The Two-Tier Provision in the Chicago Teachers Union’s Tentative Agreement, Explained

Shaun Richman October 18, 2016

The CTU’s House of Delegates meets Wednesday to deliberate over the tentative agreement and vote on whether to send it to the entire membership for ratification. (Chicago Teachers Union/ Facebook)

The ten­ta­tive agree­ment that the Chica­go Teach­ers Union (CTU) struck with dis­trict man­age­ment less than an hour before a mid­night Octo­ber 10 strike dead­line has been hailed by many as a vic­to­ry. Fac­ing anoth­er round of con­ces­sion­ary demands, the union man­aged to extract $88 mil­lion from the mayor’s cor­po­rate slush fund to restore some bad­ly need­ed fund­ing to the school sys­tem. The union also man­aged to win an increase in compensation.

But the way that the com­pen­sa­tion is struc­tured — with cur­rent teach­ers keep­ing their cur­rent 7 per­cent pen­sion pick­up,” and new hires receiv­ing a salary increase in lieu of a pen­sion con­tri­bu­tion — has some crit­ics decry­ing the deal as a sol­i­dar­i­ty-killing, two-tier con­tract. A pick­up is the per­cent­age of a worker’s pay that an employ­er puts direct­ly into a pen­sion fund.

The CTU’s House of Del­e­gates meets Wednes­day to delib­er­ate over the ten­ta­tive agree­ment and vote on whether to send it to the entire mem­ber­ship for rat­i­fi­ca­tion. If the deal is reject­ed, there is no guar­an­tee that man­age­ment will agree to more of the union’s demands — or even return to the table.

Two-tier con­tracts are an emo­tion­al sub­ject in the labor move­ment. Begin­ning in the 1980s, employ­ers used threats of off-shoring and sub-con­tract­ing, as well as their legal right” to per­ma­nent­ly replace strik­ing union mem­bers, to force a wave of wage and ben­e­fit give­backs across many union­ized indus­tries. In order to make these cuts more palat­able to the mem­bers who would have to vote on their rat­i­fi­ca­tion, unions nego­ti­at­ed agree­ments where cur­rent work­ers pre­served most of their pay and ben­e­fits while future hires would bear the brunt of the cuts.

There are many epi­thets for this sort of thing, but the most com­mon may be sell­ing out the unborn. These tick­ing time bombs blow up years lat­er, as the new” hires become a larg­er por­tion of the bar­gain­ing unit and resent their vet­er­an col­leagues both for their more gen­er­ous com­pen­sa­tion pack­ages and for the fact that the old­er work­ers signed away their younger col­leagues’ right to enjoy the same. As the vet­er­ans become a minor­i­ty in the work­place, there is an obvi­ous finan­cial incen­tive for super­vi­sors to push them out through aggres­sive dis­ci­pline. In such a sit­u­a­tion, work­er uni­ty in future rounds of bar­gain­ing is hard to achieve.

To be clear, not all two-tiers” are alike. The pow­er­ful New York Hotel and Motel Trades Coun­cil accept­ed a two-tier wage struc­ture after sur­viv­ing a 27-day strike in 1985. But the tiers only impact­ed work­ers dur­ing their first year of employ­ment. By year two, all work­ers were earn­ing the same pay rate. And, decades lat­er, end­ing the tiered pay scale remained a union bar­gain­ing priority.

The Unit­ed Auto­mo­bile Work­ers (UAW) accept­ed a two-tier pay scale at Chrysler when the com­pa­ny went bank­rupt in 2009. It was so severe that new hires earned only half the hourly wage of vet­er­an employ­ees. When mem­bers vot­ed down a 2015 suc­ces­sor agree­ment that did not go far enough in revers­ing the dou­ble stan­dard, the UAW was able to rene­go­ti­ate a deal that brings new­er work­ers clos­er to the tra­di­tion­al pay scale over the course of sev­en years.

The CTU’s pro­posed two-tier” is a bit more of a shell game than those con­ces­sions. The fight over Chicago’s 7 per­cent pen­sion pick­up has more to do with sym­bol­ism than anyone’s actu­al pay­check. Pen­sion sys­tems are com­pli­cat­ed things that only accoun­tants and union researchers ful­ly under­stand. But basi­cal­ly, a pen­sion fund needs a cer­tain amount of mon­ey com­ing in every year in order to guar­an­tee a liv­able retire­ment income for actu­al and pro­ject­ed retirees. Cur­rent­ly, the Chica­go Teach­ers Pen­sion Fund has set that tar­get at 9 per­cent of every pen­sion-eli­gi­ble employee’s annu­al income.

Before the CTU won col­lec­tive bar­gain­ing rights in the 1960s, teach­ers had most, if not all, of their pen­sion con­tri­bu­tions deduct­ed direct­ly from their pay­checks. Over the years, the CTU was able to bar­gain for 7 of that 9 per­cent to be con­tributed direct­ly into the pen­sion fund, instead of paid as a salary increase and then imme­di­ate­ly deduct­ed as a per­son­al pen­sion contribution.

Obvi­ous­ly, the dif­fer­ence between putting 7 per­cent in pen­sion con­tri­bu­tions direct­ly ver­sus rolling it into salaries, and then imme­di­ate­ly deduct­ing it, makes no finan­cial dif­fer­ence to the employ­er. But the 7 per­cent became a vis­i­ble tar­get for Gov. Bruce Rauner and May­or Rahm Emanuel. It was mon­ey they could por­tray to the pub­lic and the press as extra” com­pen­sa­tion that teach­ers get that oth­er work­ers don’t and demand that teach­ers give it up. (It should be not­ed that Chica­go teach­ers aren’t eli­gi­ble for Social Secu­ri­ty, so their pen­sions are the only thing that stand between them and an old age spent sub­sist­ing on cat food.)

Under the ten­ta­tive agree­ment the CTU is con­sid­er­ing, the pay for new hires would increase by an addi­tion­al 3.5 per­cent in two suc­ces­sive years. It’s not entire­ly clear how soon new hires would be respon­si­ble for pay­ing the full pen­sion contribution.

Teach­ers at char­ter schools also par­tic­i­pate in the Chica­go Teach­ers Pen­sion Fund. Mem­bers of the Chica­go Alliance of Char­ter Teach­ers and Staff (Chica­go ACTS) at the UNO Char­ter School Net­work (UCSN) are cur­rent­ly bar­gain­ing over the very same pen­sion pick­up, and have set a Wednes­day strike dead­line.

I was a part of the bar­gain­ing team that nego­ti­at­ed the first con­tract at UCSN in 2013. Because we had a sig­nif­i­cant amount of bar­gain­ing lever­age in the wake of a very pub­lic insid­er deal­ing scan­dal, we real­ized that those nego­ti­a­tions were our best shot to get the char­ter net­work to pay more than the whole lot of noth­ing that it had been con­tribut­ing to teach­ers’ pensions.

We were suc­cess­ful. That 7 per­cent was a part of an over­all com­pen­sa­tion pack­age we were going to win any­way. But by direct­ing the employ­er to put it towards the pen­sion, we politi­cized a dif­fer­ent fig­ure: the network’s start­ing salaries. Because char­ters com­pete in the same labor mar­ket as the dis­trict to recruit new teach­ers, the salaries they can offer are key. If that 7 per­cent had sim­ply been rolled into base pay, UCSN would be able to quote start­ing salaries that appear to be larg­er than what the dis­trict offers, but real­ly aren’t, giv­ing the union lever­age to raise wages in future nego­ti­a­tions. Now that start­ing salaries at Chica­go Pub­lic Schools will appear to be 7 per­cent larg­er—if CTU mem­bers rat­i­fy the deal — the salaries that UCSN offers will appear even less competitive.

As for rat­i­fi­ca­tion of their con­tract, CTU mem­bers have to decide how impor­tant the sym­bol­ism of that 7 per­cent is and what impact it will have on future rounds of nego­ti­a­tions. The shift­ing of that 7 per­cent from one col­umn in a spread­sheet to anoth­er strikes me as a last minute ploy to give Rauner and Emanuel a face-sav­ing nar­ra­tive that allows them to say they didn’t suf­fer a humil­i­at­ing defeat in this round of bargaining.

This is not a per­fect agree­ment,” said CTU pres­i­dent Karen Lewis. But it is good for the kids. And good for the clin­i­cians. And good for the teach­ers, and the paraprofessionals.”

Shaun Rich­man is an In These Times con­tribut­ing writer and the Pro­gram Direc­tor of the Har­ry Van Ars­dale Jr. School of Labor Stud­ies at SUNY Empire State Col­lege. His Twit­ter han­dle is @Ess_Dog.
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