Tuesday, November 27, 2012

“Unions – For Better, For Worse”

Sydney M. Williams

Thought of the Day
“Unions – For Better, For Worse”
November 27, 2012

The fire in the garment factory in Bangladesh on November 24th that took 134 lives is reminiscent of the Triangle Shirtwaist Factory fire in New York City that occurred on March 25, 1911 that claimed 146 lives. In both cases, the factories were located in crowded, squalid areas. Poorly paid young women, working in cramped quarters with few safeguards, were the principal victims. In the case of the Triangle Shirtwaist tragedy, doors were locked – the reason being, or so management alleged, to prevent pilferage and unauthorized breaks. In Bangladesh, fire officials said people were killed because “there were not enough exits.” As the editor of a socialist paper wrote in the aftermath of the New York fire, “The deaths resulted because capital begrudged the price of another fire escape.”

The fire in Bangladesh cries out for the need of labor and safety reform in that country, just as the fire 100 years earlier did in New York. In the wake of the Triangle fire, union leaders from the International Ladies Garment Workers Union (ILGWU) allied themselves with reformers such as Al Smith, Robert Wagner and Frances Perkins to push for comprehensive safety and workers’ compensation laws. It took a long time for reforms to be fully implemented and for workers to be paid fairly, but ultimately (and because of the pressure unions brought to bear) they were.

Most people most of the time operate in their own self-interest. It makes no difference whether one is speaking of capitalists, labor leaders or politicians. Capital is fluid and chases returns wherever it can find them. Government tries, through monetary controls and tariffs, to keep capital closer to home, but the fact is it migrates to where returns are the highest, not necessarily what is in the best interest of the country. In like vein, union leaders have a personal interest in growing their membership base, increasing dues and, thus, their power.

Reforms always take longer than we would like. Sometimes the pendulum swings to excess; efforts to better working conditions and increase wages at some point become counter-productive. As well, the interests of union leaders can be at odds with those they purport to represent, as employees at Hostess Brands are discovering when their demands forced the elimination of all jobs. Union demands over the past few decades have bankrupted many businesses, forcing jobs overseas. Such actions explain, in part, the sixty-year decline of private sector union membership. Losses in the private sector, however, are being offset by gains in the public sector.

Countering the exploitation of labor by capital in the first half of the Twentieth Century demonstrated the good side of labor. But the relatively recent intractability of their demands in the public sector have created enormous fiscal problems for states and have helped make too many public elementary and high schools uncompetitive in international testing. In the private sector, labor and capital seek equilibrium. Both have powerful incentives to protect their easily-defined interests.

In the public sector, however, there is not the same natural alignment of interests. Labor, obviously, wants as generous a package as possible, but the representatives for the counter-side are not so obvious. In state governments, management and capital are two distinct parties. Management is the elected officials. Capital is taxpayers. Government employees work for the taxpayers and citizens of their respective state. Their income, pensions and benefits are paid for via tax receipts. Elected officials have often had their campaigns sponsored by the largesse of the same unions who may be demanding greater benefits for their members. But it is the taxpayer who has the obligation to pay the benefits negotiated by elected officials. It is one reason why Franklin Roosevelt did not favor the unionization of public sector workers. He considered the possibility of public sector unions going on strike as “unthinkable and intolerable.” In like vein, former president of the AFL-CIO, George Meany, stated: “It is impossible to bargain collectively with the government.”

Unfunded state pension plans and post-employment benefit obligations totaled $3.49 trillion at the end of last year. To put that liability in perspective, fiscal 2012 aggregate state spending budgets, according to the National Governors Association, will be $667 billion this year with revenues of $659 billion. It is beyond the ability of the most profligate states to honor their promises. According to the findings of the Joint Economic Committee, the state pension plans of twenty states are more than 60% unfunded, with the two worst, Illinois and Connecticut, unfunded by more than 70 percent. No state is even close to being adequately funded. North Carolina is in the best shape, with their plan 37.1% unfunded, according to the same study.

Because of the unreasonable demands unions have requested, and that elected officials have granted, the American people will be faced with the difficult choice of either a federal bailout of states’ pension and health plans, or letting prior promises go unfulfilled. The first will require an unprecedented increase in federal taxes (along with a concomitant slowdown in the economy such tax increases would cause); the second would be reflected in the difficulty of affected states to access credit markets. Neither choice is desirable.

The other area in which unions have acted against the broad interest of the American people is in education. The National Education Association (NEA) and the American Federation of Teachers (AFT) have a combined membership of 4.5 million. With dues averaging about $500, unions collect about $2.25 billion, enough money to give them enormous political clout. While one might argue the merits that unionization has brought to teachers, the real-life consequence has been declining standards for millions of American children. Seniority is given precedence over merit. Bad teachers are not fired; they are kept on in “rubber rooms.” Additionally, unions have fought competition stemming from Charter Schools and voucher programs, despite the obvious public clamor for such alternatives. Ironically, those that are most damaged by the intransigence of teachers’ unions are the urban poor. Suburban schools tend to perform better, but still not well enough in the global environment. And the wealthy have private school alternatives.

Every three years the Program for International Student Assessment (PISA) publishes its survey of student achievement. The results for the 2009 PISA survey were published in December 2010. They indicate the distance our students must travel in order to be globally competitive. In reading, the U.S. ranked 17th, in science 23rd and in mathematics 31st. In reading the United States ranked just below Poland and just above Lichtenstein; in science we were between Hungary and Norway, and in math betwixt Luxembourg and Ireland. Asian nations and Finland dominated the top five in all three categories. We may have the best universities in the world, but too many of our public high schools are failing to keep pace. It is the greatest challenge our nation faces.

Over the years, unions have played a critical role in improving working conditions and raising the standard of living for millions of workers. They did so especially in the first half of the Twentieth Century in the U.S. The conditions that created the horror in Bangladesh demonstrate the need for worker-support groups in that country. Unions should be applauded for representing the cause of workers at a time when they needed it. But they should also be chastised for advocating programs that are destructive to state budgets and deleterious to public school students. Their greed led directly to the bankruptcy of businesses in the auto, steel and now in the baking industry. More important, in the public sector, they have set us up for a financial Armageddon that lies ahead, and they risk graduating a generation of students unqualified to meet the demands of the Twenty-first Century.

In short, the success of public sector unions, at the expense of the people, is but another step toward the Potemkin village that Washington is rapidly becoming.

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