Are American universities and model in trouble competing on fees and on line?

Are American universities and model in trouble competing on fees and on line?

The American model of higher education is spreading. It is good at producing excellence, but needs to get better at providing access to decent education at a reasonable cost

IF YOU LEARNED that the top dogs in a particular market were the same as 100 years ago, you would probably surmise that the business concerned had suffered a century of stagnation. In the case of higher education, which has been dominated by American universities since the early 20th century

The American-style research university is the gold standard, and competition among nations to create world-class research universities as good as America’s is intensifying. Spending on higher education is rising: across the OECD, from 1.3% of GDP in 2000 to 1.6% in 2011.

America’s best universities still do more top-class research than any other country’s; the problem lies in getting value for money on the teaching side. Tests suggest that many students do not learn enough these days. They work less than they used to. The average performance of America’s graduates, compared with those of other countries, is low and slipping. Higher education does not increase social mobility but reinforces existing barriers. At the same time costs have nearly doubled in real terms in the past 20 years. The enrolment rate is falling. Technology offers the promise of making education both cheaper and more effective, but universities resist adopting it.

America, having exported its model to the world, could learn some lessons from other countries about how to improve its own system.

What happened in America then happened in Europe and Japan in the 1960s and 1970s, in South Korea in the 1980s, and is now happening the world over. Student numbers are growing faster than global GDP. So hungry is the world for higher education that enrolment is growing faster than purchases of that ultimate consumer good, the car (see chart 1). The global tertiary enrolment ratio—the proportion of the respective age cohort enrolled in university—increased from 14% to 32% in the two decades to 2012; the number of countries with an enrolment ratio of more than half went up from five to 54 over the period. Sub-Saharan Africa is the only part of the world where “massification” is not much in evidence yet.

Some countries, such as South Korea, where pretty much everybody goes to university, have probably reached saturation point

But changes in the labour market also help to explain the ever-growing pressure to get a degree. Automation has created what Claudia Goldin and Lawrence Katz, two Harvard academics, have called “a race between education and technology” which only those with plenty of education will win. As automation depresses wages at the bottom of the pile, inequality grows, and the more unequal society becomes, the riskier it is not to have a degree. For all the stories of university dropouts who became software billionaires, non-graduates have little chance of joining the ranks of the prosperous few.

Although individuals enjoy decent returns to their investment in higher education, it is less clear that society as a whole does. The big question is whether the graduate premium is the consequence of higher productivity or of establishing a pecking order. If universities increase people’s productivity, then society should invest in having more graduates, but if they are merely a mechanism for signalling to employers that graduates are cleverer than non-graduates, then it should not. And since little effort goes into measuring whether universities actually educate people—a matter to which this special report will return—society does not know whether investing in education is worthwhile.|hig|26-03-2015|

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