Where has all the money gone? The decline in faculty salaries at American colleges and universities over the past 40 years

Once upon a time, I began to look at the financing of law school education in America, and was amazed by what I found. Recently, I’ve been researching the economic structure of American higher education in general. My amazement is growing . . .

Everyone is aware that the cost of going to college has skyrocketed since [fill in any date going back to the middle of the last century]. Why has this happened? This post is about one possible explanation, that turns out not to have any validity at all: increases in faculty salaries. In fact, over the past 40+ years, average salaries for college and university faculty have dropped dramatically.

Salaries have increased, sometimes substantially, for a tiny favored slice of academia, made up of tenured professors at elite institutions, some professional school faculty (business, law, medicine), and most especially faculty who have moved into the higher echelons of university administration. Such examples merely emphasize the extent to which the economics of the New Gilded Age have infiltrated the academic world: the one percent are doing fabulously well, and the ten percenters are doing fine, while the wretched refuse of our teeming shores will adjunct for food.

Numbers:

Average salary for all full-time faculty in degree-granting post-secondary institutions (this category includes instructors and lecturers, as well as all ranks of professors) in constant 2012-13 dollars:

1970: $74,019

2012: $77,301

These figures, of course, give a very incomplete picture of the economic circumstances of the actual teaching faculty in America’s institutions of higher education.

One of the more astonishing statistics regarding the economics of our colleges and universities is that, despite the fantastic increase in the cost of attending them, there are now on a per-student basis far fewer full-time faculty employed by these institutions than was the case 40 years ago. Specifically, in 1970 nearly 80% of all faculty were full-time; by 2011, more part-time than full-time faculty were employed by American institutions of higher learning (note that the former category does not include graduate students who teach).

While comprehensive salary figures for part-time faculty aren’t available, it’s clear that their salaries are on average vastly lower than those of full-time faculty (and of course when it comes to who does the bulk of the actual teaching at many schools, the designations “full-time” and “part-time” have a distinctly Orwellian flavor). If we assume that “pat-time” faculty earn one-third as much as their full-time counterparts — and this seems improbably optimistic, given that the average compensation for part-time faculty for teaching a three-credit course is around $2,700 — that would mean that in 1970 average salaries for college and university faculty were nearly 30% higher, in real dollars, than they are today.

This an astonishing figure, given that, in the last 40 years, tuition at private colleges has more than tripled, while resident tuition at public institutions has nearly quadrupled.

So where has all that money gone? Here are a couple of plausible-sounding answers, often cited by university administrators, which turn out to have little or nothing to do with soaring college costs:

(1) Faculty benefits. While it’s true that the amount universities spent on benefits for full-time faculty members nearly doubled between 1977 and 2011, going from $11,832 to $22,754 (2012$), the vast majority of this per capita cost increase was ameliorated by the replacement of full-time faculty with “part-time” faculty, who of course are almost never eligible for any faculty benefits. (BTW, 70% of the increase in the cost of benefits for full-time faculty was accounted for by employer contributions to the cost of medical insurance plans, meaning that most of this nominal increase in total compensation for full-time faculty went straight into the pockets of third parties, i.e., insurance companies and health care providers).

(2) Back-filling cuts in state support for higher education. Total state support for higher ed in America increased from approximately $42 billion (2014$) to $80 billion between 1970 and 2014, while total enrollment in public institutions of higher education increased from 6.43 million to 14.88 million. This means state support decreased from about $6,550 to $5,375 per student. This is not a trivial decrease, but on the other hand, federal Pell Grants, which didn’t exist in 1970, totaled $33.7 billion in 2012-13. Roughly 70% of this amount went to students enrolled in public schools, meaning that total tax subsidies to public higher education are actually higher now per student than they were in 1970.

In addition, another consequence of the New Gilded Age is that college endowments have exploded: while 18 institutions had endowments of at least one billion dollars (in 2014$) in 1987, 91 had reached that level last last year, while hundreds of others had endowments in the hundreds of millions. (A particularly extreme example is provided by my alma mater. When I graduated in 1982, the University of Michigan’s total endowment was $115 million. As of last June, it was $9.7 billion, which represents a 34-fold increase in constant dollars. Over this same time, undergraduate resident tuition has more than tripled in real terms, from less than $5,000 (2014$) to nearly $15,000.)

It’s clear that, over the past few decades, American higher education has turned into a veritable money-printing machine. What’s also clear is that, with few exceptions, this massive increase in revenue isn’t going to the people who do the teaching in these institutions.