Volume 20

Does Unionism Mean Higher Earnings or Higher Taxes?

On several recent occasions union officials have contended that higher levels of unionism benefit workers who are not union members because where unions are stronger wages are higher for both union and nonunion workers.

In the state of Oklahoma they are preparing to vote on a referendum on a Right to Work law, a law that would make it illegal to require a person to belong to or support a union as a condition of employment. One of the arguments union officials have used to try to persuade voters to reject this referendum is that even if they aren't union members, they benefit from strong unions because where unions are strong everyone's wages are higher.

Recently, the Ninth Circuit Court of Appeals rejected a union argument that it should be allowed to force nonmembers to pay for union organizing expenses. One of the arguments the unions raised in support of their position was that nonmembers benefited from union organizing because where there are more union members wages were higher.

So, the question of whether high levels of unionism results in generally higher wages is worth examining because, in addition to its economic significance, it has both political and legal consequences.

Does unionism mean a higher wage? On the surface it would seem that union members receive higher wages than their nonunion counterparts.

The latest national figures from the Bureau of Labor Statistics show union members earning 17.5 percent more than those who are not members - an average of $17.85 for union members compared to $15.19 for nonmembers.

But that's an incomplete view of the question. The Union Wage Differential, the difference between the average union wage and nonunion wage, is strongly influenced by occupation and geography. 

Some occupations are higher paid than others, whether union or not. In some areas of the country, generally high cost of living areas, earnings are higher, whether union or not. Higher levels of unionism in high paid occupations in high wage areas could create an apparent benefit to unionism that had little, if anything, to do with whether the employees were represented by a union.

The differential is also influenced by the size and type of employer. Larger firms generally pay better than smaller ones. Larger firms are also more likely to be unionized. No data is presently available on the degree to which this impacts the differential, but there is little doubt that some portion of the difference is due to the size of the employer rather than to the fact that its employees are represented by a union.

The high level of unionism in the public sector combined with the fact that average earnings for public employees are significantly higher than those of employees in the private sector also puts upward pressure on the union wage differential. In 2000, 37.5 percent of all public employees were union members compared to only 9.0 percent in the private sector. Average earnings for public employees were $17.23 compared to $15.23 in the private sector, a difference of 13.1 percent. When public employees are excluded from the calculation, the union wage differential drops from 17.5 to 13.7 percent.

This differential remained fairly constant for quite some time, fluctuating between 24 and 26 percent, but in the mid 1990's it began to collapse, falling from 25.8 percent in 1994 to 17.5 percent in 2000.

This is most notable in a highly unionized industry, manufacturing, where, according to the most recent figures from the Bureau of Labor Statistics, nonunion manufacturing employees earn an average of $16.80 an hour compared to $16.37 for their union counterparts. No, that's not a typographic error; manufacturing workers who are not represented by a union earn more than their unionized counterparts.

So, while it is clear that union members have higher earnings than nonunion employees, the extent to which this difference is a result of occupation, geography and the employer or due to unionism is unclear. But that isn't the underlying claim of advocates for forcing employees to join and support unions and for forcing nonmembers to pay for union organizing expenses.

Does a high level of unionism result in generally higher wages? In other words, is a high level of union membership of benefit to others who are not union members?

On the surface, it would appear so. Table 1 shows average weekly earnings and the extent to which the workforce was unionized in each state in 2000. At this level, even though there are some very obvious exceptions, there seems to be a strong correlation between unionism and higher wages.

Nationally, 13.5 percent of the workforce belongs to labor unions. In 24 states the level of unionism is above average (High Union) and in 26 states it is below average (Low Union). In the High Union States average weekly earnings are $634, while in the Low Union states the average was $574, a difference of $60 or 10.4 percent.

To accurately compare earnings among states, however, differences in the cost of living must be taken into account. After all, if the cost of living is greater in a highly unionized state like New York than it is in a less unionized state like North Carolina an employee making less money might actually have a higher standard of living.

The American Federation of Teachers, AFL-CIO, publishes a state-by-state cost of living comparison that is generally regarded as accurate.

Once adjusted for the cost of living, the difference between average weekly earnings in High Union and Low Union states almost disappears. Average weekly earnings in High Union states are $613, compared to $612 in Low Union states. Table 2

And, as we are all painfully aware, the cost of living isn't everything. In fact, comparative cost of living calculations don't take state and local rates of taxation into account. The Tax Foundation publishes an index of state and local taxes as a percent of income. When the cost of living and the level of state and local taxes are taken into account, average weekly earnings in the High Union states are actually lower than in the Low Union states - an average of $548 in the High Union states compared to $551 in the Low Union states. Table 3

Since the level of state and local taxes destroys even the small earnings advantage that might be attributed to a high level of unionism, it is worth asking whether there is a correlation between high levels of unionism and high levels of taxation.

The rate of state and local taxes as a percent of income ranges from 13.3 to 6.8. Twenty-four states have rates above 10 percent (High Tax), while 26 states have rates of 10 percent or less (Low Tax). The average level of state and local taxes in the High Union states is 10.6 percent, compared to 9.8 percent in the Low Union states. Looking at it another way, the average level of unionism in the High Tax states is 14.6 percent compared to an average level of unionism in the Low Tax states of 10.2 percent. So there is an apparent correlation between a high level of unionism and higher taxes.

But, because the difference between the level of taxation in the lowest High Tax state and the highest Low Tax state is very slight, this may not be an accurate reflection of union influence. Comparing the level of unionism in the top ten High Tax states and the bottom ten Low Tax states gives a clearer indication. In the top ten High Tax states the average level of unionism is 16.2 percent compared to 10.2 percent in the bottom ten Low Tax states.

Average Level of Unionism in Top 10 High Tax and Bottom 10 Low Tax States
StateTax*%Union
StateTax*%Union
Maine0.13314.0
Oregon0.09316.1
New York0.13125.5
Arizona0.0936.4
Hawaii0.12524.8
Wyoming0.0918.3
Wisconsin0.12217.6
South Dakota0.0915.5
Utah0.0127.3
Alabama0.0909.6
Vermont0.11810.3
Texas0.0905.8
Rhode Island0.11518.2
Colorado0.0879.0
Nebraska0.1138.4
New Hampshire0.08510.4
Minnesota0.11018.2
Tennessee0.0858.9
Ohio0.11017.3
Alaska0.06821.9
Average
16.2
Average
10.2

*Source: Tax Foundation

Yet, another way to examine whether high levels of unionism have an influence on higher levels of taxation is to look at the voting record on taxing and spending of state delegations to Congress. The National Taxpayers Union (NTU) complies the most complete and sophisticated systems for analyzing Congressional voting records on tax and spending issues. It awards letter grades for each member of Congress that can be translated to percentage grades for the purpose of comparing the records of state delegations.

 

A high grade reflects a voting record generally favoring lower taxes and spending, while a low grade indicates a voting record favoring higher taxes and spending. The available information about levels of unionism doesn't extend to the Congressional District level and in some states levels of unionism differ greatly among Congressional Districts. That makes the scores of the state delegations to the U.S. Senate the most reliable indicator of union influence on these scores.

 

Average Level of Unionism in Top 10 High NTU Grade and Bottom 10 Low NTU Grade States
StateGrade%Union
StateGrade%Union
ArizonaA6.4
CaliforniaF16.0
TexasA5.8
West VirginiaF14.3
OklahomaA6.8
ConnecticutF16.3
ColoradoA9.0
North DakotaF6.5
New HampshireB+10.4
New YorkF25.5
WyomingB+8.3
NevadaF17.1
TennesseeB+8.9
MassachusettsF14.3
IdahoB+7.6
MarylandF14.6
AlabamaB+9.6
South DakotaF5.5
KentuckyB+12.0
HawaiiF24.8
Average
8.5
Average
15.5

*Source: Tax Foundation

The average NTU grade for Senate delegations is a C-. The average NTU grade for U.S. Senators from High Union states is a D compared to an average grade for Senators from Low Union states of C+. So there appears to be a correlation between unionism and a higher propensity to tax and spend

High_NTU.jpg

Another way to look at this is to compare the level of unionism in the states with High NTU grades to the level of unionism in states with Low NTU grades. There are 21 states with above average grades (High NTU) and 29 states with below average grades (Low NTU). The average level of unionism in the High NTU states is 10.7 percent, while the average level of unionism in the Low NTU states is 13.5 percent

 

Since there is only a slight difference between the grade of the lowest High NTU state and grade of the highest Low NTU state, comparing the level of unionism in the highest and lowest ten states in each category gives a better view of the influence on unionism on these grades. In the Top 10 High NTU states the average level of unionism is 8.5 percent compared to 15.5 percent in the Lowest 10 Low NTU states.

Clearly, the level of unionism has a pronounced influence on how members of the U.S. Senate vote on taxing and spending issues and the more unionized a state the more likely they are to vote for higher taxes and spending.

Conclusion:

There is a difference between union and nonunion earnings but that difference is collapsing. The union wage differential is influenced by geography, occupation, the size and type of employer and unionism. The extent to which each of these factors influences the difference is unclear but it is clear that union representation has very little to do with it.

There is no apparent relationship between high levels of unionism and generally higher earnings. Once adjusted for the cost of living and taxation, real earnings in states with low levels of unionism are actually higher than in states with high levels. There is a strong relationship between high levels of unionism and higher levels of taxation.

The relationship between high taxes and high levels of unionism is more than likely due to the fact that, despite their decline in membership, unions are a very powerful political influence and they are generally advocates of big government.

Table 1: States Ranked by
Unadjusted Average Weekly Earnings

StateEarningsRank
%UnionTax*
Connecticut$7461
16.3%14
Alaska$7382
21.9%3
New Jersey$7333
20.8%5
Maryland$7294
14.6%18
Massachusetts$7095
14.3%20
Colorado$7016
9.0%31
California$6917
16.0%16
Virginia$6898
5.6%47
New York$6769
25.5%1
Minnesota$67310
18.2%7
Illinois$66411
18.6%6
Michigan$66412
20.8%4
New Hampshire$64813
10.4%27
Washington$64714
18.2%9
Rhode Island$64615
18.2%8
Pennsylvania$62516
16.9%13
Missouri$62217
13.2%26
Texas$62018
5.8%46
Delaware$61819
13.3%25
Indiana$61320
15.6%17
Ohio$61121
17.3%11
Wisconsin$60422
17.6%10
Arizona$60423
6.4%42
Florida$60324
6.8%40
Nevada$59525
17.1%12
Oregon$59426
16.1%15
Georgia$59027
6.3%43
Tennessee$58728
8.9%32
North Carolina$58629
3.6%50
Kansas$58230
9.0%30
Kentucky$57931
12.0%24
Iowa$57232
13.6%23
Utah$56733
7.3%37
South Carolina$56334
4.0%49
Louisiana$56035
7.1%38
Hawaii$55836
24.8%2
Alabama$55537
9.6%29
Maine$54738
14.0%21
Oklahoma$54539
6.8%39
Vermont$54440
10.3%28
Nebraska$53841
8.4%33
New Mexico$53742
8.1%35
West Virginia$52943
14.3%19
Idaho$52844
7.6%36
Wyoming$51845
8.3%34
South Dakota$51646
5.5%48
Mississippi$50947
6.0%44
Arkansas$50648
5.8%45
North Dakota$47949
6.5%41
Montana$46150
13.9%22

Table 2: States Ranked by Earnings
Adjusted for Cost of Living

StateEarningsRank
%UnionRank
Virginia$7091
5.6%47
Michigan$7012
20.8%4
Minnesota$6963
18.2%7
Texas$6904
5.8%46
Colorado$6865
9.0%31
Maryland$6856
14.6%18
Indiana$6667
15.6%17
Illinois$6638
18.6%6
Missouri$6629
13.2%26
Tennessee$65310
8.9%32
Kentucky$65311
12.0%24
Florida$64412
6.8%40
Wisconsin$64113
17.6%10
North Carolina$64014
3.6%50
Ohio$63815
17.3%11
Georgia$63616
6.3%43
New Jersey$63417
20.8%5
Kansas$63018
9.0%30
Connecticut$62819
16.3%14
Pennsylvania$62520
16.9%13
Washington$62521
18.2%9
Iowa$62422
13.6%23
Massachusetts$62423
14.3%20
Alabama$62124
9.6%29
South Carolina$62025
4.0%49
Oklahoma$61926
6.8%39
Louisiana$61727
7.1%38
New York$61628
25.5%1
New Hampshire$61229
10.4%27
Delaware$60830
13.3%25
Arizona$60831
6.4%42
Rhode Island$60032
18.2%8
California$59933
16.0%16
Oregon$59834
16.1%15
West Virginia$59735
14.3%19
Alaska$59036
21.9%3
Utah$58837
7.3%37
Nebraska$58438
8.4%33
Mississippi$57839
6.0%44
Arkansas$57640
5.8%45
South Dakota$57441
5.5%48
Nevada$57042
17.1%12
Maine$56243
14.0%21
New Mexico$55744
8.1%35
Vermont$55645
10.3%28
Idaho$55146
7.6%36
Wyoming$52847
8.3%34
North Dakota$51248
6.5%41
Montana$48340
13.9%22
Hawaii$42950
24.8%2

Table 3: States Ranked by Earnings
Adjusted for Cost of Living and Taxes

StateEarningsRank
%UnionRank
Virginia$6381
5.6%47
Michigan$6322
20.8%4
Texas$6283
5.8%46
Colorado$6264
9.0%31
Minnesota$6195
18.2%7
Maryland$6156
14.6%18
Illinois$5997
18.6%6
Missouri$5998
13.2%26
Tennessee$5979
8.9%32
Indiana$59710
15.6%17
Kentucky$59111
12.0%24
Florida$58112
6.8%40
North Carolina$57413
3.6%50
Georgia$57214
6.3%43
Ohio$56815
17.3%11
New Jersey$56516
20.8%5
Alabama$56517
9.6%29
Kansas$56418
9.0%30
Wisconsin$56219
17.6%10
Pennsylvania$56120
16.9%13
South Carolina$56121
4.0%49
New Hampshire$56022
10.4%27
Connecticut$56023
16.3%14
Massachusetts$56024
14.3%20
Oklahoma$55925
6.8%39
Washington$55826
18.2%9
Iowa$55727
13.6%23
Louisiana$55628
7.1%38
Arizona$55129
6.4%42
Alaska$55030
21.9%3
Delaware$55031
13.3%25
Oregon$54232
16.1%15
New York$53633
25.5%1
California$53534
16.0%16
West Virginia$53435
14.3%19
Rhode Island$53136
18.2%8
South Dakota$52237
5.5%48
Mississippi$52038
6.0%44
Arkansas$51939
5.8%45
Nebraska$51840
8.4%33
Utah$51841
7.3%37
Nevada$51342
17.1%12
New Mexico$49743
8.1%35
Idaho$49144
7.6%36
Vermont$49045
10.3%28
Maine$48746
14.0%21
Wyoming$48047
8.3%34
North Dakota$46348
6.5%41
Montana$43740
13.9%22
Hawaii$37650
24.8%2

DO UNIONS HELP THE ECONOMY? THE ECONOMIC EFFECTS OF LABOR UNIONS REVISITED Richard K. Vedder, Ph.D. & Lowell E. Gallaway, Ph.D.

Using a variety of statistical techniques, we conclude that labor unions have reduced U.S. output by significant amounts - trillions of dollars over time. Additionally, the employment-population ratio and the unemployment rate have been adversely affected by the presence of unions. From the very beginning, unionization materially lowered employment in the auto and steel industries, and union militancy in coal mining has contributed importantly to largely eliminating employment in this once large industry. While some individual workers have profited from unions, the aggregate economic impact is strongly negative.

This study was first published jointly by the NATIONAL LEGAL AND POLICY CENTER of Falls Church, Virginia, and the JOHN M. OLIN INSTITUTE FOR EMPLOYMENT PRACTICE AND POLICY, in the Department of Economics at George Mason University. This study was originally published in the Winter 2002 edition (Vol. 23, No.1), of the Journal of Labor Research, published by the INSTITUTE.

Both authors are Distinguished Professors of Economics at Ohio University. Drs. Gallaway and Vedder have collaborated on a number of important research projects, including Out of Work (1997, New York University Press), a history of the economics of unemployment in the United States.

Richard K. Vedder received his Ph.D. in economics from the University of Illinois in 1965, and has served as an economist for the Joint Economic Committee of Congress. He is the author of seven books and monographs, as well as numerous articles and op-eds that have appeared in publications such as the Wall Street Journal, Christian Science Monitor and Investor's Business Daily.

Lowell Gallaway received his Ph.D. from Ohio State University in 1959, and has served as an economist for the Joint Economic Committee of Congress. He is the author of seven books and over 200 published studies, monographs, articles, essays and reviews.

SPECIAL THANKS FROM AUTHORS: We are indebted to Stephen B. Maguire for making possible the original publication of this study.

I. LABOR UNIONS AND THEIR EFFECTS

Workers who join labor unions expect an improvement in their utility, typically manifested in the form of higher wages and benefits. Indeed, there is a substantial literature that suggests that, other things equal, unionized workers do receive higher rates of compensation than their nonunion counterparts (Lewis, 1963, 1985). At the same time, however, it is possible that unions have longer-term detrimental effects on the economy as a whole and, arguably, therefore, unionized workers. Labor unions may promote practices that reduce hours worked or productivity growth (from union rules, reduced capital formation, barriers to resource mobility, etc.). A number of studies observe a negative relationship between the incidence of union membership and economic performance (Vedder and Gallaway, 1986; Pantuosco et al., 2001). On the other hand, proponents of the concept of efficiency wages and others might argue that the positive effect of unionization on worker morale might raise productivity and possibly economic growth (Krueger and Summers, 1988; Katz, 1986; Altenburg and Straub, 1998).

Of course, the impact of unions on the aggregate performance of the economy would depend in part on their relative importance in labor markets and that has changed dramatically over time. To roughly summarize the 20th century experience, during the first one-third of the century, union membership tended to be small (usually 10 percent or less of employment), in the middle third of the century it tended to be much larger (reaching one-third or so of the labor force), and in the last third of the century the "market share" of labor unions in the private sector was falling rather steadily, by century's end approaching the levels of the earlier part of the century. Thus if unions on balance had adverse effects on the rate of economic growth as some have suggested, those impacts would have been growing in mid-century (when unions were at their peak), but diminishing in the latter part of the century.

II. THE LABOR MARKET IN PERSPECTIVE

In the broadest sense, labor markets tend to conform to the economist's perception of institutions that tend to move toward equilibrium outcomes. In an unconstrained labor market, the price of labor (the wage rate) will move toward a level at which the number of workers interested in working at that wage will match the number of workers that employers are interested in hiring. In the aggregate, this is not likely to occur in all markets, but when it is the typical case, what is often called a "full-employment" situation exists.

This does not mean that there is an absence of statistically-measured unemployment. The measured unemployment under these circumstances can be explained through a choice-theoretic, reservation-wage, job-search model. Job-seeking workers approach the labor market with a reservation wage in mind. If an initial search reveals no job opportunities that satisfy their reservation-wage aspirations, they continue to search. As they do this, they will be regarded by the statistical authorities as involuntarily unemployed, that is, actively seeking work but without a job. As the search process continues and time passes, two things will happen: Superior job alternatives will be revealed, and workers will revise their reservation wage expectations downward in response to the previous search disappointments. Eventually, a correspondence between an actual job (and wage) opportunity and the job-seeker's reservation wage will be attained and the market will clear, as shown graphically in Figure 1.

 

Figure 1

When all job opportunities have been filled, historical experience tells us that there will still be active job seekers in the market. Consequently, statistically measured unemployment will still be observed.1 Expressed as an unemployment rate, this is the "equilibrium" or "natural" rate of unemployment. It differs from the "effective" rate of unemployment, which reflects any mismatch between the quantity demanded of labor and the quantity supplied. At full employment, the effective unemployment rate is zero.2 In the truest sense of the word, any measured unemployment at this point should be viewed as voluntary.

Various factors determine the magnitude of the measured rate of unemployment. Things such as public policies and market imperfections may generate shifts in either the reservation-wage or best-offer loci shown in Figure 1. For example, governmental programs that subsidize job search, such as unemployment compensation and general income-maintenance arrangements, move the reservation-wage locus upward and rightward, increasing the natural rate of unemployment. On the other hand, of particular interest in this essay, is the effect on job search outcomes of the presence of labor unions. At first glance, it might be thought that unions, by raising the wages of their members, would shift the best-offer locus upward. However, in a world in which unions are pervasive, this would not be the case. As unions increase wage rates through the use of their monopoly power, job opportunities in the unionized industries and occupations decrease, increasing the supply of labor in the nonunion sector. This drives wages down in those areas and increases the relative number of lower-wage jobs available to workers engaged in the job-search process. The effect of this is to rotate the best-offer locus to a less steeply sloped position (Figure 2), which, typically, increases the search time necessary to clear the market, thereby increasing the natural rate of unemployment and imposing a deadweight loss of economic output on the economy.

 

Figure 2

The presence of deadweight losses arising out of labor union activity can be shown in an alternative fashion. Here we borrow from Rees (1953, 1963), who has demonstrated the consequences of union wage-raising initiatives on levels of employment in both the union and nonunion sectors of the labor force. His formulation begins with a negative-sloping aggregate demand curve for labor and a fixed supply of labor,3 as shown in Figure 3 in the respective loci Dt and St (where the subscript t denotes total). In an unhampered competitive labor market, the equilibrium wage rate would be Wc. Consider an initial state in which the labor market is divided into two sectors, both of which are nonunion. In both of them, the competitive wage, Wc, will be the norm. Now, let one of the sectors become unionized, say, the smaller one. Denote its demand for labor by Du and the other's by Dn. Presumably, the union presence in its sector will lead to wages among union members rising above the competitive standard. This will reduce employment in the union sector from L2 to Lu.

Those workers who become unemployed in the union sector will tend to gravitate to the nonunion sector, driving down wage rates for those jobs available. Assuming the same slopes for the demand schedules in both the union and nonunion sectors of the labor market, the dead-weight welfare loss to the overall economy is shown by the shaded rectangle in Figure 3 and is equal to 1/2 (Wnu - Wu)(L2 - Lu).

 

Figure 3

The Effects of Union Wage Differentials
on Resource Allocation

The Rees formulation can be made operational if union density and wage premiums are known, as well as the general elasticity of demand for labor. The union density establishes the value of Lu, while the wage premium information permits the calculation of Wnu and Wu. The latter is done by setting the wage that would exist in a competitive market equal to 1.0 and writing Wc = LnuWnu + Lu Wnu, where Lnu and Lu are expressed as decimal fractions of total employment. Knowing the wage premium, this expression can be expanded to Wc = Lnu Wnu + Lu (1 + a) Wnu, where a is a decimal fraction representing the union wage premium. With Wc set to 1.0, we can solve for Wnu, viz., Wnu = 1/[(1 + a)] Wu.

This leaves only the calculation of L2 to make Rees's model operational. At this point, an estimate of the aggregate elasticity of demand for labor is needed to estimate the employment effects of the wage premium in the union sector using the expression L2 = Lu/[(Wu - Wc)EDL], where EDLrepresents the aggregate elasticity of demand for labor.

The only remaining question is, "What value should be used for EDL"? Drawing on a framework suggested in some of our other work, we have selected a value of -0.76 for this statistic.4 Using it and other estimates of the necessary data, we have calculated the Rees effect deadweight losses associated with the presence of labor unions in the American economy for selected years between 1947 and 2000. The results, expressed as a percentage of workers' wages, are shown in the second column in Table 1. Consistently, they show a deadweight loss of slightly more than a third of one percent of workers' wage income. Adjusting to take into account the fact that wages are only a fraction of Gross Domestic Product (GDP), albeit a large one, the net loss of GDP is about a quarter of a percent a year. See column two of Table 1.

 

Table 1

Estimated Deadweight Loss of U.S. National Income
Resulting from the Presence of Trade Unions, Various Years, 1947-2000

(Percent)

FactorLabor Supply
YearsRees EffectAdjustedEffectTotal Effect
19470.600.400.010.41
19530.090.060.290.35
19600.340.230.540.77
19670.340.230.540.77
19730.390.260.610.87
19800.410.280.630.91
19860.330.220.560.78
19930.260.170.400.57
20000.110.080.260.34

There is a shortcoming to the Rees methodology. He assumes a perfectly inelastic aggregate supply of labor. Consequently, any labor supply effects associated with the beating down of wage rates in the nonunion sector of the labor force are ignored. If the aggregate quantity supplied of labor responds positively to changes in wages, there will be an additional amount of output lost as the result of union activity equal to Lnu (Wc - Wnu) ESL, where ESL denotes the aggregate supply of labor.5 Estimates of this loss are shown in column three of Table 1. The values shown there range between one-half and three-quarters of one percent. Thus, the combination of Rees deadweight losses and labor supply effects can impose as much as a one percent annual drag on the American economy's output. The mean value of the three sets of estimates shown in Table 1 is 0.823 percentage points. In a $10-trillion economy (roughly the current level in the U.S.), that amounts to $82.3 billion or over $300 per person.

III. IS THERE EMPLOYMENT SHIFTING?

At the heart of the Rees formulation is the proposition that the adverse employment effects associated with labor unions are reflected by higher levels of employment and lower levels of wage rates in the nonunion sector of the labor market. How valid is this proposition? To answer that question, we explore the historical data concerning employment and wage levels in different parts of the labor force. We begin with the period 1919-1933, a time when labor unions were a relatively small factor in the American economy. This is an interval in which the average compensation per full-time-equivalent employee in the industrial callings that would later become central to the growth in unionism in America is only slightly greater than compensation in industries that would later be regarded as relatively nonunion. Details are shown in Table 2. For fourteen years of data, the average union-nonunion differential amounts to a mere 3.2 percent.6 And, in four years, it is actually negative. In fact, a simple t-test of the null hypothesis that the true differential is equal to zero leads to its acceptance.7 Thus, there is a period which, in a statistical sense, possesses characteristics not unlike those of a competitive labor market.

 

Table 2

Compensation Per Full-Time-Equivalent Employee* (Column A) 
and Difference in Compensation Per Full-Time-Equivalent Employee
between Union and Nonunion Sectors (Column B), 1919-1960

                                                                (1957-1959 Prices)

YearColumn AColumn B
1919$2,037 $147
19212,098 121
19222,306 -44
19232,319 131
19242,316 150
19252,319 92
19262,383 76
19272,386 158
19282,446 175
19292,624 147
19302,479 96
19312,586 -6
19322,560 -151
19332,466 -18
19342,455 26
19352,467 90
19362,499 201
19372,520 264
19382,556 149
19392,607 269
19402,611 369
19412,641 612
19463,274 484
19473,341 625
19483,192 704
19493,314 711
19503,431 839
19513,348 993
19523,431 1,068
19533,570 1,122
19543,700 1,107
19553,856 1,225
19563,992 1,323
19574,009 1,369
19584,038 1,388
19594,216 1,478
19604,348 1,437

Note: *In order to take account of changes in industrial mix through time, 1954 weights were used throughout to standardize the estimates of compensation per full-time-equivalent employee. Thus, these estimates abstract from shifts in industrial structure.

Source: U.S. Department of Commerce, Bureau of the Census, Historical Statistics of the United States, Colonial Times to 1957, Series D-685-D-719; and U.S. Department of Commerce, Survey of Current Business, July 1961.

From an historical standpoint, the terminal year in this interval is an important demarcation in the history of American labor unions. In 1933 the National Industrial Recovery Act (NIRA) was passed, which contains a section 7(a) that is the precursor of the National Labor Relations Act of 1935 (the Wagner Act). Between 1933 and 1935, there was a transformation of American public policy towards positive federal government encouragement of and support for unions. At the beginning of this period (in 1933), the union-nonunion industry wage differential was negative and less than one percent of the average level of compensation. Under the stimulus of the NIRA, by 1935, this differential had turned positive and risen to 3-4 percent of the average compensation level. After 1935, the union-nonunion wage differential surges, exceeding twenty percent by 1941. The general pattern shown by these data is simple: From 1919 through 1933, there is little, if any, wage differential and no time trend in it.8 After 1933, there is a pronounced upward time trend in this differential through 1941. There is a brief hiatus in the increase in the wage differential during World War II. However, subsequent to the war, the differential resumes its pre-war pattern of growth, reaching about one-third of average compensation per full-time- equivalent employee in 1960. Clearly, the behavior of wage differentials immediately subsequent to the adoption of a public policy that encourages labor unions is quite consistent with the Rees framework.

What about employment patterns, though? Here, we pick up the story in the post-World War II period. In a world where unions have the impacts already suggested, we would expect a systematic shifting of the overall structure of employment away from the union and toward the nonunion sectors of the labor force. Thus, over time, there would be a relative decline in employment in the union sectors and a relative rise in employment among nonunion workers.

As a first step in analyzing the nature of changes in the structure of employment, we have estimated the following regression equation for each of nine broad private nonagricultural industries of employment: EMPi= a + b TOTEMP + c TIME, where EMPi denotes employment in the ith industrial sector; TOTEMP represents total employment in the economy (included to control for intertemporal growth in employment); and TIME is a variable to capture the passage of time. Since our data set covers the fifty-year time period 1950-1999, the TIME variable takes the value one in 1950, two in 1951, etc., through 50 in 1999. The results of these estimations are shown in Table 3. In seven of the nine cases, the coefficient of the time-drift variable is statistically significant at the five-percent level. Four of the significant coefficients are negative and three are positive. Most interesting, the four significant negative time-drift industries (mining, construction, durable goods manufacturing, and transportation and public utilities) have the highest union densities in 1973, 1980, and 1986.9 On the other hand, the three positive time-drift coefficients are in retail trade, finance, insurance and real estate, and service employment, all very low union-density sectors. As to the two nonsignificant coefficients, wholesale trade, a low union-density sector, has a positive sign, and nondurable manufacturing, on the high side in terms of union density, has a negative sign.

 

Table 3

Regression Analysis of Time Drift in Employment,
by Sector, 1950-1999

Time-Drift
IndustryCoefficientt-StatisticProbability
Mining-21.752.02 0.0496*
Construction-58.314.660.0000*
Durable Goods Manufacturing-908.934.330.0001*
Nondurable Goods Manufacturing -423.461.100.2773
Transportation and Public Utilities-65.966.310.0000*
Finance, Insurance, and Real Estate88.446.560.0000*
Wholesale Trade5.83 0.470.6403
Retail Trade113.83 2.360.0000*
Service590.513.660.0000*

Note: *Statistically significant at the five percent level or higher.

The pattern of statistical significance shown in the time-drift coefficients is extremely consistent with the Rees model. High union-density areas experience a significant negative time drift in their employment relative to overall employment. And, low union-density industries show significant positive time drifts. What is suggested is the shifting of displaced union workers to nonunion employments. If the time-drift coefficients are expressed as percentages of average sectoral employment over the interval 1950-1999, the respective rank-order correlation coefficients between the time-drift measure and union density for 1973, 1980, and 1986 are -0.74, -0.62, and -0.61, respectively.

IV. MORE EXTENDED ESTIMATES

Clearly, the stylized facts of the post National Industrial Recovery Act and National Labor Relations Act of 1935 era are broadly consistent with the argument propounded by Rees. Thus, it seems appropriate to extend the earlier estimation of the deadweight economic losses associated with the existence of labor unions to encompass a more extended time period. This requires the developing of deadweight loss estimates for additional years. Subsequent to 1986, we have made the necessary calculations for 1993 and 2000, while, prior to 1973, we have added estimates for 1947, 1953, 1960, and 1967.10 The results of these calculations, in combination with our earlier estimates, are displayed in Figure 4. The pattern shown by this graphic is intriguing. In the early years following World War II, the deadweight losses associated with union activity are relatively small, although not trivial, amounting to slightly more than one-third of one percent of annual output. However, after 1953, as unions become more solidly entrenched in the economy, the deadweight losses mount, peaking in the 1970s. This is followed by a decline in union impact as both union membership (density)and the union wage premium fall. By the end of the century, the deadweight loss estimates have returned to their early post-World War II levels.

 

Figure 4

Union-Produced Deadweight Loss
as Percent of Gross Domestic Product

The variability in the economic cost of labor unions over the last half century or so makes it more difficult to arrive at generalizations about their total cumulative cost. To deal with this problem, we have calculated simulated (or counterfactual) levels of GDP for 1947 through 2000 that assume a zero deadweight cost of unions. The year-to-year values of the deadweight losses that are assumed in these calculations are estimated by extrapolating in a linear fashion between the individual years for which actual estimates are provided. The results of this simulation are shown in Figure 5 and provided in Table 4. They are striking. By 2000, our simulations show a shortfall in current real GDP (1992-1994 dollars) of about $3.5 trillion dollars--about forty percent of current GDP.

 

Figure 5

Real Gross Domestic Product
(1992 Prices)

This may seem to be an astoundingly large number. However, it must be remembered that the deadweight economic losses that are being measured are not mere one-shot impacts on the economy. They recur, every year, relentlessly, cumulating in their impact. What our simulations reveal is the powerful effect of the compounding over more than a half-century of what appears at first glance to be small annual effects. An even more dramatic statement of the economic cost of unions is provided by cumulating the lost income and output over the entire 54-year period under consideration. The result exceeds $50 trillion (1992-1994 prices), a breath-taking total.

 

Table 4

Comparison of Actual Real U.S. Per-Capita Gross Domestic
Product with Simulated Gross Domestic Product
Assuming an Absence of Deadweight Losses Attributable
to Labor Unions, 1959-1999

Actual Per-CapitaSimulated Gross
YearGross Domestic ProductDomestic Product
1959$2,300.0$2,316.4
19602,357.22,374.4
19612,412.12,447.8
19622,557.62,614.8
19632,668.22,748.4
19642,822.22,930.4
19653,002.83,142.1
19663,199.53,375.5
19673,279.53,486.7
19683,435.63,682.8
19693,543.23,827.6
19703,549.43,867.0
19713,660.24,020.6
19723,854.24,270.5
19734,073.14,553.5
19744,061.24,579.7
19754,050.34,606.5
19764,267.64,889.0
19774,455.75,154.9
19784,709.95,498.2
19794,870.15,736.8
19804,872.35,789.5
19814,993.95,987.5
19824,900.35,925.3
19835,105.66,227.1
19845,477.46,737.6
19855,689.87,056.8
19865,885.77,354.1
19876,092.67,669.0
19886,349.18,049.1
19896,568.78,388.7
19906,683.58,587.9
19916,669.28,625.1
19926,891.18,963.5
19937,054.19,231.3
19947,337.89,651.7
19957,537.19,962.1
19967,813.210,349.4
19978,165.110,894.5
19988,516.311,409.7
19998,861.011,910.2

An alternative way of expressing the economic impact of unions is to assess the effect on the growth rate in real GDP. We do this by comparing the mean actual growth rate with the mean of the year-to-year percentage changes in our simulated GDP series. The difference is approximately three-quarters of a percentage point a year. Among students of Edward Denison-style national income growth accounting, that is a huge impact, quite consistent with the counterfactual output differences already reported.

One interesting implication of this finding is that it implies that even union members are potentially worse off from the effects of unionization. If unionization has an accumulated long-term impact of lowering GDP by, say, 30-40 percent, and union members earn a 15-20 percent wage differential from unionization, the gains to union members from the wage differential are more than offset by the losses associated with lower wage levels in general arising from a smaller national output.

To summarize the findings of this section of our appraisal of the economic cost of government-sponsored union activity in the U.S., it can be said that it is perhaps a classic case of a doctrine laid down by Frederic Bastiat (1850) a century-and-a-half ago, when he opined, "it almost always happens that when the immediate consequence [of an economic policy] is favorable, the later consequences are disastrous." In this instance, those "later consequences" amount to what can be thought of as a "$50-trillionmisunderstanding."

V. A CROSS-SECTIONAL APPROACH

An alternative approach is to examine how labor unions affect economic performance cross-sectionally (Vedder and Gallaway, 1986; Pantuosco et al., 2001). Unlike previous studies, we decided to examine variations in economic performance over a long time horizon, the 35-year period 1964 to 1999. Our sample is the 50 U.S. states plus the District of Columbia.

Real per capita income growth (hereinafter, GROWTH) from 1964 to 1999 varied substantially among the states, from lows of under 80 percent in California and Alaska to over 150 percent in Georgia, Mississippi, North Carolina, South Carolina, and Tennessee. The incidence of unionization (UNION) likewise varied widely. Since union membership as a percent of the labor force declined over time, we took an average of membership as a percent of the labor force at the beginning and end of the period. That average varied from 5.3 percent in North Carolina to 37.1 percent in Michigan.

We introduced five additional independent variables into our analysis:MANUF (the percent of employment in manufacturing early in the period); INCOMETAX, the number of times at four different dates in the period that a state levied an individual income tax on employment-based income; INC64, real per capita income in 1964; POLITICS, the percent of the population voting for Ronald Reagan in the 1984 presidential election; and COLLEGE, the percent of the population over 25 years with a college education or the equivalent as of the 1980 Census. Finally, we introduced 64INCOME as a variable, the level of personal income per capita in 1964, at the beginning of the period examined. If neoclassical income convergence is happening, we would hypothesize a negative relationship between 64INCOME and GROWTH.

Table 5 includes the results using OLS regression analysis. There is a statistically significant (at the one percent level) negative relationship between UNION and GROWTH. For each increase of one percent of the labor force belonging to labor unions, it is estimated that real income growth per capita is lowered by over 1.24 percent-age points. The elasticity of per capita income growth with respect to unionization is about -0.16.11 Of secondary interest, there is a significant positive relationship between COLLEGE and GROWTH and between MANUF and GROWTH. GROWTH is related in a statistically significant negative fashion with the other three independent variables.

 

Table 5

Explaining Interstate Economic Growth, 1964-1999:
OLS Regression Results

INCOMETAX

Variable or StatisticEstimated Valuet-Statistic
Constant217.868.885
UNION-1.24 3.349
MANUF 0.9 6.101
-5.73 3.336
64INCOME-0.01 3.885
POLITICS-0.8 3.308
COLLEGE1.95 2.152
R2.716

From the results in Table 5, it is possible to estimate the impact that unionization has had, not only on the U.S., but on individual states. Turning first to the nation as a whole, the average state had union membership equal to 18.88 percent of its labor force. This compares with 5.3 percent in the state with the least unionization, North Carolina. If all states had the level of unionization of North Carolina, the model predicts that the rate of growth of real per capita income would have been increased by 16.89 percentage points. The mean rate of growth was 112.43 percent, so with North Carolina levels of unionization, growth would have been 129.32 percent.

This suggests that the real annual compounded rate of per capita income growth would have increased from the actual 2.18 percent to 2.40 percent, or by 22 basis points. Using a counterfactual assumption of no unions whatsoever, the mean growth rate over the 35 years is an estimated 135.85 percent, or an annual growth rate of 2.48 percent a year, some 30 basis points more than the actual growth. The estimated 1999 personal income per capita under the assumption of zero unionization is more than 10 percent higher than actually recorded, implying a gross domestic product loss associated with unionization in the year 1999 of about $1 trillion. The present value of the accumulated loss over the 35 years is, of course, measured in many trillions, reasonably consistent with the rather extraordinary estimates using a quite different methodology cited above.

In Table 6, we report the actual personal income per capita by state in the year 1999, as well as a counterfactual estimate of what that income would have been if all states had the level of unionization of the state of North Carolina. High levels of unionization are estimated to have severe adverse effects in Northern industrial states such as Michigan, New York, and Illinois, but the low relative levels of unionization in most southern states suggest that unionization had little impact. In reality, income per capita in Georgia in 1999 was less than four percent higher than in Michigan, but the model estimates that if both states had North Carolina's low level of unionization, Michigan's income per capita would have exceeded Georgia's by over 21 percent. Thus the differential patterns of unionization have had an important role in explaining interstate income differentials and changes in those differentials over time.

 

Table 6

Actual and Counterfactual Personal Income
Per Capita by State, 1999

Actual 1999Counterfactual% Income
StateIncomeIncomeLost
Alabama$22,987$24,1354.99
Alaska28,57732,77314.68
Arizona25,18926,295 4.39
Arkansas22,24423,073 3.73
California29,91033,995 13.66
Colorado31,54633,330 5.65
Connecticut39,30043,020 9.47
Delaware30,77833,633 9.27
District of Columbia39,858 42,781 7.33
Florida27,78028,553 2.67
Georgia27,34028,065 2.65
Hawaii27,54430,946 12.35
Idaho22,83524,096 5.52
Illinois31,14535,800 14.95
Indiana26,14329,752 13.81
Iowa25,61527,700 8.14
Kansas26,82428,318 5.57
Kentucky23,23725,029 7.71
Louisiana22,84723,925 4.67
Maine24,60326,403 7.32
Maryland32,46535,012 7.84
Michigan28,11334,084 21.24
Minnesota30,79334,243 11.20
Mississippi20,68821,152 2.24
Missouri26,37629,83513.12
Montana 22,019 25,025 13.65
Nebraska 27,049 28,415 5.05
Nevada 31,022 35,448 14.27
New Hampshire 31,114 32,735 5.21
New Jersey 35,551 39,906 12.25
New Mexico 21,853 22,822 4.44
New York 33,890 39,547 16.69
North Carolina 26,003 26,003 0.00
North Dakota 23,313 24,208 3.84
Ohio 27,152 31,071 14.43
Oklahoma 22,953 23,903 4.14
Oregon 27,023 30,382 12.43
Pennsylvania 28,605 32,556 13.81
Rhode Island 29,377 32,511 10.67
South Carolina 23,545 23,562 0.07
South Dakota 25,045 25,385 1.36
Tennessee 25,574 26,592 3.98
Texas 26,858 27,572 2.66
Utah 23,288 24,335 4.49
Vermont 25,889 27,165 4.93
Virginia 29,789 30,685 3.01
Washington 30,392 35,310 16.18
West Virginia 20,966 24,166 15.27
Wisconsin 27,390 30,819 12.51
Wyoming 26,396 27,852 5.52

There is evidence that the presence of significant unionization has been a major factor in the convergence of incomes over time. In 1964, the coefficient of variation on per capita income variations between the states (including the District of Columbia) was .1894. By 1999, that figure had declined to .1593, or about 16 percent. This is a sign of greater geographic income equality, as the poor states gained noticeably on the rich ones. Yet, if the regression coefficient in Table 5 is approximately correct, much of the convergence occurred because of union-related sluggish economic growth in relatively high-income Northern states. The flight of capital to the South to avoid the high wages associated with unions, and of workers to the North to obtain those higher wages, was no doubt critical to convergence.

We calculated the coefficient of variation in 1999 on the counterfactual income per capita numbers in Table 6 to be .1799. Of the 301 basis point decline in the coefficient of variation on per capita income between 1964 and 1999, some 206 points, or over 68 percent, can be attributed to the presence of unionization beyond that found in the state with the least unionization, North Carolina.

Some might read these results as favorable to unionization. After all, the presence of extensive unionization has hastened income convergence, meaning that the poor states of the South are not as poor any more in some relative sense. Yet that ignores the fact that unionization is estimated to have lowered incomes for all, albeit more in the relatively higher income states that on average have higher levels of unionization. If unionization has led to a more even distribution of the income pie, it also has led to a significantly smaller pie, one in which everyone gets smaller slices. Any increase in spatial income equality has come at a very high price.

The findings above are obviously sensitive to the statistical estimates generated. We re-estimated the model represented in Table 5 using alternative variables for control purposes. In every case, we obtained a statistically significant negative relationship between UNION and GROWTH. Moreover, the regression estimate for UNION presented in Table 5 was below the mid-range of estimates generated by sensitivity analysis, increasing our confidence in the proposition that unionization can and does have significant adverse effects on the growth in aggregate economic activity.

VI. UNIONS AND EMPLOYMENT OPPORTUNITIES REVISITED

As indicated above, if the goal of unions is to raise wages for their members, then, in the absence of productivity gains, one would expect employment opportunities to fall as a consequence of unionization, since, ceteris paribus, the quantity of labor demanded would fall with higher wages. The job creation effects are the result not only of reductions in the quantity demanded of labor in the union sector of the labor market, but also the labor supply impacts of lower wage rates in the nonunion sector.

A cursory glance at data on union density and involvement in the labor force shows that over time the proportion of the working-age population that was employed has steadily increased, while union density has decreased. For example, at mid-century, the percent of nonagricultural workers belonging to unions exceeded 30, while only about 56 percent of civilians over the age of 16 were working. By the end of the century, union density among nonagricultural workers had fallen by over one-half, but the civilian employment-population ratio had risen to above 64 percent (U.S.Bureau of the Census, 1975, p. 178; Economic Report, 2001, p. 316).

Compare the periods 1953-1973 with 1973-1999. The first period is one of relatively high union density, whereas the second one is clearly an era of steady decline in the incidence of unionization. Let us compare what one might call the "marginal employment-population ratio" in both periods. Specifically, let us look at the growth in total civilian employment as a percent of the total growth in the noninstitutional population aged 16 and over.

During the first of these two periods, employment rose by 23,885,000, and the relevant population by 40,040,000, giving a marginal employment-population rate of 59.7 percent. Both 1953 and 1973 are business cycle peaks, so the results are not significantly skewed by cyclical considerations. During the more recent period of lower and declining union density (also involving data for two prosperous years, largely eliminating cyclical factors), employment rose by 48,424,000, while the appropriate population rose by 60,657,000. The marginal employment-population ratio rises by almost precisely one-third, to 79.7 percent. This 20 percentage point increase in this ratio is the equivalent of saying that for each 10 new potential workers, two more were employed in the period of low unionization compared with the era of enhanced union density. If the higher marginal-population ratio had prevailed during the era of high labor union influence, some eight million more jobs would have been created.

This is a rather startling result, but might be criticized because it assumes that the pronounced rise in employment relative to the potential labor force entirely reflected change in unionization. Accordingly, using an alternative data source and methodolgy, we did two more estimations, reported in Table 7. We first examined variations in interstate rates of unemployment (UNEMP). Because unemployment rates vary over time and business cycle effects often are uneven spatially, we used as our measure the median of the unemployment rate for nine years dispersed widely over the period 1964 to 1999.12 As we have indicated elsewhere (Vedder and Gallaway, 1996), interstate variations in unemployment are quite substantial. We observe a range from 2.9 percent in Nebraska to 9.2 percent in Alaska (the high for the contiguous U.S. was 6.8 percent in West Virginia).

 

Table 7

Impact of Unions on Unemployment and
the Employment-Population Ratio: OLS Regression Results

Variable or StatisticDependent Variable:Dependent Variable:
UNEMPEMPOP
Constant 11.494 47.768
(7.089) (9.338)
UNION 0.074 -0.255
(3.114) (3.141)
MANUF -0.034
(2.595)
FARM -6.643 12.716
(1.854) (1.157)
COLD -0.000 0.001
(2.700) (4.148)
SUNSHINE -0.049 0.113
(2.767) (1.921)
64INCOME -0.000 0.001
(1.750) (3.511)
OVER65 -0.072 -0.607
(1.109) (2.986)
R2 0.517 0.590

In the second regression, we examined variations in the employment-population ratio, EMPOP. As with unemployment rates, the employment-population ratio varies substantially. In Table 7, we used a mid-range year, 1981, for our estimate of it.13 In each of the OLS regressions, we incorporated a number of other variables into the analysis for control purposes and to reduce the probability of significant omitted-variable bias. Among those variables not used in the earlier regression analysis are FARM, the percent of personal income in a state derived by farming at the beginning of the period (1965), COLD, the number of heating degree days annually, SUNSHINE, the average percentage of days annually the sun shines, and OVER65, the percent of the state ?s population over the age of 65 in 1981.

The results show strong and statistically significant (at the one percent level) negative relationships between our UNION variable and each of the dependent variables. The unemployment results suggest that a state with a 10 percent unionized work force could expect, other things equal, a 0.7 percentage point increase in its unemployment rate. The employment-population ratio results are even more robust. They suggest, other things equal, that for each four additional workers who become unionized, one less person works. Put differently, had union density at the end of the twentieth century remained about what it was near the middle of the century, union membership today would be well over 10 million higher, meaning that the loss of jobs would be measured in the millions. Unions have a profound effect on total employment.

Looking at the two regressions together, the adverse employment effects of unionization largely (about 80 percent) may come from an increase in the proportion of the work age population not in the labor force, and about 20 percent from higher unemployment. The higher wages associated with unionization may cause people to withdraw from the labor force because they are discouraged or because they opt for greater leisure (e.g., union workers may retire at younger ages).

These results do suggest that the rise in the employment-population ratio in modern times reflects more than changing attitudes of women towards work. The decline in the proportion of workers in unions seems to be an important factor in explaining the rising proportion of people working over time. It is true that the rise in the employment-population ratio is entirely the result of rising female employment participation. But it is at least plausible, and perhaps even probable, that the decline in unionization has enhanced the involvement of women in the world of work, just as the reverse may also be to some extent true.

The findings above are reinforced using other data and methodologies. We examined the growth in employment over time by occupation and industry. The approach to the calculation of union density by the U.S. Bureau of Labor Statistics changed in 1983, so for consistency we examined occupational and industry employment for 1983 and 2000. Tables 8 and 9 show the raw data. Starting with occupations (Table 8), there were six categories that were relatively union-intensive, in that the proportion of workers belonging to labor unions exceeded the average for the entire economy in both 1983 and 2000: professional workers, protective service, precision production workers, machine operators, transportation workers, and handlers. Employment in those six classifications grew by 33.3 percent from 1983 to 2000. By contrast, the relatively low union density classifications (executives, technicians, sales, administrative support, services other than protective service, and farming), witnessed employment growth of 39.8 percent, or nearly 20 percent higher. Job growth was meaningfully greater in the relatively nonunion occupations.

 

Table 8

Growth of Employment by Occupation and Union Density, 
1983-2000

UnionUnionNumber ofNumber of% Growth
OccupationalDensity:Density:Workers: Workers:in
Category198320001983a2000aEmployment
Executive,
Administrative 8.1% 5.3% 8,546 16,434 92.3%
Professional 24.0 19.3 11,111 18,444 70.5
Technicians 12.1 10.1 3,001 4,279 42.6
Sales 6.7 3.5 9,234 13,677 48.1
Admin. Support 15.0 12.1 15,789 18,167 15.1
Protective Serv. 39.0 39.4 1,674 2,384 42.4
Other Services 11.8 8.1 11,202 14,569 30.1
Machine
Operators, etc. 36.9 19.4 7,537 7,043 -6.6
Precision
Production, etc. 32.9 21.9 10,546 12,716 20.6
Transportation 38.5 23.1 3,822 5,182 35.6
Handlers, etc. 29.5 17.3 4,058 5,417 33.5
Farming, etc. 5.5 4.5 1,775 1,974 11.2
ALL JOBS 20.1 13.5 88,290 120,786 36.8

Note: a Numbers in Thousands.
Source: U.S.Bureau of Labor Statistics and authors' calculations.

That approach, however, probably understates the adverse effects of unionization on employment growth. Two of the occupational classifications, professional and protective service, include disproportionately large numbers of government workers (e.g., teachers and police officers). Theory expects the wage-enhancing goals of unions will reduce employment in the private market economy where firms try to maximize profits by producing where marginal costs equal marginal revenues. That is not necessarily the case in the governmental sector. Excluding the two government-intensive occupational sectors, employment grew only 16.8 percent in the remaining four union-intensive categories, substantially less than one-half the growth rate for the relatively nonunion sectors. If those four occupational categories had grown at the average of the six relatively nonunion-intensive occupational classifications, job growth would have been about six million greater.

The results are perhaps even starker when one turns to the industrial classifications of employment data (Table 9). There are six categories of employment where union density exceeded the average for the entire labor force in both 1983 and 2000: construction, durable goods manufacture, nondurable goods manufacture, transportation, communications and public utilities, and government. There were five categories that had below-average union density in both years: agriculture, wholesale and retail trade, finance, and services. The 12th category, mining, is ambiguous, with above average union density in 1983 and below average in 2000.

 

Table 9

Employment Growth, 1983-2000, by Industrial Classification

UnionUnionNumber ofNumber of% Growth
OccupationalDensity:Density:Workers: Workers:in
Category198320001983a2000aEmployment
Executive,
Administrative 8.1% 5.3% 8,546 16,434 92.3%
Professional 24.0 19.3 11,111 18,444 70.5
Technicians 12.1 10.1 3,001 4,279 42.6
Sales 6.7 3.5 9,234 13,677 48.1
Admin. Support 15.0 12.1 15,789 18,167 15.1
Protective Serv. 39.0 39.4 1,674 2,384 42.4
Other Services 11.8 8.1 11,202 14,569 30.1
Machine
Operators, etc. 36.9 19.4 7,537 7,043 -6.6
Precision
Production, etc. 32.9 21.9 10,546 12,716 20.6
Transportation 38.5 23.1 3,822 5,182 35.6
Handlers, etc. 29.5 17.3 4,058 5,417 33.5
Farming, etc. 5.5 4.5 1,775 1,974 11.2
ALL JOBS 20.1 13.5 88,290 120,786 36.8

Note: a Numbers in thousands. 
Source: U.S. Bureau of Labor Statistics and authors' calculations.

Employment growth in the six union-intensive categories was 24.4 percent from 1983-2000, compared with 55.2 percent in the five classifications with relatively low union density. If the percentage employment growth in the relatively high density industries had equaled that in the relatively low density industries, about 10 million more jobs would have been created. Had employment growth equaled that of the economy as a whole (36.8 percent), there would have been four million more jobs created. Thus the job deficiency associated with high union density may well be somewhere between four and ten million jobs, consistent with earlier estimates.14

The industry data stress the growing relative importance of public employment in American unionization. Looking at the total labor force, union density declined from 20.1 percent in 1983 to 13.5 percent in 2000, a decline in the proportion of the labor force in unions of slightly less than 33 percent. Looking at the private sector alone, however, density fell from 16.5 to 9.0 percent, a decline of over 45 percent. The decline in unionization in the market economy is in marked contrast to that in the public sector, where membership has grown significantly in an absolute sense, and even slightly as a percent of the work force. The discipline that the market imposes has made unionization less attractive. Governmental activity largely lacks that market discipline and is characterized by considerable rent-seeking--an environment in which unions flourish.

VII. UNIONS AND THE DEATH OF JOBS: TWO CASE STUDIES

The Birth of Unions and Job Destruction: The Case of Steel. In 1935, the National Labor Relations Act (Wagner Act) was enacted. By greatly expanding the move towards a pro-union/high-wage political environment that had begun four years earlier with the Davis-Bacon Act, the Wagner Act within a few years led to massive increases in union density in the U.S. In 1934, the year before the passage of the Wagner Act, union density among nonagricultural workers was less than 12 percent, while a decade after the legislation's enactment the density had tripled to over 35 percent (U.S. Bureau of the Census, 1975, p. 178). In the two years 1936 to 1938, union membership doubled. It was precisely in that period that recovery from the Great Depression stalled. Unemployment rates fell from over 21 percent as late as October 1935 to under 13 percent by May 1937 (Vedder and Gallaway, 1997, p. 77). The Wagner Act only began to be effective in the Spring of 1937, in large part because employers largely ignored it, believing, wrongly, that it would be found unconstitutional. In the spring of 1937 the great union organizing drives successfully occurred in several major industries, leading to huge wage increases in late 1937 that reversed the promising 1935-1937 recovery and led to rising unemployment: the unemployment rate surpassed 20 percent again by the spring of 1938.

Nowhere was the fight to unionize more contentious yet ultimately successful than the steel industry. While the U.S. Steel Corporation negotiated a collective bargaining agreement at the end of March 1938, and the Jones and Laughlin Company after a short strike in May, a bitter and bloody battle erupted with the "Little Steel" companies. When it all subsided by September, 18 had been killed and 168 injured (Taft, 1964, pp. 515-22).

The upshot of the unionization was a dramatic increase in the wages of workers and an equally dramatic decline in employment. From the last quarter of 1936 (the last quarter before U.S. Steel signed a collective bargain agreement) to the second quarter of 1938 (about eight months after the end of the Little Steel strikes), money wages per hour rose more than 21 percent (amidst double-digit national unemployment!), and manhours worked in steel mills fell by more than 51 percent, reversing employment gains that had occurred during 1936 when money wages were relatively stable and real unit labor costs were actually falling because of rising productivity (Vedder and Gallaway, 1997, p. 136).

After the initial trauma of unionization, markets did adjust to the new environment. From the second quarter of 1938 to the fourth quarter of 1940, money wages rose very little, but robust productivity gains, no doubt in part induced by labor-saving technological change resulting from the new high wages, led to a significant decline in the real wage adjusted for productivity change. As a consequence, employment again rose sharply. Nonetheless, even in the fourth quarter of 1940, when the nation was moving rapidly to war mobilization, employees in the steel industry worked fewer hours than four years earlier, before unionization had begun.

Long-Term Unionization and Job Destruction: Coal Mining. The quintessential militant labor union leader during the golden age of American labor unions was John L. Lewis (1880-1969), head of the United Mine Workers. Not only was he an extremely aggressive and powerful leader of his union, he was by most accounts the founder of twentieth century industrial unionization as practiced by the CIO (Congress of Industrial Organizations). Yet a strong union tradition in mining predates Lewis, who became UMW president in 1920. From the late nineteenth-century on, America's miners had showed a significant interest in unionization, and "in 1897, the United Mining Workers of America became the largest union in the United States, a position it retained for almost three decades" (Taft, 1964, p. 166). Nonetheless, many miners remained nonunion until membership grew sharply after the improvement in the political-legal environment for collective bargaining beginning in the early 1930s.

From 1909 through 1927, the number of production workers in bituminous coal mining in the United States oscillated around 500,000 or 600,000 (U.S. Department of Labor, 1968, pp. 19-20). While employment declined in the Great Depression, it never recovered. During World War II, Lewis incurred the wrath of the War Labor Board and the American public by repeatedly violating labor's no-strike pledge, followed by long and bitter strikes in the immediate post-war era. This strategy did lead to higher wages, with weekly wages well over tripling from 1933 to 1944 (U.S. Department of Labor, 1968, p. 20). Employment, which had been 471,000 in depression year 1937, had fallen to 351,000 by relatively prosperous 1950. When Lewis gave up the UMW presidency in 1960, employment had fallen below 150,000, a decline of about 400,000 during the four decades of his leadership.

Output had fallen by more than one-fourth, as consumers switched to other fuels. Railroads started using oil-consuming diesel locomotives; homes switched to gas, oil, and even electric heat. At the retail level, coal prices more than doubled from 1935 to 1950, while natural gas retail prices rose at best 10 percent (U.S. Bureau of the Census, 1975, p. 214). Aside from being dirty and relatively labor intensive, home heating with coal was losing its price advantage over alternative fuels, in part because of the high cost of mining it.

While coal mining had a brief revival in the 1970s and 1980s propelled by the explosion in oil prices, booming electricity demand, and other factors, by 1999, only 70,000 production workers were left in coal mining in the U.S., barely one-tenth the number when Lewis assumed the UMW presidency 80 years earlier. Coal miners remained among the best paid industrial workers, earning nearly 50 percent more than the average for private sector workers (U.S. Bureau of the Census, 2000, p. 428). While environmental, occupational safety, and other factors no doubt played a role, several decades of union militancy exacted a heavy toll on employment in the coal mining industry. Ironically, the United Mine Workers by 2000 were a shadow of their former self, as high wages reduced industry employment and led also to a growth in nonunion mining activity.

VIII. UNIONS AND THE QUALITY OF LIFE

Because utility is essentially unmeasurable with precision, we cannot state precisely what the impact of unions is on happiness or, broadly speaking, "the quality of life." There is one act of revealed preference, however, that is probably a reasonable proxy measure for the general level of satisfaction with a geographic locale, namely the amount of net spatial migration. If people, net, are moving into an area, that suggests that the area is perceived as being relatively attractive, for a variety of economic and noneconomic reasons. Likewise, net out-migration would be a sign that an area is relatively unattractive, leading people to vote with their feet by moving elsewhere.

The U.S. Bureau of the Census (2000) has estimated net domestic migration for the 50 states and the District of Columbia for 1990 to 1999. The sum of migration is zero--each interstate act of migration is recorded as a negative (out-migration) for the state of origin, and as a positive (in-migration) for the state of destination. We took the 10 states with the highest rates of in-migration in the 1990s and observed their end-period union density.15 We compared that figure with the union density in the 10 states with the greatest out-migration.16 Note that in the states with the highest out-migration (a total of 6,468,945), the median union density in 1999 was 17.7 percent, well above the national average of 13.5 percent, and more than twice the median density in the 10 states with the greatest in-migration (that received a total of 5,200,608 migrants).

While that evidence is rather strong, we decided to classify the data an alternative way, namely by union density. We took the 11 states with the highest density and compared them with the 11 states with the lowest density.17 The results show that the lowest density states had net in-migration of 3,530,108 which is more than one thousand persons a day, every day, for nine years. Ten of the 11 states had net in-migration, the single exception, South Dakota, having a very small (less than 3,000) out-migration. By contrast, the 11 states with the highest union densities had a net out-migration of 2,984,007 persons, with eight of 11 reporting net out-movement of people. While no doubt other factors are also relevant in explaining these population movements, the evidence suggests unions are not perceived positively by individuals making migration decisions.

IX. CONCLUSIONS

While there are no doubt many individual members of labor unions who feel that they have benefitted from collective bargaining, the overall evidence is overwhelming that labor unions in contemporary America have had harmful aggregate effects on the economy. Unions are associated with lower rates of growth in income and jobs. On balance, people move away from union-intensive areas to areas with relatively low rates of union density. Occupations and industries with high rates of union density have had less vibrant job growth in recent decades. Widespread unionization of an industry is often associated with initial sharp declines in employment, as the steel industry demonstrates. The more strident and intense union involvement in industry, the bigger that industry's decline, as the experience of coal mining shows. Also, high levels of unionization are associated with out-migration of native born Americans, while low levels are associated with in-migration. The decline in union density in the private sector in the past generation has been sharp, and that decline has added to the vitality of the economy at the beginning of the new century. The increasing weakness of unions in the market economy has contributed to economic growth and a rising proportion of the working age population that actually works.

NOTES

1 The classic case of this occurred during World War II. In the face of an overwhelming demand for workers, the lowest level reached by the official statistically-measured unemployment rate was 1.2 percent in 1944.

2 See Hutt (1977) for a fuller discussion of this issue.

3 We relax this assumption later in this essay.

4 This is derived from regression coefficients in Vedder and Gallaway (1997), Appendix B.

5 In an earlier paper (Gallaway et al., 1991), we estimate an aggregate labor supply elasticity of 0.14. This is broadly consistent with the general literature on overall labor supply.

6 See U.S. Bureau of the Census (1975), Series D-685-D-719. In order to take account of changes in industrial mix through time, 1954 weights were used throughout to standardize the estimates of compensation per full-time-equivalent employee.

7 The t-statistic for the test is 0.61.

8 The time trend in the wage differential between 1919 and 1933 is actually weakly negative.

9 See Linneman et al. (1990) for details.

10 See Lewis (1963) and Parsley (1980).

11 A loglinear version of the model provides very similar results.

12 The years were 1966, 1970, 1974, 1979, 1983, 1988, 1991, 1994, and 1999.

13 Data are not available for this measure on a strictly comparable basis for all years in the period.

14 Of course, the differential employment growth may be at least partially explainable by nonunion factors.

15 The states are Arizona, Connecticut, Florida, Georgia, Nevada, North Carolina, Oregon, Tennessee, Texas, and Washington.

16 The states are California, Illinois, Louisiana, Massachusetts, Michigan, New Jersey, New York, Ohio, Pennsylvania, and the District of Columbia.

17 The reason 11 states were used instead of ten was because the 10th highest ranking was a tie between two states. The eleven high-density states are: Connecticut, Illinois, Michigan, Minnesota, New Jersey, New York, Ohio, Washington, Wisconsin, Alaska, and Hawaii. The 11 lowest density states are: Arizona, Arkansas, Georgia, Mississippi, North Carolina, South Carolina, South Dakota, Tennessee, Texas, Utah, and Virginia.

REFERENCE

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Bastiat, Frederic. Dean Russell, tran. The Law. Irvington-on-Hudson, New York: Foundation for Economic Education, 1850.

Economic Report of the President: 2000. Washington, D.C.: Government Printing Office, 2001.

Gallaway, Lowell, Richard Vedder, and Robert Lawson. "Why People Work: An Examination of Variations in Labor Force Participation." Journal of Labor Research 12> (Winter 1991):47-59.

Hutt, William H. The Theory of Idle Resources: A Study in Definition, 2nd ed. Indianapolis: Liberty Press, 1977.

Katz, Lawrence F. "Efficiency Wage Theories: A Partial Evaluation." In Stanley Fischer, ed., NBER Macroeconomics Annual. Cambridge, Mass.: MIT Press, 1986, pp. 235-76.

Krueger, Alan B. and Lawrence H. Summers. "Efficiency Wages and the Inter-Industry Wage Structure." Econometrica 56 (March 1988):259-63.

Lewis, H. Gregg. Unionism and Relative Wages in the United States: An Empirical Inquiry. Chicago: University of Chicago Press, 1963.

____________. Unionism and Relative Wages in the United States: An Empirical Inquiry, 2nd ed. Chicago: University of Chicago Press, 1985.

Linneman, P.D., M.L. Wachter, and W.H. Carter. "Evaluating the Evidence on Union Employment and Wages." Industrial and Labor Relations Review44 (October 1990):341-53.

Parsley, C.J. "Labor Union Effects in Wage Gains: A Survey of Recent Literature." Journal of Economic Literature 18 (March 1980):1-31.

Pantuosco, Lou, Darrell Parker, and Gary Stone. "The Effect of Unions on Labor Markets and Economic Growth." Journal of Labor Research (Winter 2001):195-205.

Rees, Albert. "Wage-Price Relations in the Basic Steel Industry, 1945-48."Industrial and Labor Relations Review 6 (January 1953):195-205.

____________. "The Effects of Unions on Resource Allocation." Journal of Law and Economics 6 (October 1963):69-78.

Taft, Phillip. Organized Labor in American History. New York: Harper & Row, 1964.

U.S. Bureau of the Census. Historical Statistics of the United States, Colonial Times to 1970. Washington, D.C.: Government Printing Office, 1975.

____________. Statistical Abstract of the United States: 2000.Washington, D.C. Government Printing Office, 2000.

U.S. Department of Labor. Employment and Earnings Statistics for the United States, 1909-68. Washington, D.C.: Government Printing Office, 1968.

Vedder, Richard and Lowell Gallaway. "Rent-Seeking, Distributional Coalitions, Taxes, Relative Prices and Economic Growth." Public Choice 51 (1986):93-100.

____________. "Spatial Variations in U.S. Unemployment." Journal of Labor Research 7 (Summer 1996):445-61.

____________. Out of Work: Unemployment and Government in Twentieth-Century America. New York: New York University Press, 1997.

GOVERNMENT SECTOR UNIONISM by Charles W. Baird*

In my previous column I gave two examples of the decline of unionism in the private sector and pointed out that the picture is very different in the government sector. Whereas the unions' market share in 2001 in the private sector was 9 percent, in the government sector it was 37.4 percent (down slightly from 37.5 percent in 2000). What accounts for the relative success of unionism in the government sector, and what unique constitutional issues emerge therein?

Union Success in the Government Sector

First, unions are organizations that try to quash competition among workers in the job market. In short they are, or try to become, labor monopolies. A monopolist in the production and sale of a product tries to restrict the supply of the product and increase its price above competitive levels. A union tries to restrict the supply of labor and increase its wage above competitive levels. Private sector employers usually try to avoid paying supra-competitive wages because they cannot easily pass the resulting cost increases on to their customers. Their customers typically have many alternative vendors with which to do business. Government sector employers, on the other hand, are often monopoly providers of their (alleged) goods and services. Their customers (taxpayers) do not have alternative vendors to which to turn. Moreover, their customers cannot refuse to pay the prices (taxes) the government agencies charge them. Thus government sector employers can, much more easily than private sector employers, pass forward any cost increases that result from paying supra-competitive wages, and therefore they do not resist union demands at the collective bargaining table as much as private sector employers do.

Second, government sector workers realize that the determination of taxes and spending is a political process, and they know that organized interests are more successful in the political marketplace than unorganized individuals. Claims by government employee unions (GEUs) to be able to improve terms and conditions of employment for their members have more credibility than similar claims in the private sector, so government sector workers are more receptive to union organizing than private sector workers.

Finally, the two sides of the government sector collective bargaining table have a common interest--to pick the pockets of taxpayers. Government agency heads are empire builders. They want more visibility, authority, responsibility, and larger budgets than they have. They are perfectly happy to cooperate with GEUs in pursuing those ends. For example, administrators and faculty unions at government universities often join forces in lobbying legislatures for bigger university budgets. They may fight over their respective shares of those budgets, but they agree that bigger budgets are better than smaller budgets.

Unique Constitutional Issues

The individual state statutes that control unionism among state and local government employees are all patterned after the National Labor Relations Act (NLRA) which controls all private sector unionism. Three features of the NLRA are particularly odious when applied to government employment--exclusive representation, union security, and mandatory good faith bargaining.

Exclusive representation means that a union selected by a majority of an employer's employees voting in a representation election is the monopoly representative of all employees who were eligible to vote. Individuals are even forbidden to represent themselves on issues of wages and other terms and conditions of employment. I have often argued that even in the private sector exclusive representation violates individual workers' freedom of association. The Supreme Court disagreed by saying that the government is not a party in private sector collective bargaining so the Bill of Rights, which limits government encroachments on individual freedoms, does not apply. I think the Court is wrong on this point because Congress created the NLRA and is therefore a party in all of its processes. Be that as it may, when it comes to government sector collective bargaining governments are indisputably parties to all collective bargaining agreements. Government agencies are the very parties with which GEUs bargain. Therefore, granting the privilege of exclusive representation to GEUs is unconstitutional on its face. The government is forbidden by the Bill of Rights to discriminate against any citizen on the basis of his association or lack of association with any legal private group. A union of government employees is just that--a legal private group. It is not another branch of government. When a government says it will employ only workers who are represented by a particular union it violates the Constitution.

Union security means that all workers who are represented by a certified union must pay fees to support the union. Unions say they need union security to prevent individual workers from free riding--getting the benefits of union representation without paying for them. Whether in the private or government sector, the unions' free rider problem is an artifact of the law. Without exclusive representation there could be no free riders. However, in the government sector governments are parties to the collective bargaining agreements that include union security clauses. A government that imposes union security on its employees says to them if you do not pay a tax to the GEU that represents you, your employment will be terminated. This, too, is clearly discrimination by government against individual workers on the basis of their association or lack of association with a private group. It is also a grant of taxing power to private groups. It cannot withstand objective constitutional scrutiny. The Court has recognized this problem with GEUs but has said the denial of freedom of association must be balanced against the government's interest in maintaining labor peace. The Court ignores the fact that the granting of monopoly privileges almost always results in less labor peace. Politics dictates that GEUs must have union security privileges, and the Court simply fabricated a particularly silly argument to excuse it.

Mandatory bargaining says that if either the employer or a certified union wants to bargain about some labor-related issue (except issues that involve illegalities), the other side must agree to bargain about it. Moreover the bargaining must be in good faith, which, in practice, means that each side must make concessions to the other. The only sure defense against an accusation of failure to bargain in good faith is a record of compromise with the other side. In the government sector, matters of wages and other terms and conditions of employment are matters of public policy. Mandatory good faith bargaining with GEUs means that governments share the making of public policy with private groups. The Constitution speaks of only three branches of government--legislative, executive, and judicial. It says nothing about a fourth branch--GEUs. Now, all sorts of private groups attempt to influence public policy by lobbying and campaign contributions, but GEUs are special. Any politician or agency head can legally ignore any ordinary special interest lobby such as the Sierra Club, but it is illegal for politicians and agency heads who are in collective bargaining with GEUs to ignore them. GEUs must consent to government wages and other terms and conditions of government employment before politicians and agency heads impose them. GEUs have the legal power to cast a private veto to block government policy. This is the clearest case of the unconstitutional delegation of governmental authority to private groups I can imagine. Yet, here again, the Court has been willing to permit violation of the constitution in the name of political expediency.

In Conclusion

Government sector unionism is the only hope that union sympathizers have that unions will not eventually become irrelevant. It is also the form of unionism that is most clearly unconstitutional. If the Supreme Court ever summons the courage to once again defend the Constitution against political expediency, unionism will become a curious historical relic.

*This article was first published in Ideas on Liberty, a monthly magazine published by the Foundation for Economic Education (web: www.fee.org). Copyright is retained by Foundation for Economic Education.

Shedding The Union Label: The NEA Way By: Myron Lieberma

One of my previous columns was devoted to the fact the NEA is doing its utmost to shed the union label. One prominent way it tries to do this is to show that its policies and practices are similar to those of occupations recognized as "professional." The NEA's advocacy of "peer review" is a good example of this strategy.

Essentially, peer review in K-12 education is a process whereby senior teachers observe and evaluate other teachers--usually beginning teachers or older ones experiences severe problems. In peer review, the senior teachers who are the reviewers are called "consulting" teachers and are released from classroom duties for a year. They are paid a stipend above their regular salary to work with the newer teachers. At the end of the year, the consulting teachers recommend that the teacher in the program be appointed to the regular staff, not appointed but kept in the peer review program, or terminated. These recommendations are submitted to a board consisting of district administrators and union appointees; typically, the recommendations of the consulting teachers are accepted by the review board without serious disagreement.

According to the NEA's spin machine, peer review is a major step toward professionalization. Supposedly, it is an example of teachers taking control of their profession, as docotrs, lawyers, dentists, and other professional groups supposedly do.

The analogy to other professions is absurd. To be licensed to practice medicine, prospective doctors must pass state examinations prepared by the state medical board. Failure to pass the examinations means that the failing individual cannot practice medicine anywhere in the state; the unfortunate failures do not receive a license to practice medicine in the state.

In contrast, the teachers subject to peer review already have a license to teach. Peer review results in decisions relating to employment only in the peer review district; the teachers who are not recommended for retention are free to teach elsewhere in the state.

The rationale for peer review is based on several other misleading analogies. One is that doctors aren't supervised, hence teachers shouldn't be either if they are "true professionals." The reason that doctors are not supervised is that they are fee-takers; there is no feasible way for employmers (that is, patients) to supervise their doctors. The cost alone would be prohibitive even if the doctors would accept such arrangements.

Under HMOs, however, the situation is very different. A single employer employs many doctors, hence some sort of supervision is feasible. A principal can feasibly supervise teachers in the same school--a much different situation than fee-takers face.

Let me cite just one more example of the confusion over "professionalism" that pervades the NEA's discussion of peer review. By and large doctors, dentists, and lawyers are independent contractors. In the absence of explicit contractual agreements, either the employer or the contractor can terminate the employment relation at any time. without any obligation to resume this relationship when the existing contract expires. It is very unlikely that the NEA or its members would opt for independent contractor status for teachers. Of course, what the NEA would like is for teachers to enjoy the benefits of independent contracts while avoiding the risks associated with this status.

Dr. Myron Lieberman is the chairman of the Education Policy Institute. He is the author of a great many books about education, including Teachers Evaluating Teachers: Peer Review and the New Unionism (Transaction Publishers: New Brunswick, Connecticut, 1998). Dr. Lieberman writes a regular column on education issues, which is available through the Education Policy Insitute's web site at: http://www.educationpolicy.org. This is one of his recent columns.

Executive Summary of. Contract for Failure: The Impact of Collective Bargaining on the Quality of California's Schools Riley, Pamela A. with Fusano, Rosemarie, Munk, LaRae and Peterson, Ruben

This Executive Summary is of the most extensive study ever conducted of unionism in California schools, titled, Contract For Failure: The Impact of Collective Bargaining on the Quality of California's Schools, by Pamely A. Riley, Rosemarie Fusano, LaRae Munk and Ruben Peterson.

For far too long, the impact of collective bargaining on the quality of public education has gotten a free ride due to the lack of careful and thoughtful analysis.

In Contrct For Failure Pamela Riley, her co-authors and the Pacific Research Institute have done a thorough accounting, and the cost is a heavy one. This is a major contribution to a better understanding of this thorny issue.

It should be must reading for policy makers and academics who are concerned about public education. I can't imagine that a school board member or, for that matter, a teacher union official, would want to enter negotiations without having carefully read this important new work.

OLD LAW VS. THE NEW ECONOMY HOW NEW DEAL-ERA REGULATIONS STIFLE FLEXIBLE WORK ARRANGEMENTS by James V. DeLong

In August 1997, a certain Mr. T. Trahan of CSC Credit Service wanted to let his sales executives work out of their home offices. He was uncertain about his possible obligations under the Occupational Safety and Health Act, so he wrote to OSHA, the agency that administers the act.

The wheels of bureaucracy grind slowly: His query went unanswered for over two years, but he finally received a reply in November 1999. Those wheels also grind exceeding small, because the Occupational Safety and Health Administration finally said that, yes, a workplace is a workplace and the act applies even if it is in a home. The employer must diligently identify possible hazards to protect the employee.

OSHA's interpretive letter went on for six pages, covering such employee dangers as the possible overload of electrical circuits, the need for material safety data sheets covering hazardous chemicals, the applicability of its then-pending rule on ergonomics, and other such intricacies.

This assertion of OSHA authority went unnoticed until the next January, when a Washington Post story about it triggered a frenzy of media and congressional objections to over-regulation and invasion of the home. OSHA withdrew the letter within 24 hours, and within three weeks its head told a Senate committee that it did not hold employers responsible for home offices, did not expect employers to inspect these, would not itself inspect, and regretted the whole misunderstanding.

But that testimony clouded the reality that the agency did not retreat an inch from its view that the act does in fact apply to home offices, and that agency forbearance is a matter of choice, not law. OSHA could at any time reverse its stance, at a cost estimated by the Employment Policy Foundation, a Washington, D.C.-based think tank that leans toward the business side of employment issues, of at least $1,000 per home office for compliance with rules on clutter, lighting, furniture, exit signs, lead paint, and so on.

The OSHA telecommuting controversy was only the most publicized recent instance of the growing conflict between the possibilities of the information-age economy and the rust-caked body of labor laws and--equally important--mental attitudes built over the past century.

The business community assessed the outcome of the telecommuting encounter as an armistice, not a victory. Bobbie Kilberg, president of the Northern Virginia Technology Council (NVTC), told the same Senate committee that the agency's retreat allowed her organization to continue its pro-telecommuting policy "for the present time," but that for the long run the policy needs to be formalized by legislation, or at least rulemaking.

Kilberg noted that seven of NVTC's 17 employees telecommute at least one day per week, and that four of these are mothers with children under 14. She could have added that the NVTC is only one example of a significant trend. A Gallup poll last autumn found 8 million full-time telecommuters in the U.S.--a number up from zero a decade ago--out of a total workforce of 135 million. The number of part-time telecommuters is believed to be much higher.

In a year when the soccer mom was the most different lusted-after political quarry in America, the significance of Kilberg's numbers could not have escaped the senators. Woe awaits the elected official who lets OSHA eliminate the flexibility that telecommuting offers to the professional classes.

What Do Women Workers Want?

 

While the telecommuting battle was going on, OSHA's analogue in the Department of Labor, the Employment Standards Administration, was fighting its own war against the new economy. ESA handles such issues as time-and-a-half overtime pay, which is required if hourly workers put in more than eight hours in a day or 40 hours in a week. It was asked how the calculation of time-and-a-half was affected by a worker's receipt of stock options. In February 1999, it answered with an interpretation saying that the value of the option had to be considered as part of the employee's base pay. Then it added an elaborate and absolutely incomprehensible guideline on calculating this value. As a result, a company would have had to be insane to even consider stock options for hourly workers ever again.

This, too, sat unnoticed for a time, then hit the press big at the end of 1999. As in the telecommuting case, the political system reacted strongly. But this time, ESA did not retreat. So in May 2000 Congress changed the law, by a unanimous vote in each house, so that stock options are not considered part of an hourly employee's basic pay.

Telecommuting and stock options have both become important issues because new social attitudes are emerging from the new economy. The stock option question reflects several beliefs--the idea that all should participate in the economic returns from the new economy, a blurring of historic dichotomies between labor and capital, and concepts of worker participation and the "we're all on the team" ethic.

The defense of telecommuting reflects a rising national appetite for flexible employment arrangements. The Employment Policy Foundation notes that 90 percent of employed Americans work under traditional arrangements (i.e., 40 hours a week, eight hours a day at the employer's workplace, or some regular part-time arrangement), but some 51 percent would like looser deals, such as working from home or dropping in and out of the labor force.

The desire for flexibility is especially pronounced among parents, and two-thirds of all mothers with children under 3 are now working (compared with 42 percent in 1980). Employers have been responding. While total work time required may remain rigid, more give is creeping into starting and ending times. In 1991, 15 percent of all full-time workers had flexible schedules; by 1997 (the most recent data available from the Bureau of Labor Statistics), 28 percent did.

Congress, ever ready to impose quotas in the name of whatever cause achieves sacred-cow status, has picked up telecommuting. It has decreed that federal agencies must allow telecommuting and that the Office of Personnel Management must ensure that at least 25 percent of the federal workforce is participating, starting immediately.

The increase in telecommuting and in flextime has fueled many stories about the growing openness of labor arrangements. But these two developments are not the tip of a new labor iceberg; they are the whole iceberg. In other areas, working arrangements are steadily becoming less rather than more flexible.

For example, one might expect that many young mothers who have moved into the labor force would prefer part-time to full-time work. In fact, while the absolute number of part-time workers has expanded, part-timers as a percentage of the work force have declined from 20 percent in 1982 to 16 percent today.

Nor is the Internet generating the host of independent contractors or temporary employees that was anticipated. Only 8.2 million workers are independent, and they are mostly what they have always been: management consultants, sales reps, real estate agents, carpenters, and truck drivers. No more than 156,000 independents work as computer geeks, and no tide of independents is discernible in other parts of the economy.

Agency-employed temps are also rare, supplying only 1.2 million workers. They are not particularly noticeable in high tech; only 1 percent (18,000) of all systems analysts and 2 percent (15,000) of programmers live in the temp world.

The increase in scheduling flexibility has also proved a limited benefit. It applies mostly to professional, managerial, and sales workers, 40 percent of whom can control their schedules. As one moves down any given hierarchy, flexibility grows more rare.

Logically, introducing flexibility into organizational structures and work schedules could not only accommodate the desires of soccer moms and dads, it could produce significant economic savings that would benefit firms and workers. Yet so far the response to the possibilities created by the information age has been notably tepid. Why?

Keeping the Workers Down

Conventional labor arrangements are largely dictated by the economic imperatives involved in making the most efficient use of a firm's infrastructure, such as the support staff, supervisory time and energy, information resources, and communications. These require centralized work sites and consistent hours of operation. They also require massive investments in buildings and equipment that are used a measly 40 hours a week, plus an expensive transportation infrastructure built to meet rush hour needs that also eats up billions of hours of human commuting time.

The rise of the Internet, among other communication technologies, offers huge opportunities to organize work in new ways. Space and equipment costs can be cut, travel time reduced, even public infrastructure investments re-configured. The potential gains in efficiency are dazzling.

But the centralized structures and fixed schedules of the modern workplace are dictated by something other than economic efficiency. They are compelled by federal and state government rules, and it is far from clear that these will permit the changes necessary to produce possible gains. In fact, to judge by the telecommuting and stock-options cases, it is clear that these rules will be modified only after bitter, inch-by-inch struggles.

The U.S. Department of Labor enforces over 180 different laws. The Equal Employment Opportunity Commission and the National Labor Relations Board administer regulatory empires of their own, and the 50 states add yet more regulatory layers. These laws encompass a huge array of subjects and purposes.

The first of the big federal acts was the Davis-Bacon Act of 1931, which required that federal construction projects pay "prevailing wages" so as to avoid cutthroat competition for scarce work during the Depression. Other federal laws initiated during the Depression era, or added since, cover wages and hours, protection of corporate whistleblowers, pensions, family and medical leave, occupational safety and health, disabilities, and many points in between.

It is a jerrybuilt structure, and much of it was enacted for dubious motives. Davis-Bacon was designed by its congressional sponsors to ensure that African Americans, who were not allowed into unions, got no share of Depression-era public spending.

Laws against home-based work are based partly on the truth that the practice can be used to avoid minimum wage laws. But they also provide employment to people who do not want to keep a regular schedule. The labor bureaucracy's hostility to such arrangements derives largely from the labor-union calculation that home workers are hard to organize. The Department of Labor has conducted a decades-long crusade against folks who want to supplement meager incomes by part-time knitting at home.

Much of the structure of labor law reflects the zanier thinking of the New Deal. One was the idea that the U.S. was a mature economy in the 1930s, and that available work must be rationed. Another was that the road to recovery lay through the creation of scarcity by reducing supply while raising prices. (John Maynard Keynes tried to talk Roosevelt out of this one; he failed.)

The structure remains as built, as if Rube Goldberg had designed it, however inconsistent with subsequent experience or modern life. One of its most important premises is that flexibility is bad. Labor policy assumes that employers have power and workers do not. Thus, workers should not be permitted to bargain over conditions of employment, except through unions, because the imbalance of power means that anything that mightlead to abuse will lead to abuse.

Thus, if hourly workers are allowed to work 10 hours a day for four days instead of eight hours for five days, then employers will impose this schedule on some unwilling workers. This cannot be allowed. Thus, if employers and employees are allowed to agree that a worker will get comp time instead of overtime pay, then employers will force this on workers. This too must be forbidden. The idea that labor markets might work like other markets, that workers might sort themselves out according to their own preferences among packages offered by different employers, is antithetical to the still-prevailing New Deal belief system.

Although unions have often been criticized for crafting unyielding work rules, legal standards actually impose greater rigidity on the workplace. Unions can be bought off, persuaded to relax a rule in a trade for money. Legal standards, on the other hand, are set in stone. If the Fair Labor Standards Act forbids a four-day, 10-hour-a-day week, then that's that. The employer can't offer more money for the flexibility, nor can an employee who desperately wants the new schedule offer to take less.

Even anti-discrimination and anti-harassment laws, which have goals with which all would concur, have become forces for rigidity. They are shot through with vagueness and uncertainty, and the multimillion-dollar damages that juries have awarded under these laws have put employers into a defensive posture. This means inflexibility. Because supervisor discretion is too easily painted as discrimination, everyone must be treated alike and everything must be documented. Flexible arrangements cannot be offered to some employees and not others, which makes employers reluctant to offer them at all.

The potential implosion of Social Security is reinforcing government's propensity to enforce rigidity. Any sensible current entrant into the work force would opt out. He would declare himself a free agent, ask that his employer's share of Social Security be paid to him in cash, and sock both it and his own share into an index fund. A $50,000 per year worker would save $7,650 in a year, which at 6 percent would be worth $61,200 in 36 years. Few expect the rate of return from Social Security to be as high.

The Internal Revenue Service seems, sensibly, to fear massive defections from the system, and is growing more imperious in its decisions restricting employers' use of free agents. Any effort toward flexibility is assumed to be motivated by a desire to evade Social Security tax obligations, and can be countenanced only if the deal passes an elaborate 20-point test. An employer who guesses wrong on the result will pay heavily.

The IRS' assault on flexibility is always justified by stern lectures on the need to protect the workers against exploitive employers, never in terms of protecting Social Security revenues against the rationality of the work force. In fact, the IRS policy injures workers both directly and indirectly. Not only is the worker's rate of return on his savings reduced, but employers have responded by imposing strict time limits on the tenure of independent contractors, decreeing that after a set period-- usually three months--they must be cast adrift, regardless of their own desire or the state of the project on which they are working. Companies have also stopped hiring temps directly, forcing them to come in through temp agencies, which take a big chunk out of their pay. Both courses leave the workers worse off.

 

Employers who adopt flexible arrangements are also getting nicked by employees who repent of their bargain and want labor law to rewrite it. Last year, Microsoft agreed to pay almost $100 million to workers who had signed very clear contracts affirming their independent status. The IRS forced their reclassification as employees, and they then sued Microsoft on the theory that as employees they should have received stock purchase privileges in the 1980s.

AOL is being sued by volunteers who manned its chat rooms and performed other community services. Their original arrangement was very communitarian, and much like a gift economy; their recompense was in the accolades of the online community and in free connection time, which was valuable when AOL charged $6 an hour, but worth zilch when it instituted flat pricing of $19.95 per month.

These volunteers noticed that many company employees earned not just community approval but cash and stock options, which then became worth a fortune. They also noticed that the Fair Labor Standards Act does not allow volunteers in profit-making organizations. Like the Microsoft contractors, they want to be employees, retroactively.

Customer representatives at Amazon's Seattle facility are also reconsidering the glories of the new economy. They launched a unionization drive, an effort brought to a halt when the company cut the size of the facility and fired most of them.

Racial-bias litigation is increasing, with some minorities alleging that their underrepresentation in high-tech industries must be due to discrimination. They, too, want retroactive relief, particularly stock options, calculated at the peak values of the NASDAQ.

New Economy vs. Old Law

The collision between the possibilities of the new economy and the institutionalized rigidity of old-style labor policy is creating an odd reversal. Businesses and their workers want to use the new technologies to take more account of employees' personal and family needs, expanding opportunities to fit work into a satisfying overall pattern. The partisans of the status quo are resisting, which means they persist in the dogma that employees must be treated as fungible factors of production and plugged into one-size-fits-all slots in the workplace.

There are several reasons behind this reactionary stubbornness. One is the perceived interests of the unions, which have dominated labor policy since the New Deal. Another is that labor law is administered by large bureaucracies, which must operate through rules. Because no bureaucratic structure can be made sophisticated and flexible enough to deal with all the complexities of real life, real life must be remolded to fit the needs of the structure. Note that OSHA took over two years to respond to a simple letter of inquiry about the legal status of home offices, as if the Internet and the world of telecommuting were supposed to freeze in place until OSHA staff got around to looking at their in-boxes. A third factor is that the world of labor law administration is self-selected: People are drawn to jobs as labor law administrators because they embrace old concepts of class conflict. Combine all these factors and the result is an inevitable hostility to the new, fast-changing, and flexible world of work.

Can these forces win their war against the new economy? The ability of governments to enforce sclerosis should never be underestimated. Still, the potential economic and human gains from workplace flexibility are so immense that it is difficult to imagine either businesses or individual workers giving in without a major fight.

Consider the ongoing reconfiguration of industries at the core of the new economy, those in which the output can be translated into bits and moved anywhere in the world at the speed of light: movies, music, publishing, computer software, R&D of all kinds. These are the industries that can take greatest advantage of the economies attainable from dispersing their work forces and cutting back on their central offices.

The new configuration also greatly expands the talent base on which such a company can draw. Previously, a magazine published in Chicago had most of its staff there because interacting by mail was too slow. Staff was thus limited to those writers and editors living in Chicago or willing to move there.

Now, to say a magazine is published in a given city is increasingly meaningless. Writers and editors can be anywhere, and so can the printing plant, and none of these need be in the same place. This expansion of horizons also helps the writers. They can live in Chicago without limiting their options to that city, or they can live somewhere else and still work for the Chicago-based publication.

They have become much more mobile. Taking a job with a new publication no longer means pulling up stakes physically, so the risks of both hiring (for the magazine) and job change (for the writer) are greatly reduced. This in turn fosters innovation and experimentation. It also increases the possibility that a worker can put together two or three part-time gigs, which reduces further the costs and risks for all parties to the deal, thus creating yet more possibilities for innovative arrangements.

While new economy "bit-stream industries" offer the clearest examples of business evolution, similar changes are occurring throughout the old economy as well. Information is revolutionizing automobile manufacturing, oil drilling, and other activities once classified as "heavy industry." Computer programmers, automobile designers, lawyers, and other intellectual workers can be found all over the nation or the world, not gathered in a few business centers. Medicine is being revolutionized by bit streams in the form of pharmaceutical patents, and research facilities can be located anywhere. At a more prosaic level, American doctors now dictate post-operative notes that are transcribed by workers in India and returned to the U.S. by 7 the next morning. Even the medical advice itself can be dispensed over the Web. In the near future, your doctor may also be in India.

Are Labor Markets Like Other Markets?

There is a fundamental question at the core of this controversy, one that has remained long unresolved: Should labor markets be treated like other markets, and workers allowed to sort themselves out according to their own preferences?

Americans have always been ambivalent in their answer. On the one hand, economists regard U.S. flexibility, as opposed to European-style labor protection, as a source of economic strength. On the other, much U.S. law is indeed premised on the view that labor markets are not like other markets, and that special protection is necessary.

Part of the philosophy of the free market is that everyone is both a producer and a consumer. From this perspective, labor is a factor of production, like capital goods and real estate; the dictates of economic efficiency are that workers will be pushed to their limits. They will be subjected to competition and paid only the value that other people place on their production, and that much only if no one else can produce more cheaply.

But when workers switch to their role as consumers, things change. They then get the benefits of the wealth produced by the system. This wealth is immense, precisely because the system culls out business inefficiency and constantly reorganizes to put resources--including workers--to their most productive uses. The theory is that everyone is both consumer and producer, both king and serf. Because you cannot select only half of the system, the trade-offs benefit everyone.

In practice, people are always squeamish about this philosophy. It is difficult to separate the "factor of production" from the human being doing the producing. Moreover, the producer/consumer trade-off does not work so well for those at the lower end of the labor system, because they get fewer benefits on the consumer side. No society, certainly not a democratic one, will ever treat labor as mechanistically as pure market theory suggests.

This hesitation is strongly reinforced by political pressures. Most of us believe that the free-market system, however sound in theory, needs some tweaking in our favor. We all know that we personally are underpaid and overworked, and deserve dispensation from the tougher parts of being a producer. If we manage to convince the political system, we can get the benefits of the free market while dodging our share of its unpleasantness. The situation is a natural for political log rolling, and in fact different groups of workers are treated quite differently, depending on their political clout. Davis-Bacon still stands as the prime example of politically motivated labor law.

A second reason for interfering with labor markets is the conviction that there is an imbalance of power between employer and employees. This argument cannot be dismissed out of hand. Memory is long, and in the company towns of a couple of generations ago, the imbalance was only too real.

Even today, labor markets remain "sticky." That is, workers' ties to communities inhibit their mobility, and information about alternative employers is often imperfect. Moreover, workers often have invested to create skills specific to a particular job, company, or industry, and they may not be able to get rewarded for these if they change jobs. Employers can and do use such stickiness to their own advantage.

These concerns about labor markets are intertwined--employer power derived from stickiness leads to a sense that intervention is necessary which leads to log rolling. So one of the most interesting dimensions of the new economy is that it forces us to rethink historic positions on these issues. The revolution is improving labor markets just as it is improving the market for goods, and the reasons for many of the existing interventions--however good or bad they were when adopted--need reexamination.

Working-Class Flexibility

Job markets are no longer limited by the classified pages of the local newspaper; they exist nationwide. If bit streams are involved, then physical relocation is unnecessary, whether for hourly workers or for writers, sales representatives, and management consultants. One can work as an Amazon customer rep from anywhere, not just Seattle. Even the new economy equivalent of the assembly line, a job such as data entry, can be performed anywhere in the world, as in the case of the Indian medical note transcribers.

Relocating also entails less psychic trauma than it once did. Moving on speculation is less necessary; the labor market in a new locale can be checked in advance. Information about living in the new community is far more plentiful and accessible. If training is needed, that too is more available than ever, thanks to the Internet.

Even political log rolling may become less resistant to reform. The expansion in the number and diversity of information channels is making the government more transparent. People can use the Internet to learn about such things as the low rate of return on their Social Security contributions, or the special tax breaks given to particular groups.

Recently, a proposed expansion in the regulation requiring banks to nose into the affairs of their customers generated 250,000 e-mails to the federal agencies involved. This campaign was triggered entirely by Internet word of mouth. In contrast, in pre-Internet days, it would have been impossible for word of the government's telecommuting and stock-options decisions to have spread so quickly or to have aroused such instant and massive opposition.

One possible result of these developments is that the traditional American ambivalence about labor markets may change, too. We may become increasingly willing to accept the bargain whereby people bear the burdens of the market as producers and take the benefits as consumers. But the fate of the NASDAQ over the past year has tempered the hype of 18 months ago, as well as the everyone-a-capitalist-king enthusiasm.

In any event, all that has happened so far is that the professional classes are expanding the flexibility of their working hours and are getting the right to work from home some of the time. The free agent universe of the visionaries is not coming to pass, and is resisted by the labor and tax bureaucracies. But then the war between old labor law and the new economy is only beginning.

James V. DeLong is a senior fellow in the Project on Technology & Innovation at the Competitive Enterprise Institute in Washington, D.C. His e-mail address is: jdelong@cei.org.

A Commentary of Public Education Without Romance The Impact of Collective Bargaining on Indiana Schools

Study by Charles M. Freeland, Indiana Policy Review*

Commentary of the Study by
David W. Kirkpatrick**

Introduction

Public Education Without Romance: The Impact of Collective Bargaining on Indiana Schools, a study by Charles M. Freeland, examines "the impact collective bargaining (has had) ... on the quality of public education in Indiana--and generally finds it harmful. Yet, Freeland says, "No effort to reform public education in Indiana, to 'change that system,' can hope to succeed until it addresses" the impact of collective bargaining.

At the time of Freeland's study, 291 of the 309 schools and special or vocational education districts in Indiana had collective bargaining agreements. Indiana's state constitution (like that of other states) has an article calling for the provision of public education, but doing so is affected by union contracts.

Freeland conducted the study to help policy-makers find a way to bring freedom and competition to Indiana's public schools, for the benefit of parents and children. Collective bargaining agreements with teacher unions, regardless of their merits, hinder the achievement of that goal.

Most public school officials and teachers lack adequate experience or expertise with teacher bargaining contracts. As recently as 1960, collective bargaining for teachers was rare, even illegal. In 1970, only 10 years later, 23 states had such laws, still less than half. By 1980, 31 states had joined the bargaining ranks. Indiana enacted its law in 1973, which became effective January 1, 1974.

State Laws Patterned After NLRA

While Freeland's study is restricted to Indiana, its implications and relevance are nationwide. This is most directly true for states with collective bargaining laws. While details of these laws vary, they have much in common because they are based on the National Labor Relations Act of 1935 (NLRA).

One major example is that the NLRA allows for exclusive representation for a group receiving one vote more than 50% of the votes cast in a representation election. This has become so commonly accepted in this nation that few seem to be aware that exclusive representation is rare in other nations.

Exclusive Representation Rare in Other Nations

An Alexis de Tocqueville Institution study, conducted a few years ago, disclosed that many nations only allow a union to represent its own members. Consequently, teachers may join any one of several unions, or even choose to refrain from joining any such group and bargain as an individual.

Common Effects of Collective Bargaining Laws

Freeland's study also has relevance for other states because the effects of collective bargaining laws are so similar around the nation.

One effect is that the interests of unions sometimes conflict with the interests of their members. One sad example is that agreements give unions exclusive access to certain school facilities, such as internal mail systems (84% have such a provision), copying machines, telephones, public address systems, bulletin boards and meeting rooms. One might think it is unconstitutional to grant use of public facilities to one private party. However, the U.S. Supreme Court has upheld such provisions. In doing so, though, it only said boards may agree to such requests, not that they are a constitutional right to which boards must agree.

Nor are these procedures mandated by state bargaining laws. At best it is something that laws permit to be subjects of bargaining discussions. Too many school boards, obviously ignorant of the implications of what they are doing, give in to such requests since they are "no-cost items." No direct cost in dollars, perhaps, but as Freeland states, such agreements provide no benefit to teachers, weaken the district board and administration, and strengthen the union.

Two other tactics, even more beneficial to the union, are to place in the contract provisions for what are termed "fair share" fees, and "maintenance of membership."

In the first, teachers don't have to join the union (it is illegal for the union to force them to join), but they must pay a "fare share" fee to the union in lieu of dues. The courts have ruled payments can be limited to that portion of dues required for negotiation purposes, but unions commonly get away with charging the full amount or close to it. Teachers refusing to pay can be fired, which should be unconstitutional but has been upheld by the courts.

In the second, maintenance of membership, teachers who do join the union voluntarily may withdraw their membership only during a stipulated period, such as 30 or 60 days immediately prior to the expiration of the current contract. Since the contract may run as long as five years, and the union doesn't remind members of the right to end their membership during this "window" period, membership in effect can become perpetual.

None of these "no-cost" tactics benefit teachers, yet they are agreed to by school districts because they think doing so saves money.

A union may come to the bargaining table with a proposal for, say, an 8% increase in salaries. The board may offer 2%. Eventually they get to 6% and 4% respectively. At that point, the union may say it will accept 5%, or even 4%, if the board will agree to one, two or more of the aforementioned provisions. The board, seeing a chance to save 1-2% for "no-cost" provisions, agrees.

What they have done is strengthen the union in return for nothing. The union may have been willing to agree to the final salary offer anyway. They may have come in with artificially high proposals--yes, that does happen--knowing they would trade some away to gain the "no-cost" provisions.

"Good Faith" Bargaining Rare

The reality of "good faith" bargaining is rarely achieved. In union negotiations, whether in the public or private sector, whether friendly or hostile, the give is by the employer and the take is by the union, with rare exceptions.

Consider the example above: the union initially proposes an 8% increase, the school district proposes 2%, and they settle on 5%. Each side "gives" up 3%. But the district's 3% actually costs them money; the union's 3% costs it nothing because it gave up what it never had.

Union Interest Put Above Member & Public Interests

Freeland's point about union vs. members interest is a common charge. Yet this is true of all organizations. As Milton Friedman and others have noted, every organization has, in general, three purposes: to serve the needs of the organization; to serve the needs of its members, whether individuals or groups; and to serve the public interest in varying degrees depending on the organization. They do this in that order: the organization; the members; and, finally, perhaps, the public interest.

New Indiana Law Prohibits "Fare Share" Fees

The situation is not hopeless! This was demonstrated in Indiana in 1995, when the state legislature passed a law prohibiting "fair share" fees in new contracts. A lower court ruled this to be unconstitutional, but it was overruled by a higher court. Yet some 35 school districts agreed to continue the fair-share clauses already in their contracts.

School Board Contract Pitfalls Benefiting Unions

This weakness of school boards, not confined to Indiana, is indicated by what they are willing to negotiate, even though bargaining laws commonly limit required bargaining to compensation, hours and compensation-related benefits. They are not required to agree to any specific terms. (Of course, on bargainable items they must agree to something or the courts would charge them with negotiating in bad faith.) In addition they may "discuss" other subjects. Yet contracts are full of provisions which boards have agreed to that limit their, and the administration's, freedom of action.

Many agreements have committees to which teachers appointed by the union may constitute at least half the members. One such committee selects the companies that will provide insurance and investment-related fringe benefits. The Indiana State Teachers Association owns its own insurance and fringe-benefit companies, from which it derives income, thus further strengthening the union. The Michigan Education Association has its own insurance subsidiary, even though studies there found the cost to districts was much higher than if they had gone to other insurance companies.

Another curious action by school boards is that every agreement contains a union rights clause, but rarely a management's rights clause clearly stating that the district's management retains all rights that it does not negotiate away. This is no minor error. Absence of such a clause can and does give rise to unfair practice charges, which are expensive and time-consuming, whether the district wins or loses.

The South Bend, Indiana, union contract contains an "academic freedom" clause that says,

Academic freedom shall be guaranteed to bargaining unit members, and no special limitations shall be placed upon study, investigation, presenting and interpreting facts and ideas concerning people, human society, the physical and biological world and other branches of learning subject to the course of studies in the (district).

Aside from the fact that "academic freedom" is a legitimate public concern, especially when the public is compelled to pay the costs and students are compelled to be in the classrooms, what does the above mean? Can a history teacher unilaterally and arbitrarily present and interpret facts because it is one of the "branches of learning subject to the course of studies in the district?"

It is common to use seniority when staff reductions must be made. Seniority requires that reductions be made on the basis of length of service, with most recently hired employees being the first to go. Many contracts provide for "bumping," whereby a senior teacher leaving a specific position is permitted to replace someone elsewhere in the system who has less service.

Seniority and bumping may or may not be sensible, depending on one's perspective. For unions, such policies permit them to avoid making, or agreeing to, judgments regarding the relative merits of its members. For teachers and the public, these policies prevent districts from arbitrarily firing senior teachers because they are higher on the salary schedule. Even so, seniority makes no distinction as to quality of teaching, and "bumping" may even reduce the quality by moving a more senior teacher to a new area or subject field for which he or she is less competent than the teacher whose job was lost.

Districts like to complain, sometimes with cause, about "unfunded mandates." Yet Freeland notes how they impose major mandates upon themselves. Commonly, districts pay retiring teachers for part of unused sick days, and perhaps for unused personal days. Severance payments for Indiana teachers average almost $20,000.

In every Indiana school collective bargaining agreement, districts made these commitments without setting aside the money to pay the self-imposed "unfunded" mandates. Finally, in 2001, Indiana law was amended to require districts to fund any future retirement or severance plan on an actuarially sound basis.

These are but some of the examples that deserve wider consideration and awareness. The common existence of these developments should lead to common awareness. Yet, as Freeland states, it isn't just taxpayers and the general public that are unaware of, or misinformed about, what is negotiated. Often the teachers are too. They may approve or reject a contract without knowing what's in it, beyond what the union officers and/or negotiators choose to tell them.

Freeland observed that, "As a rule, the more language that is included in an agreement, the more restricted are the board and administrators in making decisions." Contracts have become longer, more complex, and more restrictive on both management and the members the union represents. A survey in another state, where teachers could request waivers from restrictive policies, found that the greatest number of requests was for waivers from the union contract.

Proposals for Improvement

An analysis of this type would not be complete without some proposals for improvement.

State law must change before public schools will change, because rollbacks in contract provisions are rarely possible without the union's consent. Changes Freeland mentioned or implied include:

1. End mandatory exclusive representation by the unions.
2. Have collective-bargaining agreements expire at the end of their terms, while salaries continue unchanged. 
3. Except for salaries, have terms of the Teacher Tenure Law apply in the absence of a valid agreement.
4. Allow parents to send their children to the schools of their choice.
5. Public funding should follow the student, but parents might be responsible for transportation.
6. Allow schools to exist which have innovative funding mechanisms, such as universal tax credits, or contracts to operate for a profit, such as the Edison Schools, but which still satisfy the education mandate in the constitution.
7. Move to a market system in which everyone attempts to ensure the success of the process. (Freeland said that in non-market systems they attempt to ensure the failure of the process. That's a bit strong. They may not be equally motivated to ensure success, but that's not the same as saying everyone is attempting to ensure failure.) 
8. Include teachers in the state's Open Door Law. As public employees, paid with public money, by citizens who use the public system or are heavily affected by it, teachers should be included. 
9. Place collective bargaining agreements on the ballot for public approval before they can take effect.

Signs of Hope

Freeland is under no illusion about the inclination of politicians to accept these proposals, even though the problem with the system of public education is the system itself. Signs of hope are the 1995 Indiana prohibition of "fair-share" fees, and the public's recent willingness to discuss changes in Social Security--which for decades had been termed the "third rail" of American politics, political death to those who touched it.

In Indiana, about a dozen local associations are not affiliated with any state or national union. Several openly reject union labels or tactics, such as the use of the strike, or "fair share" fees. They are successful, as are a number in the neighboring state of Ohio, but most teachers are unaware of this. A teacher doesn't have to be anti-union to wonder why they should pay dues of $500-600 or more while other teacher locals function very nicely, including negotiating, on teacher dues of $150 or so annually.

Concerns About, and Contradictions In, Freeland's Study

As worthy as this study is, a few quibbles might be raised.

One concern is Freeland's view that, "The factory model does not work well in an educational setting." The statement is basically correct except for the implication that the word "education" is interchangeable with "school." The two are not the same. Collective bargaining was not adopted to deal with education. But "school" is another thing entirely.

The factory model was adopted for negotiations because schools are based on the factory model. Teachers are public employees. Public schools emerged as a way to "process" youngsters who move through the system as if on an assembly line, admittedly a very slow one. Unfortunately, unlike industry where a defective product is improved or removed from the belt, students continue the ride until they remove themselves or emerge at the end regardless of their condition. Both teachers and students are interchangeable parts. One leaving is replaced by another, almost at random.

Another quibble relates to the title: "Public Education Without Romance." There's nothing wrong with that as such, but in at least one instance the author falls for a bit of romance himself, and he's not the only one. Freeland said,

During the years preceding the early seventies, the National Education Association transformed itself from an association of professional educators into a labor union.

As one who was there, the National Education Association, founded in 1857, was never an association of professional educators in any meaningful sense. For the first 100 years of its existence, the great majority of teachers did not belong to the NEA. The teachers who did join prior to the 1950s had no meaningful role, rarely rising to any position of leadership. Even in the 1950s, when in Pennsylvania the state presidency began alternating between a teacher and an administrator, the position was still a one-year, unpaid position with little influence. When the man who was the Executive Director from 1939-1963 retired, he was hailed as "Mr. PSEA." Not one of the presidents who served under him--and they were under him--received such accolades.

A third, minor but glaring error, was a reference to Tracey Bailey, who was the 1993 National Teacher of the Year and former AFT member, but now a critic of unions and their political nature. All true, but then Freeland adds, "She (sic) calls them 'special interests protecting the status quo' and pillars of 'a system that too often rewards mediocrity and incompetence.'" Also true, except Tracey Bailey is not a "she."

Finally, there are a few possible contradictions.

At one point Freeland suggests, "Over time, Indiana's one-deal-fits-all, interchangeable parts system (a true factory analogy) is likely to result in a dumbing down of the teacher population." Shortly thereafter he issues the disclaimer that, "This report does not assert that all, or even most, Indiana public school teachers are poor teachers." Well now, which is it? The state's nearly 30-year-old bargaining law "likely" causes a dumbing down of teachers, yet most are not poor teachers.

Then he cites a professor of economics as saying, "The problem of teacher shortages ... begins in college. There, because education courses are notoriously easy, the worst students end up in the colleges of education." Notoriously easy courses might, and probably do, attract the worst teachers, but easy courses should also attract more than enough teachers to avoid any shortage. And, incidentally, there hasn't been a shortage of teachers in the United States, including in the 1960s when one seemed to exist. Even then there was a large supply of certified teachers. The shortage occurred because so many had no wish to actually teach.

Conclusion

Having said all that, Freeland's report deserves as much attention and discussion as it can get. At the very least it should generate discussion. At its best it could help bring about desired changes.

*Charles Freeland is an attorney in Indianapolis, Indiana, and an adjunct scholar at the Indiana Policy Review Foundation. Public Education Without Romance: The Impact of Collective Bargaining on Indiana Schools, was published by the Indiana Policy Review Foundation. Web site: www.inpolicy.com.

**David Kirkpatrick is an education consultant from Douglassville, PA, who was a career educator and teacher union member beginning in 1964

The Union Stake in National Teacher Certification by Robert Holland*

NBPTS: High Investment, Questionable Purpose and Results

Well into its 15th year of existence, the National Board for Professional Teaching Standards recently issued calls for research that it hopes will show teachers who gain NBPTS certification have a larger impact on student achievement than do non-NBPTS-certified teachers.

That step comes after a federal investment of more than $100 million in a board that got its start from Carnegie and Rockefeller foundation largesse. And it comes after 33 states and almost 300 school districts have shelled out $2,300 to pay for each applicants' fee, and as much as $5,000 in lavish yearly bonuses on those who win certification.

It is past time to see tangible results (such as test score gains) from this enormous investment in education via the establishment-pampered NBPTS, as to exactly how it has improved education. However, the teacher unions--the National Education Association (NEA) and the American Federation of Teachers (AFT)--already are convinced of the NBPTS' worth in advancing their "professionalization" and other agendas.

The idea behind the NBPTS is that, as a tool of peer review, it places teachers on a professional plane with doctors and lawyers. As Education Policy Institute president Myron Lieberman demonstrates in the most recent issue of Government Union Review, "the analogy to other professions is seriously flawed." For one thing, doctors, dentists, and lawyers are, by and large, independent contractors--a status bringing risks the teacher unions and their members do not want. They want only the rewards of independence. Even if the analogy were sound, the NBPTS' assessments are a far cry from the objective knowledge required by examinations in the medical and legal professions.

NBPTS Assessments Provide Opportunities for Manipulating Certification Process

Because they are so subjective, the NBPTS assessments offer rich opportunities to manipulate the process and to prep candidates to parrot conventional education-school platitudes. The NEA and AFT, whose members constitute almost two-thirds of this private organization's governing board, know that. Although the teacher unions adamantly oppose merit pay based on gains in student achievement and supervisors' classroom evaluations, they love the NBPTS' potential for inflating pay and advancing their agendas--so much so that the NEA and AFT publish a detailed annual guide for candidates for national certification.

In applying for certification, teachers submit their portfolios for assessment. Into these portfolios go two videotapes of the teacher in action in the classroom along with his or her written commentary, two samples of student work plus more commentary, and two forms of documentation of the teachers' work with families, the community, and professional colleagues. In addition, candidates complete exercises such as preparing lesson plans or commenting on other teachers' work during an all-day session at the assessment center.

NEA / AFT Candidate Guide Dumbed Down

The NEA/AFT candidates' guide pays great attention to a teacher's skills of cinematography--perhaps not surprisingly given that teachers typically spend much time on the job preparing the best possible videotaped evidence of their instructional prowess. The "Cameraperson Guide" does not suggest the unions have a very high opinion of the candidates' common sense. For instance, the guide advises:

"Before taping, make sure all cables are securely connected and the tape is in the camera."

Put a "Do Not Disturb" sign on the door.

Avoid taping when there is "extraneous noise," such as a band practice.

Increase light in the room by turning on all the lights and opening the blinds. However, "do not aim the camera at a source of bright light."

One would think a teacher presumed bright enough to enjoy the prestige of national certification would be assumed bright enough to put a tape in a camera before such a high-stakes filming. But more telling than the almost comical banality is the NEA/AFT tilt toward the constructivist or so-called child-centered approach to learning espoused by most schools of education and the education progressivists generally.

The board's Standards heavily favor the child-centered ideology over traditional teacher-directed instruction. For instance, the NBPTS benchmarks ask for signs that a teacher has tapped a student's "natural interests and curiosity" and has allowed the child to "have some control of the activity." In addition, teachers are supposed to show that their classes let children construct mathematical or scientific principles for themselves, a clear bow to constructivism. In an in-depth Fordham Foundation look at NBPTS' operations in 1999, Danielle Dunne Wilcox found that national certification emphasizes a grasp of pedagogy far more than it does knowledge of content. Amazingly, applicants incur no penalties if their commentaries are riddled with poor syntax, misspellings, and grammatical mistakes.

Prepare for Test, Not to Teach

Accordingly, the NEA/AFT guidebook admonishes candidates:

You probably have your own standards of what you consider to be good teaching, or you may agree with another set of teaching standards. Although these teaching standards may be helpful to you in developing your teaching practice, they should not {boldface theirs} be your focus during the National Board Certification process. Your sole focus should be the National Board standards, because it is those--and only {boldface theirs} those standards--on which your work will be evaluated.

That is remarkably cynical advice. It suggests that even a master teacher who assists students in making huge achievement gains should forget everything she knows is true, unless it happens to dovetail with NBPTS-favored practice of teachers being facilitators instead of teachers being teachers. This disdain for academic results helps explain the findings of University of Missouri economist Michael Podgursky that the NBPTS has not shown its product yields tangible academic results. That's not terribly surprising given that the process-oriented approach to certification is resoundingly anti-intellectual.

Apologists may view the NEA/AFT advice as simply pragmatic--do what is necessary to win certification and fatter checks, and then go back to what you know works. However, NBPTS-certified teachers are supposed to become mentors to other teachers, and their certification lasts for 10 years (and will be renewable). Hence, the plan is for these select teachers to be a force in shaping teaching and learning through the system.

Goal of Unions is to Control Educators, Schools, Classrooms & Ideology

As the always-alert Mike Antonucci of the Education Intelligence Agency notes, a current bid by the California Teachers Association to win passage of a law expanding collective bargaining to include all aspects of a school system's operation--not just the traditional pay and benefits--shows the desire of today's unionists to control the classroom. Here's just a sampling of the many concerns that would be bargained were AB2160 to become law, according to Antonucci:

The use and assignment of mentors.

The development and implementation of any program to enhance pupils' academic performance.

Textbook selection.

Content of courses, curriculum, standards.

 

"Even conservative interest groups have been slow to realize the implications of this bill," wrote Antonucci in the March 4, 2002, online edition of the EIA (www.eiaonline.com). Antonucci continued,

The widened scope of bargaining would also apply to charter schools with union representation. You couldn't get rid of Whole Language or fuzzy math without bargaining with the union. You couldn't institute a new parental involvement program without bargaining with the union. ... (Y)ou couldn't install new lighting on campus without bargaining with the union.

While religious conservatives are up in arms about the NEA Task Force on Sexual Orientation and resolutions that have little practical value, the California Teachers Association is pushing for a system that would allow any local teachers' union affiliate in the state to bargain, develop, and implement the very gay/lesbian curricula they fear . . . or any other misguided nonsense, and do it all behind closed doors.

The National Board for Professional Teaching Standards is a more subtle part of a union power play in education. And it has supporters motivated by a sincere desire for improved teaching. Yet, its assessment processes are so subject to manipulation that vested interests like the teacher unions have a clear opening to use national certification to advance their ends--not only economic but ideological ones. The door appears to be open to outright cheating to certify the maximum number of teachers.

NBPTS Unable to Ensure Authentic Certifications

Dale Ballou, another distinguished economist (University of Massachusetts/Amherst) who has studied the NBPTS extensively, has pointed out in an unpublished paper that board certification suffers from weakness of evidence and the board's inability to ensure authenticity. Certification, he notes,

is based on how candidates present themselves to the board, not how well they teach. The board does not assess how much a teacher's students have learned. It does not visit classrooms or consult with candidates' supervisors. The board instead attempts to judge from afar, relying on portfolios and assessment center exercises. Portfolio entries can be manipulated to show the teacher favorably, while the board has no outside information that would permit it to check their accuracy. As for the assessment center exercises, the board frequently tips its hand, revealing a great deal about the questions and answers it expects in the advance materials mailed to the candidates. Even where it does not, the board does not take the most basic precautions to preserve the integrity of the assessment, but instead administers the same exercises to different candidates on different test dates.

Closing Caution for State Legislators

NEA representatives have said they would like to see 97 percent or more of candidates win certification. So far the passing rate is considerably lower than that, but it has been rising briskly. And as ill-informed state legislatures continue passing incentives to pump up NBPTS certification, quality is likely to be driven out altogether by the stampede to collect unmerited bonuses. Teachers who earnestly want their pupils to learn will find their union stewards urging them to practice and advocate teaching methods that their own experience tells them are ineffective.

* Robert Holland is a senior fellow at the Lexington Institute, a public-policy think tank in Arlington, Virginia.

UNIONS ON THE RUN* by Charles W. Baird**

In 2000 the rate of private-sector unionization in the United States was only 9 percent, a figure that has been falling precipitously since the early 1950s. John Sweeney became president of the AFL-CIO in 1995, when the private sector unionization rate was 14.9 percent, promising that he would reverse that decline. The rate has declined ever since, yet Sweeney still boasts that he will soon turn things around. The year 2001 didn't look good for Sweeney. In fact, it looks like 2001 was a banner year for workers who want to remain union-free. Coercive unionism in the private sector is on the run.

For example, last fall Sweeney and his cronies suffered two important, crushing defeats. On September 25 the voters of Oklahoma, by a 54-46 percent vote, approved a state constitutional amendment that made it the 22nd right-to-work state. Just eight days later, on October 3, 68 percent of the workers at Nissan's assembly plant in Smyrna, Tennessee, voted to remain union-free.

The Oklahoma Story

Section 14(b) of the National Labor Relations Act (NLRA) permits states to ban "union security" clauses in employment contracts within their respective jurisdictions. Union security clauses force all workers in a firm in which a union has been certified as exclusive (that is, monopoly) bargaining agent to pay fees to the union as a condition of continued employment. Where union security exists, workers do not have a right to work for willing employers without buying permission from unions with monopoly bargaining privileges. In the 22 right-to-work states, which now include Oklahoma, the right of any willing worker to be employed by any willing employer is guaranteed. No union, even with monopoly bargaining privileges, may abrogate that fundamental right.

It is not hard to see why unions abhor right-to-work laws. If they are restricted to collecting dues from their voluntary members--forbidden to force unwilling workers to pay them for representation services those workers do not want--they will have much less money to play with than they otherwise would. Money is crucial to unions because in the face of falling unionization rates their only hope for long-run survival in the private sector is for politicians to change the NLRA in a way that will make it harder for workers to avoid unionization. To that end, the AFL-CIO and its constituent unions spent approximately $500 million in cash and in-kind electoral support of union-friendly politicians in the 2000 elections for president and Congress. In the Oklahoma right-to-work battle the unions spent approximately $15 million to defeat the proposed constitutional amendment, while the victors only spent $6 million. A majority of Sooners, it appears, are far too smart to yield to the blandishments of desperate union officials who, from now on, will have no forced dues from Oklahoma to play with.

The Nissan Story

The story in Smyrna, Tennessee, is even more devastating to the Detroit-based United Auto Workers (UAW). The UAW had 1.5 million active members in 1970. By July 2001 active membership had fallen to 733,000. The Big Three Detroit-based auto producers are all heavily unionized and have been since the 1930s. But they are rapidly losing market share to union-free auto producers that are largely foreign-owned, with plants located in the largely union-free south. The UAW needed to win this certification election at Nissan to establish an auto-industry outpost in the south and to set a precedent that it hoped would make southern workers less union-resistant. The vote against certifying the UAW as the monopoly bargaining agent wasn't even close. Nissan workers rejected the UAW 68-32 percent.

The outcome is not surprising since Nissan workers in Smyrna make an average of $22 per hour without overtime. This is double what comparable workers in other industries earn in the south. Moreover, workers are becoming increasingly aware that union-free employment provides more job security than unions can offer. Unionized firms are impaired by their lack of ability to adapt to rapidly changing market conditions that have become common due to globalization of competition. Firms must be competitive to survive and flourish in the 21st century, and unions impair competitiveness.

Robert King, a UAW official, said that the union's loss "offers dramatic proof of the tremendous obstacles workers must overcome in the face of a hostile employer." He just doesn't get it. In 1989 the UAW lost its first certification election at Nissan by approximately the same decisive margin. It dropped attempts even to get an election in Smyrna in 1997 and again in 2000 for lack of worker interest.

The message seems clear: Nissan workers in Tennessee want to remain union-free. They want the UAW to go away; but, because it is so desperate, the UAW probably will continue to try to capture Nissan workers. The NLRA permits unions to harass workers and employers with certification elections and threats of certification elections indefinitely. Resources consumed in fighting these repeated attempts at hostile takeover are not then available to meet the challenges of competition. But unions don't care about the costs they impose on others, even workers. They care only about their institutional survival and capturing more fee payers.

Despite the bad news for unions in Oklahoma and Tennessee regarding their continued collapse in the private sector, they continue to prosper in government employment where the unionization rate was 37.5 percent in 2000, up from 37.3 percent in 1999. The trend seems clear. Unionization in America is becoming a phenomenon by which government workers and their union leaders attempt to live at the expense of private-sector workers. I will address issues of government-sector unionization in my next column.

*This article was first published in Ideas on Liberty, a monthly magazine published by the Foundation for Economic Education (web: www.fee.org). Copyright is retained by Foundation for Economic Education.

**Dr. Baird is a professor of economics at California State University Hayward, and the Director of the smith Center for Private Enterprise Studies. He is a regular contributor to Ideas on Liberty.

PREVAILING WAGES: COSTLY TO STATE AND LOCAL TAXPAYERS by Frank Gamrat, Ph.D. Allegheny Institute for Public Policy*

Key Findings

Prevailing wage laws exist at both the federal and state levels and are responsible for increasing the cost of government. The general purpose of a prevailing wage law is to artificially raise the wages of workers participating in government construction projects. Michigan, Florida and Ohio have experienced savings of 10 percent and higher on construction in the absence of a prevailing wage law. In Pennsylvania, prevailing wage laws apply to construction at all levels of government. This report shows that Pennsylvania construction savings would be at least 10 percent based on the difference between the prevailing wages set by the state and true market wages. Based on that finding, a number of observations can be made.

  • For the fiscal year 1999, the Commonwealth had $2.12 billion worth of construction expenditures. Absent the prevailing wage law, the state government could have saved $212 million on construction in FY99. That amounts to 2.4% of the individual income tax collected that year.
  • Local governments within Pennsylvania spent an additional $3.48 billion on construction in the same year. Again without the prevailing wage law, $348 million could have been saved. Money which could have been used to lessen the burden of property taxes by 3.6% ($9.66 billion collected in 1999).
  • School districts and the Commonwealth commit more than a half a billion dollars per year to school construction. In 1998 there were 66 school building projects, eligible for state reimbursement with a total value of over $730.6 million. With no prevailing wage requirement, school construction alone would have saved more than $73 million.

Beyond the monetary costs imposed on taxpayers, prevailing wage laws impose strict craft-based classifications and restrictive apprenticeships regulations. This limits employment opportunities in construction for entry level, or low skilled workers.

  • During the period its law was set aside by a federal judge, Michigan experienced an annual construction job growth rate that was almost 4.5 times the rate of growth as when the law was in effect (4,000 vs. 17,600). Even when controlled for external factors such as weather, the base result is still the same: More construction jobs were created during the period of no prevailing wage requirement, than when the law was in force.
  • During the 30 months without Michigan's prevailing wage law, there were 116.3 construction jobs created per 1,000 overall jobs, compared to the 78.6 per 1,000 jobs in the 30 month period before the repeal.

Introduction: The Cost of Prevailing Wage Laws

In 1931 the federal government passed the Davis-Bacon Act which requires that all contractors working on federal projects pay their employees no less than prevailing wages. According to the Davis-Bacon Act, prevailing wages are to be paid to any employee working on a federal government project with a value of $2,000 or more.

Prevailing wages were originally intended to increase the wages of local laborers and protect them from lower-wage migrants. At the time supporters of this legislation claimed that workers who were paid more would help spend the country out of the Great Depression. This argument gained momentum and eventually filtered its way down to the state level as over 30 states followed suit and passed "little Davis-Bacon" laws. The unintended consequence of the law was to force non-union contractors to pay their workers union-scale wages. The end result of the federal and state level Davis-Bacon laws is to raise the cost of labor and subsequently the cost of government projects which are ultimately passed on to the taxpayers.

The Federal Davis-Bacon Act

Although the U.S. Department of Labor sets the wage, it is almost invariably higher than what would prevail in the free market. According to the Department of Labor, the wage is determined by collecting wage data through the voluntary submission of wages by contractors, labor organizations, public officials, and other interested parties. According to the Congressional Budget Office (CBO), "those procedures (of the Department of Labor) as well as the classification of workers who receive prevailing wages, favor union wage rates...."1

The CBO in its Budget Options for 2001, recognizes that the federal Davis-Bacon law inflates the cost of government. They estimate that if Congress were to repeal the law, the federal government could save $9.5 billion from 2002 to 2011.2 As is stated in the report, "Repealing the Davis-Bacon Act would allow the federal government to spend less on construction...In addition, it would probably increase the opportunities for employment that federal projects would offer to less skilled workers."3 In absence of repeal, the CBO suggests raising the threshold from $2,000 to $1 million. By raising the threshold, the CBO estimates that the federal government could save $1.3 billion in federal outlays over the 2002 to 2011 period.4

Even though many groups support the repeal of the Davis-Bacon Act, there are other special interest groups that are steadfast in its support. Davis-Bacon gives union contractors an advantage over non-union contractors in the bidding for government projects. Davis-Bacon not only dictates the wages that must be paid to workers on government contracts, but it also dictates the hourly price for "fringe" benefits.5 Fringes for union workers are programs that are paid from trusts that have been built from dues payments and are not subject to payroll taxation. However, for the non-union firm the absence of such programs means that fringes must be paid directly to the employee as a supplement to the hourly wage and thus subject to payroll taxes. Therefore, not only are non-union firms required to meet the wage being paid by union firms, but must exceed them through fringe payments and then must pay more in payroll taxes than their union counterparts. As a result many non-union contractors pass on government projects, further biasing upwards the cost of construction.

The Act not only raises the cost of labor, which many non-union firms cannot match, but it also imposes rigid craft-based job classifications and restrictive apprenticeship regulations. This sharply limits an employer's ability to hire and train unskilled workers. In many cases these unskilled workers are minorities, which have historically been kept out of trade unions. It is believed that racism was a primary motivating factor in passing the Davis-Bacon Act. One purpose of the Act was to prevent contractors from using African-Americans from Southern states on projects in predominantly white Northern states. As one congressman stated in 1931, it prevents contractors from using "cheap colored labor."6

Nationally, black workers account for approximately 10.4% of the total workforce. However in the construction industry, blacks account for only 6.4% of all workers.7 Moreover, they have historically been shut out of unions. And since many black contractors are often not as well capitalized as large union shops, they are unable to pay prevailing wages and thus unable to bid on government projects. Many do not even try. Therefore the racial bias that was a part of the impetus of the Davis-Bacon Act of 1931, still echoes 70 years later.

Davis-Bacon at the State Level

As mentioned above, after the passage of the Davis-Bacon Act at the federal level, 32 states and the District of Columbia enacted what were to be known as "little Davis-Bacon Acts".8 As of 2000, 31 states and the District of Columbia have prevailing wage laws on the books. Nineteen states do not have such a law. Table 2 in the Appendix, provides details such as the year the law went into effect, the year of repeal, where applicable, and effective rate chosen.

The nation's first prevailing wage law was enacted by Kansas in 1891 as an "eight hour day law". This law focused mostly on prohibiting overtime except in an emergency."9 The last state level prevailing wage law was passed in Minnesota in 1973. Of the 19 states that do not currently have prevailing wage laws, 10 repealed prior Davis-Bacon laws (from 1979 through 1995.) Four arguments have led to the abandonment of prevailing wage laws: laws force employers to pay more for labor than the market would otherwise dictate; it allows employers to discriminate in hiring workers; it raises the cost of government; it increases administrative costs.

For example, to ease the burden on school districts, the Florida legislature dropped the prevailing wage requirement from school construction from 1974 through 1978. They found that the average yearly savings on school construction were about 15% ($37 million). After learning of the savings, the legislature repealed the entire prevailing wage law in 1979.10

Each state has its own process by which it determines prevailing wages. Some states set their wages through an elaborate process or through the local collective bargaining agreements between unions and contractors. Fifteen of the 31 states with a prevailing wage law use local collective bargaining rates. Some states simply choose to use federal rates and classifications. Below we compare four states, including Pennsylvania, as to how prevailing wage works.

Oregon

Oregon has had prevailing wage law since 1959. The Oregon Prevailing Wage Law (PWL) defines the rate to be paid as the rate of hourly wage, including fringe benefits paid in the locality to the majority of workers employed on projects of similar character in the same trade or occupation. The wording of Oregon's PWL may lead one to believe that local wages were recorded and used as the standard on government projects. However, according to the Oregon Bureau of Labor and Industries, prior to 1995, no survey of wages was ever taken. Instead, Oregon either used the federal Davis-Bacon rate or the collective bargaining rates of local unions.

Oregon conducted its first survey of contractors registered to perform heavy, highway, and commercial construction in 1995. The results substantiate the notion that unions push the wage rate above what would prevail in a free market. When the Oregon Bureau of Labor and Industries compared all occupations, they found that the average hourly wage in their most unionized area (Clatsop, Columbia, and Tillamook counties) were 27.6% higher ($18.49 vs. $14.48) than its least unionized area (Crook, Deschutes, and Jefferson counties). However an even larger gap occurred in the payment of fringe benefits. The average fringe benefit rate per hour in the two areas differed by 140% ($4.73 vs. $1.97). As mentioned above union shops have the advantage in fringe benefits because they are paid from well funded trusts whereas non-union contractors usually pay them as monetary supplements making them subject to payroll taxes which the non-union firm must pay. The "total" hourly union wage is 41% higher ($23.22 vs. $16.45).

Comparing occupations by union and non-union shops yields similar results. For example, painters, paperhangers, plasterers and stucco masons had an average hourly rate in the unionized zones of $15.56, while the average rate in non-unionized zones is $10.12.11 The average fringe benefit rate per hour is $3.26 in the union areas, but only $0.24 in the non-union areas.

Ohio

In 1997, Ohio passed a revision to their prevailing wage law which allows school districts the option of requiring prevailing wages to be paid on school construction projects.12 This revision is to be a five year experiment by the Ohio legislature to see if school districts are saving money, receiving quality work on school building construction, and what are the impacts on the wages of construction workers on school projects. The Ohio Legislative Budge Office (LBO) commissioned a first year study of the experiment. The results of the study show that where there are savings, the average rate is 6.1% (not counting administrative costs). There has been no appreciable decrease in the quality of school construction. Employment in the construction industry continued to grow despite the exemption of school construction from the prevailing wage law. Although causality cannot be determined, average hourly rates continued to grow despite the exemption. However, since the prevailing wage requirement was optional, some districts, in mostly heavily unionized areas, held onto the requirement.

Ohio's Legislative Budget Office surveyed the 611 school districts (396 responded--65%) after the first year of implementation of the option. Of the 396 responding districts, 14 (4%) still required their contractors pay a prevailing wage while 320 (81%) did not.13 Some of the respondents (37%) believed that by eliminating the requirement they would be able to save money on school construction. Others saw the change as an opportunity to give local contractors a chance to do some work. Some respondents expressed concern about the quality of work performed as they equated higher wages with better workmanship. However, most respondents noted that the elimination of the prevailing wage requirement did not adversely affect quality. The report finds that the skill level and quality of workmanship do not increase by simply requiring and paying prevailing wages.14

The Ohio Legislative Budge Office also surveyed contractors who bid on school projects. The LBO asked each responding contractor to submit two bids: one with a prevailing wage and one without. The difference was then used to estimate savings. 379 contractors responded to the survey. For 136 contractors (36%) there was no difference between their bids. Many of these respondents indicated that they were union shops. The author then notes that even though there were no savings in the contract bid, there should still be savings due to reduced compliance and administration costs. Two of the respondents (1.5%) noted that without the prevailing wage requirements, their bid price would be higher due to the inefficiencies in using unskilled labor. They reasoned that the inefficiencies would translate into longer hours to complete any project. However, 241 of the contractors (64%) indicated that they would bid the job lower without a prevailing wage requirement. The average savings rate between the two bids is 10.2%.

The LBO also noticed that savings depended upon the location, rural or urban, of the school district. In urban districts, where there were savings, the average rate was 9.4%. However, in rural districts, where there were savings, the average rate was 14.4%. One explanation is that since urban wages are typically higher than those found in rural communities (due to tighter labor markets), prevailing wages are often "imported" into the rural region. Removing the prevailing wage requirement allows rural contractors to do more work at a lower wage. The survey found that savings by trade are larger in rural counties than in urban counties. This again is a reflection on the tightness of the labor market lessening the difference between the union and non-union wage in an urban versus a rural setting.

The conclusion of the Ohio study notes that "where there are savings, the savings may be significant."15 However, the savings do depend upon the location of the district and the labor climate in which they operate. The Ohio LBO also cautions that extrapolating those savings across all construction projects may be premature since school construction only accounts for 5% of all construction in Ohio and some contractors may simply have passed on these projects since they are such a small percentage of their business.

Michigan

In December 1994, Michigan's prevailing wage law was found to be invalid by a federal judge. The judge ruled that the state's prevailing wage law was preempted by ERISA, a federal pension law. This decision was later reversed by an appellate court in June 1997. As a result Michigan's prevailing wage law was not enforced for a period of 30 months. Richard Vedder studied how the hiatus effected construction employment and government spending.16

With regard to construction job growth, during the break, Michigan experienced an annual growth rate that was almost 4.5 times the rate of growth as when the law was in effect (4,000 vs. 17,600). Even when controlled for factors such as weather, seasonality of construction, and business cycles, the author finds the base result is still the same: More construction jobs were created during the period of no prevailing wage requirement, than when the law was in force. During the 30 months without the law, there were 116.3 construction jobs created per 1,000 overall jobs, compared to the 78.6 per 1,000 jobs in the 30 month period before the repeal.

Prevailing wages have been shown above to increase the cost of public construction. But, how much so depends upon three factors: By how much does the prevailing wage exceed the free market wage; what percentage of the total construction costs are labor; and what impact on productivity does the prevailing wage have.

In Michigan, Vedder finds that the prevailing wage was 30-40% more than the market wage. He also estimates that labor costs are, on average, about 25% of the value of a construction contract. He also finds that there is no reliable evidence that labor productivity changed in the absence of prevailing wages.17 Therefore, with prevailing wages that are as much as 40% higher than free market wages, and labor comprising 25% of overall construction costs, the cost of a contract will be raised by approximately 10%. Evidence from school construction that took place during the 30 month reprieve shows that savings were over 10% (13-16%). This could actually be due to improved managerial control over workforce and thus lower total overhead costs and compliance.

In fiscal 1995, Michigan state and local governments spent almost $2.51 billion on construction outlays. Assuming a savings rate of 10%, the elimination of the prevailing wage could have saved them $251 million. Adding to that total, non-construction outlays that are subject to prevailing wages, the overall savings to Michigan was about $275 million in 1995.18 As noted by Vedder, "It is the equivalent of slightly over five percent of the revenue raised by the Michigan individual income tax in fiscal 1995 ($5.473 billion). "(R)epealing Michigan' prevailing wage law would have an impact the equivalent of giving every taxpayer a rebate equal to five percent of his state income tax payments."19

Pennsylvania

Pennsylvania instituted its prevailing wage law with the Pennsylvania Prevailing Wage Act of 1961.20This Act applies prevailing wages to any publicly funded construction project with a value of $25,000 or more. (In 2001, a bill was introduced in the State Senate (SB 821) which would have raised the threshold to $500,000. This bill, like previous attempts to amend or repeal the prevailing wage act, did not succeed.) Pennsylvania's prevailing wage act also applies to established trades outside of the construction industry, such as printing contracts at the state level (local leaders have the option on printing contracts) and highway construction. Maintenance work is not covered, however reconstruction work is, causing many court battles seeking to define when a project is "maintenance" or "reconstruction".

When determining the rates to be used, the Act gives the Secretary of Labor the power to use the local collective bargaining rate as the prevailing wage. However, the Ridge Administration commissioned a Prevailing Wage Advisory Board to construct county-by-county surveys to set and update new rates. In 1997, they claimed that by establishing new rates, taxpayers should save $100 million in public construction costs. They claim that "the Prevailing Wage Law will now be able to function as intended because the Ridge Administration has taken the initiative to determine rates which truly reflect local wages on construction projects in each of our counties."21

Government Construction Expenditures in Pennsylvania

For the fiscal year of 1999, the Commonwealth of Pennsylvania had $2.12 billion worth of expenditures on construction.22 It will be assumed that all of the projects (given the low threshold of $25,000) were subject to the state's prevailing wage law.23 Using conservative estimates from the Michigan experience, it can be assumed that the state's taxpayers could have saved 10% of these costs in the absence of prevailing wages without any noticeable differences in workmanship. This amounts to $212 million for FY99, which represents 2.4% of the individual income tax collected in 1999 ($8.85 billion). Local governments within Pennsylvania spent an additional $3.48 billion on construction in the same year. Again, assuming that 10% could have been saved without prevailing wages, this amounts to $348 million which could have been used to lessen the burden of property taxes by 3.6% ($9.66 billion collected in 1999).

In the Pittsburgh region, the differences in the average free market wage and the prevailing wage is shown in Table 1. Table 1 shows a sampling of occupations that are covered by the Prevailing Wage Act of 1961. The first column gives the average free market wage in the Pittsburgh MSA while the second column gives the corresponding prevailing wage for the same occupation. The third column shows the difference between the two. The largest difference occurs with Electric Linemen ($10.03), while the smallest occurs with Cement Masons/Finishers ($2.85). The average difference is just over $6.00 per hour.

The real discrepancy happens when fringe benefits are added to the mix. Column 5 lists the hourly fringe benefits as required by the prevailing wage. The average hourly fringe benefit is $8.57, with a range of $6.12 (Landscape Laborers) to $11.65 (Sheet Metal Workers). As mentioned above, union contractors pay fringe benefits through programs that are run from trusts and are not subject to payroll taxation. However, for the non-union firm the absence of such programs means that fringes must be paid directly to the employee as a supplement to the hourly wage and thus subject to payroll taxes. When adding the cost of the fringe benefits to the hourly wage, the average payment that is to be made to a worker under the prevailing wage law is $31.20. In the free market, hourly fringe benefits can be conservatively estimated at 30% of the hourly wage. Thus the free market fringe is approximately $5.00 per hour, bringing the total wage plus benefits to $21.62.

According to the Pennsylvania Department of Education, school districts and the Commonwealth commit more than a half a billion dollars per year to school construction. In 1998 there were 66 school building projects, eligible for state reimbursement with a total value of over $730.6 million.24 Assuming that Pennsylvania experiences the same savings rate that was found in both Ohio and Michigan (10%), savings would exceed $73 million. This represents only a fraction of all school projects that are undertaken that would fall under the guise of the prevailing wage act. In the first two months of 2001, there were 169 prevailing wage projects in Allegheny County that were submitted to the state's Bureau of Labor Law Compliance.25 Of these, 76 or 45% of the projects were school related. If Pennsylvania were to follow the lead of neighboring Ohio, and allow school districts to be exempted from the prevailing wage law, savings to individual school districts could be substantial.

Conclusions

In 1931, the Davis-Bacon Act was passed with the promotion of providing a "level playing field" for local contractors bidding on lucrative government contracts. The idea of paying workers more, or giving them "fair" wages, quickly spread throughout state level governments as over 30 states passed similar laws. However its roots were firmly planted in racism in an attempt to prevent contractors from using "cheap colored labor." The intended consequence of forcing non-union contractors into paying their employees union scales wages has cost taxpayers billions of dollars nationwide each year.

The Congressional Budget Office recommends either eliminating or modifying the Davis-Bacon Act. By repealing Davis-Bacon, the CBO estimates that the federal government can save $9.5 billion over the next ten years. In the absence of repeal, the CBO advocates raising the threshold from its current level of $2,000 to $1million. This would save the federal government approximately $1.3 billion over the next ten years.

The discrepancies caused by prevailing wages at the state level are well documented. Empirical evidence from Oregon, Michigan and Pennsylvania show that prevailing wages are on average 25-40% higher than free market wages. The real difference occurs with fringe benefits, which in Oregon were shown to be nearly twice what was being offered in the private sector. Fringes compound the problem by adding additional tax burdens onto non-union contractors. With prevailing wages higher than free market wages, many non-union contractors simply pass on government projects. This leads to less competition and higher costs for government construction which are ultimately borne by the taxpayer.

Making the prevailing wage law an option at the school district level, has resulted in substantial savings for Florida (which ultimately led to the statewide repeal), Ohio and Michigan. Average savings were about 10%. If Pennsylvania were to follow in the footsteps of these states and make the prevailing wage an option at the school district level, the Commonwealth could see annual savings of $73 million.

Prevailing wage laws not only cost taxpayers more in construction costs, it also limits job creation. During the 30 month break in Michigan's prevailing wage law, job creation in the construction industry per 1,000 jobs increased from 79 to 116 (47%). In addition, it sets strict guidelines on job classifications as well as the number of apprentices and trainees that may be used on a job. In many cases these unskilled workers are minorities, which have historically been kept out of trade unions.

The Davis-Bacon Act of 1931 and the subsequent "Little Davis-Bacon Laws" that have sprung up at the state level, are firmly based in racism and are very costly to taxpayers. The repeal of these laws would further increase the opportunities for unskilled workers to enter the construction industry and earn the decent wage originally promised by the legislation. Its removal would also put more money into the pockets of taxpayers while decreasing the cost of government.

This report, Allegheny Institute Report #02-02, was first published by the Allegheny Institute in February 2002. © by Allegheny Institute for Public Policy. All rights reserved. Note: Nothing written here is to be construed as an attempt to aid or to hinder the passage of any bill before the Pennsylvania General Assembly.

Frank Gamrat, Ph.D., is a Senior Research Associate at the Allegheny Institute for Public Policy. Address: 305 Mt. Lebanon Blvd., Suite 305, Pittsburgh, PA 15234. Phone: 412-440-0079. Fax: 412-440-0085. Web site: www.alleghenyinstitute.org.ppp

1 Congressional Budget Office. Budget Options for 2001. February 2001. Section 920-05-A. Page 7.

2 Ibid.

3 Ibid.

4 Congressional Budget Office. Budget Options for 2001. February 2001. Section 920-05-B. Page 8.

5 Fringe benefits were added to the Act in 1964 and include medical care, workman's compensation, pensions, vacation pay, etc.

6 Vedder, Richard. "Michigan's Prevailing Wage Law and Its Effects on Government Spending and Construction Employment." Mackinac Center for Public Policy. 1999. Page 4.

7 Wilson, Mark and Rebecca Lukens. "Four Reasons Why Congress Should Repeal Davis Bacon". The Heritage Foundation Backgrounder. June 7, 1995. No. 252.

8 9 states already had such laws on the books and 9 never had such a law.

1 Thieblot, Armand J. Jr., "Prevailing Wage Legislation: The Davis-Bacon Act, State "Little Davis Bacon" Acts, the Walsh-Healey Act, and the Service Contract Act." University of Pennsylvania. The Wharton School Industrial Research Unit. 1986.

10 Broward County Florida installed their own prevailing wage law in 1981.

11 An area or zone is classified as unionized if 40% or more of the workers belong to a union.

12 Ohio Senate Bill 102.

13 The remaining 72 had not adopted a formal policy.

14 Lundell, Allan. "A Study of the Effects of the Exemption of School Construction and Renovation Projects from Ohio's Prevailing Wage Law." Ohio Legislative Budget Office. September 1998. Page 7.

15 Ibid. Page 13.

16 Vedder, Richard. "Michigan's Prevailing Wage Law and Its Effects on Government Spending and Construction Employment." Mackinac Center for Public Policy. 1999.

17 Ibid. Page 14.

18 Ibid. Page 14.

19 Ibid. Page 15.

20 Pennsylvania Prevailing Wage Act of 1961, P.L. 987, No.442.

21 News Brief from the Office of Governor Tom Ridge. "Taxpayers to Save Millions Through New Prevailing Wage Rates." Vol. 2, Issue 6. February 28, 1997.

22 U.S. Census Bureau. Pennsylvania State and Local Government Finances by Level of Government: 1998-99. www.census.gov/govs/estimate/9939pa.html.

23 Does not include expenditures on highway construction or printing contracts which are both covered by prevailing wages.

24 Dept. of Education must approve plans and specifications for all public school construction or reconstruction, and for ordinary repairs or maintenance work for any second, third, or fourth class district. http://www.pde.psu.edu/facilities/esschbld.html.

25 Determination dates were for January and February of 2001 with award dates through June 1st. http://164.156.7.70/PWAGE/010103.html.

THE LIVING WAGE FOLLY* by Charles W. Baird**

As of July 2001, sixty-two municipalities (cities, counties and government school districts) in twenty-four states had enacted "living wage" regulations affecting all private and non-profit enterprises with which they do business. California, Michigan and Wisconsin have more living wage ordinances (LWOs) than other states, but LWOs are spread widely over the entire country. Moreover, there are active campaigns to establish new LWOs in all states except Alaska, Idaho, Wyoming, North Dakota, South Dakota, Mississippi, and West Virginia. It is only a matter of time before municipalities in those states are targeted. According to the Employment Policy Foundation (EPF), which is the best single source of data on LWOs, a total of seventy-five living wage campaigns are now active in thirty-seven states. There even are or have been campaigns to adopt statewide LWOs in sixteen states. EPF data and commentary on the issue can be found at www.livingwageresearch.org.

An LWO requires that all enterprises doing business with the municipal authority pay their employees no less than the specified living wage, which differs from jurisdiction to jurisdiction. There are stiff penalties, including back pay awards, fines, and loss of contracts imposed on firms that violate LWOs. Typically an imposed living wage is 50% to 100% higher than the current federal minimum wage of $5.15 per hour. An LWO is nothing other than a minimum wage regulation imposed at the local, rather than the state or federal levels, with the exception that it applies only to firms doing business with the municipal authority that imposes it. State and Federal legal minimum wage statutes preempt local wage ordinances as they apply to other private firms. However, twelve private universities, including Harvard and Stanford, as well as several private enterprises, have been importuned to adopt their own living wage policies without government mandates. LWO campaigns undertaken at private firms are modeled after the old union "corporate campaigns" of the 1970s and 1980s. They involve concerted efforts to ruin the reputations of those who do not surrender as well as picketing, demonstrating, boycotting and other forms of harassment. All, of course, in the name of "social justice." In all settings other than labor such actions are called extortion.

The Perpetrators

The Association of Community Organizations for Reform Now (ACORN)--which calls itself a "grassroots" organization, but is mostly a collection of 1960s radicals who, since the worldwide collapse of socialism, need other ways to pursue their anti-market agenda--initiated the living wage movement in the late 1980s. ACORN's crusade was soon joined by John Sweeney's AFL-CIO and several of its constituent unions together with welfare advocacy groups of various descriptions and the usual coterie of well meaning but economically benighted religious groups.

John Sweeney has always identified himself as a proponent of democratic socialism and an opponent of free markets; so he is a natural ally of ACORN. The payoff to individual unions, such as the Service Employees International Union, is three-fold. First, living wage ordinances increase the price of union-free labor relative to unionized labor, thus increasing the demand for unionized labor. This has always been a major reason for the unions' support of legal minimum wages. The unions have become impatient with federal and state governments' slow and, to them, meager increases of legal minimum wages and are delighted to endorse the more radical increases proposed by ACORN. Second, LWOs often include requirements that covered employers remain neutral in any union organization campaigns. Unions have been losing market share in the private sector ever since the mid 1950s, and that decline accelerated during the 1980s and 1990s. Thus they are eager to prevent employers from being able to explain the downside of unionization to their employees. Third, LWOs involve the creation of committees to oversee their implementation. Unions are always heavily represented on such committees, and they dominate many of them. In such cases unions effectively have veto power over both the level of the living wages that are imposed and the determination of which firms are eligible to get municipal contracts.

Many self identified welfare advocacy groups--e.g., Jessie Jackson's Rainbow/Push Coalition--are more interested in the preservation of their continued own existence and visibility in the press than they are in the actual welfare of low income people. Welfare advocacy groups that really are interested in promoting the interests of low income people and support the imposition of living wages simply are unaware that, like all legal minimum wage statutes, LWOs hurt the very people they are intended to help.

Religious groups that support LWOs are also ignorant of their actual, rather than their intended, effects. The Catholic Church and most other Christian denominations claim to have a "preferential option for the poor." Inasmuch as it is indisputable that economic systems built on private property, voluntary exchange, and the rule of law have consistently created much more wealth, and distributed it much more widely than command and control systems of all kinds, it seems to me that actually to exercise a preferential option for the poor one must oppose LWOs and all kindred anti-market government policies.

The Alleged Need for LWOs

Proponents of LWOs start by doing some simple arithmetic. Full time work is defined as at least 2000 hours per year. The federal minimum wage is $5.15 per hour. This means that a full time minimum wage worker may earn only $10,300 per year. That figure is below the 2001 Department of Health and Human Services poverty threshold for all family sizes larger than one. The threshold for a family of four was $17,650 (see www.census.gov). Clearly, according to LWO proponents, this is unacceptable. Just to reach the poverty threshold for a family of four the wage must be $8.82 per hour, and a decent "living wage" should be significantly more than that. Following the arithmetic, living wage proponents usually add a few uninformed words about employers exploiting labor, which amount to a definition of exploitation as a wage that is less than that of which they approve. That's it. That is essentially the whole argument offered in support of LWOs.

Living wage proponents paint a purposefully misleading picture of the situation of minimum wage earners. They strongly imply that the typical full-time minimum wage earner is the sole earner in a family of four. Moreover, their peripheral rhetoric suggests that the typical full-time minimum wage worker is a single mother struggling to make ends meet against all odds. EPF research demonstrates this is simply not the case. A household with two full time minimum wage workers earns $20,600, well above the 2001 poverty threshold for a family of four. When opportunities for overtime are considered such households can easily have earnings that exceed the 2001 poverty threshold for a family of five. Only seven percent of people who are paid between $5.15 and $7.15 per hour are single parents, and one-half of workers who earn $7.15 per hour or less live in households with annual incomes over $42,671. Approximately forty percent are children or other relatives of a family head who earns much more than the legal minimum wage. And none of these figures take into account employer and government benefits received by low income households.

The crisis to which LWOs are alleged to be the solution simply doesn't exist. Some poor will always be among us, but the force that ameliorates poverty better than any other is economic growth. Measures which impede economic growth, such as LWOs which corrupt the information content of wages and prices and distort incentives to work and acquire marketable skills, ultimately hurt the very people the proponents of LWOs assert they wish to help.

Some Economic Effects of LWOs

The effects of increases of legal minimum wages on the employment prospects of workers who are least experienced, least well trained, and who have not developed good work habits and attitudes are well documented. Each ten percent increase of a legal minimum wage results in job losses of from 1.3 percent to 2 percent. Moreover, as noted above, LWOs impose wages that are significantly higher than ordinary legal minimums. Economic theory tells us the negative responsiveness of jobs to increases of wages (elasticity) is greater at higher wages than at lower wages. So LWOs are even more destructive to jobs than increases of ordinary legal minimum wages.

Profit seeking employers are willing to continue the employment of a worker if and only if the cost to the employer of the worker's services is not greater than the amount of money the employer would lose from sales (net of the cost savings on materials and supplies no longer used) if he lays off the worker. In other words, if and only if the cost of retaining a worker (the full hiring cost including payroll taxes) does not exceed what the employer would lose if the worker were let go. So when increases of legal minimum wages are imposed in any form, including living wages, some workers will be let go. The ones that are always let go first are those who are the least productive. (The lost output and sales that follow upon letting a worker go will not amount to much in the case of a worker who isn't very productive.)

Not only will the least productive workers lose their jobs, every time there is an increase in a legal minimum wage young people just entering the labor force with little experience and training will find it more difficult to get first jobs. The surest route to becoming a productive worker for people who have little training and education is on-the-job experience. All increases in legal minimum wages make it more difficult for the disadvantaged to follow that route.

Sometimes profit seeking entrepreneurs will try to avoid layoffs by cutting non-wage compensation paid to workers. For example, reductions in paid vacation time, employer contributions to retirement funds, employer paid medical insurance, and rates of sick leave accrual can sometimes offset the effect of a higher legal minimum wage. If so, affected workers will keep their jobs, but they will not be any better off than they were before the minimum wage increase. In fact, they will probably be worse off because more of their compensation will be taxable than before.

Another way for profit-seeking entrepreneurs to try to avoid layoffs is to attempt to pass the wage increases on to customers in the form of higher prices. In the private sector this is often difficult to do because of competition. Competition among American firms is not much of a problem in the case of an increase of the federal minimum wage, because it applies to all American firms alike. Firms affected by state minimum wages, to the extent they are not less that the federal minimum, are somewhat constrained from passing on cost increases to customers by interstate competition. It is much easier for governments to pass costs forward on to consumers, because the consumers are taxpayers who do not have the option of refusing to pay. Firms affected by municipal LWOs may simply respond by raising the prices they bid for municipal contracts. Municipalities that try to offset those higher costs with higher taxes face jurisdictional competition within their own states as well as others. People can simply vote on the resulting tax burdens with their feet. But this discipline is not always effective. LWOs are often followed by municipal tax increases.

EPF researchers have pointed out a unique harm done by LWOs. The high school drop out rate of workers who earn between $5.15 and $8.15 per hour is double that of workers earning between $8.15 and $10.15 an hour. To the extent that an LWO results in increasing the number of high school dropouts receiving more than $8.15 per hour, the wrong message is sent to both groups. High school dropouts learn that politics trumps education and training in wage determination, and the more productive learn that their training and education gives them fewer advantages than before. The productivity of both groups will decline, and younger people still in school will have less of an incentive to stay there.

In Conclusion

The living wage folly is undoubtedly in the interests of unions, 1960s radicals and other enemies of free markets, but it is certainly not in the interests of all the disadvantaged workers, and taxpayers, who are harmed thereby. Of all the arguments of socialists and their contemporary successors, it seems that those based on confusions about labor and labor markets are most enduring. I think that is because humans everywhere are prone to envy. If A earns more than B, and B doesn't like it, there is a perverse profit opportunity for anti-market entrepreneurs to blame it on the alleged injustice of free markets. The record is clear: The pursuit of economic equality through the political marketplace eventually results in almost everyone, except political elites, having less than they otherwise would. In contrast, individual pursuit of economic success in free markets under the rule of law never leads to equality of results for everyone, but it always results in almost everyone having more than they otherwise would. Let's hear it for the Tenth Commandment.

* This article was first published in Ideas on Liberty, June 2002, pp. 16-19.

** Dr. Baird is Professor of Economics and Director of The Smith Center at California State University in Hayward, California.

Executive Summary of THE EFFECT OF RIGHT-TO-WORK LAWS ON ECONOMIC DEVELOPMENT* by Robert P. Hunter**

"Right-to-work" (RTW) laws are state statutes or constitutional provisions that ban the practice of requiring union membership or financial support as a condition of employment. These laws establish the legal right of employees to decide for themselves whether or not to join or financially support a union. The right to enact a RTW law is assured by Section 14(b) of the Federal Labor-Management Relations Act (also called the Taft-Hartley Act) of 1947.

Since the 1940s, 22 states have adopted RTW laws, the most recent being Oklahoma, which added a provision to its constitution in 2001. Michigan, a non-RTW state, is home to 972,000 unionized employees, which represents 21.8 percent of all private and public sector workers employed in Michigan in 2001.

Advocates of RTW laws cite a growing body of evidence showing that RTW states enjoy faster economic and employment growth than non-RTW states. This growth advantage--experienced predominantly by the southern and western states, which comprise the bulk of RTW states--has been in evidence ever since Taft-Hartley was passed.

To evaluate the merits of these arguments, this study compares economic development between RTW and non-RTW states. It examines a broad cross-section of state economic statistics from the past three decades. Michigan's economic performance receives particular attention. The results of this analysis contradict many of organized labor's long-standing contentions.

The following are the key conclusions of the research. Except where otherwise noted, these data are averages of annual figures taken from 1970 through 2000:

From 1977 through 1999, Gross State Product (GSP), the market value of all goods and services produced in a state, increased 0.5 percent faster in RTW states than in non-RTW states. Michigan's GSP grew at roughly half the rate of RTW states.

Employment grew almost 1 percent faster each year, on average, in RTW states. Employment in Michigan grew only half as fast as employment in RTW states.

Manufacturing employment grew 1.7 percent faster in RTW states. Right-to-work states created 1.43 million manufacturing jobs, while non-RTW states lost 2.18 million manufacturing jobs. Michigan lost more than 100,000 manufacturing jobs during this period, performing even worse than many other non-RTW states.

Construction employment grew 1 percent faster each year, on average, in RTW states. Michigan ranked 32nd in the nation in this category.

From 1978 through 2000, average annual unemployment was 0.5 percent lower in RTW states. Unemployment in Michigan was 2.3 percent higher than in RTW states.

Per-capita disposable income was 0.2 percent higher, on average, in RTW states. Michigan's rate of increase in this category matched the average for other non-RTW states. Although nominal per-capita disposable income was 10 percent higher in non-RTW states in 2000, research shows that the cost of living is also higher in these states; so high, in fact, that after-tax purchasing power--real income--is greater in RTW states.

Unit labor costs--the measure of labor compensation relative to labor productivity--were 93.2 in RTW states and 98.1 in non-RTW states in 2000. Michigan, at 109.2, had the second highest unit labor costs in the nation that same year, exceeding all but New Jersey.

The percentage of families living in poverty in RTW states dropped from 18.3 percent to 11.6 percent between 1969 and 2000. During this same period, seven states saw increases in poverty, all non-RTW states. Michigan was among them, with a poverty increase of 0.6 percent, ranking it 45th among the states in poverty rate improvement.

Income inequality rose in both RTW and non-RTW states between 1977 and 2000. But while this inequality was greater in RTW states in 1977, by 2000 the situation had reversed.

This study attributes the better economic performance of RTW states to greater labor productivity. The post-World War II period has brought rapid economic globalization, which has dramatically increased the importance of labor productivity and of policies, such as right-to-work, that affect it.

Advances in information technology, greater capital mobility, and lower barriers to entry for business startups are making it increasingly difficult for businesses to pass higher costs on to suppliers and customers. The net effect is increasing pressure for firms to seek geographical regions with lower cost structures and higher rates of labor productivity.

Right-to-work laws increase labor productivity by requiring labor unions to earn the support of each worker, since workers are able to decide for themselves whether or not to pay dues. This greater accountability results in unions that are more responsive to their members and more reasonable in their wage and work rule demands.

The study predicts that Michigan will continue to fall behind economically relative to RTW states until it adopts a right-to-work policy.

* This is the Executive Summary of a larger publication recently published by the Mackinac Center for Public Policy--Mackinac retains the copyright. See Mackinac's web site: www.mackinac.org, pub. no. 4291, posted June 5, 2002.

** Robert P. Hunter is the director of labor policy for the Mackinac Center for Public Policy, located in Michigan. He is an attorney and author, and served as a member of the National Labor Relations Board, as Chief Counsel to the U.S. Senate Committee on Labor and Human Resources, and as a professor at the John Hopkins University Graduate Business School.

THE ECONOMIC EFFECTS OF THE TEACHERS' UNIFIED SALARY SCHEDULE by John T. Wenders*

Abstract

This paper addresses the teachers' salary grid employed in virtually all public schools in the United States. It will show how the salary grid causes the data on teachers salaries collected by the National Education Association to underestimate the rate at which these salaries have increased in the decade of the 1990s.

Since the grid recognizes only years of service and accumulated education credits, the incentives in the grid tell teachers not to worry about student performance and to spend their time accumulating education credits and degrees of no value to student performance. Further, if you have talent in math or science, or are ambitions and want to work hard to get ahead, you can do better outside of teaching where you will be rewarded for good performance.

The existence of the grid makes it very difficult and expensive to upgrade teacher quality. The existence of a rigid grid means that most of the money spent on salary increases goes to those already on the grid and further locks these teachers into place--the very ones you want to replace. Research shows that this is exactly what happened during the 1980s when teacher salaries generally were raised by about 20 percent with no discernable improvement in teacher quality. This is also what is happening to the Teach for America program for teacher reform. With the grid in place, all piecemeal attempts to improve teaching will fail. The grid has an insidious ability to thwart reform by wringing competence out of the public schools.

The grid survives and is popular because it has advantages for teachers, unions, administrators, and school boards in the political market in which teachers' pay is determined. Taxpayers and parents, the only ones who would count if education were market based, are out of this loop.

Introduction

Recently, the National Education Association issued its annual review of public school teachers' salaries (see: http://www.nea.org/nr/nr020408.html). Predictably, it is accompanied by the usual posturing that these salaries are too low and need to be increased. This year, the story is that teachers' salaries have barely kept up with inflation: "Teachers Union Berates Salaries" was the headline in my local newspaper, and the headline continued, "NEA Says Pay Barely Keeps Pace With Inflation." The not-so-subliminal message is, as always, that teachers are under-paid and stingy legislators and school boards need to be prodded by indignant voters to raise taxes and spend more money on salaries.

Before the public buys into all this, a little straightforward analysis of both the teachers' market and the salary numbers is in order. In particular, the effect of the unified salary schedule under which virtually all public school teachers are paid needs to be exposed, as it affects published salary figures, influences the general market for teachers, and attempts to reform the public school system.

The Grid and Average Salaries

Let us look at the unified salary schedule--the grid--and see how it affects published average teacher salaries.

Like most government compensation systems, the grid typically puts all teachers into a rigid salary schedule of rows and columns, with years of service along one axis and amount of education, primarily in pedagogy, along the other--bachelor's degree, master's degree, master's plus 30 education credits, doctor's degree, etc. Over time, teachers automatically move up the grid as they accumulate years of service and various college credits.

Teacher attrition is concentrated in the early and late age/experience groups. Thus, over time individual teachers enter at the bottom of the grid, and if they do not leave in the first few years of teaching, they then ride the grid upward until retirement. And with the ranks of teachers growing, as they have over the past decade, there are more teachers coming into the bottom of the grid than leaving elsewhere.

These simple dynamics have implications for the behavior of reported "average" salaries over time. These averages are computed by adding up the salaries of different teachers, in different places, on different salary grids. A key thing to keep in mind is that the number and identity of persons in these different places--the mix--changes over time. Primary grade teachers usually have lower salaries than secondary teachers, possibly due to fewer years of experience and fewer education credits. If, over time, the proportion of primary teachers in the mix is increasing--either due to faster growing primary student enrollment or the sustained drive to lower class size in the primary grades, as in California--this lowers the computed average, even though no actual individual teacher's salary falls. If the age or years of experience of teachers are falling, then this fact, in and of itself, would lower the computed average. If the number of teachers is growing, more teachers are probably coming into the mix at the lower end of the salary grids, producing lower average salaries. In short, merely changing the mix in the salary grid in these ways can make the computed average come out lower.

On the national level, this is exactly what has been going on: the number of teachers has been growing faster than the number of students, as evidenced by falling pupil/teacher ratios, and is expected to continue into the future. The lowering of average salaries is artificial; it is not real and is not because any individual teacher experienced a stagnant or lower salary. Simply put, the "average teacher" is a statistical abstraction, not a person. The vast majority of real teachers who stayed in teaching inevitably accumulated more years-of-service and professional development education. These real teachers inexorably marched up through successively higher salary grids--grids where every element, every step, gets bigger over time. During the last decade, teachers ended up with a substantially higher salary in both nominal and real terms. No teacher ever moves down the grid, and no grid's elements ever get smaller over time.

If the NEA really wanted to track teachers' salaries over time, it would take a random (or total) sample of real teachers in every state in 1990, and record their progress up through the elements of the succeeding higher grids until 2000, and see what happened to their salaries annually. If random sampling is chosen, the NEA could also take a sample of teachers in 1991 and succeeding years. The result would be a table of the actual growth of teachers' salaries every year over this decade. The NEA, of course, does not do that, which gives credence to the speculation that the results would be much different than the simple reporting of artificial "average" salaries. This is another of the dogs that don't bark at the NEA, along with the computation of teacher benefits.

There are other problems with reported teachers' salaries, most notably the failure to take account of the generous benefits given to teachers relative to employees in the private sector. While these problems are oblique to our discussion of the salary grid, the interested reader can find an excellent review in Wynne and Watters (1991).

The Incentive Effects of the Grid

Aside from the effects of the grid on reported average salaries, the grid has other, more serious, economic effects on the teachers market.

The most important of these is its effect on teacher quality. All teachers in any school district are put into the same grid no matter how well or what they teach. Dolts get paid the same as superior teachers, and PE teachers are paid the same as physics teachers. Unlike in the real market place, teachers who perform well, or have valuable talents, are not paid more, and those who perform badly, or whose talents are commonplace, never make less. Thus, we have an artificial shortage of math and science teachers, and U.S. students' performance in these subjects is about the lowest in the world. We also have a surplus of P. E. and social science teachers, who then, sadly, often end up teaching math and science.

The NEA's spin on this is to emphasize the shortages of math and science teachers, but never mention the surplus of PE, social science and elementary teachers. One of the NEA's regular non sequiturs is to use the perennial shortage of math and science teachers as a lever to raise all salaries in the grid. One could just as logically argue that the common surplus of most other teachers means that all salaries in the grid should be lowered. But you never hear that.

There is also evidence that better college graduates, as measured by SAT and ACT scores, are less likely to enter teaching and more likely to become disillusioned when trapped by the public school inflexible salary grids (see: http:// www.edweek.org/sreports/qc00/templates/chart.cfm?slug=intro n-c3.htm; Barro. 1992, p. 157).

One could not consciously design a policy with worse incentives for attracting and keeping good talent and performance.

The salary grid would have some appeal if it were true that teachers' experience and education improved student performance. This is not supported by the best research (Walsh, 2001, pp. 57; Walsh and Podgursky, 2001; Ballou and Podgursky, 1997, p. 8; 2000[a], 2000[b]; Hanushek, 1986; Wenglinsky, 2000; Ehrenberg, et. al., 2001). The bottom line is that teacher quality is almost entirely determined by: (a) teacher cognitive ability--brains, (b) experience for the first few years of teaching, and (c) at the secondary level, possession of a master's degree in one's teaching subject. Everything else can't be found on the student performance radar screen. If you measure teacher quality in terms of student performance, then certification, licensing, and in-service training are beyond detection. The education establishment, of course, hotly denies this because it demolishes the raison d'etre for a very large fraction of the public school establishment.

The net result of all this is that teachers are being told by their pay incentives not to worry about student performance, to spend their time accumulating education credits and degrees of no value to student performance, and if you have talent in math or science, or are ambitious, you can probably do better outside of teaching. Yet, the NEA defends the grid tooth and nail.

In a recent study assessing student achievement, Grissmer, et. al. (2000, pp. xxvi-xxvii) summarized the effects of the teacher salary grid:

The current system rewards experience and education--but neither seems to be strongly related to producing higher achievement. If the system could distinguish and provide higher compensation for higher-quality teachers and those who are more effective with lower-scoring students, for whom there is more leverage for raising scores, one would expect a dollar of compensation to be more effective. However, in the current system, another dollar of compensation is used to reward experience and degrees and to raise all salaries--rewarding both high- and low-quality teachers--and teachers of both low- and high-scoring students. With such a compensation system, lower effects might be expected.

How the Grid Thwarts Public School Reform

The salary grid is responsible for much of the sclerosis in the whole lower public education system, a sclerosis so bad that it makes piecemeal reform virtually impossible.

Suppose you want to improve teaching, as measured by teaching performance. The evidence is that better teachers are smarter, and smarter people always have more opportunities outside the teaching profession. Thus, if you want to attract smarter people to the profession, you are going to have to pay new teachers more. But the only way to do this within the confines of the salary grid is to raise the whole grid. This, in turn, raises everyone's salary, which, in turn, further reduces teacher attrition and turnover rates. When combined with ironclad teacher tenure, this locks in place many of the teachers you are trying to replace. Lower turnover rates also mean less demand for new hires, which in turn will eventually have a depressing effect on the supply of those training for teaching due to reduced prospects of gaining employment. And this will greatly affect the career decisions of smarter, potential teachers who have better employment opportunities outside of teaching. This then reduces the relative quality of potential new hires. Aside from the wasteful aspect of simply paying windfalls to existing teachers--to those you wanted to upgrade--the reduced turnover rates also mean that it will take a long time before new, higher quality, hires arrive in sufficient numbers to make a difference. The net result is that--even assuming the administrators want and find better quality teachers, as measured by improved student performance--a general upgrade of the faculty will take a long time and waste a lot of money paying lower quality faculty to hang on until retirement.

In addition, unfortunately, there is no evidence that those running the existing schools really want to upgrade teacher quality, as measured by student performance, even when given the chance (Strauss, 1993; Ballou and Podgursky, 1997). This is contrary to what happens in private schools, which tend to hire teachers with talents that improve student performance (Ballou and Podgursky, 1997; Hoxby, 2002).

This is not simply an academic exercise. The following analysis from Ballou and Podgursky (1997) pulls this all together in the context of what happened in public education in the 1980s.

In the decade of the 1970s, real teacher salaries fell by more than 10 percent. Then, in response to general concerns about low teachers salaries and the Nation at Risk report (1983), and aided by the prosperous economy of the 1980s, real average teacher salaries nationwide rose by about 20 percent in the 1980s. This means that whole salary grids were raised by about 20 percent on the average, restoring competitiveness between teaching salaries and opportunities elsewhere. In this environment, schools should have been able to raise teacher quality, again as measured by student achievement.

Ballou and Podgursky found that they did not, largely because of the sclerosis caused by the prevalent salary grid. Their reasoning is as follows:

Teacher salaries are not differentiated on the basis of performance. When teacher pay rises, it rises for all teachers. As a result, quit rates fall and jobs become more difficult to find. The fact that prospective teachers must invest in occupation-specific training that has no value outside public education makes them sensitive to declining job prospects. This effect is greatest for those with the most attractive options outside teaching, who incur the greatest loss if they train to become teachers and cannot find a teaching job. By contrast, persons with no professional prospects outside education will scarcely be deterred by a decline in job opportunities (1997, p. 163).

Thus, the higher salaries offered during the 1980s "had little if any discernable impact on the quality of newly recruited teachers" (ibid.). It was also found that public school administrators are no more likely to hire better candidates than those with far fewer quality credentials. In short, in the culture of the public schools there is no incentive to hire better teachers even when given the opportunity to do so. This observation is also confirmed by Strauss' (1993) analysis. I would add that this culture is a result of the fact that there is little or no competition for students in the retail public school market, thereby insulating administrators from any incentive to improve student performance by hiring more competent teachers.

In the context of the salary grid and the general lack of incentives to hire better teachers even when given the chance, the prospects for improving public school student performance by hiring better quality teachers seems hopeless.

This is further illustrated by the following statement from Jane Liebbrand, Vice President for Communications at the National Council for Accreditation of Teacher Education (NCATE), a private organization that advocates further raising the barriers into public school teaching by increasing the pedagogy requirements for certification and licensing. The Teach for America (TFA) program she refers to is aimed at recruiting top graduates from selective colleges who do not major in education but are the kind of teachers that research has found to be the best at increasing student performance. Liebbrand says:

During the past decade, TFA has placed 7,000 recruits in classrooms--but only 2,000 to 3000 of these are still in the classroom. Retention is lower than among regularly trained teachers, creating constant turnover in those schools that choose TFA recruits. . . .

However, TFA is not the answer to the teacher shortage in America. . . . The select group of top college graduates that includes TFA members will not stay for long in jobs that are at the bottom of the pay and perk scale. . . . The vast majority did not attend Ivy League schools to earn less in a year than it costs for nine months of their undergraduate education. . . .

If the salaries and working conditions of teachers were raised to a level commensurate with those of other college graduates, the profession would begin to attract more of the best and the brightest into teacher preparation programs (Liebbrand, 2002).

Ignore the usual spin about a teacher shortage--there is none--and the typical failure to mention that teachers' benefits are way above those in the public sector.

I have shown above how the grid fails to reward performance. Good teacher performance is best predicted by the brains of the teacher, not training in a college of education as NCATE advocates. Smarter teachers, trapped by the salary grid that does not reward performance, are the ones least likely to enter and most likely to leave public school teaching early.

In this context, it is not surprising that TFA recruits display higher turnover. Their experience is simply another example of what happens to good teachers who are trapped by the grid. They leave teaching and leave the lower performing teachers behind.

The response of the public school establishment and NCATE is not to do the obvious--abolish the grid, or at least make it much more flexible. The strategy is to use the problem created by the grid--the failure of the public schools to retain the best teachers--as a lever to argue for higher salaries for all. This would result in rewarding lower quality teachers and further entrenching them in public school teaching.

Another example of how the grid might thwart piecemeal reform in the public schools comes from New Jersey's alternate teacher certification program. There, after a finding that "most undergraduate education courses are not useful" and that they displace academic courses, the state reduced the required education courses to three, and "gave all candidates with degrees in academic subjects the option of taking the three courses during their initial year of employment" (Klagholz, 2002). The obvious question to ask about this good faith effort to improve public school teaching is: what is going to happen to these new teachers once they get into teaching and are trapped by the salary grid? Won't the salary grid simply chew them up and spit them out as it does other quality teachers? Aren't all other piecemeal attempts to improve the system doomed to the same fate?

Given the lack of competition for students in the public school market, Liebbrand's and NCATE's suggestion that all salaries be raised will be fruitless, as it has in the past. As I have already indicated, the evidence shows that even when better-qualified teachers are available, public school administrators do not hire them. For them, it is easier to take the safe alternative and hire a "certified" teacher. There is no incentive to improve hiring in the monopolistic public school retail market where most parents are trapped. Contrast this with private schools which do hire better teachers because their retail market requires them to compete for students by doing so.

Whether teacher turnover is good or bad depends on the filtering criteria. With the salary grid, the best teachers are filtered out, and the worst filtered in. In a market oriented world, where administrators have incentives to hire and keep the best teachers by adopting a reward system consistent with this objective, the best teachers are filtered in and the worst out. This is impossible with a rigid salary grid.

In the context of a monopolistic public school system at the retail level, the teachers' salary grid has an insidious ability to wring competence out of the public schools.

Why is the Grid Popular?

If the teachers' salary grid is economically irrational, why is it so universal and popular in public schools? The general reason is: because teacher salaries generally are the product of a political, not a market, process. In such negotiations, both sides need a focal point, and in a non-market context, it is much easier to discuss pay via a grid that applies to all. In such discussions, neither side has to bother with messy variations among individuals. The exchange process has become collectivized and homogenized to the point where individual productivity and reward have become lost. This is much different than in other managerial and professional situations--even universities--where salaries are usually decided at the department level where relevant market conditions for individual fields are taken into account.

I have mentioned above how the NEA uses the grid as a lever to raise all salaries because of the shortage of math and science teachers, ironically, caused by the grid. Another successful tactic used by teachers and their unions to raise all salaries is to argue that the first step in the grid is too low, thereby, allegedly, making it difficult to hire new teachers. Since in general there are always more teachers available than there are job openings, from a market standpoint this assertion is nonsense (Ballou and Podgursky, 1997, pp. 56-57). This is why the argument then proceeds on moral, not market, grounds. Should we really entrust our children to someone making only $25,000 or $30,000 per year? Don't teachers "deserve" more than that? Shouldn't we have more "respect" for those who teach our children? This, of course, is the never-never land of the medieval search for the "just" wage, to which there is no answer, just political power, of which the NEA has plenty.

However, as much as unions may posture on behalf of the beginning teacher, they are really using this argument as a lever to raise the whole grid, thereby benefiting all teachers. They never argue, for example, that the first step of a grid be eliminated and new teachers be hired at step two. They want to raise the first step and all succeeding ones as well. One particularly potent way to do this is to exercise political muscle at the state level by getting legislators to mandate a higher, statewide, minimum salary. This mandate then forces all school districts in the state to raise all the elements in their grids. This is just another example of how teacher unions are able to improve their well-being by exercising their political muscle at the state level and make gains that they could never get at the school district level (Peltzman, 1993, 1996).

Worried about the quality of public school teachers? This can also be used to argue for raising the salaries of all in the grid. As I have indicated above, the grid has the additional benefit of being useful in turning back any piecemeal attempt at public school reform.

In a broader sense, in the political environment in which teachers' compensation is determined, and with a monopolistic public school retail market, the existence of the grid self-generates focal points for increasing salaries generally. Unions can always find one element that is, or is claimed to be, "too low", and then use that as a reason for raising the whole grid. Salaries for entry level, math and science, and special education positions are favorite candidates for this salary ratcheting technique.

As irrational as it is from a market standpoint, the salary grid is popular because it has something for all the actors in the political pay-determination process. For teachers and unions, it gives many of them an automatic, stealth, annual salary increase no matter how they perform--no performance review, no salary negotiations, and no newspaper headlines showing increased teacher pay. As indicated, the grid also gives them a convenient lever for raising all salaries by focusing on one element of the grid and then generalizing it to the whole grid. For union leaders and school administrators, the grid is easy to administer and makes their lives easier. It gives both something to hide behind as it relieves them of the burden of having to make, justify, and adjudicate, via grievance procedures, salary differentials based on such performance factors as merit and subject taught. And for School Boards, who are playing with taxpayers' money, not their own, the grid allows them to give automatic, low-profile, salary increases without specific negotiations that might get the public's and media's attention.

Unlike in the marketplace, the taxpayers who are paying the bill, and the parents whose children are being educated, are out of this loop. This is in sharp contrast to what would happen in a market environment where parents had a choice between schools where cost and product quality determined which schools survived.

Conclusion

From an economic standpoint, the only general question relevant to teachers' pay is: what mix of salary, benefits, and other job dimensions are necessary to hire competent individual teachers? Since these vary across states, school districts, schools, and teachers' talents and competencies, there is no rational one-size-fits-all answer, such as the grid.

* John T. Wenders is Professor of Economics, Emeritus, at the University of Idaho. His e-mail address is: jwenders@uidaho.edu.

REFERENCES

Ballou, Dale, and Michael Podgursky. 1997. Teacher Pay and Teacher Quality. Kalamazoo, MI: W.E. Upjohn Institute for Employment Research.

Ballou, Dale, and Michael Podgursky. 2000[a]. "Reforming Teacher Preparation and Licensing: What Is the Evidence?" Teachers College Record, 9/13/00.
http://www.tcrecord.org/Content.asp?ContentID=10434

Ballou, Dale, and Michael Podgursky. 2000[b]. "Reforming Teacher Preparation and Licensing: Continuing the Debate." Teachers College Record, 102, 1:5-27. http://www.tcrecord.org/Content.asp?ContentID=10524

Barro, Stephen M. 1992. "Models for Projecting Teacher Supply, Demand, and Quality: An Assessment of the State of the Art." In Teacher Supply, Demand, and Quality, Erling E. Boe and Dorothy M. Gifford, eds. Washington, DC: National Academy Press.

Ehrenberg, Ronald G., Dominic J. Brewer, Adam Gamoran and J. Douglas Willms. "The Class Size Controversy." Psychological Science in the Public Interest, May 2001. Draft: February 6, 2001 (http://www.ilr.cornell.edu/depts/cheri/work.html). A more popular version titled "Does Class Size Matter?" appeared in Scientific American, Nov., 2001.

Grissmer, David W., Ann Flanagan, Jennifer Kawata, and Stephanie Williamson. 2000. Improving Student Achievement: What State NAEP Test Scores Tell Us. Santa Monica: The RAND Corporation. 
(http://www.rand.org/publications/MR/MR924/)

Hanushek, Eric A. 1986. "The Economics of Schooling: Production and Efficiency in Public Schools." Journal of Economic Literature, 24-3 (September):1141-1177.

Hoxby, Caroline M. 2002. "Would School Choice Change the Teaching Profession?"' Draft; January 2002.
(http://post.economics.harvard.edu/faculty/hoxby/papers.html)

Klagholz, Leo. 2002. "No alternative." Education Next. 2 (summer):6-7.

Liebbrand, Jane. 2002. "Quick fix." Education Next. 2 (summer):6.

National Commission on Excellence in Education. 1983. A Nation at Risk: The Imperative for Educational Reform. Washington DC: Government Printing Office.

Peltzman, Sam. 1993. "The Political Economy of the Decline of American Public Education." Journal of Law and Economics, 36 (April):331-70.

Peltzman, Sam. 1996. "Political Economy of Public Education: Non-College Bound Students." Journal of Law and Economics, 39 (April):73-120.

Strauss, R. P. 1993. "Who Should Teach in Pennsylvania's Public Schools." Pittsburgh, PA: Carnegie Mellon University Center for Public Financial Management.

Walsh, Kate. 2001. Teacher Certification Reconsidered: Stumbling for Quality. Baltimore, MD: The Abell Foundation. www.abell.org

Walsh, Kate, and Michael Podgursky. 2001. Teacher Certification Reconsidered: Stumbling for Quality: A Rejoinder. Baltimore, MD: The Abell Foundation. www.abell.org

Wenglinsky, Harold. 2000. How Teaching Matters. Princeton, N.J.: Educational Testing Service and The Milken Family Trust.

Wynne, David J., and Charles W. Watters. 1991. "Teacher Compensation: How it Compares with the Private Sector." Government Union Review, Vol. 12, No. 3 (Summer):31-43.

PREVAILING WAGES AS PERCEIVED BY THE KENTUCKY LEGISLATIVE RESEARCH COMMISSION by Lowell Gallaway and Richard Vedder*

Introduction

In 1931, in the midst of the Great Depression, the United States Congress passed the Davis-Bacon Act, a law that requires contractors to pay "prevailing wages" on construction projects undertaken for the federal government. This legislation led to the passage of "little Davis-Bacon Acts," or "prevailing wage" laws, in over 40 states, including Kentucky.

What are prevailing wages? The short answer is that in many jurisdictions, including the federal government, prevailing wages are typically wages set at or near the union-scale level. Prevailing wage laws, then, force contractors on government construction or other projects to pay their employees at the same rate as unionized members of the relevant occupation--whether it be bricklayers, carpenters, electricians, or other categories of workers--even if non-union contractors could perform the same work less expensively by paying their workers lower but mutually agreed-upon wages.

Ever since the enactment of the Davis-Bacon legislation, the question of the impact of prevailing wages on the market for construction worker labor has been an issue among economists. The major question raised is simple enough: Does the enforcement of the prevailing wage statutes distort labor market outcomes associated with public construction projects? The report under review here, prepared by the Kentucky Legislative Research Commission, deals with this issue in the particular case of the Commonwealth of Kentucky, which has had its own prevailing wage law since 1940. Currently, the Kentucky law is applicable for construction projects with a total cost of $250,000 or more. In its letter of transmittal (memorandum) to the Governor of Kentucky, the Commission describes the matters dealt with as consisting of "whether or not Kentucky's prevailing wages accurately represented local wages and if the use of prevailing wages increased the costs of public construction" (p. iii).

By way of background, two different procedures are employed in determining prevailing wages in Kentucky. For 81 of the State's 120 counties, the prevailing wages are set by an entity known as the Kentucky Labor Cabinet. These rates are based on wage data collected from contractors and unions at public hearings held in the various localities. The rule for determining the prevailing wage is straightforward. If the submitted data show that a majority (51%) of workers in a particular construction worker category are paid the same wage, that wage is viewed as the prevailing wage. If there is no clear majority wage, a weighted average of the submitted wages is calculated to determine the prevailing standard.

In the other 39 counties, the prevailing wage determined by the Federal Government is accepted for use in implementing Kentucky's prevailing wage law. These wages are set by the United States Department of Labor on the basis of information collected from contractors and construction worker labor unions. The Federal Government uses a similar rule to that used at the state level to make wage determinations.

Prevailing Versus Actual Wages

We turn now to the relationship between actual and prevailing wages. In this regard, the Kentucky Legislative Research Commission's findings are unambiguous. They state in their Executive Summary, "Currently, neither prevailing wages set by the Kentucky Labor Cabinet or the United States Department of Labor yield prevailing wages that are representative of local wages" (p. ix). Rather, the bias is in the direction of prevailing wages being higher than actual wages.

The source of the discrepancy between prevailing and actual wages is found in the dominance of union scale rates in the data employed in determining prevailing wages. Among wage standards set at the state level, 81 percent of the wage rate data collected at local hearings originates with union workers, despite union workers accounting for only 18 percent of the construction labor force. This leads to union wage scales dominating the determination of prevailing wage standards. The Commission reports that in 372 determinations where there was sufficient evidence to assess union influence, 256 (or 68%) of the prevailing wage determinations were identical to the union wage.

Similarly, the Commission's report presents evidence which indicates that the federal prevailing wage rates used in Kentucky are biased upward. Prevailing wage rates are compared with Bureau of Labor Statistics information detailing actual wage rates in 27 separate instances. The median percentage differential between the prevailing and actual wage rates is 17 percent, in favor of the prevailing wage.

Impact on Construction Costs

Having established that prevailing wages in Kentucky are greater than actual average wages paid, the authors of the report turn to the question of the impact of prevailing wages on construction costs for public projects. They begin their consideration with the following remarks:

Public projects in Kentucky are typically awarded to the lowest bidder. In the absence of prevailing wage laws, contractors are free to select among various mixes of inputs, such as labor and equipment, in an attempt to develop a competitive bid. Prevailing wage laws constrain contractors from one avenue by which they can reduce bids and, therefore, the costs of construction. To the extent that prevailing wages are higher than the wage that would be paid to at least some workers, paying prevailing wages could increase the costs of construction (p. ii).

Having said that, they add:

When faced with paying higher wages, contractors will attempt to shift from using low skilled labor to more productive labor or increase the use of equipment. This substitution tends to offset some of the additional costs associated with prevailing wages. Although there are several studies which conclude that there are no additional costs associated with prevailing wages, there are a number of technical problems which raise doubt about their validity.

The studies just referred to are numerous, and are summarized and discussed on pp. 45-70 of the report and in an Appendix B.

In dealing with the specific issue of the impact of prevailing wages on construction costs, the fundamental problem is an efficiency-wage consideration. In short, do the higher wages implicit in the prevailing (or union) wage premium lead to increased worker productivity, either through greater work effort, the hiring of more productive workers, or a higher capital-labor ratio. Evidence on this point is provided by Steven Allen, who concludes that an earlier union vs. non-union productivity advantage had disappeared by 1982. If this is the case, productivity feedbacks are a non-issue.

The Kentucky Legislative Research Commission, not content to rely solely on the Allen findings, collected data that describe wages paid to workers on prevailing wage covered projects as well as wages paid to the very same workers when employed on private (non-prevailing wage) jobs. The data set for this comparison consisted of 283 workers (90 on road projects, 47 in state non-road activity, and 146 employed on education projects). The results of the analysis are summarized as follows:

Overall, the 283 workers were paid $86,029 more as a result of the prevailing wage. This indicates that prevailing wages resulted in a 24% increase in the wage costs for these projects ... It is important to understand that this estimate does not imply that prevailing wages increased the cost of these projects by twenty-four percent. Rather, it indicates that the wage portion of construction costs was twenty-four percent higher as a result of the prevailing wage. It is argued by some that the additional wage costs of requiring prevailing wages are offset because contractors substitute more productive workers or use more equipment. Because this analysis only examines the workers that actually worked on the project, it incorporates any productivity gains achieved by this type of substitution. Since prevailing wages paid on the projects are still higher than the wages that these workers are paid on private projects, any productivity gains do not effect the full wage cost associated with the prevailing wage requirements (pp. 57-59).

The total cost effect of the 24 percent prevailing wage premium observed in these data will depend on the relative importance of labor costs. If labor costs represent one-half of total construction costs, the taxpayers' bill for public construction projects will be 12 percent greater. If they are 40 percent of total costs, the extra cost of public construction will be 9.6 percent. A labor cost share of 30 percent will produce a 7.2 percent extra project cost burden.

Some Additional Considerations

Beyond the questions of determining the prevailing wage premium and assessing its impact on public construction costs, the Kentucky report also responds to a variety of arguments made by proponents of prevailing wages. Among them is the proposition advanced in the often-cited study entitled, Losing Ground, that reductions in tax revenues resulting from declines in construction worker earnings exceed any construction cost savings associated with repealing prevailing wage laws.

This argument is, at best, a strange one. On the one hand, it suggests that repeal of prevailing wage laws in nine states reduced the annual earnings of construction workers by an average of $1,835 (1991 prices) while, on the other hand, arguing that the construction cost savings associated with these lower earnings are less than the taxes that would be paid on the lost earnings. For this to be true, each dollar of lost earnings must reduce construction costs by less than the marginal tax rate on income in a state. For example, in a state with a five- percent marginal tax rate, construction cost savings per dollar of lost earnings would have to be less than five cents. Given the findings that the very same workers were paid 24 percent more on prevailing wage projects than when working in a non-prevailing wage setting, this does not seem to be applicable in the case of Kentucky.

There are other problems with this argument. The report quite properly concludes that this analysis does "not provide sufficient evidence to conclude that the repeal of prevailing wages would result in lost tax revenue that would exceed reductions in construction costs" (p. 67).

Additional Evidence

Confirmation of these findings is provided by an exercise in polling conducted by the Kentucky Legislative Research Commission. It surveyed six different groups of Kentuckians involved with prevailing wage projects: contractors, representatives of unions with members working for contractors, city government officials, county government officials, local school district representatives, and municipal utility officials. Of these groups, two expressed strong support for the prevailing wage system - contractors with union workers and union officials. This is exactly what would be expected given the finding that there is a significant prevailing wage premium that arises because prevailing wages tend to be the union wage. Contractors with union workers have committed themselves to paying that premium and, consequently, are at a competitive disadvantage relative to contractors with non-union workers. Therefore, it is in their interest to support government intervention that will mandate higher labor costs for their competitors.

As to the union officials, their support for prevailing wages has an obvious motivation--higher wages for union members and more money for unions. The prevailing wage premium is nothing more than an economic rent that is being captured by union members. The recipients of economic rents generated by a policy regimen are not disinterested observers of that regimen. Quite the contrary. They have a vested interest in supporting the policy involved. Perhaps this explains the near unanimous approval of the prevailing wage system expressed by union officials, 97.7% of whom feel that the effects of prevailing wages are either somewhat positive or very positive.

The remaining groups bear the burden of these economic rents, either directly as the funders of prevailing wage construction projects, or as a construction company with non-union workers that has a competitive disadvantage foisted upon it by the government regulatory apparatus. Among this latter group, when polled as to the effects of prevailing wages, nearly two-thirds replied that they were somewhat negative or very negative. By contrast, three-fourths of contractors with union workers feel that the prevailing wage system has either somewhat positive or very positive effects.

Among those involved with the financing of prevailing wage projects, attitudes toward the system are decidedly negative. When asked whether prevailing wages increased construction costs, about 90 percent of city, county, school district, and municipal utility officials replied in the affirmative. Also, when polled about the impact of the prevailing wage system on the quality of construction, only a handful of officials (less than 10 percent) expressed the view that it improved quality.

Collectively, the results of the opinion polls administered by the Kentucky Legislative Research Commission reveal a set of attitudes that is powerfully consistent with the Commission's conclusion that the prevailing wage premium is directly associated with the union wage premium in the construction industry.

Evidence from Nearby States

An interesting question is whether Kentucky is somehow unique in its prevailing wage environment. To explore this issue, conditions in two nearby states are worth noting. First, there is the case of Ohio, where a five-year exemption from its prevailing wage law is running its course. The Kentucky report summarizes a preliminary analysis of the Ohio experience as follows:

The Ohio Legislative Budget Office is currently studying the effects of a five-year exemption of the state's prevailing wage law. Contractors that were awarded construction projects during the exemption were asked to estimate their bid amount if prevailing wages had been applied. Based on this comparison, interim reports on the study conclude that prevailing wages increased the costs by 10.5% on projects where a savings could be estimated (p. 53).

A similar series of events occurred in Michigan. In this case, a federal district court ruling (December 1994) held that Michigan's prevailing wage law was in conflict with a federal pension law, ERISA, and that ERISA takes precedence over the state legislation. The decision was later reversed by an appellate court (June 1997), but in the interval the Michigan prevailing wage law was not enforced. This affords the opportunity to assess the cost and employment effects of a specific minimum wage law during a period when it is not operative. An analysis along these lines is quite revealing. It shows that during the time when the Michigan prevailing wage law was in abeyance, employment in the construction industry surged--even after adjusting for variation produced by seasonal, weather, and business cycle conditions.

Perhaps the most revealing statistic in this regard is the ratio of construction jobs created to total new jobs. In an era when the prevailing wage law was enforced (June 1992 through December 1994), 78.61 new construction jobs emerged for every 1,000 new jobs of all kinds. However, from December 1994 through June 1997, a period without prevailing wages, that ratio was 48 percent greater, standing at 116.27.

In addition, the Michigan experience confirms the existence of a prevailing wage premium. The median percentage differential between the prevailing wage and the market wage in nine different construction occupations in 1992 was 31.6 percent in Wayne County, and 39.3 percent in Monroe County. In both cases, the median differential occupation was that of carpenter. These wage premiums, for a period when the prevailing wage law was in force, translate into higher construction costs. By contrast, when 20 different projects were examined for the period characterized by no enforcement of the prevailing wage law, "On average ... the savings were well above ... 10 percent" (Vedder, p. 14).

In summary, the experiences of two nearby states, Ohio and Michigan, are quite consistent with the findings reported by the Kentucky Legislative Research Commission. This indicates that the Kentucky analysis is not an anomaly that can be disregarded in the broader perspective of assessing the effects of prevailing wages.

Concluding Remarks

The report of the Kentucky Legislative Research Commission on prevailing wages provides a rather thorough indictment of the policy of mandating such wages for publicly financed construction projects. As such, it offers an excellent summary of the case against prevailing wages and their tendency to restrict people from operating in a free market, where they would otherwise be able to allocate resources and use production factors most efficiently. Thus, prevailing wages retard job creation and lead to slower economic growth.

The Kentucky report should be studied by anyone interested in the issues that attend the prevailing wage question.

* Lowell Gallaway and Richard Vedder are both distinguished Professors of Economics at Ohio University, and are the authors of numerous books and articles on labor economics.

 

ENDNOTES

 

1. An Analysis of Kentucky's Prevailing Wage Laws and Procedures, Staff Report, Kentucky Legislative Research Commission (Lexington, Kentucky, December 2001).

2. "Can Union Labor Ever Cost Less," Industrial and Labor Relations Review, April 1988, pp. 347-73.

3. Peter Phillips, Garth Mangum, Norm Waitzman, and Anne Yeagle, Losing Ground: Lessons from the Repeal of Nine Little Davis-Bacon Acts(February 1995).

4. Ohio Legislative Budget Office, A Study of the Effects of the Exemption of School Construction and Renovation Projects from Ohio's Prevailing Wage Law, An Interim Report of a Five-Year Study - Year Two (January 2000).

5. For a description and analysis of this situation, see Richard Vedder, Michigan's Prevailing Wage Law and Its Effects on Government Spending and Construction Employment (Midland, Michigan: Mackinac Center for Public Policy, 2001).

The PTA, the NEA, and Education by Charlene K. Haar*

Teachers' unions, federal agencies, special interest groups -- when we talk about the power structure of our education system, we sometimes forget to include parents. At the National PTA, we are committed to putting parents back into the educational power equation, and we've been taking some steps to do so.1

 

-- Grace Baisinger, President, National Congress of Parents and Teachers, 1979

*Charlene K. Haar granted permission to reproduce this part (Chapter 5) of her recently published book, titled, The Politics of the PTA (New Brunswick: Transaction Publishers, 2002), in the Review.

 

I. Introduction

 

As an adjunct of the public schools since the 1920s, the National PTA adopted an agenda shaped by school administrators at the local level and by the NEA at the federal level. This framework prevailed until the 1960s, when unionization of the NEA led to the expulsion of administrators from the association. Changes in the NEA resulted in basic changes in the PTA that have continued to this day, but have not been widely recognized. Although the formal relationship between the two organizations has remained constant, virtually every aspect of the PTA has been and is deeply affected by the unionization of the NEA.

 

II. PTA/NEA Relationships: Phase I

 

In 1919, the steadfast financial support for the National Congress provided by Phoebe Apperson Hearst ended with her death. Without her support, the National Congress could not raise enough money to keep the thirty-two-room mansion on Massachusetts Avenue in Washington, D.C. as a permanent headquarters. The building, which had been used as a service club for enlisted men during World War I, was sold in the summer of 1920. After the sale, the National Congress of Parent-Teacher Associations, already closely allied with the NEA, moved its offices into the NEA's Washington headquarters. Despite membership of over 180,000, the executive secretary was the only employee of the National Congress.

As more Americans moved away from farms to towns and cities, secondary-school enrollment rose from 1,115,000 in 1910 to 2,500,000 in 1920, and to 4,812,000 in 1930.2 These increases resulted jointly from immigration, increases in the native population, the enactment of compulsory education laws, and more vigorous enforcement of such laws. The increases also resulted in a major policy dilemma. During the early 1900s, high schools were primarily college preparatory institutions. As their enrollments increased, high schools were enrolling increasing numbers of students who did not plan to enroll in college and were not interested in a college preparatory curriculum. To resolve the dilemmas over the objectives of secondary education, the National Congress accepted the NEA's lead.

The Cardinal Principles of Secondary Education

The NEA was founded in 1857 as a national organization of college presidents and school superintendents, almost all of whom were men. Women teachers were not allowed to become NEA members until 1866. Unlike the National Congress, the early NEA had only three appointed committees; their tasks were to recommend a course of study for high schools, prepare an ideal program for the education of youth, and provide annual reports of staff qualifications and compensation, student enrollment, and library resources.3 By the 1890s, the NEA was creating a national agenda via its issuance of reports, through which the NEA impacted public opinion on educational issues.

In 1918, in response to the tremendous increases in secondary-school attendance, an NEA committee issued a report which contrasted sharply with an 1893 study that had recommended that all secondary students study English, foreign languages, mathematics, history, and science. That study, chaired by Harvard University President Charles Eliot, was promptly criticized for allegedly assuming that secondary schools should be primarily college preparatory institutions. In contrast, the new report, Cardinal Principles of Secondary Education, recommended a much more diversified curriculum emphasizing the importance of educating "the whole student," thus departing from the previous emphasis on academics.4According to Cardinal Principles, the goals of U.S. education should be health and safety; worthy home membership; mastery of the tools, technique, and spirit of learning; citizenship and world goodwill; vocational and economic effectiveness; wise use of leisure; and ethical character. This NEA report was destined to become one of the most influential statements on education in American history.

The National Congress, referred to as the PTA after 1924, formally adopted the NEA's Cardinal Principles in 1927 to "give suggestions for legislative effort and programs of work to state PTA branches and local associations."5 Adopting Cardinal Principles did not mean that the National PTA would cut back on its involvement in noneducational programs; for that matter, Cardinal Principles was never confined to secondary education, or even to educational issues concerning kindergarten through twelfth grade.

There is no doubt that Cardinal Principles was very influential; the problem lies in assessing the influence of the various principles it advocated. Long before the PTA had officially adopted Cardinal Principles, it had supported activities and programs that embodied the principles. Cardinal Principleslegitimized the goals that the PTA had previously encouraged local school districts to adopt.

Elsewhere, however, Cardinal Principles played a more substantive role, especially as the goals of secondary education became more controversial in the 1920s and thereafter. As secondary-school enrollments increased to unprecedented levels, new issues emerged. Was it fair for public schools to provide college preparatory programs for a small minority of students while ignoring the needs of the large majority of students who did not plan to seek a college education after high school graduation? Should lower-income families be required to subsidize higher education for students from higher-income groups? Cardinal Principles was instrumental in raising such issues, as well as in providing a respected authority for anyone who already shared the point of view it expressed.

Today, conservatives criticize the public schools for offering a cookie-cutter, one-size-fits-all curriculum. Actually, it was the public school establishment that emphasized meeting "the needs and interests" of students in the 1920s, and it was this establishment that was responsible for breaking away from the rigid secondary-school curricula that had prevailed in the early 1900s. Today, the main issue is still with us; what subjects, if any, should all students be required to study in order to preserve prosperity and cohesiveness in a highly diverse society? Unfortunately, there is no consensus on the answer to this question, and none appears to be in sight.

On other curriculum issues, also, the PTA was guided by Cardinal Principles. For example, Cardinal Principles asserted that "[t]he purpose of democracy is so to organize society that each member may develop his personality primarily through activities designed for the well-being of fellow members and of society as a whole."6 The NEA/PTA concept of citizenship reflected this fuzzy collectivism, in which citizenship as social cooperation and working for the public good predominated, instead of citizenship as political rights and individual responsibilities.

Legislation versus Parental Concerns

Although it turned its education policy over to the guidance of professionals in the NEA, the PTA nevertheless continued its standing committee on education. However, the committee now focused its attention on issues of concern primarily to career teachers, such as teacher salaries, retirement and tenure policies, the status of teaching as a profession, and (as before) federal aid for education. Obviously, none of these items was very helpful to parents interested in improving the education of their own children, but all of these issues deeply concerned the NEA.

A report at the 1926 PTA convention reflects the NEA's strong influence on the PTA. The National PTA vice president, charged with promoting "school education," reported that "[t]he Committee on School Education receiving through its chairman all of the educational forces of the N.E.A. has concentrated on the new Education Bill."7 As an illustration, the education chairman reported that from April 1925 to April 1926, the PTA had sent out 18,427 leaflets supporting the establishment of a federal department of education. Coordination of these activities between the PTA and the NEA was facilitated by the fact that Charl Ormond Williams, the National PTA vice president, was also the director of field service for the NEA. Several times during the year, Williams requested that PTA leaders and members write to their congressmen urging the passage of the bill. The education chairman readily acknowledged that "the aim of the school education committee is really closely related to the work of the PTA's committee on legislation."8

Four other areas of education were included in the PTA's agenda; humane education, illiteracy, music, and art. The PTA's humane education committee fostered benevolent attitudes toward pets and other animals. The PTA suggested that its members write articles for magazines on topics such as "Children's Attitude Toward Their Pets." The PTA also endorsed other efforts to achieve a better world for pets, including education against rodeo shows, sponsorship of poster contests, and a general observance of Be-Kind-to-Animals Week.

Alarmed over the fact that literacy rates in Denmark, Sweden, and Switzerland greatly exceeded that of the United States, the National PTA's chairman of the illiteracy committee took on the task of raising "Uncle Sam from the tenth place in the scale of literate and enlightened nations."9Following up on the NEA's Adult Education Conference, PTA officials worked with state superintendents and state and local PTA presidents to recruit teachers for evening classes for adult illiterates in rural school districts. When possible, the PTA cooperated with other organizations to secure home teachers to teach English to foreign-born women. Support was enlisted from the American Legion, the Daughters of the American Revolution, and the Colonial Dames. The PTA set a goal of eliminating adult illiteracy before the 1930 census, declaring it shameful that the "cross mark is still being written on court records, marriage licenses, deeds, etc."10

The PTA also encouraged the study of music and art in all schools. Each local PTA was urged to provide music on loan, programs on the significance of music, and even music lessons and music appreciation classes for adults. Many local affiliates sponsored a Mother's Musicale preceding Mother's Day. Local PTAs were also encouraged to survey "art conditions in the home, schools, evening art schools, libraries, museums, [and] city and community stores." Clearly, at that time, the PTA's education agenda was much less political than the NEA's, which emphasized the enactment of federal legislation, especially on funding for education.

Through the years, the National PTA and the NEA shared speakers, general programs, and award programs. As noted in a history of the PTA, "This cooperation with the National Education Association is carried down from the national to the state, district, and local levels.... [F]or example, the state president of the parent-teacher organization is made an ex officio member of the state education association. Similar relationships are maintained all down the line."11 State teachers' association affiliates sometimes granted the PTA free pages in their monthly magazines.12 In another example of cooperative relations, the state education associations often paid the expenses of National PTA officers who visited the state.

The PTA and School Administrators

At the local level, the support of school administrators was critical to both the NEA and the PTA. It was precisely because school administrators encouraged membership in the PTA and the NEA that both organizations expanded as they did. For example, in 1915, when the Cook County superintendent announced at the Illinois Teachers' Institute that his office "desires and will cooperate in the establishment of a Parent-Teacher association in every county school, and urges immediate affiliation with the Illinois Congress of Mothers and Parent-Teacher Associations," the teachers acted accordingly.13 In 1933, PTA leaders "held regular office hours in the [McLean County, Illinois] superintendent's office on Saturday afternoons to meet with the rural teachers."14 In certain areas, the NEA sought to require an effective PTA as a condition of school accreditation by the appropriate regional accrediting agencies, which served as a sort of "Good Housekeeping seal of approval" among educators.

The close relationship between the PTA and the NEA turned out to be invaluable after the stock market crash of 1929 resulted in severe financial problems for schools. As one of the most expensive government programs, schools were among the first public services to be cut, and the cuts were sometimes drastic. Supervisors were dismissed, the number of teachers and their salaries were reduced while class size increased, and extracurricular activities were often eliminated. Teachers in many systems went unpaid for months or were "paid in scrip or tax warrants which could be cashed only at a considerable discount."15 As the collection of school taxes dropped drastically, the NEA appointed a Commission on the Emergency in Education to help unpaid teachers and keep schools open. In addition, the commission urged federal support to assist school systems that depended heavily on local property taxes that were often in default during the Depression years.

The National PTA supported these efforts in various ways. It flooded lawmakers' desks with letters that insisted that public education must be adequately maintained despite decreased tax revenues. Occasionally, where schools were temporarily closed, local PTAs sponsored educational programs for children. Sometimes state and local PTAs joined with teacher organizations in mass meetings to promote special measures to help school districts in dire straits. As unpaid and underpaid teachers resigned from their school districts, the National PTA urged its members who were former teachers to help alleviate the teacher shortage. In some school districts, the PTAs coordinated the emergency programs intended to ameliorate the crisis in school revenues.

Meanwhile, the PTA itself experienced the debilitating effects of the Depression. From 1932 to 1934, membership in the National PTA decreased sharply, and bank failures and widespread unemployment forced many PTAs to disband. State PTAs everywhere were forced to curtail their activities, merge committees, and reduce committee expenses.16 Meetings were held less frequently, and some state conventions were suspended. Despite these organizational setbacks, however, the PTA continued its legislative efforts to increase state aid to public schools and raise teacher salaries. Desperation was evident in a National PTA resolution that called for an additional year of high school to ease the unemployment crisis.

After almost a decade of troublesome fluctuations, unemployment dropped appreciably in 1939 and was minimal, as the United States became "an arsenal of democracy" while fighting World War II. After the war, the PTA's new Four-Point Program resolved to strengthen school curricula, improve the health of the nation's children, promote world understanding through the United Nations, and expand lifelong education for parents. In 1946, the PTA also supported an NEA initiative relating to teacher training and certification. Efforts to attract more men to the profession of teaching were also a high PTA/NEA priority in the 1950s, but their joint efforts along this line did not have any appreciable effect on the gender composition of the teaching force, which remained almost 80 percent female.17

School consolidation was another PTA objective that originated with the NEA. Between 1940 and 1957, the number of school districts was reduced from 120,000 to 55,000.18 Consolidation eventually encountered widespread opposition, but before the trend ran its course, the number of school districts had been reduced to approximately 15,000. Proponents of consolidation had argued that the result would be more effective use of public funds, improved education for millions of children, and more equitable distribution of the tax base to support poorer districts. In particular, the California PTA cited its effort to reduce the number of school districts in California as among its significant activities. The opponents of consolidation contended that it would weaken the ties between parents and schools, and that taxpayers would be more reluctant to pay for schools that they could not observe. Of course, the opponents of consolidation were sometimes motivated by more practical considerations, such as having to travel farther to school or losing control over patronage.

From 1943 to 1957, the NEA and the PTA supported federal legislation that would have provided federal aid for the education of illiterates, Americanization programs for immigrants, the partial payment of teachers' salaries, and the establishment of a federal department of education. During this period, none of these proposals was enacted.

The Federal Government and the Curriculum

All of the PTA/NEA objectives were shattered by an event that took place far from the United States--or, for that matter, from any place on earth. On October 4, 1957, the Soviet Union launched Sputnik I--the first man-made satellite to orbit the earth. As Americans awakened to second place in the space race, schools were subjected to a barrage of criticism from all sides. Distinguished scholars such as James Bryant Conant, a former president of Harvard University, charged that state departments of education were little more than the "willing tools" of the interests of the state NEA affiliates.19 President Dwight D. Eisenhower urged PTAs to scrutinize school programs. Military officers like Vice Admiral Hyman Rickover argued that professional educators were bringing America to its knees before a superior Russian educational system.20 To remedy the deficiencies in science, mathematics, foreign languages, and vocational guidance, the federal government passed the National Defense Education Act of 1958 (NDEA)--the first major step by the federal government to directly influence the curricula in America's local schools. Although the PTA and the NEA had long supported increased federal funding for education, the NEA initially opposed the passage of the NDEA because the funds it granted were earmarked for mathematics, science, and other defense-related curricula, but could not be used for teacher salaries or buildings. Subsequently, however, both the PTA and the NEA supported the NDEA.

The NDEA was just the beginning. In the five years between 1962 and 1967, Congress passed almost thirty laws that pumped vast amounts of federal support into public education. Improving occupational training and retraining the nation's labor force and jobless illiterates were targeted goals of the Manpower Development and Training Act (1962). The Vocational Education Act (1963) enlarged high school and post-high school vocational education programs. The Economic Opportunity Act (1964) was part of President Lyndon B. Johnson's declaration of "war on poverty." Among various separate programs, it authorized youth and adult work-training programs for the poor, and a domestic peace corps known as VISTA (Volunteers in Service to America). The Higher Education Act of 1965 authorized a student-loan program. Public Law 89-10, the Elementary and Secondary Education Act of 1965, also signed by President Johnson, provided $1.2 billion for public elementary and high schools during the first year of enactment. The funds were (and still are) distributed to the states based on the numbers of children in low-income families, but the efficacy of the legislation has been mired in controversy.

 

III. PTA/NEA Relationships: Phase II

 

The PTA's relationship with the NEA can best be described as a partnership with two distinct phases. In the first phase, dating from the early 1900s, the NEA was controlled by school superintendents. Because school boards were supposed to be nonpartisan agencies, they typically lacked the means of generating political support for their programs. For this reason, school boards and superintendents (who were essentially appointees of nonpartisan elected school boards) sought PTA support to legitimize their programs and actions.

With nearly twelve million members in 1965, the PTA was more than ten times larger than the combined memberships of the NEA and the American Federation of Teachers (AFT). Despite its impressive membership, however, James D. Koerner, editor-in-chief of the Education Development Center in Newton, Massachusetts, criticized the PTA after his extensive study of public education in the 1960s:

[T]he American PTA is rarely anything more than a coffee-and-cookies organization based on vague good will and gullibility....

In a word, the local PTA does indeed have an influence on educational policy: by failing to be more than an administrative rubber stamp, it simply sustains the existing order....

Indeed the national PTA is a member in good standing of the 'Big Six,' a sort of behind-the-scenes association of three professional groups and three lay groups in education: The American Association of School Administrators, the National Education Association itself, the Council of Chief State School Officers, the National School Boards Association, the National Association of State School Boards, and the National Congress of Parents and Teachers [the PTA]. Some people might look on the Big Six as something of an establishment creature, as an instrument for promoting establishment policy rather than as what it is alleged to be: an instrument for hard-headed debate and bargaining among broadly based interests about what American educational policies should be. However that may be, the three lay groups on the Big Six, the National PTA in particular, are no match for the three professional groups.21

Difficult as it may be to believe, Koerner's comments understated PTA subordination--hence, that of parents also--to the interests of the NEA. Although his prediction was accurate, at the time he could not have realized how the unionization of the NEA from 1964 to 1975 would affect NEA/PTA relations.

In the pre-unionization days, educational policy-making followed normal political procedures. Elected school boards met as legislative bodies to adopt, reject, or amend policies, including policies on the terms and conditions of employment for teachers. Teacher organizations and the PTA presented their points of view along with other interested parties. For better or for worse, school boards adopted the policies that they deemed appropriate. Insofar as the policies were budget related, they were largely settled until the next budget cycle. Granted, this is an oversimplified view, for present purposes, however, it sets forth the policy-making structure and procedures in the pre-unionization era accurately enough.

Despite Koerner's acerbic conclusions, local PTAs wielded considerable influence in middle- and upper-class school districts. Usually no other powerful interest groups were active in educational affairs. Local PTAs worked closely with school management, and for a good reason. Management had the power to run the district on a day-to-day basis. If a local PTA became interested in a particular program or activity, it had only to persuade the school administrators, who exercised broad discretion over the district budget and terms and conditions of teacher employment, to adopt the program or pursue the activity. Furthermore, although they lacked financial resources, local PTAs played a significant legitimizing role; their approval was valuable even though PTAs were not politically powerful in their own right. At the same time, the local teacher associations were largely social organizations. Except for presentations on school district budgets, the teacher associations welcomed new teachers at meetings and sponsored receptions for retiring teachers; typically, they were not a powerful force at the local level.

Unionization of the NEA

Teacher unionization drastically altered the political landscape. Many issues formerly resolved unilaterally by school boards after hearing anyone who wished to comment on them were resolved by collective bargaining with teacher unions--a process that excluded PTAs as well as others who wished to address the issues. Furthermore, teacher-union dues escalated to pay for union staff to negotiate contracts and process grievances. When negotiations were completed, usually for multiyear contracts, the union staff served as full-time political operatives, amply equipped with the facilities and campaign workers to be a formidable political force. Indeed, the emergence of teacher unions as a powerful political force at all levels is one of the most significant political developments in the United States since the 1960s.22

For practical purposes, the 1962 collective bargaining election in New York City marks the beginning of the collective bargaining movement in public education.23 After months of rancorous negotiations, including a one-day strike by twenty thousand New York City teachers, the New York City board of education and the United Federation of Teachers (UFT, an affiliate of the AFT and the AFL-CIO) negotiated a forty-page written agreement. In addition to a substantial pay raise for teaching and pay for extracurricular activities, the striking teachers demanded and received "free lunch periods, check-off for union dues, and one hundred and forty-seven other items dealing with work-place conditions."24

After losing the New York City representation election to the UFT, the NEA's executive director, William G. Carr, sounded the alarm. In an address to the 1962 NEA convention, Carr expressed an apocalyptic view about the threat of unionism: "This ... is the first time in which forces of significant scope and power are considering measures which could destroy the Association."25

Ironically, however, the NEA responded to the threat of unionism by becoming a union itself, albeit with nonunion terminology to maintain the pretense that it was not a union. For instance, the NEA embraced "professional negotiations," which turned out to be collective bargaining with a few cosmetic changes. Furthermore, the NEA contended that state educational boards, not state labor boards favored by the AFT, should administer the laws and regulations governing negotiations at the local level. Within a few years, however, all cosmetic differences of this sort between the NEA and the AFT positions disappeared, especially after the NEA realized that it could utilize collective bargaining to stifle the membership threat from the AFT. Both unions increased their membership dramatically under collective bargaining by enrolling teachers who had not previously been members of any union.

Prior to unionization, the NEA at the national level was not influential in political and legislative affairs because it could not provide much support for candidates for public office or for its preferred causes. Most local NEA affiliates had miniscule budgets and no full-time staff to provide grassroots support for the NEA's favored candidates and legislative agendas. These weaknesses disappeared when the NEA became a union; today, no other national organization has the power of the NEA to provide grassroots support for its candidates. According to a study by Myron Lieberman, the NEA's revenues at the local, state, and national levels exceeded $1 billion in 1996, and the association employs thousands of fulltime employees who are politically active at the state and local levels.26

Unionization changed the NEA in three fundamental ways. First, administrators left or were excluded from the association at all levels. Second, as a result of the departure of administrators, the NEA was not restrained by any management issues. Third, the NEA became a highly influential political force.

In theory, administrators represent both public and their own welfare interests. With the administrators no longer in the NEA, local NEA affiliates faced no internal opposition to bargaining for teacher benefits that would reduce the funds available for school maintenance, textbooks, or salaries for employees not covered by union contracts. While school management would normally consider these interests, collective bargaining endangers this outcome.

Under collective bargaining, school districts and unions bargain over "terms and conditions of employment." What this phrase means varies somewhat from state to state, but it usually covers salaries, benefits and other kinds of compensation, workday, length of the school year, transfers, workload, and a host of other matters that affect a district's resources and ability to initiate or change curricula or programs. Theoretically, school boards continue to be responsible for educational policy, but as people familiar with collective bargaining can attest, "terms and conditions of employment" and "educational policy" are frequently one and the same issue regarded from two different perspectives.

For example, suppose that parents in a local PTA want the school board to adopt a policy whereby the most experienced teachers (who are invariably also the highest-paid) are assigned to inner-city schools that are presently staffed largely by new teachers or substitutes. To parents, how to utilize teachers in order to maximize learning among the disadvantaged is an educational policy issue. The teacher unions, however, regard the issue in terms of transfers and assignments, that is, as "terms or conditions of employment," subject to negotiation between the union and the school district. In such negotiations, the unions almost invariably insist that transfers be voluntary and based upon seniority--the very same policies that created the problem to begin with. Even proposing the staffing change causes problems for the local PTA--teachers predictably support their union position and a potential boycott of the PTA may result in loss of dues and leadership. Furthermore, union members may retaliate against the parents who led the effort for the change in staffing policy.

In collective bargaining, third parties are rarely allowed to be present at the bargaining tables. As a result, there is no parental representation at the bargaining table, and parental political influence is miniscule compared to that of the teacher unions. Indeed, the unions are often directly responsible for the election of school board members who establish the board's bargaining position and vote to ratify or to reject a negotiated agreement.

Consequently, instead of presenting its views at open board meetings on an equal basis with the teacher organizations and other interested parties, the PTA can only express its views at contract ratification meetings, when the contract is, in effect, a fait accompli. Theoretically, the school district could keep the PTA informed on the progress of negotiations and receive its input on union positions, but the dynamics of bargaining preclude this outcome. Both union and management prefer not to have third parties involved precisely because their objections make it more difficult to reach agreement. Furthermore, if information about negotiations is provided to third parties, there is a danger of leaks and distortions that could upset negotiations. If the PTA were entitled to information about the progress of negotiations, other groups would clamor for the same privilege, and the requisite confidentiality would disappear altogether. If bargaining were to go on until the early morning hours, or around the clock, it would not be feasible to get parental input in the climactic stages of bargaining. Collective bargaining by teacher unions is not consistent with the open manner in which public policy should be made, but unfortunately, the legislatures that enacted the teacher bargaining statutes did not know or care about this inconsistency.

At the outset of the unionization of the NEA, local PTAs frequently found themselves in opposition to union demands: when this happened, relations at the local level deteriorated rapidly. The tensions between local PTAs and local NEA affiliates came to a head during teacher strikes. Parents were inconvenienced by teacher strikes and concerned about the impact of the strikes on their children's education. Also, they were concerned about the example being set, because most teacher strikes were (and still are) illegal. Pupil safety when school was not in session was another prevalent concern. Needless to say, the teacher unions characterized teacher strikes as a benefit to pupils. Unions urged parents to keep children at home for safety reasons, thereby putting more pressure on school boards to settle on union terms.

The PTA Opts for Neutrality

To help formulate its policy on teacher strikes and bargaining issues, the National PTA appointed a task force to recommend PTA policies on these matters. The task force elicited opinions from teacher unions, school boards, school administrators, and others. At its September 1968 meeting, after receiving the task force report, the national board of directors adopted policies on the role of the PTA in teacher strikes. The board first identified several "dilemmas" that teacher strikes and negotiations posed for local PTA members.

1. If the PTA provides volunteers to man the classrooms during a work stoppage, in the interest of protecting the immediate safety and welfare of children, it is branded as a strike breaker.

2. If the PTA does not take sides in issues being negotiated, it is accused of not being interested.

3. If it supports the positions of the board of education, which is the representative of the public in negotiations, the teacher members of the PTA have threatened to withdraw membership and boycott the local PTA activities. (emphasis added)27

To resolve these dilemmas, the PTA adopted guidelines covering the pre-strike period, the period during the strike, and the aftermath of the strike. Prior to the threat of a strike, PTA members are urged to keep the lines of communication open, and to seek action to remedy the causes of increased teacher complaints. If a strike occurs, PTA members may encourage action to protect children and to keep teachers involved in the PTA, but should not volunteer to help in ways that assist the administration in keeping the school open. When a strike is over, the PTA is encouraged to seek community support to ensure that implementation of the negotiated strike agreement continues. The PTA's guidelines emphasize that a local PTA should resist all activities that might be considered "taking sides" in a teacher strike: instead, it should encourage a public airing of the issues and let the school board and teacher union settle their dispute.28

Despite the fact that national policy called for neutrality, PTA/union conflict at the local and state levels continued to erupt. As additional states enacted teacher bargaining statutes, the conflicts emerged all over again at the legislative as well as the local level. The question of whether the PTA would represent parental or union interests surfaced in many ways: the experience in Ohio foreshadowed the eventual outcome nationally. According to an analysis of the conflict there:

[T]he state PTA and the powerful Ohio Education Association [OEA], an NEA affiliate, came to blows over three bills in the state legislature. Two of these involved teacher certification, training and dismissal; the third was a strong professional negotiations bill that included binding arbitration. The state PTA actively--and successfully--opposed several of OEA's legislative proposals in these areas, and that was when OEA apparently decided enough was enough. At its 1976 state convention, OEA adopted a resolution asking its 85,000 teachers to drop out of the PTA, to boycott all its activities, and to encourage parents to form new parent-teacher organizations that are not affiliated with the PTA. Of the 217,000 members who quit the PTA in 1976, more than 50,000 were from Ohio, where entire units disaffillated.29

Robert Lucas, president of the Ohio PTA, described the change in teacher union attitudes toward PTAs after the PTA challenged the teacher unions:

For years we did everything the teacher association wanted and we never disagreed about anything. We gave out certificates, awarded the principal a seat of honor and carried all the tax levies, and we were the nicest guys in the world. Now that we're beginning to deal with real issues, they have a different opinion of us.30

Although parents and the teacher unions disagreed about several issues, teacher strikes precipitated the crises that forced a resolution of the conflict. Despite the fact that strikes by public employees are prohibited by statute or judicial decision in most states, the incidence of teacher strikes increased dramatically after the teacher bargaining statutes were enacted. Actually, the number of strikes does not convey the magnitude of the problem: for every actual strike, there were scores of threatened strikes that led to turmoil in school districts. Needless to say, opinions about teacher strikes varied widely, but teachers and their unions certainly viewed them as more benign than did parents. The unions were sometimes successful in recruiting parents to their cause, but most parents were more concerned about the disruption to their own lives and their children's education than about the strike issues.

Ultimately, however, the outcome was virtually preordained. With miniscule funds, a highly transient membership, heavy dependence upon teacher support just to remain viable, and intimidation by teacher boycotts, the National PTA raised the white flag again in 1987. The board of PTA officers affirmed the 1968 board's neutrality position with only a few editorial changes. Neither the elected officers nor the PTA bureaucracy was willing to risk an organizational meltdown that might have resulted from a declaration of independence from the NEA. Neutrality marked the end of the PTA's independence because it prohibited the PTA from adopting positions that were opposed by the teacher unions.

In its defense, the PTA contends that its neutrality policy applies only to strikes. A fair reading of the policy in conjunction with its aftermath, however, demonstrates clearly that the defense is fallacious. For example, the National PTA policy advises local PTAs on what they should do in the "prestrike" period, as if PTA members could know beforehand that a strike would materialize. All the teacher union would have to do in order to neutralize the PTA would be to set a strike date, regardless of whether it actually planned to strike. Furthermore, if the PTA policy is applicable only to strikes, the PTA would have to explain why its affiliates are not involved in bargaining issues that are vital to parents and their children.

To appreciate the implications of PTA neutrality in teacher bargaining, one must consider what its guidelines recommend--and also what they do not mention. The guidelines include eighteen recommendations that either imply or suggest that strikes are justified, or ensure PTA support of union positions during a strike. The possibility that a teacher strike might be due to unreasonable union demands is never suggested, even implicitly. On the contrary, by urging PTAs to "seek action that corrects the basic cause of dissatisfaction," the resolution is clearly biased in favor of the union. "Teacher dissatisfaction" is not always justified, nor does it always merit PTA intervention. In fact, dissatisfaction is frequently fomented by the unions to cause more pressure on school boards to make concessions. The repeated support for "negotiations" implies that the school boards have not fully met their obligations to bargain in good faith before the strike. PTA guidelines do not mention the fact that when school boards do not bargain in good faith, the teacher unions have adequate remedies, such as filing unfair labor practice charges with state labor boards. The guidelines also recommend that PTAs make sure that negotiated agreements are "faithfully implemented." This ignores the fact that unions are the parties who cite contract violations, and that unions have ample legal remedies and resources to ensure that contracts are "faithfully implemented."

The omissions in PTA policy are an even more telling sign of PTA capitulation to the NEA. Significantly, PTA policy does not address parental concerns over items on which school boards are required to bargain (mandatory subjects of bargaining). One would expect several of these items to be high-priority issues in any organization dedicated to promoting parental and pupil interests:

What are teacher responsibilities to help pupils outside of regular class hours?

How long do teachers remain in school after class to assist pupils and/or confer with parents?

Are there adequate procedures to resolve student/parent grievances against teachers?

Is there any appeal from teacher grades, or negative recommendations to employers and institutions of higher education?

Do teacher contracts provide adequate opportunities for parents to confer with teachers? For example, if parents work during regular school hours, are there opportunities to meet with parents at some other time during the day?

Do pupil report cards convey adequate information about pupil progress?

What is the impact of teacher seniority on continuity of instruction and teacher/pupil relationships?

What criteria are included in teacher evaluations?

What is the district policy on teacher tenure?

Do district teachers have the qualifications to teach the grade(s) and subject(s) assigned?

How does the district deal with a negative teacher evaluation?

What is the percentage of teachers who have received unfavorable evaluations in the past 2-3 years?31

Surely, an organization that represents parents and students should have positions on such issues, and strive to have them adopted. Nevertheless, as a result of the PTA's "neutrality," local PTAs do not address these issues, or any others that might lead to conflict with the teacher unions. In contrast, the teacher unions aggressively bargain for their positions on all such issues. Despite the NEA's professed concern for parents and pupils, association proposals would often severely disadvantage both, to say the least. For instance, the teacher unions typically propose the following:

No student grade may be changed without the consent of the teacher. Obviously, this assumes that teachers always recognize and agree to correct their mistakes.

Teachers cannot be required to return in the evening or on weekends for parent conferences; if they do return voluntarily, they must be paid generously.

Parent complaints cannot be considered as a basis for disciplinary action unless the complaint is in writing and the teacher has had time off with pay to prepare a response.

If a parent has a complaint, the teacher has the right to have a union representative present when the complainant faces the teacher.

Parents who are not literate in English, such as many itinerant farm workers, are practically helpless in districts that accept such union proposals: even sophisticated parents are often deterred from pursuing their grievances against such union-imposed obstacles.

 

IV. The Aftermath of the Takeover

 

Although neutral on bargaining issues at the local level, the PTA is invariably supportive on other issues of importance to the NEA. It might be a stretch to assert that the NEA dictates PTA policy; it would not be a stretch, however, to assert that the NEA exercises a veto power over PTA policy on any issue that affects the NEA. PTA members often are not aware of this fact because overt coercion is no longer evident. PTA members and officials often bristle at the suggestion that the PTA is dominated by the teacher unions. If one thinks of domination only in terms of explicit union commands to the PTA, this reaction is understandable. In practice, however, NEA domination is pervasive. It shows up in the selection of speakers and convention programs, the issues that are raised and the ones shoved under the rug, the avoidance of union identification among delegates to PTA conventions, the immediate rejection at PTA conventions of any effort to reconsider union-backed positions, the similarity between PTA and union legislative agendas, and the PTA's leadership in union-funded coalitions.

Even if "shared views" explains the PTA's alignment with NEA positions, it does not explain the complete absence of attention to union policies detrimental to parental concerns at PTA meetings and conventions. Furthermore, by its own admission, the PTA has never disagreed with the NEA on any significant issue.32

Myron Lieberman's experience at the 1997 National PTA convention illustrates the NEA's low profile but heavy hand in PTA affairs. The PTA convention program listed workshops and showed only the name and city of each discussion leader, not his or her occupation. Lieberman, the author of several books and articles on teacher unions, attended one of the workshop sessions devoted to privatization issues. The discussion leader at the session was so skillful in presenting NEA positions without labeling them as such that Lieberman sought to identify the individual. After the session, Lieberman complimented the discussion leader and asked about his occupation. The first answer was: "I work for an educational organization." On further questioning, the discussion leader reluctantly revealed that he was a UniServ director employed by the Iowa Education Association. "UniServ director" is NEA-speak for union business agent and political operative. Lieberman was probably the only individual present at the session who realized that the discussion leader was a full-time NEA employee. The other delegates attending the session did not feel coerced, for they weren't: they were, however, exposed to only one side of highly controversial issues by someone purporting to be just an interested parent. This situation is commonplace at state and National PTA conventions: the union presence is pervasive but not usually apparent to convention delegates. Inasmuch as the divisive union/parent issues are not raised, delegates are not aware of any coercion.

The PTA has internalized its subordinate role: new members simply take for granted that the PTA is a support group for teachers. Supposedly, pupils will benefit as a result of PTA activities. Unfortunately, what the unions seek for teachers is not always good for students; hence, the PTA's neutrality is a major strategic victory for the NEA. When local PTAs do on occasion actively oppose a union position while the union is engaged in collective bargaining, the NEA does not hesitate to remind the PTA that its only option is to remain silent. For example, in April 1994, at the urging of its executive committee, NEA President Keith Geiger wrote to the president of the National PTA after the relationship between the NEA and a local PTA did not improve following settlement of a bitter contract dispute. Geiger "emphasized the long-standing tradition of cooperation and respect between the two organizations at the national level and asked the PTA president to remind its local affiliate of the National PTA's policy of neutrality in labor/management disputes in school districts."33

Perhaps the strongest argument against the thesis that the union dominates the PTA is that the PTA's leadership shares the NEA's educational and political views; there is no need to dominate an organization that willingly supports your positions. Nevertheless, this convergence argument clearly is not applicable to the PTA's policies on bargaining and privatization issues. On these issues, the record is clear that the PTA's neutrality is a direct result of the NEA's threats in the 1960s to withdraw its support and launch a new parent organization unless local PTAs stopped supporting school management in bargaining disputes. Because local PTAs are bound by national policy, the PTAs neutrality in collective bargaining has removed local PTAs as players on the local school issues that matter most to parents.


 

Notes

 

1. Grace Baisinger, "The National PTA: New Power on the Block," National Elementary Principal, March 1979, 76.

2. Lawrence A. Cremin, American Education: The Metropolitan Experience, 1876-1980 (New York: Harper and Row, 1988), 311.

3. Allan M. West, The National Education Association: The Power Base for Education (New York: Free Press, 1980), 7.

4. Commission on the Reorganization of Secondary Education of the NEA, Cardinal Principles of Secondary Education (Washington, DC: U.S. Bureau of Education, 1918).

5. National Congress of Parents and Teachers, Proceedings of the Thirty-First Annual Convention of the National Congress of Parents and Teachers(Washington, DC: National Congress of Parents and Teachers, 1927), 311.

6. Commission on the Reorganization of Secondary Education of the PTA, Cardinal Principles of Secondary Education, 35.

7. National Congress of Parents and Teachers, Proceedings of the Thirtieth Annual Convention of the National Congress of Parents and Teachers(Washington, DC: National Congress of Parents and Teachers, 1926), 96.

8. Ibid., 113.

9. Ibid., 99.

10. Ibid., 102.

11. National Congress of Parents and Teachers, The Parent-Teacher Organization (Chicago: National Congress of Parents and Teachers, 1947), 51.

12. See, for example, the list of accomplishments in G. G. Koenig, "State President Reports--South Dakota," in National Congress of Parents and Teachers, Proceedings of the Thirtieth Annual Convention, 293. See also Alabama Branch of the National Congress of Parents and Teachers, Year Book 1928-1929 (Birmingham, AL: State Board of Education, 1929), 17; Naomi Adams Whitesell and Louise Eleanor Ross Kleinhenz, The First Fifty Years of the Indiana Congress of Parents and Teachers, Inc.(Indianapolis, IN: Indiana Congress of Parents and Teachers, 1962), 44, 81, 83-85, 88; Thad Stem, Jr., PTA Impact: 50 Years in North Carolina,1919-1969 (Raleigh, NC: North Carolina Congress of Parents and Teachers, 1969), 63, 67; and Dorothy Sparks, Strong is the Current: History of the Illinois Congress of Parents and Teachers, 1900-1947(Chicago: Illinois Congress of Parents and Teachers, 1948), 11, 37-40, 58-59, 131-32, 139, 235-36.

13. Sparks, Strong is the Current, 37.

14. Ibid., 38.

15. Ibid., 136.

16. Ibid., 126.

17. Cremin, American Education, 554.

18. West, The National Education Association, 29-30.

19. James Bryant Conant, Shaping Educational Policy (New York: McGraw-Hill), 1964, 37-38.

20. Joel Spring, "The Evolving Political Structure of American Schooling," in Robert B. Everhart, ed., The Public School Monopoly: A Critical Analysis of Education and the State in American Society (Cambridge, MA: Ballinger, 1982), 97.

21. James D. Koerner, Who Controls American Education? A Guide for Laymen (Boston: Beacon, 1968), 147-49.

22. Clive S. Thomas, "Understanding Interest Groups in Midwestern Politics," in Ronald J. Hrebenar and Clive S. Thomas, eds., Interest Group Politics in the Midwestern States (Ames: Iowa State University Press, 1993), 13-14.

23. For a detailed account of the emergence of teacher bargaining, see Myron Lieberman and Michael H. Moskow, Collective Negotiations for Teachers (Chicago: Rand McNally, 1966).

24. Ibid., 35.

25. West, The National Education Association, 64.

26. Myron Lieberman, The Teacher Unions (New York: Free Press, 1997), 124-46, 170.

27. National PTA, "Teacher Negotiations, Sanctions, and Strikes," in National PTA, National PTA Resolutions and Positions (Chicago: National PTA, 1995), IV.3B.

28. See ibid. for the text of the PTA's guidelines. The National PTA Board reaffirmed its position statement on "Teacher Negotiations, Sanctions, and Strikes" in 1987.

29. Rose Marie Scott-Blair, "The Changing PTA: No More Tea & Cookies and -- Maybe - No More 'T,'" Learning Magazine, January 1978, 68.

30. Ibid., 69.

31. Charlene K. Haar, "The Teachers' Unions," Crisis in Education,February 1998, 39-40.

32. Lieberman, The Teacher Unions, 225.

33. See National Education Association, Reports on Implementation of Actions of the 1993 Representative Assembly of the National Education Association (Washington, DC: National Education Association, 1994), 52.

IF THEIR UNIONS ARE SO POWERFUL, WHY ARE TEACHERS NOT BETTER PAID? by Paul E. Peterson, Ph.D.*

Teacher union power is awesomely arrogant. In New York City, the local chapter of the American Federation of Teachers (AFT) is fighting school board efforts to restore order to the city's schools. The board wants teachers to supervise hallways, lunchrooms and playgrounds, because costly but ineffectual "paraprofessionals" don't command the needed respect. But union leaders refuse to co-operate, despite the fact that their members work less than four hours per day.

Nor is union power operative only during contract negotiations. In California, the state chapter of the larger of the two big unions, the National Education Association (NEA), is demanding statewide changes that will give them control of school curricula. In Massachusetts, the NEA has fought teacher competency tests all the way to the state supreme court. Elsewhere, the AFT and NEA are preventing the formation of union-free charter schools while doing their best to shut down existing ones.

These anti-educational actions are but atolls perched atop a vast volcanic mountain lying below. As private-sector unionism has waned, the NEA and AFT have become the most powerful labor combination in American political life. Teacher unions easily shut down school systems whenever bargaining demands are not met. They contribute multi-millions to Democratic candidates for state and national office--and no small sums to friendly Republicans as well. Organized teachers are said to serve as election day workers and constitute as much as a quarter of the delegates to the national Democratic conventions. Once competitors, the two unions have now formed a quasi-formal duopoly designed to maximize their mutual power.

Teachers even elect their own bosses. In school board and school bond elections, teachers who work in their own school district outvote ordinary citizens by large margins. In a recent bond referendum in Huntington Beach City, California, a Stanford study shows, 93 percent of the teachers cast ballots, though overall turnout was but 19 percent. In nearby Santa Ana, 88 percent of the teachers voted, as compared to 23 percent of all registrants.

Yet for all this political influence, teacher pay, relative to that of other occupations, has been slipping downward for decades. In 1940, female teachers made better than 60 percent of what was earned by the average college-educated woman; by 1990, they were earning hardly 40 percent. Among males, salaries slipped from 52 to 33 percent of the college-educated average.

As pay has fallen, so has teacher quality. According to a Department of Labor survey, 50 percent of women entering teaching in the 1970s were high scorers on a test of educational achievement. Twenty years later, high-scoring female teachers had all but disappeared, constituting but 10 percent of the total. For men teachers, the drop in high scorers was from 20 percent to 10 percent. In other words, we pay less for teachers--and we get less talented ones as a result.

So what's gone wrong? Powerful unions should be generating high wages that attract the best and the brightest. Yet pay and ability are going the same direction as wrong-way Corrigan.

Part of the problem is union insistence on uniform pay. In the name of union solidarity, leaders resist all attempts to reward teachers of special merit or pay more for those who have skills that are in short supply (such as math, science and computer instructors). More money can be given to teachers only on the basis of additional years of experience or added credentials. Since teacher effectiveness generally declines after five years of experience, and teacher credentials have been shown to be meaningless, the disconnect between service rendered and compensation received is all but complete. Under the circumstances, it makes little sense to pay employees more. So school boards don't.

Then, too, school boards and unions take the line of least resistance. Instead of paying teachers more, school boards have handed out more rights and less work. Indeed, it was to keep wage demands down that the New York school board originally agreed to turn over hallway supervision to the so-called paraprofessionals.

Worse, ineffectual teachers remain protected by union grievance procedures. Ask any urban superintendent how many teachers have been dismissed for reasons other than proven moral turpitude. The number is generally smaller than Roger Clemens' earned run average.

If students are the losers, union officials win big. Weak, ineffectual, complaisant teachers make for loyal union members. And when ineffective teachers abound, more are needed. As a result, the ratio of pupils to teachers nationwide plunged from 22 to 17 between 1970 and 1995. More teachers, more dues, more campaign contributions, more power, more rights--lower performance. No wonder governors and presidents are beginning to talk accountability.

*Paul E. Peterson is the Director of the Program on Education Policy and Governance at Harvard University, and a Senior Fellow at the Hoover Institution, Stanford University.