A common complaint of businesses nationwide is that they have not been able to hire as many highly educated workers as they would like to employ, resulting in unfilled vacancies in professional and technical positions. Regardless of the traditional relationships between employers and nearby universities, many states now are reexamining how their higher educational institutions can play a larger role in the development and growth of "knowledge-based" industries.

Colleges and universities have an effect on the availability of labor in their local area in a variety of ways, most notably in educating students who may develop work relationships with local companies and in sponsoring research and development that leads to local job opportunities. This article focuses on what is arguably their largest role: supplying new graduates at the bachelor's degree level. The author describes the influences on graduation patterns, documents key trends for major states, and demonstrates their relative importance using regression analysis. Her research suggests the need for coordination of educational policies at the high school and college levels. States that are trying to improve public high schools should also reexamine the capacity and competitiveness of their public college systems. Expanding capacity or lowering charges would entail extra public expenditures, but may also be consistent with broader economic development goals.