Teacher Pensions Blog

The Chicago Teachers Union leaders were adamant that they weren’t on strike over salaries, but rather were fighting for educational justice in the form of more staffing. Now that the dust has settled, the numbers support that claim. Teachers didn’t gain anything in terms of salary that wasn’t already offered before the strike started. Instead, they lost six days of pay for the missed school days. (They struck for 11 days, but will make up five of them.)

For the average teacher, the unpaid strike time amounts to $2,100 in lost wages. There goes most of this year’s raise. 

But it’s the senior teachers nearing retirement that got hit with a double whammy. First, their salaries are higher (some as high as $111,000) so the lost wages can total as much as $3,200 per teacher. Then, for teachers retiring in the next four years, those lost salary dollars will result in lower pension payments. Because pension amounts are based on the last four years of salary, teacher pensions are highly sensitive to even modest changes in salary during any one of those final years. For the six lost days of work, retiring teachers should expect a dip of a little over $600 per year, but that loss affects every single year of retirement. Using standard assumptions of lifespan and discounting, it is clear that the effect on pension amounts to a loss for a retiring teacher of more than $9,500 in today’s dollars.

That means, for a teacher at the top of the pay scale retiring in the next four years, the strike meant walking away from salary and pension payments totaling nearly $13,000. Ouch.

Perhaps it was because of these losses that the final-hour negotiations included union demands for higher pay for senior teachers. As the strike ended, the mayor pledged $5M per year toward extra pay for teachers with more than 14 years’ experience. We don’t yet know how these funds will be doled out, but if the cash gets spread evenly among all the teachers who qualify, it will amount to under $600 per teacher annually for the duration of the five-year contract. Still to be decided is whether those additional dollars would be factored into pensions. (Given that the district’s pension fund is already billions in the red, these kinds of decisions affect all sides.) Either way, the extra veteran pay will hardly offset the lost earnings.

Chicago Board of Education President Miguel del Valle called the walkout a sacrifice for all involved but said that the resulting contract will make the education system stronger.

Under the new contract, every school will be staffed with the mix of adults prescribed by the union, taking away school-level control over such decisions. Teachers gave up cash to support that; soon-to-retire teachers gave up the most.

Whether the system will be better for students remains to be seen (as does the impact on the district’s financial health). But we can see the financial tradeoff that teachers made. The question for them is, was it worth it?