Most Unions Hate Performance Pay

Major League Baseball’s players union has eagerly agreed to eliminate large bonuses for certain accomplishments:

Major League Baseball and the Players Association have come to an agreement that the 30 teams will no longer be able to offer personal service contracts or special milestone bonus clauses in future player contracts, MLB’s top labor official said on Friday.

The two sides decided to eliminate those negotiating chips in the wake of recent deals in which Albert Pujols signed with the Angels for 10 years at $240 million and Ryan Zimmerman extended his contract with the Nationals for six years at $100 million.


Manfred added that this has been an issue on the table between the parties for years. It pre-dated last year’s collective bargaining negotiations and violated a clause in the Basic Agreement that restricts bonuses based on statistical achievement. Pujols also had a marketing clause in his contract that would pay him $3 million if he reaches 3,000 hits and $7 million if he breaks Bonds’ home run record. Pujols went into action on Friday with 2,089 hits and 445 homers.

The union’s quick agreement to lower salaries initially seems odd — what’s not to like about additional large sums of money going to its players? But upon closer examination it becomes clear that the kind of bonus in Pujols’ contract rests at the top of a slippery slope. Halfway down the slope are contracts with tiny base salaries and large incentive bonuses, and at the bottom lie contracts with salaries based purely on performance. The players union wants nothing to do with these performance-based contracts because although a shift towards performance pay will ultimately lead to a more efficient distribution of the salary pool, it will make it easier to shrink that pool.

I point this out because it’s important to understand that teachers unions aren’t all that different from any other union. On one hand, this means that some of the “our kids depend on them” arguments that attempt to make a special class out of teachers are relatively weak when it comes to labor issues. On the the other hand, it means that there’s nothing inherently “evil” or selfish about teachers unions attempting to protect the salaries and interests of their members by opposing performance pay.

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