Novel Virus, Same-Old Policies?

More than 1 million Texans have filled for unemployment since mid-March. There will be many more individuals who will file in the coming weeks. This is a signal that something is very wrong—and it’s a novel virus. But this novel virus has also created a novel recession, and we can’t prepare to treat it with the same old cures.

The destruction occurring to our economy is not the creative kind that economists are usually sanguine about. Creative destruction arises from innovators discovering inefficiencies and creating solutions that replace old products and systems. This is different.

Yet there are creative responses that are arising all around us, and many are building on trends that were already well underway before the shut-downs began. The most obvious is the shift to online education, which is now no longer voluntary for educational institutions. 

The shift from a model based on how long a student sits in a seat to how well as student masters the content has become mainstream—overnight. Some institutions were better equipped to make the shift than others. Institutions of higher education, especially those that rely on the traditional cohort of rising high school seniors to attend in the fall, face a very uncertain future. Will these traditional students show up?

We have seen in past recessions a flight back to education by working adults who feel the need to reskill or upskill. A key difference between this recession and previous ones is the existence of far more and far better online education options. The newly unemployed and underemployed are preferring online education to meet their needs in a far more accessible fashion than traditional classroom-based instruction.

Calls  to bail out higher education are a predictable reaction to what is shaping up to be a profound challenge to the traditional college business model. But this model was in danger long before the present crisis emerged. In fact, Sen. Elizabeth Warren’s plan to make college free was, in truth, a bailout for the higher education sector.

Another proposal that is being dusted off is increasing spending on jobs training programs, such as the one recently proposed by House Speaker Nancy Pelosi. Federal jobs retraining programs are a common theme for addressing recessions. The only problem is that they haven’t been very successful. 

Instead, policymakers at all levels should consider leveraging higher education’s existing capabilities and creating new pathways to career success for non-traditional students. In fact, traditional students, or those between 18-22 in full-time study at a residential college, may only make up 60% of undergraduate enrollment.

Pell Grants are an existing mechanism that could be deployed more flexibly to allow the unemployed and underemployed to gain skills through short-term programs. This means that concerns about how well credentials add up to longer-term degrees, should take a backseat  to questions of cost, length, flexibility, and most important, how well a program actually prepares a student for their next job. 

De-emphasizing seat-time in favor of demonstrable skills is also an essential part of making career pathways both affordable and customizable on a mass scale. Currently, accreditation regimes stand in the way of reforming seat-time requirements, but as my colleague Andrew Gillen argues in his most recent publication, states have an opportunity to create “escape hatches” in order to encourage innovation.

In order to ensure that the new career pathways actually deliver value for students, additional funding for institutions should be contingent on post-graduation employment. A model for this already exists in the Texas State Technical College system. The success of the returned-value funding model is remarkable.

Between 2010 and 2016, the first-year earnings of TSTC graduates increased 61%. Quite simply, TSTC receives a commission based on student wages after graduation. This is a powerful incentive, and as a result, TSTC is able to keep its offerings relevant and closely aligned with swiftly changing business needs.

In this recession, there is an opportunity for policymakers to respond creatively, even in the face of the virus’ economic destruction. Instead of pouring more money into federal jobs training programs or bailing out higher education institutions that want to continue business-as-usual, let’s fit our response to the time, and help people find new possibilities in themselves.

Erin Valdez is a policy analyst with the Texas Public Policy Foundation’s Right on Work initiative.