No one is immune.
The forces of creative destruction that economist Joseph Schumpeter wrote about in the early part of the 20th century affect all industries, businesses, and organizations. The economy is such that new ideas and new products come along all the time, forcing to rethink how we practice our trade.
My industry, higher education, is feeling the impact of these destructive forces, but resisting change. Most colleges and universities still do things the same way, protecting their traditions and institutional framework.
Economic theory shows us why the business of higher education will have to change.
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Awhile back many economists figured out that students don’t necessarily go to college to learn anything (of course, students knew this long before their professors). Many people pursue college degrees for what such effort demonstrates to employers.
Signaling theory, as it is known in economics, predicts that highly educated workers earn more than others, not because education has made them more productive or smarter, but because workers that already have natural ability go to college and use their degrees as a way to show prospective employers they have innate abilities that make them good workers. Business firms use education as a way to sort high-ability workers from low-ability workers.
The implication for this line of research is that attempts to increase the educational attainment of all workers will not affect the overall level of wages in the economy. More people with a college degree reduces the effectiveness of the signal.
Again, students (the consumers of higher education) are figuring this out and looking for new and better ways to let employers know how good they are.
In a variety of professional fields, specific certifications and professional licenses are available to students that can simply pass the exam. Students can buy a book or just watch videos online to prepare for the exam and avoid the ever-increasing tuition of college. The exam results can be a strong signal to employers that the job candidate has the ability to manage office systems, run a payroll department, conduct a social media campaign or any number of other business tasks that were previously given only to college graduates.
In other fields, job candidates can now directly demonstrate their ability by doing the work and then quickly showing it to many prospective employers. Software engineers write the app, and in no time, firms that can benefit from these skills are calling. Previously, graphic designers needed institutions, such as colleges and studios, that would display their work. These artistic portfolios are now instantly available to whoever likes the work, and thereby instantly signal the worker’s ability.
Colleges and universities continue to hold on to their old way of doing things despite these creative forces. Despite the declining value of the signal produced, the higher education industry continues to lobby for more government-provided financial assistance or seeks donors for endowments protecting old academic programs and tenured-faculty positions.
Earlier this year the administration of Northwest Nazarene University announced a restructuring which I support. NNU is doing what it can to meet the needs of students. My faculty colleagues have their own reasons for opposing the action, but I pray it isn’t fear.
We need to change, and it could be fun.
University faculty and administration should let go of the old way of doing things and seek new ways of instruction. We should be smart enough to find more and better ways our students can demonstrate what we are teaching them.