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October 31, 2014

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Guest column:

Our current model isn’t working

Education and the economy

We’ve heard and received several comments over the past several months about how higher education does, or doesn’t, contribute to the economy and economic development in Nevada. The Sun asked three people for their insight: Gov. Brian Sandoval, Nevada System of Higher Education Chancellor Dan Klaich, and writer Patrick Gibbons. Here are their thoughts. What are yours? Send us a letter: 2360 Corporate Circle, Henderson, NV 89074; e-mail: [email protected]; or post your comments on these pieces online.

The idea that higher education can be an engine of economic growth is an appealing one. There is some compelling evidence supporting this theory. Sandy Baum, an economist for the College Board, found that college graduates earned about $300,000 more over their lifetimes than high school graduates. College graduates are also less likely to be on welfare or go to prison, tend to live longer and are more likely to be employed.

But don’t jump to conclusions just yet. There are several major problems with higher education, including a decline in the value of a college degree, rapidly rising costs, administrative bloat and mission creep.

First, college degrees no longer hold the value they once did.

A recent Rutgers University report found just 53 percent of recent graduates surveyed had full-time jobs. Forty percent of the employed graduates reported holding jobs that required no college degree. Nine percent of recent college graduates reported being unemployed — a rate on par with high school graduates.

Richard Vedder, an economics professor at the University of Ohio, found that 17 million college graduates now work in jobs that require no college degree. This means higher education is leaving millions with nothing but debt and disappointment.

Higher ed also seems to have little effect on state economies and overall unemployment rates.

Since the recession began, there has been no statistical correlation between the number of graduates in a state and the unemployment rate, or even GDP growth. There is also no correlation between the amount spent on “education and research” in higher education and unemployment rates and GDP growth rates. In other words, spending more money on higher education in Nevada in order to produce more graduates would likely have no positive effect on Nevada’s overall economy or unemployment rate.

In fact, states with a top-tier national research university as ranked by U.S. News & World Report have an average unemployment rate that is 1.1 points higher than states with only middle- and bottom-tier universities.

Next, higher education costs are growing at unsustainable rates.

Mark Perry, an economist at the University of Michigan, compared higher education costs with housing costs from 1978 to 2010. Perry discovered a “higher education” spending bubble that is now 2.5 times larger than the housing bubble was at its peak.

Numerous studies report that higher education costs have increased faster than inflation and personal income. Nevada System of Higher Education Regent Ron Knecht reported this year that NSHE’s total operating budget grew by 18 percent between 2000 and 2010 — significantly faster than Nevada’s per capita income.

Jay P. Greene at the University of Arkansas reached similar conclusions in his review of more than 400 major universities. According to Greene, inflation-adjusted spending grew 140 percent at UNLV and 69 percent at UNR between 1993 and 2007.

Compared to the rest of the nation, Nevada’s “education and research” spending per student ranks 19th-highest in the nation according to the Delta Cost Project report “Trends in College Spending.” Despite above average spending, not a single Nevada university graduates more than 50 percent of full-time students after six years. Apparently, the spending never helped.

Where did all the money go?

Greene found that universities across the country rapidly expanded their operations beyond education and research. This included increasing the number of administrators and professional staff faster than the student population. UNLV, for example, increased the number of administrators per 100 students by 90 percent between 1993 and 2007. Benjamin Ginsberg, a political scientist at Johns Hopkins, found similar results in his study of national universities between 1975 and 2005.

The administrative bloat found is the direct result of mission creep — that is, the universities are focusing on far more than just education and research.

UNLV officials, for example, want to expand the university by creating a domed athletic stadium, business/research park and business incubator.

Aside from gambling tuition and tax dollars on risky business ventures, should we really allow a university that can’t even graduate half its full-time students after eight years of college to expand its mission even further?

Criticism of higher education does not mean education is unimportant. Education is very important. The problem is that, at best, higher education is seeing diminishing rates of return on the investment. At worst, we may already be overinvested. Something must be done, but spending more money on an institution that is already bloated, wasteful and ineffective is not going to benefit anyone but the university administrators.

Patrick R. Gibbons is an independent researcher and policy consultant in Las Vegas.

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  1. The article cites a study published this year, yet the study says that only 7% of recent college grads are unemployed & looking for work -- below the national rate; 2% are in the military; 21% percent are in grad school; 82% have some employment. Sixty-nine percent obtain jobs within 6 months of graduation, and the majority find a job within 2 months.

    Of those who work, 70% do so in areas related to their degrees; only 27% work jobs "just to get by."

    Since the employment rate for grads is lower than the national average, a college degree does correlate with higher employment, and over half of grads work in areas requiring the degrees they hold. As the need for education rises, the demand for grads rises with it.

    So, what about top-ten research institutions, like Harvard, Duke, and Stanford? These serve the country as a whole; even so, it isn't Stanford grads who are unemployed in CA. Research creates employment, but not often for those with below-college skill levels; these are the unemployed. [E.g., NV's employment in construction vs. other areas.] Even among academics, unemployment varies by field: less than 3% of health science grads lack jobs.

    I agree that the real cost to students of higher ed has risen greatly -- even since 1992. Faculty salaries have barely kept pace with inflation. At public colleges, that rise is a result of several factors: lowered investment from states; rising costs of resources (land, energy, etc.). College budgets have not kept pace with costs and have passed some of that increase on to students.

    During that period, the real costs of legal services, water, sanitation services, and medical care have increased at rates greater than that of higher ed. Costs to consumers of some retail products and services have risen at similar rates. The number of administrators has increased, but that rise doesn't account for the overall cost increase that colleges have faced.

    Public spending per student has fallen sharply nationwide (2002 to 2006) and in NV, where spending declined another 3.2% from 2005 to 2010 and again this year. Educational appropriations per full-time student were at $7800 in Nevada in FY10 -- a five-year decline of 12.2%. (State Higher Education Finance report, SHEEO.)

    Finally, colleges are not all about jobs and degrees. The vast majority of community-college students take classes to meet goals that do not include degrees. Many students now attend multiple institutions simultaneously. The Chronicle of Higher Education reported earlier this year that 37% of bachelor degree graduates now attend more than one institution; 23% attend more than two. Traditional counting methods show two colleges as "failures," while the one that awards the degree is a "success." Instead of such archaic methods, we must look at the fact that most college students meet their goals -- whether or not a degree at the college is among those goals.

    Investment in higher ed is crucial for the state's future.

  2. 7% are officially unemployed. 2 percent are unemployed and quit looking. 7 + 2 = 9

  3. UNLV and UNR point to Stanford, Duke, UNC, Boston U, Boston C, Harvard, MIT as examples as what to do and claim that if they got the funding to do what they do they can turn the state around.

    So yes my point about the top tier universities remains relevant but only because university officials are making a blatantly bogus statement (you seem to understand why it is bogus...but you're blaming the wrong person).

  4. part time students are NOT counted in graduation statistics for the obvious reason that it is too difficult to track. Graduating full-time students is a good indicator (and best available) of how valuable a university is to the students.

  5. Higher ed spending is not down since the start of the decade. Its actually up slightly.

    Nevada's NSHE revenues for 2011 are only down 1.1 percent from 2007 revenues. The bulk of the cuts we saw was because NSHE's revenues shot up nearly 10 percent between 2007 and 2009 (about 90% of the real cuts were because of a real revenue increase and subsequent spending of that money). The rest of the claimed budget cuts were imaginary (that is the universities claimed they needed X +Y budget where X = last years budget and Y = an amount they had never spent before.

  6. Patrick Gibbons wrote, "7% are officially unemployed. 2 percent are unemployed and quit looking. 7 + 2 = 9." In the general population, the rate of unemployed/looking plus unemployed/(not looking) is estimated at 16.6%. So the college educated win again.

    I do agree that funding alone will not "turn things around."

    Part-time students are no more difficult to track than full-time students. The issue has to do with the traditional student from years ago averaging 15 credits per semester. Largely for financial reasons, students take fewer classes now, but we still only track full-time students, and we only track them for given lengths of time. The big (modern) issue is trying to track them across institutional and state boundaries.

    Mr. Gibbons wrote, "Nevada's NSHE revenues for 2011...." Now you're talking about overall revenue vs. state contribution. This is consistent with what I wrote. The research institutions have increased outside contributions, in part to try to compensate for reductions in state funding. Sometimes, this creates other issues (e.g., perceived conflicts of interest), but the three research institutions have tried to make up for that lost contribution; the other institutions are out of luck.

  7. First, you must actually educate students in grades k-12. Indoctrination is not education. Currently we have colleges that are also indoctrination factories that have higher price tag than value received. Largely due to federal interference at all levels of the school system. IF Nevada and in particular UNLV or CSU want to be recognized for excellence in something besides manure spreading, they had better start educating.

  8. Frank,

    Well I stand corrected on the use of the unemployment statistic. However, recent college grads at 7 percent is a far cry from the 4.2 percent for all college graduates. So if recent college graduates have an unemployment rate that is 67% higher than all college graduates, I'd say there is still very much a problem.

    And be honest, do you really think the overall unemployment rate would be around 4 percent at this time if 100% of Americans were college graduates.

    Next, propose the Department of Education start tracking part-time graduation rates. They don't do that. Also get them to track low-income graduation rates, they don't do that either. That said, full-time graduation rates are the best data we have. UNLV and UNR stink, no matter how much you complain about that statistic - especially in relation to how white and wealthy the student population is and how much money both universities spend.

    As for overall spending, that is the only way to look at the issue. Looking at just one segment of revenues is dishonest and deceitful. All states are cutting back on higher ed (more in relation to other spending programs rather than absolute dollars) and have been for sometime because higher ed can and has raised revenue elsewhere. That said, higher ed spending continues to outpace inflation by several factors.

    States are having to make a choice - spend scarce tax dollars on higher ed (mostly upper middle class people) or other programs.

  9. Good questions, Patrick.
    I doubt the unemployment rate would be 4% if all were grads. a) In the Depression, doctors might get jobs as street-sweepers just to be employed; the economy doesn't appear to be "bad enough" yet for that. b) Job openings differ by discipline. There are fields with less than 3% unemployment now, but if we "all had degrees," they'd have to be spread out according to demand. A "random" degree would not do. It is not the sheepskin but the knowledge it represents that counts.

    Knowledge is a goal of education by itself.

    The FT grad rate is a 6-year rate for those who START FT -- not for those who always GO FT. I openly promote tracking overall graduation rates, and whether or not students meet their goals (degree or not).

    Other points: community colleges don't have research positions and rely more on state funding. The only recourse they have when funding goes down is to raise fees -- something that I personally don't like. DRI is the other end of the spectrum -- lots of grant funding, but 100% research. The teaching role is the one requiring state funds or fee money.