Minor Thoughts from me to you

Not all unions are created equal. Public sector unions are fundamentally different from private sector unions. While private sector unions can serve a valuable function, public sector unions exist in a different world, with different constraints and a different history.

Private and public sector unions are different historically. While there's a long of history of private sector unions (based on both negative rights and positive rights), public sector unions have only been around since the late 1950's. The shape of that history has also been dramatically different. Take it away, Jonah Goldberg:

Traditional, private-sector unions were born out of an often-bloody adversarial relationship between labor and management. It's been said that during World War I, U.S. soldiers had better odds of surviving on the front lines than miners did in West Virginia coal mines. Mine disasters were frequent; hazardous conditions were the norm. In 1907, the Monongah mine explosion claimed the lives of 362 West Virginia miners. Day-to-day life often resembled serfdom, with management controlling vast swaths of the miners’ lives. Before unionization and many New Deal–era reforms, Washington had little power to reform conditions by legislation.

Government unions have no such narrative on their side. Do you recall the Great DMV Cave-in of 1959? How about the travails of second-grade teachers recounted in Upton Sinclair's famous schoolhouse sequel to The Jungle? No? Don't feel bad, because no such horror stories exist.

Government workers were making good salaries in 1962 when President Kennedy lifted, by executive order (so much for democracy), the federal ban on government unions. Civil-service regulations and similar laws had guaranteed good working conditions for generations.

The argument for public unionization wasn't moral, economic, or intellectual. It was rankly political.

Traditional organized labor, the backbone of the Democratic party, was beginning to lose ground. As Daniel DiSalvo wrote in “The Trouble with Public Sector Unions,” in the fall issue of National Affairs, JFK saw how in states such as New York and Wisconsin, where public unions were already in place, local liberal pols benefited politically and financially. He took the idea national.

The plan worked perfectly — too perfectly. Public-union membership skyrocketed, and government-union support for the party of government skyrocketed with it. From 1989 to 2004, AFSCME — the American Federation of State, County, and Municipal Employees — gave nearly $40 million to candidates in federal elections, with 98.5 percent going to Democrats, according to the Center for Responsive Politics.

Private and public sector unions also face different bargaining conditions. Private sector unions bargain with employers who face competition of their own. The employer must find ways to satisfy the union demands for pay and benefits without paying so much that it goes out of business. The union (mostly) recognizes this and limits its demands accordingly. Private sector unions are also paid with money earned from selling products or services to consumers who bought them voluntarily.

Public sector unions bargain with a single employer who faces no competition whatsoever. The employer satisfies the union demands for pay and benefits not with its own money but with money taken from the public purse. This limits the incentive of the employer to drive a hard bargain. Unions recognize this and increase their demands accordingly. Because public sector unions are paid with money taken from taxpayers who have no choice in the matter, taxes can always be raised to compensate for increased demands.

Private and public sector unions have different effects on the rest of the population. Private sector unions work for employers who provide goods and services as part of a free wheeling market place. If a private sector union strikes, it risks having consumers permanently move to a competing supplier. If a public sector union strikes, it deprives the citizens of an urgently needed service -- generally one that isn't provided by anyone else. A striking public union holds citizens hostage to its demands.

(Peter Kirsanow, a former member of the National Labor Relations Board, lists other constraints that apply to private sector negotiating but not to public sector negotiating.)

Public sector unions also deprive the voters and their representatives of the final say over government spending. A huge percentage of the government's budget -- of any organization's budget -- is spending on salary and benefits. But in areas with public sector unions, the government doesn't directly set salary and benefits. Instead, it can only set the amounts that the unions will agree too. This ultimately gives the union final authority over the government's budget. This was recognized by a 1943 New York Supreme Court decision.

To tolerate or recognize any combination of civil service employees of the government as a labor organization or union is not only incompatible with the spirit of democracy, but inconsistent with every principle upon which our government is founded. Nothing is more dangerous to public welfare than to admit that hired servants of the State can dictate to the government the hours, the wages and conditions under which they will carry on essential services vital to the welfare, safety, and security of the citizen. To admit as true that government employees have power to halt or check the functions of government unless their demands are satisfied, is to transfer to them all legislative, executive and judicial power. Nothing would be more ridiculous.

Even Franklin Delano Roosevelt recognized that public sector unions were a bad idea.

All government employees should realize that the process of collective bargaining, as usually understood, cannot be transplanted into public service. It has its distinct and insurmountable limitations when applied to public-personnel management. The very nature and purposes of government make it impossible for administrative officials to represent fully or to bind the employer in mutual discussions with government employee organizations. The employer is the whole people.

There is one, final, crucial difference between private and public sector unions. Public sector unions get to pick their own bosses, their own negotiators. This turns them from just an organization that protects their members to an organization that acts as a giant special interest. They are able to take the union dues that their members are forced to pay and spend a large portion of those dues on political lobbying.

As they sit across the negotiating table, they are able to implicitly threaten the negotiator with a loss of his own job or to implicitly support him with future campaign contributions. Nothing is said openly. Nothing needs to be said openly. Everyone at the table knows how the game works. The representatives and negotiators who play nice will be handsomely reward during the next election campaign. Those who do not can expect to be attacked endlessly.

This is not just a theoretical concern. Professor Bainbridge reviewed the evidence against public sector unions and found it persuasive.

Research by Terry Moe (22 J.L. Econ. & Org. 1) into the electoral power of teachers' unions finds just such an outcome:

The first study ... provides evidence that teachers, acting through their unions, are quite successful at getting their favored candidates elected to local school boards. When a candidate is supported by the unions, her probability of winning increases dramatically, so much so that the impact of union support appears to be roughly the same as the impact of incumbency. In terms of total impact, union influence may be even greater than this suggests, because union victories literally produce incumbents—and the power of incumbency then works for union candidates to boost their probability of victory still further in future elections.

The second study ... shows that public bureaucrats' turnout advantage over other citizens is much greater than the existing literature would lead us to expect. It also offers persuasive new grounds for believing that their high turnout is indeed motivated by occupational self-interest—and more generally, that they are actively and purposely engaged in an electoral effort to control their own superiors.

Moe concludes:

The prevailing theories treat bureaucrats as mere subordinates, controlled from above by political authorities. But the control relationship can run both ways, and not just because bureaucrats have expertise and other sources of private information. In a democratic system the authorities are elected, and this gives bureaucrats an opportunity to exercise electoral power in determining who will occupy positions of authority and what choices they will make in office. It would be odd indeed if public bureaucrats and their unions did not invest in this kind of reverse control—and there is ample evidence that they do.

In effect, public sector unionism thus means that representatives of the union will often be on both sides of the collective bargaining table. On the one side, the de jure union leaders. On the other side, the bought and paid for politicians. No wonder public sector union wages and benefits are breaking the back of state budgets. They are bargaining with themselves rather than with an arms'-length opponent

Nor are these the paranoid delusions of far-right anti-union agitators. Union leaders recognize their power over their employers.

the Michigan Education Association has distributed a 40-page instructional manual for local leaders that's entitled "Electing Your Own Employer, It's as Easy as 1, 2, 3." And as one high-ranking state union official told me when I wrote Revolution at the Margins, "We knew the school system wasn't moving to Mexico," so there was no reason to work with the state negotiator on establishing a prudent salary structure.

Even when unions don't directly control the officials they're negotiating with, they can strongly influence the negotiations through political means.

Professor Bainbridge quotes from the 1971 book, The Unions and the Cities.

No such market restraint exists in the public sector except in theory since discharging teachers, sanitation workers, or police- men as a result of granting higher benefits raises very real political pressures from within the affected government department and from an inconvenienced public. Government employers too frequently yield to constituents by a grant of increased benefits to employees and then either bury the increases in the "bowels of an incomprehensible municipal budget," seek new funds, or reduce other services by reallocating the city's treasury. Thus, normal market restraints are often supplanted by political restraints regardless of economic or social impact.

Increases can be buried if the public doesn't realize exactly how well employees are paid. A teacher's listed salary may only be $35,000 or $40,000 a year. The rest of the teacher's salary is hidden inside the benefits. The Wall Street Journal did an analysis of the fringe benefits for Milwaukee public school teachers. The top of the line number may be surprising: for every $1.00 in salary that they receive, they receive another $0.72 in benefits. These benefits include a total of $0.22 put into pension plans and $0.38 put into healthcare benefits.

Benefits are also hidden from casual view by specifying that they're for life. For instance, Milwaukee school teachers receive district funded healthcare for life. The district pays 100% of the cost of healthcare at the teacher's retirement and the teacher is only responsible for the annual increase in the cost of healthcare. Historically, these promises have not been pre-funded and the future costs do not show up on the district's budget.

Here's another way that benefits can be hidden. You know that public school teachers get healthcare as part of the compensation. But do you know how they get that healthcare? Did you know that WEA Trust, an insurance company affiliated with WEAC, provides health insurance to nearly every public school employee? And that that healthcare is significantly more expensive than comparable insurance from companies not affiliated with WEAC?

BigGovernment.com provides an overview.

WEA Trust has grown very fat on public school dollars, with a net worth of $316 million and a team of 12 administrators all receiving compensation packages worth six figures per year.

Sadly, this insurance swindle is endorsed by state law.

The pressure derives from state law, which makes the identity of a school’s health insurance carrier a topic of collective bargaining between local unions and school boards. That allows union representatives to come to the table demanding expensive WEA Trust coverage, and frequently school boards give in.

[snip]

Once school districts sign up for WEA Trust coverage, and write the carrier into collective bargaining agreements, the shackles are on. And they aren't easily removed.

Local unions often refuse to have the provision stricken from school labor contracts in subsequent negotiations. If a school board presses the issue in an effort to save money, WEAC will frequently take the case to arbitration.

The Trust's business practices also complicate the problem.

Districts need employee claim histories to provide to potential bidders, but WEA Trust sometimes refuses to surrender the information, making it more difficult, if not impossible, for competitors to draft an accurate insurance estimate.

WEA Trust also reportedly threatens districts with higher premiums – by removing them from regional insurance pools with lower rates – if they consider a cheaper carrier.

Some districts have managed to break WEA Trust's shackles and the savings tell the story. Officials from 15 districts recently told EAG that they saved six figures the first year under new coverage, while still providing quality health benefits for employees. They also say the cost of their new coverage has remained steady in subsequent years.

But there is a catch. Officials at all of the breakaway districts said they had to surrender, or at least share, the insurance savings with their local unions, generally in the form of salary increases. That left them with little or no extra revenue to cover other costs.

Last year, Milton's school district was able to switch from WEA Trust to Dean Health and save $382 per month, per employee. That's not exactly chump change. This is something that other school districts around the state would also like to be able to do.

Yes, public sector unions are almost completely different from private sector unions. They are not at all the same thing and shouldn't be treated the same either by the general public or by the government. They should be treated like what they are: a special interest that looks out for its own interests at the expensive of everyone else's, like any other special interest does.

But they're not just any other special interest. They use their position as public "servants", providing crucially needed public services, to make demands of the general public. If they're rebuffed they don't just respond by campaigning politically as other special interests do. They also do whatever is necessary to inflict pain upon the general public, in an effort to further pressure government representatives. This pain can take the form of protests, slow downs, or stoppages thus depriving citizens of the services on which they depend.

Because of all of this, I do not find public sector unions to be admirable. I despise them as much as I despise every other special interest.