Tuesday, July 31, 2007

 

Pricing by Major, Revisited

I don't usually do back-to-back posts on the New York Times, but this Sunday's issue provided atypically fine fodder.

According to this article, more colleges and universities are setting different tuition levels for different majors.

I've weighed in on the subject before (here and here), so longtime readers know that I'm broadly supportive of differential pricing, as long as it's based on the actual cost of providing the service. I'm essentially endorsing taking the 'lab fees' model and using it to capture more of the true cost of certain areas, such as Nursing. My theory is that limiting the institutional losses on a given program will make it easier for the institution to provide enough seats in that program to meet (or almost meet) demand. (More subtly, the cost premium attending to Honors programs will allow those programs to continue, which is important to the extent that they bring in the offspring of the affluent. Without a meaningful connection to the elites, public institutions become typecast as institutionalized welfare, and suffer funding shortfalls accordingly. If we can attract Muffy and Skip with some premium programs, we can use that leverage with their parents to maintain or improve our quality levels for everybody else. It's the same logic behind sending Social Security checks to rich people.) The alternatives are waitlists, which strike me as far less desirable, and a continued hollowing-out of the liberal arts, which strikes me as both immoral and eventually self-defeating.

According to the article, though, two areas that are getting price hikes are business and journalism.

I'll admit being surprised at both, though more so at journalism. (And I'll admit that my perspective is informed by being at a two-year college, so my sense of what's needed in those fields reflects what's needed in the first two years.) Entry-level journalists don't make much at all, and it's an intensely competitive field, so the folks being asked to shoulder premium tuition will almost certainly be ill-equipped to pay it back. As one blogger aptly put it, nobody says “yeah, I make good money, but it's not newspaper money.” George Will's paycheck is impressive, but also unrepresentative.

(If I were king of the world, I'd require prospective journalists to get solid backgrounds in history, economics, political science, and sociology. Learn something about the world, so your sense of what's unusual enough to bear scrutiny will be grounded in something. Have some basis for independent judgment when The Powers That Be hand you their press releases. But that's another post altogether.)

At least with business, I could imagine an argument that the market will bear it, and that's the first lesson business students should learn. (The article says the premium is needed to pay six-figure salaries to assistant professors. I'll just say that's not my world and leave it at that.) The courses taught in the first two years have pretty low direct costs, but I'd guess the grads could be assumed to have a reasonable shot at higher salaries, so premium tuition would be an argument from prospective progressivity.

That argument strikes me as very slippery, though. At least with lab sciences and nursing clinicals and studio art workshops, it's fairly easy to point to what the student is getting now to justify paying extra now. (The same would be true of Honors programs with very small classes.) Whether the student goes on to succeed in the field or not, at least she's getting some value for the money upfront. It's not clear to me what the business major would be getting above and beyond what she gets now, at least at this level.

One of the officials interviewed in the article notes, correctly, that the shift to differential tuition is, in part, a recognition of the cultural shift from viewing higher ed as a public good to viewing it as a private good. If it's truly a private good, then it should be priced accordingly. (This does not bode well for public institutions generally.) We publics have our work cut out for us. If we act in acknowledgement of a cultural shift that has already occurred, we grease the skids. If we act as if nothing has happened, we hit progressively tougher funding limits every year.

Nobody said this would be easy.



Comments:
I think this proposal would be extraordinarily difficult to administer effectively. If business were premium-priced, I'd advise prospective business students to major in something else, like economics, but take as many business courses as they need for their career goals.

The one bright side to this proposal is that it might inhibit some parents from pushing their children to major in business "because it's practical."

While I'm sympathetic to the problems this proposal is attempting to address, I think the bigger problem is helping people see the very real public benefits of higher education.
 
In observing the journalism program that my husband is currently in, I can see why they might charge extra for the program. So far for the classes he has taken, all of the students get personal copies of professional video editing software (paid for by the univ - and not cheap at all!), use of professional video cameras (starting at $5K a pop), and web design and editing software (also not cheap.)

However, as you said, journalism certainly will not make us rich. (I'm just hoping he stays steadily employed at this point, given the state of media.) The tools that journalists use these days are not just pencil and paper anymore and I guess the costs reflect that. However, I think that quality journalism is a public good worth the investment . . . althouugh others will debate that (and I really don't wish to right now . . .)
 
DD, your comments about direct costs for the first two years seem to assume that these fees apply to freshman. In most of the cases I looked at, they only apply once you are admitted to upper division courses.

On costs, I think 130k$ asst. prof salaries in the TAMU business college translates into more expense than even engineering lab equipment. You don't pay retirement and FICA on capital equipment.

Raising the fees for journalism was also a shocker for me. Must be faculty salaries, maybe due to a surfeit of BA degrees and a shortage of PhD degrees ... but you would think English majors would fill in those gaps. Maybe higher cost will reduce the over supply, although a requirement to know some actuarial math and statistics (a more critical gap than history IMO) would have the same effect.

Anonymous 1 needs to read further. Every program with higher tuition imposes a limitation on the number of courses you can take "for free" as electives, if they even allow that. Many "limited access" programs will not allow non-majors to take any upper division classes. One that does allow them has placed a strict limit on the number of courses (two) you can use toward graduation in that major if you take them prior to declaring that major.
 
This comment has been removed by the author.
 
In a parenthetical comment Dean Dad refers to the value of honors programs. Unfortunately, judging from that comment, I think he completely misunderstands honors education. I have commented upon this in full at my blog, http://engage.shc.psu.edu/?p=270
 
CCPhysicist is right. The premiums are charged only on business courses, not on all courses taken (so freshman comp does not carry differential tuition based on your declared major, but intro to business does, regardless of your declared major). Any other scheme would simply encourage people to postpone declaring a premium-priced major.

The skyrocketing salaries for new business faculty are a fact, and a rather amazing one. Years ago (i.e., in the 1950s and early 1960s), business faculty, far from earning a premium, received discounted salaries. This is largely because they had only MBAs, not PhDs. Today, businesses--particularly consulting firms, advertising agencies, and financial firms (including banks) hire a fair number of business PhDs, meaning that B-schools have to compete with private sector salaries to hire the "best and brightest." Having been involved in job searches in a business school, I can attest that it makes life difficult for a smaller, not-so-well off institution. It also creates some intra-university (and intra-B-school) jealousies--why is that new assistant professor of accounting making $100 K, while I, a full professor of English, an making $75 K?????).

B-schools used to be cheap, and they often functioned as cach cows. No longer.
 
But you really can't price according to the actual cost without contemplating the demand. Business faculty salaries are higher in part because business is a popular degree (whether that's driven by vocationalism among students or curricular collapse in the traditional disciplines is for another day) which puts some of the responsibility for raising the "actual cost" on the student who is willing to sign up for the degree, whether that student is enrolling at Wisconsin (where the differential pricing is going into effect) or at Northern Illinois (where there is no differential yet.)

There's also a subtlety in the determination of salaries business faculty might earn as practitioners -- ultimately it's the willingness of consumers to buy the business's products that meets the payroll.

As far as higher education being primarily a private good, with the public subsidies being regressive transfers, that's been our reality for some time.
 
Let me place the responsibility for lab fees where they belong, on the Deans, VPs and Presidents. We hated to put them in, but the fact that our consumables budget had not risen in 20 years, and the price of everything had gone up X times was reasonably convincing.

The running costs of a general chemistry lab for supplies(allowing for some small equipment such as pH meters- They cost $300 ea and the electrodes are close to $100. It is the rare electrode that survives a semester) is about $75/head, organic is at least twice that, and the advanced labs are hundreds of dollars per student and that does not include the cost of instrumentation that can easily exceed $20K per piece.
 
I'm way behind on reading, but I visited the NYTimes link today and saw this:

Correction: August 3, 2007, Friday A chart on Sunday with a front-page article about universities that charge different tuitions for different majors misstated the undergraduate division at Iowa State University that charges more than other programs. It is the College of Engineering, not the business school.

Kind of nullifies the part of the debate about whether higher salaries for business degrees are "worth it".
 
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