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Wednesday, June 8, 2011

Sustainable solution for academic income issue: an economic perspective

The Island

By Luxman Siriwardena and Chanuka Wattegama

How much a professori worth? This confusion never arises in a free market where everyone is paid one’s market value. It becomes an issue only when the paymaster is not the consumer. The Sri Lankan university academics now get paid through the most inefficient money spending mode of Milton Friedman’s four. The transaction is most efficient, says Friedman, when somebody spending their own money on themselves. Then they will be concerned about both the money spent as well as the quality of the product. The most inefficient mode is somebody paying others’ money on others.

In this case, politicians and bureaucrats spend public money in the salaries of academics to educate public (or, their children). The quality of the product is of least concern either for politicians or bureaucrats, whose offspring study in the west, probably with the offspring of academics. State universities are increasingly becoming exclusive clubs for rural middle class and lower. An entry is a ‘consolation prize’ for those who cannot afford superior offshore education for their children. Neither the students nor their parents rate the education. The investment is the concern of the government only to the extent of budgetary allocations. The salaries of academics do not reflect market values. So the ‘fairness’ of current salaries should be judged only by taking non-market factors.

International rates

In absolute terms, a significant gap exists between the salaries of academics in developed and developing nations. For example, according to a study by Boston College USA, on average Canada, Saudi Arabia and USA had academics earning above or about USD 6,000 per month, PPP adjusted, in 2008. Australia, New Zealand, UK, Germany, Japan and South Africa reported average monthly salaries between USD 4,000 – 5,000. These are higher than the PPP adjusted salaries of Sri Lankan academics. But Sri Lanka is in the same boat as India and China as the table below indicates.

Table 1: Comparison of Sri Lankan academic salaries with those in selected countries


Sources: Boston College Study ‘International Comparison of Academic Studies’2008, Lankadeepa May 15, 2011; Comparisons are approximate


A position as a university academic in any country is bestowed with social respect and dignity, say the academics. So the universities, according to them, should take efforts to recruit and retain people with highest academic achievements by offering attractive wages and other benefits. This is true, but the current demand for higher compensation is not to attract new faculty. If it is for the existing faculty, it would be useful to analyse their past achievements that deserve such a rise.

How many faculties in Sri Lankan universities today can confidently declare they produce quality graduates who can be and will be employed in the industry immediately following graduation? Sadly, not many. The high demand for the Electronics and Communications and Computer Science and Engineering graduates from Moratuwa University is a fact. A similar demand exists for the Computer Science graduates from University of Colombo School of Computing (UCSC). There may be few others examples, but these are exceptions than norms. Graduate unemployment in Sri Lanka is such a crucial issue that the government has to step in recruiting over 40,000 graduates – backlog of few years - to state sector for a meager salary of Rs. 6,000 per month. Having interviewed fresh graduates the authors know the gaps between the private sector demand and the state university produce. Proficiency in English, soft skills and computer literacy are the competencies most local graduates typically lack, but they are not the only reasons why the private sector does not want to touch them with a barge pole. Lack of confidence and subject knowledge too are common symptoms. Local graduates are also risk averters. Only a fraction of them agree for a job in marketing irrespective of the salary. Even if employed in the private sector many, at the first opportunity run for a risk-free state sector job most of the times for a fraction of the salary they receive in private sector. These are not yarns, but facts. Among those who joined public sector for Rs. 6,000 were private sector employees who have completed their masters. Their years in the university have not trained them to face the challenges in the private sector.

Leaving the popular anecdote about some lecturers just parroting not only their twenty five year old own notes to students but also the same jokes alone, let the statistics speak. By education attainment graduates are not the most unemployed (Figure 1) but 12% is no small issue. Also the unemployment in other categories are on the fall or same while in case of graduates it is a steady increase from 1979 to 2004, the latest year for which the data is available. When encountered with such a visible quality drop, increasing the compensation for those who are responsible would be negative incentivizing.

Figure 1: Unemployment rates by education attainment

Source: Central Bank of Sri Lanka

Performance vs. privileges

As a category of state sector employees, academics are not as underprivileged as they portray themselves to be. Most government officers mandatorily retire at the age of 60 while the academics continue for five more years. They also enjoy the sabbaticals, paid leave of one year for every seven, to engage in their own research at an extra income. So instead of comparing snapshot basic salaries, if the average earnings over a career are considered the academics are probably among the highest earning government officers. Paying them above their market value will only be possible by cross subsidies, at the cost to poorer categories, including the samurdhilabhis.

The question is not whether it is possible or not, but why. Progressive career development is not confined to universities. It is seen in almost every sector both public and private. State universities mostly do not recruit professors or senior lecturers. They recruit fresh graduates as assistant lecturers. Since then career building is an effort funded by the joint investment of the state (funds) and themselves (time and labour). This process is not different from what happens in Central Bank, other state banks, security services, state hospitals, Police, CEB, Ports authority or ministries. Most these organizations support higher education of their employees, just like the universities. Everywhere individuals build their capacity as they climb the corporate ladder. Senior police officers may not be decorated with a Ph. D.s, but that does not mean they have not made the personal investments in building their capacity. Why a special treatment for just one sector of state employees?

Indian Academics

Indian academics have a standard pay rate – another reasonable claim, prima face. This gives the incorrect impression that all Indian academics are on a single government pay scale. The sixth pay commission of India, its March 2008 report, has made recommendations only on the salaries of academics of the technical institutions governed by Indian central government. These include mainly Indian Institutes of Technology (IITs), Indian Institutes of Management (IIMs) and National Institutes of Technology (NITs) – about 50 institutes among thousands of Indian universities, state and public. These 50 institutes are the cream of Indian higher education sector and cannot be compared with all Sri Lankan universities across all faculties. An academic of any of these institutes is not a typical university professor/lecturer in India. Comparing their capacity and market value with those of an average university academic in either India or Sri Lanka is meaningless.

It is also necessary to understand the backdrop of the sixth pay commission recommendations. Prior to India’s economic liberalization the salaries of Indian academics, even at top level institutions, were at comparable levels or lower than those of their Sri Lankan counterparts. In 1990 the consolidated salary of an IIT professor was INR 8,000 (equivalent to LKR 20,000 then). A senior lecturer received INR 6,000-6,500 while a lecturer INR 4,000. A fresh graduate joining staff as an assistant lecturer got only INR 2,500. These were not sufficient even to maintain a four wheeler, with the choice is only between an Ambassador and a Maruti, both costing more than INR 200,000 then. This explains why some Indian professors, in spite of their decent salaries today, still do not own vehicles other than scooters or sometimes even push-cycles. They were historically not used to such lavish life styles.

The transformation in academic salaries in India came only with the liberalization and expansion of the higher education sector. A large number of fee-levying medical, engineering, accountancy, IT and law colleges were introduced to cater to the increasing demand. They could and did offer higher packages. Maintaining higher salary scales was the only way IITs and IIMs could retain their own staff. If not for these changed market conditions, these Indian academics too would have been enjoying the re-liberalization rates.

Competition and Opportunities

Liberalization typically brings benefits not just country-wise but sector-wise too. Compared to what the professionals in healthcare, telecommunication and banking industries receive today, their counterparts received peanuts in the pre-1978 era. The high living standards were the outcome of the competition created by the dynamic private sector entry. If not for the private banks, the bankers would have been a very frustrated group today. The competition has enabled the expansion of the industry guaranteeing everyone higher compensation. Telecommunication sector, which was once considered a social overhead, is now driving the economy.

Education sector, compared to the three above has so far not liberalized and largely remains a state monopoly. The economic potential of the higher education sector, especially its ability to attract direct foreign investments has never been fully explored. It would be unfair to direct the blame to academics fully, but economic reforms in Sri Lanka were rarely supported by the academics. Anticipating high compensation from a non-reformed, state monopilised education sector is like engineers of Department Posts and Telecommunication of pre-‘90s demanding high salaries. It is not be feasible. There are serious limits to what any non-profit making state entity offer its employees. State bodies like Central Bank of Sri Lanka and Ceylon Electricity Board, the academics are fond of comparing, make substantial contribution to the economy unlike non-profit making state universities maintained by tax payers’ money.

Any of the arguments we make above do not imply academics should earn less. Government recognizes their value by lawfully permitting academics to take research and consultancy assignments, a privilege it does not offer for other public officers, for example, Central Bankers. Unlike most state and private sector officers who receive fixed incomes, the limits of academic pay are only governed by their own personal capacity. A section of academics enjoyed sumptuous earnings working for so called ‘peace missions’ funded by Norwegian and German donors begun during the Chandrika Bandaranaike regime and went till Nandikadal. If these earnings they received not for compiling research papers, but simply newspaper type articles advocating ‘federal solutions of varying complexity’, are considered their income they earned few times higher than the most senior Central Bankers then. A different question is if such opportunities disappeared after Nandikadal.

What academics and government can do

The key to higher living standards of academics is in their own hands rather than with anyone else. They just have to take more assignments (short term) and sincerely support opening up the education sector like the Indian academics did (long term). Only that will ensure them enjoying decent earning, not resolving to trade union actions of the proletariat.

One positive step the Sri Lankan government can take, perhaps with foreign donors, is to increase its research allocation in budget and create research funds that can be exclusively used by the academics. That will ensure the country gets tangible output while the academics making an additional income. It will also be an entry point for those academics who cannot directly take international consultancy assignments. A worthy privilege for academics if government considers a win-win.

The authors are independent policy researchers and the article reflects their personal and not institutional viewpoint. lankaecon@gmail.com is open for comments.