So, last week (here, here, and here) I noted that in most parts of the country, total compensation levels have been running more or less in line with changes to total operating grants.  But this is not a reason to become complacent about university finances and future collective bargaining agreements, for two reasons.

First, what I’ve been showing is that salary mass has been increasing in line with operating income.  But salary mass and salaries are two different things.  If I give very high salary increases, I can keep salary mass down by reducing total staff complement.  That is very clearly starting to happen at some universities, and it’s not necessarily positive.  So there’s that.

Second, all the projections I’ve made have assumed that growth in tuition revenue is going to continue at present rates.  But there are some good reasons to suspect that this won’t be the case.  On one hand, domestic student numbers are already falling in Ontario and the Maritimes, due to demographics.  But more importantly, there’s simply no guarantee we’ll continue to increase tuition revenues from international students the way we have for the last seven or eight years.  And yet, every time another campus signs a big-money salary deal with staff, this is implicitly what the system is banking on.

What most people on Canadian campuses haven’t yet realized is the extent to which the 4.5% annual real increases in total operating budgets have been funded by international students (actually, a lot people don’t even believe that operating budgets have been increasing, but that’s another story).  And to keep those increases going into the future requires that institutions not only to keep the students they have, but also that they maintain a constant rate of growth.

So here’s the deal.  With institutional income increasingly coming from volatile market-based sources, sensitive to changes in demand, and quite possibly headed in the wrong direction, we are ill-served by a collective bargaining culture based on keeping-up with what profs at (insert comparator institution here) got 12 months ago.  That way lies an inflationary spiral.  What really matters is how total operating income is going to grow, and how to ensure salary mass increases don’t crowd out other important educational expenditures.

There is a simple way to do this, and, as I suggested back here, it involves linking pay to institutional income.  Institutions need to start saying publicly, at the outset of negotiations, what their likely income increases are going to be over the next 3-4 years, and make it clear that no settlement will be signed in which salary mass increases are more than this.  If an institution’s total net income is expected to increase by 10%, make it clear that 10% is the most that can be offered to staff.  Within that 10%, many things can be negotiated, of course.  But the bottom line has to link pay to income.

What if income increases more than 10%?  Staff should get their share of any incremental increase, of course.  That way, everyone has an incentive to see total revenues increase – which currently means giving everyone an incentive to be more foreign-student-minded.

Unions might not like this.  And that’s their right.  But then it would also be their responsibility to explain what universities should be cutting if growing paycheques can’t keep up with faltering revenue – publicly, and before the start of any contract negotiations.