Surveys reveal that the public believes a college education is essential but too expensive. People feel squeezed between the cost and the necessity. At the same time, public colleges complain that they are being squeezed by declining state support and increasing pressure to educate larger numbers of less-prepared students.
Yet society has provided higher education with a river of new real revenues over the past several decades. Since nonprofit institutions of higher education follow a balanced-budget model, expenditures are capped by revenues. Therefore the real cost per student cannot increase without a corresponding increase in real revenues. So the problem has not been too little revenue.
Nevertheless, college affordability has declined. So the crucial question is: Where was all that new money spent?
A common theme among higher education's critics is that shared governance is to blame for colleges' profligate ways, because faculty have too much influence over how money is spent. And the critics are right: Shared governance does play a role. But it is not the "shared" part of "shared governance" that has failed; quite the opposite. The fault lies in the withering away of the shared part. Reason and data alike suggest that the largest part of the problem is that it is administrators and members of governing boards who have too much influence over how resources are used.
The pursuit of self-interest by both faculty and administrators is at work here. Higher education is, of course, a labor-intensive service industry. An institution's labor cost per student is the sum of wages and benefits divided by the number of students. The cost per student goes up as wages and benefits go up, or as the ratio of staff to students rises. When that ratio goes down, productivity increases, and the cost can go down, even if wages and benefits go up. Staff-to-student ratios, then, are the key to understanding higher-education costs.
A study of those ratios from 1987 to 2008 for research universities, colleges, and public master's-level institutions reveals that the number of faculty and administrators per student actually grew over those years. But we can't lump faculty ratios and administrative ratios together, because they are significantly different. On the academic side, the tenure-track ratio increased modestly at public research universities and to a greater extent at private research universities and colleges. But in both cases, the institutions significantly increased their use of non-tenure-track full-time and part-time faculty. So although faculty-to-student ratios went up, most of the increase was based on the use of contract and part-time faculty.
On the administrative side, the ratios of executives to student and professional staff to student increased—the latter by 50 percent. In 1987, except at private research universities, where administrators outnumbered tenure-track faculty, colleges had approximately as many tenure-track faculty as full-time administrators. By 2008 there were more than twice as many administrators as tenure-track faculty at all types of institutions.
So, during the years studied, costs grew further out of control as administrators and governing boards consolidated their control over institutional priorities—hardly a healthy trend for genuinely shared governance.
Indeed, if it were true that faculty members have too much influence, then all full-time-faculty increases would have been in tenure-track positions, and academic costs would have risen faster than overhead costs. In fact, overhead costs grew faster than academic costs, and institutions economized on the use of tenure-track faculty and spent heavily on overhead staffing. Now, as then, faculty members are part of the cost problem; however, the most significant problem stems from administrators and governing boards, who hold authority over resource allocation. Tenure-track faculty members' influence on campus priorities has declined steadily, while the number of nonacademic professional staff has proliferated.
In a larger context, this is called bureaucratic entropy. For example, in urban studies one finds that the number of municipal workers tends to grow faster than a city's population. So the ratio of municipal workers to population increases, raising the cost of city services even if wages and benefits are constant (which they are not).
In academe, shared governance is the only natural constraint on the pursuit of self-interest. It is past time for a new campus contract among faculty, administrators, and governing boards to affirm that fact. Communication among those three groups must be open and outside the control of any one of them. Faculty members should independently choose their own representatives, through whom they can speak to the administration or the board.
If the administration controls that communication, or if the board considers it a violation of the chain of command, then the new contract will not work—and the pursuit of self-interest by administrators and boards will lead to the same destructive effects on cost and quality we have observed over the past three decades.
Robert E. Martin is an emeritus professor of economics at Centre College and author of The College Cost Disease: Higher Cost and Lower Quality (Edward Elgar, 2011).