The impending retirement of the baby boom generation will have far-reaching consequences for Texas and the nation. The implications for our Social Security and health care systems have been widely discussed, but not nearly as much attention is being paid to what this mass exodus of skilled workers will mean for our economy.
Texas Workforce Commission Chair Diane Rath frequently speaks of the demographic cliff that Texas approaches. Over the next five to 10 years, some of Texas’ key industries will lose as much as half of their professional talent. Unfortunately, our public schools and state universities are producing nowhere near enough graduates who have the skills to be able to fill those vacancies.
Right now, Texas businesses can still fill their shortages of skilled workers by poaching from their competitors. But Rath notes that when that no longer works, “they’ll do one of two things: either find their skilled workers overseas and bring them over here on visas; or they’ll simply uproot their facilities and equipment and move those to where they found the skilled workers.”
We must act immediately to address this problem. Even if we dramatically increase the number of enrollees this fall in engineering, computer science, nursing, and mathematics programs, it will take at least four years for them to complete their degrees. And for many critical positions, another three to five years of professional experience will be required before they can replace the knowledge of those about to retire.
Writing a blank check to the university systems won’t be enough to solve this problem. Despite their best intentions, the universities’ pools of graduates continue to be mismatched against the needs of the marketplace.
To the extent we put more money into our institutions of higher education, it should be targeted to producing the type of graduates Texas needs to preserve its competitive advantage.
Thankfully, Gov. Rick Perry has proposed such an initiative as part of his higher education reform package. His proposal – which has been introduced in the Legislature via HB 3828 by Rep. Geanie Morrison and SB 1029 by Sen. Florence Shapiro – would allocate more than $350 million to universities, community and technical colleges, and medical schools that increase the number of students completing bachelor’s degrees, associate degrees, and certificates.
The concept is simple: If a student earns a degree and scores well on a major field test or licensure exam, the institution gets an incentive check. If that student was considered at-risk or majored in engineering, math, physical science, nursing, computer science, allied health, or math and science teacher education, the institution gets a higher premium.
Additional funding to the institutions would be based on factors including retention rates; 4-, 5-, and 6-year graduation rates; the number of transfers accepted from community colleges; classroom space utilization; course completion rates; and shortening the length of time for students to complete their degrees.
To prevent the incentive system from being manipulated, all baccalaureate graduates would take an exit exam. For some fields, that would be a licensure exam. In others, the major field tests produced by the Educational Testing Service could be used. A low score on the exam would not affect the student’s graduation, but a higher score on the exam would mean a larger incentive for the university.
To a great extent, the higher education funding formulas reward inputs, such as how many students enroll. Over time, we need to re-tool those formulas so that they reward outcomes, such as those proposed by Gov. Perry.
And eventually, we should restructure our entire higher education funding system so that all of the money follows the students. Universities should be paid based on the number of students they recruit, enroll, and graduate; not on their prowess in the legislative budget process.
The American free enterprise system works best when there is a clearly defined entrepreneurial motive. An opportunity for financial profit will alter behavior more quickly and productively than a government regulation. When we inject that entrepreneurial motive into our higher education system and reward them for what they do best, I have no doubt that they will produce world-class results.
Brooke Leslie Rollins is President of the Texas Public Policy Foundation, a non-profit, free-market research institute based in Austin.