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The global community is experiencing pervasive change in virtually every sphere as it enters a new millennium. Higher education, one of the world's most enduring institutions, will not be exempt from these forces. This section highlights the major change driversdemographics, the knowledge revolution, and information technology. It then addresses the implications for higher education in general and particularly for higher education in North Carolina and for public university systems such as the University of North Carolina. These forces and the challenges and opportunities they represent for North Carolina and the University of North Carolina inform the strategic directions adopted by the Board of Governors for the period 2000-2005 (Section IV).

A. Major Change Drivers

1. Demographic Changes

The U.S. population, while continuing to grow through births and immigration, is shrinking in size compared to the rest of the world's population, aging, and becoming more diverse ethnically and racially.

Among age groups in the United States, the strongest growth during the next decade will occur within the 45-64 year old cohort, whose members will subsequently inflate the number of persons 65 and older. By 2020 about 18 percent of the U.S. population will be over 65, compared to 14 percent today (Figure III.1).

The baby boomers (born between 1946 and 1964) are the best-educated generation in American history. They are accustomed to having their needs met on their own terms. They can be expected to demand increased educational opportunities, whether for career advancement, second careers in retirement, or personal enrichment.

Strong growth will also occur among those 18-24 years old (children of the baby boomers), who constitute the traditional college-going cohort.

The number of high school graduates in 2007-08 is projected to reach an historical peak of 3.2 million, exceeding the previous peak reached in 1978-79 by more than two percent.

Overall the U.S. population will become increasingly diverse, with the non-Hispanic white share of the population falling from 72 percent in 2000 to 64 percent in 2020 (Figure III.2).

By 2020 Hispanics will constitute 16 percent of the U.S. population and blacks 13 percent.

North Carolina's population will outpace the nation's growth, but will have less diversity than many other states.

North Carolina's population is projected to grow from 7,777,000 in 2000 to 9,600,000 by 2020a 23.4 percent increase. This compares with a projected 17.5 percent increase for the total U.S. population.

During the period 2000-10, the 18-24 year-old cohort (the baby boom echo) will experience an 18 percent increase, while the 25-44 year-old cohort will decline by 2.3 percent to slightly more than 25 percent of the total population (Figure III.3).

Between 1995-96 and 2007-08 North Carolina will experience a 37 percent increase in high school graduates.

The greatest increase after 2020 will be in the 65 and older group, as baby boomers reach retirement age.

Although North Carolina will become more diverse racially and ethnically, the changes will be less dramatic than for the nation as a whole (Figure III.4).

The number of whites in North Carolina's total population will fall from 74 percent in 2000 to 72 percent in 2015 (compared to 66 percent nationally).

The African-American proportion of North Carolina's population will increase from 22 percent to 23 percent and the American Indian share will remain stable at 1.2 percent between 2000 and 2015.

Hispanics, who are projected to constitute 15 percent of the U.S. population by 2015, are expected to rise to just 1.9 percent of North Carolina's population, with Asians rising to 1.6 percent by 2015.

As in the recent past, most of North Carolina's population increase is expected to come from in-state births and domestic in-migration, as opposed to international immigration.

Different regions of North Carolina will have differential rates of growth, with urbanized areas in the Piedmont or near interstate highways and certain counties on the coast and in the mountains growing faster than more rural counties.

2. The Knowledge Revolution

Advances in information technology and telecommunications have made possible the rapid dissemination and exchange of information and vastly increased the pace of new discoveries.

The volume of human knowledge continues to expand exponentially.

As a consequence, the value of education and of lifelong learning will rise dramatically. Learning and degrees will need to be refreshed continuously.

This need is producing a revolution in the learning business.

The key to wealth and prosperity will no longer be land or natural resources, but the availability and creative use of information to produce and apply knowledge.

The weight of a society's exports will reflect its economic success, with lighter weight (knowledge, information technology, and services) producing greater prosperity than bulk products.

The competitive advantage will go to those societies that have widespread connectivity (installed bandwidth) that enables broad dissemination and exchange of information among an educated citizenry and workforce.

3. Innovation and Change: The Impact of Information Technology

Advances in information technology have created a global community that is both increasingly interdependent and competitive.

Innovations in computerization, telecommunications, miniaturization, compression technology, and digitization have resulted in declining costs and expanded availability of information technology globally.

These innovations have greatly increased the speed, distance, and amounts of information that can be transmitted and which flow freely across boundaries.

They have created a faster, more open, and more complex global marketplace with increased efficiencies and economies of scale.

Global competition, in terms of the quality, price, and source of products and services and the speed at which they can be delivered, has intensified enormously.

Technological advances are strengthening a consumerism that demands convenience and responsiveness to consumer needs and interests.

The pace of innovation and change will require a streamlining of bureaucratic procedures and regulations and the creation of more efficient organizational structures.

Competitive organizations will reward employees for their knowledge and skills, and employees, with greater loyalty to their careers than a specific employer, will prefer guarantees of lifetime education to lifetime employment. Many will choose to work as contract employees.

The rate of change, competitive pressures, and heightened specialization will require organizational focus, outsourcing, collaboration, and the development of strategic alliances based on shared interests and complementary strengths.

B. Implications of Change Drivers

1. Implications of Demographic Changes

While North Carolina ranks 11^th in overall population size, it ranks fourth in projected K-12 enrollment growth over the next decade. Figure III.5 shows the projected growth in North Carolina school enrollments.

That projected growth, coupled with anticipated teacher retirements and turnover, indicates that North Carolina will need nearly 80,000 new teachers over the next decade, a number comparable to the total corps of teachers in the state today.

Given the need for teachers and concerns about quality, teacher education (and the universities that prepare teachers) will be the subject of intense scrutiny by public officials and others.

Many states, North Carolina among them, will be challenged to accommodate a substantial increase in traditional college-age students (echoes of the baby boom) and, at the same time, serve the needs for continuous learning on the part of nontraditional students.

College attendance will surge, and a large percentage of the enrollment increase will be full-time undergraduates.

Students will be more diverse ethnically and racially than in the past.

Although a robust economy has produced relative prosperity for higher education in the late 1990s, states will be challenged to maintain that level of funding and support the anticipated growth in enrollments should the economy falter.

2. Implications of the Knowledge Revolution

Higher education has never been of greater importance to society and the economy. Knowledge will be to the 21^st century what natural resources and manufacturing were to the 20^th century.

Education, more than ever before, will be the strategic resource for ensuring economic growth and individual income, a stable and democratic society, and quality of life. Tables III.1 and III.2 illustrate this relationship.

Table III.1. Median Earnings & Unemployment Rates by Educational			Table III.2. Correlates of Educational Attainment
Attainment (U.S. Bureau of Labor Statistics)			(Postsecondary Education Opportunity, March 1999)
Education Attained	Median Earnings (1997)	Unemployment Rate (1998)	Activity	H.S.Grad	College Degree
Professional degree	$72,700	1.4%	Attendance at various arts activities	19.6%	35.9%
Doctorate	$62,400	1.3%	Participation in exercise program	55.0%	75.0%
Master's degree	$50,000	1.6%	Read newspaper at least once a week	85.0%	91.0%
Bachelor's degree	$40,100	1.9%	Read one or more magazines regularly	86.0%	94.0%
Associate degree	$31,700	2.5%	Read any books in last six months	57.0%	83.0%
Some college	$30,400	3.2%	Correctly answer questions about government	43.0%	84.0%
High school grad.	$26,000	4.1%	Voted in presidential election (1996)	51.7%	77.0%
No h.s. diploma	$19,700	7.1%	Participate in ongoing community service	33.0%	52.0%

More than two-thirds of the jobs being created in the fastest-growing sectors of the U.S. economyoffice jobs (e.g., legal and financial services, sales and marketing, accounting, managerial and editorial positions), health care, and teachingnow require a college education (Table III.3).

Table III.3. The Ten U.S. Industries with the Fastest Projected Employment Growth: 1996-2006 (U.S. Bureau of Labor Statistics) Industry Growth Growth (1,000's) (percent) Computer & data processing services 1,301 108% Health services 796 68% Management & public relations 527 60% Misc. transportation services 123 60% Residential care 398 59% Personnel supply services 1,393 53% Water & sanitation 118 51% Social services 420 50% Health practitioner offices 1,295 47% Recreation services 1,565 45%

Technological innovations are causing jobs in agriculture and manufacturing to fall, while increasing the skill level necessary for many that remain. Figure III.6 depicts the changes occurring in major North Carolina employment sectors.

Low-wage services jobs, which comprise about 20 percent of all U.S. jobs, have held steady since the 1950s and are not expected to become more plentiful.

The demand for specific vocational skills is giving way to a growing need for knowledge workers with mathematical and verbal reasoning ability, analytical, problem-solving and interpersonal skills, and the ability to communicate, coordinate, manage, and work in teams.

Continuous education will be the hallmark of careers in the new economy. The two-year or four-year degree will be replaced by the 99-year degree, as the knowledge and skills required for jobs, and the jobs themselves, will change at an unparalleled rate. Figure III.7 shows the results of one workplace survey on this trend.

With just 24.4 percent of the 25-and-older population having a bachelor's degree or better and 65 percent of new jobs requiring higher skills, the U.S. has an under-degreed adult population.

The percent of North Carolina adults with at least a bachelor's degree is just 23.3 percent, with a large gap between white and black adults (Figure III.8).

In 1998 an estimated 59 percent of recent U.S. high school graduates were enrolled in postsecondary institutions.

In North Carolina just 51 percent of recent high school graduates were enrolled in postsecondary institutions.

In 1998 24.9 percent of males 25 and older in North Carolina had a four-year college degree or higher, compared to 21.8 percent of females (Figure III.9).

However, the number of women currently enrolled in North Carolina's colleges and universities is 27 percent higher than the number of males, so the lower female educational attainment is likely to vanish soon, possibly to be replaced by lower educational attainment by males.

In 1998 25.6 percent of white North Carolinians had attained a four-year degree or higher, compared to 13.6 percent of blacks and 19.2 percent of Hispanics.

However, in fall 1999 the UNC going-rate among first-time freshmen was 30.6 percent for whites, 28.5 percent for blacks, 29.8 for American Indians, 26.0 percent for Hispanics, and 45.2 percent for Asians. Thus the state is making progress in closing the racial/ethnic educational attainment gap.

As North Carolina has raised the educational attainment of its people, it has also narrowed the gap between the North Carolina ($23,170) and U.S. ($25,298) average per-capita income (Figure III.10).

However, North Carolina's per capita income is just 91.6 percent of the national average.

Just as educational attainment is not evenly distributed throughout the population, so too with respect to one of the outcomes of educational attainmentemployment in good-paying jobs. Unemployment, and the accompanying poverty, varies significantly among the various regions of the state (Figure III.11).

Fig. III.11. Regional Differences in N.C. Unemployment Rate (N.C. Employment Security Commission)

3. Implications of Innovation and Change: The Future Competitive Environment for Higher Education

Institutions of higher education will experience fierce competition both from their traditional peers and from alternative providers and delivery mechanisms.

Education and training constitute a substantial growth industry, estimated by Merrill Lynch at $740 billion in the United States alone and growing at six percent annually. This represents nearly ten percent of GDP, second only to health care in size.

The for-profit sector in postsecondary education alone is estimated at $8 billion, with a projected 15 percent annual rate of growth.

The educational needs of a knowledge economy, contrasted with the deliberate pace characteristic of most colleges and universities, are creating opportunities for more nimble and innovative providers to enter the market.

To meet the need, new institutional models are emerging-for-profit and proprietary institutions, "educational brokerages," clearinghouses and certification agencies, etc.

Faced with competition from new education providers who will focus on the most profitable markets and realize economies of scale through mass marketing of courseware, traditional institutions of higher education (especially those in the public sector) will be under increased pressure to reduce their costs and increase their productivity. Should alternative providers succeed in capturing their large and most profitable markets (e.g., the MBA), such institutions will find it even more costly to support high cost/low demand programs (e.g., the liberal arts, doctoral degrees).

Owing to the impact of technology and globalization, education in the 21st century will change significantly in terms of delivery systems, teaching and learning methodologies, and the nature and number of educational providers. Examples include change from a faculty-centered to a learner-centered environment, greater reliance on interactive and collaborative learning, greater focus on learning outcomes and competencies, and delivery of education "anytime, anywhere."

Higher education, especially public higher education, will be subject to changing and heightened expectations both from the state (e.g., economic development, solution of societal and environmental problems) and from the public (e.g., a more "service, client-centered" orientation coupled with broad access to a quality, affordable, and convenient education).

4. Implications for Public University Systems

Article 1, Section 116-1 of the North Carolina Constitution succinctly states the purpose of a multicampus system: "In order to foster the development of a well-planned and coordinated system of higher education, to improve the quality of education, to extend its benefits and to encourage an economic use of the state's resources, the University of North Carolina is hereby redefined in accordance with the provisions of this Article." (1971)

A public university system serves the public and the state when it promotes access, appropriate specialization, diversity, and intercampus collaboration through a division of labor that provides educational choice and excellence. The need for these services has never been greater.

Changes in the external environment have greatly outpaced changes within the internal environment of higher education. In the future, university system leaders and institutional leaders must find ways to manage change and institutional transformation without sacrificing the core values of higher education. Information technology will be a key ingredient in this transformation.

As institutions seek to respond to change and external competition, there is the potential for increased tensions and conflicts between institutional ambitions and the needs and interests of the system and the state. System leaders will be challenged to achieve a creative tension between the whole and its parts and a sense of balance among competing institutions.

University systems will have to find a balance between the deliberate pace required to ensure quality and avoid unnecessary duplication and a timely response to immediate public needs and competitive forces.

Successful future systems will be leaner and more agile, fueled by the information revolution and nurtured by alliances. This will require a commitment to collaboration and inter-connectivity-among campuses, students, other public agencies, and private entities-even, sometimes, competitors.

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