Moody's: Grad Student Unionization 'Credit Negative'

September 2, 2016

Graduate student workers' newly won right to unionize at private universities is a ding on those institutions' credit, Moody's Investors Service said Thursday.

Moody's called last week's National Labor Relations Board ruling, which awarded the unionization rights, a credit negative. That means it is one of many credit factors affecting institutions but is not a change in any credit rating or outlook.

The ruling comes at a time of increased financial stress for institutions. Research funding costs are increasing, tuition prices are under pressure and endowments face declines in value, Moody's said. Graduate students are also becoming more important to higher education's business model. However, the ratings agency went on to note that large, research-intensive universities will be most affected by the ruling -- and those institutions tend to be wealthier and are best situated to absorb higher costs and wages from unionization.

Since most graduate student assistants are enrolled at public universities governed by state labor law and not covered under the ruling, the NLRB's decision affects fewer than 78,000 graduate assistants, Moody's estimated. It said about 40 percent of graduate assistants in private higher education are at just 10 universities: Boston, Carnegie Mellon, Columbia, Cornell, Harvard, Johns Hopkins, Stanford and Yale Universities, the Massachusetts Institute of Technology, and the University of Southern California. Increasing the average wage for graduate teaching assistants at those universities would cost each one between $7 million and $11 million annually, Moody's estimated. The increase would be the equivalent of less than 1 percent of each institution's operating expenses.

However, Moody's also pointed out that institutions more moderate in size and means will be pushed to boost their graduate assistant compensation to keep up with larger competitors.

"Increased graduate assistant compensation or a material change in workload could cause modest pressure on operating performance," Moody's wrote. "Since universities with large graduate populations tend to compete nationally, if not internationally, the actions of their peers will outweigh regional standards in shaping the potential financial effects."

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