Shortage of graduates in fast-growing fields could threaten Sacramento's growth

The Sacramento region has had significant job growth over the last decade, but the regional economy could plateau if local colleges and universities don't supply more graduates with the right degrees.

Appeared in: Sacramento Business Journal

By: Scott Rodd

Published on: 01/25/18

The Sacramento region has had significant job growth over the last decade, but the regional economy could plateau if local colleges and universities don't supply more graduates with the right degrees.

“Universities are not producing graduates in the right fields and with the right skills,” said Sanjay Varshney, chief economist of the Sacramento Business Review, whose 2018 economic forecast emphasized the lack of qualified graduates as a significant threat.

Overall, the most prominent job growth has been in health care, construction, real estate, professional services and hospitality. Higher education institutions in the region, however, are producing fewer graduates with degrees related to some of these fields.

University officials and area employers acknowledge that the region’s higher education institutions can do more to tackle this labor mismatch. But they also argue that the situation is more nuanced than the Business Review's findings suggest.

According to Annette Smith-Dohring, workforce development manager for Sutter Health’s Sacramento-Sierra region, the Business Review may not have taken into consideration all the institutions that contribute to the labor market. For example, Sutter Health and Dignity Health have been developing partnerships with area colleges, which the Business Review forecast may have not factored into its analysis.

“There are other players in the market that may not be reflected in this data,” she said.

Meanwhile, at California State University Sacramento, state law limits the number of students that can be accepted in some majors, such as nursing and health sciences. And state budget constraints prevent the university from expanding these and other programs, according to Sacramento State president Robert Nelsen.

Job growth

The Sacramento region’s labor market has outpaced the state’s labor market over the last five years, according to the Business Review. Since 2012, the Sacramento region reported a 14.4 percent increase in jobs, compared to 13.5 percent statewide. In the last year, the Sacramento region recorded a 3.2 percent increase in jobs—more than double the statewide growth rate.

Job creation has been especially strong in the health care and construction sectors. Over the last decade, the region's employment in health care increased from one out of every nine jobs to one out of seven. In the last five years, construction has reported the highest job growth rate as the sector bounced back from the Great Recession.  

Nationally, over the last seven years, job openings in construction have increased 366 percent and job openings in health care have increased 224 percent. While similar regional data is not available, the Business Review believes the trend is reflected in the Sacramento area. The Business Review points to a report from the California Employment Development Department that found registered nurses and construction laborers as two of the occupations with the most job openings in the region

Shortage of graduates

The Business Review warns that the number of local graduates with degrees related to these disciplines has failed to keep up with the increase in job openings.

“The availability of labor to fill these occupations may be the greatest constraint to the region’s labor market growth in the future,” the Business Review states.

In some sectors, the number of graduates with relevant degrees has increased in the last five years, but has not kept up with the increase in job openings. Construction jobs increased by over 40 percent from 2012 to 2017. At the same time, the number of students earning construction management degrees from regional universities increased by less than 30 percent. (The Business Review does not include data for degrees earned in 2017.)

Other sectors witnessed a decline in the number of graduates earning relevant degrees. Health care jobs increased by over 20 percent from 2012 to 2017. Through 2016, however, the number of students receiving degrees in health sciences and nursing dropped by about 5 percent.

The inability to fill job openings in one area can have a ripple effect in related industries. If new construction jobs are difficult to fill, for example, it could constrain growth at building material suppliers and in rental leasing and real estate.

Varshney said that universities like Sacramento State and University of California Davis are “slow to change," but that “they need to be more nimble when it comes to adapting their programs to the demands of the economy and labor market, and anticipating needs moving forward.”

The region’s two major universities have different sets of challenges when it comes to contributing to the region’s labor markets, he said.

UC Davis attracts many students from outside the Sacramento region who, upon graduating, often leave the area.

Sacramento State, on the other hand, attracts the majority of its students from the Sacramento region, and many of them stay in the area upon graduating. Sacramento State's challenge is to produce a higher quantity and quality of graduates in the disciplines that are in demand, Varshney said.

The problem isn't only with the major universities, he added.

“It’s also community colleges and trade schools that are not producing the graduates we need,” Varshney said.

Smith-Dohring from Sutter Health agrees that the region’s higher education institutions are not meeting the demand in the health care sector for certain jobs.   

“We do have a mismatch in areas like medical assistants,” Smith Dohring said. “There’s only one community college in the area that offers that program.”

She added that some of the medical assistants hired by Sutter Health do not receive adequate training during their education—particularly those who receive degrees from less-rigorous, for-profit colleges. As a result, Smith-Dohring said, Sutter often has to provide additional training before a new medical assistant can start on the floor.

“A candidate may have spent $30,000 to $40,000 for their education as a medical assistant, but they’ll have to be technically retrained when they start,” she said.

Smith-Dohring added that colleges and universities in the area—and across the state—are not producing enough graduates in clinical laboratory sciences. Moreover, she said that locally, UC Davis has only one small clinical laboratory program, while Sacramento State doesn't have one at all, despite the fact that Sutter Health has been asking for one "for something like 10 years now.”

Other resources

The shortage of clinical laboratory scientists coming out of colleges and universities was part of the motivation for Sutter Health, which operates hospitals and clinics throughout Northern California, to consolidate laboratory services in the Bay Area, at one facility in Livermore.

But, Smith-Dohring noted, the Business Review may not be accounting for all of the institutions that health care employers draw their labor supply from.

For-profit Chamberlain College of Nursing, for example, opened a campus in Rancho Cordova in 2016. Samuel Merritt University—which has a Sacramento campus that has grown “by leaps and bounds,” according to Smith-Dohring—offers programs in various nursing fields, in addition to occupational therapy and podiatry. Neither of these schools are included in the data collected by the Business Review.

Josh Freilich, chief nursing executive at Dignity Health's Mercy Hospital of Folsom, said Dignity has partnered with area community colleges—including American River College, Sacramento City College and Sierra College—to develop an accelerated nursing program. American River and Sacramento City College are included in the Business Review’s data, but Sierra College is not.

Dignity Health already sees “a steady stream of graduates from those regional institutions,” Freilich said, and he believes those numbers will increase as the partnerships with the colleges grow.

University Leaders Push Back

Sacramento State president Nelsen acknowledged that his university can make some improvements related to the findings in the Business Review’s forecast.

Despite hiring over 100 tenure-track faculty in the last two years, the university has “a shortage in faculty members in many different areas,” he said. “We have to increase the number of faculty in the right fields.”

The university is currently looking to fill over 60 positions.

Nelsen also acknowledged that graduates in certain fields are being absorbed into the labor market at a rate that suggests outsized demand.

“The students in construction management have a 100 percent placement rate (after graduation), which proves part of what the study says,” Nelsen said. “There is a need out there — if you have a 100 percent placement rate, the program is very good, but it’s also because there is a need out there.”

But Nelsen disagrees with the Business Review regarding the scope and severity of the shortage in labor supply for sectors like health care and construction. He also argues that his university is, by-and-large, meeting the demands of the labor market and adapting the changes in the economy.

“Companies that come into (the region) often talk about the talent pool at Sac State," said Nelsen, who is a board member at the Greater Sacramento Economic Council. "That’s one of the reasons they move here.”

Sacramento State has also implemented advisory councils in each of its colleges, including the College of Business Administration, College of Health and Human Services and College of Engineering and Computer Science.

Nelsen also noted the constraints the university faces as a result of so-called “impaction”— when there are more applicants to a program than there are available spaces. Majors that are currently impacted at Sacramento State include business administration, biological science, nursing and all health science majors.

Barry Broome, CEO of Greater Sacramento Economic Council, said the state’s policy of impaction is choking the supply of valuable labor that could flow through Sacramento State.

“One of the most negative state policies in California is the capping of students at California State universities,” he said. “Sac State is turning away thousands and thousands of students every year.”

Gov. Jerry Brown’s 2018-2019 budget, according to Nelsen, only compounds these problems. It appropriated $10 million less than what the governor previously promised the university system, Nelsen said, and a total amount about $150 million short of what the university believes it needs to reach its full potential.

“The state has been divesting from education,” he said.

The governor's office did not immediately respond to a request for comment.

UC Davis Chancellor Gary S. May also pushed back against some of the Business Review’s findings.

“We’ve experienced enrollment growth in construction management, health care analytics and project management,” he said. “We are producing these graduates.”

He also noted that the university recently opened its nursing school. The Betty Irene Moore School of Nursing opened in 2009, offering graduate programs in nursing. Its new $50 million facility, Betty Irene Moore Hall at UC Davis's medical campus in Sacramento, opened last October.

May acknowledged that the university can do a better job of connecting with industry leaders and stakeholders. That is one of the motivations, he said, for the creation of Aggie Square, a partnership between the city of Sacramento and UC Davis that will connect the region’s business community with the students and resources offered by the university.

The initiative is still in the development stage, but May said he anticipates the it will “provide a one-stop-shop (for) educational programs and training programs … with business partners collaborating on research and employers hiring our graduates.”


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