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Bad News for College Professors

? Bad News for Young College Workers: Part III |


| Good time to learn accounting? ?

September 14, 2005

Bad News for College Professors

Michael Mandel

The four year decline in the real earnings of college graduates is bad news for their professors. The past 10-15 years has been a golden age for college faculty--there was a strong demand for their primary product (college graduates), who were willing to pay steadily rising tuition to get the crucial diploma. As a result, real salaries for continuing faculty have risen every year since 1982.

As we can see in this chart, real faculty salaries tracked real earnings of college graduates (B.A. only) very closely through the 1990s.

But as college grad pay has started to drop, faculty salaries have continued to rise. This divergence is unlikely to last. If real college earnings continue to fall, the hot and heavy demand for college is likely to slack off--and the golden age for college professors (and their pay) will come to an end.

01:57 PM


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They should be ready for retirement anyway. I noticed the number of foreign students have been declining since 95.

Posted by: Lord at September 14, 2005 03:23 PM

It looks like the AAUP data uses the university as the unit of measurement. This obscures the fact that there are significant differences in the rtrends for different disciplines. For example, I would assume that the salaries for liberal arts professors are largely flat. In contrast, the salaries for business school professors have risen significantly.

Even within the business schools, salary trends vary quite a bit. For many years, the offers made to new finance Ph.D candidates were the highest (by $5-10K per year) among all business disciplines. However, at present there seems to be somewhat of a shortage in accounting professors. As a result, this year, offers to new accounting Ph.Ds will likely be up (relative to last year) by 10-15%. So, for once, the new assistant salaries for accounting profs will easily be the highest of any b-school discipline.

One of the trends that b-schools are very concerned about is the possibility of a shortage in PhD qualified professors in the next decade or so. The number of new doctoral graduates has been going down, even as enrollments have increased. This should push b-school salaries even higher. Since I'm in that pool, I of course think it's a good thing.

Posted by: The Unknown Professor at September 14, 2005 05:23 PM

Good point, Professor Unknown. If you look at some of my earlier posts, you'll see that the real earnings of holders of advanced degrees is still rising. That fits with your analysis.

Posted by: MM at September 14, 2005 05:33 PM

I don't have any hard data to back this up, but my sense is that there's a pretty high correlation between the average salary for a professor in a discpline and demand for (and salaries garnered by) graduates with a degree in that area.

Here's why - student salaries reflect the attractiveness of a given skill set. This has two effects on faculaty salaries. First, it helps drive student enrollment, which affects the demand for faculty. Second, it also determines the "outside options" that the faculty have (i.e. finance professors can usually often get pretty good jobs on wall street). This second effect contributes to the supply of faculty. Better outside options means that a faculty job is reltively less attractive.

It's be interesting to see if that hypotehsis holds with real data.

Posted by: The Unknown Professor at September 14, 2005 08:43 PM

Arghh! If I didn't have such clumsy fingers, that last sentence should have read, "It's be interesting to see if that hypothesis holds with real data."

Posted by: The Unknown Professor at September 14, 2005 08:44 PM

"If real college earnings continue to fall, the hot and heavy demand for college is likely to slack off--"

The non-college-degree options are worse. Military? Blue collar? Service industry?

None of them offer as much promise to a new high school grad as a BA degree, even if the BA degree pays 2% less than last year's BA degree. I'm willing to bet that the professors will be OK.

Posted by: mark at November 14, 2006 03:35 PM

I'm currently 1/2 way thru my graduate program and will be entering an accounting doctoral program in Fall 2008. I recently attended the PhD Project's annual Chicago conference and learned about the shortage of PhD's in accounting and that business PhD's are going to be in shortage very soon as the baby boomers are retiring. This is truly a very good time to be a PhD student.

Posted by: seschris at December 2, 2006 03:18 AM

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