higher	1.4%	1,870,331

Source: American Community Survey Data, Current Population Survey (CPS) Data

Conflicts Between Income Growth and the Benefits Cliffs

The public benefits system is complicated but is designed to provide public subsidy based on income. In CSI’s April 2023 report, Reimagining Colorado’s Social Safety Net to Incentivize Work, the study analyzed how workers can get caught in a trap of wages being too low for self-sufficiency but too high to qualify for public assistance to help meet a family’s basic needs. In some instances, workers may choose to take lower paying or part-time jobs to avoid these cliffs. While many individuals who face employment barriers are employed, those who are not, are at risk of becoming marginally attached to the labor force. With help they could be enticed to re-enter the labor force for the right job opportunity. Not addressing the long-term barriers to employment hampers the supply of labor and adds a significant cost to both the individual, public services and the Colorado economy.

What’s the Remedy to Colorado’s Workforce Woes?

The solutions to the squeeze on worker supply must be addressed in multiple ways by employers, education and training programs, and the workforce development system.

Employers Must Ensure they are Offering Good Jobs and Training Opportunities

When the labor market is tight it creates an alignment of interests between low-wage workers and employers. Employers must think beyond mere job placement – everyone in jobs – and consider job quality, because workers can be more discerning and look for jobs which offer them more. The Aspen Institute’s Economic Opportunities Program found 53 million people across the US feel stuck in low-wage jobs that lack upward mobility. That’s more than 30% of the workforce and these individuals are more likely to be women, people of color, and immigrants.[xiii] A low wage job is defined as one paying less than what a full-time worker who supports a family of four needs to live above the federal poverty level. Many frontline jobs offer low wages, few benefits, little training, and unpredictable schedules and income. In 2018, an estimated 23% of jobs were classified as low wage.[xiv] 36% of workers who earn low wages in Colorado are between the age of 21-30 and 56% of them work at least 30 hours per week. When job opportunities are plentiful and workers have access to good jobs, positions with limited upward mobility are more likely to remain unfilled. Employers also experience higher than average turnover and declining productivity. While many companies are meeting the moment, organizations like Guild, based in Denver, work with partner companies to provide learning programs that lead to career pathways for employees.[xv] This model serves as a solution for improving the skill base of employees while also providing an employee benefit. The Colorado Workforce Development Council has also developed the Colorado Job Quality Framework which identifies how employers can improve job quality by enhancing opportunities for growth, connection, and meaning.[xvi] Attractive jobs offer higher wages, benefits, more reliable scheduling, and safe working conditions. They have transparent hiring practices and advancement opportunities, paid training, and ways to build wealth (e.g. pensions, stock options). Such companies have cultures that respect employees and give them opportunities to be heard. Another important opportunity for companies is to expand their Fair Chance or Second Chance hiring. Fair Chance hiring expands the talent pool by ensuring employers consider an individual’s criminal background only after they have been interviewed and their qualifications assessed. It may be necessary to change corporate culture and adopt a system of support to ensure employees can be successful as they reintegrate into the community. Numerous studies have shown fair-chance hires have better retention than employees with no criminal record.[xvii]

Education and Training Programs Must Prepare Workers for the Jobs of Today and the Future

The idea that one must have a four-year degree or be consigned to low-wage work is false. Many jobs require a post-secondary credential rather than a degree. Forty-nine percent of jobs in Colorado require education and training beyond high school but not a four-year degree, yet only 35% of workers have the skills training needed for these jobs.^xiv The K-12 education system, employers, state programs, apprentice programs, and community colleges can play a role in preparing workers. First, high school graduates must be prepared to go into training by having the math and reading skills required to complete the programs. According to the US Department of Education, more than half of Americans between the ages of 16-74 read below a 6^th grade reading level. Skilled trade training programs, however, require a high school diploma or equivalent.[xviii] The state of Washington has created the Integrated Basic Education Skills and Training program (I-BEST) which identifies and addresses education gaps that prevent some workers from succeeding in job training. I-BEST combines adult literacy and job training by placing two teachers in the classroom, one doing job training and the other teaching basic skills in reading and math related to the target trade skills. Students receive additional wraparound support to help with financial aid or other barriers that might decrease course completion. Impressively, 54% of I-BEST program students complete a degree or certificate program.[xix] About 75% of Colorado jobs require education beyond high school, but only 49.9% of Colorado’s 2021 high school graduates enrolled in college.[xx] The Colorado Department of Higher Education has set a goal to reach 66% post-secondary attainment by 2025.[xxi] Though some of the credentials, such as Certified Nursing Assistant (CNA) lead to lower-wage jobs, there is an opportunity to think of these credentials as the beginning of a stacking process; one in which subsequent, higher skill credentials are stacked on top of the original credential. The new certificate provides a new opportunity for advancement such as moving from CNA to Registered Nurse (RN). Legislation signed in 2021 created Apprenticeship Colorado, the state’s apprenticeship agency, operated within the Office of the Future of Work, part of the Colorado Department of Labor and Employment (CDLE). This group has taken over apprenticeship programs for Colorado from the federal government. Apprenticeships are high-quality, career-driven pathways. Learners receive immediate work for pay and classroom instruction for 1-6 years, depending on the career of choice. According to the US Department of Labor, the starting salary is $77,000 per year upon completion of an apprenticeship and 94% retain employment after completion of their apprenticeship.[xxii] Community colleges can also play a key role in training the workers of the future. Community colleges offer flexibility and affordability. 75% of students attend part-time for at least one semester. The flexibility, however, comes at a cost. Students who attend part-time are much less likely to complete their degree, with an average completion rate of about 22%.[xxiii] The challenge is to increase low completion rates which leave students without the credential and with significant debt. If education or credentials from community colleges are going to be part of the path to success, they must innovate to improve their value proposition.[xxiv] In addition to strengthening basic education, training, and certificate programs, policymakers need to consider how to prepare workers for future demands. One example underway is the Opportunity Now Colorado grant program, administered by the Office of Economic Development and International Trade (OEDIT), which is a competitive grant program focused on transformative change for Colorado's workforce and incentivizing partnerships around in-demand jobs and industries. In Colorado, job growth is expected in IT, healthcare, skilled manufacturing, and skilled trades especially in the alternative energy sector. The Federal Reserve has identified Opportunity Occupations defined as well compensated jobs that require post-secondary education or training rather than a four-year degree. Occupations with the greatest growth opportunity and the least risk of disruption due to automation are in healthcare and the skilled trades. In the construction trades alone, there is an anticipated need for 50,000 more workers by 2030. Additionally, 20% of the current 190,000 construction workers in Colorado are 55 and older, meaning even more openings in the coming years.[xxv]

State Workforce Development Must Provide Marginalized Groups with Wrap Around Services to Help them Move into the Workforce

The Workforce Innovation and Opportunity Act (WIOA) of 2014 updated how federal workforce funding would be spent by states and local governments, as well as the accountability and measurement requirements for those funds. Workforce centers report data about employment every six months, though there is no national system to combine the data from the states and provide comparison or identify best practices. When done effectively, workforce development ensures everyone gets a job or the training they need to learn marketable skills for a job. The aim is that workers will eventually get off public assistance by ensuring they earn enough to support themselves and their families, and displaced workers will get back into the workforce. However, results from WIOA programs show marginal gains at best. A rigorous study performed by Mathematica showed that services and training provided through workforce centers did not increase earnings or improve employment related outcomes. Nationally less than half of all individuals enrolled in occupation-specific training found jobs in a related occupation.[xxvi] Figure 6 shows the number of job seekers served by workforce development in Colorado has returned closer to normal after its peak in 2020. However, just 55% of job seekers from the prior year were employed six months after accessing services. According to Colorado’s PY21 WIOA Annual report, just over 6,000 individuals enrolled in training programs in the same year, with 69.7% successfully employed six months after accessing services. Figure 5 shows federal spending for the WIOA system in program year 2022. It shows $115.4 million in federal funding for Colorado’s workforce development system. While some information is collected and reported relative to program outcomes, there remain gaps in finding data with regard to assessing the success of the overall system at engaging with and improving the outcomes of the target populations that have existing barriers to employment. A single dashboard with information about individuals being served by the workforce development system could benefit policymakers, employers, and workers. With an accessible dashboard comes added transparency about who is being served. How many served are individuals with barriers to employment? How many are currently employed seeking upskilling or retraining? Furthermore, it is difficult for WIOA participants receiving training dollars to navigate the outcomes of the training providers. With easier to find data on employment and earnings, taxpayers, employers, and workers could better understand which providers are most successful in helping participants get into good jobs. Efforts by the state like My Colorado Journey to enhance transparency are a good starting point that could be improved to help participants make decisions that help them navigate the different eligible training providers. Figure 5

Federal Funding in the WIOA System in Program Year 2022
Program	Fed. Funding
WIOA Title I Adult, Dislocated Worker, and Youth Activities[xxvii]	$42,136,840
Adult Education and Family Literacy Act (AEFLA), Title II of (WIOA)[xxviii]	$8,529,044
Title III: Employment Service (Wagner-Peyser)[xxix]	$12,535,126
Title IV: Vocational Rehab[xxx]	$48,748,391
Labor market information[xxxi]	$3,420,154
Grand Total	$115,369,555

Figure 6

Colorado WIOA Participation[xxxii]
Program Year	# of Coloradan's Enrolled	% Successfully Retaining Employment After 1 Year
2021	144,413	55%
2020	376,593	61.7%
2019	313,370	64.5%
2018	191,796	66.4%

A March 2023 report from Harvard University found that though the federal workforce policy seeks to support good jobs, in general the workforce development training funding does not promote job quality. A primary outcome is training workers for low-wage jobs, particularly in healthcare. Workforce centers’ training programs are not always aligned with expected growth in occupational demand[xxxiii] Further, the Harvard study showed that federal funding for job training is insignificant compared to traditional higher education – about 1/50^th the size of what is spent on Pell grants at 4-year institutions. As such, a smaller number of people benefit from WIOA funded training vouchers. Generally, the funding going into workforce development is low and the results are modest, so there is limited incentive to put more money into workforce development as it exists today. The best results from workforce centers occur when job training is paired with support services such as transportation, childcare, and affordable housing. In this way, workers with barriers to employment get what they need to move into the workforce and stay. Utah’s One Door Policy, created in 1997, has addressed inefficiencies and programming duplication by integrating the program’s residents need through “one door.”[xxxiv] Federal and state funding for human services and workforce development is braided to ensure individuals have one place to receive all the services needed, including both workforce training and other public benefits, and they need not navigate agencies’ competing rules and requirements. Conclusion and Summary Recommendations It’s no secret that Colorado faces a worker shortage. With the baseline outlook indicating little improvement in the future, the state needs to reach out to untapped and chronically underemployed individuals to bridge the divide between the demand and supply of skilled labor. Employers, educators, and the state workforce development program have a role to play in breaking down barriers to employment. The state will reap the benefits of higher economic output while improving the lives of thousands of Coloradans through upward economic mobility. Summary Recommendations:

Employers – Employers should broaden their view of prospective talent and job satisfaction and seek opportunities to expand who they attract and retain for positions. Workers with disabilities, the formerly incarcerated, and those who they can train internally for the skillset needed are untapped talent waiting for the right opportunity.
Education and Training Institutions - Career pathways outside of a 4-year degree must re-align with the occupational demands of the rapidly evolving job market. They must also improve their value for students by increasing completion while remaining the low-cost and flexible option. Community colleges should also explore a way to replicate Washington state’s I-BEST program that integrates adult basic education and job training.
Workforce Development System– The workforce development system should improve how it helps the persistently unemployed and those previously detached from the labor force. This could be made possible by seeking a federal waiver to establish a One-Door policy for streamlining and integrating support services and workforce training. This would allow for an integration of resources across agencies (human services and employment services) that provide public benefits and the agencies that train individuals to improve their economic standing. Further, the state could examine a more centralized method, potentially through a workforce scorecard, to better understand the impact of the workforce development system on participants, especially individuals facing barriers to employment.

[i] Colorado Talent Pipeline Report | Colorado Workforce Development Council

[ii] LMI Gateway - Current Population Survey (CPS) Data (colmigateway.com)

[iii] Colorado demographer warns of impact to state's workforce | Business | denvergazette.com

[iv] Employment and poverty | Econofact

[v] 2023 State Report for County-Level Data: Prevalence | Annual Disability Statistics Compendium (disabilitycompendium.org)

[vi] Persons with a Disability: Labor Force Characteristics Summary - 2022 A01 Results (bls.gov)

[vii] Disability and Employment Status Report for Colorado, 2019 (disabilitystatistics.org)

[viii] Out of Prison & Out of Work | Prison Policy Initiative

[ix] Barred from employment: More than half of unemployed men in their 30s had a criminal history of arrest | Science Advances

[x] The Employment Situation - June 2023 (bls.gov) [xi] Do you live in a child care desert? (childcaredeserts.org)

[xii] The Child Care Crisis Is Keeping Women Out of the Workforce - Center for American Progress

[xiii] Good Jobs Champions Group - The Aspen Institute