“Education is the most powerful weapon which you can use to change the world.” - Nelson Mandela
In recent decades, universities have experienced significant growth worldwide. The number of researchers employed by higher-education institutions have increased from 4 million in 1980 to approximately 13,1 in 2018. Government spending on the education sector has also risen. Theoretically, universities should be a valuable source of productivity, potentially enhancing economic growth within nations. Universities are expected to generate intellectuals and scientific advancements that can be utilized by the general public and eventually “change the world”, according to the quote from Nelson Mandela.
The Paradoxical Circumstance
In an article from The Economist, the facts show that the significant growth in higher education has coincided with a slowdown in productivity growth. Despite the surge in artificial intelligence (AI) innovation, productivity remains low, arising concerns for overall economic growth. A study suggests a connection between the rapid expansion of universities and the stagnation of productivity. If we look back to the era post-World War II, businesses were primarily responsible for innovation, spending far more on research than universities.
Examples from the US, corporate research labs, like those at AT&T, were as scholarly as they were profitable. However, this model declined when competition policies became more lenient in the 1970s and 1980s, and businesses began relying more on university research.
A study from Ashish Arora (et al., 2023) suggests that the old model of corporate-led science may have been more effective at driving productivity gains than the current university-led model. Despite universities' scientific breakthroughs, corporations often do not respond by increasing their own research efforts, except in life sciences. This lack of response may be due to the loss of interdisciplinary teams in corporate labs and universities' focus on research for its own sake rather than practical breakthroughs.
According to that analysis, this productivity decline can be attributed to factors such as insufficient coordination among economic agents and a perceived lack of practical utility in university research which caused the economy to slow down. However, is the sole objective of universities to foster economic growth?
Productivity, Does it Matter?
The significance of productivity growth in an economy is widely acknowledged because the ability to enhance living standards over time hinges largely on increasing the output of workers. In various industries and businesses, productivity gains are crucial for balancing rising input costs, such as wages. Similarly, in higher education, boosting productivity is viewed as a key strategy to manage costs and ensure college education remains affordable (Sinha, 2012).
From the production function, we can see that productivity implies the number output produced with a given set of inputs. The usual outputs and inputs of productivity (Y/L) measurement in an economy is Y as GDP (output), L is labor, followed by other factors of inputs, such as physical capital (K), human capital (H), and natural resources (N), therefore this equation summarizes the determinant factors of productivity Y/L = AF (K/L, H/L, N/L).
But how do we define the output and inputs for university? While productivity measurement methods are well-established in the private economy, progress has been slower in areas like education, where outputs are less tangible and not easily measured. Unlike a firm or nation, it is a misconception to think that the main goal of higher education is to enhance GDP or individual incomes.
Many vital roles in society, such as teachers and social workers, are in fields with lower pay. If productivity is judged solely by post-graduation incomes, institutions that produce more graduates in these important but lower-paying fields may seem less productive than those producing many high-earning business graduates.
Universities (normally) are not motivated by profit and their outputs, like education and research, are not easily quantifiable. Productivity in education can be quantified using metrics such as the quality or value students receive relative to the cost of their education. These definitions enable an assessment of how changes in costs, quality, or quantities affect productivity in higher education. Productivity rises when student quality (academic performance, understanding, & achievements) improves more than the cost of education. Likewise, cutting costs while maintaining or enhancing student quality also boosts productivity. Yet, how do we calculate “quality”? This lack of guidance for measuring quality of this four-year educational institution has been linked to the common practice of student grades as the indicator of student quality (Ng et al., 2022)
Relying on a single measure for evaluating performance in the multifaceted higher education sector is inadequate. Using the proposed productivity measure, or any single performance metric, in isolation is insufficient for most purposes. While a productivity measure alone may not significantly enhance institutional performance, measuring higher education productivity overall could contribute to creating a better policy environment.
Why Can’t Students be Smarter?
This question needs to be addressed to all policy makers and those who run the administration. The objectives of a university should encompass various aspects, enhancing student quality, expanding access and diversity, attaining greater cost-effectiveness, better serving community needs, and advancing research. Although, university officials and state legislators may differ in their perspectives on the primary objectives of a university.
The sole objective of any institution of higher learning should be to enhance the quality of students, their knowledge, and skills gained through education. However, many faculty members struggle to achieve this goal. One reason is that teaching is often viewed as less important than publishing in academic journals and securing research funding. This correlates to the need for universities to boost their ranks and accreditations.
Productivity in higher education is a complex and nuanced issue, which is why policymakers and politicians often prioritize making higher education more affordable rather than more productive. But, the irony is, universities are raising their costs and there has been little to no improvement in student quality (William Poole, 2005)
Baumol's cost disease highlights how certain sectors, like education and healthcare, can experience cost increases without corresponding productivity gains. In higher education, factors like faculty priorities and teaching methods can affect productivity. Despite technological advancements, traditional teaching methods persist, and faculty often lack training in effective teaching strategies. This contributes to rising costs without substantial improvements in student quality.
A Bubble to Burst
Charles Sykes argues that academia is a bubble on the brink of bursting. Professors often seek to reduce their teaching loads, a trend that is encouraged by administrators and academic departments. In his book, he mentioned that in 2016, only 44% of faculty dedicated nine hours or more per week to teaching, down from 63% in the 1900s.
Teaching assistants or poorly-paid adjuncts are often used to replace professors in the classroom, while professors have increased the volume of their research output. Moreover, a significant portion of published articles go unread, with up to half never being read by anyone other than editors, and sometimes not even by them. Additionally, up to 90% of articles never receive a single citation. Most of this system is supported by taxpayer subsidies, often without adequate consideration of value or cost.
Sykes highlights what he calls the "law of more," which economists refer to as the "revenue theory of costs." This concept suggests that higher education institutions, unlike most other industries, struggle to measure unit costs and can potentially spend unlimited amounts of money for the sake of “education”. If a college receives more funding, it will likely find ways to spend it. Governments that subsidize higher education have yet to fully grasp this aspect of college economics, leading to continued overspending in college campuses.
Is The More The Merrier?
The American Association of Colleges and Universities highlights a decrease in the quality of graduates and criticizes public policies for prioritizing student enrollment in college without sufficient focus on what students should achieve once enrolled. If they manage to fulfill the preferred demand of targeted students, what’s next? There will be too little percentage of students who graduate with requisite skills needed to boost economic growth.
It resonates with the fact that quality issues in higher education significantly impede the slowing productivity growth. As the quality of higher education declines, the demand for highly skilled workers continues to rise. But, obtaining a bachelor's degree without acquiring the necessary knowledge, skills, and competencies for effective participation in the labor market and society is an empty achievement. If continued continuously, this habit can lead to the “diploma mill” phenomenon. In the end, economic projection that fails to consider negative externalities, such as those affecting education quality, isn’t actually a growth.
However, this bloated education system does not exist without reason. Society does seek a higher education to attain a respectable quality of life. This drives universities to fulfill societal demands and reflects the industries' requirement for an educated workforce.
Through the age earnings profile graph (Douglas Curtis and Ian Irvine, 2023), we can see that individuals with higher education earn more from the beginning of their work age and their earnings increase significantly over time, leading to a widening gap compared to those with lower education levels. While less educated individuals can earn a decent wage initially, their wage growth tends to be limited over the years. This trend directly contributes to the high demand for university education and influences the inflated cost of higher education.
The Most Powerful Weapon
Reflecting on the title of this article, "Have Universities Failed?" prompts us to reconsider the true purpose of a university. Is it primarily to stimulate the economy? If so, then perhaps we have indeed fallen short. However, aren't universities meant to cultivate ideas, foster critical thinking, and nurture brilliant minds across generations within a country? Sadly, universities seem to have failed in this regard as well, big time! Yet, we cannot deny the impact of how industry and society shape what universities are today. Education is indeed the most powerful weapon; it can be used to change the world, for better or for worse.
Jocelyn Emmanuella Mok | Ilmu Ekonomi 2023 | Staff Divisi Kajian Kanopi FEB UI 2024
References
Arora, A., Belenzon, S., Cioaca, L., Sheer, L., & Zhang, H. (2023, November 1). The Effect of Public Science on Corporate R&D. https://doi.org/10.3386/w31899
Does Higher Education Have a Productivity Problem? (n.d.). https://www.higheredjobs.com/articles/articleDisplay.cfm?ID=2170
Hare, J. (2024, February 27). Productivity Commissioner Catherine de Fontenay says poor university teaching a drag on productivity. Australian Financial Review. https://www.afr.com/policy/health-and-education/poor-university-teaching-a-drag-on-productivity-20240227-p5f86z
Ng, H., bin Mohd Azha, A. A., Yap, T. T. V., & Goh, V. T. (2022, May 23). A Machine Learning Approach to Predictive Modelling of Student Performance. F1000Research, 10, 1144. https://doi.org/10.12688/f1000research.73180.2
Sinha. (2012). Improving Measurement of Productivity in Higher Education (Sullivan, Mackie, & Massy, Eds.). National Academies Press. https://doi.org/10.17226/13417
Stop Paying More for Less: Ways to Boost Productivity in Higher Education. (2006, January 1). Federal Reserve Bank of St. Louis. Retrieved May 29, 2024, from https://www.stlouisfed.org/publications/regional-economist/january-2006/stop-paying-more-for-less-ways-to-boost-productivity-in-higher-education
To, W., & Yu, B. T. (2020, January 30). Rise in higher education researchers and academic publications. Emerald Open Research, 1(3). https://doi.org/10.1108/eor-03-2023-0008
Why Universities Are Failing. (n.d.). Foundation for Economic Education. https://fee.org/articles/why-universities-are-failing/
Why Universities Are Failing. (n.d.). Foundation for Economic Education. https://fee.org/articles/why-universities-are-failing/
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