Stories At The Margin
columnist: Christopher Espinal

Topic: Economics
The Economics of UChicago Renewing Worker Contracts

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Insight into how to analyze UChicago's decision to raise wages or maintain wages for Aramark (Dining Company) employees.

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by Christopher Espinal
(Conservative)
Friday, May 9, 2008

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 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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2008 Christopher Espinal, all rights reserved.
Published: Friday, May 9, 2008
Last modified: Friday, May 9, 2008

The views expressed in this article are those of Christopher Espinal only and do not represent the views of Nolan Chart, LLC or its affiliates. Christopher Espinal is solely responsible for the contents of this article and is not an employee or otherwise affiliated with Nolan Chart, LLC in his/her role as a columnist.

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