Recently we’ve all been bombarded with news about the financial crisis and dire warnings about what’s ahead for the economy. As of this writing, InTrade has the likelihood that the US economy will go into recession in 2008 at 45%. These odds jump to almost 80% in 2009. Companies are hunkering down for what could be an extended period of decreased consumer spending, reduced access to capital and downtrodden financial markets.
So what will happen to online education over the next few years? Admittedly, I’ve *very* biased but I think the next few years could actually bring a boom in online education. For the following six reasons it seems like online education could indeed be counter-cyclical and steal market share from traditional education in the near future. Here’s why:
#1 – Many people will re-tool in a downturn. When times are good many people tend to be very focused on making money. When times turn bad then the focus is not so much on “How much can I make?” but rather on how “How do I make sure I’m not out of work?” Re-tooling, getting a certification, etc. are things that now become even more important. And for those who do loose their job, the focus often shifts to finding a new job or even on finding a new career. Education lies at the center of all of this attention and in a world that is changing as fast as ours, people who have often been doing pretty much the same work for years now are faced with the proposition of having to do a lot of learning again. This of course isn’t necessarily a bad thing as it can be a great chance to focus on what’s truly important (as happened a lot after 09/11).
#2 – In a down economy, many people will head back to grad school. During the go-go years of the dot com bubble many people left business school early to pursue start-ups. After the bust people who were laid off tended to “hide out” in school for a few years. This is pretty natural. The opportunity cost associated with going to school (in terms of missed opportunities) is much higher when times are good than when times are bad. It won’t surprise me at all to see record numbers of people pursue graduate degrees in coming years. If that’s the case, online education that focuses on preparing people for graduate school entrance exams should be a very hot area.
#3 – People will be more price sensitive in the coming years. When times are good a lot of money gets thrown around at stuff with less concern for what it costs. However, when times get tight a lot more thought goes into spending patterns. Online education tends to be a fair amount cheaper than traditional education, in large part because of decreased overhead and less inefficiency. For example, at eduFire, private tutoring tends to run at 25-50% the cost of private tutoring at brick-and-mortar companies, even though in many cases the tutors are the same ones who’ve taught at traditional education companies in the past.
#4 – Rising gas prices become more of a concern. Similar to the previous reason, people are increasingly likely to focus on gas prices when considering decisions. If someone is consider a class at a tutoring company or a local community college and it’s a 10 mile commute each way that’s like a $4-$6 surcharge in gas prices alone for each class. All of this adds up and the cumulative impact of a weak economy and rising energy prices is already starting to cause an increase in the cocooning effect. That cocooning effect should drive increased demand for online education.
#5 – Larger number of highly-qualified teachers. There is likely to be an increased number of people looking for full-time or part-time employment in the coming months. Many of them may turn to online education as a means to supplement their income. This will likely mean some highly-qualified teachers who will be available here and on other online education sites. An increase in the number of teachers will likely result in a better experience for students looking to learn online.
#6 – Relative strength in foreign economics and/or weakness in the dollar will allow the US to export education to the rest of the world. This is fairly US-centric in nature but a weaker US economy relative to the rest of the world plus a depreciating dollar could mean a lot of American teachers will have an easier time finding students in other parts of the world. For example, in the last year, the US Dollar has fallen almost 20% relative to the Japanese Yen. This means that a Japanese student looking to take a class or tutoring session from an American instructor now finds it almost 20% cheaper. While these changes have negative ramifications as well (a declining US Dollars means Americans must pay more on a relative basis for foreign goods), it could help to spur demand for American classes and tutors.
Of course, if the financial crisis gets too bad it won’t be good for anyone. But at least when it comes to online education it’s very likely that the trends listed above will keep the industry strong despite a downturn. It will certainly be interesting to see how this all plays out.
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October 14, 2008 at 10:24 pm
[...] Source [Edu Fire] Filed Under Adult Education, College, Costs, Online [...]
October 15, 2008 at 4:51 am
[...] 6 Reasons Why Online Education Will Boom in the Bust is a welcome ray of sunshine amongst the gloom ...
November 2, 2008 at 1:20 pm
[...] nostres competidors, també ho han sabut veure i argumentar. [...]