There doesn't seem to be any compensation for the vastly greater spending on administration in colleges. Yale's non-instructional spending has grown 3 times faster than the cost of tuition in the last two decades. Is that sort of support structure really necessary or has it simply been taking advantage of the relatively easily obtained money that students now have available to them. If colleges have little skin in the game with a student's inability to ever pay, what economic incentive is there to run a lean operation?
The answer is it's both. On the one hand there isn't enough incentive to rein in costs. But on the other hand, administrative requirements really have been going way up:
> Perhaps most controversial is an increasing raft of federal and state regulations that universities must abide by: the Clery Act, which requires campuses to report their crime activity; new Title IX regulations that govern the handling of sexual assault; and Family Educational Rights and Privacy Act (FERPA) requirements for providing educational records.
> In 2013 and 2014 alone, the Department of Education released rules and directives on 10 new sets of issues, ranging from proposed rules on teacher preparation programs to Net Price Calculator requirements to specific regulations for FAFSA verification. Complying with all these rules requires additional staff and additional money. The resources required are not insignificant: a Vanderbilt study of 13 colleges and universities found that regulatory compliance comprises 3 to 11% of schools’ nonhospital operating expenses, taking up 4 to 15% of faculty and staff’s time.
> “It is pages and pages and pages of regulations that require more sophisticated professionals,” says Penny Rue, vice president for Campus Life at Wake Forest University and board chair-elect of the National Association of Student Affairs Professionals. Rue adds that incidents on college campuses, such as the 2007 shooting at Virginia Tech, contributed to a need for administrative spending that often goes unnoticed, from case management services to threat assessment teams.
Baumol’s law enables this growth in the administrative state - the money is available to pay for tuition, so it gets spent however the university wants.
The wages are what's relevant with Baumol. It's possible rising wages of parents helped generate the administrative burden but 90% of the time it was the flood of cheap student debt via gov, every kid thinking they need to go to college, the massive boom in demand via international students, etc.
The fact university administrators responded to boom in demand/capital by hiring way more administrators is probably not directly a consequence of Baumol either. But it is why the costs of these administrators is so expensive, t
which is reflected in tution costs.
Maybe you could blame it because being a uni admin is an easy job to get with little actual output demanded of you, but you still get paid like a high productivity sector employee, so people flocked to it. And if they were paid a wage connected to their individual output they wouldn't be nearly as many of them and tuition costs could go down.
But the universities could also just fire 2/3rds of them and still function while paying the rest normal high wages.
>There doesn't seem to be any compensation for the vastly greater spending on administration in colleges. Yale's non-instructional spending has grown 3 times faster than the cost of tuition in the last two decades.
Maybe Yale is an outlier here because there's another analysis[1] that looks at aggregate data for nonprofit and private colleges collected by NCES, and that analysis showed that support (ie. non-teaching) costs have outgrown teaching costs.
Sorry, I mistyped my original comment. I meant to say that non-teaching costs have not grown faster than teaching costs. From the article:
>Again, everything is per FTE per year. So support cost (student services, academic and institutional support) is roughly comparable to instruction cost (teaching), and the two have risen at similar rates in the 1999-2013 window. Research expenditures, meanwhile, have been pretty flat.
