The One Good Point Modern Unions Make

The cheapest employee isn't always the best one.

The damage done to our economy and education system by American labor unions has been extensively documented, both by Scragged and elsewhere.  It's well known that outrageous union costs and featherbedding led to the financial collapse of our Big 3 auto manufacturers and to the impending bankruptcy of such states as California, New York, and New Jersey.

How do we know that union costs are excessive?  In the case of the car companies, it's simple: Toyota and other foreign companies can build cars in non-unionized Southern factories for about half of the labor rates (including benefits and pensions) as the UAW exacts in Detroit and the Midwest.

The same is true of public-sector unions.  Forests have been felled describing how unionized teachers accomplish half the teaching at three times the cost of non-unionized private schools, to say nothing of home-schooling; failed public schools are almost a redundant statement, certainly by international standards.  The more money dumped into them the worse they get, yet the only suggestion by unions is still more good taxpayer dollars thrown after bad.

In fighting for better pay for the working man, however, labor unions do make a point worth taking note of and which all too many modern corporations have forgotten:

If you pay peanuts, you get monkeys.

The Price of Incompetence

There are many reasons not to eat fast food.  For your humble correspondent, though, there is one overriding aggravation involved that dwarfs all others, and that is: virtually without exception, they get my order wrong.  Drive-through orders are worse than ones placed inside, of course, but I can't remember the last time I placed an order and wound up with everything I wanted, correctly charged, right the first time.

Why is this?  Things may be different out in rural areas where I don't live, but in all the fast-food joints anywhere near me, an American behind the counter is a rare sight to behold.  Where once McDonald's was staffed largely by American high-school students, now they seem more to tend towards older immigrants for whom it's a steady long-term job, not just a somewhat greasy stepping-stone on the way to a better future.

There may be good reasons for this - American high-school students are not noted for their reliability and sober-mindedness in employment anymore - but unlike adult immigrants, most American high-school students can speak the language.  Communicating via a drive-through speaker setup would challenge William F. Buckley; for Jose or Sasha, there's no hope.

The result?  I simply don't eat fast food anymore.  Abstinence is good for my heart, not just from the cholesterol avoided, but the stress and conflict of a botched order as well.

For McDonald's, there has got to be an opportunity cost here; surely I am not alone in my boycott?  Yes, the immigrants are probably cheaper than reliable, competent, and fully literate Americans would be, but by that much?  Unlike farmers, McDonald's is too visible a target to rely on illegal labor paid less than minimum wage; most likely their employees have every legal right to be present and working.

Raising wages would certainly benefit the product provided: suddenly, a better class of more-qualified workers might take interest in the job.  A more reliably product would, in turn, increase sales to previously-vexed ex-customers.

This isn't to say that higher wages are a cure-all.  Hondas from union-free Southern factories are equal if not better in quality than UAW vehicles; for its excessive charges, the UAW provides nothing of any value.  For every example where the extra pay is wasted, however, there is another example where more pay might actually make a positive difference.

But surely, the difference is only at the margins?  Not necessarily.

In March 2007, retailer Circuit City abruptly fired 3,400 salesmen because they were "making too much."  Since salesmen are paid on commission, "making too much" would seem to imply that they were selling a lot; isn't that a good thing?  Management evidently thought they could find replacements who'd do the same work for less.

Not so.  By May, analysts noted a disastrous drop in profits:

Analysts said Circuit City had cast off some of its most experienced and successful people and was losing business to competitors who have better-trained employees.

"I think even though sales were soft in March, this is clearly why April sales were worse. They were replaced with less knowledgeable associates," said Tim Allen, an analyst with Jefferies & Co.

In particular, the televisions showing disappointing results are "intensive sales" requiring more informed employees, Allen said. "It's a big-ticket purchase for somebody. And if they feel like they're not getting the right advice or are being misled by someone who doesn't know, it would be definitely frustrating. They will take their business elsewhere." [emphasis added]

Which they did in droves, with predictable results: A year later, the company went bankrupt, surviving only as an online website operated by another company that bought the brand in liquidation.

The Back-End Matters Too

Getting rid of all your experienced and successful salesmen is visibly moronic, but a happy customer experience can be fouled just as badly by incompetence in the invisible but essential back room.  Here, too, your humble correspondent had an insightful recent experience.

My family found itself in need of several new mattresses of varying types.  A bit of research discovered a superb clearance sale at a major national department store.  The beds were of top quality; the price rock-bottom; the financing terms ideal; and the salesman superb.  In fact, I don't believe I have ever encountered a more thorough, helpful, diligent, and effective salesman so absolutely dedicated to making me 100% satisfied.

Alas, he had to work very, very, very hard to reach that goal.

The first set of delivery guys were as loutish as the salesman was professional.  My mattress was physically folded entirely in half and clamped that way to fit into their truck, which a) destroys the springs and b) voids the warranty.  I was stuck with it, however, because my old mattress had been unceremoniously dumped in the mud in front of my house by the surly crew who were supposed to haul it away neatly.  Oh, and all the pictures were knocked off the walls during the delivery.

Several phone calls and a teleconference with the mattress manufacturer later, a new one was on the way via a different delivery service; well and good.  Meanwhile, another mattress had been delivered but was the wrong one.  When the second credit card bill arrived, someone had neglected to tell the computer that this was a no-interest financing; the finance charges were breath-taking.  The whole affair took several months and many hours on the phone before all the correct beds were in their proper places, intact, and financed correctly on the previously agreed terms.

Thanks to the sterling efforts of the salesman, all was eventually resolved, but consider the opportunity cost of the salesman arguing with minions on the phone when he could have been selling stuff!  What's more, despite the great price and quality, I'll think long and hard before buying from that store again in the future.

Who is at fault?  Not the salesman, as the original receipts confirmed that everything had been entered correctly at the beginning of the sales cycle, but nearly everyone else involved got it wrong.

The warehouses put the wrong items on the trucks and handled them improperly; the accountants entered the wrong data on the charge account.  Any giant company will have a loser here and there, but such multifarious and widespread failings can only be caused by negligent and ineffective management.

Which, of course, is where unions blame every failing of their employers.  It's all too easy simply to dismiss labor unions as greedy, lazy dinosaurs from a bygone era, and most of the time you'd be right.

But they're not always alone in being lazy dinosaurs - sometimes management is right in there with them.  As trite and dated as it may sound, "our employees are our greatest asset", and woe betide the company that forgets it.

Petrarch is a contributing editor for Scragged.  Read other articles by Petrarch or other articles on Economics.
Reader Comments
Interesting. As a teacher who works in the town right next to Central Falls, Rhode Island, I've been looking into unions lately.

After hearing all of the vitriol directed at teachers' unions, I wondered if there might not be some concrete evidence that unionized public school districts were on average costing more or performing less than non-unionized districts.

After searching some, I found a few studies that actually tried to answer that question.

The studies I've read have indicated that teacher unions have either a negligible effect on teacher pay (Lovenheim 2009), or a modest positive effect in the neighborhood of +5% (Hoxby 1996). This means that a teacher who is actually earning the oft-quoted "outrageous" salary of $70,000 per annum would expect to earn either exactly the same amount, or maybe around $65,000 per annum, if his union were to dissolve. That's what the actual studies indicate.

For some time I've considered teachers' unions to be more of a burden on the teachers than anything else; they collect their dues just fine but don't seem to do much for the workers and dish out ominous answers when asked why we need them ("You never know -- a student could accuse you of molesting them" is the one I've heard several times, answered in a way that seems to carry just the whiff of a threat). Admin loves to moan about how they can't force any "real reforms" in public ed because of "those meddling unions", but I've seen ample evidence that if the local unions weren't there then the typical reforms being pitched would ultimately end up getting shot down by the unforgiving concrete walls of reality and the free market if the unions weren't interfering.

And evidence that non-unionized public school districts are outperforming unionized ones? I haven't seen any -- I'd be curious to read of any data anyone else can direct me to.

- Ron ^*^
May 6, 2010 1:50 PM
There probably are non-unionized school districts out there somewhere, but I'm not aware of any. The only comparison of that nature that I can make is public school vs private or homeschools. For that's, there's no contest: private and homeschools knock the socks off public schools, at somewhere between one-third and one-half the price depending on location.

For a long time, the response would be that there's a selection bias: smart parents had smart kids and send them to private schools. The totally randomized DC voucher program killed off that theory once and for all: the exact same impoverished DC ghetto kids who fail at great cost in the public schools, did above average at half price in private schools.

Personally I don't think the unions are 100% of the reason for this. They're a major contributing factor. But also, they provide a major excuse for lack of reform on the part of lazy politicians and administrators. Either way, direct or indirect, it's a decades-long betrayal of our kids and a critical risk to the health of America.

And about the unions' first victims being the teachers themselves - I think you have a point. Those dues aren't cheap, and the work-rule restrictions chafe against good teachers and protect bad.
May 6, 2010 4:08 PM
Petrarch? Many public school districts are non-union. My brother-in-law teaches in one in North Carolina. They're all over. Check the rough chain of states from Texas to North Carolina.

I'm curious where you got your information about private and homeschooling "knocking the socks off public schools"; it seems like you are asserting that this is the case because there is less money spent per student. Where are you getting your numbers?

The DC program might have "killed off" the selection argument (assuming that it really was totally randomized) if it had actually produced superior results. But it didn't. The DoE itself reported that the voucher program was not improving student performance. I notice that you didn't assert that it was.

I'll give an example of a "bold" reform that I witnessed in my own career. When I was first hired in my town, a new law had recently been passed requiring all public school teachers to live in the town. There was some rhetoric about this providing an incentive for the teachers to better form an "invested community" or some such with the students, but most people knew it was really an attempt to save money for the town (teachers would be paying local taxes back to the town).

The union apparently didn't do or say anything to oppose this, probably because teachers who already had jobs were "grandfathered in" and didn't need to follow the new law.

It only took a few years for the town to realize that it had shot itself in the foot. Yes, new hires were paying their local taxes back into the system, but there was a net loss in cash flow because the town had to spend more to attract teachers.

Substitutes (who generally form the pool from which new teachers are hired) didn't choose to work in the town because they could earn the same trying to build careers in nearby towns that didn't have residency requirements. In response the town raised sub pay to be close to the highest in the state, and still couldn't attract the hires it needed. Schools did without more sought-after categories of teachers such as physics and chemistry, or began hiring "emergency certified" staff (teachers who weren't actually certified).

Meanwhile, trying to enforce the law proved costly and problematic. An entire local bureaucracy was set up to check and verify new hire residence on a yearly basis, using methodologies that were more tedious than accurate (yours truly was accused of living outside of the town for pointing out a simple way to fool the town into thinking that one had residency based on the faulty verification process used; I *was* a resident). Of course, the politically connected were not harassed by this entity; some went so far as to speak aloud of their "real" residences, and the son of a past superintendent seemed to make a point of driving to school in a car with out-of-state license plates.

Ultimately, the residency requirement was lifted, and when I asked about why I was told that it had proved fiscally unsound. Curiously, no mention of the supposed "close knit community" that the requirement was publicly plugged to have been creating was made. It was almost like that had never really been a concern in the first place.

Now, had the union opposed this boneheaded scheme, no doubt the administrators who had concocted it would have wailed long and loud about "obstruction of reform". It would have been (accidentally, I'll admit) saving them a lot of trouble, but they would never have conceded that.

You're right on about the unions providing a handy excuse for anyone else connected to education. I am currently trying to figure who gets the blame in non-union districts. Can't be the unions, so who's next in line?

- Ron ^*^
May 6, 2010 5:18 PM
Well. You do come up with some interesting stuff, Werebat.

I've never heard of your specific example, but it sounds perfectly in keeping and I've no doubt that it's true.

As far as the DC experiment, let me clarify: Yes, it DID improve the kids. We've written about it before, as has the WSJ and others.

Likewise, any number of studies have demonstrated the superiority of homeschooling.

and for private schools the proof is even more abundant.

Of course, this is not to say that every individual private or home school is better than each and every public school, that would be absurd. But on average, the bottom line is clear: public schooling, taken as a whole and the way we currently do it, is a failure.

That's why I believe the only solution is a full voucher system, where the money follows the child. Put competition to work and amazing things happen. Until this is done, our schools will never improve as a whole - in individual places, sure, but not across the board.
May 6, 2010 8:34 PM
I see people claiming the DC miracle was real, I see people claiming it was false, but what I don't see is any hard data. The DoE says it didn't work, which to me says that it didn't; I'd be open to reviewing any actual studies on the matter.

I'm going to go out on a limb here (not so much, really) and guess that the "random" lottery wasn't completely random in that only students whose parents cared enough about their education to put them in the running were included in the random draws, and that students who caused problems with behavior, absenteeism, or the law were "counseled out" of the schools they had been placed in. This is typically how these "totally random lotteries" work when it comes to charters, which studies have shown to be no better than public schools even when they have these advantages in clientele.

Arne Duncan... Well, Arne Duncan's friendship with Eli Broad may reveal a lot about his defense of charter schools. And Obama himself seems to have been listening to Arne (his friend and Eli's); who else would have given him the idea that the Met school in Providence was performing better than CF High (when it wasn't)?

I think vouchers are an interesting idea. I can see a problem with them in that a state that switched to a complete voucher system would gradually become very segregated along class lines. This would come about as schools began charging more than the voucher for tuition; a plain voucher would get a child into a "standard" school but a voucher plus some more cash would pay for tuition in a "standard-plus" school -- you see where I'm headed. A voucher system would ultimately serve to keep poor kids locked into the "standard" system and open the door for wealthier kids to attend elite schools (even more so if the voucher values were determined by district, which is probably how things would go). Not that this is effectively any different from what happens already, it's just that I don't see it as the answer to closing any "achievement gaps".

- Ron ^*^
May 6, 2010 11:11 PM
One more thing regarding the "failure" of the American public schools...

Check this article on Obama's speech on education about a year ago:

There were several statements that the new president made that were less than truthful. I think it is a fair question to ask why these statements were made and for what purpose, but let's gloss over that for now. Notice this:

"Among adults age 25 to 64, the U.S. already has the second highest percentage of college graduates with a four-year degree in the world (30 percent), trailing Norway by a single percentage point."

Seems a little strange to be labeling our public school system as a "failure" when its clients go on to complete four-year college degrees at a rate higher than every other country in the world save one, which they only lag behind by one percentage point. Remember that these American students are typically attending American colleges, which are recognized internationally as being some of the most rigorous and challenging institutions of higher learning in the world. "Failure" seems like much too strong a word.
May 6, 2010 11:25 PM
America has the world's best colleges, no doubt about it. It also has some of the world's poorest high schools, and a great many mediocre institutions of "higher learning" that are more geared to remediation than they are to true university-level knowledge. Many if not most graduates of no-name community colleges are no "better educated" than were high-school graduates of the 1950s; there is a growing body of scholarly research arguing that much modern American "college education" is a total waste, since the jobs those people get don't require anything more than what used to be a high school level. We all know college graduates who work as waiters.

The question of the DC vouchers is so politically fraught that we may never know the true degree of improvement, but one thing is clear: the voucher recipients' educations certainly did not get WORSE. Yet the value of the vouchers was less than one-half of the amount spent per DC public school student. That alone is an overwhelming argument for vouchers - if we can save half the money and be no worse off, we should do so at once.

Considering that almost every other aspect of our economy is loaded to the gills with competition, in which each individual person can choose their price level and preference, and that this system has led to the greatest and most widespread wealth in human history, it's hard to discern why we wouldn't do the same in education. Even in your feared scenario, where the finest private schools would require a parental financial supplement over and above the voucher, isn't that still an improvement from today where the parents must pay the whole bill? A lot more poor-ish parents could pay half the tuition, than can afford all of it.

We already have a heavily class-straitifed schooling system as is widely known. The question is, is there any mechanism whereby a switch to vouchers would make it worse? I have a hard time seeing how it could.
May 7, 2010 8:38 AM
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