Commentaries
Administrative Costs Mushrooming

Rapidly rising numbers of and expense for administrators explain much of the rising cost of college education.

By George Leef

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September 15, 2010

Perhaps the most talked about subject pertaining to higher education in America is the fact that costs keep rising faster than the rate of inflation, faster than the growth in the number of students, faster than most family incomes. Try googling “rising cost of college” and you get more than 18 million hits.

What explains that persistent phenomenon? In a study released last month by the Goldwater Institute, authors Jay Greene, Brian Kisida, and Jonathan Mills identify a big part of the problem: administrative bloat.  

“Between 1993 and 2007,” they write, “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 grew by 61 percent during the same period, while instructional spending per student rose 39 percent.”

Anyone familiar with American higher education has been at least vaguely aware that more and more administrators have been hired over the last two decades, often to fill new offices such as “Chief Diversity Officer and Associate Vice Chancellor for Equity, Diversity and Inclusion.” (That’s the title of a new position that has been created at UNC-Greensboro; the school has launched a national search to find a “visionary leader.”)

Greene, Kisida, and Mills have dug into U.S. Department of Education data on 198 leading universities, including all state “flagship” schools and many elite private research universities, proving that the perception of administrative bloat is anchored in reality. College and university administrators make the decisions on the number of employees, and it’s clear that they love to hire more people like themselves.

The study’s key insight is that leaders of non-profit colleges and universities need to spend all the money that comes in and have chosen to devote much of their revenue to new administrative offices and staffs. The authors explain it this way: “These administrators are paid dividends in the form of higher compensation and more fellow administrators who can reduce their own workload or expand their empires.”

When pressed as to why they need higher tuition, administrators usually say, “Our costs have gone up.” The problem with that explanation is that costs have gone up because they have decided to spend more. Thomas Sowell hit that point hard in his 1993 book Inside American Education, writing, “Whatever colleges and universities choose to spend their money on is called a ‘cost.’ If they hire more administrators, or build more buildings to house them, or send the college president on more junkets, these are all additional costs.”

One important point that the Goldwater study did not go into is the level of compensation paid to all those administrators.  Data in The Chronicle of Higher Education’s Great Colleges to Work For 2010 show that it’s common for college administrators to earn substantially more on average than faculty members do.

Schools ranging from large public universities to small private colleges responded to The Chronicle’s survey and reported an array of data. Looking at the figures for average salaries for administrators and for full-time faculty members, it’s hard not to be surprised at the disparity. Here are some representative examples:

Abilene Christian University: administrators--$155,480; faculty--$61,029.

Athens State University: administrators--$113,199; faculty--$69,608.

Blue Ridge Community College: administrators--$79,487; faculty--$57,179.

Centre College: administrators--$96,241; faculty--$66,250.

Emory University: administrators--$152,380; faculty--$95,274.

Georgia Tech: administrators--$194,065; faulty--$94,215.

University of Mississippi: administrators--$138,870; faculty--$76,847.

University of Texas: administrators--$123,136; faculty--$85,910.

Wayne State: administrators--$131,453; faculty--$104,103.

There are, to be sure, some schools where average faculty salaries exceed average administrative salaries, such as George Mason University, Duke, Harvard, and the University of Michigan.  Of the schools listed in the report, those where administrators are paid more than faculty members were four times as common as those where the reverse is true.

The University of Michigan is an interesting case. Greene, Kisida, and Mills report that it is one of a tiny number of schools where the number of administrators actually declined. During the period 1993 to 2007, the number of administrators fell by 5.5 percent, while full-time instructional, research, and service employees increased by 68 percent.

So it is not some irresistible force of nature that causes colleges and universities to expand their administrative staffs. Why was Michigan able to reduce administrative bloat while other schools have succumbed to it completely? (Apparently, Wake Forest has the worst case of bloat, with administrative personnel up 600 percent.)

The authors suggest that incentives play a role in how freely administrators spend money to hire more administrators, observing that the University of Michigan obtains relatively little of its funding from the state. “Reducing government subsidies,” they write, “may be just the remedy for rapidly growing university administration.”

I’m all for reducing government subsidies, but since there is elephantine administrative bloat at some private universities (such as Wake Forest) where little or no government money flows into the budget, cutting government support isn’t the whole answer.

The root of administrative bloat (and many other dubious to downright silly uses of money) is in the very essence of non-profit decision-making. Whether public or private, college officials don’t have much incentive to economize. Since there are no stockholders to gauge a president’s performance by his efficient (and hence profitable) use of resources, he pays little attention to the hard, often unpleasant business of reducing unnecessary costs.

Instead of scrutinizing costs, a college president usually devotes most of his efforts to bringing in additional money, as Professor Robert Martin argued in this Pope Center paper on what he calls “the revenue to cost spiral.” The college president’s life is far more pleasant when his spending decisions make the various constituent parts of the community happy. A winning football team makes many alums happy; a reduced teaching load makes professors happy; having more administrators makes most current administrators happy.

Besides, attempts to reallocate resources as a part of prudent cost-control program will be controversial and may damage the school’s reputation since many consumers accept the “Chivas Regal” idea that in college education, high cost means better quality.

An interesting comparison would be the administrative costs at non-profit colleges with administrative costs at for-profit institutions. The Goldwater study did not make that comparison and I am aware of no ready data on administrative costs at University of Phoenix or DeVry University, for example. If that comparison were made, however, I have no doubt that it would show a much lower cost at for-profit schools.

Besides highlighting the high cost of administrative bloat, the Goldwater study provokes us to think about this question: Is there some way to induce the leaders of non-profit colleges and universities to take efficiency and cost control seriously?

 


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