Community colleges in the US are leading the way in widening participation in higher education, according to a study by the Learning and Skills Network.
The report, part of a series, said that UK and US colleges were perhaps the best-equipped institutions to reach disadvantaged students. But the US was far ahead, with more than 50 per cent of the workforce having some higher education compared to 29 per cent in the UK.
To break the 40 per cent barrier, UK colleges will need to play a greater part and have more freedom to run their own higher education courses, according to the report's author, Richard Brown, who is chief executive of the Council for Industry and Higher Education.
Key to the success of US community colleges is a system of credit and funding that makes it easy for students to study at their own pace and move between institutions or levels of study within the state.
Mr Brown said: "We have to help learners transfer their learning when they transfer their job. We have to help them build their learning from all learning sources.
"We have to stop thinking that learning is only acquired in a centre of learning and that somehow on-the-job practical learning is second rate. Every step that learners took down a learning road should be valued, and those who stopped should not be classified as drop outs," he said.
Further education colleges provide the majority of students taking higher education courses at a level below the bachelor degree, which both the Leitch Review in Britain and US policy have identified as central for the future economy.
More than a third of their students come from lower socio-economic groups, compared to a quarter in sixth form colleges and eight per cent in private schools.
Higher education programmes run by FE providers also attract a larger proportion of students targeted for widening participation, due to their accessibility for local students, short and part-time study, vocational orientation and lower entry requirements.
The UK foundation degrees, while intended to fulfil the same need as the US community colleges' associate degree, serve two purposes, as a qualification equipping students for work and as a way of achieving a bachelor degree.
This has encouraged universities, which accredit foundation degrees, to emphasise the preservation of their "supply chain" rather than meeting the skills gaps for employers at supervisory level, the Learning and Skills Network report said.
It said colleges should be given more freedom to provide foundation degrees without a university partner - something that New College Durham is working towards.
"Where they have a particular vocational niche, they may be the only player with the credibility and understanding to develop such awards," the report said.
UK colleges were at a disadvantage compared to the US because of their many roles beside providing advanced qualifications, and there was nothing to compare with the common credit system in the US for universities and colleges.