One Road to Ruin

It is a terrible idea to freeze tuition or limit the increases to something lower than inflation. As William Baumol taught us, given our fixed or worse labor ratios, we have no choice but to increase tuition higher than inflation in order to be competitive for talent (read: faculty and administrators). Yet, we keep encountering schools that either froze tuition during the 2008 downturn or have done so more recently in response to parent pressure or as a way to fill seats, and are now facing the consequences in terms of massive increases all at once or draconian cuts to program.The problem with even a temporary freeze is that it telegraphs the message that the board can, if it wants to, keep tuition level. In fact, it can't. Doing so just puts the school further behind the proverbial 8-ball with huge increases later on. Best to keep your customers trained to expect annual increases of a modest sort.