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Academic salary compression across disciplines and over time

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  • McDonald, James B.
  • Sorensen, Jeff

Abstract

Academic salary compression occurs when professors of lower professorial rank earn salaries close to—or even higher than—salaries of more senior faculty. We present a modified maximum likelihood method for fitting flexible Dagum distributions to limited data that provide only the minimum, maximum, mean, and sample size, and we use this method to study salary compression across 15 academic disciplines over the past 22 years. After examining mean-based compression ratios, we estimate salary percentiles and explore stochastic dominance relationships between estimated salary distributions for different disciplines and professorial ranks. Although salary compression is not seen in most academic disciplines, it is prevalent in business-related disciplines, is increasing in these disciplines, and exhibits examples of stochastic dominance. In addition, salary compression increases as competing nonacademic salaries increase. Finally, we evaluate our methodology, showing that it would likely be useful in a variety of settings.

Suggested Citation

  • McDonald, James B. & Sorensen, Jeff, 2017. "Academic salary compression across disciplines and over time," Economics of Education Review, Elsevier, vol. 59(C), pages 87-104.
    • Handle: RePEc:eee:ecoedu:v:59:y:2017:i:c:p:87-104
    DOI: 10.1016/j.econedurev.2017.06.003
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    References listed on IDEAS

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    1. Burgan, Mary, 2005. "Superstars and Rookies of the Year: Faculty Hiring Practices in the Postmodern Age," University of California at Berkeley, Center for Studies in Higher Education qt0tp9x6cf, Center for Studies in Higher Education, UC Berkeley.
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    3. James B. McDonald, 2008. "Some Generalized Functions for the Size Distribution of Income," Economic Studies in Inequality, Social Exclusion, and Well-Being, in: Duangkamon Chotikapanich (ed.), Modeling Income Distributions and Lorenz Curves, chapter 3, pages 37-55, Springer.
    4. James B. Mcdonald & Jeff Sorensen & Patrick A. Turley, 2013. "Skewness And Kurtosis Properties Of Income Distribution Models," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 59(2), pages 360-374, June.
    5. Bernt Bratsberg & James F. Ragan Jr. & John T. Warren, 2003. "Negative Returns to Seniority: New Evidence in Academic Markets," ILR Review, Cornell University, ILR School, vol. 56(2), pages 306-323, January.
    6. Ransom, Michael R, 1993. "Seniority and Monopsony in the Academic Labor Market," American Economic Review, American Economic Association, vol. 83(1), pages 221-233, March.
    7. McDonald, James B. & Xu, Yexiao J., 1995. "A generalization of the beta distribution with applications," Journal of Econometrics, Elsevier, vol. 69(2), pages 427-428, October.
    8. Singh, S K & Maddala, G S, 1976. "A Function for Size Distribution of Incomes," Econometrica, Econometric Society, vol. 44(5), pages 963-970, September.
    9. Lillydahl, Jane H. & Singell, Larry D., 1992. "Compression in faculty salaries: An empirical evaluation of merit and market based adjustments," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 21(3), pages 229-243.
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    Cited by:

    1. Hamermesh, Daniel S., 2018. "Why are professors “Poorly paid”?," Economics of Education Review, Elsevier, vol. 66(C), pages 137-141.

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    More about this item

    Keywords

    Salary compression; Faculty salaries; Order statistics; Stochastic dominance; Dagum distribution;
    All these keywords.

    JEL classification:

    • C46 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Specific Distributions
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality
    • I26 - Health, Education, and Welfare - - Education - - - Returns to Education
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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