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Northwestern and the 'Living Wage' Campaign

The University provides answers to a list of frequently asked questions

March 1, 2010
A group of students have requested that Northwestern University pay its employees a “living wage,” which they define as a minimum wage of $13.23 per hour or $14.67 per hour including benefits such as health care and retirement. Following are some frequently asked questions and answers regarding this issue.

How many Northwestern University employees make less than $13.23 or $14.67 including benefits?
Of Northwestern’s approximately 5,000 employees, there are approximately 50, or 1 percent, who are paid less than $13.23. When benefits such as health care and retirement are included, only about 25 employees are paid less than $14.67. Of those 25, about half choose not to take advantage of the University’s health insurance program. Another 10 or so are recently hired employees who are not yet eligible for retirement benefits but will be after they have been employed by Northwestern for a year. Bottom line: For more than 99 percent of its employees, the value of Northwestern’s wages and benefits meets or exceeds the “living wage.”

What about employees who work for contractors hired by Northwestern?
Northwestern contracts for a variety of services, including food and custodial services. Northwestern does not mandate what wages and benefits are paid by the contractors or vendors that provide those services. The individuals who work for these companies are not Northwestern University employees, but employees of those firms.

Are those employees members of unions and if so, how does that affect their wages?
Most of them are union members. The wages are negotiated by their unions and the private companies that provide the service and there are several different agreements between the unions and contractors. Northwestern does not participate in the wage and benefit negotiations between the unions and the companies. Our understanding is that at least some of the unions involved “trade off” benefits and wages on behalf of their members, meaning that wages might be lower because benefits are higher, or vice versa.

The student group appears to be asking Northwestern to mandate that the firms that provide food service and custodial services pay the “living wage” to all of the firms' employees who work at Northwestern. What would be the additional cost to the University for doing that?
Total additional cost to the University is estimated to be approximately $3.3 million to $4 million a year now, with the cost increasing annually.

The students have suggested that Northwestern take the money out of its endowment to pay the additional wages. Why not do that?
Two reasons: First, the University’s endowment is basically its savings account. Like almost all universities, foundations, nonprofit hospitals and other organizations, Northwestern spends some of the earnings from its endowment, but does not spend the principal. Using endowment principal to pay operating expenses would reduce the amount of earnings from the endowment, thereby reducing funds for other areas of the University. Northwestern endowment has decreased by approximately 17 percent in the past year, so endowment earnings already have dropped significantly.

Second, much of Northwestern’s endowment and earnings from it are designated for specific purposes, such as scholarships or professorships. The University can use such funds only for the restricted purposes. Funds that are not restricted as to use support such costs as financial aid and salaries for faculty and advisors.

If Northwestern mandated increased wages for custodial and food service employees and did not use endowment funds, where would the money come from and how much would that be?
The money would need to come from increases in room and board fees and/or tuition. Room and board fees cover the cost of operating Northwestern’s residence halls and dining services and a portion of tuition is used to pay for custodial services in academic buildings. Because approximately half of Northwestern’s undergraduate students receive financial aid and do not pay full tuition or room and board fees, the increase would need to be high enough to cover the estimated $3.3 million to $4 million cost. Therefore, the estimated additional annual cost in room and board rates for those living in residence halls would be at least $1,000. Tuition costs for all undergraduates could be affected as well. 

If the wages are increased, will it cause employees to lose their jobs?
Unlike most similar universities, Northwestern has not laid off employees because of the current recession and in fact, most University employees received salary increases this year. Northwestern has historically been managed in a fiscally responsible manner and as a result has been able to, on a relative basis, weather the current economic storm, although there have been reductions in operating budgets. However, if the University decided to increase its wage costs by $3-4 million a year and did not increase the student fees, then it is very likely that job losses would result.

Is Northwestern opposed to unions?
No. Some Northwestern employees are members of unions and the University has a good working relationship with those organizations.

Students have asked that Northwestern consider other benefits for contract employees, such as reduced admission to University events, library privileges, etc. Would the University consider such things?
Yes, and this is underway.

Have Northwestern administrators met with student leaders on this issue and will they continue to do so?
Yes, administrators have met with students on this and will be happy to continue to do so.
Topics: University News