The Book of Genesis alludes to seven years of plenty followed by seven lean years of want. For American higher education, the last forty years (roughly) have been years of plenty, but it is becoming increasingly apparent that many lean years lie ahead. Perhaps there won’t be any more fat years.
The latest piece of evidence is “Colleges Lose Pricing Power” in today’s Wall Street Journal. The article cites is a new study by Moody’s Investors Service finding that a third of the colleges and universities responding said that they anticipated that their net revenues will grow less than inflation in the current fiscal year. It’s a reasonable bet that the actual percentage is substantially higher.
The title, however, doesn’t really indicate the depth of the problem and many lower-tier schools are facing. The deeper problem is not just some schools face dodgy finances this year. Nor is it confined to “shifting demographics and the weak economy,” as the president of Wittenberg University told the reporter. The root of the problem is that, as a person in the college planning business said, “We have a more informed class of college consumers. Everyone today knows someone who went to college and ended up in a career that didn’t justify the cost.”
And that is why many colleges are facing lean years, if not extinction. The college bubble was supported more than anything else by the general perception among Americans that college was a good investment that pretty much ensured a good job and a substantial boost in lifetime earnings. As long as great numbers of families believed that and sent their kids to college, schools could keep growing, adding academic programs of dubious worth and hiring well-paid administrators to succor the students. Colleges that once had the physiques of marathon runners started putting on weight, and now are more like Sumo wrestlers. The trouble is that their diet is about to return to the caloric intake of the former.
Americans are rapidly abandoning the old notion that going to college was a good investment in the face of proof that it isn’t. Actually, there has been an imbalance between the number of “good” jobs (that is, high-skill, high-pay work) and the numbers of people with college degrees (thus supposedly qualified for such employment) for quite a long time. One of the first books I read when I got into higher education policy was Who’s Not Working and Why by Frederic Pryor and David Shaffer, which pointed out that, from data going back to the 1980s, a large and increasing percentage of college graduates were spilling over into jobs traditionally held by high school graduates.
In 2010, Rich Vedder and his CCAP team published a study showing that the trends observed by Pryor and Shaffer had accelerated over the years. An increasingly large percentage of college graduates were working in “high school jobs.”
The implicit understanding that there would be a “good job” waiting for everyone who graduated from college has been disproven by events. Aided by innumerable articles, blogs, and word-of-mouth, the reality that going to college ensures neither a job nor any gain in human capital – but does ensure huge expenditures and debt — is rapidly spreading. That foretells a dramatic decline in the number of “customers” who will be looking at traditional college programs.
Colleges are not just losing their “pricing power.” They’re losing their clientele.