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November 14, 2005

Cashing in in higher education

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Higher education is a huge industry in the United States, and a rich one, privileged with multiple tax exemptions, able to extort crippling levels of tuition from parents anxious to ensure their children get a running start at a lucrative career.

Once upon a time, not so long ago, genteel poverty was the expectation of those entering higher education as a career. In return for abundant vacations and the ability to choose one's interests as the focus of work life, presumably intelligent people chose university life over law, medicine, business, and other professions. The ability to spend life in a pleasant campus setting, surrounded by young minds eager to be shaped into adults, has its compensations.

Today, it iseems, it's all about the money. The San Francisco Chronicle has been doing wonderful journalism (credit,wll—deserved) uncovering sweetheart deals for top administrators at the University of California, leading to the resignation of the number two person in the UC system.

Today, the Chron presents the stunning information that no fewer than 2,275 people at UC earned more than $200,000 last year, while 496 got more than $300,000. Both numbers are up very substantially in the past two years — as much as 30%.

The Boston Globe, for its part, presents the results of the annual survey by the Chronicle of Higher Education of the salaries of university presidents. It finds that it is no longer uncommon for compensation to exceed a million dollars.

I have no particular prejudice against people in higher education earning good money. I used to be a professor myself, and did not suffer economically, thanks to consulting income the exceeded my salary. But higher education is a classic oligopolistic industry, greatly in need of healthy competition and structural reform. Tuition has increased at double the level of inflation for generations, to the point that many upper middle class families sacrifice their security to pay for four years of education.

A good place to start would be to apply anti—trust laws to collusion on tuition and scholarships, and to enforce transparent accounting standards and full disclosure of comopensation on these tax exempt institutions.

Thomas Lifson  11 14 05