Digitized by tine Internet Arciiive in 2007 witii funding from IVIicrosoft Corporation littp://www.arcliive.org/details/carnegiepensionsOOcattricli Under the Same Editorship SCHOOL AND SOCIETY. A weekly journal cov- ering the field of education in relation to the problems of American democracy. SCIENCE. A weekly journal devoted to the ad- vancement of science. THE SCIENTIFIC MONTHLY. An illustrated magazine, devoted to the diffusion of science. THE AMERICAN NATURALIST. A journal de- voted to the biological sciences. AMERICAN MEN OF SCIENCE. A Biographical directory. SCIENCE AND EDUCATION. A series of volumes for the promotion of scientific research and edu- cational progress. Volume I. The Foundations of Science. By H. PoiNCARife. Containing the authorized English translation by George Bruce Halsted, of "Science and Hypothesis," "The Value of Science," and "Science and Method." Volume II. Medical Research and Education. By Richard Mii,i^ Pearcb, Wii,i,iam H. Wei^ch, C. S. Minot and other authors. Volume III. University Control. By J.*^ McKeEn CaTTEI,!. and other authors. THE SCIENCE PRESS NEV YORK AND GARRISON, N. Y. CARNEGIE PENSIONS BT J. McKEEN CATTELL TOOETHEB WITH EXTRACTS FROM LETTERS FROM TWO HUNDRED AND FOURTEEN COLLEGE AND UNIVERSITY PROFESSORS, AN ARTICLE ON THE HISTORY OF THE CARNEGIE FOUNDATION BY JOSEPH JASTROW, AND THE REPORTS OF THE COMMITTEE ON PENSIONS AND INSURANCE OF THE AMERICAN ASSOCL^TION OF UNIVERSITY PROFESSORS THE SCIENCE PRESS NEW YORK AND GARRISON, N. Y. 1919 ^^-^ PRESS OF ▼HE NEW ERA PRINTING COMPAMV LANCASTER, PA. PREFACE The Carnegie Foundation has made lavish dis- tribution of its literature ; it seems desirable that the position adverse to its plans for the control pf academic teachers should be stated in acces- pible form. There are consequently here repro- duced several articles that I have written on the subject, including extracts from 214 letters by- university and college professors; an article on the history of the foundation by Professor Jas- trow, and the reports of the committee on pen- sions and insurance of the American Association of University Professors. Permission has been obtained from Professor Jastrow for the use of his article. The reports of the committee of the American Association of University Professors were printed in a journal that I edit, but the association is not responsible for their present republication. ''..,:,' •:> Dr. Henry S. Pritetiett, piesiderit of the Car- negie Foundation a'nd of itxe ugw C&rnQgie Com- pany, opens his article oh * *T^he l^ension Prob- lem and its Solution'* in the December (1918) issue of The Atlantic Monthly with the definition of ** Pension" in Dr. Johnson's Dictionary: An allowance made to any one without equivalent. In England, it is generally understood to mean pay given to a state hireling for treason to his country, iii iv CABNEGIE He characterizes the effects on the professor of the foundation that he has administered for thirteen years as follows : Aside from the economic and financial weaknesses which have justt been alluded to, there is a more serious objection to the free pension which only those who have administered such a system can fully understand. This lies in the fact that, to get something for nothing, or to seem to get something for nothing, has always proved demoralizing. The so-called free pension is perhaps the most prolific breeder of human selfishness ever set up in the social order. Dr. Nicholas Murray Butler, president of Co- lumbia University and a member of the execu- tive committee of the Carnegie Foundation, in one of his last reports quotes the sentiment: ** Academic freedom means freedom to say what you think without thinking what you say,*' and he writes still more explicitly in the Educational Review : Truly the academic animal is a queer beast. If he can not have something at which to growl and snarl, he will growl and sh^\ at nothing :a^ «1]P. , These ;'emarks ,by ftose J^esponsible for the ad- ministra'tio'n:''of--tTArn*eg]e..E>eijsip*ns scarcely ex- hibit an attitude proper for the conduct of a foundation established to "encourage, uphold and dignify the profession of the teacher and the cause of higher education.'' They are quoted in ,order to use the authority of office as a shield for the character of the counter-statements made by PENSIONS V college and university professors in some of the letters here printed. Criticism is always ungracious ; it is futile un- less it leads to construction. Mr. Carnegie and Mr. Rockefeller have had the best of intentions in making their large endowments ; most of those who conduct these foundations and most of the trustees and executive officers of our endowed universities have sincere faith in the methods that they use and in the objects that they seek to accomplish. But a democracy can not submit to the policy that the common people should do the work assigned to them and leave it to the king and his lords to care for them. As is shown in this book, the teachers directly concerned hold by a majority of fifty to one that the plans of the Carnegie Foundation are un- satisfactory. The only solution is to change the plans. The first step should be to discard those responsible for the existing situation; then the teachers should come into control of a foundation established for their benefit. J. McK. C. Gabbison-cn-Hudson, N. Y. , Maj, 1919 CONTENTS Page Life Insurance and Annuities for Academic Teachers 5 The *' Policies" of the Carnegie Company. 28 The Verdict of American University Pro- fessors 59 The Carnegie Foundation for the Advance- ment of Teaching 100 The Fifth Annual Eeport of the President of the Carnegie Foundation 128 Ten Years of the Carnegie Foundation. By Joseph Jastrow 135 Report of the Committee of the American Association of University Professors on Pensions and Insurance 184 Second Report of the Committee on Pensions and Insurance of the American Associa- tion of University Professors 213 Supplementary Statement concerning the Plan of Compulsory and Contributory Annuities proposed by the Carnegie Foun- dation. By Arthur O. Lovejoy and Harlan I. Stone 241 VI LIFE INSURANCE AND ANNUITIES FOR ACADEMIC TEACHERSi When Mr. Andrew Carnegie made in 1905 his munificent gift of ten million dollars to es- tablish the Carnegie Foundation for the Ad- vancement of Teaching, he wrote to the trus- tees: ** Expert calculation shows that the rev- enue will be ample'* **to provide retiring pen- sions for the teachers of universities, colleges and technical schools in our country, Canada and New Foundland.'* The university presi- dents who formed the board of trustees may have calculated that the fund would provide large subsidies for their institutions, but it is difficult to guess who could have made the cal- culation that the income from ten million dollars would permanently provide pensions for college and university teachers throughout North America. The president of Columbia University in his annual report for 1906 stated that the cost of the Carnegie retiring allowance to the professor, if in middle life, ** would be not less than $1,200 annually.*' If all the teachers were in middle life, the total annual cost of the system for Columbia alone would consequently be twice the whole income of the foundation. The present writer printed in 1909 the basis for the calcula- 1 Priirted in School and Society, November 9, 1918. 5 tion that forty years hence a complete pension system for academic teachers might require two hundred times the income of the foundation. The inevitable has happened, as it inevitably does. The foundation was compelled to limit the institutions included in its list, so that, for example, at present only four pensions are paid in the state of Illinois. It was compelled to give up its length of service pensions, even for those to whom they had been promised ; it was compelled two years ago to abandon the whole plan of free pensions; it now finds that its re- sources will not pay the obligations into which it has already entered. AH sorts of irrelevant explanations have been offered by the president of the foundation, Dr. Pritchett, and by the trustees for these various steps. Institutions were not worthy to be in- cluded. Thus, to take an example, which at the same time illustrates the pernicious control that the foundation has sought to exercise even over state universities, the University of Illinois was informed, at the time when the funds of the foundation were exhausted, that pensions could not be granted to the professors in its academic departments at Urtbana unless it would alter the conduct of its medical school at Chicago. In like manner the governor of Ohio was informed that the universities of the state must be * * re- constructed ' ' on lines laid down by the founda- tion if the professors in the Ohio State Univer- sity were to hope for pensions. PENSIONS 7 When the foundation found that it had no money to pay the len^h of service pensions, which were one of the two objects specified in its charter, it did not mention its financial in- ability, but the president announced that it had been discovered that the effect of the length of service pensions was not **good" owing to **the opportunity which is opened to bring pressure to bear on the teacher, or by the tendency of the teacher assured of a retiring allowance to become ultra-critical toward the administra- tion.'* When the foundation could no longer pay the old-age pensions it had promised, it was announced that it is bad for teachers to **have the risk of dependence lifted from them by free gift,*' that it is **even an embarrassing use of trust funds." But now finally, when it can no longer be concealed, confession of insolvency is made.* Whether what the officers of the foundation call the * * expectations ' ' of the professors, namely, the promises of the foundation, are contracts is a question that the courts may be called upon to decide. Professors have in many cases moved from an independent institution to a Carnegie a The most severe arraignment of the foundation will be found in the annual reports of the president. A criti- cal review has been published bj Professor Joseph Jas- trow in School and Society, October 7, 1916. The pres- ent writer has discussed the conduct of the foundation in Science, April 24, 1908, April 2, 1909, March 11, 1910, Decemiber 2, 1910, March 3, 1911 and April 15, 1916. 8 CABNEGIE institution in view of the promise of a pension ; they have given up lucrative business or profes- sional careers owing to the permanence of ten- ure and the pensions that have been guaranteed, and the like. It may be that the courts will de- cide that the promises of payment for these services are contracts, in which case the cor- poration will be technically bankrupt. In any case it is morally insolvent, and it might be sup- posed that it would place its affairs in the hands of a receiver selected by its creditors for such adjustments as can be made with least injury to them. But the president of the Carnegie Founda- tion and the presidents of universities who are its trustees cling to their power to control our academic institutions and their teachers. They ihave grasped **the skirts of circumstance.*' No longer having money to pay for their over- lordship, they have devised a plan of contribu- tory and compulsory annuities which will com- pel institutions and teachers to pay for their own subjection. Industrial workers understand how com- pletely pension systems place them at the mercy of their employers. Thus a trade-union paper remarks : Twenty years of contimions, faithful service are de- manded by most pension-advertising corporations before the worker is entitled to a certain monthly or weekly al- lowance. Twenty years during which time the slave PENSIONS 9 must always be humble, never grumble, do everything de- manded, never think of trying to better his conditions, be always satisfied, and never, never join his fellows in an organization for the purpose of enforcing demands he individually can not obtain. And this is the kernel contained in the sugar-coated pension pill. In the case of college and university teachers a pension system may prove particularly per- nicious, for it can be used to control not only their freedom of action, but also their freedom of teaching and of investigation. President But- ler's statement is quoted above to the effect that the cost of a pension may be $1,200 a year to the professor. This considerable sum is with- held from his salary, to be repaid ultimately for good behavior. The professor who does not see eye to eye with Wall Street and Trinity Church may be compelled to sacrifice either his intel- lectual integrity or his wife and children. He is under heavy bonds to keep the peace; but it will be the peace of the desert. The control which a pension system may seek to exercise can be illustrated by an example. When in 1910 the present writer enquired' whether he could obtain the length of service pension which the rules of the Carnegie Foun- dation had provided, the president in his reply described the inquisition that would be under- taken into his scientific ability and said in con- clusion : • The correspondence is printed in Science, December 2, 1910. 10 CABNEGIE I ought to add that the foundation would view with grave concern the possibility of your withdrawal from editorial duties. We should find it difficult to get along without the aid of your kindly and encouraging editorial scrutiny. To this the reply was made : Your last paragraph is presumably only legitimate irony; but it is open to the unfortunate interpretation that beneficiaries of the foundation may not criticize its conduct or the educational schemes it promotes. Professor Josiah Eoyce, one of the greatest and noblest of our teachers, in a criticism* of the unjustifiable interference of the Carnegie Foundation with the affairs of Middlebury Col- lege, wrote with reference to this incident: The CSarnegie Foundation is from its very nature not responsible in any obvious and regular way to existing academic opinion. It carries out the wishes of its founder as interpreted by a board of trustees whose powers are, comparatively speaking, autocratic. This board inevitably represents the judgment of administra- tors rather than the judgment of teachers. Experience has shown that the foundation is not very sensitive to the opinion of teachers. In a well-known case, when an emi- nent teacher whom we all value expressed a plain and not unreasonable opinion of some of its acts, the reply of the Carnegie Foundation, through its president, was a sarcastic intimation, which could only be understood as meaning that some people ought to mind their own business. It is possible that it may on the average be to the financial advantage of an institution to re- , * School and Society, January 30, 1915. PENSIONS 11 tire professors at the age of sixty-lBve. It is doubtless so if the pension is paid by an outside corporation or by enforced contributions from the professors. But it is not an advantage to the teacher to be dismissed from his life work and be relieved of half of his salary at a time of life when men in other professions and in busi- ness are active and earning larger incomes than ever before. When in recent years the writer wanted the best legal advice in New York City he consulted Mr. Choate; when he wanted the best medical advice he consulted Dr. Jacobi; when he wanted the best possible article to in- augurate School and Society he obtained it from President Eliot. None of these men lost his in- tellectual vigor in the eighties. Now when I want the best actuarial advice in New York City I consult an actuary seventy-four years of age. My two great teachers in psychology — Professor March, of Lafayette College and Professor Wundt, of the University of Leipzig — continued their teaching until they were over eighty. The situation of the professor is peculiar be- cause the continuation of his work after the age of sixty-five years depends on the favor of the president. The president decides each year whether the professor shall be kept on, judging his competence for the work, and being influ- enced by other considerations, such as the means of the institution, the availability of a successor, the professor's ** loyalty*' to him personally, and 12 CABNEGIE the like. The whole theory of permanence of tenure on which the low salary of the professor is based breaks down at the age of sixty-five. Any one familiar with the conditions at a uni- versity such as Columbia, will know the bitter- ness and humiliation which result from drop- ping men as they grow older on the ground of alleged incompetence. The professorship should be a life office, as it is in Great Britain, in France and in Germany. The older teachers should be relieved of work that they find irksome or can not do to advantage ; and teachers should be en- titled to a pension for disability at any age. Any plan for the retirement of older or dis- abled professors should be left to the institutions in which they teach. If the pension is paid from outside sources, the temptation of the president to retire the professor prematurely is greatly enhanced. Most of the eastern universities had pension systems, which were contracts with their professors, before the Carnegie Foundation in- tervened. That corporation should have used its income, or preferably its capital, to establish disability pension systems in institutions where they did not exist, and to strengthen the systems in the interest of the institution and its pro- fessors w'here they were already in operation. Variation in different institutions would allow opportunity for the survival of the fit; and the ablest men would go to the institution offering the plan most acceptable to them. By its meth- 1 PENSIONS 18 ods of centralization and outside control the Camera Foundation has done its share to de- moralize the entire university situation. Instead of confessing their incompetence and insolvency and leaving pension systems to the educational institutions where they belong, the university presidents who are the trustees of the Carnegie Foundation now propose to maintain and even enlarge their control of academic teachers by establishing a contributory and com- pulsory system of annuities. The American As- sociation of University Professors appointed a committee of twenty-four with Harlan I. Stone, dean of the Columbia Law School, as chairman, to report on the situation. This committee drew up a careful report* in which it says : . Thus it Beems clear that the Carnegie Foundation ia under moral obligations, not only to individuals, but to the institutions themselves, not to deprive teachers in the accepted institutions of their present expectancy of a pension. There is no middle ground for the compromise of moral obligations. We are therefore of the opinion that the Carnegie Foundation should not assume any new functions until its present obligations both moral and legal are examined with precision, and provision made explicitly for meeting those obligations. The committee further says in the concluding paragraph of its rex)ort : The unfortunate financial history of the foundation, the suggested change in its fimdamental purpose under the guise of a change of rules relating to its administra- 8 Printed in School and Society, December 2, 1916. 2 14 CABNEGIE tion, the defects and omissions in the proposed Compre- hensive Plan of Insurance and the unconvincing char- acter of the reasons which are urged for the change, have resulted in a loss of confidence in the foundation on the part of American university teachers. No mjan enjoying a wide acquaintance with members of the pro- fession can have any doubt of this fact. If evidence of it were needed, it may be found in the reports of various comnuttees of university faculties, appointed to consider the ComprehenMve Plan of Insurance and Annuities, such as, for example, the reports of Cornell, Harvard, Princeton, Stanford Universities, the University of Wis- consin and Johns Hopkins University. Such lack of con- fidence must inevitably impair the usefulness of the foundation, and make it difficult, if not impossible, to solve satisfactorily the problems which are pressing for solution. This report compelled the Carnegie Founda- tion to submit to asking the cooperation of the American Association of University Professors. A commission was appointed containing six rep- resentatives of the Carnegie Foundation, two of the American Association of University Pro- fessors and one each of the Association of Amer- ican Universities, the National Association of State Universities and the Association of Amer- ican Colleges. This commission of course found that the foundation was insolvent. For the pres- ent group of accepted institutions and teachers, the annual cost (if retirement is at sixty-five) would ultimately be $2,226,422. The income from the endowment of the foundation in 1917 was $519,862. The commission recommended PENSIONS 15 that the foundation should first meet its exist- ing obligations — ^which it assumed was possible through the Carnegie Corporation, to which Mr. Carnegie has given $125,000,000 to underwrite the foundations that bear his name. It then outlined a plan for contributory pensions to take the place of the free pensions of the in- solvent foundation. The executive committee of the Carnegie Foundation, headed by President Nicholas Mur- ray Butler, has now issued a report. The Car- negie Corporation has consented to contribute $11,000,000 which will enable the foundation to meet about two thirds of the engagements that it has already contracted. The pensions pro- vided are to be reduced in size, so that ulti- mately the professor retiring at the age of sixty- five will receive two thirds of the pension prom- ^ed, and less if he has no living wife. It re- mains to be seen whether the American Asso- ciation of University Professors will accejrt this compromise of the foundation with its creditors. At the same time there has been made public the proposed charter (since granted) of the Teachers' Insurance and Annuity Association of America, the incorporators being headed with the names of Elihu Root and Nicholas Murray Butler. The Carnegie Corporation provides a million dollars for capital and surplus and owns the stock. It is not a mutual company, but its business is to be conducted without profit to it 16 CABNEGIE or its stockholders, and it is said that arrange- ments may later be made by which the policy holders may participate in the management. The plans for insurance and annuities of this association are not yet announced, but they are foreshadowed by statements of Dr. Pritchett, who is on the interlocking directorates of the three corporations, and by the commission of which also he was a member. It is proposed that the association shall write term insurance, ex- piring at sixty-five or later, the purchase of which is to be optional with the teacher. The premiums will be computed on the basis of the American Experience Table and 3^ per cent, interest. It is then proposed that *Hhe annu- itant, or his college, or the two together, will con- tract to pay to the association * level* premiums of a certain amount each year until the annu- itant reaches his sixty-fifth year.'' Provision is made for repayment in case of death or retire- ment. The accumulation will be invested by the association and will be converted into an annuity on the basis of McClintock's Table and 4 per cent, interest. The purchase of the an- nuity is to be compulsory for all teachers in in- stitutions that join in the plan.® 6 Most of the state universities have been eager to ob- tain the free pensions of the Carnegie Foundation, but it is not likely that they will contribute to the purchase of annuities for their professors from a private corpora- tion. A charming memorandimi was submitted by the PENSIONS 17 It is announced that the association will not contract for an annuity of any stated amount, nor to compound the payments at any stated rate of interest, but that the foundation will guarantee 4^ per cent. Dr. Pritchett realizes the difference, for he says: ** Whether the indi- vidual participates in insurance or in a deferred annuity, he can be secure only when the relation is contractual.*' This is certainly understood by teachers to whom the Carnegie Foundation has not paid the length of service pensions which it had promised and by those to whom it will not pay the old-age pensions which it had promised. There are, however, men of business who like to believe that their word is as good as their bond. Unlike the Carnegie Foundation the new scheme has had expert actuarial advice. An as- sociation writing life insurance for teachers on the basis of the American Experience Table and commiflsion to the Carnegie Foundation to the effect that *'in 8tate-«upported institutions of higher education whose standards are in conformity with the rules of the foundation, such institutions may be admitted to the benefit of the new system *' when the governing board approves of the principle of institutional contribution, '* meanwhile reconmiending and permitting the eligible faculty as a group, to carry the entire burden of neces- sary contribution for themselves and on behalf of the institution. ' ' It was later also voted that the founda- tion should consider extending the same privilege to en- dowed institutions. An imusual ''benefit'' is certainly extended to professors in institutions ''whose standards are in conformity with the rules of the foundation. ' ' 18 CABNEGIE 3 J per cent, interest will earn large profits if properly managed. Teachers have an expecta- tion of life much above that of the American Ex- perience Table, and the present rate of interest, which is likely to continue or increase, is much above 3J per cent. The association will not con- tract to give the insured the benefit of profits accruing on account of a higher rate of interest, but expects to provide for a distribution of bonuses. The new association obviously does not offer academic teachers anything that they can not obtain from the standard companies. It does not provide for disability allowances which are what is most needed. The association, however, has what amounts to an endowment of one mil- lion dollars, and is dealing with preferred lives. It may be able to divide profits larger than the dividends of the mutual companies. This, how- ever, is not certain. There are at present 6,593 teachers in the Carnegie institutions, seventy of our more than seven hundred colleges and universities. If the association writes 10,000 policies, it will have an annual subsidy of $5 for each; if 20,000, it will have $2.50. It may be that this amount will not cover the additional overhead and agency expenses of a comparatively small company, operating in all the states and in Canada. The standard companies must main- tain agencies, legal departments and medical service everywhere, and the cost divided among PENSIONS 19 a million policy holders is obviously much less than it would be if the cost of a similar service is divided among 10,000 policy holders. The question, however, is not financial only, or chiefly. The fundamental problem is whether it is for the ultimate welfare of academic teach- ers to be compelled to purchase annuities in a company controlled by university presidents. The interest of the university and of its pro- fessors should be identical, but this is impossible until the professors have some control in the university. At present almost every professor in every university wants his salary increased; the president sits on the safety valve as long as he dares. The professor wants freedom; the president has his eye on students, alumni and benefactors, and wants a personal machine to run the institution. Compulsory retirement on an annuity at the age of sixty-five, or at the option of the president, especially when the an- nuity has been purchased by the professor, may work extraordinary hardship to him, and may be used to keep him in a condition of servitude. Academic teachers are face to face with a dif- ficult situation and one vital to them. It is for- tunate that they have a well-organized a;nd powerful body in the American Association of University Professors. This association was represented on the commission which drew up the plans for the Teachers* Insurance and An- nuity Association by two members, selected, 20 CABNEGIE however, for their actuarial knowledge, rather than for their interest in academic freedom. They were subordinated to four associations rep- resenting college and university presidents. The Carnegie Foundation has not followed the recom- mendations of the commission even though it was dominated by Dr. Pritchett and the other trustees of the foundation. It has not provided for the payment of its existing obligations; it will not establish disability pensions; it does not permit the American Association of Uni- versity Professors to share in the management. The problem is now under consideration by the representative committee of the American Association of University Professors. This committee and the teachers of the country may accept the plan and seek to guide it in a direc- tion that will benefit them and avoid the sub- jection of the teacher to the administration. Probably this can only be accomplished by abol- ishing the compulsory feature and permitting the teacher to purchase his insurance, and an annuity, if he wants one, in the new association or wherever he can do so to the best advantage and with the least danger to his freedom of ac- tion, of teaching and of research. But other plans should be considered now if ever, and there are at least two alternatives. The teachers might form a mutual company of their own or they might unite to secure fa- vorable methods and terms from one of the standard companies. PENSIONS 21 A mutual company limited to teachers and scientific men has always appealed to the present writer and he had under constant consideration efforts to organize such a company before the ill- starred Carnegie Foundation intervened to dis- rupt the existing pension policies of our univer- sities and the insurance policies of individuals. At that time the writer carried life insurance of $20,000. He estimates that a company would make a clear excess profit of $5,000 on a $20,000 straight life policy, if the expectation of life of a university professor of good heredity and habits is five years greater than the average. The company would on the average receive the premium payments for five years longer, say, $1,500, and if the insured lived five years beyond the average age it would have the in- terest of $20,000 for five years, say at compound interest $5,000. These excess profits of $6,500 would on the average be reduced somewhat, for, while the excess profits on the policies of those who died earlier would be in proportion, the ab- solute amount would be less. One may, how- ever, guess that a company which insures for $20,000 a life with an expectation five years be- yond the average makes an excess profit in the neighborhood of $5,000. A stock company would make profits of fifty million dollars by insuring 10,000 such lives. It is almost certain that college and university teachers have an expectation of life beyond the 22 CABNEGIE average, but we do not know how large it is. It could readily be determined by a competent act- uary, and somewhat comparable data are avail- able in the experience of organizations such as the Presbyterian Ministers Fund. For its pol- icy holders the actual mortality has in recent years been less than half the expected mortality. According to the data in the writer's ** Statis- tical Study of American Men of Science'* the d^eath rate of those under fifty from 1904 to 1910 was about three per thousand as compared with an expected mortality of about ten. For an insurance company a capital of $100,- 000 and a surplus of $50,000 are required by the New York state laws. If one hundred and fifty college teachers and scientific men would form a company, each taking a share at $1,000, no one being permitted to hold more than one share or to transfer his share to any one but a teacher, and if such a company wrote insurance for teachers on the basis of the American Expe- rience Table and 3J per cent, interest, it would with proper management be financially success- ful. It might also arrange life insurance and annuities more favorable to the independence of the teacher than can be expected from an asso- ciation controlled by university presidents and having xdterior motives. For example, Dr Pritchett thinks that life in- surance is of no use after the age of sixty-five; but some of us even at that age may be con- PENSIONS 23 cerned about our children and our grandchil- dren. We may also not care to have our sav- ings converted by compulsion into an annuity which lapses at death and leaves nothing for our heirs. As a psychologist the writer is con- cerned with types, and two of those which he has proposed are two opposite kinds of men, those who take out life insurance and those who buy annuities. Ten years ago he wrote to Dr. Pritchett:^ It appears to me that most healthy-minded men are more concerned with provision for their families in case of disablement or death than with anxiety as to their own old age. I sympathize with those who take out life insurance, not with those who buy annuities, and it gives me no satisfaction to be put by force of circumstance into the latter class. I should like to exchange mj annuity for life insurance of equal value, and I believe that this would be the nearly unanimous preference of my colleagues. The Carnegie Foundation adds substantially to the in- comes of accepted universities and colleges, but it does not greatly assist the individual professor. The pro- vision for retirement for age does not help at all in in- stitutions that already had a pension system ; in other ac- cepted institutions the salaries will be adjusted with ref- erence to the pension, and the only individuals who benefit are some of the older men in institutions without a pension system for whom the benefit is retroactive. Apart from this group, the benefit to the individual — ^and only until readjustment of salaries takes place — ^is coat- fined to the length of service provision, the wisdom of 7 The correspondence is printed in the issue of Science for April 24, 1908. 24 CABNEGIE wihidh is doubtful, and the widow's pension, wMcli only applies at the age when it is least needed, and if admin- etered aa a charity would in the long run be, as you say, *'sure to harm rather than to help the teacher and the cause of education.'* . If the professor must be the Versuchstier of paternal- ism, is not the German system — ^by which he receives his salary for life, being relieved from service if disabled by illness or old age, and his widow and each of his minor children receive a pension — ^the best plan both for the professor and for the university. And, if so, could not the Carnegie Foundation bring about this system by offering endowments to those institutions that would adopt it? Probably the form of insurance making the strongest appeal to married teachers is the en- dowment policy. In a standard company a forty-year term endowment policy for $5,000 can be purchased at the age of thirty for an an- nual premium of about $100. If the insured dies before the age of seventy his family receives the $5,000; otherwise he himself receives that amount when he reaches that age. If then he has no dependents, or if he has no better use for the money, he can convert it into an annuity of about $700. As the salary of the teacher in- creases he can, if he sees fit, purchase additional endowment policies to make his capital at the age of seventy, or his annuity if he wants one, as large as may be desirable. If he becomes dis- abled before the age of seventy, he can obtain the accrued value of his policy; or if he con- tinues to teach beyond the age of seventy he can PENSIONS 25 buy a larger annuity. This gives the teacher much greater freedom in the use of his savings, and does not subject him to the whim of the ad- ministration, as does the enforced purchase of an annuity accruing at the age of sixty-five and followed by enforced retirement. While a mutual company established and con- trolled by teachers would give them greater free- dom and more advantages than a stock company owned by the Carnegie Corporation, it would lack the endowment of one million dollars. The Carnegie Corporation may hold that the price of a university professor is only five dollars a year. It is also the case that a small company would have the same excessive cost of adminis- tration as the Carnegie scheme. Either com- pany, writing insurance on preferred lives on the basis of the American Experience Table and 3J per cent, interest, would be profitable, but the dividends might be less than those of the standard mutual companies selecting their lives by the usual methods. To avoid the cost and loss of time inevitable in the conduct of a small insurance company, a society of teachers might be formed without cap- ital that would reinsure the lives of its members in one of the standard companies, or one of these companies might be shown the desirability of es- tablishing a group or department for academic teachers. The companies are prevented by law 26 CABNEGIE from giving preferred rates to preferred lives. This is a curious social anomaly. Bad risks when known must pay a higher premium, but pre- ferred lives are given no advantage for their better heredity and habits. An actuary once said to the writer that preferred lives had to be obtained by his company to balance bad risks insured unawares. That is to say, university professors must pay the premiums of those who fall into intemperance or contract venereal dis- ease. Even when professions are equally useful to society, there appears to be no reason why teachers should pay the premiums of physicians, whose expectation of life is probably five years less. The problem would perhaps receive the best solution if one of the great mutual companies would consent to form a department for teach- ers and keep their insurance premiums in a separate account, paying back the dividends that were earned by the group. Teachers would earn the higher rate of interest which money now pays and would in addition obtain insur- ance at the rate warranted by their greater ex- pectation of life. They would be free from the control of the Carnegie-Pritchett-Butler com- bination. The question is of vital importance for the welfare of teachers and for the future of our colleges and universities. It should receive care- PENSIONS 27 ful consideration while it is still open. The mag- nitude of the problem is enhanced by the fact that it concerns closely the pension systems of public schools, and indeed all professional, in- dustrial and governmental life insurance, dis- ability allowances and old-age pensions. THE "POLICIES" OF THE CARNEGIE COMPANYi The article on **Life Insurance and Annui- ties for Academic Teachers/' printed in the issue of School and Society for November 9, was sent to a number of college and university pro- fessors, with the request for an expression of opinion on the subject. Those to whom the ar- ticle was sent were selected to represent dif- ferent subjects and institutions, without ref- erence to the writer's acquaintance with them or knowledge of their views. They were asked to check one of the three statements here repro- duced, the number of the votes for each^ being as shown. The plans af the Carnegie Foundation for life in- surance and annuities seem to be satisfactory. ... 13 It seems to be desirable to consider alternative plans under the control of the teachers concerned 636 The recipient is not prepared to express an opinion at the present times 104 1 Printed in School and Society, January 4, 1919. This name is used for brevity and accuracy. The Carnegie- Pritchett Company is certainly not what it calls itself, a ''Teachers A^ociation." We thus have three inter- locked concerns — The Carnegie Corporation, with a capi- tal of $125,000,000; The Carnegie Poundation, now in- solvent, and the Carnegie Company, with a capital of $1,000,000. 2 There were six mixed ballots. 8 A large part of those who are not prepared to express 28 PENSIONS 29 The Carnegie Foundation certainly received an unlucky vote; 636 to 13 is a majority not often recorded. Indeed an almost incredible situation has arisen, for the Carnegie Company claims to have been established for the benefit of exactly those who state by a majority of fifty to one that its plans are unsatisfactory. We are told by the management that the company is **the concrete embodiment of those principles, as finally reached with the cooperation of the teachers in the institutions associated with the Foundation and of representative academic and actuarial societies,*' but the teachers repudiate ** those principles'' with an emphasis of combined opinion approaching unanimity. In addition to the vote, about two hundred letters have been received, some of them brief notes, others detailed discussions of the situa- tion. If all of us had as much money to spend on printing as the Carnegie Foundation, it might be desirable to reproduce the letters. It is, however, only possible to print some of them in full or brief extracts from all of them. The latter plan has been followed, extracts being quoted from each letter that expresses any opin- an opinion between the tvro alternatives and at the same time write letters of explanation state that they are op- posed to the Carnegie Foundation scheme, but also object to plans under the control of teachers, because they do not trust the business qualifications of their colleagues or because they regard the existing companies as ade- quate. 3 30 CABNEGIE ion. The most definite and striking sentence or paragraph has been selected and this does not always represent the entire viewpoint of a letter ; but the extracts taken together give a correct and impressive exhibit of the consensus of opin- ion of college and university professors. The names of the individual writers are immaterial, for we are concerned only with the group, and the same reasons which make a secret ballot es- sential to a democracy lead to the withholding of the names. Most of the writers would doubt- less have pleasure in giving their names and showing their complete letters to officers of the foundation. The extracts here printed are from all letters received prior to December 1. Many others have since been received, extracts from which will be printed later. The new Carnegie Foundation plan seems to me prom- ising, because I believe that in principle some contribu- tion by beneficiaries should be made, and believe furi^her that this contribution should be compulsory, or at least unfailing. I should have to depend upon the testimony of actu- aries as to the new proposition, and they seem to think that is the best way out of the difficulty. It seems to me that Mr. Carnegie *s gift horse has been looked too critically in the mouth. I believe in the idea of getting a better plan from the Carnegie Foundation, if possible. I have read your article with great interest and gen- eral sympathy. While I do not regard the plan of the Foundation as entirely satisfactory, I do not wish to be PENSIONS 81 thought to be expressing an opinion that it is unsatisfac- tory faute de mieux. My present view is that alternative plans c^ould be considered, and particularly the plan which you advo- cate of placing the whole matter of insurance under the control of the teachers concerned. Nevertheless, I still am rather of the opinion that the insurance of college teachers should not be absolutely divorced from the Carnegie Foundation. Existing insurance companies are sufficient. Of the two plans pr(^>osed, I regard the second as preferable, but neither as desirable. I believe that professors through an authorized agent should inaugurate an insurance system, but that it should be managed and controlled by a reputable insurance com- pany. My position is that we should act through the Ameri- can Association of University Professors. The advantage of unanimous action as presumably rep- resenting the profession is not to be neglected. My impression is that a joint scheme is preferable. Not sure teachers concerned could control or adminis^ trate fund, but thank you for keeping up the agitation and showing status from time to time. Personally, I would not care to have anything to do with either plan. In the interest of the younger men in the teaching profession I consider the second as much preferable and have therefore marked my assent to it. I do not favor compulsory insurance. I am not in favor of any plan of compulsory insurance. Even if it should not prove feasible to carry through any of the proposals outlined in your article in School and Society, I should think it better for a university 32 CABNEGIE teacher to go to one of the old-line companies and pay the regular rates, rather than to entrust his fortunes and those of his family to the trustees of the Carnegie Foun- dation. . I have long since lost interest in th« doings of the Car- negie Institution. I hope my plans to be absolutely in- dependent of any expectations from their fund will not miscarry. I no longer have any interest or confidence in the Foundation and have thought only of depending on com- mercial insurance companies. Sometimes I think it would be well to go in with them, and sometimes I feel that there is no use of putting good money after bad in the hands of dishonest people. If the Carnegie Foundation wishes to help the financial status of university professors, surely the best plan is one, often mentioned by you, of so endowing universities that they may make the salaries of their professors for life, with suitable provisions for widows or dependents. Your article is both able and interesting. But quite independently of it, I should consider it better judgment to invest in a regular insurance company consisting of business men, rather than in an amateur organization which dabbles in insurance. The teachers concerned should have some control of the provisions which are to be made. I should certainly be glad to join any real professors' insurance scheme. I have my hesitation whatsoever in joining you in the statement that alternative plans certainly should be con- sidered and in my judgment these ought to be under the control of teachers. I don't care for any protection after I am sixty-five. If I have health up to that time, I shall provide for PENSIONS 33 myself and if I can not I am not worth being provided for except possibly by pauper agencies. What I want ia a little protection against the nightmare of disability during the years I am struggling to make way in a pro- fession where advancement comes slowly and where the foimding of a family is a bitter struggle. Buying insurance in the regular markets would have the added value of being left to the free choice of the purchaser. Such a scheme would have a further advan- tage of removing any tendency of thought or policy con- trol by an outside institution such as the Cam^e Foun- dation or any of the proposed substitutes. I resigned my professorship last June. After eighteen years in service I found that I must better provide for the present and future welfare of my family. I believe that the Carnegie Foundation has shown poor manage- ment by inexcusably undertaking a plan that it can not fulfiU. Teachers like all other people should be free to take or not take insurance — and by any method they please — without advice from others unless the advice is requested. You certainly deserve the thanks of the acadOTiic world for persisting in the good work. Whether enough money can be found among our poor professors to or- ganize a mutual stock company, I know not. If institutions are prepared to pay pensions as a mat- ter of right — as compensation for inadequate pay on ac- tive service — well and good. Otherwise the matter would better be left to the individual in my opinion — or to a voluntary association of the individuals. I would like to make my vote stronger. No compulsion of any sort. Moat desirable to consider alternative plans. Thank you for this clear and forceful discussion. Will 34 CABNEGIE be glad if I can ever render any assistance along tliese lines. It seems to me that the problem is very clearly pat and analyzed. I heartily agree with you that the conditions are very undesirable. The mistake is to compel retirement at sixty-five. The proportion of men doing good work up to seventy-five or even later is very considerable among scientific men and scholars. If college teachers are to be pensioned the inevitable tendency will be for salaries to remain low. With low salaries college teachers have slight freedom and limited influence. On what ground do the present trustees insist on standing between Mr. Carnegie and the profession he planned to serve? We now have the agency that may relieve them of their burdens. It is absurd that a foundation for the advancement of teaching should put a premium on the exploitation of teachers by selfish executives. But the teacher 's problem is bigger than any question of pensions and, instead of wasting much time on the Carnegie Foundation, I think we should make its benefits, if they are such, negligible by a concerted effort: (1) to protect the older men and women now employed, (2) to encourage younger persons of promise in the profession to get out of it, and (3) to bring every effort to bear upon those who are not yet in it to keep out of it until teachers all the way from the kindergarten to the universities are paid a salary con- sistent with financial self-respect. I have always resented the scheme as a kind of char- ity and I do not think that charity is a good principle, but I believe firmly that professorial positions should be PENSIONS 35 for life; that the professors ebould be relieved of teach- ing only in case of disability regardless of their age, and that either the institutions employing the professors or the whole nation should pay in case of such disability due to sickness, accident or advanced age. I have been watching with much interest your fight for a democratic government in educational institutions. It seems to me that in these days when we are talking much of ** world democracy,'* that you are justified in advocating a measure of ** educational democracy.** Our president and board of regents have always been wary of being dominated by an educational taskmaster. Personally, I have no inclination to take advantage of their plan, since I can discover no guarantee that this venture will have any more success than the former one. It seems to me to be highly desirable to form a company in which teachers could profit by sound management and yet not pay the excessive costs of advertising and solici- tation. It seems to me the teaching profession should be inde- pendent from any close corporation. In other words we should have democracy in education and a freedom to express our opinion on educational matters. I do not see how a state institution could be independent if it were attached to the Carnegie Foundation. Gtuirantee of College and University Pro feasors: (1) Much higher salaries to attract more men of ability to the profession. (2) Life tenure or during mental and physical ability to perform his duties. (3) Protection against disability at any and all times and at any age. (4) Protection for widow and minor children at any time. I favor keeping clear of the Cam^e plans. With good and fervent wishes for the success of your efforts. 36 CABNEGIB One thing is clear — ^that the plans of the Carnegie Foundation are unsatisfactory and untrustworthy . It seems evident that the Carnegie Foundation has failed, and I doubt if I could ever be prevailed upon to contribute any part of my small salary to such manage- ment as the Foundation has enjoyed. In fact I came to the decision some time ago that I should never subscribe to compulsory insurance of any sort, even if by so re- fusing, I found it necessary to seek another profession. The American A^ociation of University Professors should not wait another day to voice its radical dissent from the views of President Pritchett and his associates, and to repudiate the Foundation both as an organ of public charity and of educational influence. I have heard many unfavorable criticisms of the Car- negie scheme which have created a feeling of distrust in my mind towards the scheme, but the basis of the criti- cism has never been clear to me until I read your article. I welcome the enlightenment and guidance which it brings. I have long since lost confidence in the Carnegie Foun- dation and last week increased my life insurance to the limit I feel able to carry. College teachers are said to be poor financiers, but I do not think the Carnegie Foundation Trustees can hand them much. It would be unspeakable to be compelled to entrust one *s insurance to them. Any scheme of insurance, annuities, pensions or what not that is not based upon the wholly voluntary support of those presumably to be benefited should be rejected by self-respecting citizens. You have made a real contribution to the cause and problem of teacher's insurance. I think the time has come for the college men to take up in earnest this vital interest of the guild. \ PENSIONS 37 I am in full sympathy with your sharp criticism of the Carnegie Foundation administration. With best wishes for strength and skill to your right arm in your struggle for academic democracy. I am in hearty accord with your article on the Car- negie Foundation, as well as with your views on other subjects as far as I have heard them expressed. Your suggestion seems to cover the ground exactly. Certainly the less we have to do with a quasi-charitable organization the better. I have followed your articles from the first and always agreed. Allow me to express my sincere thanks for the stand you have taken and are taking against the subjugation of teachers and investigators. If the present unfortunate conditions both intellectually and financially are not soon ameliorated, the professions mentioned will inevitably be avoided by all self-respecting men of ability. I want to insure where I can get the best treatment which does not seem to be what you name the C — P — ^B combination; and I like independence and propose to keep it even if I have to get out of teaching. I am beginning to think that any salary, any pension is good enough for men who will put up with the treat- ment professors do put up with in the matter of both salaries and discipline. I know the Carnegie Foundation has made an utter failure of the work entrusted to it and that it should be reorganized or go out of business. I had not, until I read your admirable article, per- ceived the relation between the proposed annuity-insur- ance scheme and the control of college professors by trustees and presidents. I was, and am still more strongly, since reading your article, opposed to the Car- negie Foundation scheme. 38 CABNEGIE I want to thank yau for this admirable critique of a condition of affairs that concerns all of us. I have for years followed your independent attitude on this and on many subjects. While, of course, not always in agree- ment upon smaller matters, may I none the less take this occasion to express my substantial agreement with you and admiration for your courage? I hope it may be possible to get the benefit of insur- ance and endowment free from the Prussian control you are so valiantly denouncing. I am convinced that it is necessary for the teachers to take positive action by way of defense against the de- signs of the Carnegie Foundation. We should never con- sent to any scheme of pensions except one formed on the mutual plan and under the complete control of the teach- ers themselves. You an;d Professor Jastrow deserve our thanks for your careful analyse (moral as well as financial) of the mismanagement of the C. F. In my opinion the Foundation has failed utterly to do that for which it was founded. I don't care to express any opinion as to the incompetence or dishonesty of those who have been managing it, but I can't see how they can escape one charge or the other. What is needed is another foundation whose integrity, wisdom and financial stability renders it like Caesar's wife. I hope that your activities in thM field will bear fruit positive. So far as actually losing money is concerned, I pre- sume the Carnegie Flounderation has escaped; but why a concern so conspicuously ill-managed, as regards the main purpose for which it was publicly declared to be founded, should expect to command the confidence and respect of trustees and faculties of American colleges, I can not see. Its ** scraps of paper" are vanderlipped away in a man- ner fiirst understood in Prussia. PENSIONS 39 I liave alwajB been unalterably opposed to both the principle and practise of the Carnegie Foundation pen- sion fund for academic teachers. The whole plan has always appealed to me as a kind of mortgage upon the energies and ambitions of the young teacher at usurious rates of interest. It is my opinion that the proper course to pursue is, if possible, to put the affairs of the foundation in the hands of a receiver; let this receiver meet the existing obliga- tions of the foundation so far as the funds will allow, and go out of business. Of course no new chains must be forged for the aca- demic profession; the old ones are bad enough. I entirely agree with you that the Carnegie system was one which was fraught with the greatest danger to free- dom of thought and the develo^nnent of the social sci- ences. I am glad that it was so poorly planned that its failure is assured. It has always been a mystery to me that every single teacher in private conversation sympathizes with your point of view while very few of them dare openly react against the continued humiliation inflicted upon our pro- fession. . . . Carnegie plus our academic system of ad- ministration has broken our back-bones. I have no ^rmpathy with the methods of "The Car- negie Foundation for the Control of Teaching" (and teachers), because it has been so repeatedly shown that they were based on incomplete data, bad logic, and inex- pert specialists, even if they were not tricky or worse. The whole business is an insult to the intelligence of the teaching profession — an excuse for keeping capable men on starvation salaries during their productive years in the vain hope of having their declining years provided for by charity — an excuse for universities to discontinue retiring allowances for honorable service. 40 CABNEGIE The plan proposed is unsatisfactory. My impression is that professors have no confidence in the Pritchett- Butler gang, and feel that the sooner the Carnegie Foun- dation is rid of this incubus the better. The great calamity befalling professors in recent years was the giving of the Carnegie milUonB. Would that he had kept them. It's just as necessary to human freedom to shatter the educational autocracies as it is to blow up those of a political sort. The parallel with the German situation is obvious. But I suspect that the K^aiser will surrender before Pritchett. There is less excuse for the latter to hang on. It is going to be hard enough to teach in an American university and retain one's self respect apart from the activities of this Foundation. What I think we ought to do is to utterly ignore the Carnegie Foundation, and all its works. Moreover we should make it clear that we do so because it has brazenly disregarded all its promises, and because its only apparent raison d'etre is to exercise an external, non-academic control over the souls of Amer- ican university teachers. Words can scarcely be framed to express the criminal and selfish culpability of the trustees of the Foundation. This, however, is only one of the many symptoms of the disease affecting our colleges, namely ''presidentitis.'' The original Carnegie Pension Foundation, as worked out by the board, is scandalous and the new scheme ap- peals to me as even worse. The conduct of the Carnegie Foundation has been an insult to the intelligence and an affront to the integrity of the teaching profession. These statements are so clear and direct that comment is not required. Of the eighty-eight PENSIONS 41 letters only one is mildly favorable to the Car- negie Foundation and its ways, three or four are exculpatory, the great majority are severe arraignments. The letters also show widespread discontent with the position of the professor in the American university. This is even more the case in the full letters than in the extracts which have been selected with special reference to the Carnegie plans. The situation seems to have become worse, or better understood, since the present writer published in 1913 three hundred letters on the subject in his book on ** University Control.'* The '* Handbook of Life Insurance and An- nuity Policies for Teachers" has now been pub- lished by the * * Teachers Insurance and Annuity Association of America," and articles of eluci- dation and edification have appeared by the president of the Carnegie Foundation and of the new company in the Atlantic Monthly,* and by the secretary of the two corporations in President Butler's Educational Review, The ** Handbook" is obviously from the hand of the same Mr. Pecksniff who has produced the unlucky thirteen annual reports of the president ♦ Conducted by Dr. Pritchett's fellow trustee in the control of the New York Evening Post under the owner- ship of Mr. Lament, of J. P. Morgan and CJompany, and a trustee of the Carnegie Company. Shall we now find in the Post the vigorous criticisms of the Carnegie Foun- dation which appeared there when it was controlled by Mr. Villard and when Dr. Franklin was one of the editors f 42 CABNEGIE of the Carnegie Foundation. We are told : The teacher whose retirement allowance is secured by a Deferred Annuity policy on the Teachers Eetirement Plan will enjoy a protection fundamentally more secure and equitable than one whose reliance must be upon a pension payable at the discretion of a Board of Eegents or of Trustees. A Non-forfeitable Pension From the moment the first premium is paid on such a policy, the teacher will become the owner of a policy or contract which neither his employer nor the Association will have any power to modify adversely to his interests, etc. Dr. Pritchett actually informs us that we can trust his new company because the laws will compel it to keep its contracts, whereas it is within the discretion of regents or trustees to keep their promises, which they are liable to modify adversely to the interests of the teacher. This has in fact been done by the trustees of the Carnegie Foundation and of Columbia Univer- sity; but surely boards of regents and trustees usually follow the ordinary standards of busi- ness honor. It has besides not yet been decided by the courts that a promise in dependence on which a teacher has acted is not a contract. The Carnegie Company says it is ** created not to get but to give, * ' therefore : Its policies, further, will be free from any speculative element; they wiU be what is called non-participating. The consideration shown to the teacher in free- ing him from the ** speculative element'* of re- PENSIONS 43 ceiving the dividends earned by his excess pay- ments on his policy is truly Pritchettarian. The company increases its rates by 11.11 per cent, in case the policy holder is no longer em- ployed by a college or university. The **Haind- book'*says: For technical reasons, it seems best to accomplish the same result by adding a small percentage to the net premium rates and providing for a reduction on each premium paid while the policy-holder remains a member of the profession. The ** technical reasons" are to evade the dis- crimination laws which provide that no com- pany ** shall make or permit any discrimination between individuals of the same class or of equal expectation of life in the amount of payment or the return of premiums or rates charged for policies of insurance.'* The expedient seems to be of somewhat doubtful legality. The ob- ject, of course, is to make it harder for a teacher to escape from an undesirable position. It is not necessary to describe in detail the policies offered by the Carnegie Company for its ** Handbook'* has been widely distributed and can be obtained on application. They are similar to those of the standard companies (ex- cept the undesirable features of its deferred an- nuity), and, what is truly surprising, the charges are also the same. The ** Handbook'* says of the new company : . Its situation is quite different from that of the solicit- 44 CABNEGIE ing company. Through an endowment, contributed in the form of capital and surplus, it is able to offer insurance at cost, -without overhead charges which in the ordinary company absorb a considerable proportion of the premiums paid by the policy-holders. It is further said : It is believed that college teachers are subject to lower rates than ordinary holders of insurance and that in time this should result in a lowering of the cost of insurance for a group composed of such teachers. After reading this and much more to the ef- fect, the teacher will be interested in the follow- ing comparison with the rates of the two largest American companies, both mutual (owned by the policy holders and returning the profits in dividends), and a standard non-participating company. PREMIUMS FOR $1,000 INSURANCE AT AGE 35 Company Ordinary Life 20-Year Term* 30-Year Endowment Carnegie Company: Teachers 20.19 22.41 21.90 22.00' 20.11 27.57 30.60 29.76 29.76 27.67 26.59 Escaped teachers 29.51 Prudential* 28.02 Metropolitan' 28.02 Travelers . 26 84 5 The term policies of the Carnegie Company are par- ticularly undesirable for the teacher, because they do not contain the usual provision permitting renewal without a medical examination. 6 The rates quoted for the Prudential and Metropoli- tan will be reduced by the payment of dividends. ■'Endowment at age 85. PENSIONS 46 THE ANNUITY (MALE) PURCHASED BY $1,000 AT AGE 65 Carnegie Company $113,248 Prudential 112.61» MetropoHtan 116.92» Travelers 115.14» No reference is made in the ** Handbook'* as to what will be done with the large surplus that will undoubtedly accumulate at the rates charged by the company ; but the charter reads : The purpose of the corporation la ... to conduct its business without profit to the corporation or to its stock- holders; and the corporation shall transact its business exclusively upon a non-mutual basis and shall issue only non-participating policies. The trustees of the Carnegie Corporation can not divide the profits among themselves (except by salaries such as the Hughes insurance inves- tigation disclosed), but they can use it for the further control of teachers. The only adequate reason why a teacher should purchase life insurance or an annuity in the Carnegie Company is because he is com- pelled to do so by the institution which employs him. The deferred annuities, which are the real raison d*etre of the company, are particularly adverse to the interests of the teacher. The joint commission, on which representatives of the American Association of University Professors came to an agreement with Dr. Pritchett, adopted the following provision: « Payable monthly. • Payable annually. 4 46 CABNEOIE The assoeiatian will contract tliat if the annuitant re- tires from the profession of teaching prior to the age of sixty-five, it will return to the annuitant the premiums that have been paid to the association by the annuitant alone (or by the annuitant and his college), prior to his retirement, with compound interest at the rate of 3i per cent. This right is now withdrawn and the teacher once caught in the net of the company is there for life/® Yet we tell our students that slavery- has been abolished in the United States. The control of the professor's freedom of ac- tion and of thought is so disastrous that the financial clipping to which he is inured is trivial in comparison. It may, however, be noted that the joint commission decided that the founda- tion should guarantee four and one half per cent, interest on the annuity payments, and that this is now reduced to four per cent. No pro- vision is made for insurance against disability. The usual medical examination and statements concerning physical condition, etc., are required. 10 The Oamegie Company also ignores the recommenda- tion of the joint commission that all possible considera- tion be given to the needs of older teachers who enter the system. If a man does so at the age of sixty, he would have to pay over $5,000 a year to obtain an annuity of $2,500 at the age of sixty-five. If Columbia University requires all its professors to purchase de- ferred annuities and the University of Chicago retains its pension system, how can a professor go from Chicago to Columbia? PENSIONS 47 The ** Handbook'* however, offers the following notable privilege: No physical examination is required if the application is for a deferred annuity, or for a life annuity. In fact the teacher who had paid premiums for thirty years and on reaching the age of sixty- four finds that he is suffering from Bright 's dis- ease or cancer, not only is not required to take a physical examination, but the company is so considerate of his interests as to compel him to purchase the annuity. If the teacher takes out an endowment policy in a standard company, he can, of course, obtain the accrued value of his policy (after three years in some companies) and on reaching the age of sixty-five he can pur- chase an annuity or use the money in any other way that he sees fit. An inexplicable provision of the deferred an- nuity of the Carnegie Company is that it unites a queer form of life insurance with the annuity. If the annuitized teacher dies before the pay- ment of his annuity begins, the premiums with interest are paid to his heirs in 120 monthly in- stallments. The teacher is, of course, compelled to pay for this insurance at the regular rates. It is the most undesirable insurance possible, for it is least when most needed and most when least needed. If the ordinary $10-a-month pros- pective annuitant dies at the end of the first year, when he may leave a wife with young 48 CARNEGIE children, they will receive $1.02 per month for ten years. After forty years of payment the accumulation amounts to $11,649.^^ The reverse form of policy would be useful^ — the writer does not understand why it is not of- fered — in which the premium is constant through life and the proceeds decrease each year with decreased need and the increased chances of death. Thus if $120 were paid annually (and there were no expenses) the family of the in- sured should receive about $30,000 if he died^^ at the age of 25, $20,000 at 35, $10,000 at 45, $5,000 at 55 and $2,500 at 65. A teacher with a dependent wife and young children should insure his life for a sum that will yield at least one half the income that he earns. This is usually possible by the purchase of term insurance ; but it can not be done in the Carnegde Company which limits its policies to $10,000, although it provides for the sale of an- nuities of the capital value of $50,000 to $100,000. It is further the case that if a teacher is forced to purchase an annuity, he will find it 11 If the teacher invests his own money and its interest in government bonds it will aanount to a much larger sum after forty years and will in the meanwhile be de- cidedly safer. But he will lose the ''privilege'' of be- ing forced to purchase an annuity with it, whether he wants one or not. 1^ The chances being about 4 in 1,000 for the general population; the amount of insurance for the teacher should be at least 50 per cent. more. PENSIONS 49 by no means easy to purchase life insurance. In advocating the plan that educational institutions shall require the purchase of deferred annuities, leaving life insurance optional and even making it difficult, the Carnegie Foundation does what it can to cultivate in the young teacher a selfish and even an anti-social attitude. The entire scheme is arranged to enable the administration to drop older teachers when it no longer wants them. According to the plan of the Carnegie Foun- dation and the Carnegie Company, teachers above the rank of instructor in associated insti- tutions are to be compelled to purchase de- ferred annuities to the extent of 10 per cent, of their salaries, 5 per cent, to be deducted from the salary and 5 per cent, to be paid by the in- stitution. It should be clearly understood that the 5 per cent, paid by the institution will be deducted from future increase in salary. When this was first stated by the present writer in 1908, it was denied by Dr. Pritchett, but he has learned it in the course of his education, to which he so frequently refers in his reports and articles. Thus the * * Handbook ' * says : Teachers who have followed the discussion of pensions during recent years will understand that the contribu- tion made by a college or university to a teacher's an- nuity will inevitably in the course of time be considered as a part of his salary. This result must always follow on any such arrangement between two parties who have to each other the relation of employer and employee. 50 CABNEGIE There is at the present time imminent danger that the management of colleges and universi- ties, in order to annnitize their teachers and thus provide for dismissing them at sixty-five and holding them in more complete subjection in the meanwhile, will persuade them to accept the annuity system on the ground that it will provide an immediate five per cent, increase in salary, although according to the present value of the dollars in which salaries are paid an inh crease of more than 50 per cent, is now over- due. The example will probably be set by such institutions as Columbia, Harvard and Yale, whose presidents are trustees of the foundation and have assisted in framing the scheme. Teach- ers may even be told that unless they accept the plan, their institution will no longer be asso- ciated with the foundation and their older col- leagues will be deprived of the pensions now promised by the foundation. It is perhaps to prepare us for the contingency that the founda- tion will once more do away with what it calls **the expectations'' {i. e., expectations that the foundation will keep its promises) of teachers, that Dr. Pritchett so frequently reminds us, to quote again from the * * Handbook, ' * that : , No axrangement for such retirement will be satisfac- tory to either the college or to the teacher except one that has the definiteness and security of a contract. The standard companies seem to be in every way preferable to the Carnegie Company. They PENSIONS 61 have the advantage of reliability with no like- lihood of interference with the freedom of the teacher. The difficulty is that the cost is greater with them, as it is with the Carnegie Company, than the teacher should be compelled to pay. The premiums for insurance are based on the American Experience Table, three and one half per cent, interest and a loading for expenses. The death rate of professors under fifty is less than half that of the American Experience Table and probably twenty per cent, less than the average of accepted risks. Interest is now much higher than three and one half per cent. The expenses of the standard companies are over twenty per cent, of the premiums received and are largely due to the cost of obtaining busi- ness, which is an added charge to those who do not require solicitation. Perhaps a professor of good heredity and habits pays twice the net value of his insurance. Thus to take a case where the conditions are the simplest, in England (where vital statistics are properly compiled) the death rate between the ages of 25 and 35 is 4.5 per thousand. To secure $1,000 insurance (apart from costs) it should be necessary to pay only $4.50 a year. But this is for the general population, inclu- ding defectives and criminals, drunkards, those with syphilis, tuberculosis and all sorts of dis- eases that would disqualify for academic posi- tions; it includes the submerged classes, those 52 CARNEGIE exposed to excessive hours of labor and abnormal risks, those improperly fed, clothed and housed, without education or decent medical attendance. It is unscientific to make guesses concerning quantitative relations, but it seems probable that the annual death rate of academic teachers be- tween the ages of 25 and 35 is not more than 3 per thousand, and after a medical examination it may be not more than 2. They ought to pay (if costs of management are excluded) $2 to $3 per $1,000 of insurance. But the Carnegie Com- pany charges $8.21, or $9.12 to escaped teachers. It is also the case that the death rate is lower at the beginning than at the end of the ten-year period and the company earns a considerable sum in interest. If the company should insure ten thousand teachers and ex-teachers for an average of $10,000 at an average rate of $8.50 per thousand they would pay it $850,000 a year and it would return to them $200,000 to $300,- 000. As the Carnegie is not a mutual company, it is not clear where these profits would go ; but it is certain that it is not the company which confers the benefit. The greater expectation of life which the pro- fessor is assumed to have reverses the situation in the case of annuities; but the annuitants used in the McClintock tables have also an ex- pectation of life beyond the average, for those do not buy annuities who foresee an early death. It is also the case that the lower death rate of PENSIONS 53 professors is greater at earlier than at later ages. The duration of life after seventy depends chiefly on original constitution or heredity; the death rate under fifty is influenced largely by eco- nomic situation, habits, exposure to risks and the like, in regard to which the professor is favor- ably placed. If all teachers are forced by their institutions to purchase deferred einnuities, and only acceptable risks are insured, the Carnegie Company gets them coming and gets them going. The teacher, like the industrial worker, passes through an economic life cycle. He must be supported in childhood and should be supported until he completes his education. Teachers who find employment in one of the Carnegie institu- tions receive an average salary of $1,200 at the age of 28, which is the average age of marriage. However prosperous a married man of twenty- eight, maintaining the standards of a university teacher, may be on a salary of $1,200 — ^the wages and board of two domestic servants now amount to about $1,600 — he is better off eco- nomically than he will be later, if he has chil- dren to support. He will have a salary of $1,700 at the age of 35, and $500 will not feed and clothe two or three children. If the children are properly educated, their cost increases more rapidly than the salary of their father, even if he is promoted in a Carnegie institution. It is not until the children become self-supporting and the father is in the fifties with a salary of 54 CABNEGIE $3,000 that his economic situation improves somewhat. His salary will not thereafter in- crease appreciably; but he may no longer sup- port dependent children. In the Carnegie insti- tutions he is liable to be turned off at sixty-five with about half salary, now decreased through the inability of the foundation to keep its promises. .Wealth should be distributed with reference to both service and need; some method must be found to equalize the inequalities that occur dur- ing the life of an individual. Children are no longer an economic asset to their parents, least of all in the educated classes; neither can the employer of the father be expected to pay for them. But children are of greater economic value than ever before to the state; the children of the academic class are probably of an aver- age economic value of over $100,000, in that they produce during their lives that much wealth beyond what they consume. Ultimately the state will pay for the bearing, the rearing and the education of its children. In the meanwhile we face a difficult situation. It is met by the teacher in large measure by not having the children, his average family being about 1.5. But this is a method undesirable for the indi- vidual, disastrous to the state.^^ 13 The economic inequality of the life cycle has been made greater in a curious way by increased longevity. When the parents died at the average age of fifty their PENSIONS 55 As the dependent child must ultimately be cared for by the state, so the disabled worker should be supported by the state. The risk of prolonged incapacity during the working period is extremely small and the cost of insurance should be correspondingly low. But the risk, though remote, is a constant menace to the un- derpaid teacher. The Carnegie Company, in not providing for insurance againspt it, m^kes an exhibit of permanent incapacity on its part. The disability of old age is not of long average duration. It is normally provided for by sav- ings or by the dutiful repayment of the chil- dren's obligations. As has been stated the in- equalities and risks of the economic life-cycle should be equalized by the state. Until we have reached that stage of civilization, insurance is necessary and pensions may be desirable. So we must meet the immediate problem. Whether the Carnegie Company can be of use is entirely dependent on its being made either a mutual company owned by the policy holders or a stock company owned by representatives of the academic teachers of the country. If the present owners are unwilling to agree to this, they demonstrate their lack of good faith and property went to the children ^hen needed for the suj)- port of their own children. Now when parents die at the average age of over seventy their property goes to their children when least needed. Inheritances should go to grandchildren. 56 CARNEGIE proclaim that they are there not to benefit teach- ers, but to control them. The only objection to the standard companies is their excessive charges. It may be possible to arrange with one of them to offer insurance and annuities to a large group of teachers on some mutual plan that will enable them to pay only for what they get. Or it may be possible to organize a new company that will accomplish this result. If university and college professors should establish an insurance company they would not transact its details; they would only elect trustees or directors. There is no reason why they should not do so as efficiently as the Carnegie Corporation. The difference would be that the trustees would be elected by the teach- ers to conduct the work in their interests instead of being appointed by Dr. Pritchett and Dr. Butler to do as they are bid. It is also true that the earned surplus would be used for the benefit of teachers instead of being a menace to them. There is no warrant for the common opinion that teachers and professors are poor men of business or inefficient in the conduct of affairs. It requires executive skill to conduct a laboratory or department; the professor of the novel and the stage survives only there. The reputation of professors for business incompetence is due to absorption in their work, to the inadequate sal- aries they accept in order to do the work they want to do, and to their futility in faculty meet- PENSIONS 67 ings. The latter situation is caused in large measure by lack of power to accomplish any- thing worth while and is besides a symptom of all large groups meeting for discussion at long intervals. University presidents are supposed to be efficient and are selected for all sorts of out- side jobs from the presidency of the nation down to pulling wires for Mr. Barnes of Al- bany. These presidents were once professors and have usually been elected for traits, such as success in after-dinner speaking, not related to business efficiency; they represent in this re- spect about the average level of the professor. When presidents who undertake to control hun- dreds of millions of dollars of university prop- perty, thousands of professors and tens of thou- sands of students meet once a year as trustees of the Carnegie Foundation, they prove more hopelessly inefficient than any college faculty. It is, however, true that teachers are a difficult group. They impose their discipline and their opinions on immature students and are intel- lectually individualistic, they are paid and con- trolled by superior officials and are socially sub- missive ; they are consequently hard to lead and easy to drive. But the situation is not hopeless. The intellectual initiative of teachers may lead them to see the need of reforms, while their sub- jection to administrative machinery has become so intolerable that they may be driven to enact their Magna Charta. Real progress has been 58 CARNEGIE made in the organization of the American As- sociation of University Professors, but we can only hope for a slow development of the *' con- sciousness of kind." When the present writer first proposed the establishment of such an as- sociation his plans were more directly in the form of a union. It might now be desirable for the more radical academic teachers to form a national union affiliated with the American Fed- eration of Labor. Agitation and the capitalization of discontent may be unladylike; but they may also be the price of liberty. President Butler in his last report to the trustees of Columbia University tells them what he thinks of those whom he calls ** academic Bolsheviki'*; but their ferment has more promise than the dry rot of the rule of Czar Nicholas. Liberty, though the name may be ** soiled by all ignoble use," is the religion of the teacher. He must maintain at any sac- rifice his freedom of investigation and of thought, his freedom of teaching and of speech. If he submits to the violation of his intellectual integrity, the colors of his academic hood are no more honorable than the colors on the syph- ilitic face. University professors can not allow themselves to be placed in the economically de- pendent classes, for then they are in danger of being forced into the intellectually dependent classes. And that would be the end of us. THE VERDICT OF COLLEGE AND UNIVER- SITY PROFESSORS! In general, I trust the Carnegie Foundation, and I am not able to say in what respect the in- ^surance plan could be better. It seems to me we should be prepared to cooperate, unless a fairer and safer plan is offered us. I HAVE a reasonable degree of confidence that if I live a few years more I shall receive the ex- pected pension from the Carnegie Foundation; but I have never based my own conduct on this expectation. I have never thought that I had a claim against the foundation. And in general, I believe life is happier if, without pusillanimity, claims are not unduly exaggerated and unduly pressed, as seems to me to be the case with those professors whose voices are just now most loudly Jieard. Let the professor, like the shoemaker, jsftick to his business. s Personally I am satisfied with the scheme .worked out by the Carnegie Foundation. What J believe to be an open-minded and efficient effort at service has been far too much the subject of attack by individuals who can easily ent in providing pensions for the teachers who had 156 CARNEGIE donment of the age-retirement. The plan will come up for action in November; the issue is critical. The action to be taken may lead to the rehabilitation of the foundation under dif- ferent management; or may prove to be the oc- casion for its last will and testament. Profiting by the experience of 1909, the trustees voted to submit the plan to all professors in associated served their generation unselfishly upon salaries whieh made provision for old age almost impossible. To have l)egun a system of pensions which called forth at once an additional expenditure on their part would have been repugnant to the idea of the endowment. '* As is too familiar, the world of 1912 was a very different one from the world of 1916. Insuperable difficulties have be- come distinct obligations of the trustees; the same sal- aries which made provisions for old age impossible now make them ** readily available*'; **the idea of the en- dowment'' is so elastic that what is repugnant in 1912 is demanded by a social philosophy eagerly welcomed by teachers of 1916. The unselfish service of 1912 gives way in 1916 to the sentiment that **the possession of a pension or the right to possess one . . . tends to arouse that selfish conservatism which exists in greater or less measure in every human breast. ' ' Even the professor is entitled to consolation; he may find it in the fate of Tommy Atkins: Then it's Tommy this, an' Tommy that, an' "Tommy 'ow's yer soul?" But it's '*Thim red line of 'eroes," when the drums be- gin to roll. An' it's Tommy this, an* Tommy that, an' anything , you please; An' Tommy ain't a bloomin' fool — ^you bet that Tommy sees! PENSIONS 157 institutions. Disregarding the lessons of the past, Mr. Pritchett presents his proposals in the same objectionable manner that characterizes his past utterances when creditable reasons must be sought for conclusions otherwise determined — thus calling forth the caution of Professor Cattell : It is desirable at least to watch the Greeks, both when they bear gifts and when they take them away. There is the same copious shuffling of the issues, the same lack of frankness, the same as- sumption of benevolence of motive, the same dis- regard of accepted principle as of actual opin- ion, the same aspersions and evasions. There is an improvement in adroitness and plausibility, and a larger use of the method of presenting masses of sound data and deductions in a con- text that invites an irrelevant application. The task of clearing the dust-heaps and presenting the bare issues is much facilitated by the pro- tests which several universities have registered against the plan. Writing in 1909 of the repudiation of the promised service-retirement. Professor Cattell said: **This action would be incomprehensible if it were based on the grounds alleged by the president in his annual report, which has just now been printed. He does not even remotely refer to the financial inability of the foundation to carry out the obligations it had assumed, but 11 158 CABNEGIE bases his recommendations'' upon the bad ef- fects of the provision. In the present instance the admission of financial difficulty is clear but hardly ample, only that "any pension system resting upon a fixed endowment must inevitably reach its limit, and that the resources of the foundation, and any addition likely to be made to them, would provide a pension system in only a limited number of institutions.'' The first clause does not suggest a petition in bankruptcy, and the second is a fixed (?) principle of the foundation. The irritating pretext of the * * Com- prehensive Plan"^ is that **the reason for the existence of such a report lies in the desire to correct the weaknesses of the present system, etc." A frank statement would place the rea- son in the admission that (owing to gross mis- calculation) the foundation can not continue ^ The plan itself is simply described. It withdraws the age pension and substitutes a contributory (compul- sory) system in which the professor and the institution each pay half the cost of such combined insurance and of annuity after age sixty-five as each professor cares to pay for between certain limits (one for insurance and another for annuity) ; also that the plan may include half the annuity for the widow. The foundation pays the cost of maintenance, guarantees the rate of interest and provides for disability, though the manner of such provision requires more definite statement. The insur- ance and annuity system are to be administered by a sub-agency of the foundation, in which the contributors will be represented. A portion of every annual salary is thus retained for a pension, and that from the time of the first academic appointment. PENSIONS 159 much longer the age-retirements as promised, even if it is prepared to exhaust principal as well as income, and must make no new promises ; that eventually additions to its resources will be required to meet the obligations already as- sumed; that it appeals to the indulgence of its creditors, and asks for a charitable regard of its imprudence; that to save what is possible from the impending disaster requires the cooperation of institutions and professors, which is now in- vited; and, above all, that the plan plainly re- linquishes very substantial benefits and substi- tutes limited though still desirable ones. It would be pertinent to add that the type of benefit proposed is one suitable to the cooperation of the foundation, but the management of which belongs to those affected. As a supplementary activity of the foundation it has much to com- mend it; but the presentation of the plan as though what it offers is a more comprehensive benefit and a support by the foundation of the associated institutions comparable to the age- retirement, is misleading. (That it should ap- peal to the non-associated institutions with no pension system of their own is intelligible.) To make a virtue of a necessity may be a wise con- solation; to present the necessity of restriction as the virtue of expansion is as unwise as it is unwarranted ; it is not even tempered by the ad- mission of responsibility for the necessity. To consider the ** Comprehensive Plan'' two 160 CABNEGIE sets of data are needed, and neither is adequately supplied ^y Mr. Pritchett. The one is the extent of the existing obligations assumed by the foun- dation under the age-retirement ; the other is the extent of the benefit offered by the proposed plan to professors. The answer to the first ques- tion requires an interpretation of the incurred obligation: whether it applies to all members of the faculties of the associated institutions, who in the future may qualify for age-retirement, or only to those who do so within a stated period. Mr. Pritchett's statement is this: The actuaries have suggested that men below the age of forty-five years could to their own advantage transfer from one system to the other. Whether twenty years is a reasonable notification of a change in the rule is a matter which will be considered in the most serious and conscientious manner by the trustees. A few replies from leading universities^ are available; they agree that the obligation exists toward all members of associated institutions ir- respective of age. The phrase **to their own ad- vantage'* is either wholly misleading, or it im- 8 The universities referred to are Cornell, Johns Hop- kins, Princeton and Wisconsin; others may have replied or still propose to reply to the same purpose. The ** Comprehensive Plan" was at first issued with the mark *' Confidential, " and the repli^ bore the same token. When the plan itself was made public, the re- plies were presumably released; both are intended to affect sentiment. Permission to cite the replies in the present survey was asked and granted. PENSIONS 161 plies that financial disaster is so certain that men under forty-five may already read on the doors of the foundation the warning: **A11 hope aban- don, ye who enter here. ' * It is fortunate that the replies of two institu- tions afford the needed data. The Cornell reply is a model of precision and pertinence. It main- tains that changes in the system should apply only to those who become instructors in asso- ciated universities after the change is decided upon, but makes its calculations on the basis of obligations to those over forty-five years of age. After taking into acount every factor that is capable of reasonable estimate, the conclusion is reached that (extending over the term of years of the lives of beneficiaries pensionable under the limitations stated) a sum of about $25,000,- 000 would be needed and used, principal and intereirt, in meeting these accrued liabilities.* This can be done with the help of the Carnegie Corporation; such a solution leaves slight mar- gin for other service unless a financial recon- struction is arranged. The Cornell reply pro- poses: If relief from the burden of obligations already as- sumed can be secured, the foundation ^ould (a) pay out of its income, under rules to be adopted, disability annuities to such teachers in associated institutions as • The sum should be decreased by an (uncertain) al- lowance for the forfeiture of pension by emigration to a non-associated institution. 162 CABNEGIE have purchased and are continuing annuity contracts with approved insurance companies maturing at sixty- five to sixty-eight years of age and of $1,000 to $4,000 in value, such disability annuities to cease when the disa- bility is relieved and in any event when such purchased annuities respectively become payable; and (6) dis- tribute annually to such teachers equally the balance of its income. The several protests agree that a wholly com- pulsory system is neither proper nor feasible; the institutions or individuals must have a voice in this determination. The Wisconsin reply with equal definiteness examines and reports upon the value to benefi- ciaries of the ** comprehensive plan'' and con- cludes that the saving to professors, as com- pared with prospects and opportunities offered by commercial companies, is at all events slight and may be problematical. The data are too complex for summary. The foundation is prac- tically limiting its benefits to a provision for disability (the nature of which is not fully stated) and for which the Cornell proposal is a substitute. The benefits proposed — slight or problematical though they are — make participa- tion by the institution and by the professor com- pulsory. For certain state institutions this will be legally impossible, for others practically so. Such compulsion sooner or later places the whole burden on the professor, since participation by the ini^itution tends to react against advance in salary. The complications introduced by migra- PENSIONS 163 tions from institutions with pension systems to those without them, and vice versa, will be dif- ficult to meet. The plan proposed not only in- troduces a different system, which is admitted, but justifies the abandonment of the original principle. So long as the income is used [to encourage or compel othersio] to pay pensions to teachers who have grown old and have passed the period of usefulness in service, or to provide pensions for teachers who after long service are absolutely broken in health, or for the widows of such men, the expenditure does good, not harm. To go beyond this is to tread on questionable ground (Pritchett). 10 The added words are inserted to apply to the situa- tion if or when the * * CJomprehensive Plan'* is adopted. They are not needed at present. The replies, in addition to giving opinions upon the plan proposed, urge important considerations which should be respected at this critical juncture. The points raised may be summarized: the plan as a whole is not feasible; the compulsory feature is especially objection- able; the effect will be to throw the whole support upon the professor; the obligation toward insurance and toward annuities is different; the disability provision is not clearly defined; commercial companies and individ- ual initiative are competent to supply the benefit pro- posed; the foundation should not enter an uncertain field already well occupied, and abandon its distinctive function; the policy of influencing the many institutions through the few should be maintained ; there should be a contract between the professor and the foundation; the institutions and the professor should participate in the management of the foundation; all existing liabilities should be met without discrimination; a partial retire- ment should be inaugurated as an optional procedure. 164 CABNEGIE It is certainly most Tinfortiinate that the financial situation should so dominate past and present issues as to confuse where it does not obscure the outlook ; but that is no reason what- ever for the abandonment of sound principles. The line between what is just and wise and what is unjust and unwise is to be drawn precisely along the boundary that divides those who shape policy to principle and those who shape principle to policy. Their mutual adjustment is the re- curring problem of administration. Apart from the question of meeting obligations, the continu- ance of the foundation upon any useful career depends upon the measure of its return to the position which was and is its raison d^etre. In the financial situation there seems no other re- source than the Carnegie Corporation to which Mr. Carnegie has conveyed one-hundred-and- twenty-five million dollars for the purpose of using the income (at present about six million dollars annually) for the increase of the capitals of the five great benefactions which bear Mr. Carnegie's name. It is fortunate that the other participants in this corporation are not likely to require so large a measure of support as to pre- vent the use of the corporation to make the foun- dation solvent for a sufficiently long period to restore and shape its policy toward greatest benefit to the teaching profession. The full and frank admission of the situation is imperative. There must be no shuffling, though there may be PENSIONS 165 slight interest in fixing responsibility. To urge or imply, as Mr. Pritchett does, that absence of accurate data was in any real sense the cause of the discrepancy between fact and estimate is pre- posterous. It is true, very true, that more is known than was known ten years ago of the cost of pensions, and much of the increased knowl- edge is due to Mr. Pritchett. But the estimates went wrong not by rods, but by miles ; how they were obtained or who made them is not dis- closed.^^ The acceptance of responsibility would 11 Professor Love joy points out that the estimate in the First Report of the Foundation contains **no refer- ence to the all-important factor of age-distribution," and comments: "It would be hard to imagine an ac- tuarial error more glaring or more easily avoidable." He adds: **Thi8 error, and the insufficiency of the foundation's endowment for its announced intentions, were clearly pointed out by Professor Cattell in Science four years ago, ' * that is in 1909. Professor Cattell com- ments : * * 'nie lack of foresight and expert knowledge dis- played by the president and trustees of the foundation is astounding." There is little evidence that these views, which have proved to be rather dismally prophetic, received proper attention or any at all. To have it im- plied that the trustees knew all along that their funds were inadequate and that they stated the fact, is mis- leading. To accuse men who accepted the pensions with- out the claim of poverty, of lack of consideration for their less fortunate colleagues is unfair and peculiarly invidious in view of the assurance of ample funds not only in the First Report but in the repetition of this assurance when the state universities were admitted and Mr. Carnegie added five million dollars to the endowment 166 CABNEGIE be an aid in restoring confidence in future prom- ises. It is clear that relief from financial distress would not of itself restore confidence any more than it would confer wisdom or integrity. The Obstacles that Stand in the way of the wisest ad- ministration are plainly moral ones. If the foundation can escape the desire to control, can avoid the temptation of justifying actions by specious reasons, can freely entertain any plan or suggestion conducive to its true function, can for this purpose. In the letter of gift it is stated that ** expert calculation shows that the revenue will be ample*' 'Ho provide retiring pensions for the teachers of universities, colleges and technical schools in our country, Canada and Newfoundland"; and in Mr. Pritchett 's words : * ' It may therefore be safely assumed that while the income of the foundation is sufficient to carry out the original plan of the founder, it is not suffi- cient to extend the system of pensions, at least at first, beyond the scope which he indicated in his letter of gift.'' In 1908 Mr. Carnegie wrote to Mr. Pritchett: **1 understand from you that if all the state universitiea should apply and be admitted five millions more of five per cent, bonds would be required." Under the rules then operative and in the light of the draughts upon the funds then secured, these statements are so wide of the mark that if increased five-fold they would still be ques- tionable in a twenty-year prospect. The gross nature of the miscalculation as well as the responsibility for it should be clearly noted. Moreover the slur upon those who accepted pensions without the plea of distress, is another instance of reading implications into statements after the event. Poverty, like disability, is shuffled into the requisite justification for accepting an earned pen- sion, as relief replaces reward in the conception. PENSIONS 167 give to the teaching profession the full partici- pation in its measures that the trust implies ; if, in brief, the attitude and perspective of obliga- tion are firmly fixed, the outlook, however dismal at present, holds promise for the future. It is for this reason that emphasis must be placed upon principle and that the proof of violation of principle is demanded in convincing meas- ure. No mature moral sense is interested in fault-finding beyond the demonstration of guilt. The constructive program of the foundation is the central interest of this review. What should the foundation have done, and what can it do to carry out the high purpose and distinctive mission which it accepted under fa- vorable auspices ten years agoT What are the conclusions to be drawn from its unfortunate history? At no point is the reviewer *s respon- sibility more exacting than in the attempt to an- swer these final, practical and comprehensive questions. The considerations may be presented serially. 1. A prompt return and fixed adherence to first principles is imperative. Mr. Pritchett's original statement is pertinent and sound. **In the long run, men*s personal preference for the work of the teacher . . . can not be depended upon to secure an adequate supply of the best men. This fact the older European countries long ago recognized, and in order to secure for the place of teacher the best men, they have 168 CABNEGIE sought to dignify the profession of teacher by the highest social and official honors; and they have sought in addition to strengthen it by larger financial rewards." And inasmuch as **the sal- aries of the teachers can not be made equal to those of outside professions this reward has come, in the main, by the establishment of a sys- tem of pensions. ... In other words, the first and largest ground for the establishment of systems of retiring pensions for teachers has been found in a wish to strengthen the teaching profession.'* The direct bearing of this conclu- sion is that the retiring allowance shall influence the professor in his career. The foundation has insisted upon complete retirement; this is a serious mistake. As Professor Cattell has sug- gested, the foundation takes away half a man's salary and all his occupation ; it should give him all his salary and relieve him of half (the bur- densome portion) of his duties. Naturally the allowance would continue (in some form) for life, in view of the fact that it comes as a right, earned in the process of earning the salary ; for the salary itself is but a means of support to make possible the devotion to the intellectual life. Neither salaries nor pensions should be con- sidered in commercial or irrelevant terms. The question of the best provision with the available resources to secure the ripest fruits of individual attainment between the ages of fifty and sixty- five or seventy is too complex to be included in PENSIONS 169 this discussion. The vital point is to recognize that here above all lies the great opportunity of the foundation to support and cooperate with the universities in remedying the most glaring and wasteful defect in the academic economy. There has been too much endowment for build- ings and institutions and too little endowment for men. The professor is inevitably institution- alized ; yet institutions are but opportunities for the right men. To strengthen the teaching professions means to influence directly the pro- fessorial career. The provision must be con- ceived in a far larger and more sympathetic spirit than appears in the service-retirement rule, which was acceptable only as an indica- tion of the recognition of a need. It must be administered in a spirit the very opposite of that which has obtained. To abandon the essential conception because the mode of expressing it was inadequate is like poisoning a patient be- cause the first treatment proved unsuited to the case. A further important provision must be reinstated from the original rules; that of leaving the initiative and the choice of time and manner of retirement with the individual." " Since the time and manner of retirement is the point of emphasis, the First Report may again be cited : ''The question as to the age at which a professor shall retire is a matter entirely between him and the institu- tion with which he is connected. ' ' It was tMs provision of the twenty-five year service retirement that proved its pertinence; for it allowed one to retire at a period de- 170 CARNEGIE Many men would prefer to teach in full service until they are ready to retire completely ; others termined by the complex circumstances of the case. At the same time the absolute prohibition of teaching lim- ited the manner of retirement, while a part-time ar- rangement would have given the desired elasticity. It thus becomes clear that when the service retirement was withdrawn a double injury was done, since now the foundation insisted that the professor must teach until the age of sixty-five. As the result of persistent appeal two small concessions have been grudgingly allowed. The first permitted universities to retire men and carry the allowance a few years in advance of the retiring age ; the later permitted a part-time arrangement without diminution of pension at age of sixty-five. All these ar- rangements are affected by the same drawback: that so few men can afford to take advantage of them. It is only the more fortunate who can live adequately upon a diminished income. The one central need is not met. Professor Hobbs has called attention to the importance of early and partial retirement as a means of freshening the profession; he rightly asserts that a man's optimum teaching period is limited, while the type of intellectual service that he can best perform is unprovided for. All arguments point to the importance of influencing the careers of professors and not merely to the relief of old age. It is also worth noting that the qualification for retirement has not been changed. Twenty-five years of service entitles one to a pension, which one does not re- ceive until the age of sixty-five; the widow receives it in case of the professor 's death. Whether a professor could claim a pension if he changed his profession after twenty-five years of teaching is a matter that only the courts can decide. Rules can not be changed retroac- tively to the disadvantage of beneficiaries. It is in many ways regrettable that the legality of certain of the foun- dation 's changes has not been tested in court. PENSIONS 171 would not. The system should be elastic, and no undue pressure exerted either by an outside agency or the university. The university re- tains an interest and a right to maintain its in- struction at the proper standard ; but retirement should not be an administrative decision, deter- mined by administrative interests. Until the funds of the foundation are used in furtherance of the direct strengthening of the teaching pro- fession by providing for at least the ripest period of scholarship something approaching the con- ditions under which many European professors spend the greater portion of their lives, its most significant and important function will not be exercised. 2. Hardly second in importance is a conclu- sion of quite different bearing. The history of the decade emphasizes what the academic world is learning slowly in many directions: the dan- gers of the administrative attitude and controL If there is one institution above all in which aca- demic considerations should be decisive, the foundation is that one. The funds belong to the teaching profession and should be adminis- tered by the profession for the profession. An external board of trustees is an anomaly. The contention that a board composed largely of col- lege presidents is not external in the sense in which a lay board would be, is just. There should be college presidents upon the board to represent the administrative interests; just as 172 CABNEGIE there should be financiers to represent the finan- cial interests. All the members of the board should hold office as the cfhoice of the professors and institutions concerned. It is a great satis- faction to note that such a plan of government was precisely what Mr. Carnegie provided. The deed of gift provides that each participating in- stitution shall have a vote in the election of trus- tees ;^^ this vital provision was set aside with no 13 There is a strange incident in the history of the foundation that may pertinently be recalled. Early in its career, yet with the financial uncertainty already present to a proper foresight, the maximum allowance was increased from $3,000 to $4,000. This increase could affect only salaries of $5,300 to $7,200 on the age basis, and of $6,800 to $9,200 on the service basis then in operation. Such salaries are presidential rather than professorial; it would be interesting to know what pro- portion of the men affected by the change participated in the extension of liberality. The incident ds thus com- mented upon by Professor Cattell: **It is certainly odd that a board of trustees consisting of university and col- lege presidents should increase the maximum pension from $3,000 to $4,000, which can practically only be of advantage to the comparatively high-salaried president, and should retain the privilege of retiring after twenty- five years, when this ds denied to the professors through the financial inability of the foundation. But perhaps they assume that higher education can be best advanced by retiring the president whenever possible." The financial inability is n^t mentioned by Mr. Pritchett, but is admitted by President Jordan, who also prints the actual resolution which was adopted, while the Eeport prints the resolution in a form containing several serious disagreements. In abolidiing the service-pension the PENSIONS 173 more explanation than these words: **In view of the desirability of a permanent, self -perpetuating governing board, the provisions of this para- graph '* (which provided that **each institution participating in the fund shall cast one vote for trustees,** the trustees to serve for five years and be eligible for reelection) **were, upon the advice and with the consent of Mr. Carnegie, omitted from the act of incorporation which forms the present charter of the foundation*' — and by this step autocratic misrule was made possible. It is in many ways humiliating that a body of men worthy of the esteem of the foun- dation to the extent of receiving its benefits, should be unrepresented upon the governing executive committee was instructed to ''aafeguard the interests" of competent professors engaged in research, of thoee whose service included service as a college presi- dent ; and of those expecting benefits in 1910. The reso- lution in the report makes of the first a **rare" pro- fessor, repeats the second with the assumption that presidents are also distinguished, and omits the third. A few years later this unfortunate discrimination be- tween presidents and professors was withdrawn, but not before it became known (the knowledge pointing to a breach of confidence) that a pension applied for on this groimd had been refused to a former college president then entering upon a campaign for high political office. In 1916 Mr. Pritchett is prepared to admit that **it seems doubtful whether the change was desirable." The question recurs: Would errors of judgment of this nature, which so soon require correction, have occurred if professors had been as well represented upon the board as were presidents! 13 174 CABNEGIB board. Mr. Pritchett's attention has been called to this grave defect, but without avail. If every vacancy that has arisen in the board had been filled by electing a professor, there would at least have been evidence of a democratic inten- tion and an opportunity for the presentation of the professorial point of view. Nothing less than a majority of professors upon the board and a control by the professors of election to the board will be a permanently satisfactory ar- rangement. It may be assumed that if the orig- inal provision had been retained, or if professors had been represented upon the board, the serious errors of the foundation and the violation of pledges would not have occurred. It is not implied that professors — even the select ones who would be honored by their col- leagues for such office — ^would be possessed of greater foresight or a more rigid conception of moral obligation, than is true of a group of col- lege presidents. It is implied that the perspec- • tive of interest and obligation of the two is meas- urably different. Under ideal conditions this would not be the case; under actual conditions it is the case. And yet it is not easily intel- ligible how a group of men whose positions form a richly adequate warrant for their ability and responsibility have come to acquiesce in a series of decisions and statements that have estranged the teaching profession from an institution de- signed particularly for its benefit. The dif- PENSIONS 175 ficulty must lie in the manner of direction which ** offers too large a temptation to certain qual- ities of universal human nature,'* which may be further specified, while yet denying that they are universal. College presidents are exposed to the emphasis of administrative decisions, which under pressure, great or slight, tend to become autocratic ; they are under temptation to substitute expediency for principle; they too commonly drift away from the academic point of view; in the present relation they are prone to consider benefit to the institution (in relief of financial strain) rather than provisions for men; appreciating in their official relations the value of acquiescence and the importance of leaving the direction of affairs to those in official posi- tions, they may lose the critical sense in apply- ing this policy to the president of an institution which they direct and who also shares the tradi- tions of the presidential office. If such consid- erations in part remove the burden of respon- sibility from individuals, they place it the more directly upon the system that invites such ac- quiescence. The personnel of the board con- tains men who may confidently be counted upon to protect academic interests and who might readily owe their places to a professorial elec- tion. What manner of protest or objection they raised, we do not know; the majority action stands. One may be assured that under dif- ferent leadership they would have served the 176 CABNEGIE cause of education as faithfully in this as in other relations. If the restoration of the original purpose of the foundation can be brought about (and in a manner suitable to actual conditions as re- vealed in the last ten years), and if professors can be given a directive voice in all future de- cisions, there is reason for hope that the mis- takes of the past may be atoned and the activi- ties of the foundation shaped to a permanently useful function. These two desiderata stand conspicuously in the foreground of the present perspective. Other provisions helpful to such a consummation should not be overlooked.^* 3. The question of financial resources and of the relations of funds to a system of benefits i*It is no more pertinent in one connection than in another to emphasize that fixity of policy is itself of permanent value. The foundation should determine its policies and adhere to them. The uncertainty incident to frequent change undermines confidence. Changes of the order involved are not due to the lessons of experi- ence (however plausible it may be to refer them to such source) ; they indicate an original lack of judgment and foresight or a too ready yielding to expediency, and in either case a lax hold upon the loyalty to principles. At all events the changes of heart would be more convinc- ing if the reasons assigned for the changes and the changes themselves were more consistent. Some assur- ance of a relatively permanent policy is to be expected at the present crisis. The First Eeport is, as usual, clear and correct: retiring allowances were to be voted *'in accordance with a fixed set of rules and upon a fixed plan. * ' PENSIONS 177 must be considered together. The policies that hastened the period of financial embarrassmenit were, first of all, the admission of too many in- stitutions; secondly, the liberal extension of pensions to individuals in non-accredited insti- tutions. The motives leading to the latter step were wholly commendable from the point of view of relief, and doubtless a wise discrimination was exercised in a difiScult apportionment. Such grants would bring home to a considerable num- ber of institutions the importance of providing retiring allowances. It is merely unfortunate that the purpose could not be thus extended; between definite expectations and these specially voted benefits there can be no question of pre- cedence. The grants to individuals outside of accredited institutions have been withdrawn, and were withdrawn frankly for financial reasons. The remedy for the error of admitting insti- tutions too freely can not be simple. The liabil- ities obtain equally among the seventy-three in- stitutions, and there are a number of others that have qualified or are about to do so, whose claims can not be denied without questionable dis- tinctions. The original estimate of a group of one hundred to one hundred and twenty institu- tions was far too large; forty institutions (in- cluding the leading state universities) would still present serious but perhaps not insoluble financial difficulties, and would be a large 178 CABNEGIB enough number to establish the practise of re- tiring allowances and to influence opinion. It is doubtful whether the foundation can under- take more than this under any program within its scope; though it might aid in the establish- ment of a system such as the '* Comprehensive Plan/' for institutions not on its associated list. Clearly the actual program which it announced was impossible with the funds available. That its impossibility was not foreseen at the outset hj the officials of the foundation is amazing (Love joy). The foundation definitely adopted the policy of influencing the many through the few. This is well stated in the first report in which the force of example is emphasized; it is restated in later reports. In 1912 Mr. Pritchett said: I think, however, that it is clearly admitted by all teachers that a few hundred adequate pensions at the service of teachers is far better than some thousands of very small pensions. . . . The trustees have felt sure that it was better to establish a fair retiring allowance sys- tem in a limited number of colleges than a very poor system in a large number. In 1916 one of the chief *' weaknesses" of the system is that it is limited; and the assurance has become a question ** whether the foundation shall cooperate in a system of pensions avail- able to the great body of teachers or whether it shall, on the other hand, pay the entire cost of retiring pensions for a comparatively small group of teachers"; it is urged as a reason why PENSIONS 179 the foundation can not ask of the corporation adequate aid that the system is available **to a very limited number of institutions. ' ' Had Mr. Pritehett submitted the question he would have found little support for his change of view. The Wisconsin reply emphasizes the fact that the indirect benefit is greater than the direct, that the support of strong institutions is the correct mode of influence, while Mr. Pritehett 's reports of pension provisions stimulated by the founda- tion is certainly gratifying. The question of limitation ia fundamental and is the critical issue which fixes the financial program; it also determines the equally funda- mental question of cooperation. All this was decided in 1906. The embarrassment results from an attempt to reverse the policy, which confuses the essential relations. Cooperative plans were doubtless considered when the orig- inal system was adopted; if so, they were re- jected. If they were rejected for the right rea- sons, these reasons still hold. If they were re- jected for wrong reasons, the mistake should be admitted and the desirable type of cooperation established. One can not but suspect that the desire for control played a part in the decision; for taxation means representation, and the rep- resentative principle was extracted from the government at the outset. The central agency that establishes the system must either assume the cost, or at the time of establishment (which 180 CABNEGIE means for each institution the time of its admis- sion) provide for such cooperation as may be demanded and accepted; for this is part of the contractual nature of the relation. Though it is without warrant to impose cooperation such as the ** Comprehensive Plan" proposes, the uni- versities in their effort to reinstate the founda- tion will unquestionably be as liberal as possible in facilitating the consummation in which they have a common interest. Institutions and pro- fessors must demand a voice in the conduct of affairs, and not be misled by any partial control. It is out of the que^ion that the institution should pay half the cost and the professor the other half (in the end the professor will pay the whole), while the foundation assumes the incidental fees and some form of disability benefit. Mr. Pritchett's sustained admiration of the ** comprehensive plan" which so miracu- lously multiplies the loaves and fishes is hardly justified. If one could induce two benevolent agencies jointly to pay one's bills, living on one's salary would be a simple accomplishment. The role of residual benefactor is an agreeable one, especially if it retains the direction of the bene- faction and the sense of providing the benefits paid for by others. The consolation that the transfer of obligation rests upon ^*a true social philosophy" should not be harshly disturbed. It is hardly to be expected that the trustees will determine all the pending issues at the meet- PENSIONS 181 ing in November ; it is least of all to be expected that they will adopt the ** Comprehensive Plan." They may be expected to reach decisions affect- ing all future actions and policies. Not alone must the foundation be reconstructed financially, but it must regain the confidence of the pro- fessors for whose benefit it exists. Professor Lovejoy wrote in 1910: There seems grave reason to conclude that it is time for the rank and file of the teaching body to demand that the management of the Carnegie Foundation shall be altered in whatever manner is necessary in order to protect them against the sort of deception and the sort of indignity to which they have been subjected in the re- cent administration of this potentially beneficent insti- tution. This is strong language, but has amply re- ceived since 1910 what measure of justification it may then have lacked. It is too much to ex- pect that the desirable relations of the founda- tion to its beneficiaries can be restored until a distinct indication of a change of heart and mind appears. Upon the successor of Mr. Pritchett will devolve the difficult task of reconstruction. His first requirement is the possession of the confidence of the teaching profession. The trus- tees should realize — each for himself and col- lectively — that at present no such confidence ex- ists, and that in its place there exists a serious distrust that finds its justification in past deeds and words. The clearest manifestation that the 182 CABNEGIE trustees could give of their desire to serve the trust which is committed to them is to provide for an immediate participation (in the Novem- ber discussions) of duly accredited representa- tives of the teaching profession; the natural medium for this is the American Association of University Professors. They should provide for a permanent representation of professors on the board. Trustees with no very distinctive interests to represent and who have enjoyed the office for ten years can in no better way show their appreciation of the situation and their loyalty to the teaching profession than by re^ signing their offices (now held for a double term according to the first plan) to such professors as may be nominated by representatives of the teaching profession and elected by the trustees. Such a proposal is neither impractical nor pre- sumptuous ; it is merely a return to the original plan and the original principle. Crises^ as current comment indicates, bring forth the heroic qualities and the spirit of sac- rifice. May they do so upon this occasion.^" 15 While the reviewer aims to present opinion as ob- jectively as the outlook which he commands makes pos- sible, the individual angle as well as the personal organ of vision determines the perspective. He may be per- mitted to refer to the evidence of his good will toward the foundation and its officials as well as its projects. When the foundation was inaugurated, and at the dis- tinctive stages of its career, he wrote editorially and over his signature in high commendation of its projects and PENSIONS 183 with a siiioere faith in its mission. In connection with a plea for the admission of the state universities he re- viewed the general purpose of the foundation (North American Beview), and indicated the significance of what it had done and proposed. The task now imposed upon him is not sought, nor is at agreeable. One of the chief reasons why he felt it incumbent to accept the ob- ligation is that he could refer to his past expressions as evidence of an original good will and high opinion of the foundation and its direction. The responsiblitj he has tried to share by citation of others' views; he ac- cepts the full responsibility for the opinions and conclu- sions expressed. Since this review was written, the ''comprehensive plan'' has been attacked upon its actuarial side, and that in several aspects. To one of these criticisms the secretary of the Carnegie Foundation has replied in a manner which implies that the arrangements for adopt- ing the plan are going forward. Such a procedure would be as unfortunate as it would be unjust. The importance of arousing the professorial sentiment and the public interest in the impending issue is thus emphasized. REPORT OF THE COMMITTEE OF THE AMERICAN ASSOCIATION OF UNI- VERSITY PROFESSORS ON PEN- SIONS AND INSURANCE! In March, 1916, President Pritchett of the Carnegie Foundation for the Advancement of Teaching submitted to the teachers and the presidents of educational institutions associated with the foundation a report entitled * * Compre- hensive Plan of Insurance and Annuities for College Teachers/' Teachers in associated insti- tutions were invited to submit suggestions and criticisms with respect to the proposed plan, and the report itself asked the cooperation of every teacher and president in the associated institu- tions in determining the question ** whether the fundamental principles set forth in the report are those upon which sound pension administra- tion and legislation must rest. ' ' This invitation, as well as the fact that the report proposes radi- cal changes in the relationship existing between the foundation on the one hand and the asso- ciated institutions on the other, vitally affecting all university teachers in the United States, led to the appointment of this committee on pensions and insurance to investigate and report upon the proposals contained in President Pritchett 's report. 1 Printed in School and Society, December 2, 1916. 184 PENSIONS 186 Without attempting to state in detail the com- prehensive plan of insurance and annuities for college teachers, it may be said briefly that in substance the plan proposes: (a) The abandonment of the plan adopted by the foundation ten years ago of providing for teachers in accepted institutions a retiring al- lowance to be paid during life, following the age of retirement, which is now fixed by the rules of the foundation at a minimum of 65 years. The suggestion is made that since the adoption of the existing plan has created to some extent the just expectation of a retiring allowance on the part of teachers in accepted institutions, this ex- pectation will be fully met in the case of all teachers in accepted institutions who are over 45 years of age, but that teachers under that age may profitably transfer to the proposed plan of insurance and annuities ; and there is an intima- tion that this transfer may be made by action of the foundation, without the prior assent of the individuals affected. (&) The substitution for the existing plan of the proposed comprehensive plan for insurance of college teachers, which in substance is a plan for insurance for college teachers until age 65, combined with the payment of annuities to teachers after age 65, or to their widows in the event of their death after reacftiing that age. (c) The establishment of a plan for the pay- ment of disability allowances, defined as follows: 186 CABNEGIE In case of a teacher holding a contract for insurance and annuity, whose health completely fails after a serv- ice of 15 years as professor, or 20 years as professor and instructor, the foundation would at its own cost con- tinue to pay during the period of his disability the premiums on his life insurance policy and also a mini- mum pension of $1,200 a year. It is proposed that the cost of insurance and annuities be borne one half by the teachers them- selves and one half by the educational institu- tions to which the teacher is attached, and that the benefits of the plan be extended generally to teachers in institutions of higher learning in the United States and Canada. The contribution of the Carnegie Foundation to the proposed plan is the cost of administra- tion of the plan, provided the surplus from in- surance and annuity funds is proved insufficient for that purpose, and the guarantee of an inter- est return upon all invested insurance and an- nuity reserve funds of 4^ per cent, per annum ; and it is suggested that the foundation may bear the cost of the disability allowance as above sug- gested. I It will be observed that the essential element in the proposed change of plan is the transfer of the financial burden of making provision for members of the teaching profession, whether by pension or otherwise, from the foundation to the teachers themselves and to the institutions with PENSIONS 187 which they are associated, and that so far as the foundation itself makes any contribution to the proposed comprehensive plan, that contribution is to be spread out over so large an area as to make the benefits which it offers to any individ- ual so slight as to be almost negligible. President Pritchett's report makes it plain that the Carnegie Foundation has not sufficient financial resources to enable it to carry indef- initely the burden of the system which it has es- tablished. Under ordinary conditions, this might be deemed a sufficient reason for aban- doning the existing plan and make it unneces- sary to discuss the other reasons suggested in the report for proposing such action. It appears from the report, however, that the Carnegie Cor- poration, an institution quite distinct from the Carnegie Foundation, has abundant funds which may be used for maintaining the existing sys- tem, although it is not bound to make such use of them. Since, therefore, abandonment of the plan may not be a financial necessity, and as the other reasons urged for its abandonment raise questions which are fundamental in the consid- eration of any plan for the financial benefit of the teaching profession other than by direct pay- ment of salary, it is desirable that we should comment upon them very briefly. On page 54 of President Pritchett's report he states in summary form his reason for believing that the existing pension system should be aban- doned, as follows : 188 CABNEGIE The fundamental defect in the existing pension sys- tem lies in the assumption that free pensions for college teachers would be permanently justified. In the light of ten years of experience and in the light of the experi- ence of European pension systems, this assumption seems to rest upon a defective social philosophy. No perma- nent advantage will accrue to any calling or any profes- sion by lifting from the shoulders of its members a load which under moral and economic laws they ought to bear. It is to be noted that in reaching this conclu- sion emphasis is placed on the argument that it is the ^^free'^ pension which is based on a de- fective social philosophy, for elsewhere in his report (page 12) President Pritehett reaches the conclusion that a pension system for the benefit of teachers is * * demanded from the stand- point of a just and humane social philosophy. ' * He enumerates the reasons which may be urged for the establishment of a pension system for teaehers as follows (pages 12, 13, 14) : 1. The altruistic character of the teachers' profession. 2. The poverty of the teaching profession. 3. That a pension system is the only humane and feasible method by which aged and worn- out teachers may be removed from the service. 4. The fact that college and university teach- ers as a class are separated from the usual com- mercial avenues of investment. 5. That college teachers constitute a group of employees in the economic sense, and that it PENSIONS 189 is practicable to unite them for common pro- tection. 6. That the maintenance of a pension system for college teachers has some effect in bringing able men into that calling. While President Pritchett repudiates the first two of these reasons as offering any basis for a pension system, he accepts the others as justify- ing and requiring **the establishment and main- tenance of a pension system for college teach- ers** (page 15). While some of these reasons have at various times been advanced as a justification for the establishment of a pension system for college teachers, it may fairly be said that they do not singly or collectively state the reasons which were given, either by Mr. Carnegie or President Pritchett, upon the establishment of the Car- negie Foundation system of pensions ten years ago. The reason then urged for the establish- ment of the pension system was that by its es- tablishment the cause of education would be aided by adding in substance to the remunera- tion of teachers in the form of a retiring allow- ance. And this allowance was established on the theory that, since it was in effect one form of remuneration, it was giving to the teacher something that he was entitled to receive, thus adding to the dignity and security of the teach- ing profession and contributing to the cause of education. 18 190 CARNEGIE Mr. Carnegie in his letter of April 16, 1905, in wMch he announced to the first board of trus- tees of the foundation the purpose of his gen- erous gift, opens with the sentence : I have reached the conclusion that the least rewarded of all the professions is that of the teacher in our higher educational institutions. President Pritchett in his First Report said (page 1) : It had for a long time prior to the establishment of this foundation been evident that the time was approach- ing when, for the sake of education no less than of the teacher, the remuneration of the teacher's calling must be increased. and on page 2, This gift to higher education was received with gen- eral approval. It was universally admitted that no wiser attempt could have been made to aid education than one that sought to deal in a wise and generous way with the question of the teacher's financial betterment. And on page 31 — referring to European ex- perience it is said — And inasmuch as the salaries of the teachers can not be made equal to those of outside professions, this re- ward has come, in the main, by the establishment of a system of pensions to be paid to the professors them- selves, to their widows and their orphans. In other words, the first and the largest ground for the establish- ment of systems of retiring pensions for teachers has been found in the wish to strengthen the profession of the teacher. TENSIONS 191 On page 37, it is said : It is true that the real teacher finds in the joy of teaching his chief reward. The same thing is true of the highest class of men in any profession; but it is also true that as the rewards and the honors of a profession increase, it will become more attractive to men of ability, strength and initiative. In other words, the chief value of the establishment of a system of retiring allowances to the teacher in the higher institutions consists in the lifting of this uncertainty regarding old age or disability, in the consequent lightening of the load of anxiety, and in the increasing attractiveness of the professor's life to an ambitious and enlightened man. All this tends to social dignity and stability. And in answer to the question **How this fund may be so used as ... to strengthen the gen- eral interests of education?" President Prit- chett says (page 37) : With regard to the second question, it is evident to the trustees that, to better the profession of the teacher and to attract into it increasing numbers of strong men, it is necessary that the retiring allowance should come as a matter of right, not as a charity. ... It is essential in the opinion of the trustees that the fund shall be so administered as to appeal to the professors in American and Canadian colleges from the standpoint of a right, not from that of charity, to the end that the teacher shall receive his retiring allorvrance on exactly the same basis as that upon which he receives his active salary, as a part of his academic compensation. It is upon these two fundamental principles that the trustees and the executive committee have sought to build; and their whole effort has had for its aim the establishonent in America, ludng that term in its widest 192 CABNEGIE sense, of the principle of the retiring allowance in in- stitutions of higher learning, upon such a basis that it msLj come to the professor as a right, not a charity. In the Second Annual Report of the Founda- tion, in a chapter entitled * * The Carnegie Foun- dation, Not a Charity but an Educational Agency," it is stated (page 64) : *'that the re- tiring allowance must come as a right not as a charity; a thing earned in the regular course of service, not a charity. ' ' It would be easy to multiply quotations from the annual reports of the Carnegie Foundation to show that the original conception of the pen- sion plan adopted by the foundation took very little account of the reasons which President Prit- chett's report now states justify and require the establishment of a pension system — see ** Com- prehensive Plan of Insurance and Annuities" (page 15). Its principal aim, clearly and re- peatedly enunciated, was to promote the cause of education by increasing the security, the dig- nity and the economic attractiveness of the scholar's calling, through the addition of cer- tain forms of deferred salary to the teacher's eventual compensation. And this, so far as known to the teaching profession, has continued to be its aim until the publication of the * ^ Com- prehensive Plan for Insurance and Annuities for College Teachers. ' ' The plan for retiring allowances thus con- ceived was put into operation. The teachers in PENSIONS 193 accepted institutions and the educational world in general have accepted it in the spirit in which it was created. The Carnegie pension has not been regarded as a charity, the recipient of it has had no thought that he was receiving something for which he had given nothing. He has felt no embarrassment in receiving it, even though he might possess independent means. It has remained for President Pritchett in 1916 to inform the recipients of the Carnegie pension that the pension is a **very gracious and noble charity'' (page 54) and on page 56 of his report he states that the payment of a pension under such circumstances is an ** embarrassing use of trust funds. ' ' This can be the case only when the original purposes of the pension sys- tem established by the foundation are completely lost sight of. If the Carnegie pension is a form of compen- sation, as it was intended to be at the time of its establishment, and as we believe President Pritchett establishes that it is or tends to become in his discussion of the topic **Are pensions wages f (page 34 of the report), then the only substantial social or economic question requiring to be answered in determining the desirability of the existing pension system is whether the Amer- ican college teacher in receiving a Carnegie pen- sion is receiving excessive compensation. This was emphatically answered in the nega- tive by the founder and by all those who were 194 CABNEGIE associated in the work of establishing the exist- ing system, and we do not believe that the ques- tion is one which now merits serious debate or would receive any different answer if its consid- eration were dissociated from the immediate financial problem of the foundation. The fact that this compensation in the form of a pension is not received directly from the educational institution to which the teacher is attached does not appear to us to alter the case. The compensation of the teacher, whether paid by his college or university or by the Carnegie Foundation, has its ultimate source in benev- olence, at least in the case of all institutions which do not receive state aid. A pension con- tributed to by the university whose only source of funds is private benevolence is a ^^free'* pen- sion to the same — ^but no greater — extent as if the contribution were made by the Carnegie Foundation or any other benevolent institution. The proposed change of plan, therefore, in so far as it shifts the burden of providing a pension allowance, or annuity to the colleges or univer- sities, does not appear to us to be based upon an essentially different social philosophy from that on which the existing system of Carnegie pen- sions is now based, and, in so far as it transfers the burden to the individual instructors, it ap- pears to us to be in effect a reduction of the com- pensation to which they have heretofore justly regarded themselves as entitled, in the form of a pension **as a right, not a charity.'* PENSIONS 195 We believe that the original conception of the pension system adopted by the Carnegie Foun- dation, as an aid to education through the in- crease of compensation to the teacher, was based upon sound social and economic principles. It would not have been essentially different in prin- ciple had the Carnegie Foundation made addi- tions to the permanent endowment of the sev- eral accepted institutions for the purpose of in- creasing salaries, except that by effecting the in- crease through the medium of the pension it re- lieved its beneficiaries from the burden of in- vesting the salary increase, a burden which as a class they are relatively unfitted to bear. Nor do we find in President Pritchett's report any convincing evidence that the existing pension system is based on a defective social philosophy, or that if continued it will not realize its pur- pose, or that it ought to be abandoned for any reason except inability to provide adequate funds for its maintenance. If financial exigencies necessitate a modifica- tion of the existing plan so as to require coopera- tion and voluntary contribution to it by teachers, in order to ensure the continuance of its benefits, then we are of the opinion that the contribution by the foundation should be so substantial that such benefits would not lose their present char- acter as a means for improving the status of the profession by sensibly increasing the rewards that it offers; and that, so far as possible, the 196 CABNEGIE original aim and purpose of the foundation should be adhered to. II A suggestion made in President Pritchett's report which immediately concerns all of the teachers in accepted institutions is the proposal that teachers under 45 years of age should not be included in the benefits of the existing pen^ sion system. That the trustees of the founda- tion clearly recognize that the foundation is under moral obligation to the teachers in ac- cepted institutions appears from their resolu- tion of November 17, 1915, **That whatever plan is finally adopted will be devised with scrupulous regard to the privileges and expectations which have been created under existing rules'' (page VIII). It becomes important at the outset, therefore, to inquire whether the proposed cur- tailing of those privileges and expectations is necessitated by financial inability to meet them, and if not, whether there is any moral justifica- tion for the discrimination against teachers in accepted institutions under 45 years of age. "We were encouraged to believe that such necessity did not exist by the statement (page 81) : Mr. Carnegie has placed behind the institution he has founded [The Carnegie Foundation] a great corporation [The Carnegie Corporation] with an income far beyond the load which would be imposed by the present pension system. PENSIONS 197 In order, however, that a clear understanding might be readied on this point this committee, through its chairman, made inquiry of President Pritchett whether such necessity did in fact ex- ist. To this inquiry President Pritchett has re- plied, suggesting a gradual increase in the age of retirement from 65 to 68, and saying: With this change in the nilea th« trustees m&j then fairly ask the Carnegie Corporation for its support in inaugurating the new system, and in maintaining the old one for all teachers now in the associated colleges, leav- ing to every teacher the option as to whether he would remain in the old system or enter the new. (Copies of the correspondence with President Pritchett are printed in an appendix.) While this does not answer definitely the inquiry whether there is financial necessity for exclu- ding any teacher in an accepted institution, what- ever his period of service, from the benefits of the existing system, we interpret President Prit- chett 's answer as an assurance that there are sufficient funds available, through the aid which the Carnegie Corporation may extend to the Carnegie Foundation, to meet the expectations of all teachers in accepted institutions, regard- less of age, if such expectations are deemed to rest on a moral obligation of the Carnegie Foun- dation. If it should be found that the financial resources of the foundation and the funds which may be availed of by it are insufficient for this purpose, then, of the various suggestions which 198 CABNEGIE have been made for reducing the benefits of the existing system, we regard a gradual change in the minimum age of retirement as perhaps least objectionable.^ That, however, such moral obligation exists is not, in our opinion, open to serious debate. It is the common observation of every man of ex- perience in the teaching profession that the ex- pectation of a retiring allowance is an important factor with many a teacher, not only in the choice of the profession, but, in many instances, in his choice of the institution in which he will practise that profession. There are few men in administrative positions in our colleges and universities who can not re- call cases of young men who have given up more lucrative professions to adopt the calling of the teacher, and have been influenced in doing so, in part at least, by the expectation that they would be entitled to the retiring allowance. In the first annual report of the foundation it was stated (page 37) that one of the principal ends to be realized by the pension system was the attraction of strong men into the teaching profession. In the report for 1912 (page 86) it was stated that the pension system * * will have ^ TMs statement does not imply an approval of such a step, by the members of this committee, or the en- dorsement of any policy looking to an advance in the minimum age of retirement. Such proposal is not made in the comprehensive plan and is open to serious objec- tions. PENSIONS 199 its influence in inducing men to remain perma- nently in the teaching profession," and in the present report, President Pritchett comments on the fact (page 34 and page 54) that the prospect of a pension is held out as an inducement to teachers to accept positions in associated insti- tutions, and properly so, we may add, since, as we have already pointed out, the original concep- tion of the pension system was that it was a form of additional compensation to the teacher. Moreover, it is undoubtedly a fact that many teachers under 45 years of age have already made provision for life insurance of such char- acter that it would be impossible for them to transfer to any other system without financial loss ; while others, in expectation of the promised pensions, have failed to make provision for their old age, and can now make such provision, if at all, only by serious financial sacrifice. As Presi- dent Pritchett points out in his report, **The man of 30 who looks forward over an interval of 35 years*' to the acceptance of a pension **will pay for it in one way or another before he re- ceives it.'* If pensions are wages, or if an in- structor **at $1,500 a year who is offered $1,800 to go to another college is induced to remain where he is under the expectation of a pension 30 years later, not realizing that the difference in salary will pay for the pension several times over,*' then teachers in accepted institutions have been paying for their prospective pensions, 200 CABNEGIE of which it is now proposed they shall be de- prived. But the question of moral right is not one af- fecting individuals alone ; it affects the accepted institutions. All of them have consciously shaped their policy in relation to employment, compensation and retirement of teachers with definite reference to the pension system of the Carnegie Foundation. A number of them have abandoned or modified established pension sys- tems of their own, as in the case of Columbia, Harvard and Yale, in reliance upon the pension system of the Carnegie Foundation which they have substituted for them. Others, in response to a definite offer of the foundation to place them on its accepted list if they would comply with certain stipulated conditions, have made changes in their constitutions and in their denomina- tional relations. Yet others, in return for the extension of the benefits of the pension system to them, undertook to provide retiring allow- ances for their teachers not eligible to the ben- efits of the Carnegie Foundation, and are now under moral, if not legal, obligations to make provision for the continuance of those benefits. Thus it seems clear that the Carnegie Foun- dation is under moral obligations, not only to in- dividuals, but to the institutions themselves, not to deprive teachers in the accepted institutions of their present expectancy of a pension. There is no middle ground for the compromise of moral PENSIONS 201 obligations. We are therefore of the opinion that the Carnegie Foundation should not assume any new function until its present obligations both moral and legal are examined with preci- sion, and provision made explicitly for meeting those obligations, and we believe that the foun- dation is under the strongest moral obligation to include within the benefits of its existing pen- sion system all teachers in accepted institutions, regardless of their age, to whom its present reg- ulations were applicable in the academic year 1915-16. m With reference to the proposed ** Comprehen- sive Plan of Insurance and Annuities*' we would say at the outset that we consider that the ex- isting pension system of the Carnegie Founda- tion might properly be supplemented by some sjrstem of mutual insurance, with special provi- sion for disability and for teachers who are not of sound qualifications — that is of sub-standard physical qualifications — and for widow's allow- ances, the benefit of which system might well be extended to instructors in institutions not on the accepted list of the foundation. Such a system should be mutual in character, so conducted that the 'beneficiaries of the plan would control its management and be entitled to participate in any surplus accumulation of insurance funds, and it should offer to all participants a definite 202 CABNEGIE contract. The existing pension system does not offer adequate protection against the risk of dis- ability and it offers no protection for the risk of death before the completion of 25 years of service. We believe that the foundation could render a highly useful service to college and university teachers by the use of its organization in the col- lection of data and in assisting, in conjunction with representatives of the teaching profession, in the organization of such a plan of insurance, the cost of which should be defrayed from pre- miums paid by the insured. The members of the teaching profession undoubtedly constitute a group having common aims and experience such as make entirely feasible and desirable the es- tablishment of such a plan of insurance. But we find ourselves unable at this time to approve of the proposed comprehensive plan of insurance and annuities, both because it is proposed as a substitute for a plan which we believe should not be abandoned in principle — ^because it does not itself contribute to the advancement of teach- ing — and also because we are not satisfied that the proposed plan is not open to serious objec- tions, which should be subjected to systematic study and to the scrutiny of experts before it is finally adopted. The past experience of the foundation and its present financial embarrassment should serve as a warning of the perils involved in the laying out and putting into operation of an insurance PENSIONS 203 plan for the payment of pensions and annuities extending over an indefinite period into the future and lacking in its statement many of the details on which must necessarily depend its suc- cess or failure. The members of this committee have acquired from their recent experience a lively sense of the concern, not to say mental dis- tress and financial loss, which may result from the failure or abandonment of such a plan after the great body of teachers have come to rely upon its protection. We believe, therefore, that before the adoption of the proposed plan, or any plan which under- takes the establishment of a scheme of life and disability insurance and the payment of annu- ities to college teachers, additional data and de- tailed information should be available for study and criticism. No doubt such data have been gathered and considered by the foundation, but before an invitation is accepted to participate in a plan involving the ultimate investment of a large sum of money by members of the teaching profession, and affecting vitally the future of college and university teachers throughout the country, we believe that a specific statement should be prepared and submitted by the foun- dation showing its liabilities, accrued and pros- pective, under the existing plan, whether moral or legal. It will then be possible to ascertain definitely what financial resources are available, and therefore whether they are sufficient to en- 204 CABNEGIE sure the success of the proposed plan of insur- ance and annuities or of any other plan which may be adopted involving participation by the Carnegie Foundation. There should also be prepared and submitted a statement showing the prospective progress and details of operation of the proposed plan for insurance and annuities, as estimated in advance during a term of years, presumably at least for two generations. For this purpose the founda- tion should prepare and present a schedule showing the estimated operations of the insur- ance company and the savings or annuity fund. It should show the number of lives, classified as to age, that are expected to participate in the plan at the present time, with the estimated in- crease in membership from year to year. It should show the income in the way of premiums, the expected or estimated contributions of va- rious institutions and colleges, the interest in- come, the expected death claims, the expense, and the annual amount which must be reserved to meet the reserve requirements of the New York insurance law. Such statement when pre- pared should be submitted to a committee or committees of representative teachers and of representatives of some recognized organization of actuaries, such as for example the Actuarial Society of America. Then and only then will it be possible, we be- lieve, to form an intelligent judgment as to the PENSIONS 206 probable financial success of the plan and as to the real service which it is capable of rendering to the teaching profession. In order that ade- quate opportunity may be had for such study of the problem and the formation of such judg- ment, we are of the opinion that a period of at least one year is necessary, and we respectfully suggest that formal action with respect to this or any other plan of insurance and annuities for college teachers should be postponed at least one year from the date of the meeting of the trus- tees of the foundation to be held on the 15th of November, 1916. It also seems to the committee desirable, and it therefore requests, that opportunity be given to representatives of the American Association of University Professors to be present and to be heard at that meeting of the trustees. And in view of the importance of the subject and its far- reaching consequences to all university teach- ers in America, we venture to express the hope that no plan of insurance or annuities for uni- versity teachers will be adopted by the founda- tion without further consultation with the as- sociation. We believe also that the consideration of this and other problems affecting the interests of university teachers would be facilitated and greater cooperation insured if the policy were adopted of electing university teachers to the Board of Trustees of the Carnegie Foundation from time to time as opportunity presents. 14 206 CABNEGIE We think that a consideration of the details of the proposed plan at this time is of minor im- portance. Nevertheless it is desirable that we should direct attention to some of the numerous criticisms of it which appear to us to raise ques- tions which, so far as can be gathered from Presi- dent Pritchett's report, have not received ade- quate consideration. With respect to a number of these the committee expresses no opinion, for it has had neither the time nor the resources to enable it to make any thorough investigation of them. But if sufficient opportunity is afforded for the study of the details of the proposed plan of insurance and annuities, as we have already suggested, then we believe these criticisms should receive careful consideration. Among them may be mentioned the following : (a) The proposed plan for insurance and an- nuities does not provide with sufficient definite- ness for a plan of mutual participation, whereby the participants in the plan shall share in its management and in the accumulated surplus. (&) The proposed disability benefit limits the payment of the benefit to professors who have been in service 15 years or more. In our opinion disability ought to be defined as disabil- ity from carrying on university service for any time during the period of service, and adequate provision made to insure against disability as thus defined. The consequences of the teacher's disability are usually much more serious during PENSIONS 207 the earlier years of the period of service than in the later years. (c) The difficulties of establishing a plan of insurance which would be compulsory for all participants have not received sufficient consid- eration. We are of the opinion that the compul- sory feature of the plan is open to serious objec- tion, and that it is doubtful whether it can be carried into practical operation. Among the ob- jections which may be briefly enumerated are — that it restricts unduly the freedom of the indi- vidual teacher; that state universities and col- leges would find themselves legally incompetent to contribute to a scheme for the benefit of teachers, and that an attempt to render them competent to do so through process of legislation would involve the entire vexed question of in- surance for state employees; that the tendency would be to take from the teacher *s salary the share contributed by the college toward his in- surance by deferring increases of salary; that teachers already carrying commercial insurance would be unwilling to give up such insurance; or to continue it with the added burden of com- pulsory insurance; and that many of those who have heretofore not taken commercial insurance would probably have valid reasons for declining to participate. {d) The plan does not sufficiently disclose whether participants in it are to be subjected to a medical examination, and, if such examina- 208 CAENEGIE tions are to be made, it does not make adequate provision for those who are sub-standard risks. If no medical examination is to be required, it does not appear whether there are sufficient data available on which to base an estimate of the cost of this class of group insurance for long periods. In the absence of such data the acceptance of such risks would imperil the success of the plan, (e) It has been urged by some that a plan for insurance of teachers could be devised and carried into effect with established insurance companies, eliminating agents* commissions, at a cost not substantially greater than the cost of in- surance under the plan proposed, but with the added benefit of the experience, stability and es- tablished organization of the better commercial insurance companies. Without expressing any final opinion upon this contention, we may say that it is not clear from President Pritchett's report what saving in cost of insurance is effected over the cost of insurance on a similar plan which might be effected with the commercial companies. Such information as we have been able to gather indicates that the difference in cost would be very slight, and that by carrying into effect the proposed plan the Carnegie Foun- dation would substitute for its former activities a venture into a field new to it, not free from business hazards, but long and successfully oc- cupied by others, without any definite expecta- tion of substantial financial advantage. PENSIONS 209 (/) The proposed plan does not make clear that there is any definite separation of the in- surance from the annuity plan, and is in any ease too rigid, and does not offer sufficient variety of types of insurance to be adaptable to the needs of university professors. (g) Adequate consideration has not been given to the possibility of combining with the proposed savings fund a provision for decreas- ing term insurance so that as the savings fund increases the amount of insurance may decrease with consequent saving of its cost. (h) No definite provision is made for the pay- ment of dividends or other disposition of surplus accumulation under the proposed plan. (i) Sufficient consideration has not been given to the position of one who withdraws from the teaching profession and wishes to continue his insurance upon a proper basis. (i)^No consideration has apparently been given to the relative age of professors and their wives and to its effect on the cost of the annuity.* (A;) No provision is made for enabling those who already have insurance to avail themselves advantageously of the benefits of the proposed plan. The unfortunate financial history of the foun- « Thia objection has apparently been met in the non- confidential copy of President Pritchett's report which, however, was not in the hands of the committee at the time of preparing this report. 210 CABNEGIE dation, the suggested change in its fundamental purpose under the guise of a change of rules re- lating to its administration, the defects and omis- sions in the proposed Comprehensive Plan of Insurance and the unconvincing character of the reasons which are urged for the change, have resulted in a loss of confidence in the foundation on the part of American university teachers. No man enjoying a wide acquaintance with mem- bers of the profession can have any doubt of this fact. If evidence of it were needed, it may be found in the reports of various committees of university faculties, appointed to consider the Comprehensive Plan of Insurance and Annu- ities, such as, for example, the reports of Cor- nell, Harvard, Princeton, Stanford University, the University of Wisconsin and Johns Hopkins University. Such lack of confidence must in- evitably impair the usefulness of the foundation, and make it difficult, if not impossible, to solve satisfactorily the problems which are pressing for solution. We deem it of the highest impor- tance that every effort should be made on the part of those interested in the promotion of the purposes of the foundation to repair that loss. For the full realization of this end four things seem to us chiefly requisite. The first is the pub- lication by the foundation of a definite assurance that it will completely fulfil any expectations held out to teachers in the associated institutions by the present rules. The second is a strict ad- PENSIONS 211 herence to the fundamental principles and pur- poses indicated by Mr. Came^e in his letter of gift and repeatedly enunciated in the early pub- lic declarations of the foundation, on the basis of which the existing system was established. The third is the encouragement of a more active and direct participation of the teaching profes- sion in the management of the foundation and in the consideration of questions which gravely affect the future of the profession and of the American universities and colleges. Finally it seems to us essential, if the foundation is to en- joy the confidence of the academic profession and attain its highest usefulness, that it should be recognized that for it, even more than for other institutions, definiteness and steadiness of purpose and stability of policy are indispensable. It is our earnest hope that the future work of the foundation with its potency for notable serv- ice to American education may be firmly based upon these principles. The committee : Thomas S. Adams, Yale University. Francis H. Bohlen, University of Pennsylvania. Walter W. Cook, Yale University. F. S. Deibler, Northwestern University. Frank H. Dixon, Dartmouth College. Thomas C. Esty, Amherst College. W. F. Gephart, Washington University. John H. Gray, University of Minnesota. 212 CARNEGIE Henry B. Gardner, Brown University. M. W. Haskell, University of California. Otto Heller, "Washington University. Jacob H. Hollander, Johns Hopkins University. S. S. Huebner, University of Pennsylvania. Joseph Jastrow, University of Wisconsin. E. W. Kemmerer, Princeton University. Alfred C. Lane, Tufts College. Arthur 0. Lovejoy, Johns Hopkins University. H. A. MiLLis, University of Chicago. Carl C. Plehn, University of California. H. L. RiETZ, University of Illinois. Ashley H. Thorndikb, Columbia University. Henry S. White, Vassar College. W. F. WiLLCox, Cornell University. Harlan F. Stone, Chairman, Columbia University. SECOND REPORT OF THE COMMITTEE ON PENSIONS AND INSURANCE OF THE AMERICAN ASSOCIATION OF UNIVERSITY PROFESSORS! In the report of this committee, submitted at the annual meeting of the Association in Chi- cago on December 28, 1917, the committee dis- cussed at length the plans of insurance prepared by the joint commission appointed at the re- quest of the Carnegie Foundation to consider the various suggestions for a plan of insurance for college teachers, and at the conclusion of the report the committee formulated its views and recommendations as follows : 1. We believe tha/t the plan of insurance as proposed by the commission, if actuarially sound, is well adapted in its general features to meet the needs of teachers in American universities and colleges, although we believe experience will indicate that the plan should be modified in some particulars. 2. We recommend that this association do not appoint representatives to participate in the organization of the proposed insurance company until there is substantial compliance with the conditions hereinafter enumerated. 3. We recommend that the American Association of University Professors express its approval of the plan 1 Printed in School and Society, March 8, 1919. This report was presented, and unanimously approved, at the annual meeting of the association, held at Baltimore on Saturday, December 28, 1918. 213 214 CABNEGIE and cooperate in launeMng it, when the following condi- tiona have been satisfied: (a) That before taking any steps toward the organi- zation of the proposed insurance company and before the diversion of any funds available to the Carnegie Foun- dation, to the purposes of the proposed insurance com- pany, the present obligations of the foundation, both legal and moral, be examined and determined, so far as is practicable, with precision and definite and binding assurances be given by the Carnegie Foundation or some other responsible body that provision will be made for meeting those obligations to the extent of the financial resources of the Carnegie Foundation and of any funds available to it. (6) That the proposed plan of insurance together with a comprehensive statement of its prospective operation be submitted to an independent body of actuaries for study, and its criticism and suggestions invited. (c) That the proposed plan of insurance be so modi- fied that an the organization of the proposed insurance company suitable provision be made whereby within a reasonable time, if not inmiediately, the power to elect the company's trustees or directors shall be vested in the policy-holders, in proportion to their contribution to the financial resources of the insurance company, and that they shall have authority to vote in person, or by proxy, at all meetings for the election of directors. The committee reserves the privilege of bringing to the attention of the association other matters germane to this subject or supplementing the foregoing recom- mendations when such action seems desirable. These recommendations were approved by vote of the association and it was further voted **that when in the judgment of the Committee P, concurred in by the Executive Committee, the plans of insurance of the Car- negie Foundation conform to the spirit of the recom- mendations in this report, the Executive Committee be PENSIONS 215 authorized to take such steps aa may be necessary for cooperation in carrying out these plans." During the past year this committee has car- ried on an extensive correspondence with its own members and with members of the teaching pro- fession, and it has sought through personal in- terviews and correspondence with President Pritchett of the Carnegie Foundation to com- municate to the foundation in detail, the views of the committee which have been summarized in previous reports, and it has endeavored to secure some real cooperation between the foun- dation and this committee in formulating plans for the protection of the interests of those en- titled to the benefit of the existing pension plan and for the establishment of the proposed scheme of insurance, which would meet the expressed views of the association and which would com- mend themselves generally to members of the teaching profession. The committee presents its report in two parts relating, respectively, to the plans for the future of the existing pension plan, and to the new plan for teachers* insurance and annuities. In each case, it first records the recent action of the foundation and its dealings with the committee, and then appends the committee 's comments and recommendations : 216 CABNEGIE 1. FUTURE OF EXISTING PENSION SYSTEM A. EECOED OP ACTION TAKEN In April, 1918, the trustees of the foundation adopted and made public a statement in which was announced the future policy of the founda- tion with respect to administering the existing pension scheme. This statement (copies of which may be procured from the Carnegie Foun- dation) so far as now relevant, may briefly be summarized as follows : (a) It announced the accumulation of a re- serve fund for the liquidation of pension obliga- tions, to be paid into the treasury of the founda- tion by the Carnegie Corporation. This fund is to be made up of five million dollars, to be paid into the treasury of the foundation as of Janu- ary 1, 1918, and further additions thereto which are to be made at the rate of $600,000 annually for a period of ten years, making a total reserve to be paid by the corporation aggregating eleven million dollars without including accumulations of interest on the capital of the reserve fund. (&) It was announced that pensions would not be paid to teachers appointed to positions in associated institutions after November 17, 1915. A resolution to this effect was adopted by the trustees of the foundation on May 18, 1917. (c) It was announced that the plan of retire- ment with maximum pension allowances at age 65 would be continued until June 30, 1923. PENSIONS 217 After that date the age of retirement with the maximum allowance will be advanced until June 30, 1928, after which date the maximum age of retirement with the maximum allowance will be seventy years. The increase of age of retirement was indicated as follows: Between July 1, 1923, and June 30, 1925, maximum allowance at 66. Between July 1, 1925, and June 30, 1926, maximum allowance at 67. Between July 1, 1926, and June 30, 1927, maximum allowance at 68. Between July 1, 1927, and June 30, 1928, maximum allowance at 69. It was also announced that as an alternative the teacher is to be given the option of retiring on reaching age sixty-five, with a diminishing pension allowance, the actual allowance being the maximum allowance diminished at the rate of one fifteenth for each year by which the age at which the maximum allowance is available is anticipated. For those reaching age sixty-five after June 30, 1923, who are unmarried the allowance is to be reduced to 66§ per cent, (to 85 per cent, if the salary is $1,800 or less). The reason given for these sweeping reduc- tions of the benefits of the existing pension sys- tem was that actuarial computations prepared for the foundation indicate that the resources of the foundation, including the reserve fund ere- 218 CABNEGIE ated through the generosity of the Carnegie Corporation already referred to, will not be suf- ficient to maintain the pension plan on the pres- ent basis for those who are appointed to asso- ciated institutions before November 17, 1915, without a substantial diminution in the rate of expenditure. 2. The following resolutions were adopted by this committee at a meeting held June 17, 1918, in New York City, and were thereafter trans- mitted to the trustees of the Carnegie Foun- dation : Voted, that: the plan embodied in President Pritchett's public statement of April, 1918, and subsequently adopted by the trustees of the Carnegie Poimdation without pre- vious consultation with this committee or any other rep- resentative body of imiversity teachers, does not conform to the spirit of the recommendations contained in the second report of this committee of January, 1918. We therefore offer the following suggestions for the amend- ment of the plan: (a) That, in view of the repeated declarations of the trustees, it is manifestly implied that the entire eleven million dollars recently granted by the corporation, to- gether with its increment and with the interest on the original capital of the foundation, is to be devoted ex- clusively to the payment of pensions, with a view to realizing, as nearly as these resources permit, the rea- sonable expectations of teachers in accepted institutions, upon the basis of the rules in force on November 17, 1915. The committee accordingly requests the trustees of the foundation to publish a formal declaration to this effect. (&) That, inasmuch as it is clearly impossible at the FBN8I0N8 219 present time to detennine with even approximate pre- cision what scale of pensions these resources will permit the foundation to pay, the committee protests against the adoption at this time of any permanent scale, and especially against that proposed in President Pritchett 's communication of April, 1918, which there is reason to believe to be less liberal than the above mentioned re- sources will make possible. The scheme of pensions set forth in that communication should, however, be made public as an indication of the minimum benefits which younger teachers in the accepted institutions may, in the least favorable circumstances, expect. It is also de- sirable that the actuarial computations and the data on which they are based be made accessible to representa- tives of the teaching profession. (c) That, in view of the special hardship of sudden changes in the rules affecting men near the age of retire- ment, the provision relating to men between 60 and 65, in President Pritchett 's statement of April, 1918, should be observed by the foundation. (d) That, at the end of five years from the present date, the foundation should in the light of its experience up to that time, and upon the basis of further actuarial studies, take up with a committee of this association the question of the framing of new rules, in accordance with the principle mentioned under (a), should at that time determine what pensions, approximating as nearly as possible to the 1915 rules, its resources will enable it to pay. Decision as to the least objectionable modifications of those rules should be reached only after consultation with representatives of the university teaching profes- sion, i. e., with a committee of this association and pos- sibly with other bodies. (e) That, any new scale of pensions, to be adopted in 1923, as provided in the preceding paragraph, shall not apply detrimentally to teachers who, on June 30, 1923, are between the ages of 60 and 65. 220 CABNEGIE (/) Tliat, the retroactive provision, "wheretoy teachers entering the service of accepted institutions between November 17, 1915, and the date of the actual annul- ment of the old rule by the foundation are excluded from the benefits of the existing pension system, is not in ac- cord with the declaration of the trustees *Hhat whatever plan is finally adopted will be devised with scrupulous regard to the privileges and expectations which have been created under existing rules," and should be re- pealed. It was further voted, *'that the foundation be re- quested to encourage the governing bodies of the several associated institutions to adopt a plan whereby the younger teachers now entitled to the benefits of the ex- isting pension plan be enabled to retire at sixty-five rather than at seventy." 3. At the animal meeting of the board of trus- tees of the Carnegie Foundation, November, 1918, the following minute was adopted, and was on November 21, transmitted to this Committee. The board of trustees acknowledges the receipt of the suggestions and recommendations contained in the reso- lutions adopted by the Committee on Pensions and In- surance of the American Association of University Pro- fessors at its meeting of June 17, 1918. The trustees of the foundation have sought to comply as fully with the suggestions of the committee as the fixed amoimt now available for these retiring allowances will enable them to do. In response to these resolutions the trustees au- thorize the following additional statements which would seem to make clear the purposes of the trustees : (a) The reserve created by the aid of the Carnegie Corporation and the subsequent additions to it and all interest accumulations thereon can be used under the arrangement with the Carnegie Corporation only for the PENSIONS 221 payment of the retiring allowances to teachers in the associated colleges and universities. (&) The adjustment explained in the statement to teachers of the associated Institutions in the circular of the foundation dated April 22, 1918, stated that the scale adopted was based upon exhaustive actuarial ex- aminations, but that the experience of the future might show a situation that would make possible a more liberal scale than that based ujwn these actuarial computations. In the event that such a reduction in the expected load is realized it is the intention of the trustees to make as liberal provision for the payment of pensions as the funds will permit. (c) The income of the endowment of the foundation is now being expended in accordance with the directions of the founder *'to provide retiring pensions for the teachers of universities, colleges and technical schools in our country, Canada and Newfoundland under such con- ditions as you (the trustees) may adopt from time to time.'* But it was further provided by the foimder that **by a two third vote they (the trustees) may from time to time apply the revenue in a different manner and for a different though similar purpose to that specified, should coming days bring such changes as to render this necessary in their judgment to produce the best results possible for the teachers and for education." It is, of course, not possible for trustees to bind their successors with respect to either of these conditions. It is under- stood that the expense of educational studies is met from a special endowment not available for pensions. (d) The actuarial computations upon which the action of the trustees has been based are at the disposition of the committee for any examination they may desire to make. B. COMMENTS OF THX COMMITTES The net result of these negotiations, and of the eventual action of the foundation with respect 15 222 CABNEGIE to the existing pension system, may be briefly summarized as follows : (a) Through the generosity of the Carnegie Corporation eleven million dollars has been added to the funds of the foundation for the pur- pose of enabling it to fulfil, to a greater extent than its previous resources made possible, the ex- pectations of retiring allowances justified by the published rules and announcements of the foun- dation. (&) Certain additional assurances have been given that this fund will be used for the payment of pensions. It is to be observed, however, that the above-noted resolution (a) of. the trustees of the foundation, to the effect that the reserve cre- ated by the corporation's gift **can be used un- der the arrangement with the corporation only for the payment of retiring allowances to teach- ers in the associated colleges and universities,'* is in express conflict with the terms of the agree- ment between the corporation and the founda- tion. As published in **A Statement to the Teachers in the Associated Colleges and Univer- sities" (April 5, 1918), that agreement provides (p. 7) that if **the reserve should prove greater than is demanded for this purpose (the payment of pensions) , the remainder shall be added to the permanent endowment of the foundation to be used for its corporate purposes." It was to in- sure the use of the entire reserve fund for the payment of retiring allowances instead of the PENSIONS 223 ultimate addition of a substantial portion of it to the endowment of the Carnegie Foundation that the committee urged the trustees to adopt a definite program for revision of the scale of re- tiring allowances at the expiration of a fixed period and in the light of actual experience, a suggestion which for reasons not disclosed the trustees have declined to accept. It is further to be observed that, even by the terms of the resolution of November, 1918, there is assurance that the funds of the foundation will be used for the payment of pensions only so long as the present agreement between the foundation and the corporation remains unmod- ified. That agreement, however, can apparently be modified at any time by the consent of the two boards, which consist in great part of the same persons. In their formal statement the trustees give no assurance that the income from the endowment of the foundation will be used for the payment of pensions; and the published rules can be varied or abandoned, at any time without the violation of any legal obligation, or of any moral obligation differing in nature from those which the foundation has, in several previous instances, indicated that it does not regard as binding. (c) In disregard both of the vote unanimously adopted by the joint commission (of which the president of the foundation and five of its trus- tees were members) , and published in its report 224 CABNEGIE of April 27, 1917 (p. 8), in disregard also of the above-cited resolutions of this committee, the board of trustees has declined to modify its ac- tion whereby teachers entering the service of the accepted institutions since November, 1915, will be deprived of pensions to which they were en- titled under rules not abrogated until 1917. There is no reason to doubt that a number of teachers have been influenced to retain positions in, or accept calls to, these institutions, during this period, by the expectation that they would receive the pensions specified by the rules then apparently in force. The committee, therefore, is compelled (especially in view of the founda- tion's now increased resources) to take the view that the foundation has disregarded the formally announced declaration of its trustees * * that what- ever plan is finally adopted will be devised with scrupulous regard to the privileges and expec- tations which have been created under existing rules. ' ' INSURANCE ! A. BECOBD OP ACTION TAKEN 1. The plan of insurance referred to in our last report, with some modifications and addi- tional details, has been submitted by President Pritchett to a committee of the Actuarial Society of America and to a committee of the American PENSIONS 226 Institute of Actuaries for their criticisms and suggestions. Both committees have reported in substance that the plan as submitted is safe and practicable if capably managed. Apparently, however, no definite plan for the selection of risks was submitted to either of these committees, and the reports of both committees urge con- servatism in the selection of risks by certifica- tion. Both recommend changes in the form of policy and both comment at length on the fact that the policies provide for a flat premium rate without the usual rebate or ** dividend" to pol- icy-holders which is offered in participating poli- cies. Taken together the two reports indicate no adequate reason for not issuing the usual form of participating policy sold by other insur- ance companies organized or doing business un- der the laws of New York. (Copies of these reports may be obtained from the Carnegie Foundation.) 2. An insurance company has been incor- porated under the laws of the State of New York, under the name, ** Teachers* Insurance and An- nuity Association of America. ' * It is announced that the company is to begin business with a capital of one million dollars paid into the In- surance Company by the Carnegie Corporation (not the Carnegie Foundation, as originally pro- posed) which owns and holds the entire capital stock of five hundred thousand dollars. The trustees of the Carnegie Corporation have 226 CABNEGIE adopted the following resolution with respect to the control of the insurance company : Voted, That it is the intention of the Carnegie Cor- poration whenever a group of policy-holders has been se- cured sufSciently large to be representative of the col- lege and university teachers of the United States and Canada, in conference with the interested parties to pro- vide machinery by which the policy-holders, through rep- resentatives selected by them, shall participate in the election of the trustees who manage the association. As at present constituted, however, the insur- ance and annuity association is controlled by a board of sixteen trustees chosen by the Carnegie Corporation as provided by the by-laws of the insurance association. Six trustees constitute a quorum for the transaction of business. Its pres- ident is Henry S. Pritchett, who is also president of the Carnegie Foundation ; its secretary is the secretary of the foundation ; the treasurer is the treasurer of the foundation; and the chairman of the board is a member of the foundation's board of trustees. Of the trustees of the insur- ance company, eight are or recently have been trustees or employees of the Carnegie Founda- tion ; the same is true of four of the six members of the executive committee. Three members of this committee constitute a quorum and the com- mittee is given all the powers, of the board of directors, in the intervals between the meetings of the board. There are two professorial repre- sentatives on the board of trustees: Professor PENSIONS 227 Michael M. McKenzie, of the University of To- ronto, and Dean F. W. Nicholson, of Wesleyan University, formerly a trustee of the foundation. There are no professorial representatives on either the executive committee or the finance committee. It should be added that two members of your committee were, as individuals, offered appoint- ments to the board of trustees of the insurance company by President Pritchett, who at that time proposed to have three teachers elected to the board of trustees. It seemed clear to both members that they could not with propriety ac- cept such appointment, while the question of approving the new corporation 's plan was pend- ing before the committee, and before the com- mittee's report had been submitted to the asso- ciation. The committee was given no informa- tion with respect to the personnel of the officers and trustees of the insurance company or of the provision of the charter and by-laws until the company was organized, its trustees and officers selected and the details of the organization pub- licly announced. There has lately been published by the Teach- ers' Annuity and Insurance Corporation of America a Handbook of Life Insurance and An- nuity Policies for Teachers, which is a brief pro- spectus of the newly formed insurance company, giving details of the policies which it proposes to write and stating the premium rate. This 228 CABNEGIE booklet either has been, or will shortly be, dis- tributed to college and university teachers. It is therefore unnecessary to summarize its contents in this report. B. COMMENTS AND EECOMMENDATIONS OP THE COMMITTEE WITH RESPECT TO THE PLAN OP INSURANCE AND ANNUITIES 1. Control of the Company Neither the plan for control of the insurance company unanimously recommended by the joint commission, nor a definite plan for the eventual mutualization of the company, proposed by this committee, has been adopted. The corporation, in the resolution above cited declares only its in- tention, at some future time not specified, to ** provide machinery whereby the policy holders through representatives selected by them shall participate in the election of the trustees." A literal fulfillment of this intention would be compatible with a wholly negligible representa- tion of the policy-holders or the teaching profes- sion on the board of trustees or in the processes by which the trustees are to be elected. Mean- while, the company is left in a control which, for all practical purposes, is identical with that of the Carnegie Foundation. We deem it unnec- essary to repeat at length those portions of our last report^ in which we direct attention to the menace to educational freedom in the United 2 School and Society, December 2, 1916. PENSIONS 229 States of uniting in the Carnegie Foundation the function of critic and mentor of our educational institutions with that of distributing financial benefits to such institutions and of controlling the savings of their teachers. We did not in fact at that time contemplate that the insurance com- pany was to be brought immediately under the control of the foundation. We only pointed out that **the exigencies of death and retirement of the members of a self-perpetuating board of trustees might in a comparatively short time place the absolute control of the company in the hands of a board and of executive officers who were also members of the governing board of the foundation or are virtually selected by that body. Such an outcome would, in this com- mittee's opinion, be sure to create dissatisfaction and antagonism on the part of the policy-holders and would be prejudicial to the success of the undertaking.'* What we contemplated as only a possible eventuality turns out to be the basis of the organization of the insurance company as it is to begin business. 2, Rates of Premium On account of the late date of issue of the Handbook of the Teachers' Insurance and An- nuity Association, the committee has not been able to make an exhaustive examination of all the types of policies therein offered, or to at- tempt a complete comparison of the rates with 230 CABNEGIE those charged for similar policies by existing companies. So far, however, as the committee has been able to make such comparisons, it does not find that, taken at their face-value, the non- participating policies offered by the insursmce and annuity association are, in point of cost, more advantageous to college or university teach- ers, than are those offered by a number of well- managed participating companies, when allow- ance is made for the '* dividends" paid by the latter. An actuary of one of the largest insur- ance companies states, in reply to an inquiry of the chairman of the committee : So far as coneerns participating policies, I have made a comparison on the ordinary life plan at three ages, 25, 35 and 45, with a company which pays as large dividends as any other American company. The difference be- tween the gross premium charged by that company, less the dividend paid for a period of ten years, shows a re- sulting cost slightly in excess of the rates charged by the teachers' association. If the policy were terminated at any time within ten years, it would be more advantage- ous to have carried insurance with the teachers' associa- tion, but less advantageous after that time because of the increase in dividends under the participating policy. A similar estimate has been made by President Pritchett in a communication to the chairman of this committee. If a policy issued by the teach- ers' association be compared with a similar pol- icy issued by a certain well-known company, the premium in the latter, Mr. Pritchett observes, **will be much higher. '^ **If however,'' he PENSIONS 231 adds, **you cany the company mutual rates into the future and assume that earnings on the company *s investments are going to be on the same level as of recent years, you will find that at the end of about ten years the net cost of the company policy rate thus obtained will come down to the level of the corresponding rate published in the handbook. In time it may fall below the rate there quoted/' President Pritchett, however, offers reasons, which seem to the committee unconvincing, for doubting whether the company he names, or other par- ticipating companies, will continue to obtain the present rate of interest on their investments. Other computations made for the committee confirm the conclusion that, except for very short term policies, college and university teach- ers can probably do as well by taking insurance in any one of several existing companies as by purchasing the policies of the new association at the rates now announced and with the benefits thus far promised, if there is no distribution of surplus among policy-holders. It should be added that the new company offers, in addition to the more usual policies, some desirable forms of annuity and insurance not at present written by most of the older companies which President Pritchett believes will be desired by university teachers. The committee believes, however, that the latter companies would readily write similar policies at approximately the same net cost to 232 CABNEGIE the purchaser, if requested to do so by any con- siderable number of university teachers. The explanation offered by President Pritchett in his 12th Annual Report (1917), for the un- willingness of the Teachers* Insurance and An- nuity Association to offer participating insur- ance, as most companies at present do, is the statement that, under the laws of the state of New York, ** dividends" of participating com- panies are required to be distributed annually and that the annual dividends of the new com- pany would for a time be so small as to be less than the cost of postage. This explanation seems to the committee so inconsequential as to require no discussion. 3. Use of Surplus It is true that, as President Pritchett has pointed out, the new company may be expected, since it pays no dividends, rapidly to accumulate a surplus, and that it is in a more favorable posi- tion for doing so than ordinary companies. In a letter to the chairman of this committee, Mr. Pritchett states that ** under the provisions of the charter such accumulations must be used for the benefit of the policy-holders.'* The com- mittee is, however, upon examination of the charter, unable to find in it such a provision. The only clause relevant to the matter is that which requires the corporation **to conduct its business without profit to the corporation or its PENSIONS stockholders/' There is in the by-laws a further provision that no officers or trustees shall be paid salaries in excess of $5,000 per annum, "unless such payment shall first be authorized by a vote of the board of trustees of the association," also that no pension shall be paid to any officer or trustee, or to any member of his family. There is in these provisions no assurance that the ac- cumulations will be used wholly for paying divi- dends to policy-holders or for reducing their pre- miums. The charter, indeed, expressly provides that the corporation "shall transact business ex- clusively on the non-mutual basis and shall issue only non-participating policies." Policy-hold- ers would have no legal standing to object to the amendment or repeal of the provision of the charter and by-laws referred to, either by action of the Carnegie Corporation, the sole stock- holder, or by any purchaser or subsequent owner of the stock. There is nothing at the present time to prevent the board of trustees from em- ploying at their discretion the surplus from the savings invested by college and university teach- ers in the company — within the limitations set by the above-cited clauses and by the laws of the state of New York relating to insurance companies. The committee finds it pertinent at this point to recall a sentence from the report unanimously adopted by the joint commission in 1917 : " The man of thirty who participates in a pension plan 234 CABNEGIE under which he expects an annuity thirty-five or forty years in the future will take some risk of disappointment in accepting any arrangement less secure than a contractual one." This re- mark has, we believe, been more than once cited with approval by President Pritchett; and it in- dicates, in the committee's opinion, the primary rule which should guide the action of any teach- ers who may be considering dealing with the new company. The warning thus incorporated in the report of the joint commission gains force from any review of the history of the Carnegie Foundation. Those responsible for the manage- ment of Mr. Carnegie's benefaction have exer- cised very freely and frequently the liberty of changing their minds and of radically and ab- ruptly altering the policy of the foundation. Since the new insurance company is under the same management, there is no reason to antici- pate that its history will not be similar, so far as the insurance laws permit. The committee, therefore, is strongly of the opinion that any col- lege or university teacher will take some risk of disappointment in accepting any assurance less secure than a contractual one for the employ- ment of the accumulated surplus of the new company exclusively for the benefit of the policy- holders through the payment of dividends or reduction of premiums. No such contractual guarantee is now offered by the Teachers' In- surance and Annuity Association; in fact, it is PENSIONS 235 forbidden by its charter to give such guarantee, and the contract actually offered by the associa- tion contains the provision: **This policy is is- sued on the non-participating plan. It is not entitled to participate in the surplus of the asso- ciation." Yet it is to be remembered that eventually the surplus, if any large number of teachers should take insurance in the company, will be derived chiefly from interest upon funds contributed by those teachers in the form of premiums, or by universities or colleges in their behalf. If the new company, however, is prepared to give binding guarantees upon the point in ques- tion, the committee is unable to see why it should for a moment hesitate to amend its char- ter so as to require the company to write only participating policies; nor indeed, is the com- mittee able to see why a charter permitting this should not have been obtained in the first place. 4. Selection of Bisks The committee finds the provisions thus far announced with respect to medical examination and selection of risks to be indefinite and unsat- isfactory. President Pritchett states that **the policy of the association will be to make the med- ical examination a simple and reasonable one**; and he apparently implies that the requirements of the association in this respect will be less ex- acting than those of conservative companies of- 236 CABNEGIE fering general insurance. The natural effect of this — taken in connection with the considera- tions already mentioned — ^will be that the policy- holders of the new company will consist largely of risks rejected by other companies, while the great majority of teachers who are good risks will, the committee anticipates, prefer to pur- chase their insurance from long-established par- ticipating companies of good reputation. 5. Surrender Value of Annuity Policies So far as yet appears from the announcement of the insurance company, and from the form of annuity policy which it proposes to write, there is no indication that annuity policy-holders will at any time before reaching the age of sixty- five have the option of claiming the cash value of their policies instead of an annuity beginning at age sixty-five. This is in conflict with the ex- press recommendation of the joint commission. The teacher who on reaching age sixty-five is in failing health or afflicted with an incurable disease should not be compelled to invest his life 's savings in an annuity. 6. Disability and Convertibility Clauses The committee regrets that the sample forms of policies submitted contain a *' disability*' clause which does not in any way comply with the former recommendations of this committee, PENSIONS 237 in that it merely provides for a waiver of pre- miums in event of disability, but does not pro- vide for any disability allowance, as do the dis- ability clauses in policies offered by many insur- ance companies. We also regret that the term policies offered by the association do not contain any provision for conversion into higher pre- mium contracts, as do the similar policies issued by most insurance companies. 7. Compulsory Participation in the Plan by Teachers The Rules of the Carnegie Foundation for Ad- mission of Institutions and for Granting Retir- ing Allowances (1918) provide that (p. 3), ** After April 22, 1918, colleges and universities to be eligible to the associated list, must have ac- cepted a participation in the contributory plan of old age annuities for their teachers as pro- vided in the Teachers' Insurance and Annuity Association of America.'* At the date of draft- ing this report the committee has received no complete statement as to the terms on which this participation may be had. For reasons stated in its first report^ a ma- jority of this committee does not favor any plan which involves compulsory purchase of insur- ance or annuities by teachers and the committee would regard any attempt by particular institu- tions, to designate the company in which teach- 3 School and Society, December 2, 1916. 238 CABNEGIE ers shall invest their savings, as an intolerable invasion of the private rights of the individual affected. For the reasons above stated, and other less important ones which it would unduly lengthen this report to include, your committee is unable to recommend that this association express its approval of the plan of the Teachers' Insurance and Annuity Association, or that this association cooperate in promoting that plan. The com- mittee is, for the same reason, unable to hold that members of this association would be acting either for their own interest or that of their pro- fession in purchasing insurance or annuities in the new corporation, under its present rules and form of organization. The committee further expresses the hope that all teachers will energetically oppose any at- tempt to use the power of university governing boards to prescribe to members of university faculties the manner in which they shall invest their own savings, whether in the form of insur- ance, the purchase of annuities, or in any other manner. Finally, the committee recommends that this committee be discharged and that a new com- mittee be constituted with authority on behalf of the association : (a) To examine and report upon the actu- arial data on the basis of which the foundation PENSIONS 239 adopted its revised schedule of pension allow- ances, as published in the foundation's state- ment of April 28, 1918, and to observe and re- port upon the administration of the existing pen- sion system, and (6) To examine any modified plans of the Teachers' Insurance and Annuity Association of America, if such should be offered, and to inves- tigate the possibility of effecting suitable insur- ance for college teachers either through the co- operation of established insurance companies, or the organization of a mutual insurance company for college teachers, and to report the results of their investigation to this association. The Conunittee : Thomas S. Adams, Yale University, Walter W. Cook, Yale University, F. S. DiEBLER, Northwestern University, Frank H. Dixon, Dartmouth College, Thomas C. Esty, Amherst College, W. F. Gephart, Washington University, John H. Gray, Board of Appliance, 39 Whitehall St., New York City, Henry B. Gardiner, Brown University, M. W. Haskell, University of California, Otto Heller, Washington University, Jacob H. Hollander, The Johns Hopkins University, S. S. HuEBNER, University of Pennsylvania, Joseph Jastrow, University of Wisconsin, E. W. Kemmerer, Princeton University, 240 CABNEGIE Alfred C. Lane, Tufts College,* Arthur 0. Lovejoy, The Johns Hopkins University, H. A. MiLLis, University of Chicago, H. L. Rietz, Iowa University,* Ashley H. Thorndike, Columbia Univer- sity, Henry S. White, Vassar College, W. F. WiLLCox, Cornell University, Harlan F. Stone, Chairman^ Columbia University. 4 Professor Lane and Professor Rietz are not prepared to condemn the general principle of compulsory insur- ance, provided it is stipulated for by the contract be- tween the teacher and his college or university at the time of his appointment. SUPPLEMENTARY STATEMENT CONCERN- ING THE PLAN OF COMPULSORY AND CONTRIBUTORY ANNUITIES PRO- POSED BY THE CARNEGIE FOUNDATION! Certain information concerning the plan for compulsory annuities, referred to near the close of the report of Committee P, has come into the hands of the officers of the association and the chairman of the committee since the report was drafted. In view of the importance of the mat- ter, and of the desirability of prompt communi- cation of this information to members of the as- sociation, it has seemed best to the president of the association and the chairman of the com- mittee to submit the following supplementary statement, for which the signers alone are re- sponsible. A submission of the matter to the committee would have precluded immediate pub- lication. A circular of the Carnegie Foundation which bears the date of December 6, 1918, but which had not reached the chairman of the committee before the Baltimore meeting, states as follows the terms upon which colleges or universities may be admitted to participation in the new sys- tem of compulsory annuities for teachers re- ferred to in the committee 's report : 1 Printed in School and Society, February 1, 1919. 241 242 CABNEGIE 1 (a) Each full-time professor, associate professor, assistant professor, or oflacer of equivalent rank in the service of associated institutions, who does not enjoy the privileges given under the non-contributory plan now in operation, shall contribute annually in monthly install- ments five per cent, of his salary toward an old age an- nuity contract in the Teachers Insurance and Annuity Association. In the case of institutions admitted here- after to the associated list this requirement shall apply to all professors, associate professors, assistant professors and officers of equivalent rank admitted to the service of the institution after acceptance of participation in the contributory plan. (h) Each associated institution shall pay a correspond- ing five per cent, in the case of any such contributing professor, associate professor, assistant professor or offi- cer of equivalent rank, provided that the institution shall be under no obligation to begin its payments before the teacher begins his, or to make annual contributions in excess of those made by him. (c) Each institution shall make a like contribution in the case of any teacher below the rank of assistant pro- fessor who has voluntarily accepted a participation in the contributory plan and who has had not less than three years of service as a teacher in a college, univer- sity or technical school. 2. The trustees of the Carnegie Foundation request that any institution now associated with the foundation which desires to be admitted to the new privileges of the foundation, including disability allowances, will announce its acceptance of the contributory system, and the spe- cific plan upon which the institution itself will partici- pate, to become effective not later than January 1, 1920. The effect of these provisions would be to es- tablish a system of compulsory annuity con- tributions by teachers in the institutions in PENSIONS 243 which the provisions are adopted. In such insti- tutions every teacher of the rank of assistant professor or above will — ^whether or not he needs, desires or can afford to purchase an annuity in this amount — be required to pay five per cent, of his salary towards the cost of an annuity in the new insurance corporation. He will, however, receive a like amount from his institution to- wards the purchase of the annuity. Colleges or universities imposing this requirement upon their teachers, and making the specified con- tribution, will be listed as ** associated institu- tions*'; and to teachers in institutions on this list the foundation announces its ** intention * ' (but ** without any legal obligation'') of granting the two following additional privileges: (a) **The foundation will provide from its in- come, if necessary, such amounts as may be nec- essary to secure to teachers in associated colleges and universities an annual return of four and one half per cent, on the payments made by them to the Teachers Insurance and Annuity Associa- tion for the purchase of deferred annuities — said sums to be paid at the time of retirement or in case of death." (Policy holders not in asso- ciated institutions are guaranteed by the insur- ance company interest at the rate of four per cent, only.) (h) The foundation also intends to grant to teachers in associated institutions disability al- lowances upon the following terms : 244 CABNEGIE (a) Disability shall be interpreted to mean total per- manent disability as certified by a medical examiner designated by the foundation. (ft) To be eligible to a disability allowance the teacher must have contributed for not less than five years toward an old age annuity and must have been during the period in active service. (c) When retired on the ground of disability the teacher will assign his annuity policy to the foundation. (d) The foundation will provide an annuity of two thirds the amount the teaeher would have obtained if he had continued to age sixty-five average contributions equal to the average of the five years preceding his disa- bility. The annuity payments will continue for life, or in case of death, until the accumulation to the credit of the teacher has been returned to his estate. Annuity al- lowances will be limited to a maximum of three thousand dollars, and are subject to discontinuance in case of the annuitant's recovery of health. In the case of such re- covery the unexpended portion of the contributions made by and for the teacher, and their accumulations, shall remain to his credit. Teachers in colleges or universities not upon the list of associated institutions may purchase insurance or annuities in the new company, hut will not enjoy the two additional benefits above specified, which are offered by the foundation, not by the insurance company, and are not con- tractual. The question thus arises whether it is to the interest of teachers, and of the institutions, that colleges and universities should accept the con- tributory plan, and impose upon their professors the requirement that they devote a portion of PENSIONS 246 their salaries to the purchase of deferred annu- ities in the new Teachers Insurance and Annuity Association. Upon this point the signers of this supplementary statement offer the following ob- servations : 1. There is manifestly a strong presumption — for reasons indicated in the report of the com- mittee — against action by college or university trustees which would have the effect of com- pelling all teachers of professorial rank, not merely to purchase annuities which they may neither need nor desire, but also to make this in- vestment of their savings in a particular com- pany designated by the trustees. There appears to us to be an equally manifest presumption against colleges offering a bonus to teachers in order to induce them to purchase insurance in a particular company. In our opinion, colleges or universities which are disposed to add five per cent, to the salaries of teachers on condition that the teachers devote this and a like sum from his present salary to the purchase of a deferred annuity, should leave the teacher free to select the company in which he will thus invest a por- tion of his compensation. It may, however, be contended that the pre- sumptions just mentioned are offset by the fact that the Carnegie Foundation offers institutions two specific inducements to require their teach- ers to purchase annuities in the Teachers Insur- ance and Annuity Corporation, and to make con- 246 CABNEGIE tributions from their corporate funds' towards the same purpose — ^the inducements, namely, of disability insurance, and the addition of one half of one per cent, to the interest on payments made towards the purchase of annuities in the new company. The question consequently re- solves itself into this : Are these two benefits suf- ficient to annul the presumptions above men- tioned, and to justify boards of trustees in en- tering into an agreement with the Carnegie Foundation for the establishment of the pro- posed contributory and compulsory system of professorial annuities? Upon this question the following considerations seem pertinent. {a) The Carnegie Foundation does not con- tract, nor does it promise, to grant the two ben- efits specified to the teachers in institutions which may adopt the proposed plan. It care- fully disclaims any contractual responsibility, and merely declares its ** intention" of granting those benefits. Experience has shown, however, that in great part the intentions announced by the Carnegie Foundation remain unfulfilled. The foundation has, in the course of its history, offered to American colleges and universities, upon certain conditions, an extensive series of benefits for their teachers. In spite of the ful- fillment of the conditions by many institutions, a number of the most important of these benefits have been withdrawn, and the rest have been greatly reduced in value. It appears to us, PENSIONS 247 therefore, that a declaration of intention by this corporation does not afford a substantial basis for any action by the governing board of a col- lege or university. (h) In any case, any sums taken out of the income of the foundation to provide disability insurance for teachers in institutions on the new ** accepted list'* or to increase the rate of interest on future annuity payments, must reduce by so much the sum available for fulfilling the ** rea- sonable expectations" of teachers entitled to pensions under the old rules. Committee P has, as its report indicates, urged upon the trustees of the foundation that a ** scrupulous regard" for the obligations of the foundation to these older teachers would require that those expecta- tions — and especially such as were justified by the rules in force in 1915 — should be as nearly fulfilled as the resources of the foundation may permit, though they can not in any event be ful- filled completely. The committee had under- stood the trustees to accept this principle and to declare their intention of acting upon it. Never- theless, it is now announced that a part of the income of the foundation will be diverted to other uses. What should be clearly understood, both by teachers and boards of trustees, is that the resources which the foundation may employ to give the proposed new benefits to one set of teachers will be taken away from another set of teachers (usually in the same institutions), who 248 CABNEGIE have in equity a prior claim — as the trustees of the foundation have formally recognized. (c) The disability insurance offered by the foundation applies only in cases of ** total per- manent disability. ' ' Few teachers suffer total permanent disability, as this term is usually con- strued by the courts ; but against lesser disabil- ities which yet might disqualify teachers for the practise of their vocation no insurance appears to be offered. One of the two benefits which the foundation now declares its intention of grant- ing (to teachers in institutions which comply with its new requirements) thus appears to be of very limited value, even supposing that the intention should be realized. The other new benefit — ^which is equally non-contractual — namely, the offer of an additional one half per cent, interest on the accumulated sums paid by teachers and institutions towards teachers' an- nuities, brings the total rate of interest on these payments to less than can be obtained from gov- ernment or municipal bonds — ^the purchase of which would be a much more advantageous means of accumulating the amount necessary for the eventual purchase of an annuity. The proposed new arrangement, it should further be noted, has the effect of continuing the supervisory relation of the foundation to the American colleges and universities. For reasons which have been set forth in the reports of Com- mittee P, we regard it as undesirable that this PENSIONS 249 relation should become permanently established. After the arrangement is entered into by any college, it will remain within the power of the foundation to amend or alter its rules of eligibil- ity to the **list of associated institutions,'* and so to exercise pressure upon the policy of an in- stitution, by threatening to remove the institu- tion from the list.^ The effect of the removal from that list of a college or university which failed to comply with the amended regulations, would apparently be to deprive teachers in that institution of any further claim to the benefits held out to them by the foundation at the time the institution was originally placed upon the list. It is, indeed, provided (though **non-con- tractually") that removal of a college from the associated list ** shall not result in the discon- tinuance of retiring allowances already granted. ' ' There is no provision, however, precluding the discontinuance of benefits not yet actually granted, but only made the subject of a declara- tion of intention by the foundation. Such dis- continuance, nevertheless, would mean the dis- appointment of definite expectations, which the governing board of the college would be jointly responsible with the foundation for having caused the teacher to form— expectations by 2 See ''Bules for the Admission of Institutions, 1918, '^ page 3. It will also be remembered that the per- sons who manage the foundation will control the surplus accumulations of the new insurance company. 260 CABNEGIE which his plans of life and mode of investment of his savings would have been influenced. A governing board, under these circumstances, would be subject to a material inducement to make such changes in its organization or meth- ods as the foundation might dictate. It appears to us anomalous and dangerous that an irre- sponsible outside body should, by the voluntary action of college or university boards, be put in a position from which it can subsequently exer- cise this kind of material pressure upon the pol- ices of those boards. The opinions of the Car- negie Foundation, or of its president, concern- ing educational questions should, in our judg- ment, rely upon their intrinsic merit for their influence upon the policies of our higher institu- tions ; that influence should not be reenf orced by an arrangement enabling the foundation by the threat of a sudden withdrawal of anticipated benefits, to involve in more or less serious em- barrassment boards or administrative officers who decline to conform to its views. It remains to ask whether the teacher will not substantially benefit by the provision that his college or university shall pay half the amount of his annuity premiums. Upon this two things are to be said. In the first place, it is question- able whether much advantage would in the long run accrue to the teacher from such an arrange- ment. President Pritchett has recently re- marked that **a pension paid by an employer is PENSIONS 251 in its practical effect deferred pay, which only a minority ever receive. There is, indeed, no such thing as a free pension when it is involved in the relation which exists between employer and employee. It will inevitably be absorbed in wages.*' These remarks obviously apply to a contribution made by a college out of its cor- porate funds towards the purchase of an annuity for a professor. If the institution has the means of making such contribution, it has also the means of increasing salaries by a corresponding amount. In the opinion of many, it is much to be preferred that the sum should be paid in the form of salary, and not as an inducement to teachers to employ their own savings in the pur- chase of a specified type of provision for old age from a designated non-mutual and non-partici- pating insurance company sustaining an anom- alous and undesirable relation to our higher educational system. An increase of average sal- aries in the American colleges is inevitable in the near future, for obvious economic reasons— unless the quality of the profession is to be al- lowed gravely and rapidly to deteriorate. But it is probable that, as a rule, this future increase will simply be diminished by approximately the amount of the payment made by any institution towards the purchase of annuities. In the second place, what is proposed by the Carnegie Foundation is that college and univer- sity teachers shall be compelled by the boards of 252 CAENEGIE trustees of their institutions to purchase some- thing which some teachers do not need, and which many others can not afford and should not buy. For it is required by the new plan that the joint payments of teachers and institutions shall be devoted to the purchase of deferred annuities. But most of the younger teachers should be em- ploying their savings primarily, not for laying up provision for their own old age, but for the protection of their dependents. An assistant professor at the age of thirty, who is struggling to support a wife and children on $1,800 or $2,000 a year is usually in no position to buy hoth a future annuity for himself and adequate insurance for his family. It is a grave hardship to such a teacher to compel him to spend nearly ten per cent, of his annual compensation for an annuity payable thirty-five or forty years later, and — ^what would frequently result — ^to leave his dependents meanwhile without proper protec- tion against the hazard of his death or prolonged illness. Most teachers would, and should, pre- fer to meet first the more immediate and im- perative duty, and to leave provision for their age until the later years of their service, when their salaries will be larger and their children no longer dependent. We conclude, therefore, that there is no good reason why an institution's contribution towards annuities for its teachers — if it desires to make such contribution — should be accompanied by PENSIONS 253 the requirement that the annuities shall be bought of the new insurance and annuity asso- ciation. It is desirable that large institutions should establish their own pension systems, con- tributory or other. Institutions which are not able to do this will, in our opinion, serve neither their interest nor that of the teacher by making their contemplated additions to the teachers' present or deferred compensation contingent upon his willingness to invest approximately ten per cent, of his total salary in a policy of the recently established company. Still less will they do so by making such investment com- pulsory. It is, in any case, manifest that no institution should adopt a plan of this kind without full consultation with its faculty. A faculty should, in our opinion, decline as a body to participate in the plan, unless it shall, after full examina- tion and discussion by all the teachers affected, have been approved by a substantial majority. Arthur 0. Lovejoy, President of the Association Harlan F. 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