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How to Set Wages: What is “Fair”?
I have received two contradictory letters about the budget cuts: one from an administrator who said that even the idea of cutting the wages/benefits of Dartmouth’s lowest paid employees left her shaking her head. The second came from a faculty member who was angry that his total compensation had been trimmed by thousands of dollars due to the increased cost of the College’s health insurance plan, the raising of co-pays/deductibles, and the reduction in his pension contribution.
Both correspondents based their concern on some abstract notion of fairness.
Fairness is a slippery concept. Fortunately in the business world, it is not something that comes up often. Can you name the concept that replaces it when an employer fixes wages and benefits for employees? The answer should be obvious, but in my experience in Hanover, it eludes most people: supply and demand in the open market.
Just as I don’t ask whether the price of a bottle of milk at the Hanover Food Co-op is fair — I simply evaluate if the milk is worth its listed price to me; if it is not, I buy something else or shop elsewhere — so, too, do I negotiate wages with my employees.
Per RSA 279:21, the minimum hourly wage in New Hampshire is $7.25, but if you put an ad in the Valley News offering a full-time job for anything less than $9.00, you will not get a response. Believe me, we have tried. My lowest paid full-time employees now make $9.50/hour, with benefits and medical insurance that are well beyond the legal minimums. Of course, most staff members make substantially more.
Supply and demand dictate this pricing of labor. I need to pay enough in order that people are happy to work in my business, and so that they won’t leave to work elsewhere. Fairness has nothing to do with it, dearie. Wages are pragmatically set in order to keep people working with us. That said, the wage rate can shift. We recently lost an employee to a better paying competitor, and as a result we adjusted upwards the salaries of all staff members in that area.
How does this apply to Dartmouth? Well, supply and demand works at the College, too — even if the administration does not acknowledge it. The professor who wrote to me could well leave for another institution which pays more to its faculty. A smart institution pays the going rate to faculty and to staff, and as a result it keeps the people it needs. Dartmouth, par contre, pays support staff based on some abstract notion of fairness, and today, after the budget cuts, it is still grossly over-paying support staff members — who know full well that their friends are working for local companies at wages and benefit levels much below what they are making at Dartmouth. Yet at the same time, the College is now under-paying its best faculty, who know the opposite about their own colleagues at other schools. The end result will be that the College will lose some of its top faculty members, a loss that is not nearly compensated by the good feeling that certain progressive people seem to get from over-paying Dartmouth’s 3,000+ non-faculty support staff members.
Let the market dictate wages and benefits. There are consulting firms that can tell us exactly where our wages need to be. If Dartmouth were to follow their advice, three things would occur: all of our employees would earn the same income as their friends and colleagues in similar positions make outside the Dartmouth Bubble; the College would save many millions of dollars; and we would keep our best faculty members. To not follow this advice will do (and has already done) lasting damage to our great institution.
August 14, 2013
Breaking: Of Crips and Bloods and Memories of Ghetto Parties
History repeats itself, first as tragedy and then as farce, or sometimes it just repeats itself. From the New York Times on November 30, 1998: At Dartmouth College, white students at a ”ghetto party” dressed…
June 25, 2013
Dean of the College Charlotte Johnson’s War on Students Part (2/2)
Part 1, Part 2 Today’s post again recounts the events that befell the Freshman. However, the content of the Hanover Police department report reproduced in this space yesterday is supplemented by information from my own…
October 18, 2009
When Love Beckoned in 52nd Street
We were at San Francisco’s BIX last evening, enjoying prosecco, cheese, and a bit of music. A full year of inhabitation in Northern California has unraveled to me no decent venue for proper lounging, but…
October 9, 2009
D Afraid of a Little Competish
So our colleague and Dartblog writer Joe Asch informed me that the D has rejected our cunning advertising campaign. Uh-oh. The Dartmouth is widely known as a breeding ground for instant New York Times successes,…
September 4, 2009
How Regents Should Reign
As Dartmouth alumni proceed through the legal hoops necessary to defuse a Board-packing plan—which put in unhappy desuetude an historic 1891 Agreement between alumni and the College guaranteeing a half-democratically-elected Board of Trustees—it strikes one…
August 29, 2009
Election Reform Study Committee
If you are an alum of the College on the Hill, you may have received a number of e-mails of late beseeching your input for a new arm of the College’s Alumni Control Apparatus called…
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- 2007 Trustee Election
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