A Government of Unions

September 20, 2010

For release noon Sept. 21 and thereafter

In the two decades that the Indiana Policy Review Foundation has been commissioning research on public-sector unions, it has never been made clear to me why such unions exist. And now, in the middle of a recession, with union contracts straining Indiana municipal governments to the breaking point, there is need for the most serious and complete review.

For public employment has grown by almost 250 percent in the last 40 years while government-employee union membership has increased by more than 750 percent. Favorable state laws and court judgments beginning in the 1970s increased the share of state and local government workers represented by unions to the current 38.5 percent (27.3 percent in Indiana) compared with 7.6 percent in the  private sector.

And this year, the Bureau of Labor Statistics reports that total compensation per hour in the public sector was 45 percent greater than the average in the private sector, the advantage in benefits being a whopping 70 percent greater.

Have we gone crazy?

Apparently so. Government, by definition, is a closed system, a monopoly unaccountable to markets or competitors. So why would government, which historically has set the standards in wages and benefits, take advantage of itself, its own managers and employees? From whom exactly are the teachers, firefighters and policemen in need of protection? From us, the people they hired on to serve?

Gov. Mitch Daniels got it right on his first day in office, rescinding the collective-bargaining power of certain state workers. Unfortunately, his order was limited and nobody else at the Statehouse would pick up this very hot potato.

Indiana politicians are far from alone in their reticence on this issue. Matthew Brouillette of the Commonwealth Foundation cites a reluctance to challenge government unions as a reason for the ongoing collapse of municipal finances in Harrisburg, Pennsylvania. And the Harrisburg City Hall, predicts the Wall Street Journal, will be “the canary in the default mine of state and municipal debt problems.”

Do not assume that Indiana cities are better managed. “We have a new privileged class in America,” Governor Daniels told Politico magazine this summer. “We used to think of government workers as underpaid public servants. Now they are better paid than the people who pay their salaries.” “It’s a part of a very large question the nation’s got to face,” Daniels added. “Who serves whom here? Is the public sector — as some of us have always thought — there to serve the rest of society? Or is it the other way around?”

An electorate in which one out of four families knows someone who has lost his or her job is likely to get Daniels’ point. A Rasmussen poll in July found that only 19 percent of Americans said that they would be willing to pay higher taxes to keep government workers from being laid off. Only 34 percent would endorse higher taxes to preserve jobs in public safety even.

Taxpayers and property owners have figured out that nobody in government is watching their backs. When that happens, history tell us, they form “tea parties.”

Indeed, a recent paper by the Cato Institute argues that politicians have a vested interest in public-sector unions, that they will be as supportive as the union leadership itself.

There are good or at least logical reasons for this. First, the need to negotiate with government unions increases the power of both politicians and bureaucrats regardless of party. And there is that symbiotic relationship among elected officials, bureaucrats and public employees stemming from the characteristic high voting rate of the union membership.

It is no surprise, then, that layoffs and discharges in government — good times or bad — occur at just one-third the rate of the private sector. This is true even though it is estimated that public-sector collective bargaining adds 8 percent to the cost of government. And the political process creates more government workers practically every time your council or legislature sits to meet.

We are left with a dangerous juxtaposition of forces. Public-sector unions, which are privately and not publicly controlled, serve no public interest outside themselves yet create a political dynamic that trumps all other public interests, including the rights of other workers and the financial integrity of government itself. Yes, it is precisely what the writers of our state and federal constitutions sought to avoid.

So prepare for this dismalness: The percentage of Indiana’s local and state government employees will ratchet upward each business cycle, each generation. The ruin of our cities, absent heroic stances by elected officials, will not be just politically likely but mathematically certain.

Craig Ladwig is editor of The Indiana Policy Review. Contact him at cladwig@inpolicy.org.

Resources

Charles E. Rice. “Collective Bargaining: Are All the Cards on the Table?” The Indiana Policy Review, Vol. 1, No. 1 (Winter 1990).

Morgan O. Reynolds and Craig Ladwig. “Why Collective Bargaining Is no Bargain.” The Indiana Policy Review, Vol. 1, No. 5 (Winter 1991).

Charles M. Freeland. “The Teacher Unions: Cutting Out Paper Dolls.” The Indiana Policy Review, Vol. 12, No. 3 (Winter 2001).

Maryann O. Keating. “State Pensions Built on Rosy Predictions.” The Indiana Policy Review (Winter 2009).

Chris Edwards. “Public-Sector Unions and the Rising Costs of Employee Compensation.” Cato Journal, Vol. 30, No. 1 (Winter 2010).

Editorial. “The Harrisburg Canary.” The Wall Street Journal, Sept. 15, 2010.

Ben Smith and Maggie Haberman. “Polls Turn on Labor Unions.” Politico, June 6, 2010.

Steve Malanga, “Union Power and the Christie Effect,” the Wall Street Journal, Sept. 15, 2010.



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