Schooling the MEA in Basic Economics

Ignoring that the Michigan Education Association uses private contract labor to service their headquarters in East Lansing, Iris Salters, president of the MEA, recently railed against schools doing the same thing. Salters' arguments demonstrate a failure to understand how contracting out affects schools and the state economy and ignores the role that profits play in market economies — even in government-run schools.

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Salters tells the story of two women who lost their jobs when the school district they worked for chose a new custodial service provider. She claims this is an example of how contracting out by schools negatively impacts the state by putting more people out of work. What Salters fails to see, though, are all the other jobs created to replace the ones she laments as lost.

The custodians, food service workers and bus drivers who lose their jobs when a district switches service providers are replaced by new custodians, food service workers and bus drivers. In fact, the new private company often hires many of the former district employees. Additionally, because districts get the same service at a lower cost, they can use the savings to support the creation or retention of other jobs in the district. In the end, schools that contract out for noninstructional services do not negatively affect the overall economic well-being of the state.

The fundamental reason why Salters doesn't like it when school districts contract out for services is that her union is the biggest loser in the deal. The privately contracted employees aren't forced to be represented by a union like the MEA and therefore don't have to pay union dues. So while the state economy remains unaffected when schools contract out, the MEA most certainly is, and this is the root cause of its opposition to this cost-saving practice.

Salters goes on to postulate that contracting out is ineffective because "for-profit companies don't have a stake in our schools or our communities," and "they're only concerned with the bottom line." She clearly doesn't understand the important role that a slew of for-profit companies play in public schools. Book, pencil, computer, chalk and paper companies all make profits by selling goods and services to schools. Should these services also be done in-house by school districts to avoid the risk of using for-profit entities to deliver goods and services to schools?

What is lacking from Salters' viewpoint is an understanding of free exchange. Free exchange is based on mutual benefit, and when schools buy books or computers for their students to use, students and the for-profit companies benefit (as well as their employees). This same rule applies to the types of services that the MEA vehemently opposes being provided by a for-profit company.

Finally, Salters is right that the bottom line is a main concern among for-profit companies. She's wrong, however, that this means companies must choose between providing quality service and higher profits. In the real world, these two things go hand-in-hand.

Unlike the government-enabled public school monopoly, for-profit companies must compete with others firms and offer services someone will purchase voluntarily. If companies want to grow their bottom line, they must maintain quality services that consistently satisfy their customers. If businesses sacrifice quality for short term gains, they'll find themselves without many clients and soon out of business. If the quality of the service they provide suffers, their bottom line will eventually suffer too.

As a recent Detroit News editorial pointed out, it shouldn't surprise anyone that the MEA and its president don't understand these basic economic principles. The MEA's political power and near monopoly on representing public school employees insulates them from the market forces and realities that are commonplace in the private sector.


Michael Van Beek is director of education policy at the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, Mich. Permission to reprint in whole or in part is hereby granted, provided that the author and the Center are properly cited.