If You Want to Know Why College/Law School Tuition Is Increasing

In August, the Goldwater Institute published a report on "Administrative Bloat at American Universities: The Real Reason for High Costs in Higher Education". Here is the Executive Summary of that report:

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.

We base our conclusions on data from the Integrated Postsecondary Education Data System (IPEDS), which is sponsored by the U.S. Department of Education. Higher education institutions report basic information about enrollment, employment and spending in various categories to IPEDS, which then makes this systematically collected information publicly available. In this report, we focus on the 198 leading universities in the United States. They are the ones in IPEDS identified as four year colleges that also grant doctorates and engage in a high or very high level of research. This set includes all state flagship public universities as well as elite private institutions.

Hat tip: Environmental Economics