Indiana cut college funding based on bad data. It's costing us $1B a year.

Indianapolis Star

2 days ago

Indiana projected a surplus of 231,000 college workers. In reality, there were 140,000 more jobs for college graduates than expected.
| Contributing Columnist
Indiana made a billion-dollar mistake based on a flawed jobs forecast a decade ago, and we're still paying for it.
State officials in 2015 used discredited federal methodology to predict a massive shortage of workers without college degrees. They were catastrophically wrong, but not before the forecast shaped education policy that steered thousands of students away from higher education.
This mistake began with good intentions. In late 2014, Gov. Mike Pence announced plans to create a stronger pathway to non-college career opportunities for high school students. He emphasized in speeches the need for academic preparation as well as a pathway for every student.
Schools needed guidance on what careers to prepare for, so the state Department of Workforce Development stepped in with an occupation forecast that used a methodology from the Bureau of Labor Statistics — projections that have faced criticism for systematic flaws since the mid-1970s.
Economists warned the data was flawed
The several dozen major studies finding fault with these projections are best summarized by a study funded by the Lumina Foundation in 2010, which concluded BLS data 'systematically under-predicts the demand for postsecondary education and training.' Other economists and I provided more than a dozen studies that said some version of the same thing to the DWD.
The DWD nonetheless projected that by 2024 there'd be a shortage of 385,000 workers who hadn't been to college and an oversupply of more than 231,000 workers who'd been to college. The fact that nothing like this had ever happened anywhere before didn't dissuade the DWD. This projection went on to influence cuts to higher education funding.
What actually happened? The exact opposite.
Instead of losing jobs for non-college workers, Hoosier businesses actually created just over 92,000 jobs. The big forecast error was on college jobs. The DWD projected a surplus of 231,000 workers who'd been to college. In actuality, there were 140,000 more jobs for college graduates.
Even with state policy moving the needle in their direction, the DWD projection was off by 371,000 jobs. All economic forecasts are wrong, but most are useful. Given the predictably poor track record, the DWD projections shouldn't have been used for policy development. Indeed, I know of no other state that actually uses these to inform public spending.
My own forecast projected exactly the opposite — a decline in jobs for people who hadn't attended college of roughly 90,000 workers, and an increase in college jobs of 86,000 positions. I was off by only 54,000, an almost seven-fold difference from the DWD error. My error is freakishly close to the number of Hoosier students who would have been expected to attend college, but chose not to, over the same period.
The billion-dollar price tag
Between 2016 and today, 50,000 fewer Hoosier students attended college. Consider the cost to the Indiana economy of this policy mistake. Given the current wage gap and assuming historical completion rates, the cost to Indiana in lost incomes is nearly $1 billion a year.
Fortunately, the legislature has backed off some of the more egregious efforts to steer kids away from college, and very few state leaders are actively telling families that college is not worth it any longer. That doesn't erase the funding cuts to K-12 and higher education.
The most hopeful news is that changes to 21st Century Scholars program should also orient more Hoosiers towards post-secondary education. We'll know about that success in the next couple years.
In the meantime, the economic losses due to lower educational attainment will continue throughout the work life of that cohort of young Hoosiers.
Michael J. Hicks is the director of the Center for Business and Economic Research and the George and Frances Ball distinguished professor of economics in the Miller College of Business at Ball State University.