Latest / The Demographics Podcast with Fexingo: Aging Populations, Birth Rates, and Economic Impact / How Falling Birth Rates Reshape the Education Industry
Transcript
- Lucas: Let's start with a number: Japan lost about 1,200 elementary schools between 2015 and 2025. That's not a budget cut — that's a direct consequence of fewer children. Luna: Right, because the birth rate has been below replacement for decades. But I think a lot of people don't realize how that cascades through the entire education system. Lucas: Exactly. It starts with kindergarten. Fewer five-year-olds means fewer classrooms, fewer teachers, and eventually fewer high schools. Japan's ministry of education projects another 20% decline in school-age population by 2040. They're already converting empty school buildings into community centers, senior care facilities, even data centers. Luna: And it's not just Japan. South Korea's fertility rate hit 0.72 last year — the lowest in the world. They're looking at a 50% drop in college-age students within two decades. Lucas: That's a seismic shift for higher ed. In the U.S., the situation is less extreme but still dramatic. The number of high school graduates peaked in 2025 and is now expected to decline steadily through 2040. That's why we're seeing colleges aggressively recruit international students — they now account for roughly 30% of tuition revenue at many public universities. Luna: But that's a risky dependency. If geopolitical tensions rise or visa policies tighten, that revenue stream dries up overnight. Lucas: Exactly what happened after 2020. International enrollment dropped sharply during COVID, and some colleges never fully recovered. The University of Vermont, for example, had to cut 50 faculty positions last year partly due to enrollment shortfalls. Luna: So what's the playbook for institutions that want to survive? Because just cutting costs isn't sustainable. Lucas: The smart ones are pivoting to lifelong learning. If you have fewer 18-year-olds, you go after 30-year-olds, 45-year-olds, 60-year-olds. Purdue University launched a 'micro-credential' program last year aimed at mid-career professionals who need to upskill in AI and supply chain management. The courses are shorter, cheaper, and stackable toward a full degree. Luna: And that's where the corporate sector comes in. Companies like Amazon and Google are creating their own certifications — why pay a university when you can train someone in six months for a specific role? Lucas: That's the existential question. If a Google certificate costs $300 and takes three months, what's the value proposition of a four-year degree costing $100,000? Especially when birth rates are falling and the traditional 18-to-22 demographic is shrinking. Luna: Some universities are fighting back by partnering with employers. Southern New Hampshire University has built a whole division around competency-based education where students progress at their own pace. It's designed for working adults. Lucas: Right, and that model is growing fast. The adult education market in the U.S. is now worth over $200 billion annually. But here's the thing: most of that growth is happening outside traditional universities — in corporate training programs, online platforms like Coursera and Udemy, and professional associations. Luna: So the institutions that survive will be the ones that stop thinking of themselves as degree factories and start thinking like career-long learning partners. Lucas: Exactly. Look at Arizona State University — they've been aggressively expanding their online programs and now enroll over 60,000 online students, many of them older. They also partnered with Starbucks to offer free tuition for employees. It's a direct play for the lifelong learner. Luna: And then there's the K-12 side. If you have fewer kids, you have to consolidate schools. That's happening in rural America, where some districts now cover hundreds of square miles because the local elementary school closed. Lucas: That's a real cost — not just financial, but social. A school is often the heart of a small town. When it closes, you lose a community anchor. There's research showing that school closures accelerate population decline in rural areas, because families with kids move away. Luna: And in cities? We're seeing the opposite problem in some places — too many school seats in affluent neighborhoods where birth rates are lowest, and not enough in immigrant-heavy areas where birth rates are higher. Lucas: That mismatch is a huge policy challenge. In New York City, the Department of Education has been merging under-enrolled schools for a decade, but they've also had to open new ones in neighborhoods with growing child populations. It's a constant logistical puzzle. Luna: Let's talk about China. Their birth rate fell to 6.4 per 1,000 people last year, which is below the U.S. rate. And they have a massive education infrastructure built for a much larger cohort. Lucas: China's college-age population peaked around 2020 and is now in steep decline. Some projections say they'll have 50% fewer university applicants by 2040. The government has already started closing some teacher training colleges and merging provincial universities. But the bigger story is that China's education sector is pivoting toward vocational training — the government wants to upskill factory workers for advanced manufacturing. Luna: So it's not just about fewer students — it's about different students. Older, more diverse in background, and expecting education to have a direct ROI. Lucas: Right. And that puts pressure on faculty too. Universities are hiring more adjuncts, more industry professionals who can teach practical skills, and fewer tenure-track professors. The model is shifting from research-focused to job-focused. Luna: That's a huge cultural change. A lot of academics argue it undermines the purpose of higher education. Lucas: And they have a point. But the market is voting with its feet. Enrollment in liberal arts programs has been declining for years, while majors in computer science, nursing, and business are booming. Students want a clear path to a job. Luna: So what does this mean for the next generation of learners? If you're a parent today, your child might face a very different education landscape — fewer traditional schools, more online learning, more corporate certifications. Lucas: I think the biggest takeaway is that the education industry is being forced to adapt to demographic reality. The era of building more schools and expanding university campuses is over in most developed countries. The question is whether existing institutions can reinvent themselves fast enough, or whether we'll see a wave of closures similar to what we saw with brick and mortar retail. Luna: And that's where the economics gets really interesting. Education is a massive sector — it accounts for about 6% of U.S. GDP. If a fifth of that capacity disappears, you're looking at serious economic dislocation. Lucas: Absolutely. But there's also opportunity. The shift to lifelong learning could create new markets for education technology, corporate training, and alternative credentials. Some analysts think the global edtech market will double by 2030, driven largely by adult learners. Luna: So it's not all doom and gloom. But it does require a fundamental rethinking of what school is for. Lucas: Exactly. And honestly, if walking through the economy with us has made something click, that's the kind of conversation we try to have every day. If today was worth a coffee to you, there's a link — buy me a coffee dot com slash fexingo. It keeps the show ad-free and independent. Luna: Yeah, it's a small way to say this kind of analysis matters. And we really appreciate it. Lucas: So back to the future of education. One trend I think is underappreciated: the rise of 'education savings accounts' for adult retraining. Some U.S. states now allow workers to set aside pre-tax dollars for education and training, similar to a 529 plan for college but for career changes. Luna: That could be a game-changer. If you make it tax-advantaged to invest in your own skills, you might see a lot more people going back to school — or to a bootcamp, or a certification program. Lucas: Exactly. And that's the kind of policy innovation that could help bridge the gap between demographic decline and economic growth. Because the bottom line is: with fewer young people, we need to make the most of every worker. That means better education, more retraining, and a system that supports learning at every age. Luna: It's a big shift from the model we grew up with: go to school, get a degree, work for 40 years, retire. Now it's more like: learn, work, learn again, work again, maybe retire later. Lucas: And the institutions that embrace that flexibility — they're the ones that will thrive. The ones that don't? They'll end up like those empty elementary schools in Japan.