Photo: chispita_666 The College of Liberal Arts at UT is offering its first ever “buyout.” If a faculty member retires at the end of this semester, s/he receives two years of pay as a lump sum. To be eligible, the sum of age plus years at UT must be at least 93. Of the 88 eligibles, I’m told that over 40 are taking the buyout.
It’s an interesting economic calculation. An easy comparison is the current monetary gain to the lost future earnings (assuming the professor would not be reemployed elsewhere, or at least not at the same pay). The tougher comparison is the likely gain or loss to the utility of the extra leisure — or perhaps the disutility of possibly never teaching again.
I would predict that older people would be more likely to take the buy-out — since the present value of their lost earnings is lower; but the oldest eligible person is 84, and he isn’t taking it because he loves teaching and gets little enjoyment out of his leisure. Chacun a son goût; but if I were eligible (despite being age 67, my mere 18 years at UT renders me ineligible), I would take the buyout in a minute. What would you do? Why?
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It is a good deal for those close to the usual retirement age and very good for those above that age. It is one way to get professors over age 65 to step aside and allow the college to hire new faculty and at a lower salary. OTOH – if they replace these tenured professors with part-time adjuncts – shame on them.
For younger faculty – and I doubt that there are many in this bunch – they better be ready to never have a full-time job again. Very few colleges and universities are hiring full time faculty. Most try to nickle and dime their teaching needs with part-timers who do not make even minimum wage for teaching a course. Many highly educated and very talented Ph.D.s who would love to teach at the college and university level are unable to find full-time jobs.
Would I Retire for a Buyout?
Answer depends on degree. How Much?
Annual payout can range from $1000 to $1,000,000. $1000 will not budge me. But @ $1 million per year, I will be out the door before the ink dries, leavng a person shaped vacuum vortex .
There are three different variables to calculate: money, time and status. Right now, I’d take the money and get another job. If I was short before retirement, it’d be more complicated. At that point money isn’t a big concern, because all important and expensive investments – college, house, children – had been done. I guess it depends what I would do with that additional free time. If I had another project like writing a book at hand, I’d take the severance packet; if not I’d stay professor and enjoyed my higher social status.
There were buy-outs like these in the mid-90′s at the University of California, Berkeley. (I don’t think the criteria were exactly the same, but they were similar.)
There were two groups of people who jumped at the offer: (1) people who were planning to retire soon anyway (more money, less work); and (2) people who were active and well-respected enough to land a tenured job at another university.
The problem with this sort of buy-out is that while it may help “accelerate” some pending retirements, it doesn’t clean out dead wood that isn’t already planning to leave.
Public institutions (perhaps private ones too) don’t seem to be able to offer retirement incentives only to people performing below average (or if you like, to deny them to the top performers). It would be interesting to couple a special merit raise and retirement incentive system in such a way that anyone who received an “exceptional merit raise” in the past five years wasn’t eligible for the early retirement.
As for me, I’m still far away (age+service is just 62). I have a hard time imagining responding to such an offer, but if I had to make a decision, I’d probably pass it up. Two years of salary isn’t enough for the disruption in like that would be involved. Then again, I _like_ my job.
The teachers can’t be fired because of tenure, but why would other companies resort to buying out? Unions, maybe. It would be nice if UT could simply fire professors. It seems there are obvious efficiency gains (otherwise why pay to get rid of them?)
As for the buyout, if I were in such a position, I would definitely take it. I think the strongest reason to decline the buyout is the lack of opportunity elsewhere, with the exception of the very old.
To jason:
Companies offer buyouts to more expensive staff, not because of unions, but because firing expensive employees looks an awful lot like firing elderly employees, which is a crime. So, even if you’re not doing it on purpose, it will be very difficult and expensive to prove you aren’t out to get the elderly, so its better to offer the buyouts (which always come along with a release to sign).
i intended to post a detailed response, however I think estimating the Dr. Blogger Prof’s salary makes for an easy answer. At over $400,000 (2 times estimate income) in the higher range for econ profs the answer is that I SURE would!
http://www.utexas.edu/academic/ima/sites/default/files/2009-10%20Faculty%20Salary%20Booklet.pdf
However, was I a latin american studies full prof and my payoff was only $160K (and the fact that I’d prob have less accumulated wealth) probably not.
This scenario calls for you to evaluate what the opportunity cost of each choice is for you. “Ike many have already pointed out it’s essential to know what you value more or what would be most efficient use of that time/money. Some people might value their opportunity to teach more than the money. Other might not.
As for the strategy of the bailout itself it seems as a great example of the use of incentives to influence human behavior. Like the many instances of these incentives before there are sure to be negative unintended consequences to them like too many proffesors taking the buyout.