Reconciling Diversity & Inclusion Goals with Pay Equity Concerns in Higher Education
It is no secret that the demographics of graduating high school seniors are changing throughout the U.S. Colleges and universities recognize that a sustainable business model requires them to be accessible and relevant to a growing percentage of minority populations within a decreasing pool of graduating high school seniors. Attracting a diverse student body has become mission critical and key to maintaining and growing student enrollment. As a result, diversity and inclusion initiatives have become a strategic priority across the industry, not only in terms of its importance to student recruitment efforts, but also for the impact it can have on recruitment, retention and engagement of faculty and staff. Recognizing the importance to the industry, CUPA-HR recently launched a Diversity, Equity and Inclusion (DEI) Maturity Index that allows institutions to assess how they are doing across five critical factors that impact DEI—Communication/Education, Assessment, Culture, Investment/Infrastructure, Compensation/Recruitment/Retention. One of the stated goals of the index is to foster campus-wide strategic conversations and collective commitment to DEI across many dimensions.
At the same time, well-documented pay equity issues in higher education are getting increased attention and presenting a cultural and financial conundrum at campuses both large and small. Successful pay discrimination lawsuits are making headlines and causing proactive institutions to revisit the status quo and ensure strategic priorities are appropriately aligned.
Competing for Students
The cost of tuition and escalating student loan debt is making families question the long-term value of a college degree. Institutions are working hard to compete for students at a time when the percentage of new high school graduates enrolling in college has flattened following many years of steady increases. The National Center for Educations Statistics (NCES) reports that undergraduate enrollment decreased by 7% between 2010 and 2016. The same report indicated that enrollment will increase by only 3% over the next ten years. At the same time, undergraduate enrollment is becoming increasingly diverse with the rate of enrollment for Black and Hispanic young adults outpacing that of Whites. The Chronicle of Higher Education has highlighted enrollment challenges, particularly for private institutions that are highly tuition-dependent and public institutions whose funding sources are diminishing. In January, the Chronicle reported that 52% of private colleges and 44% of public colleges didn’t meet their 2017–18 academic year enrollment goals. A diminishing number of international students may be a contributing factor. Enrollment of international students, a long-time panacea for some institutions, has suddenly declined. A November 2018 report in the Wall Street Journal confirmed the total number of international students enrolled in the U.S. declined 6.6% in 2017–18, down from average annual growth of 6.1% over the past decade when enrollment of international students doubled.
Longer-term prospects may not be much better. A September 2018 article in The Hechinger Report indicated the college-going population will drop by 15% between 2025 and 2029 according to a prediction by Nathan Grawe, an economist at Carleton College in Minnesota¹. The data has created some urgency and institutions are responding by focusing on student success to improve retention, and developing academic programs that provide the necessary skills and knowledge that lead to greater employability and a better return on investment. They are also working hard to create cultural environments that are appropriately aligned with student expectations regarding diversity, inclusiveness and tolerance. Campus leaders recognize that administrators and faculty need to be more representative of the populations they serve. Students and their tuition-paying parents expect it. The importance of recruiting from diverse talent pools has never been greater. As a result, diversity and inclusion officers have become an increasingly important position of leadership and influence on many campuses.
Competing for Employees
The current highly competitive labor market and industry talent shortage make it difficult to recruit and retain the high-quality faculty and administrative staff that will help drive organizational success. At the same time, the industry is wrestling with an aging workforce many of which will be transitioning into retirement in the coming years and increasing the competitive demand for key talent. Total rewards programs that have historically included generous retirement, dependent tuition, paid time off and other benefits have been helpful in the past, but are becoming increasingly difficult to sustain. With the cost of salaries and benefits often exceeding 70% of operational budgets, and pressure to slow the rate of tuition increases, institutions may feel they are being squeezed from all sides.
There is another pressing concern. In 2017 CUPA-HR issued three research briefs that found “women and ethnic minorities, analyzed separately, continue to face disadvantages regarding representation and pay.” The publicity around pay disparities in the industry combined with the increasing number of states passing new pay equity laws has put pressure on institutions to reassess their employee value proposition, organizational priorities and potential liability.
The financial cost of being on the wrong side of the pay equity issue is high, the reputational cost and negative impact on employee engagement, while difficult to quantify, may also inflict an expensive toll. In 2018, the University of Denver was successfully sued by six female law professors resulting in a $2.6 million dollar settlement. An EEOC investigation found the law school had engaged in a continuing pattern of discrimination by paying female law professors less than their male counterparts. Under the settlement agreement, the law school agreed to improve pay transparency by providing annual salary data to faculty members for all employees in similar positions.
In 2018, faculty members and/or academic administrators filed pay discrimination claims against a number of other institutions. It remains to be seen if this will be an increasing trend, but for many in the industry, the time has come to engage in difficult but important conversations about pay equity to ensure strategic goals are aligned with organizational values. These conversations must include Human Resource practitioners who need to work with key institutional leaders to address equity concerns, identify and evaluate the risk, and create a pathway for making substantive and sustainable changes that are acceptable to the broad campus community.
Revisiting the Status Quo
The pressures of tight operating budgets, enrollment expectations, and a highly competitive labor market—coupled with a strategic focus on diversity and inclusion, and pay equity concerns across the campus community—give higher education employers an opportunity to rethink their traditional approaches to compensation and benefits.
While institutions readily see the business value in understanding and responding to student expectations and needs, it is important to recognize that successfully engaging faculty and staff requires the same principles be applied to the workforce. Without engaged employees, institutions will face more challenges to achieving organizational goals.
Promoting equity across the entire workforce is a fundamental tool for any engagement strategy, and will help employees connect with a diverse student population and improve organizational outcomes. In creating an environment that appeals to future generations of students and employees who feel equally valued and respected, it is critical that institutions evolve and redefine their value proposition in a holistic and sustainable way. The economic realities on most campuses will require creative and collaborative solutions that include input from many constituencies. What institutions can least afford is stagnation, so total rewards approaches must respond with the market. Changing employee expectations must be clearly understood and traditional sacred cows may need to be reconsidered. The faculty and administrator workforce silos that persist on many campuses will have to be bridged, and the paternalism of the past replaced with a more flexible, data-driven, long-term strategic approach to total rewards.
A number of institutions are taking a proactive approach. The 2018 Higher Education addendum of Gallagher’s National Benefits Strategy and Benchmarking Survey indicates that 23% of institutions have a multiyear benefits strategy and 24% have one for compensation to help develop sustainable total rewards programs. The survey reports that one-third (33%) use employee preference survey results in benefits planning, and 22% consider workforce characteristics such as length of service, age or gender. While the data is a positive indicator, there is room for improvement. The majority of institutions appear to approach benefits and compensation planning on an annual basis, making it difficult to allocate limited resources to address pay equity concerns or deploy in those areas where it can produce the greatest benefit in terms of employee engagement.
While there is no single approach that’s right for every institution, difficult choices may have to be made over time, with a full understanding of inherent trade-offs. Long-term solutions will require planning and patience so it’s important to incrementally improve in ways that make the most sense for organizational priorities and budget resources. This is why a comprehensive total rewards strategy informed by well-analyzed data is pivotal. In determining how and where to deploy limited resources in the current environment, decisions driven by reliable insights— and supported with clear and effective communications—are best bets for addressing pay equity concerns, minimizing risk and improving employee engagement.
¹ “College Students Predicted to Fall by More than 15% After the Year 2025” – Jill Barshay, The Hechinger Report, September 10, 2018
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