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Market Wages at Dartmouth? Never!

LivingWage.jpgThe choice that the College has made to overpay its staff stems from the administration’s acceptance of the doctrine of the “living wage” — a policy advanced in the far left circles of the Democratic Party, which asserts that wages set by the market (even though these are almost invariably well above the legal minimum wage) are immorally low. Wages, according to this line of thinking, should have a floor based on a supposed calculation of the actual cost of living. This set of ideas echoes the teachings of Rerum Novarum, Pope Leo XIII’s encyclical of May 15, 1891.

Curiously, when the College makes an economic calculation, for one reason or another it always seems to fall on the side of paying more to its employees rather than less. In his Report to the General Faculty, October 28, 2002, Jim Wright said:

Compensation strategy for both faculty and staff. Over the last three years, Dartmouth has allocated an additional $1.8 million to Arts and Sciences faculty compensation and a similar amount to staff compensation. This has allowed Dartmouth to bring faculty salaries closer to the mean of our peer institutions and to be more competitive with our staff salaries.

As regards the faculty, bringing “faculty salaries closer to the mean of our peer institutions” make prima facie sense. We don’t want to lose the best faculty members to other schools because we pay them less. But the calculation seems to ignore the fact that living in central New Hampshire costs approximately 18% less than living in Cambridge, Massachusetts, our closest Ivy neighbor, according to federal statistics. The cost of living here is half what it is in Manhattan, and 10-15% below all of our other Ivy competitors, except for Cornell (the overall cost of living in Ithaca is about 4% less expensive than central NH). So if we are paying the Ivy mean, we are giving our faculty more purchasing power than all of the other Ivy schools except Cornell.

And as for staff, the administration’s goal does not seem to be to align ourselves with our peer institutions. Of course, that would make no economic sense; a cook or an administrative assistant would not be wooed away from Dartmouth by Harvard to work in Cambridge. So what does Wright mean by the phrase, “to be more competitive with our staff salaries”? In the Upper Valley market for labor, we are already much more than competitive. The local market is a low-cost-of-living, low-wage one, which potentially gives us a huge advantage over most other Ivy Institutions — given that the market allows us to charge the same tuition and fees that the other Ivies charge. Even the Poverty in America group, which seems to be the home base for living wage ideology, estimated the living wage for a single person in Hanover to be $8.37/hour, whereas the similar floor in Cambridge is $12.17/hour. So why do we over-pay? The only answer is that Dartmouth has chosen to pay along ideological lines — an expression of guilty privilege — rather than follow the local market.

When historians write Jim Wright’s legacy, they will note his building program, his neglect of the faculty and any type of innovation, and most importantly, his effort to buy support from the faculty and staff by setting up a College pay scale that wastes tens, if not hundreds, of millions of dollars each year. Jim Kim has done little more than nibble around the edges of this situation.

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