Income inequality at Mac: the corporatization of higher education
Opinion

Income inequality at Mac: the corporatization of higher education

Last year Raymond Burse, the president of Kentucky State University, took a stand against income inequality and voluntarily asked for a $90,125 pay cut. The amount he gave back to the school equaled a quarter of his $349,869 salary. Burse took this step with the intention of making sure that 24 minimum wage workers on campus were paid a higher wage. Burse made the decision to reduce his salary all on his own, moreover – no campus movements led to his action, only his conscience and profound sense of academic stewardship. “I figured it was easier for me to forgo that amount, rather than adding an additional burden on the institution,” Burse said.

To many of us, this is exactly what our universities and colleges are expected to do: stand up for good ideas. Our universities were the starting place for movements that ended the Vietnam War, gave birth to environmentalism, and fostered a storied list of advancements that we now take for granted as part of the informed society we know today. Over the past few decades, however, colleges have increasingly adopted the narrow imperatives of profit-maximizing corporations, and these changes often fly under the radar of the general public. This move is often referred to as the “corporatization of higher education.”

One such change is the arrival within college payrolls of runaway executive compensation. This is a development that tacitly endorses and actively helps create the record income inequality we see around us nationwide. To illustrate this point, one need look no further than demoralizing data gleaned from institutional research and IRS990 forms publicly released by Macalester College. Macalester is often ranked as one of the most progressive colleges in America. However as the graph below makes clear, our reputation for visionary governance is increasingly a thing of the past.

Over the past nine years, pay for the most senior and highest-paid Macalester staff members (between seven and nine employees including the president, the vice presidents and deans), have increased 19% adjusted for inflation – an increase from $250,494 to $298,215 on average. The leading salary increase within this group is of course that taken by the college president, who has enjoyed a 55% real pay increase in the period. The president’s total compensation of $354,601 when he started (a year earlier than the graph shows) has more than doubled, sitting at $792,169 in fiscal year 2013 including benefits and deferred pay. These extraordinary increases have occurred against an economic backdrop including the greatest economic downturn since the 1930s. Yet, these pay increases were not enjoyed by all Macalester employees, in fact the discrepancies in raises have caused the total share of the salary pie going to senior staff (as opposed to everyone else) to increase by at least 32% since 2002.

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One such group not enjoying the same raises given to executives are full-time teaching professionals, whose pay has all but completely stagnated with an increase of a meager 2.5% over the same nine years: from $110,475 to $113,228 in constant 2013 dollars. Clearly, with executive pay outpacing teachers whose average compensation has stood still, inequality at Macalester is rising in a fashion similar to that of corporations.

Macalester financial data has a way of obscuring the worst of these changes. One method is the data released about its lowest paid workers. Macalester reports the salaries of various staff positions for last year through a “staff pay band structure.” The lowest paid Macalester staff member under this method is compensated at a minimum salary of $28,560 (data that does not account for part-time adjunct faculty who are known to be paid much less than this). Since the highest compensated employee is the president at $792,169, the ratio from highest to lowest is 27:1.

But Macalester contracts out some labor – with Bon Appétit for dining services, American Security, its bookstore the Highlander and its document and mailing services. So while Macalester gets to say it pays its staff at a minimum of $14.17 an hour, the Macalester books don’t reflect the fact that contracted companies commonly pay their employees much less. As shown on the graph, including the bottom threshold of potential subcontractor pay (the minimum wage) pushes the pay ratio between highest and lowest paid workers at Macalester from 27:1 in 2004 to 53:1 in 2013.

Hopefully at this point you are persuaded of rising inequality at Macalester College. But you may be thinking: we’re only talking about the salaries of nine staff members, right? These pay increases have in reality consumed hundreds of thousands of dollars from the school budget. If senior staff salaries had remained at their 2002 share of the payroll budget in 2013, Macalester would have an additional $621,182 in the annual budget. Those raises alone amount to about $300 of your tuition dollars each year.

That money could pay for 14 full-time counselors to aid student mental health care. It could be used to increase adjunct pay from $6,200 per class on average to around $8,400 per class. It could increase the wages of the lowest paid on-campus employees like at Kentucky State University.

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What is apparent is that our generous executive salary increases have not reflected the spirit of belt tightening being asked of students and families, and which surely must be better justified or rescinded before budget-controlling strategies are placed on students.

Macalester’s strategic plan has taken note in discrepancies between rates of growth, referred to as the “slope problem,” in which the growth rate of expenses exceeds the growth of revenue causing an unsustainable financial model. These arguments make no mention of the corporatization of pay on campus, much less that this very same slope problem is exacerbated by senior staff salaries that have increased at a rate of 7.6% per year on average, more than double the school’s 3.5% tuition revenue growth target mentioned in the same plan.

In fact, just a week ago the president sent a letter to students’ homes explaining that Macalester’s tuition would increase by 3.6% for the 2015-2016 school year to a record total of $59,761 including room and board. The letter states that one of the main reasons for the tuition hike is “the need to recognize the outstanding work of our faculty and staff through modest compensation increases.” The issue with this wording is the implication that both groups are contributing equally to the problem when it is clear from the data that the compensation for faculty has stagnated on average, while the pay raises for senior staff are far less “modest.”

Suggested repairs for our “slope problem” include a three year residency requirement for students and cuts to study away expenditures. At the scale targeted in the strategic plan for moving to the new residency requirement, the 125-150 new beds needed could provide around $700,000-840,000 of tuition revenue yearly to the budget (not taking into account any resulting costs, such as construction and upkeep). If executives did not take such large raises, however, this extra revenue might not even be necessary – since at least $621,182 could be saved if the share of senior staff salaries did not increase as aforementioned. Students should not be the only members of the Macalester community to pay for the new austerity, especially when these executive salaries exemplify a fundamental “slope problem” of the budget.

We need to put higher education back on track for promoting sensible financial leadership. The first step is to control the corporatization process that allows this divergence of school revenue into the top 1%, who are expected to possess more of the world’s wealth than the other 99% next year. Since our tuition dollars allow Macalester to operate, students are stakeholders in the path Macalester takes going forward. Let’s make sure it’s one that doesn’t contribute to the unsustainable, ultimately destabilizing and socially damaging inequality epidemic.

February 6, 2015

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