Until the late 1950’s and early 60’s, the deal for government employees was that they were paid less than similar private-sector workers but got excellent benefits, especially strong pensions and almost absolute job security. And although some government workers belonged to associations, they did not have collective-bargaining rights.
The deal was a fairly good one. Although government always tends toward bloat and inefficiency, in the former scenario taxpayers didn’t pay too much. But pay and benefits had to be good enough to attract decent people to patrol the streets, clean the roads, fix the sewers, and put out fires.
In those days organized collective bargaining was entirely done by private unions, such as the AFL-CIO, the UAW, and the Teamsters. The natural tendency of unions to demand too much in labor negotiations was tempered by the risk of bankrupting the companies for which their members worked.
In the late 50’s, relations between union bosses and company management, although sometimes tense, were well established under the Wagner Act (1935), which was pro-union, as well as the Taft-Hartley Act (1947), which permitted states to enact right-to-work measures and limited excessive labor power, while guaranteeing worker rights. In the mid-50’s, union membership had reached a peak of 35 percent of the U.S. labor force, rising above 50 percent in Detroit and other industrial cities. In Eisenhower’s America, industrial prosperity was the greatest and most widespread the world had ever seen. The middle class expanded so much that only the lazy could avoid it. The Baby Boom filled the schools. Dad’s single job paid enough that Mom could stay at home with the kids. Detroit was the Paris of the West.
I don’t know if you’d call that era a golden age, unless you’re a fan of old-time rock ’n’ roll and Marilyn Monroe. But it was decent in many ways, especially for my extended family, most of whose breadwinners were union guys who worked in the shops and factories of Southeast Michigan.
Then it changed. Nixon took us off the gold standard in 1971, pushing the middle class into higher tax brackets; the Vietnam War and the Great Society effectively bankrupted the country; the recovery of foreign economies after World War II increased competition; immigration increased dramatically after 1965; and the Baby Boomers discovered abortion-on-demand. Some people also blame America’s economic decline on the U.S. government’s refusal to counter the protectionism of our trade partners with tariffs of our own.
Maybe it was hubris: When you fly so high, the only way left to go is down. That seems to be the case with labor’s part in the decline, as described by Daniel DiSalvo, a senior fellow at the Manhattan Institute’s Center for State and Local Leadership.
At one time, liberals understood public-sector collective bargaining was a formula for disaster. DiSalvo quotes none other than Franklin D. Roosevelt:
Meticulous attention should be paid to the special relations and obligations of public servants to the public itself and to the Government. . . . The process of collective bargaining, as usually understood, cannot be transplanted into the public service.
Even AFL-CIO boss George Meany conceded that it is “impossible to bargain collectively with the government.”
That opinion gradually changed in the 1950’s when unions sought to expand beyond their industrial base. Three actions quickly occurred. In 1958 New York City Mayor Robert Wagner, Jr., whose father authored the 1935 law, issued the Little Wagner Act, giving municipal employees collective bargaining rights. DiSalvo explains, “Mayor Wagner used the measure to mobilize the public sector workforce behind him and finally break the back of the Tammany Hall political machine”—an argument, if ever there was one, against political reform.
Then in 1959, Wisconsin enacted the first state collective-bargaining law (the Municipal Employees Relations Act) for government employees. Finally, in 1962 President Kennedy issued Executive Order 10988 to allow collective bargaining for most federal employees outside the military.
That opened the floodgates to public-sector unionization. According to an online AFL-CIO fact sheet, about two thirds of public-sector employees
have the right to collective bargaining. . . . a process in which working people, through their unions, negotiate contracts with employers to determine their terms of employment, including pay, health care, pensions and other benefits, hours, leave, job health and safety policies, ways to balance work and family and more.
However, as DiSalvo indicates, the negotiation isn’t one of “working people . . . with employers,” but of government with itself. Specifically, government employee unions “negotiate” with politicians whom the unions themselves put into office. The unions sit on both sides of the negotiating table.
DiSalvo calls it “electing your own boss.”
The unions provide the foot soldiers for registration and get-out-the-vote drives in key races. Unionized public employees also turn out to vote at much higher rates than average citizens and nonunionized workers, which is particularly important in local elections.
In California, the most powerful unions are the teachers’ unions, followed by the police. Many local school-board elections see less than ten-percent turnout, allowing California Teachers Association members and their relatives to dominate the vote. The prison-guard union once was nearly as powerful, but lost clout as its push for higher incarceration rates and pay started cannibalizing school and police budgets.
There used to be a balance between “law and order” Republicans who enjoyed police support and the ACLU liberals who worked to restrain police brutality. But in the early 1990’s, state Democratic Party Chairman Gray Davis, later governor, dropped the ACLU stuff and convinced most of the police unions to back Democrats. As a result, police now get “3 percent at 50”—three percent of their highest salary times the number of years on the force, meaning that most get 90 percent of their pay to retire at age 50. He also signed into law a “Peace Officers Bill of Rights” that made it nearly impossible for the public or journalists to investigate police-brutality cases.
The pattern is now nationwide. According to a USA Today analysis in 2010, “At a time when workers’ pay and benefits have stagnated, federal employees’ average compensation has grown to more than double what the private sector earns.” It’s only become worse since then—even as the private-sector middle class has seen its compensation continue to erode.
Government Executive reported on February 23 that, in 2014, more than 17,000 federal employees made over $200,000. A 2014 study by the American Enterprise Institute found state-level public employees’ compensation varied greatly. Connecticut’s public servants were at the top, compensated at a rate 42-percent higher than the taxpayers who fund their pay; Virginia’s were at the bottom, at 6-percent less.
Predictably, liberal states were on the higher side: Pennsylvania, 34-percent better; New York, 34 percent; Illinois, 26 percent; Rhode Island, 24 percent.
A major part of compensation for public-sector employees comes in the form of pension guarantees, which are notoriously underfunded. A 2011 Stanford University study found California’s major pension funds to be $500 billion underfunded, with state taxpayers legally responsible for any shortfall.
DiSalvo writes,
[P]ublic employees are one of the fastest-growing groups of millionaires in the country. And this isn’t just because a million bucks isn’t what it used to be. Today, upon retirement in their mid-50s, cops, firefighters, and teachers will be paid handsome pensions and receive healthcare coverage until they die. . . . Eight states pay on average over $1 million in pension benefits to a retired worker, and 23 states pay about $750,000 or more over the course of a worker’s retirement.
Governments don’t have to turn a profit like private-sector companies. But they can go bankrupt. In California, during the last economic slump, Vallejo, San Bernardino, and Stockton all went belly up largely because they couldn’t pay mammoth pension costs. The same later happened to Central Falls, Rhode Island; Harrisburg, Pennsylvania; and Detroit, Michigan.
“After the 2010 Tea Party elections, American politics was consumed by disputes over public sector labor relations,” writes DiSalvo. Scott Walker built his brief campaign for the Republican nomination for president on beating the government unions in three straight elections, including an attempted recall. He’s the governor of Wisconsin, the state where much of the problem started. Gov. Chris Christie of New Jersey was elected twice on a platform of taming the unions.
Liberal Democratic governors, such as Jerry Brown and Andrew Cuomo, have also pushed back against the unions. They have benefited from budgets with new infusions of cash from the tepid economic recovery. But, as sons of previous governors, their family backgrounds gave them the bona fides, and the knowledge of what buttons to push, to tame the unions.
However, these victories have been temporary. In his budget proposal for fiscal year 2015-16, which began on July 1, Brown conceded $227 billion in unfunded pension liabilities, less than half the number a more realistic Stanford study projects. He offered no plan to pay for the shortfall.
These governors are aided by a growing public perception of just how large public-sector pensions have become. Most private-sector pensions now are “defined contribution” plans, meaning the worker places a certain amount in a 401(k) or other program. The value depends on the vagaries of the stock market.
By contrast, most public-sector pensions remain “defined benefit” plans, meaning that, no matter how well or poorly the underlying investments perform, the retiree gets a specified check. When I debate public-sector union bosses over this, they arrogantly insist they should not have to “gamble” on the stock market—even as the socialist policies of their unions help torpedo private stocks’ equity.
DiSalvo found the same thing:
Consequently, as one union leader put it to me, “pension envy” is real. A pollster who ran focus groups in New Jersey about people’s views on the financial crisis reported that he found more anger at public sector compensation than at Wall Street. According to him, “I had one guy in a focus group go on a rant about the pension his father, who was a retired cop, got from the town, that the pension was way too generous.” Clearly, if citizens are singling out their family members for criticism, the generosity of pensions, especially for those in the protective services, is a problem.
In terms of solutions, DiSalvo suggests limiting collective bargaining to salaries, keeping pensions and retiree medical benefits (another big cost center) off the negotiating table. Indiana and Michigan recently enacted right-to-work laws, allowing most workers to opt out of unions, sharply reducing union power. In states where that is not possible across the board, a more feasible reform might be to mandate right-to-work for public-sector workers only.
Another possible reform would be to eliminate the use of union dues for political activism—effectively making it harder to “elect your own boss.” This would be difficult to accomplish in left-leaning states. In California, such a reform has been wiped out twice at the polls by union cash.
When the next recession hits, bloated pensions will cause more cities to go bankrupt. Perhaps then, more states will be willing to consider limiting the tremendous power of public-sector unions.
[Government Against Itself: Public Union Power and Its Consequences, by Daniel DiSalvo (Oxford: Oxford University Press) 304 pp., $27.95]
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