Faculty Salary Inequality in U.S. Business Schools: A Mixed Methods Analysis

Abstract

Through a mixed methods approach, this study provides a greater understanding of salary inequality in U.S. business schools and how it changed between 1998 to 2004. The quantitative research examines full-time faculty using individual-level salary data from both a constant sample of 307 institutions and a larger 2004 sample of 464 schools, allowing for in-depth examination of inequality including within institutions. The qualitative research used interviews with business school deans to uncover decisions that, in the aggregate, can impact faculty salary inequality.Quantitative analysis of faculty salary utilized descriptive statistics as well as several inequality measures, along with regression analyses, to reveal the level and structure of inequality and the contributions of within-institution and between-institution inequality. Salary inequality increased between 1998 and 2004. However, contrary to previous research, salary inequality isn't attributed to superstar salaries; the growth in salary inequality is attributable to negative real growth in the lower tail of the salary distribution. Analysis between institutions reveals that the highest paying 10% of institutions are pulling away, increasing stratification between the most prestigious institutions and the others. Although private school faculty earn more than their public counterparts, salary inequality among faculty at public institutions increased more rapidly. Institutional characteristics including Carnegie classification, MBA ranking, degrees offered, accreditation, faculty size, tuition and fees, state appropriations per student and endowment per student contribute to differences in salary inequality between institutions. Within institutions, unionization and higher MBA ranking correspond to lower salary inequality; whereas research/doctoral, public institutions, and larger faculty size correspond to more salary inequality. Differences also exist in the inequality source: upper tail or lower tail.While the primary interview theme is the rule of the market, deans do make individual decisions based on their own competitive marketplace. The qualitative inquiry revealed four decision categories that can affect salary inequality, including: hiring strategies, environmental influences--colleges and fields, compensation challenges and market response strategies, all which may collectively increase or decrease faculty salary inequality. Interview analysis revealed additional questions that need to be answered using quantitative data, from changes in faculty composition, to compression/inversion, and salary inequality differences across fields.