Teacher Shortages Can Be Fixed With Higher Pay
(Bloomberg Opinion) -- The service sector's scramble to find workers is going to come to the public school system by the end of the summer. The reasons go back as far as the 2008 financial crisis, exacerbated by the pandemic and broader dynamics in the labor market right now. School districts should act now to bolster pay so that in a few months they're not going through the same kind of extreme labor shortages being experienced by the hospitality industry.
Outside of leisure and hospitality, it's education that's dealing with the largest employment shortfall related to the pandemic. From peak to trough, state and local government education shed more than a million jobs, and as of April's employment report the shortfall is still 900,000 workers.
There's no surprise about why; though teachers continued to teach remotely, other employees weren't needed to operate mostly empty facilities. The pandemic also may have been a catalyst for older workers to retire, or for workers who felt chronically underpaid to reassess their careers and switch industries. Since the school year has already ended — or will end soon, depending upon the state — we probably won't know how bad the school system's staffing problem is until the school year starts up again at the end of summer.
Coming into the pandemic, educator pay had been stagnant for a decade due to dynamics that began during the onset of the 2008 financial crisis. State and local government budgets got decimated as home values and property-tax revenues fell. That meant school systems had to lay off workers and institute hiring and pay freezes, many of which weren't undone even after tax digests recovered years later. The National Education Association put out a report in 2019 saying that nationally, average teacher pay had fallen by 4.5% after inflation over the prior decade. Stagnant pay was a driving factor behind teacher strikes in states like West Virginia and Arizona in 2018.
Low pay isn't just a problem for full-time teachers. It's also a problem for support staff like substitute teachers and school bus drivers. Gwinnett County has one of the largest public school systems in the state of Georgia, enrolling more than 177,000 students in the fall of 2020, and its substitute teachers make between $93 and $103 a day. With McDonald's Corp. announcing that it would raise wages at its company-owned stores to an average of $13 an hour, that means someone would earn more at McDonald's than as a substitute teacher in the county.
But it's rising wages in the service sector that pose the biggest problems for school systems looking to staff up. Service-sector wages increasing to $15 an hour or higher doesn't just pose a challenge to employers in that wage range; it also starts to squeeze employers that pay a little bit more. Wages of $20 an hour — in the range of what entry-level teachers make in some states — aren't as attractive as the wage floor rises from $10 an hour to $15 an hour. The squeeze might be particularly pronounced in states like Arizona and North Carolina, which have been slow to raise pay but where student enrollment growth has been most pronounced over the past decade.
The good news for states and cities is that their finances are in much better shape today than they were in the aftermath of the 2008 financial crisis. It took three years for state and local government tax receipts to match their second-quarter 2008 peak, and even longer on an inflation-adjusted basis. This time around it only took two quarters, and that doesn't account for the hundreds of billions of dollars allocated for state and local governments as part of the American Rescue Plan. Property tax revenues have a strong tailwind as well, thanks to the surge in home values.
So the situation is pretty straightforward and something that governments should be in a position to address. Properly staffing schools this fall is going to require hiring or bringing back from unemployment hundreds of thousands of workers. Pay had been stagnant for a decade due to post-2008 budget cuts that persisted for too long. Now wages throughout the service sector are rising strongly, making it harder for schools to hire workers at pre-pandemic wage rates.
But governments are flush with cash and should be in a position to offer raises or signing bonuses to hire the staff they need. The only question now is if legislators and administrators are up to the task, or if they'll be caught flat-footed like private-sector employers have been over the past couple of months.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Conor Sen is a Bloomberg Opinion columnist and the founder of Peachtree Creek Investments. He's been a contributor to the Atlantic and Business Insider and resides in Atlanta.
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