The Elephant on the Table – Faculty Compensation

May 21, 2010

KEN SNOWDON, President, Snowdon and Associates Inc., Harrowsmith, Ontario

In earlier commentaries I outlined the importance of the quality challenge in PSE (April 16th) and the importance of investing in more faculty (April 30th) as the linchpin to address the challenge. In the interim a report by TD Economics¹ has been released and one of the conclusions is that considerably more investment is required to address participation and quality concerns in PSE. Simply put, major increases in enrolment and research activity have not been matched with the requisite resources, to date, and the sector will continue to face increased demands in the coming decade. Meeting those demands is critically important to Canada’s future and the TD report speaks directly to the “tremendous expectations we have of our higher education system.”  

Meeting those expectations will require greater investment.  But the topic of investing in PSE often sparks some rather pointed comments, inside and outside academe, about faculty compensation levels (and workloads).  Some argue that faculty compensation is ‘out of line’ and new investments in higher education will simply end up in the pockets of faculty in the form of higher salaries.

The recent release of public sector salaries in Ontario (the so-called “sunshine list” of salaries over $100,000) caused more of a stir than usual – probably because of the general state of public finances and recent pronouncements about public sector compensation freezes. Although all segments of the public sector were represented in the “sunshine list”, faculty (and university presidents) bore their fair share of the scrutiny and commentary. 

It is true that over the past decade faculty compensation has outpaced inflation by a considerable margin. That increase, however, needs to be seen in the light of compensation increases in other sectors and, more specifically, in light of the very robust ‘market’ for professors that characterized much of the period from the late 1990s onwards. 

First, let’s put university salaries in perspective relative to similar parts of the labour force.  Based on a decade of earnings information gleaned from the Labour Force Survey, a Statistics Canada study by Rene Morissette noted that

• Recent years have also witnessed sharp growth at the top of the Canadian earnings distribution … a phenomenon also observed in the United States.” (p.12)
• “in several sectors of the economy, pay rates rose substantially for some highly skilled workers over the last decade.” (p.14)
• Private sector –“average earnings of managers grew a solid 20%, four times the rate for other employees.” (p.19)²

One could argue that university professors constitute a subset of the group that Morissette refers to; they are, on average, at the top end of the Canadian earnings distribution,³ highly skilled, and the job has been referred to as similar, in responsibility, to that of  ‘managers’ due to complexity, responsibility and skill requirements.  

Second, it is important to recognize that a major impetus for increased faculty compensation was directly related to ‘market factors’ – basic supply and demand. The downturn in PSE spending that characterized the mid-1990s resulted in a reduction in PhD degree production in the latter part of the 1990s just as demand was picking up for new faculty appointments. Fuelled by the competition for new research funding, the impending double cohort (in Ontario), increasing demand for graduate studies, and continued increases in participation rates, universities scrambled to recruit faculty - effectively ‘bidding up’ the price for new appointees. At the same time the Canada Research Chairs (CRC) program introduced the prospect of 2000 more faculty appointments with relatively high compensation provisions – thus adding more demand into the equation and effectively ‘bidding up’ the price for all faculty right across the country.

The combination of supply and demand dynamics, coupled with the availability of funding from the CRC program, ‘double-cohort’ related operating grants, and differential tuition in professional programs, provided a robust environment for faculty salaries; considerably more robust than that afforded by operating revenues alone that, in some provinces, were hard-pressed to keep pace with enrolment and inflation.

A related market factor to consider is that the market for faculty extends well beyond Canada’s borders. Salary increases for faculty in the United States outpaced inflation over the past decade.⁴ A more detailed comparison of Canadian and U.S. faculty salary increases from the late 1990s to the mid-part of this decade indicated “marginally higher faculty salary increases in the U.S. than in Canada.”⁵  No doubt there are other factors that would help shed further light on the topic of faculty compensation (e.g., increased unionization, the abolition of mandatory retirement, differentials by discipline, increased demand for PhD’s outside academe, the effect of “sunshine lists”) but the preceding emphasis on supply and demand basics should be recognized.

The ‘market’ for faculty has changed more recently in light of the increased numbers of Ph.D graduates and the straitened financial circumstances faced by the PSE sector in Canada and elsewhere.  Accordingly one would expect that for the next few years the rate of growth in faculty compensation will slow and that starting salaries for new appointees will soften somewhat.

In that environment this is the perfect time for investment in more faculty positions! Bold steps now will help address the quality challenge.

SNOWDON ASSOCIATES INC. provides consulting services to the higher education sector aimed at optimizing institutional resources by improving governance, strategic planning, resource allocation and organizational effectiveness.

RETENTION 2010, International Conference on Student Success, June 9-11, 2010, Chicago, IL

The Swail Letter (May 2010).
In this issue: Trends in International Education Enrollment.