June 03, 2019
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.
April 23, 2019
New study finds little evidence that federal student loan limits drive tuition at professional schools (Michael Simkovic)
Robert Kelchen, Does the Bennett Hypothesis Hold in Professional Education? An Empirical Analysis, Research in Higher Education 1-26 (2019):
"Policymakers have been debating the Bennett Hypothesis—whether colleges increase tuition after the federal government increases access to student loans—for decades. Yet most of the prior research has focused on studying small changes to loan limits or Pell Grants for undergraduate students. In this study, I examine whether business schools (the most popular master’s program) and medical schools (one of the most-indebted programs) responded to a large increase in federal student loan limits in 2006 following the creation of the Grad PLUS program by raising tuition or living expenses as well as examining whether student debt burdens also increased. Using two quasi-experimental estimation strategies and program-level data from 2001 to 2016, I find little consistent evidence to support the Bennett Hypothesis in either medical or business schools."
Hat tip Frank Pasquale.
April 18, 2019
In the United States, both Democratic and Republican politicians sometimes attempt to bolster their populist credibility by going after easy targets--attacking pharma companies, or doctors, or insurance companies or banks or universities--while being elitists where it really counts: cutting taxes for billionaires and raising taxes on the middle class.
French president Emmanuel Macron, who recently faced angry protests after making France's tax system more regressive, is taking a page out of the American playbook by threatening to close ENA, an elite institution that trains the upper echelons of the civil service and corporate managers.
In knee-jerk populist logic, making civil servants less well-educated and less competent somehow makes up for taxing the middle class more heavily to provide tax relief to the wealthy.
April 10, 2019
New study sheds light on why female law firm associates are less likely to make partner (Michael Simkovic)
A rigorous new study by Ghazala Azmat and Rosa Ferrer finds that much of the difference in employment outcomes between male and female law firm associates is attributable to men billing more hours (not simply working more hours; doing more work that is billable), bringing in more revenue, and having greater aspirations to make partner. (Summary available here).
After controlling for these differences, there is still evidence consistent with some sex discrimination (albeit directional and no longer statistically significant), but discrimination appears to be far less severe than many earlier studies had suggested. Those earlier studies had less information about differences in employee performance. Questions remain about whether discrimination could lead female law firm associates to have fewer opportunities to do billable work or to network and generate business, although Azmat and Ferrer find some evidence against this. Consistent with previous studies, child-rearing has a more negative impact on women than on men through greater reductions in work hours and revenue generation.
The results suggest that ambitious associates--of either sex--can increase their chances of making partner by prioritizing billable work and revenue generation over other uses of their time.
April 09, 2019
AccessLex Institute released a new report, Examining Grad PLUS: Value and Cost, showing the primary criticisms of the Grad PLUS loan program—unchecked rises in tuition and the potential cost to the federal government—are either nonexistent or substantially overestimated.
March 22, 2019
George Mason donor-contract disclosure case will be heard by the Virginia Supreme Court (Michael Simkovic)
A student group, Transparent GMU, has sued the George Mason University Foundation to try to force disclosure of donor contracts with the the Charles Koch Foundation and other conservative billionaire-backed foundations and re-granting organizations.
George Mason is a public university. A limited number of George Mason's donor contracts have already been disclosed. Some of these contracts gave donors an inappropriate degree of influence which critics say may have politicized research. However, contracts between donors and the George Mason University Foundation are at issue in the lawsuit.
A law clinic unofficially affiliated with George Mason University actively harassed climate scientists because of their research on global warming. The clinic was led by a George Mason adjunct, staffed by George Mason students who received academic credit through a law-school-approved externship program, funded by donor groups similar to those supporting the law school, and named after George Mason, but was not officially part of the law school or under the control of its dean.
The ultimate identity of many donors to George Mason and embedded think tanks and foundations on campus remains shrouded in mystery because of the use of re-granting organizations and donor-advised funds, but there are links to a group of prominent and politically powerful conservative billionaire families.
The George Mason University Foundation won the disclosure case at the circuit court level, but the case is now heading to the Virginia Supreme Court.
The case could have important implications for many universities who have received substantial donations from donors with strong ideological views. Public universities could be especially vulnerable to disclosure lawsuits.
The advocacy group UnKoch my campus, which seeks to promote academic freedom and integrity by limiting donor control over university research, and the AAUP have developed kits to help universities ethically accept donations without impinging on academic freedom and academic integrity. Some prominent conservative donors to law schools and universities, such as the Olin Foundation, have excellent reputations for respecting academic freedom.
- Ave Maria and its law school (see also here),
- George Mason University, George Mason University School of Law, the George Mason University Foundation, the Mercatus Center at George Mason, and the Institute for Human Studies at George Mason, and the George Mason Environmental Law Clinic.
- The University of Chicago (and its law school),
- Hillsdale College
- Harvard and its law school
- Stanford, its law school, and The Hoover Institute
Of the leading 5 academic recipients from conservative donors, only George Mason is a public university. Leading public university recipients include University of Oklahoma, Michigan State, the University of Virginia School of Law, and the University of Arkansas.
I am not aware of any database that tracks donations from ideologically left-wing groups. If readers know of such a database, please direct me to it and I will update this post to include a list of leading recipients from liberal groups.
Some critics worry that UnKoch myCampus's tactics at times might go too far and could make colleges and universities reluctant to accept funding that supports rigorous, unbiased, and non-ideological research which happens to be funded by conservative groups.
Updated 3/26/2019: This article has been corrected to note that Transparent GMU, and not UnKoch myCampus, is the party to the lawsuit seeking disclosure and that the George Mason University Foundation, rather than George Mason University, is the defendant.
March 20, 2019
Last night I was invited to appear on Tucker Carlson’s show on Fox News. For the last two nights, Mr. Carlson has been inveighing against higher education and federal student loans. Mr. Carlson has been promoting a private-student-lender supported plan to tax higher education institutions that accept federal student loans. Similar plans to tax educational institutions were previously backed by both Senator Hillary Clinton and President Trump, with the support of several Wall Street connected think tanks.
Mr. Carlson and I spoke via a remote uplink from a Fox News affiliate in Los Angeles (Fox News’ headquarters is in midtown Manhattan, near Rockefeller Plaza). The video appears here or here. (There was a bit of a delay in the audio relay, so we sometimes speak at the same time).
Although my time was severely limited, and Mr. Carlson frequently spoke over me, I did manage to make a few key points:
- Higher education boosts earnings and employment by more than the education costs, to the benefit of both students and governments (see also here and here).
- The increase in earnings and employment is largely caused by the education.
- (see also here, here and here for a review of the extensive empirical literature, including identical twin studies, instrumental variables studies, field experiments, quasi-experimental designs, OLS regression studies, fixed effects studies, and basically studies using every technique of causal inference know to professional labor economists)
- We are about as sure that education increases earnings as we can be sure of anything in social science—the evidence is solid
- The federal government benefits more from higher education than universities do.
- The increase in payroll and income tax revenue to the government from education is greater than the cost of tuition
- Education also reduces costs to the government such as unemployment and disability insurance
- With symmetrical risk sharing (of both upside and downside) universities would be paid more by the government for providing education, not less.
- If the government invested more in education, the economy would grow faster and we would have more innovation, less unemployment, and a lower debt to GDP ratio.
- Student loan debt is actually too small relative to other assets and as a share of the economy to cause big problems--$1.5 trillion in student loan debt outstanding versus $104 trillion in household net worth; $200 trillion in present value of future government spending, and $1,000 trillion in present value of future US GDP.
- Federal student loans generally perform well. Federal student loan 3-year cohort default rates are only around 6 to 7 percent at 4-year-and-above non-profit and public institutions. These default figures include students who start at such institutions but do not complete their degrees. Recovery rates on defaulted loans are close to 80 percent. (Defaults and problematic practices tend to be concentrated at for-profit universities, which Republicans have recently moved to deregulate).
- Education boosts net worth in the long run, even after accounting for debt. People who are more highly educated not only have higher incomes, they also have higher savings rates and higher net worth. Among households headed by someone age 40 or older, those with professional degrees have median net-worth of $700,000 compared to only $100,000 for those with a high school diploma. More highly educated heads of household also have significantly less debt relative to their assets.
- We are underinvesting in education. Increases in the costs of education pay for themselves in higher quality.
- University administrators are not overpaid.
- There’s a market for executive talent in which universities must compete.
- Many private industries pay managers more than universities and have a higher concentration of managers than universities
- Universities pay their top executive leaders less than private sector companies pay senior executives (at the top, around $5 million at universities versus around $150 million at publicly traded corporations). Pay is lower for top executives in academe even after accounting for institution size.
- For example, Fox News, with only around $2.7 billion in revenue, recently paid its chief executive $21 million dollars in total compensation. NYU, the largest private, non-religiously affiliated university in the United States recently paid its president $1.5 million. NYU has $10 billion in operating revenue. Scaled by revenue, NYU pays its chief executive only 2 percent as much as Fox News pays its chief executive (i.e., Fox News pays its chief executive 50 times as much per dollar of revenue as NYU pays its chief executive).
- NYU's business--which includes hospitals, biomedical research, and scientific and engineering labs--is far more complicated and far more socially valuable than Fox News' entertainment business. Fox News has never saved anyone's life. NYU Medical Centers and other university based medical facilities have. Fox News has never trained anyone to become a doctor, lawyer, or engineer. NYU and other universities have.
For more information, see:
- Michael Simkovic, The Knowledge Tax, 82 U. Chi. L. Rev. 1981 (2015).
- Michael Simkovic, Risk-Based Student Loans, 70 Wash. & Lee L. Rev. 527 (2013).
- Frank McIntyre & Michael Simkovic, Timing Law School, 14 J. Empirical Legal Stud. 258–300 (2017).
- Michael Simkovic & Frank McIntyre, The Economic Value of a Law Degree, 43 J. Legal Stud. 249–289 (2014).
- Michael Simkovic & Frank McIntyre, Populist Outrage, Reckless Empirics: A Review of Failing Law Schools, 108 Nw. U.L. Rev. Online 176–280 (2014).
- Michael Simkovic, A Value-Added Perspective on Higher Education, U.C. Irvine L. Rev. (2016).
With the benefit of more time, I could have pointed out a few more things and corrected some more inaccuracies, described in greater detail below:
March 14, 2019
Yale’s Federalist Society provided a platform on campus to an anti-gay group which has been identified by mainstream media organizations and the Southern Poverty Law Center as a hate group because—unlike some religious groups that have misgivings about the theological acceptability of homosexual acts—this group has advocated for criminal prosecution of homosexuals by secular authorities at least as recently as 2013 (see here, here, and here).
Many Yale students predictably responded by losing respect for both the Federalist Society and for the students who invited the alleged hate group to campus.
Although most Christians—especially young and highly educated Christians—favor greater acceptance of gays, a leader of the Federalist Society claimed that by inviting the anti-gay group he was simply “attempting to be a Christian at Yale Law School.”
The numerous Christian groups that are active at Yale did not band together to invite to campus a group that has advocated criminal prosecution of homosexuals. That decision was the sole prerogative of the Federalist Society or some of its members.
The leader of the local Federalist Society’s account of events appears here.
He acknowledges that he is viscerally angry at his classmates, but praises the Yale faculty for supporting free speech.
The entire unfortunate turn of events could have been avoided if the Federalist Society vetted its speakers more carefully and favored substance over shock value. There are plenty of other highly capable lawyers who can argue effectively for religious freedom in situations that challenge progressive views of gay rights, and who are not associated with any actual or suspected hate groups.
If the Federalist Society leader had allowed himself to cool off before publishing his essay, he might have considered that the best way to demonstrate “Christian love” and “forgiveness”—as he claims to want to do—might not be to refer to those who disagree with him about controversial social issues as "over-the-top" "enemies" organized in "an alphabet soup of identity groups" which "attacked" him with "snarky, vitriolic . . . progressive" words because they are neither "adults" nor "serious thinkers" "even by Yale standards."
I can empathize with the Federalist Society leader’s aversion to the harshness of internet trolls these days.
But he should not suggest that those who disapprove of or could be hurt by his actions include only gays, women, racial and religious minorities, and liberals.
Why are leaders of the Federalist Society mischaracterizing Christianity as monolithically hostile to gays and other minority groups? Intent is always perilous to guess. However, given Republican donors' history of nationally coordinating provocation campaigns that are executed through local campus chapters, conservative groups may be attempting to incite conflict between Christians and other progressive and moderate groups. Many Christians and progressive, moderate and conservative groups favor family-friendly economic policies and lower taxes on churches and religious schools, including non-profit universities. While such policies provide economic benefits to society as a whole, they are often opposed by political donors who fear that they could be funded through higher taxes on the very wealthy.
Whether or not conflict is being intentionally provoked here, a more constructive approach for all concerned would be to focus on building solidarity across ideological lines rather than engaging in such polarizing conflict on social issues.
March 12, 2019
White House proposes to spend approximately nothing on early childhood education to minimize taxes for top 0.1 percent (Michael Simkovic)
NPR reports that the Trump administration has proposed a meager one-time increase in funding for childcare / early career eduction equal to approximately 0.0045 percent of GDP ($1 billion out of $22 trillion estimated 2020 GDP) or about 0.001 percent of household networth. Total federal spending would increase to $5.4 billion, or 0.0225 percent of GDP.
In contrast, Senator Elizabeth Warren has proposed to spend approximately $70 billion per year on childcare and early childhood education--13 times as much as President Trump. Warren's plan would be financed with approximately one third of the revenue generated by an annual ultra-high net-worth wealth tax of 2 percent on personal fortunes above $50 million, and 3 percent above $1 billion. It would therefore cost 99.9 percent of households nothing in increased tax burdens.
The White House explained that its less generous proposal was motivated by a desire to avoid spending "unsustainable amounts of taxpayer dollars" and instead come up with a plan that would be (politically) "viable."
March 10, 2019
QJE: Investments in education continue to provide economic benefits two and half centuries later (Michael Simkovic)
A recent article in the Quarterly Journal of Economics (the leading journal in economics) finds evidence that early investments in education in the 1600s through mid 1700s continued to provide economic benefits in the form of persistently higher eduction levels and 10% higher wages and centuries later.
The study examined the economic performance of communities based on their proximity to Jesuit missions established and subsequently closed hundreds of years ago. The Jesuits emphasized literacy and job training. The missions were established in locations that were not particularly desirable in terms of population density, soil fertility, climate, or access to transportation and trade, because Franciscans who arrived earlier claimed the best locations for their missions. The Jesuits were expelled from the Spanish Empire in 1767, at which point Jesuit missions shut down.
The closer communities were to Jesuit mission, the higher subsequent education levels and earnings, and the quicker communities adopted new technologies. These benefits persisted for centuries. The benefits are similar across national boundaries and do not appear to be due to institutional or legal differences.
Proximity to Franciscan missions, which emphasized healthcare and anti-poverty efforts rather than education, did not provide similar benefits.
Felipe Valencia Caicedo; The Mission: Human Capital Transmission, Economic Persistence, and Culture in South America, The Quarterly Journal of Economics, Volume 134, Issue 1, 1 February 2019, Pages 507–556, https://doi-org.libproxy1.usc.edu/10.1093/qje/qjy024
This article examines the long-term consequences of a historical human capital intervention. The Jesuit order founded religious missions in 1609 among the Guaraní, in modern-day Argentina, Brazil, and Paraguay. Before their expulsion in 1767, missionaries instructed indigenous inhabitants in reading, writing, and various crafts. Using archival records, as well as data at the individual and municipal level, I show that in areas of former Jesuit presence—within the Guaraní area—educational attainment was higher and remains so (by 10%–15%) 250 years later. These educational differences have also translated into incomes that are 10% higher today. The identification of the positive effect of the Guaraní Jesuit missions emerges after comparing them with abandoned Jesuit missions and neighboring Franciscan Guaraní missions. The enduring effects observed are consistent with transmission mechanisms of structural transformation, occupational specialization, and technology adoption in agriculture.
The Washington Post has provided a good summary.