Up From Wage Slavery

Financial Freedom Through Economic Thinking

Incentives

The Structure of Teacher Compensation Creates Bitter Teachers and Bored Kids

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Teachers, like Rattlesnakes, will strike when they feel trapped.

Low teacher salary gets a lot of media coverage, but there is another factor at play in the education world that has detrimental consequences.  Barriers to entry, exit, and movement between teaching jobs is not only bad for teachers, but it’s also hurting your kids’ education.

In Colorado, as well as California, Texas, and a dozen other states, public school teachers don’t pay into Social Security but state-based pension plans instead (PERA in Colorado). Although teacher salary is generally lower than careers requiring commensurate education and skills, the pension plans for retired teachers are comparatively generous.  In other words, a teacher can expect to earn less during his career than in the private sector but will enjoy greater income in retirement than someone dependent on Social Security.

This delayed compensation creates a strong incentive for a teacher to stay in the teaching field once they are established. Why is this a problem?  It keeps bitter teachers in classrooms and energetic would-be-teachers away from the job.

The compensation structure that causes these mobility issues:

Teacher pay is based on two things; the total amount of educational credits collected, and years of teaching experience.  For example, the new teacher with only a bachelors degree gets paid the least. The old teacher with three masters degrees or a Ph.D. gets paid the most.

Salary Schedule Example (plagiarized from some random school district website)

In the short term, your pay sucks.  In the long term, you get paid pretty well, and if you stick around long enough, (25-30 years or more) a solid pension will be yours for the rest of your life.  It is nice to know that if you manage to survive a career as a political pawn, a scapegoat for all society’s problems, an entertainer to the apathetic, and suppressor of youthful energy, you will be able to relax with a sizeable retirement check.

But what happens when 15 or 20 years into it you realize that you hate kids, are tired of parental and administrative pressure to inflate grades, or are just ready for a change of pace?  If you leave the teaching field you will only get a small fraction of your retirement benefits. That generous pension you were promised is only for those who survive an entire career. You don’t get to credit the years teaching towards Social Security either.  All those years of service mean nothing to the Social Security Administration! You haven’t paid them a dime and you will be starting from scratch when it comes to retirement.

This delayed compensation structure creates strong incentives to stay in the teaching field long after you are burnt out from the high-stress job. “Just five more years!” or “Just ten more years!” are the mantras you will hear in the teacher’s lounge of your local public school.

On the other side of the equation, a knowledgable professional who may have incredible skills to share with your kid is unlikely to try teaching because of the financial disincentives and barriers to entry. In most cases, districts won’t credit any of her professional experience towards her teaching license or level of salary.  For example, the experienced 40-year-old lawyer or accountant would be paid the same as the 22-year-old kid fresh from college. (After she spends a year getting licensed, that is.) This, of course, keeps many would-be-teachers from even testing out the field.

Not only is mobility in and out of teaching difficult, but even within the teaching field, a teacher will face significant costs when switching districts.  In most fields when you decide to change companies you are able to negotiate a salary based on your experience and abilities. However, when changing school districts, the new district can only give you credit for a certain number of years experience and may not accept all your education earned.  In other words, you will move to the left and top of that handy dandy salary schedule shown above.

For example, Let’s say a teacher worked for Denver Public Schools for 15 years but wanted to change districts.  Maybe she feels mistreated, maybe another position would be a better fit, or maybe she just wanted to teach in an area where she could afford to buy a home.  The neighboring district where she wants to work may give her credit for only 5 years of teaching and ignore the fact that she worked summers on that second master’s degree.  If she were to take the new job she would likely take a salary hit of $10,000 or more/year. The new district would end up paying her significantly less than they would pay somebody already in the district, even if the in-district hire is significantly less qualified.  The results of these policies are that our mistreated teacher stays in the school and district she hates and the less ideal candidate takes the job in the other school.

Many teachers find the perfect fit for their talents and are able to motivate and inspire generations of students. Unfortunately, for many others, the golden anchor of a distant retirement keeps them trapped in a job they can barely tolerate.  The detriment to their finances would be too great to change districts or careers.

Your kids lose because they end up with a teacher who hates his job (and your kids), while the people who want to teach your kids are stuck in another school or find the barrier to enter the educational field is too great to risk making the move.

The Denver Public Schools teacher strike in 1994.  Like with a great snowstorm, we kids were freed from the repressive clutches of bureaucrats and teachers for a few sweet days.

Here are some sources for your in-depth reading pleasure:

https://www.cga.ct.gov/2006/rpt/2006-R-0547.htm

https://www.fool.com/retirement/2018/10/07/why-does-social-security-leave-out-teachers-in-the.aspx.

https://www.teacherpensions.org/resource/uncovered-social-security-retirement-uncertainty-and-1-million-teachers

Dad Spent Too Much Time With Me

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Paying for your child’s college seems generous, but if you had to spend large portions of his childhood working overtime to pay for it, the costs on his emotional health may not be worth it.

“When I was a kid, my dad spent too much time with me.  I wish he would have worked more so that I could have had fancier vacations, and spent more time at daycare.”  If I had a penny for every time I heard a phrase like this I would be… penniless.  One of the biggest motivations for me to quit my job was the fact that I had never heard anyone say this or anything remotely similar to this.  On the other hand, I have witnessed the opposite sentiment many times over.  That is, people who grow up resentful that their father seemed to prioritize his career over his family.  

I have also spoken with fathers who wished they had spent more time with their kids and less time with their job.  They realized, too late, that their kids were happiest, not with the biggest house or the fanciest vacations, but when spending time with people who cared for them.  Apparently, not spending enough time with kids is a common regret among parents, with this study finding that spending too much time at work while their children were young was the number one regret of parents.

So, why are we, as parents, so focused on work instead of our families?  Do we prefer filling out long reports to playing at the park?  I don’t think so.  In fact, I think we have the best intentions for our kids, and generally make what we consider to be the best choice available.  The problem is that that choice, to focus on financial security and consumption, is often detrimental to our kids.

There are many reasons we tend to focus more on providing our families with greater financial resources instead of our physical and emotional presence.

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Taking Advantage of Government Incentives and Handouts

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Free Suitcase of Money
Free suitcase of cash, courtesy of your government.

Our government, which is comprised of an almost infinite number of Federal departments and agencies, and state, county, and local entities, etc. is filled with uncommonly generous people who have created policies and laws that reward people for making certain life choices.  This incredibly complex and inefficient set of incentives encourages various behaviors, rewards constituents, employs hundreds of thousands of accountants and lawyers, and can help you financially.

Now, just to be clear, these people are being generous with other people’s money.  The politicians and the agencies they run are generous in a way that helps them gain power and prestige.  But, for today’s purpose, instead of dwelling on the sad reality of how politicians and political parties maintain power through the strategic taking and giving of others’ money, we are going to focus on how to take advantage of this never-ending generosity.

The outward goals of many subsidies and other government incentives are generally to promote some sort of economic growth, modify behavior so that we live more sustainably, or to promote social and economic stability or equality.*  It is useful to know these goals, so we have an idea of where to start looking for these endless funds.

One question I have had to wrestle with is whether or not it is ethically acceptable to take advantage of government incentives, even if I disagree with the programs themselves.  I have decided that I will not accept government funds if I have to violate my own moral code, but I will happily accept government funds whether or not I believe in the economic value of the program.  For example, I would be ok with accepting a “green” tax credit for an electric vehicle even if I didn’t believe that this was a financially effective way to “save the environment.”  On the other hand, I would turn down a grant that paid me to evict low income families in order to build a new football stadium (a common practice in our football loving country). [Read more…] about Taking Advantage of Government Incentives and Handouts

What Wells Fargo, Timeshare Companies, and I Have in Common

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Not a bad bedroom view...too bad it isn't mine.
For the cost of a motel 6, this could be your bedroom view…


For years I have wanted to attend a timeshare presentation.  You know, the kind where the most talented, aggressive, and tricky salesmen in the world convince vacationers to purchase a vacation property for one week a year forever.  I am not interested in a timeshare, but I have heard so many horror stories of people buying property they didn’t actually want to buy that I thought this is something I need to see in person.  On a recent trip with my family to Puerto Vallarta, Mexico, I decided it was the time to fulfill my dream.  (I was actually more excited about a timeshare presentation than seeing the ocean, and I love the ocean.)  Arriving at the airport, we were instantly swarmed by dozens of timeshare sharks, pretending to be there to help us get a taxi, hotel, or whatever else we may have needed 30 seconds after walking off the plane.  I didn’t feel like booking a timeshare right then, so I did what seemed to be the polite thing.  I pretended like they didn’t exist.   [Read more…] about What Wells Fargo, Timeshare Companies, and I Have in Common

Expert Advice is Dangerous Advice

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Don't Believe“Don’t believe anything your teachers tell you!”  I used to tell my economics classes this in the beginning of each semester. Usually one or two students would respond with, “Wait, can we believe that?”  “Good question kid.  If you believe it, you can’t believe it.”  I use this paradox as a starting point for the students to see that critical thinking and questioning are integral parts of life.

But, the other point about this statement is the importance of questioning those who are seen as experts in their field.  Before believing an expert, we need to know what their incentives are when giving us advice, and whether their incentives and our incentives line up.

As a social studies teacher, my incentive may have been to convince hundreds of young adults to vote for my political party.  (Aspiring political activists, keep the teaching field in mind.) On more than one occasion I had students ask, “Why would you lie to us? you are a public school teacher!”  I appreciated their confidence in me, a government employee, but I was not too sure that made me a dependable source of information.  After all, if the government had your best interest in mind, would they try to sell you lottery tickets? [Read more…] about Expert Advice is Dangerous Advice