The Enrollment Cliff: What it is and why TA leaders should be concerned

The “enrollment cliff” also referred to as the “demographic cliff", is something colleges have been paying attention to for decades but has been flying under radar of most employers.  How big is the issue for colleges? The National Center for Education Statistics reports that more than 500 colleges and universities closed from 2015-2020, and it is expected many more will follow. However, I’ll be focusing just on the employer side of the equation in this post.

Enrollment cliff refers to a predicted and significant decrease in the number of students available in the near term to enter colleges and universities, primarily due to lower birth rates during economic downturns. Overall, US birth rates have declined steadily over the past few decades leading to 2.6 million fewer students over the last decade alone. However, this phenomenon is expected to have significant consequences for the availability of new graduates entering the job market just around the corner – so anyone in early talent recruiting should be paying attention.

The enrollment cliff kicks in around 2025, which correlates with the expected college entry age for children born during the 2008 -2011 recession. Estimates are there will be up to 600K fewer students available to attend college between 2025 -2030 or roughly 100K fewer students each year for at least those five years. Furthermore, there was another notable drop in births in 2020, which might extend the impact of the enrollment cliff beyond initial predictions. The decline in college enrollment could lead to a 15-20% smaller incoming freshman class in 2025. This reduction is not only due to lower birth rates but also because of competing trends including:

• Students and parents are questioning the ROI of college against higher education costs, shifting to lower cost institutions.
• Strong job market pushing entry level wages up ($20hr+), causing students to defer entering college.
• Loosening of degree requirements, shift to certifications, e-learning.
• Apprenticeships gaining in popularity.

Okay, so that’s the supply side of the issue. What about demand for talent? Short of a worldwide recession and unexpected gains from AI, the demand for talent is expected to continue to rise dramatically. Not convinced? Consider just manufacturing, specifically just high-tech manufacturing. The CHIPS and Science Act alone, which repatriates semi-conductor manufacturing to the US, is expected to create a demand of 1M additional skilled workers by 2030. This does not even include all the industries that support the semi-conductor industry, meaning the 1M is conservative.  BTW, building these hi-tech plants will take years and in some cases decades so this issue is not going away any time soon.

If you consider just the highly skilled part of the talent funnel, it will mean 100,000 MORE skilled workers needed, year after year through 2030. For a wakeup call, fewer than 100,000 graduate students are enrolled in electrical engineering and computer science in the United States annually. And just for comparison it’s estimated China and India combined graduate nearly 1M of these folks....but I digress.  If we add in the pressure for skilled trades (plumbing, welding, carpenters, etc.), this will ensure that blue collar wages go nowhere but up, further enticing prospective grads to think twice about going to college while incurring no debt. For a great short read on the shift to Blue Collar, read Ryan Chan’s LI article “Technology Will Elevate The Blue Collar Worker Beyond White Collar Status”.

What does this mean for employers? In the wise words of Bob Newhart “Just stop it”.

• Stop putting your head in the sand and hoping the problem goes away. It’s probably as good as it ever will be and the phrase “robbing Peter to pay Paul” will take on a whole new meaning.
• Stop treating early careers recruitment primarily as a way to obtain cheap hires (they really aren't BTW) rather than investing in talent pipelines, yes even LDP programs, to give you an edge for the coming talent drought.
• Stop thinking about early careers as only college and openly embrace apprenticeships as much of the world has done. Best estimates, less than 40% of youth go on to get degrees which leaves a very large “trainable” workforce to consider.
• Stop thinking the increased renege rates most early talent employers saw this year were a “blip”. You can thank virtual interviewing for giving students unprecedented access to interviews and multiple offers to go along with them, and this is unlikely to change soon.
• And for goodness sakes, stop thinking of early careers as a talent spigot you can turn on or off – those day are long gone.

It is clear that the coming years will bring unprecedented challenges to the world of early talent acquisition, with a predicted shortage of young professionals entering the workforce. It is also entirely possible that all of this doom and gloom prognostication is a case of Chicken Little syndrome and time will tell the real story. But it's hard to ignore what has been happening in talent for the past decade and will most likely accelerate as the "cliff babies" materialize or rather, don't materialize as expected.

To ensure that your organization is prepared for this potential crisis, and avoid being a "Paul", it is essential to take decisive action and focus your resources on what you do best and seek help from talent acquisition experts for any areas in need of improvement. 

Contact us for more information on how early careers talent services can provide you with the competitive advantage needed to be one step ahead of the competition.