Kenyon College - CASE

A Service Industry
Into the breach step Feldman and his colleague, Robert B.
Archibald, also a professor of economics at William and Mary.
Their 2011 book Why Does College Cost So Much? takes a selfdescribed
aerial view of the economics of higher education,
explaining increased costs in the context of economic trends.
They reject the damning “magnifying glass” look applied by some
critics who, for example, equate the rising number of administrators
with wayward inefficiency, and the variety of dining hall food
choices with wretched excess. One of their goals is to cool down
the raging rhetoric.
An embrace from higher education “is not why we wrote the
book,” Feldman said. “I have been thinking about these issues for
a very long time now. We were surprised by the audience we got
for our papers.” Not everyone is a fan. Those who criticize higher
education also criticize Feldman and Archibald. “We’re picking
darts out of our various body parts,” he said.
Paying for the “big ticket item” of a college education is a
“family decision … an ethical decision.” In his view, a college education
is the best way to transfer wealth to children. The financial
advantage is inarguable. In 2008, median annual earnings of men
with a college degree reached $55,000; for men with just a high
school diploma, that number was $32,000.
And regardless of the public view about the expense of a college
education, the Pew Research Center poll found that 94 percent of
parents expect their children to attend college and 86 percent of
college graduates believe their education was a good investment.
Kenyon President S. Georgia Nugent pondered the paradox.
“That’s the mood of the nation at the moment,” she said. “ ‘Higher
education is doing a terrible job, and we want more access to it.’”
Feldman believes a vocal minority has unleashed the aggression
against higher education—those people “willing and able to
scream the loudest,” including those who are paying the most at
very expensive schools. He noted that half of the country’s college
students face a tuition list price of less than $10,000 a year. And
stories about some graduates leaving school with six-figure debt
{
Colleges must keep pace
with technology, both in
teaching and in the services
that students expect.
may be true but are, in fact, rare. “Making public policy on the
basis of outliers is bad,” he said.
The rising cost of higher education, Feldman said, can be
attributed to the requirements of the digital age and accelerating
technology; the growth of financial aid in the zeal to attract an
accomplished and diverse enrollment; and the fact that colleges
must maintain a highly educated work force.
Improvements in technology have reduced costs for manufacturers
but do not have the same effect in a “service industry” like
higher education. Yet colleges must keep pace with technology,
both in teaching and in the services that students expect. Science
labs must be state-of-the-art. Colleges that wired campuses for
the Internet have moved on to wireless technology. And, given
the ubiquity of mobile telephones, land-line phones installed in
residence-hall rooms face a phase-out.
“We react to technology very differently than Ford or General
Motors,” Feldman said. “We don’t adopt new technologies to
lower cost. We have to shape the world our students are moving
into.” When something new comes out, students expect it.
The ramping up of financial aid, called discounting by
Feldman, is a “big problem,” triggering an arms race among
schools to attract the best and most diverse students. Higher
tuition, along with a reliance on endowment revenue and philanthropy,
helps cover the cost of financial aid. “I don’t know where
the discounting is going to stop with the private [colleges].”
The size of a college budget, Feldman said, is largely based on
the quality of the program. If a college believes in the “supreme
importance” of a diverse student body and is determined to
provide discounts to reach that goal, the school may decide to
hold the line on faculty salaries or not replace or hire a high-profile
kenyon mandatory charges:
(tuition, fees, room, board)
1971-72 ..... $3,850 ($21,607 in 2011 dollars)
1981-82 ..... $8,525 ($22,545)
1991-92 ..... $19,425 ($32,397)
2001-02 ..... $32,130 ($40,624)
2011-12 ..... $52,650
kenyon budget growth:
1980-81 ..... $12,870,000 ($38,629,764 in 2011 dollars)
1990-91 ..... $33,312,000 ($58,556,973)
2000-01 ..... $56,189,000 ($73,459,589)
2010-11 ..... $102,916,000