What's ahead for higher education?

Here is what the latest issue of the Dismal Scientist has to say about the future direction for higher education as the economy continues to improve.

While the majority of U.S. industries are expected to see demand for their products improve over the next several months, providers of higher education will see the opposite trend. Although data on enrollment levels are not timely, demand for higher education has clearly remained strong ever since the onset of recession in early 2001. Providers of higher education have added almost 170,000 jobs over the past two years, and growth in real personal consumption expenditures on higher education has continued to accelerate.

Much of the education industry’s above average performance may be due to the business cycle itself. There is good reason to believe that college enrollment is countercyclical. As outside economic opportunities become scarce, enrolling in further education becomes relatively more attractive. Also, since foregone wages represent the opportunity cost of attending school, education becomes relatively cheaper when compensation growth is constrained. Recently, anecdotes of students fleeing the labor market have been widespread, suggesting that this dynamic is likely responsible for much of the above average performance of the education industry.

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