A Quiet Crisis: Higher Education & Economic Development Transcript
MR. FROLIK: Jenny Brown, let’s start with you. You’re with the Ohio Board of Regents. You were also research director of BP America and sat on the board of numerous Fortune 1000 corporations.
You told me recently that we’re under-educated in Ohio. Tell me what you meant by that, and particularly from an economic standpoint, what does that mean to the State of Ohio?
MS. BROWN: Well, it’s a very serious issue and it’s one that I don’t think is well enough appreciated by the citizens of our state, all the way from the business community to the students and parents who are going to be attending our universities in order to change the statistic.
What it means is that on - compared to national averages - Ohio has about 408,000 citizens that they would need to educate with at least some college in order to get to the national average, just to get to the national average.
We have only 17% of the citizens in Ohio who have a Bachelor’s degree or higher. We have something like 39% who have an Associate’s degree or any kind of college. What does this mean? And, incidentally, we want to get much higher than the national average. Ohio can and should aspire to a much higher, I think, goal than just becoming average in this world. What does this mean? Research across the country, and it has been demonstrated in state after state, shows that the average income of Ohioans and their level of educational attainment clearly go together. That’s a given. If you earn a Bachelor’s degree, your income is going to be almost twice as much as a high school graduate. But they’ve also found that an area’s economic development, it directly parallels an area’s educational level. Businesses will go to where there is an educated work force. So this is, for Ohio, a very critical problem. We are under the national average and, in fact, we are not gaining on it. We are not turning this situation around like other states have done.
And so, as I say, this issue is one that we are truly concerned about and that we must correct as quickly as possible or we will never be able to realize the kinds of quality of life issues, the kinds of personal income growth that we would like to see for every Ohioan in this new knowledge economy, this new century that we are in and find ourselves in at the moment.
MR. FROLIK: I was struck by a chart that the Board of Regents generated that in 1940, Ohio had actually about 110% of the national average in per capita income.
MS. BROWN: Exactly.
MR. FROLIK: And we were right about at the national average, I think a tad below in terms of percentage of the population with a Baccalaureate degree, and the two of them in parallel lines go downhill in the 60 years since. Anyone, what’s your sense, why did that happen? Why did we let that happen in Ohio?
MR. KIRWAN: You know, I’m a relatively newcomer to the State of Ohio, so I’m far from an expert on this subject, but my sense is that for so much of the 20th century, Ohio’s economy was humming based on production line manufacturing businesses and it was an economy that was not particularly dependent upon large numbers of college graduates coming out of our colleges and universities, and so I think higher education just wasn’t the priority that it was in other states whose economy were dependent upon larger numbers of college graduates.
And I think Jenny made such an important point, that economy of the 20th century is - has completely been transformed as we enter the 21st century and it’s now a knowledge economy. The most important raw material we have to support this economy are well-educated people. That’s what’s going to differentiate regions and states in terms of their economic success.
One of the statistics that - coming out of what Jenny was saying is that the average income in Ohio is - has continued to drop to where it’s almost 5% below the national average. It’s not like we’ve leveled off. It’s on a downward trajectory. If we don’t do something and do something pretty dramatic in the near future, you know, I really do worry about the future of Ohio in the 21st century
MR. PROENZA: Just a case in point to add to Brit’s and Jenny’s comments, the educational deficit that Jenny talked about, this 400,000 additional college experience or college graduates means that Ohio today is foregoing in excess of a billion dollars of revenue that it could have if these young people had that much educational attainment. If this continues, that revenue gap will continue to grow and the Board of Regents has very amply calculated that by 2003, I believe, we will be foregoing as much revenue as we are anticipating we need to fix the K through 12 DeRolph decision.
If this continues, we will continue to not only forego that kind of ability to address K through 12, but obviously we will not be able to get to the point where we can increase our higher education delivery system as well as we should.
MS. BROWN: Joe, let me add to what Brit said because I think this issue of why this happened in Ohio is really something we need to understand. Peter Drucker, someone I admire greatly, has dubbed this “the age of social transformation” and has clearly pointed out in his many wonderful writings that at the turn of the last century, Ohio was an agricultural state and 64% of the jobs were in agriculture and a small percentage were in industrial-type things.
And then we had the Industrial Revolution, and by the end of World War II, we had been fully immersed into the industrial economy but young people could come off the farm and go onto the factory floor and have good, unskilled blue collar jobs that paid a very fine standard of living for them, paid well and had a good standard of living as a result.
But what’s happened since World War II is we have moved into this new knowledge economy, and particularly we saw this in the booming ‘90s. There was no question about the fact that we see new businesses starting, we see a high tech economy. We’re moving away from making things and moving them around to a time when we need to have the knowledge that’s in people’s heads, begin to generate innovations which become commodities and businesses and new entities that, in turn, pay higher jobs. That’s what has happened is that we’ve moved from about 80% of our workers in blue collar unskilled jobs to today only 20% of the jobs being in that area. 80% are now and are projected to even grow to maybe 90% in the next ten years.
MR. KIRWAN: Joe, and there’s a really important point here that obviously the technology sector is something that we need to grow in Ohio. I mean, we are woefully behind many other states in this regard, but this new economy is just not about high tech companies. It’s about globally competitive innovative companies.
So what’s at stake here, this sort of this knowledge economy is important to all areas of business. I mean, there isn’t a business out there that doesn’t have to re-invent itself every 12 or 18 months because that’s the nature of competition in this day. People need new ideas, good ideas to stay at the leading edge no matter what they’re doing, the insurance business, the banking business or making computer chips. So this is important for the entire state and the economy of all of our businesses, not just the high tech area.
MR. FROLIK: Roy, what are some of the things that we need to do as a state to close the education gap and get back in the race?
MR. CHURCH: One of the things we need to do is to get a much larger percentage of our students coming directly out of high school taking advantage of the higher education opportunities. You know, we still lag the region as well as the nation in the percentage of students who matriculate immediately after high school into higher education, public, private, two or four-year institutions. so that’s a major initiative that we need to undertake.
We also need to really work with those folks that already are in the work force, the people that we call the incumbent workers, people that have already begun to earn a living, because the reality is that without further education, they’re not going to be able to retain the competitiveness in the jobs that they have to be successful in this 21st century environment. We really need to up-skill our entire current work force if we’re just going to be able to compete and to enable our companies to be successful.
So we’ve got a challenge on both ends of the continuum, on those coming out of the traditional education pipeline, if you will, and those folks that are incumbent adults. So we need to work across the entire spectrum to try to address the challenge.
MS. BROWN: Roy, what about retraining the workers such as our LTV workers who are maybe being downsized? That’s part of the issue today is that people are finding that they need during a lifetime when we’re changing jobs now something like six or seven times during one professional career. I worked my whole lifetime in one company. That is definitely not the experience today.
And as you move from job to job, it may well require upgrading your skills and so - or moving into an entirely new area where you have no skills at all, but we want to make these opportunities available certainly to northern Ohioans and to the whole state.
MR. CHURCH: And, Jenny, I think that really addresses another fundamental impact of the transformation that is taking place. Not only are we seeing individuals having to address other types of job skills, what we’re seeing is that the number of jobs in that traditional manufacturing sector are diminishing and diminishing rapidly. So that individuals that are attempting to become competitive in a new environment many times are having to change fields, having to start building another whole skill set that they haven’t had to use in the manufacturing sector and that doubles the challenge that we face.
MR. FROLIK: Do any of you have a ballpark figure of dollars of what it’s going to take in terms of an investment to do the sort of things you’re talking about?
MS. BROWN: $250 million right now if we were going to try to educate these 400,000 that have not had sufficient education. It would take about $250 million - that kind of a budget input right at this very time to start approaching the problem, and then, of course, this is just this year’s number, so we have to continue to move with it.
MR. PROENZA: Joe, you asked what do we need to do and I think Roy is very correct and Jenny has approximated the investment that is necessary. From a public policy perspective, without question, people need to understand what the new jobs of the knowledge economy require and indeed the retraining portion of it, but from the perspective of the State, creating the appropriate incentives for people to find higher education affordable is very important as is the case in many other states where Georgia, for example, has the Hope Scholarship Program that enables any student that finishes high school with a 3.0 average to get their first year of college education tuition free with an allowance for books.
This places simultaneously a massive amount of pressure on the schools, K through 12, to perform well as well as an incentive of the students themselves to move forward. Ironically, however, Ohio is a high-tuition, low state-support state, and you find as the Board of Regents observed in their Amicus Brief with the DeRolph case that it already is investing near the top of states in K through 12 but quite nearly at the bottom of states in terms of higher education. So a lot of students find the accessibility to college not there for a variety of reasons including the cost of higher education.
MS. BROWN: And that’s just at the time when they most need an education. We find ourselves 40th out of 50 states in state support to higher education and that makes it all the more difficult when personal incomes are not keeping up with the national average in their growth and tuitions are rising.
We are now the tenth highest, I believe, in four-year publics and the eighth highest even in community college, tuitions across the United States. So, you see, things are working against each other to help Ohioans begin to achieve more in the way of an education in order to find those jobs. And remember, it’s the work force, a skilled work force that will bring in these additional kinds of jobs that we are looking for to try to change Ohio’s state of mind as the Board of Regents has been saying.
MR. WAGNER: Don’t you feel, also, we have talked a little about the obligations of the business community and the obligations of the state. Aren’t there certain obligations on us, as well?
We have mentioned the importance of innovation. You mentioned that, I think, Jenny, and, Brit, you talked about re-invention and we talked about mid-career continuing education. I think these talk to a different kind of education, as well. It troubles me a little bit. I know what you mean to talk about an educated work force or a skilled work force. It’s the past tense there that bothers me. What we need is an educating, a learning work force. That’s an attitude of education.
MS. BROWN: Good point, Jim.
MR. WAGNER: And also to expect to have a learning business community and a learning state legislature for that matter.
I think if we were providing these things, and we’re… all our institutions are working in those directions to have life-long, career-long and life-long learners. I think if we were doing that better, however, we would find our institutions also more attractive to the economies that are booming. That’s a difficult pill to swallow, but I know that we should be seeing a greater influx, it seems to me, of out-of-state students seeking the kind of education that we provide even if they can’t ply that here. Of course, the notion is, if we… as we, not if, as we begin to provide this sort of drive toward an educating populous which includes skilled workers and educated workers, that we’ll be attractive not only to students within the state but students coming from out of state.
MS. KILBANE: When we go back to the high tuition issue in the State of Ohio - and I think we all agree that we have a very high tuition here - but it works really in two ways: When we are an essentially relatively low-income state or low-wage state, what that says to workers in terms of investing in their own education, the rate of return is not there for individuals investing in education, so on one hand, the economy works against people’s willingness to do so, but I think secondly, then, having a higher tuition state, I’ll tell you personally, I send my son to the University of Idaho and I pay as much to send him there than I would to send him to Ohio State University.
And that’s not critical of Ohio State University. That job does fall on the legislature, and I think the problem that you have is that when you are trying to induce people to invest in themselves in higher education when they have to see a greater rate of return and especially if they want to stay in their local economy or a greater chance for their families to prosper here, but I think on the other hand, with higher tuition rates it’s to teach a case. And I used to ask the kids that came from like New York state and Massachusetts like, you know, why did you come here, because they have so many universities, especially in the Boston area, and every single time the question was the same. It was the financial package that Case offered.
So I think from the point of view public policy, one of the things that’s really - it’s important not only to look at the programs you offer, how they fit into your, you know, what you are trying to achieve and technology. Those are two sides of the same coin, but also how you can make it affordable for students, and unfortunately, that falls on the State legislature to do that.
MR. WAGNER: I accept, in fact, what you have said to be absolutely true, that we have far too many students that come to a place like Case Western Reserve University because it’s one of the better financial packages that they get. I don’t mean there are too many students coming. What I mean to say is that for that reason is that we need to be working toward and we are distinctiveness in programs that we offer that make it worth the premium that they pay in addition to lowering the costs and making the education more accessible.
MR. KIRWAN: Joe, just I want to pick up on something that both Sally and Jim said, and that is this issue of attracting students from out of state and keeping the talent that we have here in Ohio. Obviously in a knowledge economy, this has got to be of interest to our state, to see our universities as magnets for talented young people, not only in Ohio but from other states. We’re in a competitive situation. This is not, you know, they’re trying to recruit our students away and, you know, the sad fact of the underinvestment in higher education over a significant number of years is that higher education in Ohio unbalanced is not perceived as excellent around the country and this hurts us in terms of both keeping the talent in the state and attracting talent from out of state.
We’re a net exporter of our most talented students. The more national merit and national achievement scholars leave the state than we bring into the state because of our universities. Now, in a knowledge era of premium on smart people and knowledge economy, this is not a good trend for our state to be facing and it’s something we have got to address. We have got to build quality across the board in our higher education, appeals nationally and internationally.
MS. BROWN: In addition to that, we have states around us raiding our best students with a, you know, $3,000 scholarship for math/science majors, GI bill, since that is starting in Pennsylvania. Very innovative thinking, very, I think, important from the standpoint of - but there’s another point you made, Jim, that I think I would love to see us get to and this is the importance of research universities for attracting businesses to the area again and keeping people in the area to Brit’s point.
And that is, research findings again over and over have shown that people tend to work in the area where they have gone to school. And you mentioned, Joe, in your first of these series how unfortunate it is if we all have to visit grandchildren halfway across the country because that’s where they got their jobs and they went to school. We would like to keep them closer to home. And that’s an issue for all of us.
But more importantly, let’s look at the examples of Research Triangle Park, of Huntsville, Alabama, Nebraska, I think you were mentioning, Sally. All over we are seeing focuses of places where great research universities are putting together initiatives with the help of both the higher education community, the business community and government to attract those new kinds of industries that are part of this knowledge economy and to do much more to help the current existing industries. Like you say, manufacturing is important to Ohio, but we all know you can’t get a job in manufacturing without at least an Associate’s degree because you have to run computer-aided equipment.
You have to be able to read and write and communicate very adequately, and so these are important issues. The importance of using our research strengths, using our universities, and right here we have three of the best represented, to be the catalyst, to be the incubator for the start of this kind of new mentally in Northeastern Ohio particularly where we can generate clusters, from Michael Porter’s wonderful report “Competitiveness In 2001,” and we have identified in Ohio strengths of nanotechnology, biotechnology and information technology.
How many people know we have 2,000 information tech firms right here in Ohio? How many people recognize that nanotechnology, there’s an eminent scholar in a new position down at Ohio State. Polymers. Luis, let me hand it to you. I’m sure you want to comment on that one.
MR. PROENZA: The point has obviously been made beautifully by “Newsweek” just recently that recognized Akron as one of the new technology cities in the process and he indicated the role that the University of Akron has played in northeast Ohio and transforming that economy into a more diversified polymer base. 1,400 companies just in northeast Ohio alone and several others throughout the state.
Tim Ferguson put it very well in “Fortune” magazine two years ago when he said in Cleveland’s heyday, it was proximity to water and rail that mattered a lot, but today it’s proximity to a major research university that matters a lot and we have not focused on that. Ohio State has great strengths. Cincinnati is emerging, but in the state, the only other university that has a major science and engineering program ranked in the top five among the public universities is the University of Akron, and we enjoy great collaboration in the polymer area with our colleagues at Case Western.
MR. WAGNER: You said a very important thing that you said, as well, the universities with the help of and then you ran a list. I must say, one of the things that struck me coming to Ohio only about three and a half years ago now was this enormous potential of puzzle pieces on the table that just hadn’t been snapped and linked together. In fact, I discovered some resistance to snapping and linking together, but these partnerships, I think we will - I shouldn’t have said think. It will be through making important partnerships between universities, between universities and the business community, the political government sector, as well. It will be by making these with the same attitude of enthusiasm for innovation rather than risk aversion that we’re all talking about here today that I think we have seen the beginnings of already and I’m excited about it.
MR. FROLIK: The Board of Regents had a pretty ambitious program that they proposed to the governor and the legislature for investment in research in terms of support for the state universities that didn’t go very far in the legislature.
Sally, can you talk a little bit about the session that just ended or the budget process that just ended and what happened to higher education, if you will, and…
MS. KILBANE: I think there were three converging factors. You had the DeRolph decision which required an enormous expenditure ending up about $1.4 billion. You had unexpected increases in the Medicaid budget. I think that was in the area of $250 million, and then you had an unanticipated short fall in revenue from projected revenue around $800 million and all of those kind of converged together to make it a very, very tight budget session.
And so as a result, there were areas in which the State did not, you know - Medicaid clearly is off the table. It’s an entitlement program. We have to fund it because of the federal government and that’s literally billions of dollars in terms of health care costs for the poor. We had mental health and mental retardation areas which were again for those most in need and so those were kind of off the table, so that really it came down to those areas that were unfortunately, and I think higher education was the big one, that were not off the tables and there was a reluctance on the part of the legislature to raise revenue in terms of this particular budget cycle.
So I think all those things kind of converged together and I think unfortunately higher education really was the one that lost about 25%, 26% in the projected growth that you would have anticipated, and it’s extremely problematic. Again, we have all said here, the failure to make this strategic investment, and I think the investment has to be strategic in terms of, again, what the strengths are, how you capture those strengths within Ohio, how you build on it. But failure to do that will continue the downward slide that we have experienced.
I tried to say to my colleagues the most important page in the Governor’s budget is the page on economic projections. It’s backward looking and it’s forward looking and it shows, one, that our income, again as we’ve all said here, is below the national average and it’s projected to be so going forward. The other part of it that’s very frightening to me is that we are essentially at full employment. When some of these budget projections in terms of income and we are looking forward, again, we are almost at full employment. So that says to us we have a lot of low paying jobs and the potential of growth is not there.
And the only way in which Ohio turns this around - you know, it’s a lack of what economists would call productivity, and how you are going to change productivity in a knowledge economy is in two ways. It’s your labor force, an educated labor force and it’s technology or the businesses that employ them and the people that come up with the people that make these new ideas work. And at this particular point I think we have to begin to look at our budget in terms of how we can come up with the type investment that I believe we must make in Ohio.
