Do Teacher Unions Matter?

Posted on by Audrey Spalding

A 2009 study in the October issue of the Journal of Labor Economics finds that teacher unions have no effect on teacher pay.

Shocking! As the author, Michael Lovenheim of Stanford University, notes, these results aren’t expected. Unions negotiate for better work conditions and salary increases, so it’s a general assumption that school district unionization would increase teacher pay. Previous studies have shown unionization to increase teacher pay by as much as 12 percent. A paper by Caroline Hoxby, seen here at the Show-Me Institute talking about the effects of collective bargaining, found that majority teacher union membership results in a 5-percent pay boost for teachers (study available here).

Looking at the source of Lovenheim’s data, I wonder whether his findings are attributable to a lack of available details. He calculated monthly teacher pay by dividing a district’s monthly full-time instructional payroll by the number of full-time instructional staff. That pool includes not only teachers, he writes in the study’s appendix, but also educational support staff, school-level administrators, principals, and guidance counselors.

The things I saw while attending teacher-administration contract negotiations at the Lindbergh School District in Saint Louis lead me to believe that educational support staff, school-level administrators, principals, and guidance counselors don’t necessarily benefit from teacher union negotiations, even if the union purports to represent them. In fact, in the Lindbergh case, they lost out slightly. (Administrators and the teacher union ended up agreeing that counselors and librarians should contribute to the “substitute pool” when absent from school, even though substitutes aren’t hired when either counselors or librarians are absent.)

The average pay Lovenheim calculated could be obscuring teacher gains because of the varying salary trends among non-teacher staff. For an example of this in action, see the Miami-Dade School District. After 16 months of negotiations, the district awarded its teachers an average 1.8-percent raise, while “reducing the number of days support staff will work from 260 to 250.” For the unindoctrinated, school districts generally can’t cut pay; instead, they cut days.

Another issue with analyzing the effects of unionization on teacher compensation is that non-salary benefits, such as health, life, and vision insurance, as well as working conditions, are difficult information to find, and can be very hard to quantify. The lack of availability, Lovenheim writes, forced him to leave those measures of compensation out of his study. Non-salary benefits are not inconsequential, and can add up to thousands of dollars more in compensation. If unionization helps teachers negotiate for more non-salary benefits, that could amount to a large positive effect left unaccounted.

I’m not quite sure whether the following is a non-salary or a salary benefit. In any case, it’s my favorite teacher union contract provision. From the Mehlville School District’s 2009–2010 agreement with its teacher union:

Any savings exceeding $70,000 between now and August 1 resulting from teacher staff changes will be added to the base salary.

That surely is evidence of teacher union negotiating power, especially during a recession when school districts across the state are looking at ways to make cuts.

Correction

Posted on by Sarah Brodsky

I wrote two posts about Quest to Learn under the impression that it’s a charter school. I was mistaken. Quest to Learn is not a charter school; it’s a New York Department of Education public school. Although in some ways it looks more like a charter than a traditional public school (it has outside sponsors, and students choose to attend rather than being assigned by residence), it is not a charter.

Clearly, I was wrong to criticize Popular Science for leaving out “information” about Quest to Learn that I myself didn’t get right. My apologies go both to Quest to Learn and to Popular Science for my mistake.

One result of competition from charters, online schools, and other options is that public districts respond with innovative schools of their own. In this case, New York did such a good job that I couldn’t tell the difference!

Public Plan and the Health Care Wedge

Posted on by Abhi Sivasailam

Today’s edition of the Maneater featured an op-ed attacking the notion that a public option in health care is necessary to keep health care costs in this country low. From the article:

Indulge me in a very simplified thought experiment. You, reader, enjoy beer, and I have deep pockets. We come to an arrangement: you pay me a fixed fee, and I will heavily subsidize each of your purchases of beer over the course of a night.

What would we expect to see happen? I expect that your demand for beer will increase toward over-consumption since the more you use this service, the more attractive the deal becomes. Perhaps an astute bartender notices the strength of your demand and decides to react by raising the price of each beer by 25 percent. As far as you are concerned, you continue to pay the same as before. As far as the bartender is concerned, he’s reacting rationally to forces of supply of demand. As far as I’m concerned, I’m going to have to raise the price of my fee for future nights if I’m going to keep from losing money.

The price of beer will balloon and the culprit is an economic wedge — the difference between the price a consumer pays and a producer receives.

Applying the analogy to health care, we can see that a public option would produce unintended consequences of health care cost inflation by exacerbating the effects of an economic wedge in the health care market. Sounds a lot like the conclusion of this recent Show-Me Institute study.

Caps on Stacked Taxes

Posted on by Caitlin Hartsell

The St. Joseph News-Press reports that Missouri lawmakers recently proposed a solution to the problem of “tax stacking” — the practice by which municipalities attempt to pass additional tax increases through referendums in order to circumvent the state-mandated limit of an additional 1.5 percent in sales taxes. The lawmakers proposed two things:

The resolution would protect cities from the threat of lawsuit, as they believed a 1999 letter from the Missouri Department of Revenue condoned the taxes. However, the two legislators want to cap general sales taxes at one cent and other authorized sales taxes — such as St. Joseph’s CIP [Community Improvement Project] tax — at one-half cent.

These extra taxes usually come in the form of CIP taxes (also known as CID, Community Improvement District, taxes). CID taxes are levied when at least 50 percent of the property holders holding at least 50 percent of the property in the area decide to levy a voluntary tax. In practice, this money could be used for landscaping or infrastructure improvements that benefit 51 percent of the owners, to the detriment of the other 49 percent. The use of CIDs is of questionable value, at best, and this proposal would essentially prohibit further CID taxes.

When I wrote about the topic of tax stacking earlier this summer, a Farmington lawyer was suing cities to repeal these taxes. At the time, I was conflicted over my desire to see taxes lowered and my concern that the lawsuit was redistributing city money inappropriately, essentially hurting the taxpayers it was intended to help. Recollecting the money would not solve matters, because the transaction cost of both the initial collection and the recollection process (as well as the difficulty of determining the appropriate reallocation) would be prohibitively costly. Considering the situation, strengthening the tax cap is the best solution to protect Missouri taxpayers from further harm.

Tax caps would require Missouri’s cities to promote further growth if they want to increase tax revenue. Preventing extra taxes from being collected — thereby leaving more money in the hands of consumers — would permit more growth, and would result in a far better long-term outcome than simply raising taxes.

The High Cost of High-Speed Rail

Posted on by Christine Harbin

During the drive home from work yesterday, I listened to a discussion of high-speed rail on NPR’s “Marketplace.” Mitchell Hartman discussed a new report from the Pew Research Center reminding us that high-speed rail depends on federal assistance. Pew calculated that Amtrak receives a $32 subsidy per ticket, on average, from taxpayers. Amtrak, however, estimates that the size of the subsidy is $8. From the show’s transcript:

The difference is Pew includes all the costs of running a railroad, like depreciation — that’s wear-and-tear on tracks and trains — and overhead, like the legal and HR departments. Taxpayers pick up those costs too. Amtrak got $1.3 billion in funding last year.

The program even quoted Randall O’Toole, a Cato Institute senior fellow and self-described “Antiplanner”:

Best thing we can do for mass transportation would be to privatize it, let the private operators respond to the market, and then we’ll have a more efficient system that might be attractive to more people.

O’Toole has written several policy studies for the Show-Me Institute on the subject of high speed rail and its free-market alternatives. His most recent, “Why Missouri Taxpayers Should Not Build High-Speed Rail,” was published late last month.

High-speed rail is relevant to Missouri, particularly as officials consider upgrading the tracks from Saint Louis to Kansas City to accommodate high-speed trains. As David Stokes testified before the Joint Committee on Transportation Oversight earlier this month:

For Missouri to build true high-speed rail — the type that American tourists ride in Europe at 150 mph — would cost Missouri taxpayers billions more, all to serve the small percentage of the population that uses passenger rail.

Domestic Migration and Tax Policy

Posted on by Christine Harbin

New York’s higher-income residents are fleeing the state, and they are taking their tax dollars with them. The New York Post reports that this is because of the state’s high cost of living and high taxes:

It all adds up to staggering loss in taxable income. During 2006-2007, the “migration flow” out of New York to other states amounted to a loss of $4.3 billion.

Not coincidentally, states that have lower tax burdens experience positive domestic migration. According to information from the Tax Foundation, New York has one of the highest marginal tax rates on personal income in the nation. In New York, the top marginal tax rate in 2009 is 8.97 percent. In Florida and in Tennessee, it’s 0.00 percent. In Missouri, this rate is 6.00 percent.

The Show-Me Institute has extensively explored the relationship between tax policies and domestic migration. In an op-ed, “Tennessee vs. Missouri: Taxes May Tip the Odds,” the institute’s executive vice president Dr. Joe Haslag explained how different tax structures contribute to domestic migration:

Economic theory indicates that the difference in income tax rates — that is, the property rights enforced on people’s labor, and the payment for that factor of production — can help to account for the differences in growth rates.

The basic idea is elementary economics. Consider two people with identical characteristics, one in Missouri, the other in Tennessee. Suppose those two people were given identical work opportunities, so that they had access to the same machines and plant surroundings. For one hour of work, each produced the same amount, and was paid $20. Excluding federal taxes, the person in Missouri would take home $18.80 while the person in Tennessee would take home $20. (If the person worked in Saint Louis or Kansas City, take-home pay would only be $18.60. We will save that discussion for another time.) The person in Tennessee will supply more labor because he realizes a higher return for his effort.

Related to this subject, Jenifer Zeigler Roland and Dave Roland recently published a case study that explores how different tax policies may have played a significant role in Tennessee outgrowing Missouri. They provide another explanation:

A lower overall tax burden is attractive to prospective businesses and residents, because it leaves more money available for consumers to spend on goods and services.

Government Approval ? the Ultimate Measure of a Virtual School?

Posted on by Sarah Brodsky

Edspresso links to this essay by Hope Frick, a virtual school student in Pennsylvania. She’s written an articulate explanation of why she chose to attend a virtual academy. You have to sympathize with her frustration at the responses she gets when she tells people about her school. Frick is absolutely right that online high schools should be accepted as mainstream.

There is one thing that bothers me about the essay. I’ve highlighted it in the following quote:

Approved by the state, cyber schools enable students from pre-kindergarten to 12th grade to gain a public school education from their homes.

Frick refers several times to state approval and regulation, implying that government involvement is key to virtual schools’ success. Now, it’s true that many good online schools are run by states or strictly regulated, but states are closely involved with public brick-and-mortar schools, too — and the results aren’t always stellar. That’s not to say that they’re all bad, just that there’s a lot of variation, despite the government authorization they have in common. We have to conclude that factors other than state approval cause the difference in outcomes.

The real test of a school’s quality, be it online or brick-and-mortar, is whether students learn from it and parents are satisfied. Given that thousands of students voluntarily choose virtual schools over other options, I’d say they’re doing well by those measures.

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