Okay, so everyone knows that demography’s an issue in higher education. Fewer students means more competition. More old people means more pressure on pensions and health care and hence more competition for public subsidies. Tough times ahead for higher ed, right?

Well, yes. But there’s another impact of demography which I don’t think anyone’s really absorbed yet. It’s the impact of a shrinking or stagnant labour market, and in many ways, it could be the most significant demography-related challenge of all.

For decades, Canada’s labour market expanded rapidly. Boomers, women entering the labour market, the baby boom echo, immigration; one thing after another just kept pushing the size of our working population upwards. It’s one of the reasons that we’ve tended to have higher unemployment rates than other countries. But as of last year, the Canadian labour market is no longer expanding. Oh, the population is still growing, but only at the top: the only age group where we see an increase is the over-65s.

So, what happens to the price of labour in this kind of situation? Well, the population is expanding, which increases the need for goods and services, but the labour market is stable. One would therefore expect that unemployment would fall and the price of labour would rise. The thing is, we’ve seen this game play out before. Check out what happened in Alberta just before Lehman Brothers went to meet its maker; there was a while there where fast-food joints were paying $16-17/hour and having trouble keeping staff, where warehouse jobs were paying $50-60K.

The key question for every last recruiter in the country will be: how do you sell your university or college when the alternative is making $50-60K in a warehouse job? In the near future, it’s not going to be tuition fees pushing kids out of education, it’s going to be the skyrocketing cost of foregone income which is going to keep kids out of post-secondary (though, as a secondary consequence, this phenomenon will exert significant downward pressure on fees).

In a full-employment environment, just saying “our education gets you a job” won’t cut it – students are going to be concerned about what kinds of job they’ll be able to get. Similarly, governments won’t care about graduate employment rates, they’re going to care about productivity and whether or not your graduates are contributing to the economic growth needed to pay for all those new retirees.

This demographic shift is going to create a whole new operating environment for institutions. It’s going to mean a whole new set of priorities, and it’s not going to be easy. The time for institutions to start thinking through the implications is now.