Comparing American automakers with public schools

Two of the best school reform minds have detailed the similarities between the big three American car companies and the bloated public school system.

Bailing out Detroit’s isn’t all that different from what we’ve witnessed for decades regarding education funding. Both are bloated entities that cling to a failed model.

Jay Greene, the endowed professor of education reform at the University of Arkansas and a senior fellow at the Manhattan Institute, recently posted “Guess who wants a bailout?” on his blog. He began with these two points:

  • That industry serves millions of customers and constitutes a sizable portion of U.S. GDP.
  • A major industry that employs millions of people has asked for a bailout.

Greene writes:

“Despite its size and importance, this industry has a notorious track record of performance. It fails to complete more than a quarter of the products it starts. Even among those it does finish, almost 40% fail to meet basic standards for quality. Quality has not improved a smidge in over three decadesdespite more than doubling the average cost of production. And foreign competitors are cleaning our clocks. In a comparison of 21 industrialized countries, US quality exceeded only that of South Africa and Cyprus.

And this industry has huge and understated pension liabilities that, failing a miraculous improvement in the returns on investments, will inevitably have to be paid by taxpayers. These ‘legacy’ costs are consuming an increasing share of resources and distorting labor markets, hindering an industry turnaround. But the unionized workforce continues to press for increased pay and benefits while opposing restructurings that might address quality-control problems.”

This industry is also unwilling to correct its structural weaknesses, control costs, or improve quality.

“Are we talking about the U.S. auto industry? It sounds like we could be, but I’m sure most of you have guessed that the industry described here is the US K-12 public education industry.”

Click here to read Greene’s post.

Andrew Coulson, the Director of the Cato Institute’s Center for Educational Freedom, recently wrote a wrote a piece explaining how the failed American car makers could learn a lot from America’s public schools about being sustained financially despite failure. Using appropriate sarcasm, Coulson notes that the Big Three shouldn’t have waited so long and shouldn’t have asked for just a one-time bailout.

“What the automakers should have asked for was permanent government ownership and control.

Consider how well this has worked for public schools. Between 1970 and 2005, real, inflation-adjusted public school revenues more than doubled, to nearly $12,000 per pupil. And the schools didn’t have to compete with anyone or show any improvement to get it! According to the National Assessment of Educational progress, 17-year-olds perform no better academically today than they did back in 1970.”

Detroit and the public schools also share the problem of unsustainably high wages, but the car industry has to face real competition:

“The reason that inflated union contracts cause problems in competitive markets is that they drive prices up above those of competitors, jeopardizing the viability of the business. But what if you don’t have any competitors? What if, as with public schools, the government gave everyone $12,000 a year toward the purchase of a new car, but only if it were made by GM, Ford, or Chrysler? Hardly anyone would pay for any other brand when they could get a new Detroit model for ‘free’ every two or three years.

Once again, look how well this is working for public schools. According to the Department of Education, public school teachers earn nearly 40 percent more than their private school peers — and that’s not even counting their superior health and pension benefits. These above-market wages don’t drive public schools out of business, because taxpayers have to keep paying their taxes, and public school parents can’t take those tax dollars elsewhere. Quality is almost irrelevant.”

Click here to read Coulson’s article.

©2008 John F. Biver