Topic: Economics
The Economics of UChicago Renewing Worker Contracts Insight into how to analyze UChicago's decision to raise wages or maintain wages for Aramark (Dining Company) employees.by Jeff Peters
(conservative)
Friday, May 9, 2008
Several days ago I was invited to an event of student's interested in assuring a fair contract renewal for Aramark employees. Aramark is the company that provides the dining services for the University of Chicago.
I wasn't able to attend to listen to what students had to say because of midterms and other important academic obligations. I would like to extend some ideas as to how to economically analyze our approach to contract renewals.
It is important to note that our experience at the college as students largely depends on the cleanliness and beauty of our school environment. It's no wonder that the University of Chicago spends millions of dollars in maintaining its nationally recognized botanical garden on the main quad. It's also no mystery as to why students should hold the utmost regard for the individuals who maintain university facilities and have the meals ready to go. The hard work of these employees has positive externalities for everyone. Thus, the university workers and their situation deserve our attention.
However, when we ask ourselves about whether or not one should get a raise, we are essentially asking if one can contribute more to their firm. Speaking in econ jargon, have the Aramark employees become more productive individuals in such a way that they produce more goods and services within some given time? Are these Aramark employees contributing greater positive externalities to the University community?
To be quite honest, I don't always think this is the case. Numerous times I have encountered some of the most genuinely rude and obnoxious employees when trying to get a meal. Other times I realize employees just really don't want to be here. These small instances don't help when I'm stressed from midterms and problem sets. These negative externalities don't positively contribute to output of human capital at the U of C.
Furthermore, there is a tradeoff at hand, and it's not pretty. When costs at the University go up so does your tuition. To make these employees happy by paying them more, you are trading off your satisfaction with your tuition bill.
You may not have to worry much if financial aid gives you a lot of money. The University only requests more in grants from the federal government. There is no incentive for the University to cut costs. Essentially, taxpayers compensate for any differentials due to rising University costs.
However, paying workers more can also hurt individuals who pay tuition out of their own pockets, especially the middle class. They aren't covered by financial aid and have to pay the extra by taking out more loans or consuming less of other goods.
Paying more tuition because workers, who may or may not provide additional benefit, want raises is not necessarily a good thing for everyone.
I would add that it is true that workers may become more productive as a result of a wage increase. Employees would have an incentive to work harder if their wages are above market equilibrium. Efficient wage theory says that if they are paid more than the market, employees will work hard to keep their jobs.
Using these tools and ideas, we have to seriously ask the question if marginally increasing the costs of going to this school balance or trail its marginal benefit. The reason for this question is that consumers of education who bear these costs are the ones who suffer in the long haul, and possibly for nothing. I'm for workers rights but I'm also for a reasonable tuition.
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Posted By: Miroslav Lysyuk
Date: 2008-06-03 00:34:17
I'm also for worker rights. I'd like to point out that the discontent you site as evidence for not increasing wages needs addressing. In discussing the working conditions with workers in the last few weeks, its evident that the rude behavior and lack of enthusaism on the job you site are due to poor management which includes and is not limited to: understaffing, overworking, wages that are below the cost of living, unfair and arbitrary punishment, poor hours, not to mention the often obnoxious students themselves. Furthermore, I'd like to remind you that your tuition also helps pay university employees such as the head of the pritzker school, who reportedly makes about 1.6 million dollars a year. So when it comes to the "economics of uchicago renewing worker contracts" I'd put my econ books down for a second and actually go talk with the workers you turn into econ statistics. If you ask me, I would enjoy an environment where workers are treated properly and paid sufficiently more than where the garden gets more attention. And part of that problem is the lack of interest and involvment by students. I encourage you to check out soul.uchicago.edu/aroverview to learn more.
In sum, your post said something to the extent of that you prefer your tuition to go to the quiet greenery around campus than to the workers that make sure your day runs smoothly. And when they show discontent for their working atmosphere, then all the more reason for your lack of support.
[I apologize for the amount of posts, but my original post was cut off, and an older version was posted]
We as students are the main consumers on this campus, which means that we have a considerable amount of leverage, especially when it involves things such as the dining halls, which are even more directly related to our investments than, say, the botanical garden. We know how much we pay for the annual dining hall plan as opposed to the greenery. That being said, we have the ability to use our position to help direct policies on campus towards more just conditions for workers. So in the case of the Aramark workers, we have the right to call for better working conditions and pay. And in terms of tuition, there are only about 175 dining hall workers. Giving them a raise to cover the cost of living would not create a noticeable difference in tuition assuming that tuition would be raised at all. And if it was, we as students have the right to discontent as well and to demand spending policy changes that would balance tuition changes.
Posted By: Christopher Espinal
Date: 2008-06-11 00:36:50
Miroslav,
Thanks for responding to my post. The fact that you think economics, which are basically a series of models that allow us to predict important information, such as the effects after wage increases, are irrelevant shows that you need to learn it before criticizing it. The purpose of using economics is to analyze rationally, not emotionally. Empirical evidence is key, not your "gut feeling."
This brings me to my next point: the article demonstrates not empirical evidence but how to analyze empirical evidence using cost-benefit analysis. The way the University and Aramark is maintained is by doing cost-benefit analysis. Let this not be an indicator that I'm for lowering wages. If wages are to be raised, there must be some benefit - that is how responsible firms operate. You also overlooked my model that involved raising wages - efficiency wage theory.
Let me add, that you totally misunderstood the point of bringing up the "greenery" on the campus. That was just an example of a reason why students should respect University maintenance staff. The same goes for those who make our meals.
I also state that it's not always the case that these workers benefit the university community. Key words: not always the case. Which also means: sometimes they do and sometimes they don't.
"Giving them a raise to cover the cost of living would not create a noticeable difference in tuition assuming that tuition would be raised at all. And if it was, we as students have the right to discontent as well and to demand spending policy changes that would balance tuition changes."
What empirical evidence do you have that shows this is the case?
Posted By: Christopher Espinal
Date: 2008-06-11 00:43:58
Another point:
I would never advocate students directing policies for a firm that tries to responsibly remain within certain costs. You don't know what resources have been allocated to for current and future projects. Student groups focus way too much on short term issues rather than focusing in on a tradeoff between long term and short term goals. It may be the case that when you raise wages, you cause an increase in unemployment. The indirect costs are never taken into consideration by ideological students who aren't the accountants of firms. Remember that the real minimum wage for some people for irresponsible policies is zero.
Posted By: Christopher Espinal
Date: 2008-06-11 01:09:09
The reason why the President of Pritzker makes so much money is because (1) not so many people can do the job, (2) not so many people can maintain the University's VERY important program in medicine - biochem is currently in demand for careers in medicine. It's no wonder this person is so highly paid, especially for a nationally recognized program. However, no one is advocating for this person's wage increase despite his/her productive capacity in producing more medical engineers.
Aramark workers get paid so little because many people can do their jobs.
It seems you are the one using flawed logic throughout this entire rebuttal.
Posted By: Christopher Espinal
Date: 2008-06-11 15:17:39
Another point, Interestingly enough you say "And if it was, we as students have the right to discontent as well and to demand spending policy changes that would balance tuition changes" yet "And part of that problem is the lack of interest and involvment by students."
How sure are you that students have a lack of interest? Maybe they don't think irresponsibly like you do!
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