5 ms·
Actually the math doesn't work quite like that, but it's a common misconception. 53% indirect costs (overhead) is multiplied on the direct costs rather than the
by lazyjeff 5y ago
Actually the math doesn't work quite like that, but it's a common misconception. 53% indirect costs (overhead) is multiplied on the direct costs rather than the total amount, so it is actually 500K-500K/(1+0.53) = 173K taken by the university assuming the full amount can be charged indirect. In practice, some charges like tuition and equipment do not have indirects, so the actual amount taken by the university would be about 135K +- 35K out of the 500K. So you get about 365K of direct spendable money from the 500K if the overhead rate is 53% (as it is at the University of Tennessee where the author was).
The indirect cost rate is decided by the federal government based on data by the universities, so it's accounted for in the grant award amounts. So it's not as nefarious as it sounds.
- javiramos 5y agoPoint is the same
- ta988 5y agoAnd most of the time (if not always with NIH) when researchers say they got a $x grant, x is the direct cost so what they get directly. then you can often negotiate things back from your university such as time on shared equipments, students...
- deleted 5y ago[deleted]
- soheil 5y agoAlso I don't think that is taxable income so basically multiply by 1.67 since most people end up paying roughly 40% of their income in state/federal taxes, social security, medicare, etc.
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- TruffleLabs 5y agoWhere did you get 40%?
- anamax 5y agoThe cool trick is that some of the direct costs are for things that the university didn't pay for. Consider the building. Some rich people donate enough to pay for its construction. The university didn't pay anything. Moreover, that's a tax-deduction for them, so the Feds are effectively paying for part of it. Now some sponsored research is to take place in that building. You guessed it, the university charges rent to the research grant. Remember that the university didn't pay for the building....
- Spooky23 5y agoThat sort of thing is factored into the programs and policies. Efficiency isn’t really the point. You don’t pay for the building, but a bunch of Vice Associate Provosts get paid to do something and the union janitors make a living. Economists can map this crap to direct and indirect labor hours generated and other economic metrics. At some level we do this stuff as a type of work program. Somebody calculates how many hotel nights and cheeseburgers are consumed for each construction dollar spent, etc.
- anamax 5y agoThe janitors are paid for by the rent. The "efficiency" here is that the university gets paid for an asset that it didn't pay for.
- pests 5y agoIs that not allowed? If someone gives you a house or a car, is it wrong to profit off it by renting it out or offering it on rideshare?
- jcelerier 5y agoThe idea that universities or other public services should be profitable in any way is bewildering to me
- Spooky23 5y agoThey get paid for the whole institution. It’s not a contracting model in the traditional sense, it a model designed to support the educational mission of the university.
- cbhl 5y agoSure, but what are new grad salaries in industry these days? 100k-200k/yr base?