Higher education is a labor-intensive industry whose primary service, instruction, is delivered by a lecturer, accompanied by administrative support and various other services. Growing student enrollment necessitates some additional staffing; however, one would think that the recent and ongoing technological boom would have lessened the labor burden at colleges, but a close examination of the data suggests otherwise. In fact, the data reveals that colleges have generally increased their staff relative to enrollment and the number of degrees awarded, especially in the back office.

One problem, critics claim, is that an onerous regulatory environment has been established that requires a myriad of regulations and reporting requirements, which are often unnecessary and redundant in nature. In order to comply with the government's requirements, colleges need to employ a staff that is responsible for providing the multiple state and federal agencies with compliance reports and data. This may be one piece of the puzzle, but it certainly does not tell the complete story of the burgeoning administrative staffs in higher education.

This report will analyze employment trends and labor productivity at institutions of higher education over the past twenty years. What I find is that colleges have altered the composition of their work force by steadily increasing the number of managerial positions and support/service staff, while at the same time disproportionately increasing the number of part-time staff that provides instruction. Meanwhile, employee productivity relative to enrollment and degrees awarded has been relatively flat in the midst of rising compensation.

Financial aid programs are supposed to improve access and affordability in higher education. The effectiveness of these programs is increasingly being questioned as college attainment figures stagnate and the financial burden on students and families continues to climb year after year. This report identifies the main culprit for this unsatisfactory state of affairs as a misunderstanding of the effect of financial aid on schools.
Currently, financial aid programs take costs per student as a given, and attempt to offset some of those costs. However, costs are not given. In fact, it is widely acknowledged that colleges and universities are engaged in an academic arms race. Thus, when financial aid programs make more money available to schools, this money is spent and results in higher costs per student. The end result is more costly higher education, generally accompanied by higher tuition, which has negative implications for access and affordability.
Financial aid that is restricted to low-income students (allowing them to pay current costs at their school) will not materially contribute to the arms race. The effect of such aid will be to improve access, affordability and equality of opportunity. However, when aid is made available to students who can already pay the current costs, the schools are likely to capture the aid money and spend it--which contributes to the arms race.
Thus, to avoid providing fuel for the arms race, financial aid needs to be well targeted. Current financial aid programs generally do not meet this requirement. State appropriations and other lump sum payments are particularly bad in this regard, as are the federal tax credits. When income limits on federally backed loans exist, they are generally too high. The only large program that does not contribute to the arms race is the means-tested Pell grant program.
This report therefore argues for the elimination of most current financial aid programs (including state appropriations) and for the creation of Super Pell grants. A revised student loan program would likely be needed to fill any funding gap.

The prevailing view among leaders in the university community is that America is not investing enough in higher education. A recent survey of the American economy by the Organization for Economic Cooperation and Development (OECD) echoed that concern. After all, college graduates are dramatically more productive than those without higher education preparation, and America is falling behind other nations in the proportion of the adult population with college degrees. National competitiveness and economic well-being are at risk, or so it is argued. The conventional wisdom downplays the concerns about rising costs, particularly soaring tuition fees.

One argument is that the cost explosion is an illusion: "net tuition fees" (sticker tuition prices minus scholarship aid and loans) have risen less dramatically than gross tuition fees (published rates). Americans think college costs are greater than they really are. Besides, the rate of return of a university education remains high, since the earnings differential associated with college has risen over the past several decades in tandem with fees, maintaining a high return on the financial investment. Yet I think most of these arguments are flawed, even downright wrong.

An excellent case can be made that we are over invested in universities, that too many students attend school, that much of our investment is wasted. Moreover, the rise in costs -- to society, to taxpayers, and especially to consumers -- is excessive, and has been made more so by well meaning but inappropriate public policies. The law of unintended consequences looms large in any discussion of America's colleges and universities.

This study is not a comprehensive blueprint for reform in the system of higher education in North Carolina. Its purpose is to present factual evidence suggesting that the system of universities is deserving of greater public scrutiny. The evidence also shows areas where reform is needed the most -- cost containment, for example.And we will make some suggestions of areas where cost containment might legitimately occur. And while the system has many defects, we are the first to acknowledge that it is possible to have a wonderful collegiate experience in North Carolina and that some very fine research is conducted in the state that has had positive social benefits. Yet the issue is: can North Carolina use its resources in a better way, one that will improve the quality and affordability of its higher educational services?

This paper is about a court case decided by the U. S. Supreme Court in 1971. Although attorneys recognize that the case is important to businesses, its impact on colleges and universities has been explored by only a few. As this paper will show, Griggs v. Duke Power may have enormously boosted the number of students in college and may have increased the differential in income between high school and college graduates. It may have led to higher tuition, without providing commensurate additional value.
Indeed, it could even be a judicial decision whose economic implications have been matched by only a few far more celebrated cases in history such as Gibbons v. Ogden (1824), the Dred Scott decision (1857), and the Schechter Poultry case (1935). The hypothesis of this paper is that Griggs turned a college degree into a "credential." The content of the education did not change, but the degree -- the sheepskin -- became a necessary first step for a decent job.
Today, for many jobs, only a degree opens the doors of potential employers' offices. It does not ensure a job -- college graduates often say that it is just a "fishing license" -- but it assures the employer that an applicant has at least a minimum level of skill and accomplishment. In the eyes of an employer, a degree demonstrates that the applicant passed a certain number of classes,
completed outside reading, wrote at least a couple of papers, thought critically, and was able to manage his or her life in a way that led to graduation. Such skills -- determination, critical thinking and writing, organization, and independence -- are often valued by employers.
Providing such assurance to employers did not always require a college degree, and this credentialing function did not happen by chance. Through a series of court rulings and subsequent legislation, a cumbersome set of legal rules has developed that make it difficult for employers to use testing to find out if an applicant is intelligent, capable, and diligent. As we will see, fear of litigation is always in the background. For many jobs, a college degree has become an alternate means of "testing."
This paper will describe Griggs, the environment from which it emerged, and the subsequent judicial and political activity that created such great constraints on testing. It will discuss testing today and then provide economic information suggesting the magnitude of the changes that Griggs may have instigated. While this paper does not "prove" the educational and economic consequences of Griggs, it suggests that additional scholarly work on the impact of Griggs on higher education is appropriate.

This report documents the latest trends in net tuition for American higher education. Affordability has become a topic of concern for many, but there is a lack of information on the relevant concepts of tuition, primarily published vs. net. This report seeks to shed light on this topic.

While few doubt that published tuition rates (sticker price) have been increasing at alarming rates, it is often argued that "net tuition," or the out of pocket expense, for students is much lower because of financial aid. This report shows that with few exceptions, financial aid has not increased sufficiently to offset increases in published tuition. In other words, the net tuition paid by students is higher now than it was five years ago.

Higher education during the twentieth century underwent drastic changes as reformers forcefully argued education was the business of the state, and society could be improved by strong, publicly backed schools (Coulson 1999). Often proponents of state-sponsored education on the left argued the government should use education as a way to shape the minds of the nation's citizens, who were not responsible enough to take care of their own education properly (Coulson 1999). On the right, similar arguments were used as special interest groups saw the government as a means to influence what went on in the classroom. Consequently, the government stepped into the higher education arena, in part, by arguing people were not competent enough to oversee their own education. While the data for this period are scarce, it is safe to say for the period 1890 -- 1972, for-profit colleges were increasingly marginalized by the growth of highly subsidized public institutions (Breneman et al. 2006; Kinser 2006; Ruch 2001).

Starting in the mid-1970s and accelerating through the 1980s and 1990s, for-profit education underwent a renaissance, due in large part to the 1972 reauthorization of the Higher Education Act, which increased the amount of government student aid available to for-profit schools (Kinser 2006; Turner 2006). During this era, the broadened scope of Pell Grants gave rise to an increasing number of for-profit universities offering associates, bachelors, and graduate degrees (Turner 2006). Since 1976, for-profit enrollment has grown at an annualized growth rate of about 11 percent, increasing by a factor of nearly twenty-three. For-profits'market share of higher education has gone from 0.4 percent to nearly 6 percent (U.S. Department of Education, National Center for Education Statistics, 2006a). The robust resurgence of for-profit schools suggests America's nonprofit colleges are failing to meet fully the people's needs. As a result, for-profits are stepping in to meet market demands their highly subsidized counterparts have chronically failed to satisfy. These recent and rapid developments have once again brought for-profit education national visibility.

Until relatively recently, both the price of housing and tuition at America's institutions of higher education were rising at unsustainable rates.As the late economist Herbert Stein once said, "Anything that can't go on forever, won't." His prophecy has proven correct for the housing market.
By 2007, house prices were falling in many parts of the country, a trend that showed signs of spreading and accelerating in 2008. College tuition, however, continued its ascent. It would seem only a matter of time before these "unsustainable" increases in tuition cease and likely reverse, but as we have seen with the dot-com bubble and now the housing bubble, readjustments can be very painful. Thus, if tuition increases truly are unsustainable, we should aim to minimize any bubble in the interest of avoiding additional pain -- such as school closures and large-scale student dislocations -- from the inevitable readjustment. Intriguingly, the housing bubble offers some insights into what might be termed the "tuition bubble."