While hoping for the best it is increasingly difficult to believe that the next two years won’t be very tough. The economic news changes by the day and there is still little certainty about the process for removing the various lockdown measures around the world. It is even tempting to not to write until the dust has settled.
A number of commentators have suggested that higher education is counter-cyclical in terms of student growth and refer to the experience of the ‘great recession’ of 2008. But I recently quoted Charlie Munger, vice chairman of Berkshire Hathaway who said of the current situation, “This thing is different”, and I doubt that previous global shocks a good guide to what might happen this time around. For home and international student enrollments this may even be a fundamental turning point.
This is not a counsel of despair. There are signs that many students are still keeping their options open before deciding whether to travel across country or overseas for study. But the backdrop to their decision making and the factors constraining countries, let alone universities, are far more complex than 2008.
….it really is Global
The 2008 recession for the G20-zone (85% of all gross world product (GWP) is often called a global recession which lasted from mid‑2008 until 2009. But while 2009 saw real GDP rates fall in virtually all of Europe, along with Canada and the US, the reality was that China, India, South America and almost all of Africa had GDP growth. The coming recession may be V, W, L or swoosh shaped, but it seems likely that every country in the world will have a dip in GDP this year.
China was never in recession throughout the period of what was called the ‘great recession’ but the first quarter of 2020 saw the Chinese economy shrink for the first time since 1976.
…Established Student Sources May Not Drive Growth
China’s GDP growth was at 14.7% in 2007 and remained above 9% until 2012. Its 20-24 year age group grew by 13 million between 2007 and 2011. These factors fueled international student growth through the ‘great recession’.
According to HESA data, between 2007/08 and 2011/12 the number of Chinese students in UK universities grew by over 33,000 to 78,715. The next largest growth was from India which grew just under 14,000 from 25,905 to 39,090 by 2010/11 before falling back to 29,900 as Government visa policies hardened.
In the US, Open Doors data indicates that 2007/08 was the first year since 2001/02 that international student enrollments had got above 560,000. By 2011/12 the number of enrollments had increased by a further 120,000. China contributed over 100,00 of that increase.
China’s university age population is stable but at lower levels than a decade ago and financial pressure on the middle class was already evident before the coronavirus. Add in the safety concerns and it is little wonder that the British Council found that Chinese students had a high propensity to reconsider plans for the coming year.
…Oil Glut and Increased Production Capacity
In the previous recession oil prices dipped rapidly but recovered within two years. This time round some benchmark oil prices have gone negative early in the pandemic and the global oil glut is considered by some to be similar to the 1980s when prices stayed low for several years. The impact is exemplified by Saudi Arabia’s reduction of $27bn in net foreign assets in just the month of March. Development of technology and the re-emergence of the US as a dominant producer seem certain to make it difficult to constrain production in a way that forces prices up.
It seems unlikely that, in the foreseeable future, any government will be able or willing to fund substantial scholarship schemes driven by oil wealth.
…Quality, Value and Availability of Online Degrees
In 2009 it is estimated that there were 5.5m students worldwide taking at least one course online, but by 2017 it was estimated to be over 6m in the US alone. By 2019, 98% of public universities and colleges in the US offered some form of online program and the University of Pennsylvania had become the first Ivy-league institution to offer a bachelors’ degree totally online.
In the ‘great recession’ the for-profit universities were at the forefront of online education. This time around there is, literally, a world of choice and great brand names available to students. Students wanting to get a degree do not have to incur the health risk, the uncertainty or the extra cost of an on-campus experience.
Online has provided a short-term response to the coronavirus but students may find it a cheaper and more convenient option for future study.
…Cost of Higher Education to Students
Analysis suggests that going to college in the US in 2018/19 was 25.3% (private) and 29.8% (public) more costly than in 2008/09 on a like-for-like dollar basis. Forbes has estimated that between 1989 and 2016 the cost of going to college grew eight times faster than average annual wages.
In England the introduction of £9,000 a year student fees didn’t occur until 2012. By 2019 average student debt on entry to repayment was £35,950 compared to £11,720 in 2009. Rising levels of debt have not, thus far, deterred students in England from going to university but it’s on their minds.
As importantly, universities have been obliged to spend significant amounts on attracting students from less well represented backgrounds. The government debt burden has also been significantly increased as the real cost of student loans was added in late 2019. Faced with the cost of combatting coronavirus and a global recession students, universities and the Government may be less willing to absorb these costs.
The cost of going into higher education has become increasingly difficult for any of the stakeholders to absorb – even before the pandemic.
….Attitudes Towards the Value of Higher Education Degree Have Hardened
UK and the US students have never paid more for their degree and there is some evidence that disenchantment has set in. In 2013, Gallup found that 70% of U.S. adults considered a college education to be “very important,” 23% felt it was “fairly important” and 6% said it was “not too important.” In 2019, those figures had shifted to 51%, 36% and 13%, respectively with even bigger negative shifts seen in the 18-29 age group.
Longitudinal evidence about student sentiment is harder to come by in the UK but this year’s graduating students will be the first under the higher English fee level to come into a world where unemployment is rising. UK unemployment following the ‘great recession’ peaked at just over 8% in 2011. It is likely that the job market will be tough for at least a couple of years.
The value of a degree has always been partly about having choices and career options. The rising cost of education and the gloomiest jobs market for a decade may make potential students rethink their decisions. The UK Government may be forced to reconsider whether Post Study Work visas are creating too much competition for scarce jobs.
…and New Options May Be More Attractive
A recession is likely to focus this argument on the ways a workforce is able to help a country emerge from recession. It is claimed by Upwork that the 20 fastest growing skills on their Skills Index do not require a degree. It notes that in 2018 Glassdoor said, “Increasingly, there are many companies offering well-paying jobs to those with nontraditional education or a high-school diploma.”
Non-traditional education options focused on work skills have grown rapidly and the lockdown may be driving more people in that direction. Udemy has already seen a surge of interest in its online courses, particularly in AI and machine learning. A trend towards skills-oriented learning, whether online or in short-courses, leading to a qualification may become better established.
The safety of university degrees offering shelter from the jobs market for three or four years come at a high cost. It seems possible that the new options available and the scramble to find work or avoid excessive HE costs will drive people towards focused solutions.
This is not an exhaustive list but flags some things which seem materially different this time round. The extent to which institutions are able to adapt and pivot to meet the needs of students and society may determine their ability to survive. There will always be opportunities for the flexible, the creative and those who can offer value for money and the promise of a better future.
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