The Economics of Academic Tenure

In some countries, many universities use an employment system for teachers known as tenure. After a lengthy trial period, a faculty member whose performance meets with the approval of the senior members of the department and the administration of the institution may be awarded tenure. A tenured faculty member enjoys considerable job security for the rest of his or her working life and can only be fired for reasons of “moral turpitude” (bad or evil behavior) or “gross incompetence” or if the financial stability of the institution requires the elimination of an entire department or program.

The high degree of job security enjoyed by tenured faculty members has been the source of complaints about the tenure system. One issue that has been raised by many, including legislators evaluating the finances and managerial practices of state universities in the United States, is that tenure shelters faculty from accountability for poor performance. Another argument is that tenure makes the university inefficient in responding to changing instructional demands. It is difficult to substitute computer engineering faculty for civil engineering faculty if most of the latter have tenure. In 1988, the Education Reform Act significantly softened” the tenure system in the United Kingdom, making it easier to fire individual faculty members for financial reasons. More recently, some universities in the United States have taken steps to give university administrators more control over tenured professors And, in general, American institutions of higher learning have ended to increase the use of part-time and nontenured instructors over time. In 1992, just 48 percent of all instructors had tenure on were in a position that was expected to lead to tenure

The traditional argument in favor of tenure is based on academic freedom, the freedom to investigate and teach any area of knowledge without restriction or interference. In this view, tenure protects faculty members from retaliation for voicing unpopular views. For example, a labor economist might not present a complete examination of the costs and benefits of worker unions it he or she feared that a rabidly anti-union university leader might seek to have the economist fired for speaking of the positive aspects of unions. In fact, the American Association of University Professors (AAUP), a group dedicated to protecting academic freedom, got its start in the wake of a 1901 decision by Stanford University to fire economics instructor Edward Ross at the insistence of the university’s co-founder, Jane Stanford, who objected to his views on economics and other matters.

Going beyond academic freedom, the economics literature has recently turned to an emphasis on tenure as a labor-market institution that may have a positive payoff to universities through the incentives (motivation) it provides. For example, economist Lorne Carmichael’s model of an academic department treats tenure as the means of providing incentives for incumbent (current) faculty to participate in identifying the best candidates for new positions. If incumbent faculty had to worry that more-able new additions to the department might replace them one day, they would be less inclined to make hiring decisions that were in the best interests of the university. Incumbents are much better positioned to judge the talents of potential new hires than is the university administration. Moreover, the long-term job security they gain through tenure gives incumbents an incentive to hire new faculty who might be more productive than the existing faculty in a department.

The economists Michael McPherson and Morton Shapiro have also emphasized the notion that tenure has a positive payoff for the university by aligning the self-interest of individual faculty members with the long-run interests of the institution. They see two valuable economic benefits from the tenure system beyond the incentive to hire and mentor more productive new faculty. First, job security allows tenured faculty the independence to perform credibly objective evaluations of students and other faculty. People outside the university who rely on the information provided by student grades or faculty reviews of papers or proposals can have greater confidence that these evaluations have not been colored by the faculty member’s concern about job security. Second, tenure allows faculty to make long-run strategic decisions about educational policy and research even if these are in conflict with the short-run, career interests of administrators. The fact that tenured faculty often are viewed as obstacles to change by ambitious administrators looking to enhance their records for their next career move might well be a good thing for the long-run interests of the university

1.In some countries, many universities use an employment system for teachers known as tenure. After a lengthy trial period, a faculty member whose performance meets with the approval of the senior members of the department and the administration of the institution may be awarded tenure. A tenured faculty member enjoys considerable job security for the rest of his or her working life and can only be fired for reasons of “moral turpitude” (bad or evil behavior) or “gross incompetence” or if the financial stability of the institution requires the elimination of an entire department or program.

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