"Public Unions - a Force for Destruction"

Sydney M. Williams

Thought of the Day

“Public Unions – a Force for Destruction?”

February 19, 2010

About 80% of the $280 billion of stimulus money that has been spent thus far has gone to state and municipal governments largely to ensure continued employment for union workers. These jobs represent the bulk of the alleged 2,000,000 jobs saved in the past year. It is perhaps a worthy cause, but serves as a band-aid on a gaping wound.

Despite Federal help, the Center on Budget and Policy Priorities estimates that budget shortfalls for the fifty states will total $350 billion. Budget shortfalls vary enormously among states, but those with the biggest gaps have one thing in common – sizable public unions.

The history of unions in our Country began of necessity. Workers, especially in assembly-line factories, mines and railroads, were ill-treated and under paid. Initial organization attempts proved violent, resulting in bloody strikes, the best known being the 1886 Haymarket Riots in Chicago and the equally bloody nationwide Pullman Strike in 1894. With the passage of the National Labor Relations Act (the Wagner Act) in 1935, labor gained respectability along with the right to organize and to strike.

Unionization in private industry peaked, as a percent of non-farm workers, in the immediate post-war years at 33.9%. At the time, 9.8% of public employees (all state and local) were unionized. Today those numbers have reversed – 7% of private sector non-farm employees are unionized, while 37% of public employees are union members.

A major boost to public unions came in 1962 when President Kennedy signed executive order 10988 permitting the unionization of federal employees. That act, as Daniel Henninger wrote in the Wall Street Journal in January, “…swung open the door for the inexorable rise of a unionized public work force in many states and cities.”

As well, that act became one of the prime catalysts to today’s state and local budget woes. There is direct correlation between states with high unionization and large budget gaps. States, like California, Illinois, Nevada, New Jersey and New York, with big budget gaps have large public union representation. Those with small gaps, states like Nebraska, Texas, South Dakota, North Carolina and Wyoming, have relatively low exposure to unions. There is also equivalence between high unionization and municipal bond ratings, suggesting that states that can least afford it, like California and New York, have to pay the highest interest rates.

This rubber band can be stretched only so far. An increase in taxes, at a time of stress, will accentuate the down turn. Costs must be cut, which, unfortunately, means reducing employment. According to Dennis Kneale, a CNBC editor, newly elected Governor Chris Christie, on CNBC Thursday morning, cited a stunning statistic: “A 42-year-old state government worker in New Jersey who gets a 20-year pension has paid in $124,000 – and will take out $3.8 million in payments and health coverage for the rest of his life.” Try comparing that to Social Security or to your 401K plan! Mr. Christie stated a truism: “…we’ve spent too much and we’ve borrowed too much. The only way to fix that is to stop spending so much – it’s the only way to do it.”

Excluding higher education employees, 85% of California’s 235,000 employees are unionized. According to a piece in the January 22 Wall Street Journal by Steven Greenhut, over the past decade pension costs for public employees increased 2000%, while state revenues rose 24%. Unemployment in California exceeds 12% and there is little likelihood of a budget resolution which will not involve gimmicks and accounting tricks. Perhaps the State should hire the same magicians from Goldman Sachs who so brazenly abetted Greece?

Governments have a history of bowing to union demands. In part, that consent reflects respect for those serving in public office and, in part, because, ostensibly, public employees give up the right to strike. But increasingly it reflects the enormous political power of public unions and the millions of dollars they provide in campaign contributions. It becomes a self-serving and self-reinforcing cycle.

Of course, there have been times when public employees have struck. In 1919, then Governor Calvin Coolidge of Massachusetts halted the Boston police strike by saying famously: “There is no right to strike against the public safety by anybody, anywhere, any time.” Forty-two years later President Reagan fired striking air traffic controllers, and kept planes in the air by hiring replacements.

President Obama, in his support for charter schools and voucher programs (with the, ironically, infamous exception of schools in the Nation’s Capital) has begun to take on the very powerful teacher’s unions. Perhaps this is an early indication that even the Democratic Party (the prime beneficiary of public union campaign contributions) has finally realized the futility and damning direction of current trends. I certainly hope so.

Unions are important, but they must be responsive and responsible to the needs of those they serve, and they must be cognizant that stubborn adherence to the past may bankrupt their employer and themselves, serving no one. There is no better example than the American auto industry – an industry bankrupted by a combination of poor merchandise and over-reaching unions, an instance of which government has first hand knowledge.

It is a tourniquet that is needed at the government level, not a band aid, and the tourniquet, as painful as it will be, means tighter controls on unions and reduced spending.