March 4, 2005

The Story of an Elite Wage Gap

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Cornell professors are paid significantly less than their colleagues, despite the increasingly competitive salaries due to the tug-of-war for highly qualified professors at top U.S. universities.

A Wall Street Journal article published Feb. 22 reported the increasingly heated competition among schools such as Harvard University and Stanford University to give “star economists” professorial positions in their economics departments, but according to economists here at Cornell, this phenomenon is nothing new, and Cornell seems less affected by it than most fellow institutions.

According to the Journal article, the Bureau of Labor Statistics reported that economics teachers averaged nearly $140,000 a year, making it one of the highest-paid professions in 2003 that they track. At elite colleges, the article reported, some senior faculty of economics departments earn anywhere from $150,000 to $250,000 for one academic year.

While demand for star economists continues to grow, explained Prof. Robert Frank, Henrietta Johnson Louis Professor of Management and Economics at the Johnson Graduate School of Management, its supply remains limited, and as a result, offers for higher salaries rise across the board.

However, he pointed out, this was not a new occurrence. “[These] salary levels have been affected for quite some time,” Frank said.

“The [Journal] article makes it seem that economics professors are the only [ones whom] this is affecting. That’s not true,” said Prof. Ronald Ehrenberg, Irving M. Ives Professor of ILR and Economics and director of the Cornell Higher Education Research Institution. “In fact, in the sciences, the competition is much more extensive. It doesn’t show up in the form of salaries; it shows up in the form of the magnitude of start-up packages and research support.”

Frank agreed, saying that different situations also force salary offers to rise. Lawyers, for example, who currently teach in law schools, have the option of earning higher salaries in the private sector.

Prof. Uri Possen, chair of economics, pointed out that economics departments in competitor schools were rapidly expanding, partially to make way for the increasing number of students who major in economics as undergraduates. He added that the department of economics at Cornell was the largest department in the Arts and Sciences college.

At Cornell, however, instances of these offers of competitive salaries are less prominent. According to the Financial Plan report released last May by Cornell’s Division of Planning and Budget office, the nine-month salary for faculty members of fellow institutions such as Harvard, Princeton, and University of Pennsylvania, average well above $115,000 per academic year. At Cornell, the faculty at our endowed colleges garner a mere $107,794, and at contract colleges only $89,828 over the academic year.

“The University was legitimately concerned that faculty salaries were too low,” Ehrenberg said. He said that Cornell had created programs in both the endowed and contract colleges to be phased over several years in hopes of improving the situation.

“It’s a balancing act that the administration is always thinking about. They would like to keep tuition as low as possible for students; they would like to have salaries as high as possible to attract and retain top people; [but] they can’t do both simultaneously,” Ehrenberg added. “The University is really doing a wonderful job of worrying about these [salary competition] problems and maintaining and attracting high quality faculty … and attracting top quality students and making sure we are accessible to students.”

“It does give certain visibility to hire a star … who may spend most of his time away from the university … but we’re looking for a [contributor] who will teach courses, and interact with students,” Possen argued. “It’s about who we feel will help the department the most … I would prefer to hire someone who’s younger, someone who [will be] a contributing member of the Cornell community.”

At the same time, however, Ehrenberg argued that it was important to hire “people who [will] bring the University fame and reputation.” Such faculty members, he added, would help bring outside resources to the University, as well as improve research, funding, and eventually help lead to major scientific discoveries. Ehrenberg, who wrote Tuition Rising: Why College Costs So Much, also pointed out student concerns with rising tuition costs, “but the wonderful thing about Cornell is that they are firmly committed to [meeting students’] need-based financial aid.” He added that if tuition rose, assuming the students’ financial status remained the same, grants would be rewarded to replace the gap.