The Holy Trinity: Greed, Stupdity and Arrogance At America's Universiities

By Richard Vedder

Barack Obama is signing a bill today that will once again allow American university presidents, at least at public schools, to continue on their inefficient ways. The stimulus package contains enough dollars to allow most colleges to have a merely mildly uncomfortable budget adjustment instead of a fundamental reinvention of the delivery of higher education services. Aside from budgetary funds directed specifically for education, there are lots of dollars for enhanced spending by organizations like the National Institutes of Health and the National Science Foundation, much of which will filter down to campuses.

Universities have gotten fat, rich and arrogant during the last generation. The National Center for Education Statistics (and a calculator) tells us that in 1976, there were 3.15 full time administrators or "other professionals" working at universities for every 100 full time equivalent students. By 2005, that number had nearly doubled, to 6.06. In 1976, it took 10 professional staff to educate a 100 students; today, it takes more than 14.

Rather than embracing technology to lower labor costs, we in higher education have expanded bureaucracies --simply because we could. And we have started to pay them princely salaries, arguing that we have to compete with corporations. Bull. Facing far greater risks and financial consequences than higher education, corporations have cut staff to the bone, and have raised productivity to remain competitive. Higher education has done the opposite, and does not either deserve nor require corporate level salaries.

Let us look at higher education then and now. I will use my own university as an example. Forty years ago, in 1968-69, the dean of the business school made $22,000 a year. Today's counterpart makes $242,500. Allowing for inflation, that is a real doubling in salary (particularly since the inflation adjustment, the CPI, is generally acknowledged to have overstated inflation in that era). This ignores soaring fringe benefits, and is dramatically more than real compensations per hour in the private sector (about 60 percent). And that is not an isolated example. The head football coach in 1968 (a campus legend with a great record) made $20,400 a year, one third the inflation adjusted salary of the current $330,000 (with bonuses extra) coach. While some positions have seen real gains in pay of "only" 60-70 percent, on the whole the administrative bureaucracy has grown not only enormously in size, but also in emoluments, relative both to the American population and to the faculty (who have not, however, done badly either --salaries for new assistant professors of economics, for example, rose around 50 percent in inflation-adjusted terms, and probably 60 percent when fringe benefit expansion is considered).

Here is the hustle. University presidents and other academic hookers go to the legislature, DC, or to private donors and beg for more money --to make college more affordable, to promote economic growth, to reinvigorate the American Dream - the spiel du jour used in this con game varies with time and place. A naive but well intentioned public gives us university folks more or less what we want (although, ironically, we rarely say thank you), and we use some of it to line our pockets, some to lower our teaching load (faculty), increase our power (administrators), etc. And of course, we sock it to the students too --raising tuition fees constantly. Without the pressure of market discipline, we become arrogant and greedy.

What about the "stupidity" in the title of this blog? Aren't university officials pretty clever to be able to convince Americans to subsidize them in the good life? Yes, but greed sometimes makes them stupid - even from the standpoint of their own narrow self-interest. Today's INSIDE HIGHER ED has a great story showing how public and campus opinion is turning strongly against presidents who have taken huge bonus payments in the midst of national economic suffering and campus cutbacks (one is my own president, Rod McDavis, who apparently refuses to return a cent of the $85,000 pay hike he received back to the university). Astute presidents (David Hodge of Miami University comes to mind, but there are others) have rejected these bonus payments, knowing how they create enormous resentment on campus and anger in the broader community. For some, greed trumps common sense, leading to stupidity.