The strange economics of the university strikes

The mining strikes of the 1980s had a real impact on coal. To state the obvious, they actively reduced the production of an important industrial commodity. This stood to affect everyone, which was part of the point, and leverage, of striking.

Today, the university sector begins its biggest strike in living, or probably historical, memory, as part of a battle over the future of its pensions system.

This is a moment that embodies the age of services, in sharp contrast to the age of industry. It does not deplete the production of a commodity; instead, in constrains the provision of a service.

University education is a service purchased by students, who represent the victims of these strikes. The introduction of tuition fees at the end of the 20th century began an inevitable move towards their being seen as customers. This has gathered more momentum this year as part of ongoing governmental attempts to construct a market for higher education.

Students buy their education service as part of a complicated system of governmental credit, referred to as student loans, which are repaid above a specific threshold and eventually written off. In April, the Office for Students, a new regulatory body, will examine the question of value for money. Students are now typically assuming £50,000 of “debt” for a three-year degree, according to the National Audit Office.

So we have a picture-perfect microcosm for the UK’s generational tensions: a strike over provision for eventual retirees (some of them still young themselves), which financially impacts the young. This post, though, is not concerned with the rights or wrongs of the strike, but instead on its relationship to the privatisation of the educational process (a post next week will address the pensions issue specifically).

How have students reacted to the strikes? There is widespread support, in part because of the political sensibilities of students in the first place. But at the same time, if the financialisation of higher education encourages students to act as consumers, it also encourages them to consider their hypothetical consumer rights. We’d like to draw your attention to a petition, launched this month by Ying Tang, a first-year law student at the University of Liverpool (though she had previously completed two years of a Mathematics degree).

The petition, which has just over 7,000 signatures, calculates the annual cost of tuition, currently £9,250, and divides it by the number of striking days, which in this case number 14 (the strike does not include weekends). It requests compensation for these days. The logic is simple: the students have already paid for a service which they are not going to receive (Ying Tang told us that she nonetheless supports the strikes themselves).

The University of Liverpool confirmed to students in an email, and separately to the FT, that it will not pay any compensation. In a statement, it said [our emphasis]:

The University is committed to maintaining the quality of our students’ learning experience throughout the planned industrial action. Not all members of staff will take part in the strike and many teaching sessions will go ahead as planned. Where teaching sessions are cancelled on strike days, students will be provided with alternative learning materials and supervisory support so that they can achieve all intended learning outcomes. The University will therefore not be issuing refunds.

It also confirmed it is not paying staff over the strike. They will forfeit 1/365 of their annual pay for every day they go on strike.

This situation is by no means specific to Liverpool, though it serves as a useful example. Sixty-one universities are on strike across the UK. Most universities are docking various amounts of pay. The University and College Union has said it will pay strike pay, of up to £50 a day after the first three days, prioritising those with “insecure contracts, low earnings or with special circumstances”.

How do the economics of the strike relate to the financial position of universities? In its annual accounts for the year ended 31 July, Liverpool states that income from tuition fees is £256.5m, out of a total of £523.2m. That is 49 per cent. Expenditure on staff is £263.1m, out of a total of £479.1m, making up 55 per cent.

Liverpool, again, is representative of the overall sector here. According to the Higher Education Funding Council for England (HEFCE), the current regulator, the sector’s largest expenditure is staff costs, which should rise to £17.7bn in 2019-2020, or 52.8 per cent of total income. Across the entire sector, as with Liverpool, tuition fee income is also the bulk of total income. A chart from the HEFCE report, including forecasts, breaks this down clearly:

The strikes, because of the lack of refunds, have no impact on the most important source of income, but they halt the payment of the most important source of expenditure. This generates the strange situation where the strikes appear to actually be profitable for the institutions (without factoring in any potential reputational consequences).

When we asked the University of Liverpool about this, they said this money will be put to use:

Many staff will not take part in the industrial action and will be paid as normal. Money withheld from staff due to industrial action will be used to fund student-facing projects which will enhance provision relating to mental health and tackling sexual misconduct.

The actual legal likelihood of students being able to claim compensation from universities is probably slim, and anyway a technical question for lawyers to ponder. But the risk of litigation over coming years is an obvious corollary of the marketisation of the sector. Consumers tend to become conscious of the need for consumer rights. This risk extends far beyond strikes, to the question of contact time, the quality of teaching, the quality of course materials and resources, the quality of accommodation, and so on.

What is also interesting here is how the strikes themselves shed light on the veiled economics of the university business model. The model involves huge amounts of revenues from student loans. Because student loans are subsidised by the taxpayer, the victims of the strike, in terms of losing out on expenditure, are actually the students and the taxpayer. The latter’s involvement increases as the labour market performance of future graduates decreases, and vice versa.

But whereas the industrial strikes of the 1980s resonated with everyone who consumed electricity, the impending service sector strikes of the 21st century, of which this is something of a milestone, are more fundamentally intangible. In the case of universities, this is made even worse by the moral, political and economic complications surrounding student loan finance. The discussion is fragmented. There is no unmined coal to count.