University Grapples With New Wage Mandates

The tents and chanting are gone. The formal committee meetings are over. The report has, for the most part, been accepted. Now, the burden of implementing the report of the Harvard Committee on Employment and Contracting Policies (HCECP) has fallen to the University’s 11 schools.

The schools are finding that the impact of the report is anything but clear—the only thing they know for sure is that it will cost their schools a lot more in benefits and wages.

Complicating the situation for the schools is that their proposed budgets are due to the University administration next month, long before the true cost of the HCECP report has been totalled.

“By March, we’ll have to have a perspective on what this means,” says J. Bonnie Newman, executive dean of the Kennedy School of Government and also a member of the HCECP committee.

A Guessing Game

Union negotiations with custodial workers have been ongoing for the last four weeks, and after their conclusion the University will reopen discussion with representatives of dining services and security workers.

The goal, as recommended by the HCECP, is to set wages between $10.83 and $11.30 for the school’s 1,000 lowest-paid employees.

Under the current timetable, Harvard hopes to complete union negotiations by May and to develop a parity wage plan—to ensure outsourced workers receive similar pay and benefits to comparable in-house workers—by March 31.

The University’s Human Resources Office (HRO) is conducting the negotiations, which will then apply to all schools. But while the central administration officials are in regular contact with the schools and are aware of the budget deadlines, they cannot speed the process, says David A. Jones, who directs the HRO’s Office of Labor and Employee Relations and is in charge of union negotiations.

“They’re waiting for us,” he says. “But this is collective bargaining, and the parties don’t have to agree.”

As a result of the uncertainty, schools can only estimate the costs of the HCECP report.

“As to how much [the implementation will cost], it’s hard to say,” says Harvard Law School Assistant Dean and Chief Financial Officer Paul Warren Upson. “We don’t have much control. In the next month, we’re going to have to make guesses to put these numbers in the budget.”

The committee estimated in its Dec. 19 report that overall costs for the University would be between $2.4 and $3.7 million a year. But in a Jan. 31 interview, University President Lawrence H. Summers said the committee’s estimate was “somewhat” low.

For some schools, estimating has been relatively easy. Schools with fewer employees, like the Graduate School of Education, have a greater ability to predict costs.

The school has a total of about 16 contract employees and expects the wage proposals to cost about $28,000 next year—a number Director of Fiscal and Administrative Services Robert Gewecke says was relatively insignificant in light of the school’s $20 million budget.

For larger schools, the impact is not as straightforward. Harvard Business School, for example, has 123 outsourced dining workers. But the Business School also has more financial resources to draw upon if it needs to.

“We don’t expect [implementing the HCECP report] will have an effect we won’t be able to absorb,” says Business School Chief Financial Officer Donella M. Rapier.

The Kennedy School of Government, already facing a $3 million shortfall for the current fiscal year, lacks the Business School’s leeway.

The Kennedy School, which was cited specifically in the HCECP report for employing a large number of low-paid outsourced dining services workers, is waiting to hear back from Sodhexo, its major outside contractor, on what implementing a parity wage plan would cost.

But without knowing what in-house employees are going to be paid, it is impossible to get exact information from outside contractors.

“Until you know what parity wages are going to be, you’re not going to have precise numbers,” Newman says.

Paying the Piper

Like the costs of increased wages, the actual impacts on each school’s programs and tuition remain uncertain.

At the Law School and the Kennedy School, tuition will increase at a higher rate than usual next year—a result of the ongoing recession and other increased costs, as well as the costs of implementing the HCECP report. Tuition hikes at the Business and Medical School, however, will be in line with those of previous years.

Dental School Associate Dean for Administration and Finance Mary Cassesso says she worried that higher outsourcing costs would necessitate cost cutting.

“There’s been a suggestion that the assessment we pay [for outsourced labor] will increase sharply over the next few years,” she says. “That is a huge concern to us.”

And that the wage decision comes in the midst of a recession, as Upson puts it, “doesn’t help.”

One of the most significant impacts will likely come from Harvard’s various food services.

Whereas the College’s dining service workers are largely paid wages above the HCECP level, the Law, Business and Kennedy Schools were cited in the report for outsourcing large numbers of dining workers, and all three will have to make changes to keep food services afloat.

“We hardly keep it going [as it is],” Newman says of the Kennedy School’s cafeteria.

While it is unlikely the school would stop offering dining facilities—as they help provide a sense of community within the school—Newman says it is a decision the school might have to consider if expenses became too high.

The Law School already subsidizes its dining facilities, and Upson says that subsidy “is about to get quite a bit larger” because of increased wages.

Since the schools’ dining facilities have to compete with the restaurants in Harvard Square for diners, Upson says raising prices to offset the coming salary hikes would be “self-defeating.”

Like the Law School, the Business School will increase food subsidies before allowing food prices to exceed market rates, since dropping dining services altogether is “not an option” because of the school’s location in Allston, Rapier says.

The impact of the new wage requirements on the Business School’s dining operation is likely minimal as its contractor, Restaurant Associates, employs unionized workers with pay scales similar to Harvard’s in-house workers, unlike the Law and Kennedy Schools’ contractor.

An Unfair Burden?

Central administration officials are negotiating the wage increases, which all schools will then be required to adopt. But Mass. Hall will not provide schools any extra funding, in accordance with long-standing University philosophy that schools support themselves independently.

Medical School Associate Dean for Finance Cynthia L. Walker says she had not expected University help but adds that “whether they should [help] is a different question.”

University Vice President for Finance Elizabeth C. “Beppie” Huidekoper says costly policy requirements imposed by the central administration on the schools are not out of the ordinary.

“There are many guidelines that come out of the center,” she says. “This is not way out of the norm. All compensations are overseen by the center.”

But Upson says that in the past, the University has typically issued wage or other guidelines to ensure schools were complying with legal requirements—not to enforce a decision based on judgments of principle.

“It’s almost always based on rules or regulations rather than this discretionary sort of thing,” he says.

He adds that the scale and cost of the wage report’s requirements were not typical central administration mandates.

But despite the added burdens on budgets, many of the finance officers say they and their schools supported the wage increases called for by Summers and the committee.

Newman points out that the budget process always involves balancing priorities, even in the best of financial times.

“We were fully aware that we were making recommendations that would have cost impacts, but we felt so strongly about the recommendations that we still proposed them unanimously,” she says.

—Jenifer L. Steinhardt contributed to the reporting of this story.

—Staff writer Elisabeth S. Theodore can be reached at theodore@fas.harvard.edu