Is This Why College Costs Keep Rising?
Posted: March 10th, 2011 | Author: Joe | Filed under: Economy | Tags: Bill Clinton, college tuition, Education, Inflation | No Comments »It’s no secret that the cost of college rises faster year-over-year than any other cost. I was reading an article about inflation yesterday and the gist of it was that who inflation affects depends on the type of consumer you’re talking about. For instance, inflation in the cost of tobacco affects smokers more than non-smokers.
The items in the typical budget that rise the fastest are: Gas/fuel, food, health care and education.
This got me thinking about why those items experience inflation. Gas and food are pretty obvious. They’re essentially affected by supply and demand, with uncertainty and fear contributing to major spikes. The global economy as a whole is experiencing increased demand for food and fuel (oil) due to a increase in the number of previously undeveloped and communist countries opening the doors to capitalism, with riots and unrest in the middle east causes spikes in the price due to fear and uncertainty.
A lack of domestic oil production also serves to curb supply and drive up costs. Likewise with using food for fuel with such initiatives as ethanol (crops that would otherwise be used to produce food are used instead to produce fuel-grade corn to be converted into ethanol).
But what causes the cost of healthcare and education to rise faster than anything else? Is the underlying supply of required goods in those fields insufficient to meet the demand? Are there not enough teachers or schools, or doctors or nurses? In some areas, that is the case. But I don’t think the shortage is so bad as to explain the exponential growth is costs.
I think the root causes in both cases is essentially the same – the middle man.
The end consumer is shielded from the real cost of the service, so the costs get distorted beyond all sense. If you or a relative has ever spent time in a hospital and you ask to see a detailed breakdown of the bill you’ll see what I mean. Hospital beds costs $1,000′s per night, and Advil or Tylenol goes for 100′s dollars per pill.
How does this continue? Because patients never see the cost, and if they do they don’t have to pay it. We all pay for it. Patients pay their health insurance provider, or in
most cases the money is taken out of their paycheck before they ever see it (unless they work for a public sector union). This 3rd party insurance provider insulates the patient for the true cost, leaving hospitals to charge whatever they can, usually to make up for some other budgetary shortfall.
Education is the same way. Students get student loans, grants and scholarships that all go to offset and defer the cost while the universities continue to hike the tuition because students (and parents) have accepted the premise that they’ll be paying for decades to come anyway, what’s another year or two. Besides, they never see where the money goes.
But how many schools waste money on things like this: Thousands turn out for Bill Clinton appearance ? The University at Albany hosted former president, Bill Clinton, last week. He spoke to nearly 5,000 students for an undisclosed amount.
“UAlbany’s Student Association still hasn’t disclosed how much it paid Clinton for the event but the former president reportedly earns $100,000 for a single speaking engagement.”
The money was taken out of the student’s $85 “activity fee” for the semester, and possibly elsewhere in their fees and tuition.
Maybe if schools didn’t spend 6 figures for speakers like this, tuition wouldn’t grow at double digits every year. I don’t know. But it does seem like a waste and unfair use of student money. Why don’t they sell tickets and charge admission for those who truly want to see the speaker?
