August 26, 2008

Small Colleges and New Faculty Pay

By Marthers, Paul Parker, Jeff

How do liberal arts colleges decide what to pay new faculty? Do liberal arts colleges act like research universities when they seek to appoint new faculty members? Evidence shows that research universities bid aggressively for talent, using discretionary salary policies to achieve a diverse professoriate, appoint research stars, and fill vacancies in fields where market forces require differential salaries. As researchers like Ronald Ehrenberg of Cornell's Higher Education Research Institute have shown, universities routinely pay market-based salaries for faculty who teach undergraduates in fields such as computer science, economics, and the sciences.

Anecdotal reports suggest that some liberal arts colleges have joined this trend. Yet the evidence is scant and inconclusive. We investigated whether small liberal arts colleges that compete for faculty on a national scale follow research universities in paying salary differentials to new faculty or whether they stand aside from market competition.

We had a local reason for raising the question. Our institution, Reed College, follows an equity principle. Under Reed's "faculty of equals" approach, appointees with similar experience receive the same salary regardless of academic field, ethnic background, or gender. Reed eschews the "star" system, choosing instead to appoint assistant professors and nurture their development through and beyond tenure. The college never awards tenure at the time of appointment. All new faculty members, even those who had tenure elsewhere and are appointed at a rank above the assistant professor level, must undergo a tenure review.

Equitable Treatment

The compensation system that a college follows serves as a symbol of its culture and values. Traditionally, higher education favored internal equity over external competitiveness, using rank, seniority, and individual merit as the determinants of salary and deemphasizing disciplinary differences. Such an approach muted academe's response to labormarket forces. For at least a generation, however, research universities have broken with the traditional equity approach, assembling the highest-quality faculty possible using market-based salary policies.

A salary-equity approach, like Reed's, rests on the notion that faculty members are individual contributors to a collegial organization, where financial rewards should be similar for faculty members of equivalent credentials. Equity-pay institutions believe they cannot justify differential pay for any single discipline over others. The equity model leaves little mystery as to how salaries are set and keeps the Pandora's box shut to divisive speculation about whether individual professors may be paid more because of discipline, gender, or ethnicity.

Still, the equity principle has its own set of potential pitfalls. A professor of economics may define equity by comparing herself to colleagues in economics departments at peer liberal arts colleges rather than to professors in other departments at her own institution. Yet her college may consider it equitable to resist paying her a field differential for her membership in the high- salary discipline of economics. Although such a practice may satisfy internal equity at the college, the economics professor, whose colleagues at peer institutions receive discipline-based salary premiums, may see it as highly unfair. The same arguments apply to faculty of color at equity-pay institutions that do not pay diversity-based salary premiums.

Market-Based Pay

Salaries calibrated to the market are set nationally, reflecting the going rates by field or demographic. The market-based model assumes that faculty members are defined as much by their disciplinary affiliation as by their institutional association. The salaries of individual faculty members in high-demand fields reflect market rates. University economics departments, for example, compete against business schools and the private sector for faculty members. And college economics departments compete against university departments; as a result, salaries get bid up. No comparable multilevel market exists for Chaucer scholars.

Market-based pay results in some individuals receiving higher salaries than similarly credentialed colleagues, potentially breeding resentment, especially within small departments or colleges. The funds used to support high-paying fields or to retain professors who receive outside offers may come at the expense of raises for faculty in lower-paying fields. Small colleges that cannot afford to engage in market-based competition in high-paying fields may lose out to better-endowed peer institutions. Adopting market-based pay may also change the personality of a faculty, attracting professors who are more focused on compensation than on the intrinsic values of teaching, scholarship, and collegiality.

Our Investigation

The literature and public data on faculty salaries do not specify whether small colleges offer market-based salaries at the appointment (or lure) stage to faculty or why some liberal arts colleges, like Reed, eschew the research university trend toward differential salaries. To obtain this information, we sent a survey questionnaire to 102 liberal arts colleges classified as national institutions in 2007 by U.S. News and World Report, of which 65 percent responded.' We directed the questionnaire to chief academic officers or their designees - that is, people with knowledge of faculty salary data. We specifically wanted to determine (a) if small liberal arts colleges make differential salary offers to faculty candidates based on academic discipline, ethnic background, or gender; (b) whether institutions match outside salary offers to retain faculty already employed; and (c) whether small liberal arts colleges seek to appoint faculty stars. We excluded colleges where religious identity strongly shapes the composition of the faculty and instructed institutions with business, engineering, or graduate programs to confine their responses to faculty teaching undergraduate arts and sciences students.2

The survey found that an overwhelming majority of small national liberal arts colleges pay differential faculty salaries, especially to computer scientists and economists but also to faculty of color and star faculty. They also do so to fend off "raids" of sitting faculty. The findings held when the colleges were compared by prestige ranking, tuition level, endowment size (total and per capita), and average faculty salary. (See tables 1 and 2.)

Roughly three-quarters of the national liberal arts colleges pay academic discipline-based differentials. Most are highly ranked, have large endowments, and pay high salaries. A majority of the equity-principle colleges are less well endowed and not ranked in the top twenty. Perhaps equity pay is a cost-saving strategy for these more modestly endowed institutions. A few of them get around the difficulty of attracting computer scientists and economists by giving them summer research stipends-effectively a salary supplement.

Types of Differentials

The prevalence of differential salaries for certain academic fields was unmistakable - and far more common than pay premiums based on ethnicity, gender, or star power. That field differentials are confined primarily to computer science and economics suggests that small liberal arts colleges are relatively content with the supply and quality of faculty in such lower-paying fields as English, foreign languages, and philosophy.

The suggestion that higher salaries might be offered to attract new faculty of color provoked somewhat contradictory reactions. Some colleges responded that paying more based simply on ethnicity would raise legal issues. Others said that idealism clashes with pragmatism in this area. To do the so-called right thing and appoint more faculty of color, it is often necessary, for reasons of supply and demand, to offer the relatively few candidates of color higher- than-usual salaries. The situation can mirror the Economics 101 definition of inflation: too much money chasing too few goods.

Differential pay for new faculty of color happens, but not frequently. Most of the top-ten colleges do not pay salary premiums to new faculty of color, whereas institutions below the top ten are more inclined to do so. These findings beg several questions: (a) are the highest-rated colleges better able to assemble ethnically diverse faculties through standard appointment procedures; (b) did respondents sometimes lump salary premiums for ethnicity in the field category; and (c) has the legal climate around affirmative action chilled ethnicity-based differentials or sent the practice underground? Each of these questions might be addressed by another study.

Liberal arts colleges are surprisingly willing to lure stars. That more than half of the colleges engage in competition for faculty stars reveals that, like their research university counterparts, small liberal arts colleges are aware of the prestige of making such appointments. Not surprisingly, none of the equity- principle colleges seek to appoint stars.

The prevalence of defensive salary actions to retain faculty is another acknowledgment of the cost of highquality faculty. Paying differentials defensively, that is, to fend off raids on faculty by other colleges, is more common than appointing stars. Barely one- fifth of the colleges in our survey are equity-principle institutions, and four-fifths of them match outside offers, meaning that they may practice equity with new appointees but will pay market prices to keep valuable professors. Most institutions reported that gender does not influence the pay given to new faculty. That is so because liberal arts colleges routinely have an equal or nearly equal percentage of men and women on their faculty.

A handful of colleges justify equity pay on a community-wide honor principle; others provide subsidized housing to most professors. Campus housing is a valuable nonsalary benefit that may equalize a higher salary offer from a competitor. It also places faculty in a close, no-secrets community, where differential pay might damage morale.

Unlike the findings of researchers who investigate salary trends at universities, our survey uncovered no need for salary differentials in the sciences. Perhaps small liberal arts colleges provide sufficient levels of laboratory equipment and research support, obviating the need to add salary differentials to appointment packages. Or perhaps science faculty appointed at small liberal arts colleges are less likely, compared to their colleagues in computer science and economics, to seek positions at research universities. Our findings suggest that science faculty at small liberal arts colleges have greater interest in teaching undergraduates and less inclination to seek research grants than their counterparts at research universities.

The Implications

In competing with peer colleges, equity-pay institutions have at least two alternatives: they can overpay in low-salary fields such as English to remain competitive in high-paying fields like economics, or they can accept that appointees in high-salary fields will be underpaid relative to the market and hope that faculty quality will not suffer as a result. Our findings suggest that the first alternative is not happening in practice because it is not feasible. So by implication equity schools may find themselves with lower-quality computer science and economics departments.

Equity-pay policies can work if faculty members believe that the principle trumps the value of the potential additional salary. Yet if the majority of colleges offer premium compensation for faculty candidates with particular attributes (in terms of their fields, research success, or ethnic origin), then colleges practicing equity pay are at a competitive disadvantage. Although equity-pay colleges may feel able to attract and appoint outstanding faculty, their salary policies can detract from efforts to diversify their faculties, improve their scholarly profiles, and build programs in computer science and economics.

One could look at these findings and conclude that, in the main, most small liberal arts colleges act similarly to research universities when appointing new faculty. Nevertheless, a not insubstantial minority, nearly a quarter of the national liberal arts colleges, do not pay salary differentials and thus are taking the leap of faith that a tenuous link exists between faculty quality and faculty salary.



1. The colleges listed in this note received the survey instrument; those whose names are set in italic type responded, as did two colleges that could not be identified. Agnes Scott, Albion. Allegheny, Amherst, Augustana (Ill.), Austin, Bard, Barnard, Bates, Beloit, Birmingham Southern, Bowdoin, Bryn Mawr, Bucknell, Carleton, Centre, Claremont McKenna, Coe, Colby, Colgate, Colorado, Connecticut, Cornell (Iowa), Davidson, Denison, DePauw, Dickinson, Drew, Earlham, Franklin and Marshall, Furman, Gettysburg, Goucher, Grinnell, Guilford, Gustavus Adolphus, Hamilton, Hampshire, Hanover, Haverford, Hendrix, Hillsdale, Hobart and William Smith, Hollins, Hope, Holy Cross, Illinois Wesleyan Juniata, Kalamazoo, Kenyon, Knox, Lafayette, Lake Forest, Lawrence, Lewis and Clark, Macalester, McDaniel, Middlebury, Mills, Millsaps, Mount Holyoke, Muhlenberg, Oberlin, Occidental, Oglethorpe, Ohio Wesleyan, Pitzer, Pomona, Puget Sound, Redlands, Reed, Rhodes, St. Lawrence, St. Olaf, Sarah Lawrence, Scripps, Sewanee, Skidmore, Smith, Southwestern, Spelman, Swarthmore, Sweet Briar, Transylvania, Trinity (Conn.), Union, Ursinus, Vassar, Wabash, Washington, Washington and Jefferson, Washington and Lee, Wellesley, Wesleyan, Wheaton (Mass.), Whitman, Whittier, Willamette, Wittenberg, Williams, Wofford, Wooster.

2. We included some religiously affiliated institutions but eliminated a small number that reportedly pay close attention to the religious affiliation of prospective faculty when making new appointments.


Small Colleges and New Faculty Pay

Paul Marthers is dean of admissions at Reed College and a doctoral candidate in higher education management at the University of Pennsylvania. Jeff Parker is George Hay Professor of Economics at Reed College.

Copyright American Association of University Professors Jul/Aug 2008

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