The Senate Source

August 2014

New Total Remuneration Study Shows Decline in UC's Competetive Position

Academic Senate leaders say a new study of UC faculty compensation calls into question the University’s ability to successfully recruit and retain the best faculty in the world.

The just-completed study of total remuneration provides evidence that the position of UC faculty relative to faculty at the “Comparison 8” group of institutions (the benchmark group of four public and four private research universities accepted by the state for comparison) has declined since 2009, the time of the last study. “Total remuneration” refers to the combined value of cash compensation, current health and welfare benefits, and retirement benefits. Principal factors contributing to the relative decline are the resumption of employee contributions to UCRS in 2009 and the creation of the “2013 tier “of retirement benefits for employees hired on or after July 1, 2013.

The 2009 study found that while the salaries of UC faculty, as a group, lagged those of Comparison 8 faculty by 10%, their total remuneration gap was reduced to only 2% when the value of UC’s health/welfare and retirement benefits was included in the calculation. The new study, however, shows that by fall 2013, the salary lag had grown to 12% and the relative value of UC faculty’s health/welfare and retirement benefits had declined to nearly the average level of the Comparison 8, creating a total remuneration lag of 10%.

UCFW Chair and Academic Council Vice Chair-elect Dan Hare says the study illustrates how the ramp-up in employee contributions to UCRP and other changes to retirement benefits have affected UC competitiveness. “The 2014 update shows that UC’s benefits are no longer sufficiently rich to compensate for below market salaries,” says Hare. “Near-average benefits and below market salaries have serious implications for UC’s future as the world’s premier public research university. UC quality will decline if it cannot compete successfully to recruit and retain the best faculty.”

In spring 2013, the Academic Council requested an update to the 2009 study to assess UC’s competitive position relative to the Comparison 8 after accounting for changes in the total value of UC benefits resulting from increasing employee contributions to UCRP and the introduction of the 2013 tier.

Mercer, a consulting firm specializing in human resources and related areas, performed the 2014 study for the Office of Academic Personnel and the Senate, using the 2009 methodology to ensure an accurate longitudinal comparison. Mercer’s methodology assigns a value to each employer-funded benefit component, including medical, dental, life, and vision insurance; disability insurance; UC’s pension plan; and retiree medical and life insurance and compares the value of each of these to that of the comparable component of the benefits offered by the Comparison 8 institutions. The study covers general campus ladder rank faculty only. Health Sciences and law faculty are not included in the study.

The Comparison Eight includes Harvard, MIT, Stanford, SUNY - Buffalo, Illinois – Urbana, Michigan – Ann Arbor, Virginia, and Yale

Employee contributions to the pre-2013 UCRP tier (the “1976 tier”) have increased 1.5% each year since July 2009 and are now at 8% of covered compensation. The new tier approved by the Regents in December 2010 that affects faculty hired on or after July 2013 has an employee contribution of 7%. Although the 2013 tier includes the same 2.5% maximum age factor as the 1976 tier, the 2013 tier increases the minimum retirement age from 50 to 55, and penalizes early retirement before age 65. It also eliminates both the “inactive COLA” that makes inflation adjustments to the salary base for calculating pension benefits for employees who vest in UCRP but leave the University before retirement age, and eliminates the option available to members of the 1976 tier to take their retirement benefits in a single lump-sum cash-out.

Hare is particularly alarmed by the small share that benefits represent in the total remuneration of faculty at the Assistant and Associate professor levels, because the value of the retirement benefit is heavily discounted for younger faculty due to the longer time required to reach retirement age. The average full professor has already qualified for retirement benefits, whereas assistant professors will not reach retirement age for about 20 years. An employee who vests in UCRP but leaves the University before retirement age will receive a smaller pension after reaching that age based on the salary he or she received at the time of separation from the University. As a result, there is a higher probability that an assistant or associate professor will not remain employed at UC long enough to earn a significant pension.

“Because of the declining portion of benefits in the total remuneration of Assistant and Associate Professors since 2009, an attractive cash offer by a UC competitor may now be more successful at luring away young UC faculty,” Hare says. “This is troubling because young faculty are the future of the university.”

Vice Provost for Academic Personnel Susan Carlson says she was not surprised by the overall findings. “We already knew that our salaries lag those of the Comparison 8, and we knew, as well, that the value of our benefits had decreased since the last study in 2009,” she said. “I was, however, surprised by the finding that overall total remuneration had essentially remained flat since 2009. Notably, the dollar amounts have not been corrected for inflation.” 

She says the study shows that UC remains competitive, but it is a wake-up call reminding the university that it must pay attention to what it takes to recruit the best.

“While salary and benefits are not all it takes, they make a difference. The findings make a strong case that we need to make faculty salaries a priority,” she said.

UC Berkeley Professor Robert Anderson, who along with UC Davis Professor James Chalfant was a faculty advisor to the Total Remuneration Steering Committee, is more negative in his assessment. He says the study “drives a stake through the heart of the idea that UC's benefits compensate for below-market salaries. The Senate must insist that, whether or not that was ever true, it certainly is not true now. We need to address the salary lag if we are going to remain the University of California and not a middle-tier state university.”

The full study and a set of briefing points have been posted online and provided to campus Chancellors, Executive Vice Chancellors, and Vice Chancellors for Academic Personnel. Senate leaders say they hope that the results of the study will presented to the Regents at a meeting in the next academic year.