I recently read an interesting article by David Brooks called “The Education Gap.”  Published in The New York Times on September 25, 2005, Brooks talks about the ability of colleges to address the inequities between poverty and wealth.  He points out the fact that only 28 percent of Americans have college degrees but that most of those with degrees find themselves in social situations where almost everybody has been to college.

Brooks notes that behavioral differences are starting to surface between the groups.  According to Brooks, divorce rates are twice as high for high school grads as college grads, high school grads are twice as likely to smoke, high school grads are much less likely to exercise, college grads are twice as likely to vote, college grads are twice as likely to volunteer, and college grads are twice as likely to donate blood.

Brooks maintains that today’s information society has increased the gap between high school and college graduates.  In an information society, a college degree is a must.  Students need to recognize the importance of that as early as ninth grade in order to prepare for college.  Students from families with parents who have attended college have a greater chance of going to college than students from families that don’t have a parent who attended college.  Furthermore, Brooks states that students in the lowest per capita income quartile of the population have an 8.6 percent chance of graduating from college versus students in the top income quartile who have a 74.9 percent chance of graduating from college.

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It is hard to have a day go by where there is not at least one article in the major media about the high cost of college.  With the recession and its impact on state and local budgets, tuitions are being increased at many public colleges and universities and some institutions are reducing the number of students attending in order to cut costs for next year.  Unfortunately, these actions are not increasing the access and affordability of higher education in the United States.

While access and affordability of higher education have been stated goals of the Spellings Commission, the National Center for Public Policy and Higher Education (NCPPHE) in its annual Measuring Up reports, President Obama, and others, the recommendations for improving affordability are few and far between.  The Spellings Commission stated that colleges need to think more like entrepreneurs and examine partnerships and distance learning as options to improve access and cost.  Many in traditional higher education panned the Spellings Commission’s recommendations although little was said that had not already been identified by many of the other public policy organizations like NCPPHE, State Higher Education Executive Officers (SHEEO), Western Interstate Commission for Higher Education (WICHE), and The National Center for Higher Education Management Systems (NCHEMS).  This past January, I wrote an article for this blog about a survey of college presidents entitled The Iron Triangle: College Presidents Talk About Costs, Access, and Quality.  I was aghast that during a period of economic downturn, most of the presidents surveyed stated that the only solution to improving access was to provide them with more funding at the federal and state levels.  I wonder how many entrepreneurs have succeeded by waiting for more money to pay for a product rather than designing the product to meet the ability of their customers to pay for it.

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Public Agenda and the National Center for Public Policy and Higher Education (NCPPHE) recently issued their report entitled Squeeze Play 2009: The Public’s Views on College Costs Today.  Given the state of the economy, Public Agenda and the NCPPHE decided to conduct a survey in December 2008 that they had conducted two years previously for their Squeeze Play 2007 report.

There were a couple of significant findings in this study.  For example, more Americans than ever believe that obtaining a college degree is the only way to succeed in America.  From a low of three out of ten Americans agreeing with that statement in 2000, the number has almost doubled to fifty-five percent, up twenty-four percent in only eight years.  In previous studies, people cited Bill Gates as an example of why you didn’t need a college degree to succeed, but this year’s survey has tipped the balance toward a majority believing that college degrees are a necessity.

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As part of my ongoing review of some of the literature and topics around the affordability of a college education, I happened to find a publication from the National Center for Public Policy and Higher Education entitled The Iron Triangle: College Presidents Talk about Costs, Access, and Quality.  Prepared by John Immerwahr, Jean Johnson, and Paul Gasbarra, the report is about a unique piece of research in which 30 college and university presidents were interviewed for their perspectives on the three major issues of cost, access, and quality of higher education (and, the corners forming the Iron Triangle).

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In 2003, Michael Silverstein and Neil Fiske published the book Trading Up: Why Consumers Want New Luxury Goods…And How Companies Create Them.  As partners at The Boston Consulting Group, Silverstein, Fiske (now the CEO of Eddie Bauer Holdings, Inc.) and others worked to research the consumer purchasing trends in the United States and overseas.  The phenomenon that they identified was the willingness of consumers to pay a premium for certain goods even in times of economic downturns.  Identified as “trading up,” the researchers also identified that consumers often “trade down” in order to afford the items for which they “trade up.”  In fact, they state that the effect of luxury brands in a market segment is to cause that category to polarize where the growth and profits move to the high and low ends of the spectrum while “companies caught in the middle struggle to succeed and survive.”  The authors provide a historical perspective that the trend to trade up has been around for centuries and that economists from Adam Smith to Thorstein Veblen to John Kenneth Galbraith have observed the trend of consumers to buy goods that cost more than what most others can afford to pay.

Silverstein and Fiske believe that the trading up phenomenon is positive and is driven by middle class consumers who are aware of the price/value ratio of what they are purchasing.  Furthermore, they state that so many middle class consumers are able to afford premium goods that the conventional wisdom of “higher price, lower volume” does not follow the trading up phenomenon.  Instead, the middle class consumers have a stronger emotional attachment with their luxury purchases than with other goods.  That emotional attachment is why they choose to ignore the mid-price product.  Silverstein and Fiske believe that the consumers have no desire to purchase a product that offers “neither a price advantage nor a functional or emotional benefit.”

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