Wednesday, October 21, 2015

Tuition Rising

Ronald Ehrenberg

The real earnings of workers increase as their productivity levels increase. During the period [of a study], because of changes in technology and increased use of capital equipment, the productivity and hence the real earnings of Americans rose by about 2.5 percent a year. However, the productivity of faculty at these selective private institutions, as measured by the number of students that they educated each year, did not change very much, primarily because low student-faculty ratios were felt to be essential to high-quality college education. As a result, these institutions did not receive extra revenue each year from gains in faculty members’ productivity, which in turn could then be distributed back to the faculty in the form of salary increases.

The institutions thus faced a choice. On the one hand, they could allow faculty salaries to decline relative to salaries of individuals in other professions. On the other hand, they could raise tuition sufficiently to provide faculty salary increases in line with the raises other employees in the economy were receiving. The former strategy would make it difficult to attract and retain high-quality faculty, so invariably the latter strategy was pursued.

Q&A - 21/5

Question How do you empirically prove interest rates do not cause increase or decrease in GDP growth? There is a test for that Data ,...