Public sector battles ahead

ADVERTISEMENT
Of equal importance was the upholding of Walker’s move to halt state deductions for union dues. Public service employee union membership began to drop immediately. This is the key issue. It is not an issue under European law, where in Germany for example, since 1876 all public service workers are “stakeholders” and their rights at workplace and board of directors levels are part of the basic “Company Law.”


U.S. unions must negotiate all rights, privileges and benefit levels. Without a strong union membership, supported by public sentiment, the battle by unions to forestall the imminent moves by state, county and local officials to both cut, and  revise pensions and benefits, and where possible increase employee contributions to underfunded pension and benefit plans is greatly weakened.

Dropping their union membership by government employees may also mirror a growing awareness among taxpayers that the huge deficits and inability to meet obligations presents a major threat to the economic futures of individuals and families. How did we get into this mess?

A brief history and analysis of the current budget deficits and huge unfunded obligations may assist in defining a meaningful and objective approach to an eventual solution of both major threats to the national economy.

Public sector unions are a relatively new phenomenon in the United States, but not in Europe. With the adoption of “social welfare” policies the Prussian Chancellor Otto von Bismarck needed to unite the German Confederation unions in the public sector who were locked into basic constitutional rights as “stakeholders” (the European version of corporate governance). Unions in the private sectors of Europe rapidly gained equal powers but were subject to a collective bargaining process, on a confederated multicompany basis.

Why did the United States not follow the European model?  Interestingly, it was a Russian emigrant, professor of economics at the University of Wisconsin, Selig Perlman, whose “Theory of the Labor Movement’’ in 1923 pointed out that the individualistic spirit in the American psyche would resist tying personal comfort goals to subversion to “leftist” political goals.  Yes, the teachers did organize in the 1920s. But it was the ‘’Little Wagner Act’’ in New York in 1958 that opened the floodgate to the unionization of the majority of public service employees at state level.  This was followed by JFK rejecting FDR’s abhorrence for government unions and allowing unionization at the federal level in 1962.

Public service employee unions grew rapidly, from four million, mostly teachers in 1950, to over six million in 1976, 16.6 million in 2009 and an estimated 20 million plus in 2012 (before recent layoffs). Along with growing membership public employee union leaders, it seems, found some very cooperative government officials at town, city, county and state levels. This is what I came to view as a game of “ring around the rosy.” Government officials agreed to juicy benefit plans to compensate for the lower base pay levels of public employees compared to their brethren in the private sector. In return, contrary to Perlman’s recommendations, union leaders began to see the major advantages in identifying with one political party. Supporting these government officials usually guaranteed their election and so a bonding began. Oversight was minimal. Newly elected Gov. Dan Malloy pointed out that the Connecticut State Legislature had ignored its oversight of collective bargaining at state and local levels for over 30 years. Malloy blamed this lack of oversight to the astronomical benefit plan costs and the financial disaster facing the state. 

Well, someone, including individual citizens, should have been caring. If, as I believe, it is the individual voter who has oversight responsibility of his elected officials then all of us have a share of the blame.

A bigger battle faces over half of the United States. Illinois, Nevada, and California, for example, have budget deficits equal to nearly half their GDP. This forecasts fiscal disaster. When added to the recently announced borrowing needs of the private sector of over $46 trillion for the period 2012-2016 the demand on available funds will be even greater.

So, weakening the collective bargaining power of public sector unions may help governors, mayors and town selectmen in their desperate efforts to “claw back” some of the benefits granted by earlier administrations. Evidence that the inferior base pay for public workers has been debunked should also make union negotiators and conferees more realistic. The only other outcome open to government officials failing in restructuring will be continuing terminations and layoffs. This will not only add to our economy’s woes; it may rile the voting public to finally rise up and demand more and more effective governance at all levels.

John Alan James is executive director of the Center for Global Governance, Reporting and Regulation at Pace University’s Lubin School of Business in New York City with a long career in management consulting in the labor relations area. James is also program director of Pace University’s new Certified Compliance and Regulatory Professional certificate program. He is the author of the first texts in English on labor and industrial law and practice in key countries of Europe. He began his management consulting career with Hewitt Associates in Chicago and McKinsey & Co. in New York City.