Where Do All the Savings Go?

By Jenna A. Robinson


January 06, 2016

In 1876, Alexander Graham Bell was awarded the first U.S. patent for a telephone. The first long distance coast-to-coast telephone call was placed in 1915—exactly a century ago.

Fast-forward 100 years. Phones, many now mobile, are almost unrecognizable from their original 1876 design. And they do so much more than just make long-distance telephone calls. Users can text each other, surf the web, go shopping, take high quality photos, calculate large sums, listen to music, play games, and control their TVs. 

Remarkably, all these features are available for less money than the first cell phone. Motorola debuted the world's first portable cellular telephone in 1983. That phone, known as the Motorola DynaTAC 8000X, measured more than a foot long, weighed almost 2 pounds, and cost a whopping $3,995. Today, a new iPhone 6s costs just $649 (or far less with a service contract).

The history of many other products and services mirror that of the telephone. International travel, cars, appliances, delivery service, books, prepared food, music, and photography are now more abundant, better, and cheaper than they were when invented.

Why can’t the same be said for higher education? Because, unlike other sectors where gains in productivity have led to better and cheaper products for the consumer, higher education’s “product” is neither better nor cheaper.

Defenders of higher education often cite Baumol’s cost disease as the cause of the ever-increasing cost of college. The classic example of an activity that falls victim to Baumol’s cost disease is a symphony performance—where instruments, musicians, and venues haven’t changed in centuries. Therefore, there are no observable gains in productivity.

Many academics argue that university education is the same. Teaching, they say, hasn’t changed in its delivery or standards since Socrates’ time. Highly educated professional experts still lead discussions and shape young minds in modern America the same way Socrates did in ancient Greece. And since the main driver of cost in higher education is faculty salaries, there are no savings to be had. As salaries rise in other professions that require considerable postsecondary education, so must university salaries.

But at best, this theory can only explain a portion of the costs of higher education. That’s because Baumol’s “disease” really only applies to one part of a professor’s job—the in-person delivery of education, e.g. the lecture or discussion. This, in turn, is only one part of the total activity of a university. 

To be fair, however, the important task of classroom teaching has changed little over time. But what the theory ignores are the important advances in the technology that support higher education, that have enabled the faculty to become much more productive than even a half-century ago.

These advances have occurred in four major areas of higher education delivery:

Assessments: At one time, oral examinations were the main form of assessment. Later, these viva voce exams gave way to written tests, which were graded by hand. Then, in the 1970s, the advent of the Scantron allowed professors to supplement written exams with multiple-choice sections. Even such seemingly minuscule factors as students switching from handwriting assignments to typing them has saved professors considerable time; they no longer have to interpret students’ poor penmanship.

Today, new web-based technology has helped move many assessments (including homework) online. These online forms allow for various question types (including multiple choice, short answer, matching, fill-in-the-blank, and essay). They also offer plagiarism- and grammar-checkers for essays and research projects submitted online. Together, these tools allow professors to grade more exams or problem sets in less time.

Research: Veteran professors have seen revolutionary change in research methods during their careers. Many first conducted empirical research using punch cards, which took hours to process results. Today, research faculty have far better options for data processing, many that use simple (and fast) point-and-click commands. 

Access to academic literature has also improved. Researchers were once restricted to the information they could physically access in a local library or, later, through inter-library loans. Today, university libraries subscribe to thousands of academic journals electronically. Complicated searches can now be conducted without consulting a card catalog or even leaving the office.

Communication: Communication with students is easier than ever. For example, online versions of syllabi, complete with calendars, due dates, and FAQ sections, mean that students don’t have to bother their professors with questions to which they should already know the answers. Professors can now email all their students at the same time with the click of a button. Grades are posted online instead of in the hall outside a professor’s office. Communication about grades, study tips, and missed classes is now quicker and more painless than ever. 

Lectures: The “sage on a stage” format has also evolved. Teaching assistants allow universities to supplement large lecture courses with small discussion sections. The advent of film and then the Internet meant that lectures in topics that rarely change (like physics or ancient history) can be recorded once, then used many times—often to “flip” or blend a classroom.

Given these advances in technology and others too numerable to mention here, it becomes clear that higher education only partially resembles a symphony performance. There have, in fact, been many productivity gains since higher education’s inception. Professors can complete all of their non-classroom activities much more efficiently than they could in the past.

Yet the performance of students has not measurably improved. Quite the contrary; many graduate without gaining making significant gains in knowledge or critical thinking skills. Others drop out because they find little value in what’s offered.

But it is the failure to control costs that is most obvious. They have increased every year—for students, parents, and taxpayers. Even many schools that are small and relatively “cost-conscious” have barely managed to hold the line on tuition increases. In an era when everything else is getting cheaper, this is not good enough.

The reason efficiency increases have not been passed to students and others is that universities have kept their savings on campus instead of sharing them. Those savings have been used to shift professors’ time from teaching to research and to hire more administrators and professional staff at ever-escalating salaries.

Economist Andrew Gillen analyzed the number of classes that tenured and tenure-track professors taught between 1988 and 2004. He found that the average teaching load declined 25 percent—from 3.6 to 2.7 courses per term. At research-intensive universities, the typical professor teaches just 1.8 courses. However, he found that similar declines occur at every type of higher education institution in the U.S., including at community colleges. Given current trends, it’s likely that professors teach even fewer courses today than they did in 2004. According to Gillen: 

Universities are shifting their priorities. Teaching loads have been declining primarily because research has been increasingly prioritized by both universities and faculty. For faculty, publish or perish has come to dominate tenure and promotion decisions; for institutions, bringing in research dollars is a mark of prestige. As a result, both colleges and their faculty are putting more emphasis on research…at the cost of teaching.

Administration, too, has grown. According to an analysis of federal figures by the American Institutes for Research and the New England Center for Investigative Reporting, the number of non-academic administrative and professional employees at U.S. colleges and universities more than doubled between 1987 and 2011. The growth in these administrative positions vastly outpaced the growth in the number of students or faculty.

Not only has the number of administrators grown, so has their pay. As Jesse Saffron and I showed here, “2.17 percent [of UNC’s employees], earn more than $200,000 and 6,243, or 13 percent, earn more than $100,000.”

Higher education’s gains from productivity should be put to better use. As it stands now, amazing innovations in teaching and education delivery are benefiting the system instead of the student. Universities should take advantage of the efficiencies that exist by decreasing administrative staff and insisting that faculty teach more. Only then will students benefit from the recent innovations in higher education.


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