Enrollment responsiveness to changes in recent employment conditions at for-profit and community colleges

Abstract

For-profit colleges are continually criticized as preying on individuals from lower socioeconomic backgrounds. This condemnation typically calls out for-profit colleges for putting profits ahead of students, leaving them with poor quality education in exchange for large amounts of debt. However, given that students can select between multiple suppliers of higher education, it is unclear why costly for-profit colleges remain a viable option in the higher education market, especially with substantial government subsidies to their direct competitors. One potential reason may be the institution themselves; for-profit colleges are more able to respond to structural changes in labor markets in ways that non-profit institutions are unable. Using a panel dataset with student information from three rounds of the restricted-access National Postsecondary Student Aid Study (2000, 2004, 2008) and employment data from the Bureau of Labor Statistics' Occupational Employment Statistics, I empirically test the responsiveness of enrollment at for-profit and community colleges to changes in sectorial employment conditions. The results indicate that a 1% increase in a sector's employment growth results in a 2.5% increase in the percentage of students enrolled at for-profit colleges in majors that lead to occupations within that sector. However, no effect is observed on the enrollment in these majors at community colleges. The results also indicate that students are responsive to both local sectorial employment conditions and national conditions. Lastly, both for-profit colleges and community college enrollments appear to be unresponsive to sector wage growth, while only males show a response to sector wage levels. One explanation of these results is that for-profit colleges face different constraints than non-profit institutions and are better able to quickly adjust their faculty inputs to changing enrollment demands.