Texas has one of the strongest economies in the U.S., driven by industries such as energy, health care and technology. However, the skills of the state’s workforce don’t always match the needs of employers, creating a gap that hinders economic growth. Industry leaders across the state are struggling to fill job vacancies due to a lack of applicants with the necessary education and technical competencies. According to a January 2023 survey by the Federal Reserve Bank of Dallas (Dallas Fed), more than half of Texas business executives who responded identified this as an impediment to their hiring process.
Bryan Daniel, Texas Workforce Commission (TWC) chairman, says the length of time it takes an employer to fill a job depends on the job sector.
“Texas still has a need for more registered nurses, and the expansion in the food and entertainment sector continues,” Daniel explains. “Overall, the Texas labor market remains tight.”
Appropriately credentialed applicants are vital, but the cost burden of higher education compounds the skills deficit in the workforce. An April 2022 report by the Educational Data Initiative stated the average student debt in Texas was $32,920.
TWC’s partnership with the Texas Higher Education Coordinating Board (THECB) and the Texas Education Agency through the Tri-Agency Workforce Initiative “provides a forum for all three agencies to maximize our efforts to ensure Texas has the best workforce,” Daniel says.
THECB, in its strategic education plan Building a Talent Strong Texas, says an increasing number of jobs going forward will require postsecondary credentials. This strategic plan aims to address the skills gap by expanding access to postsecondary credentials for all communities, including people of color, women and those who fall outside of the traditional demographics of a college student.
“Texas still has a need for more registered nurses, and the expansion in the food and entertainment sector continues. Overall, the Texas labor market remains tight.”
- Bryan Daniel
Skills Gap
Texas boasts the largest civilian workforce and the highest number of employed individuals in its history, adding 49,000 positions in May 2023 and surpassing 15 million in total. According to the U.S. Bureau of Labor Statistics, in April 2023 Texas had the second highest number of job openings, behind California, at 845,000 and 1,005,000, respectively. Additionally, Texas has more than two jobs available for every unemployed resident.
Despite ample job openings, many industry leaders state they are having trouble filling open positions, indicating that the skills gap remains a critical issue. The Texas Business Outlook Survey conducted by the Dallas Fed in January indicated that 46.4 percent of respondents were understaffed and looking to hire replacements or fill new positions. Of those, 69.9 percent found the main impediment to hiring was a lack of applicants, and 50.5 percent cited a lack of technical competencies or hard skills.
A booming economy poses challenges for even the oil and gas companies in the abundant Permian Basin. According to the Texas Independent Producers and Royalty Owners Association, the state in April had gained 17,600 jobs in upstream employment year over year. Among those positions, 1,700 were in oil and natural gas extraction, and 15,900 were in the services sector. However, the region will need an estimated 190,913 new workers by 2040 (from both growth and replacement needs) who are better prepared for an increasing number of technical jobs, according to a 2023 report provided by The Perryman Group.
An assessment by Permian Strategic Partnership (PSP) found a lack of STEM (science, technology, engineering and math) and career technical education in the Permian Basin. PSP acted on those findings by investing more than $130 million over the last four years in education, workforce development, health care and infrastructure — a commitment that has led to more than $1 billion in collaborative investments in the region, through public-private partnerships with federal and state governments, businesses and nonprofits.
“We know that the Permian Basin is going to continue to be the most strategic and prolific energy basin in the world, and certainly the most secure for a hundred years,” says Tracee Bentley, PSP’s president and CEO. “We need to make sure that we have the talent and the workforce in order to keep that vision.”
Texas boasts the largest civilian workforce and the highest number of employed individuals in its history, adding 49,000 positions in May 2023 and surpassing 15 million in total.
Technical Colleges, Community Colleges and State Programs
While many job openings in Texas require a four-year college degree, many don’t, according to All Eyes on Texas: Community Colleges Focus on Preparing the Workforce of Tomorrow, a study published in 2023 by the Dallas Fed. These “middle-skill” jobs, those that need more credentials than a high school diploma but less than a bachelor’s degree, are often “good jobs” — meaning well-paid, with benefits and advancement opportunities.
Good jobs are more precisely defined as positions with annual salaries at a minimum of $35,000 and a median of $57,000 for workers ages 25-35. They can be found in industries such as manufacturing, construction, transportation, information technology and health care.
According to the National Center for Education Statistics, in 2021 obtaining an associate degree increased the median annual earnings for a full-time worker by nearly 40 percent (Exhibit 1).
EXHIBIT 1: MEDIAN ANNUAL EARNINGS OF FULL-TIME, YEAR-ROUND WORKERS AGE 25-34, BY EDUCATIONAL ATTAINMENT, 2012-2021 (IN CONSTANT 2021 DOLLARS)
Source: National Center for Education Statistics
The more than 50 community colleges and technical schools across the state are well-positioned to provide students from all walks of life the job-focused education, skills and credentials to access the state’s abundance of good jobs.
With average annual tuition (PDF) of $2,949 for the 2022-23 school year (Exhibit 2), Texas has the fifth most affordable community college tuition in the country, well below the national average of $3,860.
Exhibit 2: LOWEST 10 AVERAGE PUBLISHED TUITION AND FEES AT PUBLIC, TWO-YEAR INSTITUTIONS IN 2022 DOLLARS, 2017-18 TO 2022-23
UNIVERSITY
1-YEAR PERCENT CHANGE
5-YEAR PERCENT CHANGE
MAINE
-8%
-11%
MISSISSIPPI
-4%
1%
NEBRASKA
-5%
-6%
KANSAS
-5%
-4%
FLORIDA
-8%
-16%
TEXAS
-6%
-4%
ARIZONA
-7%
-17%
NORTH CAROLINA
-7%
-15%
NEW MEXICO
-4%
-3%
CALIFORNIA
-8%
-16%
Note: Average tuition and fee prices are weighted by full-time enrollment.
Source: College Board
The All Eyes on Texas study points to three distinct advantages of Texas community colleges:
Although the state’s community college system is overseen by THECB, it is under local governance. This allows for the guidance of a central authority with innovation down to the campus level.
Texas community colleges are funded in large part by local property taxes, and local businesses frequently collaborate with local colleges to meet community workforce needs.
Texas initiatives are recognized nationwide, such as funding mechanisms that reward outcomes and programs that respond to changing employer needs.
The Texas State Technical College System provides students with technical skills and hands-on training that prepare them for specialized jobs in industries tailored to meet the demands of the job market. Its outcomes-based funding formula is dependent on student success and their postgraduation wages.
The 88th Legislature approved, and Gov. Greg Abbott signed, House Bill 8 this year to expand outcomes-based funding to community colleges, encouraging such accomplishments as students getting a degree, certificate or other credential or transferring to a general academic institution.
State programs such as the Jobs and Education for Texans Grant Program help fund the purchase of equipment and provide workforce training programs in high-demand occupations for eligible institutions.
Despite historically high numbers of employees, the skills gap
and higher education affordability issues remain critical issues
for Texas employers who are unable to fill positions.
In another example, PSP partnered with the Cal Ripken Sr. Foundation on a $7.5 million initiative to provide 134 elementary schools in the Permian Basin with fully equipped STEM centers, reaching more than 60,000 students and 2,000 teachers in 22 counties.
Another $4.5 million investment from PSP went to energy education and workforce curriculum that will impact all K-12 districts, along with colleges, in the region. The curriculum will feature innovative industry practices, courses offering dual credit for high school and college, and credential options for students. This provides an opportunity to improve student achievement, strengthen interest in the energy industry, build a workforce pipeline and enhance the economic vitality of the Permian Basin. A $2.6 million partnership with the Skillpoint Alliance provided fast-paced, no-cost job training in skilled trades to lower income, underserved populations of the community.
Student Debt
The affordability of postsecondary education or certification also determines our state’s ability to find and retain qualified workers. Student debt represents a significant financial burden for Texas graduates. According to a study by Southern Methodist University published in 2019, the average student cumulative debt for a bachelor’s degree in Texas was $25,794 at graduation. The same study found that students earn approximately $34,132 their first year after graduating, meaning their median debt-to-income ratio is an astounding 74 percent.
One major contributor to the increasing burden of student debt is the increasing cost of higher education. According to THECB, between 2014 and 2021, the average cost of a semester’s tuition and fees for a full-time student at a public university in Texas increased by 11.1 percent when adjusted for inflation, leaving students and families with a significant financial burden.
In addition to tuition, costs for textbooks, housing, transportation and other associated expenses can contribute to student debt. According to THECB projections for 2023-24, average resident tuition costs at Texas four-year public institutions come in at $10,323 per year, with total expenses of $27,820. Notably, tuition is less of a burden than the cost of associated expenses.
Building a Workforce for the Future
Despite historically high numbers of employees, the skills gap and higher education affordability remain critical issues for Texas employers who are unable to fill positions. According to THECB, less than 41 percent of Texans age 25 to 34 held an associate degree or higher as of 2021, placing Texas 36th in the nation. This is insufficient to fulfill the state’s needs for skilled workers and poses a challenge to the state’s economy, hindering innovation and putting Texas’ competitive edge at risk.
To help address this challenge, THECB’s strategic plan sets an ambitious target of 60 percent of Texans (age 25 to 64) receiving a degree, certificate or other postsecondary credential of value by 2030. The strategic plan emphasizes access to earning credentials that allow students to pursue meaningful careers, aligning academic programs with workforce needs. It also sets a goal of no undergraduate debt, or only manageable debt, for 95 percent of graduates, helping them pursue their career goals without this financial burden.
Technical colleges, community colleges, state programs and industry efforts all play crucial roles in providing students with job-focused education and credentials to secure good jobs without accumulating unmanageable student debt.
These intertwined initiatives will allow the state to create a strong Texas workforce for the global economy. FN
