How Public Employee Unions Are Bankrupting the Nation, Part II

Last week we presented you with the first part of our interview with Steven Greenhut, author of Plunder: How Public Employee Unions Are Raiding Treasuries, Controlling Our Lives, and Bankrupting the Nation.

Today, Mr. Greenhut and I talk more problems and solutions. Read on below…

Gary: We talk about the markets a lot in Whiskey & Gunpowder, and their power to give people what they deserve. And in your book you say that in a system where we take the market out that we’re bound to get bad results.

Steven: Well, I had a debate with our public school superintendent, and it was a very friendly debate in front of a bunch of teachers. And I argued for the complete separation of school and state, the elimination of the public school system. And not its replacement with charter schools or vouchers, but a true market. It was a thought experiment, that we just shut down the public school system. And at first, they were aghast. But then I explained that we need teachers…

There’s no question that you have to have good education and you have to have schools, and we need teachers. And in a market situation, the best teachers could be paid an extremely high salary. The market would determine. So you might have a great teacher, might get paid a small fortune. But that teacher might be worth it.

But we have this system of the collective bargaining system, where it’s very hard to reward good teachers. So everyone gets paid kind of the median, and often teachers do not come out of the whole public, the teaching programs, they’re not the premiere programs in universities. So in some ways, it’s a bit of a race to the bottom. So a market’s the only way to determine what we should pay people, not a government system.

Gary: Well, a lot of people are truly horrified at that notion, and disbelieving…that the market could provide quality education and more kinds of education, more choice, more types of education specific to a given student’s needs. Markets do it for everything else from cars, to computers to houses to higher education, but people get antsy when you suggest it could be done for more basic education. They think it’s just one of those things that need to be run Soviet-style.

Steven: Right. I don’t know why people don’t want to – I mean my idea is too radical, even for conservatives, the idea that we create our schools – and I talk about this a little bit in the book, and I always present it as a though experiment. Because for some reason, people think this is just such a crazy, radical idea. But the idea that we create public schooling the way we create cars. Right? If we do the equivalent, if we produced cars, let’s say, which are arguably far less important than educating our kids. If we produce cars the way we produce public education, we’d be paying $100,000 for Yugos. It’s obviously competition is what creates the best. And what – I might – I drive a Mini Cooper. My neighbor drives a mega pickup truck.

We have different needs. I drive to San Francisco every week. He’s doing construction. It’s a simple analogy, but we have vastly different needs of transportation, so we drive vastly different vehicles. And of the type of vehicle we each drive, there are all sorts of choices. And we pick what suits us. And because of the competitive system, we end up with a pretty darn good product at a pretty darn good price. And car manufacturers woo our business. In the school system, my kids, all my kids are different, and my neighbor’s kids are different in what they value and what skills they have and their intelligence levels and their interest levels.

And yet we offer them a one-size-fits-all type of education. Take it or leave it. And the only way to change it is to send them, pay again, and send them to a private school, or to move out of the neighborhood. And that’s a crazy way to do things. I mean one model is a Soviet model, and the other is a market model. So people will say to me, “Well, what about the poor people?” I mean poor people care about their kids too and they would pay and have their kids go to schools, and there would be competition for their business, just as there’s competition for their business in other areas.

Right now it’s the poor kids that suffer the most under the current system. That’s why we have parents in poor neighborhoods camping out overnight to get into the few slots in different fundamental schools or charter schools in their area. They want their kids to have the best education. But instead, they have to often go to these horribly performing schools, often with dropout rates as much as 50 percent. I mean imagine if 50 percent of the articles I wrote or the books that you sold were completely flawed. I mean that would not bode well for our careers. And yet, at LA Unified, they’re arguing whether it’s a 33 percent dropout rate or a 50 percent dropout rate.

What does that say? So unionization and this monopoly system that it feeds off of has created what is, in many times, a horrible, horrible type of education system. And the mayor of Los Angeles, a liberal democrat, a longtime union supporter, blames the unions for the huge obstacles to progress in that district. And he calls the education crisis for poor kids the new civil rights movement of our time. This is what we get from this kind of system. And compare that to any competitive system.

Gary: It’s a system that seems to give the worst the same reward as the best. I don’t know how you improve a product without rewarding what works and weeding out what doesn’t.

Steven: And the fact is it’s impossible to fire teachers. The Los Angeles Times did a series which I refer to in the book, about how hard it is to fire teachers who are credibly accused of misbehaving on the job, and it could take 10 or 12 years, and they get put in these rubber rooms where they’re paid their full pay and benefits while their case is adjudicated. And LA Unified doesn’t even – and this is probably typical in other school systems – they do not even try because of unionization, to fire incompetent teachers. So they do what’s called “the dance of the lemons”, where there’s this arcane process for moving teaching around and promoting teachers, and the bad teachers get foisted on other school districts.

I mean this is an insane way to run a school system, and yet thanks to union work rules and collective bargaining that’s the kind of system we have now. How do we have good public services with this kind of system? How do we determine the real worth of a public employee in a system like this? This is nonsense.

Gary: What you’re describing sounds, I don’t mean to be pejorative here, but it sounds like a system that attracts thugs and parasites.

Steven: Well, you know, I don’t use terms like that because it’s obvious that there are a lot of good people in all government professions. It’s just that you’re going to a system that protects the worst. It’s certainly going to attract a certain amount of people who are not the most stellar people.

I’ve seen it up close and personal as a newspaper writer. I have watched unions defend some really troubling actors: police officers who abuse their power, teachers who misbehave. And the union process is designed to protect everybody.

And it’s also not designed to reward the best. So we get what we encourage, and we’re not encouraging the best.

Gary: Like we would in a more market-based system. You won’t hear any argument from me on that.

So we’ve identified the problems and seen how bad things are. What can be done to turn things around?

Steven: We need to reduce the size of the pensions and the power of public employee unions. Most of us can come up with a variety of solutions — moving to a defined-contribution system for new hires and, as the Little Hoover Commission reported, reduce the size of the pensions for current employees going forward. But it’s a political problem, not a technical one. That’s why I agree with efforts to end collective bargaining for public employees. That would help reduce the power of the unions and enable managers to make changes to the pension system and improve accountability for public employees. By reducing the power of unions, the public could have a better chance at achieving meaningful reforms that reduce costs and improve public services.

Gary: Thank you very much for taking the time to talk with us, Steven.

Steven: My pleasure.

March 7, 2011

The Daily Reckoning