Friday, July 23, 2010

A quick note on tenure and the economics of deferred compensation

(Joseph may be through with this, but I'm just getting started.)

One of the many weird things about the exceedingly weird tenure debate is the way many (hell, most) of the participants talk about tenure as a gift to teachers rather than a form of compensation that's part of a highly competitive market. *

All forms of deferred compensation offer two attractive features to employers: they reduce the initial cost and they encourage retention. Both of these features are particularly attractive to school administrators who work in an incredibly labor-intensive industry, can't offer big salaries, often require employees to move to out-of-the-way towns and can't afford to have their best people move on the moment a better offer comes along.

If you eliminate tenure you will have to come up with an alternative compensation plan that accomplishes the same thing and with the possible exception of Tyler Cowen, no one seems to show any interest in what that alternative might be.

* Of course you can also talk about tenure as a way of protecting academic freedom and discouraging grade inflation, though no one does anymore.

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