Key Research Findings
Our analysis of faculty compensation data reveals important trends in academic labor markets, including wage growth patterns, field premiums, and institutional variation.
Finding 1: Nominal vs. Real Wage Growth
While nominal faculty salaries have increased steadily since 1987, real wages (adjusted for inflation) show more modest growth. The divergence became particularly pronounced after 2008, suggesting that salary growth has not kept pace with inflation in recent years.
Figure 1: Faculty Salary Trends (1987-2025)
Nominal salaries vs. real salaries adjusted to 2019 dollars
Key Insight: Real wages have grown by approximately 15% over the 38-year period, while nominal wages have increased by over 200%. This highlights the importance of inflation adjustment in understanding faculty compensation trends.
Finding 2: Substantial Field Premiums in Business Disciplines
Faculty in Finance, Accounting, and Economics command significant salary premiums compared to other fields. These premiums are driven by competitive outside options in the private sector and reflect the market value of field-specific human capital.
Figure 2: Average Salary by Field (Full Professors, 2025)
Comparing mean salaries across business disciplines
Estimated Field Premiums (vs. baseline)
| Field | Premium | Std. Error |
|---|
Finding 3: Increasing Wage Dispersion
The distribution of faculty salaries has become increasingly dispersed over time, with growing inequality both within and between fields. This reflects the rising importance of market forces and the differentiation of academic labor markets.
Figure 3: Distribution of Faculty Salaries (2025)
Histogram showing the frequency distribution of salaries
Finding 4: Institutional Heterogeneity
Significant variation exists across institutions, even after controlling for field and rank. Top-ranked research universities pay substantial premiums, while regional institutions often struggle to remain competitive.
Key Factors Driving Variation:
- •University prestige and research ranking
- •Geographic location and cost of living
- •Public vs. private institution status
- •Endowment size and financial resources
- •State funding levels (for public universities)
Implications:
- →Difficulty in retaining top talent at lower-ranked institutions
- →Potential sorting of faculty by ability and productivity
- →Geographic clustering of high-earning academics
- →Growing stratification in higher education
Policy Implications
For Universities
- • Develop competitive compensation strategies by field
- • Consider total compensation packages beyond base salary
- • Address equity concerns within and across departments
- • Monitor market conditions and peer institutions
For Policymakers
- • Ensure adequate public funding for higher education
- • Address growing stratification across institutions
- • Consider policies to support regional universities
- • Promote transparency in academic compensation