U-M economist Paul N. Courant and co-author Sarah Turner (University of Virginia) released a study, “Faculty Deployment in Research Universities.” In it, they examine the relationship between faculty salaries and student course offerings at U-M and the University of Virginia, two major public research universities.

The authors found that while faculty salaries vary greatly across disciplines, the faculty compensation per student taught does not. Salaries in fields like economics have seen substantial increases, while those in English and other humanities programs have not. One reason the authors reference this is the necessity of English and other text related courses to be taught in smaller classes if they are to be successful. They found English to be one of the most expensive departments because of this. Whereas economics is more easily “scaled up” as they put it.

While faculty in economics would prefer smaller class sizes, they have increased to compensate for recruiting and retaining faculty with prolific research. The authors found that “within departments the highest-paid faculty teach fewer undergraduates and fewer undergraduates courses than their lower-paid colleagues. This finding confirms our hypothesis that salaries are determined principally by research output and associated reputation, and that universities respond rationally to relative prices in deploying faculty.”

“Faculty Deployment in Research Universities” by Paul N. Courant and Sarah Turner.

Abstract

Deploying faculty efficiently (or more efficiently) should surely part of any optimizing strategy on the part of a college or university. Basic microeconomics about the “theory of the firm” provide some insight as to how a university would achieve productive efficiency given differences in the price (salary rate) of faculty across disciplines and variation in compensation within departments. The prices of faculty activities demonstrate substantial variation across institutions, disciplines, within disciplines and over time. These observations about variation in input prices raise fundamental questions about whether and, if so, how differences in the cost of faculty affect resource allocation at research universities. We examine how teaching allocations and costs vary both between departments and within departments. This allocation is complicated because teaching and research are jointly produced by universities, while they are also substitutes at some margin in faculty time allocation.

We examine the link between departmental compensation (payroll) and student course offerings at two major public research universities. Strikingly, we find that faculty compensation per student taught varies much less across departments than salary levels. In turn, changes over time in relative salaries by discipline are much larger than changes in faculty compensation per student as universities adjust to these cost pressures by increasing class size and increasing teaching inputs from other sources. We also find that within departments the highest-paid faculty teach fewer undergraduates and fewer undergraduate courses than their lower-paid colleagues. This finding confirms our hypothesis that salaries are determined principally by research output and associated reputation, and that universities respond rationally to relative prices in deploying faculty.