Educating Americans Today for Tomorrow’s Global Market

Richard Freeman

Take Aways

  • Between 1990 and 2005, worldwide enrollment in higher education doubled and the U.S. share of enrollments fell from 20% to 13%.
  • China is expanding higher education within its borders and is pursuing a strategy of sending as many graduate students to the United States as possible by awarding generous scholarships to anyone who is accepted into a U.S. graduate program.
  • It is clear that the United States cannot compete in terms of quantity. Nor does the United States want to be the only country in the world producing lots of college graduates. We do, however, want to build on our quality advantages.
  • Perhaps American higher education can serve as the center of spokes of networks linking scholars around the world and as a source of excellent students and faculty even while its worldwide enrollment share declines.

The United States has been the world scientific and technological leader for decades and likewise has enjoyed a comparative advantage in these realms in the global economy. Yet, between 1990 and 2005, worldwide higher education enrollment doubled while the U.S. share of those enrollments and degrees, particularly in science and engineering, fell rapidly. Richard Freeman, Herbert Ascherman Chair in Economics at Harvard University and director of the Labor Studies Program at the National Bureau of Economic Research, documents the growth of higher education globally and the decline of U.S. dominance in science and engineering—trends that he believes will continue into the foreseeable future. Freeman discusses their implications for American universities, students, and the U.S. labor market. He concludes with a variety of ideas about how American institutions can make a smooth transition from being the global higher education superpower to being one of many centers of excellence.

The Facts

The global higher education environment is changing significantly as more countries devote more resources toward educating their citizens.

Worldwide Growth of Higher Education

Table 1. Millions of Enrollments (and Percentage Share) in Higher Education Worldwide
NOTE: Includes two-year colleges.
SOURCE: UNESCO Institute for Statistics, http://stats.uis.unesco.org/unesco/tableviewer/document.aspx?ReportId=143

Between 1990 and 2005, worldwide enrollment in higher education doubled. At the same time, U.S. enrollment rose from 13.7 to 17.3 million, but the U.S. share of enrollments fell from 20% to 13%, largely as a result of the increased propensity for higher education in developing countries. As shown in Table 1, China’s enrollment increased nearly sixfold between 1990 and 2005, during which time its share of worldwide enrollment rose from 6% to 16% and surpassed that of the United States. India also added more students than did the United States, and its share of total enrollments rose from 7% to 9%.

Not only are other countries enrolling growing shares of students, but they also have higher graduation rates than U.S. institutions: OECD data show that in 2004, the United States was tied for last place with New Zealand out of 18 OECD countries in survival rates at “tertiary A” institutions, that is, at four-year colleges and universities (OECD, Education at a Glance: OECD Indicators 2006, p. 56). These enrollment and graduation rate data offer a sense of a future wherein U.S. dominance will continue to decline.

The United States’ rank and share of natural science and engineering (NS&E) degrees has been falling as well. In 1992, the United States ranked second of 21 advanced, OECD countries in the number of NS&E undergraduate degrees; by 2002 the United States had fallen to 14th of 23 OECD countries. The data for NS&E Ph.D.s are similar: The United States ranked third of 21 OECD countries in 1992 and 19th of 23 in 2002. Reliable comparative data for the developing world are not available. We do know, however, that in 2002 the United States accounted for 14% of first degrees awarded worldwide, but just 9% of NS&E degrees. The data for NS&E Ph.D.s are similar: In 2003, China produced not quite half as many science and engineering (S&E) Ph.D.s as the United States; given current enrollments and higher retention rates, it is projected that by 2010, the number of Chinese S&E Ph.D.s will exceed those in the United States by more than 25%. The contrast between that figure and the fact that as recently as 1975 virtually no one was earning Ph.D.s in China (as a result of fallout from the Cultural Revolution) is striking.

International Students

Not only are more scientific and engineering workers being educated in China itself; China is sending more than 50,000 graduate students annually to study in American universities. Only India sends more, at nearly 65,000 annually. (Two other Asian countries, South Korea and Taiwan, round out the top four on the list of countries that send graduate students to American universities.) China is pursuing a strategy to send as many graduate students to the United States as possible by awarding generous scholarships to anyone who is accepted into a U.S. graduate program.

Despite these numbers and efforts, the U.S. share of all international students has been steadily dropping, from 38% in 1985 to 22% in 2005, as more countries—already offering less expensive alternatives to U.S. institutions—have been taking measures to make themselves more attractive to foreign students, such as teaching in English. In the last two decades, Australia, for example, has opened the door so wide for foreign students with a number of incentives, including easier immigration, that higher education is now its largest services export sector. The absolute number of international students studying in the United States is increasing, however, and the foreign-born share of U.S. Ph.D.s awarded in the natural sciences and engineering has been steadily rising, from 22% in 1985 to 38% in 2002. Foreign-born postdocs, who are critical to the conduct of the scientific enterprise in the United States, now outnumber American postdocs: Their numbers rose from 40% in 1985 to 58% in 2002.

Students from the Asian and other developing countries are more likely to stay in the United States when they graduate because their opportunities are better here than at home. Graduates from the EU countries, on the other hand, tend to have more opportunities back home and so are more likely to return there. Michael Finn’s recent analysis of stay rates of Ph.D.s using Social Security information finds huge differences across countries that are roughly consistent with the intentions that those students give in the Survey of Earned Doctorates when they earn their degrees. Two-thirds of foreign citizens who received science or engineering doctorates from U.S. universities in 2003 lived in the United States in 2005. The vast majority of Chinese and Indian Ph.D.s from earlier cohorts were still in the United States seven years after gaining their degrees (Oak Ridge Institute for Science and Education, 2007).

Advanced Country Feminization of Higher Education

Table 2. Female-to-Male Higher Education Enrollment in OECD Advanced Countries, 2004

Female enrollments in higher education have been surging in the advanced countries, and gaining slowly in the developing countries. In 2004, U.S. female undergraduates outnumbered males by 37%, and in master’s degree programs females outnumbered males by a full 43%. At the Ph.D. level males still outnumber females by 8%—but given the trends, that likely won’t be the case for long.

The United States is not unique in this respect: As shown in Table 2, in 2004 more women than men were enrolled in higher education in all but four OECD advanced countries.

With specific regard to science and engineering, in the mid-1950s and 1960s, the percentage of National Science Foundation fellowships awarded to women hovered around 10%. Their rise has been steady and marked since then, and beginning in the early 2000s, women have been winning the majority of all NSF fellowships awarded—that is, they are proving themselves to be the cream of the crop in these fields. Women’s share of the NSF awards in the social and life sciences has exceeded 60% in recent years. Clearly, some leveling off of these trends will occur at some point—but we haven’t reached it yet.

Implications

Should we be concerned about the decline in the U.S. share of world higher education enrollments and degrees, particularly in science and engineering? Does it matter that the U.S. share of international students is dropping too? What are the implications of the fact that women have become the majority of university students throughout the advanced world?

Macroeconomic Effects

From the macroeconomic point of view, the key outcome of these trends is that there will be tens of millions more university graduates working throughout the world. More knowledge will be created, productivity will rise, and the cost of goods will fall—all of which will be good for humanity.

U.S. and multinational companies that globally source their labor will benefit because they hire the best candidate for the job regardless of nationality. U.S. firms, too, will benefit from the fact that an increasing number of students around the world will have been educated in English, thus overcoming language barriers to their hiring.

On the other hand, the U.S. comparative advantage in science and technology is at risk. Indeed, the increased supply of scientific and engineering workers—including doctorate researchers and others able to advance scientific and technological knowledge—in large developing countries threatens to dramatically alter the traditional North–South trade model. This model postulates that the advanced area, the North, has the skilled work force and R&D capabilities to innovate new goods and services and trade them with the South, which produces older goods as it gains the technology to do so. Once the two regions have access to the same technology, the lower-wage South produces the good or service. Workers are more highly paid in the North than in the South because they are more highly skilled and because the North has a monopoly on the new products. More rapid technological advances increase wages in the North relative to the South, while more rapid diffusion of technology has the opposite effect.

Today, the rapid expansion of higher education in China creates the possibility of human resource leapfrogging, in which large populous countries employ enough scientists and engineers to successfully compete with the advanced countries in the high-tech vanguard sectors that innovate new products and processes.

With regard to the feminization of higher education, it is to the United States’ advantage to be educating more women, especially as they are added to the U.S. supply of science and engineering graduates. As Table 2 shows, this phenomenon is occurring in nearly every advanced country. But these trends raise an obvious question and concern: What is happening to the boys and men in these countries?

Finally, I am a strong believer in university education as a democratic force. I have seen firsthand students in China, for example, who have studied in the United States and returned home with a solid democratic orientation quite different from that of their government. Recently I proposed to the South Korean government that they offer fellowships to the children of North Korea’s dictatorial elite to enable them to leave North Korea to be educated elsewhere. I am convinced that within a generation such a program could change North Korea’s political climate. I think of foreign students studying in the United States as a great secret weapon—a foreign policy tool to advance democracy and civilization throughout the world. Ideally, more and more foreign students will study in the United States and return to their native countries with friendly attitudes toward us. The same is true, of course, in reverse. We all stand to benefit from not just economic effects but also from the social and civic benefits of expanded higher education.

Effects on U.S. Universities and Students

Despite the drop in the U.S. share of international student enrollment, at this point it is unclear how competitive foreign universities actually are in attracting the best foreign students—or American students for that matter. There is no question, though, that with all the serious effort being devoted toward improving higher education around the world, at some point American universities’ ability to attract the best and brightest will be affected. Meanwhile, U.S. institutions stand to benefit from a wider pool of applicants as other countries fill the pipeline with more high school and first degree graduates, and therefore present a better selection of students. Likewise, American students increasingly will find themselves competing for admission to the top U.S. institutions, albeit largely at the graduate level given that foreign-born enrollment at the undergraduate level in the United States is still low (3% of total enrollment in 2002).

Up to now, most of the growth of foreign-born U.S. enrollment has been occurring at less competitive institutions in smaller, newer graduate programs. The influx has spurred expansion and quality improvement at these institutions, which in turn can improve overall quality throughout the system.

The benefits to companies that globally source their labor, as discussed above, mean that American graduates will be competing for jobs both with foreign-born graduates of American institutions, particularly at the higher levels, and with graduates from foreign universities, whose quality is increasing. Thus, we can expect that the share of foreign-born U.S. graduates and foreign graduates working for U.S.-based multinationals will rise in the future. At the same time, however, globalization will offer American graduates new job opportunities overseas. Given these dynamics, one wonders whether there might be a role for universities as agents for their graduates in setting policies that affect their labor market.

Conclusion

It is clear that the United States cannot compete in terms of quantity—our share of world enrollments simply will keep getting smaller and smaller for the foreseeable future. But presumably that’s a good thing because education will increase worldwide. The United States does not want to be the only country in the world producing lots of college graduates. We do, however, want to build on our quality advantages: Many U.S. institutions today have a strong brand with potential for branching out internationally, as do global companies. Should it be possible for students in India or China to earn an MIT degree, for example? Could we attract the best students to the United States by making their immigrant status after graduation a less difficult process?

Perhaps American higher education can serve as the center of spokes of networks linking scholars around the world and as a source of excellent students and faculty even while its worldwide enrollment share declines. Consider that more and more scientific papers are being jointly written and that science is being done by teams of scholars collaborating from around the world. The U.S. advantage in this respect is that our colleges and universities produce the best trained graduates, many of whom go back to their home countries but stay linked with their U.S. counterparts.

American institutions have several advantages in their favor, including a first mover’s edge in terms of global collaboration, close links to business, an entrepreneurial mindset, and an openness to accepting and building upon foreign-created knowledge. The key will be to find and exploit quality niches that allow U.S. institutions to make a smooth transition from being the global higher education superpower to being one of many centers of excellence.


Richard Freeman holds the Herbert Ascherman Chair in Economics at Harvard University and is currently serving as faculty director of the labor and worklife program at the Harvard Law School. He is also director of the Labor Studies Program at the National Bureau of Economic Research and a Senior Fellow in Labour Markets at the London School of Economics’ Centre for Economic Performance. Freeman can be reached at freeman@nber.org.