Higher Education Probably Won’t Help Our Economy

Bloated, wasteful and ineffective is no way to grow an economy
(Guest Post by Patrick Gibbons)

As the rest of the Nation recovers Nevada’s economy still seems to slide further and further into the abyss. Nevada has the nation’s highest unemployment rate (over 14 percent). We also face a significant budget shortfall. The general fund revenue for the state budget is projected to be $5.3 billion for the next biennium – current spending is $6.4 billion.

Governor Sandoval has proposed cutting the budget and implementing reforms – most notably for education. Higher education in particular is slated for a 7 percent cut in state appropriations (17.5 percent if you include the lost ARRA federal subsidy).

To discuss the magnitude of the cuts the Board of Regents called a meeting on February 3, 2011. After three hours of testimony the only solutions presented were 1) close class sections, 2) reduce enrollment and 3) terminate faculty.

Oh no, budget cuts… Again.

The colleges and universities of Nevada have also been rolling out a new PR campaign. They’ve argued “invest more in us and we’ll help grow and diversify the economy.”

The relationship between higher education and positive economic growth is “indisputable” claims the state’s higher education chancellor Dan Klaich.

Its not at all clear that higher education can help grow Nevada’s economy. Naturally, a more educated work force can be more productive and earn higher incomes. But that assumes we’re actually educating people in the first place. It also assumes that jobs are created just because of education quality rather than a host of other factors.

First of all, states with top tier universities like California, New York and Michigan are bleeding residents and jobs. Its not just these three, a host of other states with top universities are also struggling to create jobs and keep residents. Between 2000 and 2008 the combined net migration rate for states with an Ivy League school was -2.5 million. Nevada, with its 3rd and 4th tier universities, had a net migration rate that was higher than the combined rate of all 32 states with a top 100 university. In fact, having a Top 100 University as ranked by U.S. News and World Report means a state also averages a statistically higher unemployment rate (nearly 3 points higher than not having a top 100 university).

University officials in Nevada are making a very basic logical fallacy. They are seeing Nevada’s economic struggles (fact) and assuming that Nevada’s low percentage of college graduates (fact) must be a reason why the economy hasn’t diversified and recovered. This fallacy leaves them believing they’re the saviors of Nevada, thus, we can’t cut their budget.

Conveniently, they forget the fact that prior to this economic crash Nevada sustained high economic growth, population growth, high income-per capita, and below average poverty rates for DECADES, despite having a “poorly educated” populace.

There is probably a more robust positive relationship between higher education spending
and keg stands than with economic growth.

It is especially unlikely that further investments in higher ed will boost Nevada’s economy when the Universities spend so much already and produce very little in return.

UNLV spends $19,000 per FTE student and only graduates 48 percent of the full-time students within 8 years. Meanwhile, UNR spends over $34,000 per FTE student and graduates merely 54 percent after 8 years.

At the Regents meeting I pointed out that UNLV and UNR spend more money per-pupil and employ more adults per-pupil to do the same job. According to Dr. Jay Greene’s report “Administrative Bloat at American Universities” both UNLV and UNR grew their employees faster than the student body between 1993 and 2007. UNLV saw inflation-adjusted spending per-pupil rise 59 percent while UNR saw spending rise 21 percent.

According to the U.S. Department of Education, UNLV’s inflation adjusted credit-hour costs have risen 90 percent while fees increased a whopping 771 percent over the last decade. At UNR the increase was 80 percent and 290 percent respectively.

How can anyone consider UNLV or UNR to be a wise investment? Spending more and more money to employ more adults to do the same shoddy job will not grow our states economy. At best it will do nothing at all. At worst, it may actually retard or reverse economic growth.

My two minutes of comment were up at that point, but the damning facts keep piling up. The Lied Institute at UNLV released a rather shoddy report calling for more “investment” in higher education, pointing two Arizona and Utah as states to emulate. I’ve blasted the report to pieces here and here.

Failing to conduct even the most basic literature review or even analysis on state spending, the Lied Institute researchers failed to notice that Nevada already spends more on education and research per-pupil than Utah and Arizona (see figure 11 on page 29).

In particular the Lied Institute researchers and Brookings Institution Mountain West have called on lawmakers to emulate Arizona State and the University of Utah.

ASU spends $28,000 per-pupil on “Education and General Expenditures per FTE” according to the Education Trust. That is $6,000 less than UNR, Nevada’s flagship university. As much as Arizona State is made fun of for their low-quality, they spend less and graduate more of their own students than UNR.

The University of Utah does in fact get the lion’s share of resources in Utah – spending over $50,000 per FTE. Embarrassingly, their 6 year graduation rate is 51 percent. They make Arizona State – a university lampooned by everyone including SNL and the Daily Show – look like Harvard AND a bargain.

Worse still may be the quality of, at least some, of the faculty in Nevada. One professor employed at the University of Nevada – Reno wrote me via Facebook to accuse me of believing what I do because I’m paid to believe it. Of course he “believes with all [his] heart in the mission of the university” and is “proud of [the university’s] progress” and success.

After pointing out the irony – he has called for higher taxes to fund his own employer where he makes $143,000 a year – I asked him exactly what the university’s mission was and what does he mean by success.

Just 12 percent of UNR’s students are considered low-income (Pell Grant recipients) and just 11.6 percent are underrepresented minorities (white non-Hispanics make up just 56 percent of the population in Nevada and less than half of the K-12 student population).

I wondered if the mission was to spend $34,000 a year to graduate half the students within 8 years – the vast majority of whom were middle/upper class and white.

If that his definition of success and progress, then I think the Klan might agree with him. Or at least the Joker…

Nevada needs to rethink the higher education paradigm because being bloated, wasteful and ineffective is no way to grow an economy.

5 Responses to Higher Education Probably Won’t Help Our Economy

  1. allen says:

    It’s worth keeping in mind that an important part of the value of a college degree comes from the demands of human resources departments.

    Human resources departments can, for their own reasons, demand a college degree for a job that hardly requires that level of education and by doing so artificially inflate the value of a product for which they don’t have to pay.

  2. […] This post was mentioned on Twitter by Patrick Riccards, Jay P. Greene. Jay P. Greene said: Higher Education Probably Won't Help Our Economy http://wp.me/peH0y-1V8 […]

  3. MatthewLadner says:

    Nicely done!

  4. Patrick says:

    There are more videos on ASU:

    The Simpsons:

    30 Rock:

    I actually used the Simpsons clip in a testimony just after the Brookings Institution talked about how wonderful Arizona State was.

  5. […] to secure funding during the recession by claiming that higher education will lead to more jobs (take Nevada for example). In reality, higher education does drive economic growth; but it does so on a national level, not […]

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