This paper is one of three in a series on higher education costs. The series also includes “Initiatives for containing the cost of higher education” and “Public policies, prices, and productivity in American higher education.”
Higher education productivity, as measured by academic degrees granted by American colleges and universities, is declining.[1] Since the early 1990s, real expenditures on higher education have grown by more than 25 percent, now amounting to 2.9 percent of US gross domestic product (GDP)–greater than the percentage of GDP spent on higher education in almost any of the other developed countries.[2] But while the proportion of high-school graduates going on to college has risen dramatically, the percentage of entering college students finishing a bachelor’s degree has at best increased only slightly or, at worst, has declined.[3]
Figure 1 shows the trend in productivity from 1970 to 2006, expressed in terms of the ratio of degrees granted to total sector expenditures.[4] The downward slope is steepest among universities, where current productivity is less than half of what it was 40 years ago. Even when adjusted for the growth in overall labor costs in the economy (see dashed lines in figure 1), the decline in bachelor’s-degree production is nearly 20 percent. If these declines continue, maintaining the current rate of bachelor’s-degree production will cost an additional $42 billion per year 40 years from now.[5] Thus, even if state support for public higher education did not continue to decline, tuition would have to increase by an average of $6,885 per full-time equivalent (FTE) student in public universities to maintain current spending, almost doubling today’s tuition.[6]
What accounts for declining productivity in higher education? Prior research provides an array of potential explanations.[7] Most analysts point to the role of rising costs, and others focus on declining degree attainment.[8] Collectively, these explanations reinforce a widespread perception among higher education administrators and many scholars that productivity is impossible to control. According to economists Robert B. Archibald and David H. Feldman, “The problem in higher education is that productivity growth often is synonymous with lower quality. Adding more students to each class can diminish the benefit for each student, leading to diminished outcomes and lower graduation rates. Increasing the number of courses a professor teaches would reduce research or community service.”[9] Similarly, in a study of college presidents’ attitudes, a two-year president said: “I don’t think there are any more efficiencies left to be squeezed out of public universities across the nation. . . . There are no more efficiencies to be had.”[10] So, at least some institutional leaders feel helpless when it comes to improving productivity without sacrificing quality.[11] Even when costs are considered, institutions tend to focus on enrolling more students rather than helping them graduate.[12]