State of the Union, Part 2

 

Karen Lewis, a former chemistry teacher, has orchestrated one of the greatest economics lessons in a generation. As the leader of the Chicago Teachers Union, she has shown America how to rebuild our sluggish and staggering markets.

The Chicago Public Schools certainly merit that description: the city faces a $665 million deficit, and the Board has already approved the closing of seven schools and wholesale staff layoffs at ten others. Some reports suggest that Mayor Rahm Emanuel plans to shut down well over a hundred schools total – up to one fifth of the district. With such excruciating layoffs as the backdrop, Emanuel refused to honor a previously negotiated raise of 4%, aggressively pursuing a radical new evaluation system and a longer workday for the remaining teachers.

These are not new concepts – corporate managers often burden the survivors of mass layoffs with longer hours and perhaps even a higher standard on performance reviews. Since 1976, the average work week has swelled by nearly eight full hours, a 25% increase that nearly accounts for all of the increase in wages over that same time span. The pay rate has essentially flat-lined over that span, so Emanuel’s maneuvers are right in step with the private sector’s approach. Furthermore, despite numerous objections about his proposed evaluation system (one that leans on student test scores to rate teachers) and in spite of offering a 2% raise for a 25% increase in the workday, Emanuel had newly passed legislation backing up both initiatives. He had unilateral muscle. Or so he thought. The Illinois Educational Labor Relations Board struck down his attempts to circumvent the union when Karen Lewis’ team refused to roll over. The city was forced to negotiate, and when they tried to remain bullish at the bargaining table, it cost 350,000 students seven days of instruction.

I give Emanuel credit on two counts. First, he did not try to make it appear that Chicago’s kids would receive education as usual during the strike. He converted several campuses into day care centers where students could be supervised and fed rather than installing poorly trained substitutes to conduct sham classes. (Roger Goodell, are you taking notes?) Second, it didn’t take long for the city to start an honest collaboration with, arguably, its most valuable workforce. The resulting agreement is “an honest and principled compromise,” in the mayor’s own words:

-       When schools close, the highly rated teachers with tenure will be able to follow their students to their new schools where possible. If not, then when job vacancies open, the district must fill half of them with those same highly rated teachers.

-       A raise of 3% this year, followed by 2% in each of the next two years. However, teachers can no longer accumulate unlimited sick days, nor can they cash out those days upon retirement.

-       The union will collaborate with the district on a new school day schedule and a new teacher evaluation system. Teachers gets to approve the new schedule via majority vote, but the evaluations will take effect next year (four years earlier than required), taking student growth into account at the minimum levels prescribed by law.

The first lesson learned during this incredible month? Negotiation works. Unions can compassionately address the fiscal needs of management – notice how there is nothing in the agreement above that prevents school closures? More critically, the process compels managers to show compassion towards their employees, something that the American workplace has sorely lacked for a generation. Collective bargaining cannot prevent layoffs, but it can add a slightly greater sense of security during wildly insecure times. I noted earlier that the Chicago teachers’ strike dovetailed quite nicely with the one-year anniversary of Occupy Wall Street. Over the past three decades, productivity has grown such that every American should have seen a 300% increase in their income if all the spoils were divided evenly. The actual increase has been just 30% for all but the upper decile of earners, yet in 2011, America’s 15 million union workers out-earned their colleagues by almost thirty percent. That’s enough to raise the average household income by almost $16,000 a year. While wages in the non-union sector are increasing at a rate slightly higher than the union raises, the average weekly wage of $729 for the non-unionized worker last year is still some $40 below what union members were earning in 1983! Organized labor takes care of its workers because, for an entire generation, the private sector has neglected them.

Football fans are seeing just how far management is willing to go in order to break the backs of associated employees. We’re now three weeks into a National Football League season that has been completely marred by replacement referees. The difference here is that the league, not the referees association, initiated this work stoppage. The billionaire owners of the NFL’s thirty-two franchises have shut out the refs in a lockout; the referees are not on strike. Moreover, if Referees Association chief Tim Millis is to be believed, the league is attempting to back out of pension benefits that were promised to current referees, and those same employees propose nothing more radical than a “grandfather” clause to allow the new pension plan, the one the owners want, to phase in over time. Here we have a ten billion-dollar industry that has grown almost five-fold in less than two decades, not a cash-strapped municipal school district, yet the tactic is eerily similar – a bullish, steadfast commitment to unilateral decree rather than collaborative compromise.  The games are still being played, but league commissioner Roger Goodell (the CEO, for all intents and purposes) now faces an increasingly loud backlash in the wake of nationally televised debacles on Sunday and Monday night.

Then we have the National Hockey League, which can legitimately lay claims to both tremendous success and financial difficulty. In a way, this business consortium may be the most accurate microcosm of the economy at large. On the surface, the league seems to have thrived under a new economic model adopted after (wouldn’t you know it?) a labor dispute that cancelled the entire season in 2004-2005. Revenue for the league increased by 50% over the seven years since, adding over a billion dollars in annual income. When you consider the financial outlook for the league’s thirty franchises, however, the numbers show a great income and profit disparity. Forbes reported last November that only eight teams posted a profit margin over 6%, and eighteen teams lost money during the 2010-2011 season. Now, I doubt this tale of woe would inspire an Occupy Yonge Street movement in Toronto; just about everyone represented at the bargaining table is a multi-millionaire. Still, the league’s current negotiations with its players need to focus on the income inequality within its own ranks.

We would typically expect the league to shut a franchise down, right? Close up the shops that aren’t working, same as the struggling schools in Chicago. Well, that’s tricky. You see, since Gary Bettman began his term as League Commissioner, he’s added four new teams to the league and seen the relocation of three others. Six of those seven franchises rank among the bottom ten in the league in terms of revenue. Six of those seven teams are losing money. The most obvious candidates for contraction just happen to be the commissioner’s pet projects, which explains why the league blocked the sale (and relocation) of the Nashville Predators and took over the operations of its floundering Phoenix franchise. One struggling team, the Atlanta Thrashers, managed to increase its value by 21% last year – the largest jump in the league – because it was sold and moved to Winnipeg two summers ago. Despite this empirical evidence that putting a team up for sale may be the best way to improve its economic lot, Bettman and the NHL owners seem adamant to avoid this solution at all costs. Earlier this month, Bettman gave the owner of the New Jersey Devils (which is not one of his expansion/relocation teams) a refinancing plan that sounds like something from a mortgage store.

This would appear to leave just one option left: revenue-sharing, something Donald Fehr, the head of the NHL Players Association, knows a thing or two about from his heyday with Major League Baseball.  In fact, the lion’s share of the players’ last official proposal (which also included a decrease in the players’ cut of revenue) involved a thorough restructuring of how the league’s most successful teams should subsidize the debt-ridden teams. The league’s proposal is a mirror image: minor tweaking of the revenue sharing structure while asking the players to take another salary rollback and hacking about ten percent off their cut of the revenue. Both sides seem to agree that the solution involves a combination of revised revenue-sharing and a scaling back of player salaries; they only disagree on where to put the emphasis. Incredibly, this is where the impasse lies. The NHL has locked out its players, threatening yet another season and, more importantly, forcing the league office and several teams to cut the hours and the jobs of several non-millionaire staffers. Even mascots are feeling the pinch.

If this nation’s third-largest school district (wherein four of every five enrolled families are poor) can resolve a cantankerous negotiation after losing only seven days of instruction, how does its most successful sports league justify its three-month holdout? How does a business with such wide disparities between the success of its franchises justify shutting everything down?

Simple. Because Rahm Emanuel, Roger Goodell, and Gary Bettman all started this month with the same attitude, and Jim Devellano, the Senior Vice President of the Detroit Red Wings – one of the “elite eight” hockey teams to see a profit year after year – finally put it to words: “The owners can basically be viewed as the Ranch, and the players, and me included, are the cattle. The owners own the Ranch and allow the players to eat there. That's the way it’s always been and that's the way it will be forever."

Employees are cattle. They shalt not speak. They shalt not resist. They shalt eat at the trough and be thankful that they aren’t tri-tip. Yet.

Devellano was fined a quarter of a million dollars for his comments, which violated a gag order instituted by the league upon its management personnel. Because heaven forbid that Americans finally hear the mantra that has kept their wages stagnant and their jobs insecure for decades. Heaven forbid that the nation finally hears the sentiment that singularly dismantles all argument that free market bosses will single-handedly cure the fiscal woes of our workers. Modern capitalism feeds on a festering contempt for the employee. It’s a bipartisan disdain, make no mistake. Republicans champion the managers outright while Democrats have distanced themselves from labor groups. Both parties claim to know how to rescue the nebulous “middle class”, but nobody nobody NOBODY looks out for the American workers.

Except Karen Lewis. Except Tim Millis. Except Donald Fehr.

Except the fifteen million employees who pay their dues and pledge to protect and serve all of their colleagues.

Without economic equity, we may well be resigned to a perpetually divided nation. We need more workers to organize in order to make our union more perfect.