America’s Tuition Problem

The figures on college tuition increases amidst the continuing recession are really amazing. Most of the people I interact with who are involved in the university system like to talk about cuts in public funding in this context, and if you look at the public/private gap in tuition increases, that’s clearly part of the problem. But the private non-profit four-year college sector increased prices 4.5 percent.

It’s a number that far exceeds the overall level of inflation or income growth in the economy. It’s not because America’s private non-profit four-year colleges got a lot better. Nor is it clear what production inputs saw that kind of leap. College education is not hyper-sensitive to rising gasoline prices. Schools are spending much more money, but on what?

The normal hypothesis would be some kind of shortage of highly specialized labor. Just because unemployment is high doesn’t mean Google can hire software engineers for cheap. There are only so many good ones to go around. Similarly, the spike in joblessness hasn’t led to a surplus of experienced heart surgeons. So labor costs in specific markets can go way up even amidst generalized malaise. Colleges, like hospitals and innovative tech firms, employ highly skilled labor that may be in short supply. But I certainly don’t get the impression from my friends in PhD programs that the academic job market is suffering from critical labor supply bottlenecks. It’s just the reverse. You’re constantly hearing about the glut of people going on the market and unable to find work. Something has gone badly, fundamentally wrong with the basic model.