Not so long ago, the Great Satan to the labor movement was
Wisconsin Governor Scott Walker — who faces a union-led recall
election later this year. This week, if perhaps temporarily, that
title is being claimed by Indiana Governor Mitch Daniels whose
signature Wednesday made Indiana the only right-to-work state in
the upper Midwest and one of only two such states in the entire
northeast quarter of the nation. (See right-to-work state map
here.)
Labor unions would like you to think that right-to-work
laws outlaw unions. But what they actually do is say that a person
can’t be compelled to be a union member or pay union dues in order
to hold a job. In other words, right-to-work laws increase the
economic liberty of all Americans while threatening the funding
sources for union bosses in states where workers are held captive
to big labor. This of course threatens Democrats whose life blood
is that same union money.
Indiana is the 23rd right-to-work state and the first
state to adopt a right-to-work law since Oklahoma, which took that
step in September, 2001.
The industrial, labor-dominated states of the Midwest’s
“Rust Belt” such as Illinois, Michigan, and Ohio have for years
been losing jobs (and population) to the South, where there are
legal protections of workers’ and employers’ freedom.
Indiana is aiming to become a Midwest alternative to those
southern states. Republican Indiana Senate President Pro Tempore
David Long, quoted in the Indianapolis Star, described
an Indiana company which was going to move to Alabama but is now
staying put, as well as saying that “a company from Michigan was
planning to go to a ‘right to work’ state in the South. When they
saw what was happening here, (they) invited the state to bid… .
We are now in consideration for those jobs.”
If Indiana can show that its new law is a magnet for jobs,
it may turn out to be the first domino to fall across a part of the
nation which has been rapidly losing manufacturing jobs while
Democrats’ desire to protect union coffers has trumped their desire
to promote their citizens’ prosperity.
Although less discussed than Indiana’s move, Virginia also
struck a blow for public finance rationality and to protect that
state’s right-to-work law. With the state’s lieutenant governor
casting a tie-breaking vote in the state senate, the legislature
passed a bill
that bans mandatory Project Labor Agreements
(PLAs). The measure prohibits state agencies and their contractors
from requiring union membership for any part of a project involving
the building or repair of state facilities or infrastructure.
Additionally, neither the state nor its contractors may
discriminate against any worker or company for refusing to enter
into a labor agreement with a union.
About two years ago, public sector union membership
surpassed (in absolute number) private sector union membership, and
that remains true today. A Bureau of Labor Statistics
report released last
week notes that “Public-sector workers had a union membership rate
(37.0 percent) more than five times higher than that of
private-sector workers (6.9 percent).” In absolute numbers, “In
2011, 7.6 million employees in the public sector belonged to a
union, compared with 7.2 million union workers in the private
sector.”
Within the government sector, about 28 percent of federal
workers, 31 percent of state workers, and 43 percent of state
workers are unionized, each of those representing an increase over
the prior year. The fact that the absolute number of workers in
each of these categories has declined suggests that in trimming
their workforces, government are cutting more non-union workers
than union members. While this may be because their hands are tied
by certain contracts, it also implies that governments are not
cutting costs — which is the real goal — to the same
degree that they are cutting head count.
Since 2000, the percentage of the private work force,
which is unionized, has fallen from 9.0 percent to 6.9 percent,
whereas the percentage of government workers (federal, state, and
local) who are union members has remained fairly constant around 37
percent. The drop in private sector union membership continues a
long-running trend while the public sector union membership
maintains gains made during that same trend: In the 1940s, union
membership was the inverse of today’s situation, with more than a
third of private sector workers and fewer than 10 percent of
government workers being union members.
The downward trend in private sector union membership
makes sense from the standpoint of one of unions’ basic missions:
protecting the physical health and safety of its members. As we’ve
moved toward a less industrial and more service-oriented economy,
as we’ve added safety equipment and regulations across the economy,
this particular union function is less important than ever. In
other words, the natural evolution of technology (and to a lesser
degree government) have eliminated a key raison d’être for
unions.
Some may argue that the growth of public sector unions was
less predictable. After all, do most government workers (with the
obvious exception of certain first responders) actually risk
physical harm while sitting in their offices, ordering the lives of
citizens?
But public choice economics explains all. In short, when
politicians are spending other peoples’ money on government
workers’ salaries, those citizens whose taxes are being taken to
fund government each suffer a very small loss, perhaps an extra few
dollars a year, whereas the cash flowing into union coffers is
enormous. This cash is then used to support the very politicians
whom the union leans on for raises for its members, and a vicious
circle is created in which those spending the money and those
receiving the money have very little incentive not to make
government as expensive as possible.
The negotiation between government workers and their
employees is fundamentally different from the same private sector
conversation, where the employer is spending his, or his
investors’, own money.
A study by
the Cato Institute’s Chris Edwards offers historical context and
current data:
Between 1950 and about 1980, average compensation in the
public and private sectors moved in lockstep. But after 1980,
public sector compensation growth began to outpace private sector
compensation growth, and by the mid-1990s public sector workers had
a substantial pay advantage. In the boom years of the late-1990s,
private sector workers closed the gap a bit, but public sector pay
moved ahead again in the 2000s.
The public sector pay advantage is most pronounced in
benefits. Bureau of Economic Analysis data show that average
compensation in the private sector was $59,909 in 2008, including
$50,028 in wages and $9,881 in benefits. Average compensation in
the public sector was $67,812, including $52,051 in wages and
$15,761 in benefits.
Bureau of Labor Statistics data, however, “show a much
larger gap between average public and average private sector
compensation than the BEA data. In June 2009, total compensation
per hour was $39.66 in the public sector, which was 45 percent
greater than the average $27.42 per hour in the private sector. The
public sector advantage in average wages was 34 percent, while the
advantage in benefits was a huge 70 percent.”
Democratic politicians spend taxpayers’ money to buy votes
of public sector union members and to maximize political
contributions from those unions. They got away with it while the
nation’s economy was booming, while we were all “fat and happy.”
But despite the concentrated benefits and diffuse costs explained
by public choice theory, when times are tough people notice their
tax bills and they begrudge public sector employees who complain
about not getting raises but rarely worry about losing the jobs
that the rest of us pay for. So with unemployment stubbornly above
8 percent, with the so many Americans having to cut back on
spending as they watch the values of their homes and savings
decline, with a new level of public awareness of overspending and
wastefulness at all levels of government, people have woken up to
the predatory fleecing of citizens by unions and their Democrat
enablers.
In other words, public choice theory suggests that if
50,000 people each pay $1 that goes to fund one government
employee, the employee (and her union) will fight for that money
whereas it’s not worth the taxpayers’ time to arm-wrestle with
government for $1. But in times like this, we do in fact care about
the $1, and when there are enough citizens together willing to
fight for our dollars, we can become as motivated and perhaps as
powerful as the unions and other special interests.
When a truly “swing state” like Indiana can pass a
right-to-work law, when a “blue state” like Wisconsin can elect a
Republican governor who goes after public sector unions head-on,
and when Virginia can eliminate PLAs from public sector
construction projects, it is a welcome sign that labor pains are
increasing. The weakening of unions, public sector even more than
private sector, is the most important policy goal that state
governments should have if their aim is the solvency of their
budgets and the prosperity of their citizens.
Nothing will give politicians the courage to take on
unions who will continue to behave like wounded animals backed into
a corner as much as the success of the courageous politicians who
are already taking the political, and even physical, risk of doing
the right thing.
