Did the higher education bubble let out some air?

Wed. May 04, 2022 - by Josh Studl

A headline caught my eye “Chegg stock crashes amid ‘issues of enrollment, the economy, and now inflation’”. Chegg is an e-textbook and edu services company that I don’t really care about, but it does have a market cap of $2.43B, so…I clicked.

Chegg lowered its guidance and investors bailed fast. Chegg CEO Dan Rosenweig attributed the coming loss of customers and revenues to inflation and suggest that people are full-stop on their education and forced to enter the workforce full-time to keep pace.

Then, I get this email this morning from The Balance with the subject line: Hiring Slows.

Dear Mr. Rosenweig, sir, would hiring slow if your millions of customers are suspending their education and entering the workforce?

Here’s what Rosenweig said:

“As noted in our fourth quarter call, we entered the year with momentum, however this trend has not continued at the level we expected,” Chegg CEO Dan Rosensweig said on Monday evening earnings call. “The issues of enrollment, the economy, and now inflation have all impacted our industry. Students continue to take fewer classes and those they do take are often less rigorous, with fewer or more limited assignments. With higher wages and increased cost of living, more people are shifting their priorities towards earning over learning, resulting in a lower course load, or delaying enrollment in school at this time.”

No doubt cost of living increases force people out of education and into the workforce. This migration is contrary to all that I’m hearing on customer discovery calls and discussions with clients: Employers cannot find enough warm bodies to hire.

Here’s what Kristin Myers, The Balance, Editor-in-Chief wrote in her email:

This morning we got a glimpse of the national employment picture as jobs in the private sector increased by 247,000 in the month of April, down from March’s rise of 479,000 according to the payroll provider ADP’s National Employment Report. While ADP’s report and the Labor Department’s report, which will be released on Friday, don’t always mirror each other, the ADP figures do serve as a leading indicator of labor market trends. The numbers in ADP’s report came in below estimates, and significantly below March’s figures, indicating hiring might be slowing in the U.S…

Hmmmm…folks are not pursuing education and not entering the workforce? So, where are they?

Then, I remember a headline from a month ago: Community college enrollment is down, but skilled-trades programs are booming

This article leads us to another that highlights a big finding from a study from Georgetown University’s Center on Education and the Workforce1 :

a growing number of people without a bachelor’s degree are now out-earning those with one.

I’ll pump the breaks here. I’m not an economist (nor did I stay at a Holiday Inn Express last night), but I think Rosenweig has an easy scapegoat in inflation for the truer fact that his customer base is recognizing the poor return (of salary and potential salary) on their investment (tuition and overpriced, outdated ebooks) of undergraduate and graduate degrees. Technical education and gaining vocational skills have a much better ROI – shorter time to acquire in-demand skills, ability to earn income while learning (work-based learning and apprenticeships) and clearly better long-term earnings potential.

Chegg’s guidance, IMHO, is just one more leading indicator that the higher education bubble is letting out some air.

All this underscores why we at Turbine are focused on shortening the gulf between employers and the institutions - community colleges and Career & Technical Centers - tasked with developing the skilled workforce for the future American economy. Employers must get more involved in the skills development.

So, are people selling back their e-textbooks and acquiring technical, vocational job skills?

What do you think?

  1. The College Pay-off, Georgetown University’s Center on Education and the Workforce