The Consumer Price Index (CPI) measures the average change in prices paid by urban consumers for a basket of consumer goods and services. While it provides a broad overview of inflation, it doesn’t compare two specific years in a row directly. Instead, it tracks changes over time relative to a base year. This article explores how the CPI relates to the Higher Education Price Index (HEPI) and how both are used to understand inflation in higher education. Specifically, we’ll examine whether CPI provides year-over-year comparisons and how it differs from HEPI in measuring inflation for colleges and universities.
HEPI vs. CPI: Measuring Inflation in Higher Education
The Commonfund Higher Education Price Index (HEPI) is specifically designed to track inflation in higher education. Unlike the CPI, which focuses on consumer goods, HEPI measures the average relative price changes of goods and services purchased by colleges and universities. This includes faculty salaries, administrative costs, utilities, and other expenses specific to the higher education sector.
Figure 1: Comparing HEPI and CPI over Fiscal Years 2020-2024
While CPI doesn’t inherently compare two consecutive years, both CPI and HEPI data can be used to analyze year-over-year trends. For example, the HEPI report for fiscal year 2024 revealed a 3.4% inflation rate, down from 4.0% in fiscal year 2023. This indicates a decrease in the rate of inflation for higher education institutions. Similarly, CPI data can be used to calculate the percentage change in price levels between consecutive years, providing a year-over-year inflation rate for the broader economy. The HEPI report states that in FY2024, HEPI increased 3.4% and CPI increased 3.3%. This allows for a direct comparison of the two indices in the same fiscal year.
Analyzing HEPI Components and Trends
HEPI provides a more granular view of inflation in higher education by breaking down cost increases into eight key components: faculty salaries, clerical wages, fringe benefits, administrative salaries, service employees, utilities, supplies and materials, and miscellaneous services.
Figure 2: HEPI Component Changes Compared to 5-Year Averages
Analyzing these components reveals specific areas driving inflation in higher education. For example, in FY2024, faculty salaries, a significant portion of HEPI, saw a lower increase than in FY2023 but still remained above the five-year average. This detailed analysis allows institutions to better understand the specific cost pressures they face. Comparing these component changes to their five-year averages provides valuable context for understanding long-term trends.
Why HEPI Matters for Higher Education Institutions
HEPI serves as a vital tool for higher education institutions in financial planning and budgeting. By providing a more accurate measure of inflation specific to their sector, HEPI enables institutions to project future budget needs and maintain real purchasing power. While CPI offers valuable insights into general inflation trends, HEPI’s tailored approach allows colleges and universities to make more informed decisions regarding tuition, salaries, and resource allocation. Understanding both HEPI and CPI provides a more comprehensive understanding of the economic landscape affecting higher education. While CPI doesn’t directly compare two years, analyzing its yearly changes alongside HEPI offers valuable context. This knowledge helps institutions navigate financial challenges and maintain their long-term sustainability.
