The economic and institutional determinants of faculty salaries at Montana State University
Allard, Celia Ahrens
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Salary differentials are characteristic of faculty salaries in universities lacking rigid pay scales, and are attributable to a wide variety of factors. Economic theories of wage determination reveal that supply and demand, wage expectations, marginal productivity, and human capital are important salary determinants. Literature describing institutional organization suggests that funding, administrative rules and customs, and departmental power affect a university's decision-making processes, including salary determination. Federal antidiscrimination legislation and the lawsuits filed in response show that demographic factors may also influence salaries. Faculty at MSU tend to explain this year's salary as a function of last year's salary and the legislative allocation for raises, with some consideration given to university priorities and faculty performance. This thesis undertook to investigate that perception, drawing upon evidence from literature and past salary studies to construct a cross section time series model that would test possible reasons for salary differentiation. Factors were included at both department and individual levels. Some factors were explicit in MSU salary policies, while others arose through the informal arrangements that tend to evolve in universities. Data for a five-year period permitted evaluation of these effects over time. Regression analysis confirmed the faculty perception and also indicated that some of the informal salary determinants explained more variation in salary than some of the formal ones. The informal determinants included two department-level variables, one indicating an active doctoral program to represent a department's proximity to MSU's land grant mission, and another indicating growth in number of majors to represent pressure to hire and retain faculty in high-demand areas. Both variables served as crude proxies for institutional priorities , and both were statistically significant, although not strongly so. An informal determinant at the individual level indicating promotion to a higher rank was also significant. By contrast, the human capital variables did not suggest strong salary differentiation based on education and experience. Of the departmental merit variables, only the one. indicating high research productivity was positive and significant. Because of weaknesses in the available data the results are not conclusive, but they are suggestive enough to warrant further investigation.