By Richard Vedder
My wife is forever nagging me to throw away old records, files and junk. In the process of doing so the other day, I discovered a list of positions and salaries for the administration of Ohio University of precisely 40 years ago --the 1968-69 school year. I suspect OU is a very typical state university, and what I say below is the rule and not the exception for American universiites.
There has been about a 10-15 percent increase in enrollment at the school, and when one factors in some inrease in the real volume of research, arguably the school is 25percent larger than it was four decades ago. But the administrative structure grew far faster.
At the top of the pyramid in 1968 was a President, an Executive Vice President, a Provost, three vice presidents, an assistant provost, and a chief business officer. A total of eight persons ran the school. Today, there are 17 persons I count in comparable positions. Today, we have, of course, a "Chief Information Officer." Instead of one assistant provost, we have 10 associate or vice provosts. The number of top administrators per student has come close to doubling. Going further down the ladder, the number of public relations professionals and affirmative action persons has far more than doubled.
Also, in the 1960s, the president was considered to be the equivalent of a super faculty member --part of the university community paid more than others, but not dramatically more. Today, the OU president makes about 10 times what the president did 40 years ago, whereas salaries of facuty have risen less, perhaps seven or at most eight-fold. The CPI rose about six fold --but if one allows for overstatement of inflation in that index, the true inflationary factor is probably about five fold. Real faculty salaries probably rose on the order of 50 percent, while that of the president roughly doubled. If football coaches are taken into account, the widening salary disperio between faculty and non-teaching administration is even more dramatic.
Today, we are told the business of running a university is far more complex than decades ago, and that we need to compensate presidents so that they are competitive with corporate counterparts. Bull. If running a university is more complex, it is becuase we have made it that way, creating unnecessary regulations and bureaucratic structures out of stupdity or hubris. If one were to take the top ten CEOs of financial service companies in the U.S. two years ago, about half of them have lost their jobs. The real comprehensive work income (using the Haig-Simons definition that takes into account changes in wealth associated with employment) of the group over the past two years has probably been negative. There are dire and real consequences of screwing up, of performing poorly. By contrast, if you take the top 10 university presidents (however chosen), probably the turnover has been one or two --and that has been voluntary. And the income of the presidents has been decidedly positive.
Moreover, who knows if the presidents are doing a good or bad job? In the private sector, pay is related to performance (hence the outcry over bonuses to poorly performing executives on Wall Street). Markets discipline bad behavior brutally in the private sector. University presidents do not face that, and should not be compensated remotely on the same scale as business leaders.
Universities are now facing a real financial crunch. I predict they will try to muddle through, putting their major efforts into trying to get more money out of Washington and state capitals. They will grudgingly make some modest reductions in the administrative bureaucracy, but will not try to do the radical rethinking of the way we do business that is desperately needed. As long as third parties continue to pay most of the bills, the problem will remain and grow.