May 27, 2008

Sweet crude prices, exchange rates, and higher ed

Gas prices are rising above $4/gallon in the U.S., prices of crude are over $130/barrel, so what does this have to do with higher ed? First, in the U.S., it will affect the effective operating costs of universities, as they face higher heating/cooling bills and higher costs of living for faculty and staff (so either salaries have to rise accordingly or real wages fall for faculty and staff).

Second, it will affect commuting students, who will want schedules consolidated to reduce gas prices as well as job schedules, and who will put more pressure on costs they think should be more flexible (primarily textbooks).

Third... and here I am going to take a flying leap... it will dramatically change the calculations of students who might travel between countries for their education. Part of the rise in oil prices in the U.S. is because of the dropping value of the U.S. dollar against major currencies such as the euro. Exchange rates are an important determinant of the effective price of higher education when you cross borders. Looking just at exchange rates between the U.S. dollar and other currencies since the beginning of the year, I can group countries roughly by whether the value of their currency is rising, falling, or remaining about the same against the US$.

Rising against the dollar: euro, Australian dollar, Brazilian real, Chinese yuan, Danish krone, Japanese yen, Malaysian ringgit, Mexican peso, Norwegian kroner, Singapore dollar, Swedish krona, Swiss franc, Taiwan dollar,

Stagnant: British pound, Canadian dollar, Hong Kong dollar, New Zealand dollar, Sri Lankan rupee

Falling against the dollar: Indian rupee, South African rand, South Korean won, Thai baht
When prospective students think about going to college or grad school in a different country, expected cost has to figure into it in several regards -- in the cost to families who are paying privately, or in the cost to governments (and the number of slots available) when the public purse is paying. In either case, I wonder what the swing in exchange rates will do to international enrollments. As the euro rises against the dollar, will American universities out-compete German universities? Will Chinese student enrollment in other countries rise and Indian enrollment fall with the difference in relative currency value for their countries?

It's already happening, at least in graduate school admissions. An April 14 IHE article on the slowdown in international applications to U.S. graduate programs notes the decline of applications from India and South Korea and continued growth (if moderated) from China without asking whether there is a link between these trends and the parallel trends in the relative value of each currency against the dollar. (There was also no mention of exchange rates in a November 2007 IHE article, though one comment writer mentions them.) The only other mention I could find in a quick search was the effect of exchange rates on U.S. students who want to study abroad, not students from other countries interested in the U.S.

Plenty of factors shape international movement in higher education enrollment, but I wonder if any institution will seize on exchange rates to reshape recruitment efforts in countries with rising currency values against the dollar.

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Posted in Education policy on May 27, 2008 12:04 AM |