BLS’ Inflation Measures Take With One Hand…

Not What It Used to Be: American Universities Represent Declining Value for Money to Their Students,” The Economist.

Consider this:

The cost of university per student has risen by almost five times the rate of inflation since 1983 (see chart 1), making it less affordable and increasing the amount of debt a student must take on … Universities cannot look to government to come to the rescue. States have already cut back dramatically on the amount of financial aid they give universities. Barack Obama has made it clear that he is unhappy about rising tuition fees, and threatens universities with aid cuts if they rise any further.

Figure 1

So which one is it, Economist? Are the fees going up or are state governments cutting spending? The causes of inflation are important if you want to argue it’s a problem.

Here’s my variation on the Economist‘s chart; you may’ve seen similar displays elsewhere:

CPI & Median Family Income

You’ll have to dumpster-dive into the BLS’ inflation tables to get these data, and the Census Bureau has median family income tables.

The real increases look something like this:

CPI & Median Family Income Growth Rates

Real College Tuition Growth Rates

Notice how the last two humps coincide with recessions? That’s because the BLS combines public university tuition increases (due to lost state funding) with private university tuition increases (more spending), which dilutes the utility of the BLS’ inflation measurement.

Now for the killing blows.

CPI Growth RatesMedian Family Income & College Tuition

(Digest of Education Statistics)

This isn’t to say that everything else in the Economist‘s article is wrong or that all public universities are model state apparati, especially when these numbers include the notorious California systems. It does, however, suggest that private university education is significantly less affordable than in the past but public education isn’t so savagely overpriced. The problem is whether the time spent in higher education improves people’s productivity for jobs that need it or if it’s just “middle class” ticket-punching.

Fortunately, the enrollment ratio is in public universities’ favor, in 2009 there were about 7.7 million fall enrollments at 4-year public institutions while there were 5.2 million at 4-year private institutions. There were another 7.1 million people in public 2-year institutions versus 420,000 in private 2-year programs.

I point these things out because they reminds us that context matters when discussing inflation indexes. Even if they’re accurate, they might not measure what you think they’re measuring, and they might fail to separate the costs of different tiers of goods, like public vs. private higher education.

Thus, my fear isn’t a mass of over-indebted college students getting hosed out of their futures; rather, it’s a minority of over-indebted college students (like private law school grads) whose concerns are easily ignored by the government.

4 comments

  1. Damn it! You keep beating me to the punch! I saw this same article in the economist and thought, well it must be getting bad if they’re talking about it again (they did a law school story a while back).

    Great write up, maybe someday the facts will kill the myth.

      1. I’m just kidding. Still, it is interesting to note the rapid (though not unexpected changes). I’m interested to see how these events converge together (rising defaults, growing transparency into the endeavor–i.e. higher ed, and a weak job market for the acquired skills) and the result.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s