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Journal of Undergraduate Research

Keywords

academic salary compression, labor, high demand, low supply, moving costs

College

Family, Home, and Social Sciences

Department

Economics

Abstract

Salary compression is common in many fields with high demand for or low supply of a specific type of labor. In order to attract new recruits in such fields, employers sometimes must offer them wages higher than those of more senior employees. Unlike in most labor markets, there is evidence that returns to seniority for college professors are negative. Ransom (1993), along with many others, found a negative correlation between the number of years at the university and salary after controlling for total workforce experience, research activity, and other variables. He developed a model in which universities act as a monopsony (one buyer, many sellers) and take advantage of professors’ high moving costs, resulting in a “loyalty tax” for professors who stay at their current university. In response to these findings, Moore, Newman, and Turnbull (1998) included additional research-related variables in their models and found that the negative returns to seniority disappear when research activity is more completely controlled for. More recent work, such as that done by Bratsberg, Ragan, and Warren (2003), took into account effects of the faculty/university “match quality” and confirmed the findings that returns to seniority for professors are negative.

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