Wednesday, August 19, 2009

College Tuition Increases and Faculty Salaries

The chart above shows annual price indexes for college tuition, faculty salaries (data from the National Center for Education Statistics) and all consumer prices (CPI-U) from 1978 to 2007, along with the average annual compounded increases for each series. College tuition has increased annually since 1978 at about twice the overall rate of inflation, 7.9% vs. 4.1%. In contrast, faculty salaries have increased annually at only 4.5%, just barely above the overall inflation rate.

Bottom Line: The significant real increases in college tuition over the last thirty years have not been caused by increases in faculty salaries.

Originally posted at Carpe Diem.


At 8/19/2009 10:30 AM, Blogger Cabodog said...

Makes me wonder how dedicated our higher education system is to "getting graduates out the door."

With such high overhead, seems like there's an inherent conflict with actually seeing your "customers" depart.

At 8/19/2009 10:55 AM, Anonymous Admiral said...

Good chart. This could suggest a few things:

1. Colleges expanded, adding subjects and students, meaning more faculty who also factor into the average.

2. Administrators made more than the 4.5% increase.

3. Some combination of 1 or 2

Of course, the new faculty who are added, in humanities disciplines, would likely drag down the average salary and avg salary increase. But I imagine there would be more engineering professors as well, whose average would not drag it down. Thoughts?

At 8/19/2009 10:59 AM, Anonymous Admiral said...

Ooops, spoke too soon, just read your Higher Ed chart. As the good Emperor once said, "Well, there it is."

At 8/19/2009 11:00 AM, Blogger C. August said...

Thomas Sowell had some interesting things to say on this topic. He attributes much of the price inflation to government interference, which should be no surprise.

He notes that colleges have cut the number of teaching hours in half since the 60's, leaving more profs free to do research that brings in government money.

Also, the government subsidizes tuition payments. So as MP's earlier post showed, the rate of increase in non-faculty and administrators -- basically, bureaucrats -- has skyrocketed. This is the typical bloat seen in government programs. Instead of working to be efficient and productive, bringing better products to market a ever lower costs, the incentive is reversed. Hire more people, raise prices, because when you do you get more government money.

This is what Sowell wrote in the article I linked to:

"In any kind of economic transaction, it seldom makes sense to charge prices so high that very few people can afford to pay them. But, with the government ready to step in and help whenever tuition is "unaffordable," why not charge more than the traffic will bear and bring in Uncle Sam to make up the difference?

The president of a small college once told me that, if he charged tuition that was affordable, even an institution the size of his would lose millions of dollars of government money every year.

In a normal market situation, each competing enterprise has an incentive to lower prices if that would attract business away from competitors and increase its profits.

Unfortunately, the academic world is not a normal market situation.

At 8/19/2009 11:04 AM, Anonymous Michael R said...

Didn't your post the other day on UNC give an example of too many administrators being hired? More administrators means more money is needed.

At 8/19/2009 11:27 AM, Anonymous morganovich said...

if you want to see the real driver in the price of private education, look at scholarships. as the % of students receiving aid goes up, the price that those who can pay must pay goes up as well. i am still involved with my old high school, whose tuition has gone from $15k/yr in 1990 to $33k now. scholarships are the big driver of this. they also create an unfortunate barbelling effect in the student body: only the rich and the poor can go. there is no middle to hold them together.

on $60-100k a year, you will find it very difficult to get aid, but the cost is simply out of reach, especially if you have more than one child. i understand the impulse that scholarships are supposed to heighten fairness, but the simple fact is that it does not work out that way in the intermediate term.

how is it fair to exclude the middle class from the best educational opportunities?

how is it good for the students who do get in to be starkly divided into rich and poor with no middle? (and it does have a noticeable effect on campus). a strong middle is a part of diversity too.

At 8/19/2009 11:33 AM, Blogger RebelRenegade said...

Now we need to graph the increase in federal dollars spent on tuition over that same time period.

At 8/19/2009 11:54 AM, Blogger Richard Rider, Chair, San Diego Tax Fighters said...

Another possible factor:

While SALARIES have gone up at a reasonable rate, what about the cost of BENEFITS? Look back at the cost of health care and pensions. Often pensions have been defined benefit plans, with retroactive boosts in formulas.

I suspect you'll find that both component costs have soared compared to the CPI -- and that doesn't count the current monstrous unfunded liability for both benefits.

At 8/19/2009 12:30 PM, Anonymous Anonymous said...

I agree with Richard Rider, you havent looked at the complete picture of public institutions pay packages. The same thing can be seen in California for public employees, modest to large salaries with huge retirement benefits that not even the private sector could afford.

At 8/19/2009 12:43 PM, Anonymous Anonymous said...

The significant real increases in college tuition over the last thirty years have not been caused by increases in faculty salaries.

Full scholarship students are not counted in the college tuition CPI. Partial scholarship students may or may not be counted. See this BLS factoid.

I think that it is a little too simplistic and, of course, self-serving to state that college tuition has risen more than faculty salaries for the mean college student since there is no mechanism to adjust for the quality (your typical hedonically adjusted automobile) of education.

Anecdotally, my kids' tuition was 9X mine but their scholarships were 40X mine and as far as I was concerned there was no relative improvement in the quality of their education.

At 8/19/2009 2:13 PM, Blogger juandos said...


At 8/19/2009 11:33 PM, Anonymous Ian Random said...

I think there is some Cato guy that points out educator spending at universities has remained constant at around $5,800 per student. The extra money is going toward recreation centers and stuff like that.


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