NCPA - National Center for Policy Analysis

COLLEGE SHEEPSKINS ARE A BAAD INVESTMENT FOR STATES

June 22, 2005

The plea from all university presidents is the same: more money please. They argue that if the government invests more money in higher education the economy will grow. In a sense this is true; but, increased funding for universities does not lead to greater prosperity, in fact, it may even reduce it, says Richard Vedder (Forbes).

A comparison of the growth in real per capita income of states that spend more on higher education than states that do not supports Vedder's assertion.

  • Low-support state New Hampshire surpassed neighboring Vermont on nearly all economic measures, even though Vermont spent more than twice as much of its personal income on higher education (2.3 versus 1.15 percent).
  • Missouri, another low-support state (1.32 percent), grew faster than its neighbor Iowa (2.41 percent).
  • Additionally, Vedder compared 10 states with the highest state funding with the 10 lowest and found that the low-spending states had a median growth rate of 46 percent in real income per capita versus 32 percent in high-spending states; the median income for low-spending states was found to be $32,777, or 27 percent higher than high-spending states.

Vedder says colleges have devoted little funding to the core mission of instruction. Instead, they prefer to "assist research, hire more nonacademic staff, give generous pay increases, support athletics and build luxurious facilities."

  • In 1976, three non-faculty professional workers were hired for every 100 students; since 2001, that number has doubled.
  • Additionally, nearly 40 percent of students fail to graduate within five or six years.

Moreover, he says, taxes reduce private-sector activity, so increasing funding to universities would move resources from the relatively productive private sector to the less productive and efficient sector of higher education. The cure, concludes Vedder, is for state governments to slash their support.

Source: Richard Vedder, "College Is a Bad Investment," Forbes, June 20, 2005.

 

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