me:
> the inflation in the education sector is not due to demand (as David says).
> It's more a supply-side phenomenon, the difficulty of raising the
> productivity of service labor in a time when service wages have to keep up
> with those in other sectors -- along with a tremendous rise in overhead
> (insurance, medical, and legal costs, especially). To some extent,
> college-cost inflation is a matter of "you get what you pay for": colleges
> provide many more services to students than they used to. We had a gym; they
> have a health club, etc.
David Shemano:
> I absolutely 100% disagree. Colleges have health clubs instead of gyms
> because, as a result of government policy manifested in the student loan
> program, there are billions of dollars being allocated to the educational
> sector, which manifests itself in huge capital improvements and a
> proliferation of administrative jobs. No student loans, no health clubs... <
I don't know about other places, but at LMU students have to pay extra
for access to the gym (which is much like a health club like "Gold's
Gym" but less expensive). Strictly speaking, therefore, the price of
gym membership might not be seen as part of educational price
inflation. But it is, since the official price of the college is kept
down by making people pay an extra fee for access to the gym. However,
in many ways, the gym is better than in previous generations, so that
the extra price may be justified by higher quality ("you get what you
pay for"). The BLS might therefore be right if they ignore gym fees in
measuring college-price inflation.
> It is a simple shift in the demand curve, not the supply curve. <
It's always nice to have a simple single-cause theory, especially when
it meshes well with one's political world-view. While I'm relying
mostly on personal experience (and thus obviously inadequate anecdotal
evidence), as far as I can tell, David is starting from his conclusion
and working backward, while relying (it seems) on _a priori_
assumptions about the government's evil impact on the allegedly
pristine market that existed in the world before the government
started subsidizing scholarships. Of course, I don't really know how
David came to his conclusion, since he doesn't tell us anything about
the evidence, method, theory, etc. that he used.
So let's see what another source says, based on actual research (from
http://www.usnews.com/education/articles/2009/01/15/the-surprising-causes-of-those-college-tuition-hikes).
It seems to represent the consensus of those who've studied academic
price inflation.
>> The Surprising Causes of Those College Tuition Hikes
A new report finds that much of that money does not go directly toward
educating students
By Kim Clark
January 15, 2009
Why has college tuition been rising so high [sic] and fast? Will
college costs ever drop back to more affordable levels?
Those questions have been frustrating parents and students for years.
A new report provides some surprising answers that will,
unfortunately, probably only frustrate and anger them even more. At
public colleges, tuition has generally been driven up by rising
spending on administrators, student support services, and the need to
make up for reductions in government subsidies, according to a report
issued by the Delta Cost Project, a nonprofit based in Washington,
D.C. [I think the report can be found somewhere at
http://www.deltacostproject.org/analyses/index.asp. I haven't read
it.]
In some cases, such as at community colleges (which educate about half
of the nation's college students), tuition has risen while spending on
classroom instruction has actually fallen. At public colleges
especially, the current economic troubles will likely only accelerate
the trend of rising prices and classroom cutbacks, says Jane Wellman,
the author of the report. After analyzing income and spending
statistics that nearly 2,000 colleges reported to the federal
government, Wellman concludes: "Students are paying more and,
arguably, getting less in the classroom."
Among the more surprising findings:
* The main reason tuition has been rising faster than college costs
is that colleges had to make up for reductions in the per-student
subsidy state taxpayers sent colleges. In 2006, the last year for
which Wellman had data, state taxpayers sent $7,078 per student to the
big public research universities. That's $1,270 less (after accounting
for inflation) than they sent in 2002.
* Public universities have been reining in overall spending per
student in recent years. Flagship public universities' spending per
student has risen from about $12,400 in 1995 to $13,800 in 2006 after
accounting for inflation. But since 2002, spending at public colleges
has generally not exceeded inflation.
* Increases in spending were driven mostly by higher administration,
maintenance, and student services costs [as I asserted]. Public
universities spent almost $4,000 per student per year on
administration, support, and maintenance in 2006, up more than 13
percent, in real terms over 1995. And they spent another $1,200 a year
on services such as counseling, which was up 23 percent. Meanwhile,
they spent about $8,700 a year on classroom instruction for each
student, up about 9 percent.
* Big private universities, powered by tuition and endowment
increases, have increased spending dramatically while public schools
have languished. Total educational spending per student at private
research universities has jumped by almost 10 percent since 2002 to
more than $33,000. During that same period, public university total
spending was comparatively flat and totaled less than $14,000 a year.
That growing gap between rich schools and poor schools worries
observers like Wellman. The cost of attending a public university,
even after subtracting out aid and inflation, rose more than 15
percent in the last five years, according to the College Board. But
almost all of the recent price increases at public universities are
"backfilling for cuts in state funds," Wellman says.
Some college presidents say the report shows they haven't been raising
prices irresponsibly.
"Virginia Tech" explained David Hodge, president of Miami University
of Ohio. "Everybody expects us to do a lot more security. Students are
coming with more physical disabilities and emotional needs. There are
greater expectations for career services," he says. And that kind of
administrative and support spending "is a really good investment. It
helps the students."
In addition, public schools tend to serve many low-income students and
minority students who need more remedial classes and extra counseling
services than better-prepared students who attend elite private
universities, says F. King Alexander, president of California State
University—Long Beach. [The need for remedial education has a lot to
do with cut-backs of funding for public schools, which in California
have been pushed by right-wing politicos for decades.]
One of the reasons that Duke University costs about $51,000 a year is
that the elite schools are in a bidding war for top faculty and better
services for students, says college spokesman Michael Schoenfeld. In
addition, competition for the best students forces schools to offer
bigger and bigger scholarships, which means few students actually pay
the full sticker price, he notes. Duke's record-breaking flood of
applications for the next academic year shows there's still plenty of
demand for what private universities offer, he says.
But as more and more states facing budget crises consider further
subsidy cuts and tuition hikes for public schools, parents and
students are increasingly objecting to price increases for any reason.
"Enough is enough," says James Boyle, president of the College Parents
of America. A tsunami of applications at lower cost schools such as
the California State University campuses shows that students and
parents are voting with their feet. "The changing market for higher ed
will cause colleges to hold down their expenses and state legislators
to increase their subsidies," Boyle predicts.<<
Though I am not an expert on the economics of higher education, this
story fits my reading, my anecdotal evidence, and my intuition. It
doesn't fit David's single-cause theory. In fact, the demand side
doesn't rate a mention. One thing I'd add is that in the current
very-litigious environment, universities and colleges spend much more
than in previous decades to keep lawyers on retainer, while having to
spend a lot on insurance. Another thing: in my experience, all else
equal university administrators would rather spend money on hiring
other administrators (or paying themselves princely salaries) instead
of increasing the quality of education. This is partly justified by
the current ideology that says that universities should be run like
for-profit corporations, with top-down hierarchies and constant
(futile) efforts to measure output.
To get a first idea about whether Pell grants and the like have
encouraged college-price inflation, I'd look at the importance of
these grants relative to the size of the college system. I don't have
the time to do that, but I was able to do quick and dirty calculation
of the US Department of Education's outlays for higher education
relative to GDP. Interestingly, this ratio has fallen steeply since
1985. (The trend likely reflects a delayed effect of the Reaganauts'
hatred of public education and the like, along with the increased
power of the rich since then, since that group generally wants
education to be a luxury.) Given the poor fit between the data and
what David is talking about, we can't really say anything about his
hypothesis being either true or false. But it suggests that the US
federal government's commitment to "everyone going to college" has
faded during recent decades.
--
Jim Devine / "In an ugly and unhappy world the richest man can
purchase nothing but ugliness and unhappiness." -- George Bernard Shaw
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