Why I’m not complaining (much) about Vice Chancellors’ pay

Posted on March 16, 2010 by | 7 Comments

The annual story about university Vice Chancellors’ pay rises is in the papers again today. I have to admit that some of the stats are a little eye watering. The average VC now earns £194,000.

There is, quite naturally, outcry about this from, well, nearly everywhere. At a time when Governments are threatening to cut university budgets, it does seem that this isn’t the best use of resources. There are lots of valid complaints in Universities about this allocation of cash, and about inequity in pay. These are perfectly right and proper.

However, there is one argument which is often carted out which I think is pretty wrong-headed. People seem to think that pay discrepancies in the public sector are more objectional than those in the private sector because they feel like they are paying for the former, but not the latter.

Just where, then, do they think the money for bankers’ bonuses, or Asda’s chief executive, is coming from?

Adam Smith tells us that, in a perfect market, price is set by competition, and by supply and demand. If one company is making excessive profits on a good or service, then another will cut it’s profit margins, and under-cut it’s competitor.

If banks can afford to pay massive bonuses – or Phillip Green can afford to pay himself enough in one year to double the wages of the entire Cambodian workforce for eight years – then this means there is a market failure. Either these companies are passing the costs of their bonuses onto us, as consumers, or onto those from whom they buy – their workers, and suppliers. In the case of banks, this means all of us. We all need financial services at some point in our lives, and we all depend on services which need financial services. The fact that there is a market failure (banks are monopolistic) means that they are able to pay massive bonuses, and pass costs onto the rest of us, without fearing that we’ll go somewhere else.

The money for their bonuses comes from all of us – from right across the economy. We don’t have a choice about whether or not we buy services which are more expensive because of this monopoly, or work for people who pay us less because of it.

So, sure, it’s not great that the public sector is  perpetuating inequality by paying it’s managers much more than those they manage. But in the ranks of the overpaid, vice-chancellors come a long way down. You buy their services through taxes. You buy bankers services through, well, pretty much everything else you pay for. But both draw their salaries from your hard earned cash. And bankers take much, much more of it.

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Comments

7 Responses to “Why I’m not complaining (much) about Vice Chancellors’ pay”

  1. NishmaNo Gravatar
    March 16th, 2010 @ 6:11 pm

    Bankers may be earning more from our taxes, but universities are being transformed into businesses rather than places of education. With increases in VC pay, there are also massive spending cuts in various departments, including all humanities and arts.

    Any subject which does not cater to economic prosperity (in the way that you dislike Adam) is facing a slow demise in funding and research opportunities. This means that any left-wing or non-conformist ideas are being hushed up because they do not bring in revenue.

    The fact is that universities in the UK have been representatives for increasing knowledge not catering towards a ideological economic system. Without these subjects and academic support, the side of academia that focuses on society-before-individual or meaning and humanity, science (esp. the humanistic and evolutionary/individualistic angle) is gaining much more credibility.

    Bankers may get more of taxpayers money, but that won’t change where the government places its funds. The fact they are cutting off higher education funding means that the organisational structure of these disciplines needs to be challenged. The starting point is reducing high wage earners and placing that extra funding in education rather than in a Bentley for the VC to drive around in.

  2. Adam RamsayNo Gravatar
    March 16th, 2010 @ 6:44 pm

    Hello,

    Yeah, I agree that people in universities should complain about this, and demand that unis spend their money better – for all the reasons you give.

    What I object to is people using this as an excuse to argue that we should have lower taxes/to attack the public sector, when they don’t make the same complaints about the private sector.

    Adam

  3. Michael FourmanNo Gravatar
    March 16th, 2010 @ 7:19 pm

    I’m with Adam. On the grand scale, VCs are small fry. Furthermore, a good VC is worth a lot to the University – and makes a positive contribution to budgets. The really good ones also protect academic values.
    Not clear that a ‘good’ banker helps anyone else. Do the most successful banks make most contribution to society? Perhaps not; for universities the answer may be, “Yes”.

  4. Seb PowerNo Gravatar
    March 17th, 2010 @ 11:54 am

    Michael, the fact that VCs make a valuable contribution to society should not be an excuse for huge inequality in pay. There are many people whose contributions are valuable. This is very difficult to measure. Kindergarten teachers look after kids at their most vulnerable stage in life, during the most rapid and fragile period of a child’s development. They get paid peanuts. But I do agree with Adams point regarding the rather irritating imbalance of criticism between the public and private sector.

  5. RicNo Gravatar
    March 17th, 2010 @ 3:29 pm

    Your blog needs more pictures.

  6. OsbertNo Gravatar
    March 18th, 2010 @ 5:16 pm

    Good report from nef about the contribution of different professions to society
    http://www.neweconomics.org/publications/bit-rich

  7. IrrationalPointNo Gravatar
    March 27th, 2010 @ 1:23 am

    I agree with Adam that it’s easy to lose sight of the big fish in pay disparity issues, but I really object to Michale Fourman’s suggestion that VCs’ contributions to a university justifies the pay disparity. Tutor make massive contributions to my education, but many (most?) of them are below the breadline.

    …and yet. At a time when everyone else has pay freezes, hiring freezes, threats of redundancies…it would have been nice if the VC had declined yet another pay rise that’s well above the rate of inflation. His pay rise could have hired a few more tutors, or raised a few more people’s pay to a living wage. I know it’s small fry, but it’s small fry in the way that most campus-based politics is small fry. It doesn’t mean that the money couldn’t have had a very real impact if spent elsewhere.

    –IP

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