Collective bargaining and budget deficits

So it was collective bargaing that caused the state budget crises circulating the United States, right?  I'm certainly not a union appologist- but let me offer a second solution.

A revenue bubble caused by housing policy caused the state budget crises.  It began with a new innovation in the mortgage industry- the mortgage backed security.  Back in the 1980's- savings and loans would take deposits from customers and then offer mortgages from those deposits.   However, this limited the number of loans that could be made (at least in theory).   Every loan required a proportional amount of money in reserve.   Securitization of loans changed this.  Through securitization, loans could be sold on a market.   Once loans were off the books- and into the hands of a 3rd party- lenders could issue more loans.  They quickly found out that they could make more money selling loans than they could holding them.   As these loans became more numerous- politicians were asked, then asked again, to regulate them.   Neither Republicans nor Democrats wanted any part of this- as to do so would limit home ownership rates.   Instead, they basked in the glory of an accelerating housing market.   More and more people were realizing the American dream. 

As the housing market accelerated, ratings agencies- who were tasked with rating the newly securitized debt.   However, these industries quickly succumbed to the allure of money- rather than the nitty gritty work of effectively analyzing this debt.  Banks came to ratings agencies expecting AAA ratings (the highest rating).   If Moody's would not give it to them, they went to S&P, and vice versa.  This quickly became a conflict of interest- for if ratings agencies wanted market share- the path was to keep the banks happy.   Before long, nearly every basket of loans was AAA, creating what was essentially a false demand for more mortgages.  A bubble.   Standards shot- the banks felt free to loosen their credit standards.  If every loan could be sold in a AAA basket-  it didn't matter who they gave a loan- no matter their credit worthiness.   The loans were easy to sell- and with a AAA rating- they sold at a premium price on the market.   The house of cards was stacked.

The housing market exploded- and nearly everyone benefitted.  Although the revenue bubble was not caused by public sector unions- they certainly benefited from it in the short term.   It's funny now that some people blame unions for bankrupting state coffers.   As if the money that went toward salaries of unionized employees would not have gone somewhere else.   Even my 3 year knows that no matter the size of the cookie- he had better eat it- lest someone else come along and take it from him (that would be me).   I do know of one state that put money aside for the recession- Montana.   Good for Montana.   Smart.

The point here is that collective bargaining was no more the cause of the state deficits than it was the cause of the state surpluses which preceded it.   To cast collective bargaining as the problem- as is currently being done in Wisconsin- is nothing more than politics.  The public sector will be forced to take less money now- just like they got more money when states were fiscally strong.   But to point the finger to the collective bargaining process- is scapegoating- not problem solving.   I think we all deserve much more of the latter.

And if we want to have a debate over collecting bargaining- or giving people choice when joining a union- let's have that argument.    But let's have that argument over the merits.    It could prove a much more useful dialogue than what is going on now.   And perhaps we could all be made better off- I nominate the governor from Montana to lead the discussion.

The value of a contract

For a few months now, I have developed an interest in the work of Dan Ariely, a behavioral economist from Duke.   His work has many applications in the world of teaching.   In his this most recent blog post- Ariely talks about the value of the handshake.    Union members, on the other hand, often harp on the importance of the contract.   We can't work during lunch.   We can't be required to come at this time or that time.  Or from the other perspective, I can't believe so and so left before the duty day ended. I think we'd all be better off if things were settled with a handshake.    I once read that one of the least happiest professionals is the attorney.   They bill by the hour- or rather, the 6 minute.   Constantly reminded of the market value of their work- their happiness is drained.  


I suppose many see the handshake as something straight out of Utopia.  But as the Montgomery County Council- and the state of Maryland begin their budget decisions- they will most likely remind all teachers not of the handshake- but of the written contract.   I suppose we'll have to wait see what the result will be.   From Ariely's post:

All contracts deal with the direct aspects of the expected exchange and with unexpected consequences. Incomplete contracts lay out the general parameters of the exchange (the part that we shake hands over), while the unexpected consequences are covered by social norms governing what is appropriate and what is not. The social norms are what can motivate me to work with you, and what would establish goodwill in resolving problems that might arise.


As for complete contracts, they too specify the parameters of an exchange, but they don’t imply the same adherence to social norms. If something is left out, or if circumstances change, there’s no default to goodwill—it’s happy hunting season for all. When we use complete contracts as a basis for working together, we take away flexibility, reasonableness, and understanding and replace them with a narrow definition of expectations. That can be costly.

The best defense of seniority (so far)

I found this reprint of a Matthew DiCarlo piece from the Answer Sheet.   It's the best attempt to "defend" seniority based decision making that I've seen.   Needless to say- I take issue with several points made by DiCarlo- which I hope address in the near future.   Here's a snippet:

Third, all of the outrage against seniority seems way overblown. It has for decades been considered a fair and impartial way of proceeding, in both the public as well as private sectors (though it is far more common in the former, and among unionized employees in both sectors). In education, this policy also has some research backing: Even by the narrow measure of student test score growth, experience is among the few proven signals of teaching quality (see here, here, here, here, or our summary here), to say nothing of the possibility that experience matters more when it comes to other student learning outcomes (including, by the way, reducing attrition; experienced teachers are less likely to leave the profession).


In short, seniority is definitely imperfect, but it is hardly outrageous to use it as a proxy for quality

The failure of targeting data

I wrote last week about the dangers of targeting data rather than the underlying conditions that serve as the cause for the data.   Jay Mathews of the Washington Post then wrote about this policy at West Springfield High in Virginia.  The school provides some type of review session for students in need remediation.  That sounds benign enough- except that while a small percentage of students attend these sessions, the rest of the school is left to litterally, do whatever they please:

Fairfax high schools have different names and schedules for the periods. At West Springfield, two 45-minute sessions a week are used to help the 10 percent or so of students in danger of flunking Virginia's Standards of Learning exams.

The decision made above is not one that was made in a vaccuum.   Rather, this is symptamatic of the way data drives narrowly tailored decision making across the country.   Often, this type of decision making drives data driven results that are celebrated as successes.   Yet little is done to consider  the cost of such decision- making.   Are the students at West Springfield High School better off for a policy where 90% of the student body sits idle?   I am inclined to think the answer is no.

The failed logic of seniority based lay-offs.

A union cannot also be a professional organization so long as it defends seniority rules.   What type of organization protects more experienced workers over less experienced ones irregardless of quality?   Not one concerned about professional reputatoin of its workforce, that is for sure.  Here's a great editorial from the New York Post.   Richard Whitmire explains the problem associated with seniority based decision-making.

National teacher union leaders seem to sense their vulnerability on this issue. Rather than defend seniority-based layoffs, they insist the real issue is avoiding layoffs at all. Or, they answer indirectly. “In no other profession is experience deemed a liability rather than an asset,” said Dennis Van Roekel, president of the National Education Association, the nation’s largest teachers union. “Teaching is a complex profession, and experience matters.”

Yes, but nobody is arguing that teachers get worse with experience, only that the best teachers aren’t always the most experienced.

We haven’t heard any good defense from union officials of last-hired-first-fired — perhaps because there aren’t any. If you want to the best teachers on the job, you find a different way to allocate layoffs. For political protection against what Rhee experienced in Washington, districts should announce the grounds for layoffs well in advance.

Read more: http://www.nypost.com/p/news/opinion/opedcolumnists/bottom_of_seniority_top_of_the_class_LBFY3yQDCJcnxcJexZ2JDO#ixzz1DCnBh8On

Do we protect incompetent teachers?

I probably don't agree with 90% of what this blogger writes, but ok, so, I'm going to do it.  A quote from Liberty's Lifeline:

Why in the world would a talented teacher want to link his career to an incompetent teacher and be sold to a school district as a package? Are teachers professionals or are they not? If they are, then why do they aspire to the level of an unskilled assembly line worker?

Every school teacher should probably ask whether or not this is the case with their own union- and act accordingly. I believe in unionization. However I also believe in choice and democracy and accountability.