Salary Compression
University of Houston
Central Campus
 
Faculty Affairs Committee of the Faculty Senate
Jerome Freiberg, Chair                       Alex Ignatiev
William Douglas                                  Ruth Manny
Joseph Eichberg                                 Cary Nathenson
Elizabeth Anderson Fletcher                Carlos Pedemonte
Osman Ghazzaly                                 Dale Rude
Wyman Herendeen
 
December 29, 1999
 
Ruth E. Manny
College of Optometry
 

Context of the report:
The Faculty Affairs Committee of the Faculty Senate began meeting under the direction of Jerry Freiberg in February, 1999 to identify issues common to all faculty on campus.  An all day retreat was held to narrow the number of issues and determine priorities.  Faculty compensation was one issue that was identified.  Under the umbrella of faculty compensation the following areas were studied:  retirement (including VMOE, contributions to retirement programs and benefits upon retirement), and salary compression.  This report on salary compression is the first from the 1999 Faculty Affairs Committee.  Other reports on compensation as well as the institutional environment for research and institutional priorities are expected to follow.
 

Acknowledgments:
The analyses were based on data provided by Barbara Fasser and staff in the Office of the Provost.
Resource person:  Steve Werner, College of Business.
Critical Readings of Early Drafts:  Jerry Freiberg, College of Education and Dale Rude, College of Business.
 
 

Executive Summary

     Salary compression is the narrowing of the pay differentials between people in the same job or between people in different (usually adjacent) jobs in an organizational hierarchy over time.  This narrowing of the pay differential may be either a perception of inequity (subjective compression) or a true salary compression (objective compression).  While most faculty at the University of Houston have the perception that salary compression is present (subjective compression) there has been no recent systematic investigation of the problem by the faculty to determine if salary compression (objective compression) is actually present at the University of Houston.
     In this report two different analyses, a modification of the within class data analysis and the rank ratio method, are used to explore the possibility that objective salary compression may be present at the University of Houston.  The analyses used data obtained from the office of the Provost and are based on the monthly salary of tenure track faculty for fiscal year 2000 current as of September 15, 1999.  Administrative stipends are not included.
     Both the within class data analysis and the rank ratio method show clear indications of salary compression.  Salary compression appears to be widespread affecting most colleges and departments at the University of Houston.  Recommendations to reduce salary compression include: increasing the recent centrally funded merit increments tied to promotions; expanding the funds available for merit based equity; continue with the current policy of exploring counter offers with faculty; appoint a task force to examine opportunities for progressive employee benefits and salary stagnation as it relates to the private sector and comparable universities; and establish a central University wide system/database (which includes years at a given rank) to monitor salary compression and report the outcome to the faculty every 3 years.
 

Salary Compression
 

I.  Background

      Definitions

     Salary compression is "the narrowing over time of the pay differentials between people in the same job or between people in different (usually adjacent) jobs in an organizational hierarchy" (Bereman and Lengnick-Hall, 1994).  This narrowing of the pay differential may be either a perception of inequity (subjective compression) or true salary compression may be present within the organization (objective compression).  According to Gomez-Mejia and Balkin, (1987) the perception of equity or the salary one feels they deserve is based on both merit and seniority.  Since there is both an objective and subjective component to salary compression, Bereman and Lengnick-Hall (1994) propose three different scenarios as these two components are viewed together.  In the first scenario, objective pay compression is present and the personnel are aware of the compression and perceive an inequity.  This scenario is most likely to occur where employees have access to salary information as they do at the University of Houston and other public institutions.  It is also possible that an objective or true compression may be present but the personnel are either not aware of it or do not view the compression as inequitable.  This case is most often present in organizations where the pay systems are not available to the employees and hence, they are not aware of any inequity.  In this case, pay compression is not problematic for the personnel within the organization since there is no perception of inequality.  In the last scenario, the employees believe salary compression is present but their perception is not supported by the presence of true or objective salary compression.  Based on their access to the budget, most faculty at the University of Houston probably believe salary compression is present (subjective compression). However, there has been no recent systematic investigation of the problem by the faculty to determine if salary compression (objective compression) is actually present at the University of Houston.  This question will be explored in section II of this report.
     An extreme form of salary compression is salary inversion.  Salary inversion refers to the condition where a new junior person is hired at a salary that exceeds that of a senior person at a higher rank within the organization (e.g. an assistant professor whose salary exceeds that of an associate professor).  Inversion has been reported to be as high as 25% in a few high-demand fields in academia (Bereman and Lengnick-Hall, 1994).
     It is also important to recognize that salary compression is not the same as salary inequity.  Salary compression and even inversion may occur when a faculty member consistently receives a less than average raise over the course of many years and the salary then falls behind his or her colleagues in the same rank or in lower ranks who receive well above average increments.  This form of salary compression may not be inequitable but a reflection of an average full professor compared to an outstanding associate professor.  In this case subjective compression may be present but true compression may not be present.
 

Factors contributing to salary compression

      Although salary compression is a multi-faceted problem, several factors have been identified as contributors to true compression.  When there is low unemployment in the market place, the imbalance between qualified people available to fill positions and the demand for quality faculty forces the university to pay high salaries to attract the limited number of qualified applicants.  This factor will have the greatest impact on those fields most vulnerable to outside offers.  The strong Houston economy and that of the United States has created the potential for this to be a significant factor in salary compression at the University of Houston.
     Limited funds for faculty salaries can also impact the salary structure within the University.  When funds are limited, often the scarce resources must be used to attract newly trained faculty particularly when the University is understaffed.  When the limited funds are used to attract new faculty, compression at the associate and full professor levels may result, particularly when a demand/supply imbalance is present.  Table 1, complied with the assistance of Barbara Fasser and her office staff in the Office of the Provost, summarizes the funds available from the state legislature for faculty increments at the University of Houston since 1990.
 

TABLE 1 - Increment Pool Available for Faculty Raises
 
Year 
Type of Pool
Percent Increase
Comments
1990
Merit
5%
 
1991
Merit
3%
 
1992
Across the Board
Merit
3%
0.2%
2% on 10/1/91
1% on 8/1/92
1993
Across the Board
Merit
3%
0.3%
12/1/92
1994
Merit
0.7%
 
1995
Merit
0.2%
 
1996
Merit
3.6%
Includes 3% mid-year merit
increase
1997
Merit
2.4%
 
1998
Merit
5.2%
 
1999
Merit
1%
 
2000
Merit
Equity
3.5%
0.63%
 
 

     Salary compression is also exacerbated by the university's academic rank structure.  Tenured faculty in the higher academic ranks typically have fewer options and offers (Gomez-Mejia and Balkin 1987) to move to other universities to overcome salary compression.  Often these faculty wish to retain tenure, may have other personnel working in their labs which can complicate a move and have greater demands for space and other institutional resources that prohibit other financially strapped institutions from attracting these established faculty.  This decreased mobility in the higher ranks can compound the problem of salary compression across ranks.
     There are also several factors at the University of Houston, which extend across all disciplines and could contribute to salary compression.  Under a previous administration, there was a policy that no counter offers would be made to faculty at the University of Houston who received offers from other institutions.  While the actual impact of this policy on salary compression at the University of Houston is not known, two possible scenarios are presented.  A no counter offer policy would prevent established faculty from receiving significant salary increments if they remained at the University.  These larger increments in the form of counter offers would have the potential of offsetting salary compression particularly for quality faculty at the associate and full professor levels.  The no counter offer policy could also result in a significant exodus of the qualified faculty who would be replaced by junior faculty hired at high salaries resulting in further compression of those faculty who remain.  This last possibility would be compounded by the demand/supply imbalance mentioned earlier.
      Previously at the University of Houston, there was no central policy or funds for increments tied to promotions and/or tenure.  Without specific increments tied to promotions, salary differentials between the academic ranks have an increased potential for erosion.  When faculty are promoted in years when funds from the legislature are minimal, (for example: 1994 - 0.7 % merit pool or 1995 % - 0.2% merit pool), the problem is magnified.
      Singleton (1990) has pointed out that traditional merit increases often do not adequately differentiate the contributions of individual faculty.  Frequently merit increases for adequate performers are just a few percentage points less than those for outstanding performers.  The problem is magnified when the increment pool is small as it has been for many years at the University of Houston (see Table 1).
 

Potential problems created by salary compression

     Several consequences may occur when salary compression is present in an organization.  Perceived or real pay inequities can result in poor faculty morale (Bergman, Hills, Priefert 1983; Lawther 1989; Bowen and Schuster as cited by Berman and Lengnick-Hall 1994).  Poor morale can lead to a lack of pride in the institution.  This lack of pride can carry over to the community and the community's perception of the institution when faculty feel they are undervalued.  If this feeling is widespread, it could be particularly troubling for an urban university such as the University of Houston, wishing to increase its community-based support.
     The hiring of new faculty can increase salary compression and salary compression can hinder the hiring of qualified new faculty.  Gomez-Mejia and Balkin (1987) reported that the majority of new faculty hires in business colleges occurs at the assistant professor level.  At the University of Houston about 45% of those faculty hired within the last 8 years have been at the assistant level (See Table 2).  To counter the labor market, particularly in high demand fields, junior faculty are often offered salaries above the generally-accepted salary ranges and in some fields at a level that is above the senior faculty in the same department (salary inversion) (Bereman and Lengnick-Hall, 1994).  When a university's tight budget is directed towards attracting new junior faculty, resources to prevent salary compression in the higher academic ranks are just not available.  The limited merit increases are not sufficient to keep pace with the supply and demand imbalances in many of the disciplines.  If the University of Houston implements plans to increase the number of faculty over the next several years, salary compression is likely to increase if salaries higher than those of qualified high performing current faculty are necessary to attract the best new faculty.  If these higher salaries are not offered in an effort to keep salary compression in check, the hiring may fall short of projected goals or the ability to attract the most qualified faculty could be compromised.
     Another reported outcome of salary compression is a reduction in the performance level (Lawther 1989, Singleton 1990).  Lowered performance occurs as faculty seek to restore perceptions of equity by lowering work inputs (effort, time spent on the job, etc.).  According to Singleton (1989), the fact that pay decisions affect productivity, cost containment, employee turnover, and even employee skills development has gained increased recognition.  It might be interesting to review the outcome of the post-tenure review process in light of salary compression to determine if reduced performance is associated with salary compression.

Methods used to detect salary compression

     According to Lawther (1989) pay compression is identified by examining trends in salary inequities that may be present within various classes or ranges.  There have been several methods used to examine a pay structure for salary compression.  In the merit based system present at the University of Houston and other academic institutions a modification of the within class analysis (Lawther, 1989) and the rank ratio method (Bereman, Lengnick-Hall 1994) appear to be the most appropriate.
     The within class data analysis examines the personnel within selected departments.  In this analysis, a matrix is constructed with years of service placed in the rows (ascending order) and salary ranges in the columns (ascending order).  If no salary compression is present then the majority of employees should fall on the major diagonal of the matrix.  A large number of faculty to the right of the major diagonal could suggest a shift in the demand/supply with higher salaries needed to attract the best candidates and faculty on the diagonal on that same row could be casualties of salary compression.  A large number of faculty falling to the left of the major diagonal could also suggest salary compression or salary stagnation.  However, those faculty to the left of the diagonal could also be among the poorest performers and may not be victims of salary compression.  Thus, poor performance may confound the interpretation of faculty falling to the left of the diagonal.  A modification of this method is used to examine salary compression at the University of Houston in Table 2 (section IIA, pages 8 & 9).
     The rank ratio method (Bereman, Lengnick-Hall 1994) compares the salary differential between the various academic ranks within a discipline.  By calculating the rank ratio for each discipline, college or department, comparisons across disciplines may be made without comparing absolute dollar amounts.  The rank ratio expresses each rank's average salary as a percentage of the average salary of full professors (Bereman, Lengnick-Hall 1994).  For example "a ratio of 100:75:62:59 indicates that associate professors are earning 75% of professor salaries, assistant professors are earning 62%, and newly hired assistants are earning 59% of professor salaries" (Bereman, and Lengnick-Hall 1994).  Since salary compression has both an objective and subjective component, the ideal ratio between ranks or the ratio that would be viewed as equitable is subject to debate.  Thomas Mahoney as cited by Gomes-Mejia, and Balkin (1987, p47) has argued that in academia compensation differentials require about a 33% difference between the ranks, a ratio of 100:67:33, to be viewed as equitable.  In section IIB of this report (pages 9-15), the rank ratio method is used to examine the pay scales at University of Houston for salary compression.  Since the ideal ratio is subject to debate, Table 3 presents data from the University of Houston, and Table 4 presents data from other universities located in the 10 most populated states for comparison.
 

II.  Analysis of Salaries at the University of Houston

     The Office of the Provost supplied the data for the analyses.  Specifically Barbara Fasser and her office staff compiled the salary information from data supplied by the MIS Department from the Human Resources System (HRS) and data from a CB8 report on faculty rank from the Office of Planning and Policy Analysis.  The data consisted of a list of faculty by college, department and rank that included the number of years employed at the University of Houston, their monthly salary and the average monthly salary of all other faculty at that rank within the same college department.  This information was then analyzed using two of the models discussed above.
    To put this information in context the following issues should be recognized:

1.  Salaries for fiscal year 2000 were requested.  The salary information is reported to be current
     as of September 15, 1999.  Changes made in the database after September 15, 1999 are not
     reflected in the data.  Salaries of 736 tenure track faculty were provided.

2.  Information regarding faculty rank prior to the Fall 1989 is not available.  Therefore faculty
     with more than 10 years at a given rank were listed as 10 years in the information received
     from the Office of the Provost.  This limitation prohibits an accurate and detailed analysis
     of professors and associate professors by years of service within these ranks.  However,
     the total number of years of employment at the University of Houston was available and
     used in the analysis.

3.  The analyses are based only on tenure track faculty.  Information on faculty in non-tenure
     track positions was not included.  Some colleges have a large number of faculty in
     non-tenure track positions which could significantly alter the picture presented within
     these colleges.

     In an effort to make comparisons more similar and avoid problems which are created by contracts of different length (9- versus 12-month contracts) the analysis was based on monthly salaries.
a.  The full-time equivalent for the College of Architecture is 0.75.

b.  The 11 month salaries within the College of Pharmacy are paid over a 12 month period.

c.  Most faculty in the College of Optometry have 12 month appointments.

d.  Some faculty with administrative assignments are paid over a 12 month period.

e.  Administrative stipends were not included in the monthly salaries.

f.  The figures supplied by the Office of the Provost were not verified except in one case
    that appeared to be an outlier.  The salary in the report was twice the actual salary due
    to a split appointment between two colleges or departments.  There may be other errors
    in the data that were not detected.

g.  Summaries by years of service provided by the Office of the Provost did not always
    match the overall composite.  Therefore these summaries were not used and data used
    for this report was taken only from the overall composite.
 

A.  Within Class Analysis

      Tenure track faculty with less than 9 years of service were divided into 4 categories based on their years of service at the University of Houston.  The salary for each faculty was compared to all other faculty within the same college at the same rank (professor, associate professor, assistant professor, instructor) and placed in one of four quartiles. There were 2 cases where the highest paid faculty within a rank containing faculty with less than 9 years of employment, earned more than twice the next highest paid faculty within that same rank.  In these two cases the highest salary was taken as the second highest within that rank when the quartiles were calculated under the assumption that the highest paid in that rank was an exceptional performer or outlier.  Table 2 displays the percentage of faculty within each years of service category falling within each salary quartile.  When there were less than three faculty within the college at a given rank none were included.  Applying this exclusion criteria 31 faculty employed 8 years or less were omitted from analysis.  It should be emphasized that Table 2 includes faculty at all ranks and that only 83 of the185 faculty (44.9%) represented in Table 2 are at the assistant professor rank.  Salaries of 551 faculty employed more than 8 years are not included in this analysis.
 

TABLE 2 - Modified Within Class Analysis

 
 
 
% of Faculty within each years of service category who fall within each Salary Quartile
(Quartile calculation based on the same College and Rank)
Years of
Service
Number of
Faculty
< 25%
26% - 50%
51% - 75%
76% - 100%
< 2
60
45%
10%
10%
35%
3-4
55
34.5%
18.2%
14.6%
32.7%
5-6
35
37.1%
25.7%
8.6%
28.6%
7-8
35
31.4%
28.6%
11.4%
28.6%
 
     The numbers along the diagonal are in bold to aid in interpreting the data.  When large percentages appear to the right of the diagonal those faculty falling on the diagonal in that same row are likely to be casualties of salary compression.  For example, 45% of the faculty employed less than 2 years, are in the top half of their respective salary range suggesting that the 45% in the lowest quartile (along the diagonal) are experiencing salary compression.  Another indication of salary compression illustrated in Table 2 is found by comparing the percentage of faculty in the top salary quartile.  Note that a greater percentage of those employed less than 2 years are in the top salary quartile than those who have been employed 3 years or more.
     There is also a significant number of faculty falling to the left of the diagonal.  More than a third of the faculty employed 5 to 6 years fall in the lowest salary quartile and 62.8% are in the bottom half of their respective salary range.  Unless these individuals are the poorest performers within their department and rank, salary stagnation and/or salary compression is responsible.
 

B.  Rank Ratio Analysis

    As described by Bereman, Lengnick-Hall (1994), the rank ratio expresses each rank's average salary as a percentage of the average salary of full professors within the same department.  Using this analysis, each department within a college can be examined to determine the extent of salary difference present between the academic ranks.  A small difference between the ranks is suggestive of salary compression.  Table 3 displays the rank ratio calculated for each department at the University of Houston.  For each department the mean salary of the full professors was set to 100.  The mean salary for associate professors, assistant professors and instructors was then expressed as a percentage of the full professor's salary within the same department.  Setting the mean full professor's salary to 100 permits comparisons across departments and ranks but does not imply this is the ideal salary for that department and rank. Of the 736 salaries supplied, 33 were omitted from this analysis.  Omissions include faculty listed in institutes, honors colleges and other faculty with no comparisons at neighboring ranks.
 

TABLE 3 - Rank Ratio Method
 
College
Ratio
Full:Assoc:Assist:Inst
Comments
     
ARCHITECTURE 100:80:75:53  
     
BUSINESS ADMINISTRATION    
     Accounting & Taxation 100:83:81  
     Finance 100:76:78 Only 1 Assoc. Professor
     Management 100:71:65  
     Marketing 100:XX:63 XX = no Assoc. Prof. listed
     Decision and Information 100:79:63 Only 1 Asst. Professor
     
EDUCATION    
     Educational Leadership & Cul 100:82:81  
     Curriculum & Instruction 100:62:55  
     Educational Psychology 100:60:54  
     Health & Human Performance 100:57:51:38 Only 1 instructor
     
ENGINEERING    
     Chemical 100:79:64 Only 1 Asst. Professor
     Civil 100:62:61  
     Electrical 100:82:78  
     Industrial 100:108:98 Small #'s:  2 Prof., 3 Assoc., 
                 1 Asst. Prof.
     Mechanical 100:71:XX XX = no Assist. Prof. listed
     
HOTEL & RESTAURANT MNG 100:69:56  
     
HUMANITIES & FINE ARTS    
     Art 100:75:63  
     Communication 100:75:67  
     Theatre 100:35:34 Small #s:  2 Prof.
     English 100:63:45:43 Only 1 instructor
     Communications Disorders 100:XX:43 XX = no Assoc. Prof.
     Modern & Classical Lang 100:59:51  
     
LAW 100:84:84:46  
     
NATURAL SCIENCES & MATH    
     Biology 100:71:66:28 Only 1 instructor
     Chemistry 100:68:61  
     Computer Science 100:70:75  
     Geology 100:57:XX XX = no Assist. Prof. listed
     Mathematics 100:73:61  
     Physics 100:70:68 Only 1 Assist. Prof. listed 
     
OPTOMETRY 100:58:47  
     
PHARMACY 100:72:73  
     
SOCIAL SCIENCE    
      Anthropology XX:100:72 Small #s:  1 Assist Prof. 
XX = no Prof. listed
      Economics 100:77:77  
      Political Science 100:71:75 Only 1 Assist Prof. listed
      Psychology 100:72:49  
      Sociology 100:75:66  
     
SOCIAL WORK 100:92:69  
     
TECHNOLOGY    
     Industrial 100:69:58 Small #s:  1 Prof., 4 Assoc. Prof., 
                2 Assist. Prof.
     Civil/Mech/Related 100:99:73 Small #s:  1 Prof., 7 Assoc. Prof., 
                1 Assist. Prof.
     Electrical-Electronic 100:59:XX XX = no Assist. Prof. 
Small #s:  1 Prof. 5 Assoc. Prof.
     Human Development 100:68:XX XX = no Assist. Prof. 
Small #s:  1 Prof., 3 Assoc. Prof.
 

This same information is may be obtained in graphical form by contacting the author (email: rmanny@uh.edu).

     Using this method of analysis, there are 5 departments (3 with small numbers) where the average salary of a lower rank exceeds the average salary of a higher rank, a salary inversion.  These departments are indicated in bold.  There are also 12 other departments where the average salaries of the next nearest rank are either the same or within 4 percentage points of each other.  These departments are shown in italics.  Of the 44 departments/colleges listed above 33 or 75% have neighboring ranks separated by 15% or less.  Although the ideal ratio between neighboring ranks is debatable, Table 3 demonstrates that a significant number of colleges and departments have small differences between neighboring ranks suggesting a salary compression problem at the University of Houston.

    Table 4 shows the rank ratios present at other Universities derived from data available from the Chronicle of Higher Education (April 23, 1999 and August 27, 1999).  The salaries used to calculate the rank ratio were reported in thousands of dollars and were rounded to the nearest hundred.  The figures cover full-time members of each institution's instructional staff, except those in medical schools for the 1998-1999 academic year.  The American Association of University Professors compiled the salaries reported in the Chronicle of Higher Education.  In the data reported by the Chronicle of Higher Education, the University of Houston was rated as category I, doctoral institution.  Universities in the 10 most populated states with the same rating (category I) were selected for comparison (California, Illinois, Michigan, New York, North Carolina, New Jersey, Ohio, Florida, Pennsylvania and Texas).  The overall rank ratio for the University of Houston was calculated from these figures and is shown in Table 4 for comparison.
 

Table 4 - Rank Ratio Method of Universities located in 10 Most Populated States
 
Institution
Ratio
Full:Assoc:Assist:Inst
California  
     California Inst of Tech 100:70:58
     Stanford 100:68:54
     U of Calif @ Berkeley 100:66:55
     U of Calif @ Davis 100:72:60
     U of Calif @ San Diego 100:66:56
     U of Calif @ Santa Barbara 100:65:54
     U of San Diego 100:69:60:50
     U of Southern Calif 100:70:61:51
Illinois  
     DePaul U 100:73:55:52
     Illinois Inst of Tech 100:79:70:50
     Illinois State U 100:79:66:49
     Loyola U of Chicago 100:68:54
     Northern Illinois U 100:73:62:37
     Southern Illinois U - Carbondale 100:74:61:42
     Trinity International U - Liberal Arts 100:85:66
     U of Illinois @ Chicago 100:73:60:49
     Urbana-Champaign 100:70:60
Michigan  
     Michigan State U 100:75:60:54
     Michigan Tech U 100:73:64:45
     U of Michigan - Ann Arbor 100:71:56:46
     Wayne State 100:76:60:54
     Western Michigan U 100:80:65:52
New York  
     State U of NY - Albany 100:72/56
     State U of NY - Buffalo 100:72:57
     Cornell U 100:78:65:42
     Syracuse U 100:76:62:70
     U of Rochester 100:66:63
North Carolina  
     Duke U 100:66:55
     North Carolina State U 100:72:63
     Chapel Hill 100:74:58:51
     Greensboro 100:72:58
New Jersey  
     Princeton U 100:60:47:39
     New Brunswick 100:72:53:45
Ohio  
     Kent State U 100:74:59
     Ohio State Main Campus 100:68:57:45
     U of Cincinnati Main Campus 100:74:61:47
Florida  
     Florida Atlantic U 100:77:64:53
     Florida International U 100:77:65:55
     Florida State U 100:75:66:34
     U of Central Florida 100:78:63:43
     U of Florida 100:73:63:58
     U of South Florida 100:74:63:52
     U of Miami 100:68:59:46
Pennsylvania  
     Carnegie Mellon 100:69:61
     Drexel U 100:76:74:46
     Lehigh U 100:71:57
     Pennsylvania State Main Campus 100:67:55:38
     Indiana U of PA 100:81:62:46
     Temple U 100:75:53:52
     U of Pennsylvania 100:67:60
     U of Pittsburgh Main Campus 100:71:58:45
Texas  
     Texas A&M U 100:71:62
     Texas Tech U 100:71:56:40
     University of Houston  100:69:63:48
     University of Texas - Austin 100:65:60
   
PUBLIC Doctoral Institutions (Chronicle of Higher 
Education - August 27, 1999)
100:71:59:42
 

     Based on the within class analysis (Table 2) and rank ratio analysis (Table 3), it is apparent that true salary compression is present at the University of Houston.  Salary compression is present at all academic levels in most, if not all, colleges.  It is also apparent that salary compression is not a unique problem to the University of Houston but is a national issue, affecting many other Universities (Table 4).
     It should also be recognized that neither of the analyses reflects salary differentials present between the University of Houston and the private sector or other comparable Universities.  This is a very significant issue in many fields but is beyond the scope of this report.
 

III.  Possible solutions to a salary compression problem

     Several models to remedy true salary compression have been proposed.  However, Lawther, (1989) has cautioned that "if pay compression exists on a large scale, attempting to deal with it on a piece-meal basis may only aggravate the problem."  This statement suggests that the solution to the salary compression present at the University of Houston may require action centrally rather than at the college level.  Four different approaches to solving salary compression are presented.  The solutions are not meant to be exhaustive or exclusive, but are presented to provide a sampling of the possible solutions that have been proposed to solve salary compression.

VI.  Recommendations References

Bereman, NA, Lengnick-Hall, ML.  (1994)  Pay compression at public universities:  the business school experience.  Public Personnel Management.  23(3):  469-480.

Bergman TJ, Hills FS, Priefert L.  (1983)  Pay compression:  Causes results and possible solutions.  Compensation Review 15:17-26

Gomez-Mejia, LR, Balkin DB.  (1987)  Pay Compression in Business Schools:  Causes and Consequences.  Compensation & Benefits Review 19(5):  43-55.

Lawther WC.  (1989)  Ways to monitor (and solve) the pay-compression problem.  Personnel 66(3):  84-87.

Singleton CA (1990) Maximizing the productivity boost from your merit increase dollars. Compensation & Benefits Management 7(1):  34-39.

The Chronicle of Higher Education (1999) Facts and Figures 1998-99 AAUP Faculty Salaries.  April 23, 1999.

The Chronicle of Higher Education (1999)  Average faculty Salaries of Full-Time Faculty Members.  46(1):36  August 27, 1999.