Robert Toutkoushian is Associate Director of the McBee Institute and Professor of Higher Education at the University of Georgia.
When people think about how much they will get paid for working, they usually focus on their salary or hourly wage rate. Salary is important because it is the largest share of total compensation, and it offers the most flexibility in how the money is used.
Nevertheless, employees also get paid in other ways that do not get as much attention and yet are important. These other payments, or benefits, can be grouped into two major categories: (1) money can only be used in the future (e.g., for retirement), and (2) money that can only be used for specific things such as medical insurance. In general, there is a long list of possible benefits people can receive, including contributions to Social Security, retirement plan contributions, medical and/or dental premiums, unemployment insurance, tuition benefits for employees and/or their families, disability and group life insurance, workers’ compensation coverage, and other benefits (e.g., profit sharing plans).
Benefits at institutions of higher education
In a recent study, I looked into the different types of benefits paid to faculty at institutions of higher learning. I examined data from four-year colleges and universities on the different types of benefits that they pay their faculty, how these have changed over time, and how benefits varied by type of institution.
Some data were obtained from the Integrated Postsecondary Education Data Study (IPEDS) surveys conducted annually by the National Center for Education Statistics, which gathered information about institutional spending on retirement benefits and health insurance for faculty. Another source of data was the American Association of University Professors (AAUP), which collects annual faculty compensation. Over the period 2005-2018, the AAUP also assembled information on both average faculty salaries and average total compensation.
Findings
My key findings on trends in benefits included the following:
- There has been a slow but steady growth in total benefits for faculty over time. Average total benefits for faculty have increased from $25,205 in 2005, to $29,123 in 2018 (after adjusting for inflation; $2021). The share of total compensation in the form of benefits also grew during this period, from 21.7% in 2005 to 23.7% by 2018.
- By far the most dramatic growth in benefits was for health insurance benefits. In 1980, health insurance accounted for under three percent of total faculty compensation. By 2020, however, health insurance benefits amounted to over 10% of total compensation. Health benefits are now the largest single source of benefits for faculty, eclipsing retirement benefits.
My research also used multiple regression analysis to identify which type of higher education institutions had the largest benefits as of 2018. Among the key findings were the following:
- On average, institutions that pay higher salaries to faculty also had higher benefits. This is partly due to the fact that retirement benefits tend to be set as a percentage of salary.
- Private colleges have less generous benefits compared to public colleges, despite the fact that highly-selective private colleges pay higher salaries than do their public counterparts. This helps to offset some of the compensation differences between the two sectors.
- Not surprisingly, colleges with more money per student are more generous with both faculty salary and retirement benefits. Yet there is no connection between the amount of money a college receives per student and the health insurance benefits provided.
- Benefits for faculty vary by geographic region. These differences are partly attributable to the higher cost-of-living along the east and west coast regions of the United States, and differences in the cost of health care by region.
Looking Ahead
It is reassuring to see that faculty benefits for retirement have gradually increased over time. More alarming is the dramatic growth in health insurance expenditures by colleges and universities. This is partly due to the rising cost of health services in the United States which is passed along to institutions and their employees. Managing rising health costs will likely continue to be an important concern for colleges in the near future.
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