Transcript The Demographic Challenge Facing Scottish HEIs

The demographic challenge of higher education:
Impacts of a decline in student numbers on the
Scottish economy
Kristinn Hermannsson
Katerina Lisenkova
Peter McGregor
Kim Swales
June 30, 2009
Scotland’s Universities and the Economy: Impact, Value and Challenges
Fraser of Allander Institute, Department of Economics, University of Strathclyde;
Centre for Public Policy for Regions (CPPR), Universities of Glasgow and Strathclyde
The “demographic challenge” for
HEIs
• Demographic changes in the UK are projected
to result in a fall in the number of students
• Recent Universities UK report makes projections
of likely numbers of students
• We provide a CGE analysis of likely impacts on
Scottish economy of Universities UK scenarios
In 2007 71% of the first year fulltime UK-domiciled undergraduates
were aged 18-20
Population aged 18-20
Scotland
2006-based principal GAD/ONS projection
210,000
-11.0%
190,000
180,000
170,000
160,000
-16.9%
2026
2025
2024
2023
2022
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
150,000
2005
thousands of persons
200,000
UUK projections
• Two types of projections in UUK report:
– Baseline projection – based on demographic factors
• Projected age/gender/ethnicity composition of the UK
population
• Projected population of EU countries
• Projected number of non-EU students
• Projected conversion rate from undergraduate to
postgraduate study (increasing in line with recent trends)
– Three scenarios – take into account how HEIs may
react to these changes
Projected total number of
students (FTE*): UUK baseline
200000
thousands of students, FTE
190000
-6.8%
180000
170000
160000
150000
-11.4%
Source: Universities UK, own calculations
*FTE – full-time equivalent; part-time students added with coefficient 0.5
2026
2025
2024
2023
2022
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
140000
Description of scenarios
Scenario 1
Scenario 2
Scenario 3
Slow adaptation to change
Market-driven and competitive
Employer-driven flexible learning
Participation of
young people
As now but with some switch
from full-time to part-time
Reduced participation in full-time
but increased participation in
part-time
Substantial reduction in full-time, but
on headcount basis participation at
current level
Participation of
older people
Modestly increased
Substantially increased
Substantially increased
Employer
engagement
Modestly change, mainly
through increased influence on
the curriculum
Increased but not necessarily
primarily with publicly funded
HEIs
Substantially increased – employers
are the primary drivers of large
proportion of public funding
Competition (UK)
Increased competition amongst
publicly funded providers
Significant expansion of the range
of private providers – fierce
competition for UK students
Highly stratified and polarised
system with only limited
competition
Competition (int-l)
UK HEIs compete effectively
despite increased competition
UK HEIs compete less well
With the exception of elite HEIs, UK
HEIs compete less well. However,
they engage with technology-based
borderless education
Technology-based
learning
Some increase in e-learning, but
face-to-face learning is the
predominant mode
Substantial increase in elearning
E-learning is the predominant
mode
Academic staffing
As now with academic staff
undertaking teaching and
research
Two streams: one – research
and teaching in large HEIs, the
other – teaching in small HEIs
Flexible academic workforce. Increased
movement between academia and
business. Significant part of academic
staff becomes self-employed,
contracting work at several HEIs
Projected total number of
students (FTE): all scenarios
200000
thousands of students, FTE
190000
180000
170000
Baseline
Scenario1
Scenario2
Scenario3
160000
150000
Source: Universities UK, own calculations
2025
2024
2023
2022
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
140000
Sources of Scottish HEIs income
• Funding Council grants
– Recurrent grants (Teaching) –proportional to the number of Scottish
students (FTE)
– Recurrent grants (Research)
– Recurrent grants (other)
• Tuition fees & education grants & contracts
– Home & EU domicile
• Full-time fees – proportional to the number of full-time home and EU
students
• Part-time fees – proportional to the number of full-time home and EU
students
– Non-EU domicile – proportional to the number of non-EU students
(FTE)
• Research grants & contracts; Other income
AMOS-HEI: a CGE model of the
Scottish economy
• Effectively a regional, empirical, general equilibrium variant of the Layard, Nickell and
Jackman (LNJ) model. So the supply side is crucial (and, of course, non-passive)
• Multisectoral CGE calibrated on 2006 Scottish Social Accounting Matrix, with HEIs as
one sector:
– 25 sectors, cost minimisation
– 3 domestic transactor groups
• Goods markets modelled as competitive, with equilibrium relative prices determined
simultaneously by demand and supply
– Demands fairly conventional
– Trade flows sensitive to relative prices
• Labour market imperfectly competitive, though unified
– characterised by regional bargaining - wage curve (w, u negatively related) - LNJ variant
AMOS-HEI (continued)
• Second element of flexibility - population is
– either fixed
– or Harris-Todaro (w, u positively related) - LNJ variant
– When combined with wage curve the two relations tie down w, u
• Final element of flexibility relates to treatment of capital stocks, which are
– either fixed (total and composition)
– or gradually adjusted to optimal level, driven by gap of rental rates and user costs
• Dynamics in model are recursive: sectoral capital stocks updated each period
through investment functions; population updated via the migration function
• Financial markets fully integrated and not modelled explicitly
• How does AMOS-HEI relate to IO models of HEI impacts?
–
–
–
–
Full specification of the supply side
Can therefore capture heterogeneity among regions (e.g. supply constraints?)
Relative prices (competitiveness) endogenously determined
But, if supply-side is passive, AMOS-HEI converges on comparable IO models
Impact of the loss of income by
HEIs: baseline
2006
2010
2015
2020
2025
GDP (£m)
0.000
10.434
-15.325
-62.043
-73.158
Total employment ('000)
0.000
0.261
-0.378
-1.633
-2.020
Unemployment (%)
5.797
5.792
5.806
5.815
5.798
CPI (%change)
0.000
0.016
-0.029
-0.063
-0.017
Real wage (% change)
0.000
0.010
-0.018
-0.034
-0.001
HEI sector employment('000)
0.000
0.346
-0.594
-1.670
-1.152
UUK baseline
Impact of the loss of income by
HEIs: all scenarios
2006
2010
2015
2020
2025
2026
0.000
0.000
0.000
10.434
0.261
0.016
-15.325
-0.378
-0.029
-62.043
-1.633
-0.063
-73.158
-2.020
-0.017
-74.869
-2.051
-0.016
0.000
0.000
0.000
15.015
0.379
0.022
-2.767
-0.042
-0.019
-40.618
-1.057
-0.052
-42.942
-1.210
-0.004
-39.913
-1.123
0.002
0.000
0.000
0.000
7.359
0.182
0.012
-23.555
-0.598
-0.035
-75.941
-2.007
-0.070
-93.255
-2.558
-0.025
-98.651
-2.680
-0.029
GDP (£m)
0.000
-3.808
-53.704
-127.030
-165.986
-179.044
Employment ('000)
CPI (%change)
0.000
0.000
-0.104
-0.003
-1.402
-0.059
-3.380
-0.097
-4.506
-0.055
-4.822
-0.065
UUK baseline
GDP (£m)
Employment ('000)
CPI (%change)
Scenario1
GDP (£m)
Employment ('000)
CPI (%change)
Scenario2
GDP (£m)
Employment ('000)
CPI (%change)
Scenario3
GDP impact of the fall in student
numbers: baseline
90200
90150
90050
90000
89950
HEI income only
Including student's expenditures
2026
2025
2024
2023
2022
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
89900
2006
£m
90100
GDP impact of the loss of income
by HEIs : all scenarios
90200
90150
UUK baseline
90050
Scenario1
90000
Scenario2
89950
Scenario3
2026
2025
2024
2023
2022
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
89900
2006
£m
90100
Employment impact of the fall in
student numbers: baseline
2406
2405
2403
2402
2401
2400
2399
2398
HEI income only
Including student's expenditures
2026
2025
2024
2023
2022
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2397
2006
thousands of jobs
2404
Employment impact of the loss of
income by HEIs : all scenarios
2406
2405
2403
UUK baseline
2402
Scenario1
2401
Scenario2
2400
Scenario3
2399
2398
2026
2025
2024
2023
2022
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2397
2006
thousands of jobs
2404
Conclusions and future research
•
•
•
•
The macroeconomic consequences of the demand-side impacts of UUK’s projections
of student numbers entering Scottish HEIs appear fairly modest, though
unambiguously negative
These effects are smaller than would be revealed by conventional “impact” or
“multiplier” analyses, in which wage and price flexibility would be unable to insulate
the real economy
However, here we do not include the adverse supply-side impacts of the projected
contraction in student numbers, which we might expect to predominate over the
longer term as these are reflected in the level of skills in the host region, and in the
scale of knowledge transfer effects. In this sense the estimates represent a minimum
estimate of the likely macroeconomic consequences of UUK’s projections
Future research along the following lines:
–
–
–
–
impact on other regions
supply-side consequences of the “demographic challenge”
interregional effects
wider economic and social impacts of HEIs.