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Margaret Haley was born in Joliet, Illinois, in 1861. She completed her elementary and secondary education by the age of 16 and then began a teaching career in an Illinois country school. She took a year of teacher training at the state normal school in Bloomington, Illinois, and then became a Chicago elementary school teacher in 1883. She also completed one term of teacher training at the Cook County Normal School in Chicago, known nationally as the school led by the famous pedagogical progressive, Francis Parker. In 1897, after almost 2 decades of teaching in Chicago, Haley helped form the Chicago Teachers Federation (CTF) in cooperation with her colleague Catherine Goggin. Both Haley and Goggin, and many of the CTF members, were Irish-American Catholics.

The major issues around which the CTF was formed were bread-and-butter concerns, initially teachers' pensions. After pensions were achieved, tenure in the job was the next goal for Haley and the CTF. Of course, salaries were also a CTF concern, and Haley and Goggin led the efforts of their union to increase the salaries of elementary teachers. Despite the clearly economic goals of the CTF, Haley earned the image of an effective political reformer at the same time that she sought traditional benefits. For example, in reaction to a salary cut for elementary teachers in the late 1890s, Haley led an investigation into Chicago's municipal records that revealed numerous cases of either nonpayment or underassessment of property and/or franchise taxes on the part of large corporations, public utility companies, and large landowners. She doggedly sought to expose these tax inequities, and in 1904 she won a court verdict ensuring a more equitable system of taxation in the city of Chicago and the state of Illinois. This victory was considered a signature event in the progressive political reform movement of the era, which attacked corruption and inequities in the finances of many American cities. Haley linked her tax victories to other causes held dear by political progressives, such as municipal ownerships of street railways and other public service companies and the popular election of school board members.

Haley's political reform crusades continued through the first two decades of the 20th century. She became a nationally famous advocate for woman suffrage and spoke on behalf of women's right to vote in many parts of the country. She voiced her prosuffrage arguments to the members of the CTF and linked the case for suffrage, convincingly, to the economic improvement and the rise in status of women teachers. She was often an ally of social reformers such as Jane Addams and of pedagogical reformers such as Ella Flagg Young, superintendent of the Chicago schools for a time and colleague of John Dewey at the University of Chicago.

Haley's CTF was one of four local teacher organizations that founded the American Federation of Teachers (AFT) in 1916. She also was an ally of John Fitzpatrick, leader of the Chicago Federation of Labor. Shortly after joining the AFT, however, Haley and her group were forced out of the national teachers' union by the actions of Jacob Loeb, president of the board of education in Chicago. Loeb pushed through the school board a rule change that threatened the job of any teacher who joined a labor organization. Enforcement of the Loeb Rule was directed at CTF members and, thus, Haley was forced to pull her organization out of the teachers' union after 68 of her members were denied continued employment in the Chicago schools. While the CTF responded to the Loeb Rule challenge by successfully supporting teacher tenure legislation in the state legislature, that legislative enactment was accompanied by other provisions that increased the power of the school superintendent and the school board. With passage of the Loeb Rule, the CTF left the AFT. The CTF, however, and Haley, became fixtures in the national conventions of the AFT's major rival, the National Education Association (NEA).

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