Wednesday, September 12, 2012

“Chicago Teacher’s Strike – Emanuel’s Waterloo?”

Sydney M. Williams

Thought of the Day
“Chicago Teacher’s Strike – Emanuel’s Waterloo?”
September 12, 2012

The bitterness emanating from the Chicago teacher’s strike was as predictable as it is unsettling. State and municipal unions have become symbolic of government overreach and, in fact, the focal point of fiscal irresponsibility; so leaders are fighting for their survival, with little regard for the affected students, nor even for their hard working, most effective members.

Private sector union membership has been declining since peaking in the mid 1950s, when about 35% of all workers were union members. For 2011, the comparable number is 6.9%, according to the U.S. Bureau of Labor Statistics (BLS.) Public sector unions, which did not exist in the 1950s, represented 37% of government employees in 2011. The BLS notes that total union membership in 2011 was 11.8% of all wage and salary workers, with 14.9 million workers – a 70-year low, according to the New York Times. In contrast, in 1983, there were 17.7 million union members, representing 20.1% of the workforce. Tellingly, according to the BLS, union membership was highest among workers 55 to 64 years old (15.7 %) and lowest among those aged 16 to 24 (4.4%.) With states like Indiana, Michigan, New Jersey, Ohio, Wisconsin and others implementing reforms that do away with mandatory membership requirements for municipal workers, public-sector union membership roles continue to decline. That is positive for the citizens of those states, as public employees reorient their allegiance to taxpayers – their real employers – versus union leaders who have usurped that responsibility.

For most of our country’s history, unions had no role with public employees. Calvin Coolidge, as governor of Massachusetts, rode his breaking of the Boston police strike in 1919 to the Vice Presidency, and then to the White House upon the death President Harding in 1923. President Franklin Roosevelt, a friend of labor, said in 1937, “The process of collective bargaining, as usually understood, cannot be transplanted to the public sector.” Even George Meany, the first president of the AFL-CIO, believed it was “impossible to bargain collectively with the government.” The sense was, according to Daniel DiSalvo, a professor of political science writing two years ago in National Affairs, that “democracy would be compromised when elected officials begin sharing with union leaders the power to determine government employees’ wages, benefits and working conditions.”

The enactment of civil-service laws in the late 1940s converted many government jobs from patronage appointments to lifetime jobs, or at best made them non-political. (In the early 1940s, for example and according to Mr. DiSalvo, the average tenure for a cop or garbage collector in New York was five years.) During the 1950s, the “baby boom” created increased demand for government services, especially teachers. At the same time, the labor movement was becoming more and more important to Democratic coffers. For the 22 years ending in 2010, twelve of the twenty largest political contributors were unions. Almost all of their money went to Democratic candidates. So, when private sector union membership roles began declining in the late 1950s, newly elected President Kennedy was open to the idea of allowing public sector employees to organize, and in January 1962, with the signing of Executive Order 10988, he granted them the right to collectively bargain. That act triggered a wave of unionization, a movement that initially enjoyed bi-partisan support. However, in time it became a movement that enhanced the growing symbiotic relationship between unions and Democrats.

The dye had been cast. Union leaders demanded more and more in terms of salaries and benefits. Politicians’, eager to satisfy this growing bloc of votes, ignored the math of what they were promising. By the late 1960s, equities had been rising for more than thirty years. Interest rates were rising nominally. In those early post-War years there were more than six workers for every retired person; positive equity returns, while modestly rising interest rates implied that a discount rate of eight or nine percent seemed reasonable. No one worried about the consequences of the promises that were being made. Future obligations did not seem especially onerous.

At the same time, though, many in the private sector saw the handwriting on the wall. The weight of union demands was pressuring their businesses. Those that did not heed the warning, like Chrysler in 1980 and Bethlehem Steel’s in 2003, had to file either pre-packaged bankruptcy proceedings or were forced into outright bankruptcy. One consequence was a gradual shift from defined benefit retirement plans toward defined contribution plans, initially for non-union employees. Employees had to assume some of the costs of healthcare and other benefit plans. With a responsibility to shareholders, as well as to employees, management realized the route they had been on would lead to failure. Persistent demand by union members led to a reduction in their numbers. As markets became more volatile and interest rates began a thirty year decline, the cost of future obligations for retirement and health plans rose. At the same time, foreign competition put additional demands on productivity. Many industries and businesses, as a consequence, failed. The result was a dramatic decline in private sector union membership, as noted above.

At the same time, public sector unions were increasing their roles. They have been long time contributors to the Democratic Party. In exchange for campaign donations, politicians assured union members of their continued support. Left out, were taxpayers who had to fund the promises made by political leaders to municipal and state union employees. Between 1989 and 2012, The American Federation of State, County and Municipal Employees (AFSCME) contributed $61.4 million, with none of it going to Republicans. During those same years, the National Education Association (NEA) donated $44 million, with 5% going to Republicans. And, over that same time frame, the American Federation of Teachers (AFT) gifted $34.7 million to political parties, again with none going to Republicans.

The recall election in Wisconsin in June of this year was a sea tide moment, with Governor Scott Walker fending off a bid to unseat him, despite very aggressive spending – $21 million by some accounts – by union leaders. According to the BLS, there are about 7.6 million public sector union members in the U.S. With average annual dues around $500, that amounts to approximately $3.8 billion. The most important use of those funds is keeping their members happily employed and growing the base. That means campaign contributions. The relationship between union leaders and Democratic bosses has served both parties well for six decades. But, time is drawing nigh. Through the end of July there have been nine municipal bankruptcies this year alone, and two major California cites – San Diego and Sacramento – recently voted overwhelmingly for public-pension reform.

Now we have President Obama’s former chief of staff and current Chicago Mayor Rahm Emanuel confronted with a disruptive strike by teachers in Mr. Obama’s home city. The average teacher in Chicago, according to the Wall Street Journal makes $71,000 a year, plus annual benefits estimated to be worth an additional $15,000. (The New York Times puts the average salary at $76,000.) Meanwhile, the median household income in Chicago – the taxpayers who pay the teacher’s salaries – is $47,000 – thirty percent less. For their money, Chicago’s taxpayers are getting a graduation rate of about 55%, one of the worst in the United States, with only six out of every one hundred public high school freshman receiving four-year college degrees. (Among African-American and Hispanic boys, the number is three out of a hundred.) When Mr. Emanuel assumed office, the Chicago Public Schools were facing a $700 million deficit. In three years, expectations are that the Chicago School System will be $3 billion in the red. S&P and Moody’s recently downgraded Chicago Public School’s debt, despite the City having the highest property tax allowed by law.

The problem confronting Chicago voters is a system that has gotten out of control. It is broke. The strike by 26,000 teachers has meant that 350,000 students are not being educated. It is disrupting the lives of working families. When the income disparity between teachers and residents of Chicago is as great as it is, one cannot feel sorry for them. When teachers refuse to submit themselves to the same type of standards as the rest of us, it is difficult to have sympathy for them. When 50,000 lucky Chicago students attending charter schools are unaffected by the strike, will it come as a surprise that the demand for more charter schools by inner-city parents will be forthcoming?

If government chooses to play a positive role for the future of our nation, in a globally competitive world, there is no more important place to begin than in education, especially at the elementary school level. Parents, especially those of disadvantaged and minority students, understand that that their children need tools, not handouts, if they are going to successfully compete against youngsters from Asia, South America, Europe and Africa. They instinctively understand that competition breeds excellence – they see it in sports. What is true for a basketball or baseball team is equally true for young scholars. Parents understand this, even if union leaders do not. If Mayor Emanuel lets Chicago’s students be devoured by the greedy leaders of Chicago’s teacher’s unions, then he has met his Waterloo.

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