Monday, February 28, 2011

Public and Private Unions: Not The Same

Is the much-maligned Wisconsin bill involving public employee unions an assault on all unions?  Listening to opponents of the bill, pundits, and campaign contributions-conscious politicians, one would think so.

Attempting to marry the status and interestes of public employee unions to labor unions in the market economy makes good strategic sense on the part of core opponents of the bill such as the unions and politicians that profit--premature pun intended, tuck that one away--tremendously from the current system.  Such a rhetorical move broadens opposition to the bill by pulling in union empathy nationwide.  And where there is union empathy there will most likely be a shadowy corporate-conspired threat to the existence of the middle class lurking behind the closest tree.  Now you're talking opposition!  

The problem with conflating the tax-consuming interests of public employee unions with the interests of regular, wealth-producing labor union members does not rise above the integrity of  rhetoric.  The two unions operate as differently as those with whom they respectively "bargain," government and private businesses.

For starters, the fundamental management-labor relations paradigm in the free market is completely turned on its head in the public union-state government scenario.  Private labor unions collectively negotiate with company management, a management unions do not have the luxury of choosing.  When public employees sit down with "management," however, they negotiate with a government they had a hand in forming via massive union campaign contributions to the very people representing the government that unions bargain with.  These same politicians draw up the legislation that sets the terms of compensation and benefits for public employees.

This politicized institutional arrangement amounts to a self-perpetuating, legalized system of graft that can only expand with time and tax funds. Tax payers are coerced, via laws that require mandatory dues paid by public employees, to subsidize a union that in turn donates heavy campaign contributions to politicians who, once in office, pass laws eliciting additional tax funds for the salaries that pay the dues that fund the campaign contributions of--you guessed it--their own campaigns.  Higher wages and new jobs means higher taxes and more dues for the union, which means more campaign funds for the union's favorite politicians.  The government and public unions have every incentive to swell the ranks.  Everyone wins except the taxpayer.  It's win-win-lose.

No such arrangement exists for labor unions in the market economy.  (At least unions not affiliated with companies bailed out at tax payers expense.)  The closest labor unions come to this arrangement is donating to the campaigns of politicians who pass pro-union legislation, but that is not even marginally close to the public union-state bargaining government system.

Additionally, private unions seek compensation for their members based on greater shares of the profits their members help to create in business operations.  They negotiate for more of the profits they have a hand in creating.  Consequently, they are wealth and tax creators.

Public employee unions, by contrast, "bargain" for more tax money.  Public employees create neither profit nor wealth; they consume wealth through the taxation required to pay for their compensation.  This is not a slam on public employees.  (Far from it.  Certain public services are a must and society should be prepared to incur the reasonable cost of those services.)  This is just a statement of economic fact that is sidestepped by the conflation of public and private union interests.

One more notable difference: In the market economy, unions and management have a shared interest in making reasonable agreements that do not hazard either the public image or economic health of the business.  Consumers, remember, vote voluntarily with their dollars and can easily switch support to competitors in the market.  Less profits generated freely through the market is bad news for labor unions and management alike.  There is therefore sufficient incentive for both parties to make reasonable labor-management agreements.

Public employee unions and their supportive politicians in government, on the contrary, have no fear of alienating the economic fount of their paychecks and benefits packages.  Except by moving to a different state, tax payers cannot opt to take their funds elsewhere; they are coerced by the force of law--laws lobbied for by public employee unions--to keep the tax-funded promises streaming to governors' desks to be signed into effect.  There is no incentive to make reasonable agreements; on the contrary, as we can see by the situations in most state budgets, the current system is situated for the exact opposite.

It is telling that FDR, the progressive responsible for the monumental labor relations piece of legislation, the Wagner Act of 1935, unequivocally asserted the very idea of public employee collective bargaining was "unthinkable and intolerable." In 1955 the head of the AFL-CIO quipped "It is impossible to bargain collectively with the government." To take the private union model and apply it to tax-funded government just does work.  So, too, with conflating the immediate interests of private market unions with public employee unions.

Debating the validity of public unions and collective bargaining does not equate to denigrating or vilifying public employees.  It should never be inferred from the hubbub in Wisconsin that many public employees do not provide valuable services.  On the contrary, if society deems certain services are worth of the costs they incur, by all reasonable means those services should be appropriately funded. 

Valuable public services should be sustained on the merit of their service to the public, and all public services should not be propagated by an inherently unworkable system that is so susceptible to narrow self interests, graft and the detriment of tax payers. 

Private economy unions do not get to operate that way, and insisting on the perpetuation of such a system is the antithesis of public service.