Saturday, December 29, 2012

Oh, the Old "Competitive Pay" Saw

I woke up very early this morning and had some quiet, quality time with my hard copy Wall Street Journal, Weekend Edition.

A story on the front page talked about the rise in college costs (specifically, this was all about U of Minnesota-Twin Cities).  The article pointed to the growth in non-teaching staff and other administrative bureaucracy as major culprits behind cost increases, which have galloped far beyond inflation but even beyond rises in health care costs.  Now that's a worthy benchmark!

I will keep this blog post short, and I won't wade into waters that I don't fully understand.  I don't know all the details about how much better -- or not better -- the Golden Gopher students are served by these extra staffers or other overhead.

What I do know, however, is that as I read, I was eagerly waiting a quote from some official offering a defense of certain high salaries via the "competitive with industry" canard.  U of M employs 353 people who make more than $200,000 per year.  The school's new President, who is introduced early and hailed throughout the article as a cost-cutter, is quoted towards the end of the article as saying his $610,000 salary "is competitive in the marketplace."  (His Chief of Staff, by the way, makes a sweet buck ninety-five).

Again, I won't presume to be an expert -- or even to have a clue -- about how to run the University of Minnesota.  One article, even a full-length WSJ feature -- doesn't change that.  I don't know which offices and staffs could be trimmed down.  I also won't talk about the work ethic of people I've never met (particularly in light of the past 7+ years which I've spent working for Uncle Sam).

But here's what I do know:  Government jobs, non-profit jobs, and university jobs are NOT comparable to private sector jobs in a simple apples-to-apples sort of way.  You can't simply say, "Well, the average Fortune 500 CEO makes [x], so therefore we should pay our "CEO" [y]."  And it works even less well once you start moving down the line.  

Yes, they're both leaders.  Yes, they're in charge of people, and yes there are significant pressures and stresses that come with Senior Executive positions anywhere.

But how often do you see people come from a solely government, non-profit, or university background STRAIGHT into the C-Suite of a Fortune 500 corporation?  Not that often, right?  Because the skill sets aren't directly transferable.  You could throw statistics out there that show the average Fortune 500 CEO making something near $13 million, which is way more than 20 times higher than the average University president, but that just doesn't mean much in and of itself.

Now, perhaps by "competitive in the marketplace" the guy was referring to the marketplace for University Presidents (average salary just shy of $500k).  Given that his University is one of the largest in the country, that would make way more sense.

I guess to tie it back to my original point, though, here's what I wanted to say with this entry: You often hear people in the government, non-profit, or university sectors defend high salaries with vague claims about 'private sector pay' or 'what they could make in industry.'  

The reality -- a VERY small number of people in the private sector make VERY high salaries.  Whether they deserve them is a question for another day.  There are lots more people in the private sector who make very quotidian salaries to work very hard.

If the people who earn incomes in the "very comfortable, but not quite 1 percent" range (say, between 150k and 400k) in those aforementioned sectors were to try to walk right in the door at State Street, or JP Morgan, or General Electric and think they could earn those sorts of salaries right away (excepting those with prior backgrounds in those areas), they might see the weakness in the sector-to-sector comparison argument).  

1 comment:

C R Krieger said...

At 0601 Sunday my comments on the article will emerge.  That should give me just enough time to figure out the letter and number combination to post this comment, starting as I am at 2259.

Regards  —  Cliff