By Richard Vedder
Wick Sloane
Wick Sloane is one of the most innovative thinkers in higher education. He thinks outside the box and asks important questions. He has asked, for example, why are all courses roughly the same length? Why don't we give 2.5 credits for some bits of knowledge, 1.2 credits for others? Why don't we teach smaller bits of knowledge for smaller amounts of credit? Or, on another topic, why don't we look at tax exemptions in terms of their "Pell Grant equivalency?"
The estimable Hechinger Institute on Education and the Media at Columbia University has awarded Wick a fellowship for the coming year to explore issues relating to community colleges. Columbia has chosen well; we have used Wick in the past to do a "perspectives" piece for us, and as our resources slowly expand, we hope to use him again very soon. Three cheers for Wick Sloane!!
Andrew Gillen
One of the joys of being a college professor is seeing your "output" --your students --mature, improve, and do great things as they enter adulthood. Thus I am bursting with joy at the fact that Andy Gillen is joining CCAP. Andy studied economics with me at Ohio University, and is finishing his Ph.D. at Florida State, where my buddies on the faculty have told me he has done just fine. He is working in a fascinating new area --experimental economics-- and brings research skills and common sense to CCAP. Bryan O'Keefe and I are looking forward to working with him, and we are taking him to dinner next week to celebrate his coronation as CCAP's first research director. Andy may have taken the job with us because his girlfriend lives in DC, so possibly his hormones overcame his brains in making this vocational decision to join CCAP, but, whatever the case, we are delighted to have him on board!
Friday, June 08, 2007
Wednesday, June 06, 2007
Lederman's Lament
By Richard Vedder
One of the very best, if not THE best, reporters on higher education today is INSIDE HIGHER ED's editor and part-owner (I think) Doug Lederman. He has written a superb column for today's edition of his electronic newspaper that is must reading for anyone interested in higher education.
Doug points out that the potential conflict of interest problems that have come to the surface with the student loan scandal may only be the tip of the iceberg. Universities interface with vendors and commercial interests all over the campus community. Harvard's former president Derek Bok wrote a good book about it a few years ago with respect to the possible problems associated with corporate sponsorship of research. In selective admissions schools where the quantity of services demanded far outstrips the quantity supplied at the stated price, there are enormous incentives for bribes and kickbacks. Dan Golden has written about institutional kickbacks and preferential policies, but I wonder if there are admissions officials who have attained a good deal of personal enrichment? Are there IT administrators who have been enriched by favoring certain vendors? Whenever money is dropped out of airplanes (or the equivalent) to support something, human nature is such that some of the funds get illegitimately diverted into the pocketbooks of key personnel. Sometimes it is done legally (if not always productively) as well --there is a positive correlation between salary increases over time for professors and the degree of grant funding from the federal government, for example.
Since public funds are heavily involved, it could be argued that theft of university funds is equivalent of theft of public monies, and should be treated the same way. Universities that cover up or bury acts of malfeasance should face criminal sanctions or --more potent --loss of accreditation, the ability to participate in student loan or research grant programs, and/or the loss of tax exempt status. Hit them hard in the pocketbook, and institutional efforts to ferret out dishonesty will grow and might bear some fruit.
Having said all of this, however, we return to the old dilemma. Federal intrusion into university affairs seldom have a happy result. The strength in our system of higher education is its institutional diversity. Each school can seek its own destiny. Yet federal money is corrupting that principle. If schools want dollars from the Feds, they have to be willing to become quasi-public institutions subject to rules and regulations designed to minimize waste, fraud and abuse, and at the same time they have to be transparent and accountable. The solution? The gradual defunding of higher education from taxpayer sources. Have American higher education move towards the Hillsdale College model. Then corruption becomes a private problem, without widespread ramifications for public policy.
One of the very best, if not THE best, reporters on higher education today is INSIDE HIGHER ED's editor and part-owner (I think) Doug Lederman. He has written a superb column for today's edition of his electronic newspaper that is must reading for anyone interested in higher education.
Doug points out that the potential conflict of interest problems that have come to the surface with the student loan scandal may only be the tip of the iceberg. Universities interface with vendors and commercial interests all over the campus community. Harvard's former president Derek Bok wrote a good book about it a few years ago with respect to the possible problems associated with corporate sponsorship of research. In selective admissions schools where the quantity of services demanded far outstrips the quantity supplied at the stated price, there are enormous incentives for bribes and kickbacks. Dan Golden has written about institutional kickbacks and preferential policies, but I wonder if there are admissions officials who have attained a good deal of personal enrichment? Are there IT administrators who have been enriched by favoring certain vendors? Whenever money is dropped out of airplanes (or the equivalent) to support something, human nature is such that some of the funds get illegitimately diverted into the pocketbooks of key personnel. Sometimes it is done legally (if not always productively) as well --there is a positive correlation between salary increases over time for professors and the degree of grant funding from the federal government, for example.
Since public funds are heavily involved, it could be argued that theft of university funds is equivalent of theft of public monies, and should be treated the same way. Universities that cover up or bury acts of malfeasance should face criminal sanctions or --more potent --loss of accreditation, the ability to participate in student loan or research grant programs, and/or the loss of tax exempt status. Hit them hard in the pocketbook, and institutional efforts to ferret out dishonesty will grow and might bear some fruit.
Having said all of this, however, we return to the old dilemma. Federal intrusion into university affairs seldom have a happy result. The strength in our system of higher education is its institutional diversity. Each school can seek its own destiny. Yet federal money is corrupting that principle. If schools want dollars from the Feds, they have to be willing to become quasi-public institutions subject to rules and regulations designed to minimize waste, fraud and abuse, and at the same time they have to be transparent and accountable. The solution? The gradual defunding of higher education from taxpayer sources. Have American higher education move towards the Hillsdale College model. Then corruption becomes a private problem, without widespread ramifications for public policy.
Tuesday, June 05, 2007
Laureate Education's Buyout and For Profit Education
By Richard Vedder
Many educational traditionalists have thought that the for-profit higher education "fad" had peaked. After all, market leader Apollo (University of Phoenix) had slumping stock prices last year, amidst some questionable accounting practices and sharply slowing growth rates in enrollments. The feeling seems to be growing that the for-profit school market was becoming saturated. I have been skeptical of that argument, and markets are suggesting that there is plenty of life left in for-profit education.
This all came back into mind yesterday when I read in the Wall Street Journal (p. C3) that "Laureate Accepts Sweetened Buyout Bid." Laureate Education is the former Sylvan Learning Systems, and now has more than 262,000 students studying on its on-campus and on-line programs. The management of the company wants to buy out the stockholders --in a $3.82 billion buyout.
What is interesting about the price is that it represents close to 40 times the current annual earnings of the company -- a very high P-E ratio, one usually reserved for "hot" high tech stocks with extremely bright futures. In 2004, the company made $62 million on sales of $648 million, in 2005 it made $75 million on sales of $875 million, and in 2006 it made over $105 million on sales of $1.146 billion. This is not the sign of a company in decline, or one beginning to stagnate.
Not only are publicly traded companies expanding, but so are private firms not traded on stock exchanges (and the Sarbanes-Oxley law is providing perverse incentives for public firms to go private, as Laureate is proposing to do). I have worked with a couple of innovative firms that are booming, not only in the U.S. market but also abroad. Small liberal arts colleges are being bought by for-profits trying to get accreditation and using that to expand greatly, mainly on-line but also through on-site learning centers. The far greater efficiency inherent in market-based forms of educational delivery are increasingly allowing the for profits to compete head on with government or privately subsidized not-for-profit institutions. This is a trend that is to be applauded, not feared, as it introduces much needed competition into American higher education.
Many educational traditionalists have thought that the for-profit higher education "fad" had peaked. After all, market leader Apollo (University of Phoenix) had slumping stock prices last year, amidst some questionable accounting practices and sharply slowing growth rates in enrollments. The feeling seems to be growing that the for-profit school market was becoming saturated. I have been skeptical of that argument, and markets are suggesting that there is plenty of life left in for-profit education.
This all came back into mind yesterday when I read in the Wall Street Journal (p. C3) that "Laureate Accepts Sweetened Buyout Bid." Laureate Education is the former Sylvan Learning Systems, and now has more than 262,000 students studying on its on-campus and on-line programs. The management of the company wants to buy out the stockholders --in a $3.82 billion buyout.
What is interesting about the price is that it represents close to 40 times the current annual earnings of the company -- a very high P-E ratio, one usually reserved for "hot" high tech stocks with extremely bright futures. In 2004, the company made $62 million on sales of $648 million, in 2005 it made $75 million on sales of $875 million, and in 2006 it made over $105 million on sales of $1.146 billion. This is not the sign of a company in decline, or one beginning to stagnate.
Not only are publicly traded companies expanding, but so are private firms not traded on stock exchanges (and the Sarbanes-Oxley law is providing perverse incentives for public firms to go private, as Laureate is proposing to do). I have worked with a couple of innovative firms that are booming, not only in the U.S. market but also abroad. Small liberal arts colleges are being bought by for-profits trying to get accreditation and using that to expand greatly, mainly on-line but also through on-site learning centers. The far greater efficiency inherent in market-based forms of educational delivery are increasingly allowing the for profits to compete head on with government or privately subsidized not-for-profit institutions. This is a trend that is to be applauded, not feared, as it introduces much needed competition into American higher education.
Attainment Honor Roll
By: Matt Denhart
Table 1: State Attainment Honor Roll
As schools are letting out for the summer, it’s appropriate for us to announce our CCAP state college attainment honor roll. By "college attainment" we are referring to the percentage of the population age 25 or more with at least bachelor degrees. These states, as listed in the accompanying table, are the top 10 in attainment during 2005. Accompanying each state’s attainment is its corresponding rank of per capita appropriations to higher education in the year 2005 and historically relative to the other 49 states. What is most remarkable is that not a single top 10 state in terms of attainment had appropriations spending in the top 10, and a majority not even in the top half of states.
As many may argue, state appropriations take time to come to produce results in the form of graduates. To compensate for this time lag we took not only a spending rank for 2005, but also calculated an average rank based on appropriations rankings in 1975, 1985, 1995 and 2005. This historical average ranking actually accents the low spending standing of the majority of honor roll states. As a whole the honor roll states average a spending rank of 31.5 (spending below the median or average), while the bottom ten states in the U.S. average a spending rank of 25th. The better performing states spend on average significantly less. This seems to call into question the hypothesis that increased spending augments state college attainment percentages.
Certainly there are a few exceptions; Minnesota, Washington and California have both historically had relatively high attainment concurrently with higher spending. Yet more striking are those states that appear to have high attainment and low spending. Take Massachusetts, Vermont and New Hampshire for example. All have spending historically in the bottom 10 in the nation while among tops in attainment. Throw Colorado into the mix, and you see 4 states in 2005 that were tops in attainment and the bottom 4 in appropriations spending to higher education. These states clearly demonstrate the flaw in equating higher spending with more graduation success. In fact, my own research seems to call into question any significant relationship between appropriations and attainment at all. Perhaps there are other and better ways to spend these tax dollars to bolster a state’s attainment.
Many will argue that attainment is greatly affected by population migration and cultural factors, and this is the reason for higher attainment in some states relative to others, regardless of appropriations spending. That very well may be case, as skilled and educated workers move to states with better and more skilled labor opportunities. Still, this introduces another question: are some of our high spending states educating students who then migrate out of the state directly upon graduation? While state governments certainly have an obligation to provide for the education of their citizens, are they still justified in such high spending if they are in fact financing the future of other states?
Iowa is one interesting case study. The Hawkeye state has the lowest attainment of any of her six bordering states, while also ranking highest in per capita appropriations with the sole exception of Nebraska. Is Iowa funding the education the Midwest’s future? This is an interesting topic to be further explored and discussed.
Table 1: State Attainment Honor Roll
As schools are letting out for the summer, it’s appropriate for us to announce our CCAP state college attainment honor roll. By "college attainment" we are referring to the percentage of the population age 25 or more with at least bachelor degrees. These states, as listed in the accompanying table, are the top 10 in attainment during 2005. Accompanying each state’s attainment is its corresponding rank of per capita appropriations to higher education in the year 2005 and historically relative to the other 49 states. What is most remarkable is that not a single top 10 state in terms of attainment had appropriations spending in the top 10, and a majority not even in the top half of states.
As many may argue, state appropriations take time to come to produce results in the form of graduates. To compensate for this time lag we took not only a spending rank for 2005, but also calculated an average rank based on appropriations rankings in 1975, 1985, 1995 and 2005. This historical average ranking actually accents the low spending standing of the majority of honor roll states. As a whole the honor roll states average a spending rank of 31.5 (spending below the median or average), while the bottom ten states in the U.S. average a spending rank of 25th. The better performing states spend on average significantly less. This seems to call into question the hypothesis that increased spending augments state college attainment percentages.
Certainly there are a few exceptions; Minnesota, Washington and California have both historically had relatively high attainment concurrently with higher spending. Yet more striking are those states that appear to have high attainment and low spending. Take Massachusetts, Vermont and New Hampshire for example. All have spending historically in the bottom 10 in the nation while among tops in attainment. Throw Colorado into the mix, and you see 4 states in 2005 that were tops in attainment and the bottom 4 in appropriations spending to higher education. These states clearly demonstrate the flaw in equating higher spending with more graduation success. In fact, my own research seems to call into question any significant relationship between appropriations and attainment at all. Perhaps there are other and better ways to spend these tax dollars to bolster a state’s attainment.
Many will argue that attainment is greatly affected by population migration and cultural factors, and this is the reason for higher attainment in some states relative to others, regardless of appropriations spending. That very well may be case, as skilled and educated workers move to states with better and more skilled labor opportunities. Still, this introduces another question: are some of our high spending states educating students who then migrate out of the state directly upon graduation? While state governments certainly have an obligation to provide for the education of their citizens, are they still justified in such high spending if they are in fact financing the future of other states?
Iowa is one interesting case study. The Hawkeye state has the lowest attainment of any of her six bordering states, while also ranking highest in per capita appropriations with the sole exception of Nebraska. Is Iowa funding the education the Midwest’s future? This is an interesting topic to be further explored and discussed.
Hurray for Rateyourprofessor.com!!
By Richard Vedder
Historically, I have been somewhat negative or at least ambivalent about student evaluations of professors. Students sometimes literally do not know who is a good teacher at the time they are taking a course, and sometimes are excessively swayed by the professor's ease of grading. It is not entirely an accident that grade inflation in America roughly began when student evaluations came into vogue 35 years or so ago.
On the flip side of that, however, there is little accountability in higher education, and student evaluations are one form. They convey information -- information that is useful to student consumers of products. And, by and large, the students seem to get it right. They like the professors who take teaching seriously, who know their subject, and devote time to helping students learn and transition into the adult world.
Professors often are especially furious with the rateyourprofessor.com web site. The rankings typically reflect small, non-random samples of students --often several years old, I suspect. Yet, as today's Inside Higher Education reveals, the correlation between these flawed evaluations and more comprehensive official evaluations is quite high. My own reading is that, by and large, the students with high evaluations on rateyourprofessor.com are pretty good, and the ones with low evaluations are pretty mediocre or bad. For some strange reason, I get extremely high (4.9 out of a possible 5) average evaluations on this site, and am even "hot", a particularly cherished designation I am told. Maybe this is further evidence of how flawed the evaluation system is, and maybe biases me in favor of this popular Web site.
In short, the evaluations are an attempt to create a "bottom line". Just as USNews rates colleges, and Consumer Reports rates autos and appliance, so rateyourprofessor.com rates professors. It is a legitimate attempt to convey information to students about the relative attractiveness of faculty. On the whole, I think it does more good than bad, and the principle of student evaluations probably should be extended further, including more systematic evaluation of university and college leaders by members of the university or college community.
Historically, I have been somewhat negative or at least ambivalent about student evaluations of professors. Students sometimes literally do not know who is a good teacher at the time they are taking a course, and sometimes are excessively swayed by the professor's ease of grading. It is not entirely an accident that grade inflation in America roughly began when student evaluations came into vogue 35 years or so ago.
On the flip side of that, however, there is little accountability in higher education, and student evaluations are one form. They convey information -- information that is useful to student consumers of products. And, by and large, the students seem to get it right. They like the professors who take teaching seriously, who know their subject, and devote time to helping students learn and transition into the adult world.
Professors often are especially furious with the rateyourprofessor.com web site. The rankings typically reflect small, non-random samples of students --often several years old, I suspect. Yet, as today's Inside Higher Education reveals, the correlation between these flawed evaluations and more comprehensive official evaluations is quite high. My own reading is that, by and large, the students with high evaluations on rateyourprofessor.com are pretty good, and the ones with low evaluations are pretty mediocre or bad. For some strange reason, I get extremely high (4.9 out of a possible 5) average evaluations on this site, and am even "hot", a particularly cherished designation I am told. Maybe this is further evidence of how flawed the evaluation system is, and maybe biases me in favor of this popular Web site.
In short, the evaluations are an attempt to create a "bottom line". Just as USNews rates colleges, and Consumer Reports rates autos and appliance, so rateyourprofessor.com rates professors. It is a legitimate attempt to convey information to students about the relative attractiveness of faculty. On the whole, I think it does more good than bad, and the principle of student evaluations probably should be extended further, including more systematic evaluation of university and college leaders by members of the university or college community.
Saturday, June 02, 2007
CCAP At Its First Birthday
By Richard Vedder
The Center for College Affordability and Productivity (CCAP) is now one year old. I officially started getting paid on June 15 of last year, but the entity actually began a bit before that. I am not one to toot my own horn, but a review of a few accomplishments of the past year is in order, as well as a brief discussion of future plans.
Over the last year, we have assembled a small but agile team (myself, Bryan O'Keefe, and the "Whiz Kids", mainly Jonathan Leirer and Matt Denhart). We have relied on several volunteer and paid consultants, starting with Brian Fruchey but including others, including my colleague Tony Caporale, and the late Arthur Beroz.
Our blog output is almost precisely one blog per work day for the year. Volume of readers has grown. A highlight of the year was when one reader who comments often, "the cowboy," actually came well over one thousand miles to visit us in Ohio. While I have done a majority of the blogs, increasing numbers are being done by others, especially Bryan.
We have had op-eds appear in a variety of newspapers. I have appeared on national TV, most prominently in a Fox News Special on higher ed (with Newt Gingrich), but also elsewhere, including the ABC Nightly News with Charles Gibson. We have published electronically a couple of longer commentaries, and are finishing up a joint study on Michigan higher education with the Mackinac Center, Michigan's premier public policy think tank. We had a great conference on higher education in the post-Spellings Commission era, keynoted by remarks by Secretary of Education Spellings herself. I have appeared on panels and discussions from Boston to the San Francisco bay region. I have participated in several post-Spellings Commissions meetings of importance. All told, it has been a very good year.
In the coming year, our goal is to ramp up our research and publications. To facilitate that, we will be adding Andy Gillen, who is finishing up his Ph.D. in economics at Florida State, to our staff in two weeks. Andy will serve as our Research Director, overseeing the research of the Whiz Kids, and doing several things of his own. The biggest single project will be to engage in state-specific research. With the assistance of the Pope Foundation, we will look a good deal at North Carolina. Our most exciting project, funded by the Center for Higher Education Excellence, is being done in cooperation with the State Policy Network. We will be researching the higher education systems of several states, although the details are still being worked out. State think tanks will compete for the right to have us do a study, which we will then publish jointly with them. With assistance from the Bradley Foundation, Andy will supervise some additional in depth studies, probably done by outside scholars.
With help again from the Center for Higher Education Excellence, Bryan will be doing a study more fully analyzing the role and ramifications of the monumental Duke v. Griggs Power court case on American higher education, here working in tandem with our friends at the Pope Center in North Carolina. We will be doing more conferences (tentatively, one on accreditation in cooperation with the American Enterprise Institute -AEI- this fall). We will be exploring further the issue of over investment in higher education, and debunking the notion that incremental public spending on higher education in its current form has high pay offs. We will weigh in more on the whole question of student loans, arguing that the nation would be well served if the federal government disengages from this area.
We owe debts to many people and organizations, beginning with the Searle Freedom Trust (SFT) and its benefactor Dan Searle, who put us on the map. Kim Dennis of SFT is our Mother Superior and great friend, assisted ably by Courtney Myers. The Koch Foundation has assisted us by paying for a majority of Andy's salary for the coming year. Fred Fransen has become a good friend, along with our pals in North Carolina, George Leef, Dave Riggs, and, now, Jane Shaw. AEI has worked cooperatively with us. A special friend is Anne Neal, whose American Council of Trustees and Alumni is one of the real positive reform voices in higher education.
Personally, the best thing of all for me is meeting great people and working with them. Bryan O'Keefe is awesome, and his forthcoming wedding in September will be the social event of the forthcoming year. I have had the best student helpers you could ask for, and I will especially miss Jonathan Leirer, who is going off to Florida State to get a Ph.D. in economics.
Enough is enough. This had been a great first year, and we anticipate growth and excitement to mount as we mature in the year ahead.
The Center for College Affordability and Productivity (CCAP) is now one year old. I officially started getting paid on June 15 of last year, but the entity actually began a bit before that. I am not one to toot my own horn, but a review of a few accomplishments of the past year is in order, as well as a brief discussion of future plans.
Over the last year, we have assembled a small but agile team (myself, Bryan O'Keefe, and the "Whiz Kids", mainly Jonathan Leirer and Matt Denhart). We have relied on several volunteer and paid consultants, starting with Brian Fruchey but including others, including my colleague Tony Caporale, and the late Arthur Beroz.
Our blog output is almost precisely one blog per work day for the year. Volume of readers has grown. A highlight of the year was when one reader who comments often, "the cowboy," actually came well over one thousand miles to visit us in Ohio. While I have done a majority of the blogs, increasing numbers are being done by others, especially Bryan.
We have had op-eds appear in a variety of newspapers. I have appeared on national TV, most prominently in a Fox News Special on higher ed (with Newt Gingrich), but also elsewhere, including the ABC Nightly News with Charles Gibson. We have published electronically a couple of longer commentaries, and are finishing up a joint study on Michigan higher education with the Mackinac Center, Michigan's premier public policy think tank. We had a great conference on higher education in the post-Spellings Commission era, keynoted by remarks by Secretary of Education Spellings herself. I have appeared on panels and discussions from Boston to the San Francisco bay region. I have participated in several post-Spellings Commissions meetings of importance. All told, it has been a very good year.
In the coming year, our goal is to ramp up our research and publications. To facilitate that, we will be adding Andy Gillen, who is finishing up his Ph.D. in economics at Florida State, to our staff in two weeks. Andy will serve as our Research Director, overseeing the research of the Whiz Kids, and doing several things of his own. The biggest single project will be to engage in state-specific research. With the assistance of the Pope Foundation, we will look a good deal at North Carolina. Our most exciting project, funded by the Center for Higher Education Excellence, is being done in cooperation with the State Policy Network. We will be researching the higher education systems of several states, although the details are still being worked out. State think tanks will compete for the right to have us do a study, which we will then publish jointly with them. With assistance from the Bradley Foundation, Andy will supervise some additional in depth studies, probably done by outside scholars.
With help again from the Center for Higher Education Excellence, Bryan will be doing a study more fully analyzing the role and ramifications of the monumental Duke v. Griggs Power court case on American higher education, here working in tandem with our friends at the Pope Center in North Carolina. We will be doing more conferences (tentatively, one on accreditation in cooperation with the American Enterprise Institute -AEI- this fall). We will be exploring further the issue of over investment in higher education, and debunking the notion that incremental public spending on higher education in its current form has high pay offs. We will weigh in more on the whole question of student loans, arguing that the nation would be well served if the federal government disengages from this area.
We owe debts to many people and organizations, beginning with the Searle Freedom Trust (SFT) and its benefactor Dan Searle, who put us on the map. Kim Dennis of SFT is our Mother Superior and great friend, assisted ably by Courtney Myers. The Koch Foundation has assisted us by paying for a majority of Andy's salary for the coming year. Fred Fransen has become a good friend, along with our pals in North Carolina, George Leef, Dave Riggs, and, now, Jane Shaw. AEI has worked cooperatively with us. A special friend is Anne Neal, whose American Council of Trustees and Alumni is one of the real positive reform voices in higher education.
Personally, the best thing of all for me is meeting great people and working with them. Bryan O'Keefe is awesome, and his forthcoming wedding in September will be the social event of the forthcoming year. I have had the best student helpers you could ask for, and I will especially miss Jonathan Leirer, who is going off to Florida State to get a Ph.D. in economics.
Enough is enough. This had been a great first year, and we anticipate growth and excitement to mount as we mature in the year ahead.
Friday, June 01, 2007
College Attainment and Prosperity
By Richard Vedder
There is absolutely no doubt that richer states have a large proportion of adults who are college graduates. Tom Mortenson in the last issue of Educational Opportunity has a nice scatter diagram that demonstrates that point, and notes, no doubt correctly, that the correlation between per capita income and attainment of a bachelor's degree or more has grown over time. In my own statistical work using somewhat more sophisticated statistical procedures, I obtain very similar results.
But then Tom and I part company. Mortenson says "If a state were interested in increasing its per capita personal income...then it should focus on increasing the share of its population age 25 and over with at least a bachelor degree." He then asks the question, "So why have states reduced their investment efforts in higher education by 32 percent since FY1980?"
Implicit in Mortenson's question is an assumption that, it turns out, is completely erroneous. He assumes that increasing state appropriations for higher education (his "investment") leads to a greater proportion of the population with bachelor's degrees. Yet using the Mortenson simple correlation approach, Whiz Kid Matt Denhart finds no such relationship exists. The simple correlation in 2005 between per capita state appropriations and the percent of the over 25 population with at least bachelor's degrees is -0.246 --more appropriations, a lower proportion of graduates among the adult population. You could argue that "today's adult college graduates were educated in previous years -- what is relevant are appropriations at earlier points in time. So we took the average of appropriations over 4 years (1975, 1985, 1995, and 2005) and correlated them with BA or greater attainment --again, we obtain a slightly negative result.
Matt did some other interesting things, which I am encouraging him to put in future blogs, op-eds, etc. We see North Carolina, with high levels of per capita spending (thanks largely to former governor Jim Hunt) with relatively low levels of BA attainment (compared with neighboring states. Several New England states and Colorado, with very high levels of educational attainment, have relatively low spending levels. Fairly high spending Iowa has lower educational attainment than most of its lower spending neighbors, and so on.
One factor at work may be migration. States that have high taxes to finance high university expenditures may have lackluster economies that drive recent college graduates to move to other states, for example. Our research shows that higher tax burdens are associated with lower income growth. In states with traditionally high emphasis on private higher education - New England -states like Massachusetts, New Hampshire, Connecticut and Vermont, for example, people use private funds to finance their children's higher education investment in private school more than in states without that tradition. Also, as state appropriations grow, so do university bureaucracies and the salaries of employees --money goes from the pockets of taxpayers who work in the efficient private sector and into the pockets of those in the far less efficient public sector. My reading of the evidence is clear: the reduction in higher educational effort by state governments is rational behavior, and rather appropriate --indeed, it needs to go farther.
There is absolutely no doubt that richer states have a large proportion of adults who are college graduates. Tom Mortenson in the last issue of Educational Opportunity has a nice scatter diagram that demonstrates that point, and notes, no doubt correctly, that the correlation between per capita income and attainment of a bachelor's degree or more has grown over time. In my own statistical work using somewhat more sophisticated statistical procedures, I obtain very similar results.
But then Tom and I part company. Mortenson says "If a state were interested in increasing its per capita personal income...then it should focus on increasing the share of its population age 25 and over with at least a bachelor degree." He then asks the question, "So why have states reduced their investment efforts in higher education by 32 percent since FY1980?"
Implicit in Mortenson's question is an assumption that, it turns out, is completely erroneous. He assumes that increasing state appropriations for higher education (his "investment") leads to a greater proportion of the population with bachelor's degrees. Yet using the Mortenson simple correlation approach, Whiz Kid Matt Denhart finds no such relationship exists. The simple correlation in 2005 between per capita state appropriations and the percent of the over 25 population with at least bachelor's degrees is -0.246 --more appropriations, a lower proportion of graduates among the adult population. You could argue that "today's adult college graduates were educated in previous years -- what is relevant are appropriations at earlier points in time. So we took the average of appropriations over 4 years (1975, 1985, 1995, and 2005) and correlated them with BA or greater attainment --again, we obtain a slightly negative result.
Matt did some other interesting things, which I am encouraging him to put in future blogs, op-eds, etc. We see North Carolina, with high levels of per capita spending (thanks largely to former governor Jim Hunt) with relatively low levels of BA attainment (compared with neighboring states. Several New England states and Colorado, with very high levels of educational attainment, have relatively low spending levels. Fairly high spending Iowa has lower educational attainment than most of its lower spending neighbors, and so on.
One factor at work may be migration. States that have high taxes to finance high university expenditures may have lackluster economies that drive recent college graduates to move to other states, for example. Our research shows that higher tax burdens are associated with lower income growth. In states with traditionally high emphasis on private higher education - New England -states like Massachusetts, New Hampshire, Connecticut and Vermont, for example, people use private funds to finance their children's higher education investment in private school more than in states without that tradition. Also, as state appropriations grow, so do university bureaucracies and the salaries of employees --money goes from the pockets of taxpayers who work in the efficient private sector and into the pockets of those in the far less efficient public sector. My reading of the evidence is clear: the reduction in higher educational effort by state governments is rational behavior, and rather appropriate --indeed, it needs to go farther.
Do Poor College Students Work?
By Richard Vedder
In the good old days (that actually were less good than old-timers like to believe), it was common for students from middle class and especially low income backgrounds to pay for a good bit of their college education by working while in school. Even though our parents paid most of the bills, both my wife and I worked while in college, and that experience was commonplace four or five decades ago. The kids from less affluent backgrounds were more inclined to work than those from affluent ones, since they needed the money to cover college costs.
Do kids from relatively lower income families work in college today? I have always assumed the answer is "yes," and know many students (including my own beloved Whiz Kids) who follow that traditional pattern. Yet some Current Population Survey data that Tom Mortenson of postsecondary.org presented in his May newsletter is making me think, and even wanting to explore that data set more extensively. Let us look at the four major racial/ethnic groups identified by the CPS -- whites, blacks, Asians, and Hispanics. The group with the highest labor force participation in college is whites (42.5 percent work while in school), yet it is either the most affluent or second most affluent group, depending on the measure of financial success used. The group that is clearly the poorest --blacks -- has the lowest rate of college labor force participation, 28.7 percent. Not all blacks are poor, of course, but my suspicion is that blacks are overrepresented among the poor kids attending college. Why, then, do they work less, relative to, say, whites? The picture for Asians and Hispanics is less stark, but even Hispanics work less than whites (40 percent), despite as a group having substantially lower incomes. Asians as a group are relative affluent, and have relatively low levels of work participation, more in keeping with the thesis that college workers are concentrated among the less affluent students.
Caution is in order. Group statistics can be deceptive, and it may well be that blacks attending college are highly concentrated among the black middle class, much more so than, say, whites. But the data suggest at least the possibility that either: blacks are given such substantial preferential treatment in financial aid that they do not need to work as much relative to others of similar economic status, or that blacks are unusually enticed to borrow deeply to fund college. The area is ripe for further exploration, and I am heading down the hall to see my colleague who is the resident expert on using the CPS to see if she wants to collaborate on a project either for journal publication or as a CCAP special study. Stay tuned.
Independent of the racial/ethnic dimension, why is the proportion of working students so low? For the relatively more expensive four year colleges, it is 33.1 percent. Two-thirds of the kids in four year schools do not work, despite the fact that data from the National Survey of Student Engagement suggest that their total academic work absorbs no more than perhaps 35 hours a week on the average. Are we over-subsidizing a bunch of under worked kids? At Berea College, every student works -- period. Berea is a fine school with a growing national reputation. Maybe if we subsidized student loans less, we would get greater labor force participation from students who have excessive time on their hands. I know two cures for hedonistic student behavior. One, demand more of them in class and give more grades below "B". Two, get them a job. To be sure, excessive student employment can interfere with studies and academic success. But I suspect for most students taking a college job would crowd out more party time than study time.
In the good old days (that actually were less good than old-timers like to believe), it was common for students from middle class and especially low income backgrounds to pay for a good bit of their college education by working while in school. Even though our parents paid most of the bills, both my wife and I worked while in college, and that experience was commonplace four or five decades ago. The kids from less affluent backgrounds were more inclined to work than those from affluent ones, since they needed the money to cover college costs.
Do kids from relatively lower income families work in college today? I have always assumed the answer is "yes," and know many students (including my own beloved Whiz Kids) who follow that traditional pattern. Yet some Current Population Survey data that Tom Mortenson of postsecondary.org presented in his May newsletter is making me think, and even wanting to explore that data set more extensively. Let us look at the four major racial/ethnic groups identified by the CPS -- whites, blacks, Asians, and Hispanics. The group with the highest labor force participation in college is whites (42.5 percent work while in school), yet it is either the most affluent or second most affluent group, depending on the measure of financial success used. The group that is clearly the poorest --blacks -- has the lowest rate of college labor force participation, 28.7 percent. Not all blacks are poor, of course, but my suspicion is that blacks are overrepresented among the poor kids attending college. Why, then, do they work less, relative to, say, whites? The picture for Asians and Hispanics is less stark, but even Hispanics work less than whites (40 percent), despite as a group having substantially lower incomes. Asians as a group are relative affluent, and have relatively low levels of work participation, more in keeping with the thesis that college workers are concentrated among the less affluent students.
Caution is in order. Group statistics can be deceptive, and it may well be that blacks attending college are highly concentrated among the black middle class, much more so than, say, whites. But the data suggest at least the possibility that either: blacks are given such substantial preferential treatment in financial aid that they do not need to work as much relative to others of similar economic status, or that blacks are unusually enticed to borrow deeply to fund college. The area is ripe for further exploration, and I am heading down the hall to see my colleague who is the resident expert on using the CPS to see if she wants to collaborate on a project either for journal publication or as a CCAP special study. Stay tuned.
Independent of the racial/ethnic dimension, why is the proportion of working students so low? For the relatively more expensive four year colleges, it is 33.1 percent. Two-thirds of the kids in four year schools do not work, despite the fact that data from the National Survey of Student Engagement suggest that their total academic work absorbs no more than perhaps 35 hours a week on the average. Are we over-subsidizing a bunch of under worked kids? At Berea College, every student works -- period. Berea is a fine school with a growing national reputation. Maybe if we subsidized student loans less, we would get greater labor force participation from students who have excessive time on their hands. I know two cures for hedonistic student behavior. One, demand more of them in class and give more grades below "B". Two, get them a job. To be sure, excessive student employment can interfere with studies and academic success. But I suspect for most students taking a college job would crowd out more party time than study time.
The Decline in Four Year Inistitutions of Higher Education
By Richard Vedder
Tom Mortenson of Postsecondary Education Opportunity is somehow wired differently from us folks at CCAP. We often interpret facts differently. If Tom were to say "empirical evidence leads me to believe that the sun will rise in the East tomorrow, June 2" I might have to rethink my own similar views on the subject. But Tom is unsurpassed in the way he mines data on higher education, with imagination, panache, and, above all, integrity. If you are interested in access issues, run, do not walk, to his web site at http://www.postsecondary.org CCAP is an avid subscriber and consider Tom's work indispensable. This and two subsequent blogs draw from the May issue of his monthly newsletter to subscribers.
A funny thing has happened since 2001: four year colleges have been steadily losing market share of entering postsecondary students. In that year, the Current Population Survey data that Mortenson uses suggested that 68.1 percent of recent high school graduates that went on to college entered four year schools. That share, a modern day high, fell in 2002, and again in 2003, 2004, 2005, and 2006. The 2006 share, 62.7 percent, was the same as it was in 1992, when the 4-year school share was still trending up over time. As Tom correctly notes (we sometimes agree on data interpretation) "If these enrollment shifts...continue, then by 2010 when the total number of school graduates begins its projected decline 4-year colleges and universities will be especially hard hit and find it especially difficult to fill their freshman classes."
This new trend, if sustained, reverses the pattern of the 1980s and 1990s, although revives a trend prevalent in the 1950s and 1960s. In Gong Broke By Degree (AEI Press, 2004) I argued that as incomes rise, parents are more willing to pay big bucks to confer economic advantages on their kids --hence the frantic desire of many to get into elite private universities compared with two generations ago (when I casually turned down admission to Harvard and went to a nearer but slightly less prestigious school, Northwestern, whose 2006 entering class had average SAT scores approaching 1500). Four year schools have what economists call a "high income elasticity of demand" while the two year schools in economist lingo are "inferior goods" --demand falls as income rise, somewhat like with bus travel. However, the recent data contradict this. What has happened, then, in the last five years to challenge that conventional wisdom?
While several ideas come to mind, I think a lot of it has to do with finances. The cost of four year schools has risen very considerably since 2001, while that of two years schools, always lower, has risen less rapidly. The price differential between the two alternatives has grown rather sharply. People prefer to pay less than more. The two year schools take the mission of maximizing access and affordability very seriously, but the four year schools typically do not, their rhetoric notwithstanding. It appears that an increasing proportion of students with their parent's support are saying "I will try a two year school, and if I do well I will transfer to the four year institution, thus saving money and still earning a ticket to a nice paying job." Fear of this trend is no doubt one reason why four year schools sometime erect educationally illegitimate obstacles to the acceptance of transfer credit from two year schools.
The fear of racking up huge college loan debts and the real possibility of dropping out of school makes "investing" in a four year education somewhat risky and problematic for many kids and their families of moderate means. All of this, of course, is leading to the growing stratification within higher ed, with even the flagship state universities becoming elitist bastions for the affluent who live in increasing luxury in country club-like settings, getting some cultural enrichment and learning in between visits to the rec center, student union, and the local bars.
For years, I have been saying that the four year schools will have to alter their behavior --that current trends are unsustainable in the long run. The recent upsurge in reform sentiment, beginning with the Spellings Commission, is a manifestation of that reality.
Tom Mortenson of Postsecondary Education Opportunity is somehow wired differently from us folks at CCAP. We often interpret facts differently. If Tom were to say "empirical evidence leads me to believe that the sun will rise in the East tomorrow, June 2" I might have to rethink my own similar views on the subject. But Tom is unsurpassed in the way he mines data on higher education, with imagination, panache, and, above all, integrity. If you are interested in access issues, run, do not walk, to his web site at http://www.postsecondary.org CCAP is an avid subscriber and consider Tom's work indispensable. This and two subsequent blogs draw from the May issue of his monthly newsletter to subscribers.
A funny thing has happened since 2001: four year colleges have been steadily losing market share of entering postsecondary students. In that year, the Current Population Survey data that Mortenson uses suggested that 68.1 percent of recent high school graduates that went on to college entered four year schools. That share, a modern day high, fell in 2002, and again in 2003, 2004, 2005, and 2006. The 2006 share, 62.7 percent, was the same as it was in 1992, when the 4-year school share was still trending up over time. As Tom correctly notes (we sometimes agree on data interpretation) "If these enrollment shifts...continue, then by 2010 when the total number of school graduates begins its projected decline 4-year colleges and universities will be especially hard hit and find it especially difficult to fill their freshman classes."
This new trend, if sustained, reverses the pattern of the 1980s and 1990s, although revives a trend prevalent in the 1950s and 1960s. In Gong Broke By Degree (AEI Press, 2004) I argued that as incomes rise, parents are more willing to pay big bucks to confer economic advantages on their kids --hence the frantic desire of many to get into elite private universities compared with two generations ago (when I casually turned down admission to Harvard and went to a nearer but slightly less prestigious school, Northwestern, whose 2006 entering class had average SAT scores approaching 1500). Four year schools have what economists call a "high income elasticity of demand" while the two year schools in economist lingo are "inferior goods" --demand falls as income rise, somewhat like with bus travel. However, the recent data contradict this. What has happened, then, in the last five years to challenge that conventional wisdom?
While several ideas come to mind, I think a lot of it has to do with finances. The cost of four year schools has risen very considerably since 2001, while that of two years schools, always lower, has risen less rapidly. The price differential between the two alternatives has grown rather sharply. People prefer to pay less than more. The two year schools take the mission of maximizing access and affordability very seriously, but the four year schools typically do not, their rhetoric notwithstanding. It appears that an increasing proportion of students with their parent's support are saying "I will try a two year school, and if I do well I will transfer to the four year institution, thus saving money and still earning a ticket to a nice paying job." Fear of this trend is no doubt one reason why four year schools sometime erect educationally illegitimate obstacles to the acceptance of transfer credit from two year schools.
The fear of racking up huge college loan debts and the real possibility of dropping out of school makes "investing" in a four year education somewhat risky and problematic for many kids and their families of moderate means. All of this, of course, is leading to the growing stratification within higher ed, with even the flagship state universities becoming elitist bastions for the affluent who live in increasing luxury in country club-like settings, getting some cultural enrichment and learning in between visits to the rec center, student union, and the local bars.
For years, I have been saying that the four year schools will have to alter their behavior --that current trends are unsustainable in the long run. The recent upsurge in reform sentiment, beginning with the Spellings Commission, is a manifestation of that reality.
Tuesday, May 29, 2007
The Tuition Freeze Movement
By Richard Vedder
One way to reduce tuition hikes is to outlaw them. Ordinarily, I abhor price controls, noting that they lead to shortages and often a decline in the quality of the controlled good or service. Yet higher education markets are highly controlled and manipulated to begin with, with the government subsidizing major suppliers (state universities), providing financial assistance to demanders of their services, etc. Public policy has contributed, I think, to the tuition price explosion, so the attempts of politicians to freeze tuition fees or moderate their growth are not surprising, and perhaps even marginally useful in controlling the cost explosion.
Governors Charlie Crist in Florida and Ted Strickland in Ohio are polar opposites, one a pretty conservative Republican and one a rather liberal Democrat. Both, however, want to constrain tuition increases. In Florida, the University of Florida and Florida State want to be able to raise tuition fees a lot and "invest" in achieving national competitive status. That usually translates into taking incremental dollars from students and devoting it to enhancing research programs, paying big salaries to new research professors, etc. Crist has said "over my dead body." He seems to saying, "if they want state subsidies, those funds will be used to keep college affordable to all --not to engage in a costly academic arms race to increase one's national rankings." In Ohio, Strickland, a Democrat working in tandem with a Republican-controlled legislature, seems to have broad acceptance of a two year plan that will allow tuition rates to rise less than the overall rate of inflation, in returns for greater state subsidies.
I am of two minds about all of this. In general, I favor tuition fee price competition over price fixing, institutional autonomy over central direction, and students paying for their own education instead of third parties doing so. The prime beneficiaries of a college education are the students educated, and most of them should pay their own way, or at least a healthy proportion of it. Moreover, I have earlier argued that we are "over invested" in higher education, meaning we are overly obsessed with providing access to every student wanting to try to go to college, no matter what the social cost or risk of failure. These are all arguments against what Crist and Strickland are trying to do. On the other hand, in many ways, the colleges have brought on this strong-armed behavior themselves, by letting their hubris to lead them to engage in costly policies (big spending increases) that are highly dubious on cost-benefit grounds. In a perfect world in my opinion, these problems would not exist, because governments would largely exit the higher education enterprise, with private charity helping those of limited means attend school. But that ideal world does not exist.
One way to reduce tuition hikes is to outlaw them. Ordinarily, I abhor price controls, noting that they lead to shortages and often a decline in the quality of the controlled good or service. Yet higher education markets are highly controlled and manipulated to begin with, with the government subsidizing major suppliers (state universities), providing financial assistance to demanders of their services, etc. Public policy has contributed, I think, to the tuition price explosion, so the attempts of politicians to freeze tuition fees or moderate their growth are not surprising, and perhaps even marginally useful in controlling the cost explosion.
Governors Charlie Crist in Florida and Ted Strickland in Ohio are polar opposites, one a pretty conservative Republican and one a rather liberal Democrat. Both, however, want to constrain tuition increases. In Florida, the University of Florida and Florida State want to be able to raise tuition fees a lot and "invest" in achieving national competitive status. That usually translates into taking incremental dollars from students and devoting it to enhancing research programs, paying big salaries to new research professors, etc. Crist has said "over my dead body." He seems to saying, "if they want state subsidies, those funds will be used to keep college affordable to all --not to engage in a costly academic arms race to increase one's national rankings." In Ohio, Strickland, a Democrat working in tandem with a Republican-controlled legislature, seems to have broad acceptance of a two year plan that will allow tuition rates to rise less than the overall rate of inflation, in returns for greater state subsidies.
I am of two minds about all of this. In general, I favor tuition fee price competition over price fixing, institutional autonomy over central direction, and students paying for their own education instead of third parties doing so. The prime beneficiaries of a college education are the students educated, and most of them should pay their own way, or at least a healthy proportion of it. Moreover, I have earlier argued that we are "over invested" in higher education, meaning we are overly obsessed with providing access to every student wanting to try to go to college, no matter what the social cost or risk of failure. These are all arguments against what Crist and Strickland are trying to do. On the other hand, in many ways, the colleges have brought on this strong-armed behavior themselves, by letting their hubris to lead them to engage in costly policies (big spending increases) that are highly dubious on cost-benefit grounds. In a perfect world in my opinion, these problems would not exist, because governments would largely exit the higher education enterprise, with private charity helping those of limited means attend school. But that ideal world does not exist.
Sunday, May 27, 2007
Is College a Waste of Time, Revisited
By Richard Vedder
I was struck by a headline in today's Columbus Dispatch: "College Graduates Now Turning to Trade School," written by H.J. Cummins of the Minneapolis Star Tribune. Cummins note that there is a growing tendency for college graduates with esoteric majors that have little vocational relevance to go back to schools to learn a trade --air traffic controller, heating and air-conditioning work, etc.
I have argued that the earnings differential that college grads command comes less from what they learn in school than from other attributes they have --intelligence, ambition, discipline, etc. Students sometimes leave college after spending thousands of dollars and four or five years of their life and find little in the way of satisfying employment --but learn that plumbers and heating specialists and air traffic controllers are making big bucks. So they go back to trade school and, after a year or two of training, get jobs often paying within a few years $75,000 or more a year. The statistics record these individuals as high earning college graduates, but I ask the question: would they have probably earned about as much if they simply skipped college and went to trade school in the first place?
Charles Murray argues that too many people go to college and too few go to trade school. If the story that Cummins is telling is true, and I suspect that it is, than we have overeducated trades persons who have often spending tens of thousands of dollars unproductively before getting training that is vocationally relevant. How much government subsidy goes to sustain these individuals as they go through college unnecessarily?
I was struck by a headline in today's Columbus Dispatch: "College Graduates Now Turning to Trade School," written by H.J. Cummins of the Minneapolis Star Tribune. Cummins note that there is a growing tendency for college graduates with esoteric majors that have little vocational relevance to go back to schools to learn a trade --air traffic controller, heating and air-conditioning work, etc.
I have argued that the earnings differential that college grads command comes less from what they learn in school than from other attributes they have --intelligence, ambition, discipline, etc. Students sometimes leave college after spending thousands of dollars and four or five years of their life and find little in the way of satisfying employment --but learn that plumbers and heating specialists and air traffic controllers are making big bucks. So they go back to trade school and, after a year or two of training, get jobs often paying within a few years $75,000 or more a year. The statistics record these individuals as high earning college graduates, but I ask the question: would they have probably earned about as much if they simply skipped college and went to trade school in the first place?
Charles Murray argues that too many people go to college and too few go to trade school. If the story that Cummins is telling is true, and I suspect that it is, than we have overeducated trades persons who have often spending tens of thousands of dollars unproductively before getting training that is vocationally relevant. How much government subsidy goes to sustain these individuals as they go through college unnecessarily?
Friday, May 25, 2007
Student Status and Graduation Rates?
By Matt Denhart
In a previous blog, I presented research based on faculty status and its relationship to student graduation rates. However, to truly tackle this issue perhaps the true story lies with the students themselves. This has been discussed briefly in the form of student quality evident in ACT scores. Yet, it seems other factors directly involving the students—namely tuition and financial aid—are key factors in this puzzle.
Interestingly enough, aside from ACT scores, the most consistently significant and relatively strong variable explaining graduation rates is tuition. What is truly interesting is that in all models, average in-state tuition had a positive correlation—i.e. higher tuition equals higher graduation rates. All models also control for student quality and the type of school, public vs. private and research extensive vs. intensive. Thus the argument that this finding is due to the link between tuition and student or school quality is not valid.
I would venture to guess that this positive relationship is due largely to incentives. As a student, if I have invested significant amounts of money into my education, I am going to be sure to obtain that diploma. Many students have accumulated significant debt to finance college and the only way to pay these bills is through a decent job—requiring a college degree.
The percentage of students receiving any type of financial aid likewise is inversely related to graduation rates. This seems to support the same hypothesis stated above. When students have made a greater investment in their education, they are more likely to succeed. Other research done this past summer by Jonathan Leirer supports this. He found that students receiving loans as opposed to grants in their financial aid package were also more likely to graduate. I think from all this it is safe to conclude that this notion of an investment in one’s own education plays an integral role in the eventual success of that student. There’s something to be said about the motivation of the individual student. I think it’s safe to assume that, on average, students paying higher tuition and receiving less aid are working at least part-time to finance these heavy expenses. While one may believe that this would negatively affect study time and school performance, it is these students who are graduating at the highest rates. Perhaps there’s something to be said for working one’s way through college.
Matt Denhart is an undergraduate student at Ohio University and a research assistant for CCAP.
In a previous blog, I presented research based on faculty status and its relationship to student graduation rates. However, to truly tackle this issue perhaps the true story lies with the students themselves. This has been discussed briefly in the form of student quality evident in ACT scores. Yet, it seems other factors directly involving the students—namely tuition and financial aid—are key factors in this puzzle.
Interestingly enough, aside from ACT scores, the most consistently significant and relatively strong variable explaining graduation rates is tuition. What is truly interesting is that in all models, average in-state tuition had a positive correlation—i.e. higher tuition equals higher graduation rates. All models also control for student quality and the type of school, public vs. private and research extensive vs. intensive. Thus the argument that this finding is due to the link between tuition and student or school quality is not valid.
I would venture to guess that this positive relationship is due largely to incentives. As a student, if I have invested significant amounts of money into my education, I am going to be sure to obtain that diploma. Many students have accumulated significant debt to finance college and the only way to pay these bills is through a decent job—requiring a college degree.
The percentage of students receiving any type of financial aid likewise is inversely related to graduation rates. This seems to support the same hypothesis stated above. When students have made a greater investment in their education, they are more likely to succeed. Other research done this past summer by Jonathan Leirer supports this. He found that students receiving loans as opposed to grants in their financial aid package were also more likely to graduate. I think from all this it is safe to conclude that this notion of an investment in one’s own education plays an integral role in the eventual success of that student. There’s something to be said about the motivation of the individual student. I think it’s safe to assume that, on average, students paying higher tuition and receiving less aid are working at least part-time to finance these heavy expenses. While one may believe that this would negatively affect study time and school performance, it is these students who are graduating at the highest rates. Perhaps there’s something to be said for working one’s way through college.
Matt Denhart is an undergraduate student at Ohio University and a research assistant for CCAP.
Faculty Status and Graduation Rates?
By Matt Denhart
In a world of few objective evaluation methods—higher ed—graduation rates are the key measurement for college student success. With alarmingly low average graduation rates, we find ourselves searching for solutions to this ultimate question—how do we get our kids to graduate? According to research here at CCAP, part-time faculty does appear to play a somewhat significant role, but tenure status does not seem to be a significant or strong variable.
Regressions for four and six year graduation rates at research extensive and intensive public and private colleges tell us much. Part-time to full-time and total faculty ratios generally show a significant and somewhat strong and negative relationship to graduation rates. By decreasing this ratio, i.e. hiring more faculty members on a full-time basis and fewer part-time, colleges could increase student success. While this may increase costs, perhaps it’s worth consideration for the students’ sake.
Tenure status is a less significant variable. The ratio of non-tenured faculty (and not on a tenure track) to tenured faculty does not significantly contribute either positively or negatively to graduation rates. This is not to say that tenured professors are not on average more experienced than their non-tenured colleagues or that tenure status plays no role in research output and other roles of faculty. However, strictly from an interest of graduating students, a university would be wise to not place such great emphasis on the extremely costly practice of tenure.
While I have discussed the previous two factors, it should be noted that average ACT scores are consistently a highly significant and positively strong factor. This should be expected as ACT scores are a good indicator of student quality, and the better the student the higher chance for success. This does much to explain why the Harvard’s and Princeton’s of the world are able to graduate over 95 percent of their students while other institutions—with less qualified students, continue to struggle. That said, in the interest of student success, universities would be wise to focus more strongly on full-time faculty and less on their tenure systems. Expect more on this issue in the coming future.
Matt Denhart is an undergraduate student at Ohio University and a research assistant for CCAP.
In a world of few objective evaluation methods—higher ed—graduation rates are the key measurement for college student success. With alarmingly low average graduation rates, we find ourselves searching for solutions to this ultimate question—how do we get our kids to graduate? According to research here at CCAP, part-time faculty does appear to play a somewhat significant role, but tenure status does not seem to be a significant or strong variable.
Regressions for four and six year graduation rates at research extensive and intensive public and private colleges tell us much. Part-time to full-time and total faculty ratios generally show a significant and somewhat strong and negative relationship to graduation rates. By decreasing this ratio, i.e. hiring more faculty members on a full-time basis and fewer part-time, colleges could increase student success. While this may increase costs, perhaps it’s worth consideration for the students’ sake.
Tenure status is a less significant variable. The ratio of non-tenured faculty (and not on a tenure track) to tenured faculty does not significantly contribute either positively or negatively to graduation rates. This is not to say that tenured professors are not on average more experienced than their non-tenured colleagues or that tenure status plays no role in research output and other roles of faculty. However, strictly from an interest of graduating students, a university would be wise to not place such great emphasis on the extremely costly practice of tenure.
While I have discussed the previous two factors, it should be noted that average ACT scores are consistently a highly significant and positively strong factor. This should be expected as ACT scores are a good indicator of student quality, and the better the student the higher chance for success. This does much to explain why the Harvard’s and Princeton’s of the world are able to graduate over 95 percent of their students while other institutions—with less qualified students, continue to struggle. That said, in the interest of student success, universities would be wise to focus more strongly on full-time faculty and less on their tenure systems. Expect more on this issue in the coming future.
Matt Denhart is an undergraduate student at Ohio University and a research assistant for CCAP.
A New Way of Ranking Colleges
By Richard Vedder
US News & World Report, in the best capitalistic tradition, has made some money while serving an important human need: an evaluation of the quality of colleges and universities. The USN&WR rankings are the closet thing to a bottom line in higher education today.
Yet the rankings are very badly flawed in that they are mostly input and opinion based, not based on outcomes and results. Variables relating to the revenues and spending of resources account for about 30 percent of the rankings, and "peer assessment" for another one-fourth. Denying student’s access, thus increasing exclusivity is worth at least 15 percent. The one reasonable component is the school's graduation rate compared with the predicted graduation rate given the resources (including student quality) available to it --but it counts for only 5 percent --less than average faculty salaries. Thus the rankings give schools enormous incentives to raise and spend money --increasing tuition fees in the process.
My student Bob Arnold reminded me of a great study that I have not promoted in this space, namely the College Rankings Reformed piece done for the Education Sector (at http://www.educationsector.org) last fall. Written by Kevin Carey, the study calls for putting a good deal of emphasis (35 percent in the rankings) on the National Survey of Student Engagement (NSSE) and the Collegiate Learning Assessment. These instruments deal us what students do in college, and whether their ability to think critically has improved (assuming the test is administered at the beginning and end of the college career). He proposes putting a 30 percent weight on post-graduate achievement and satisfaction --job earnings, alumni satisfaction with their lives, their job placement, etc. And he proposes a much higher weight on the actual vs. predicted graduation rate variable. I think Carey's proposal is excellent and some variant of it should be adopted. The Spellings Commission did not explicitly endorse this proposal, but it is certainly consistent with its recommendations of more outcomes-based assessment.
Persons with a conservative or libertarian bent are loathed to require colleges to meet a new federal mandate, and many in the liberal academic establishment do not want to report any more information than at present, because, frankly, some of the information is embarrassing. Yet colleges are up to their eyeballs in governmental involvement already, and a huge number of schools (over 1,000) already use the NSSE test and hundreds are using the CLA. Requiring schools wishing to have federal funds to use and report results on these tests would go a huge way toward building alternative rankings. The Social Security Administration has earnings histories on most American workers. The National Institutes of the Deaf have already reported how their students (collectively) do in terms of earnings. Minor changes in the law would allow (require?) the Social Security Administration to report average earnings for each class of graduates, and to relate that to some national average. A lot can be done to get an outcomes-based assessment system without a huge amount of interference in the ways colleges work. If a school like Hillsdale College wants to opt out because it takes no federal money, so be it, but if you want the federal dollars, you should have to show how those dollars serve students.
Other testing devices exist. I love the Intercollegiate Studies Institute (ISI) work on testing students on knowledge of civic institutions and history at the beginning and ending of their college careers. Some expansion and modification of that would be another good testing instrument --measuring actual knowledge, not just thinking skills and student engagement.
For a modest sum of money, we could have a rating system that enormously reduces incentives for colleges to raise costs -- and also incentives to pay more attention to the undergraduate instruction dimension which is still the bread and butter of most institutions of higher education in the United States.
US News & World Report, in the best capitalistic tradition, has made some money while serving an important human need: an evaluation of the quality of colleges and universities. The USN&WR rankings are the closet thing to a bottom line in higher education today.
Yet the rankings are very badly flawed in that they are mostly input and opinion based, not based on outcomes and results. Variables relating to the revenues and spending of resources account for about 30 percent of the rankings, and "peer assessment" for another one-fourth. Denying student’s access, thus increasing exclusivity is worth at least 15 percent. The one reasonable component is the school's graduation rate compared with the predicted graduation rate given the resources (including student quality) available to it --but it counts for only 5 percent --less than average faculty salaries. Thus the rankings give schools enormous incentives to raise and spend money --increasing tuition fees in the process.
My student Bob Arnold reminded me of a great study that I have not promoted in this space, namely the College Rankings Reformed piece done for the Education Sector (at http://www.educationsector.org) last fall. Written by Kevin Carey, the study calls for putting a good deal of emphasis (35 percent in the rankings) on the National Survey of Student Engagement (NSSE) and the Collegiate Learning Assessment. These instruments deal us what students do in college, and whether their ability to think critically has improved (assuming the test is administered at the beginning and end of the college career). He proposes putting a 30 percent weight on post-graduate achievement and satisfaction --job earnings, alumni satisfaction with their lives, their job placement, etc. And he proposes a much higher weight on the actual vs. predicted graduation rate variable. I think Carey's proposal is excellent and some variant of it should be adopted. The Spellings Commission did not explicitly endorse this proposal, but it is certainly consistent with its recommendations of more outcomes-based assessment.
Persons with a conservative or libertarian bent are loathed to require colleges to meet a new federal mandate, and many in the liberal academic establishment do not want to report any more information than at present, because, frankly, some of the information is embarrassing. Yet colleges are up to their eyeballs in governmental involvement already, and a huge number of schools (over 1,000) already use the NSSE test and hundreds are using the CLA. Requiring schools wishing to have federal funds to use and report results on these tests would go a huge way toward building alternative rankings. The Social Security Administration has earnings histories on most American workers. The National Institutes of the Deaf have already reported how their students (collectively) do in terms of earnings. Minor changes in the law would allow (require?) the Social Security Administration to report average earnings for each class of graduates, and to relate that to some national average. A lot can be done to get an outcomes-based assessment system without a huge amount of interference in the ways colleges work. If a school like Hillsdale College wants to opt out because it takes no federal money, so be it, but if you want the federal dollars, you should have to show how those dollars serve students.
Other testing devices exist. I love the Intercollegiate Studies Institute (ISI) work on testing students on knowledge of civic institutions and history at the beginning and ending of their college careers. Some expansion and modification of that would be another good testing instrument --measuring actual knowledge, not just thinking skills and student engagement.
For a modest sum of money, we could have a rating system that enormously reduces incentives for colleges to raise costs -- and also incentives to pay more attention to the undergraduate instruction dimension which is still the bread and butter of most institutions of higher education in the United States.
Thursday, May 24, 2007
The College Credentialing Fraud Revisted
By Richard Vedder
A growing number of people are asking, "Why go to college?" The costs are soaring. The one thing that leads people to go, of course, is that college graduates earn by far bigger bucks than non-graduates. Nonetheless, we have James Altucher of the Financial Times saying college is a waste of time. We learn that the Dean of Admissions at MIT was fired because she lied about being a college grad --an embarrassment, showing how a leading administer of a top school could function beautifully for decades without a college diploma. On the left, Barbara Ehrenrich asks "What good are educational credentials anyway?"
Another very accomplished and bright non-college graduate, James Taranto, one of my very favorite Wall Street Journal journalists, has taken up a cause we have long championed: the unintended consequences of the 1971 Duke v. Griggs Power decision in giving colleges more clout as a credentialing force, by forbidding alternative ways of testing potential employees to determine future success.
With the help of Fred Fransen, who distributes grants for a small number of prominent philanthropists, my colleague Bryan O'Keefe is doing a more extensive investigation of the Griggs decision, and, if the findings confirm my suspicions, we plan to carry the research even one step further. We have a situation where employers cannot test for aptitude, but colleges can -- and they use this advantage to make a college-education a more mandatory requirement for good employment, even when the skills learned in college are tangential to the needs of the job.
A growing number of people are asking, "Why go to college?" The costs are soaring. The one thing that leads people to go, of course, is that college graduates earn by far bigger bucks than non-graduates. Nonetheless, we have James Altucher of the Financial Times saying college is a waste of time. We learn that the Dean of Admissions at MIT was fired because she lied about being a college grad --an embarrassment, showing how a leading administer of a top school could function beautifully for decades without a college diploma. On the left, Barbara Ehrenrich asks "What good are educational credentials anyway?"
Another very accomplished and bright non-college graduate, James Taranto, one of my very favorite Wall Street Journal journalists, has taken up a cause we have long championed: the unintended consequences of the 1971 Duke v. Griggs Power decision in giving colleges more clout as a credentialing force, by forbidding alternative ways of testing potential employees to determine future success.
With the help of Fred Fransen, who distributes grants for a small number of prominent philanthropists, my colleague Bryan O'Keefe is doing a more extensive investigation of the Griggs decision, and, if the findings confirm my suspicions, we plan to carry the research even one step further. We have a situation where employers cannot test for aptitude, but colleges can -- and they use this advantage to make a college-education a more mandatory requirement for good employment, even when the skills learned in college are tangential to the needs of the job.
Tuesday, May 22, 2007
Dismissing Academic Personnel; 3 Case Studies
By Richard Vedder
I have been finding myself contemplating the question of when is it appropriate to get rid of academic personnel who somehow do not meet minimum standards. We know that tenure raises the costs of dismissing some faculty, and the rise in the importance of non-tenure faculty in modern times is in part an attempt to reduce these costs. Keeping poor tenured professors on both lowers the quality of the instructional mission and reduces the ability of institutions to reallocate academic resources as needed in a dynamic society.
Beyond that, however, three incidents recently have focused my attention on this issue. As mentioned earlier, Texas entrepreneur Jeff Sandefer runs a no-tenure business school, the Acton School of Business, that adopts one of Jack Welch's old ideas from General Electric: it drops, at least temporarily, from the faculty that professor each year that least measures up to standards, which I gather is largely determined by student evaluations. While arguably somewhat brutal, it no doubt stimulates faculty to be engaged, enthusiastic, prepared, relevant --all good things. On balance, I think it is a good idea.
Second, there is of course the student loan scandal, and the ousting of a significant number of directors of financial aid from major universities. In this case, ethical transgressions are involved, and it seems to me that the moves being made are fitting and proper, although I have no first hand knowledge of the individual circumstances. To be sure, if I had my way, there would be largely a divorcing of the act of education from the act of financing that education, and financial aid officers would lose much of their clout --and the ability to engage in nefarious activities to enrich themselves.
Along the same lines, I wonder about admission offices. At selective institutions, parents are willing to fork over big bucks to get their kids in, and occasionally the schools take "gifts" in return for preferential admissions. How often, however, do admission officers admit kids in return for some form of personal financial consideration? Often it is difficult to do, since committees make decisions, but given the stakes involved, I wouldn't be surprised if there are not some scandals lurking out there, particularly when schools use subjective criteria to differentiate between many near equally qualified students. I am not suggesting most admission directors are crooks, but rather that when non-market criteria are used, the temptations to stray from sound ethical principles increase, with predictable results owing to the frailties of human nature.
My third example is at my own university. By many objective criteria, Ohio University is floundering --endowments are stagnant, the quality of incoming students is not rising like at its competitors, and the retention rate of students is falling. The students (!!) in a campus-wide referendum overwhelmingly (78 percent) voted no confidence in the President, and in two votes not yet announced it appears the faculty will do likewise. Yet the trustees of the university have announced "full support for the president." This gets into issues of governance, the role of trustees, and the whole issue of "who owns the university?" If the trustees do not bend, the faculty probably will vote to unionize, trying to force greater consideration of its views. As an economist, I would simply spend a million dollars or so to induce the leadership of the institution to step down, but for some reason the trustees find that unacceptable. I find the whole thing sad and perplexing. While universities may be too important to be left to the whims of faculty opinion, overwhelming votes of no confidence amidst objective signs of big troubles is, to me at least, a sign that changes are needed. But the "optimal rate of dismissal" for incompetence or unethical behavior is hard to define with precision --it is more of an art than a science.
I have been finding myself contemplating the question of when is it appropriate to get rid of academic personnel who somehow do not meet minimum standards. We know that tenure raises the costs of dismissing some faculty, and the rise in the importance of non-tenure faculty in modern times is in part an attempt to reduce these costs. Keeping poor tenured professors on both lowers the quality of the instructional mission and reduces the ability of institutions to reallocate academic resources as needed in a dynamic society.
Beyond that, however, three incidents recently have focused my attention on this issue. As mentioned earlier, Texas entrepreneur Jeff Sandefer runs a no-tenure business school, the Acton School of Business, that adopts one of Jack Welch's old ideas from General Electric: it drops, at least temporarily, from the faculty that professor each year that least measures up to standards, which I gather is largely determined by student evaluations. While arguably somewhat brutal, it no doubt stimulates faculty to be engaged, enthusiastic, prepared, relevant --all good things. On balance, I think it is a good idea.
Second, there is of course the student loan scandal, and the ousting of a significant number of directors of financial aid from major universities. In this case, ethical transgressions are involved, and it seems to me that the moves being made are fitting and proper, although I have no first hand knowledge of the individual circumstances. To be sure, if I had my way, there would be largely a divorcing of the act of education from the act of financing that education, and financial aid officers would lose much of their clout --and the ability to engage in nefarious activities to enrich themselves.
Along the same lines, I wonder about admission offices. At selective institutions, parents are willing to fork over big bucks to get their kids in, and occasionally the schools take "gifts" in return for preferential admissions. How often, however, do admission officers admit kids in return for some form of personal financial consideration? Often it is difficult to do, since committees make decisions, but given the stakes involved, I wouldn't be surprised if there are not some scandals lurking out there, particularly when schools use subjective criteria to differentiate between many near equally qualified students. I am not suggesting most admission directors are crooks, but rather that when non-market criteria are used, the temptations to stray from sound ethical principles increase, with predictable results owing to the frailties of human nature.
My third example is at my own university. By many objective criteria, Ohio University is floundering --endowments are stagnant, the quality of incoming students is not rising like at its competitors, and the retention rate of students is falling. The students (!!) in a campus-wide referendum overwhelmingly (78 percent) voted no confidence in the President, and in two votes not yet announced it appears the faculty will do likewise. Yet the trustees of the university have announced "full support for the president." This gets into issues of governance, the role of trustees, and the whole issue of "who owns the university?" If the trustees do not bend, the faculty probably will vote to unionize, trying to force greater consideration of its views. As an economist, I would simply spend a million dollars or so to induce the leadership of the institution to step down, but for some reason the trustees find that unacceptable. I find the whole thing sad and perplexing. While universities may be too important to be left to the whims of faculty opinion, overwhelming votes of no confidence amidst objective signs of big troubles is, to me at least, a sign that changes are needed. But the "optimal rate of dismissal" for incompetence or unethical behavior is hard to define with precision --it is more of an art than a science.
Monday, May 14, 2007
Do Adjuncts/Contingent Faculty Lower Quality?
By Richard Vedder
At a conference my sidekick Bryan and I attend a few weeks ago in New York, I kept hearing that part-time "adjunct" faculty do a poorer job than full-time tenured faculty, largely because of a lack of institutional commitment, and, perhaps, because of inferior qualifications.
I have had one of the Whiz Kids, Matt Denhart, investigating this issue. It is difficult to evaluate. We lack good measures of student performance. The institutional data on adjunct faculty is imperfect. However, we can see to what extent increased concentration of adjunct faculty leads to higher student attrition. While our research is not complete, and further testing is possible, we do not obtain statistically significant differences in attrition rates because of variations in the proportion of part-time faculty on the staff (a pretty good proxy for adjunct status).
Even if adjunct faculty presence led to slightly higher attrition rates, the question would arise: given the vastly lower cost of hiring adjuncts, on cost-benefit grounds does it make sense to hire lots of expensive full-time faculty with lifetime employment contracts? The answer, of course, is no, but we persist in maintaining the current system with its high costs in order to provide economic rents to those fortunate enough to have tenured positions.
To be sure, many tenured faculty do significant amounts of research as well, and some provide good advising services to students. But it is highly dubious that any objective appraisal of tenured faculty positions would find that the costs of these positions are low in a quality and output adjusted sense relative to the alternative, adjunct faculty.
At a conference my sidekick Bryan and I attend a few weeks ago in New York, I kept hearing that part-time "adjunct" faculty do a poorer job than full-time tenured faculty, largely because of a lack of institutional commitment, and, perhaps, because of inferior qualifications.
I have had one of the Whiz Kids, Matt Denhart, investigating this issue. It is difficult to evaluate. We lack good measures of student performance. The institutional data on adjunct faculty is imperfect. However, we can see to what extent increased concentration of adjunct faculty leads to higher student attrition. While our research is not complete, and further testing is possible, we do not obtain statistically significant differences in attrition rates because of variations in the proportion of part-time faculty on the staff (a pretty good proxy for adjunct status).
Even if adjunct faculty presence led to slightly higher attrition rates, the question would arise: given the vastly lower cost of hiring adjuncts, on cost-benefit grounds does it make sense to hire lots of expensive full-time faculty with lifetime employment contracts? The answer, of course, is no, but we persist in maintaining the current system with its high costs in order to provide economic rents to those fortunate enough to have tenured positions.
To be sure, many tenured faculty do significant amounts of research as well, and some provide good advising services to students. But it is highly dubious that any objective appraisal of tenured faculty positions would find that the costs of these positions are low in a quality and output adjusted sense relative to the alternative, adjunct faculty.
Sunday, May 13, 2007
Is College A Waste of Time? The Altucher Hypothesis
By Richard Vedder
A few weeks ago, James Altucher of the Financial Times caused a bit of a stir when he declared college is a waste of time. (I would add, decidedly, and money). Gary Becker and other apologists for the higher education establishment rushed to the attack.
One major dimension of the question of the utility of college is: what do students learn? What is the "value added" by obtaining a college degree? Some data suggest that there is some value added, but it is either very small, or is declining markedly over time. The data are sketchy, incomplete, imperfect, precisely because the higher education establishment has fought mightily to prevent such "value added" measures, although there are some signs that some schools are changing their tune a bit, prodded by the Spellings Commission and others.
VALUED ADDED TO LITERACY OF ADULTS The National Assessment of Adult Literacy (NAAL) measures the literacy of adults in three areas: prose literacy, document literacyn, and quantitative understanding. Let us look at the difference between the average scores of college grads compared with high school grads for two years, 2003 and 1992.
Prose Literacy In 1992, college grads scored 57 points higher on the NAAL test of prose literacy than high school grads; by 2003, the differential narrowed by 5 points (9%) to 52 points.
Document Literacy
In 1992, the college/high school differential was 57 points; by 2003, it had fallen relatively sharply, 20 percent, to 46 points.
Quantitative Literacy
In 1992, the differential was 57 points; 11 years later, it was 5 percent smaller, 54 points.
In 2003, college grads scored better than high school grads on all measures of literacy, but the differential, which can be considered the "value added" by a college education, fell, a great deal in the case of document literacy.
VALUED ADDED IN COLLEGE IN KNOWLEDGE OF HISTORY AND AMERICAN INSTITUTIONS
The Intercollegiate Studies Institute administered a 60 question test to freshman and seniors at 50 U.S. institutions. The average score of seniors on the test was 53.2 percent, only slightly higher than the 51.7 percent average for freshman. At over 30 percent of the schools, knowledge for seniors was lower than for freshman. Among the schools with negative gains were Yale, Cornell, Duke, California at Berkeley, and Williams College. To be sure, these are imperfect tests and can be criticized on a number of methodological grounds. Nonetheless, the evidence suggests that there may not be not an awful lot of learning and acquisition of skills going on in college, and in fact, they may be in decline. I am the first to admit far better and more sophisticated tests are needed. But, for the moment, I see a good deal of evidence that says "Altucher may be right." College's one advantage -- its certification of skills is still valued by employers. When employers lose confidence in that, the gig is over, the demand for college will fall, and, out of necessity, colleges will enter into real reform.
While the evidence is that learning may be deteriorating, faculty evaluations of students have been rising -- grade inflation. Students may be learning less, but told, increasingly, that they are doing fine. This is the Revolution of Declining Expectations in higher education.
The Tax Status of University Contributions and Endowments
By Richard Vedder
My sidekick Bryan O'Keefe and I met with staffers of the Senate Finance Committee the other day. The most interesting thing about the meeting is that key staffers were there from both the Democratic and Republican side. We talked about many things, but one of them was endowments.
Lynne Munson, a former high level government official, has been chatting with me about endowments, and I think she is on to something. Colleges are typically very secretive about spending from endowments. While they provide information on the aggregate size of the endowments, many don't want you to know what percent of the endowment is spent. Since the corpus of the endowment arose in part because of favorable tax treatment, and because income from the endowment is not taxed, it is possible that a college endowment of, say $1 billion, brings in $50 million annually in dividends and capital gains income, but only spends $20 million of that endowment. Huge sums of money are being tax sheltered, but relatively little is going to financially support the cause for which tax-free funds were provided.
To deal with this problem, many years ago the Feds imposed a 5 percent rule on foundations – that they had to spend five percent of their endowment annually if they wished to avoid taxes. For some reason, universities were excluded from this requirement. Why? Why are universities treated differently than other charitable organizations? Using the 5 percent rule, endowment income per student at some schools is now over $75,000 a year. Are they spending that much? If not, why are we allowing universities to augment their huge endowments TAX FREE by new donations? If they are spending that much, why are they charging tuition at all, given the fact that they raise huge additional research funds and annual private charitable contributions for current expenses. In other words, the Harvard-Yale-Princeton type school has over $100,000 annually per student coming in independent of massive funds for research activity. Since high quality liberal arts colleges typically spend less than that amount per student, why is tuition charged at all? Or is all this tax-exempt money funding amenities at these schools of a non-educational nature, or lining the pockets of the staff via very high levels of compensation?
I don't like taxes, and think they are inimical to growth. But I don't like giving some people special tax status relative to others, particularly when the tax privileges are of dubious social value. Cutting tax exemptions to some of the uber rich schools and giving lower tax rates to all would probably be growth-enhancing. In any case, we need to learn more about how endowment incomes are used.
Friday, May 11, 2007
The Student Loan Scandal: A Disaster or an Opportunity?
By Richard Vedder
The more I think about it, I think the student loan scandal is a positive development for higher education, with one huge caveat. Universities, their financial aid officers and/or lenders have been exposed in sweetheart deals, for taking or giving overt bribes, and for misinforming consumers. While that is bad, it reveals to the public that universities are not saintly institutions, free from sin and human frailties. That is good. And it is good that people are increasingly critical about the providers of higher education services. The universities have largely been viewed as sacrosanct, not subject to criticism, and that has deterred meaningful reform.
When billions of dollars of loan money is sloshing around, it is inevitable that individuals will try to get their hands on some of it --by legal or illegal means. When student financial aid offices have full information on the economic status of the customer (via FAFSA financial disclosure forms), as well as control or influence over the funds available to meet student needs, they have the means to make decisions often not in the student's best interest.
The House of Representatives overwhelmingly passed a bill that tries to deal with the problems of kickbacks to colleges and college officials from loan providers. The Senate will approve it also. It is an understandable response to a problem, and might do some good. But I am not sure the best solution is government regulation. A better solution is to restructure financial aid. Perhaps the provision of education services needs to be separated from the financing of them. Maybe the federal government would be best served providing cash assistance to the poor for whom college access is truly problematic for financial reasons, done by giving students (not institutions) vouchers good to cover part (but not all) of tuition charges. Call it an expansion and modification of the Pell Grant program if that is what sells it. Beyond that, the government should exit the student financial assistance business, leaving it up to individuals, charitable organizations, private lenders, and, perhaps, state governments to fill the gap. Financial aid offices would largely disappear, except to dispense institutional provided aid (tuition discounts) and also lists of private providers of loans. The current loan system, as constituted, is a key factor in the tuition fee explosion, as colleges can charge whatever the traffic will bear, and the customers simply borrow whatever it takes to pay the bills. If you want to slow the tuition fee rise, you need to reduce the rate of growth of federal subsidized assistance.
The more I think about it, I think the student loan scandal is a positive development for higher education, with one huge caveat. Universities, their financial aid officers and/or lenders have been exposed in sweetheart deals, for taking or giving overt bribes, and for misinforming consumers. While that is bad, it reveals to the public that universities are not saintly institutions, free from sin and human frailties. That is good. And it is good that people are increasingly critical about the providers of higher education services. The universities have largely been viewed as sacrosanct, not subject to criticism, and that has deterred meaningful reform.
When billions of dollars of loan money is sloshing around, it is inevitable that individuals will try to get their hands on some of it --by legal or illegal means. When student financial aid offices have full information on the economic status of the customer (via FAFSA financial disclosure forms), as well as control or influence over the funds available to meet student needs, they have the means to make decisions often not in the student's best interest.
The House of Representatives overwhelmingly passed a bill that tries to deal with the problems of kickbacks to colleges and college officials from loan providers. The Senate will approve it also. It is an understandable response to a problem, and might do some good. But I am not sure the best solution is government regulation. A better solution is to restructure financial aid. Perhaps the provision of education services needs to be separated from the financing of them. Maybe the federal government would be best served providing cash assistance to the poor for whom college access is truly problematic for financial reasons, done by giving students (not institutions) vouchers good to cover part (but not all) of tuition charges. Call it an expansion and modification of the Pell Grant program if that is what sells it. Beyond that, the government should exit the student financial assistance business, leaving it up to individuals, charitable organizations, private lenders, and, perhaps, state governments to fill the gap. Financial aid offices would largely disappear, except to dispense institutional provided aid (tuition discounts) and also lists of private providers of loans. The current loan system, as constituted, is a key factor in the tuition fee explosion, as colleges can charge whatever the traffic will bear, and the customers simply borrow whatever it takes to pay the bills. If you want to slow the tuition fee rise, you need to reduce the rate of growth of federal subsidized assistance.
Monday, May 07, 2007
Over or Under Investment in Higher Education?
By Richard Vedder
I seldom agree with Tom Mortenson's interpretation of data, but I always admire the way he gathers and reports it, with unfailing accuracy. The last issue of Postsecondary Education Opportunity makes this point once again.
Tom shows that bachelor's degree attainment among young adults has risen sharply in other industrial democracies relative to the U.S. Looking at 25 to 29 year old adults, 37 percent of them in Norway have degrees, compared with 30 percent in the U.S. Korea, with substantially lower per capita income, has a slightly higher proportion of young adults with college degrees than the U.S.
This could be interpreted to say "the U.S. is falling behind its competitors, and needs to invest more in higher education." Yet the issue is whether additional college graduates means higher productivity and a decline in non-economic problems (like deaths related to smoking). I am skeptical. Alison Wolf and I have argued that the positive economic growth/university investment relationship is spurious at best. Charles Murray has argued that intelligence trumps formal education every time as an explanation for financial success. Moreover, incremental government subsidies, in the U.S. at least, seldom have much of an impact on actual graduation rates. Remember, a large proportion of those entering college do not finish in a timely fashion.
For example, from 2000 to 2004, France closed one-third of the gap between it and the U.S. in terms of the proportion of the young adult population with bachelor degrees. But this was not a happy period for that nation, and increased "human capital" was not associated with economic vitality. More systematic analysis is needed, but I am not going into panic mode over the relative decline in our leadership with respect to college graduates.
I seldom agree with Tom Mortenson's interpretation of data, but I always admire the way he gathers and reports it, with unfailing accuracy. The last issue of Postsecondary Education Opportunity makes this point once again.
Tom shows that bachelor's degree attainment among young adults has risen sharply in other industrial democracies relative to the U.S. Looking at 25 to 29 year old adults, 37 percent of them in Norway have degrees, compared with 30 percent in the U.S. Korea, with substantially lower per capita income, has a slightly higher proportion of young adults with college degrees than the U.S.
This could be interpreted to say "the U.S. is falling behind its competitors, and needs to invest more in higher education." Yet the issue is whether additional college graduates means higher productivity and a decline in non-economic problems (like deaths related to smoking). I am skeptical. Alison Wolf and I have argued that the positive economic growth/university investment relationship is spurious at best. Charles Murray has argued that intelligence trumps formal education every time as an explanation for financial success. Moreover, incremental government subsidies, in the U.S. at least, seldom have much of an impact on actual graduation rates. Remember, a large proportion of those entering college do not finish in a timely fashion.
For example, from 2000 to 2004, France closed one-third of the gap between it and the U.S. in terms of the proportion of the young adult population with bachelor degrees. But this was not a happy period for that nation, and increased "human capital" was not associated with economic vitality. More systematic analysis is needed, but I am not going into panic mode over the relative decline in our leadership with respect to college graduates.
Should the President Be Fired?
By Richard Vedder
I have often stated "there is no bottom line in higher education." It is very difficult to assess performance when there are few good "metrics" that make objective evaluation possible. Therefore, when people call for the head of a university president, usually it is difficult to reach an unambiguous conclusion about the merits of the case. Did Larry Summers do a good or bad job at Harvard? I suspect some evidence can be gathered on both sides of that issue.
All of this has come home to me in a very personal way, big time recently. I have been disturbed for some time about what appears to be signs of decline at my university, Ohio University. Along with several other of the university's most senior professors (measured primarily by research accomplishment), I wrote a letter calling for changing leadership in my institution, and, at his request, sent a copy to the Chairman of the Board of Trustees. The letter was then sent by the University to the press (!!), and now the school is embroiled in controversy.
In the letter, we noted that retention rates were down, that real per student endowments were faltering relative to peer institutions, and that the quality of incoming students was not rising like it was at our main competitors. All of this can be demonstrated empirically. We also made some more normative judgments about leadership style, handling of campus crises, etc. Our feelings are held by many others, and no less than 4 evaluations or non-confidence votes in the president are being held in the next 10 days, and the majority opinion is that these evaluations will be overwhelmingly negative.
Yet the President has his supporters. And, frankly, some of the critical information that would be useful in evaluating the state of the university under his leadership is simply unavailable. Do students graduate knowing more than when they entered? Are graduates of the university leading fulfilling lives five years after attending the school? Do new graduates feel their education was a good investment? And has the answers regarding any of these questions changed materially over the years the current president has run the institution? Honestly, I don't know the answers to these questions. Nor do the Trustees who hire the leaders of our institutions --they operate with far less information than is desirable. That is another reason why the Spellings Commission calls for more assessment and transparency in university operations is important.
I have often stated "there is no bottom line in higher education." It is very difficult to assess performance when there are few good "metrics" that make objective evaluation possible. Therefore, when people call for the head of a university president, usually it is difficult to reach an unambiguous conclusion about the merits of the case. Did Larry Summers do a good or bad job at Harvard? I suspect some evidence can be gathered on both sides of that issue.
All of this has come home to me in a very personal way, big time recently. I have been disturbed for some time about what appears to be signs of decline at my university, Ohio University. Along with several other of the university's most senior professors (measured primarily by research accomplishment), I wrote a letter calling for changing leadership in my institution, and, at his request, sent a copy to the Chairman of the Board of Trustees. The letter was then sent by the University to the press (!!), and now the school is embroiled in controversy.
In the letter, we noted that retention rates were down, that real per student endowments were faltering relative to peer institutions, and that the quality of incoming students was not rising like it was at our main competitors. All of this can be demonstrated empirically. We also made some more normative judgments about leadership style, handling of campus crises, etc. Our feelings are held by many others, and no less than 4 evaluations or non-confidence votes in the president are being held in the next 10 days, and the majority opinion is that these evaluations will be overwhelmingly negative.
Yet the President has his supporters. And, frankly, some of the critical information that would be useful in evaluating the state of the university under his leadership is simply unavailable. Do students graduate knowing more than when they entered? Are graduates of the university leading fulfilling lives five years after attending the school? Do new graduates feel their education was a good investment? And has the answers regarding any of these questions changed materially over the years the current president has run the institution? Honestly, I don't know the answers to these questions. Nor do the Trustees who hire the leaders of our institutions --they operate with far less information than is desirable. That is another reason why the Spellings Commission calls for more assessment and transparency in university operations is important.
Friday, May 04, 2007
Student Loan Scandal: Alumni Associations Now Involved
By Bryan O’Keefe
Well, newspapers and websites across the country have the latest revelations in the growing student loan scandal this morning. This time the alleged wrong-doers are not the financial aid offices, but, rather, alumni associations. The NY State Attorney General’s office is investigating whether several alumni associations gave Nelnet, a private student loan company in Nebraska, access to its membership and use of their logo in marketing letters in return for money.
There are several dimensions to this latest story, all of which are worth mentioning. First, the Nebraska State Attorney General recently investigated Nelnet for any wrong-doing and found that the company was basically above-board – which means that either the Nebraska AG missed something or the NY AG is making something out of nothing. Time will tell which one is true. Second, on its face, this scandal does not seem quite as bad as the more startling revelations about kickbacks in actual financial aid offices. Let’s be honest here: how many people are actively involved with their alumni associations? How many folks would get a letter in the mail from Nelnet, see that their alumni association logo on the promo letter and then pick Nelnet solely on that basis? Maybe I am underestimating the influence of alumni associations, based partly on my own experience, but I just can’t see this happening too often. What made the financial aid office scandal so terrible was that many students do take the advice of university financial aid administrators – I am not quite so sure that alumni association folks have the same sway.
That all being said, the issue should still be thoroughly investigated. We need more disclosure in higher education and that goes for alumni associations too. If the alumni associations were actually being paid off to promote Nelnet, then it should have said so somewhere in the Nelnet promotional letter. If that wasn’t being done, then alumni association members need to know about it and the NY AG’s office should pursue appropriate penalties. At this point, it’s much more a matter of principle than practical effect, but principles are important too.
Also, one small note – a reader of ours criticized my recent blog posting on the Hula Hut Happy Hour and said that we were not taking the student loan scandal seriously enough. I beg to differ. The student loan scandal is a huge deal, perhaps one of the biggest scandals to hit higher education in years (from what I have been told). The Hula Hut Happy Hour was an amusing, over-the-top event, but that should not detract from the seriousness of the charges being leveled against universities and private lenders.
Well, newspapers and websites across the country have the latest revelations in the growing student loan scandal this morning. This time the alleged wrong-doers are not the financial aid offices, but, rather, alumni associations. The NY State Attorney General’s office is investigating whether several alumni associations gave Nelnet, a private student loan company in Nebraska, access to its membership and use of their logo in marketing letters in return for money.
There are several dimensions to this latest story, all of which are worth mentioning. First, the Nebraska State Attorney General recently investigated Nelnet for any wrong-doing and found that the company was basically above-board – which means that either the Nebraska AG missed something or the NY AG is making something out of nothing. Time will tell which one is true. Second, on its face, this scandal does not seem quite as bad as the more startling revelations about kickbacks in actual financial aid offices. Let’s be honest here: how many people are actively involved with their alumni associations? How many folks would get a letter in the mail from Nelnet, see that their alumni association logo on the promo letter and then pick Nelnet solely on that basis? Maybe I am underestimating the influence of alumni associations, based partly on my own experience, but I just can’t see this happening too often. What made the financial aid office scandal so terrible was that many students do take the advice of university financial aid administrators – I am not quite so sure that alumni association folks have the same sway.
That all being said, the issue should still be thoroughly investigated. We need more disclosure in higher education and that goes for alumni associations too. If the alumni associations were actually being paid off to promote Nelnet, then it should have said so somewhere in the Nelnet promotional letter. If that wasn’t being done, then alumni association members need to know about it and the NY AG’s office should pursue appropriate penalties. At this point, it’s much more a matter of principle than practical effect, but principles are important too.
Also, one small note – a reader of ours criticized my recent blog posting on the Hula Hut Happy Hour and said that we were not taking the student loan scandal seriously enough. I beg to differ. The student loan scandal is a huge deal, perhaps one of the biggest scandals to hit higher education in years (from what I have been told). The Hula Hut Happy Hour was an amusing, over-the-top event, but that should not detract from the seriousness of the charges being leveled against universities and private lenders.
Tuesday, May 01, 2007
Hula Hut Happy Hour
By Bryan O'Keefe
No, CCAP is not sponsoring a "Hula Hut Happy Hour" despite how much fun an event like that surely would be. But, as the Wall Street Journal reports this morning, a "Hula Hut Happy Hour" was on the agenda of the Office of Student Financial Services at the University of Texas at Austin. The happy hour was, of course, sponsored by a private lender, and is now another chapter in the scandal over how such lenders influenced schools to gain a spot on their preferred lenders list.
What makes the most recent story outrageous isn't just the eccentric name of the happy hour, but rather that the financial aid office would actually rank lenders, "based on the number of lunches, breakfasts and extracurricular functions for entire OSFS staff. Lenders on the list were graded on the quality of their culinary largesse by metrics ranging from "very good" to "poor.""
This type of stuff is simply unfathomable -- an actual ranking system based on who gives out the best freebies? Students at UTexas at Austin should be up in arms over this (I imagine that they are.)
Meanwhile, the Washington Post has another salvo laying blame for the mess at the feet of the Department of Education, claiming that the Department was lax in its oversight role and that many Department officials have ties to the private student loan industry. Some folks quoted in the story however claim that proposed rules that would have clamped down on the private loan industry probably wouldn't have made much of a difference because lenders and schools would have found loopholes.
There is probably some truth to both sides of this. In hindsight, the Department should have probably regulated all of this activity better. But government regulation -- as is usually the case -- would probably not have stopped it completely. At some point, the lenders and schools themselves need to be responsible to the people they are supposed to be serving: the students.
I'd also note that the Post story is another blame-game type story. I don't doubt for one second that we need to get to the bottom of this, but, what about more comprehensive reform? Why can't we take this scandal and use it to propose something different from our current system?
No, CCAP is not sponsoring a "Hula Hut Happy Hour" despite how much fun an event like that surely would be. But, as the Wall Street Journal reports this morning, a "Hula Hut Happy Hour" was on the agenda of the Office of Student Financial Services at the University of Texas at Austin. The happy hour was, of course, sponsored by a private lender, and is now another chapter in the scandal over how such lenders influenced schools to gain a spot on their preferred lenders list.
What makes the most recent story outrageous isn't just the eccentric name of the happy hour, but rather that the financial aid office would actually rank lenders, "based on the number of lunches, breakfasts and extracurricular functions for entire OSFS staff. Lenders on the list were graded on the quality of their culinary largesse by metrics ranging from "very good" to "poor.""
This type of stuff is simply unfathomable -- an actual ranking system based on who gives out the best freebies? Students at UTexas at Austin should be up in arms over this (I imagine that they are.)
Meanwhile, the Washington Post has another salvo laying blame for the mess at the feet of the Department of Education, claiming that the Department was lax in its oversight role and that many Department officials have ties to the private student loan industry. Some folks quoted in the story however claim that proposed rules that would have clamped down on the private loan industry probably wouldn't have made much of a difference because lenders and schools would have found loopholes.
There is probably some truth to both sides of this. In hindsight, the Department should have probably regulated all of this activity better. But government regulation -- as is usually the case -- would probably not have stopped it completely. At some point, the lenders and schools themselves need to be responsible to the people they are supposed to be serving: the students.
I'd also note that the Post story is another blame-game type story. I don't doubt for one second that we need to get to the bottom of this, but, what about more comprehensive reform? Why can't we take this scandal and use it to propose something different from our current system?
The Accreditation War of 2007: The Anne Neal Appointment
By Richard Vedder
I am, by and large, on the side of Margaret Spellings and the Department of Education in the great war currently being fought in Washington over accreditation. The current system stinks, and accreditation is not being used to prod schools to demonstrate students are learning something. I do not like a lot of federal intrusion into the affairs of universities, and, indeed, want the feds to get out of the student loan business completely. But pressuring the accreditors to force the colleges to measure and report "value added" during the college experience is a good idea.
The appointment of Anne Neal to NACIQI (the "National Advisory Committee on Institutional Quality and Integrity) is the latest sign the Administration means business in trying to implement the Spellings Commission recommendations. Anne is a dear friend and ally, one that CCAP often works with. Ironically, I was the one who talked Charles Miller into letting her testify before the Commission. Anne is a believer in accountability, in measuring progress, and in having students be familiar with a series of general education courses including basics like American history. As head of ACTA --the Association of College Trustees and Alumni -- Anne has been indefatigable in her defense of teaching the corpus of knowledge that binds us together as a people, as well as urging trustees and alumni to be more assertive in university affairs. She also shares my opposition to grade inflation, and might push for accrediting agencies to demand grade distribution data from colleges, and to give lower marks to schools that show no interest in differentiating materially between the good and the bad, the excellent and the fair. Her appointment will drive the Higher Ed establishment crazy -- which is precisely the reason she belongs on NACIQI. The establishment has viewed accreditation as a minor annoyance, not an important instrument in assuring some quality is maintained.
Anne is bright (Harvard Law grad), opinionated, politically savvy (her husband is a congressman) and principled. All good qualifications for being on NACIQI. I see the hand of Vickie Schray, Charles Miller and Margaret Spellings in this appointment, and three cheers to all of them. It shows that they can appoint someone good outside the state of Texas.
I am, by and large, on the side of Margaret Spellings and the Department of Education in the great war currently being fought in Washington over accreditation. The current system stinks, and accreditation is not being used to prod schools to demonstrate students are learning something. I do not like a lot of federal intrusion into the affairs of universities, and, indeed, want the feds to get out of the student loan business completely. But pressuring the accreditors to force the colleges to measure and report "value added" during the college experience is a good idea.
The appointment of Anne Neal to NACIQI (the "National Advisory Committee on Institutional Quality and Integrity) is the latest sign the Administration means business in trying to implement the Spellings Commission recommendations. Anne is a dear friend and ally, one that CCAP often works with. Ironically, I was the one who talked Charles Miller into letting her testify before the Commission. Anne is a believer in accountability, in measuring progress, and in having students be familiar with a series of general education courses including basics like American history. As head of ACTA --the Association of College Trustees and Alumni -- Anne has been indefatigable in her defense of teaching the corpus of knowledge that binds us together as a people, as well as urging trustees and alumni to be more assertive in university affairs. She also shares my opposition to grade inflation, and might push for accrediting agencies to demand grade distribution data from colleges, and to give lower marks to schools that show no interest in differentiating materially between the good and the bad, the excellent and the fair. Her appointment will drive the Higher Ed establishment crazy -- which is precisely the reason she belongs on NACIQI. The establishment has viewed accreditation as a minor annoyance, not an important instrument in assuring some quality is maintained.
Anne is bright (Harvard Law grad), opinionated, politically savvy (her husband is a congressman) and principled. All good qualifications for being on NACIQI. I see the hand of Vickie Schray, Charles Miller and Margaret Spellings in this appointment, and three cheers to all of them. It shows that they can appoint someone good outside the state of Texas.
What State Legislatures Should Do Now: II
By Richard Vedder
My presentation before the American Legislative Exchange Council (ALEC) Higher Education Committee last weekend went well, and I mentioned some things I was going to tell them in the last blog. But that list of things for legislatures to do was not exhaustive. Additional ideas:
1. Incentizing tuition restraint. I tend to be lukewarm towards tuition caps, a form of price controls. However, when many colleges restrict supply through selective admissions, the shortages that arise from price controls already exist before the caps are in place, and also government already is messing up markets for higher ed in other ways, meaning tuition caps are not as clearly bad as they might otherwise be. One approach that is not a pure tuition cap approach is to tie state assistance to the amount of tuition increase. For example, give a school a 5 percent increase in subsidy payments if it keeps tuition increases to two percent or less, and 3 percent increase for tuition increases between 2 and 4 percent, a 1 percent increase for tuition hikes of 4 to 6 percent, and no subsidy increase for hikes of greater than 6 percent. This gives schools some flexibility, but encourages them to moderate increases. Governor Ted Strickland and the legislature in Ohio are proposing a scaled down version of this approach. More generally, give a 6 percent subsidy increase for schools enacting a tuition freeze, and a 1 percent reduction in subsidy for every one percent of tuition hike above that, and then a one percent reduction in subsidy for hikes greater than 6 percent in tuition (or some variant on that formula).
2. Tie subsidy payments instead to total spending per student (excluding commercial operations and federal government research grants). If total spending rises more than X percent, there is no subsidy increase, but subsidies rise by 1 percent a year for each 1 percent spending per student is held below the threshold amount.
3. Better yet, freeze all subsidy payments to schools, but use incremental funds that would have gone for subsidies for student vouchers (as discussed in the last blog). Allow vouchers to be used only at schools whose sticker price increases less than X percent a year (perhaps 4 percent).
My presentation before the American Legislative Exchange Council (ALEC) Higher Education Committee last weekend went well, and I mentioned some things I was going to tell them in the last blog. But that list of things for legislatures to do was not exhaustive. Additional ideas:
1. Incentizing tuition restraint. I tend to be lukewarm towards tuition caps, a form of price controls. However, when many colleges restrict supply through selective admissions, the shortages that arise from price controls already exist before the caps are in place, and also government already is messing up markets for higher ed in other ways, meaning tuition caps are not as clearly bad as they might otherwise be. One approach that is not a pure tuition cap approach is to tie state assistance to the amount of tuition increase. For example, give a school a 5 percent increase in subsidy payments if it keeps tuition increases to two percent or less, and 3 percent increase for tuition increases between 2 and 4 percent, a 1 percent increase for tuition hikes of 4 to 6 percent, and no subsidy increase for hikes of greater than 6 percent. This gives schools some flexibility, but encourages them to moderate increases. Governor Ted Strickland and the legislature in Ohio are proposing a scaled down version of this approach. More generally, give a 6 percent subsidy increase for schools enacting a tuition freeze, and a 1 percent reduction in subsidy for every one percent of tuition hike above that, and then a one percent reduction in subsidy for hikes greater than 6 percent in tuition (or some variant on that formula).
2. Tie subsidy payments instead to total spending per student (excluding commercial operations and federal government research grants). If total spending rises more than X percent, there is no subsidy increase, but subsidies rise by 1 percent a year for each 1 percent spending per student is held below the threshold amount.
3. Better yet, freeze all subsidy payments to schools, but use incremental funds that would have gone for subsidies for student vouchers (as discussed in the last blog). Allow vouchers to be used only at schools whose sticker price increases less than X percent a year (perhaps 4 percent).
Saturday, April 28, 2007
What State Legislatures Should Do Now
By Richard Vedder
I am attending the spring meeting in Hilton Head, South Carolina, of the American Legislative Exchange Council, a group of state legislators. I am about ready to speak to some of them (Saturday morning). I am going to recommend a few things they can do NOW to improve their colleges and universities in a manner that will cost virtually nothing.
1. Following up on the Spellings Commission, require all state schools within the state to administer a standardized test agreed to amongst the schools, such as the Collegiate Learning Assessment, a specially designed test made by ACT, the College Board, etc., and perhaps, also, the National Survey of Student Engagement. Give the test at the beginning of the freshman and the end of the senior year.
2. Report results of this test along with other data on a single web site for all state institutions. Other information to be incluuded would be 4,5,6 year graduation rates (retention rates), the gross tuition fee and the average amount of student discounting from scholarships, the campus crime rates for various categories of felonies; and, in an uniform fashion for each school, the percent of the total budget (less comercial enterprises such as hospitals or dorms) that goes for instruction, research, student services, administration, intercollegiate athletics, etc. Actually, I would encourage an even longer list than given above.
3. Separately, pass legislation that prohibits state university employees or the institutions from accepting any gift, including scholarship aid, or other monetary payment from any private lender to students of that institution. Prohibit institutional endorsement of private lenders in any form. Generally, divorce the act of educating from the act of financing that education.
4. Move away from a school-based to student-based funding of higher education; voucherize it, giving bigger vouchers to students who are poor and do well, smaller ones to the more affluent and who perform less.
For legislators wishing to promote such legislation, CCAP would be glad to help you. Give us a call at 202-376=7831. Talk to Bryan O'Keefe, who can then get you in contact with me.
I am attending the spring meeting in Hilton Head, South Carolina, of the American Legislative Exchange Council, a group of state legislators. I am about ready to speak to some of them (Saturday morning). I am going to recommend a few things they can do NOW to improve their colleges and universities in a manner that will cost virtually nothing.
1. Following up on the Spellings Commission, require all state schools within the state to administer a standardized test agreed to amongst the schools, such as the Collegiate Learning Assessment, a specially designed test made by ACT, the College Board, etc., and perhaps, also, the National Survey of Student Engagement. Give the test at the beginning of the freshman and the end of the senior year.
2. Report results of this test along with other data on a single web site for all state institutions. Other information to be incluuded would be 4,5,6 year graduation rates (retention rates), the gross tuition fee and the average amount of student discounting from scholarships, the campus crime rates for various categories of felonies; and, in an uniform fashion for each school, the percent of the total budget (less comercial enterprises such as hospitals or dorms) that goes for instruction, research, student services, administration, intercollegiate athletics, etc. Actually, I would encourage an even longer list than given above.
3. Separately, pass legislation that prohibits state university employees or the institutions from accepting any gift, including scholarship aid, or other monetary payment from any private lender to students of that institution. Prohibit institutional endorsement of private lenders in any form. Generally, divorce the act of educating from the act of financing that education.
4. Move away from a school-based to student-based funding of higher education; voucherize it, giving bigger vouchers to students who are poor and do well, smaller ones to the more affluent and who perform less.
For legislators wishing to promote such legislation, CCAP would be glad to help you. Give us a call at 202-376=7831. Talk to Bryan O'Keefe, who can then get you in contact with me.
Friday, April 27, 2007
Incentivizing Excellence
By Richard Vedder
Universities like to think they are superior to their K-12 brethren in the sense that success is generally rewarded by promotions, merit pay increases, nicer offices, etc. A good K-12 teacher is treated the same as a poor one in most of public education. That is different in higher ed. Consumers of higher ed have more choice, and have to pay something for the services consumed, imparting a bit of market discipline, unlike with our public school monopolies. In large part for these reasons, we have mediocre primary and secondary education by international standards, but a decent, respectable (some would say premier) higher education system. I wrote a longer piece on that a few years ago for the CATO Journal.
Yet university costs are rising and productivity is likely falling. One part of the solution is a measurement/reporting issue --finding new metrics to measure institutional performance, and then publicizing those measures to the public. That is at the heart of a current controversy over rule-making regarding accreditation organizations going on in Washington. This was a key issue before the Spellings Commission.
Yet the second part of the solution is seldom discussed --increasing the incentives for excellence in performance and ingenuity in cost reduction. Higher ed will not change if the staff refuses to cooperate, and the "rules of the game" with respect to promotion, tenure, salary increases, etc., needs to change. People need to be rewarded more on performance.
One metric is moderately easy to measure --research reputation. Partly for that reason, faculty advancement depends mainly on publications, never mind the fact that no one is doing cost-benefit analysis on the contributions of that research to society. Has the incremental publication brought about by the de-emphasis in teaching in modern times also brought about improvements in incomes, outputs, life expectancy, and human happiness? Do people migrate into areas of high research intensity because of the positive spillover effects of that research activity on the quality of life?
At the administrative level, do we reward deans who do more with less? (answer: rarely). Do we give bonuses to persons who develop on-line programs where student performance equals that of traditional methods -- but costs per student are lower? Do we reward presidents who keep tuition fees down? (answer --no; the big bucks are going to the presidents of institutions where costs are high and rising faster).
One way to reform is to increase the market share of for-profit institutions, where the financial incentives to be productive and efficient are great. But we need to also increase those incentives in not-for-profit institutions. Reducing rigidities like tenure is a helpful start, but we need to introduce markets more throughout university life. Departments should have to rent space from the central administration, perhaps, with rents varying with the demand for space --done correctly, this will increase capital utilization and dramatically lower new capital expenses. I could go on and on, but I have to go speak to a group of state legislators pondering public policy issues in the squalor of a luxury resort on Hilton Head Island.
Universities like to think they are superior to their K-12 brethren in the sense that success is generally rewarded by promotions, merit pay increases, nicer offices, etc. A good K-12 teacher is treated the same as a poor one in most of public education. That is different in higher ed. Consumers of higher ed have more choice, and have to pay something for the services consumed, imparting a bit of market discipline, unlike with our public school monopolies. In large part for these reasons, we have mediocre primary and secondary education by international standards, but a decent, respectable (some would say premier) higher education system. I wrote a longer piece on that a few years ago for the CATO Journal.
Yet university costs are rising and productivity is likely falling. One part of the solution is a measurement/reporting issue --finding new metrics to measure institutional performance, and then publicizing those measures to the public. That is at the heart of a current controversy over rule-making regarding accreditation organizations going on in Washington. This was a key issue before the Spellings Commission.
Yet the second part of the solution is seldom discussed --increasing the incentives for excellence in performance and ingenuity in cost reduction. Higher ed will not change if the staff refuses to cooperate, and the "rules of the game" with respect to promotion, tenure, salary increases, etc., needs to change. People need to be rewarded more on performance.
One metric is moderately easy to measure --research reputation. Partly for that reason, faculty advancement depends mainly on publications, never mind the fact that no one is doing cost-benefit analysis on the contributions of that research to society. Has the incremental publication brought about by the de-emphasis in teaching in modern times also brought about improvements in incomes, outputs, life expectancy, and human happiness? Do people migrate into areas of high research intensity because of the positive spillover effects of that research activity on the quality of life?
At the administrative level, do we reward deans who do more with less? (answer: rarely). Do we give bonuses to persons who develop on-line programs where student performance equals that of traditional methods -- but costs per student are lower? Do we reward presidents who keep tuition fees down? (answer --no; the big bucks are going to the presidents of institutions where costs are high and rising faster).
One way to reform is to increase the market share of for-profit institutions, where the financial incentives to be productive and efficient are great. But we need to also increase those incentives in not-for-profit institutions. Reducing rigidities like tenure is a helpful start, but we need to introduce markets more throughout university life. Departments should have to rent space from the central administration, perhaps, with rents varying with the demand for space --done correctly, this will increase capital utilization and dramatically lower new capital expenses. I could go on and on, but I have to go speak to a group of state legislators pondering public policy issues in the squalor of a luxury resort on Hilton Head Island.
Keeping Things in Perspective: The Student Loan Scandal
By Bryan O'Keefe
Few people have been more critical of the student loan industrial complex than this blog over the past 9 months or so. And we have been especially harsh on colleges and universities in light of the recent scandal over kickbacks and payments paid in order to be listed as a preferred provider of student loans. There is no doubt that the scandal is a major one and will have significant consequences for both the universities and private lenders for some time to come.
But my greatest fear was that the scandal would turn into a lot of finger-pointing and blame and would not become a siren call for more comprehensive higher ed reform. Unfortunately, that’s exactly what is happening. Consider the story in today’s New York Times which claims that Sen. Kennedy has now asked the Department of Education for the complete personnel files of 27 department employees.
I am not exactly sure what the Senator would do with these files, even if the Department handed them over (which I doubt they will). If he is looking for conflicts of interest – which are a serious matter – there must be less intrusive ways to accomplish that goal. As somebody who also follows labor and employment issues pretty closely, a request from another branch of government to view somebody’s personnel file is very personal and probably an invasion of privacy, especially when the people whose files would be pulled are probably from a different political party than the person asking for the information. It's requests like this that make people very reluctant to leave the private sector for government service.
Back to my original point – there is a tremendous need to get to the bottom of what exactly happened in this scandal. But at the same time, this should not delve into a Democrats v Republicans, Ed Department vs. Congress, who-is-to-blame type fight. We should use this scandal as an opportunity to come up with fresh ideas about how to reform the student aid system, not just another chance to have Congressional hearings and embarrass people politically. That goes for both sides of the political aisle.
Few people have been more critical of the student loan industrial complex than this blog over the past 9 months or so. And we have been especially harsh on colleges and universities in light of the recent scandal over kickbacks and payments paid in order to be listed as a preferred provider of student loans. There is no doubt that the scandal is a major one and will have significant consequences for both the universities and private lenders for some time to come.
But my greatest fear was that the scandal would turn into a lot of finger-pointing and blame and would not become a siren call for more comprehensive higher ed reform. Unfortunately, that’s exactly what is happening. Consider the story in today’s New York Times which claims that Sen. Kennedy has now asked the Department of Education for the complete personnel files of 27 department employees.
I am not exactly sure what the Senator would do with these files, even if the Department handed them over (which I doubt they will). If he is looking for conflicts of interest – which are a serious matter – there must be less intrusive ways to accomplish that goal. As somebody who also follows labor and employment issues pretty closely, a request from another branch of government to view somebody’s personnel file is very personal and probably an invasion of privacy, especially when the people whose files would be pulled are probably from a different political party than the person asking for the information. It's requests like this that make people very reluctant to leave the private sector for government service.
Back to my original point – there is a tremendous need to get to the bottom of what exactly happened in this scandal. But at the same time, this should not delve into a Democrats v Republicans, Ed Department vs. Congress, who-is-to-blame type fight. We should use this scandal as an opportunity to come up with fresh ideas about how to reform the student aid system, not just another chance to have Congressional hearings and embarrass people politically. That goes for both sides of the political aisle.
Tuesday, April 24, 2007
Posner Beats Becker
By Richard Vedder
I am writing this from the home of the Pope Center and the John Locke Foundation in Raleigh, NC, where I spent a marvelous day conversing with a variety of business persons, faculty and, above all, students, mainly from North Carolina State University. Roy Cordato invited me, and our Pope Center colleague and friend George Leef was not only was gracious (as were others like Jane Shaw,Rick Stroup, Roy's wife Karen, and Dave Riggs), but also gave me a copy of the latest Becker-Posner blog. Gary Becker and Richard Posner are both great economists and first class minds. But I think Posner has it right and Becker is wrong in evaluating the returns to higher education.
Becker points out that the college-high school earnings differential has widened, and that college graduates benefit in other ways as well --they are healthier, more law-abiding, etc. He argues that even controlling for attributes of college kids(being brighter than average, for example), graduates of higher education institutions earn more and lead longer lives.
Posner is skeptical. Posner poses the possibility that higher ed may be a good private investment for most students, but evidence does not "suggest that it is either a particularly good social investment (it does improve matching of employees to employers, but at great cost) or that its value has much to do with the institution's education program." Later he opines, "I am skeptical that it should be a national priority...to increase the number of people who attend or graduate from college."
Amen. If Becker were right on the economics of higher education, one would expect spending on colleges by governments to positively impact growth rates. The work I am doing, now in conjunction with Tony Caporale and Whiz Kid Jonathan Leirer, convinces me that spending on higher ed by state governments has, at the margin, no positive growth effects whatsoever, and probably even negative ones. As to the other dimensions, do college graduates smoke less (and thus live longer) than non-college graduates because of what they learned in college, or because they are smarter and more disciplined? The evidence of Charles Murray on IQs and earnings, correcting for education, may be disconcerting to some, but it is real, and it needs to be considered.
If James Bryant Conant, former Harvard president, had gotten his way, we would today have perhaps five or at the very most 10 percent of the adult age population with college degrees. Would we be poorer, less healthy, etc.? Maybe, but to me the evidence is very far from clear. As Posner notes, many studies on these issues were based on K-12 results, and the marginal benefits of subsequent education may be quite different than that associated with basic literacy and numeric skills.
Why is it that more spending on higher education by state governments seems to have very little impact on the proportion of the population, 10 or 15 years later, who have B.A. degrees? Follow the money. I have, and the indications are that the marginal spending on higher education in recent times has had little positive impact.
By the way, if I were an employer, for jobs for which I want to hire bright persons but ones who will learn on the job most of the important work-related things, I would have as a job requirement a B.A. degree, or a letter of admissions acceptance from a US News and Report top 50 school, plus a high school transcript and ACT/SAT scores. I would offer the latter group a bit less than the B.A.s, since they are younger and arguably less mature, but I would save money and get bright kids cheaper than if I rigidly held to the B.A. requirement (in this, I agree with Financial Times columnist James Altucher).
I am writing this from the home of the Pope Center and the John Locke Foundation in Raleigh, NC, where I spent a marvelous day conversing with a variety of business persons, faculty and, above all, students, mainly from North Carolina State University. Roy Cordato invited me, and our Pope Center colleague and friend George Leef was not only was gracious (as were others like Jane Shaw,Rick Stroup, Roy's wife Karen, and Dave Riggs), but also gave me a copy of the latest Becker-Posner blog. Gary Becker and Richard Posner are both great economists and first class minds. But I think Posner has it right and Becker is wrong in evaluating the returns to higher education.
Becker points out that the college-high school earnings differential has widened, and that college graduates benefit in other ways as well --they are healthier, more law-abiding, etc. He argues that even controlling for attributes of college kids(being brighter than average, for example), graduates of higher education institutions earn more and lead longer lives.
Posner is skeptical. Posner poses the possibility that higher ed may be a good private investment for most students, but evidence does not "suggest that it is either a particularly good social investment (it does improve matching of employees to employers, but at great cost) or that its value has much to do with the institution's education program." Later he opines, "I am skeptical that it should be a national priority...to increase the number of people who attend or graduate from college."
Amen. If Becker were right on the economics of higher education, one would expect spending on colleges by governments to positively impact growth rates. The work I am doing, now in conjunction with Tony Caporale and Whiz Kid Jonathan Leirer, convinces me that spending on higher ed by state governments has, at the margin, no positive growth effects whatsoever, and probably even negative ones. As to the other dimensions, do college graduates smoke less (and thus live longer) than non-college graduates because of what they learned in college, or because they are smarter and more disciplined? The evidence of Charles Murray on IQs and earnings, correcting for education, may be disconcerting to some, but it is real, and it needs to be considered.
If James Bryant Conant, former Harvard president, had gotten his way, we would today have perhaps five or at the very most 10 percent of the adult age population with college degrees. Would we be poorer, less healthy, etc.? Maybe, but to me the evidence is very far from clear. As Posner notes, many studies on these issues were based on K-12 results, and the marginal benefits of subsequent education may be quite different than that associated with basic literacy and numeric skills.
Why is it that more spending on higher education by state governments seems to have very little impact on the proportion of the population, 10 or 15 years later, who have B.A. degrees? Follow the money. I have, and the indications are that the marginal spending on higher education in recent times has had little positive impact.
By the way, if I were an employer, for jobs for which I want to hire bright persons but ones who will learn on the job most of the important work-related things, I would have as a job requirement a B.A. degree, or a letter of admissions acceptance from a US News and Report top 50 school, plus a high school transcript and ACT/SAT scores. I would offer the latter group a bit less than the B.A.s, since they are younger and arguably less mature, but I would save money and get bright kids cheaper than if I rigidly held to the B.A. requirement (in this, I agree with Financial Times columnist James Altucher).
Thursday, April 19, 2007
Reforming Federal Student Loan Programs
By Richard Vedder
The federal student loan scandal has aroused anger on the part of everyone, excepting of course the universities themselves, who rarely can bring themselves to admit that they have done something wrong. We have a morally dubious cesspool of problems. I have a great solution to the federal student loan problem: get rid of them. The federal government should go to one single assistance program (other than the GI Bill): an expanded Pell Grant system that is administered as a voucher given to individual students, not to the institutions. Private loan companies then can make all the loans they want to students, and charge whatever interest rates they want -- without special government regulation or involvement. They should probably be forbidden from making those loans via student financial aid offices at colleges, since colleges use financial information routinely to modify their own scholarship decisions relative to students.
Make the vouchers a fixed amount for all, or make them progressive depending on student income, but do not vary the voucher with the school that the student attends. The government should help all students in need attend Basic Quality U, a good but not necessarily distinguished institution. It is not the federal government's job to send poor kids to expensive schools, many of them increasingly country club-like in their orientation. Poor kids who do extremely well at Average State U will receive fellowships and other aid for advanced degrees, increasingly the key to big time financial success.
If we gave 8 million of these vouchers out in amounts averaging $5,000, (vastly more than the number or size of Pell Grants given now), and allow them to go to families with, say, incomes of less than $75,000 a year (somewhat above the national median), we would be giving major help to poor and even many middle class Americans going to college. The $40 million cost would not break the federal government's budget if we eliminate other programs. Persons with incomes above that should be forced to pay for them on their own, or get scholarships based on academic excellence (I believe merit based scholarships are not heinous in principle). If families want their kids to go to Yuppie U, or if they want to maintain their present life style while sending their kid to college, then the kid (or parents, or both) can go to the bank and borrow, just as they might for a car.
I would allow colleges to give out their own institutional aid if they choose, but I would forbid them from asking students about their finances or other aid received. I would ABOLISH the FAFSA form in its current use, having a short form on family income (and not wealth) used by the federal government for determining the size of Pell vouchers, with it illegal for colleges to require that form in their own determination of financial aid. Student financial aid offices would become scholarship offices of modest size, perhaps even disappearing at some schools that give little or no institutional scholarship aid. Schools themselves could make loan programs using their endowment, or even equity-based programs where kids sold some of their human capital to the school (the amount of student repayment of funds becomes dependent on student vocational success). At Harvard, providing average loans or equity investments of $50,000 to 50,000 present or former students would absorb well under 10 percent of the institution's obscenely large endowment.
This system would solve all sorts of problems. The whole student loan scandal would eventually go away. Vouchers could be increased by the rate of inflation, ending the current inflationary spiral where colleges raise tuition fees a lot and student loans follow with ever larger loans. It would help put a break on increasing tuition charges. The disincentive effects on national saving of the current system (if you save for college, your college aid declines) would mostly be eliminated. Students would be empowered more in choosing schools, increasing price competition and attention paid to undergraduates. It is a marvelous idea, a way of moving away from the bureaucratization of higher ed and ending the increasing corruption.
Yet it does not have a snowball's chance in hell of succeeding. Why? Two reasons. Teddy Kennedy and George Miller (chairs of the congressional education committees) love government, and want governments providing aid --an extension of the welfare state they love so much. The same is true of many others in Congress. This problem canbe overcome, however, if the expanded Pell Grant program is large enough. A bigger issue is that student loan interests will drop literally tens of millions of dollars over Congressional offices to stop this -- they will engage in the subtle form of bribery that has so poisoned the public policy arena in America today.
The late great Milton Friedman proposed vouchers over 50 years ago, and they are starting to have some impact in K-12 education despite powerful union opposition. Perhaps if we stick to our principles we can effect change at the collegiate level in even fewer years -- although probably not overnight.
The federal student loan scandal has aroused anger on the part of everyone, excepting of course the universities themselves, who rarely can bring themselves to admit that they have done something wrong. We have a morally dubious cesspool of problems. I have a great solution to the federal student loan problem: get rid of them. The federal government should go to one single assistance program (other than the GI Bill): an expanded Pell Grant system that is administered as a voucher given to individual students, not to the institutions. Private loan companies then can make all the loans they want to students, and charge whatever interest rates they want -- without special government regulation or involvement. They should probably be forbidden from making those loans via student financial aid offices at colleges, since colleges use financial information routinely to modify their own scholarship decisions relative to students.
Make the vouchers a fixed amount for all, or make them progressive depending on student income, but do not vary the voucher with the school that the student attends. The government should help all students in need attend Basic Quality U, a good but not necessarily distinguished institution. It is not the federal government's job to send poor kids to expensive schools, many of them increasingly country club-like in their orientation. Poor kids who do extremely well at Average State U will receive fellowships and other aid for advanced degrees, increasingly the key to big time financial success.
If we gave 8 million of these vouchers out in amounts averaging $5,000, (vastly more than the number or size of Pell Grants given now), and allow them to go to families with, say, incomes of less than $75,000 a year (somewhat above the national median), we would be giving major help to poor and even many middle class Americans going to college. The $40 million cost would not break the federal government's budget if we eliminate other programs. Persons with incomes above that should be forced to pay for them on their own, or get scholarships based on academic excellence (I believe merit based scholarships are not heinous in principle). If families want their kids to go to Yuppie U, or if they want to maintain their present life style while sending their kid to college, then the kid (or parents, or both) can go to the bank and borrow, just as they might for a car.
I would allow colleges to give out their own institutional aid if they choose, but I would forbid them from asking students about their finances or other aid received. I would ABOLISH the FAFSA form in its current use, having a short form on family income (and not wealth) used by the federal government for determining the size of Pell vouchers, with it illegal for colleges to require that form in their own determination of financial aid. Student financial aid offices would become scholarship offices of modest size, perhaps even disappearing at some schools that give little or no institutional scholarship aid. Schools themselves could make loan programs using their endowment, or even equity-based programs where kids sold some of their human capital to the school (the amount of student repayment of funds becomes dependent on student vocational success). At Harvard, providing average loans or equity investments of $50,000 to 50,000 present or former students would absorb well under 10 percent of the institution's obscenely large endowment.
This system would solve all sorts of problems. The whole student loan scandal would eventually go away. Vouchers could be increased by the rate of inflation, ending the current inflationary spiral where colleges raise tuition fees a lot and student loans follow with ever larger loans. It would help put a break on increasing tuition charges. The disincentive effects on national saving of the current system (if you save for college, your college aid declines) would mostly be eliminated. Students would be empowered more in choosing schools, increasing price competition and attention paid to undergraduates. It is a marvelous idea, a way of moving away from the bureaucratization of higher ed and ending the increasing corruption.
Yet it does not have a snowball's chance in hell of succeeding. Why? Two reasons. Teddy Kennedy and George Miller (chairs of the congressional education committees) love government, and want governments providing aid --an extension of the welfare state they love so much. The same is true of many others in Congress. This problem canbe overcome, however, if the expanded Pell Grant program is large enough. A bigger issue is that student loan interests will drop literally tens of millions of dollars over Congressional offices to stop this -- they will engage in the subtle form of bribery that has so poisoned the public policy arena in America today.
The late great Milton Friedman proposed vouchers over 50 years ago, and they are starting to have some impact in K-12 education despite powerful union opposition. Perhaps if we stick to our principles we can effect change at the collegiate level in even fewer years -- although probably not overnight.
Wednesday, April 18, 2007
The Bob Vedsky Proposal for Contingent Faculty
By Richard Vedder
In my book Going Broke By Degree and elsewhere, I advocated that more services, including instruction, be provided to universities by private providers under short or intermediate term contracts. My friend Bob Zemsky of Penn (The Learning Alliance) has carried this idea one step further: why don't so-called "contingent faculty" do better than unionize --why don't they incorporate --and then sell their services collectively to universities? Universities can have a competitive bidding process with different instructional companies, perhaps owned and operated by contingent faculty themselves. They hire the firm, and thus do not have to worry about fringe benefits, legal issues relating to having employees on their payroll, etc. The owner-employees no longer have university bosses and control their own destiny. They save union dues, and are not mixed in the same union with others (full time tenured faculty) who may have competing economic interests.
The little corporations could be very small, say two or three friends selling their services to the Modern Language Department to teach beginning French or Spanish, or could be huge, selling services university-wide. In the long run, larger companies will try to buy up the smaller firms and try to achieve some economies of scales. How that would work out is unknown, because I am uncertain as to the scale economies realizable here, but I suspect they are sizable (e.g., developing a common curriculum usable on many campuses, offering common multi-campus exams, perhaps have some lectures provided at multiple campuses simultaneously using distance learning techniques).
At first, I thought Bob and I were the odd couple on the Spellings Commission, me the resident radical and Bob the ultimate Establishment cautionary voice (many of Bob's remarks started, "You got to be careful...." ) But I realized in the long run that we actually have in many ways very similar ways at looking at things, with a mutual appreciation of using market forces to break down inefficient bureaucratic ways of doing things.
To schools facing an unionization threat from contingent faculty: tell them, "incorporate yourselves and liberate yourselves from both us and the unions."
In my book Going Broke By Degree and elsewhere, I advocated that more services, including instruction, be provided to universities by private providers under short or intermediate term contracts. My friend Bob Zemsky of Penn (The Learning Alliance) has carried this idea one step further: why don't so-called "contingent faculty" do better than unionize --why don't they incorporate --and then sell their services collectively to universities? Universities can have a competitive bidding process with different instructional companies, perhaps owned and operated by contingent faculty themselves. They hire the firm, and thus do not have to worry about fringe benefits, legal issues relating to having employees on their payroll, etc. The owner-employees no longer have university bosses and control their own destiny. They save union dues, and are not mixed in the same union with others (full time tenured faculty) who may have competing economic interests.
The little corporations could be very small, say two or three friends selling their services to the Modern Language Department to teach beginning French or Spanish, or could be huge, selling services university-wide. In the long run, larger companies will try to buy up the smaller firms and try to achieve some economies of scales. How that would work out is unknown, because I am uncertain as to the scale economies realizable here, but I suspect they are sizable (e.g., developing a common curriculum usable on many campuses, offering common multi-campus exams, perhaps have some lectures provided at multiple campuses simultaneously using distance learning techniques).
At first, I thought Bob and I were the odd couple on the Spellings Commission, me the resident radical and Bob the ultimate Establishment cautionary voice (many of Bob's remarks started, "You got to be careful...." ) But I realized in the long run that we actually have in many ways very similar ways at looking at things, with a mutual appreciation of using market forces to break down inefficient bureaucratic ways of doing things.
To schools facing an unionization threat from contingent faculty: tell them, "incorporate yourselves and liberate yourselves from both us and the unions."
Unions and the Professoriate
By Richard Vedder
My sidekick Bryan O'Keefe and I attended most of the 34th annual meeting of the National Center for the Study of Collective Bargaining in Higher Education and the Professions, held the last couple of days in New York City. I was speaking about the Spellings Commission and its impact, but also attended a few sessions and Bryan picked up the slack by attending some that I missed.
The National Center is a group of union leaders and management people mostly specializing in human resource/collective bargaining issues, along with a few lawyers, private consulting firms, and the like. Richard Boris, the Director, told me before the meeting even began that there are now about 420,000 faculty and instructional support staff in American universities that are members of collective bargaining units (and many more are members of nonacademic support staff).
The theme of the meeting was the "struggle for resources: a joint management/labor challenge." I felt that I was in a different world -- on a different planet, really, from the one I usually inhabit. Boris opened the conference saying "We have been on a diet too long." Barbara Bowen, President of the Professional Staff Congress of the City University of New York (CCNY) added "There is no reason why higher education needs to be chronically under-funded." As the level of indignation kept rising, Bill Scheurman, President of the United University Professions of the State University of New York (SUNY) chimed in, calling for a need to engage in the "battle of ideas with extremist think tanks." (No doubt CCAP, among others).
Two things struck me the most. First, American academic unionism is terribly concentrated geographically -- half the union members are in either New York or California, states that together have well under 20 percent of the U.S. population. My guess is you can put all the academic unionists in North Carolina in a telephone booth. Second, the participants are living in another world – even their perceptions of what is reality are well off-base. The reality is that spending at American universities is not rising as rapidly as in the salad days of the 1950s or 1960s, but it is still growing. It is true that a smaller proportion of that spending is going to the professoriate. To the attendees of the National Center meeting, on average, the solution is to get the taxpayers to fund higher education more generously, rather than to reallocate university funds back to historic proportions with respect to spending on instruction.
To be sure, there were pockets of realism and analytical thinking. Dan Julius, the Provost at Benedictine University, called for more serious academic research on labor issues, suggesting good ideas for studies. For example, has the spread in the use of part-time non-tenured ("contingent") faculty led to reductions in academic or instructional quality? What is the relationship between academic quality and unionization? Good questions, deserving serious scrutiny. And Ernst Benjamin, who runs the American Association of University Professors (AAUP), saw a potential dilemma. In pushing hard for higher salaries and fringe benefits for mostly tenure track full time faculty, unions increase the incentives for institutions to hire more adjunct faculty with low pay and fringe benefits. He came close to suggesting that unions are promoting the demise of their own membership by driving universities to lower cost substitutes for their services. Just as the United Auto Workers helped mortally wound the American auto industry by being too successful in pursuing its objectives, so faculty unions face the same prospects, particularly as spending on higher education is squeezed at the state level by rising Medicaid costs.
I could see a scenario where colleges squeeze faculty costs down in order to become a bit more affordable, and that, in turn, pushes faculty at institutions previously immune from unionization to reconsider and demand collective bargaining. But I can also see a quite different scenario unfolding, with enrollments, etc., at union dominated schools falling, because of concerns over quality and price, relative to private institutions and even non-collegiate forms of skill certification. Time will tell.
My sidekick Bryan O'Keefe and I attended most of the 34th annual meeting of the National Center for the Study of Collective Bargaining in Higher Education and the Professions, held the last couple of days in New York City. I was speaking about the Spellings Commission and its impact, but also attended a few sessions and Bryan picked up the slack by attending some that I missed.
The National Center is a group of union leaders and management people mostly specializing in human resource/collective bargaining issues, along with a few lawyers, private consulting firms, and the like. Richard Boris, the Director, told me before the meeting even began that there are now about 420,000 faculty and instructional support staff in American universities that are members of collective bargaining units (and many more are members of nonacademic support staff).
The theme of the meeting was the "struggle for resources: a joint management/labor challenge." I felt that I was in a different world -- on a different planet, really, from the one I usually inhabit. Boris opened the conference saying "We have been on a diet too long." Barbara Bowen, President of the Professional Staff Congress of the City University of New York (CCNY) added "There is no reason why higher education needs to be chronically under-funded." As the level of indignation kept rising, Bill Scheurman, President of the United University Professions of the State University of New York (SUNY) chimed in, calling for a need to engage in the "battle of ideas with extremist think tanks." (No doubt CCAP, among others).
Two things struck me the most. First, American academic unionism is terribly concentrated geographically -- half the union members are in either New York or California, states that together have well under 20 percent of the U.S. population. My guess is you can put all the academic unionists in North Carolina in a telephone booth. Second, the participants are living in another world – even their perceptions of what is reality are well off-base. The reality is that spending at American universities is not rising as rapidly as in the salad days of the 1950s or 1960s, but it is still growing. It is true that a smaller proportion of that spending is going to the professoriate. To the attendees of the National Center meeting, on average, the solution is to get the taxpayers to fund higher education more generously, rather than to reallocate university funds back to historic proportions with respect to spending on instruction.
To be sure, there were pockets of realism and analytical thinking. Dan Julius, the Provost at Benedictine University, called for more serious academic research on labor issues, suggesting good ideas for studies. For example, has the spread in the use of part-time non-tenured ("contingent") faculty led to reductions in academic or instructional quality? What is the relationship between academic quality and unionization? Good questions, deserving serious scrutiny. And Ernst Benjamin, who runs the American Association of University Professors (AAUP), saw a potential dilemma. In pushing hard for higher salaries and fringe benefits for mostly tenure track full time faculty, unions increase the incentives for institutions to hire more adjunct faculty with low pay and fringe benefits. He came close to suggesting that unions are promoting the demise of their own membership by driving universities to lower cost substitutes for their services. Just as the United Auto Workers helped mortally wound the American auto industry by being too successful in pursuing its objectives, so faculty unions face the same prospects, particularly as spending on higher education is squeezed at the state level by rising Medicaid costs.
I could see a scenario where colleges squeeze faculty costs down in order to become a bit more affordable, and that, in turn, pushes faculty at institutions previously immune from unionization to reconsider and demand collective bargaining. But I can also see a quite different scenario unfolding, with enrollments, etc., at union dominated schools falling, because of concerns over quality and price, relative to private institutions and even non-collegiate forms of skill certification. Time will tell.
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