Could someone explain to me the reasons behind the big jump in the cost of higher education over the last twenty years? I suspect that it all comes down to healthcare costs.
When healthcare costs rise briskly and the cost of employer-provided healthcare insurance is bundled into compensation (which means that total compensation is rising, too) while wages, i.e. compensation excluding benefits, is more or less stagnant the differential between wages and the costs of all sorts of things will certainly become substantial over time.
I’m open to other explanations but that sounds like the most likely one to me.
Here is an old Forbes answer to the question:
http://www.forbes.com/2010/08/01/rising-cost-education-opinions-best-colleges-10-feldman-archibald_print.html“>Why Does College Cost So Much?
Sorry for the print-link, but their non-print page is whack.
Anyway, you’d think Forbes would name health care if they could, instead they say “artisanal industry” and “technological progress has not reduced the number of labor hours needed to ‘produce’
the service.”
… confirmation of my bias there. Lack of innovation and disruptive change.
I tend to like articles in Forbes but that one, unfortunately, is pretty lightweight. The author notes the rising price of education but doesn’t do much analysis of the sources of rising costs in higher education.
Are average wages rising in universities sufficient to explain the increase? Is total payroll employment increasing in universities? Is the price increasing simply because it can, i.e. monopoly power? I don’t know the answers to any of those questions and I don’t find any in that article.
Just from watching Champaign-Urbana (home of University of Illinos) over the last twenty years, I believe I could find evidence of a substantial increase in building permits (both on and off campus) and payroll, while the number enrolled stayed the same. But a large landgrand college that gets a lot of research money from the government might not reflect what’s going on at say a small liberal arts college or elsewhere.
The article that jp linked to cited large price increases in public universities.
I can see some ways that tuition at public universities would need to rise — adjusting to new technologies, increased counseling services, increased remedial teaching — but what justifies the enormous increase at Loyola Law in New Orleans, for instance?
The instruments of law don’t require the maintenance of an electron microscope.
Some say the law schools are a university profit centers (Instapundit?), so pricing may uniquely be based upon perceived worth of a lawyer’s starting salary and the excess money goes to the University.
Loyola also had substantial building improvements in the last ten years, like many law schools. New buildings signal higher status.
Maybe one of us will stumble on a copy of Disrupting Class, Expanded Edition: How Disruptive Innovation Will Change the Way the World Learn
I really don’t understand why a revolution in information technology, which has brought down costs across the board, should have the singular effect of raising costs in education.
It begs incredulity.
I found a study on “Explaining Increases in Higher Education.” Their conclusions:
1. The rising cost of higher education correlates strongly with costs in other personal service industries that rely on highly educated labor.
2. The study does not find much evidence to support the “revenue theory,” i.e. rising revenue streams create increased spending.
3. The problem is wage growth for more highly educated labor is not offset by comparable increase in productivity.
4. Primary policy proposal appears to be better use of information technology to increase productivity.
http://www.auburn.edu/outreach/dl/pdfs/Explaining_Increases_in_Higher_Education_Costs.pdf
Here are the details on two factors: more lavish facilities and the prestige people give to a high priced college.
http://www.washingtonmonthly.com/college_guide/feature/the_prestige_racket.php
I tend to think it is a demand issue. Parents are paying consultants $400 an hour to help get their kids into school. With so much presure to get into the best schools, they can raise prices because people will pay.
Steve
Everybody misses one point, the price keeps rising because it can, just as the government funded housing bubble increased until it crashed, so will education prices until the government funded higher education bubble bursts. Get rid of government involvment such as basic grants, taxpayer supported funds, and guarenteed student loans and the prices will fall.