What Will Harvard Do With $42 Billion Endowment? Layoffs

Harvard University’s endowment value rose 7.3% to $41.9 billion in the fiscal year that ended June 30. That makes it the richest university in the world, by far. That money is meant to keep the university’s infrastructure updated, support the operating health of the institution and provide scholarships, among other things. The university particularly needs the money now as the pandemic cuts revenue. However, the sum apparently is not large enough to make certain all Harvard’s employees stay in place. Larry Bacow, Harvard’s president, wrote that it may have to take “potential workforce actions.” In plain terms, that means layoffs.

It is worth asking why such a rich institution would undermine in any way its ability to operate at full capacity. A reasonable assumption is that Harvard needs its full staff, or it would not have hired them in the first place. However, an early retirement plan already has caused 700 staff members to go.

Like most other large institutions and companies, the pandemic makes financial performance uncertain. However, the demand for admission to the flagship Harvard College runs around 5% of applications. The acceptance rate of its other schools, which includes its medical and MBA programs, has to be low as well because they are considered among the best such programs in the country. In short, Harvard has no financial trouble due to student tuition revenue.

Finally, alumni continue to give the university hundreds of millions of dollars a year. In the past five years, it has received huge gifts from individual alumni. These include gifts of $400 million, $350 million and $200 million.

Bacow said faculty and students needed to brace for “tough decisions.” Among those are likely to be actions that eliminate jobs to protect the $41.9 billion.