24 August 2012

University Rent-Seeking: This Time It's Personal

As a university professor who is also the mother of an 18-year-old daughter, I am experiencing the anxiety of the university admissions season more than most this year. My daughter has her place, and yet I feel uneasy rather than jubilant. My visit to the institution of her choice convinced me that it is one of those rapacious London-based universities that profits from the rent paid by its own students while competing to out-rank Harvard in a meaningless international comparison. I try to explain the meaning to her life of a debt that may well reach £100,000 over her lifetime.

With my political hat on I have written a report for Green House thinktank that argues strongly for free third-level education for those young people who would benefit from it. My research into this issue blew away many of the myths that were propagated during the debate about raising students fees in the UK. I discovered that the UK’s spending on higher education in 2008 put it in 26th position out of the 33 members of the OECD. The figure illustrates these comparisons and offers some interesting evidence. Perhaps most striking is the high proportion of GDP that the US and Canada spend on tertiary education. While we are following the US models in terms of fee rates, we are not following their level of investment in education, which is around 2.5 times as much. It is important to stress that these data relate to a period before the 40% spending cuts introduced in 2011/12.

Now a paper published in the autumn edition of the Journal of Co-operative Studies explains where all our public money is going, and why we cannot afford to fund our young people through education. It exposes a process of self-endowment by senior academics, who have used the cover of the shift from collegiality to managerialism to massively increase their salaries. The absence of checks on managerial autonomy has enabled the moral hazard of self-serving rent-seeking:

'The levels of vice chancellors’ pay provide material evidence of this hazard. In 1994-5 the
median VC pay was £92,000 and in 2009-10 their average pay was £254,000. Over the same period, the top of the senior lecturers’ pay scale rose from £33,000 to £55,500. In 1994-5 VCs earned 2.8 times the pay of a senior lecturer at the top of the scale, whilst in 2009-10 the comparable multiple was 4.6. In 1995 the Prime Minister’s salary was £82,000 and 29 out of 103 vice chancellors earned more than £100,000. In 2010 the Prime 20 Minister’s salary was £142,000, but every single VC was paid more than him, as were a further 800 other university employees.'

The authors find deep-seated problems with the governance of universities that they argue can only be addressed by a change in the ownership structure: the John Lewis University. The assets of every university should be placed in a nonrevocable trust that would hold the formal legal title to the organisation’s assets. The university's academics and students would become the Trust's beneficiaries. The trust deed would 'affirm the university’s status as a community social asset and an element of the knowledge commons'.

The authors conclude that 'Current turbulence in higher education organisations in the UL opens up potential spaces in which such alternatives might flourish. What is needed is
imagination and the determination to make change happen.'

As ever, if you would like to read the paper but cannot get beyond the corporate firewall that encloses academic knowledge, please contact me.

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