These are not happy times for universities — after decades of declining support, the pandemic is hitting us hard, and the colleges that ought to know better are opening up for business because they can’t afford not to, which is a bad idea. Of course, it’s also an opportunity for some MBA in a business school somewhere to analyze universities from a capitalist perspective and make predictions about which are going to survive the current crisis, and which are going to break. It’s a bit ghoulish, and I’d rather efforts be spent on figuring out how to make universities viable again, but OK, let’s look into your crystal ball.
Business Week looks at over 400 universities and categorizes their ability to weather the storm. Schools will can a) thrive, which is the case for the big prestigious private colleges with massive endowments. Think Harvard. They’re going to whine and moan about having to peel off some of their riches, but they don’t have any real worries. Then there’s b) survive, where the school has enough status and income that they can make it through lean times and rebound. c) Struggle, is for schools that already have some lurking problems that will be amplified by the pandemic. And finally d) perish is the fate of those colleges that had severe issues already, like high tuition and dependency on foreign students.
There is a spreadsheet with the parameters and results. You can check you alma mater to see how it is predicted to do.
I’ve attended or worked at a long list of state schools: University of Washington, University of Oregon, University of Utah, Temple University. All are predicted to survive. I attended one small liberal arts college in Indiana, DePauw University, and it’s slated to perish, sad to say. Fortunately, my current employer, the University of Minnesota Morris, also a small liberal arts college, is expected to survive the coronavirus! Hurrah! The tea leaves have fallen in our favor!
Of course, any model is only as good as its assumptions and data, and this paragraph dispelled all of my optimism. It’s nonsense.
College is an expensive operation with a relatively inflexible cost structure. Tenure and union contracts render the largest cost (faculty and administrator salaries) near immovable objects. The average salary of a professor with a PhD (before benefits and admin support costs) is $141,476, though some make much more, and roughly 50% of full-time faculty have tenure. While some universities enjoy revenue streams from technology transfer, hospitals, returns on multibillion-dollar endowments, and public funding, the bulk of colleges have become tuition dependent. If students don’t return in the fall, many colleges will have to take drastic action that could have serious long-term impacts on their ability to fulfill their missions.
Average salary of a professor with a PhD is $141,476!!! On what planet? Here in Minnesota we have access to salary numbers as a matter of public record, and nope, no way is that accurate. The numbers for Morris are less than half that, but we are slightly underpaid compared to other institutions in the UM system. Many universities have found ways around those “near immovable objects”, hiring armies of underpaid adjuncts and using grad student labor for a pittance. Telling readers grossly inflated numbers for salary and pretending that is representative is just a way to focus blame on the faculty who are the soul of the university, and justify further actions to undercut their support. I hate it.
We just paid our taxes, so I’m painfully aware of our financial situation. Thanks to my decision to take a sabbatical, a voluntary and massive reduction in pay, my salary for the last two years has been about $40K. I’m grateful for it, and it’s enough to live a modest academic life, but to imply that it’s excessive for a senior position with decades of seniority that required about ten years of training to land is rather offensive and stupid. Yes, the majority of the expenses for a university is people, big surprise. You’re paying people to teach and do research, would you rather that real estate and buildings form the bulk of the expenses?
Anyway, great job undermining your own analysis, Scott Galloway. As always, pretending a university is a widget factory is a bad interpretation that makes your whole thesis suspect.