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New York — The higher education sector, vital to the success of the American economy, is facing a number of challenges that should force a rethink of some of its orthodoxies, said Patrick T. Harker, president and CEO of the Federal Reserve Bank of Philadelphia on Thursday. Harker made the remarks to an audience of higher education financial and industry professionals. He drew on his own history in academia, including as a business school dean and a university president, but framed his perspective as that of a policymaker.
Harker cited both demographic influences and the growing price tag on a college education, among others, as issues facing the sector and the country as a whole.
“Labor force participation in the United States is significantly lower than a decade ago. This is largely due to demographic factors and, according to research by my staff, is likely to continue to decline.” In addition to fewer people in the labor force, he said, the baby boom generation’s move into retirement, coupled with the tendency to live longer, has further economic impacts.
Student debt is also an issue, with research from the Philadelphia and other regional Feds finding an effect on both household and small business creation. Additionally, higher education institutions are themselves facing constraints in funding.
With labor force participation low and costs on the rise, Harker addressed the implications for the economy. “Growth is, fundamentally, growth in the labor force plus growth in productivity. Without an increase in one of those variables, GDP is likely to suffer, and in recent years productivity growth has proven to be stubbornly low as well.” Adding to the concern is new research indicating that the U.S. may be missing out on a vast amount of talent as lack of access for some groups has created what the authors called America’s “lost Einsteins.”
Given these factors, Harker advocated a multilateral approach to higher education, lauding skills training, workforce development, and apprenticeship programs as one avenue and urging traditional four-year institutions to consider rethinking some of their established approaches as another.
Pointing to community colleges, Harker said there were creative approaches and business models that could serve multiple purposes. “Programs like these can help students avoid debt, funnel people into well-paying, understaffed occupations, and develop new revenue streams without disrupting four-year programs,” he said.
“I’m not advocating that traditional four-year institutions change their models to practical training. I am saying that the pragmatic approaches these programs take to meeting the needs of business and industry, while simultaneously being creative in how they educate students, can help us rethink some of the old ways of doing business.”