We've seen how unions negotiated contracts that ultimately helped bring down giants like GM & Chrysler...but at least they negotiated with private sector managers who theoretically have to make sure those contracts don't bankrupt their companies. (Of course, now we know that government -- Republicans and/or Democrats -- may bail them out with taxpayer money, but that’s not the usual assumption.)
In my syndicated column this week, I take another look at public sector unions. They are a different story entirely, because they basically hire their own bosses—they negotiate their contracts with politicians who need union backing to get elected. Most of those politicians will no longer be in office when the contracts bankrupt their government.
Last week, John Gage, president of the biggest federal workers union, the American Federation of Government Employees, came onto my Fox Business show (Thursdays @ 9pm ET) to argue about that with Steve Malanga of the Manhattan Institute. Malanga suggested that public sector unions adopt defined-contribution plans:
A defined-contribution plan is like your 401(k). Your pension
benefits depend on how well your investments do. State and local unions, by contrast, have "defined-benefit" plans, which simply force taxpayers to send retirees a monthly check.
Gage doesn't like Malanga's suggestion: "Can you imagine working 30, 35 years ... and (with) what just happened with the (stock) market, suddenly you're left holding nothing?"
I don't think they'd be holding "nothing." Yes, the market crashed, but the Dow is still above 11,000. Twenty-eight years ago, it was below 800. That's up more than 1,000 percent. Over time, 401(k)s provide a decent retirement.
When I said that we in the private sector have such plans, Gage responded, "Only because of the laws in this country which make it almost impossible for private-sector workers to organize and to have a union. ... (W)ithout unions, we'd have a 'race to the bottom.'"
But this makes no sense. Do all employers move to Mexico because wages are lower there?
Full column here.