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.