July 12, 2023
Colleges will continue to be hit by high inflation through at least fiscal year 2024, according to a new analysis from Moody’s Investors Service.
Analysts predict that increasing costs of labor, food, utilities and construction will spur difficult decisions and force higher education leaders to reprioritize how they allocate resources.
Employee compensation will be the most difficult expense to manage in the coming years, as collective bargaining efforts seek to close the gap between wages and an increasing cost of living, analysts said. Employees are turning to work stoppages to secure increases above inflation and advocate for better terms for part-time and nontenured faculty, as well as graduate student workers, the analysis said.
Colleges’ operating costs increased 5.2% in the 2022 fiscal year, according to Commonfund’s Higher Education Price Index, or HEPI, an inflation index created specifically for colleges. But that increase lagged behind the consumer price index, which saw a jump of 9.1% over that same period.
It is rare for the two metrics to diverge so significantly, Moody’s said.
The difference can be explained partly by faculty salaries, which rose the least among eight cost categories that HEPI evaluated.
Other reports found that employee wages didn’t keep up with rising costs. Full-time faculty wages decreased 5% in the 2021-22 academic year after adjusting for inflation, according to the American Association of University Professors.
This wage stagnation, combined with reductions in benefits during the COVID-19 pandemic, have paved the way for the wave of labor strikes currently affecting higher education, according to the analysis.