Education as a “Business”: Not So Fast

There are several strands of thought concerning education that I have been mulling recently. The first pertains to how the changes in how we view labor plays out in the how we treat the labor of teachers.

It is tragic that we have devolved to a point where we prioritize cost-cutting in public education as oppose to meeting the needs of students and our society.

I find it perplexing whenever I hear that thought that we must treat education more like a business. Embedded in this notion is the sad reality that much of American industry has come to a point where it desires to improve investor returns by cutting labor (and to a degree capital) costs while seeking to maintain a similar output. It’s very similar to cost-engineering, which can often be (in real estate) your supervisor looking at your construction budget and cutting something here and there in order to meet some super-imposed financial targets. Maybe that security budget was actually kind of important, those cheaper appliances will wear much quicker…but that’s not the priority.

While my experience in major industry is limited (ok, non-existant), I do know a little about economics and history. There was once a time when our economy was committed to enhancing productivity, i.e. finding ways to achieve more output with the same amount of labor inputs or increasing the output that comes from one additional unit of labor, however arbitrary labor units can be.

This is what the Frederick Taylor’s critical innovation was in the early 20th century was. By taking, say, one front-line worker, giving him or her some training, a 20% increase in pay and putting them in a middle-management positions, your output would increase by much more than the 20% increase in labor units you incurred.

If we turned to microeconomic theory, the accomplishment of greater labor productivity (capital being held constant) would shift the production-possibility frontier outward along the labor axis, leading a business to spend more on labor costs. On the other hand, the accomplishment of greater capital productivity would shift the production-possiblity frontier outward along the capital axis, leading a business to spend more on labor costs.

What is the bottom-line?

It only really makes economic sense to cut labor costs when you see improvements in capital productivity. Thinking like a business (assuming a microeconomic lens) does not involve strategizing how you can pay your workers less and thus reduce the marginal costs. That is the a new type of business mind-set that involves changing the rules of the system in a manner that improves your profits in absence of any change in the fundamentals. I’m deeply disturbed by this trend, and it by definition is a question of political economy and not markets. If this is what “thinking more like a business” means, than I think it’s absolutely indefensible.

At this point, you’re asking me to slowly step away from the economics text book and put my hands where you can see them.

My point with all the theory is set a context for how we treat labor in the context of education. We shut down schools with experienced and certified teachers (or shift the focus away from such schools) in order to substitute charter schools with non-unionized labor forces. Charter schools who can more easily put a TFA-corps member with 3 months of training, or potentially even recent college graduate with no teaching experience in a classroom. In spite of the fact that the new teaching force will likely be less experienced and relatively less possessive of formal certifications, there is no true consideration of whether the individual teachers are better in the process. It is inherently better because they have rid themselves of burdensome teacher unions which allows meeting some financial target imposed by political economic conflicts.

Something akin to enhanced productivity is truly a mystery in this situation. If the students are in school for a different amount of time, undergoing a different curriculum, involved with new volunteers, benefiting from corporate philanthropy, then no reasonable argument can be made that there is enhanced productivity with the new arrangement because the labor and capital inputs (whatever that means in this situation) or both so drastically different than before. Productivity is not simply about output (the test scores, or whatever outcome matters) but about output per unit of input. Microeconomic theory is again useful here because you know that the productivity of labor is impacted by the amount of capital (which could be computers, curricular approaches, and anything else outside of how many teacher-hours you have).

To me, it is entirely hypocritical to say that schools should not be used as an agent of economic development because the labor force is organized but say they schools should be operated more like businesses and should reduce labor costs. It misappropriates what economic development truly maeans, embraces but minimizes markets and engages in politics. Yet this is exactly what I have heard coming from the same side of the education debate. Perhaps the appropriate path involves a teacher corps, whereby teachers are allocated on the basis of nationally-driven policy. We allow local municipalities to complete, praise individualism except for when it is practiced by teachers.

In closing, the Treaty of Detroit refers to a WWI agreement between labor leaders and industry leaders about sharing the increases in firm productivity between owners and workers in exchange for eliminating strikes that prevented effective industrial production planning. The relationship facilitated incredibly business success as well as the middle-class boom following the War as the agreement continued on. There needs to be some analog agreement in education labor reform. I believe it would serve public education and the teaching industry in a manner that is very seriously needed at this juncture.