Thursday, March 3, 2011

2-4-6-8... How Do We Negotiate?

Why drink the water from my hand?
Contagious as you think I am
Just tilt my sun towards your domain.
Your cup runneth over again

- from the song December, by Collective Soul.

So why did the bottom drop out of American public education just as per-pupil spending soared? Basic economics provides a compelling answer, though countless blue-ribbon commissions, and indeed much of the present national dialogue about school reform, have failed to acknowledge it: the $250 billion public education industry behaves precisely like any other publicly protected monopoly. Union negotiators in the private sector know that if they insist on protecting incompetent workers and cling to outdated work rules, especially in the global economy, the company will begin losing market share, and union members will lose their jobs. In public education, by contrast, collective bargaining takes place without the constraining discipline of the market. When school board representatives sit down with union officials to negotiate a labor contract, neither party is under pressure to pay attention to worker productivity or the system's overall competitiveness: if the contract allows some teachers to be paid for hardly working at all, and others to perform incompetently without penalty, there is no real economic danger for either side. After all, most of the monopoly's customers, the schoolchildren, have nowhere else to go. Historically, tax revenues have continued to flow into the schools no matter how poorly they perform.

The words written above are not mine. They were written in 1997 by Sol Stern (City Journal). The article “How Teachers’ Unions Handcuff Schools” is a good read and very timely even though it was written 14 years ago. It really gets down to the core of the public employee collective bargaining controversy. Economists would characterize public employee collective bargaining as a Monopoly Union Model. This model states that the monopoly union has the power to maximize the wage rate (and benefits, work rules, job security, etc etc.); and the employer then has the right to choose how many people it can afford to hire. The problem comes when the affordable level of employment cannot satisfy customer demand. The customer (parents/students) can either pay more, settle for poor service (higher student-teacher ratios, limited curriculum), relocate or go to private school (aka pay more).

Unions started back in the day because certain industries had monopoly or near monopoly power over workers. All of us from working class backgrounds owe a debt of gratitude to the union movement. Even today, the threat of unionization is a key factor in motivating many employers to pay more and treat their employees better than they might otherwise be inclined to do. So I am not anti-union, at least in theory. But having managed Teamsters once upon a time, I must admit that unions are pain in the ass. And in a deregulated, competitive trucking industry, guess what? The Teamsters overplayed their hand and lost their position as power players in that industry.

If public employees (or any group of employees) have what is essentially monopoly power, including the political leverage to handpick those with whom they will be negotiating pay, benefits and working conditions; we have a serious problem. In the public employee market where “collective bargaining takes place without the constraining discipline of the market”; it would appear that the only constraint is the taxpayers’ willingness to spend more money. And clearly the taxpayers are fed up. If the public employee unions are to survive they must face the same realities that all employers, government or private, face everyday when they turn on the lights. Stated simply, those are economic reality and the reality of providing value to the customer.
Employers and employees who ignore these realties eventually cease to exist.

“Come now, let us reason together…” Isaiah 1:18

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