Salary Cap and the BRDPI Inflation Estimate

Jul 16 2015 Published by under Fixing the NIH, NIH Budgets and Economics

Wow. I last used the BRDPI estimate of inflation in the cost of biomedical research to illustrate how the full modular grant ($250K direct) had not changed and therefore purchasing power had eroded.

Jeff Mervis at Science has a blockbuster observation.

To remind you, the BRDPI is this:

The annual change in the Biomedical Research and Development Price Index (BRDPI) indicates how much the NIH budget must change to maintain purchasing power. The BRDPI was developed and is updated annually by the Bureau of Economic Analysis (BEA), Department of Commerce under an interagency agreement with the NIH.

That link also leads you to the data tables where you find the annual rates stretching back to the 50s.
BRDPI-rate

The Mervis article highlights the historical low for FY2012 and reminds us of the cut in the salary cap (maximum amount of an Investigator's salary that can be charged to NIH grants)

Congress passed a spending bill in December 2011 that lowered the salary ceiling for investigators on a standard NIH grant from $199,700 to $179,700.

and concludes with a caution:

NIH enjoys strong support in Congress, and the realization that biomedical inflation largely tracks salary trends, not the sticker price of essential lab equipment and supplies, is unlikely to have a major impact on policy debates. Still, it may behoove biomedical lobbyists to think twice before citing the cost of high-tech science as a rationale for pumping up NIH's budget.

Yeah, I hear that. Let's peer a little closer though.

The NIH Office of the Budget January 2015 overview [PDF] futher anticipates that salary cap is a major driver of the inflation index.

The modest BRDPI growth rate of 2.0 percent for FY 2014 reflects the effect of the NIH extramural investigator salary limitation (“cap”) of $181,500 and an increase on salaries of Federal civilian employees of 0.75 percent for that fiscal year.
The projected 2.2 percent growth for FY 2015 assumes a one percent increase for Federal salaries starting in January 2015, as well as an increase on the extramural investigator salary cap to $183,300.

OK, let's route ourselves back to the NIH Office of the Budget report from January 2013 [PDF] which indeed draws an explicit link.

The modest BRDPI growth rate of 1.4 percent for FY 2012 reflects the effect of the reduction of the NIH extramural investigator salary limitation (“cap”) from $199,700 to $179,700 for that year and the continued freeze on salaries of Federal civilian employees.

However, it also goes on to note other contributions:

The BRDPI growth rate was also adjusted for the growth of stipends and related expenses on fellowships and training awards. In addition, the FY 2012 BRDPI growth is lower than the growth for FY 2011 because the rate of growth of prices for several input categories slowed down in FY 2012 compared with the growth during FY 2011. For inside NIH activities, the categories with slower growth in prices include travel, transportation, printing and reproduction, ADP and other IT services, instruments and apparatus, laboratory supplies, office supplies, utilities, repairs and alterations of facilities, compensation rates for consultants and support contracts. For extramural activities, fringe benefits, travel, equipment, supplies, patient care alterations and indirect costs each showed slower price growth during FY 2012 compared with FY 2011.

Wait. Sooooo, everything contributes a little bit? This seems out of step with Mervis' column. Wait, wait....the 2013 overview continues....

Primarily because of the freeze on Federal civilian employee salaries and the cap on compensation of extramural investigators, the rate of growth of the BRDPI during the years FY 2011 through FY 2013 has been relatively low compared with its historical relationship with general inflation as represented by the growth of the GDP Price Index.

Primarily. So that circles us right back to the reduction in the extramural cap and elimination of Federal civilian salary raises. [You might ask why the Federal civilians did not also suffer salary reductions, merely freezes, eh?] But if we take this as a valid and intended connotation then it would seem Mervis has it right. The salary issues are huge.

I wonder why they didn't just find the dollar figure. How many Investigators funded by the NIH in a given year are paying up to the cap? Multiply that by you favored reduction or increase and boom, you can translate that into new R01s.

The annual Salary Cap numbers can be found here. It seemed to steadily increase from 2005-2010, including that 2008-2009 interval that produced the most immediately prior reduction in the BRDPI. So why didn't salary cap drive the BRDPI that year?

30 responses so far

  • Ola says:

    So what you're sayin' is, the price of all that shittio the real folks in science worry about (tips, antibodies, animal per diems, service contracts on instruments, assay kits, core facility charges); all that shit didn't increase much, and it's all really just BSD salaries driving costs up.

    Yeah, gonna have to call BS on that analysis.

    Notice that the big biomed suppliers (VWR, Fisher, Sigma, Invitrogen, Thermo, Millipore, BioRad) make out like bandits if they can pin "milking the NIH" onto PIs. Who do you want to bet has the best paid political lobbyists - researchers or the biomed supply industry?

  • Grumble says:

    "it's all really just BSD salaries driving costs up."

    Well, you don't have to be a BSD to make more than the salary cap anymore. You just need to be a full prof in a major metropolitan area. Or have a MD and be an associate or sometimes even assistant prof.

  • fjordmaster says:

    Sounds like they should report a "core-BRDPI" number without salary and benefits for clarity around the true inflation level associated with research supplies and equipment. Since the salary cap and federal employee raises are arbitrary and will fluctuate they can be removed like food and energy costs are for core-CPI.

  • dsks says:

    Given that the labor costs of medical research almost certainly dwarf the cost of equipment and supplies, it's hardly surprising that salaries are what's driving inflation in this area (although, to be fair, it's not just PI salaries I shouldn't think, but the aggregate of all labor compensation).

  • drugmonkey says:

    But these documents are pointing the finger at the $20K difference in cap as a huge contributor. "Primarily". That's the question here- 52%? Plurality? 90% of the impact? What does this word mean?

  • NewPI- stunned says:

    Salaries pretty routinely increase about 3% per year, at least for this PI who is making <0.5X the cap. So, I don't feel that this 3% salary increase is primarily driving anything, rather is a piece. The 1-4% annual increase in the index suggests that similar increases in salaries are right in line with inflation of everything else.

    Here, profs over the cap are still paid over the cap, just not off of NIH funds for that part. I have not heard of anyone taking a $20K salary cut. Anyone else? (Have to admit, it would be pretty tone-deaf for them to loudly complain about _only_ making $179K, but tone-deaf is what I have come to expect, see Steve McKnight; Alice Huang; et al.,)

    Finally, if we stipulate that these highly paid, influential PIs quietly sat back and absorbed a $20K cut in a single year, then _of course_ the inflation rate went down based on this. They took a 10% loss instead of a 3% gain and in a single year this could have somewhat of a driving effect on the overall index. That does not mean that in a normal year the increase in the index is primarily driven by PI salaries, but rather in a year that was an absolute outlier, a large drop in one piece of the puzzle had a partially offsetting effect (notice the index still was positive).

    Doesn't this also correlate with the end of one-time ARRA largesse, possibly indicating a market adjustment to the return of lean times?

    Ola nailed it: "Yeah, gonna have to call BS on that analysis."

  • drugmonkey says:

    Finally, if we stipulate that these highly paid, influential PIs quietly sat back and absorbed a $20K cut in a single year,

    The point is what was able to be charged to federal grants. And this was not in the hands of any PI or Uni, it was a done deal from the top down. It would appear to be the case that BRDPI is estimated by costs actually charged to federal grants, not what the extramural salaries happen to be. If you reduce the cap, this is effectively a salary cut to BRDPI even if not to the PI herself.

  • Namesaste_Ish says:

    So, I hear you saying Jeff Mervis should take over Sally Rockey's job....is that it?

  • NewPI- stunned says:

    DM: "The point is what was able to be charged to federal grants."

    Me: Was this salary cut not just shifted to supplies, then? Or the PI was previously listed at 40% effort, salary cap lowered, PI effort magically jumped to 45%? Using the modular grant, any new applications would have just written in more supply money. Were active grants administratively cut even more, proportional to the drop in cap? (I know, they are not your data-- hard to know with zero transparency)

    DM: "It would appear to be the case that BRDPI is estimated by costs actually charged to federal grants"

    Me: I wondered about this. But with a shrinking NIH budget and a stagnant modular limit, how to get to 1-4% annual increases?

  • drugmonkey says:

    Take salary- you can do it as dollars per calendar month effort

  • In the short term, decreases in the salary cap do nothing but force institutions to pay for more of the salary of their current PIs than they currently do. In the longer term, it probably means fewer faculty positions for ambitious post-docs.

  • drugmonkey says:

    And fewer bridge / startup awards to junior faculty from internal funds, would you think PP?

  • physioprof says:

    And fewer bridge / startup awards to junior faculty from internal funds, would you think PP?

    Yeth.

  • drugmonkey says:

    Don't be gross

  • moto-sci says:

    Forcing institutions to cover more of the PI's salary is pragmatic. Either the institutions will do or they won't. If they won't the current generation of PIs are free to leave for greener pasture institutions or career paths if they are dissatisfied.(isn't that the line fed to the trainees to justify their working conditions and wages?). This will balance out the "fewer faculty positions available for new hires." There is certainly no shortage of ready, willing and qualified applicants to take the place of old PIs who will leave if they are forced to take a permanent salary cut, and who would gladly do so at the new salary since it is still much more than their current postdoc/permadoc wage.

  • mH says:

    How is repeating something Rockey pointed out on her blog years ago a "blockbuster observation"?

  • Science Grunt says:

    Re: your tweet about the lack of disgruntledoc ranting. I don't have much to rant about it. I don't have a problem with other people getting paid a lot of money if they add a lot of value, and I'm glad the NIH pays them. Iwanted a few clarificatoins though:

    1) Is the salary cap on the amount charged to the grant or is it in the salary nominal basis?

    2) What is the number of investigators hitting that cap? Are there so many researchers getting paid 180K that the 2011 changed moved the needle on biomedical inflation?

  • drugmonkey says:

    How is repeating something Rockey pointed out on her blog years ago a "blockbuster observation"?

    Does the passing of time make Terminator any less of a blockbuster movie?

  • drugmonkey says:

    1) Is the salary cap on the amount charged to the grant or is it in the salary nominal basis?

    the maximum amount of the person's salary that can be charged to all federal grant sources inclusive.

    2) What is the number of investigators hitting that cap? Are there so many researchers getting paid 180K that the 2011 changed moved the needle on biomedical inflation?

    I have no idea and yes it was surprising to me that this is being blamed as having such a big effect. The devil is in the weasel word "primarily". Does this mean it is simply the one source that has the biggest effect out of many sources? if so it doesn't have to be that big in and of itself if there are many contributing factors. Does it mean more-than-half? or does it mean the 80-90% plus that is implied (to me) in context?

  • 1) Is the salary cap on the amount charged to the grant or is it in the salary nominal basis?

    the maximum amount of the person's salary that can be charged to all federal grant sources inclusive.

    Wrong. It is the maximum nominal salary basis. So only if you are allocating 100% of your professional effort to federal grants, can you charge 100% of the cap amount to grants. If you earn $1,000,000 per year salary, and you are allocating 75% of your professional effort to grant-supported research activity, you can still only charge 75% of the cap amount to your research grants, not the full cap amount.

  • Science Grunt says:

    Oh. In case this is the nominal value, than I can easily see the salary cap affecting the inflation index. A lot of the NIH monies goes to medical schools with their medical faculty and often they have a single appointment to charge their clinical side along with the research side. And medical faculty often goes into the 200+ income rather quickly.

  • drugmonkey says:

    Typical PP. distinction with zero difference to the point at hand.

  • physioprof says:

    Typical PP. distinction with zero difference to the point at hand.

    Are you fucken HIGH!?!?!?!?! The actual real mathematics by which the NIH salary cap operates that you got completely wrong is a "distinction with zero difference to the point at hand"?

    For the love of fucken godde, I hope you are just trolling, and really deep down inside you know that it actually matters that you got this basic point about NIH extramural finances wrong.

  • drugmonkey says:

    What diff does it make that is pertinent to the discussion?

  • Grumble says:

    It would make a difference if there were a lot of faculty who earn more than the salary cap but do not charge anywhere close to 100% if salary to grants. If that's the case, then it's even less likely that changes in the salary cap are primary drivers of the inflation of research costs.

    BTW, I didn't realize that the cap works as PP describes, so his explanation was useful.

  • profduder says:

    Salary cap only applies to HHS funds. Where I'm at, some people have DOD money. DOD funds don't have a salary cap.

  • jmz4gtu says:

    It seems inefficient that the NIH doesn't set a total cap on what they're willing to pay on top of other salary.
    If I have an endowed chair, paying me 200k per year, it seems stupid I can still draw 181.5k from my grants, as long as I can con my university into saying my salary is 381.5.

  • Science Grunt says:

    @jmz4gtu In order to that, you'll have to have a 100% effort on the grant.

  • Juan Lopez says:

    Jmz4gtu, that's a common misconception. Many of us when we first heard that "we pay our own salary from our grants? " ask "Can I pay myself a million dollars?".

    Universities actually have reasons to keep salaries down. Plus they don't want to run the risk of being left holding the bag when someone loses their grant.

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