Monday, June 3, 2019

The myth of administrative bloat in Higher Education (Michael Simkovic)

In a recent Wall Street Journal op-ed, Professor Philip Hamburger of Columbia calls on the federal government to impose restrictions on access to student loans to discourage universities from hiring more administrators relative to the number of tenured faculty members. 

I sympathize with Professor Hamburger’s desire to strengthen the role of tenured faculty in university governance.  But stripping universities of resources—or giving universities perverse incentives to evade anti-administration regulations by outsourcing or automating managerial tasks when it is costlier and less effective to do so—is not the right way to accomplish such goals.

Hamburger justifies federal interference with colleges’ and universities’ internal personnel decisions on the grounds that there is “administrative bloat” in higher education, and that such “bloat” is wasteful and leads to bad outcomes.  The evidence he presents to support this claim is that there are more administrators in higher education, relative to changes in the numbers of tenured faculty or students, than there used to be.

But the growth of managerial and administrative employees as a share of the workforce is an economy-wide phenomenon, not one that it is unique or unusual for higher education.

As I’ve discussed previously, compared to higher education, many industries in the private sector pay administrators more.  Compared to higher education, many private sector industries also employ more managerial employees as a larger share of the workforce.

There is no evidence of “administrative bloat” in higher education.  To the contrary, colleges and universities dedicate a much lower share of their workforce to managerial occupations than other industries such as real estate and construction, financial services, energy, entertainment, software and technology industries, religious organizations, professional services, and architecture and engineering firms. (OES data here).  

Higher education is about on par with chemical manufacturing, clothing retailers, and freight transportation with respect to its use of managerial employees.

There are good reasons to believe that public and non-profit educational institutions manage themselves well when left to their own devices.  Higher education is much better, and much more widely available than it once was.  Earnings premiums are higher, and increase (after controlling for student characteristics) when universities spend more per student.  Completion rates are growing, after controlling for students’ race and institution type.  Educational attainment is also higher. 

These changes might relate to the increase in administration.  More diverse and less elite student populations might require more in the way of administrative support programs.  A more specialized faculty may require more administrative support to handle routine tasks and free the faculty to focus on their areas of expertise in research and teaching.

Rather than attempting to divide university communities internally—for example, by pitting faculty against administrators—it would be far more productive to focus on increasing the total amount of public resources dedicated to higher education.  At only 3% of GDP and with rates of returns that are often higher than private sector investment, there is ample room for more public investment in education.

To the extent that some administrators engage in unproductive busy-work, this is likely to be due to regulatory and reporting requirements imposed on universities by federal and state governments and agencies. 

Some of these regulations may be unnecessary and counter-productive.  Before rushing to impose new—and perhaps ill-conceived—regulations on universities, regulators should think long and hard about lifting some of the mandates they have imposed in the past.  Compliance costs are only a symptom.  Regulation is the cause.

Guest Blogger: Michael Simkovic, Of Academic Interest | Permalink