Chart of the week

The cost of education

This week I thought about the cost of education after reading a great OpEd from the Harvard Crimson titled, Fire Them All; God Will Know His Own. The cost of education has far outpaced inflation and evaded the deflationary force of technology. On its face, education seems like an industry vulnerable to disruption. Any user of Khan Academy or YouTube can receive college level education on almost any topic at ~no cost, so why is education so expensive?

One reason is the expansion of the administrative swamp. The Harvard OpEd notes that the administrative staff at Harvard (7,024 total) roughly equals the undergraduate population and is 1.5x the number of academic employees. Yale has also hit the 1:1 undergrad to administrator ratio. My bet is that a real audit of many college administrators' actual work functions would reveal a shocking number mainly overseeing the bylaws of the campus underwater basket weaving clubs.

Aside from the swamp, the real reason the cost of education has outpaced inflation is because colleges aren’t actually in the education business, they’re in the credentialization business. Education is free and scalable today, but a credential from a well regarded college is immensely valuable. 

Price deflation in education will require a widespread private sector embrace of skill assessments or professional skill certificates (like Coursera or Google certificates). Until a true alternative to traditional college is accepted, colleges will continue to generate artificial scarcity in their ability to “educate” (read credentialize) students, and the demand will remain strong. While a credential from a true brand name college will likely never be disrupted, there is a real opportunity for technology to disrupt the colleges charging brand name prices for an inferior credential. Perhaps there is hope for the next iteration of this chart. 

Chart source - BLS, Mark Perry