How the University of California helped to create the Global Fiscal meltown

[Liberal_in_LA]

The central role of the University of California in this mess can be shown by looking at four factors: 1) the UC is the top or one of the top employers in every city that it is located (San Diego, Los Angeles, Santa Barbara, Irvine, Riverside, Santa Cruz, Davis, San Francisco, Berkeley, Oakland, and Merced); 2) housing and rents skyrocketed in all of the areas surrounding the campuses; 3) there has been a dramatic growth in income disparity for UC employees; and 4) the university, its students, and workers have taken on tremendous levels of debt. Moreover, now that the global bet on subprime mortgages has gone bad, we are seeing high rates of home foreclosures and unemployment in the areas surrounding the UC system; meanwhile, the university has engaged in its own austerity measures that include layoffs, salary reductions, and massive fee increases.

While the UC rightly claims that it is an engine of economic growth in California, it is important to look at how the combination of increased housing costs and stagnant wages forces UC employees to take on large debt burdens. For example in Santa Barbara County, UC is the largest employer, and the county has one of the highest average home prices in the country. Since faculty, students, and staff need to find a place to live near the campus, they are often left with no choice but to take out subprime loans in order to finance million dollar single-family homes. Moreover, the salaries of employees at UCSB are some of the lowest in the university system, while the rents for campus housing and rentals in the surrounding area have shown a constant increase. Due to the high price and small number of available apartments, UC employees and staff have to take out huge loans to live anywhere near the campus.

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If we look at UC's payroll in 2008, we find 240,000 employees with a collective pay of just over $9 billion. At the tope of this compensation system, there were 3,600 people making over $200,000 a year for a collective pay of $1 billion; in other words, 1.5% made 11% of the income. At the other end of this spectrum, 166,600 employees made less than $40,000 a year for a collective pay of $2 billion. Although some of these employees may have had other jobs, the vast majority are students, workers, and faculty who often earn close to poverty wages, and while the top 1.5% have seen constant earning increases, the bottom 60% of earners have not kept up with inflation. This income disparity matches the national trends that Ashook and Walker highlight: "Two-thirds of the income gains between 2002 and 2007 went to the top 1% of U.S. households (Piketty & Saez 2009). It allowed the rich to bid up houses at the top of the market to astronomical heights and steered house-builders toward upper-end buyers (making for a surfeit of large houses and a shortage of modest homes) (Tully 2008, DeLara 2009, Hong 2009)" (12). Not only does income inequality make it difficult for low-wage employees to find housing without going into debt, but the wealthy earners end up driving up the prices for everyone else.

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Not only is the university a large borrower, speculator, and employer, but it dominates the healthcare market due to its highly successful medical centers. Once again, the university's participation in the medical industry is a double-edge sword: on the one hand, the UC helps to provide high quality care, and on the other hand, it drives up costs by rewarding huge compensation packages to its star administrators, researchers, and faculty. Not only do medical faculty and administrators often make between $400,000 and $1,000,000 a year, but their centers generate giant profits for the university. In turn, the university is a major purchaser of healthcare insurance for present and retired employees. While it should be possible for the UC system to use its market clout to force down the costs of healthcare premiums, the opposite has been the case, and the university now faces a multi-billion dollar healthcare liability for retirees.

http://www.huffingtonpost.com/bob-samuels/how-the-university-of-cal_b_575326.html

[EFerrari]

1. I don't get it. This writer is blaming UC for a pattern followed

in and around every major large employer in the country.

[county worker]

2. The whole thing is s load of crap!

I live in Santa Barbara County.

[truedelphi]

4. Same thinking here. the headline was quite titillating,

But there is not any real beef here.

[hunter]

3. Wealthy assholes who don't pay their fair share of taxes caused the meltdown.

They don't pay back while living high on the backs of those who have nothing.

Tax the ultra-wealthy out of existence and make the top 20% pay their fair share.

That'll put an end to all these problems.

[FarCenter]

5. This was certainly the case in Merced

UC projected a 25,000 campus, developers started throwing up developments, and the projections were never met. Housing construction, a main source of employment, essentially stopped.


http://www.usatoday.com/news/nation/2010-02-17-two-cities-recession_N.htm

In Merced, the frenzy had still more fuel — the arrival in 2005 of the University of California-Merced, the latest campus in the prestigious UC system.

Builders put up houses with confidence that the arrival of more students and faculty would provide people to live in them, says Shawn Kantor, economics professor at the young campus.

"With the availability of mortgage capital, there was just incredible building going on," Kantor says. "When I moved here in 2004, there was new development popping up just on the outskirts of town. You kind of wondered, where were all these people going to come from?"

The university one day will enroll 25,000 students, its projections show.

Today, however, there are fewer than 3,500 students. It will take decades for the young school to reach its enrollment potential.

"This is a relatively speaking poor area, with high unemployment and perpetual poverty," Kantor says.