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Chicago teachers’ strike: Everybody wins, really?

FORTUNE — The 16-page settlement ending the furor over the Chicago teachers’ union strike lays out details as specific as the number of minutes allotted for the daily lunch break and the remedy if teachers have to skip lunch.

There is enough in the three-year contract for both sides to claim victory. Teachers get yearly wage increases, and well-rated teachers who are laid off get some preference for new Chicago school job openings. But the school day is longer, and teacher evaluations will be partially based on student test scores.

While an end to the 10-day standoff clearly benefits students, it also dimmed the daily public spotlight on public employee rights and salaries and how those issues relate to education reform. Critics fumed that the teachers were simply being recalcitrant in the face of proposed reforms — namely, tying pay to student performance — designed to combat poor scores and high dropout rates.

In a climate where union members like public school teachers are regularly pilloried as overcompensated, the teachers’ union took a defiant stance by going on strike to get a better employment contract.

Some castigated the union’s actions as a greedy grab for money when the average teacher salary in Chicago is $75,000 a year. The union says that figure is inflated because it includes administrator salaries, but no alternative number has been offered.

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Chicago’s troubles are the latest front on a determined push to cut back public employee salaries and pensions after a precipitous fall in revenues has decimated state and local budgets. Despite the recent surge of anti-teacher and anti-union sentiment, teachers decided to stop negotiating and take their complaints to the street.

“There’s an attitude that teachers should be glad they have jobs with so many others losing ground,” says Peter Cappelli, a labor relations professor at the Wharton School of Business at the University of Pennsylvania. That loss of respect and courtesy contributes to pushing teachers to take a harder stance, he notes. “If teachers feel they are not going to be treated as professionals, they feel that they can push in another direction so they can be treated fairly,” he says.

Critics cite Democratic President Franklin D. Roosevelt’s scathing comment that government employee strikes are “unthinkable and intolerable.”

Union leaders simply want “teacher evaluations watered down,” argues policy analyst James Sherk in his blog on labor issues for the conservative Heritage Foundation. “They also want the school district to rehire teachers who lose their jobs in layoffs or school closings — no matter how ineffective they are,” he says.

Teachers have their defenders, who believe that they are being turned into scapegoats by those lashing out at union members for their assured salaries and retirement benefits. But disdain for unions stems back decades, says Michelle Kaminski, who teaches public sector labor law at Michigan State University.

When Ronald Reagan squelched the federal air traffic controllers’ strike in 1981, “it was a signal that if the government can bust unions, anyone can,” she says.

“Strike activity has been very low for at least a decade, nothing like the 1950s, 60s, and 70s,” she notes. While few private sector workers are unionized — only 6.9% — some 36.2% of public sector employees belong to unions, according to data from the federal Bureau of Labor Statistics.

“As a country, we have a real blind spot about public sector employees. During the Republican convention, [Mitt] Romney praised Neil Armstrong’s accomplishments,” she notes. “But Armstrong worked for the government. What he did was paid for by public money.”

While most police and firefighters are subject to mandatory arbitration (rather than being able to go on strike), states have varied policies on other public employees. The idea of imposing a settlement on striking workers has been slow to take hold in the United States. Many Americans view the practice as contrary to individual democratic rights.

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Corporations, though, routinely attach mandatory arbitration clauses to employment contracts and such binding arbitration has become widespread in contracts for consumer goods (like cell phone contracts). But some academic studies say that arbitration, in fact, favors unions because it assures members of some gain in contract negotiations.

Employee rights have been called into question — notably in Wisconsin, which was the first state to allow collective bargaining — even though about 75% of states currently allow it. While the political will was there, the judicial system so far has not agreed. A state court judge recently struck down a new Wisconsin law that nullified collective bargaining, setting off what is likely to be a protracted legal fight.

The Chicago Teachers’ Union, the third largest in the country, did bargain with city officials — and arrived at a compromise — but the situation turned hostile when the 26,000 union members declined to quickly ratify the pact and kept 350,000 children out of school for seven school days.

In recent years, there have been scattered strikes in smaller suburban and other school districts over paychecks, and those have settled. But the Chicago Teachers’ Union saw the contract outcome as a bellwether for the larger national battle over school control. The National Education Association, one of the two largest teachers’ unions, last year passed a resolution against embracing charter schools and new federal education spending formulas.

Chicago’s mayor Rahm Emanuel, a Democrat, invoked arguments that echoed Wisconsin’s Republican Governor Scott Walker when he asked a court last Monday to issue an injunction against the strike. He said that Illinois law “expressly prohibits” teachers from striking over noneconomic issues like layoffs and teacher evaluations.

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Emanuel has been pressing for a longer school day and a longer school year, and he favors a teacher evaluation system where 40% of an assessment (up from 25%) will be derived from student test score changes.

While the reputation of Chicago’s teachers will likely be tarnished because of the missed school days and the chaos it caused for families with school-age children, their tactics appear to have worked. Student scores will comprise 25% of teacher evaluations for the next two years, and rise to 30% in the third year of the contract. Teachers are on track to receive a 3% raise in the contract’s first year, and 2% raises in the subsequent two years, plus raises for additional degrees and higher levels of experience.

But as teachers and students alike returned to school this week, no one was crowing. Chicago schools face a $1 billion budget deficit next year, which is likely to mean school closings, a major shortfall in teacher pension funds, restive parents who naturally want their children’s needs to come first.