Unions: Ideals vs. Reality

The ideals of unions are noble and pure. The rights of the ordinary worker are indeed worth fighting for. But there are unions and there are unions.

In the competitive private arena, unions that ask for too much will eventually derail their company’s financial success. For example, unions negotiated defined retirement benefits decades ago with America’s major automakers, that, especially as these companies started to face global competition, became fiscally unsustainable. The phenomenon was self accelerating as well, because as these companies struggled to meet their pension obligations, they became less competitive, which caused them to shrink in size, which made them even less able to meet their pension obligations. The funding projections that applied when American automakers enjoyed nearly a monopoly position in world markets became hopelessly inaccurate as the auto industry globalized, and unions representing auto workers had to negotiate a new deal that reflected the new competitive reality.


In the government sector, however, there are not the same checks that force unions and management to negotiate in good faith in the private sector. Governments are by definition a monopoly. Who else gets to collect taxes? Who else enacts and enforces laws? The government has no competition. In the government sector, union negotiated collective benefits can be agreed to and the taxpayer will pay. Compounding this is the intrinsic conflict facing all government agencies – success is failure – in the important context whereby if you solve a problem, you don’t need the same staff, troops or experts to fight the problem any more.


UNIONS IN THE PUBLIC VS. PRIVATE SECTOR

In the above chart, the vertical axis represents the degree of regulation on a scale of 1 to 10, and the horizontal axis represents the degree of competitiveness on a scale of 1 to 10. Appropriate levels of regulation of unions is represented by the blue diagonal bar, and the actual levels of regulation of unions is represented by the red bar. As the blue “should be” bar indicates, in a highly monopolistic environment, unions should be heavily regulated but as the environment becomes more competitive, unions can be less regulated. But as the “current status” red bar indicates, today there are far too few checks on the power of unions within monopoly environments, and as a result there are not adequate self-correcting mechanisms on the power of unions. This is most true of all with respect to unions representing government workers.

In California since 1978, when then Governor Jerry Brown signed legislation granting full collective bargaining rights to public employees, public employee unions have essentially taken over the public sector, negotiating for government workers a package of holiday/vacation, health and retirement pension benefits that are, on average, far better than what workers get in the private sector. And there is a cost for this – higher taxes and lower services. Politicians who challenge the unions, such as Governor Schwarzenegger in 2005, are spent into the ground by the public sector unions. They can pretty much spend as much as they need to in order to get what they want. They have literally billions of dollars annually in dues they collect from their members working in government. This is taxpayers money.

This is the genuine “two Americas,” those of us in the private sector who have to be wealthy in order to retire with any sort of financial security, and public sector workers, who earn as much or more than private sector employees during the years they work, then retire early with an income for life that dwarfs what they might have eventually gotten under social security. Not only is this unjust, but it has become totally unsustainable from a financial standpoint.

In the next few years, don’t be surprised if virtually every public agency in California faces insolvency due to the requirement they represent as an expense each fiscal year the cost to fund the future retirement benefits of current employees. The statewide impact of this is in the tens of billions of dollars every year. This relatively recent financial reporting requirement came too late, and in any case may yet be skewed by optimistic assumptions on the part of California’s pension fund accountants.

The intrinsic conflict of interest that faces government agencies – success is failure – is challenging enough when determining the appropriate scope of government. But when you combine this with the unfair advantage enjoyed by government employee unions collecting often mandatory dues, engaging with decisive impact in political campaigns, and negotiating benefits for their members far better than the benefits that taxpayers fund for private sector workers – you have a government sector with grossly undermined credibility. The noble ideals of unions should include all workers, not just public sector workers. Hence unions in the public sector should be strictly regulated. As it is, unions no longer bargain with the government, they are the government.

As local and state agencies face insolvency, rather than confront the reality of union control of our government, the 2008 version of Jerry Brown is as California’s Attorney General, busily trying to be greener than his Republican counterpart Governor Schwarzenegger. Brown has started being the tough guy with California’s city and county governments, not telling them to quit giving their employees benefits no private sector taxpayer might even dream of having, no, he’s threatening to sue our cities and counties under CEQA, on the grounds of contributing to global warming. This of course will allow municipal entities to collect carbon offset funds, no matter whether the money comes from auction, trading credits, taxes or fees.


We all want to squirrel away a little something for retirement.
(Photo: EcoWorld)

This is a lot of tough love, and the emphasis belongs on “love.” Taking away the ability of one landowner to work with one homebuilder to build a house, instead imposing an “urban service boundary,” does nothing to encourage pluralistic economic opportunity. But it keeps building fees within existing local jurisdictions and artificially inflates housing values. This raises the quantity and the amount of property tax and fee assessments. It also allows the municipalities to collect “carbon credits” because they will calculate the annual CO2 emission reductions attendant to dense infill vs. “sprawl.” The potentially billions in new funding to public entities based on new ordinances enacted to supposedly combat global warming is not being noted anywhere in the mainstream press. Under the pretext of combatting global warming, California’s Attorney General is preparing a new source of funds to feed the monster he created, and nobody is noticing the hidden agenda.

Even if CO2 were pollution, as the U.S. Supreme Court recently ruled, why should this money go to public entities to fund public employee benefits no private sector working taxpayer can enjoy? When every worker gets Social Security and Medicare, then we will reform and improve these vital programs. But as long as 30% of the electorate is either working for the government or depends on someone who does, reform will be perfunctory at best. And entitling every working citizen to the same formula when calculating taxpayer funded health and retirement security would also encourage employee crossover between the public and private sectors, allowing more diverse talent to enrich the hiring pools of both. And, of course, it would help America’s manufacturing sector compete globally.

Crucial linkages would engage and require resolution if public employee unions were again regulated and retirement and health benefits were normalized between the public and private sectors; we would have to define what taxpayer funded health & retirement security formula would apply equally to all citizens, and we would have to define who qualifies for benefits entitled to citizens. This fulfills the ideals of a union, but does so for all workers. The role of government can increase – and perhaps it should – but first it has to stop dealing only to its own, and give every American worker the same deal. Carbon credits might even be a currency of some utility, but only if integrity is restored to our democratic system, by regulating public employee unions, and using our taxes to provide decent health and retirement security to every American worker, and not just government workers.


Categorized | Business & Economics
3 Responses to “Unions: Ideals vs. Reality”
  1. nunzio says:

    THE UNIONS WERE BUILT ON SAFETY FOR THE WORKER AND THE BENEFITS THE WORKER IS ENTITLED TO AND WITH A UNION THE WORKER IS SUBJECTED TO NO LABOR PROTECTION AND THEREFORE IS EXPLOITED BY THE CORPORATION WHO IS OUT FOR THEIR OWN GREED. OUR COUNTRY NEEDS NAFTA REVISED IN SUCH A WAY THAT ALL AMERICAN GOODS ARE SOLD HERE IN OUR COUNTRY WITH LESS TAX CHARGED THAN IMPORTS – IT’S OK WHEN FOREIGN STUDENTS COME TO OUR COUNTRY AND THEN WORK BUT WHEN OUR PRODUCTS ARE BUILT HERE AMERICAN MADE WE SHOULD HAVE A QUOTA OF WHO COMES IN TO OUR COUNTRY AND LEARN IF THERE IS NOT FAIR TRADE. THERE ARE NOW COUNTRIES SUCH AS KOREA BUYING OUR WALL STREET STOCK WITH NO SOCIAL SECURITY NUMBER REQUIRED WE NEED TO HAVE LAWS CHANGED NOW BEFORE PLACES LIKE KOREA WILL BE C.E.O OF EXXON – THE UNIONS WERE HERE 50 YEARS AGO AND NOW LABOR WILL BE AGAIN REBORN FOR THE JOBS AND GROWTH THAT OUR COUNTRY WILL HAVE IN OUR NEXT ELECTION BUT OUR WORKERS DO NEED PROTECTION FROM UNIONS AND FROM OSHA FROM NUNZIO BAGLIERE SYRACUSE N.Y. FORMER UNION OFFICIAL OF THE I.B.E.W OF LOCAL 2084 COOPER INDUSTRIES E MAIL NUNZIO61@VERIZON.NET

  2. Paul M. says:

    Everyone of age in America has a right to work, in order to feed and clothe and house his family and/or himself. And just because certain jobs are federally-funded, doesn`t mean that those who work those jobs leave their constitutional rights at the property line, when they arrive for work No zone within the USA should take away our First Amendment rights, irregardless of who funds what. I just applied and went thru training at one such place where the training manager told us to keep our mouths shut about religion, politics and gender, and to never pray for someone sick and disabled while working on that job. Christians are told by Christ in Matthew 10 to pray for the sick and afflicted, and in Mark 16 it says to lay our hands on them in prayer, so that manager`s dictatorial powers are trumped by the words of Christ. Like the apostles of old, who were told by the Sanhedrin leaders, not to teach anymore in Christ`s name, they answered without hesitation, “We ought to obey God, rather than man. Jesus said, “Ye are my friends, if ye do whatsoever I command you.” Man or government or union has no say when it comes to rights of conscience. Glitteringspear.

  3. Eileen Hultin says:

    Hi Dave,

    I worked at GM in 1955 when Walter Reuther negotiated on behalf of the UAW to gain the Guaranteed Annual Wage. I was a secretary in the Salaried Personnel Department and worked some of the time for Harlow Curtis, the CEO so I was closely involved in the talks. In fact I was one of the people typing up each day’s agreement. I got to know Reuther rather well, and even then it seemed as though the company was agreeing to make itself less competitive in the future. Over the years I have watched with interest as my worst fears for GM have come true. The demands were unreasonable in 1955 and have continued to be unreasonable – but so have the excessive executive salaries and bonuses.

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