In “Paying the Professoriate,” education Professor Philip Altbach and his colleagues compare the salaries of university faculty members across 28 countries. At a first glance, the list of top ten highest-paid academics is surprising:
For underlying data.
Relatively impoverished countries like South Africa, Malaysia, and especially India seem out of place. How is it possible that poor countries like these pay their professors more than the United States and several other developed countries?
The secret lies in a calculation called “Purchasing Power Parity” (PPP) that the authors use to adjust for differences in costs of living in one country versus another. Purchasing power varies dramatically across the world, with relatively lower prices (and therefore greater purchasing power) within poorer countries. For example, $5 in the United States barely buys a fast food meal while in a developing country like India that same amount might purchase a fancy meal at a restaurant. International tourists often comment about these sorts of differences. Places like Switzerland, Norway, and Japan are notoriously expensive. Conversely, countries in Asia are known for their bargain prices.
These differences in purchasing power matter dramatically for a professor (or anyone) trying to stretch every dollar of their paycheck. For example, a professor earning a $7,000 monthly salary in China almost certainly has much greater discretionary income than a professor earning the same amount in the United States.
The PPP adjustment is calculated as the amount of dollars required to purchase a particular basket of goods in one country compared to the United States. The particular basket of goods varies depending on PPP calculation, but typical goods included are housing, basic food products, clothing, and transportation expenses. Once the prices of this basket of goods are collected from each country, the PPP adjustment is simply the cost of the goods in the United States divided by the cost of goods in country A.
For example, if the cost of the basket of goods is $200 in China and $600 in the US, the PPP conversion factor is 3.0 ($600/$200). The final step in the adjustment with respect to professors’ salaries involves multiplying the actual dollar amount of the salary (e.g. $ 2,000 monthly) by the conversion factor (e.g. 3.0) which results in an adjusted salary of $6,000 per month.
The PPP adjustment applied by Altbach et al. is not without its problems and likely overstates the salaries of some professors working in the developing world. This occurs because the PPP adjustment is calculated using country-wide average prices. Professors in developing nations typically work and live in cities, which are usually more expensive than the rest of the relatively poor country. Nevertheless, the PPP adjustment allows for more meaningful comparisons of faculty salaries across the world than a simple, unadjusted monthly salary expressed in dollars.