The Grand Illusion
In the United States, as Warren Buffett put it, we live in a country where valor on the battlefield is rewarded by a medal, and the best teachers get thank-you notes [except now teachers are more likely not to get thank-you notes, but blame for their failure to overcome all the obstacles placed in their way by permissive parenting, excessive and counterproductive regulations, and the need to teach to the tests in order to keep their jobs], while speculators and financial executives get millions. And similar levels and types of rewards exist in most other industrialized countries. As most readers know, my wife is a university professor, and this year, after several years of no increases in salary, or token raises of one percent, the faculty at the university received another one percent raise that wasn’t one.
Why not? Because the university took it all back – and more — in other ways. Health insurance premiums weren’t raised [that happened last year with a massive increase], but the cost to faculty still went up because the co-pay for prescription drugs was doubled; the co-pay for physician visits was increased; and the procedures covered and the amounts covered were decreased. Faculty parking charges were instituted. Departmental budgets were cut by another 15%. On the other hand, the new university president will get a 15% higher salary than the departing president.
These sorts of “rewards” are far from limited to education. Despite the fact that those Americans who are working happen to be working longer hours than they were thirty years ago, family income, in real dollar terms, has decreased over the past decade for all but the top ten percent, and that decrease doesn’t include increased costs of various sorts passed on to employees in a myriad of ways. But Goldman Sachs senior employees get hefty bonuses for figuring out how to double the price of aluminum so that the company gets a larger profit while passing the costs on to everyone else.
I don’t mind “rewards” that recognize true efficiency, where the costs for everyone go down, and profits go up without screwing someone else, but these days, all too many executive rewards are awarded for “efficiency” that results in essentially lower pay and longer hours for underlings and often even increased costs to everyone else. That’s not efficiency, but passing the buck to those who can’t pass it to someone else.
The last time this sort of business behavior was rampant, over a century ago, it resulted in trust-busting and corporate dismemberment. That’s one of the very few parts of the not-so-good-old days that we ought to bring back… because it’s all too clear that American business and even large non-profits and state governments aren’t about to reform themselves on their own. And that in itself is a shame.
If I sell peaches and there happened to be a glut of peaches in the marketplace, then you’d expect me to sell those peaches cheaply. This is simple supply and demand at work. If your wife is in a market with too much supply and not enough demand then she will have a hard time selling her product for what she thinks it’s worth.
I’ve believed for a long time that the laws on the books that protect lenders who make student loans have resulted in a glut of college graduates — including teachers — with massive student loans to pay back. Who benefits? Lenders benefit by having the full weight of government stomp on any student who doesn’t repay — with no bankruptcy possible. The schools benefit because with all this borrowed money floating around looking for a school to land in, schools have jacked-up their tuition rates at five times the rate of inflation. Teachers however have not benefitted because they are in the business of training their potential replacements. Think about that for a minute. Classrooms full of potential teachers legions of competition marching through their halls. Too many teachers or too many peaches the effect is too much supply and not enough demand.
Your problem is that the middle men [schools] are keeping all that money. The solution is to get rid of the schools and have the teachers deal directly with the students.
You offer the simplistic reply. But students and teachers are not peaches. Peaches are essentially commodities. The skills sought and the those imparted vary from student to student and teacher to teacher. Moreover, while the marketplace does a decent job of matching supply and demand in real present time, it does a lousy job of doing so for less tangible services in for future delivery. Furthermore, political concerns foul up supply and demand in teaching. Teachers are effectively prohibited from removing the bad “peaches” from the schools or even from delaying the unripe ones from entering, and improving teacher quality is difficult if not impossible because low standards allow too many less competent teachers to enter the field, thereby increasing the supply, but politicians and parents don’t want tighter standards because “their” kids might not get their “credential.” Thus, supply and demand doesn’t work effectively in education, and the application of the so-called business model is effectively the Walmartization of education — cheap goods at low prices resulting in low wages.
You might be interested in this presentation by Linda Rising about incentives. It shows us that our beliefs in rewards are completely wrong and counter productive.
bit.ly/12WY3sI
A warning in advance, the presentation is about an hour long.