Middle-Skills Workforce Development: Addressing Labor Shortages Through Expanded Training Pathways
Authors
Table of Contents
- Introduction
- Understanding Labor Shortages
- Expanding Middle-Skills Pathways
- Investing in Workforce Development
- Conclusion
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Introduction
Labor shortages across industries have intensified workforce pressures nationwide, creating an urgent demand for workers with specialized skills and training. Middle-skills jobs—those that require training or certification beyond high school but not a four-year degree—represent a fast-growing part of the labor force and account for roughly one-half of all U.S. jobs. Expanding the pool of appropriately qualified workers to fill these positions is a key facet of addressing these shortages.
Middle-skills jobs provide a valuable and feasible pathway to economic mobility for credential-holders, particularly for populations historically underrepresented in postsecondary education. As a result, in recent years, state and federal governments have taken steps to boost worker supply by expanding funding for the nontraditional degree programs that prepare individuals for these types of jobs.
This paper elucidates the context underpinning lawmakers’ efforts to expand the middle-skills workforce by describing key social and policy factors driving current labor shortages, examining the intersection of these shortages with middle-skills occupations, and exploring why middle-skills pathways matter for economic mobility and equity. It also highlights examples of recent trends in the ways taxpayer dollars are being used to support this type of training.
Understanding Labor Shortages
Labor shortages occur when the supply of workers in a particular field falls short of demand. Shortages are measured by comparing the number of people looking for work to the number of open jobs. This section explains the primary drivers of current and projected workforce shortages, with particular attention to how these dynamics affect middle-skills occupations.
Drivers of Workforce Shortages
Labor shortages can be the result of external factors that dramatically and acutely affect workforce needs or worker availability, like the 2008 recession or the COVID-19 pandemic. However, persistent labor shortages and those predicted to continue into the future are often driven by the intersection of multiple factors—including population shifts, immigration policies, misalignments between training and employer needs, and requirements for occupational licensing—that prevent the workforce from finding equilibrium.
- Population shifts. The country’s aging population and declining birth rates are leading to labor shortages in certain industries. The workforce currently has a greater number of older individuals than younger ones, which means there are not enough young workers to replace those who are retiring. Slowed population growth compounds this issue, as it lowers the total number of available workers going forward and also increases the cost of labor. This can cause industries to turn toward technological innovation and automation to solve labor-shortage issues. Although technology sometimes improves efficiency, it often changes workforce needs rather than simply curbing the need for workers. This can drive job displacement among individuals who lack key skills but actively increase the need for highly skilled workers, thus worsening existing shortages in those positions.
- Immigration policies. Policies that restrict immigration place additional pressure on the U.S. labor force, as foreign-born individuals make up nearly 20 percent of the nation’s workers. In 2025, immigrants also accounted for more than 70 percent of U.S. population growth. This is particularly relevant for workforce growth in the context of recent population shifts. Because many industries already rely on immigrant workers to meet their labor needs, policies that hinder immigration will only exacerbate ongoing shortages.
- Credential misalignment. Another factor that contributes to labor shortages is mismatches between the skills or credentials a job requires and the training or credentials workers actually have. This greatly affects workers with middle-skills credentials like vocational certificates or other postsecondary, non-degree training, as more than 25 percent of these workers completed programs that do not align with a direct occupational match. Credential/training mismatches typically fall into one of two categories:
- Those who are highly skilled but work in jobs that do not require those skills
- Those who have completed programs but who still lack the skills required for available jobs
These mismatches mean that under-trained workers struggle to find jobs they qualify for, and overqualified workers often remain in positions below their skill level—both of which create inefficiencies that compound workforce shortages.
- Licensing requirements. Finally, occupational licensing can contribute to labor shortages, especially for middle-skills pathways. Although licensing aims to protect public health and safety, the proportion of the U.S. labor force required to hold an occupational license to work grew from 5 percent to 25 percent between 1960 and 2020. This is concerning because state-mandated licenses restrict entry into the workforce and have expanded beyond occupations with relatively high public health and safety risks to include those with much lower risk. Licensing regimes may also worsen the skills-mismatch issue, as they have been shown to increase over-education in long-term U.S. immigrants.
Projected Workforce Gaps
The United States is projected to experience a total labor shortage of 5 to 6 million workers spread over nearly 200 occupations by 2032. Recent analyses have projected severe and persistent shortages in critical areas such as healthcare, education, and management. For example, in the next six years, the United States is expected to face a shortfall of more than 400,000 nurse practitioners, registered nurses, and licensed practical nurses alone and almost 2.9 million management positions across a variety of industries and required education levels.
Current and emerging labor shortages are concentrated among positions requiring some training or education beyond high school. Positions that require a bachelor’s degree or higher are expected to account for the majority of the overall shortage—4.5 million unfilled jobs in the next six years. Compounding this challenge, the federal government’s recent steps to exclude several training tracks—including those in nursing, social work, and engineering—from updated definitions of “professional” have substantially cut graduate loan eligibility and are likely to further exacerbate bachelor-level shortages. Beyond bachelor’s-level positions, a shortage of 750,000 middle-skills workers is expected, which is nearly 14 percent of the overall projected shortfall. In contrast, some estimates suggest that by 2032, there will be a surplus of workers with a high school education and no additional job-related skills or training. This pattern suggests that there will be a pool of individuals in need of work but also in need of the relevant education to meet the job requirements of available positions.
Expanding Middle-Skills Pathways
In recent years, lawmakers have increasingly focused on expanding middle-skills pathways—training and certifications that fall between a high school diploma and a four-year degree. This focus reflects both growing workforce demands and the recognition that these pathways offer accessible routes to economic mobility, particularly for populations historically underrepresented in higher education. These types of programs include state-authorized apprenticeships and licenses, trade schools, community college programs, and, sometimes, unregulated education. In the United States, more than 330,000 unique employment credentials exist; these may be duplicative, cumulative, or complementary.
Growing Workforce Demand
Forty years ago, approximately two-thirds of U.S. jobs required only a high school diploma. Today, the opposite is true, and about 68 percent of jobs require training beyond high school. Most of these—about one-half of all U.S. jobs—require some additional training or education beyond high school but not a four-year degree. In other words, roughly 50 percent of all U.S. jobs are currently middle-skills positions.
These types of jobs also represent a growing portion of the labor market. One state report estimated that 69 percent of its projected job openings in key industries would require additional skills training beyond a high school diploma. This estimate translated into a need to upskill or reskill 82,000 workers annually in that one state alone. In addition, almost every U.S. state has set or is in the process of setting a goal to increase its population’s postsecondary skills. These types of goals generally call for at least 55 percent of the states’ residents to hold some type of post-high school education or training. Alabama illustrates this trend, having set a goal of adding 500,000 skilled workers to its workforce by 2025. They met 97.6 percent of that target, adding 487,937 newly skilled workers, more than 150,000 of whom obtained middle-skills training or credentials.
Enhancing Economic Mobility
As the need for middle-skills jobs continues to grow, pathways for accessing the necessary skills have become an increasingly important factor for fostering economic mobility because these programs are more accessible than four-year degree programs and offer a strong return on investment for workers.
- Accessible entry points. Many people do not have the time, financial resources, or desire to pursue a college or university degree. In addition, the attainment of traditional four-year degrees and the acquisition of student loan burdens—as well as the ability to shoulder these debts—remain stratified by race, income, and gender. For example, recent federal data show that white and Asian students complete bachelor’s degrees at substantially higher rates than Black and Hispanic students. In addition, individuals from higher-income families or those with a parent who holds a four-year degree are more likely to graduate than first-generation or low-income peers. Research also documents that Black borrowers are more likely to take on larger student loans and experience greater repayment difficulties than white borrowers at similar income levels. Together, these factors contribute to enduring racial disparities in wealth and economic mobility.
Because middle-skills training programs are often shorter term and lower cost than four-year degrees, especially with recent government investments such as those described below, they are particularly appealing to and offer more accessible entry points for groups that have historically struggled to access education and advancement opportunities. Consequently, women and Black workers are more likely than men and white workers to hold certifications, particularly in health-related fields. - Strong economic returns. Middle-skills credentials can deliver consistently strong economic returns. Studies suggest that full-time employees who have non-degree credentials earn more in the same positions than those lacking credentials. In fact, workers with postsecondary credentials earn 30 percent more on average than those who have only a high school diploma. Moreover, some middle-skills workers like mechanics, construction supervisors, and web developers earn wages comparable to college graduates. These annual earnings can translate into long-term gains: Completing a registered apprenticeship can result in an additional $300,000 earned (wages and benefits) over a person’s lifetime. Additionally, those who have completed these types of programs have an 8.6 percent higher employment rate than non-credentialed workers.
It is, however, important to note that not all middle-skills positions pay well. Some credentialed positions, such as caregiving professions like childcare assistants and home health aides, typically offer wages below general market averages. Yet even in these fields, workers earn notably more after receiving credentials. For example, Californians who received a certificate in Administrative Medical Assisting earned $25,606 two years after earning that credential. Although this salary is lower than average earnings for the general population in the relevant age group holding a high school diploma, it is much higher than it was before enrolling in the certificate program ($14,894).
Investing in Workforce Development
Labor shortages can strain service delivery, reduce goods availability, delay business operations, and create inflationary pressures—effects that extend across healthcare, manufacturing, and other critical sectors. These workforce pressures have prompted policymakers to prioritize expanding access to middle-skills credentials. The need is urgent: Fewer than half of Americans hold credentials beyond high school, and, in some states, this number falls below 40 percent. This gap between workforce demand and current credential attainment has driven significant public investment in these types of training programs.
At the federal level, the most recent effort is the Bipartisan Workforce Pell Act, a $65 million grant that passed as part of President Donald J. Trump’s One Big Beautiful Bill Act. This grant funds support programs that help community colleges develop training programs for in-demand occupations. To be eligible for the grant, programs must provide education that is aligned with high-skill, high-wage, or in-demand industries. Workforce Pell Grants will begin July 1, 2026, and are for students enrolled in short-term credential programs for professions such as emergency medical technicians and automotive technicians. Additionally, programs can only receive this funding if they meet specific performance benchmarks, like having a 70 percent or greater completion rate and job placement rate. The Department of Education asserts that this grant will, “help fill the growing skills-gap and labor shortage [and] create a stronger talent pipeline for our nation’s workforce.”
Before this legislation, only low-income students pursuing a typical four-year degree program were eligible for Pell Grants; they were not designed to support workforce expansion or middle-skills job training. This inhibited pathways to many high-quality, short-term training programs for in-demand jobs (e.g., skilled trades like electricians or solar installation technicians), leading to fewer students pursuing those industries and potentially contributing to ongoing labor shortages. The Workforce Pell Grant program targets a different population of students: anyone without a graduate degree looking to develop specific skills. This broader eligibility requirement is expected to give new workers as well as low-income workers specialized expertise and improved access to better jobs.
The federal government has also invested considerably in workforce-specific training through more than $86 million in industry-targeted grant programs distributed to 14 states in September 2025. Award recipients are operating programs that focus on “training and retraining newly hired and incumbent workers in high-growth and emerging industries critical to American competitiveness.” These programs training for jobs in manufacturing, construction, aerospace, health care, and more.
Additionally, states are directly investing in their specific workforce needs, with a growing focus on preparing residents for middle-skills jobs. For example, Indiana and Louisiana have been supporting students in skilled, non-degree certification-training programs for several years. The focus of these programs is often on emerging technologies and high-demand skills, from carpentry and plumbing to aviation maintenance and the health sciences. Michigan has allocated funds enabling adult students without postsecondary credentials to attend community college at no cost. In December 2025, Virginia announced a plan to invest $6.2 million in workforce development programs targeting skilled trades, technology, aviation, and small business growth. Many states with large rural populations are leveraging the Rural Health Transformation Program, which provides funding and policy flexibility to strengthen local healthcare delivery systems and expand healthcare workforce capacity beyond traditional degree pipelines. A central strategy for these states has been investing in community health workers—a category of middle-skills employees who serve as trusted connectors between clinical systems and communities.
Conclusion
As industries grapple with ongoing labor shortages and the projected increase in need for middle-skills workers, lawmakers have supported programs that provide training and credentials for these non-degree positions. These investments will help solve current labor shortages, prevent future shortages, and unlock economic opportunities for individuals who have historically been excluded from post-secondary education.
However, as these investments grow, lawmakers will need to consider how the broader policy landscape—especially state occupational licensing requirements—affects who can access these pathways. Forthcoming R Street analyses will examine occupational licensing policy in specific middle-skills fields, evaluating the evidence on licensing’s impacts and identifying when reform may be warranted to better align quality assurance with accessible pathways to opportunity.
This report was made possible through the support of Lumina Foundation. The views expressed are those of the authors and do not necessarily reflect those of Lumina.