Wisconsin's new law curbing public employee unions ends the first skirmish to restore integrity to public sector collective bargaining and sanity to states' finances. But even if other states adopt similar laws, it won't provide a politically stable model for public sector collective bargaining.
Governors and state legislatures are grappling with chronic budget deficits caused in some measure by union contracts guaranteeing excessive retirement and health-care benefits. Governor Scott Walker, facing a $3.6 billion dollar shortfall, pushed through legislation requiring most state workers to kick in 5.8% of wages for pensions, and pay 12.6% of the cost of health insurance. Compared with private sector workers, those are great terms.
The rub? The new law limits collective bargaining to wages, prohibits bargaining on pensions and health insurance, limits the collection of dues through paychecks, and requires unions to submit to annual recertification elections. Other states are considering similar laws, because governors increasingly recognize union political activities subvert the balance in labor-management relations necessary to ensure sustainable wage and benefit structures and sanity in state finances.
In the private sector, competition limits union leverage; if workers negotiate wages, benefits and costly work rules employers can't pass on to customers, businesses fail and union contracts become worthless. Recognizing what overbearing unions did to GM (NYSE:GM), Chrysler and other once-mighty American employers, most workers won't vote 'yes' in union representation elections, and membership has fallen to less than 7% of non-government workers.
In the public sector, unions have special leverage, because employers are monopolies -- if service is lousy at the Motor Vehicle Bureau, taxpayers can't go to another vendor to renew their driver's licenses. Moreover, public unions invest in political campaigns to help ensure management -- governors and key legislators -- support excessive benefits packages, ignore the abuses of tenure, and make organizing employees easy.
Union political activities ensure workers are represented on both sides of the negotiating table, the taxpayers interests be damned.
No surprise, 36% of government workers belong to unions!
Municipal unions often don't have to even negotiate excessive benefits. New York Mayor Michael Bloomberg complains state law mandate teachers' pensions that the city must finance, and tenure rules are set by state law. Corruption in Albany -- union campaign resources exchanged for votes in the state legislature -- ensures local systems are prohibitively expensive, and incompetent teachers are not removed.
Now, Wisconsin law prohibits unions from negotiating benefits for workers and threatens their survival. This leaves unions with no recourse but to put virtually all their resources into political campaigns to legislate benefits and more favorable organizing conditions.
Polls show voters, even if they don't find unions relevant to their personal circumstances, believe workers, if they choose, have a fundamental right to be represented by a union. Volumes of international human rights law, which the United States helped write and is obligated to defend, say they are correct.
When pressed to the wall, union leaders claim they are willing to share sacrifices. In Wisconsin, they offered to accept the contributions to pensions and health insurance demanded by Governor Walker in exchange keeping the right to collectively bargain for wages and benefits in the future.
Voter sentiment favoring collective bargaining rights, coupled with national unions' formidable political machinery and support from President Obama indicates they could win in the end by electing more union friendly governors and legislators. Conversely, voters may recognize the inherent conflict between the public interest in affordable, competent government and unions for public employees that use dues and manpower to influence the outcome of elections and corrupt elected officials.
At virtually every level of government, unions are among the largest contributors to political campaigns. For private sector unions that is fine-after all corporations again have a virtual free hand under recent Supreme Court decisions-but public sector unions active in politics ensures taxpayers interests go unattended until governments can't recklessly borrow or raise taxes any further without chasing away bond investors and employers.
If union leaders are genuinely interested in workers right to collective bargaining, then a grand bargain should be possible. Let unions have a free hand in organizing government workers and bargaining for wages, benefits and working conditions in exchange for an absolute ban on public sector union political activities-no dues or other resources can be used to finance or organize for candidates, laws and causes. That would satisfy workers right to collective bargaining, ensure management represents taxpayer interests, and reduce conflicts of interest for governors and legislators.
Peter Morici is a professor at the Smith School of Business, University of Maryland School, and former Chief Economist at the U.S. International Trade Commission.