It troubled me when President Obama scoldingly said, “We’re putting colleges on notice: you can’t assume that you’ll just jack up tuition every single year”. The UC has raised tuition, but it hasn’t been on its own initiative; it’s been because the state has cut funding to higher education.
Now Robert Frank riffs on Obama’s comment, attributing rising tuition to rising faculty salaries.
To recruit professors, universities must pay salaries roughly in line with those made possible by productivity growth in other sectors. So while rising salaries needn’t lead to higher prices in many industries, they do in academia and many other service industries.
As they say about the International Jewish-Zionist Monetary Conspiracy, if there is one I want my share.1 I don’t think rising faculty salaries are the primary cause of increasing tuition costs.
Frank’s colleague Ronald Ehrenberg has been more eclectic – and I think more persuasive – in attributing the rise of tuition costs.
These include the aspirations of academic institutions; our “winner-take-all” society; the shared system of governance that exists in academic institutions; recent federal government policies; the role of external actors such as alumni, local government, the environmental movement, and historic preservationists; periodicals that rank academic institutions; and how universities are organized for budgetary purposes and how they select and reward their deans.
Or consider this report:
- 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. 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.
I wonder what Mark Thoma himself thinks.
1Or half-share, if you insist.
The Edge of the American West 
36 comments
March 11, 2012 at 3:53 pm
Jonathan Rees
The fact that 75% of faculty in American higher education are now poorly-paid adjuncts is all the proof I need to conclude that Robert Frank hasn’t got the faintest idea what he’s talking about.
March 11, 2012 at 5:19 pm
astronomer
In your third bullet point from the US News summary, it is true that classroom instruction has a smaller percentage increase than either admin or student support, but because the increase is from a bigger base it is still the place that most of the new dollars are going. But you are right that in some states, particularly California, this increased cost is minor compared to the huge transfer of costs from the public to the tuition- (or fee-) paying student. In other states that were already at a lower base of state support, or where cuts weren’t as big, or in the private universities, Frank’s story is closer to being correct. But Frank misses the fact that some of these increased faculty costs directly increase at least the perception of quality (e.g., the widespread move from 3-3 to 3-2 teaching loads at mid-tier liberal arts colleges in recent years improves student-faculty contact and arguably teaching and learning), and that in our increasingly economically stratified society there are still plenty of people willing to pay more for real or perceived quality.
I suspect endowment isn’t a big factor in recent years in increased spending. At my current institution, because of multi-year averaging, endowment spend rates are still below what they were at the peak before the 2008 decline. That means even more pressure on tuition, since we’re not even seeing inflationary increases that could pay the real increased costs in endowment-supported expenditure and scholarship lines, leaving a choice of finding those funds elsewhere (e.g., tuition) or cutting activities people care about.
In the specific case of the University of California, which is often a topic here, I don’t think the effect Jonathan Rees points to is very important: lecturers at UC are not making poverty wages, and indeed those working full time can earn substantially more than assistant profs, in some cases into six figures. Under their contract, lecturer salaries have continued to rise in recent years when tenure track salaries have been frozen. (Adjuncts in UC are something other than what Rees means; they are on the same salary scale as tenure track faculty.) Obviously, the lecturer/adjunct situation is different outside California.
March 11, 2012 at 5:24 pm
astronomer
In case I’m at all unclear in my last comment, by “not important” I only mean “not important to the truth of Frank’s argument.” In the broader sense, working conditions and salaries for contingent faculty are of course very important issues, where in many (but certainly not all) ways I think the UC is an admirable model for other states and universities.
March 11, 2012 at 5:43 pm
anonymous
Astronomer, something tells me that when you talk about lecturer salaries in the UC, you’re not talking about the humanities. Not to get too deep into the weeds here, but there are plenty of classes in the UC being taught by people making poverty wages, and Jonathan’s point still stands: that in the decades in which tuition has skyrocketed, there has also been a large-scale shift in teaching labor away from well paid full time postions towards poorly paid contingent positions.
March 11, 2012 at 6:29 pm
astronomer
UC Lecturer salary scales are available here: http://www.ucop.edu/acadpersonnel/1112/table16.pdf
non-union scales are here: http://www.ucop.edu/acadpersonnel/1112/table10a.pdf
adjunct scales are here: http://www.ucop.edu/acadpersonnel/1112/table1.pdf
As I noted, the situation is certainly different outside California, but on my (former) UC campus the rising cost of lecturers relative to tenure track faculty was a significant expense driver in the humanities just as in the sciences, and the resulting trend for at least the last five years has been towards lower use of part time faculty, not greater, in every part of the campus.
March 11, 2012 at 7:43 pm
ari
Unless I’m missing something, astronomer, the figures you cite don’t include the wage paid for a single course taught in the Humanities or Social Sciences by an adjunct.
March 11, 2012 at 7:46 pm
eric
Can’t we all just get along by disagreeing with Frank?
March 11, 2012 at 8:37 pm
Susan Davis
I agree that that Yiddishkeit is anextra, but maybe not Muppets. (jk)
March 11, 2012 at 8:38 pm
Susan Davis
Reblogged this on Learning and Labor.
March 12, 2012 at 3:11 am
Wade
The main reason tuition costs are going up is the bad economy. When the economy is good enough for people to get jobs that pay well, people don’t need to go to college, and choose not to. When getting a good job is difficult, employers take only the best educated (because they generally don’t have better criteria for choosing employees, so your barista often has a PhD in a down economy), and a college degree becomes something worth paying extra for, just to get a job.
University presidents will say tuition must rise because costs are going up, but in fact, this is disingenuous. Costs always want to go up, but the only time tuition can rise is when the economy is terrible. As proof, compare the historical record of times of high job creation and that of tuition increases. They move opposite one another.
To see how high tuition costs can rise, assume that the parents want their children to live as good a life as they do themselves, and this is very, very important to them. How much will they be willing (able) to pay to get a good education (job) for their children? If their house is almost paid off, then they can be tapped for at least as much as another house. As is common in monopoly-scarcity buyer-seller relationships, price is not about actual costs, but rather about how much the buyer can pay. Again, as proof that universities maintain scarcity, there are about 100 astronomy graduates for every job opening. Could some of these graduates become new university teachers and thereby reduce the wages (costs) of present university teachers? Obviously, yes. Will they be allowed to? Obviously, no.
March 12, 2012 at 4:52 am
silbey
@Wade: The Bureau of Labor Statistics does not agree with you:
Note that tuition was increasing even in the boom years at a rate greater than inflation.
http://www.bls.gov/spotlight/2010/college/
March 12, 2012 at 5:04 am
Main Street Muse
The story by Robert Frank is troubling for the assertion that professor salaries are fueling the tuition hikes. But Obama is correct when he says “access to higher education is increasingly threatened by runaway tuition growth.”
In a nation where the median family income is just shy of $50K a year, in-state tuitions can suck up nearly half of that. ($20k – $25K for state schools I know about – I think the UC system is cheaper, but that’s not my area). Many private colleges now charge $60K a year – more than the median income of American families.
In a time of high unemployment, stagnant wages and lack of economic growth, families must start asking themselves if acquiring a college degree is worth acquiring a serious burden of debt. For many, I think the answer is “no.” But since we’ve lost our manufacturing sector to the cheap, third world markets, I’m not sure what someone with a HS degree will do for a living. It’s a terrible situation for American youth – serious debt and unemployment or no education and unemployment. I wish colleges would understand that their high tution is reaching a tipping point for many of their customers.
March 12, 2012 at 5:44 am
eric
Obama is correct when he says “access to higher education is increasingly threatened by runaway tuition growth.”
Nobody argued that point. The president is, however, wrong to blame the universities in cases like the public systems in California, where “runaway tuition growth” is caused by the state slashing funding to the public university systems. So when you say, ” I wish colleges would understand that their high tution is reaching a tipping point for many of their customers”, it’s not colleges who fail to have that understanding.
March 12, 2012 at 6:37 am
Main Street Muse
Eric, how much is tuition at your university? As I said, I think the UC is generally less expensive than others (and offers an outstanding value). U of I is about $25K, I believe, as is UNC. That’s pricey for families earning the median wage of just under $50K/year. Tuition overall at colleges and universities has been rising well above the cost of inflation for a number of years.
That said, you are correct to point out the shift in American political thought has resulted in dramatic shifts in how we view – and fund – public education. If we want to compete at all in this global economy, it is extremely short-sighted to slash funding for public education at the levels we see today.
March 12, 2012 at 6:46 am
eric
You can easily find tuition and fee breakdowns, as here.
You are correct that tuition has been rising ahead of inflation for a long time. That’s what the Ehrenberg chapter, and book, are about.
The rise of tuition and fees at public universities, not just the UC, owes overwhelmingly to the decision to defund them from the public purse.
March 12, 2012 at 7:11 am
Liz
Rising health insurance costs probably play a role in tuition cost growth, too. Any employer that offers health benefits to its employees has seen total compensation costs balloon over the past decade as insurance has gotten pricier. According to the Kaiser Family Foundation, between 1999 and 2009, the average employer contribution to the premium of an employee family plan increased 131%, from $4,247 to $9,860 (the total average premium cost rose from $5,791 to $13,375, and employees also saw their contributions increase 128%).
I’m guessing most adjuncts don’t get nearly as much of a contribution toward their health insurance premiums as full-time faculty and staff do, so this is yet another way in which relying more heavily on adjuncts reduces universities’ costs (by shifting the costs to someone else, of course).
March 12, 2012 at 9:26 am
jim
The private colleges and universities discovered a long time ago that students and their parents use nominal tuition as a proxy for quality. So it makes sense for them to continually raise nominal tuition but make their product affordable by tuition discounting: giving the bulk of their students either “need-based” grants or “merit-based” scholarships, so that the effective tuition rate is much lower than the nominal rate, funding the difference out of their endowment income. This has the added advantage that as endowment income rises and falls effective tuition rates can be lowered or raised opaquely.
But it has the unfortunate side effect of anchoring price expectations. If the nominal cost of attending a private institution is $50K/yr, then $20K/yr at a public starts to look cheap. So the people who are indirectly responsible for setting public tuition levels (e.g. politicians who set the state subsidy) don’t feel they’re doing something bad by pushing public tuition levels that high.
Public institutions raise tuition to these levels because they can. In the past, financial aid meant Pell grants and subsidized student loans, whose levels were capped. University costs wouldn’t be much higher or they’d become unaffordable. But now students can take out unlimited amounts in unsubsidized loans. So universities are unconstrained by the finances of their students.
Looking at cost drivers misses the point.
March 12, 2012 at 11:50 am
grackle
Here is a handy page with lots of data on the U.C. budget system. Most pertinent single fact to this discussion: In 1990, the state contributed $16,430 per student, or 78 percent of the total cost of education. By 2009-10, that figure had fallen to $7,570 per student, or 48 percent of the total cost. (Figures for both years are inflation adjusted).
It is asserted that “senior managers” account for less than 1% of total payroll. I wonder where the break is between “senior managers” and other administration. I have a very unscientific sense that as business schools have become the darlings of academia over the last 30-40 years, their product has engorged itself on the entire higher educational system. I wonder just wjat is the growth rate for administration of all sorts in the U.C. system. I haven’t been able to dig that out.
March 12, 2012 at 12:11 pm
eric
Public institutions raise tuition to these levels because they can.… Looking at cost drivers misses the point.
Inasmuch as the state’s budget-cutting is a cost driver, this is incorrect. Public institutions would not be raising tuition (or, in the case of the UC, starting to charge tuition) were it not for the state’s budget-cutting.
March 12, 2012 at 12:12 pm
eric
I wonder just wjat is the growth rate for administration of all sorts in the U.C. system. I haven’t been able to dig that out.
If you Google “administrative growth university of california” you get all kinds of information, some of it from UCOP, some from critics.
March 12, 2012 at 12:52 pm
Chuck Rudd
No love for the Bennett hypothesis I see.
If colleges know they’ll be the beneficiaries of student aid in its various forms then there is no reason for them to control costs. There is a tacit feedback mechanism whereby the colleges raise tuition, the government increases funding, which causes the colleges to raise tuition more. This provision of money is the ultimate source for the problem that most are developing sophisticated arguments to explain.
March 12, 2012 at 12:57 pm
eric
the government increases funding, which causes the colleges to raise tuition more
I would very much like to see the experiment take place here, where the government increases funding to the UC. If this happens, and the UC then raises tuition, I will reevaluate my belief that it’s the government cutting funding that causes the rise in tuition. Until then I will stand by the idea that tuition rises in public university systems occur because states cut funding to public higher education.
March 12, 2012 at 1:30 pm
jim
Inasmuch as the state’s budget-cutting is a cost driver
The state’s budget cutting by itself has no effect on the university’s costs. The university’s costs are such things as faculty salaries, administrative salaries, building heating, lighting and maintenance, IT, etc. The university’s revenues are the state subsidy and tuition (we’re ignoring research activities, here). If the state subsidy goes down, the university has two options: it can raise tuition to compensate or it can cut costs. If, as a matter of practice, students are able to pay higher tuition, then the path of least resistance is to raise tuition, cutting costs being hard. Administrators tend to follow the path of least resistance.
March 12, 2012 at 2:01 pm
eric
If the state subsidy goes down, the university has two options: it can raise tuition to compensate or it can cut costs. If, as a matter of practice, students are able to pay higher tuition, then the path of least resistance is to raise tuition, cutting costs being hard.
You’ve given no evidence that the costs are out of line.
March 12, 2012 at 5:00 pm
chris
The state’s budget cutting by itself has no effect on the university’s costs.
True, but there’s no evidence (yet) that the university’s *costs* are rising rapidly, only that its *tuition* is. Since you’ve pretty much defined tuition as cost minus subsidy, and the subsidy is dropping, rising cost is not needed to explain the observed tuition rise.
It is of course possible that both things are happening at once, but it would be nice to see some evidence of that.
March 12, 2012 at 5:11 pm
silbey
If, as a matter of practice, students are able to pay higher tuition, then the path of least resistance is to raise tuition, cutting costs being hard.
“Your tuition will remain the same, but your classes will now be taught in the dark. Enjoy.”
It would be nice if folks disagreeing with eric actually put some evidence on the table.
March 12, 2012 at 5:23 pm
jim
You’ve given no evidence that the costs are out of line.
That’s because I’m not claiming they are.
The costs are what they are. They could be reduced by e.g. firing half the faculty (and somewhat more than half the administrators), offering far fewer courses and, obviously, serving fewer students.
When the state reduces its subsidy, the university has the option of reducing its costs, by such drastic action (which I’m not advocating) or raising tuition. Generally, if it can, it will raise tuition.
I think we’re actually in vociferous agreement.
March 12, 2012 at 7:08 pm
silbey
@jim
Then what’s your point?
March 13, 2012 at 12:04 am
andrew
I think what Chuck Rudd is referring to when he writes
“There is a tacit feedback mechanism whereby the colleges raise tuition, the government increases funding, which causes the colleges to raise tuition more.”
is increased funding for student aid/loans, not direct funding to universities. The argument is that as student loan dollars are made available, tuition will soak them up. So the experiment of increasing funding to the UC and seeing what happens to tuition addresses a different argument, since the loan money is attached to individual students, not the university (and of course it’s loan money, not pure spending).
That said, I pretty much agree with eric that rising tuition in public universities has been driven by reductions in public funding. I’ve seen the student loan argument used to explain rising tuition at private universities, but I don’t know how strong the argument is even for that case.
March 13, 2012 at 2:12 am
erubin
The very existence of a runaway argument here is exactly why the president must turn to sound bites.
March 13, 2012 at 4:41 am
jim
Then what’s your point?
I thought I had made it, but I was mistaken.
1. The guys in Sacramento who cut the budget sleep easy because they still think of the higher UC tuition that results as being relatively cheap when they look at, say, Oxy, Claremont or Wells.
2. The UC administrators raise tuition in reaction to the budget cuts rather than make drastic cuts to their programs because students can (and are willing to) borrow the money to pay that higher tuition.
Andrew above says “The argument is that as student loan dollars are made available, tuition will soak them up.” I’m reversing that: my argument is as tuition rises, student loans are made available to cover the increase, so universities are willing to raise tuition in response to budget cuts.
That’s why Obama’s statement was silly. What is he going to do to break this cycle? He can’t force Sacramento to give UC more money. He can’t limit student borrowing (or he’ll break medical schools). What tool does he have available?
March 13, 2012 at 5:01 am
Main Street Muse
As a relative outsider to the university life, as a parent, as someone who paid for my graduate degree – and as someone who is teaching this year (for one year) at a public university, it seems to me that the argument that student loans are tied to the increase in tuition is valid. Tuition has been rising higher than the cost of inflation for years (see Silbey’s chart above). Recently, we’re seeing tuition hikes related to the drastic cuts in state funding for public universities.
But what explains the rise in tuition costs (paid by families, not funded by state budgets) prior to that?
Student loans created vast pools of families who no longer could say “no” to the cost of college, thanks to the availability of loans. Universities could be less careful about costs, thanks to the availability of students with financing in their pockets. Salaries, particularly for the increasing numbers of administrators (less so for the faculty), began to rise. College presidents began to join the ranks of millionaires. Public university football coaches could earn so much that they could donate a library to the campus (see Penn State).
Students began to take more than 4 years to graduate and they began to graduate with an increasingly difficult burden of debt. (see here: http://nyti.ms/yM3pFJ and also here: http://buswk.co/A3l60e)
Banks also handed out loans like candy – as I understand it, until recently, banks got paid for signing the loans, but the government assumed responsibility for the loans after the paperwork was signed. Great deal for banks; not so great for those saddled with debt or the government, which had to write off the bad loans. Supposedly the “gravy train” was halted in 2010 with the passage of the Student Aid & Federal Responsibility Act.
Some consider this to be a crisis. The Atlantic says this of the “student debt” crisis: “Our system of higher education is failing our students and our economy. It’s failing by putting young people into debt, and by not getting them through school. It’s as if millions of Americans have decided to take out mortgages, but never got the house.” (http://bit.ly/z99o7w)
My children are some years away from venturing off to college. Confess to feeling terror at the thought of trying to pay for it all. Feel slim comfort in knowing Brad Delong also had to pick up an extra job making speeches to help pay for his son’s tuition….
March 13, 2012 at 5:03 am
Blissex
«The private colleges and universities discovered a long time ago that students and their parents use nominal tuition as a proxy for quality.»
Note that here the “quality” parents are seeking is that of the CREDENTIALS not that of the education. Parents want to purchase the credentials that give access to the best and most secure jobs.
This means “exclusive” credentials, and for middle and upper class parents this means that the exclusivity should come from being very expensive credentials, as that excludes competition from “undesirables”, and enhances the “tone” of the connections their children can make while attending parties at the university.
Top, expensive universities are the mechanism by which the middle and upper classes reproduce themselves in the aggregate by giving their children a huge start-of-career boost.
Middle and upper class jobs/roles cannot be literally inherited in a case-by-case way but, thanks to “exclusive” universities selling expensive credentials that give access to the best jobs and connections, they can be passed on in a diffuse, statistical way.
March 13, 2012 at 5:54 am
silbey
Ehrenberg (in the linked chapter) does actually talk about this.
March 13, 2012 at 8:35 pm
TF Smith
From the public policy point of view, perhaps the better question is what is the return to a given society of X dollars invested in subsidies for higher education, and of what type, and at what level?
As an example, does the state of California really need to provide financial support – at whatever level – for nine Phd-granting institutions?
Or 33 institutions (total) that can grant bachelor’s and master’s degrees? Plus Hastings? Plus the Ed.D programs at multiple CSUs?
Or Five (and a half) medical schools? Or a maritime academy AND an oceanographic institute?
Just this year, the Little Hoover Commission recommended consolidating the adult education programs provided by K-12 districts across the state with the community college system, where facilities are available; that could work in almost every urban and suburban district, at least, if not in rural areas. Perhaps the CCs, CSUs, and UCs deserve their time in the barrel?
The master plan was a great idea in 1960, but the world – and the state – have changed somewhat over the past five decades.
Less bricks and mortar would, presumably, free up funding that could result in lower costs, or even a complete full ride, for more students?
Perhaps fewer duplicative departments across the three systems – especially in particularly niche areas of study – could do the same?
Just a thought.
March 15, 2012 at 6:00 pm
chris
As an example, does the state of California really need to provide financial support – at whatever level – for nine Phd-granting institutions?
Considering that the state of California has more population than some countries, I don’t see that as a particularly unreasonable number of PhD-granting institutions.