Tipping the (Diseconomies of) Scale

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BY LINDSEY BURKE – The Goldwater Institute has released a new report, authored by Dr. Jay Greene of the University of Arkansas and researchers Brian Kisida and Jonathan Mills, examining the “administrative bloat” at America’s colleges and universities. According to the report, Administrative Bloat at American Universities: The Real Reason for High Costs in Higher Education:

In U.S. higher education, there have actually been diseconomies of scale. Universities employ more people and spend more money to educate each student even as those universities increase their enrollment. … Between 1993 and 2007, the number of full-time administrators per 100 students at America’s leading universities grew by 39 percent, while the number of employees engaged in teaching, research or service only grew by 18 percent. Inflation-adjusted spending on administration per student increased by 61 percent during the same period, while instructional spending per student rose 39 percent.

What has enabled colleges to compound upon their inefficiencies over the years?


A significant reason for the administrative bloat is that students pay only a small portion of administrative costs. The lion’s share of university resources comes from the federal and state governments, as well as private gifts and fees for non-educational services. The large and increasing rate of government subsidy for higher education facilitates administrative bloat by insulating students from the costs. Reducing government subsidies would do much to make universities more efficient.

That students pay only a fraction of the administrative costs at universities is another tale in an ongoing saga about the college cost crisis. Government subsidies not only insulate students from the reality of administrative bloat; they make students less sensitive to increases in tuition, which are flamed by ever-growing government subsidies. It’s a vicious cycle whereby government subsidizes students at greater rates, enabling universities to raise tuition, in turn causing students to seek more government loans.

But while the Obama Administration is intent on reining in costs at for-profit universities, they seem unconcerned with the administrative bloat, rising costs, and questionable value of “traditional” public and private universities. Which raises the question: Is it the “profit” in for-profit that is problematic to this Administration?

It is true that default rates are higher at for-profit institutions (11 percent compared to 5.9 percent at public universities), but these institutions serve the needs of students who have been underserved by the traditional university model. New regulations being considered by the Department of Education, which would effectively cap costs at for-profits that receive federal aid, would have the net result of decreasing the number of students who have access to higher education, because many for-profits could be forced to close their doors.

The Administration also seems to be unconcerned by a similar trend in K-12 education. Non-teaching staff positions have increased significantly in recent decades, putting a tremendous strain on state budgets while providing little if any academic benefit to students. While student enrollment has increased just 7 percent since 1970, non-teaching administrative staff has increased 83 percent. Instead of having school districts address problems such as administrative bloat, the Obama Administration has rewarded this inefficiency with yet another $10 billion public education bailout.

The report by Professor Greene et al. highlights a larger problem of inefficiency plaguing public education at both the K-12 and university levels. But creative solutions abound—such as moving coursework online—that would shake up the status quo. That would put administrative bloat at all levels on a much-needed diet.


Lindsey Burke Author Lindsey Burke authored this report for Heritage.org