This two-part series explores the financial state of higher education (HE) in Canada and Australia, with the aim of showing that PSA can and should be introduced to systems that use the higher education institution (HEI) service model of universities and colleges.
Originally, given its size and global prominence, the plan was to include the United Kingdom in the series. However, UK data is deficient with respect to an academic denominator that represents the number of HEI employees classified as directly responsible for teaching or research. This denominator is essential in demonstrating the possibility and preferability of academics who offer their expertise in HE through solo or partnered private practice – as other professionals offer their expertise in law, medicine, engineering, accounting, psychiatry, and so on.
It is unfortunate that better UK data is not available since,
as this post is being written, there is considerable unrest in its HE community.
The University and College Union which represents academic labour throughout
the system reports that pay is down by 25.5% in real terms since 2009, while
over 70,000 are employed on insecure contracts.[1] For these and other serious
work condition grievances, including major cuts to their pension, 68
universities have voted to take up to 10 days of strike action in the latter
half of March.[2]
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| Source: nottstv.com |
The use of union industrial action such as strikes, boycotts and work-to-rule are common in countries that employ the HEI model. None of this would occur under PSA, if only because academics are not employees of HEIs and so there is no room for the common conflicts of interest that arise between employers and employees.
In the previous post,
data analysis of the Canadian university system reveals that academics can
offer their HE expertise in fields of study (FOS) readily amenable to the PSA
model and earn net incomes that range from $81,162 to $559,675 - depending on
the source of existing funding paid not to university employers but directly to
professional academics in private practice. These readily amenable FOS include:
Executive MBA; Regular MBA; Business, management and public administration;
Mathematics, computer and information sciences; Education; Architecture; Law;
Social and behavioural sciences, and legal studies; Visual and performing arts,
and communications technology; and Humanities. These FOS represent at least 60%
of total student enrolments and 76% of international enrolments at Canadian
universities. [3][4]
Using an academic denominator and various private practice
funding sources for PSA, the same sort of analysis will now be offered for Australia,
whose data on HE has fewer blind spots than the Canadian. Most notably, the
academic denominator is clearly provided in headcount and full-time equivalent measures,
and includes all forms of employment from full-time permanent to part-time casual.
As a consequence, the academic denominator is not speculative, but actual.
To remind the reader, distinctions in data profiles are made
clear, particularly when data speculation or cross-country analysis are
offered. For each country, the analysis is broken down into several broad
categories: i) tuition; ii) student aid; iii) HEI revenue; iv) HEI expenditure;
v) and government expenditure. The financial data in each of these categories
is analyzed in several ways using an academic denominator and an academic
practice expense profile unique to each country. The aim is to demonstrate that
professional private academic practice is desirable competition or compliment
for the HEI model of universities and colleges which we have inherited.
Australia
- Professional Private Academic Practice
One thing becomes clear as the data on academic employment
is unpacked across countries such as the US, UK, Canada, and Australia: Much academic
work is performed on a casual employment basis. The surplus in tuition and fee
revenue that casual-status, low-paid academics make possible through their teaching
is used by HEIs to subsidize research and fatten the pay of academics with full-time
and permanent employment status.[5] A part-time window cleaner is one thing,
but a part-time teacher is another – especially when the teacher desires permanent
full-time employment.
Though this might sound like union boss rhetoric, it should
be clear by now that PSA is not union representation. In fact, it makes academic
unions moot. The principal function of a union is to represent the interests of
their dues-paying members in labour negotiations and disputes with employers,
while PSA obviates the need of employers all together. Undoubtedly, the two
means of labour organization share some functions, but this distinction exemplifies
the difference between them. But more than that, while both PSA and labour
unions represent the economic and work condition interests of their members, an
act of legislation further charges a professional society with representing the
individual and societal interests of those that depend on the services of its
members. PSA is not a union.
The interests of non-represented parties do on occasion
coincide with the interests of union represented members. For example, when it
suits the interests of their members, student unions support industrial action
taken by academic unions. Granted, this has become a near universal marriage of
interests thanks to the myriad serious deficiencies of the HEI model. But as
PSA demonstrates, it is a marriage of (in)convenience not necessity.
By the very articles of their legislation, professional
bodies must represent all individual and societal interests in the sector – not
merely their dues-paying professional members. One way this is achieved - which
further illustrates distinction between labour unions and professional
societies - is that the latter develops codes of ethics and conduct that are
enforced by investigation and penalization through the statutory self-regulatory
powers of the profession. In contrast, if a union member is an incompetent or
irresponsible employee, that’s fundamentally an employer problem, not a union
problem.
As we move into the data that supports professional private
academic practice in Australia, it is important to broach this topic because these
PSA financial analyses might be criticized for being too academic-focused,
ignoring the valid interests of other parties such as students and society at
large. But at least in form, if not always in function, nothing could be
further from the truth where professions are concerned. No doubt, the existing
professions have behaved in laudable and deplorable ways. No doubt, as a
professional service model, PSA is likewise susceptible to the deplorable. But
with the hard-earned, wide-learned lessons from existing professions and the
liberty of origination in hand, there is reason to believe PSA might do better
– or at least be the lesser of evils.
Methodology
Restricting discussion to the university system, the academic
denominator required for financial analysis is explicitly provided in the
official data collected by the Australian government Department of Education
Skills and Employment (DESE). For 2020, among HEIs designated as universities, there
are 49,852 full-time equivalent (FTE) staff whose function is described as “Teaching
Only,” “Research Only,” and “Teaching and Research.”[6]
In the same year, with a total equivalent full-time student
load (EFTSL) of 1,132,578 domestic and international students, 64% or 729,369 are
enrolled in FOS readily amenable to PSA.[7] An academic-to-student ratio of 1:22.7
is calculated using the FTE academic staff and total EFTSL student enrolment figures.
HEI revenue and expenditure data is taken from the DESE 2021
publication, University Finance 2020 Summary Information, and a 2019 Deloitte
Access Economics study commissioned by the Australian government. With the aim of
aiding government in administration of its Commonwealth Grant Scheme, Deloitte
Access Economics’ study, Transparency in Higher Education Expenditure, provides
data points on “the costs of teaching and scholarship by field and level of
education”.[8]
For 2020, the DESE reports total university revenues of $34.7 billion, with 52.4% coming from national government finance programmes and 27.9% from upfront fee-paying domestic and international students.[9] Total expenditures are $34 billion with a distribution of 29.6% for academic employee benefits, 12.9% for payroll tax, depreciation and amortisation, repairs and maintenance, and 30.4% on defined benefits expense, bad and doubtful debts and borrowing costs.[10]
So far, no speculation or modification is needed for the
data. We now turn to the three remaining data points required to complete the
financial analysis: i) tuition and fees; ii) student aid; and iii) operational
expense of a professional private academic practice.
As the self-described voice of universities, Universities Australia
(UA) devotes 35 pages of its, 2020 Higher Education Facts and Figures, to
discussion of students, in which virtually nothing is said about tuition and
fees charged by its member institutions. In fact, the only explicit data point
on tuition and fees occurs when international comparisons are being made and UA
uses OECD data that estimates $4,061 as the average annual tuition fees charged
by public institutions for domestic Bachelor degree students in Australian universities.
This is clearly an absurd figure, since in the same document UA’s own data
declares that FOS with the lowest maximum per student contribution to university
revenues is $6,804(pg.16), with an average of $8,830(pg.15).[11]
This dearth in data is inexcusable for UA and the Australian
government, which also fails to provide tuition and fees data - though it
provides data on HELP (Higher Education Loans Program) assistance, 80% of which
must be repaid and in 2019 represents some $66.8 billion in outstanding student
debt.[12] The DESE reports HELP loans as $6,063,971,000 or 17.5% of university
revenues for 2020.[13]
To complete the analysis, an estimate of major professional
private practice expenses is required. This is achieved by determining costs
for key practice features that approximate the HEI model of face-to-face
service: i) teaching or research assistance and ii) office and classroom
facilities. Since PSA is compatible with HEIs that operate as service vendors
for professional academic practices, the facilities offered by the University
of Wollongong Innovation Campus have been chosen. According to their website, $700/month
gets you a fully furnished private office with internet, phone and mail
handling service, as well as media-ready classrooms, and other amenities such
as a gym and showers.[14] This puts the annual facilities costs at $8,400.
With respect to graduate teaching or research assistance, a
pay rate of $60/hour AUD at 15 hours per week results in $3,600/month or $43,200/year.
This figure is consistent with the rates that could be culled from university websites
and labour contracts.[15]
For purposes of this analysis, the combined chief assistance
and facilities cost for a private academic practice are set at $51,600 per
year. Though it approximates face-to-face HE service found at HEIs, this is a speculative
number. Naturally, there is considerable room for variance in the cost of
operating a private academic practice. Some factors that affect this variance will
be explored in the Discussion section.
Though practice finances are properly described in terms of revenues and expenditures, to emphasize the fundamental nature of PSA as a service model of self-regulated, self-employed professionals, the Academic Denominator tables speak in terms of practice income.
Table 1: 2020 data restricted to
universities, with further details in the Methodology section. To arrive at the
gross Practice Income, the Amount is divided by the FTE academic staff of
49,852. The net Practice Income is determined by subtraction of the major
practice expenses stipulated at $51,600/annum, which includes a graduate
teaching/research assistant, dedicated private office, and media-supported classroom
facilities.
Discussion
In concert with the Canadian post, this analysis restricts
itself to the university system. Due to a lack of transparency, the current analysis
offers less in terms of tuition and fees compared to the post on Canada. This
is unfortunate considering students and their families constitute a major
interest in the HE enterprise. Moving forward with the PSA project, effort will
be made to secure more detailed data that fills this gap in the Australian discussion.
That said, based on FTE measures, this analysis reveals PSA
is a financially viable option for HE Down Under. One impressive funding source
for the model is presented in Table 2, “G. Average Unit Teaching Cost per EFSTL.”
Limited to undergraduate FOS that typically don’t require expensive clinical or
experimental resources, if the 2018 per student average cost of teaching were
paid directly to professional academics for their services, then the result is a
remarkable net practice income of $311,600/annum.
But the position of PSA is favoured by two further features
of these financial calculations. First, they include staff that is described as
“Research Only,” who in 2020 totalled 17,871 FTE academics.[22] The exclusion
of these academics increases the cited Practice Income in Tables 1 and 2. For
instance, the teacher-to-student ratio is adjusted to 35.4, resulting in a net
annual income of $514,800 per FTE academic, based on the 2018 average unit teaching
cost per EFSTL of $16,000 cited in Table 2. Second, even in those FOS that require
expensive resources, there is an element of classroom-based learning which can
be readily provided by the PSA model. This expands the scope of service for PSA
beyond those FOS considered primarily ‘classroom-based’.
Another impressive way to see this analysis is through the
lens of Table 2, “C. Commonwealth Government Grants.” These grants are based on
the number of publicly funded Commonwealth Supported Places (CSP) - that is,
places in the HE system reserved for domestic students. Using this source, the net
income is $191,566/annum for all academics in the PSA model, which is consistent
with the 2018 maximum salary of $194,000 for professors and 34.5% higher than the
average salary for full-time permanent and fixed-term contract academic staff
in the university system.[24]
But perhaps even more remarkable, is the observation that this is possible using only the Commonwealth Government Grants that under PSA subsidize not only domestic but also international students, who in 2020 constitute 32.2% of EFSTL enrolments.[23] Imagine what this can mean for international student recruitment and the burden of student debt.
To provide further perspective, 29.6% of university
expenditure is on what the DESE describes as Academic Employee Benefits - that
is, employees who represent 46% of all staff at universities and whose primary function
is teaching or research. Under PSA, while covering major private practice
expenses, this expense of the HEI model can provide each FTE academic a net
practice income of $150,390 per annum. The DESE uses three further categories
of university expenses: i) Depreciation and Amortization; ii) Repairs and Maintenance;
and iii) Other Expenses (i.e., defined benefits expense, bad and doubtful debts
and borrowing costs). These are not characteristic expenses of the PSA model,
but rather of the HEI model for HE. Together they account for 40.7% of total
university expenditures.[25] If these monies are paid directly to professional academics
in the operation of their private practice each FTE academic earns a net income
of $225,846 per annum.
The point is not to identify any specific funding source within
the HEI model. The point is to illustrate that ample financial resources are
available for operation of the PSA model – a viable, historically grounded and
tested service model that can substantially reduce the overall costs of HE. Even
a conservative 30% reduction is welcome in a system that relies on vulnerable international
student tuition fees for 26.6% of its operating revenue, while HEIs chronically
cry poor from within operating margins that declined by more than 50% since
2010 and now sit at less than 5% for the sector.[26]
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| Source: smapse.com |
Canada is no different. The case of Cape Breton University (CBU) is telling. CBU is a relatively small institution in my home province of Nova Scotia, where between the years 2017 and 2019 it raised enrolment by 80% to over 5500. It accomplished this through reliance on international students, whose enrolment during the two-year period increased by 285%. As a public university, with declining regional demographics and public funding the institution had little choice if it wished to survive. However, this desperate response has cost it dearly, having to pay for expansion of classroom, cafeteria and housing facilities, along with the personnel needed to recruit and service the increase in enrolments – not to mention the buses it had to buy the city of Sydney, Cape Breton, to maintain community service in the face of a large influx of students.[27] It is now a university where the student body is composed of more than 62% full-fee-paying international students. As, Alex Usher from Higher Education Strategy Associates says, “[You] kind of have to wonder at this point: is it still a public university?”[28]
Unfortunately, for reasons endemic to the HEI model, there
are many institutions around the world who find themselves in such dire
straits. In Australia around 16% of its universities are operating at a deficit.[29]
PSA is a choice response to such circumstances. One that does not require the expansive
institutional cost of securing and servicing a vulnerable supply of
international students. With PSA, similar enrolment expansion – or contraction
for that matter – can happen at CBU but without the added operational costs. In
fact, if PSA was their response operational costs would decrease thereby allowing
for more competitive and expansive international market strategies.
To be clear, growth of the international student market offers
personal, cultural and economic benefits to all involved. In 2018, beyond the
billions they contributed to HEI coffers, international students contributed $32
billion to the wider economy of Australia through the purchase of services and
products.[30] In Canada, the contribution is $22.3 billion for the same year.[31]
Beyond that, international students add value by raising cultural awareness and
emigrating to their host country. We want this. We just don’t want it under the
present precarious circumstances.
PSA changes those circumstances. If further argumentation is
need, consider that in the financial analyses for Canada and Australia, the major
stipulated expenses for operating a private academic practice were $42,600 and
$51,600, respectively. As indicated, this expense covers a teaching or research
assistant working 15 hours per week, a private office with services, and a
media-ready classroom. There are, of course, other practice expenses such as: retirement
contributions, healthcare insurance, payroll taxes, travel and conference
expenses, and professional society dues.
But consider: Aside from the expansive opportunity PSA
presents with respect to billions in international student revenue, professional
academics (not HEIs) provide the education and training that socially and
economically drives a country. In recognition of such substantial benefits, there
is room for government to introduce tax policies and business incentives that favour
opening a professional private academic practice. Such incentives are offered in
other sectors where the government wants to attract and retain talent. Imagine
the talent that can be drawn to a HE system that offers the sort of remuneration
and control over work characteristic of PSA.
Further, there is precedent for government policies that favour
PSA in the legal status of existing HEIs, which are exempt from all sorts of taxes
- well, sort of. It turns out that the federal government pays municipal property
taxes for at least some public universities. Take as example Queen’s University
of Kingston Ontario, Canada. The provincial government pays about $1.5 million
each year to the city of Kingston for a student head tax in lieu of property
taxes, which based on the university’s property holdings is technically in the
order of $6-6.5 million.[32] Along with the cost of accreditation systems and
government HE bureaucracy, monies such as this don’t get tallied as part of the
real and total cost for the HE model – and none of them is required by PSA.
Finally, the public universities of Canada and Australia are built using public funds. Where the government endorses the PSA model, these public resources can be put at the disposal of the academic profession. In such as case, the universities become vendors that offer professional academics at-cost-rates for services and facilities, putting competitive pressure on wider community commercial rates for similar services and facilities.
Combined with the professional prerogative to offer service
as one sees fit, these and other factors can substantially reduce the expense
of operating a private academic practice. To the extent that this is true, the
real financial footprint of the HEI model can be substantially reduced.
Reducing the cost of HE is the principal purpose of developing
the PSA model. Being an international student is an elitist luxury and so not
available to millions of people around the world who unable to even gain access
to their domestic resource-limited HE systems or who can but leave with significant
debt – not to mention concerns about quality in any case. At the same time, the
reality is that without academics – or students, the second necessary denominator
– there is no HE and so any model must consider how to attract and retain more
of this labour.
For a number of years, I left academia and took up high-rise
window cleaning. The salary and hours were better and the employment more
secure. That is not to say I am talent HE cannot afford to lose. It is to say
that more is always better in HE – more academics and more students. This is
only reliably possible where the cost of the system is lowered and only deniable
from within an HEI model that is bankrupting higher education.
This window-cleaner-philosopher invites collaboration and comment
on the PSA project.
Sources
[1] UCU
- UK universities to face five more days of strike action before Easter
[2] UCU -
Why we're taking action
[3] The
State of Postsecondary Education in Canada 2021 (higheredstrategy.com)
[4] Canada
(iie.org)
[5] The
cash nexus: how teaching funds research in Australian universities - Grattan
Institute
[6] 2021
Staff full-time equivalence - Department of Education, Skills and Employment,
Australian Government (dese.gov.au) (Table 1.3)
[7] 2020
Student summary tables - Department of Education, Skills and Employment,
Australian Government (dese.gov.au) (Table 5)
[8] Dept
of Edu & Deloitte 2019 - transparency_in_higher_education_expenditure.pdf
(pg. v)
[11] 200917-HE-Facts-and-Figures-2020.pdf
(universitiesaustralia.edu.au) (pp. 15
& 16)
[12] 2018-19
HELP report data extract - Department of Education, Skills and Employment,
Australian Government (dese.gov.au) (Table 1)
[14] Private
& Coworking Offices @ The Uni of Wollongong Innovation Campus
[15] Enterprise
Agreement 2019 - 2022 (flinders.edu.au) (pp. 66-70)
[23] 2021
Staff Appendix 1 – Actual staff FTE - Department of Education, Skills and
Employment, Australian Government (dese.gov.au) (Table 6)
[24] 2020
Student summary tables - Department of Education, Skills and Employment,
Australian Government (dese.gov.au) (Table 5)
[25] 907-Mapping-Australian-higher-education-2018.pdf
(grattan.edu.au) (pp.39 & 40)
[27] 200917-HE-Facts-and-Figures-2020.pdf
(universitiesaustralia.edu.au) (pg. 27)
[29] Cape
Breton, You Have to be Kidding Me | HESA (higheredstrategy.com)
[30] 200917-HE-Facts-and-Figures-2020.pdf
(universitiesaustralia.edu.au) (pg. 28)
[32] Economic
impact of international education in Canada 2017-2018
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