By Dr. Michael A. MacDowell
Conflicting policies of the Obama administration are placing some institutions of higher education in very difficult positions. One such policy is the Department of Labor's proposal to substantially raise the salaries of those with mid-level and graduate positions at our nation's colleges and universities.
While the new rule applies to all employees, it would hit higher education particularly hard. Colleges and universities are already under tremendous pressure to keep tuition rates from rising. The proposed rule would, in many instances, double the pay for graduate students and staff without any commensurate increase in productivity. Colleges and universities employ many graduate students whose benefits, such as tuition waivers, housing and board, are not counted as part of their salary by the government. These individuals are usually paid less than the $50,440 salary level that the Labor Department's proposed policy considers minimum.
How significant a problem is this? The University of California system alone estimates that the cost will exceed $39 million a year. The vast majority of those funds will need to come from increased tuition.
This places colleges and universities on the horns of a dilemma. Should institutions raise salaries, or should they instead reduce their mid-level workforce substantially and by so doing offer significantly fewer services to students? If they comply with higher salaries, they will undermine the President's goal of making colleges more affordable. According to the Wall Street Journal, the Administration would not comment on this obvious dilemma. To be sure, however, the policy, once enacted, will inevitably increase tuition and the amount of debt with which students will graduate.
Some have suggested it would be easy to address a dilemma by simply cutting back on highly paid administrators and faculty. But these are not the employees who will be directly impacted by the new policy. Rather, lower-level staff and students will suffer. Many of them will be graduate and postdoctoral students. Most are in the process of honing their skills to qualify for research grants, teaching or other positions in the private and public sector where they will help create the nation's wealth of tomorrow.
New state policies regarding minimum wages will also harm colleges because they employ many student workers who are paid the minimum wage. This will be particularly true in in CA and NY where a gradual rise, yet substantial increase, in the minimum to $15 an hour has been put into place. Competing studies exist, but the generally-held opinion of economists is that a significant increase in the minimum wage causes unemployment among those it is supposed to help. A survey of 166 U.S. economists conducted by the University of New Hampshire for the non-partisan Employment Policies Institute found that 83% thought the new $15 minimum wage would have a negative impact upon youth employment, 52% believe it will diminish adult employment and 76% said it would lower the number of jobs available overall.
Faced with increasing labor costs, employers will inevitably reduce the number of employees, usually starting with those working at close to minimum wage. This will certainly be true with colleges whose student workers are paid minimum wage.
It is not only the Democrats who are advancing dichotomous economic policies. Leading Republican presidential candidates advocate significant limits on immigration from Mexico and Central America. This will inevitably raise the cost of labor and hence the prices we pay for goods and services, stunting economic growth so important to the nation.
It would be a refreshing change if those advocating new policies spelled out the intended and unintended consequences of their recommendations. It is not a matter of who will pay for the new Department of Labor salary increases. Students and their parents will.
Nor are the consequences of a significant jump in the minimum wage unknown. Restricting immigration will raise labor costs in this country and the price of the goods and services we enjoy.
So, when a new policy is advanced or a new program is put into place, remember to think through its implications. It may sound good, but there really is no such thing as a free lunch.