The Cost Of College Education Is Rising While Entry Level Wages Are Falling

Its difficult to increase access to higher education when tuitions keep rising and state funding for education is falling. This article attempts to explain tuition inflation. Education, like many other service industries, has not experienced a rise in productivity. Despite low growth in productivity, colleges must pay wages that are competitive with wages paid in more productive industries. Colleges also compete for prestige, and competition for academic super stars has led to wage inflation. The super stars get large salaries and they get lower teaching loads. This problem, however, primarily affects a relatively small number of research universities.

Whenever wages grow faster than productivity there is bound to be wage inflation, and that is part of the tuition inflation explanation. There are other factors at work as well. Colleges also compete for students by providing amenities for students. Even small colleges must invest in athletic facilities, and provide funding for athletic teams that do not pay for themselves. Salaries for administrators have risen as well, and the number of non-teaching employees has also grown. Overhead costs have grown even faster than the cost of instruction in most colleges. Colleges have increased the number of less expensive adjunct faculty to contain the cost of instruction, but they have had to supplement the services ordinarily provided by full-time faculty with non-teaching employees.

This article only touches on the problem of tuition inflation, but it introduces another problem that deserves attention. Wages offered to new college graduates have seen little growth in recent years. A small number of prestigious colleges produce graduates who are recruited by consulting firms and investment banks which pay very high salaries, but graduates from less prestigious colleges have a low probability of landing those jobs. The graduates from low tier colleges have even experienced a decrease in their entry level wages. Many do not even get job offers. They end up taking jobs that would ordinarily have been filled by high school graduates. We may be producing more college graduates than our economy demands, and the number of higher paying jobs for recent graduates is declining along with the number of middle level managers employed by major corporations.