Two weeks ago I saw a presentation by a demographer named Ken Gronbach, author of the book The Age Curve. He made a simple but important point. Markets are influenced by the number of people in them. 50 people eat less, buy less, vote less and die less than 100 people. So one of the ways to understand why an industry is performing poorly or well, is to look at the demographic it serves and how many individuals are currently in that demo.
You may also make predictions on how an industry will perform in the future, based on the number of people that are moving into the target demographic over the next 5 or 10 years.
Looking out at the demographics, it seems clear that enrollment for the freshman classes of 2012-2017 will be flat, or even smaller than the freshman class of 2011.
Before I proceed, I should say I am neither a demographer nor a statistician. I was simply curious how Gronbach’s ideas could be applied here.
If you look at the chart below, on top you see a blue line indicating total births. This is the number of children born 18 years prior in the US (according to Department of Health and Human Services statistics). So in 1970, the 3,913,000 children born in 1952 turned 18 years old and became potential freshman.
The red line represents the size of the actual incoming freshman class in the US, including 2-year and 4-year schools (according to the U.S. Department of Education, National Center for Education Statistics, Biennial Survey of Education in the United States).
When you compare the pool of potential freshman (18 year olds) to the actual number of freshman enrolling, you start to see a relationship. In 1957 the US set a new all-time record for births with 4.308 million. Eighteen years later, in 1975, an all-time record for freshman enrollment was set with 2.515 million students.
Relatively small numbers of children were born in 1973 through 1975 (an average of 3.147 million). Subsequently the freshman classes of 1991-1993 averaged only 2.207 million, down over 13% from the incoming group in 1975.
One other factor is in play here. The overall percentage of students enrolling has increased dramatically from the first year on this chart as well. The freshman class of 1970 represented only 52.7% of the total number of births from 1952. Twenty years later in 1990, the incoming class represented 69.2% of the births from 1972. That number stayed in a range between 60% and 69.5% from 2000-2008.
But in the last two years it has jumped to 73.5% for 2009 and 78.6% for 2010. This may be a result of kids and adults without good job prospects turning to school during the recession. Obviously this number becomes harder and harder to grow as it approaches 100%.
What It Means
All this leads me back to the initial point. While there are many factors that play into enrollment, the most likely scenario for higher education is that enrollment will be flat for the next five plus years, before growing again. There just weren’t enough kids born between 1994 and 1999 for it to happen any other way.
Total births dropped steadily throughout the middle nineties. And didn’t climb back over 4 million until 2000. So the potential freshman pool won’t likely reach this past year’s levels until 2018 or 2019. If we return to a more traditional percentage of the population enrolling (say 68%) instead of the unheard of 78.6% this past year, it will take even longer.
The good news is the last ten years or so, we’ve been a very fertile group. From 2000 through 2008 (the last Vital Statistics Report available from CDC) we haven’t had a year with less than 4 million births, including a high of 4.3 million in 2007. So while we may need no additional infrastructure for a little while, plan on having those extra dorms ready in time for the class of 2025.