Our Increasingly Bifurcated Higher Education System

Today’s paper has an AP story on Chief Justice John Roberts’ annual report, which this year focuses exclusively on the pay of Federal justices and that it has not kept up with inflation and is discouraging private sector lawyers from entering the judiciary (and, hence, that the judiciary is increasingly composed of public sector careerists) and further that judges are actually leaving the judiciary in increasing numbers for reasons of income. According to Roberts, this creates a selection bias in who becomes a federal judge (increasingly, only the independently wealthy or those for whom judicial pay represents a step up) and hence threatens to undermine our system of law.

The AP story today follows a piece by Linda Greenhouse yesterday on the same topic that explains part of the issue is a law that ties Federal judges salaries to the salaries of members of Congress, who are loathe to vote themselves salary increases for fear of being accused of gilding the lily by the public, although a reasonable counter argument can be made that a substantially higher salary would enable members of Congress to be less malleable to pressure from lobbyists and more able to resist the perqs that lobbyists provide. The problem is illustrated by observing the current salary structure of Justices. Greenhouse reports:

By statute, federal district judges receive the same salaries as members of
Congress, now $165,200 a year. Judges on the federal appeals courts receive
$175,100; associate justices of the Supreme Court, $203,000; and the chief
justice $212,100. The linkage of district judges’ and Congressional salaries
means that judges pay the price when members of Congress discern that it would
be politically unpopular to raise their own pay.

Contrast this with the Census’ most recent report on income (from the calendar year 2005) where median income for all households is not quite $47,000 while for married households (the highest income category) median income is about $66,000. Thus the justices’ income (and this doesn’t included spousal income) is about three times the median for the population, and for many who might consider the issue that might seem like enough. But Greenhouse reports that nowadays former clerks who worked for the Justices make as much or more one or two years out. This clearly has a psychologically damaging effect in that the clerks are perceived (rightly?) by the Justices as their underlings. But perhaps the more relevant comparison is with Law School professors and Deans where Greenhouse reports:

Justice Breyer presented charts showing that while in 1969, federal district
judges earned slightly more than law school deans, $40,000 compared to $33,000,
and substantially more than the $28,000 earned by senior law professors, the
situation by 2002 was completely reversed. In that year, the judges were earning
$150,000, compared to $250,000 for the professors and $325,000 for the deans.

The situation with faculty pay in Law Schools is similarly reflected in faculty pay within Business Schools and I believe it to be the case in Medical Schools as well, with substantial spillover to the pay of faculty in the Biological Sciences even if such departments are not housed in Medical Schools. Thus, if one were to compare the relative salaries of faculty in Law or Business to the salaries of faculty in English or Math, and look at the relative compensation over time, I’m sure one would see the professional school faculty salaries looking increasingly steep relative to the Arts and Sciences faculty salaries, though I don’t have the data at hand to document this.

In effect, the rising income inequality in society as a whole is playing out on our campuses, creating more inequality in faculty earnings and substantial tension internally to address the issue – the hyperinflationary pressure on faculty salaries in professional program disciplines. From the institution viewpoint (but definitely not from the student perspective) the situation is at least partially ameliorated by the tuition differentials across colleges, with the professional schools charging a substantially higher tuition than colleges of arts and sciences. But the same type of selection bias that Chief Justice Roberts describes for Federal Judges is at root with professional school faculty, many of whom have opportunities in the private sector to earn substantially more than what they are making as faculty members. This is one substantial source of the bifurcation we are seeing in Higher Ed.

A rational response to an escalation in price is either to dampen demand or increase supply. However, in the case of professional school faculty (and the professions they support) we are unlikely to see either of these effects come into being as the rising relative earnings encourage new students to want to enter these professions as well as to create resistance from current practitioners to significantly expand their membership.

The sole mitigating effect appears to be from the “student’s liquidity constraint.” Students who attend professional schools who are not themselves independently wealthy must become increasingly leveraged to finance the tuition they must pay. The costs are up front while the earnings are down the road and, of course, those earnings are risky – there could be a downturn in the market overall or perhaps their own performance and aptitude (and a willingness to put in 80 or more hours per week) proves lacking. This is a risk that one can’t insure against and so the liquidity affect may limit demand.

In the absence of insurance against this financial risk, individuals will look to self-insure and one obvious way of doing that is to attend a high ranked school. Thus the demand to get into the very top professional programs is all the greater, even if the demand at more modest programs has abated somewhat. Since these schools must rationalize this student perception, they must compete for the best and brightest faculty and provide increasingly swank facilities. As the documentary Declining By Degrees notes, this sort of competition is happening at the undergraduate level as well. Thus the hyperinflation in cost is not just fueled by the professional programs side of the house, but also because of the elite institution effect, even within Liberal Arts education. This is a second important source of the bifurcation.

I believe we are witnessing an increasing bifurcation in student seriousness as well. I have written about this before – students are increasingly viewing college through a mercenary lens because of the rising tuition and hence “can’t afford” to smell the roses while they are in school. In my view, of course, this reflects a myopic understanding of what education is good for, it tends to deaden curiosity for curiosity’s sake, and it creates an air of nihilism and ethical depravity.

None of this is for the good. It is anti-democratic and ultimately destructive. The question I’m asking myself is whether Higher Education can reform itself in these dimensions without the underlying society reducing income inequality overall. This has the feel of walking up an escalator going down. In spite of individual good efforts, overall I expect the situation to get grimmer. I have not seen others talk about this issue with the causality running from outward in the society as a whole to inward with how we operate in Higher Ed. I’ve only seen the discussion go the other way – the increasing cost of Higher Ed making it increasingly difficult to provide adequate financial aid for low income but deserving students. That is an issue, an important one, but its not the only issue.

When will we wake up and start calling for steps to reduce income inequality overall? That is long overdue.