I disagree rather vehemently with Megan McArdle’s claim that America’s workers have brought the present state of the U. S. labor market on ourselves:
In a similar way, as employees, we want to have maximum freedom to take better jobs, to withhold our labor until we get a better deal, or to take time off for stuff we think is important, while enjoying maximum income stability. As customers, however, we want folks who will work cheaply with no commitments and yet show up reliably, which is why we hate the cable company so much. The institutions that intermediate these two desires are employers: governments and companies.
As with the banking system, this creates immense value: You don’t have to personally locate a cable installer every time a wire goes on the fritz. However, as we saw in 2007, it also creates risks. These risks can be mitigated by good government policy, but they can never be entirely eliminated.
I note she cites no data to substantiate her claim—just airy generalizations.
There might be some truth to it if America’s workers or consumers were capturing more of the economic surplus in the economic transactions that we’re making but we aren’t. Most is being realized in the form of producer surplus as is obvious from the empyrean heights the stock market has reached and the rates by which executive salaries are exceeding the wages of average Joe’s.
There is a wide-ranging consensus on economic policy between the two major political parties. It’s sometimes call the “Washington consensus” or neoliberalism. The American people didn’t choose our immigration policy. It’s the opposite of what most of us want to see. We didn’t choose our monetary policy, either. I seem to recall that’s made by a handful of appointed academics and bankers. To change the present trends in the American workplace (or, for too large a percentage of Americans, out of it) that policy would need to change which is another way of saying the situation will get worse before it gets better and it’s no fault of mine.
She gets paid to believe the American worker should take it in the ass & beg for more, so her position is hardly a shock.
The piece is a bit impressionistic, but I think the Kling reference points to what she is getting at. Consumers want to buy houses with low interest rates, the ability to refinance at will, and they don’t want to do much paperwork, hire lawyers, nor pay much of a downpayment. Both the government and the private sector have moved towards accommodating these desires, which create risk. And there are businesses that make a lot of money from risk, and their ventures can be risky.
I think the point is that as consumers and voters, the collective “we,” are not innocent of all the crap we blame government and big business for (nor are the institutions innocent). When Ben Wolfe argued at OTB for mortgage reforms that relied upon a simple, transparent rule like minimum downpayment, it was objected that it wasn’t fair, the interlocutor would not have been able to pay such a downpayment and he’s never missed a payment — and that would be unfair. To paraphrase Pogo, this staunch liberal who hated the banks, but desired no inconvenience to himself, he had met the enemy and he was sleeping with it.
On the employment side, I think she is talking more about sticky wages. When times were better workers in some sectors got steady pay increases and benefits that were not sustainable. The colleges cannot afford to give tenured positions to everyone, so a two-tier system is introduced. Same with public sector jobs, at least in Illinois, a two tier system means new hires get less pay and benefits, plus contribute their pay into the older tier pensions they won’t benefit from This is what happened in manufacturing in the late 70s and 80s, union wages outstripped what the market would bear. More generally, new college students are not finding the job market accessible because of legacy issues.
But if people think a college degree is cheap, or want their property taxes to increase to pay government workers salary and benefits most taxpayers lack, or buy American-made cars, or stop buying cheaper on-line from stores that lack brick-and-mortar, maybe things would be different.
The problem is, PD, that she’s wrong on the facts. I’ve published this stuff before here from time to time so I’ll try to explain it better without looking up the actual detailed figures.
We’ll use just one example: the saving realized by manufacturing goods in China. It doesn’t make a huge difference in the total costs of a product to the American retailer. Frequently just pennies of the total cost of the product. That’s due to the costs of transportation, the additional costs from managing the supply chain, and the greater productivity of the American worker.
Consumers aren’t getting those few pennies back in the form of lower prices. How can I tell? Because prices aren’t falling. The “producers” and retailers re realizing in the form of bigger bottom lines and those frequently translate into higher stock valuations and larger executive paychecks. The consumer is hardly in the picture at all. The economic surplus from the economization is being retained as producer surplus.
And it’s been going on this way for decades. Consumers aren’t getting more for their money, workers aren’t being paid more, but stock valuations go up and executive pay rises.
Well, manufacturing isn’t just an example, it’s the weak point in her essay, which again is not so clear as to be falsifiable. Though, I think the mfg example has some credence if we go back to the late 70s / early 80s, when employment peaked in part because of pattern bargaining and the assumptions that went with it.
But most of her essay is about services, particularly public services, that are hard to assess productivity values. Today we have teachers making over six-figure salaries plus benefits because we like teachers. People, to make it easier, I’ll call them Steve, believe that if only we pay more for teachers we will achieve better results, even if the end-result is one teacher who is 120 years old and won’t retire no matter the payout. We will know her by her persistency. Illinois credits over nine teacher’s to teach in its school district each year per opening. Would any of those passed over be better than those advantaged by seniority? Who knows?
The tricky stuff is not in manufacturing, and Megan’s main examples are college-educated people operating in more uncertain terrain.
“People, to make it easier, I’ll call them Steve, believe that if only we pay more for teachers we will achieve better results”
I think that if we could get some grads from the top half of the class, rather than the bottom, to go into teaching we might get better outcomes. Seems to work in other countries. Might work here also. Then again, might not. Our middle class (and up) white kids already do quite well. It is the poor students that aren’t doing very well. Better teachers may not be the real answer.
Steve
@steve, for every four teachers certified to teach in Pennsylvania elementary schools there are less than one job available each year. Let’s say you double the incoming salary, what have you accomplished or how would you accomplish it?
I think its a sticky wicket. I don’t have answers for it. I’m as suspicious of the objectivity of the tests as the teachers, and annoyed that so much of the school year is spent testing for federal dollars. (How do you know if a school is doing well? They tell their students they don’t have to come to school this week. Fuck the PARCC tests) But I’m willing to encourage more dollars for better outcomes, but a lot of the outcomes are beyond teacher control.
I’d probably start with eliminating tax benefits to private schools that don’t open their doors on a neutral basis to everyone.
Of course, I only meant a fictitious steve, any resemblance to real persons, living or dead, is purely coincidental.
PD- Reverse your thought experiment. Cut salaries in half. What would you predict that would do to the quality of people entering the teaching profession?
“but a lot of the outcomes are beyond teacher control.” Which is why I said I am not sure that better teachers are really the answer. Put the best teachers in the world in our inner city schools or our rural poor areas, and I don’t think things change that much. However, if you are of the mind that better teachers is the answer, then I think I have a valid question.
Steve
If a corporate employees wages were pilfered to fund stock price driving corporate profits one would expect to see inverse ratios or negative correlations in the corporate environment. I’ve seen no such data. In fact, those ratios are remarkably stable. Most of these assertions involve use of measures relative to national income accounting. I think the best one can do in making such a case is conclude that employment is being minimized, or,it’s opposite, productivity is being maximized. Good luck with changing that.
It seems to me the relevant line of inquiry isn’t a focus on Fortune 500 companies, their bubbly stock prices or their CEOs salaries. Those are convenient scapegoats and yield nothing for the line worker. One should focus on the wage intensity of GDP. As a first cut that would suggest trade and immigration policy are more fruitful topics.
I’m sympathetic to the problem, but don’t think it’s at all clear what to,do. Anyone who has participated in a big box retailer shoot out (think Wal-Mart, Depot, grocers etc) knows shelf space is dependent on pennies at the margin. And that is driven not by producers or retailers/distributors, but by consumers. Only niche players, by definition low share players, can afford to altruistically forego cost reducing practices. Volume players ignore this at the risk of their very existence. For most goods and services the American consumer is the most ruthless determinant of business practice and success I know of.
I don’t know that cutting salaries would impact quality. Each year Illinois certifies nine new elementary teachers for every one job opening. There are significant layoffs and reducing staffing. Having some of the highest teacher salaries in the country isn’t helping, it’s hurting. Many kids will, or should, be learning that a teacher’s degree is not a path to a job. A friend’s daughter graduated w/ a teacher’s certificate and two years in a row she was hired by a school that had to fire her within a month because they lacked the funding to keep her. It’s not hard to imagine that if we reset the wage structure back about ten years, things would be a lot healthier, but that steps on the vested interests and power of seniority.
The additional problem is that teaching is a calling, not just a job. If you raise wages high enough not only will you capture more of the top half of the class, you’ll also attract a lot of people who aren’t much interested in teaching.
That isn’t a problem unique to education.
I think Dave is right. The wages aren’t high but some people have a passion for it. Teaching (esp elementary) attracts women who value the schedule, too- meshes well with raising kids. I’m sure there is a floor below which salaries would be a problem, but I don’t think it’s the main issue.
I do think that most teachers would be happier if there was less bureaucracy and a better working environment. Figure out how to make the system better and most would forego high salaries.
You really don’t want people as teachers who, were the financial incentives for teaching lower, would be bankers. You’ll create a set of social problems I don’t think we want to deal with.
“I don’t know that cutting salaries would impact quality.”
So you really think that if they made $28,000 a year they would all still work and do just as good a job? (This would translate into beginning salaries of about $18,000 a year.)
” Having some of the highest teacher salaries in the country isn’t helping” Sure, but that was not the question. if you think the answer is better teachers, you will need to pay more. If you can’t afford it, then the answer is not better teachers. At present, half of all teachers leave the profession in five years. My guess is that Dave’s point about getting the wrong people into the profession will not be huge since people dont seem to be staying if they don’t like it/can’t do it.
“Teaching (esp elementary) attracts women who value the schedule, too- meshes well with raising kids.”
Yup. You get the low achievers from the bottom of the class.
Steve
PS- But since no one think pay matters, that should end the push for bonus pay based upon performance.
I don’t think that pay doesn’t matter. I agree with Peter Drucker’s observation that once you are fed, have clothes on your back, and a roof over your head there are other things that matter, too. Things like work environment, interactions with coworkers, job satisfaction, and a raft of other considerations. Pay isn’t the only attraction.
My mom was a teacher for much of her career. She used to point to the independence that teachers had as a major attraction of the job. The way she phrased it was “the classroom is the last kingdom”. That has largely eroded over the years.
I strongly suspect that once you’re a couple of standard deviations over median income these factors become much more important very quickly.
And, steve, I think you’re both underestimating people’s willingness to stay in jobs they hate because the pay’s good and underestimating the effect of high turnover on morale, job satisfaction, and productivity. I can only surmise you’ve never experienced the latter.
Bringing a too-long comment to a conclusion, the starting wage for a CPS teacher, bachelors in ed only, is $50,000 for a ten month job. The median income is $80,000. Chicago is already bankrupt. Where the heck do you think it’s going to get the money to compete with docs (median salary $250,000+) or people working at Goldman-Sachs (average of >$500,000 per year)? The median income in this city is about $38,000.
I’m all in favor of ending bonus pay for teachers. Turns out its a bad idea in practice.
One could get at least a few better teachers just by changing requirements. Stories crop up regularly of engineers who are retiring who would love to teach high school math, but can’t because of ed school requirements uselessly tossed in their way. Apparently that’s gotten better in recent years, but is still a barrier to entry.
@steve, I purposefully ignored the part of your question about cutting salaries “in half” because I didn’t think it was a serious hypothetical. Why not ask if the salary was cut by 75% or 90%? I recognize that over time that salary reductions will reduce the pool of applicants. (Less certain about current teachers. The downside to a system that gives specific degrees and licenses is that your trade may not be easily transferrable)
In Illinois, current salary levels are drawing more applicants than needed, so salaries don’t need to be as high. Plus unlike non-teacher work, no SS deduction is made, and in ares of the state with strong unions, the employer pays the employees contribution to the pension.
Last year’s non-hires are competing for next year’s positions with recently laid off teachers with more experience. And when I’ve tried a quick google to determine median teacher salaries in Illinois I usually get a few hits from teacher-oriented bulletin boards of teachers thinking about moving to a new state that pays better. We have no room in the inn.
Our salary levels are so high, its damaging the rest of the system. Something like 140 Chicago schools lack libraries. My kid’s grade school would lack a library if parent volunteers didn’t staff it, like they replaced the art teacher position when it was cut. I was offended by a recent link about football helmets when I know that a high school football player wearing a torn uniform came to my door and asked me to pay into some coupon Ponzi scheme to pay for uniforms and helmets. Many schools are not paying much for their athletic program, certainly not as much as religious schools. Supper calls . . . the rant must end.
“I think you’re both underestimating people’s willingness to stay in jobs they hate because the pay’s good . . .”
Or even if they no longer think the monetary compensation is good, their full pension benefits vest in ten years, so even if they hate what the job is or become, they will wait it out. I have been in a few dinner parties where this is obvious, and while switching to a defined contribution program will certainly reduce pension benefits, there is something to be said about giving people the freedom to move-on to another job without the deadweight loss of having sacrificed retirement security.
I would think, Steve, that women from all across the spectrum tend to value time to raise their kids. I’m a former high achiever with stellar academic credentials and I would give up a lot in salary if I could work a schedule that correlates with my kids’ schedules. I already have in that I’ve downsized my career (in our case it is due to some extraordinary circumstances with the kids, making it impossible to work full time and meet their needs.)
Maybe I’m an outlier though…or maybe you’re just wrong in your assumptions. Being intelligent doesn’t necessarily correlate with ambitions for a stressful career that is hostile to family life.
“I think you’re both underestimating people’s willingness to stay in jobs they hate because the pay’s good . . .â€
Not a mistake I make!
“And, steve, I think you’re both underestimating people’s willingness to stay in jobs they hate because the pay’s good and underestimating the effect of high turnover on morale, job satisfaction, and productivity. I can only surmise you’ve never experienced the latter.”
Have certainly seen the latter many times. As to the former, if someone was a really good teacher, but didn’t like the job and stayed for the pay, can’t say I would care.
PD- Keep it in context. I am simply saying that if you think better teachers will solve your problems, then higher pay is one way to do that. We know that current teachers seldom come from the top half of the academic class. We know that in other countries that perform well in the international tests teachers are higher up the pay scale than they are here in comparison with other professions, and, they are more likely to come from the top half of their class. I am sure CStanley would be willing to sacrifice for her kids, but we aren’t talking about high academic performers willing to take a cut. We are talking about low achievers to begin with.
AFAICT, there is no teacher glut in the US, and there are certainly shortage areas. Of course Illinois has many applicants. You guys pay well, and as far as Chicago goes, people by and large don’t want to live in the sticks anymore.
All that said, I could certainly be wrong. After having spent a lot of time reading and talking about it, I am still not sure what makes a really good teacher. Maybe higher performing people, at least in the US, won’t make good teachers.
Steve
I’m astonished. You don’t think that your attitude towards your job affects your performance at it? My experience is that people who hate their jobs are usually lousy at them. In a field (like education) in which you can’t be fired for poor performance that would seem to be a problem.
@Steve
The quality problem may be worse than you think. When I became a teacher for a few years I passed the Praxis examination with three hours of study (not thanks to my brilliance but the absurd ease of the test) and no academic background in the field. I found out later it wasn’t all that common for someone with a degree in education to pass the exam first time out.
I think that offering above-market wages for teachers could attract better talent, but it’s not clear that the hiring systems in most districts would hire the more talented teachers. What are the hiring critieria?
Of course there is the problem that, once hired, talent will not help much in terms of tenure or promotion given how the system is rigged to reward seniority and credentials. Talented people probably know this and understand that their talent won’t do much for their careers in teaching. This is exacerbated by how back-loaded most teacher compensation is.
So I’m not sure how effective offering greater starting pay would be at attracting talent given how the entire system is setup to reward credentials and seniority above skill.
I think it would incentivize the present teachers to stay on the job longer. It would be a generation before there would be any appreciable effect as a result of hiring “the top half of the class”.
I’m still curious as to where everybody thinks that Chicago would get the money to double teachers’ compensation. We can’t even pay them current wages.
Dave,
My point was a general one, not aimed specifically at Chicago. However increases in starting pay are only one factor and I think it gets overwhelmed by all the other factors that tend to chase away talent.
As far as Chicago goes, I wonder what the hiring criteria are – if there are many people for every job opening how does the city decide which candidate to hire? Point being, offering high starting pay means little if the hiring process does not (or cannot) select the best qualified candidates.
I’ll ask my next door neighbor. She’s a teacher in one of the best elementary schools in the system, a block and a half away. She’s also a red-hot CTU supporter.