Two Professors Attempt To Explain Why College Costs So Much

The Motley Fool has up a very informative interview with two William & Mary professors who wrote a book on the rapidly rising cost of college that is coming out in 2010.

One of them blames something called “cost disease”:

That’s the real culprit behind the rising cost of college. You see, in a labor market, when one worker’s wages rise, so do wages for other workers — because employers compete to attract them. How does this work in higher education? Improvements in productivity can lead to higher wages at firms like Hewlett-Packard. But they also raise wages at colleges that must compete for a limited supply of labor.

The problem lies in the fact that when HP raises wages, it can offset higher labor cost with improvements on its other input costs — more energy-efficient machinery, better manufacturing processes. As a result, PC prices actually get cheaper every year. Colleges are different because their primary input cost — labor — is terribly resistant to productivity improvements.

Example: In 1960, students paid roughly the same for tuition and fees as they did for room and board. Today, you see tuition and fees together exceeding room and board by perhaps two to four times. So tuition has been growing much faster.

Why is this? You can make the teaching process more “efficient” by using Blackboard software and the like. But generally speaking, every move you make to decrease the amount of time a professor spends with students is viewed not as “improved productivity” but as less personal service.

And so costs rise faster than inflation in any service-intensive industry — higher education, law, or medicine. This is exacerbated by the fact that ever since the 1980s, workers with college degrees and even higher levels of education have become much more expensive than workers without such degrees. This accelerates the rise in the cost of any industry that uses a lot of this well-educated labor, and directly leads to increased costs for service-oriented industries like higher education.

The interview has a lot more good stuff, so make sure to check it out.

Jesse Singal

Jesse Singal is a former opinion writer for The Boston Globe and former web editor of the Washington Monthly. He is currently a master's student at Princeton's Woodrow Wilson School of Public and International Policy. Follow him on Twitter at @jessesingal.