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Why do we undercapitalize white-collar workers?

Michael O'Hare, professor of public policy | May 10, 2011

The  paper SF Chronicle has a front-page story about the crisis of deferred maintenance at California’s state universities.  I’ll put up a link when it’s available online; meanwhile, things are as bad as you think. Dangerous things like leaks into electrical cabinets, power outages, a blackboard that fell off the wall and injured a grad student last fall; “broken windows” things like, um, broken windows, overgrown plantings, and a couple of times this year, a lawn outside my building so overgrown that when I walked through it, I flushed a rabbit and two small undergraduates. The story says Berkeley and UCLA are now listing almost $1.5b together (that’s a b, as in bzzzz) and Cal State campuses need another $450m.  If you’ve been in a K-12 school, you know what slums they have become.

The problem is actually much bigger than that: we are not only wasting millions and millions not fixing buildings when they need it, both by ensuring higher costs when damage (for example, from leaks) increases and by lost productivity of the people who are trying to use the buildings, but we are wasting even more by not having enough buildings. (We’re building the wrong kind of buildings as well, but that’s another story).   Disclosure of bias: I’m an architect by training and I believe the built environment matters a lot for many dimensions of the quality of life.  No, a great teacher cannot teach perfectly well on a lawn under a tree (I’ve tried it, maybe I’m just not great enough, but while the experience is charming and romantic, it’s pedagogically terrible.) But draw your own conclusions from these examples from my own industry, education:

Classrooms

Consider an improvement of some sort to a classroom with fifty seats, used for 1200 hours a year – new projector, paint the walls, new chairs, whatever.  If it could increase learning by the students by 5%, what fraction of the cost of the room would it be worth spending?  The answer  is 100%: you should be willing to throw the room away and build a whole new one.  Capital in our business is cheap compared to labor.  A fair amount of learning doesn’t happen at Cal because there’s no room to do it in: if such an additional such room would be used only two hours in each school week, or half time during our reading and review week before exams for review sessions, it would be worth building it.  OK, there’s maintenance and operations and land costs for an additional room; let’s say three hours a week.  Another way to think of it: we should keep building classrooms until the least used is only full for three hours a week, and we’re nowhere near that.  it’s not waste: it’s tough, Republican, businesslike hardheaded efficiency and waste abatement.

Offices

A typical senior faculty office is about 10 x 12 feet.  I know, lots of people who make more than we do are in cubicles; that’s Goldman Sachs’ problem and proves nothing.  In that office you can get a desk and a chair, bookshelves all over  one wall,  a couple of file cabinets, and a chair for visitors.  If we’re lucky, there’s a tree outside the window,  and the élite of profs get a squirrel in the tree.  Throw in a printer and a scanner and you need another small table and it starts to get quite tight.

What would increase productivity in my business? I nominate: another real table that seats four, and a couch. Why a couch? For naps; actually everyone would do more, better work with naps, but profs work long hours; the research on this is done and it’s not debatable.  The meeting space is because our work requires a lot of small meetings, often unscheduled, with colleagues and with students alone or in small groups.  This paragraph is guaranteed to stimulate sneers and snickers from the ignorant, for example from managers, gotcha journalists, bureaucrats and legislators who have formed their opinions without the burden of facts:  “taxpayers shouldn’t pay a bunch of lazy professors to sleep on the job!  If you want to have a meeting, sign up for a conference room, or talk in the corridor like ordinary people do!”

How much would this ridiculous luxury cost?  About 12 x 15 will do it; 60 more square feet. The most expensive recent construction at Cal I’m aware of was $1000/ft2, but that’s average for a whole building; making rooms larger instead of making more of them is quite a bit cheaper. Let’s say $800:  that’s $48,000; at 6%, $3000 per year.  Let’s add another $1000/y for maintenance for the extra floor and wall surfaces (generous!): $4000.  The cheapest college professor costs more than $100,000 per year with fringes and benefits; most closer to twice that.  So we only need a productivity increase of two to four percent to justify right-sized offices, and there’s no question that what I’m proposing will pay off at more like 20%; the nap alone is worth 10% for the second half of the day, and the meetings and extra work space much more than that for students and profs both.  Again, another way to look at it: capitalizing faculty efficiently instead of what we do now is equivalent to hiring a bunch of professors at 80% off list price.  Still another: I would pay at least $5000 out of my salary for that office in a New York minute, if there were a way to do it: there’s a grand a year, just sitting on the table waiting to be picked up.

We have had a bunch of consultants from Bain & Co. prowling around the campus for a year now trying to save us some money.  Of course, they have shown precisely no interest in creating net value by added productivity, so you won’t find anything like this discussion in their reports.  Paying $20,000 a year for professing is beneath their notice, I guess; or maybe being forced to work in cubicles has crippled their own productivity.

Cross-posted from The Reality-Based Community. Everyone is entitled to his own opinion, but not his own facts.

Comments to “Why do we undercapitalize white-collar workers?

  1. Prof. O’Hare, thank you for your acknowledgement.

    I have always respected your posts on the Berkeley Blog, especially your post “A letter to my students.” Your apology is a most honorable act by a Berkeley professor that I shall probably never forget because it places you in a class by yourself as a new cultural role model for your colleagues. Hopefully there are more like you, and you can take positions of leadership to make the right things happen for your students, California, and civilization before too many tipping points go even more terribly wrong.

    UC professors and scholars who post on Berkeley Blog must be much more responsive to questions and comments by California citizens because we are the people who are ultimately responsible for paying the bills and we deserve to know all the facts.

    Relative to Ivory Tower cultural causes of financial problems, you might want to read some of an increasing number of investigative reports by California journalists who are documenting root causes of UC’s financial problems:

    “Generous Perk Adds Strain to University Pension System” by Jennifer Gollan, The Bay Citizen
    http://www.baycitizen.org/pensions/story/generous-perk-strain-university-pension/#comments

    “The University of California invests $53 million in two diploma mills controlled by UC Regents chairman Richard C. Blum” by Peter Byrne, Metroactive
    http://www.metroactive.com/features/diploma-mills.html

    “UC plans to cut administrative waste” by $500 million by Laruel Rosenhall, Sacramento Bee
    http://www.sacbee.com/2010/05/20/2763606/uc-plans-to-cut-administrative.html

    UC regents, administrators and faculty must be held accountable for UC financial problems, along with politicians, before they can truly be solved.

    Our younger generations depend on immediate, comprehensive changes to the UC culture and system if we are ever going to be able to guarantee acceptable quality of life for their future.

  2. Come on, Anthony; I weigh in on exactly these questions regularly here, as do many of my colleagues, and on the RBC. Your comment is a (good) rhetorical question, whose answer is necessarily a long essay or series of essays or conversation, and a lot of it is going on. That you don’t get a personalized piece of research in reply to a blog comment is not grounds for complaint.

  3. Sadly, my failure to receive feedback/answers to questions once again proves the Ivory Tower culture that marginalizes the people of Californian is as good a reason as any to explain why the legislature gets away with Draconian cuts to our university system.

  4. Seriously Prof. O’Hare, considering your post and the realities that are overwhelming us today, our university establishment must, with the greatest sense of urgency, become much more creative and implement solutions to out of control problems that threaten our entire way of life in this century. And most importantly, these problems threaten the future quality of life for our youngest generations even more.

    Far too many historians have documented failed civilizations that became extinct due to politicians and intellectuals that failed to meet the challenges of change.

    Indeed, education is a cornerstone of Democracy, and also of civilization. Yet with the best education system in history, we still fail to protect our own civilization.

    Or do you and your colleagues not agree with these warnings?

  5. QUESTION:

    Prof. O’Hare, why didn’t the California university system teach us enough to prevent the incredible number of economic, political, social and environmental crises we are experiencing today?

    Please take this question most seriously because Californians deserve to know why the world’s preeminent professors and scholars couldn’t save California from the calamities, actual and incipient, we are experiencing today.

    I hope you will respect our right to know if our youngest generations can even expect to have an acceptable quality of life in their long-term future considering all the decline and fall failure modes we are experiencing today.

    Education is the most important cornerstone of our Democracy and we now know beyond all doubt, especially considering the subject of your post, that we must figure out how to do much better today because time is running out according to the United Nations.

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