University vice-chancellors deserve more pay, not less. Here’s why | David Blanchflower

Yosser Hughes, from Boys from the Blackstuff, famously said: “Gissa job – I can do that”. Of course, he mostly wasn’t qualified for the jobs he was after. He couldn’t do that. Lots of people these days seem to think the job of running a giant university is an easy one, and they could do that.

The reality is, they couldn’t. It turns out there is a shortage of applicants for these jobs because, compared with equivalent jobs in the private sector, they are seriously underpaid.

Despite much recent controversy about their remuneration, UK vice-chancellors are not well paid, against their next best alternative employment in education or abroad. Pay should reflect performance, and there is an international market for top talent. If you don’t pay adequately, the best people leave and those with no alternatives remain, so quality falls. The best people pay for themselves with higher output.

This is more about the politics of envy than it is about economics. The suggestion from the former education minister Andrew Adonis that vice-chancellors’ pay should be capped at £150,000 shows no understanding of labour economics.

Glynis Breakwell, at the University of Bath, is the highest-paid vice-chancellor in the UK. She runs a large business with 17,000 students, of whom 3,500 are from overseas, and employs about 3,000 staff. The university received £123m in research grants last year. According to its financial statement, it had an annual income of £260m in 2016. A recent report suggested that nearly 6000 local jobs are supported by the university.

Breakwell received a £17,000 pay rise in 2016/17, taking her annual salary to £468,000. To put this in context, more than 4,000 City bankers earned over €1m (£887,000) in 2015, approximately double Breakwell’s pay. The average pay of a FTSE100 chief executive was £4.5m last year. Amanda Goodall from the Cass Business School has shown that world-class scholars, who have high earning power, make the best leaders of universities.

Overseas students brought in £43.1m to the University of Bath in 2016. To put this in context, Breakwell would, by my calculations, need to recruit fewer than two additional overseas students to cover her pay rise. I suspect she will be able to do that. She looks like a bargain at twice the price.

British vice-chancellors are also underpaid compared with university presidents in the US, where, according to Forbes, the highest-paid president at a private university made over $5m (£3.8m) last year. The president of Columbia, Lee Bollinger, who was a provost at Dartmouth, where I work, was paid $2.5m; Amy Gutmann at the University of Pennsylvania was paid $3m; and Robert Zimmer, president of the University of Chicago, was paid $2m.

The highest-paid president of a public university, Arizona State, was paid more than $1.5m last year. Underpay vice-chancellors in the UK, and American universities will grab them. (In the interests of disclosure, I am employed as a professor of economics at a US university, and I used to work in university administration.)

The job of a vice-chancellor is an extremely tough one that few people could, in fact, do. It involves running a giant business, making speeches, coordinating with national and local politicians, speaking to journalists and doing TV and radio interviews, fundraising, talking to alumni, recruiting staff and being on call 24/7. Recruiting staff into the publish-or-perish world of academia is central to the job. A university is evaluated on both the quality of its research and teaching, and the vice-chancellor is central to that.

The buck ultimately stops with the boss. The vice-chancellor is the voice of the university. If something bad happens, it is the vice-chancellor who has to break the bad news. Theirs is the door at which sexual harassment claims ultimately arrive.

Few people have the rare skills to do such a demanding job. Most of those who are qualified for the job – including most professors – wouldn’t do the job, as they would have to give up the flexibility they have, and their research work and consulting incomes.

A vice-chancellor’s schedule is set for them. The job has a huge effect on family life. There are few places to hide and find privacy. You are always on show, even on the golf course. In the end, there are few qualified and willing applicants.

If you pay peanuts, you get monkeys, because markets work. If you don’t pay adequate salaries, the best people leave and the worst, who have no alternative, stay, and so quality falls. The public sector pay freeze has affected staff at universities, and it is clearly time for the chancellor to pay them more. But cutting a few thousand quid at the top would be a big mistake.

• David Blanchflower is a professor of economics at Dartmouth College, New Hampshire