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UPDATE (6/8/2020): A BIG THANKS to the Finance & Operations Planning Work Group (FOPWG) for revising their draft proposal in response to the input they solicited and received from the University community. I have updated the above graphic to reflect the new "Revised FOPWG Plan." (Yes, it's getting a little crowded, I know.) The proposed cutoff is now $50,000 instead of $40,000, and the curve is much less flat. At this stage, three important questions remain:
Is the new $50,000 cutoff the right minimum, or could it go a bit higher (e.g., to $60,000 as suggested by the AAUP)?
If the cutoff were to go higher (e.g., to $60,000 as suggested by the AAUP), then what slope of the line relating % pay cut to current salary would be necessary to return the same level of savings? The current slope between $55,000 and $300,000 is 0.14%/$5000.
Is a pay reduction of 8.08% the right maximum for the ultra-high earners who have not already agreed to a larger pay cut (e.g., 10%), or could it go a bit higher?
Sadly, there was limited time at the Senate meeting on Friday June 5 to really have a deep discussion that dug into this revised model and any alternative models the FOPWG might have also considered but rejected.
REVISED Alternative Plan: The revised graphic above illustrates a REVISED Alternative Plan that (maybe?) could be a viable alternative to the REVISED FOPWG plan. I have not had time to really crunch the numbers the way I would have liked (i.e., I'm in a dual academic couple with a four year old and no daycare). The raw data are here for anyone to look at and tinker with (see REVISED Alternative Plan worksheet). Features of this revised alternative plan include the following:
A new cutoff of $60,000 (instead of $50,000)
A slope between $65,000 and $290,000 equivalent to 0.19%/$5000 (instead of 0.14%/$5000).
A maximum % pay cut of 10% for those earning $290,000 or more that equals President Gabel's voluntary pay cut of 10% (instead of a maximum of 8.08% for those not taking the voluntary 10% cut).
Again, there are many unknowns and much data and background knowledge available to the FOPWG that are not available to the rest of us. So take this alternative plan (and anything you find on this website) with the appropriate grain of salt.
What follows below is the original version of this website.
Who am I?: Mark Bee, Professor in the Department of Ecology, Evolution, and Behavior and member of the Faculty Consultative Committee. For context, I am not an HR expert, a finance expert, an economist, or a University administrator. I am a regular faculty member who studies animal behavior. More specifically, I study how frogs communicate. So, my expertise is in frogs, not finance. Take that and what follows for what it's worth.
What is This?: Just some personal thoughts to share. I’ve been playing around with the numbers in the temporary pay reduction plan being proposed by President Gabel's Finance & Operations Planning Work Group (FOPWG). The initial draft plan is great in two important respects (see Blue line in the above graphic): (1) it includes a minimum salary cutoff ($40,000) below which there would be no reduced pay and (2) it is tiered across most of the salary scale. The inclusion of these two elements in the plan is laudable and in keeping with values that protect the most vulnerable employees. I thank the FOPWG for including these two elements in their draft plan. However, there are a couple of aspects that I find a little bit concerning about the plan, and I want to share them here. Maybe I’m alone in these concerns, and maybe I’m completely off the mark...or maybe not. Having read the recent AAUP Letter to Faculty Senators and the letter from the Humphrey School Graduate Faculty to the FOPWG, and having discussed the plan with other faculty, I believe I am not too far off the mark on some of them. I welcome all feedback (email me here). I think there are three main issues of concern.
1. Curve too Flat: While I am delighted to see a tiered plan, I think the proposed curve relating pay reduction to current salary is too flat (see the Blue curve in the above graphic). Hence, I'd like to see a plan that "unflattens" the curve represented in the current draft plan. Some additional explanation based on the "slope" at different points along the curve will help the graphic above convey the sense that the curve is too flat. The difference in % pay cut between someone earning $40,001 and $100,001 is 2.31% (=3.08%-0.77%); computed as a slope, that’s an approximate increase in pay reduction of 0.39%/$10K of salary (=2.31%/6). But, the difference in % pay cut between someone earning $100,001 and $300,000 is only 1.54% (=4.62%-3.08%); computed as a slope, that would come out to be a much "flatter" 0.08%/$10K (= 1.54%/20). For most earners who face a pay cut (see Purple line in the above graphic), the slope of the curve may seem too flat and, thus, too protective of the salaries of high earners. Can we unflatten this curve?
2. Cutoff too Low: While I am delighted to see a minimum cutoff salary in the plan, I think the proposed cutoff is too low. By setting the minimum cutoff salary at $40,000, many employees earning salaries well below the median income in Minnesota (~$66,000?) could be adversely impacted by a pay cut. I have no data on what job codes at the University of Minnesota might typically earn annual salaries in the $40,000 to $70,000 range. But for a comparison I am familiar with, I would note that the average salary for a Post-Doctoral Associate at the University of Minnesota is $49,539 (see Green point in the above graphic). For now, that's just a hypothetical comparison. At present, it's unclear to me whether postdoctoral trainees would be included in the proposed pay cut plan, though this is something I have tried to clarify on a couple of occasions. I hope they are not. Either way, can we raise the minimum cutoff to shield even more employees at the low end of the pay scale from a reduction in pay?
(Update: post-docs have been excluded from the employees receiving pay cuts.)
3. Lack of Representation: This last concern is less about the proposed plan and more about the process that generated it. The vast majority of employees who will be impacted by a pay cut are paid at the “low” end of the salary scale. No employees from this end of the salary scale were included as members of the FOPWG (compare Purple line and Red arrow in the above graphic). The Purple line estimates the number of employees earning a given salary; the Red line shows the mean and range of salaries of the FOPWG members. I definitely do not wish to imply that the members of the FOPWG do not have everyone's best interest in mind when making the tough recommendations necessary to determine who gets what size reduction in pay. Everyone on the committee represents an appropriate choice! My comment here is more about those who are not represented on the committee. I estimate that 15,821 of the 18,006 employees (88%) to be impacted by the proposed pay cuts earn less than the lowest-paid member of the FOPWG (excluding the student member). I hope we can all agree that the optics are not good.
An Alternative Plan?: As I continued to play around with the numbers, I tried to come up with an alternative plan that would save the same amount of money (~$37.7 million) while raising the minimum cutoff from $40,000 to $55,000 and (by necessity) making the curve less flat. I wanted to do more than merely criticize the proposed plan. (After all, everyone's a critic, right?) I wanted, at a minimum, to explore alternative plans. My suggested alternative for consideration is depicted by the Orange line in the above graphic. The "staircase" shape of the curve results from computing % pay reduction first in terms of furlough days using whole days following the FOPWG plan. (And who wants to be furloughed for 3.14159 days?) My estimation is that this alternative plan would increase the number of employees receiving NO pay cut from ~1500 to ~7000, yet it might save the University the same amount of money. This alternative plan asks those who make more to do even more for the University than the plan proposed by the FOPWG. Whether or not this plan is fair to those earning high salaries is certainly open to discussion; and I hope the FOPWG and the Faculty Senate will have that discussion. But this alternative plan does illustrate one hypothetical scenario in which raising the minimum cutoff might be compensated by unflattening the curve. (Faculty in the Humphrey School have proposed another alternative plan that might be even better in some respects!)
Assumptions. The raw data used to generate the alternative plan described above can be found here in the form of a GoogleSheet. I had to make several assumptions in creating the above graphic because I do not have access to all the data needed.
To estimate the number of employees earning a given salary, I assumed everyone in a given tier earned the midpoint salary of the tier (e.g., $52,500 for $50,001 to $55,000) and then back calculated from the proposed % salary cut an estimate of how many employees were in the tier using the total savings for that tier. My estimates for the numbers of employees in the lowest (< $40,000) and highest (> $300,000) salary tiers are probably the least accurate, but maybe they're not too far off.
I assumed no changes in the total estimated O&M savings, which are computed as 75% of the total estimated salary saving in the FOPWG proposed plan and in the suggested alternative plan. I have no idea where this 75% value comes from or what factors influence it.
I assumed no changes in the estimated additional savings from fringe, which are computed as 30% of the total estimated O&M savings in the FOPWG proposed plan and in the suggested alternative plan. I can imagine that this number goes up and down as different types of job codes with different fringe rates are included in the analysis, but I have no data to properly adjust this estimated 30% savings, so I kept it.
I followed instructions found here to find salary information included in the graphic, and I used the values for "normalized annual base salaries" in the graphic.
DISCLAIMERS:
Anyone reading this should keep in mind that I am completely ignorant of the intricacies of payroll and HR, as well as any of the difficult constraints or compromises that the FOPWG might have had to work under in generating their draft plan. So maybe my plan isn’t feasible at all due to labor laws, union agreements, or what have you. I’m sharing these thoughts in hopes that someone might double check my math, my assumptions, and my logic, and maybe even come up with an alternative plan of their own that they could share with the FOPWG.
My own salary falls in a "bin" that would see a small (< 0.4%) reduction in my own pay cut under my alternative plan. This was not by design. I promise! Rather, it is an outcome of following the FOPWG plan in determining the % pay reduction first as a number of furlough days and then converting to an equivalent percentage based on using 260 work days in the year. I wanted to use a sliding scale that started pay cuts at $55,000 and then gradually "accelerated" the slope of the pay cut across the salary range between $55,000 and $300,000. Other models are possible. Please go forth and model them!
I hope this website generates some fruitful discussion. As I would suggest to my own lab group when proposing a crazy hypothesis about animal communication: tear it apart!
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