South-Western College Publishing - Economics  
Teacher Brain Drain
Subject Unions and labor markets
Topic Labor Markets
Key Words Salaries, Contract, Pay, Jobs, Government, Property Taxes
News Story

In School District 196 in Minneapolis-St. Paul, less experienced teachers receive lower salaries than in the metro area, generally. For instance, starting salaries are $24,693 in the district, $1,806 less than the metro average, and well below the $31,690 paid in the Bloomington district. As a result, some teachers are moving to other districts. It is also harder to recruit teachers. The district says that it is expensive to fix the problem.

The immediate cause of the situation is that the teachers' contract gave bigger raises to veteran teachers. At the time, the district was expanding and had plenty of jobs, while other districts had none. Starting pay was not an issue. Further, the political reality for the union is that higher starting salaries do not benefit anyone currently in the district and teachers at the top outnumber those at the bottom three to one.

In addition, District 196 receives less money per pupil from state and local governments than 80 percent of districts, and the property tax base is small. Solutions include the possibility of more money from the legislature or higher taxes. Pay could be raised at the cost of larger classes and fewer teachers, but that would be unpopular.

(Updated June 1, 1999)

Questions
1. Bloomington schools pay teachers well. Draw a wage-employment diagram for the Bloomington district. Show the supply and demand for entry-level teachers. Mark the union-negotiated salary at the equilibrium level with a horizontal line.
  a)As teachers are attracted to the Bloomington district, what happens to the equilibrium salary? Illustrate on your diagram.
  b)What happens to the contractual wage?
  c)Is the labor market in equilibrium? Explain.
  d)What needs to happen in the next round of negotiations?
  e)What would happen to class size, everything else being equal? Why?
2. District 196 pays its entry-level teachers less well. Draw a similar diagram for District 196, again showing the contractual salary at the equilibrium level.
  a)As teachers leave the district, what happens to the equilibrium salary? Illustrate on your diagram.
  b)What happens to the contractual salary?
  c)Is the labor market in equilibrium? Explain.
  d)What needs to happen in the next negotiating round?
  e)What would happen to class size, everything else being equal? Why?
3. In practice, collective bargaining does not always fix salaries at equilibrium levels. Why might this be? Refer to the news story and your knowledge about the effect of unions.
4. a)If District 196 manages to attract more governmental aid or raise taxes, how will this affect the equilibrium starting salary and the number of entry-level teachers employed? Illustrate on your diagram.
  b)Is this better or worse than the outcome in Question 2, parts d and e.
Source Amy Sherman, "Young teachers in District 196 frustrated by low starting pay", St. Paul Pioneer Press, April 18, 1999.

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