Can Higher Education Reform Save American Jobs?

According to IMF economist Prakash Loungani, 25% of the unemployed are out of work because of skill-job mismatches. Many employers have positions they need filled, but it is too difficult and costly for them to find qualified workers, so they either don’t hire, or concentrate their growth overseas.

And the reason it’s so hard for employers to find qualified applicants for skilled jobs is because they aren’t being trained properly. Professionals with four-year degrees are not the issue here, but 68% of the labor force has less than a four-year degree, including 47% of those in professional positions and even 32% of those working in management. Unfortunately, community colleges and job training programs aren’t doing a good job at preparing people for skilled positions. Community colleges are given nearly $36 billion in taxpayer subsidies each year, but aren’t providing the necessary, targeted training students need in order to get a job.

But the majority of growth in career and technical education has been driven by for-profit educational institutions that, though they claim to train students in the necessary skills for specific jobs, are developing a reputation of being both expensive and providing a questionable quality of education. Because some of these institutions take in a significant amount of money in federally-subsidized loans, Obama’s administration has been seeking to regulate for-profit education by tracking the success of students in finding gainful employment after completing their programs, measuring the amount of loan money taken out by that student and his/her eventual earnings.

With the quality of training provided by community colleges and for-profit educational institutions questionable at best, it’s not always cost-effective or even beneficial for workers seeking retraining to go back to school. However, many employers are unwilling to invest in the comprehensive training of a new employee, rather looking for those already qualified for the position. This makes it difficult for people to move up and out of dying industries, thus shrinking the the supply of skilled workers available in the U.S. for jobs in new, thriving industries, leading employers to look overseas.

So while for-profit institution educational institutions may have been growing over the last decade as people hope to train in new, up-and-coming fields, if they can’t maintain high rates of success, the Obama administration may disqualify them from receiving federally-subsidized loans, which would discourage many students from attending. That should force for-profit institutions to not only focus more on providing the proper education for students, but focus on providing career placement services. If the industry cannot meet Obama’s standards of quality, it is doomed to fail, but if it does, it could help decrease the U.S. unemployment rate from 9.1% to 8% just by filling positions left empty by employers unable to find skilled workers.

Here are your stocks to watch: Apollo Group, Inc. (NASDAQ:APOL), Career Education Corp. (NASDAQ:CECO), DeVry Inc. (NYSE:DV), Corinthian Colleges, Inc. (NASDAQ:COCO), Strayer Education, Inc. (NASDAQ:STRA), Grand Canyon Education Inc. (NASDAQ:LOPE), American Public Education, Inc. (NASDAQ:APEI), ITT Educational Services, Inc. (NYSE:ESI), National American University Holdings, Inc. (NASDAQ:NAUH), Bridgepoint Education, Inc. (NYSE:BPI), and Education Management Corp. (NASDAQ:EDMC).

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