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Linkages between highereducation and the labourmarket: lessons fromredemocratized HungaryKassie Freeman aa Peabody CollegePublished online: 09 Jul 2006.

To cite this article: Kassie Freeman (1997) Linkages between higher education and thelabour market: lessons from redemocratized Hungary, Journal of Education Policy, 12:3,111-125, DOI: 10.1080/0268093970120301

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J. EDUCATION POLICY, 1997, VOL. 12, NO. 3, 111-125

Linkages between higher education and the labourmarket: lessons from redemocratized Hungary

Kassie Freeman

Peabody College

This research examines how higher education graduates in redemocratized countries, such as Hungary, receive infor-mation from multinational corporations regarding employment opportunities. It also assesses how the informationexchange between higher education and the labour market, i.e. multinational corporations, shapes new relationshipsbetween these two entities. The findings from this study seem to suggest that multinational corporations have influ-enced Hungarian higher education institutions in several profound ways: (1) the redefinition of graduate recruitmentprocedures, (2) the shift in employee characteristics that employers value, (3) the implications for curricular designand teaching styles, and (4) the ranking and prestige of universities. The results of this study are not only useful forcountries in transition to a market economy but for other countries as well.

Introducton

In a non-market economy, the state bears a special burden in linking resourcesbetween 'sectors' of the economy. Among the most important of the linkages is a setof mechanisms to provide employment for the human 'products' of the institutionsof higher education. A set of information exchanges that are closely tied to a systemof management planning is at the heart of this non-market system, with employmentassured for those who have been selected and trained according to the needs of thenation's economic goals.

As market replaces non-market, the security and predictability of'the plan' is lostfor human resources and the economic 'sectors' of the society alike. Competition forjobs surrounds higher education graduates. Attracting the most well-trained andmost capable graduates enters into the strategying of employers. Adapting pro-grammes to the twin 'markets' of perspective students and prospective employersbegins to be a central consideration in the management of colleges and universities.

There have been few opportunities to study carefully the impact of market-structure changes upon a nation's institutions of higher education. Hungary, the sub-ject of this study, provides such an opportunity.

Background

Within higher education circles, it almost seems criminal to mention higher educationand employment in the same conversation. To do so puts scholars, at once, on the

Kassie Freeman is Assistant Professor in the Department of Educational Leadership, PeabodyCollege, Vanderbilt University, USA. She has researched and published in the field of theeconomics of career counselling.

0268-0939/97 $12·00 © 1997 Taylor & Francis Ltd

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112 KASSIE FREEMAN

defensive, feeling the need to explain that the role of higher education is notvocational. By any account, however, one of the outcomes of completing higher edu-cation at any level is moving into the labour market.

The information exchange between higher education and the labour marketplays an important role for the return that students and societies receive on theirinvestment. All countries, including the USA, and individuals are concerned abouttheir return on investment in higher education. Therefore, receiving job-marketinformation to assist in the educational decision-making process is all the more impor-tant. As Rosen (1987) indicated, 'Specific and general job market information reducesprobable divergence between anticipated and actual returns and increases the effi-ciency of educational investments' (p. 179).

The purpose of this research was to assess the new information exchange betweenthe labour market, in this case multinational corporations, and higher education insti-tutions in Hungary. More specifically, this research examined several questions:How do higher education graduates in redemocratized countries such as Hungaryreceive information from the labour market regarding employment opportunities(e.g. on-campus recruitment, advertisement, informal channels such as friends)?How does the information exchange shape new relationships between higher educa-tion institutions and employers? Secondarily, this research reviewed how the infor-mation exchange between higher education and the labour market influences theprestige (ranking) of colleges/universities. Another intent of this research was to deter-mine what, if any, lessons higher education institutions and employers in countriessuch as the USA could learn.

The average lay persons, including parents and students, typically make employ-ment decisions based on little knowledge about the consequences of their choices.This could result in lower returns on their investment. Assessments of expectedreturns require projections and predictions of specific skill valuations, possible futureobsolescence and depreciation (Rosen 1987), information the average student oftendoes not even consider.

In a country such as Hungary, where students did not have to compete for jobsfollowing graduation from higher education as do students in a market economy,understanding a new process of receiving information from the labour market is par-ticularly important. In the past, the exchange between the labour market and highereducation was planned. The nature of manpower planning in centrally planned eco-nomic systems assured university graduates employment. However, no longer willuniversity graduates be assured jobs. As Hungary makes the transition to a marketeconomy, choice will play a key role for employers and employees. As Jan Sadlak(1990) indicated in reference to post-Communist countries, 'A graduate's job place-ment and conditions of employment will be determined entirely by the labour mar-ket and personal choice' (p. 4).

The significance of better understanding this newly defined relationship betweenhigher education and the labour market holds great importance for educators and pol-icy makers in Central Europe and other countries for several reasons: (1) conceptualiz-ing or reconceptualizing the pattern of transition between higher education and thelabour market; (2) assisting universities in developing strategies for helping studentsto maximize the individual and societal returns on their investment; (3) easing thetransition for students from higher education to the workforce; and (4) understandingand developing new relationships between higher education and the labour market.As relationships between higher education and the labour market are being redefined

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LINKAGES BETWEEN H.E. AND THE LABOUR MARKET 113

globally, this research could provide a view of higher education institutions in shapingor being shaped by the demands of the market.

To understand the newly developing information exchange between highereducation and the labour market in post-Communist Hungary, it is helpful to under-stand the historical context of the relationship between higher education and thelabour market.

Historical context of information exchange

Higher education and the labour market have historically been linked in societies. Thelinkages have differed based on the economic system, whether market or plannedeconomies. In planned economies, work was viewed not only as a right but as anobjective need for all able-bodied members of society (Binyon 1979). One importantpoint about manpower planning was that it was viewed as a crucial part of overalleconomic planning.

The idea was to prevent unemployment. Therefore, according to Kozma (1990),manpower planners developed mid-term and long-range plans (5-year and 15-year)in an attempt to determine the exact number of professionals needed in each occupa-tion (i.e. engineers, teachers, doctors, etc.). According to Lukacs (1989), in additionto determining the number of individuals needed in each profession, the politicalauthorities determined the social background these individuals should represent. Theavailability for higher education, then, was based on projected socioeconomicdemands (Lukacs 1989).

Countries such as Communist Hungary that ascribed to forecasts of manpowerneeds as the main basis for educational planning viewed competition for entry tohigher education as the best way of ensuring that those who were intellectually mostable proceeded to high-level occupations. Thus, a prescribed number of admissionsto higher education allowed the most talented of an age group to obtain access tointellectual careers (Fulton et al. 1982). It is for these reasons that entrance to highereducation has been highly selective and competitive. In Hungary, for example,Kozma (1990) estimated the ratio of applicants to admits to be 3:1

In terms of employment recruitment in centrally planned economies, academicperformance has been considered the most important criterion along with partymembership (Sanyal 1987); whereas in market economies, the idea has been to recruitapplicants who know how to best sell their skills. In centrally planned economies, inorder to avoid higher education graduates being left to an accidental meeting ofdemand and supply, some students were sponsored by enterprise-offered studentgrants (Fulton et al. 1982). The intent of these grants was to channel some specialistsinto certain jobs and/or geographical regions with limited specialists. Unlike someother centrally planned economies, in Hungary some students were left to find theirown employment, although employment opportunities were tied to admission (i.e.the number of students admitted in a given year was based on projected labour mar-ket needs).

The admissions-employment process in Hungary, as in any country, had impli-cations for the curriculum. The curriculum was highly structured. Since specializedcareers were promoted, great emphasis was on technical, engineering and agriculturaleducation (Hungarian Ministry of Education 1993). Formal lectures were structured

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114 KASSIE FREEMAN

and emphasis was placed on memorization/recall. Ideological education was requiredfor all students.

Since graduates did not have to be concerned about finding employment in the•way that a market economy demands, the return on their investment in higher educa-tion was assured. Now individuals and the stage have to become concerned about stu-dents receiving a return on their investment in higher education. Students typicallyincur direct and indirect costs for attending higher education. Although in Hungarythe government has absorbed most of the direct costs (tuition, books, fees) for stu-dents attending universities, students incur indirect cost - the amount and value oftime (leisure) and wages (foregone earnings) that they lose while attending highereducation. Davis and Morrall (1974) estimated that the major cost of education is theindirect cost of the amount of earnings students forego while attending higher educa-tion.

Research in context

Smith and Rojewski (1993), citing Stone, provide the best definition of the informa-tion exchange between higher education and the labour market in market economiessuch as the USA: 'Traditionally, the successful school-to-work transition has beenconceptualized as the movement between the end of formal, secondary or postse-condary education and the acquisition of an entry-level job related to the vocationalprogram' (p. 7). The information exchange between higher education and the labourmarket, then, can best be defined as the mutual acquisition or sharing of signals(messages) that lead to a matching of job skills between graduates and employers.

Societies and students have expectations about the linkages between higher edu-cation and the labour market. Essentially, parents and students expect higher educa-tion to help prepare students to enter a worthwhile career, one that earns higherincome than non-college graduates. Societies expect higher education institutions todevelop in graduates the knowledge, attitudes and skills which will enable them tocontribute to the economy (Watts 1983).

There is no doubt that unemployment or underemployment of expensively edu-cated graduates (for country and individual) is economically inefficient and personallydistressful (Fulton et al. 1982). For example, for employers in the USA, the cost oftraining an employee is, on average, about one month's wages, and for the employee,the costs of being unemployed or underemployed reduces the investment in theirschooling (Bishop 1993). Bishop stated it in this way: 'Better matching of workersto jobs also creates private and social economic benefits' (p. 335). One of the main pro-blems has been translating employment needs into a workable relationship withhigher education. How does education respond? What is the appropriate relationship?

In addition to the information that higher education institutions receive from thelabour market that directly leads to students moving into the labour market, otherrelationships develop that benefit employers and higher education institutions. Forexample, employers benefit from relationships with higher education through theopportunity to have access to the best and brightest graduates. Employers also benefitfrom research collaborations with higher education institutions. In some cases, highereducation institutions augment corporations' research and development departments.Additionally, the information exchange benefits higher education institutionsthrough receiving increased funding from corportions. The prestige of higher educa-

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LINKAGES BETWEEN H.E. AND THE LABOUR MARKET 115

tion institutions is often defined based on what type of employment opportunitiesstudents receive following graduation and from which organizations they receivejob offers.

Theoretical framework

It is widely accepted that the better the information exchange between higher educa-tion and the labour market the better the match between worker and job (Bishop1993). Two theories provide the foundation for this research: the recruitment channel(Bishop 1993) and orientation and preparation for the world of work (Wise andCharner 1978, Watts 1983, and Freeman 1989,1992).

The information exchange is likely affected by the recruitment channel, that is,how and from whom the prospective employee receives information and how theemployer selects the employee. Bishop (1993), for example, stated that employerswho used informal networks had average turnover, whereas employers whorecruited walk-ins and newspaper advertisement respondents had slightly higherthan average turnover. Recruiters who used employment agencies were larger insize than average, more capital intensive, paid-lower wages and had higher turnover.Those employers who hired through school referrals or placement were more likelyto recruit younger employees.

Watts (1983) describes four broad functions which higher education can play inrelation to employment: selection, socialization, orientation and preparation. Hedefined selection as the process of higher education taking on 'the functions of allocat-ing and selecting as well as training individuals for their adult roles' (p. 13).Socialization is defined as that process that influences students' attitudes about theworld of work. This research focuses on the latter two functions — orientation andpreparation. Orientation, as described by Watts, 'is concerned with deliberate curricu-lar interventions designed to help students to understand the world of employment,and to prepare for the choices and transitions they will have to make on entering it'(p. 18). Acording to him, orientation has two distinguishable facets. One is career edu-cation, 'which is concerned with helping students to prepare for their individualcareer choices and transitions' (p. 18). The other facet is learning about work. In thisfunction of orientation, students actually learn to understand the workplace in society,for example through internships.

As it relates to career counselling, once students are admitted to higher education,according to Wise and Charner (1978), 'three institutional functions — advisement,instruction, and certification - play a critical role in determining graduates' employ-ability' (p. 15). Essentially, they view advisement as beginning at the point a studentis admitted and continuing until a student is employed. According to Wise andCharner, career counsellors provide the advisement function in Western countriessuch as the USA and are a vitally important link between students and the world ofwork. Counsellors, along with academics, provide the function of orienting and pre-paring students for employment.

While it is often not viewed as having an impact on return on investment in edu-cation, career counselling plays a major role in assisting graduates in maximizing thereturn on their investment. The importance of career counselling as it relates to mone-tary return on investment in higher education has been documented in a study byFreeman (1989). In that study the impact of career counselling on the return on invest-

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116 KASSIE FREEMAN

ment of Master's in Business Administrtion (MBA) graduates was investigated. Thefindings from that study indicated that at some of the most prestigious schools of busi-ness in America, the majority of graduates used career counselling to assist them infinding employment regardless of socioeconomic background. In that study, careercounselling was found to have a significant, positive influence on return on invest-ment for the graduates of those schools when starting salary and number of job offerswere used as indicators of return on investment. That, is, frequency of the use of careercounselling significantly influenced the dollar amount of students' starting salary andnumber of job offers.

Career counselling also helps students with non-monetry (or delayed monetary)returns. It assists students with developing strategies for lifelong career planning.Career counsellors generally view their work as the bridge between the world of edu-cation and the world of work, but they do a great deal more. Particularly, it aidsundergraduates with graduate school planning and alternative careers (i.e. careers inthe non-profit sector). The career counsellor is, in effect, the person who negotiatesbetween the academic institution and the employer on behalf of the student, provid-ing students with information about employers and providing employers with themost appropriate information about students (Freeman 1992). As demonstrated inFigure 1, professors and career counsellors have a direct and indirect impact on stu-dents' return on their investment in higher education. Students invest in higher educa-tion institutions which provide them with academic and student services which inturn impact on their ability to move into the labour market (information exchange).

It is when students' expectations about the labour market are found to be in errorthat the case is really made for providing more accurate information through collegejob market counselling (McMahon 1987). Career counselling centres keep abreast ofmarket conditions and workforce trends and are in a good position to inform studentsof possible career pitfalls. But labour market information is a two-way street betweeneducational institutions and the market. The analysis of the labour market related toeducational planning gains more relevancy when its studies are not limited to those

Studel (Services(Career Counseling)

I.e.Lifelong Career

Skills &Labor MarketInformation

Academic Services(Instruction)

It .Grades &

Recommendations

Figure 1. Impact of career counseling and academic services on students' returns to higher education.• , Direct relationship; ^ • , reciprocal relationship.

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LINKAGES BETWEEN H.E. AND THE LABOUR MARKET 117

already in the job market but includes those in high schools and higher education(McMahonl987).

It is through preparation, as Watts (1983) indicated, that students are taught spe-cific skills and knowledge which they will be able to apply in some specific wayafter entering employment. This function.most often in a market economy, is left toemployers through on-the-job training programmes.

However, other theories refute the role that higher education plays in preparingstudents for the role of work. The screening, or filter, theory (Arrow 1973) assertsthat schooling is a process that employers use to identify qualities inherent in indivi-duals. In other words, according to this theory, it is the innate qualities in individualswhich are productive and valued by firms, not the process of schooling (Magnussen1979). In 'Higher Education as a Filter', Arrow (1973) stated that in the screeningmodel, higher education contributes in no way to economic performance; it increasesneither 'cognition nor socialization' (p. 194). Rather, according to him, 'higher edu-cation serves as a screening device, in that it sorts out individuals of differing abilities,thereby conveying information to the purchasers of labour' (p. 194). Institutionalquality (elite or non-elite) is also posited as an employer screen; that is, employers pre-fer those graduates from the schools that they perceive to be the most prestigious insti-tutions (Magnussen 1979).

In summary, the most prominent theories about the information exchangebetween higher education and the labour market that provide the framework forthis research indicate that higher education provides orientation and preparation forstudents, often through the deliberate curricular interventions designed to help stu-dents understand the world of work (Wise and Charner 1978, Watts 1983). InWestern countries, one way that this has been done has been through the use of careercounselling (Freeman 1989,1992). Another direct link between higher eduction andthe labour market, as outlined by Bishop (1993), is through the recruitment channel— how and from whom prospective employees receive information. Other theorists,for example Arrow (1973), however, indicated that higher education merely servesas a screen to identify qualities inherent in individuals. Additionally, Magnussen(1979) stated that employers use higher education institutions as a means of sortingindividuals by institutional type, elite or non-elite.

Research strategies and findings

Procedures

In order to examine the questions raised in this study, 13 companies completed a sur-vey and were interviewed. These interviews were conducted in the spring of 1994 inHungary in the offices of the participating companies. Interviews were verbally con-ducted to minimize language and cultural differences. In order to obtain a more accu-rate sampling, companies were selected by product/service type (e.g. financial,computer, food and beverage), by number of employees (ranging from 30 to over10,000), and by multinational and Hungarian (unfortunately, most formerlyHungarian companies were jointly or wholly owned by Western companies so thatall the companies in this sample were multinational).

The individuals who were interviewed for this study held a range of responsiblepositions from the head of the company's office to the person responsible for the hir-

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118 KASSIE FREEMAN

ing decisions. All but four were Hungarian (two were American, one was British, andone was Swedish).

Instrument

The survey for this study was researcher designed and was evaluated by twoHungarian economists. The questions were based on theoretical constructs related tothe theoretical framework outlined in this study on the information exchangebetween higher education and the labour market. The questions were both forcedresponse and open ended, allowing for greater input from the participants.

The survey instrument was divided into four broad sections: (a) backgroundinformation on the companies, including industry type, number of employees, andprojections for hiring new employees in two and five years; (b) new hire proceduresand recruitment channel, requesting such information as employment proceduresand employee characteristics employers value; (c) ranking of universities that best pre-pare students for the labour market; (d) and employer benefits and services offeredto employees (e.g. training).

Findings

Profile of the participating companies: All 13 companies participating in the study weremultinational (one company indicated that it was 80% American and 20%Hungarian owned). In terms of type of industries represented (see Table 1), three werecomputer, one was financial, four were production, three were food/beverage, andtwo were indiated as other (one was affiliated with the American government andone was trading/distribution). The number of current employees ranged from 30 toover 10,000. All but three of the companies projected growth over the next two years,although two were not sure (of the three, one projected no growth — company with600 employees - and two projected decreases - companies with 1,000 employees).Only three of the companies felt comfortable to make projections about growth overthe next five years (one projected further decline, one estimated an increase of approxi-mately 30 employees, and another estimated an increase of about 80 employees).

As these were multinational companies, there is often the tendency to transportemployees from Western countries, so the representatives were asked about thenationality of the current workforce, that is, the percentage of Hungarian versusWestern employees. Four of these employers indicated that 100% of their workforcewas Hungarian; five predicted 90—95% to be Hungarian; two predicted 70% to beHungarian; one was unsure; one did not report. In terms of what number of entry-level professional employees they had hired in the last two years (see Table 1), thenumbers indicate that the bulk of their professional positions were hired in the lastthree years. In fact, when asked when they opened their offices in Hungary, with theexception of three companies (including the largest employer with over 10,000employees), all had opened in the last three years. However, even the companies thathad opened prior to 1991 indicated that their hiring procedures had had to change asHungary is making the transition to a market economy.

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Table 1. Profile of companies participating in Hungarian survey.

Industry

Computer123

Financial

Production1234

Food/Beverage123

Other:US GovernmentPetroleum

Number of employees

5010030

110

11,000600

87125

1,0001,000

100

401,000

New Hires

20205

110

700

6280

505070

1010

Projected hires

10104

20

1,0000

35

700-100

10-100

Note: Number of professional-level new hires in the last two years.** Projected new hires in two years.

How students receive information from employers: Employers were asked to select all themethods they have used to hire new college graduates (Table 2). All employers indi-cated that they have relied on newspaper advertisements. As noted in Table 2, in addi-tion to relying on newspaper ads and journals as a source for professional employees,they have relied on informal networks such as employee referrals.

While 38% of these participants stated that they had paid fees to student groups,they indicated that relationships with university officials, particularly with professors,has been non-existent. These representatives reported that there •were no career coun-sellors at the universities and only two reported having any interactions with profes-sors. The job fair held at the Budapest University of Economics was very popularwith employers. In fact, in response to the question of what had proved to be themost effective procedure to find college graduates, four indicated the job fair, threestated personal connections (i.e. current employees), and two indicated employmentagencies. It is interesting to note that while all the companies used newspaper ads,only two found this to be the most effective means of finding college graduates.

In sum, while the informal network is still very active, employers voiced strongintrests in using resources at higher education institutions, including better interac-tions with professors, as evidenced by their use of job fairs. This increased interest inthe higher education institution as a recruitment channel supports Bishop's (1993)theory that employers interested in recruiting younger employees utilize higher edu-cation institutions. Several employers, for example, stated that they did not want tohire employees over the age of 40 because they are difficult to train in a new way ofthinking.

Skills employers value: Employers were asked to rank characteristics they most valued inhiring new professional employees, with 8 = highest and 1 = other (see Table 3).

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Table 2. New hire procedures Hungarian employer participants have used torecruit/employ professional employees.

New hire procedure Percentage

Advertisement:Newspaper 100Journal 77

University:Counsellor 0Faculty 15Student group 38Job fair 92

Informal network:Friends 84Employees 77Professional association 15

Employment agency 85

Other 15

Note: Since individuals were asked to mark all that apply, the percentage total exceeds100%.

Interviewing skills were rated as the characteristic employers valued most when hiringgraduates. For example, employers stressed the need for students to better understandhow to market themselves for a market economy and present an attitude that conveysmotivation and a willingness to do things differently. One representative stated it inthis way: 'Students need to know their abilities, know how to present themselves.'

Understandably, since these were multinational companies (many with head-quarters in the USA), the characteristic that employers valued most after interviewingskills was the ability to speak the English language. One company representative,however, indicated that they wanted individuals with the ability to speak a third lan-guage. It is not surprising, then, that graduates from those universities that requiredforeign languages would be in demand. University attended was of the next mostvalued characteristic. Employers rated appearance higher than type of training, a

Table 3. Employee characteristics Hungarian employer participants seek-ranking of factors in making higher education graduate hiring decisions.

Applicant characteristics RankX

Interview skills 6.8English language 6.4Univesity attended 5.7Appearance (physical) 4.1Type of training (technical, general) 4.0Letters of recommendation 3.0Grades in school 3.0Other 0.2

Note: 8 = highest; 1 = lowest.

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clear movement away from specialized training. Grades and letters of recommenda-tion were rated as the least important characteristics that employers valued in gradu-ates. One representative indicated that understanding teamwork and companyculture were very important. The bad news is that companies (nine of the 13) indi-cated that they used universal hiring procedures, not procedures that are specific tothe Hungarian culture.

When employers were asked what are some of the things that colleges/universi-ties can do to benefit their hiring of higher education graduates, their answers fellinto two categories, one curricular and one student-services orientated. In terms ofcurricular issues, these companies indicated providing more problem-solving skills,including case studies in teaching, offering more Western business courses, and inter-nationalizing the curriculum. They also recommended better relationships betweenprofessors and employers.

As for student services, these representatives suggested helping students betterunderstand how to sell themselves. In order to do so, employers mentioned the needto develop and centralize the career services, provide a graduate database for currentgraduates and alumni, and maybe schedule two job fairs per year instead of one.One employer stated, for example: 'We need real help. I do not know who to address,and there is no contact point.'

Ranking of colleges/universities: Employers were asked to list the four colleges/universitieswhich best prepared their students for employment. Eight of the employers listed theBudapest University of Economics as their top choice, and three listed it as their sec-ond choice. Three listed The Technical University as their top choice, and two listed itas their second choice. These two universities were followed by the College ofAccountancy, the College of Foreign Trade, and the College of Commerce andTrade. When asked what these colleges/universities did to better prepare their studentsfor employment, the foreign language requirement(s) was mentioned as one of thetop issues (particularly at the Budapest University of Economics) followed by the jobfairs that were scheduled each year.

Employer Benefits: To make themselves attractive to potential employees, especially tohave them accept a new way of working (sometimes longer hours and the offering ofcustomer services, which was frequently mentioned), these multinational companiesare offering higher salaries to offset offering fewer benefits than Hungarians wereaccustomed to in the past. For example, in the past, Hungarians would be allowed 30days of vacation per year, and vacations would be sponsored at holiday resorts, such asLake Balaton. Many companies had holiday lodges where employees could stay whileon vacation. However only one of these companies indicated that they had a holidayhouse. Other companies, especially the food and beverage companies, indicated thatthey subsidize their employees with company products. All of the companies indicatedthat they subsidize lunch for their employees. In some jobs, like sales, company carswere provided. All companies, too, indicated that ongoing training was provided foremployees to perform their jobs.

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Interpretations and implications

This research provides several clues about the information exchange between highereducation and the labour market for all countries that ascribe to a market economybut, particularly, for countries in the process of redemocratization: (1) the influencecompanies have on higher education curriculum; (2) the necessity of the informationexchange between higher education professors and employers; (3) the importance ofcentralized services for students to receive information from employers; and (4) therole student placement plays in developing and ranking the prestige/elite universities.

The effect employers can have on the higher education curriculum is both directand subtle. In direct ways, employers, particularly in the case of newly redemocra-tized countries such as Hungary, define not only the type of skills and training thatstudents must have before they will hire them but also how the students are taught.For example, in Communist Hungary, students were taught more specialized courses.Now employers have indicated that they would like to hire students who are taughtmore problem-solving skills and who speak English as a second language. As thisresearch has pointed out, there is a clear movement away from rote memorization,which will require a new style of teaching from professors. This could mean thatteaching styles will have to be more interactive, with students being involved in activ-ities that require more participation, more problem solving. These findings, then,would tend to support Watts's theory of preparation. That is, these employers seemedto be moving in the direction of preferring students who are prepared with a moregeneral education and whom they will train through on-the-job training.

Diamond (1989) has discussed the need for employers to be involved in curricu-lar design. Obviously, in economic terms, employers are the consumers of the pro-ducts (students) of higher education institutions. Therefore, employers, according toDiamond, influence higher education institutions' curricula through assessing thebasic competences all students should have upon graduation, providing informationon field/discipline-specific requirements, and filling existing gaps between what isneeded and the abilities of graduates. These findings seem to support the importanceof better communication between higher education institutions and employersabout curricular issues that will affect the employment outcomes for graduates.

If the curriculum and delivery of course content are impacted on, then under-standably the relationship and exchange of information between employers and tea-chers would be redefined. While at first glance the newly defined relationship mayappear negative for already overworked and underpaid professors, it could in factprove to be a helpful relationship. As pointed out in Figure 1, the relationshipbetween professors and employers is reciprocal. Professors could use corporate execu-tives to deliver cases to their classes, as some employers who participated in thisresearch have indicated that they are both interested and willing to do. This wouldprovide a first-hand overview of what employers mean by problem solving or casestudies. Next, those professors who take the time to establish these relationshipswould be the first in line for equipment and research grant monies that some of thesecompanies have indicated that they are willing to provide. Even more important,though, professors could play a major role in defining the extent of the relationshipof their institutions with these employers. Professors know better than anyone at acollege/university what skills students are acquiring, the limitations of their particularinstitution, and the capabilities of their students. If professors use this information intheir negotation with corporations, this information could make professors active

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participants in shaping the market rather than being shaped by the demands ofemployers.

As demonstrated from past research (McMahon 1987, Rosen 1987, Freeman1992) and pointed out in Figure 1, the importance of the information exchangebetween students and employers is crucial in order for students to maximize the returnon their investment in higher education. The findings from this research appear tosupport this theory. This view was supported by the employers' view that centralizedservices would enable them to make the best use of the time of students, alumni,administrators and themselves. In this way, guidelines and expectations would beclearly defined by both parties (institutions and employers). As Rosen (1987) indi-cated, this information exchange would reduce the probable divergence betweenanticipated and actual returns. Particularly for a country like Hungary, as reportedby these employers, it would be helpful for students to better understand which skillsemployers value and how to better prepare for the interview process and to betterunderstand corporate cultural environments. All of these requirements differ consid-erably from former Hungarian ones, and students who do not understand theserequirements in the context of a market-style economy could lose valuable employ-ment opportunities.

Another point that this research seems to convey is the role that employers playin developing and ranking the prestige/elite colleges and universities. Astin (1985), inlisting the five factors that define quality in higher education institutions, indicatesoutcomes (where graduates are placed) as one of the five indicators of excellence.The employers who participated in this research have already begun to rank col-leges/universities based on the employment of those graduates that best suit theirneeds and the type of career services that these institutions provide. This processhelps define prestige because it essentially sets up a 'good-old-boy' network.

The graduates of a particular institution who have been employed at a companybegin to recommend the hiring of other graduates of their school, and after a shortperiod of time, those graduates move up to become the top management. That com-pany in turn begins to provide more resources to the institutions from which theyhire the most qualified students. More specifically (using the USA as a model), theresource allocations accrue to the most prestigious universities through corporatesponsorships and alunmi giving. This scenario gets played out almost in a form ofcompetition between corporations. For example, as universities are ranked as themost prestigious, creating a system of elite versus non-elite universities, corporationsbegin to provide more monetary and non-monetary (relationship with professorsand student groups) resources to those elite, ranked universities.

In fact, the findings from this study appear to indicate that this process is alreadyunder way in Hungary. Corporations have already indicated their interest in provid-ing and presenting cases to classes at the Budapest University of Economics. Asmore companies are in competition for graduates, they provide more funding, assum-ing that they can influence the graduate hiring pattern. Their funding assures thempriority of access to the best and brightest graduates (as pointed out in Figure 1)through both the administrative staff and established relationships of providing ser-vices to professors. It is unlikely, for example, that corporations providing fundingto universities will be denied access to graduates.

It is through this same pattern of corporations who give more funding acquiringaccess to the best and brightest graduates that a pattern of alumni sponsorship is culti-vated which perpetuates the elitist universities. The alumini of the elite universities

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begin the formation of the 'good-old-boy' network. This new network of graduateswill have more resources from which to provide services (whether direct funding orinformation that leads to the successful hiring of other graduates) to their institutions.In countries in transition to a market economy such as Hungary, then, it is throughthese hiring practices and political and economic changes that power can drasticallybe shifted to new and different players.

Corporate hiring patterns and ranking of universities affect higher educationinstitutions in another -way. The fact that more students are being hired from a parti-cular institution begins to attract more student applicants which in turn provides a lar-ger admissions pool from which that institution can select students, which meanshigher selectivity. That college/university than gets ranked as one of the most presti-gious.

Essentially, this study points out the need for better communication betweenhigher education institutions and the labour market. It also points out the influencethat employers, particularly multinational corporations, exert on higher educationinstitutions and the culture of countries in transition in several ways: (1) a redefinitionof the graduate recruitment procedures; (2) a shift in employee characteristics theyvalue; (3) the implications for curricular design and teaching styles changes; and (4)the ranking and prestige of universities. It is not indicative of problems with theHungarian educational system, which has always served the graduates of their institu-tions very well. Rather, this study signals a transition in the needs of and players inthe labour market.

One of the challenges for any economic system in transition is better exchange ofinformation between the educational system and employers. The results of thisstudy, however, are not only useful for countries in transition to a market economybut for other countries as well.

Lessons for the West

As a relationship between higher education and the labour market is being redefinedglobally, this research points out or reaffirms several important lessons for the West.Employers have tremendous influence on shaping the higher education curriculum.An important message for American higher education institutions is the need forinternationalizing the curriculum, especially as more international companies havebought American companies. The institutions that are slow to internationalize acrossdisciplines will find it increasingly difficult for their graduates to compete in the glo-bal market.

One important component of internationalizing American higher educationcurricula is including an understanding and appreciation of other cultures. Highereducation graduates will increasingly be required to work ouside the US borders asjobs continue to move to different markets. In terms of the curriculum, this researchalso could be taken as a forewarning to higher education institutions of the impor-tance of requiring courses in other languages, as one company indicated that itrequired its new hires to speak two languages other than their national language.

Understandably, then, as jobs for higher education graduates will require moremobility, the tremendously important role that career counselling plays for assistingstudents in maximizing the return on their investment in higher education willbecome even more important. In the short run, particularly since many American

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higher education faculty have little or no interntional experience, the career counsel-ling offices could provide the requirements and preparation necessary for the globallabour market. This is often an unnoticed, under-utilized resource at many institu-tions.

Finally, in terms of information for US higher education institutions, thisresearch confirms the role that employers play in determining the elite higher educa-tion institutions in societies. Where graduates are placed following graduation fromhigher education institutions has always played a role in ranking the prestige ofAmerican institutions. This research offers a historical perspective on this process inthe context of market economies.

Acknowledgement

I gratefully acknowledge the helpful comments of Robert L. Crowson, VanderbiltUniversity, and Istvan Magyari-Beck, Budapest University of Economics. Thisresearch would not have been possible without the generous and much appreciatedsupport of the Pro Renovanda Cultura Hungariae Foundation; however, no endorse-ment of the findings reported in this article should be inferred.

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