Wednesday, July 01, 2009

Naomi Riley On Tenure

By Richard Vedder

Our friend Naomi Riley at the Wall Street Journal has written an excellent column on tenure. This is an illustration of the law of unintended consequences in higher education (another example: the vast increase in federal student financial aid has been associated with reduced access among lower income groups, not more, in my opinion).

There are two legitimate arguments for tenure. First, it is argued that tenure allows professors to espouse unpopular views, increasing diversity of thinking and promoting a greater "marketplace of ideas" within higher education. Second, the job security associated with tenure is greatly valued by professors, thereby lowering cash outlays for salaries below what they otherwise would be (the supply of professors is enhanced relative to demand, lowering equilibrium compensation).

Naomi in her Journal piece suggests that tenure may work the opposite way with respect to intellectual diversity. It may promote conformity instead. Persons with non-mainstream ideas --usually political conservatives --are denied tenure in the first place by the tenured faculty making that decision. Those with orthodox views who are tenured use the power associated with lifetime appointment to block attempts to diversify universities, not only in terms of political thinking, but also in terms of content. This makes universities less flexible, less able to change with technology, economic growth, and evolving tastes. That is one reason why the for-profit universities, unburdened by tenure, are rapidly increasing market share.

With respect to the argument that tenure is simply a fringe benefit that enhances the attractiveness of being a college professor, it should be noted that the awarding of tenure involves a potential liability to universities of two million dollars or more in present value terms. Consider a 32 year old economics professor making $100,000 a year --not unusual these days. Suppose that professor will teach until age 62 --a total of 30 years. The present value of a $100,000 stream of income (no doubt increased over time with inflation and economic growth) is, conservatively, two million dollars (more if fringe benefits are taken into account).

Typically, large universities make dozens of tenure awards annually, meaning they are creating potential new liabilities of tens of millions of dollars annually in present value terms. To be sure, the faculty must provide services to get that money, and the true market value of tenure is much smaller, perhaps a tenth or so of the salary paid. Nonetheless, the financial burden is far from inconsequential.

For that reason, I have advocated universities offering new faculty a choice. To use my economics professor example, you can offer the faculty member a job with a five year term contract with no obligation for renewal at a salary of $105,000 a year, or a tenure track appointment with a guaranteed life-time employment contract IF TENURE IS AWARDED, with a salary of, say $95,000 a year. This would eventually make explicit the largely hidden costs of tenure.

Tenure is decreasing as an issue of importance as universities, aware of its potential long-term liabilities, are hiring more non-tenured faculty. My "tenure optional" proposal in the long run might do more to preserve the institution of tenure than the current system where tenure is slowly dying by attrition.

2 comments:

capeman said...

The Doc is emeritus (retired), if I'm not mistaken.

I wonder if the Doc gave up his tenure -- his tenured chair, I believe -- before he became an emeritus professor.

right-wing prof said...

"they are creating potential new liabilities of tens of millions of dollars annually in present value terms"

This is really not true. They can always lay people off if there is a financial emergency, otherwise presumably somebody has to do the teaching. And there is nothing in tenure that guarantees any salary increase. So really they aren't creating any future financial liabilities, all they are doing is giving up the right to replace the professor with someone else down the line.