Richard Vedder: Going Broke by Degree: Why College Costs Too Much; American Enterprise Institute; 2004; 232 pp.; $25
It is incontestably true the cost of going to college has been steadily climbing for decades. Tuition, mandatory student fees (which compel students to pay for a lot of non-academic folderol), books, and campus expenses have been escalating much faster than the rate of inflation. It’s also true that the rising cost hasnıt prevented many students from enrolling. The percentage of students who enroll in some postsecondary institution has risen right along with the escalating cost. Increasing governmental financial support, more generous scholarships, and the fact that there is more private wealth than ever to help pay for higher education have enabled colleges and universities to sell more of their product despite its escalating price tag.
Turning a blind eye to the record-high rate of college enrollment, many politicians have declaimed a “crisis” in college affordability and say that government needs to do more. Federal politicians demand an increase in Pell Grants, and here in North Carolina, the UNC Board of Governors opposes any increase in tuition this year because students “need a breather.”
Instead of simply bemoaning the rising cost of college, Ohio University economics professor Richard Vedder prefers to ask why it has risen so much.
His recent book Going Broke by Degree takes a sharp-eyed and highly critical look at higher education in America and concludes that its productivity is very low. Professors donıt teach much. Personnel costs continue increasing as more faculty and administrators are hired. Schools build apace, such as new student unions with every conceivable amenity, and they engage in a host of activities having nothing to do with educating students for life and work. Sooner or later, Vedder believes, some college balloons will have to deflate.
The book throws down the gauntlet to higher education spokesmen who would have us believe that pushing students through college is a great “investment.” Governor Hunt used to call the UNC system “the engine of our economy” and Michigan’s Governor Jennifer Granholm opines that higher education is like “jet fuel for the economy.” Going Broke by Degree reminds readers, however, that the law of diminishing returns applies to higher education just as it applies to other human endeavors. In fact, Vedder’s research leads him to believe that there is a negative relationship between state higher education spending and state economic growth. The more money a state pours into its higher education system, the slower its economy tends to grow.
Now, that’s a highly contrarian position to take, and Vedder himself was surprised at the conclusion his research pointed to. After double-checking his analysis, however, he was certain that he was right. But what could explain such a result? The basic economic concept of opportunity cost, that’s what. To increase higher education appropriations, a state must either spend less on other governmental functions or raise taxes. Either way, Vedder maintains, resources are drawn away from more productive uses when states spend heavily on higher education. Or to put it in terms Governor Granholm might understand, a jet needs jet fuel, but if you overload the plane with it, the plane flies less well.
All right, skeptics may say, what about the fact that, on average, people with college degrees have higher earnings than do people without them?
Vedder replies that college degrees don’t necessarily cause people to become more productive (although they may), and that many employers now use the BA as a screening device. Employers presume that students who have gone to college will probably be somewhat more trainable and reliable than those who haven’t; since there is a huge pool of college graduates these days, employers often feel that they can screen out those with only a high school diploma and still have plenty of applicants to fill their personnel needs.
This situation leads to what Professor David Labaree calls, in his book How to Succeed in School Without Really Learning, credential inflation. We now find that a college degree is said to be a “requirement” for such entry-level jobs as bank taller and purchasing agent. As more and more jobs are foreclosed to those without college degrees, itıs inevitable that the average earnings difference between the two groups will widen, but the reason is credential inflation, not that having gone to college makes an individual so much more productive.
Going Broke by Degree advances a number of sensible ideas for raising the productivity of colleges and universities without spending more money. Here are a few:
Tenure. Vedder doesn’t want to abolish tenure, but he recognizes that it can lower productivity by encouraging professorial laziness and, more importantly, making it hard for schools to redirect resources as demand for education increases in some fields and decreases in others. His suggestion is to make tenure an option for faculty members. It should be a priced benefit for faculty members. If they want it, they will have to accept less in cash or other benefits.
Vouchers. Competition would be stimulated if, instead of providing funds directly to state colleges and universities, government gave a voucher to students and allowed them to use it at any school in the system.
Affirmative action. Vedder would eliminate race-based admission programs, which mismatch students and schools, thus leading to retention problems.
Contracting out. Colleges do a lot of things that arenıt necessary to their educational mission, such as housing, food service, golf courses and conference centers. All such activities should either be contracted out or entirely privatized.
Even if the traditional, non-profit higher education sector begins to increase its productivity, Vedder sees market developments that are going to alter the face of postsecondary education in the U.S. One big development is the emergence of a for-profit sector that provides functional education without all the frills of the typical campus. While for-profits still cost more than most state-subsidized colleges and universities, the force of competition is bringing down the formerıs costs and the gap is narrowing.
The allocation of resources between the for-profits and non-profits is striking. For-profit University of Phoenix spends 66 cents of each dollar of revenue on instructional costs and services, whereas state universities usually spend about 34 cents of each dollar on instruction.
Another key development Vedder sees is the growth of professional certification programs, such as one now finds in the computer software industry. Why should people who want to go into that industry spend four or more years taking a bachelorıs degree that gives them only some useful knowledge about the field when they can spend two years in intensive training that virtually ensures them a job when they have completed their studies? The high cost and questionable value of most college programs in computers and other areas, will probably give a boost to the development of more certification programs. As they spread, traditional colleges will have a hard time competing for students.
Going Broke by Degree is a long overdue book that tells a lot of uncomfortable truths about American higher education. If college presidents and trustees donıt read it, they may soon regret not having done so.