24 January 2013

College Admin Costs: "Oh well, beyond our control" is not an acceptable answer

Asymmetric Information | Megan McArdle | Quote of the Day

From Arnold Kling:

This topic came up at lunch yesterday with Tyler Cowen. Could universities cut costs by firing half of their administrators? [...]

In universities, I would argue that the growth in administrators is symptomatic, not an independent cause. The problem is what is known in the software business as scope creep or feature bloat. [...]

Students want their college to be like an all-inclusive resort, with loads of different things for them to do at a nominal cost. But that means more administrators. So does the increasing regulatory burden for liability and discrimination laws: better have a diversity officer, a safety officer, and sexual harassment training, so that you can defend yourself in any sort of lawsuit. HR is getting more complicated every year: probably needs at least a VP-level role. And so on, and so on, and so on . . .

Anyone who works in the private sector can attest that this is not just happening at universities.

We might be able to cut college costs substantially if we slashed administration, but we can't slash the administration.
Yes. But.

Administrative costs are up 37% in a decade. It's not like colleges ten years ago didn't have liability or discrimination concerns. I'm pretty sure that when I filed my college applications in 2001, every one of those schools had a diversity officer, a safety officer, a sexual harassment officer, etc. It's not like colleges just discovered they could bundle services together this century. We need to turn back the clocks a decade, not roll slash colleges down to nothing but lecture halls and spartan barracks-like dorms.

If you want to get to the root of this, I think you need to look at the college-as-all-inclusive-resort thing. And more deeply than that: how is it that colleges are able to move further towards resort-mode than they were in 2001? I'd point the finger at open-ended promises by the government to loan out as much money as a kid wants to borrow to study any subject, anywhere they want. That's my go-to answer for most of what ails American higher ed though.

I also want to push back against this comment Kling makes:
I argued that administrators did not just descend on universities like a plague of locusts. In the economy as a whole, the ratio of middle managers to production workers is rising. You can see this by looking at the ratio of white collar workers to production workers in specific industries, such as automobiles.
This is true, obviously. College administrators are not marauding Norsemen sailing in to pillage our tuition money.

But the tooth-to-tail ratio has been changing in other industries because how we do work in other industries has changed. Your white-to-blue-collar ratio is going to change in Detroit because you're replaced a lot of the blues with robots. We've swapped stevedores for steel containers and wooden pallets, account clerks with adding machines for Excel spreadsheets. That hasn't happened in higher ed.

An American car factory, or shipping firm, or insurance agency, looks very different than the same enterprise in 1963. But American higher education runs pretty much the same way it did 50 or even 100 years ago, except with a lot more lifestyle bells-and-whistles for students, a lot more administrators, and a lot more debt.

Yes, yes colleges are different now in various ways. But look at it this way: how many man-hours did it take in 1963 to actually assemble the pieces of a car? A lot more than it does now, right? How many man-hours did it take in 1963 to educate a student through eight semesters of college? The actual classroom teaching, grading, lecture prep, &c. I'd wager it's about the same number of hours as it is in 2013. If the actual production hasn't changed, why should we think it's inevitable that the management of that production must change? Why should we expect it to change in the same way it has in industries that have been radically revolutionized?

PS McArdle argues in another post today that reformers will have to try to push down compensation to health care workers because that's where (a big chunk of) the money is. Doesn't the same apply to higher ed adminstrators?

PPS In looking for a chart to illustrate this post I've seen a lot of people give stats about admin costs per student. I'd make the same case against that that Mike Munger made this morning regarding measuring government spending per person. There's no particular reason that administrative costs ought to scale linearly with the number of students. Teaching costs? Sure. More students → more courses → more teachers. But once you have people to oversee your visual identity guide for official communications*
Which are pretty fascinating to read, by the way. Here's ND's and here's UMD's.
do you then need 10% more visual branding admins when you increase enrollment 10%?

1 comment:

  1. Admin salaries are really low. I know from personal experience. Painful personal experience.

    You're correct. The loan to anybody with a pulse for any degree plan is the culprit.

    Heh... Just like home loans.

    Really, just like home loans. The borrower doesn't have skin in the game. 100% financing. No down payment required.