Declines in College Enrollment: What Will This Mean?
Have we finally reached the tipping point for young people (and their parents) to decide that the going rate for a college degree isn’t worth it? According to a report just released by the National Student Clearinghouse Research Center, 500,000 fewer students will attend college in 2021, which comes on the heels of a 400,000 decline in student enrollment in 2020. The last time the US experienced an actual decrease in college enrollment was in 2012 (300,000 fewer college students), which was the whiplash effect of the 2009 economic downturn.
The question “why is this happening?” isn’t difficult to answer. College tuitions and fees more than doubled in the last 20 years, resulting in a student debt load of $1.46 trillion with an average pay-off period of 18 years. The fully bundled campus experience has become unbundled by COVID-19 and remote learning requirements. The standing promise of the bright future that accompanies a college degree ain’t as bright as it used to be, and thus the foundation on which the Higher Education value proposition is built has become increasingly shaky.
A more interesting question is “why did this take so long?” Americans are generally quick to react to sharp market increases that surge past the collective sense of value. For example, when the price of gas reaches a (national) average of $3.50, Americans buy smaller cars and start to rideshare. When the price of beef gets too high, Americans eat more chicken. When the price of cable TV stretches to $150/month, millions of Americans cut the cord. And these examples represent decisions about pennies compared to the magnitude of a $200,000+ price tag for a four-year college degree.
The short explanation for this anomalous behavior: unlike the petroleum, food and communications markets, there has been no significant alternative to build a career other than to attend college. Couple that with brilliant persuasion from the Higher Ed industry to convince three generations of Americans (Baby Boomers, GenX and Millennials) that no degree = no future, and that degrees from the best schools = the best future. They even perfected the upsell, that expensive graduate degrees are an insurance policy for career success.
The slightly longer explanation is that most students/parents have taken on significant debt out of fear; meaning fear of falling behind from the career race at the start and not being able to catch up; fear of being consigned to an underclass of workers that would dictate their standard of living forever. There is certainly a percent of these students whose decision was driven by aspiration, but sadly the most tragic stories of ruin are being told by those who did it through perspiration.
For this Higher Ed FOMO (Fear of Missing Out) strategy to be effective, the business sector needed to be a willing accomplice. During the 2000s when talent management and human capital strategies became fashionable, and job specialization became standard practice, businesses faithfully played the role of shepherds ushering millions of graduates through the gates of the working world, and shielding their companies from applicants without at least a bachelor’s degree. This was more than business convention; this was a societal and cultural norm.
Until it wasn’t. Even before COVID-19 broke the spell of age-old business paradigms (for example: people can’t be trusted to be productive working from home), there were already indications that the road to riches doesn’t need to run through a campus quad. Young adults were making respectable incomes as professional gamers, internet influencers, and e-tail entrepreneurs from their basements (powered by AWS), without a moment’s thought about community college, let alone a four-year school. True, these stories had little impact on mainstream businesses and industries, but it did pierce the armor of the no college = no future argument.
Then the tech world started asking its own questions, i.e., if we can hire non-college grads who have received certifications from coding boot camps and other non-traditional programs, and if they can do the job just as well as the guy who graduated from Georgia Tech, and if their starting salary demands are much lower, why wouldn’t we? In our copycat world, soon this practice becomes the white-collar equivalent of off-shoring manufacturing jobs to Asia and South America (for pretty much the same reason) and before you know it there are college grads from the class of 2020 and 2021 who can’t even get interviews for their first job. For Higher Ed institutions the myth has been busted, the veil has been lifted, the walls came tumbling down, pick your favorite metaphor for the ending of an era.
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Let’s say for the sake of argument that this two-year drop-off of college attendance becomes a harbinger for the future. What will a working world with fewer college graduates look like? I foresee that hiring companies will continue to hold the upper hand over career-seekers since they will control the standard for employability. While a 3% decline in college graduates may not have an immediate impact on corporate hiring practice, there are some emerging trends that I believe will ultimately have a significant effect on the way that companies view their workforce:
- Industries and companies will become more focused on competencies rather than credentials in their hiring and promotion practices. Job descriptions that routinely state that a Bachelor’s degree is a requirement will move away from this standard, especially for entry-level positions. There’s little risk associated with “lowering the bar” since most college graduates are grossly overqualified for the administrative and operational duties of their first jobs. Pre-employment testing, which is already in use by 80% of Fortune 500 companies, will become an even more popular means to identify candidates who are most likely to be successful on the job, and where a person went to school and what he or she majored in will become less important. “Fit trumps credentials every day of the week and twice on Sunday,” says global organizational consultant Deb Kosits. “How CEOS and HR leaders determine fit, evaluate performance, assess the quality of working relationships and create the cultural standards for success without looking people in the eye is the nerve-wracking challenge of our day.”
- Human Resource departments will become increasingly important to company performance. Even if the academic credentials of applicants and hires does decline, this does not mean that caliber of worker or the quality of work will necessarily follow. HR organization development leaders will need to become adept at identifying gaps between competencies and job requirements should they become apparent, and filling those gaps with training and development solutions.
- Effective senior leaders will be harder to identify, develop and retain. In their 2020 Workplace Learning Report, LinkedIn Learning found that 57% of the companies surveyed said management and leadership talent is their most significant need, well ahead of the next priorities of creative problem solving (42%) and communication (40%). This is a long-standing problem that began with the move to job specialization and has been exacerbated by the realities of remote work. As these trends harden into standard operating practice it will become increasingly difficult to find the multi-tool generalists who have worked in several departments and understand how functions integrate; these are the agile learners who are known to make the best senior leaders. Finding Millennials (even with college degrees) who are willing to make to take on the responsibilities of management and sacrifice their non-work interests will be more difficult 5-10 years from now than it is today.
- Companies will continue to use automation and technology to mitigate the risks of reduced productivity and work quality. Certainly the “knowledge economy” will continue to rise and the “industrial economy” will provide fewer jobs and opportunities for career growth in the future. We’re already living in a world where customer service and call center activities are fully automated interactions, and improvements in deep learning AI will enable companies to operate with less human involvement. If you’re under the age of 30, you are entirely comfortable with a self-service experience and probably not missing live human contact. Companies with the need for people who work with their hands will enlist the support of community colleges and workforce boards to create their own discrete talent pools.
- Companies will struggle with strengthening their cultures due to the prevalence of remote work. As the pandemic winds down and work practices normalize, some companies are finding that the corporate office is not as critical to business performance it once was, and that “water cooler conversations” are being held by two people working from home on their headsets, holding their Yetis. A recent study from the National Bureau of Economic Research found that almost one-third of Americans working from home today would like to make it a permanent arrangement. Any company that is striving to retain their best employees, help them achieve work-life balance, and minimize disruption to their business is likely to accede to these employees’ preferences. This will only increase the degree of difficulty to convince a high-potential employee to move to a company location, as the personal tradeoffs will be tough to offset if the benefits of relocation are not that apparent.
- The one industry that will undoubtably suffer from a drop-off in college students: Higher Education. Losing 3% of your customers (and revenue) every year would be troublesome for any business, and at this time it is unknowable if this is a trend that will continue at its current rate or accelerate. One can expect to see more mergers and closures of four-year schools that are highly tuition-dependent and cannot compete in a shrinking market. Online institutions such as Capella University and Penn Foster will make professional certifications a legitimate alternative to a four-year degree, and cater to companies that are shifting their hiring and promotion practices to a competency-based structure. Community Colleges will also play harder in the certification space, which will be especially attractive to people with lower economic means.
The key takeaway for career seekers is that the decision not to attend college is no longer a relegation to life in a lower financial stratum. There are numerous professions that are in demand today and require only certification credentials: software development, medical billing administration, IT support, veterinary technicians, HVAC technicians, nursing assistants, just to name a few. That said, to be successful in these professions, a person needs to demonstrate the capabilities that companies value and reward, which include work ethic, collaboration and relationship-building skills, persuasion, adaptability, and an understanding of how one’s role fits into a company’s bigger picture. These are not skills that necessarily come with a four-year degree; but they are the differentiators that can ultimately determine how high your professional ceiling will be.
Tim Guen is President of CareerMap and blogs frequently about the challenges of career building during the pandemic.