3 Reasons Why College Is So Expensive

Madison
Jerome De Perlinghi/for NPR

Consumer prices and average hourly wages are both nearly four times as high as they were 30 years ago. College tuition and fees are more than 10 times as high as they were 30 years ago, the Economist noted today.

Why has the cost of college risen so much faster than the cost of everything else?

Here are three possibilities.

1. College is worth more

The income gap between people with college degrees and those with only a high-school diploma has exploded in the past 30 years.

In 2008, young men with a college degree made 42 percent more than those with only high school degrees, up from 16 percent in 1980. For women, the gap was 44 percent in 2008, up from 26 percent in 1980. (Those numbers are based on this table.)

So the economic value of college is higher, and it's rational for colleges to charge more.

2. Colleges rely on high-end labor, which has become more expensive.

As a pair of economists argued in Forbes last month:

Starting in the late 1970s, the cost of hiring highly educated people began a sustained rise. This has driven up costs in any industry that cannot easily shed expensive labor.

And, they say:

...like many personal services, including much of health care, the law and banking, higher education remains essentially an artisanal industry. These are industries in which technological progress has not reduced the number of labor hours needed to "produce" the service. By contrast, labor productivity in basic manufacturing has soared, and this is why the cost of a year of college has gone up compared with the purchase price of a basic car or a basket of groceries.

3. Colleges don't compete on price.

The Economist argues:

The big problem is that high-status institutions such as universities tend to compete with each other on academic reputation (which is enhanced by star professors) and bling (luxurious dormitories and fancy sports stadiums) rather than value for money. This starts at the top: Yale would never dream of competing with Harvard on price. But it also extends to second-division universities: George Washington University has made itself fashionable by charging students more and spending lavishly on its facilities.

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