The standard critique of U.S. higher education is that it’s too expensive, embodies an often vague and inconsistent student experience, and graduates too few students. Institutions, vendors, foundations, and governments are busy with a host of purported solutions, but one argument is rarely heard: Are colleges and universities simply too small?
Higher education is certainly unusual in this respect. A simple comparison highlights an obvious difference in scale compared to a sample of similarly sized industries.
In most industries, a few firms or organizations dominate the market, extending brands and operations across multiple geographies. This permits economies of scale in terms of product and logistics investment and typically lowers prices for consumers. In extreme cases, such consolidation can limit consumer choice, but it’s generally held that scale is a net benefit.
The industries in the chart above represent a random subset of those with similarly sized revenues as higher education (approximately $200 billion, depending on definition). Across this sample, less than 5% (and often less than 1%) of organizations report employee scale, which is defined by the census as 500 or more staff. The organizations that do command large market share, often well over half.
Higher education is different. More than a third of colleges and universities report 500 or more staff. With such a large number of colleges and universities nationwide operating at significant scale, there is an absence in higher education of the much greater scale that we see at the top of most other industries. While there are many large public systems of higher education (e.g., SUNY or California State University) that combine hundreds of thousands of students, these are state-bound by definition and national scale is in tension with considerable autonomy across multiple campuses.
This isn’t to say that we believe higher education should look like these other industries, but making this comparison can highlight crucial differences, what some might call the “higher education problem.” Colleges and universities lack true economies of scale, investment is fragmented across thousands of institutions, and best practices too often slip through the fingers of decentralized departments and individual faculty. While there are a few truly national higher education brands, reputation drives selectivity and ultimately motivates modest size, not game-changing “product” investment and lower prices like it would in other industries.
Is this the real reason why higher education is accused of being too pricey, too inconsistent, and underproductive? To even pose such a question may seem heretical, but that’s often the precursor of progress.