Weekly C-POW: The Myth of Higher Education Efficiency

I really enjoyed my first foray into establishing the Prosperity Blog’s “Weekly C-POW: the Controversial Proposal of the Week. Our first one, proposing that we merge a bunch of economic development organizations and set up an “ArtsFund for Economic Development,” got quite the response. And so I’m emboldened to try again and see what happens. This week’s controversial proposition?

People should stop focusing on increasing the efficiency of our state’s higher education system.

I wanted to write this post because of this new study that McKinsey just put out: “Winning by degrees: The strategies of highly productive higher-education institutions. And I quote:

College attainment rates are rising in almost every industrialized country. In the United States, however, they have remained relatively flat for the past ten years, even though completing a college degree has become increasingly critical to a person’s life chances. Producing more college-educated workers is similarly critical to the nation’s overall economic growth and prosperity. Based on recent research, we estimate the United States needs to produce roughly one million more graduates a year by 2020—about 40 percent more than today—to ensure the country has the skilled workers it needs

To produce one million more graduates a year by 2020 at today’s levels of degree productivity, the United States would have to increase educational funding by $52 billion a year from its 2008 level of $301 billion. Such a funding increase is highly unlikely: revenue shortfalls led 42 states to cut higher education budgets in FY09 or FY10, and 31 states are planning additional cuts in FY11. To plug spending gaps, many states have increased student tuition fees…Partly as a consequence, student loan debt and default rates are increasing. These trends threaten both access to and demand for higher education.

Expert projections suggest that pressures on student, state, and federal budgets are unlikely to relax soon. Therefore the only realistic way to generate enough graduates within existing state and student financial constraints is to produce more graduates without increases to public funds or tuition per student and without compromising the quality of degrees awarded or reducing access—in short, to increase higher-education degree productivity.

Now, I’m not here to criticize McKinsey (especially since the Gates Foundation co-funded this study. But, I think that throwing in the towel on increased funding for higher education – saying, “well, that’s not going to happen, so we’ll just limp along” –  is a little problematic and defeatist. And I think that there are a lot of reasons why we don’t want higher education institutions in this state to be more efficient.

This is not to say that there’s no way that higher education institutions could be more efficient. McKinsey finds that the “top quartile U.S. institutions…are already 17 to 38 percent more productive than their peer group average.” But let’s start by making a distinction between “efficiency” and “accountability,” the latter of which I’m a big fan of. If you’re given a set amount of money, you should be expected to produce reasonable results with that money. The problem when you only care about efficiency is that some of the metrics that are most important to your accountability fall by the wayside. Look, I’m happy to set up a college right now and educate students for $5 a pop. That would technically be the most efficient university in the world. But the degree I hand them would literally be worth less than the paper it’s printed on. Because, at the end of the day, what we care about is the quality of the higher education someone receives, as well as some specific outcomes: who is getting those degrees (i.e.-are we meeting our equity and diversity goals); what are those degrees in (i.e.-are they meeting the needs of our economy); are the students with those degrees fully equipped with the knowledge and skills that they need?

The other problem with efficiency is that it becomes pretty subjective pretty quickly. One person’s “strategic investment” is another person’s “wasteful spending.” And that can range from degrees (“Why do we offer a degree in art history? What a waste!”) to activities (“Why do we spend so much time on technology transfer? Let corporations do their own commercialization work!”). And by the way, I’m not trying to be outlandish with those quotes; I have no doubt that people say them. I haven’t even gotten to my favorite one, which is “Why do they pay those professors and administrators so much money? That money should be going to students!” (The answer, of course, is that you have to pay competitive salaries or else you lose those people to other states.)

Then we get to Washington state in particular. It just so happens that Washington leads the nation in bachelor’s degree production and third lowest in total funding per degree (that is, we produce degrees for the least money than almost any other state). So, for all of you who are saying, “Yeah, why are we talking about trying to invest more in higher education in our state? We should just trim those bloated institutions and move on!”, I’m sorry to inform you that there’s no way we’re going to reach our state’s higher education goals with cuts and efficiencies. That’s why the Governor’s Higher Education Funding Task Force focused on increasing accountability – instituting the Complete to Compete metrics, creating an accountability incentive fund and streamlining credit transfers from K-12 and community colleges – rather than just saying “our institutions just need to spend less and produce more degrees.”

So there you have it. Less talk about efficiency, more talk about accountability, and please, please, please find a way to provide more resources to these institutions so that they can educate our state’s kids in the right way to help them get good jobs that meet the needs of our economy. Which, when you say it like that, doesn’t sound so controversial at all.

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