Way to undermine my sense of relief, guy

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.


  1. Walter Solomon says

    It’s predicted that Pat Robertson’s Regent University will “struggle.” Hopefully it takes a turn for the worse and be one of those that perish.

  2. says

    I’m a big non-fan of Malcolm Gladwell, but…
    The other day he did a podcast pointing out that museums and universities have legal dodges for manipulating the size and value of their endowments. Since a museum like The Met would never consider selling or taking a loan against any of their collection, their balance sheet has none of it. How much is that stuff worth? We don’t get to know that, either. I come from a Hopkins Family in many ways: my sister’s a hot shot lawyer who spent much of her career helping Hopkins Hospital appear to be a nonprofit. How does it do that? Simple: it bought most of East Baltimore, tax free, and spends exactly the right amount turning it into expensive high-end very valuable office space. But it couldn’t sell that so when there’s cost cutting it hits easily replaceable infrastructure: faculty and staff.

    Basically, Covid is becoming corporations’ big excuse to complete union-busting and reset all wage gains back to (inflation adjusted) 1900s levels – in fields that are not largely populated with white golf buddies of executives. This sort of trick was used by Carnegie and Frick, who never missed a chance to cause a brief business down-turn in November to set them up for rapacious salary negotiations in December.

    Meanwhile, the republicans want a payroll tax break in the next economic bill. Because waiters and workers totally pay payroll tax and need a break. Did I say “workers”? I meant “Wall St money managers” – they’re workers, too! Not that any of them are losing their jobs: people who care about payroll tax are the self-employed.

  3. IX-103, the ■■■■ing idiot says

    All I can say is that the $140k salary seems quite low for the qualifications required. In my field that’s only a bit above entry level for a newly graduated PhD. You’d assume professors with tenure would get more than that.

    But then again they’re mixing cherries and watermelons* by not breaking things out into bands, so I’m not even sure what that data point tells us.

    *I hearby coin the phrase “mixing cherries and watermelons” to mean including items with very different base distributions together to the point the statistics are useless or misleading. Coined to match the case where someone tells me have 20 fruit left, but won’t tell me if that’s 20 cherries or 20 watermelons and expecting me to know if we need to buy more.

  4. blf says

    An extremely quick search for “average us professor salary” (no attempt to limit to PhDs) returned a very wide range of values, with one site claiming the even more absurd 154,785USD (and a “typical range” (whatever that is) of 73,618–235,952USD). There were two perhaps-more-commonly quoted values, 75,430USD (US Bureau of Labor Statistics, 2016), and 102,402USD (AAUP (American Association of University Professors), also 2016). I didn’t bother to check which arsehole the OP’s quoted figure came out of.

  5. says

    A normal human who owns real estate might take out a second mortgage to try to get through hard times. This never seems to occur to universities, which often own huge pieces of real estate.

    Also: the endowment is for this sort of thing. But since it’s the source of a university’s power, they keep it mostly off the table.

    Given that faculty can still generate revenue, by doing online learning, whereas a football program cannot do online football, we must ask why any university still has a football program. There will always be football players, ready to go, if the programs start up but in the meantime, get rid of the $12mn coach and the $2mn university president – you can keep a bunch of professors for what a football program costs.

    It’s like none of these universities have a business school faculty that they can ask “plz explain this to us?” And they ask the football coach, instead.

  6. says

    [Harvard] According to data published by the U.S. Department of Education, the Athletics Department spent $37,624,262, second only to Penn’s $41,814,447 and far above the Ivy League average of $27,129,322. Of that total, Yale spent $17,479,117 directly on teams.

  7. says

    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?

    Of course. Buildings and real estate can be used for all kinds of interesting profitable purposes, while salaries are just money down the drain.

    Besides, you should really be volunteering your time for free. You know, for the love of learning and the betterment of the world and all that other stuff we put in the brochures.

  8. nomadiq says

    They should report the median and not the average salary.

    Maybe Business Week readers (and journalists?) don’t know the difference which would explain a lot.

  9. karellen says

    @opus #4 – yeah, thanks for the link.

    The average professor salary of $141,476 listed in Table 1 on pp.16 is taken from the section “Category I (Doctoral)”. However, this does not mean “professors with a PhD”. As can be seen from “Explanation of Statistical Data” on pp.29-30, “Category I (Doctoral)” refers to “Institutions characterized by a significant level and breadth of activity in doctoral-level education as measured by the number of doctorate recipients and the diversity in doctoral-level program offerings.” – i.e. it’s a subset of institutions that specialize in PhD programmes, not the set of professors with PhDs.

    A much better value for “average professor salary” would be from the bottom of Table 1, for “ALL CATEGORIES COMBINED EXCEPT IV” of $104,820.

    Looking through Appendix I, on pp.42, UMM is listed as a category IIB (Baccalaureate – Institutions characterized by their primary emphasis on undergraduate baccalaureate-level education) institution, whose average professor salary is listed as $87,500 (if I’m reading the Appendix right), which looks slightly lower than the IIB average of $90,879.

    Looks like BusinessWeek doesn’t know how to read a report. Which is somewhat depressing.

  10. raven says

    Almost everybody is hurting in some way during this pandemic.
    A lot of small businesses, including my favorite places that I go to, aren’t going to make it through either.

    There is no end in sight to this pandemic right now.

  11. unclefrogy says

    Looks like BusinessWeek doesn’t know how to read a report. Which is somewhat depressing.

    yes it is depressing but I am pretty sure that the writers of that piece can read reports well enough it is just that they are using their interpretation of it to sell their ideas.
    They do not seem to understand what education is for and since they think life is about making money they write these kinds of articles.
    They do the same thing with all they look at, like The Post Office, and Medical care. Funny how they do not ever seem to look at the military that way, maybe they see that as a good because they can make lots of money off of it the way it is?
    uncle frogy

  12. says

    @#12, raven:

    No, not everybody is hurting.

    Since the beginning of the pandemic: UnitedHealth had record-breaking profits, JP Morgan Stanley had record-breaking revenue, Moderna’s CEO became a billionaire overnight, US billionaires in general became wealthier by $584 billion, and of course Jeff Bezos became massively wealthier.

    As always: the problem is capitalism. Coronavirus just demonstrates why.

  13. kaleberg says

    $140K! They must be averaging in the salaries of the football coaches.
    Non-profits do sell assets, but they have to consider how it would look to their donors and community. They also have to be more careful than a profit making business since they have less access to credit when the good times return. Also, some of their assets are not very liquid and some are entailed.
    A lot of colleges are not going to survive, but many of them were on borrowed time pre-COVID. The baby boom echo peaked around 1990, so the college age population has been slowly shrinking. A small school already at the edge isn’t going to have a lot of options. We are going to see a lot more auctions like this one for the Green Mountain College campus. They are hoping for $20M but will accept bids as low as $3M.