Why is the pay for tenure-track faculty at business schools in developed countries other than the US substantially lower than (and often only a fraction of) their US counterpart (with the exceptions of Hong Kong and Singapore, and then perhaps a handful of other schools in the rest of the world)?

Shouldn't the proportion of people who want to pursue business degrees and are able to pay business school tuition largely comparable across developed countries? Then should non-US business schools also be able to make money from tuition to hire top business researchers/professors and pay them as well as US business schools? What makes the economics of running a business school and paying faculty different in other developed countries?

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    "Then should non-US business schools also be able to make money from tuition" You're making a lot of assumptions here. In many countries, there simply are no (or very, very low) tuition fees for public universities. This naturally decreases the demand (and thus, the prices ) for private business schools. – Jochen Glueck May 3 at 1:42
  1. Many universities are not funded by tuition by students. Funding from the government is not rare.
  2. Did you remember to take into account such issues as whether the society offers reasonable healthcare for everyone, kindergarten and school for children, reasonable holidays, unemployment benefits, rights for employees, etc.? Adjusting for these might not always be in favour of USA. This also makes it very difficult to compare wages across countries.
  3. That said, USA is a very rich country with some very rich universities that can afford to pay well.

I think this is not an issue limited to buisiness school salaries, but to a lot of other professions in the US as well. In many instances, people will earn double or triple the salary in the US than compared to lets say countries in the European Union. BUT: these countries have universal (or free) healthcare, free or reasonable priced childcare, free or very cheap, and nevertheless high quality education (even on a university and college level). And not to forget: people at the lower end of the income spectrum generally have all these perks as well, with an addition of functioning diability, unemployment and maternity leave payments. And they have 30 days of paid vacation a year. In short, all the money that you did not get paid compared to the US goes into an improved quality of life (IMHO) not only for yourself but also for the whole society you are living in. Worth it.



When faculty are represented by a powerful union, then faculty in different disciplines are all paid the same. This results in lower pay for the highest paying disciplines. The US lacks powerful unions.

Supply and demand are probably also a factor.

  • What? It isn't remotely true that professors across disciplines are paid the same in the US universities where the faculty do belong to a union. It's not remotely true even at the K-12 level, which does have powerful faculty unions. – Elizabeth Henning May 3 at 18:20
  • @ElizabethHenning You probably have no experience with powerful unions. In some places, the unions literally control the government. – Anonymous Physicist May 4 at 0:06

This is sort of a more detailed version of @AnonymousPhysicist's answer, specifically for the UK.

In the UK all academics (with the exception of Imperial College London) are paid on the same 54 point national pay spine. The salary at each point is negotiated by the unions and a organization that represents employers each year. I'd not say that the unions are "powerful" as they have lost this negotiation every year for the last 10 years, and pay increases have been zero or below inflation.

Each university can divide those points up into "grades" however they like, but most are more or less similar in practice. At my uni we have 9 grades. What grade you are is determined by your job description, not your subject area. So grade 8 is described as "having principle responsibility for delivering one or more areas of teaching and leading a program of research, either of which may involve management of junior colleagues". The complete job descriptions for each grade are available publicly on the internet. Grade 8 starts at point 37, which in 2019 was £41,526 GBP ($57,667 USD). All academics taking up an entry level faculty position will be grade 8, the vast majority grade 8.1 (sometimes people negotiate to start at 8.2 or 8.3), irrespective of their discipline.

This is useful for universities on some level - tuition fees at the undergraduate level are capped at £9,500 for home students by law, but some degrees (principally experimental science and engineering courses) cost way more than this to teach. Degrees that are either cheaper to teach (like humanities) or can attract significant overseas students (like engineer) cross subsidies expensive subjects that can do neither. MBAs are both cheap to teach and attract many high-fee paying overseas students, and so provide a large amount of cross-subsidies to, say Biology, which costs twice the fee cap to teach, but attracts few overseas students.

  • So it sounds like this isn't so much about unions, it's about having nationalized higher ed and classifying university instructors like civil servants. – Elizabeth Henning May 3 at 18:30
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    @ElizabethHenny Universities are private entities in the UK - a mixture of different legal standings (the majority are charities), but none of them are government owned. University employees are not civil servants. However, 90% of students fund their education by taking out government backed loans, and the government will only provide loans where the fee is less than £9500 (i.e. they won't provide part loans). In theory a university could decide to forgo this an charge what they like. Although Oxford/Cambridge occasionally talk about this, it never amounts to anything. – Ian Sudbery May 3 at 18:41
  • There are a small handful of what are known as "private universities", but all that really means is that the university doesn't take government loan money, and therefore is not subject to government rules. The ownership/employment rules are not any different. – Ian Sudbery May 3 at 18:43
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    The key point about the Union bargaining here is not just that academics are unionized, but that they all belong to the same union and only agree to negotiate with the employers as a single block. – Ian Sudbery May 3 at 18:47
  • Perhaps another exception to the system you describe is London Business School, where at least some disciplines pay wages similar to top US business schools. – tvk May 3 at 22:27

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