TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Wednesday, January 11, 2017

At The Universities Of Michigan And Virginia, Faculty Salaries Are Tied To Research Productivity, Not The Number Of Students Taught—And That's A Good Thing

Inside Higher Ed, Study Explores How Universities Deploy Faculty and Link Professor Pay:

A common criticism of the faculty reward system is that it tends to value research over teaching. A just-released working paper from the National Bureau of Economic Research offers new evidence in support of that contention, suggesting that the number of students a professor teaches has relatively little to do with their compensation [Paul N. Courant (Michigan) & Sarah Turner (Virginia), Faculty Deployment in Research Universities].

Disciplines with bigger class sizes do tend to offer better pay. But the highest-paid faculty members within departments tend to teach fewer undergraduates and fewer undergraduate courses than their lower-paid colleagues. The paper also suggests that changes in faculty pay over time have more to do with discipline than number of students taught, and that universities adjust to various cost pressures by increasing class size and other means.

Yet the paper asserts that universities behave “rationally” in making such decisions, and suggests that prizing research output over teaching doesn’t necessarily affect educational quality. Over all, the paper seems to dispute assertions that higher education spending -- at least on instruction -- is wasteful or inefficient.

Figure 5A

Figure 5B

Paul N. Courant (Michigan) & Sarah Turner (Virginia), Faculty Deployment in Research Universities:

Deploying faculty efficiently (or more efficiently) should surely part of any optimizing strategy on the part of a college or university. Basic microeconomics about the “theory of the firm” provide some insight as to how a university would achieve productive efficiency given differences in the price (salary rate) of faculty across disciplines and variation in compensation within departments. The prices of faculty activities demonstrate substantial variation across institutions, disciplines, within disciplines and over time. These observations about variation in input prices raise fundamental questions about whether and, if so, how differences in the cost of faculty affect resource allocation at research universities. We examine how teaching allocations and costs vary both between departments and within departments. This allocation is complicated because teaching and research are jointly produced by universities, while they are also substitutes at some margin in faculty time allocation.

We examine the link between departmental compensation (payroll) and student course offerings at two major public research universities. Strikingly, we find that faculty compensation per student taught varies much less across departments than salary levels. In turn, changes over time in relative salaries by discipline are much larger than changes in faculty compensation per student as universities adjust to these cost pressures by increasing class size and increasing teaching inputs from other sources. We also find that within departments the highest-paid faculty teach fewer undergraduates and fewer undergraduate courses than their lower-paid colleagues. This finding confirms our hypothesis that salaries are determined principally by research output and associated reputation, and that universities respond rationally to relative prices in deploying faculty.

Figure 6

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Comments

I had a freshman psych course with 1,300 students. The professor later got in trouble for dating students, and worse. But under a "productivity" metric he'd be a star.

Posted by: mike livingston | Jan 12, 2017 4:18:34 AM