Wednesday, April 25, 2012

AAUP study finds that jump in college tuition not caused by faculty pay

Faculty salaries comprise the largest component of law school overhead and thus it's where most student tuition goes.  Consequently it's always been reasonable to assume that jumps in tuition are directly attributable to the cost of finding and retaining good faculty. But this new study from the American Association of University Professors ("AAUP") found that's not the case when it comes to undergraduate faculty.  The rise in college tuition of late has far outstripped faculty salary increases in some cases by a factor of four.  So what's the explanation? 

According to the AAUP study there are several factors responsible including the need to subsidize students who can't pay full-freight, the recurring costs of improving the technology infrastructure, the growing ranks of non-teaching staff and executive pay. Of course the AAUP has a vested interested in these findings so you have to read the excerpt below with that in mind.  And before Elie Mystal and Paul Campos rip me a new one for even suggesting that law school faculty salaries aren't to blame for why our students have debt loads they can never repay, I'm just reporting the story - it doesn't mean I sympathize with the conclusions.

2011-12 Report on the Economic Status of the Profession

This year’s report begins with a summary of the findings of the annual AAUP survey of full-time faculty compensation. We then go on to consider a hot topic in policy debates about higher education: the rising price of college tuition and the questions about what’s driving it. (Spoiler alert: it’s not faculty salaries!) Following that, we take another look at what college and university presidents are earning—a topic about which we receive questions every year. In the final sections of this year’s report we touch on new topics. We provide a fresh analysis of the impact of unionization on full-time faculty earnings across different institutional sectors. We anticipate the release of new data on part-time faculty pay that will enable a much more complete description of faculty compensation. And in light of the issues raised by the emergence of the “Occupy” movement, our final section goes beyond our usual focus on higher education and looks at the broader US income distribution.

. . . .

Two variables are relevant to the analysis of college tuition: published tuition price and net tuition cost. Published tuition price is the “sticker price” colleges and universities print in their admissions materials. It’s the price paid by students who aren’t receiving any financial aid. Net tuition cost is the published tuition price minus grant aid, tax credits, and tax deductions; it represents the out-of-pocket tuition costs for students and families. Colleges and universities have learned to set tuition in much the same way that airlines set ticket prices, charging different people different rates for the same service. (In economics this would be referred to as “price discrimination.”) Students who pay full price help subsidize the grants that lower the costs for students receiving need- or merit-based aid.

Parents, politicians, and the press tend to focus on increases in published tuition prices. Although that measure overstates the rate of increase, it does contribute to the “sticker shock” that may discourage some students from pursuing higher education. According to the College Board’s Trends in College Pricing 2011, for the most recent five-year period between 2006–07 and 2011–12 average published tuition and fees at four-year colleges increased by 5.1 percent more than inflation. But net tuition and fees increased by just 1.4 percent above the inflation rate during the same period, and some two-thirds of all students receive at least some form of financial aid. Tuition prices are rising and are a source of anxiety for many middle-class families, although the net effect may not be as great as many people think.

So, why is the price of college tuition rising? AAUP survey data demonstrate that, contrary to a persistent myth, full-time faculty salaries are not the cause of rising tuition prices over the last three decades, as shown in table B. During the 1980s, increases in inflation-adjusted published tuition and fees at private four-year colleges and universities were more than double the increases in full-time faculty salaries. Tuition prices increased at three times the rate of faculty salaries in public four-year colleges and at more than four times the rate in community colleges. And this was during a decade when full-time faculty salaries were rising to compensate for significant losses against inflation in the previous decade.

During the 1990s, increases in both tuition and fees and full-time faculty salaries slowed somewhat. Nonetheless, the pattern of tuition prices rising several times faster than faculty salaries continued. Tuition and fees in four-year colleges once again rose three or four times as fast as full-time faculty salaries, on average. And the inflation-adjusted published tuition and fees in public two-year colleges increased by 5.4 percent, even while real faculty salaries declined by 2.1 percent.

In the most recent decade the tuition trends at public and private institutions diverged substantially. As figure 1 illustrates with data from the independent Delta Project on Postsecondary Education Costs, Productivity, and Accountability, state and local appropriations for public higher education declined between 1999 and 2009 after adjusting for inflation and increasing enrollment. Public colleges and universities had little choice but to raise tuition prices to make up for the decline in government support, and figure 2 indicates that at public colleges and universities net tuition revenues per full-time equivalent (FTE) student increased between 35 and 50 percent between 1999 and 2009. By the end of this period, tuition was nearly as large a source of revenue as state and local appropriations for public research and master’s universities, although it had reached only about half the level of appropriations in community colleges.

AAUP data clearly indicate that full-time faculty salaries have not been driving up the costs of higher education over the last three decades. But figure 3 provides additional compelling evidence that the revenue from increased tuition prices is not being invested in faculty members. As has been discussed repeatedly in this annual report, the proportion of full-time tenured and tenure-track faculty members has been falling precipitously. During this period the proportion of faculty members working part time has increased substantially, at rates of pay that are only a fraction of what full-time faculty members receive.

The evidence is unequivocal: faculty pay is not the source of rising tuition prices. And we’re not the only ones reaching that conclusion. The Delta Project concluded in its Trends in College Spending, 1998–2008 that “over the 1998 to 2008 period, the share of instruction spending declined against increased spending for academic support (libraries and computing), institutional support (administration), and student services. . . . The common myth that spending on faculty is responsible for continuing cost escalation is not true.”

You can read the full report here.

Hat tip to Brian Leiter's Law School Reports blog.

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