SENATE Year End Report

Report of the Faculty Senate Committee on the Economic Status of the Faculty

May 21, 1998

Contents
I. Introduction II. Resources for Faculty Salaries A. Responsibility Center Budgeting System B. How Salary Increment Decisions Are Made III. Penn Faculty Salaries: External Comparisons A. Growth in the Consumer Price Index B. Faculty Salary Levels at Other Research Universities IV. Penn Faculty Salaries: Internal Comparisons A. School Differences in Salary Increments in Comparison with CPI B. Variability in Faculty Salaries by Rank C. Variability in Professorial Salaries by Years of Service D. Variability in Professorial Salary Levels E. Variability of Average Salary Levels by School F. Variability in Average Salary Increments V. Discussion and Recommendations A. Competitiveness of Penn Faculty Salary Levels B. Inequity in Faculty Salaries C. Establishing a Floor for Salary Increments D. Subvention Pool Allocation Criteria E. Comprehensive Policy on Faculty Compensation

I. Introduction

The Senate Committee on the Economic Status of the Faculty (SCESF) is charged by the "Rules of the Faculty Senate" to:

Gather and organize data on faculty salaries and benefits,
Represent the faculty in the determination of University policy on salary issues, and
Issue an annual report on the economic status of the faculty.


In performing these responsibilities during the past year, SCESF has focused on three broad concerns:

The salary setting process: how funds become available for faculty salaries and the how salary decisions are made.
External comparisons: the overall levels of faculty salaries in comparison with external indicators.
Internal comparisons: inequality of faculty salaries within the University, and sources of possible salary inequity that might occur within observed inequality.


Major sections of this Report are devoted to each of these three topics, while a concluding section contains SCESF's recommendations.
In performing its responsibilities, SCESF has been cognizant of Penn's current salary policy as stated by the President, Provost, and Executive Vice President (Almanac April 22, 1997, p.2). Penn's guiding principle in salary planning for is to pay faculty and staff (a) competitively, (b) in relationship to the markets for their services, and (c) in order to acknowledge their contributions to the University and to help Penn remain a strong and financially viable institution.
We have also followed up on the single recommendation of the 1996-97 SCESF "to monitor the ongoing salary information carefully, and pay particular attention to any decline in the position of SAS faculty compared with peer institutions" (Almanac May 13, 1997, p. 8). This we have done, and can report that available evidence indicates that SAS faculty salary levels have maintained their competitive position with respect to salary levels of comparable groups at other major research universities. Furthermore, SAS salary increments for the current year have equaled or exceed the growth in the consumer price index to the same high degree as have faculty salary increments elsewhere within Penn-a condition that represents a significant improvement since the prior reporting year.
In studying faculty salaries for this report, SCESF has benefited from detailed salary information that has been provided by Penn's administration (excluding, of course, individual faculty salaries). Our understanding of salary variability has been enhanced enormously by access to this information (a circumstance that has become University policy only in recent years) and by the assistance of those who have produced it. The SCESF acknowledges this cooperation with appreciation.

II. Resources for Faculty Salaries

Faculty salaries are the product of a two-step process. First, most of each School's resources are raised in accordance with the principles of Penn's Responsibility Center Budgeting System. In addition, subvention is distributed to Schools by Penn's central administration. Of these resources, each School makes a certain amount available for faculty salaries in three respects: (a) sustaining existing faculty appointments, (b) providing annual salary increments for continuing faculty members, and (c) creating salary funding for new faculty positions. In addition, Schools must provide funds for employee benefits that approximate 30% of all such faculty salary expenditures. Second, Deans of Schools make annual salary increment recommendations to the Provost for continuing faculty members by a different process. These two steps are described separately in the following sections.

A. Responsibility Center Budgeting System

In accordance with principles of the Responsibility Center Budgeting System (RCBS), each of Penn's 12 schools has available a certain amount of income annually. In turn, each School is obligated to establish a level of annual expenses that does not exceed the total of available income. Income and expenses are both classified into two major types: "General Operating Funds" (formerly termed "unrestricted"), the expenditure of which is not restricted by principles established by donors; and "Designated Funds" (formerly termed "restricted"), the expenditure of which is restricted by principles established by the donors of such funds. Because payment of the base academic year salaries of standing faculty members is assured from General Operating Funds (even though significant portions of such salaries are actually paid from Designated Funds), only principles of the RCBS as applied to General Operating Funds are described here.
In general, the income available to each School is of three types: earned income, gift income, and centrally-awarded subvention. These sources are shown in greater detail in Table 1 for all of Penn's 12 Schools combined. Tuition is, by far, the greatest source of school income, with indirect cost recoveries from externally funded projects a distant second. With respect to faculty salaries, it is possible (at least in principle) that the amount of money available could be increased by augmenting a school's income from one or more of the nine specific sources listed in Table 1. To the extent that it is possible to increase a school's income from sources that are based on the work of faculty (e.g., tuition), faculty members have some influence over the growth of income that is available for supporting faculty salaries.
Expenses for each school are of three general types: faculty compensation (i.e., salary plus benefits), operating expenses (including staff compensation and student aid), and costs allocated to Schools (e.g., facility expenses) by RCBS principles. These expenses are shown in greater detail in Table 1 for all of Penn's 12 Schools combined. Faculty compensation and total allocated costs are the greatest (and equivalent) sources of school expenses during FY 1998. With respect to faculty salaries, it is possible (at least in principle) that the amount of money available could be increased by reducing a school's "standard of living," i.e., by reducing the level of staff and other support, facilities used, and/or student aid.
In essence, the RCBS sends the message to Schools that each can spend as much as it can earn, and that each School has a great deal of latitude in how it's income is spent. More, or less, might be spent on faculty salaries at a school's discretion. A major exception to this message is that a significant component of income is subvention-an annual award of funds to each school by the University centrally. The amount of subvention awarded to each school is based on a number of considerations such as an adjustment for certain inequalities among Schools in the costs of providing instruction and supporting research. One of many such considerations can be the variation of average faculty salaries by rank among Schools. For this and other reasons, the percentage of school expenses provided by subvention income varied widely among Penn's Schools from a low of 4% to a high of 28% during FY 1998 (footnote 1). These numbers suggest that considerable central judgment is used in allocating subvention to Schools.

B. How Annual Salary Increment Decisions Are Made

Annual salary increment recommendations for continuing faculty members are made by Department Chairs (in Schools with Departments) and by Deans, with review and oversight by the Provost (see Almanac 1997, April 22, p. 2 for a statement of the "Salary Guidelines For 1997-98" pertaining to salary planning for FY 1998). Penn's President, Provost, and Executive Vice President set an upper limit on a "pool percentage" for salary increments. For FY 1998, Schools were authorized to award, as increments, a pool of up to 3.5% of the FY 1997 salaries of continuing faculty members. The recommended salary increment range was 2% to 6%, with Deans being obligated to consult with the Provost about any increments outside this range. Deans could supplement the pool by 0.5% without the Provost's approval, and by more than this with the Provost's approval. To address possible inequity in faculty salaries, Deans were asked to "pay particular attention to those faculty who meet our standards of merit but whose salaries for various reasons have lagged over the years."
Within this framework of available funds, Department Chairs and Deans had the responsibility to recommend salary increments to the Provost for each continuing faculty member based on general merit, including recognition of outstanding teaching, scholarship, research, and service. In addition, the Provost reviews the Deans' faculty salary recommendations "to insure that raises on average reflect market conditions in each discipline."

III. Penn Faculty Salaries: External Comparisons

Average Penn Faculty Salaries (i.e., academic year base salaries) are compared with two external indicators in the following sections: growth in the Consumer Price Index (CPI) for Philadelphia, and a survey of faculty salaries at about 25 public and private research universities in the United States conducted annually by the Massachusetts Institute of Technology (MIT). As a methodological note, all faculty salary information discussed in this report refers to the aggregated "academic year base salary" of individual faculty members whether salaries are paid from General Operating Funds and/or from Designated Funds. In addition, all salary data reported exclude the School of Medicine.

A. Growth in the Consumer Price Index (CPI) for Philadelphia

Faculty salary increments by rank, averaged for all Schools except Medicine, for FY 1997, FY 1998, and compound cumulative for FY 1988-97, are shown in Table 2 in comparison with comparable data for the CPI (Philadelphia and National) and Penn budget guidelines. It is heartening to observe that median faculty salary increments for all three ranks for FY 1997 exceeded the percentage growth in the CPI and Penn's budget guidelines in both years.
Most impressive, however, were the cumulative compound salary increments for the 10-year period from 1988-97 seen in Table 2. On the whole (all ranks combined), cumulative mean Penn faculty salary increments were almost double the growth in the CPI (National)--a welcome reversal of the substantial net loss of purchasing power of faculty salaries during the 1970s. Obviously, some of the ground lost then has been regained in recent years.
Furthermore, the mean compound cumulative growth in faculty salaries over the 10-year period exceeded Penn's budget guidelines be a wide margin. These guidelines refer to the centrally-recommended salary pool percentage. What has happened is that many (perhaps all) of the Deans of Penn's Schools have added considerable additional school resources to the recommended cumulative base pool for salary increments. If we estimate the compound cumulative increase over the 10-year period for all ranks combined to be 89% (the exact number is not available), the cumulative compound additional contribution of Schools to the salary pool must have approximated 30% (89% minus the recommended budget guideline of 59%). Thus, it is apparent that both Penn's central and school administrations have made substantial joint efforts to raise the level of faculty salaries well in excess of the rate of inflation in the CPI during the past 10 years.

B. Faculty Salary Levels at Other Research Universities

The best available salary data from other institutions of higher education is provided by the MIT annual survey of an elite group of approximately 25 private and public research universities (the sample size varies somewhat from year-to-year). The sample includes Ivy League and other major private universities, as well as a number of highly regarded public research universities. In short, it is a group of universities which Penn can consider to be peer institutions. Mean faculty salaries by rank (Professor, Associate Professor, Assistant Professor) by discipline have been made available to the SCESF for the Fall Semesters for the years 1982 through 1996. These salary data are reported for the following disciplinary areas:

Science (at Penn, represented by SAS departments)
Humanities and Social Sciences (at Penn, represented by SAS departments)
Engineering (at Penn, represented by SEAS)
Architecture (at Penn, represented by GSFA)
Management (at Penn, represented by Wharton)


The most meaningful comparisons of Penn faculty salaries with those at other institutions in the sample are broken out by discipline by rank. However, as a broad overall generalization, it is fair to conclude that Penn faculty salaries (for the four Schools included in this analysis as weighted by faculty size) were at the 69th percentile rank as of the Fall Semester 1996-a slight improvement since 1982 (footnote 2). By rank, full professor salaries were at the 71st percentile; associate professor salaries were at the 75th percentile, and assistant professor salaries were at the 59th percentile. Thus, Penn faculty salaries (for the four Schools included) in comparison with a substantial group of peer institutions are certainly at a competitive level. However, there is clearly room for improvement in Penn's competitive position, especially at the assistant professor level.
As in SCESF's 1997 report, we can provide some information about salary levels for each disciplinary area included in the MIT survey. For example, Penn's SAS was represented by two disciplinary areas: sciences and social science/humanities. As shown in Table 3, the average salary levels of faculty members at each of the three professorial ranks in each of these SAS areas compared very favorably (in the 62nd to 81st percentile range) with salary levels of comparable groups at the other institutions as of the Fall Term 1996. However, the average salary levels of faculty members from Penn's SEAS were close to the 60th percentile of the engineering groups in other institutions surveyed. By contrast, the average salaries of faculty members in GSFA and Wharton were well above those in the MIT sample (68th to 94th percentile), except at the assistant professor level which were average or lower.
In sum, while none of Penn's four Schools ranked first or second within its relevant disciplinary group in the survey sample, none of Penn's Schools ranked below the average of the other institutions. Therefore, there is cause for satisfaction in Penn's level of salary competitiveness.
As reviewed in the previous section, the compound cumulative faculty salary increments at Penn were almost twice the growth in the national CPI from 1988-97. By contrast, the MIT data show only a slight gain in the relative standing of Penn's average faculty salaries during the period 1982-1996. It seems clear that our peer institutions in recent years have likewise increased faculty salaries well in excess of growth in the CPI. Therefore, the substantial increase in faculty salaries that has been attained at Penn during the past 10 years has been necessary just to maintain our reasonably strong competitive position.

IV. Penn Faculty Salaries: Internal Comparisons

As previous reports of the SCESF have highlighted, there is a great deal of inequality (e.g., variability) in faculty salaries at Penn attributable to several recognized factors: differences in individual merit, rank, time in rank, external labor market forces, the relative wealth of Schools, and perhaps differences among Schools in allocating salary increments.
One of SCESF's concerns has been that, among all the existing variability in faculty salaries, there might well be some significant element of inequity (i.e., salary setting based on incomplete or inaccurate information about merit, or bias that could be involved in the process of deciding salary increments). However, it is not possible for the SCESF to pinpoint any instance of individual, or group, inequity without individual faculty salaries and associated information about individual merit, labor market forces, etc. What we can do is review many facets of salary inequality and raise questions about the possibility that inequity might be responsible for some degree of the observed inequality. SCESF can then recommend that senior academic administrators (Department Chairs, Deans, and the Provost) review the dimension of inequality in question with a view to correcting inequities that might be identified.
We turn next to a review of several dimensions of inequality of faculty salaries at Penn. As with the external comparisons reviewed above, all salary data reported below exclude the School of Medicine.

A. School Differences in Salary Increments in Comparison with the CPI (Philadelphia)

As shown in Table 4, a high percentage of faculty members in all of Penn's Schools (including three disciplinary areas of SAS) were awarded salary increments for FY 1998 that exceeded the CPI (Philadelphia.). Except for the relatively low percentage for Annenberg (78%), variability among schools/areas on this indicator was quite low. The high percentages for most schools/areas (92% - 100%) should be reassuring to most faculty members.
Similarly, the vast majority of full professors of all Schools and disciplinary areas received cumulative salary increments that exceeded growth in the CPI (Philadelphia.) over the years from 1992 though 1998. On this indicator, Annenberg's percentage was very high (100%), while the social science area of SAS was relatively low. The high percentages (over 90%) for most school/areas indicate that only a small minority of full professors have fallen behind growth in the CPI over the most recent seven year period.
SCESF recognizes that there are legitimate reasons for individual faculty members to be awarded increments less that the growth in the CPI. For example, in a particular year, the salary increment pool may only approximate, or even be less than, the rate of growth in the CPI. Furthermore in a small department or school, a few promotions or market adjustments needed to retain a valued faculty member could obligate a disproportionate share of an existing increment pool, thereby leaving little to award to other faculty members in the unit. Finally, some faculty members may be sufficiently lacking in merit to justify an increment exceeding the CPI growth. However, when a salary increment pool is available well in excess of CPI growth (as it has been in recent years), it is difficult to imagine that circumstances such as these would limit salary increments to less than CPI growth for more than 10% of the faculty in a school/area. It therefore seems possible that the cumulative salary increments received by some of the full professors in the social science area have been inequitable, at least in part.

B. Variability in Faculty Salaries by Rank

Mean faculty salaries by rank are shown in Table 5 for all Schools combined (except Medicine, of course). Such data give the crudest perspective on rank differences in salary, however, because of aggregation biases across Schools. For example, one might expect a considerably larger difference between mean assistant and associate professor salaries. The modest difference might be accounted for by the facts that the Law School has no associate professors (which, if it did, could increase the associate professor mean) and the Wharton School has a considerably higher percentage of assistant professors than is typical of other Schools (a fact that could increase the assistant professor mean).
A more meaningful comparison of variation in faculty salaries is made by computing the ratios for continuing faculty members for each school and then computing a mean weighted ratio (weighted for the number of continuing faculty members at each rank in each school) (footnote 3 ). The weighted ratios thus computed are also seen in Table 5. Viewed in this way, there is much greater variability in mean salary levels by rank. This is due, in part, to the base salary level of assistant professors used to compute the ratios. And as we have seen with respect to Penn's competitive position in the 26 peer institutions included in the MIT faculty salary survey, the weighted average of Penn assistant professor salaries were less competitive (59th percentile) than those of associate professors (75th percentile) and full professors (71st percentile).

C. Variability in Professorial Salaries by Years of Service

Sufficient information was available to the SCESF to compute, for each school except Nursing, the ratio of the mean salaries of full professors appointed to a Penn faculty during the past 20 years (i.e., since 1977) to the mean salary of professors appointed before 1978. Ordinarily, it might be expected that this ratio would be less than 1.00, which would mean that more years in service at Penn is associated with higher professorial salaries. However, in six of ten Schools for which data are available (Nursing has no professors predating 1978), the more recently appointed professors have higher salaries on the average (in three of these six Schools, over 10% higher). Professors in the SAS are the major exception, where the more recently appointed professors have average salaries about 10% less that the those who have held appointments for 20 years or more.
While data such as these on a dimension of variability of faculty salaries do not demonstrate inequity, it is possible that more recently-appointed faculty members in some Schools have been placed on a higher salary scale, and justifiable upward adjustments in scale have not been made in the salaries of many of the more senior professors.

D. Variability in Professorial Salary Levels

As reported by the SCESF last year by school, the mean salary of the best paid 20% of full professors was 75% higher than the mean salary of the lowest paid 20% of full professors. This 75% figure was based on the weighted mean of professors from thirteen broad disciplinary areas-ten Schools (Annenberg, Dental, Education, Engineering, Fine Arts, Law, Nursing, Social Work, Veterinary Medicine and Wharton) and three disciplinary areas of SAS (humanities, natural sciences, and social sciences). We have monitored this index of inequality of professorial salaries and found no substantial difference for FY 1998 (the best paid 20% is now 72% higher than the 20% lowest paid). As previously, this percentage ranges from a low of 45% for one school to a high of 207% for another. As reported last year's SCESF, there continues to be considerable stability in these percentages (overall and by school) since FY 1993. For a fuller discussion of trends based on this indicator, the reader is referred SCESF's report of last year (Almanac May 13, 1997, p. 7).
As with other indicators of inequality, the wide differences between the salaries of the upper and lower 20% of full professors do not in themselves demonstrate inequity. However, it is possible that some of the gap between these two groups of professors is inequitable, and that the inequities become exacerbated over time as annual salary increment percentages are applied to the base salaries of these in the lowest quintile of professorial salaries.

E. Variability of Average Salary Levels by School

As reported by a previous SCESF (Almanac Supplement April 11, 1995), there is considerable variability of average faculty salaries by rank by school. During the current year (FY 1998), the median salary of faculty members continuing in the same rank at the highest paying school was more than that of the lowest paying school by the following percentages: full professors-58%; associate professor-65%; assistant professor-94%. As noted by the SCESF in 1995, variability among Schools is no doubt a product of market forces in the hiring of faculty members and in the relative wealth of Schools. The relative wealth of Schools is, in major part, a function of how much income a School is able to earn and the level of non-faculty expenditures it regards as essential--all as discussed above in the section on the RCBS.
Whether the inequality of faculty salary levels among Schools represents some degree of inequity is controversial. Some argue that it is, while others argue that it is a natural outcome of the wealth inherent in various disciplines and professional fields that Schools represent. Any effort to reduce such inequality substantially would no doubt require fundamental changes in the RCBS--a system that is well entrenched and has served the University well for more than two decades.

F. Variability in Average Salary Increments

As reported in Table 2, median faculty salary increments by rank for FY 1997 and FY 1998 all exceeded the growth in the CPI for most recent full year available and exceeded Penn's budget guidelines. These salary increments are broken out by school in Table 6 where it can be seen that all Schools awarded median salary increments that exceed the budget guideline in all three professorial ranks.
Table 6 reveals that there is considerable variability in median salary increment percentages both among Schools within ranks, and among ranks within Schools. Other than the most general University policy to base faculty salary increments on merit (including recognition of outstanding teaching, scholarship, research, and service), the SCESF is not aware of specific information about merit and market factors that is available to Department Heads and Deans, and how they weigh this information in deciding salary increments for individual faculty members. Without such information, it is not possible to determine whether any inequity is involved in the salary increments reported in Table 6. At the least, it is encouraging to see that faculty salary increment funds are distributed widely among the Schools and ranks within Schools, and at a level that exceeds, on average, budget guidelines pertaining thereto.

V. Discussion and Recommendations

A. Competitiveness of Penn Faculty Salary Levels

Evidence available from the MIT salary survey indicates that there is room for improvement in faculty salary levels in four of Penn's Schools for which salary data are available in comparison with similar disciplinary areas located at other leading research universities. Regrettably, no evidence is available about the competitiveness of faculty salaries for Penn's other Schools. In view of the importance to retaining and recruiting the highest quality faculty members to maintain Penn's stature and competitiveness for students, research support, and giving, it is recommended that Penn's academic administrators at the central, school, and department levels:

continue to place a high priority on at least maintaining Penn's competitive position with respect to faculty salary levels at leading research universities,
make substantial efforts to allocate sufficient resources to improve Penn's competitive position with respect to faculty salary levels at leading research universities, and
seek, or compile, evidence about the competitiveness of faculty salary levels for Penn's Schools not included in the MIT survey, and make efforts to allocate sufficient resources to attain, or maintain, competitive salary levels in these Schools as well.

B. Inequity in Faculty Salaries

While SCESF has long recognized a variety of reasons (e.g., merit, rank, market forces) for inequality among faculty salaries within Departments, among Departments with Schools, and among Schools, there nonetheless exists some degree of salary inequity (i.e., unfair or unjustified inequality) among the large amount of salary inequality. Since there is no legitimate reason for intended salary inequity, it is assumed that, in the long run, such salary inequity that may exist is unintended. Ultimately, responsibility for identifying and correcting any inequity in faculty salaries must reside with academic administrators at the departmental, school, and central levels because there are no other individuals or groups within the University who have access to individual faculty salary and performance data which are vital to assessing whether particular faculty salary levels are fully justified, or are partly inequitable. Therefore it is recommended that Penn's academic administrators take the following actions to identify and correct inequity that may reside in the salaries of some faculty members:

By using both central and school data bases, identify faculty members by rank within Schools who have unusually low salary levels (the bottom 10%) and determine whether such low salary levels are justified by evidence of poor performance. When such evidence is lacking, such faculty members should be awarded an upward salary adjustment in accordance with merit and other relevant criteria.
By using both central and school data bases, identify faculty members by rank within Schools who have unusually high salary levels (the top 10%) and determine whether such high salary levels are justified by evidence of exceptional performance. When such evidence is lacking, salary increments awarded to such faculty members should be moderated, possibly over a period of years, by limiting future annual increments to growth in the CPI (Philadelphia.) until the salary level is deemed to be equitable in accordance with merit and other relevant criteria. This recommendation is not intended to limit extraordinarily high salary levels for faculty members of exceptional merit. It is, instead, intended to limit annual increments to faculty members with very high salaries that are not justified by evidence of corresponding high performance.
For continuing associate and full professors not identified in V.B.1. above, academic administrators should also review the salary levels of these faculty members who have received cumulative salary increments less than the growth in the CPI (Philadelphia) during the years 1992-98 to determine whether such low salary levels are justified by evidence of poor performance. When such evidence is lacking, faculty members identified by this method should be awarded an upward salary adjustment in accordance with their merit and other relevant criteria so that their cumulative salary increment over the past seven years are at least as high as growth in the CPI.
Academic administrators should review the considerable variability in salary levels of full professors within Schools to identify evidence of inequity. For example, the average salary level of full professors in a number of Schools who entered Penn employment before 1978 is considerably lower that for their peers who entered Penn employment since 1977. Since it is quite possible, at least for some Schools, that average performance differences between these two groups of professors may not justify the different average salary levels. Instead, the more recently hired professors may have, in effect, been hired in accordance with a higher salary scale for a school, while the salaries of other professors with many more years of experience at Penn may have never been increased to the more recent and higher salary scale. If so, this inequality of salary levels represents inequity. When such a condition is identified, faculty members in the disadvantaged group should be awarded an upward salary adjustment in accordance with their individual merit and other relevant criteria.
Academic administrators should also review the considerable variability in the salary levels of full professors within Schools with respect to another possible indicator of salary inequity: the ratio of the salary levels of the 20% of full professors with the lowest salaries to the salary levels of the 20% of full professors with the highest salaries. For Penn overall, the average salary level of the highest paid group is about 75% above the average salary of the lowest paid group. However, this percentage difference ranges by school from a low of below 50% to well over 100%. If such wide variability between the low and high salary groups is not justified by performance differences and other legitimate criteria, then these average differences contain a component of inequity. When such a condition is identified, faculty members in the disadvantaged group should be awarded an upward salary adjustment in accordance with their individual merit and other relevant criteria.

C. Establishing a Floor for Salary Increments

To prevent or minimize possible salary inequities, it is recommended that a policy be established whereby all faculty members who perform at a satisfactory level will be assured an annual salary increment equaling the growth in the CPI (Philadelphia) provided the salary increment pool is at least 1% greater than the growth in the CPI. As a minimum, it is recommended that a policy be established whereby all faculty members who perform at a satisfactory level will be assured a cumulative salary increment during the most recent five year period that equals the cumulative growth in the CPI provided sufficient salary increment funds have been available to make this possible.

D. Subvention Pool Allocation Criteria

Average salary levels by rank differ widely among Schools. While there are a number of recognized reasons for such inequality, it is not clear that all of this inequality is justified. Even if the inequality is justified, such wide disparities are a source of poor morale among many faculty members in the relatively low paying Schools. To reduce the variability among average salary levels by rank across Penn's Schools, it is recommended that efforts be made centrally to moderate some of the largest salary disparities by explicitly taking them into consideration in determining the amount of annual subvention allocations to Schools.

E. Comprehensive Policy on Faculty Compensation

It is recommended that Penn's Central Administration initiate steps to develop, in consultation with the Senate Executive Committee, a University-wide comprehensive faculty compensation policy based on a stated set of general principles, and that salary and benefits (and changes thereto) be administered in accordance with this policy. Without such a policy, the current approach treats salary and various benefits in piecemeal fashion resulting in problems such as: (a) tradeoffs between allocating resources to salary and benefits components of compensation are not guided by stated principles and often poorly understood, (b) changes in one benefit may impact on one or more other benefits not under review, and (c) reductions in benefits without offsetting adjustments to salary may well reduce total compensation. A comprehensive compensation policy should entail the following four general principles as a minimum:

Penn should be committed to maintaining high faculty salaries and benefits in comparison with peer universities as part of its efforts to attract and retain distinguished scholars for each of its Faculties,
While changes in the structure of faculty salary levels and the benefits program are constructive and inevitable, any changes should be made with regard to their possible impact on specific benefits and salary, and tradeoffs between amounts spent on salary and benefits should ensure that the level of total compensation is not reduced.
Though there are a number of recognized sources of salary inequality among individual faculty members, departments, and schools, continuing efforts should be made by academic administrators to identify and correct variability that is the product of inequity.
Since there are many individual differences in the needs of faculty members for particular components of a broad-based benefits program, considerable flexibility should be provided within the package of benefits for faculty members to tailor a set to benefits that is most responsive to personal needs.


In developing a comprehensive compensation policy, the following faculty salary issues should be considered, and specific policies should be developed to address them:

Sources of inequality of individual faculty salaries by rank within departments/schools as a function of factors such as merit, rank, market forces, relative wealth of Schools, and years of service (e.g., discrepancies between newly hired versus longer-term full professors) (footnote 4); identification and correction of possible inequities in these respects.
Sources of inequality of average faculty salaries by rank among departments within schools, among schools, and between faculty and administrators; identification and correction of possible inequities in these respects.
Specification and publication of criteria (and their weighting) for salary increments, including the reporting to each faculty member (by their relevant department heads or deans) of information about the assessment of her/his performance in awarding a salary increment. In addition, individual faculty members should be made to feel welcome to provide further information, or to correct misinformation, relevant to established criteria for deciding her/his salary increment.
Review of salary increments over a multi-year period (e.g., over five-year blocks of time), as well as annual increments.
Weight given to outside offers of employment in deciding salary increments.
The linking of a salary increment floor (with the possibility of exceptions in special cases) to growth in the Consumer Price Index.
For Schools that are departmentalized, faculty members should be made aware of their option to seek redress of perceived salary inequity directly from their Dean when efforts to resolve such perceived inequity with the relevant Department Chair have failed. Likewise for Schools that are not departmentalized, faculty members should be made aware of their option to seek redress of perceived salary inequity directly from the Provost when efforts to resolve such perceived inequity with their Dean have failed. Under either of these circumstances, the faculty member should advised of the rationale for the faculty member's salary level by the relevant Department Head/Dean before seeking redress at a higher administrative level. In turn, the Dean/Provost should also provide the reasons for her/his decision to the faculty member.


Members of the Senate Committee on the
Economic Status of the Faculty

Roger Allen, Professor of Arabic
Jane Barnsteiner, Professor of Nursing
Erling E. Boe, Professor of Education, Chair
Joseph Gyourko, Professor of Real Estate and Finance
Rebecca Maynard, University Trustee Professor of Education
Bruce J. Shenker, Professor of Pathology/Dental Medicine

Ex officio
Vivian C. Seltzer, Professor of Social Work, Chair, Faculty Senate
John C. Keene, Professor of City and Regional Planning,
Chair-elect, Faculty Senate
Peter J. Kuriloff, Professor of Education, Past Chair,
Faculty Senate

FOOTNOTES

In defining this range, the three schools receiving grants from the Commonwealth of Pennsylvania (Medicine, Veterinary Medicine, Dental Medicine) have been excluded.
Modest improvement in the competitive standing of average faculty salary levels from 1982 though 1996 was observed in Penn's science, social science and humanities, architecture, and management areas, while a definite decline in the competitive standing of average engineering salaries was evident.
Weighted ratios were based on all Schools except Annenberg, Fine Arts, and Law (and Medicine, as usual) because each of these three Schools had no faculty members at one or more of the three professorial ranks.
The identification of these sources is not intended to imply that they are illegitimate sources of salary inequality. However, it is possible that the sources listed may also result in some degree of salary inequity. In addition, other possible sources of inequity may be involved in producing some of the inequality that exists.

TABLES

Table 1
General Operating Funds Budget for All Schools Combined at the University of Pennsylvania for Fiscal Year 1998 Reported in Millions of Dollars (Excludes the Designated Funds Budget)

Income Dollars $1,000,000s Percentage

1. Tuition $294 48%

2. Indirect Cost Recovery 79 13%

3. Subvention 66 11%

4. Commonwealth* 36 6%

5. Sales and Services 28 5%

6. Special Fees 18 3%

7. Gifts 9 1%

8. Other 23 4%

9. Health Services Transfer for School of Medicine 53 9%

Total Income $606 100%

Expenses

1. Faculty Compensation $163 27%

2. Staff Compensation 102 17%

3. Current Operating Expenses 98 16%

4. Student Aid 83 13%

5. Allocated Costs

a. Library 30 5%

b. School Facilities etc. 81 13%

c. Central Administration 54 9%

Total Expenses $611 100%

* Grant from the Commonwealth of Pennsylvania is designated for three schools as follows: Veterinary Medicine: $31M; Medicine: $4M; Dental Medicine: $1M.

Table 2
Average salary percentage increments of continuing Penn standing faculty members by rank in comparison with the Consumer Price Index (CPI) Penn Budget Guidelines

Group/Condition Average Fiscal Year 1997 Fiscal Year 1998 Compound Cumulative1988-97

Assistant Profs Median 3.5% 4.3%

Mean 5.0% 6.0% 100.8%

Associate Profs Median 3.5% 4.0%

Mean 4.3% 5.4% 87.2%

Full Professors Median 3.1% 4.3%

Mean 3.8% 5.0% 84.6%

CPI for June:

(Philadelphia) --2.3% NA

(National) -- 45.6%

Budget Guidelines Mean 3.0% 3.5% 59.2%

NOTE: Salary percentage increments pertain to all Penn standing faculty members who continued in the same rank during the periods of time reported. Excluded were all members of the Faculty of Medicine, all Clinician Educators from three other schools (Dental Medicine, Veterinary Medicine, and Nursing) that have such positions, and faculty members who were promoted or entered Penn employment during the periods of time reported.

Table 3
Percentile Ranks of mean salary levels of Penn standing faculty members
by selected academic disciplines in comparison with 26 public and
private research universities as of the Fall Term 1996.

Academic Disciplines

Percentile Ranks by Prof. Level

Number of Institutions Sampled

Full

Associate

Assistant

Sciences 65 69 65 26

Soc Sci/Human 73 81 62 26

Engineering 61 70 35 23

Architecture 78 94 35 18

Management 79 68 58 19

Weighted Mean 71 75 59 26

NOTE: Salary percentile ranks pertain to Penn standing faculty members from the Sciences (of SAS) and Social Sciences and Humanities (of SAS), and the Schools of Engineering and Applied Science, Fine Arts (for architecture), and Wharton (for management).

Table 4
Percentage of standing faculty members (excluding clinician educators)
awarded percentage salary increments exceeding the percentage growth
in the consumer price index (CPI) for Philadelphia.

Percentage of Faculty with Salary Increments Exceeding Growth in the CPI (Philadelphia)

Schools and
Disciplinary Areas

All Standing Faculty
For FY 1998

Continuing Full Profs: Cumulative For FYs 1992-98

Annenberg 78% 100%

Dental Medicine   100% 100%

Engineering & Applied Sci   93% 89%

Grad Education   100%   100%

Grad Fine Arts 85% 89%

Humanities (A&S)   99%   99%

Law   97%   93%

Natural Science (A&S)   92%   91%

Nursing 89%   100%

Social Science (A&S)   95% 81%

Social Work   94%   100%

Veterinary Med   95% 94%

Wharton 99%   95%

NOTE: Salary increments pertain to all Penn standing faculty members who continued in the same rank during the periods of time reported. Excluded were all members of the Faculty of Medicine, all Clinician Educators from three other schools (Dental Medicine, Veterinary Medicine, and Nursing) that have such positions, and faculty members who were promoted or entered Penn employment during the periods of time reported.

Table 5
Mean salary levels of Penn standing faculty members by rank during FY 1998

Ratio to Asst. Prof. Salary Level

Rank

Mean Salary

Unweighted

Weighted

Full Professor $105,616 1.69 1.89

Associate Professor 69,585 1.11 1.26

Assistant Professor 62,527 1.00 1.00

NOTE: Mean salary levels are based on all Penn standing faculty members who continued in the same rank during the periods of time reported. Excluded were all members of the Faculty of Medicine, all Clinician Educators from three other schools (Dental Medicine, Veterinary Medicine, and Nursing) that have such positions, and faculty members who were promoted effective FY 1998.

Table 6
Median salary percentage increments of
Penn standing faculty members by rank during FY 1998

Median Salary Increments Professorial Rank

School Full Associate Assistant

All Schools 4.3% 4.0% 4.3%

Annenberg 5.0% -- --

Arts & Sciences 3.9% 3.7% 3.6%

Dental Medicine 4.3% 4.0% 3.9%

Eng & Applied Sci 4.6% 4.3% 5.2%

Grad Education 4.8% 5.1% 4.3%

Grad Fine Arts 4.1% -- 3.8%

Law 4.3% -- 7.0%

Nursing 4.2% 4.34% 3.4%

Social Work 4.8% 4.0% 4.2%

Veterinary Med 4.3% 4.0% 8.2%

Wharton 5.0% 4.9% 6.8%

Budget Guideline 3.5% 3.5% 3.5%

NOTE 1: The Budget Guideline shown under each rank is for comparison purposes. As per Penn policy, it is a guideline for a salary increment pool for all standing faculty in each School, but not specifically for each rank.

NOTE 2: Salary percentage increments pertain to all Penn standing faculty members who continued in the same rank during the periods of time reported. Excluded were all members of the Faculty of Medicine, all Clinician Educators from three other schools (Dental Medicine, Veterinary Medicine, and Nursing) that have such positions, and faculty members who were promoted or entered Penn employment during the periods of time reported.

Almanac, Vol. 44, No. 34, May 19/26, 1998