Catharine B. Hill is president of and a professor of economics at Vassar College.
When President Obama takes a bus tour of colleges and announces reforms related to college affordability, the refrain grows louder that the financial model of American higher education is broken and unsustainable. Yet few people are looking at the real problem.
Income inequality is the major factor contributing to the challenges facing higher education and is a significant public policy issue. In the 1970s, the share earned by the country’s top 10 percent of the income distribution was about 33 percent of total income. According to a 2013 analysis by economics professor Emmanuel Saez, by 2011 that share had grown to a little more than 48 percent. Much of this movement is explained by shifts in incomes of the top 1 percent.
This rise in income inequality matters for colleges and universities: It has contributed to increased tuition, increased spending and, as the Education Department reported last month, greater financial aid at many colleges and universities, which calls into question the financial sustainability of those institutions.