Austan Goolsbee, former chairman of the Council of Economic Advisers, was the youngest member of President Obama’s cabinet. Now the Robert P. Gwinn Professor of Economics at the University of Chicago’s Booth School of Business, Goolsbee will be addressing participants at AGB’s National Conference on Trusteeship. Here, he shares some thoughts on the economy and higher education.
What does the uncertainty in the economy signify for colleges and universities in the future?
In the short run, it will make life more complicated for enrollment. When the alternatives in the marketplace are worse, more people choose to go back to school. The way college graduates fared so much better during this recession made that issue even starker. As the economy improves, but somewhat in fits and starts, it will be hard to know how much that will affect demand. The other short-run impact will be on endowments and tuition, which will fluctuate more and cause more indigestion. In the long run, though, I think economic uncertainty will have less impact on colleges and universities than on a lot of other industries because their time horizon is so much longer.
How can boards anticipate fluctuations in federal spending and plan for them accordingly?
That’s such a difficult one. Sadly, the budgetary facts on the ground are usually that when the money is tight, some of the first things that are cut are programs without immediate payoffs; that often means scientific research, financial aid, and other things that directly affect colleges and universities. It’s a huge mistake, but that’s the reality. The fact that government money is likely to be tight for some time means that boards must be thinking about other sources of revenue and probably should not count on federal spending to save the day.
Is the higher education business model broken?
At a basic level, no, absolutely not. Demand for U.S. higher education has never been higher. International demand alone has made education one of the country’s leading exports, and the salary and employment benefits of higher education compared to other sectors have risen to record highs, as well. But there are certainly challenges. We have the highest college enrollment rate in the world but also the highest college dropout rate. Costs and preparation will be two ongoing issues higher ed will need to confront to maintain its business model. The costs of operating big research universities are astonishing and continue to go up, which means rising prices to students who find it less and less affordable. There is no avoiding this issue—it is one that will be with us on an ongoing basis. Looking at the question more broadly, the preparation of students for higher education depends on the American K-12 system functioning properly. But as we know, there are fissures there, too, that impact colleges and universities, which are spending ever more time and money getting students up to speed for college work. This affects their ability to fulfill their mission, as well as their bottom line.
What should institutions be doing to prepare students for the economy’s changing needs?
That really depends on what type of institution it is, of course. For anything that is oriented to the practical/tangible side of things, they have got to continually show that they are producing skills that are in demand. I don’t think that will be impossible, by any means. The data show how important education is in the economy. Students know it. Parents know it. Employers know it. It doesn’t feel to me that the IT revolution that has hit so many other service industries is going to avoid higher education or is going to slow down anytime soon, so this is an area all institutions should be mindful of. Overall, though, I think the higher education sector is doing a great job.
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