Universities Are Not… Paid by their Main Beneficiaries

Having so far looked at university income, next I want to look at university’s relationships with the consumers of their production. I don’t mean the students here, although it is clear that the students are customers even if we resist the term: they pay universities fees for a service that we deliver and there are actually two separate government watchdog offices ensuring that we do it up to an intangible immeasurable standard.1 But while in income terms they’re our primary customer base, and hopefully do benefit from the education they’re largely eventually paying for, the students are not actually the main consumers of what we produce. And the actual consumers, crucially, don’t pay for what universities make for them.

This may sound silly, but consider what universities actually produce. I think there are three things: research publications, intellectual capital (or ideas, basically) and employable graduates. Now, it is a long-established woe of academia that we do not, mostly, get paid for our publications; in fact, increasingly, we have to pay to publish them at the standard to which we are held by those who pay for the research, i. e. open access.2 Despite early optimism and a few persistent advocates, open access has not so far proved capable of paying for itself except via unpaid goodwill, which doesn’t scale very well.3 But academic publishers do notoriously well out of the regular system, and yet apart from Oxford University Press, which contributes, unsurprisingly, only to Oxford, they don’t pay universities a thing for the product which we supply to them.

Of course, the situation is peculiar, since academics are also the publishers’ main customers. It is often said that this means that we can be induced to pay twice for the same product, once in our labour for making it and again to read it once we have, but obviously that’s not what’s actually happening, as people don’t in fact pay to read their own research; money is simply following the channels dug for it by the movement of knowledge between academics. But the situation does mean that there’s probably no way to make this into a source of income for the academy; if the academy didn’t pay more to read publications than it charges to make them there would be no survival margin for the publishers. So there’s not a lot of hope here to support a failing academy.4

The Nexus Collaboration Centre, University of Leeds

The Nexus Collaboration Centre, University of Leeds, picture from the site of Associated Architects, who built it for £40,000,000, roughly one quarter of the whole UK university sector’s income from commercialisation of ideas in 2014-15 (see below)

Intellectual capital is a fuzzier area, because unlike publishing it can actually make universities money. A few good ideas which have been highly marketable have certainly come out of universities – the best recent example is again an Oxford one, which I’m not doing deliberately I swear, but I mean the Astrozeneca vaccine – and taking research employment with a university accordingly means draconian and probably unenforceable intellectual property terms in case you should be the one who comes up with another one.5 In 2014-15, however, which are the most recent figures I can find, the total income for the UK’s university sector from commercial development of research was £155 million. That certainly isn’t nothing, though it spreads quite thin between all the UK’s universities, but the Higher Education Financial Council for England report which provided that figure estimated the general gain to the economy of that knowledge exchange work as £3.2 billion, more than 20,000 times more, so very disproportionate a ratio that I almost wonder if they were using American billions (which would make it only 20 times).6 If not, universities really didn’t see very much of a return for generating that revenue, and the article in which I first found these figures suggested that they would see less of it in future, as the trend seemed to be for academics who had such an idea to leave and set up their own companies.7 Indeed, anecdotal though it is, I know two people myself who’ve done just that. Furthermore, that year HEFCE itself distributed more than ten times that money in QR funding (on which see the previous post). That puts the amounts into perspective somewhat, but not as much as the fact that in 2017-18 (I can’t find figures for 2014-15, but let’s assume it didn’t change massively), the total UK university income was £37.2 billion, of which about half was tuition fees.8 So revenue from comercialising ideas really is a drop in the ocean, and for our purposes we can disregard it.

That leaves employable graduates. Here the economics are also a bit twisty, because of course, the graduates themselves pay fees before they’re graduates and they do so, says the logic of the funding system, because they hope – although this hope grows fainter – later to be earning more than they would have done without the degree.9 But the primary beneficiary of that university education must, therefore, be their employer, who must obviously be making more from it than is the graduate, or they wouldn’t be able to pay them. But do the employers pay the universities for this great good? Only in the very indirect way that their taxes form a part of the government revenue we receive a part of as funding, not directly. Now, I am not the first person to make this observation. In fact, although I missed it at the time, in 2018 one Johnny Rich, who was at the time a Director of the Higher Education Academy, as it then was, put out a paper for HEPI making much the same point and proposing a levy on graduate employers to rebalance the budget.10 As we can see, that sadly made no difference at all to the actual government’s intent – it must be very frustrating to be HEPI, really – but it also gave rise to an article of his in Times Higher Education that puts things more sharply than I just have, and is worth quoting:

“This is not a delicate balancing act, after all. It’s a cart with three horses – taxpayers, students and universities – all hitched to different sides. The only way it can go anywhere is if one horse loses or the cart is pulled apart.

“There is a fourth horse, however – a steely stallion that has been just quietly chewing its bit for fear of being noticed: graduate employers. Businesses benefit from higher education as much as graduates or the wider economy. Like dissatisfied customers, they bemoan skill shortages and the job-readiness of graduates, but their principal financial contributions to the system are through corporate taxes and paying salaries at a graduate premium.”11

And obviously, you as employer wouldn’t pay a graduate premium if the graduate employee weren’t making you more money than you pay them even with that premium included, and weren’t worth paying that for even though you could hire a non-graduate for less. So this is another of the problems that the university faces in the UK. As well as having no real possibility of meaningfully expanding their income without will and action from government in their favour, they do their greatest benefit to people and organisations which don’t pay for it, not the ones which reluctantly do. The implications of this are numerous, especially as to what should be done about it – which is ground I’m actually mostly not going to tread, myself – but one of them is the damage it does the idea of the university as business. In the next post I’m going to point out some other problems with that idea. And I should end by reiterating that these are, except where referenced elsewhere, my own views and they do not represent the views of my employers.

1. Of late, even the government has had to admit that some of its measures of university quality are broken – see Simon Baker, “‘Radical’ review for NSS as ministers say it drives down standards” in Times Higher Education (THE), 10th September 2020, online here – but that is the recognition of a long series of complaints such as Implications of ‘Dimensions of quality’ in a Market Environment by Graham Gibbs (York 2010), online here, or Samuel Moore, Cameron Neylon, Martin Paul Eve, Daniel Paul O’Donnell and Damian Pattinson, “‘Excellence R Us’: university research and the fetishisation of excellence” in Palgrave Communications Vol. 3 (London 2017), 16105.

2. On the various perverse features of academic publishing, other than the introductions linked, serious explanation can be found in Untangling academic publishing: A history of the relationship between commercial interests, academic prestige and the circulation of research, by Aileen Fyfe, Kelly Coate, Stephen Curry, Stuart Lawson, Noah Moxham and Camilla Mørk Røstvik (St Andrews 2017), online here, or Carolyn Caffrey Gardner and Gabriel J. Gardner, “Fast and Furious (at Publishers): The Motivations behind Crowdsourced Research Sharing” in College & Research Libraries Vol. 78 (Chicago IL 2017), pp. 131–149.

3. This is an area with a huge literature of debate. The obvious starting points now are Nigel Vincent and Chris Wickham (eds), Debating Open Access (London 2013), online here, and Rebecca Darley, Daniel Reynolds and Chris Wickham, Open Access Journals in Humanities and Social Science: a British Academy research project (London 2014), but for different views see, as a small sample, Daniel J. Cohen, Stephen Ramsay and Kathleen Fitzpatrick, “Open Access and Scholarly Values: A Conversation” in Daniel J. Cohen and Tom Scheinfeldt (eds), Hacking the academy: new approaches to scholarship and teaching from digital humanities, Digitalculturebooks (Ann Arbor MI 2013), pp. 39–47, online here; Richard Hoyle, “Pipe-Dream Believers” in Times Higher Education no. 2106, 20th June 2013, p. 30; Open access and monographs: Where are we now?, The British Academy, Position paper (London 2018), online here; and Keith McNaught, “The Changing Publication Practices in Academia: Inherent Uses and Issues in Open Access and Online Publishing and the Rise of Fraudulent Publications” in Journal of Electronic Publishing Vol. 18 (Ann Arbor MI 2015), DOI: 10.3998/3336451.0018.308.

4. That all said, there are definitely debates about how much publishers should get away with charging their unpaid workforce and probably ways to turn author discounts into an institutional incentive to value research publication as an activity; but there would be perverse outcomes too (see for example Jaksa Cvitanic, “Reliance on journal rankings is undermining academic integrity” in Times Higher Education (THE) 21st May 2021, online here) and because of the basic economics it’s never going to be more than an exercise in cutting losses, rather than making gains. I’ve had to think harder about that this than I did in my first attempt thanks to a conversation with Paul Jump of Times Higher Education, and I owe him thanks for helping me not to miss some obvious aspects of the money flows involved.

5. For discussion see Linda S. Bergmann, “Higher Education Administration Ownership, Collaboration, and Publication: Connecting or Separating the Writing of Administrators, Faculty, and Students?” in Carol Peterson Haviland and Joan A. Mullin (edd.), Who Owns this Text? Plagiarism, Authorship, and Disciplinary Cultures (Logan UT 2009), pp. 129–155.

6. Annual Report and Accounts, 2014-15, Higher Education Funding Council for England, HC5 (London 2015), online here.

7. Scott Carey, “How UK universities are leveraging their intellectual property to benefit from the tech boom” in Computerworld 7th July 2016, online here.

8. “Higher education in numbers” in Universities UK 16th December 2021, online here.

9. Fading hopes: David Matthews, “Busted flush? Research shows worsening odds on university study ‘gamble'” in Times Higher Education no. 2102, 23rd May 2013, pp. 6–7; idem, “Inflated premium: Russell Group earnings boost ‘statistically insignificant'” in Times Higher Education no. 2115, 22nd August 2013, pp. 6–7; The Impact of University Degrees on the Lifecycle of Earnings: some further analysis, by Ian Walker and Yu Zhu, BIS Research Papers (London 2013), online here; Tristram Hooley, “Does the postgraduate premium really exist?” in Times Higher Education (THE), 9th September 2019, online here; The earnings returns to postgraduate degrees in the UK by Jack Britton, Frank Buscha, Matt Dickson, Laura van der Erve, Anna Vignoles, Ian Walker, Ben Waltmann and Yu Zhu, (London 2020), online here.

10. Fairer funding: the case for a graduate levy, by Johnny Rich, HEPI Policy Note 10 (Oxford 2018), online here.

11. Johnny Rich, “When employers invest in education, everyone is working together” in Times Higher Education (THE), 29th November 2018, online here. Because of the strikes and IT complications, I don’t currently have my usual access to THE, so have to extend thanks to Paul Jump again first for alerting me to the existence of this article, which allowed me then to find the policy paper, and then for sending me the article text.

7 responses to “Universities Are Not… Paid by their Main Beneficiaries

  1. Pingback: Universities Are Not… Really Supposed to Make Money | A Corner of Tenth-Century Europe

  2. Second thing first: “I almost wonder if they were using American billions”.
    Everyone financial has been using American billions since the 1980s. I can remember learning at school about the British billion – which I suppose must have been used, though Lord knows by whom – and the “milliard” which I have never met in use in my life. I tend to use the unambiguous 10^9 and 10^12 notations. I don’t believe I’ve ever typed “giga” and am not sure whether I have ever typed “mega”. Numbers are best.

    Firstly: “taking research employment with a university accordingly means draconian and probably unenforceable intellectual property terms in case you should be the one who comes up with another [lucrative invention].”

    It’s a tricky one. When I started at Cambridge everything I invented belonged to me. Yippee! It was an attraction of working there. There were, however, complaints of people spending lots of university money to develop an idea and then pocketing all the proceeds themselves. (Allegedly mainly in bio-medical work.) By contrast an earlier generation had, it was said, made a habit of voluntarily handing back some of their winnings via one route or another if their success had depended on expenditure of university money. Unfounded Golden Ageism? Dunno.

    So later in my career the attempt to make money from our researches was impeded somewhat by a bureaucracy intended to make sure the uni got its cut. I don’t think I can object to the principle but suspect it might have been another small incremental change to uni life that would tend to repel people from an academic career. Bureaucracy, managerialism … bah; not to the taste of the intelligent, spirited youngsters you want to attract. And yet; money doesn’t grow on trees.

  3. Allan McKinley

    One challenge here: where is the evidence that it is university graduates that employers get the benefit from, rather than the best possible employees, a pool which currently happens to be practically limited to a sub-set of university graduates due to our educational pathways? Is there any reason to think that a university education actually is providing anything in particular that an employer needs? Or is a university degree just a convenient signpost for reasonably able and attentive, and of no particular value to employers beyond its role as a filter?

    I suspect the answer varies; I’d suggest medicine, where the major employer is paying to be fair, and engineering, where students generally graduate near the level of professional accreditation, are examples of imparting value; but what of less clearly-defined professions? Also, note that engineering companies and the government/NHS are already heavily involved with universities through providing student placements, which is arguably them paying a share of the costs.

  4. Pingback: Universities Are Not… Manufactories | A Corner of Tenth-Century Europe

  5. Pingback: Universities Are Not… Like Businesses | A Corner of Tenth-Century Europe

  6. Pingback: So Universities Are Not… The Probable Shape of the Future | A Corner of Tenth-Century Europe

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