Is it wrong to keep working?

Older university professors earn more than younger ones - this paper has Canadian evidence and references.

Studies of scientists and of Norwegian academics have found that research productivity begins to fall at some point, but the onset and rate of decline varies across disciplines. One more recent study found that age and publication productivity were unrelated. Studies (here and here) that track professors' student evaluations over time have found that professors become neither better nor worse teachers as they age. My reading of the research: productivity might decline after middle age or it might stay constant, but it certainly does not increase.

Putting these two observations together, the relationship between pay and productivity over time looks roughly like this:

If pay increases but productivity is stable or decreasing, towards the end of an academic's career her pay will exceed her productivity. This is not a problem as long as it is fully anticipated by both parties. 

Firms might structure employment contracts so that pay increases faster than productivity for any number of reasons. For example, suppose a firm makes considerable investments in its employees, so it does not want to lose them. It can induce workers to stay by deferring their compensation, paying new workers salaries below their value to the firm, and more senior workers salaries above their productivity. Workers stay with the firm in order to receive that late-career pay-off. Or firms might pay more senior workers more just because annual pay increases make people feel motivated and happy.

Such a pay structure can be profitable as long as the pay structure is similar to the one shown in the diagram above, where the high costs of paying workers between 45 and 65 are counter-balanced by the low cost of paying workers between 25 and 45. But if the terms of the employment arrangement were changed so that workers stayed on until 75, the firm's pay structure would no longer be profitable: the costs of paying experienced workers more would exceed the gains from underpaying junior workers.

Universities in BC, Ontario, Saskatchewan, Nova Scotia and Newfoundland are experiencing just this kind of change.

Until fairly recently, university professors' contracts in these provinces were negotiated under the assumption that all professors would retire at age 65. That standard retirement age is no longer in force. Professors may continue to work as long as they choose - or until they become incapable of performing their duties.

A recent paper (ungated here) by Chris Worswick and Casey Warman compared provinces with and without a standard retirement age. They found that, without a standard retirement age, the typical professor retired at about age 70, but a small minority continued to work for much longer. 

Worswick and Warman's results imply that the period during which a typical professor is receiving a salary in excess of his or her productivity has increased by about five years. That money has to come from somewhere: lower salaries or greater productivity expectations for academics earlier in their careers, lower salaries for staff elsewhere in the academy, the substitution of lower-cost contract instructors for tenured or tenure-track faculty members, higher tuition, greater government funding.

It is not wrong to keep working. One "retired" colleague of mine continues to work for the university chairing PhD examinations. He enjoys the work and does it superbly; no one else wants to do it. He is paid a sum of money that compensates him for his time, and reflects the contribution that he makes to the university. The arrangement pleases everyone.

But to collect a six-figure salary, when others could do the work as well, have greater financial need, and would be willing to do the job for less....? 

 

Comments

[Nick Rowe]

I agree. We were hired under one contract, then the government changed the rules of the game mid-play. It advantaged those of us who were mid-career, and disadvantaged everyone else. I'm sticking to the old contract.

Though I admit it's partly for selfish reasons. There's roads that need driven, and rivers that need paddling, and 40 years would be too long in the same job.

There never was mandatory retirement anyway, as your example shows. You could "retire", then come back and teach year by year under a new agreement, but at lower pay, if you and the university wanted it.

[Nick Rowe]

Of course, the interaction of tenure and the end of mandatory retirement is a whole other can of worms, that will eventually have to be opened.

[Frances Woolley]

Nick: "Of course, the interaction of tenure and the end of mandatory retirement is a whole other can of worms, that will eventually have to be opened."

People are reaching for the can opener as we speak...

By the way, the amphibex cleared the ice on the Rideau yesterday, so paddling is not far off!

[Livio Di Matteo]

Interesting post Frances. I never fully understood why mandatory retirement was abolished in universities. Much policy seems to be driven by small pockets of self interest and my guess is that there were some faculty and some administrators that liked the idea of working past 65 with full pay and benefits and did not want to retire. The fundamental incompatibility of a system of tenure with non-mandatory retirement did not seem a consideration and perhaps there even may have been a thought that such an incompatibility would eventually weaken tenure. However, tenure appears to have been more robust than otherwise thought and the result has been fewer junior hires and more contract lecturers. If there was ever a collective epitaph for the human species it should read something like this: Here lies a species capable of great thinking but seldom capable of thinking through the consequences.

[Stephen Gordon]

My - possibly mistake - understanding is there never was mandatory retirement for profs in Quebec. I wonder if that explains why prof salaries here are the lowest in Canada.

[Christopher Jillings]

I don't want to go into details but I am very lucky that we have people in our lab who hold down the "wisdom end of the spectrum". Productivity is a function of papers produced but also postdocs mentored, young researchers mentored, summer students guided. And let's not forget effort saved by this writer when told that what I am doing seems to make sense but really I ought to be doing Y instead of X.

[Frances Woolley]

Stephen: "there never was mandatory retirement for profs in Quebec. I wonder if that explains why prof salaries here are the lowest in Canada"

If you believe the story I've told in this post, yes, it would partially explain the low Quebec salaries - the other explanation is that Quebec universities have some degree of monopsony power over French-speaking academics.

But, for this reason, I'm not sure that Chris Worswick and Casey Warman's results will generalize in a straightforward way to the rest of Canada - on the one hand, Quebec professors might be expected to work for longer because they need the money; on the other hand, the relatively low Quebec salaries make staying on less worthwhile.

Livio: "tenure appears to have been more robust than otherwise thought" - partly, I think, because universities are under provincial jurisdiction. Any one university or province that unilaterally chose to end tenure would find themselves unable to compete, as they would have to offer high salaries to compensate for the lack of job security. In the US (which doesn't have mandatory retirement) tenure hasn't ended so much as faded away - that is, fewer and fewer faculty are being hired onto the tenure track - the stats in this post suggest that the proportion of US university faculty who are tenured/tenure track has gone from about 3/4 in the 1970s to about 1/2 now.

[Jospeh]

I have always thought that the simple and obvious solution to this quandary was to make tenure last only until 65 years of age. That way, highly productive and valued professors could continue after 65 on a contract basis. But most professors would retire at 65. Furthermore, professors in the age range of 55 to 65 might put in extra effort if they wanted to stay, which can only be to everyone's benefit. It would also create a pool of skilled professors who (due to pensions) could act as a flexible labor force (which is something that most university departments would highly value).

When I was a graduate student in Canada, we were told the myth of a massive wave of retirements that would open up a lot of positions. Two factors conspired to make this less impressive than one might have thought: jobs were no longer fully replaced and mandatory retirement was removed (smoothing the process). My friends in liberal arts ended up (at least in the short term) the most bitter about this.

[in the long run they mostly found other jobs and the majority are quite happy with their careers these days despite some very hard years]

As for tenure here in the US, I am the only Epidemiologist I know of in my cohort who got a US job with tenure. Which is not to say that it does not happen, but it is exceedingly rare -- especially in desirable geographic locations.

So thank you for bringing up this very intriguing point,

[POWinCA]

First, let's disabuse ourselves of the notion that professor pay is strongly related to productivity. The market for new hires is competitive, but once a worker is in place the presumption is that they will remain there and work toward tenure. Only at the Associate level is there any kind of mobility.

There isn't a free market: the labor is less mobile (except at the top schools), tenure distorts incentives, bad teaching almost never affects pay or retention, the incentive scheme rewards research to the detriment of teaching, and older professors have learned how to work the system to their advantage.

Professors don't become worse teachers over time? Ask [name deleted - FW]'s students what they think of him. Same story I've heard from more than a dozen students over an eight year period:

"Nice guy, but all he does is tell stories and his exams have nothing to do with his lectures."

The older professors I knew were generally complacent about teaching, and regarded it as a chore. Generally, the older they were, the worse a teacher they were. That may have less to do with experience than it does the effects of: boredom with teaching the same subjects, other university duties, and the aches and pains of old age.

There are generational differences too. Professors of an older vintage have a very different attitude about teaching than their younger colleagues. In the olden days, professors were gods, and students were disciples with no voice. You dare not upset the gatekeeper to your graduation! There were no teaching evaluations or they weren't taken seriously. Their students, who later became professors, were imbued with a similar bad attitude.

Universities have recently begun to take complaints from students (their paying customers) more seriously. However, compensation and tenure was (and still is) based almost entirely on research. The newer generation of professors know and appreciate the value of a good teacher, and they carry that ethic with them when they become professors. A new assistant professor is more concerned, though, with getting tenure than doing prep work for class. Their job is on the line, and every minute spent on teaching is a minute lost working on research for tenure. Their research effort is PUSHED by the tenure and promotion motive.

Some older professors are outstanding teachers. The good ones are pulling up the average for the poor ones. Younger professors have the disadvantage of inexperience and need to do prep work from scratch. Older professors don't have these problems, so their teaching evaluations SHOULD be getting BETTER over time. If student evaluations are supposed to provide feedback, and the university provides the proper incentives, and the teacher cares about those incentives and responds to the feedback, then every full professor SHOULD be getting near maximal evaluations. The fact that they don't is illustrative.

Good teaching requires only two things: good presentation skills and care for students. There's absolutely no excuse for anyone being a bad teacher. I would say that experience doesn't count one-tenth as much toward good teaching as the DESIRE to be a good teacher.

In grad school, we used to say that one full professor's total preparation for class consisted of the walk from his office to the classroom. Another full professor had illegible handwriting and talked directly to the blackboard. Another would just read out of the textbook. Anecdotes become data when you compile enough anecdotes.

Student evaluations are a rigged game. Bad teachers might "buy" good evaluations by giving good grades. Many full professors teach a small number of graduate students, all of whom are likely to have that professor on their thesis committees. The combination of small class size and the fear of being discovered giving a bad teaching evaluation greatly inflates the evaluation. The group is also self-selected to appreciate, respect, and understand the professor - there are no students who need extraordinary teaching ability to reach. The worst teacher in my graduate courses got a teaching award by staying in the room during the evaluation and by requiring us to write hand-written comments on the back (which can give away your identity).

What happened to pay compression? Not too long ago it was the case that the newer professors were making more than the dead wood.

Productivity in terms of research likely SHOULD go down. If a full professor is doing his job, he should be teaching and mentoring graduate students, working with junior faculty to help them publish, and serving on several university committees. By the time you've made full professor you've already picked the low hanging fruit according to your capabilities.

Mandatory retirement was eliminated in the US because it violated age discrimination laws.

[Frances Woolley]

Joseph: "When I was a graduate student in Canada, we were told the myth of a massive wave of retirements that would open up a lot of positions." Yes, well, The Onion's analysis of this is still the definitive one IMHO.

POWinCA: "What happened to pay compression? Not too long ago it was the case that the newer professors were making more than the dead wood."

Professors salaries are heavily influenced by the state of the job market at the time when they're first hired (as I tell PhD candidates going on the market: the intercept is negotiable, the slope is fixed). So, yes, when a good job market follows a bad market, junior professors can end up earning as much or more than senior profs.

In the work that I've done with Chris Worswick and Casey Warman we track cohorts of professors over time (click on the link in the first line of this post). No matter when a professor is hired, he can expect to earn more as he gets older. It's just that some earn more htan others.

"Mandatory retirement was eliminated in the US because it violated age discrimination laws."

That's the same reasoning as was used here. And one can say "I have a right to continue working and I will do so." But, as Livio points out, if everyone thinks and acts that way, there will, in the long run, be changes in academic salary structures. As Joseph's comment illustrates, tenure is becoming a rarity in US universities.

[POWinCA]

Thanks for the comment on compression, FW. That makes it clear.

And thanks for the name deletion. :) I should have known better than to make an academic discussion personal. Mea culpa. It won't happen again.

The pay gap you found is particularly interesting since the body of knowledge and technical skills have grown so much. In economics, younger scholars have technical skills in empirical research far in advance of their older colleagues.

The first "Here" link on teaching evaluations didn't work when I clicked on it.

I think Joseph was talking about his specific department. Is tenure becoming a rarity or merely becoming less ubiquitous? That's the first I've heard of it, not that I'm disappointed. It may be true in Epidemiology, but I've seen no sign of it at any university at which I've been.

What I'm willing to accept at face value is that more and more teaching is being done by graduate students and adjunct instructors, and more research done by post docs. To some extent, I think this is good thing. I learned more about economics and statistics by teaching it rather than being in my graduate classes (see my discussion of bad professors). Teaching pays the bills, but delays graduation; the opportunity costs are huge.

Instructors on long-term contracts who are great at teaching but less great at research allows for division of labor, leveraging comparative advantage. Post docs get to work with facilities and colleagues they might not have been able to work with because they wouldn't get a tenure-track job at the same university.

It's interesting that professors at Canadian universities are in bargaining units. At most US universities, the professors and administrators are the ONLY people not in bargaining units. It doesn't seem to have hurt their pay. But American professors DO have significant control over their universities through Faculty Senates which serve as a de facto union with respect to non-pecuniary benefits. Canada (correct me if I'm wrong) restricts foreign supply of academics. This, by itself, should increase wages. Are there many opportunities for PhDs outside of academia in Canada?

In the US, we have highly skilled foreign PhDs competing for academic positions. I'd love to see a similar wage study in the US, including controlling for citizenship.

Adjunct faculty and grad students at some colleges and universities have labor unions. I don't agree with the unions, but they have a valid basis for existence: poor regard, low pay, and arbitrary employment decisions. The unions, though, clearly restrict labor supply - growth in the number of unionized grad teaching assistance grinds to a halt, and student-teacher ratios climb. Rejection letters for prospective grad students increase. Students and people seeking admission to grad school are the invisible victims.

Unions also tend to equalize pay regardless of relative performance.

[Joseph]

POWinCA: I was mostly discussing my field (Epidemiology) where there are an increasing number of universities that do not offer tenure to the majority of faculty in the area. Even in Canada, there are universities that are experimenting with untenured Epidemiology faculty.

I do agree that this shift seems to be much more pronounced in Epidemiology. Related disciplines (like Statistics or Biology) don't seem to have this issue so I suspect it is the close relation between Epidemiology and Medicine that started the equilibrium but it seems stable now that it has started.

What I find interesting is why other fields have not made this jump to non-tenured professors.

[Frances Woolley]

Jon Kesselman sent me the following via email:

This issue has been well worked over in the economic literature on mandatory retirement. It also raises the broader issue of gainers and losers from any change in public policies. If you feel guilty over occasionally being a “gainer” from some change in policy, remember all those times when you have been a “loser”! Who was going to come forward to compensate you for your losses?

“Should” you feel guilty about taking the rewards of the change in mandatory retirement policies? That is a question that can be answered only by each individual.

And rest assured that if the abolition of mandatory retirement in academia leads to many older profs choosing to work longer when their pay exceeds their productivity (an assertion, not a proven fact, as the evidence is that more productive academics disproportionately choose to work beyond the traditional retirement age of 65), adjustments in compensation schemes will emerge. Universities will be increasing their use of performance-based rather than seniority-based pay structures, which is confirmed in the cited Warman-Worswick paper. More performance-based pay would be a positive development for universities with respect to academic staff of all ages.

Having hit the golden 65 just last week, I feel no qualms about continuing to work at a salary that most likely exceeds my “productivity.” I can recall how poorly junior faculty were paid relative to senior faculty when my career began, which is no longer the case at least in the economics discipline. Also note that many universities, including my own, have excluded profs over the age of 65 from their life insurance and disability insurance coverage, which significantly reduces their effective pay (and this discrimination is permitted by legislation in BC and, I believe, Ontario).

I’ve done related research which may be of interest. Most accessible is my paper for CD Howe, “Mandatory Retirement and Older Workers: Encouraging Longer Working Lives,” available online as Commentary No. 200 (2004). More economically oriented but less accessible is my chapter, “Challenging the Economic Assumptions of Mandatory Retirement,” in the volume “Time’s Up: Mandatory Retirement in Canada” (2005). If anyone is interested and has trouble finding the volume, I’d be glad to send a pre-publication version upon request.

Jon Kesselman

[Frances Woolley]

Jon: "as the evidence is that more productive academics disproportionately choose to work beyond the traditional retirement age of 65"

What is your reference for that, and what would be the measure of productivity (research, teaching, administration)? The one study that I have seen on this suggests that people tend to retire later at more research-oriented universities (presumably because of lower teaching loads). This would generate a research productivity/later retirement correlation, but the correlation would be coming from the demands employers are placing on workers, not from less research-productive people selecting into retirement - except indirectly, through selection into institutions with higher teaching loads.

In the Canadian context that correlation might also arise because highly productive people have historically been able to retire with a close to full pension at age 60 at one university, move to Quebec, and then generate income and pension entitlements at a second university. Again that is coming from the better labour market opportunities of the highly productive, rather than a choice of non-productive people to retire earlier.

[Determinant]

Frances:

With regard to Jon Kesselman's argument, he's caught in the fine print of life insurance and disability insurance, particularly the latter.

Assuming a fully paid-up DB pension, a safe assumption for profs, if a prof after 65 suffers a health problem, they are technically not disabled, since they don't suffer an income loss. If they have their pension income or at least the potential to get it just by asking, then they aren't "disabled" since they have alternate sources of income.

In disability insurance, disability is measured in loss of income, not strictly medical criteria. Workplace policies use an "Any Occupation" definition of income whereby alternate income like a pension is used to offset working income loss. Workplace policies are written for the benefit of the employer and have strict and stingy definitions to reduce claims, premiums and encourage employees to get off claim.

The same theory applies for life insurance. The prof has a pension covering his spouse and himself, so he has no need for workplace insurance to replace income on death.

Of course there are private policies available if the prof disagrees with what he gets at work, but it is revealing to actually examine the micro motivations for disability insurance. Disability insurance is very contractual and definition based.

[Frances Woolley]

Determinant, thanks for that, v. interesting observation.

[Jon Kesselman]

Determinant:

In BC universities the faculty pension plans are not defined benefit, but rather fully defined contribution schemes. So at age 65 the individual prof may or may not have accumulated an adequate sum in the pension account to cover a reasonable share of accustomed earnings if disabled or if deceased to cover a reasonable level of accustomed living costs for a surviving spouse. My point does not relate to whether cutting off profs at age 65 from life and disability coverage otherwise paid by the university employer for younger faculty is discriminatory. Rather, my point is that the university employer saves substantial sums when a prof continues to work beyond age 65 because it no longer has to pay the premiums for those forms of insurance. If the worker retired at age 65, the university would hire (most likely) a younger individual for who it would have to incur the costs of those premiums

Similarly, I believe that after age 65 an individual who continues working no longer has to make CPP premium payments and the employer is also relieved of those payments, which constitutes yet another form of effective decrease in compensation costs (and remuneration) for profs who work beyond age 65.

The university reaps additional savings from reducing its hiring costs and various start-up costs for new faculty when some older faculty choose longer working lives.

Thus, even if some older profs did have salaries that exceed their productivity (however you wish to measure that), several offsetting items reduce their costs to the university (and their total effective compensation) relative to the costs of employing more younger faculty.

[Determinant]

Whether you do or don't pay disability premiums is also a contractual item and one that doesn't really support your argument, John.

In Canada most disability premiums are paid for by the employee as a deduction from after-tax pay, not by the employer directly. This is due to our tax system's treatment of income-replacement insurance, which states that benefits from taxed premiums are tax-free. Conversely tax-deductible premiums provide benefits that are taxable. Both forms of policy exist in the market, but most employer plans are provide tax-free benefits as the premiums themselves are lower.

I will guess that your disability premiums are deducted from your net pay and therefore won't affect your gross pay when you hit 65, since your gross pay is a separate contractual item. Your gross pay doesn't increase or decrease when your marginal tax rate changes when the government makes a budget announcement, and DI premiums are levied on gross pay in exactly the same way.

Second, The BC Faculty Pension Plan has information online. It may be DC but you have 5% employee contributions and 10% employer contributions, which are comparable to a well-funded DB plan. Half the problem with DC plans is that the employer portion is a pittance, period. Assuming near-average investment performance you'll walk away with a nice pension, especially without full CPP co-ordination.

You can be sure whoever sells your university its benefits has already done the analysis in the previous paragraph.

Lastly, as a group with an excellent health record, the premiums for life and disability for profs are going to be modest. The savings is nice but minimal, and I doubt it would figure into hiring decisions. Group rates are low, that's the beauty of group.

[Jason]

This line really bothers me:
"But to collect a six-figure salary, when others could do the work as well, have greater financial need, and would be willing to do the job for less....?"
Who is this line directed at? I get the feeling you are speaking to the 65+ profs who haven't retired. You seem to imply that for the 'greater good' they should retire. However, that same reasoning could be applied to the 45+ group too. In fact, practically anyone who works anywhere could be replaced by someone who could do the work as well, for less and by someone with greater financial need. The idea that universities have become unbalanced due to the extra money spent on people who were due to have retired is interesting but tacking this line on the end seems unfair.

[Jack]

@Jason:

Excellent point, but I think Prof. Woolley's argument is that faculty salaries used to be determined based on the assumption of retirement at age 65. So if one works past 65, he or she is "overpaid" (my words, not hers), and to make up for the extra costs universities will reduce compensation to new or future hires.

In contrast, the 45+ group is expected to continue working, and if they work past 45 they will not be earning overall more money than what was "expected" in the original bargaining agreement.

More generally, though, in a sector where there never was mandatory retirement, then I think you'd be exactly right: at the margin, someone is just as entitled to be working past 65+ as he or she would be to work past 45+.

No one has mentioned the lump of labor fallacy. Shouldn't this have relevance here?

[Frances Woolley]

Jason: "In fact, practically anyone who works anywhere could be replaced by someone who could do the work as well, for less and by someone with greater financial need."

Yes, I agree, anyone who is in the fortunate position of being able to collect economic rents faces a moral dilemma: is it right for me to have so much when others have so little?

And the greater the rents, the more important that moral issue becomes.

In academia, starting salaries are determined in a competitive market, it's only over time that a person's salary and their value to the employer diverge. The longer the career, the greater that potential divergence, and the more a contemplative person has reason to ask "am I doing the right thing collecting this salary?".

But will that same reasoning be applied to the 45+ age group? Absolutely. The one argument made by Jon Kesselman that I agree with is is that adjustments in compensation schemes will emerge.

And it's also true that I'm not entirely disinterested - those adjustments in compensation schemes/productivity expectations will impact upon me.

But, Jason, this is why the whole subject gets me really steamed up. Here's a passage from the summary of Jon's CD Howe paper that he quoted above:

Proponents say CMR [compulsory mandatory retirement]represents voluntary agreements that must bring benefits to both parties. Yet, CMR provisions typically are not agreements between individual workers and their employers but rather the result of collective agreements. Hence, some workers (especially women and recent immigrants) may wish to work longer than the median union voter, but will be constrained by CMR. (emphasis added)

The cohort of academics that campaigned for the end of mandatory retirement is almost entirely male, and made up of academics who were either born in Canada, or moved here to take up academic positions decades ago. The people who will experience the "adjustments to compensation schemes" - and the erosion of tenure protections - are recent PhD graduates and junior faculty, who are much more likely to be female, recent immigrants or members of visible minorities.

Since female professors are typically married to men who are older than them, and couples tend to synchronize their retirement decisions, women actually aren't especially likely to want work longer.

[Frances Woolley]

Nick, this is the link to Jon's paper: http://www.cdhowe.org/pdf/commentary_200.pdf

He talks about the lump of labour fallacy in it on p. 6 and 8. How would you respond?

My response is twofold. First, there is a lump of tenured academics, even if there isn't a lump of labour overall.

Second, we're not talking about people stopping working. My father is still teaching into his 70s, and doing a great job. My grandfather kept on teaching for years too - riding his bicycle into work because his eyesight was so bad that he wasn't allowed to drive.

The issue is the wage rate.

[Nick Rowe]

Frances: will check the LoLF later. Doing Wolf Trail.

[Frances Woolley]

Also known as the Loup Loop....

[Jon Kesselman]

Some responses to a couple of points that have been raised since my initial posting.

1. My C.D. Howe paper was not focused on academics, so my argument about "especially women and recent immigrant" workers was directed at the general labour force, and I believe that it has validity in that context. Moreover, the situation of women and recent immigrants was cited explicitly by the two dissenting (and only two women) justices of the Supreme Court in the classic McKinney decision, where the majority upheld the practice of mandatory retirement in universities.

2. In the case of my institution, the premiums for disability insurance are paid fully by the employer, so that it is the employer that gains when relieved of having to cover profs who stay beyond age 65. Moreover, even with generally good health status, try insuring your full salary (or a high proportion of it) privately against earnings loss from disability when you enter your 60's. You will see that the premiums are very substantial, and even in a group plan the premium cost will be significant for the employer. Hence, the implied reduction in compensation (and compensation costs) for this item along with several others I have mentioned (and others I have not mentioned) when a worker continues beyond age 65 will be non-trivial.

3. If "the issue is the wage rate," and I grant that this is one issue, then we can expect institutional adjustments in compensation schemes over time--with a greater emphasis on performance-related salaries. Academic departments also have a wide range of instruments available for shifting the pay/employment package for members who are underperforming, such as differential teaching loads based on research productivity. Sabbatical leaves can be denied to under-performing profs in some institutions. Profs who are underperforming or even neglecting their duties also feel the pressure or lack of respect from colleagues that will induce many to take early retirement or not to work beyond 65. Hence, institutionally many ways exist for affecting retirement decisions even apart from adjustments in compensation.

[Mandos]

It's been my impression that the time-to-PhD has become longer. I wonder what effect that's going have on all the statistics.

[Frances Woolley]

Jon: "so my argument about "especially women and recent immigrant" workers was directed at the general labour force, and I believe that it has validity in that context"

I looked for references to support that statement, and I couldn't find anything. Do you have any?

Will reply to the other comments later.

[Sandwichman]

Lump of labour, you say? Does the name "Pavlov" ring a bell?

Kesselman: "Some commentators assert that CMR serves to open up work and promotion opportunities for younger workers. However, this argument runs counter to what economists call the “lump-of-labour” fallacy; a healthy economy is actually limited in its growth by the availability of workers of all ages. Moreover, the looming shortage of skilled workers means that the economy would benefit from extending average working lives."

First, the argument doesn't "run counter" to the alleged fallacy. It allegedly commits the alleged fallacy. No doubt Professor Kesselman meant to say the argument "runs afoul" of the fallacy. Oh, what a tangled web we weave indeed!

Second, where is this "healthy economy" that is "actually limited" by a projected labour shortage? In Hypothetica? Professor Kesselman is perhaps unaware that a common implementation of the fallacy claim is essentially the vulgar version of Say's Law. (See especially Raymond Bye's perennial textbook explanation from the 1920s through 1950s: "Very similar to the general overproduction fallacy is the erroneous belief that there is only a certain amount of work in the community to be done...") In the make-believe world where the possibility of general overproduction is a fallacy how can there come into being a general shortage of skilled workers? That is to say, if supply is what creates demand, how can there be "too much" demand and "not enough" supply?

Note that the publication date on K.'s commentary is June 2004. How long must a "looming" shortage loom before it can be reclassified as a mirage?

[Jim Sentance]

Further to Jon's point about cost saving offsets for faculty over 65, I believe Income tax regulations prevent pension contributions past age 71 (was 69 until recently), which I presume means employers don't have to contribute either. A bit delayed, but a much more substantial savings.

On the switching thing, UPEI is an interesting case - we had mandatory retirement imposed on us around 2000, and are currently in the process of getting rid of it through the courts and negotiations. I don't recall much of a tendency for earnings profiles to get steeper while we had it.

[Sandwichman]

For the record, Sandwichman thinks it mighty silly to treat University Professors as if they are production workers who earn a wage. They are, rather, "office-holders" who receive rents for the position they occupy. This is not to say the work they do is without value -- only that their labor doesn't play a direct role in the valorization of capital.

[Determinant]

"Note that the publication date on K.'s commentary is June 2004. How long must a "looming" shortage loom before it can be reclassified as a mirage?"

I agree. This "baby-boomers retire, jobs for everyone who is younger than them!" idea seems to me to be so much wishful thinking.

[Nick Rowe]

I wondered how long it would take for Sandwichman to show up! I think he has a Google Alert for "Lump of Labour". ;-)

At one extreme, the demand for labour would be perfectly inelastic. An increase in labour supply would cause real wages to fall, and employment to stay the same. Lump of Labour arguments 100% valid. At the other extreme the demand for labour is perfectly elastic. An increase in labour supply has no effect on real wages, and will increase employment by the full amount. LoL 0% true.

Jon's CD Howe piece is at the aggregate level. I would say that the long run aggregate labour demand curve is close to perfectly elastic. Everything just scales up. The only thing that might not scale is land. But at the micro-level the demand curve for output will not be perfectly elastic. An increase in output in a particular sector will require a fall in the relative price of output in that sector. (That can't happen at the aggregate level, of course, since the average relative price of output is one by definition.).

Suppose the labour supply of profs increases. To the extent that that reduces the price of university education, and that that price reduction increases quantity demanded, the quantity of profs demanded will increase. If the demanded for university education were perfectly inelastic, and if there were no substitutability between profs and other inputs, then the LoL argument would be 100% true for profs.

[Frances Woolley]

Nick, thanks for that.

"I would say that the long run aggregate labour demand curve is close to perfectly elastic."

In an open economy, a closed economy, or both?

Jon, "Profs who are underperforming or even neglecting their duties also feel the pressure or lack of respect from colleagues that will induce many to take early retirement or not to work beyond 65."

Yup, without a standard retirement age, it will be extremely hard to defend tenure. As I said earlier, look at the US, and the move towards greater use of untenured faculty there.

Even if there was no standard retirement age anywhere else in the economy, the special privileges offered to academics suggest that we should retire - or at least renegotiate the terms/conditions of our employment at age 65.

Looking up some more references on retirement decisions - health and caregiving responsibilities are a big determinant of retirement decision making, also spouses tend to plan to retire together. Typically married women have a spouse older than they are; married men a younger one. So this means that one would expect married women to want to retire at a younger age than married men. For singles it's hard to say which way the gender effects will go.

On the points re the savings from not paying for older workers' pensions, disability coverage etc - sure, that's a plus for employers. But even taking that into account, the compensation costs are still way into six figures for senior faculty at SFU and UBC.

[Sandwichman]

"I think he has a Google Alert for "Lump of Labour""

Yep.

"I would say that the long run aggregate labour demand curve is close to perfectly elastic. Everything just scales up. The only thing that might not scale is land."

I would say that the first presumption is utterly meaningless and is contradicted by the "possible" non-scalability of land. Land, labour and capital are distinctive categories only as a matter of analytical convenience. In reality -- as opposed to abstract models -- there is an aspect of "land-ness" and "capital-ness" to labour, etc. This is acknowledged by everyday terminology: e.g., "human resources" and "human capital". Everything does not "just scale up". At different scales the resource and capital components of labour differ -- with consequences for elasticity.

At any rate, Nick's response misses entirely my critique of Kesselman's symptomatic blooper ("runs counter to" for "runs afoul of") and his self-contradiction. My point is simply that the fallacy CLAIM is itself incoherent and self-contradictory. The CLAIM, as Maurice Dobb succinctly pointed out back in 1928 is ignoratio elenchi. Anyone invoking the fallacy claim or defending it will blunder inexorably into a quicksand of bloopers, contradictions, ludicrous presumptions about "the long run" etc., etc., etc.

For the record, here's Dobb on the "Work-Fund" fallacy, which is synonymous with the Lump-of-Labour fallacy except that it has a better pedigree in having been pronounced by Alfred Marshall (rather than D.F. Schloss):

"It is sometimes said that while the employer is interested in securing a low wage-cost, the worker is interested in securing a high level of earnings, and that, since by increased efficiency both things can be simultaneously attained, employer and worker should have a like interest in the speeding up of work and in all methods which promote this result. In the past a similar, but more general, argument has been advanced to the effect that anything which hinders an increase of output is damaging to worker and employer alike and trade unionists in the nineteenth century were severely castigated by economists for adhering, it was alleged, to a vicious "Work Fund" fallacy, which held that there was a limited amount of work to go round and that workers could benefit themselves by restricting the amount of work they did. But the argument as it stands is incorrect. It is not aggregate earnings which are the measure of the benefit obtained by the worker, but his earnings in relation to the work he does — to his output of physical energy or his bodily wear and tear. Just as an employer is interested in his receipts compared with his outgoings, so the worker is presumably interested in what he gets compared with what he gives."

[Bob Smith]

Joseph: "I have always thought that the simple and obvious solution to this quandary was to make tenure last only until 65 years of age"

Query whether that would be legal, at least in Ontario. Mandatory retirement was only allowed (until recently) because discrimination on the basis age as part of a mandatory retirement scheme was explicitly permitted under a now-repealed provision of the Ontario Human Rights Code as an exception to the code's prohibition on age based discrimination. I'm not sure how one could justify limiting tenure for professors over age 65 without running afoul of the Human Rights Code (conceptually imagine trying to draft a contract which denied tenure based on race, gender or other prohibited grounds - good luck with that).

[hosertohoosier]

What about the prestige value of old professors? Prestige enhances the fame of a department, attracts better graduate students, improves rankings in certain types of quantitative rankings (esp. those that include some measure of awards, or even a measure of productivity - since those are usually lagged significantly), and may even improve evaluation by those that should know better.

[Frances Woolley]

Hosertohoosier - "What about the prestige value of old professors?" Most universities have positions such as "distinguished research professor" or "professor emeritus" that allow people to continue to supervise students etc. upon retirement.

Again, I'm not advocating preventing people from working, the question is the wage rate. Even without pension and insurance contributions, a top-of-the-scale full professor's salary will generally be well over $100K at major Canadian universities. To collect that salary indefinitely...?