Universities Are Not Walmart

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Just recently, the e-zine Salon.com ran a piece bearing the provocative title, “The Walmart-ization of higher education: How young professors are getting screwed.” It wins my prize for the most bizarre think-piece of the year.

The author, Keith Hoeller, considers the move in higher education to replace tenure-track professors with lowly adjuncts. To him, this is apparently as shocking as it is surprising.

He begins by noting that various surveys of workers show that tenured professors are a pretty happy bunch. They average over $90,000 a year in total compensation, for only nine months work, and they report low levels of job stress, high levels of job satisfaction, and so on. This is hardly a surprise. Getting tenure means never having to hear “you’re fired.” Tenured professors are virtually immune from termination, no matter how poor their job performance.

The first strange thing about Hoeller’s article is that it isn’t reporting anything new. The shift from highly-paid tenured professors to lowly-paid adjuncts has been going on for decades. The article’s deeper flaw its author’s use of Walmart as a slur.

Yes, Walmart uses a lot of part-time labor, as do most other retail and service industries. (The frequency of part-time work is increasing rapidly as the full implementation of that crazy-quilt law called ObamaCare grows nigh). But the resemblance ends there. Walmart, so despised by bien pensant literati, has succeeded in lowering its prices dramatically, on a vast array of consumer goods, and has done so since its inception. Walmart saves the average American family — all American families, including those of elitists who refuse to shop there — something like $2,300 per year. Its costcutting measures, including of course labor-saving measures — which go way beyond using part-time labor — have benefitted all consumers with lower prices and better goods, and Walmart investors with a good return on their money.

Walmart, Target, Costco and so on continue to deliver more for less, while the higher education system business only continues to deliver less for more.

In stark contrast, colleges have systematically screwed their consumers and investors. Consider first the consumers, i.e. students. During the past few decades, they have seen their tuition rise much faster than inflation — while the service rendered has steadily deteriorated. The deterioration takes the form of watered-down courses, degrees in vacuous subjects, and rampant grade inflation. Over the past decade in particular, students have had to run up huge amounts of loan debt getting degrees that have proven worthless in terms of career placement.

The investors in these colleges, the taxpayers (for public schools) and the donors (for private ones), who have seen graduation rates dwindle and the employability of recent college grads — only 56% of whom are in jobs appropriate to their training — plummet, are also being swindled.

The Hoeller piece doesn’t address the damning context of the increased use of academic part-timers: the fact that such savings in labor costs have not even slowed the explosion of costs to the students, and the fact that the services rendered have dropped in quality. The proximate cause is, of course, administrative bloat.

Bloat is the focus of a recent article by Jon Marcus of the New England Center for Investigative Reporting. Marcus reviews a report from the Delta Cost Project (also reviewed by the Chronicle of Higher Education) on the rapid growth in college administrative staff. Marcus reports that the growth in the number of college administrators has greatly exceeded the growth in both the number of students and the number of faculty. Over the past 25 years, colleges and universities have increased the number of their administrative staff by 517,636. During that time, the ratio of nonacademic employees to faculty has doubled. We now see two non-academics for every tenure-track or tenured professor at public universities, and a ratio of two and a half to one at private colleges.

Growth in this area is especially strong at the central offices of public college and university systems. For example, the headquarters of the California State University system has a separate budget that exceeds the budget of three of its campuses!

Marcus cites economist Robert Martin making the point that so eluded Hoeller: “While the rest of the economy was shrinking overhead, higher education was investing heavily in more overhead.” Walmart, Target, Costco and so on continue to deliver more for less, while the higher education system business only continues to deliver less for more.

Marcus notes that in constant dollars, tuition and fees have nearly doubled at private four-colleges, and nearly tripled at public four-year colleges, over the last quarter-century. And during this period, the ratio of part-time to full-time faculty has gone from about one-third to about one-half.

Naturally, administrators have a reply: they claim they are delivering more value to the consumers (students) and principals (taxpayers and donors) by creating and expanding offices for security, counseling, technology services, “sustainability,” disabled student services, and especially “diversity.” But skeptics rightly reply that these services don’t seem to have resulted in objectively measurable favorable outcomes. For example, over the past decade, Marcus notes, the percentage of students pursuing bachelor’s degrees — which can be completed in four years — and actually getting their degrees within six years has risen only slightly (from 55% in 2002 to 58% in 2012).

In constant dollars, tuition and fees have nearly doubled at private four-colleges, and nearly tripled at public four-year colleges, over the last quarter-century.

And several economists cited in Marcus’ piece made the obvious point that universities, to the extent they even need many of these services, could easily outsource them. As Robert Martin put it, “You can hire outside firms, on a contract basis, with competitive bidding. All these activities are a distraction from what the institution is supposed to be doing.”

What is causing the exploitation of adjuncts and the explosion in student fees is at base the same thing: a severe case of the principal-agent problem.

The managerial agents at American universities — the administrators — have achieved virtually total power over the institutions they manage, so much so that they view themselves as the true principals (owners). Of course, they’re not — the principals are the taxpayers, the donors, and the tuition-payers. But the administrators seldom see it that way.

Until this problem is solved, you can expect to see administrative bloat continue apace, enabled by the burgeoning ranks of the adjuncts — and by higher tuition, which is in turn fueled by the federal student loan program, a government program run amuck.

In fine, the American university system is as dissimilar to Walmart as you can get. Walmart has not been shafting its customers through management bloat, higher prices, poorer service, and lousier products, all fueled by massive federal subsidies. The American university system has.

Growth in this area is especially strong at the central offices of public college and university systems. For example, the headquarters of the California State University system has a separate budget that exceeds the budget of three of its campuses!

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