Why Do Unions Oppose Merit Pay?

My guess would be:

• A belief that this wouldn’t be additional compensation, but would come out of the other money.

• A belief that encouraging good workers would raise expectations of what is expected of a typical worker. Perhaps there’s a preference for somewhat easier work instead more pay. There was that recent study claiming that visibly talented co-workers are unpopular because they raise the bar for others.

Might be due to union paranoia.

Merit raises and bonuses remove control of wage increase (merit pay) from union to worker and company. A worker deserving a merit increase is likely to believe the union is not necessary, that his/her pay is based on individual skills and not union power or union negotiations.

Also, increases chance that worker that does not get a merit award will leave company, increases union member turnover and over time increases number of retained employees who deserve merit pay and believe they do not need union.

Most unions are run by elected boards, thus their positions on big issues like this simply reflect the position of the median. It’s probably pointless to identify a cause beyond that other than “the median union member expects to lose out in a merit pay deal”.

The excuse I hear from teachers about this is that it gives teachers an incentive to teach to the test and sort of cheat the system by making the lessons going over test answers. My solution would be to keep merit pay based on student performance and fix the tests so they accurately test for what students should be learning. If the test is good, then it shouldn’t matter if the teacher is teaching to it. That might actually be a good thing.

Several possibilities that might rationalize teacher unions’ behavior:

(1) If merit pay induces better teachers to enter the workforce then the current set of unionized teachers may lose over the long run. Under merit pay, good teachers win and lousy teachers lose. Lousy teachers are likely to have lower than average wage increases and less job security. While the average compensation of teachers may increase under merit pay, the current set of teachers may lose if they are sufficiently lousy on average.

(1b) The core political/voting constituency of the union may be the worst teachers because they gain the most from the union’s existence.

(2) Merit pay may undermine the teacher union monopoly. As AJB describes, merit pay may undermine the seniority system and other agreements. Merit pay inherently requires some teacher level measure of merit, and if we know who the worst teachers are, there will be increased pressure to let them go.

Why would this monopolist care about quality one way or the other? The consumption of their good is rationed in such a way that people couldnt possible consume more of it anyway.

And merit pay, with average wages remaining equal, for the average employee means working harder for the same salary.

Teachers do not believe that performance can be fairly and objectively measured. Everybody in education knows who the good teachers are and everybody knows who the terrible teachers are. But administrators cannot be trusted with their subjective judgments because administrators’ incentives are not aligned with student welfare. Any pay for performance system will be gamed by teachers and administrators.

Teacher pay is an enormous percent of school budgets so a raise for one teacher efffectively comes at the expense of his colleagues. Unions have an overriding interest in maintaining teacher solidarity.

Teacher pay is back-end loaded because of generous defined benefit pension plans based on final average earnings. So while teacher effectiveness plateaus at 10 years experience, teacher salaries continue to rise with the acquisition of worthless credentials and long experience that adds little to teacher effectiveness.

All of this explains teacher compensation and it will not change until the government monopoly is broken.

Your question stems from a lack of differentiation between the union and the people represented by the union. There are three parties in every union-management relationship: workers, management, and the union. The union has its own interests, not always entirely consistent with the best interests of members. You cannot expect a union to do what is not in its interests or in its essential nature. Of the three parties, the union has by far the least interest in the success of the company. The union’s main interest is its own strength.

Regarding the inherent nature of unions, first of all, it is not the union’s job to maximize performance of the workforce. That is management’s job. Management lost control of performance when the union was formed. A union will not cede any power if it can avoid doing so. Allowing management to make performance determinations is ceding power, particularly when those performance determinations affect pay.

Second, the whole basis of unionization is mistrust of management. Unions are all about the perception of fairness and getting credit for that fairness. Fairness in any scenario is a matter of individual opinion based on individual values and individual perspective. If you have 100 people in a system, you will have 100 ideas about what is fair. Unions are all about minimizing perceptions of workers being treated unfairly by management. The most salient element of that is having negotiated objective standards for determining pay raises. Nothing is more objective than seniority. The further you get from that, the greater the fairness mire. Sure, paying good workers and poor workers with the same seniority the same wage may be perceived by better workers as unfair but it is simple, objective, clear, and evenly applied so the perception of unfairness by workers is minimal and manageable, the price they pay for union protection. That seniority is an imperfect proxy for performance does not matter to the union. It matters to management, whose job is performance.

Regarding merit pay, that is a figment. I have designed two performance management systems for two organizations, one merit pay and the other pass/fail. There is no way to pay for performance without a lot of overhead and discord. Usually the amount of money available to reward merit isn’t worth it. People in a system know in their guts who are the best and worst performers but systems require criteria and criteria end up being either subjective or poor proxies. Since the system needs to appear to be objective, it goes with the poor proxies and ends up measuring what is measurable, not what really matters. Is class performance on standardized tests the salient measure of a teacher? It might be a suitable criterion for a pass/fail system, a minimum criterion for retaining one’s job, but does it differentiate the best teachers? Not hardly.

Unless there is an environment where there is enough trust to tolerate subjective judgments by management or everyone is so overpaid that the differences in rewards don’t trigger an unfairness backlash from workers, a merit pay system is unfeasible. Were the work environment to meet that standard, a union would never have formed in the first place so the question would be moot.

Merit pay is not a pretty picture from an incumbent’s point of view. Merit pay means years of working hard and competing against your coworkers. It means that when you do something well, the other people at your school are going to be unhappy about it. It means that fresh young minds can actually oust you from your job.

Seniority pay, meanwhile, means all you have to do is punch your clock. Just keep showing up from 8-4 every day, and your pay is guaranteed. You can go home every night and forget about work completely.

Merit pay might be worth it if, when you did better, your school made more money, or you could go to a higher-paying school. However, that’s not how it works.

Brian, perhaps it would be more instructive to consider the question the other way around. Why do the workers in many fields actually desire to have merit pay? What is different for teachers and factory workers, versus musicians and athletes? Or even within the teaching world, why does the 8-4 stand-up teacher want seniority pay, while tutors go for merit pay?

1) What’s the point of having a union if your pay is going to be determined by your value? Bad precedent.

2) Merit pay introduces different opportunity costs of strike action. Specifically, it increases the opportunity cost of strkes for the most able workers. Undermines the whole solidarity thing that is the basis for union power.

3) Reduces perceived reliance/dependence on the union on the part of the best workers.

well explained by Gambetta and Origgi 2009 on preferences for mediocrity.

Easy guess: Large wage discrepancies reduce alignment between union member interests. Unions most willing to accept them didn’t survive this. Unions most opposed to them survived.

Probably for two reasons.

First, an expectation that the incentive funds would be taken from the overall compensation package and reduce compensation for some of the union membership.

Second, an expectation that merit pay would not be effective in improving schools and might even reduce their effectiveness. Teachers who philosophically support individual incentives have concerns about how accurately and effectively they can be applied given the typical spans of control in schools. Span of control ratios rarely come up in discussions of merit pay in schools, but they should.