Although it is far from the norm, a few colleges pay their assistant professors more  on average than they do their tenured professors. Although such pay scales might harm the egos of tenured professors, they can benefit colleges.
Organizations often pay high salaries to (1) attract new employees, (2) keep existing employees, (3) compensate workers for unpleasant working conditions and (4) compensate workers for taking on risks. These four criteria support colleges giving relatively higher salaries to assistant professors.
Consider a college that has some extra money to spend on faculty salaries. In many fields, this college competes intensely with other schools for talented assistant professors. So the college could increase the quality of its faculty by using its extra money to boost assistant professors’ salaries.
Compared to assistant professors, tenured professors rarely switch jobs. Our hypothetical college probably won’t lose a significant number of its non-superstar tenured faculty if it doesn’t allocate its extra money to raising their salaries. (And the college can always cut separate deals with it superstars.) So to maximize the quality of its faculty, the college should create a pay structure in which tenure-track assistant professors earn more than tenured professors. As the following example shows, a college can do this without ever decreasing a professor’s salary even if the professor is promoted.
|Year||Tenured Professor’s Salary||Assistant Professor’s Salary|
[If an assistant professor were promoted at the start of 2010 he would make $83,000 in both 2009 and 2010.]
Assistant professors in many ways have harder jobs than tenured professors do. They have more pressure to publish. They usually spend more time on class preparation because they have taught their classes relatively few times. And, keeping in mind their looming tenure bids, they often feel compelled to be more deferential to their senior colleagues than they would prefer. Those who care about economic fairness consequently should support the idea of assistant professors making more than tenured professors. And those who care about markets should understand that the less pleasant the job, the higher salary you must pay to attract top talent.
Job security is a large part of tenured professors’ compensation. So even if a tenured professor has a somewhat lower monetary salary than an assistant professor does, he probably, over all, receives more total compensation than his non-tenured colleagues. After all, I suspect few tenured professors who are not superstars or close to retirement would agree to exchange, say, $3,000 in extra salary in return for abandoning tenure.
Markets compensate intelligent risk takers. For example, investing in the stock market yields a higher average return than investing in safe government bonds does. Up or out tenure decisions foist enormous risk on tenure-track assistant professors. Ph.D.’s in practical fields in which many non-academic jobs are available should be willing to take on tenure risk only if they are suitably compensated for it. In contrast, however, being a tenured professor is one of the safest jobs on the planet, and consequently you would expect markets to pay tenured professors a negative risk premium that reduces their salary.
It’s relatively less risky for a college to increase its assistant professors’ salaries. For reasons economists don’t fully understand, employers almost never decrease their workers’ nominal salaries. So if a college gives a raise to a tenured professor, it is stuck paying this raise until the professor retires. In contrast, if an assistant professor becomes too expensive the college can simply not reappoint him.
I’m actually surprised that the academic market doesn’t induce more colleges to pay greater salaries to assistant professors than to non-superstar tenured professors. Tenured professors, however, have on average vastly greater bureaucratic power than their untenured co-workers and perhaps such power discrepancies explain why at most colleges tenured professors earn more than assistant professors.
Some might claim that not rewarding tenured professors for their long experience would harm their morale. But I wonder how many talented assistant professors have had their morale damaged (or indeed have even voluntarily left academe) because they are paid less than some of their less talented and less hardworking senior colleagues.