Thursday, February 05, 2009

college towns

University jobs ain't safe either. Better to stick with industry.

Dartmouth College employs roughly 4500 people, 3500 of whom are non-faculty employees. Dartmouth has an endowment that hovers somewhere between three and four billion dollars. It is reported that about 25% of the school’s operating budget comes directly from the interest generated through the endowment’s investments. The balance, of course, comes from student tuition and alumni giving. The most updated report to the Dartmouth community---sent to us last Thursday---reports that the endowment has lost approximately 18% of its value over the past 12 months.

So why, in my opinion, will college towns get hit particularly hard over the next 2-3 years? Well, it's because of a combination of factors, some of which I touched upon above. Tuitions will drop, federal financial aid will dry up, endowments will shrink, businesses that once catered to a reliable student clientele with have to cut back on staffing, the college itself with have to cut back on staffing, energy consumption costs will rise in relationship to what the college has to spend, etc. And these are all dynamics that feed upon one-another. The local coffeeshop closes and 10 people from the community lose their jobs. 3 out of those 10 individuals cannot afford to pay the mortgage because they have no income. The local bakery---which used to make 30% of its daily profits from selling to the coffeeshop---has to let go of 2 employees. 

College towns are vulnerable in that, like old mill towns of the 19th century, they usually have but one major employer. If that employer takes a big financial hit, the entire town suffers from the shock waves that result. And in an economic Depression, college itslef becomes a leisure activity rather than a necessity for survival. I predict very dark times ahead for higher education, and in particular for the tens of thousands of behind-the-scenes workers who, up until now, kept these institutions running smoothly.

1 comment:

yogijp said...

Beating the College Bubble