NCPA - National Center for Policy Analysis

Addressing the Declining Productivity of Higher Education

April 24, 2013

Higher education productivity, as measured by academic degrees granted by American colleges and universities, is declining, says Douglas N. Harris of the American Enterprise Institute.

  • Since the early 1990s, real expenditures on higher education have grown by more than 25 percent, now amounting to 2.9 percent of US gross domestic product (GDP) -- greater than the percentage of GDP spent on higher education in almost any of the other developed countries.
  • But while the proportion of high school graduates going on to college has risen dramatically, the percentage of entering college students finishing a bachelor's degree has at best increased only slightly or, at worst, has declined.

The downward slope is steepest among universities, where current productivity is less than half of what it was 40 years ago.

  • Even when adjusted for the growth in overall labor costs in the economy, the decline in bachelor's-degree production is nearly 20 percent.
  • If these declines continue, maintaining the current rate of bachelor's-degree production will cost an additional $42 billion per year 40 years from now.
  • Thus, even if state support for public higher education did not continue to decline, tuition would have to increase by an average of $6,885 per full-time equivalent (FTE) student in public universities to maintain current spending, almost doubling today's tuition.

What accounts for declining productivity in higher education? Most analysts point to the role of rising costs, and others focus on declining degree attainment. Collectively, these explanations reinforce a widespread perception among higher education administrators and many scholars that productivity is impossible to control.

In his paper, Harris shows that policymakers and college leaders do in fact have some control over productivity, but generally lack the information necessary to take the appropriate steps toward improvement. Specifically, decision makers have little information about which programs, policies and resource decisions are most cost-effective. Relative to other areas of public policy, cost-effectiveness analysis is rarely applied to specific education policies and programs. Even research that looks at the higher education system as a whole rarely considers the relationship between the costs and output -- that is, productivity.

Source: Douglas N. Harris, "Addressing the Declining Productivity of Higher Education using Cost-Effectiveness Analysis," American Enterprise Institute, April 11, 2013.


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