January 30, 2004
Reviewing Our Salary Policy
(applies only to original bargaining unit faculty)
In 1983 a joint QUFA/administration task force drafted the first consistent faculty salary policy to be used at Queen’s. While it has been modified in detail several times since, its essential features remain the same. It involves a fairly low starting salary and a series of annual career development increments (also called PTR, or “progress-through-the-ranks” increments) which can vary according to merit assessments, and which gradually increase that salary so that for most it has nearly doubled by retirement. The 1983 policy provided that salary does not increase in a perfectly straight line: in the early stages, faculty receive a junior increment (currently $458) as well as their regular career development increment; and above $100,742, the regular career development increment is reduced by an abatement, which increases in steps from $870 to $1328 as salary rises. Not only the passage of 21 years, but also significant changes such as the strong increase in starting salaries in certain market-driven disciplines, mean that it is time to re-examine the current policy to see if it is still appropriate for us. This bulletin is intended to provide some information and reflections that will allow QUFA members to clarify their own views.
1) Dollars Paid Later Are Worth Less
In Canada, universities are almost unique in having such a steep salary curve from beginning to end of a typical career. While experience does add something to a professor’s worth, the higher salaries paid in the later years are in large part deferred compensation for the work we did at low pay at the beginning of our working lives. This system has a negative impact on the financial situation of the individual member: when he is younger and needs money for a down payment and a mortgage, and for other expenses involved in starting a family, money is tight, while later on when the children may have finished university, salaries are considerably higher. From a simple accounting point of view, a dollar now is worth much more than a dollar ten years from now, as it can be invested at interest so that it will be worth a good deal more in ten years (or, for a junior faculty member, it can be used to reduce a mortgage now and so save more than its value in monthly payments). Figure 1 above illustrates two salary curves: the first is for Professor A, hired under the current policy at $60,000, who receives a median merit score every year (10) and retires after 30 years. Her salary rises by 95% over her career, to $116,917 (in 2004 dollars) with an average of $92,962 over these 30 years. The second is the hypothetical curve for Professor B, who is hired at $92,962 and receives the same salary for his whole career. The total career earnings of the two professors are exactly the same ($2,788,872, again in 2004 dollars), but Professor B ends up much better off: if he saves the after-tax difference between his salary and Professor A’s for the first part of his career, when it is higher, and invests it at 4% per year (net of inflation and tax), he will accumulate a fund of $202,106 after 14 years’ service. If he then draws from this fund to top up his $92,962 salary to Professor A’s after-tax level for the next 16 years, the fund will still have grown to $205,470 by the time he retires. He will have allowed himself the same current income every year as Professor A, and will still be ahead by $205,000 (roughly 10% of after-tax career earnings). This illustrates the substantial advantage of receiving a higher salary earlier rather than later in your career. (The Queen’s pension plan works in the same way: a high salary early in your career is more advantageous than later on, because it means larger contributions in the years when they will have longer to grow in the fund, thus producing a higher pension.) Any arguments in favour of the current steep salary curve need to be weighed against these disadvantages.
2) Small Differences In Merit Awards Have Major Consequences For Lifetime Earnings
Because merit increases are added permanently to a professor’s base salary, the present policy rewards those who receive above-average merit not just in the current year, but for the rest of their careers, and it is especially generous to those who are fortunate enough to receive high merit scores early in their careers. Figure 2 compares the salary curve of Professor A, the professor in Figure 1 who receives a merit score of 10 every year, with Professor C, who starts at the same salary but publishes early and receives a score of 15 at the end of his first and second years. After that, he does barely well enough to avoid a score below 10; Professor A, on the other hand, is a solid performer who teaches well and continues to publish, though she never quite achieves a score above 10. However, Professor C’s merit scores in his first two years mean that his career earnings are $45,129 greater than Professor A’s. Moreover, if he invests the difference each year at 4% interest (net of inflation) in an RRSP, he will have accumulated $92,502 (in today’s dollars) by the time he retires.
3) Rising Starting Salaries Are Flattening The Salary Curve In Some Disciplines
The above figures illustrate careers that are now typical for newly hired faculty only in the non-market-driven disciplines (humanities, social sciences, education, nursing, rehab, natural sciences). In the others, competition for young faculty has driven up starting salaries significantly. In a recent year, the highest salary paid to a new Assistant Professor or Lecturer was 85% above the lowest – evidence of a widening gap between disciplines; the average salary for Assistant Professors under age 30 in 2002-03 ($85,734) reflects this market pressure in certain fields. These differences not only raise questions of equity: they are flattening salary curves in the market-driven disciplines, so that new hires may be paid more than those with 5 to 10 years’ experience. This is contrary to the rationale of the current policy, which rewards seniority. In conformity with this logic, the more senior members in these fields may well request anomaly adjustments; on the other hand, the fact that the logic of the policy is in fact being subverted here is another reason to subject that rationale itself to scrutiny. Is a steep salary curve really necessary or desirable, if it does not in fact exist in some fields?
Also, because of the abatements on increases in salaries above $100,742, the recent hires in these fields will experience in the future much gentler career salary curves than their colleagues in the non-market disciplines. Figure 3 compares the same Professor A to Professor D, who is hired at $90,000 in a market-sensitive discipline and similarly receives merit scores of 10 each year. Professor D’s final salary is $128,842, or 43% more than her starting salary (while Professor A’s final salary is 95% more than her initial salary). Here again we see that the current policy is being significantly altered by market conditions in the better-paid disciplines.
The next bulletin will continue our analysis, with a discussion of some alternative salary policies.
If you have any questions or thoughts, please contact Grant Amyot, Chair of QUFA’s Salary Review Committee, at extension 36252 or amyotg@qsilver.queensu.ca.