Glimpses of Future Faculty
What impact will an evolving mix of higher education incentives and programs have on the retirement plans of future faculty? David Leslie, chancellor professor of education at the College of William and Mary, Williamsburg, Virginia, and Robert Clark, professor of business management and economics at North Carolina State University, Raleigh—both TIAA-CREF Institute Fellows—share some overarching thoughts.
How can gathering and analyzing demographic data give clues to probable costs associated with pending and future faculty retirements, as well as necessary strategies for recruiting replacement faculty?
Clark: Most universities do not do enough research about their institutions and the demographics of their employees. Academic leaders could develop demographic profiles of their faculty, determine transition rates (e.g., quits, fires, retirements, deaths) by age, and estimate the impact of changes in retirement incentives on these rates. This would allow administrators to estimate future hiring needs and provide a road map for reallocating resources within the university.
Leslie: National survey data show that younger faculty hope to retire earlier in general. Also, faculty are increasingly likely to be female. Women are attracted more than men to phased and early retirement. However, on the whole, retirement is a highly individual decision and correlations with demographic characteristics are often very weak.
How well do buyouts work as a strategy for managing faculty retirements?
Leslie: Faculty with higher pay tend to stay longer; faculty with lower pay also tend to stay—especially those in single-income households. Retirement bonuses haven't been especially successful. Because faculty tend to retire at around age 65 to 66, there may be no great benefit to encouraging earlier departure. I think incentives don't change more than a few minds and can have the perverse effect of enticing faculty to stay until the next round of incentives is offered. If the first round is not very successful, institutions tend to sweeten the next round, and faculty have learned to wait things out for this reason. The one exception would be on the health care issue. Providing health care benefits—such as pre-Medicare eligibility—could tip the decision to retire early for a significant number.
How can institutions do a better job of preparing faculty financially for retirement?
Clark: Financial education is very important. Institutions could do a better job of informing faculty of the importance of beginning to save early, managing their portfolios, and developing retirement plans. Universities could also follow the current trend and have automatic enrollment in supplemental retirement plans.
What new demands related to retirement might we see from current mid-career faculty or from younger, more ethnically diverse faculty in the future?
Leslie: The most important generational change is the rapidly increasing number and proportion of women. Ethnicity is changing more slowly. Women have been more interested in flexible terms and conditions of employment. Many of their concerns are focused on the competing demands of family and arrive much earlier than retirement. However, if flexing means also accepting lower pay and benefits, this could affect women's ability to retire. And women generally prefer earlier retirement than men. Our retirement paradigm is almost wholly predicated on men's lives and career patterns, so it may be necessary to start over, in a sense, and focus on how women's lives and careers evolve. We know very little about how women will actually retire when the larger numbers begin to do so in another 15 to 20 years.
Does what an institution offers today to current retirement-age faculty have any bearing on recruitment of new faculty or retention of faculty? How much are new hires scrutinizing current retirement benefits?
Clark: Candidates for new positions regularly ask about retirement plans, university contribution rates, and faculty contribution rates. The generosity of retirement plans differs widely across institutions and these differences can have a major impact on total compensation.
Leslie: Younger faculty appear more interested in flexible employment and earlier retirement. They are also not thinking too concretely about retirement, since it is 30-plus years down the road for most. Non tenure-track faculty represent approximately 60 percent of all faculty, although that number is inflated by the number of part-timers at community colleges. Non tenure-track faculty are typically ineligible for benefits and retirement plans. The large majority of part-time faculty are otherwise employed and usually don't need or expect benefits, since they may have them already. However, full-time contingent-year-to-year-faculty may need a lot more than we are giving them. As institutions come to depend more on contingents, they may want to consider whether it is either fair or appropriately competitive to exploit their willingness to work without benefits.
What is the greatest challenge facing chief business officers regarding faculty retirement and health benefits?
Clark: Health plans for current and retired employees are a huge concern. In the private, nonacademic sector of the economy, retiree health plans are a dying employee benefit. The big question facing colleges and university administrators may be whether retiree health plans will be maintained in higher education, and if so, at what cost.
Leslie: I would be most concerned with the long-term stability of retirement and health benefit plans. My second concern would be with the major demographic shift to a more female workforce and all that it implies for insurance and retirement plans. Thirdly, I think colleges and universities are very likely going to be faced with a shortage of qualified and interested faculty. This market reality is likely to drive up the cost of wages and benefits in the foreseeable future. I'd concentrate more on how to attract and hold the best and brightest of the next generation and less about how the current generation of those over age 55 may choose to retire.