ERIC Identifier: ED368255
Publication Date: 1994-02-00
Author: Moore, Kathryn M. - Amey, Marilyn J.
Association for the Study of Higher Education.| ERIC
Clearinghouse on Higher Education Washington DC.| George Washington
Univ. Washington DC. School of Education and Human Development.
Making Sense of the Dollars: The Costs and Uses of Faculty
Compensation. ERIC Digest.
The well-being of the professoriat depends on a solid financial foundation in
institutions of higher education. Simply put, unless adequate remuneration is
available, talented individuals will seek other employment--both faculty who are
currently in the professoriat and those who might be recruited to undergo the
preparation and enter the professoriat subsequently.
During the 1970s and 1980s, faculty salaries declined sharply, in both real
and relative comparisons, and the decline was combined with a widening
dispersion of salaries across disciplines. It has resulted in a variety of
inequities and discontinuities for individuals and for institutions. In light of
an increasingly dynamic job market for faculty in the 1990s, it is important
that both faculty and institutional decision makers understand what is involved
in compensation policies and practices to improve and preserve the professoriat
and the higher education enterprise it serves.
WHAT IS THE CURRENT CONTEXT?
The current context for
decisions concerning compensation is extremely turbulent. The financial
situation of many states has reached crisis levels. Public higher education is
under duress. Many institutions have had to make deep cuts in their budgets--as
much as 15 to 20 percent--and no relief is in sight. Because personnel costs
amount to approximately 80 percent of most institutions' operating budgets,
there is virtually no way the faculty can be sheltered from such cuts.
In addition, today's faculty are far more diverse, certainly more
sophisticated about the marketplace, and more informed of the general state of
affairs affecting their institutions and the professoriat generally than were
their earlier counterparts. In return for their contributions, they expect
institutional leaders to provide wise policy, humane practice, and dedicated
service in return. Compensation policy and practice are at the center of an
institution's relationship with its faculty. Indeed, compensation policy and
practice reflect the essential mission and philosophy of each institution
through what it rewards, whom it rewards, and how it treats its most important
HOW IS COMPENSATION STRUCTURED?
Compensation usually refers
to salary plus other monetary payments or quasi-monetary payments, such as
fringe benefits. It might also include nonmonetary compensation like leaves of
absence, released time, and sometimes even laboratory or other work space. Most
depictions of faculty compensation tend to focus exclusively on the salary
portion. Making Sense of the Dollars: The Costs and Uses of Faculty Compensation
takes a more comprehensive approach, however, examining the structure of
compensation and key decision points involved in determining institutionally
appropriate structures of compensation, including linking compensation to
institutional mission. While not a factor at every institution, collective
bargaining agreements play important roles when they do exist. Retirement issues
and their impact on the structure of compensation, including early retirement
programs and incentives, are important also.
HOW DO THE ACADEMIC LABOR MARKET AND OTHER FACTORS AFFECT
Recent federal legislation uncapping retirement has called
attention to the age structure of the academic work force and indirectly to how
faculty are remunerated. Projections for the academic work force for 2000 make
two principal observations: (1) Senior levels of faculty will be reduced as much
as 40 percent because of retirements; and (2) replacements for these departing
scholars are not entirely evident.
The overarching perspective is one that considers institutions as markets and
the ability of various types of institutions to preserve and protect their
mission and direction through practices of hiring and compensation. External
market issues affect institutional polices and practices regarding compensation,
including dimensions of the current and prospective faculty labor pools and the
dispersion of salaries across academic and nonacademic markets. Internal market
issues include the role of faculty as independent professionals within a
multidisciplinary market and new contractual and compensatory arrangements for
faculty, including retirement.
HOW IS COMPENSATION USED?
Institutional quality is
inextricably bound to the quality of the faculty, yet hiring and retaining
high-quality faculty members are likely to become increasingly difficult in the
years ahead. Does compensation motivate faculty? What is the rationale behind
using merit pay to reward productivity, and are teaching, research, and service
rewarded differently? How is compensation used to reward seniority, and what
compensation practices reward faculty activity across the career span? How is
compensation used to enhance recruitment and retention, and what institutional
issues are associated with the use of supplemental compensation? Making Sense of
the Dollars examines these questions and provides some answers for faculty and
ARE FACULTY PAID FAIRLY?
Equity is a central concept in pay
systems generally. Inequitable policies and practices of compensation can result
in poor use of human resources, individual frustration and discord, and lower
Compensation policy and practice are underwritten by several important
federal laws and regulations, and state statutes. The Equal Pay Act of 1963 and
Title VII of the Civil Rights Act of 1964 are particularly defining.
Considerable controversy surrounds the idea of equity and its application to
various individuals and groups within higher education. Claims of salary
discrimination have played a crucial role in shaping the nature of the debate
since these federal laws were passed. Considerable research has focused on three
aspects of salary discrimination: studies that document the existence of salary
discrimination; studies that attempt to explain or examine the causes of salary
inequity; and research concerning various methodological tools used to prove or
disprove salary discrimination nationally and on campus.
HOW CAN WE BUILD EFFECTIVE COMPENSATION SYSTEMS?
compensation has evolved piecemeal in response to changing markets, individual
expectations and behaviors, and institutional circumstances. It is a highly
complex system that nevertheless strives to achieve a reasonable balance between
the faculty's personal and professional needs and a college's or university's
mission, goals, and resources. A set of policy dimensions forms the foundation
of most collegiate compensation systems. These policies address internal
consistency, external competitiveness, individual contributions, and the way the
system of compensation is administered.
Increasing external pressure for colleges and universities to be accountable
and open in their operations will sooner or later affect their compensation
systems. While many institutions have open salary information, others do not.
Some have clearly written policies and procedures; others do not. In the long
run, the productivity and satisfaction of the faculty--indeed, the overall
quality of the institution--will depend on its compensation system and the
wisdom with which it is administered.
Breneman, David W., and Ted Il Koo Youn, eds.
1988. Academic Labor Markets and Careers in American Higher Education. New York:
Lawler, Edward E. 1990. Strategic Pay: Aligning Organizational Strategies and
Pay Systems. San Francisco: Jossey-Bass.
Lozier, Gregory G., and Michael J. Dooris. 1987. "Is Higher Education
Confronting Faculty Shortages?" Paper presented at a meeting of the Association
for the Study of Higher Education, Baltimore. ED 292 386. 20 pp. MF-01; PC-01.
McCaffery, Robert M. 1992. Employee Benefit Programs: A Total Compensation
Perspective. 2d ed. Boston: PWS-KENT Publishing Co.
Tuckman, Howard P. 1987. "The Academic Reward Structure in American Higher
Education." In The American Academic Profession, edited by Martin J.
Finkelstein. Columbus: Ohio State Univ. Press.
This ERIC digest is based on a full-length report in the ASHE-ERIC Higher
Education Report series, prepared by the ERIC Clearinghouse on Higher Education
in cooperation with the Association for the Study of Higher Education, and
published by the School of Education at the George Washington University.