Tenure and the cost of college

Published 11:32 pm Wednesday, June 8, 2016

The cost of college has risen dramatically in recent decades.  According to the College Board, the cost of attendance at public and private universities has increased 78% and 60% over the last two decades, adjusted for inflation.  The Board’s net cost of attendance, which includes aid given by colleges to students, has increased somewhat less: 54% and 29% faster than inflation.  College graduates earn substantially more than high school grads, 60% or more on average, making access an important component of economic opportunity.  The potential that many Americans may be unable to attend college without taking on crushing debt has made higher education inflation an important policy issue.

One of the unique elements of the professorial life is tenure, commonly viewed as guaranteeing lifetime employment.  Many people presume that guaranteed employment makes professors lazy, which suggests that tenure may contribute to higher education inflation.  A closer examination I think reveals otherwise.

To begin, tenured faculty can legally be fired, as economists Ryan Amacher and Roger Meiners explain in their book Faulty Towers.  The authors served as a university president and provost respectively, and offer the insights of economists and administrators.  Tenure just increases the cost of firing a faculty member.  Yet even terrible tenured faculty are rarely fired.  Why is this?  Amacher and Meiners argue that the non-profit organization of private and public universities explains this, and their point provides insight on the challenge of controlling the cost of college.

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Top administrators must spend money to fire tenured faculty, including legal expenses and typically a settlement with the faculty member.  The costs of poor performance are less tangible and fall largely on students.  Managers of for-profit businesses might spend money to avoid alienating customers and reducing future profit.  Amacher and Meiners argue that without the bottom line of profit, university administrators will rarely bear this expense.  Non-profit organization generally serves universities well, but leads to some waste.

Tenure emerged about a century ago, while higher education inflation is a recent problem.  Colleges kept tuition in check for decades with tenure.  This suggests the influence of another factor, like Federal government financing since 1965, but that is a topic for another day.

Even though guaranteed employment might be presumed to result in slacking, most tenured professors work hard.  Tenure ensures that a university reflects the values of faculty, since firing all the tenured faculty is too costly.  Administrators must (at least sometimes) accommodate faculty demands.  Faculty work hard, but on things that we value.

Most faculty value the integrity of our courses and degree programs.  Tenure helps faculty resist pressures for grade inflation and the watering down of the curriculum, one of the ways tenure benefits universities.  Many faculty also value doing research, or writing books and papers with lengthy and incomprehensible titles.  Faculty produce lots of research; by one count, English professors have written over 20,000 papers on Shakespeare.  Reduced teaching loads give faculty time to do research, suggesting a possible link to cost.  But the inflation-adjusted cost of instruction per student has increased only slightly in recent decades.  Administration and student services are the components of spending that have been growing much faster than inflation.

Furthermore, faculty research contributes to a university’s reputation and so is not a pure cost.  A strong reputation raises the value of degrees, both on the job market and for admission to graduate school.  The connection is imprecise, and because reputation is often based on the opinions of university administrators (themselves mostly former faculty), reputation based on research may be self-referential. Pursuing reforms unlikely to control higher education inflation has two costs.  First, reforms almost always add to administrative costs, which are driving higher education inflation.  Second, reformers could waste an opportunity to do something that would address the problem.

Higher education inflation demands serious examination.  But despite the appearance of waste, the connection between tenure and rising costs seems at best weak.  Of course, as a tenured professor, I may be hopelessly biased on this issue.

Daniel Sutter is the Charles G. Koch Professor of Economics with the Manuel H. Johnson Center for Political Economy at Troy University and host of Econversations on TrojanVision.  Respond to him at dsutter@troy.edu and like the Johnson Center on Facebook.

About Dan Sutter

I am the Charles G. Koch Professor of Economics with the Manuel H. Johnson Center for Political Economy at Troy University.

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