The Michigan Review

The Meal Plan Scam

by Jacob Oslick

October not only marks the beginning of fall, the start of midterms, and the World Series; it is also the time when new freshmen undergo the most unpleasant experience of their young college career: the first time they pay a tuition bill. And if, like roughly 95% of freshmen, they live in a University Residence Hall, they also pay for room and board (slightly under $5500 for the standard double). Presumably, this is a fair price that includes a place to sleep, clean bathrooms, Ethernet, a small library, and, most importantly, food. From this dorm rent, the University claims the Any 13 Meal plan costs $2,268 per student for two semesters. This is the rate the University charges off-campus students who for some reason (masochism?)choose to pay for a year-long University meal plan. Using some rather curious math, the University also claims the other meal plan options (such as “Points Only” where students receive no meals but get $1060 worth of Entree Plus) also cost $2268. The following report details where the money goes, and questions the efficiency of the meal plan in relation to two alternatives: the Kosher Meal plan, sponsored by Hillel, and the food service provided at the Theta Xi Fraternity House. With respect to these comparisons, the evidence clearly shows the University plan to be a significant financial burden on students relative to value, with high costs for salaries and overhead.

Perhaps one of the best gauges of how poorly the University meal plan is run is the cost per meal. According to Larry Durst, the University Housing Business Administrator, “we [the University] try to make our meals competitive and fit the market for [individual meals”. At first glance, the University meal plan seems to accomplish this purpose for its primary charges — residents. On a per meal basis, Durst says 13 Meal Plan Students pay $4.50 per lunch and $5.90 per dinner. However, this analysis assumes that students arrive the first day the Resident Halls open and leave the last day on finals, never skipping a meal in between. A more accurate estimate of the cost students pay per meal takes into account the number of meals the average student misses per week. The University, of course, assumes that students skip meals when planning their budget. Thus, perhaps a better estimate of what the University charges students is what they charge to eat an individual meal in the dorms. Here the prices are significantly more expensive: $6.25 for lunch and $8.25 for dinner. By comparison, Hillel offers individual meals at $4.25 for lunch and $6.50 for dinner. Theta Xi is by far the cheapest, as the meal plan component of rent averages out to roughly $4.30 per meal (lunch and dinners). As all three organizations are non-profits, all must make sure that revenue equals costs. Thus, the price they quote must roughly be equivalent to the costs of the food and service they provide. Therefore, to properly examine why the dorm plan costs students so much, one needs to look at the cost structure of University Housing.

On the surface, the University plan should be the cheapest, as it can take advantage of what economists refer to as “economies of scale”. Essentially, whereas Hillel and Theta Xi might have one cook for every 20-40 students, all of Markley (1173 students) has 7 cooks (25 total employees) — or one for every 167 students. Also, due to the size of the dorm plan, the University should be able to command lower prices for food and drink, because they buy in bulk. Similarly, Hillel’s costs should far exceed both the residence halls and Theta Xi. Not only does it pay a steep (close to 90%) premium for kosher food, but Jewish Law also demands separate equipment, dishes, and utensils for meat and dairy meals (e.g., a plate used to serve hamburgers cannot be used to also serve pizza, even on different days).

So why does the University plan cost so much? The answer is two-fold: bloated administration, and ridiculously high union wages. Over the past year, only 31.8% of food service expenses was used to purchase food. However, 61.2% was directed towards compensating cooks, cleaners, and management etc. Not only that, but in a year when food costs increased only 1.9% (due to more students), administration costs skyrocketed 8.6%, going $185,961 over budget. A full 16.6% (instead of the budgeted 15.8%) of the budget went simply towards paying the Managers, Assistant Managers, Supervisors at the various dorms and senior staff. Out of a $15,799,000 budget, this equates to over $2.626 million. Presumably this figure includes more than salaries and benefits, nevertheless it seems extreme. Similarly, the University uses a pay scale that starts at $10.30 an hour (plus benefits) for full time workers. Sadly, this is not the wage paid to skilled workers (chefs, bakers etc.), but to “food service workers,” whose duties include such complicated tasks as “operate automatic dishwashing and cartwashing equipment” and “trim and slice cooked meats and cheese.” Full time kitchen cleaners receive $11.00/hr, stockkeepers $11.40/hr, and chef’s assistants $13.42/hr (by comparison, this reporter was paid $7.00 an hour as a full time baker this past summer). Furthermore, non-student wages soared 5.8% in the past year (when inflation averaged only 2%), causing wages to go $361,453 over budget.

In fairness, the residence hall meal plan does have a few distinct advantages over the alternatives presented in this report. Per meal, it provides more dining options then either Hillel or Theta Xi, and in a more picturesque environment. Also, Hillel this year budgeted an expected $3000 loss on its meal plan, working out to a subsidy of (given an average of twenty-five students per meal, including holidays) $120 per student, or roughly $.30 per meal. However, even including this subsidy in the price students pay would still make Hillel $1.70 cheaper for an individual lunch, and $1.45 cheaper for dinner. This, despite all the costs associated with running a kosher facility.

In short, the University Dining Halls are plagued by high administrative costs and union wages. Unlike Hillel and Theta Xi, where close to two-thirds of the budget is devoted to food alone, the University generously compensates employees with minimal skills, and then allocates significant resources to watch over and manage these employees. The end result is higher costs for residence hall students. Thus, despite being run by a “non-profit” organization, the University residence halls are consistently the most expensive living option for the student body. MR

This article was published in the 7 October 1998 edition of The Michigan Review (Volume 17, Number 2).
For questions or comments, see the Contact Information page.