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Higher education systems play an essential role in economic growth and innovation in OECD countries. Workers with a higher education qualification continue to enjoy higher employment rates and a robust earnings advantage compared to those who have only completed upper secondary education. Today, however, many graduates have difficulty obtaining jobs that make full use of their skills and help them launch rewarding careers, while employers in some sectors of the economy lack qualified personnel. Policy makers are not only concerned about the current alignment of higher education systems to labour markets; they are increasingly uneasy about the future of work and its implications for education. Given the rising investments from students, families and governments in higher education, poor labour market outcomes for some graduates also raise concerns about the value of higher education.

Promoting alignment between higher education systems and labour market needs is an ongoing effort. Market economies are highly dynamic, and no lasting and comprehensive equilibrium between educational offerings and labour market demands can be reached. Many forces influence the supply and demand of graduate skills, from enduring trends such as globalisation, technological change or population ageing to exogenous shocks that disrupt economies and societies. The COVID-19 pandemic, which emerged as this report went into publication, exemplifies such a shock. Its ramifications for higher education systems and labour markets are deep, and it will be some time before a new – and different – alignment of labour markets and higher education systems is established in the four states we have examined, and in the wider US economy.

Initiated in 2017, the OECD project on the labour market relevance and outcomes of higher education explores how governments and institutions can improve the way higher education systems respond to labour market needs. This report, produced with the support of Lumina Foundation, is the third review in the series, following Norway (2018) and Mexico (2019). It examines four US states – Ohio, Texas, Virginia and Washington – in which the OECD team conducted interviews and workshops with over 200 stakeholder organisations in 2019.

Each state has distinctive governing institutions, higher education policies and labour market demands. Nonetheless, there are similar areas of misalignment between the labour market and higher education provision in the four states, and shared policy problems. All states struggle to meet employer demand for highly skilled graduates in fast-growing fields such as information and communications technology, as well as in high-demand fields such as teaching education, that lead to occupations that are socially important but not highly paid, such as teaching. Each of the four participating states – like other US states – has been unable to sustain public investment at levels that existed prior to the 2008-09 recession, putting at risk their ability to meet their goals for educational attainment. At the same time, the four states display a wide array of innovative policies and practices to help better align higher education and the labour market, ranging from public-private investments to significantly raise participation in work-based learning to digital tools providing up-to-date information about the skills needs of employers to students and educators. These innovations can form a rich basis for peer learning among US states and beyond.

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