This report was originally published by Discourse Magazine, the online magazine of the Mercatus Center at George Mason University. Please see the original report here.
Teachers Unions Are Bad for Teachers. Here’s Why
Rigid pay scales, high dues, lousy pension system: Membership has its privileges
The New Jersey Education Association, the state chapter of the largest teachers union in the country, boasted more than 200,000 members and $154 million in revenue last year. You might think it focuses on helping teachers become more effective and making the public schools better—especially now, with more than 80% of the state’s districts still not offering full-time in-person instruction 13 months after the pandemic began.
But instead, politics is the priority. Over the past 10 years the leadership has transformed the union into a political-organizing machine, and it’s now the most powerful political player in New Jersey. Three-quarters of the top executives were hired from the ranks of political operatives. They organize teachers and allies for political action, lobby the state government and the Legislature, and back candidates for office. Half of teachers’ dues are now spent on political activities. This shift has served very well the people who run the union—they enjoy lucrative compensation packages and gold-plated pensions.
But teachers have not been well served by a hyper-politicized union. The union largely forces teachers to fund this political machine: They have little choice but to join the NJEA and have the dues withheld from their paychecks. The annual percentage increases in dues outpace the growth in salaries, so they keep a smaller portion of what they earn. Their pension plan is severely underfunded, so their retirement is threatened.
Teachers are also ill-served by their forced participation in a rigid, union-enforced pay structure that treats them like assembly-line workers rather than professionals. There is no escape from the salary guides designed to benefit older, career teachers, the core constituency of any teachers union. As a result, pay increases are back-end loaded, so younger teachers never see the big raises that other professionals their age earn. Similarly, the pension system leaves most teachers with no or inadequate pension benefits while forcing them to subsidize a small minority of veteran teachers.
The situation is much the same around the country. In state after state with strong teachers unions, members pay high dues, suffer from back-end-loaded salary structures, and hold pensions that are grossly underfunded. New Jersey may offer some of the most blatant examples of how teachers unions hurt rather than help their members, but many operate in a similar fashion, so examining the NJEA offers insights into teachers unions nationwide.
Join the Union, or Else
The union’s power starts with its ability to, in effect, force teachers to be members. Until 2018, this coercion was achieved with what were called agency fees, which meant that in New Jersey, teachers had to pay up to 85% of their dues even if they chose not to belong to the union. Predictably, more than 99% of teachers signed up. But then the Supreme Court, in Janus v. AFSCME, ruled that agency fees were unconstitutional.
Anticipating this decision, the union-friendly New Jersey Legislature passed the Orwellian-named Workplace Democracy Enhancement Act, which replaced the agency fees’ financial coercion with other forms of coercion. The act allows unions to collect private information on teachers and other workers, makes it illegal for administrators and school board members to discourage teachers from joining or staying in the union, and restricts public-records requests to make it difficult for taxpayer and other outside groups to inform workers that they don’t have to belong to the union.
It also guarantees that union officials, during school hours, can spend at least 30 minutes and up to two hours talking each new hire into joining. If all of this doesn’t work to keep teachers in line, the act limits members’ ability to leave the union by allowing only a narrow, once-a-year window for quitting—just the first 10 days after their hiring-anniversary date. So post-Janus, NJEA membership has actually increased slightly, from around 202,000 to roughly 203,000.
Janus affected 22 other states and 10 of these states enacted legislation to circumvent it: New York, Illinois, California, Massachusetts, Washington, Maryland, Connecticut, Rhode Island and Oregon. Many of the provisions in New Jersey’s act are found in these other states’ laws.
On the other hand, after states adopted right-to-work laws and ended forced union membership, teachers quit in droves. Wisconsin passed Act 10 in 2011, and by 2017 active membership in the Wisconsin Education Association had plummeted 67%. Indiana and Michigan ended their closed shops and passed right-to-work laws in 2012. By 2017, teachers unions’ active rolls fell 19% in Indiana and 22% in Michigan.
Render Unto Caesar
For the privilege of being largely unable to escape their union, each New Jersey teacher is paying $1,362 in annual dues this school year, the highest in the nation. And these dues are easy to collect. When union officials meet with new teachers to persuade them to join, they also ask to have the dues automatically withheld from the teachers’ paychecks (known as dues checkoff). Teachers can refuse, but they would need to know their rights and have a lot of nerve, so it almost never happens. In fact, school districts can be fined for explaining their rights to them.
As with state and federal taxes deducted by employers, withholding means that teachers never see the money in their paychecks, and if you don’t notice what you never get, you’re less resistant to dues (and tax) increases. Indeed, the NJEA hasn’t been shy about jacking up its dues: After the ascendance of the political operatives, dues jumped 17.3% from 2013 to 2018, outstripping both the state’s 6.9% inflation rate and teachers’ pay raises. And the NJEA certainly doesn’t want members writing out an annual $1,362 check at the kitchen table and perhaps reevaluating their participation in the union.
Dues checkoff is a great deal for public-sector unions of all stripes. Across the nation, more than 80% of state and local government workers allow their dues to be withheld. For teachers unions, the local school district becomes their bill collector, ensuring the payment of 100% of teachers’ dues every year, for free. Unions essentially use taxpayer-funded teachers as conduits for tax dollars to flow directly into their coffers.
What does the NJEA do with this money? It spends much of it on lobbying and campaign activity. All teachers unions spend money on campaign donations, get-out-the-vote drives for their endorsed candidates, lobbying in state capitals and other political activity, but the NJEA may be the champion. In 2018, the last year figures are available, $64 million of teachers’ dues went to political spending, more than $500 for each full-time teacher. Some of the money is earmarked for standard progressive causes that have nothing to do with education but which many teachers unions help fund.
But most of the money is aimed at buying political influence in Trenton so the NJEA can get its way with goals such as boosting healthcare benefits and making it harder to fire teachers. And it conducts a considerable amount of issue advocacy to shape public opinion against school choice, standardized testing and other reforms.
More than a little of this money is wasted. For example, the union blew $6.6 million of dues in a quixotic and spiteful effort in 2017 to unseat New Jersey Senate President Steve Sweeney, a Democrat who had refused to bow to the union’s demand for a constitutional amendment to guarantee pension funding. The 16-year incumbent won anyway, by 18 percentage points. This was a rare time that the union or any state association backed a Republican candidate; almost always they oppose Republicans, and GOP members have no recourse but to watch their dues deployed against candidates they support.
Working Hard or Hardly Working?
Many of the pet causes that unions fight for are fundamentally unfair to many teachers. A prime example are the rigid, union-enforced pay scales. Across the country, “step and lane” salary guides dictate the compensation structure for unionized teachers. Teachers with the same years of service—ones on the same step—usually get paid the same regardless of whether some work harder or are better at their jobs. Likewise, teachers with advanced degrees, which puts them in a higher lane, get paid more regardless of whether those degrees make them better teachers.
In states with strong teachers unions, any sort of merit-based pay is rare because the union fights it tooth-and-nail. In the interest of solidarity, union leaders demand a system that rewards seniority and credentials rather than subjective measures such as professionalism, teaching skill and effectiveness. The result is that teachers, who almost always have college degrees and often master’s and doctorate degrees, are forced into a system that treats them not as the respected professionals they strive to be, but as factory workers punching a clock each day.
Another result is weaker student performance. A Cato Institute study showed that “union strength has a powerful negative effect on student performance.” The study notes that unions, of course, seek higher salaries and richer pensions, which may lead to better teachers and therefore improved student achievement. But they also protect poor teachers and reward seniority regardless of merit, which apparently has a greater impact.
The system is particularly unfair to younger teachers. Under union-negotiated contracts, all of a district’s teachers get the same annual percentage raises, so the largest pay gains in dollar terms occur at the end of a career; the longer the career the better. The opposite is true for professionals in the private sector: They often get double-digit pay hikes early in their careers as their productivity rises rapidly, and reach $100,000 a year by their late 30s. Their salaries usually peak in real terms around age 50, but they enjoy more years of the higher salary until they retire. Teachers’ salaries peak the year they retire, and it can take them many years to reach $100,000. The median age of a public-school teacher in the U.S. is 44, so most teachers don’t enjoy the salaries that their contemporaries in the private sector do.
Union contracts also serve to lock teachers into the school district that hired them after college. In New Jersey and often elsewhere, teachers who choose to move to a new job in a different district generally lose their tenure and seniority rights, and that could result in a pay cut. In addition, layoffs are done by seniority, so younger teachers are more likely to be laid off in hard times.
Union members may be caught in a salary straitjacket, but their leaders aren’t. At the National Education Association headquarters in Washington, 2018 compensation for then-President Lily Eskelsen García was $616,184 and $604,693 for then-Executive Director John Stocks. The top 10 executives averaged $478,000. Former NJEA Executive Director Ed Richardson made headlines when his income of nearly $1.2 million for 2015 was revealed.
Taking the average of several years because of significant fluctuations from year to year, the compensation of the top 10 NJEA executives climbed 23.3% from the five years before 2013 to the five years beginning in 2013, to an average of $509,423 a year—funded by teachers’ dues, which were funded by taxpayer dollars. By comparison, average teacher pay rose only 4.6% between those periods, to $69,229.
Pension Haves and Have-Nots
A major attraction of working for the government has long been the promise of a secure pension. The salaries may not be that great, goes the conventional wisdom, but you don’t have to worry about retirement. Well, most public pensions are now anything but secure, and underfunded public pensions have become a national crisis.
In New Jersey, the Teachers’ Pension and Annuity Fund, which covers all 263,000 active and retired public school teachers in the state, is only 27% funded and is losing assets—and that was before the pandemic began. The value of the fund’s assets is down 17% since 2014 as it pays out more in benefits than it earns in income, and the Center for Retirement Research at Boston College projects that it will run out of money in 2027. At that point, retired teachers may start seeing much smaller monthly pension checks or the state will have to cut services significantly. Gov. Phil Murphy promises to take $6.4 billion from the state budget and add it to the state’s public pension funds during the fiscal year beginning July 1, which may delay the day of reckoning somewhat.
One of a union’s main jobs is to protect its members’ retirement, but seven of the 10 states with the most-underfunded pension plans for their state and local workers are states with the strongest teachers unions (see chart). Conversely, four of the only seven states where public pensions are at least 90% funded have among the weakest teachers unions. (The condition of a state’s public pension plans generally reflects the condition of its teachers’ pension plans because teacher pensions make up a substantial portion, if not most, of a state’s pension liabilities.)
In New Jersey, the NJEA has been complicit in the underfunding for decades. Rather than use its unmatched political clout to secure teachers’ pensions, it has backed legislative deals to increase retirement benefits that would be difficult to pay, issue costly debt that failed to shore up the fund and allow the state to avoid making annual contributions to the fund. It has opposed all reform attempts and didn’t begin holding politicians accountable for the underfunding until it lost a state Supreme Court ruling in 2015 that teachers’ pension benefits are not guaranteed.
What’s more, the NJEA doesn’t tell its members the truth about their pensions. In its monthly member magazine, it misleads teachers by using less accurate, rosier funding ratios rather than Government Accounting Standards Board ratios, and by citing the total assets in the entire state system ($80 billion) rather than the teachers’ fund assets ($22 billion). Nowhere does it mention that the fund is bleeding assets and that it is in danger of insolvency, or even that its unfunded liabilities are a major concern. Consequently, teachers may have little idea how much their retirement is in jeopardy or that the pension system needs to be reformed.
On the other hand, the union’s executives, staff and retirees don’t need to worry about their pensions: Their plan is 137% funded. And it’s vastly superior to the teachers’ plan in every respect: The executives get less taken out of their paychecks, can put in many fewer years of service to receive the maximum payments, and—unlike teachers—enjoy cost-of-living increases after they retire (see table). A generic, normal-retirement-age pension for an NJEA employee is 60% more generous than a teacher’s.
No Pension for You
Pensions are a particularly bad deal for young teachers. In most states teachers are forced to join a one-size-fits-all plan as a condition of employment, but many teachers—in New Jersey it’s 45%—never collect a penny in pension benefits because they never vest in the plan. These are mostly young teachers, who are more mobile and often change jobs or careers, but their pensions usually don’t travel with them. If they leave the profession or the state before they put in the 10 years on the job that’s usually required to be vested, they don’t qualify to receive a pension. They also lose as much as tens of thousands of dollars that their forced contributions to the plan could have earned if they had been allowed to invest the money themselves.
Pension systems also disadvantage younger teachers in other ways. Pensions are based on the salaries in the last few years of service, so under the back-end-loaded salary guides, older, career teachers do well and even teachers who vest must still put in many more years to break even (see chart). Studies of teachers’ pensions by TeacherPensions.org, Equable and the Sunlight Policy Center figured that teachers often must stay on the job for decades before the value of their promised pension benefits is greater than the pension contribution that’s been deducted from their paychecks. In one state, Massachusetts, teachers hired in the last 20 years will never break even.
As with other employees in this era of job-hopping and a growing interest in investing, most teachers would be much better off if they could escape the defined-benefit pension plans they’re forced to join and sign up for flexible, defined-contribution options such as private-sector 401(k) plans. These plans are portable, they don’t make younger participants subsidize older ones, and they’re not jeopardized by politically driven underfunding. But in New Jersey, as in most states, the teachers union is dead-set against such a switch because, like the salary guides and seniority work privileges, the pension system is designed to benefit the veteran teachers who make up the NJEA’s base and run many of the local associations.
Getting a Raw Deal
The strongest teachers unions around the country all have a lot in common with New Jersey’s. Teachers are forced to join the union, which then extracts maximum dues to be used as the union leadership sees fit, often on political activities. Rather than deploy this automatic flow of withheld dues to secure teacher pensions, these unions have imperiled them. Teachers in general, and younger teachers in particular, are ill-served not only by the pension system but also by the mandatory salary system. It’s clear that despite their union’s duty to look after their interests, teachers are not benefiting from the relationship.