No, professors shouldn’t collect a six-figure pension – on top of a six-figure salary

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TheGlobeandMail.com – Opinion
May 16, 2019.   Frances Woolley

Frances Woolley is a professor of economics at Carleton University

Nearly one in 10 Ontario university professors is over the age of 65. As of 2016, these professors were earning, on average, $184,947 a year. Moreover, because federal legislation requires all taxpayers to start drawing down their retirement savings at the age of 71, septuagenarian professors can collect a six-figure pension on top of a six-figure salary.

It sounds expensive – and it is. A report from the Higher Education Quality Council of Ontario on universities’ fiscal sustainability estimated that, if mandatory retirement was still in place, and Ontario universities had been able to replace all of their professors over 65 with junior scholars, their annual salary costs would be $89-million lower, and more than 1,200 new PhDs could have been hired.

In its April budget, the Ontario government committed itself to ensuring “a more sustainable postsecondary sector” and “employee renewal.” The details of the government’s plans are not yet known. However, a discussion paper released earlier this year reported that “the ministry is giving consideration to a policy that would … require institutions to reduce salary payments so that salary and pension payments combined are not greater than the employee’s salary prior to pension payments commencing.” Professors aged 71 and older would have their salary clawed back, giving them every incentive to retire.

The Ontario government’s proposal has been widely criticized. One objection is that many older professors are still productive, and have a right to work. This misses the point. No one is stopping senior scholars from writing academic papers, or teaching ECON 101. The debate is over how much they should be paid for doing so.

Most Canadian universities overcompensate older tenured professors. Generally speaking, professors’ salaries increase steadily with age; productivity, after a point, does not. The pot of gold at the end of the career is deliberately built into universities’ salary structures because the possibility of pay increases motivates junior and mid-career professors to work hard. Many private-sector organizations, such as law firms, have similar schemes. However a top-end heavy compensation system is only financially viable if there are enough younger, relatively underpaid, professors to offset the older, relatively overpaid, ones. If university professors can collect top-end salaries into their 70s or 80s, tenure-stream faculty will become so expensive that universities will be reluctant to hire them. Indeed, the growth of the contract-instructor work force suggests this is already happening.

Another objection to the Ontario government’s proposal is that the promise of “employee renewal” is disingenuous. Next year, university tuition in the province of Ontario will be cut by 10 per cent, costing universities $450-million in revenue. A few retirements will make a dent in the budget shortfall, but Ontario universities will not see much employee renewal in the immediate future. Yet, even if “employee renewal” turns out to be a pipe dream, encouraging retirements might still be good policy.

The most serious problem with the Ontario government’s proposal is its implications for labour relations and employees’ rights. Requiring institutions to reduce salary payments to a certain group of employees would unilaterally alter the collective agreements negotiated between universities and their employees, undermining collective bargaining rights. The proposed reductions in professors’ salaries might violate minimum-wage laws.

But if we reject the idea of clawing back older professors’ salaries, what is the alternative?

One possibility is a competence test. The Ontario government could make it easier for universities to dismiss unproductive employees at any stage in their career. Indeed, I suspect reducing professors’ employment protections may be the Ontario government’s long-term goal. The current initiative is designed to fail, giving the government an excuse to introduce more radical tenure-curtailing legislation.

Some might welcome such a move. Advocates of ending mandatory retirement have long argued that performance and competence is not an age issue, and incompetent professors should be challenged whatever their age. Yet we should be careful about giving universities greater power to dismiss employees. I have limited faith in the ability of administrators to meaningfully assess performance. Powers to dismiss employees are readily abused. Finally, the real issue is mediocrity, not incompetence – the professor who writes one or two articles a year, does an adequate job of teaching, but is just not worth $184,947 annually.

There is another option: Law firms, like universities, have compensation structures that are generous to senior members of the firm, and unsustainable with an aging work force. A number of law firms have chosen to preserve their compensation structure by agreeing to put provisions in their partnership agreements requiring partners to retire at 65.

Faculty associations and universities should make similar retirement pacts. Unfortunately, they won’t do that; tenure-stream faculty have too much to gain from preserving the status quo, even if that status quo threatens the sustainability of the entire university system.

https://www.theglobeandmail.com/opinion/article-no-professors-shouldnt-collect-a-six-figure-pension-on-top-of-a/

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