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.


Performance Pay Systems Are Never Immaculate

Many chauffeurs are evaluated based on their punctuality, but their promptness does not always reflect their “true” performance. Over the course of the year numerous unforeseen traffic problems causes drivers to be late when they would have been early, or be early when they would have been late. In addition, the need to be on time could occasionally create the incentive to drive unsafely. Nevertheless, punctuality is still an uncontroversial metric for evaluating performance.

Many NFL wide receivers earn performance bonuses for making a certain number of receptions, but these achievements or lack thereof may be an inaccurate reflection of a player’s true performance. For example, a player could get open enough times to catch a hundred passes in a season, but the shortcomings of his quarterback or offensive line could make him fall short of that milestone. In addition, the emphasis on catches may lead receivers to shirk other duties such as blocking. Nevertheless, even though these bonuses are not 100% correlated with a player’s “true” performance, they are uncontroversial.

Yet when it comes to teachers many act like it’s an inconceivable injustice that evaluations based on test scores could lead to potentially bad incentives or not be 100% correlated with a teacher’s “true” performance. Obviously the science behind test-based evaluations is mixed, and the fact that teachers are paid with public money and influence our children also makes their situation different. Still, it’s clear the rhetoric of many accountability opponents is based on a noticeable double standard between teaching and other professions.

The point is that an “evaluation must correlate 100% with performance” position is not grounded in reality. That’s not to say that everybody should blindly jump on the test-based accountability bandwagon, but adhering to a strategy that refuses to give an inch in the hope that it will prevent giving up a foot makes progress impossible. I think the stubbornness is partially a response from teacher advocates who feel powerless in the face of government action, but taking extreme positions only serves to further shut them out of the debate because it essentially commits them to exclusively support an unrealistic system.