Search

Sticky Buns, Sticky Fingers, and a Sticky Wicket

But have you heard of Sticky Inflation?


In non-economist terms, sticky inflation refers to the increase in the costs of certain goods and services that once the cost increases it is much slower to decrease. The Federal Reserve Bank of Atlanta tracks this information and what they call the Sticky-Price CPI index. A July Newsweek article identifies some of these items as essential. Things like auto repair costs, children's clothing, public transportation, and rent. There are also more discretionary items like alcohol, vacations, other recreation, and going out to dinner https://www.newsweek.com/sticky-cpi-inflation-america-economy-recession-interest-rates-high-prices-1724594.


This August article by @LisaBeilfuss in Barron’s explains in economist-level detail the impact sticky inflation has and will have on our current economy https://www.barrons.com/articles/inflation-cpi-labor-shortage-energy-prices-51660265410.


So, before I lose everybody who finds economics boring, I wanted to identify why this is important to higher education. In times of sticky inflation consumers of the goods and services which are slow to decrease in cost assume the new increased cost will be permanent. For colleges and universities these costs include such things as maintenance of facilities, the construction cost of new facilities, energy, and food. Wages, which have risen in the past year as employers attempt to retain or attract workers in a very competitive employment market, can also be “sticky-down” according to Investopedia.com.


The debate regarding the return of investment of attending college versus going into the workforce directly out of high school has been raging for some time. National data indicate that an increasing number of students are choosing not to attend college. One driving factor behind this has been the cost of tuition. In a recent news article by KARE 11, a Minnesota NBC affiliate, Doug Shapiro, the executive director of the National Student Clearinghouse Research Center said, “there are now a million fewer students enrolled than there were two years ago before the pandemic.” https://www.kare11.com/article/news/local/kare11-extras/fewer-students-choosing-college-that-could-be-a-problem/89-cb011caa-8377-4fba-a026-f8352fbbf433. There is no doubt the increasing cost of tuition is a major contributing factor to this trend.


Colleges and universities are now faced with a shrinking pool of prospective students partly or largely the result of high tuition costs at a time when as a result of sticky inflation there will be more pressure to increase tuition. Tuition increases have already historically exceeded the average cost of inflation due to what Robert B. Archibald and David H. Feldman, economics professors at the College of William & Mary, referred to as “cost disease”. Simply put, higher education does not benefit from productivity enhancements and the resulting mitigation of cost increases as other industries like manufacturing do.


To remain competitive colleges and universities will need to control costs while providing enhanced services and new programs that differentiate them from other schools which offer a comparable education. The expansion of eSports is a good example as enhanced mental health services available to students and the partnership with regional medical service providers to operate urgent care-like facilities on campuses. But more work will need to be done if schools want to survive this sticky situation (pun intended).

4 views0 comments

Recent Posts

See All