Today, the New York Times reports that, “the rising cost of college — even before the recession — threatens to put higher education out of reach for most Americans,” rapidly outpacing increases in family income … and even outpacing increases in health care expenses. Citing a report by the National Center for Public Policy and Higher Education, the paper reveals that, “college tuition and fees increased 439 percent from 1982 to 2007, adjusted for inflation, while median family income rose 147 percent. Student borrowing has more than doubled in the last decade, and students from lower-income families, on average, get smaller grants from the colleges they attend than students from more affluent families.”

I touched on the “cost disease” of higher education a bit in my doctoral dissertation:

Baumol and Wolff (1998) state that, “improving education is the approach that is most likely to have substantial and lasting results” (p. 5). Education, however, is subject to his second prediction, a “cost disease” hypothesis, which describes a productivity lag in labor-intensive industries that struggle to keep pace with accelerating change (see esp. Baumol & Bowen, 1966; Baumol & Towse, 1997). This results in reduced growth in productivity, and, as a result, the cost of educational services increases. Writing on Baumol’s related work on rising costs in the performing arts services sector, Heilbrun (2003) states the cost disease problem is not necessarily bleak: “The problem of productivity lag exists only because there is persistent technological progress in the general economy which causes a rise in output per work hour and in real wages, in other words a rise in per capita income, which, in turn, increases the demand for the arts” (p. 99).

But, there’s more. The recession is impacting the ability of states to cushion against rising college expenses, with many considering reducing contributions to public universities. Coupled, however, with the unique element of this particular economic downturn that makes it difficult for students to secure student loans, the middle class is particularly stressed and may lead to a larger gap in higher education access. Is public education becoming a luxury for the wealthy?

References

Baumol, W. J., & Bowen, W. G. (1966). Performing arts, the economic dilemma: A study of problems common to theater, opera, music, and dance. New York: Twentieth Century Fund.

Baumol, W. J., & Towse, R. (1997). Baumol’s cost disease: The arts and other victims. Cheltenham, UK; Northampton, MA, USA: E. Elgar.

Baumol, W. J., & Wolff, E. N. (1998). Side effects of progress. Annandale-on-Hudson, NY: Jerome Levy Economics Institute of Bard College.