More on the Chicago Teacher Strike

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Thursday, 13 September 2012 10:15

I've heard many folks complain that Chicago's teachers are only concerned about their wages and benefits and not over the education received by the children. As my friend Larry Mishel reminds me, there is an important reason that the teachers' union is only talking about wages and benefits in the context of the strike: it's the law.

These are mandatory topics for negotiation under U.S. labor law. Issues about how the schools are run fall under management prerogatives. While the union and management are free to discuss these issues, the union cannot legally strike over them. Therefore if the union were to explicitly put forward conditions that directly related to the quality of education as a reason for the strike, the city could pursue legal action against the union and its officers for conducting an illegal strike. 

It would be appropriate for reporters to point out this fact in discussing the strike. Those unhappy that the union is not making demands on behalf of students should be complaining about labor law, not the teachers' union.

Those interested in how Chicago's teachers envision ways to improve the quality of education might look at this pamphlet they published earlier this year, as cited in a blogpost by Dylan Matthews. Matthews acknowledges that the measures listed are backed up by research showing their effectiveness, but notes that the plan comes with a $713 million price tag.

That's not trivial, but if we assume that Chicago's per capita GDP is equal to the national average, then it amounts to less than 0.5 percent of its annual income. The union also proposed ways to raise the money, all of which focus on getting more money from the wealthy.

My personal favorite is a tax on financial transactions. The Chicago Mercantile Exchange is the largest exchange for commodities and futures trading in the country. The union proposed a tax of 6 cents per transactions, which they calculate would raise about $110 million a year.

Matthews seems to view this tax as impractical suggesting that trading would just move to New York. He cites the example of a tax on stock trades in Sweden which led trading volume to quickly migrate to London.

This is an especially inappropriate example. The tax in Sweden was large (1.0 percent of the value of the trade) and almost seems to have been designed to be evaded. Brokerage houses could open up shops in Sweden for trades done in the U.K.. It is a bit more difficult to imagine all of Chicago's traders shutting down over a tax of 6 cents per transactions.

This is not the way I would impose the tax (I would take it as a percent of the trade), but based on past calculations, this tax rate would correspond to roughly one hundredth of a basis point (0.0001 percent) of the nominal value of trades. It's hard to envision the Chicago market shutting down over a tax of this magnitude.

As with the other tax proposals, Matthews is quite right that there will be enormous political obstacles. But if we have a plan on the table that we have good reason to believe will improve the education of our children, and the people with money and power in Chicago don't want to foot the tab, why are we blaming the teachers for the poor educational outcomes?