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The Effects of Decreasing College Enrollments on the Labor Market

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By Barbara Strother

Corporate Recruitment Manager at Aleron

Since its inception, higher education has been crucial in shaping individuals, fostering critical thinking, and contributing to societal progress. The history of higher education in the United States dates back to 1636 and is marked by a continuous evolution and adaptation to societal needs, changing knowledge landscapes, and advancements in teaching and learning methods. There has been a global trend toward increasing access to higher education in recent decades, with governments and institutions implementing policies to widen participation, promote inclusivity, and increase enrollment rates. Online and distance learning have allowed individuals to pursue degrees remotely.

The enrollment decline

Going to college has been proven beneficial, including better job opportunities, higher job security, enhanced job satisfaction, personal growth, self-esteem, and marketability. Workers with Bachelor’s degrees earn 75 percent more annually and $1.2 million more in their lifetime than those with a high school diploma. Yet, college enrollments have declined steadily since 2012 and dropped 8 percent from 2019 to 2022. What’s contributing to the decrease in four-year college enrollments?

  1. Rising costs and debt: Rising tuition fees, student loan debt, and the overall financial burden on students and their families have led to discussions about a college degree’s value and return on investment. Student debt has more than doubled over the last two decades, with U.S. borrowers owing $1.6 trillion+ in federal student loans. As tuition costs rise, there is a greater emphasis on tangible outcomes such as employment rates, salary potential, and career advancement opportunities. If the perceived value of a college degree diminishes relative to these outcomes, it can impact the willingness of students to pursue a four-year degree.
  2. Pursuit of alternative pathways: 34 percent of employed college graduates could have been hired for their current positions without a college degree. As a result, students are exploring less costly alternatives to gain skills and credentials. This includes community college, vocational training, apprenticeships, online courses, or certifications that offer targeted training in specific industries. These alternatives may be seen as more cost-effective and efficient for specific career paths, potentially diminishing the perceived value of a traditional college degree.

In addition, the increasing disconnect between the skills taught in traditional college programs and the demands of the job market contributes to the declining value of degrees. In rapidly evolving industries—cybersecurity, robotics and automation, and sustainable energy—employers may seek candidates with up-to-date and industry-specific skills not adequately covered by traditional academic programs.

  1. Declining birth rates: In the United States, birth rates have fallen over the past five decades, while women have children later. The 2008 recession caused a significant decline in the birth rate. By 2025, a decrease of 15 percent, and up to 24 percent in the northeastern and midwestern states, is predicted in the number of traditional college-age students causing an “enrollment cliff” or significant drop in the number of college-age individuals or students entering higher education institutions beginning in 2025.Why? Because these recession babies would have started entering college in 2025.

The effect on the workforce

A decrease in college enrollment can impact employers by limiting the available talent pool and creating skill gaps. Adaptation and flexibility in recruitment and talent management strategies are essential for employers to address these challenges effectively.

1. Emphasize skills: As the number of college graduates decreases, 76 percent of employers use skills-based hiring rather than solely relying on formal degrees. Skills-based hiring is a recruitment approach that focuses on evaluating and selecting candidates based on their specific skills and abilities rather than solely relying on qualifications such as education or work experience. Instead of primarily considering factors like the candidate’s academic background or previous job titles, skills-based hiring emphasizes the individual’s transferable skills and competencies directly related to the job requirements.

Employers can also focus on upskilling and reskilling their current workforce to meet the changing demands of the job market. These strategies include assessing their skills gap, executing training programs, and implementing experiential, social, and formal learning within their organization.

2. Look to alternative credentials: 53 percent of organizations have removed their Bachelor’s degree requirement to attract and accommodate individuals without higher education. These companies include Bank of America, Dell, Delta, Google, and IBM. Of those companies that eliminated the requirement, 60 percent did so for entry-level roles, 57 percent for mid-level, and 33 percent for senior-level. To identify qualified candidates, employers emphasize alternative credentials, such as community college, vocational training, online certifications, or apprenticeships. This shift could reshape hiring practices and create new pathways for individuals to enter the job market.

3. Focus on retention: As qualified candidate attraction becomes even more of an issue with declining college enrollments, talent retention comes front and center. Retaining skilled employees will help your organization maintain a competitive edge, reduce recruitment and training costs, promote continuity, and foster a positive work culture.

Conclusion

Decreasing college enrollments have significant implications for the labor market and employers. As a result, organizations must adapt their recruitment and talent management strategies. By embracing these changes and valuing skills, employers can navigate the shifting landscape and secure the talent they need for future success.

This blog was written by Barbara Strother, Corporate Recruitment Manager at Aleron. Acara Solutions is an Aleron company.