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Higher Education Is Dying

Wage convergence is hitting many industries, including higher education as well as oil and gas.
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Harvard University at night. (Photo: Jorge Salcedo/Shutterstock)

Harvard University at night. (Photo: Jorge Salcedo/Shutterstock)

How would you define a "dying" region? Population decline used to be a good indicator. Nowadays, robust economies might be losing people. More timeless, economies die. Places don't die. What is a good indicator of an economy dying? Wages:

Well before the recent recession, many colleges and universities realized that they could not afford so many full-time tenured and tenure-track faculty members, and they began to increase their reliance on lower-paid adjuncts. Few institutions fired large numbers of full-timers suddenly, because that could have left them understaffed if trends reversed. Longstanding protections of tenure were also a constraint. Instead, many administrators added modestly to the number of adjunct faculty members, sometimes over decades, relying on retirement and attrition to manage the shift in a relatively smooth manner.

At some point, when an economy or labor market transitions from divergence to convergence, employers must reduce total wages in order to survive. The difference between divergence and convergence is best understood geographically. If the best jobs are located in a few metros, labor is scarce. Everyone can't live in a boomtown. If the best jobs diffuse, labor is abundant. Seeking lower wages, jobs will move to where the employees live. Jobs following people is convergent. Jobs following people is indicative of a dying economy.

Overall, higher education as an industry is ubiquitous, not geographically dependent. Higher education is demographically dependent. As long as more high school graduates keep clamoring for more training, the sky is the limit for wages. Demand outstrips the supply of services. Higher education is neither divergent, nor convergent.

How can higher education, as an industry, die? Demographics conspire against every institution. The pool of high school graduates willing and able to attend a given institution declines as birth rates decline. The Hispanic population boom doesn't do any good unless those kids go to a small, liberal arts college in rural Pennsylvania.

As demographics take a bite out of high-wage employment at colleges and universities, economic divergence asserts itself on the labor market. Institutions with a large endowment, such as Harvard, can pay a much higher salary to faculty. Harvard isn't dependent on demographic trends. Harvard is divergent.

Industries or economies dependent on demographic trends are dying. Joining Big Steel, welcome to the convergent club, oil and gas:

Burned by the talent crunch created by hiring freezes in prior downturns, energy companies continue to beat the block for new recruits, even as they lay off older, more experienced workers amid the worst energy slump in years, two top energy executives said during a panel discussion Tuesday in Houston.

Reminiscent of higher education, oil and gas is replacing older, more expensive labor with younger, cheaper labor. Energy industry talent has and will go where the jobs are. The labor market hasn't been divergent. It doesn't look divergent. But oil and gas jobs are dependent on demand, which is a function of demographics (see China). Like higher education, the energy industry is dying.


Jim Russell, a geographer studying the relationship between migration and economic development, writes regularly for Pacific Standard.