University reform, part II: the barriers

Australian universities are admin-heavy, have high student-academic ratios and in recent years have seen a race to the bottom in standards, related to a battle over student numbers. The selling out of previously amassed reputation by reducing entry barriers most recently became official policy at UNSW and the University of Sydney (the ‘no ATAR’ rule that is hurting UWS), but merely followed standard practise in many other places. These forces have long been foretold by academic papers of decades past, so those looking to get their teeth into the question how it all came about should glance at this paper from 10 year ago, or this other old one, or this most recent one.

Government is now also waking up to this reality, witnessed most recently by a consultancy report by Ernst and Young that says about the future that “University asset bases and administrations will need to be significantly leaner than they are today.” In the US too has the explosion of administrators who give themselves fantastic salaries but don’t seem to add much been noted.

Whilst the Australian audience, which includes the education ministries and the general public, does not seem to realise the full scale of the governance problems in the university sector, even the insiders who do know the problem face an uphill battle in trying to think of solutions. Indeed, in this respect the consultancy report mentioned has no clue as to what to do and merely pushes hollow phrases like ‘universities will need to have a clear strategy’.

Rather than discuss what is wrong with popular particular proposals, like vouchers or privatisation, let us mainly try and get a handle on the quite baffling array of barriers that any solution has to navigate. Along the way you will get an appreciation for just what the underlying economics of our universities really are:

  1. Forget about anything that requires a wholesale increase in standards, mainly because that would cost us the overseas students who come for our easy degrees (the really smart ones do not come here unless by mistake). Hence a university inspectorate or something that would truly try to enforce high uniform standards for degrees is unlikely to get real traction. Indeed, as almost 40% of the population gets pushed through university, one can by implications not have super-high standards for normal undergrad courses.
  2. Forget about anything that costs more money. The call for reform only has a chance when times are lean and people are looking for savings.
  3. Forget about anything that needs the tertiary education unions on-side. You see, what are superfluous workers from the point of view of society includes fee-paying members from the point of view of the unions. They are members precisely because they need more protection than their more useful counterparts. Hence unions will be violently opposed to anything that would actually lead to real cost cutting.
  4. Forget about the active help of the academics. Sad to say, but when it comes to it, we are cowards. We have cushy jobs and those of us who are the best placed to push through ideas and reforms have the cushiest jobs of all, meaning they have a lot to lose and almost nothing to gain. We don’t mind telling you to what to do and engender a brain-storm session like this one, but realistically speaking we are not going to do it ourselves.
  5. Forget about mandating anything to do with who works at universities, like ratios of academics to administrators or rules on consulting. The reason why this is off the table has to do with the ambiguous answer to the question which part of government actually controls universities. You see, most things to do with budgets goes via the central government, including HECS fees, central grants, student Visas, etc. Yet, the legal power in universities rests with their senates or university councils. These are ultimately appointed mainly by the local state ministers for education who otherwise have few dealings with the universities in their state. This gives the local ministers the incentives to pay little attention to whom they appoint on these councils whilst blaming Canberra for everything. This is truly a knotty problem because universities exist by local and national acts of parliament. The current situation reflects the balance of responsibilities for education across these two tiers of government. To streamline the outside lines of authority operating on universities would require changes in the relative power between states and the commonwealth (one way or the other), no doubt in the face of furious lobbying by all concerned. To end up with one body that truly controls universities (local or central, does not matter) would then only occur if the problems are so open and so vast that people are desperate. Till then the state ministers have every incentive to look away whilst the commonwealth lacks the actual ability to force university rulers to do their bidding. Hence anything involving the appointment of the top people in universities (the core power) is immediately off the table.
  6. Forget about anything that requires lots of student mobility, such as competition between universities in different cities or even competition between existing universities within cities. The main reason why this is off the table is that mobility in general in Australia is low and students now overwhelmingly stay at home in order to avoid the very high costs of accommodation if they move out. Hence the cost of accommodation and the strong local social ties of their students mean universities have captured markets. They do not need to compete for a large slice of the students and the number of people they do need to compete for (those with strong disciplinary interests or particularly knowledgeable parents) is too low to care about. You can see the results of this captured-market thinking all over Australia: the Perth experiment is basically an exercise in wangling more money out of the people who go there anyway, copying the same experiment in Melbourne where there was a bit of a local competitor (Monash) who made them pay somewhat for dumbing-down their degrees. The ability to muddle the waters via all those fake ‘accreditations’ has meant that the competition on quality is furthermore really a very thin market. Competition on quality is basically now no longer existent for the mass degrees.
  7. Forget about anything that implies elite universities and ‘other universities’. A popular fantasy amongst GO8 scholars is that they should get more money and all the money going to research at other universities should go to them. Pure myth. Why? This is where the egalitarian culture and state governments get into the act: the egalitarian ethos makes it impossible to allocate central money solely to selective entities, unless one takes away the title of ‘university’ from most of the others. Yet that in turn is impossible because we all want our kids to have a university degree even if they are not smart enough to have a real one, which again is an egalitarian wish. So politicians will block any move to take university status away from any of the existing ones. Moreover, state governments want their local universities to be ‘world leading’, even if they are out in the bush and have few students. There is simply no way that state governments would agree with plans to officially have their universities labelled as second-rate. Quite the contrary: expect all these forces to further level the playing field between all the universities in the future.
  8. Forget about the private sector coming in to save the day, either in the form of private universities somewhere remote or as overseas universities taking over some local entity. Indeed, forget about private sector forces within any of the universities that currently pretend to be run like the private sector. Why? Because the real ‘rent’ on which all the big universities float is neither their reputation nor their captured market of current students, but rather their property. The big inner-city universities are sitting on billions of dollars of prime real estate that they are only allowed to use for teaching and research. Their returns are paltry compared to just putting apartment blocks on the same land. If they were thus truly private or run for-profit, they would cease being universities in a second and just sell all their buildings and land. For the same reason is it simply too expensive for any overseas or private university to buy their way into the Australian system.

Would-be reformers of the Australian higher-education system thus have to be exceedingly clever and creative. They must come up with a way of improving the incentives within universities so that it fires the ones that are useless and increases the power of those more useful, yet they must do this with their hands tied behind their backs. They must brave the current powers-that-be, including the unions. They can neither pour more money into the system, change the legal governance structure, call in foreign or private forces, concentrate research in a select few universities, mandate standards, or count on mobility as an organising force. Oh, and it shouldn’t be too hard to explain either because otherwise no politician will run with it.

All that the would-be reformers potentially have on their side is parts of the commonwealth bureaucracy and limited public and business support. Some of the academics will cheer them on, but don’t expect real help from them either.

Seems like an impossible challenge, does it not? It has certainly been too much for a whole generation of would-be reformers.

I do not have the answers either. I have some vague ideas that I will put in future posts (along with discussing the ideas of the commenters!) but nothing I would put my hand into the fire for. It is really a tough one.

Since they are the only ones with something real to gain, perhaps it should be concerned parents and budding students who should try and think up something that would actually have a chance. Or perhaps concerned businessmen should take up the challenge? Or perhaps a coalition of them?

So, with a clearer picture of all the barriers and incentives, I encourage the readers to put mode ideas in the thread below. The ones put on the comment thread sofar include a couple of quite innovative ones (and I do plan to come back to them!) and it would be useful to see a few more!

Author: paulfrijters

Professor of Wellbeing and Economics at the London School of Economics, Centre for Economic Performance

12 thoughts on “University reform, part II: the barriers”

  1. So, here is a thought for all those academics reading this post. I am a mere practitioner and I earn my keep as an independent consultant. Its hard earned, and I have to develop and maintain many skills to keep going. My partner is an academic (I hope she is not reading my post) and her university is trying to stream-line its syllabus scheduling system. The upshot is that they plan to sack several administrators and instead put the obligation on the academics to get with a new system, which evidently would mean more work for them. My partner’s response is that this is yet more administrative hassle, and detracts from her ability to research. I gave this opposition short shrift, and she rightly observed that I was better remunerated than her and that the quid pro quo for her quieter life was lower pay. So maybe one way to deal with all this, is to take the axe to administration, but give the academics a harder life and more money. I suspect this will be difficult, because many value a quieter life more than more money. As a bastardisation of Keynes ” to make the rich/some academics work harder you need to give them much more money, to make the poor/some other academics work much harder you need to pay them a little less.


  2. I’m not sure academics would prefer fewer admin staff – much of the admin workload would be shifted to them.

    The simplest solution would be to tie federal funding levels to admin/academic ratios. Though I’m sure the universities would find some way to game the system.


  3. Do we have any particular evidence that the marginal administrator lessens the administrative burden on faculty? How much time do we spend jumping through hoops that had no reason to exist but for the imagination of some administrative unit at the University?

    I also worry about administrative illusion. I was hired after the administrative explosion, but from what I can gather from the veterans, a lot of nice-sounding schemes were shot down in the old days because faculty recognised that they’d be the ones bearing the costs and that the costs were higher than the benefits. Now, administrative illusion sets in: we reckon that some scheme can be handled by Registry and so it’s a great idea. Until we get the new processes and forms that are implemented by the administrators to give life to the new scheme.

    It would be really interesting to see whether time use surveys for academics would show any real decline in the administrative work undertaken by faculty with the rising number of administrators.

    I suppose a counterargument would be that national governments now demand a whole lot more reporting and so the appropriate counterfactual is that admin burden on faculty would be even higher but for the administrative assistance.


  4. Bruce, Matt,

    Yes, I can see what you are thinking; all the extra administrators are surely taking the load off the academics? It is a logical thing to think, but on average, I would say ‘no, that is not what is going on’. Essentially, a lot of admin is in terms of activities that simply would not exist without those administrators. Let me give you an example.

    One of the things city-based universities have started doing in recent decades is to co-opt secondary schools in their curriculum. This means that universities offer kids in their last year of secondary school the opportunity to already do an accredited course for their university. On top of this, they give presentations, pamflets, websites, open-days, etc. All this is to lock in as many kids as possible to a particular university. Much like the drug pusher stands on the school playground to create demand by handing out freebies, so too do universities now ensure that when they leave secondary school, kids are already indoctrinated by them and have credit points with them and no-one else.

    Now, I hope you can see that this strategy makes perfect sence from the point of view of some part of the university: you invest to create a captured market later on. It requires a lot of admin but also creates work for the academics who have to do these presentations and courses.

    Still, at the overall level, these are not cost-effective activities. From the point of view of society they are a pure waste, i.e. all they do is shift students from one potential university to another. But also from the point of view of the individual universities, the costs are probably higher than the gains but these costs are decided upon at the faculty level whereas they really come from the overal university accounts so an internal governance problem allows them to exist.

    The net effect is more work for everyone; lots of admin doing the marketing and maintaining of these relations and lots of academic time in the presentations and meetings surrounding it. In the optimal system though none of these activities would even exist and there would be both fewer administrators and more free academic time.

    Universities now have lots of these things. Training courses for academics. Alumni activities. Assurance of teaching programs. Visitation committees. Etc. Activities that make some sense for some part of the university but that from the point of view of society should not be there at all.


  5. Paul,

    I can’t quite see what is going on here. The adage, “half the marketing budget is wasted, but we don’t know which half” comes to mind. If the administrative resource is partly a “make work” scheme then clearly great waste and society would be better off with reduced university funding (on condition that the unis applied the cut to admin). But if, on the other hand, part of the admin is the activity of marketing, then regrettable though such activity is, is this not just the natural consequence of a system of funding based on student numbers?


    1. same point applies: you would not want the marketing to be there, just as you don’t really want the heart foundation and the kidney foundation to compete for charity dollars. Insofar as you want universities to compete and to advertise their differences, you want them to do that on actual differences, but their incentives are to simply advertise their existence and generic greatness.

      And even then, one should not think of this as occurring rationally by a calculating center that properly evaluates the costs and benefits. Rather you should see in the same way as the bureaucratic theory of Niskanen: all kinds of little groups spending money on fairly ineffective activities as a means of keeping and spending more of the overall budget and to have more employees. If you talk to them, VCs are often remarkably ignorant of what their own university’s admin is doing.


  6. Marketing is the by-product of a competitive system, and I think not a waste overall even if some particular marketing efforts cost more than they are worth. A lack of competition gave us a system that academics view with nostalgia, but I think was a period of much weaker overall performance than now.


  7. So here is an interesting little debate. Paul points to the great waste in admin, of which marketing a promotion seems to be a large part. He suggests it would be better if unis focussed on content instead of all the flotsam. Andrew suggests marketing is bringing unis into the real world. maybe part of the problem here is that unis (and students) are slowly adapting to a world in which the former chase the latter (whereas previously the latter the former). They are taking time to get good at this changing role, but perhaps the dynamic will improve over time and there will be less marketing waste and better decisions by students, in turn shaping the unis. Joshua Gans’ recent blog on UWS seemed to suggest that it was working this way.


  8. Andrew,

    you confuse a university with a business. If universities were truly run for profit, the 30-40% superfluous administrators and most of the marketing would be axed overnight. And, as point 8 makes clear, the universities would instantaneously stop being universities and sell their true assets to convert into apartment blocks.

    Don’t buy into the fantasy that universities are currently run like businesses. Some people in universities pay themselves as if they were CEO’s, true, but it aint the same as being a real one!


    student mobility exists, but is remarkably low, particularly for the major inner city universities. Besides, they already are about as big as you want universities to be (40,000 students). We’d probably be better of with universities a little smaller!
    Still, the main point to make about marketing is that you should not see it as being rationally decided upon by a cost-benefit calculating center. That again would be confusing a university for a well-run business. It’s a very different beast.


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