Private Universities as Niche Providers By Alexander Dilger

According to the German Rectors' Conference, as of 2nd September 2009 there were 88 state recognised private universities in Germany - not including 40 church universities, which are more comparable to the 236 state universities and not taken into account in the following discussion. This means that private universities make up a substantial 24 percent of all universities, and despite some spectacular closures the trend is increasing. When it comes to their share in the country's 1,980,626 students however, the situation looks rather different - the 82,975 students at private universities amount to only 4 percent. But the private universities are not only smaller; they also less often have the right to award doctorates. They frequently offer only a single subject or a small range of subjects, which are usually also inexpensive. There are no private universities covering the full range of academic study. In offering Medicine and Dentistry, the University of Witten/Herdecke already forms a notable exception, but beyond that it has only a faculty of Economics, which is very popular at private universities, and a faculty of Arts and Humanities. On the whole, private universities in Germany must be considered niche providers, at least currently, although some niches are of course very comfortable. But the bulk not only of students, but also of funding and research is found at the state higher education institutions. This is neither a coincidence, nor is it the fault of the private universities; rather, it is due to conditions in Germany which at least for the present clearly favour the state universities, as a result of which private universities have to settle for the remaining niches.

State funding

The probably greatest advantage of state universities compared to their private counterparts is that they are largely funded by the state; private universities may in theory also receive state funding, however it is usually lower and, more importantly, less secure. On the other hand, private universities can charge higher tuition fees, which, depending on the federal state, state universities may either not collect at all, or only up to a limit of 500 euros per semester. This however means that from the student point of view the state options are either free or at least very cheap. In the face of such competition, private universities only really stand a chance in comparably cheap subjects, which is why many of them limit their offering to these. But the state-funded competitors are at an advantage even there, so private universities are left only with the aforementioned niches. A fairly large niche can be to take in applicants who have been refused a place by the state universities. The lack of market co-ordination via prices/tuition fees means that the limited nature even of public funds has resulted in rationing of supplies. The insufficient state offerings particularly in very popular subjects can therefore be supplemented by private universities, although they are more expensive and not necessarily of better quality.

In some federal states, such as North Rhine-Westphalia, state universities can become insolvent just as can private ones, at least in law. However, not only is this factually highly unlikely, it is also not overly dramatic for most creditors. As civil servants, tenured professors in particular have little to fear; they are protected not only from dismissal on the grounds of personal incapability or misconduct, except in very severe cases, but also from redundancy and even insolvency of a university. No private university can offer comparable conditions. Added to this are further benefits of civil servant status, such as exemption from the obligation to pay social security contributions; as a result, private universities cannot truly compete even where they offer significantly higher salaries. It is not even possible to meaningfully calculate how high the appropriate compensation for foregoing civil servant status would have to be, especially as these state-protected professors can earn generous additional incomes in economics-related subjects in particular. Therefore, seasoned professors rarely move from public to private universities. As in the case of students, adverse selection to the disadvantage of the private universities also occurs when it comes to professors; the private institutions find themselves having to make do with those who could not find a place at a state university. Under these circumstances it's little consolation that professors who are not good enough can be dismissed. This not an option in the case of professors with civil servant status, but they will generally have been adequately examined beforehand and provided with such incentives once in office that they are worth the labour costs, which in view of their lengthy and high qualifications are anyway minimal.