‘We Are Not Taxing the Very Wealthy Enough’: Runaway Inequality About to Get Worse
The United States' astronomical levels of economic inequality are poised to become further entrenched in the coming years.
Top college and university executives regularly rub shoulders with their fellow top execs in Corporate America. What’s rubbed off on them in the process: a taste for excessive compensation.
Top executive pay at the 25 public universities with the highest-paid presidents is averaging near seven figures, an 2014 Institute for Policy Studies report details, and at these top 25 both student debt and numbers of part-time faculty have been increasing at far above the national average.
Students and faculty have begun challenging this distinctly unequal state of affairs. Last year, students, faculty, and staff at St. Mary’s College, a prestigious public liberal arts school in southern Maryland, campaigned to limit the pay for the campus president to just 10 times the college’s lowest worker pay. This year, the pay-ratio action has shifted to Minnesota’s Macalester College. The initial results have been promising, as a leading local student activist explains here for Inequality.Org.
By Nick Michalesko
This April, on the lawn in front of Macalester College’s administration building in St. Paul, Minnesota, about 100 students gathered in a student assembly to confront issues around income inequality at our college.
The assembly — the first in a decade — would go on to pass by a landslide margin a resolution that asks Macalester to raise the wages of subcontracted workers to over $14 per hour and cap the college’s highest compensated employee’s salary at 18 times the pay of the lowest-paid worker on campus by the year 2020.
The next step: A standing Macalester student government committee will work with administrators and trustees to follow through on these objectives.
Over 20 percent of Macalester’s 2,073 students signed the petitions that authorized this spring’s student assembly, in a campaign led by Macalester Students Against Income Inequality, a coalition that includes groups ranging from the Minnesota Public Interest Research Group to United Students Against Sweatshops.
Uniting all the students involved: a deep concern about the increasing “corporatization of higher education.” Macalester, widely considered one of the most progressive colleges in America, has not been immune to this trend.
The school, for instance, subcontracts a number of positions to outside companies. On paper, Macalester has a $14.17 an hour minimum wage. But subcontractors such as Bon Appetit for dining services and Follett for the campus bookstore pay as little as $9 an hour.
Macalester pay policies have resembled the corporate model in other ways as well, as we can see from the IRS form 990s that Macalester publicly releases and the college’s own institutional research.
Over the past nine years, pay for the most senior and highest-paid Macalester staff members — a group of between six and eight that includes the president, vice presidents and deans — has increased 29 percent adjusted for inflation, an average increase from $250,682 to $324,206.[pullquote]The Macalester president has enjoyed a 46 percent pay increase.[/pullquote]
The top salary increase within this group belongs to college president Brian Rosenberg. He has enjoyed a 46 percent real pay increase over the nine-year period, with his total compensation rising to $743,968 in fiscal 2014, including benefits and deferred pay.
Even excluding the president, the average salaries of senior staff have still increased by 19 percent. These extraordinary increases have occurred against the backdrop of America’s greatest economic downturn since the Great Depression.
Other Macalester employees have not enjoyed pay hikes at anywhere near that 19 percent level. Full-time faculty pay increased a meager 4 percent over the same period, from $110,558 to $114,871.
The astronomical increases in pay for college presidents nationwide, several peer-reviewed economic studies show, have not reflected any sort of increased productivity. In Determinants of Presidential Pay at National Liberal Arts Colleges, researchers Robin Bartlett and Olga Sorokina conclude that “the pay-performance link is weak” in higher education’s executive suites.
So what’s driving up top collegiate executive pay so starkly? Many economists point to the practice of benchmarking. Boards of Trustees, the bodies that determine college top executive compensation, usually benchmark their own president’s pay at the 50th, 75th, or even 90th percentile of their peer groups. Their rationale: They do not want to “underpay” their presidents. But if all schools benchmark at the 50th percentile or above, presidential pay overall will ratchet up rapidly from year-to-year.
Macalester’s peer group includes 40 schools that track most of the U.S. News & World Report top 40 national liberal arts schools. Macalester ranks 19th in alumni giving among this group, 18th in endowment value, 16th in freshman-to-sophomore retention rates, 27th in six-year graduation rates, 31st in full-time faculty salaries, and 24th overall, according to the most recent U.S. News & World Report survey.
Macalester’s president had the second highest compensation out of this group of 40, a stat that suggests that Macalester’s compensation structure does not quite reflect college performance.[pullquote]We can save higher education from a demoralizing and unsustainable income inequality epidemic.[/pullquote]
Our solution to abate the growth of this income inequality: a maximum pay-ratio between the highest- and lowest-paid workers so that when the top gets a raise, the bottom must as well.
The current ratio between the highest- and lowest-paid Macalester workers is running about 40:1 ($358/hour: $9/hour). Raising the wage for subcontractors to Macalester’s supposed minimum of $14.17/hour and paying the president at the median of our peers ($538,206) would result in the 18:1 ratio we chose.
Student government will begin meeting with the administration and Board of Trustees next school year to move forward on our ratio proposal, hopefully by the year 2020.
Institutions of higher education should listen to the voices of students. Our tuition dollars make us primary stakeholders in our colleges, and we increasingly support closing the income gap of America. A recent Gallup poll found, for example, that 78 percent of Americans ages 18-25 agree with an increase in the minimum wage.
If enough students speak out for proposals similar to ours at Macalester, we can save higher education from our demoralizing and unsustainable income inequality epidemic — and we can come one step closer to ending these enormous inequalities everywhere else.