Monday, April 01, 2013

Airline Pricing or Flat Rates?

Southwest has spoiled me.  I’m so used to just checking a bag and not thinking about it that when I flew USAir last week and saw a “bag fee,” I actually got offended.  What do you mean, “bag fee”?  If I didn’t bring a bag, I’d get flagged by TSA, but you’re charging a bag fee?  How about a seat fee?  Sheesh.

The airlines that charge extra fees do it so they can reap revenue while still appearing cheap on travel websites.  Since people generally shop by fare, isolating fees from fares is a way to game the system and still make money.  People of my generation and older will remember the yellow pages, and the old trick of plumbers naming themselves A. Aaron and Sons to get the first alphabetical listing.  It’s the same idea, only less honest.

So I had to smile when I read about colleges doing basically the same thing.  In order to appear cheap on comparison charts and in headlines, they’re holding “tuition” down by shifting revenues to “fees.”  Worcester State, in my own state of Massachusetts, drew headlines a little while back by charging a pedestrian access fee to pay for sidewalks.  Other colleges have charged “quality” fees, or “global” fees, or, in the case of Oklahoma State, a “life safety and security” fee.  I have no idea what a “life safety” fee covers, or, more menacingly, what happens if you don’t pay it.  (“We’ll show you the real meaning of “Sooner..”)  

The issue with fees isn’t so much their existence as their extent.  “Lab fees” are fairly standard across higher ed; they cover consumables that students use in lab sciences and/or studio art classes.  Most people accept those as straightforward, since their utility is clear.  “Student activities” fees are also pretty standard.  “Technology” fees sound general, but given student expectations about on-campus tech, they’re pretty easy to defend.

But fees are multiplying well beyond their original intent.

(A quick word about my own state of Massachusetts.  Here, the legislature sets the tuition, and for courses taught by full-time faculty, the tuition reverts to the state.  But colleges set their own fees and keep the revenue.  The legislature hasn’t raised “tuition” since heaven knows when, so at this point, fees are several multiples of tuition.  If it were up to me, we’d just reverse the names and be done with it.  The issue arises with “free tuition” scholarships or benefits.  Since tuition is a relatively small, and declining, percentage of cost, those benefits mean less than a reasonable person would expect at first blush.)

The problem with airline pricing, as anyone who follows the airlines knows, is that it’s unsustainable.  The commercial air industry is remarkably volatile, and customer satisfaction with its more absurd pricing practices is legendarily low.  But at a basic level, I get it.  Flights cost.  If your competitor hides the cost and you don’t, you lose.  You need revenue to operate.  So you do what you have to do.  (Southwest’s model suggests that the “you lose” scenario isn’t necessarily true, but I don’t pretend to understand all the variables.)  

I’ve been listening to last week’s episode of This American Life, about the Disability program run through Social Security.  The argument of that episode parallels the arguments around fees.  Basically, when we ended “welfare as we knew it,” we didn’t end the need for welfare.  So disability has become a de facto welfare system in many areas.  We can rail against “welfare” all we want; at the end of the day, a modern economy has costs, and we have to pay them one way or another.  We can call it welfare, we can call it disability, or we can call it incarceration, but one way or another, we’ll pay it.  We can’t not.  In fact, by hiding the real cost and getting cute about it, we wind up paying more.  The program mentioned a private company that has contracts with 17 states to comb through the welfare rolls to find people to shift to the disability program; since welfare is paid by states but disability is paid by the feds, the states have an incentive to cost-shift.  And the company with those contracts is, in the scheme of things, a deadweight cost that serves only to hide the truth.

In my perfect world, I’d rather see public colleges have reliable and substantial operating funding, and the freedom to experiment with competency-based credentialing, than try to keep the old system alive through a shell game of find-the-fee.  But I get it.  Education costs.  We can pay that honestly -- and therefore cheaply -- or we can play games.  I’d rather we paid it honestly, but if we only pay attention to headline numbers...