What does the COVID-19 pandemic mean for higher education? If you’re Harvard, it means laying off dining hall workers while worrying about the health of your $40.9 billion endowment.
This isn’t the first time that Harvard has laid off workers in response to a financial downturn.
In the two years following the 2008 recession, Harvard took a number of cost-cutting steps, the largest of which focused on reducing expenses for salaries, wages, and compensation. Harvard drastically slowed hiring, nearly eliminated bonus payments, held salaries flat for “faculty and exempt staff”, applied a voluntary retirement program for over 1,600 staff, and “implemented reorganizations and other efficiency measures that resulted in a reduction in force affecting more than 275 positions.” In essence, Harvard fired almost 300 people, held salaries flat for faculty and some staff, and encouraged many to resign.
At the same time, Harvard’s President, Drew Gilpin Faust, refused calls to decrease her salary as a way to save other jobs at the university, and actually saw her salary and other payments increase from around $775,000 in June 2008 to $800,000 in June 2009 and $875,000 in June 2010. Many other administrators refused to discuss their salaries at that time.
In 2010, Harvard announced in its annual report that the university had “achieved significant reductions” in spending on compensation through “voluntary and involuntary staff workforce reductions, coupled with flat wage growth in fiscal 2010 in Harvard’s faculty and exempt staff populations.” In other words, staff and faculty were fired and professors saw their wages stay flat while those of administrators grew.
In times of crisis, it can seem odd that universities, especially those with endowments as large as Harvard’s, prioritize future gains rather than current needs. Harvard’s response to this critique is that, “Harvard's flexibility in spending from the endowment is limited by the fact that it is designed to last forever, which is crucial for an institution intended to serve generations of students and pursue research on big questions—questions that cannot be answered in one lifetime.”
Worry over an endowment is not unique to Harvard. For many colleges and universities, the downturn in the market has led to apprehension about the health of their endowments, which often provide necessary funds for operating costs. To ensure the long-term viability of their endowments, many colleges and universities place a cap on their payouts. Harvard, for example, limits the payout from their endowment to between 5-5.5% each year.
Yet Harvard’s insistence on cutting spending is dishonest, as the University has paid out more than 5.5% from their endowment in past crises. Rather, Harvard has a history of laying off low-wage workers and keeping down faculty salaries while refusing to decrease, and at times even increasing, administrative salaries.
What implications does Harvard’s response to the Great Recession have for today? If the past is any indicator, professors and lower-level staff will bear the brunt of any “cost-saving” measures, while administrators find ever more creative ways to justify protecting the long-term purchasing power of the endowment. Despite a surface-level commitment to supporting professors and staff, Harvard’s actions amount to robbing professors, staff, and students so that administrators can keep their multi-billion dollar pot of gold.
Christopher Kendall is Director of Development at the National Association of Scholars
