Real pay has declined steeply for law professors over the last 10 years, down by around 24 percent, while employment of law professors has stagnated.*  This cannot be not explained away by changes in professor age or seniority or by a shift toward clinical or other support staff.  Pay cuts vary by school, and appear to be worse toward the bottom, with some schools possibly even having small increases in real pay.

The decline in pay appears to be due at least in part to a steep decline in the number of applicants to law school, with the steepest declines coming from male students and white students.  This decline in interest in law school is not explained by demographics; the number of recent college graduates has increased during this period, including whites and males.

Although professor pay is sharply down for law professors, it is also down across all fields tracked by BLS OES data, with very steep declines in law, criminology, social work, and hard-science fields.

This raises an intriguing question: where did all of the money go?  Are colleges and universities facing declining revenues or increasing costs that have forced them to make cuts across the board?  And how have those cuts been implemented?  Are universities prioritizing some areas of spending over others?  Are those the right areas of spending for the long-term health of colleges and universities?  Are they prudent business decisions?  Do they suggest the right set of values?  Could they reflect poor leadership, agency costs or ideologically-driven decision making?

The analysis below attempts to begin to answer some of these questions, and perhaps shed light on others, using data from the BLS OES database.  The end product of the analysis is the change in compensation spending, in real 2022 billions of dollars, in each of several occupational categories at colleges and universities between 2013 and 2022.  Details of the method are explained below.**

It should be noted that the data lump all colleges and universities, other than community colleges and vocational and training schools, together.  It cannot distinguish between elite research universities, small liberal arts colleges, leanly funded state schools, and other institutions.  Patterns may vary across institution category.

First, universities have cut overall compensation spending across categories by a total of $26 billion dollars.  This suggests cost cutting due to either improved efficiencies (automation; outsourcing) or to declining revenue or increased costs.  However, these cuts have been imposed unevenly, with some categories of labor spending seeing large declines, and others increasing.

Universities have dramatically cut spending on educational instruction and library occupations (professors, instructors, tutors, librarians).  Educating students is one of the most important functions of universities but funding for this function appears to have been placed on the chopping block.  This might reflect a shift toward more adjuncts and online education.  Most studies suggest that adjuncts and online instruction provide lower quality education than full time instructors.  (Indeed, the shift toward online education during the pandemic has generated numerous lawsuits against universities).  Studies suggest that with cheaper forms of instruction, students learn less, retain less, earn less, and are less likely to persist in their educations.  However, some studies find benefits to adjuncts for certain courses.

Spending on scientists and healthcare workers has also been slashed.  Many regard the production of new scientific and medical knowledge, and the provision of hospital based care, as among the most important functions of universities, along with educating students. 

It is unclear why universities would cut spending in these categories.  One possibility could be reductions in real public funding for science and healthcare, but my understanding is that public funding has actually increased.  Another possibility, at least in the last two years, is reduced demands for medical procedures as patients avoid hospitals, except in dire emergencies, during the Covid pandemic. And indeed, cuts to healthcare worker spending only appear after Covid.

But the cuts to scientists predate Covid, i.e., they are evident from 2013 to 2019.   Another possibility is that research is being moved out of universities to seperate research systems or to pharmaceutical or technology companies.

Universities have also slashed spending on maintaining their physical facilities.  Unless there have been improvements in the efficiency of grounds keeping and maintenance, this will likely produce long term problems from deferred maintenance.  In the last two years, this could be explained by shuttering dorms and dining facilities because of Covid.  But here, too, cuts predate Covid and can be seen in the data from 2013 to 2019.

Universities have increased spending on bureaucratic and managerial roles—business and financial operations, management occupations, and legal occupations, both before and after covid. 

This could be due to universities moving certain functions, like managing endowments or issuing bonds or defending against litigation, in-house in an attempt to save money.  Or it could be due to more regulation and more litigation against universities, for example from changes to Title IX and Title VI.  Or it could be due to efforts by universities to engage in socialization projects, for example engaging in legally contestable race and sex based discrimination to promote diversity.  Or it could be due to efforts to relieve faculty of administrative work so that they can prioritize teaching and research.  And indeed, there is some evidence from census data of declines in professors’ work hours.  However, cuts to administrative support and library staff raise doubts about this interpretation.

Another possibility is that the proliferation of bureaucracy is due to empire building and waste at the top.  Managerial compensation is often based on the number of employees or the size of a department that one manages, and promotions and external job offers may be based on the ability to point to bold initiatives whose efficacy is hard to measure.  With faculty largely abdicating or forced out of key parts of governance (i.e., budgeting and strategic planning), and without shareholders, there may be little in the way of pressure for university administrators to be cost-effective in their spending on administration.

Universities have also increased spending on “Community and Social Services Occupations” and on “Arts, Design, Entertainment and Media Occupations.”  This may be an attempt by universities to grapple with a student population that has higher levels of mental health challenges and lower levels of academic preparedness, to increase completion rates, or to attract less academically inclined students by making the college experience more entertaining and enjoyable. 

The Covid pandemic and resulting physical distancing protocols have increased anxiety and depression.  However the changes in spending on community and social services entirely predate Covid and were even somewhat reversed by it.

In recent years, universities have emphasized geographic diversity and extending their pipeline, thereby increasing the number of students who are separated from their friends and family while attending university.  Many colleges have sought to eliminate fraternities and sororities from campus, fearing a link to sexual assaults and alcohol and drug use.  But this has reduced opportunities for students to socialize. 

Many colleges and universities have instead focused on funding and supporting race and religion-based affinity groups.  Although many universities emphasize diversity, some are concluding that it is important for students to have opportunities to surround themselves with other students who are ethnically, religiously, or politically similar to themselves—to have an island of homogeneity or a “safe space” within a sea of diversity.  Some studies link diversity to lower levels of happiness and lower levels of mental health (see also here), although others find benefits of diversity.  There is strong evidence that underrepresented minorities suffer from higher rates of mental health challenges.  Numerous studies have raised concerns that diversity can reduce sense of community and trust (see also here).  Some have argued that trainings mandated by some colleges and universities to try to combat this, if handled improperly, can be emotionally and psychologically abusive (see also here) or might actually encourage discrimination against certain groups.  There is also evidence that straight women have strong preferences to date men of the same race as themselves, suggesting that heterogeneity can make it more difficult for students to find romantic partners among their classmates.  Rates of marriage and coupling have declined.

The shift toward affinity groups may have increased political activism on campus.  In some cases, this appears to have increased race and religious based harassment and antagonism and contributed to lawsuits against universities.  Universities have also discriminated against Asian students and in favor of Black and Hispanic students and White legacy students in admissions.  They have deemphasized standardized test scores.  They have inflated grades.  They have prioritized admitting students who can pay full freight or whose family can make donations. 

Some of these policy decisions may help explain the increase in spending on bureaucracy, social and community services and entertainment, and reductions in spending on education and science.  From 2013 to 2022, the decline in spending on education and science is much larger than the increase in spending on bureaucracy, social services, and entertainment. 

Prior to Covid, in 2019, universities were increasing total labor spending, but the overall pattern of prioritization—cuts to education, science, and physical facilities, increases in spending on bureaucracy, community services, and entertainment—was very much the same.

* Throughout this article, the social security administration’s average wage index is used to inflation-adjust data to real 2022 dollars, unless otherwise noted.

** The BLS OES data shows average pay and number of employees by occupation and industry.  I restrict industry to colleges and universities.  For each broad occupational category employed at colleges and universities, I then multiply average real earnings by total number of employees.  This gives total labor spending (excluding benefits).