Unionizing Silicon Valley?

Does that get your attention? It should, because when that happens, the Silicon Valley will become the sister city of Detroit, with the only difference being Detroit gave way to union power fifty years earlier, and is still paying the price. Silicon Valley is a meritocracy, and as long as it stays that way it has a chance to maintain its high-tech dominance.

Unions in 21st Century America are not nearly the same creature they were fifty years ago. Back then unions legitimately fought for rights and benefits that have now largely become institutionalized – safe workplaces, reasonable work hours, competitive pay. Back then American heavy industry enjoyed nearly a monopoly position, and as a result businesses such as the Detroit automakers could afford to grant generous concessions to unions – including pension benefits whose financial sustainability relied on the assumption Detroit’s factories would always be hiring more people than they were retiring. When the world caught up with America, and the big three automakers no longer could experience annual growth in revenue and employees, the cost of these pensions became burdens that crippled them.

The only true monopoly left in America today, however, is in the government. In the public sector there is no global competition, and there is no problem growing revenues, since all you have to do is increase taxes and fees to increase revenue. As a result, unions who had ruinously wrung every dime out of America’s automakers, nearly killing them in the process, and who saw no percentage in trying to organize, say, Walmart employees, have taken over the public sector. And the pension debt now carried by public entities is the biggest liability, by far, most of them will ever face. Any politician who questions this reality is crushed by public sector unions, who collect mostly mandatory dues from millions of public employees and deploy this money to exercise nearly absolute control over elections at the state and local level.

At the same time as union power has shifted to the public sector from private industry – because, sadly, it is easier for unions to control the public sector – the financial epicenter of union power has become those pension funds who manage all the wealth they have confiscated from taxpayers (who have to retire on social security in their 60′s), to provide to unionized public sector workers who retire in their 50′s. These public employee pensions have become so generous, in most cases a private worker would have to have saved over a million dollars in their personal retirement fund for the annual interest during retirement to match the pension of even the lowest echelon of workers in the public sector. Since unionized public employees make far more in base pay than globalized private sector workers, amassing that million or more is problematic for most taxpayers, to put it mildly.

It is in this context that CALPRS, the retirement fund that manages pensions for California’s workers, and AFSCME, the American Federation of State, County and Municipal Employees, have launched a public relations assault on Larry Ellison, CEO of Oracle. Unlike ordinary workers in the public sector, Ellison didn’t simply show up four days per week for 25-30 years so he could retire a millionaire. Ellison’s billions were earned because he rose to the top in the business ecosystem of the Silicon Valley, a place where merit still counts for something. A place where if an employee is productive they are rewarded, and if they are incompetent, they’re fired. A place wholly dissimilar to the unionized public workplace where the only way you can get fired is by being politically incorrect, and job security is furthered if you never solve problems.

CALPRS, along with other pension funds fueled by our taxes, have taken huge stakes in companies like Ellison’s Oracle, and, as reported yesterday in the Los Angeles Times, have suggested it is time for Oracle’s board to adopt a “say on pay” plan, wherein Ellison, a hero who has helped keep America competitive and created jobs for over 84,000 people, will have to periodically justify his compensation package.

This is not a moral crusade, or even a genuine initiative; it is a public relations stunt, part of an ongoing attempt to keep voters focused on the ultra-high pay of a handful of extremely successful private sector executives, instead of on the obscenely inflated pay and benefits of literally tens of millions of unionized public employees. This sort of propaganda is infantile, playing to emotions of resentment and envy, and relying on the utter financial ignorance of most journalists as well as the general population. The venal reality is public sector workers usually make 2-4x what private sector workers make, their retirement benefits are totally unsustainable, and instead of merging funds like CALPRS with Social Security, which would benefit the U.S. economy and protect the interests of ALL workers, they point the finger at people like Larry Ellison to cloud the issue.

Ultimately, public employee unions and their pension fund managers such as CALPRS, will hopefully be smart enough to leave Oracle alone. After all, by investing in the globalized private sector, public employee pensions have a better chance – still remote – of remaining solvent. But voters and investors should understand that public employee pension fund influence on the boards of major corporations represents union influence – and once they control the boards they will control the company. Instead of organizing from the bottom up, Silicon Valley risks becoming unionized from the top down.

For more read posts in our Public Sector Reform section. Also recommended is the website Pension Tsunami.

4 Responses to “Unionizing Silicon Valley?”
  1. shutterbug says:

    I want to add a very important fact: It should be noted that if there were no unions working conditions would deteriorate to pre-union standards. Safety would take a back seat, wages would drop, and benefits would disappear. Recent mine disasters were in non-union mines for a reason – profit was valued more than safety. Independent studies show Union job sites have a better safety record than non-union job sites, probably for the same reason.

    Unions raise the standard for ALL workers, not just those who pay their union dues. Wages and benefits are better in the union sector because workers are skilled labor, trained through apprenticeship programs to do their job better than their non-union counterparts. Better-trained workers complete a job faster, saving the employer money in the long run. This article could have pointed out that the World Trade Center clean-up was completed ahead of schedule and under budget by Union Labor, but that would be a positive comment.

    As for the Walmart comment: this company has taken advantage of Walmart employees for years. Lawsuits have been decided in favor of the employee against Walmart for a multitude of offenses. The company is notorious for not offering health care and decent wages, cheats the workers out of payment for worked breaks, forced them to work “off the clock”, and has suits filed against it for discrimination. Unions have tried to organize Walmart employees, but Walmart has engaged in illegal acts to discourage employees from voting for union representation. The employees must think that any job is better than no job at all, since Walmart has fired some for trying to join a union.

    As for the carmakers being at the mercy of the unionized worker, I would rather ride in a union-made car than take a chance on catastrophic mechanical failure driving 70mph down the highway in a car made by unskilled workers.

    Does your child go to school instead of a mill to work under slave conditions every day? Do you enjoy a 40-hour/5-day week instead of 6 or 7-day week without fair compensation? What about job safety? You can thank the UNION for all of those benefits.

    All in all, this article is about the most anti-union propaganda I have read in a long time.

  2. Ed Ring says:

    Shutterbug – nobody is saying there isn’t a benefit to unions. But even unions – in the private sector – are starting to grumble about the startling disparity between wages earned by unionized public sector workers compared to those of us in the private sector – whether or not they are unionized. And if unions cared so much about Walmart employees why don’t they organize them? Could it be because there isn’t the same financial return out there? Please don’t miss the larger point of this editorial: When it comes to retirement and health benefits funded by taxpayers, ALL workers should get the same deal. CALPRS should be merged with social security. And you may be surprised how many private sector union proponents agree with that sentiment.

  3. LeGrandOiseau says:

    Most European countries have high levels of union membership, and some of them have standards of living (and quality of life statistics) that are far better than those of the US.

    I work in Silicon Valley, in IT. Meritocracy? Maybe in the eyes of someone dazzled by Reaganomics. It operates on H1-B visas, which are a racket for suppressing the wages of American IT workers by forcing them to compete with indentured temporary workers. And in meritocracies, pay would be correlated with performance. This is seldom the case in any boardroom I’ve been in, where executive compensation is paid out even when the firm is going down the tubes.

    The fact is that, no matter how hard they try, these corporations cannot do without American programmers, designers and engineers. It’s ignorant to assume that if we demand a bigger slice of the pie (which, after all, we have baked), Apple, HP or Oracle will up sticks and move to Bangalore. If they could do that, they already would have. And anyone who believes that someone like Ellison is only motivated because of the current ludicrously disproportionate level of executive compensation will have a hard time explaining every generation of American entrepreneurs in the past century other than this one, who paid their fair share in taxes and didn’t bring home billions they got by squeezing those who made them rich.

    The worst problem with Detroit, by the way, is not the unions. It’s the arrogance and complacency of the management. I’ve done consulting work there, and for Japanese car makers. It’s the difference between Usain Bolt and a runner-up in a three-legged race at an Iowa family picnic. They should all be sacked. A randomly-selected population of college grads would do better.

  4. Ed Ring says:

    LeGrandOiseau: You make a good point about Europe – but in Europe every worker has a pension, that, like social security, applies the same formula to everybody. This is precisely what we should have in the United States. Instead, because of unions, we have industries where pensions granted during times of prosperity have become financial obligations that are destroying their competitiveness. And, because of unions in the public sector, we have public employees enjoying pensions that will, during a prolonged economic downturn, create the financial blow that may completely collapse the solvency of government institutions.

    Should unions fight for retirement security and health security? Of course they should. But when unions take over the public sector, and they have, then our government allocates taxpayer wealth to create special retirement and health benefits for public employees that the rest of us will never enjoy, instead of sustainably improving these entitlements for everyone equally, public or private.

    Unions would have far more credibility if they were to fight for one formula to apply to all workers – improve social security and medicare and offer these benefits to ALL workers. Merge CALPRS with the social security fund. Transfer health insurance funds for public employees into Medicare. This would make our corporations more competitive by removing health care and pension fund liabilities from their balance sheets, it would restore solvency to government by removing the obscene pension liabilities they currently carry for their own employees, and it would give ALL workers the same deal with respect to health and retirement security. And that would be fair. This is hardly a right-wing sentiment, by the way.

    As for your comment about unionizing programmers because they have, after all, “baked the pie,” why don’t you start up your own company? If and when you do this, you may not appreciate it when the union bosses come calling as soon as you’ve made a few bucks. It isn’t as easy to be a successful entrepreneur as you may think, and unionizing Silicon Valley is NOT going to make America, or California, more competitive.


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