Wednesday, October 06, 2010

Where does all the money go?

As my oldest child gets closer to college, I've started worrying more about the cost of higher education. I'm in the high tech industry so for me the natural course of events is products get better and better, while getting cheaper and cheaper. For example today's new cell phones are more powerful than the personal computers I bought just a few years ago.

I've tried to understand better why college education is so very expensive.

Last year I wrote:

"I have blogged in the past about the problem of rising cost of acollege education. In a nut shell the cost of college education has climbed twice as fast as inflation for decades. It has gotten to the point that a college education is not an economic benefit for many."

Recently I came across a reference that it is worse than that, the cost of higher education has climbed three times faster than inflation.

Jay P. Greene may have part of the answer. He recently publised a report on Administrative Bloat at American Universities: The Real Reason for High Costs in Higher Education.

This is the start of the executive summary:

Enrollment at America’s leading universities has been increasing dramatically, rising nearly 15 percent between 1993 and 2007. But unlike almost every other growing industry, higher education has not become more efficient. Instead, universities now have more administrative employees and spend more on administration to educate each student. In short, universities are suffering from “administrative bloat,” expanding the resources devoted to administration significantly faster than spending on instruction, research and service.

Between 1993 and 2007, the number of full-time administrators per 100 students at America’s leading universities grew by 39 percent, while the number of employees engaged in teaching, research or service only grew by 18 percent. Inflation-adjusted spending on administration per student increased by 61 percent during the same period, while instructional spending per student rose 39 percent. Arizona State University, for example, increased the number of administrators per 100 students by 94 percent during this period while actually reducing the number of employees engaged in instruction, research and service by 2 percent. Nearly half of all full-time employees at Arizona State University are administrators.

A significant reason for the administrative bloat is that students pay only a small portion of administrative costs. The lion’s share of university resources comes from the federal and state governments, as well as private gifts and fees for non-educational services. The large and increasing rate of government subsidy for higher education facilitates administrative bloat by insulating students from the costs. Reducing government subsidies would do much to make universities more efficient.

As Mr. Spock would say: Fascinating.


Anonymous said...

The government funding has actually dropped for many universities. At best, it has remained stagnant over the past few years without any inflation adjustment (which is in effect a decrease) - but often, it has actually decreased as allocated money is not paid to the universities in order to balance state budgets. All the while student numbers are increasing.
This means jobs get cut: instructor's jobs - administrative positions do not get cut.

Anonymous said...

Umm, yeah. This means to me that alternative education is about to explode. It would be non-accredited (or at least it would lack traditional accreditation).

Henry Cate said...

Glenn Reynolds of Instapundit often posts about the higher education bubble. He agrees that it will burst, and thus some form of alternate education should take off.