Written by: Terry Link
Primary Source: Possibilitator
Part I: Options for Addressing Increasing Inequality Through Wage Policies
Since the Occupy Movement shined the light on our society’s increasing income inequality, the reports of the growing concentration of wealth are now common. As a result we see renewed fervor to increase the minimum wage and slightly more discussion of a ‘living wage’. There has been somewhat more media attention paid to corporate tax ”avoiders” and particularly to the astronomical rise in CEO salaries, perks, and golden parachutes.Within the higher education sector, less attention has been paid to inequality generally and to the wage differentials between those at the top and those at the bottom on campuses. Harvard students received some notoriety a few years back in their efforts to increase wages for their janitorial staff. On the other end of the scale there is a popular map of the United States that shows that the highest paid public employee in 40 of the 50 states is a university football or basketball coach.
We can be pretty confident in each of those 40 cases that the argument made to support those high salaries was that the market demands it. I’ve heard those words of supposed justification from more than one university administrator in recent years. Perhaps they might use the same argument in supporting less than living wages for low-skilled positions. When contracts come up for those lucky enough to have a union to negotiate for fair compensation, the typical mantra is, “We can’t afford to pay higher wages.” Do you ever hear that argument used when hiring a new football or basketball coach or university administrator or endowed faculty position? Those who believe in the hegemony of the market in all things (note the increasing percentage of higher education presidents from the corporate sector over the last couple of decades) have neglected any balancing notion like, for instance, the ideals of the ‘the public good’. The tendency to ignore all costs, including increasing student debt, when offering the high paid salaries is demonstrated by the silence of the trustees who condone them.
This short paper offers a look at other strategies for setting compensation that are simultaneously fair, ensure living wages for all, and yet allow for some differentiation based upon special skills, abilities and responsibilities. If the reader is looking for a silver bullet you will not find one here. Instead, a range of possibilities is offered as a launching point for serious consideration of what compensation parameters might be used within public higher education and, hopefully, other sectors.
Maximum wage – The maximum wage idea has been around for generations. Often it is tied to some specific position, e.g., no one should make more than, say, the President of the United States (currently $400,000). This assumes that POTUS is the most important and difficult job in our country, so what job would be worthy of more compensation? One could make a case that since public universities are typically chartered by the state, the maximum salary should be determined by the salary paid to the governor of that state. The current highest governor’s salary in the US is $187,256 (PA). Of course, we could tie salaries to some other benchmark, but again, since we’re talking public institutions, we assume that there should be some constraint on the upper end of salaries. Girding that perspective is an understanding that there are other non-monetary benefits to working on behalf of the public good – e.g., status, good will, prestige — that compensate for receiving less than the ‘market’ might urge in the private sector for similar work and abilities. We don’t expect people who go into the public sector to grow wealthy from it.
Wage Ratios – Another set of approaches for taming the accelerating growth of public university high-end salaries revolves around wage ratios. An early example of a wage ratio was the decision by ice cream entrepreneurs Ben and Jerry to have a maximum 8:1 ratio at their company. This meant that the highest paid (the owners in this case) could not make more than eight times the lowest paid full-time employee. If they wanted to make more, they had to bring up the bottom wages at the same rate. I have seen ratios as low as 3:1 at small firms/organizations, and we know of CEO ratios that have gone as high as 1,138:1 (Comcast). Overall the ratios have been growing in our society as reflected in the growing income/wealth of the 1% and decline or stagnation in the wages/income for those in middle and lower socioeconomic classes.
There are many ways to make the wage ratio more equitable. Here are a couple of ways to think about it. One approach would be to set a floor at the current lowest wage of the organization. For example, at Michigan State University the lowest paid full-time employee is a beginning cafeteria worker who earns about $23,000 annually. Using an arbitrary 15:1 ratio that I offered during my recent campaign for MSU Trustee would mean the highest paid employee could make a maximum of $345,000 a year. There are more than a handful at the university above that threshold currently. Another possibility would be to tie it to a ‘living wage’. A living wage is an approximate income needed to meet a family’s basic needs and provide a sense of minimal economic security. If the institution wanted to pay someone more than that they would have to bring up the floor to maintain a 15:1 ratio. But who is to say it should be 15:1? How about 10:1 (under the MSU current environment this would be a $230,000 salary), or 20:1, which would leave the highest paid MSU employee scraping by at $460,000?
A slightly different perspective would be to apply the ratio to some outside standard. An example of this might be to tie the ratio to the U.S. median household income. This is the level of income where 50% of the households in the country earn more and 50% earn less. Remember, this is a household income, not simply an individual income. The current median household income is approximately $50,000 (where it has hovered for several years). So applying our original 15:1 scenario would cap annual salary at $750,000. One can of course choose another benchmark, say, US poverty level ($11,670 for an individual, $23,850 for a family of four). For a little more on wage ratios see this piece I wrote in December 2012.
Other possibilities – Yet another approach we could consider is one like this. The typical worker has an approximate 50-year work-life. Is it fair for someone to make more in a year than another makes in a lifetime? If not, then a ratio of less than 50:1 would be called for. So if we based this on the federal poverty level of $11,670, the maximum for an individual would be less than $583,500 a year. If we applied this strategy to the household median income, the maximum would be less than $2,500,000 a year. We can debate the ratio to use as well as what we might benchmark it to – lowest paid employee, federal poverty level, median household income, etc. The far more important issue is a serious discussion of reasonable limits at the top and an appropriate floor at the bottom if we’re going to stem growing inequality [this doesn’t even address sources of additional income – e.g. interest from investments, inheritance, etc. – available most frequently to those already well off].
Robely George, author of a thoughtful analysis of these issues in his Socioeconomic Democracy – An Advanced Socioeconomic System, offers an interesting take on how to draw the lines for the bottom and the top – democratically. George, who actually focuses on Maximum Allowable Wealth (MAW) as opposed to maximum annual income and Universal Guaranteed Income (UGI) instead of minimum wage, suggests that voters should decide where to regularly set the limits using a version of instant voter runoff. George’s analysis offers much food for thought and a guide to the pertinent research, especially for any who have not reflected much on issues of basic income (equivalent to George’s UGI), wealth maximization, and income inequality.
Other forms of compensation – One concern with limiting this discussion simply to income in monetary units is to ignore other forms of compensation and their value to the individual and/or their cost to society. When we think about compensation in higher education beyond basic salary, there are benefits like retirement and health care contributions, travel allowances, extra research stipends, sometimes vehicle use, and occasionally even housing. While these all have monetary value that can be measured, there are additional important social benefits of working at a university that aren’t taken into account, including access to athletic facilities, performing arts and lectures, extensive libraries, and frequently subsidized or free education for oneself or family members. But perhaps the greatest compensation is working in an environment where learning is celebrated and encouraged.
In Maslow’s pyramid of self-actualization, once we have covered our biological/physiological and physical security needs, we are freed up to pursue higher levels of self-actualization – including belongingness, self-esteem, and personal development.
Those who are privileged to seek ”The pursuit of truth in the company of friends,” as the motto from Collwell College at the University of California, Santa Cruz implores, should appreciate the privilege, especially given the struggles of most of the human family to secure even those most basic human needs.
Noted scholar and critic Henry Giroux and others have noted recent trends “of mission drift, one marked by a fundamental shift of the university away from its role as a vital democratic public sphere toward an institutional willingness to subordinate educational values to market values” (Henry A. Giroux, Neoliberalism’s War on Higher Education , 2014, p.121). The interlocking efforts to simultaneously defund public education while nurturing private profit-seeking education is symbolic of the slow poisoning of our social fabric neoliberalism’s individualistic greed incentives have unleashed. Higher education must confront this hegemonic force openly, thoroughly, and civilly. As Gandhi warned us long ago, before our human population was less than a third of its current size, “There is enough for everyone’s need, but not for everyone’s greed.”
Controlling costs and thereby reducing student debt is an obvious aim of the possible approaches suggested above. Providing the opportunity for each individual to reach their potential is crucial for a fully developed society – the ultimate public good. As British epidemiologists Pickett and Wilkinson have shown in their well-researched The Spirit Level: Why Equality is Better for Everyone, inequality is directly tied to increased social harms. On a single finite planet with one human family, we can have only one common future. Redesigning a system based on greed into one of cooperation and the public good should be at the heart of higher education. And we all know that the best leaders practice what they preach.