Making sense of U.S. assist. prof. salaries: gross vs. net, 9 vs. 12 months

Question

Having recently received a PhD in Economics from a European university, I am entering the academic job market for economists this year. I am targeting research-intense, PhD-granting universities in the U.S. and Canada. I am thinking about Tier 4-5 institutions (certainly not Tier 1 or 2, I do not think I would have a chance there).

I am now trying to wrap my head around the quoted salaries for tenure-track assistant professorships. Having little clue of 9 vs. 12 month appointments, notions like "nominal academic year salary" and the like, I am trying to figure the gross annual salaries from the job adds. After that I am interested in deriving the corresponding net salaries; my lack of familiarity with the U.S. or the Canadian tax systems certainly does not help here.

For example, "Survey of the Labor Market for New Ph.D. Hires In Economics 2015-16" reports "expected and actual offers" on p. 8. Should I understand this is the actual annual gross salary, or should I divide or multiply it by 9/12, or add or deduct something?
Similarly, "American Economic Association Universal Academic Questionnaire Summary Statistics" (2016) list "nominal academic year salaries" in their tables. Are these the actual gross annual salaries, or..?

Once you help me figure out how to infer the gross annual salary, the next step would be to tell approximately what net salary that would correspond to. Should I expect to earn, say, 60,000 net given 100,000 gross? When I say "net", I am interested in hard cash going directly into my pocket. I would not consider any pension or insurance contributions that circumvent my pocket as part of the net salary. I am interested in how much money I would have at the end of the day to pay the bills and to put food on my family's table.

In short, what I am looking for is a brief introduction into the U.S./Canadian academic salary accounting accompanied with a couple of examples.

Edit: The first two answers focus more (although not entirely) on gross vs. net salaries (where taxes etc. feature prominently). However, I am still very much interested in how to read the job adds as well as tables with salary comparisons. That is, does the nominal figure typically equal the gross annual salary, or not exactly? What about my two examples mentioned above?

Answer 1

In the United States, the "academic year" consists of the 9 months that comprise the fall and spring semesters. This is the period during which you are formally employed by the university and receive a salary. These 9 months also define what salary you are essentially guaranteed. However, it is possible that you will also get a salary for the remaining 3 months; for example, if you have grants from a funding agency or from industry, or if your department runs a summer program and you teach during these months. You can inquire with the head of the department that made you an offer whether they run a summer teaching program, and what your chances would be to get an assignment to teach. In other words, your salary may be up to 4/3 of the nominal, academic year salary, but that is not guaranteed.

How much of this money ends up in your pocket depends on a number of factors that are hard to estimate without knowing more:

• You can look up the Federal tax rate for this income. If you're single, I would think that you have to estimate a tax rate somewhere in the 20-25% range on your total salary, including the 6.2% social security tax. But it may be significantly less if you have family and your spouse is not working.
• Some but not all states (and in some cases, cities) have a state income tax. You can also look that up. Many states use a flat percentage of your income, typically somewhere in the 4-8% range. I don't know whether that includes deductions for dependents.
• Retirement: Most universities have switched to a 401(k) system where you get no benefits from the university after retiring and both you and the university instead pays into an account over the time of your employment from which you can later draw money in retirement. Depending on university and state, you will have to expect to pay 6-10% of your total income into this account.
• Health insurance: If your health insurance has to cover only yourself, then you can expect that your employer picks up all or almost all of the cost. On the other hand, if you have family that needs to be insured, then you have to expect that your share of health insurance will be in the range of $500 per month (for only a spouse) or larger (if you have children).

So if you add all of this together, if you start with $100k per year, you'll end up with maybe $100k-25%-5%-8%=$62k in your pocket if you're single, plus or minus several thousand dollars. But it may be quite different if you had family, depending on the state you're employed in, and any number of other factors.

Answer 2

The practice of calculating "net" salaries is not done in the US, because the governments tax your total income, not your salary, and the way it works depends on a number of factors that will vary between different people.

These are the major deductions from your salary:

• Social security and medicare: 7.65% of your salary
• Medical and related insurance: This differs from employer to employer, and you will also have a choice of insurance plans, some of which provide better coverage than others and some of which will cover a spouse and children as well as yourself. Expect to pay somewhere between $100 and $500 a month. (Keep in mind this is only about a quarter of the total cost - the rest is paid by your employer.)
• Retirement: Usually this is entirely up to you, from 0-15% of your salary. You put a certain amount of money into an account that is invested for you. The income tax (see later) on the money you put into the account is deferred; instead of paying it now, you pay it when you take the money out after your retirement, which is a big advantage (because get earn interest on what you otherwise would have paid in tax). Your employer is likely to match some of what you put in as a way of encouraging you to put in some money.
• Income tax: Every year in April, every American has to calculate and pay their income tax. You add up all your income (including income from investments and in theory the $5 value of the beer your neighbor bought you for feeding their dog while they were gone), subtract a myriad of deductions (for example, you have a personal exemption of about $3000 per person in your household, plus you either get a standard deduction of about $5000, or you can instead choose to itemize deductions which allow you to deduct state taxes, large medical expenses, interest you pay on a home mortgage, and a few other items), and look up a table to see how much you owe. To collect their money sooner, the government requires that at least 90% of what you owe for the year is deducted from your paycheck. Most people just elect the simple option of using the standard formula for paycheck deductions, but you actually have a lot of control over this process, and if you get it wrong and had less than 90% prepaid, you have to pay a fine with your taxes. (If you have over 100% prepaid, you get a refund.)

Answer 3

The salaries listed in the documents you've referred to are 9 month gross salaries. Opportunities for additional summer salary vary tremendously, so don't just assume that you'll be able to earn 4/3 of the 9 months salary.