Showing posts with label Compensating Wage Differential. Show all posts
Showing posts with label Compensating Wage Differential. Show all posts

Thursday, January 27, 2011

Oregon University Funding and Faculty Salaries


Oregon Business Magazine reports on the Oregon University System's latest self study. The above chart is part of it and shows faculty salaries in Oregon as compared to all other states.  Oregon does poorly.  A few things to note about this - the first being that I clearly need a raise.  But seriously, there is a lot of talk about the generous benefits Oregon offers state employees, and they are pretty generous, but without them we would lag badly in terms of relative pay, these generous benefits vault faculty salaries from 43rd in the nation to 31st.  So talk of cutting into benefits has to take into account the fact that benefits are a component of overall compensation, so if  you cut benefits you will have to increase salaries to stay competitive.  And you will too because the second thing to notice is how states 44 through 50 offer a much lower cost of living.  I suspect that if you remade the left hand table with figures normalized by cost of living, Oregon would come out dead last.

But my experience is that faculty are not as self-interested as you might think and what rankles academics in the state is the funding cuts that affect class size, instructional support, research seminars, travel to conferences to stay current in your field.  Academics became academics for the most part because they are passionate about their fields of study and they want to be able to effectively translate their expertise into knowledge for the next generation.  Most of us went into academics knowing that we could have become wealthier if we chose a different path, so it is not as much about personal gain as you might think.  I think deteriorating working conditions are more responsible for the recent loss of two professors in my department than the fact that they now command much, much higher salaries at other state's universities.

Still academics are not immune to personal compensation.  There is a lot of talk about the fact that part of the compensation for working in Oregon is being able to live in Oregon and this is true.  Economists call this a compensating wage differential.  It is exactly what led me to choose a 25% lower salary but the opportunity to come back to Oregon, and there are many others like me.  But not that many.  There are lots of good places to live in the US and the world and if Oregon is unable to offer at least somewhat competitive salaries they are not going to be able to recruit the better talent and ultimately it will be the students and the state that suffer.  The research that gets done will not be as relevant or cutting edge (you'd better believe that the academic market prices these things), the knowledge that gets passed on will not be as timely or sophisticated and the students produced will not be as dynamic or productive.

If Oregon is unable to adequately support state universities, universities must be allowed to do what is necessary to support themselves.  I support the efforts by the OUS to become a university system and achieve more independence.  But more on that later.

Tuesday, June 9, 2009

Econ 101: Compensating Wage Differential

Right in the heart of Portland, I took this picture on a lovely Sunday walk. Can you guess where it is?
The fact that you might have trouble identifying it is testament to the fact that the city is blessed with an abundance of natural forested parklands.

Of course Oregon in general is a beautiful place, and as someone who relishes the gray damp wonder that is the Oregon winter, I get a lot of utility from living here. Because of my strong preference for living in Oregon, I accepted a job that payed considerably less than competing offers I had - in the most dramatic case about 50% less than what a big midwestern state university was offering.

Economists call this a compensating wage differential: the extra money you have to pay to get people to accept unpleasant jobs or the lower salaries you have to offer to people for particularly pleasant jobs. You may have to pay more then for a person who pumps septic tanks all day than someone who delivers flowers. It is a simple idea, you have to compensate people for the difference in the disutility of doing different jobs.

Politicians love to say that it is okay that salaries in Oregon's state universities are much lower than other places because of this: Oregon is such a wonderful place to live that talented academics will come anyway. There is some truth to this statement, but Oregon isn't the only place to live and the population of people like me who are willing to accept much less to be here is pretty small. For instance I was offered quite a bit more to go to a university in a lovely seaside California town - I don't suspect many would have made the decision I did. So, yes, economic theory suggests that Oregon can get away with slightly lower salaries, but there is a limit.

As I talk to some OSU students who are graduating and who have more than one job prospect, I emphasize that they should look past raw salary differentials and think hard about how much they will enjoy the work they will do in each job and ask themselves, how much is the extra pleasure of working at a particular place worth in terms of salary?  What I am telling them, in other words, is figure out your personal compensating wage differential. 

Good luck grads!