Why do we undercapitalize white-collar workers?

The  paper SF Chronicle has a front-page story about the crisis of deferred maintenance at California’s state universities.  [update 11/V; here’s the link] 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.

Author: Michael O'Hare

Professor of Public Policy at the Goldman School of Public Policy, University of California, Berkeley, Michael O'Hare was raised in New York City and trained at Harvard as an architect and structural engineer. Diverted from an honest career designing buildings by the offer of a job in which he could think about anything he wanted to and spend his time with very smart and curious young people, he fell among economists and such like, and continues to benefit from their generosity with on-the-job social science training. He has followed the process and principles of design into "nonphysical environments" such as production processes in organizations, regulation, and information management and published a variety of research in environmental policy, government policy towards the arts, and management, with special interests in energy, facility siting, information and perceptions in public choice and work environments, and policy design. His current research is focused on transportation biofuels and their effects on global land use, food security, and international trade; regulatory policy in the face of scientific uncertainty; and, after a three-decade hiatus, on NIMBY conflicts afflicting high speed rail right-of-way and nuclear waste disposal sites. He is also a regular writer on pedagogy, especially teaching in professional education, and co-edited the "Curriculum and Case Notes" section of the Journal of Policy Analysis and Management. Between faculty appointments at the MIT Department of Urban Studies and Planning and the John F. Kennedy School of Government at Harvard, he was director of policy analysis at the Massachusetts Executive Office of Environmental Affairs. He has had visiting appointments at Università Bocconi in Milan and the National University of Singapore and teaches regularly in the Goldman School's executive (mid-career) programs. At GSPP, O'Hare has taught a studio course in Program and Policy Design, Arts and Cultural Policy, Public Management, the pedagogy course for graduate student instructors, Quantitative Methods, Environmental Policy, and the introduction to public policy for its undergraduate minor, which he supervises. Generally, he considers himself the school's resident expert in any subject in which there is no such thing as real expertise (a recent project concerned the governance and design of California county fairs), but is secure in the distinction of being the only faculty member with a metal lathe in his basement and a 4×5 Ebony view camera. At the moment, he would rather be making something with his hands than writing this blurb.

23 thoughts on “Why do we undercapitalize white-collar workers?”

  1. I’ll note that a related issue is properly balancing the value of old and new construction. From a straight cost/learning perspective, “throw the room away and build a new one” is often the best answer, but (in every city school district I’m aware of) there are aesthetic/historical/zoning/neighborhood reasons that “tear down the old school and build a new one” isn’t an acceptable answer, even when it would be cheaper, safer, and work better than attempting to retro-fit a building with minimal insulation and no elevators.

  2. An alternative to the table and chairs in ever office would be (as some companies have had) at least one small meeting room on every corridor, so that access is never an issue. This has the advantage in some settings that the meeting is not in a particular person’s office. Of course then the beancounters would complain about the unused space.

    I wonder how much of the problem has to do with the very fact of purpose-built warehouses for professors; my childhood as a faculty brat was often spent in buildings (mansions or otherwise) that had been converted to academic use, or where the office space was an adjunct to the lab and shop space. Very few room-size problems there, at least for the senior faculty. Since then the whole place has probably been rationalized, alas.

  3. Mike O, you’re looking at only one part of the problem. How much of your “contact” with students is via email — at all hours of the day? And how much is personal contact. This varies, of course, with the predilections of the faculty member, with whether said FM is teaching large lecture classes, graduate seminars, undergraduate courses, etc. I’m out of the teaching fray (emeritus from one university, adjunct at another), but my wife finds that she can’t work very well in her office because she’s too accommodating to students, because she’s in a pod with an anteroom and two faculty offices — and her two RAs and her colleagues’ two RAs work in the anteroom. So she works at home if she wants to get work done. Goodbye, Mr. Chips indeed!

  4. At many universities, parking spaces are subsidized. I’d suggest looking into this area, too, for cost savings. If you charge full cost (capitalized cost + maintenance), practically everyone would find a way to campus besides bringing along a 6′ x 15′ object that requires a 9′ x 20′ storage area (that can never be used for anything else, by the way).

    And yet, most university “budgets” pay for capital and maintenance costs of parking out of the general budget, and then offer parking spaces at $xx per month, a price vastly below the actual expense of providing the space.

  5. Quick question: Why does space at Cal cost $800 to $1000 per square foot when new construction residential costs $200 to $250?

    Small suggestion: Perhaps trying to connect with the consultants would increase your effectiveness at proposing good ideas like allowing staff to pay some money out of salary for better office space. It’s pretty clear from the last paragraph that you don’t have much respect for them, which may or may not be deserved. However I have found it is useful to look at consultants as advocates, and if you care about your ideas then you want advocates advocating your ideas, so it pays to approach them with that objective in mind.

  6. First thing I bought as a Berkeley professor was the longest couch Viking Trader sold, to recuperate on after an 8 AM class. It’s the burgundy one in 1015 Evans if you want to see it.

    Nowadays I nap (most days) on an inflatable camping mat, which goes on the wall when not in use.

  7. You give a lot of white-collar-specific detail, all of which is enlightening. Nonetheless, it seems to me that this is a case of a more general under-investment. See, for example, transportation. Put aside arguments over which modes should get investment; we simply don’t care care of the stuff we’ve got. So, while I am sure you are correct that there is often a specific animus against spending on certain kinds of white-collar workers, there is a more general problem of convincing people to invest period.

  8. Why do we undercapitalize white-collar workers?

    For the same reason we would cut Medicare coverage to give billionaires another tax cut:
    The barbarian outside our gate has been shot dead, but the barbarians within out gates are making policy.

    What better way to destroy a culture from within than to dismantle public education and mistreat the elderly?
    Here’s why the barbarians have opened these two fronts on civilization:

    The first because public education is at the evolutionary core of everything that makes us human.
    To see the argument for this read: Kindergarten co-op: How babysitting made us brainy in the New Scientist.

    The second because when someone asked Marilyn vos Savant (Parade columnist w/highest ever score on IQ test) what was the greatest indicator of a culture’s success, she replied: How that culture treats it seniors. Seniors after all, are defenseless, and so are easy prey. To cherish them and care for them requires devotional energy and shared sacrifice. It follows that if barbarians can devalue seniors, all other social valuations could be debased as well.

    So after education, the next operationally rich target for barbarians, would be to go after the health care of our senior citizens…
    Now as for going after white collar workers in public education venues? For barbarians, that a twofer…

  9. Maybe legislators have awakened. Or maybe they get more votes or kickbacks from the prison industry. Here’s Thomas Sowell: “We don’t need more government ‘investment’ to produce more of such ‘education.’ Lofty words like ‘investment’ should not blind us to the ugly reality of political porkbarrel spending.
    I have posed the following questions repeatedly in response to posts on this site:
    I. From State (government, generally) operaton or subsidization does society as a whole benefit? You may imagine either a dichotomous classification, A={x: State operation of x enhances aggregate social welfare} and B={x: State operation of x degrades aggregate social welfare} or a continuum
    (highly unlikely) -1_________._________+1 (highly likely).
    II. What criteria determine an industry’s classification or position on the continuum?
    III. If State operation of K-PhD schools is not an employment program for dues-paying members of the NEA/AFT/AFSCME cartel, a source of padded construction and supply contracts for politically-connected insiders, and a venue for State-worshipful indoctrination, why cannot any student take, at any age and at any time of year, an exit exam for any course required for graduation or certification?
    State “investment” in “education” makes as much sense as “industrial policy” generally. The goons with the guns have no exceptional expertise that would make the outcome of their control over investment superior to the outcome of an uncoerced market in education (or other investment) and no way to accurately assess the distribution of time preference of individuals.
    The case for tax subsidy of school is weak and the case for State operation is virtually non-existent.

  10. Michael O’Hare: I love that book. Must have been so awesome to have Prof. Shoup as a camp counselor! I can only imagine.

  11. Again, why does new space at Cal cost $800 to $1,000 per sq foot?

    The distractions about parking, Medicare and billionaires are all nice and good, but let’s talk about why new space is so expensive.

  12. The problems come from the top. The UC system is probably the most corrupt in the nation and needs outside, independent auditing and Grand Jury investigations.

  13. >>> The problems come from the top. The UC system is probably the most corrupt in the nation and needs outside, independent auditing and Grand Jury investigations.

    You mean, larger, more expensive offices won’t solve the problem?

  14. David, that was the price for a top-end gut rebuilding of a small historic building a couple of years ago; I used it to be sure my B/C estimate was conservative. I don’t think UC should be building down to residential tract standards, it’s a false economy. But feel free to use $300 to $500; all what I said just goes double.

  15. Interesting article on classroom design; too bad about the paywall. Here is another, for a different purpose, but with lots of interesting ideas:

    The Frank C. Walz Lecture Halls: A New Concept in the Design of Lecture Auditoria
    Albert A. Bartlett

    Amer. J. Physics 41, 1233 (1973)

  16. (Michael): “I don’t think UC should be building down to residential tract standards, it’s a false economy.
    Why build anything at all? School is a means, not an end in itself (except to those who receive the education-dedicated tax-generated revenue stream). The State cannot require or subsidize education without a definition of “education”, but why does “education” require a physical facility? Why not just define “education” by a curriculum and tests and let people determine the means themselves?

  17. I have over 400 quarter hours of post high school education. This is scattered over a large number of universities, colleges and community colleges.

    I have never had a comfortable place to wait for office hours with an instructor, professor or department head.

    Screw your bloody comfort. You are not one whit better than I am. I don’t really give a damn if your office is in a hall. Quit whining.

  18. Things, you are right about waiting for office hrs, and one of my continuing regrets is that I neglected this when we designed our buildings. Especially because gracious waiting rooms could be student schmoose space, another thing we lack.
    I have come upon a nice technical fix so at least I don’t have people sitting on the floor outside my office (though the schmoose option is lost) http://www.wejoinin.com/sheets/fgyww

  19. Michael, I could live with that.

    Sorry I went off, but the lack of comfortable waiting space in a collegiate setting has been a pet peeve for many years.

    I used to do consulting for specialty medical groups. My first meeting was always held in a waiting room while I told them what I would look at and ask what else they might want checked. A specialty furniture company in North Carolina got a lot of business from that first meeting. No kickbacks, just referrals. None of the doctors’ waiting rooms were comfortable either.

  20. What Will says.

    We have, as a society pretty much deferred maintenance on EVERYTHING since the 70’s. As a result we have bridges collapsing, trains derailing, and aging gas pipelines incinerating neighborhoods. The American Society of Engineers estimates it would cost trillions of dollars just to apply the deferred maintenance and needed upgrades to America’s civic infrastructure, the stuff that lets economies function: transportation, water, sewage, and electric transmission systems.

    Last year I read an article about states grinding up paved roads back to gravel, because ‘it costs too much to fix them.’

    One man quoted in the article said, apparently without irony, that he supported the idea because he didn’t want to leave a debt to his granddaughter.

    No, he’d rather leave her crumbling schools, leaking sewer systems, and only a distant memory of paved roads. Thanks grandpaw!

    There was an illuminating commercial back in the 70’s for, Fram or Lee oil filters: A mechanic is standing by a car, hood up, smoke rising from the engine. He holds up an oil filter. “You can pay me now…” and he points a thumb at the car now hooked onto the tow truck “…or you can pay me later…”

    We didn’t heed the advice…

  21. Until recently, I was paid a six-figure annual salary to work on a crappy old computer that was not new when I got here three years ago. When it finally died, IT gave me a new computer and replaced my two existing monitors with larger ones (the new monitors were utterly unnecessary, but I’m not complaining). The total cost was probably under $2K, and I’m a good 5-10% more productive, as well as less frustrated. My colleagues, who (I assume) are approximately as well paid, still work on the old computers, because they haven’t had the good fortune to have them die yet. None of the smart people who run this company have realized that employees are expensive and computers are cheap. Go figure.

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