According to the National Bureau of Economic Research, the Great Recession began in December 2007 and ended in June 2009. With a duration of eighteen months, this recession was almost double the length of the average post–World War II economic downturn. It was also notable for its severity. During the recession, the gross domestic product (GDP) declined 4 percent (even after controlling for inflation); the unemployment rate doubled, as nearly nine million private jobs disappeared, wiping out more than a decade’s worth of job growth; and almost $14 trillion in household wealth evaporated—an amount equal to an entire year’s worth of economic production.
Although the worst recession since the Great Depression is now technically over, our analysis of faculty compensation and forecasts for state revenues indicates that the negative impact on higher education will continue for years in many states. Who outside the professoriate should care what happens to faculty salaries and benefits during a recession? Everyone who hopes to be employed in the future, bring home a paycheck, and have something left over to put into savings should care.
In the second decade of the twenty-first century, we live our lives in a global knowledge economy. Education is the primary component of human capital, which is the designation economists give to the skills and abilities workers bring to the various tasks involved in producing and maintaining an economic system; other components include health care and nutrition. Differences in human capital explain the majority of differences in economic growth rates across countries. The rate of innovation drives economic growth; innovation, in turn, is greater in nations with greater levels of human capital. Moreover, investments in human capital deliver compounded rates of economic return that raise GDP, employment, incomes, and wealth far beyond any other investments we can make. A large body of research shows that economic growth rates rise as a country’s educational attainment increases, from the primary to the postsecondary level.1 And who creates human capital? Well-paid elementary, secondary, and higher education faculties.
Do US academic institutions compensate their faculties at the levels needed to produce college graduates who can compete in the global marketplace? Our analysis of this year’s data and our examination of long-term trends in faculty compensation indicate that the answer is “No!”
Results This Year
Our analysis of the economic status of the faculty begins with results from this year’s annual survey of full-time faculty compensation. Survey report table 1 presents the most basic results, while table A places these results in historical perspective. The tables report two different measures of the change in full-time faculty salaries: the change in average salary levels, which is a measure of the change from the previous year in what a typical faculty member might earn, and the average change for a faculty member continuing in employment at the same institution (that is, the average raise a faculty member might expect if he or she does not move). The first of these figures is calculated only for institutions that submitted data both this year and last.
The overall increase in salary level, reported on the left side of survey report table 1 and the upper half of table A, was 1.4 percent between 2009–10 and 2010–11. This is barely higher than the overall change reported last year, when we described it as “the lowest year-to-year change recorded in the fifty years of this comprehensive survey.” It seems that this year has been just as tough as the previous one on full-time faculty salaries. The salary increases laid out in survey report table 1 varied between categories of institutions, however: as has usually been the case in recent years, the change in average salary at public institutions was lower (0.9 percent) than the change in private-independent (2.1 percent) or religiously affiliated (1.8 percent) institutions. (More detailed analysis of the public-private differential in salaries appears later in this report.) As a category, associate’s degree colleges, most of which are public, reported the lowest increase in average salary level, at only 0.1 percent among colleges using faculty ranks and 0.3 percent among colleges that do not use faculty ranks.
Given that many faculty members and other employees in higher education have endured salary freezes or involuntary unpaid furloughs in the last year, it is important to provide further context for these increases in average salary. Between December 2009 and December 2010, the consumer price index for all urban consumers (CPI-U) rose by 1.5 percent. The CPI-U has been used in AAUP reports for decades and is the default measure of inflation used by many economists. Table A provides context for considering how this year’s salary increases stack up historically. The right side of table A puts the increase in “real terms,” adjusted for inflation. Although the 1.5 percent CPI-U increase this year is relatively low, the change in average salaries is even lower. For the second consecutive year, real salary levels fell, and for the fifth time in the last seven years, overall faculty salaries declined in purchasing power. This means that the cumulative change in real salaries for faculty members during the last seven years was 1.8 percent, less than the 2.1 percent increase in real salaries for the median American worker over the same period.
The second measure of the one-year change in salaries is the average change for continuing faculty members, which occupies the right side of table 1 and the lower half of table A. This rate is generally higher, because it excludes the salaries of new faculty members—presumably starting at the low end of the range for their rank and institution—and includes all forms of salary increase (across the board, merit, and promotion). The average increase in salary for continuing full-time faculty members at all types of institutions was 2.5 percent between 2009–10 and 2010–11. This is slightly higher than the 1.8 percent increase reported last year but well below the typical rate of change for the last four decades. As with the increase in average salary levels, the average increase for continuing faculty members in public colleges and universities was lower (2.2 percent overall) than that reported by private-independent (3.1 percent) and religiously affiliated (2.7 percent) institutions.
Adjusting for inflation, the average real increase in salary for continuing full-time faculty members (the last row of table A) was 1 percent this year—an increase that contrasts with last year’s decrease but is still at the low end of the historical range.
The overall picture this year, then, is of mostly stagnant salaries for full-time faculty members. The numbers vary considerably across institutional types. But aggregate faculty salary levels did not keep up with inflation in the past year, and the cumulative increase during the last seven years lagged behind the cumulative increase in median earnings for all US workers.
Impact of the Recession
Our last two annual reports have noted the paucity of data with which to judge the specific impact of this recession on higher education. Although our overall assessment is that the recession’s effects on higher education funding and employment are far from over, we can now provide detailed analysis of the changes wrought by three years of dramatic cuts in revenues from state appropriations, endowment income, and tuition. Even when looking only at data from institutions that responded to our annual survey immediately prior to the recession (2007–08) and this year, the effects are visible in terms of the continuing shift toward contingent employment, widening salary inequality, and reductions in institutional contributions toward retirement.
The increasing use of contingent faculty appointments (both fulland part-time appointments off the tenure track) has been documented in this annual report and elsewhere for many years. In this year’s report we present the most recent comprehensive federal data on the growth of contingent academic employment and also use AAUP survey data to examine the impact of the recession on one component of the contingent academic workforce: full-time non-tenure-track faculty members.
This analysis of AAUP survey data is especially important because comprehensive national data on instructional staff employment status are not yet available for the full period of higher education’s recession. The most recent data available from the US Department of Education, collected in fall 2009, indicate that the number of contingent appointments among all instructional staff continued to grow between 2007 and 2009. Figure 1 depicts the trend over more than three decades. The proportion of tenured and tenuretrack faculty members shrank dramatically between 1975 and 2009, from more than 45 percent to less than 25 percent. In all, graduate student employees and faculty members serving in contingent appointments now make up more than 75 percent of the total instructional staff. The most rapid growth has been among part-time faculty members, whose numbers swelled by more than 280 percent between 1975 and 2009. Between 2007 and 2009, the numbers of full-time non-tenure-track faculty members and part-time faculty members each grew at least 6 percent. During the same period, tenured positions grew by only 2.4 percent and tenure-track appointments increased by a minuscule 0.3 percent. These increases in the number of faculty appointments have taken place against the background of an overall 12 percent increase in higher education enrollment in just those two years.
Analysis of AAUP data allows us to look more directly at the immediate impact of the current recession on full-time contingent appointments at the institutions supplying data for our annual survey in both 2007–08 and 2010–11. One clear pattern emerges from a review of the aggregate numbers of full-time faculty members before the recession and now: of the 1,095 institutions with tenure-track faculty members, 66 percent increased their total numbers of fulltime faculty appointments. This constitutes aggregate growth of 2.7 percent, but the composition of the faculty at these institutions has shifted. The most substantial growth has been in non-tenure-track appointments, which grew by 7.6 percent during the three-year period. Tenured appointments increased by 3.7 percent, but the number of tenure-track positions dropped by 3.7 percent. This means that some tenure-track faculty members have been promoted into tenured positions, but a substantial number of tenure-track faculty members have left their institutions and been replaced by faculty members in non-tenure-track appointments. Table B provides a breakdown of the changes in the numbers of full-time faculty positions by institutional category and tenure status.
The pattern of increasing non-tenure-track appointments and decreasing tenure-track appointments was consistent across institutional types. The greatest shift was at doctoral universities, which saw the most rapid growth in nontenure- track positions. The associate’s degree category— composed almost entirely of public colleges—showed the smallest increase in total faculty positions and the largest decrease in the number of tenure-track appointments.
Differences also exist between public and private institutions in the growth rate of full-time non-tenure-track appointments. At public colleges and universities, which make up the majority of all institutions, the growth in total full-time faculty positions between 2007–08 and 2010–11 was much lower than in either the private-independent or religiously affiliated sectors. The increase in the number of non-tenure-track and tenured positions was more rapid in both of the private sectors, while the decrease in tenuretrack positions was noticeably greater in public institutions. The distinction is particularly sharp at doctoral universities: total faculty positions increased only 1.3 percent at public doctoral universities, with growth of 9.6 percent in nontenure- track appointments and 1.6 percent in tenured positions and a decrease of 7 percent in tenure-track appointments. By contrast, at private-independent doctoral universities, the total number of full-time positions grew 5.7 percent, non-tenure-track positions grew by 13 percent, and tenured positions increased by 5.1 percent; the number of tenure-track positions declined by 0.6 percent during the period.
A smaller group of 102 institutions that provided data in both years do not have a system of academic tenure. Most of these institutions are public community colleges or smaller private baccalaureate colleges. Since they do not have a tenure track, these colleges were not shifting more of their faculty toward non-tenure-track positions. However, a higher proportion (42 percent, compared with 34 percent of all institutions) decreased their total numbers of faculty members during the period.
All of these differences are evident within a three-year period, even when considering only full-time faculty appointments and only those institutions submitting data in the first and last years. Clearly, the recession has affected faculty hiring patterns and accelerated the long-term trend toward a larger number of contingent appointments.
Although the value of tenure is not readily understood by those outside the professoriate, tenure is the mechanism for guaranteeing freedom in research and an open exchange of ideas. It represents a commitment on the part of a college or university to a faculty member that he or she will have the support necessary to do the job well. Tenured faculty members have a greater stake in the success of their institutions and their graduates than do those without tenure; being a tenured faculty member at an institution that is failing is worth very little.
Faculty members serving in contingent appointments, on the other hand, do not have the protections of academic freedom that come with tenure. They do not have institutional support for pursuing the scholarship that serves as continuing education for college and university professors and often do not have the freedom or the time to research controversial topics. Contingent faculty members find that renewal of their appointments depends more on their ability to please students than their ability to conduct rigorous classes that force students to think critically about the material they are learning. As sociologists Richard Arum and Josipa Roksa noted in their recent study, Academically Adrift, students’ cognitive performance is, on average, mediocre, and the major predictor of cognitive performance is rigorousness of instruction. We are not surprised by a lack of rigor in a system where 75 percent of the instructors are off the tenure track and therefore constantly worried about losing their jobs if they push their students too hard. And we take the opportunity to remind legislators, administrators, trustees, and regents that the path to global competitiveness requires rigor in the classroom—and rigor requires investing in the faculty members expected to provide it.
The recession has also had the effect of widening salary inequalities that already existed. The immediate impact is evident when looking at real (inflation-adjusted) salary changes by institutional category and by region during the recessionary period. It is also evident in updated tables on the long-term trend in salaries by discipline, and it is perhaps most strikingly evident in our analysis of increases in presidential salaries during the last three years.
Table C shows the change in real average salaries for institutions providing data for both 2007–08 and 2010–11. The combined result for faculty members of all ranks at all institutions is a 1.7 percent increase in salary beyond inflation. This overall figure conceals strong differences between public and private institutions, however. While overall average salaries in public colleges and universities rose 1 percent above the rate of inflation, the increase in privateindependent institutions was nearly three times as high. The gap was particularly wide at doctoral universities, a category dominated by state flagship universities that are larger in terms of faculty size than other types of institutions. The pattern did not hold among baccalaureate institutions, where there is a concentration of smaller colleges (many of them religiously affiliated) that have struggled with losses in tuition revenue and declines in charitable giving and investment returns.
Table D details the striking real differences in average full-time faculty salaries by region. The division into four regions is based on the categorization used by the Bureau of Labor Statistics, which is the source for the regional inflation indices used to produce these calculations. Analysis including the regional consumer price index does not allow for a comparison of the purchasing power a specific salary has in different regions of the country at a given point in time.2 But incorporating the regional inflation factor does highlight regional differences in the recession’s impact across the country.
Although the CPI-U increase over three years was greatest in the Northeast, the increase in average salary beyond inflation was also much greater there. Overall net salary growth in the Midwest was only about half the rate in the Northeast but was still markedly better than the 1 percent real growth in the West and the barely perceptible 0.2 percent increase in the South. In the Midwest, South, and West there was also a substantial public-private gap, with real salary increases much lower at public colleges and universities. The opposite was true in the Northeast, however.
Figures 2 and 3 depict the widening gap in average salaries between faculty members employed in the public and private-independent sectors over four decades. Figure 2 tracks salaries for the full professor rank and figure 3 shows the assistant professor trend. Each graph shows the average salary in public institutions, by category, as a percentage of the average salary in the private sector. Thus, a point below 100 indicates a disadvantage for the public sector, with a downward trend documenting a widening gap. Associate’s degree colleges are not included because so few private colleges from that category submit data.
Figure 2 shows a relatively rapid decline in public-sector professor salaries relative to those at private-independent institutions. Since 1980, the public-sector disadvantage has widened to 16 percent at baccalaureate colleges, 11 percent at master’s universities, and a full 24 percent at doctoral universities. Such a wide gap affects the ability of public institutions to recruit and retain an excellent faculty. (Bear in mind that these percentages represent the salary differential for each year in a faculty member’s career.) This significant gap is one that junior faculty members notice, as well. They know that if they settle in at midcareer in a public college or university, they are likely to experience a significant cumulative earnings disadvantage over time compared with their private-sector colleagues. That creates a strong disincentive for moving to or remaining at a public college or university.
The pattern of assistant professor salaries displayed in figure 3 is generally the same as that for full professors, albeit with one interesting difference. Until the mid-1990s, average salaries for assistant professors at public baccalaureate and master’s institutions were equal to or higher than those in private-independent institutions. The public-sector disadvantage at this rank has also not grown as rapidly, currently standing at 4 percent at master’s universities and 5 percent at baccalaureate colleges. In doctoral universities, however, public salaries did not reach parity in the early part of this period, and they are a full 19 percent lower on average this year.
Both figures give some indication of an increased separation at doctoral universities during the most recent five-year period, which might reasonably be attributed to the effect of the recession. This finding reinforces the three-year analysis presented above.
Another aspect of the growing salary inequality during the recessionary period is reflected in table E, which compares growth in presidential salaries with growth in faculty salaries. The table is based on data from the 678 colleges and universities that submitted presidential and faculty salary information in both 2007–08 and 2010–11. The figures in this table are the average (mean) of the percentage salary increases earned by presidents and faculties across all institutions in each category. Some institutions did reduce presidential salaries over this three-year period, but the average change was a substantial increase.
The result depicted in the table is striking. During this recessionary period, the average salary increase for presidents was more than twice the average faculty salary increase at public institutions and nearly three times the faculty salary increase at private institutions. Presidential salaries in all categories of institutions were already several times higher than the average salary for faculty members at the beginning of this period, and the gap widened considerably even in the space of only three years. As we have argued repeatedly in these annual reports, such a disproportionate increase in compensation for a single individual is an indication of misplaced priorities. This is especially true in a period when faculty members and other higher education employees have been faced with involuntary unpaid furloughs, hiring and salary freezes, and cuts to benefits.
As documented in last year’s report, we have received numerous indications of college and university administrations reducing the contributions they provide to faculty retirement funds. Our standard aggregate analysis of itemized benefits (survey report table 10) does not reflect a drop in the rate of institutional retirement expenditures as a percentage of salary. However, when we analyze the rate of retirement contribution by each institution, we find that fluctuations have, in fact, occurred during the recessionary period. Table F documents the direct impact of the recession on contributions, expressed as the change in the institutional contribution rate as a percentage of salary. The majority of institutions maintained the rate of retirement contributions unchanged over three years. About a quarter of institutions raised the retirement contribution rate, most of these only slightly. However, a substantial proportion in each category decreased the contribution rate by more than half a percentage point. This proportion was highest (27 percent) among baccalaureate colleges, the category with the largest representation of private institutions.
Based on survey data, we are also able to identify at least thirty-two institutions that provided an institutional contribution toward full-time faculty members’ retirement in either 2007–08 or 2008–09 and then dropped retirement contributions to zero in a subsequent year. Thirty of these institutions are private colleges and institutions, twenty-four of them private baccalaureate colleges. One community college eliminated institutional retirement contributions in 2008–09 and has not submitted data subsequently. Twenty-three institutions eliminated their retirement contributions beginning in 2009–10; of these, nine did not resume institutional contributions for 2010–11 and four did not provide subsequent data. Of the remaining ten institutions that did resume retirement contributions in 2010–11, seven have done so at a rate substantially lower than was previously the case. An additional eight colleges suspended institutional retirement contributions beginning this year. Nearly all of the institutions that have eliminated retirement contributions are relatively small, which is why their missing institutional expenditures did not affect the national aggregate statistics.
As described in last year’s report, a reduction of one or two percentage points in the rate of retirement contributions may not seem dramatic. It will likely not result in tremendous savings for the institution. But a small reduction in retirement contributions today compounds into a large decrease in the amount of funds an individual will have available for retirement.
One form of inequality in faculty salaries stems from disciplinary differences. Economic theory predicts that faculty members in disciplines for which there are alternative, higher-paying private-sector job opportunities will require higher than average salaries if they are to choose careers in the professoriate. Although some full-time faculty positions offer nonmonetary benefits such as tenure and control over one’s schedule, for many individuals these benefits are not sufficient to compensate for the income lost in taking a faculty job. Thus, higher salaries are required in some disciplines to attract the most qualified faculty members; in such cases, the salary differentials are said to be market-driven. But morale problems can arise when faculty members who do essentially the same jobs (teach classes, advise students, and conduct research) receive substantially different salaries because of disciplinary differences.
As in previous reports, we use the salaries of English professors as the base against which faculty members in other representative disciplines are compared. Annual data collected by Oklahoma State University for larger public universities show a wide range of salaries by discipline for faculty members at the rank of full professor (table G) and assistant professor (table H). Disciplines where faculty members typically earn less than English professors include fine arts, education, foreign languages, and communications. Consistent with the predictions of economic theory, the highest-paid faculty members are in law, business, economics, computer science, and engineering.
The data in table G indicate that some, but not all, of the full professor salary differentials have widened substantially in thirty years. Whereas senior law professors formerly earned about one-third more in salary than senior English professors, they now earn almost 60 percent more. The gap between professors in other disciplines at the top of the pay pyramid (engineering, computer science, economics, and business) and their colleagues in English has widened somewhat less rapidly. Full professors in fine arts and foreign languages have experienced a widening gap in the other direction: their average salaries have grown at a slower pace than salaries in English.
An analysis of the salary differentials in table H for assistant professors over the last thirty years shows a slightly different ordering of disciplines but is also consistent with theories about the operations of labor markets. Business, law, economics, computer science, and engineering are again at the top of the pay scale. As the private-sector salaries for people in these fields have grown dramatically over the last three decades, so has the premium paid to faculty members. In fact, the average assistant professor of business now earns more than double the salary of his or her assistant professor colleague in the English department. The growth relative to English among assistant professors in social sciences, health professions, mathematics, and library science has also been substantial, but less than in the five disciplines at the top of the pay scale. On the other hand, average salaries for assistant professors in communications, education, foreign languages, philosophy, and fine arts have declined since 1980 relative to those of assistant professors in English.
The gap between disciplines has a compounding effect over the course of a faculty member’s career. Because of the disciplinary differences in base salary, we can expect salary gaps among full professors in the future that are larger than those today even if all current assistant professors receive the same annual percentage salary increases in the future.
Another labor market phenomenon that sometimes affects faculty salaries is known as compression or inversion. Labor economic theory predicts that people with more experience will earn higher salaries; their experience gives them an edge in doing their jobs well. Thus, within a discipline we expect full professors to earn more than associate professors, who in turn earn more than assistant professors. This relationship between experience and pay can be overwhelmed in disciplines for which there is a shortage of individuals willing to complete a graduate degree when they could enter the private-sector job market sooner at higher salaries. In those cases, the market makes the new PhD recipient so much in demand that universities have to pay him or her more than they pay more senior assistant professors (and sometimes more than associate professors as well). Compression refers to the situation where a more senior faculty member is paid only slightly more than the newly appointed colleague; the extreme case of this is inversion, where the more experienced individual is actually paid less than the newcomer.
From the perspective of economic theory, compression or inversion are simply reflections of the operation of the labor market. From an organizational perspective, however, these conditions can be destructive because of their potential negative effects on faculty morale. Table I examines the disciplines considered in the previous section to determine whether inversion is a problem in the current faculty job market. The first column of the table shows the earnings premium (or penalty) experienced by the average assistant professor relative to the average new assistant professor. For example, in library science, the average assistant professor currently earns only 93 percent as much as the average new assistant professor, an example of inversion. Other disciplines where new assistant professors are currently paid more than their more experienced colleagues include philosophy, business, and economics. For business professors, inversion also affects faculty members in the next rank, with the average associate professor earning slightly less than the average assistant professor.
For assistant professors in health sciences, communications, mathematics, engineering, and physical sciences, the premium for experience is very small, 2 percent or less, which may be an indication of salary compression within these disciplines. However, there is no clear line demarcating cases of compression. How much more should a faculty member in the more senior rank earn? To a large extent, salary compression is a matter of perceived fairness that cannot be exactly quantified.
Our findings do show some evidence of salary inversion and compression between the disciplines, but in all likelihood the extent is lower than one would expect to find if the economy were more robust. Once the economy has fully recovered, salaries for attorneys, businesspeople, computer scientists, economists, and engineers in nonacademic jobs will increase rapidly, forcing academic employers to compete for faculty members in these positions by raising their salaries as well. However, although labor markets affect salaries, decisions about how much to pay faculty members for the important work they perform are not determined by an inexorable, inanimate market. On the contrary, these decisions are ultimately up to individuals: senior administrators and members of governing boards. Colleges and universities should start planning now in order to keep the salaries of humanities and social science professors from falling even further behind their colleagues in law, business, and the natural sciences and to avoid the morale problems created by hugely disparate salaries for faculty members doing essentially the same work.
What’s to Come?
Although the economic expansion began almost two years ago, many individuals report feeling as if the economy is still in a recession. One reason for this is that the terms recession and expansion do not apply to the level of current economic activity. Instead, they describe the economy’s trajectory. Think of a roller coaster. At the top of a very steep incline, the coaster cars are well above the boarding platform, but the turning point from upward to downward marks the start of the plunge. For our economy, that point was December 2007. The Great Recession was a downward plunge that continued well below the boarding platform. The nation stopped careening downward in June 2009, but the upward pitch of our current stretch of track is unusually gradual and the speed at which our economy is moving forward is agonizingly slow.
Although all states were affected by the recession, some states suffered much greater economic losses than others. Even in December 2010, unemployment rates ranged from a high of 14.5 percent in Nevada and around 12 percent in California, Florida, Michigan, and Rhode Island to as low as 3.8 percent in North Dakota, less than 5 percent in Nebraska and South Dakota, and less than 6 percent in New Hampshire and Vermont.
The budgetary effects of economic declines deal a double blow. Not only do tax revenues fall, but the demand for programs such as Medicaid and unemployment compensation simultaneously climbs. Unlike the federal government, states cannot plug their budget gaps by borrowing year after year, so they have made dramatic cuts in spending. According to the National Governors Association and the National Association of State Budget Officers, mid-year reductions to higher education funding made up 14 percent of the dollar value of all midyear cuts in the 2010 fiscal year and 17 percent of midyear cuts so far in fiscal year 2011.3 Here, too, responses varied across states. During the 2010 fiscal year, thirty-two states cut higher education spending midyear; that number has fallen to nine states so far in 2011.
Substantial declines in revenue collections during 2008 and 2009 were the primary force behind state budget cuts. According to the Rockefeller Institute for State and Local Government, total state tax revenues peaked in the third quarter of 2008 and then began to decline. State tax collections began to grow again in 2010, but despite solid gains during the year, the total amount of revenue collected in the third quarter fell short of the 2008 peak by 7 percent. Again, the pace of recovery was uneven: tax collections for that quarter continued to fall in six states, while ten states recorded double-digit increases.
Predicting state tax revenues for the remainder of the 2011 fiscal year and beyond is difficult, but forecasts are important because they provide some indication of the support states can provide to higher education. The National Conference of State Legislatures reported in September 2010 that forty states were projecting increases in tax collections for the 2011 fiscal year; a portion of these increases is expected to result from macroeconomic improvements.4 Tax revenues in twenty-five states were also predicted to rise as a result of tax increases adopted in 2009 or 2010.
Twenty-eight states generate some type of long-run forecast for tax revenues. For the 2012 fiscal year, the states projecting the largest increases in revenues over the current fiscal year are Arizona (9.6 percent), Florida (7.4 percent), and Nebraska (7.2 percent). Maine is projecting the smallest increase, at 0.3 percent, but no states are projecting a decline. Of the twenty-five states making forecasts for the 2013 fiscal year, Arizona, Minnesota, and Oregon are projecting the largest growth rates in tax revenues. Among the twenty states making revenue projections for the 2014 fiscal year, Alaska, Arizona, Florida and Oregon are projecting the largest growth.
Perhaps more important than projected growth rates are the forecasted dates when state revenue collections will return to their peak levels. Projected dates vary widely: only three states (New Hampshire, Oregon, and Texas) predict that revenues will return to peak levels this year. Eight states are expecting a return to peak levels in 2012, with eight more projecting a 2013 rebound. Florida, Georgia, Idaho, and North Carolina are projecting restored revenues by 2014, with Arizona, Maine, Montana, and New Mexico expecting a recovery by 2015. California faces the longest delay in restoring tax revenues to peak levels, currently anticipating recovery in 2016.
Attacks on Public Employees
A particularly troubling consequence of the Great Recession and the poor fiscal health of governments at all levels are growing attacks on the compensation of public-sector employees by politicians and pundits. These attacks have not emerged just this year and are not limited to one or two states; among others, the current or former governors of Indiana (Mitch Daniels), Massachusetts (Mitt Romney), Michigan (Rick Snyder), Minnesota (Tim Pawlenty), New Jersey (Christine Todd Whitman and Chris Christie), Ohio (John Kasich), and Wisconsin (Scott Walker) have asserted that a major cause of the poor fiscal health of their states is “excessive” compensation for public employees. The remedies they propose for this alleged problem include elimination or reduction in the rights of public employees to bargain collectively, employee pay freezes, benefits reductions, and privatization of public services. The professoriate obviously needs to be especially concerned about these attacks because 63 percent of full- and part-time faculty members in higher education are public employees.
In addition, as this report was in preparation, twelve state legislatures were considering or expecting so-called “right-to-work” legislation.5 If adopted by all twelve, only sixteen states would remain where nonmember employees who are part of a collective bargaining unit could be required to make contributions to pay for their union representation. Introduction of this provision appears to be an ideologically driven attempt to capitalize on a difficult fiscal situation by adopting a measure that will not produce any savings in public funds or create jobs but would weaken the political strength of unions.
Despite the assertions of governors and legislators, empirical analyses by the Economic Policy Institute and the Center for Economic and Policy Research unambiguously demonstrate that public employees are not overpaid relative to employees in the private sector.6 Comparisons of the overall mean salaries of private- and public-sector employees are meaningless because they do not control for the primary variables that affect worker pay, such as education and experience.
Educational attainment, the most important variable determining income, is substantially higher in the public sector than in the private sector. Rutgers University economist and Economic Policy Institute analyst Jeffrey Keefe finds that 54 percent of full-time state and local government employees have a bachelor’s degree, compared with 35 percent of full-time private-sector employees. Employees whose highest level of educational attainment is a high school degree do tend to earn more in the public sector, but this does not mean that public-sector employees are “excessively compensated”; rather, it results from the collapse of the private-sector earnings floor for low-skilled workers. As noted above, when controlling for variables related to productivity, including education and experience, Keefe finds that on average local government employees earn 1.8 percent less than their private-sector counterparts, while state government employees earn 7.6 percent less.
The analysis of AAUP survey data above indicates clearly that public college and university faculty members are not overpaid relative to their private-sector counterparts. Quite the opposite is true. And the threatened sweeping changes in policy regarding the compensation and collective bargaining rights of public employees are likely to worsen the public-private pay gap, with negative consequences for the abilities of public institutions to recruit and retain the best faculty members.
Changes proposed by these and other governors will have the effect of further removing faculty members (and administrators) from the financial decision-making process on their campuses. Unfortunately, the administrations of private colleges and universities also continue to take steps to limit meaningful faculty participation in the budgetary process. Their efforts might limit student learning as well: in its extensive study of elementary and secondary education, the Organization for Economic Cooperation and Development finds that the best-performing education systems in the world have moved away from centralized decision making and that student learning flourishes in environments where individual administrations and faculties have considerable discretion in determining how to allocate resources.7
Faculty members, as educators, need to invest time communicating with their governors, state legislators, and fellow citizens about the realities of public-employee compensation. We also need to help policy makers and citizens understand that education at all levels is a public investment that yields enormous benefits—for everyone. Employers prefer to locate operations in cities or regions with highly educated populations, and that means more jobs for everyone.8 Better-educated citizens earn higher incomes, which translate into higher state tax revenues for decades. Meeting with state legislators in their offices or in their districts is one way to communicate with them about these benefits. Other options include writing letters to the editors of local newspapers and contacting staff members on state legislative committees with jurisdiction over labor affairs or higher education in order to secure an invitation to testify against bills that reduce compensation for public employees or that cut off rights to bargain collectively.
A Way Forward
In February 2009, Congress passed the American Recovery and Reinvestment Act (ARRA) to help stimulate the national economy and aid states struggling with revenue shortfalls. Congress realized that state budget cuts would only worsen the recession and so provided funds to support key programs—including more than $87 billion to support higher education. Although the recovery is still nascent, ARRA funds are about to run out, and state revenues remain, for the most part, below the peak levels of the last decade.
President Barack Obama’s budget proposal for the 2012 fiscal year, submitted to Congress in February, called for steep cuts in many government programs, but not in most of the programs that support the mission of higher education. (The exceptions are the proposed elimination of the Leveraging Educational Assistance Partnership, a need-based grant program for states, and decreased funding for the National Endowment for the Humanities and the National Endowment for the Arts.)9 Although there is room for criticism of the administration’s narrow focus on job preparation and numbers of college graduates, the president’s proposal reflects an understanding of the fragility of the economic recovery and the necessity of high-quality educational programs to ensure continued economic growth. State legislatures and governors grappling with the lingering effects of the recession need to understand these lessons as well.
Higher education needs to be efficient, but some cuts strike at the fat and some at the heart. Although most policy makers state a preference for improved educational systems, too often higher education slips down the policy agenda. The costs of better education are incurred now, but the benefits of investing in higher education, in terms of lower rates of unemployment and better standards of living, accrue over decades. College and university performance in producing human capital for the next generation is determined by the quality of the human capital that faculty members bring to campus. Therefore our campuses need to be places that train, attract, and retain the best faculty members in the world.
This report is possible only because of the generous time commitment of numerous individuals. Faculty compensation data were collected, compiled, and tabulated by the AAUP research office. John W. Curtis, director of research and public policy, is responsible for the data collection and was the primary author of the sections analyzing AAUP survey data. His ability to sort through the mosaic of information in order to create a report of value to very different faculty members at very different institutions, as well as his meticulous analysis of data and good cheer through the long days and nights it takes to produce this report, are essential to the process. Research assistant Samuel Dunietz provided invaluable aid in the collection of faculty salary data. We also are extremely grateful to the hundreds of institutional representatives who take the time each year to respond to our survey.
Saranna Thornton (Economics), Hampden-Sydney College, and Chair, Committee on the Economic Status of the Profession
1. Alan B. Krueger and Mikael Lindahl, “Education for Growth: Why and for Whom?” Journal of Economic Literature 39 (December 2001): 1101–36. Back to text
2. The 1982–84 base that the US Department of Labor uses to compute subsequent values of the CPI-U was set at the same value (100) for all regions of the country, despite the fact that the costs of living in some parts of the country were higher than others. So while one can compare the change in the cost of living for a region over time, it is not possible to compare the cost of living across regions at any given point. Back to text
3. National Governors Association and National Association of State Budget Officers, The Fiscal Survey of States: Fall 2010 (Washington, DC: National Governors Association and National Association of State Budget Officers, 2010), tables 10 and 11. Back to text
4. National Conference of State Legislatures, “NCSL Fiscal Brief: Projected State Revenue Growth in FY 2011 and Beyond,” September 29, 2010, http://www.ncsl.org/documents/fiscal/Projected_Revenue_Growth_in_FY_2011....
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5. Kris Maher and Doug Belkin, “State Plans Anger Unions,” Wall Street Journal, February 16, 2011, A3. Back to text
6. Jeffrey H. Keefe, Debunking the Myth of the Overcompensated Public Employee: The Evidence, Economic Policy Institute Briefing Paper 276 (Washington, DC: Economic Policy Institute, 2010); John Schmitt, The Wage Penalty for State and Local Government Employees (Washington, DC: Center for Economic and Policy Research, 2010). Back to text
7. Organization for Economic Cooperation and Development, PISA 2009 Results: What Makes A School Successful?, vol. 4 (Paris: Organization for Economic Cooperation and Development, 2010). Back to text
8. Richard Florida, The Rise of the Creative Class (New York: Basic Books, 2004). Back to text
9. “Highlights of Obama’s Fiscal 2012 Budget for Higher Education and Science,” Chronicle of Higher Education, February 15, 2011, http://chronicle.com/article/ Highlights-of-Obamas-Fiscal/126364/. Back to text