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Showing posts with label debt crisis. Show all posts
Showing posts with label debt crisis. Show all posts
Tuesday, April 21, 2015
Wednesday, August 20, 2014
California's Economic Collision Course: Immigration and Water
I try to place politics in perspective.
Opinions expressed by Forbes Contributors are their own.
Opinion 46,928 views
http://www.forbes.com/
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You
have heard it before: “As California goes, so goes the nation.” If
that is the case, the national economy will be harmed for decades to
come because of California’s misplaced priorities today. Indeed, by
emphasizing high-speed rail over water and failing to deal with its debt
crisis, California poses a long-term threat to our national economy and
is on an economic collision course of increased immigration and lack of
water.
California has more than 38 million residents. Despite net losses of millions of residents to other states, California continues to grow through immigration. Latinos now equal the number of non-Hispanic whites in California. With projections that show California’s population reaching 45 to 50 million within 20 years, you would think job creation would be job one for Jerry Brown.
Sadly, that is not the case today. Despite a much-heralded recovery
in the media and by Governor Jerry Brown, California still has one of
the nation’s highest unemployment rates. Also, more than 30% of the
nation’s welfare recipients are Californians – even though California
has just 12% of the nation’s population. It is not surprising,
therefore, that California is ranked number one in poverty.
The cause for those bad statistics is bad government policy. California is the most regulated, highest-taxed, most in-debt state in America. According to government data, from the municipal to the state level, California governments have more than $1.1 trillion in debt – much of that tied to pensions.
Beyond debt, Governor Brown recently signed a huge tax increase featuring a top rate of 13.3%. Overall, California taxes are 42% higher than Texas. California also has the most extreme/job-threatening global warming law in the world, which includes a 15-cent gas tax increase slated to take effect in 2015 – on top of the already record gas prices.
High debt, high taxes, high regulations and high poverty are not exactly the foundation on which to add 7 to 12 million people. California’s private sector needs an economic recovery far more robust and broad-based to absorb those new people. Unfortunately, California continues to make bad decisions with long-term implications.
Perhaps worst among them is Brown’s decision to make high-speed rail a higher priority than water. Over the last 7,000 years, California has endured droughts that have lasted up to 20 years, according to Scott Stine, a professor of geography and environmental studies at Cal State East Bay. California is in year three of its current drought, which is projected to result in economic losses of $2.2 billion to California agriculture in 2014 alone according to a UC Davis study – not to mention the loss of over 17,000 jobs.
To combat the lack of water brought on by drought and environmental policies that favor fish over people, California farmers are behind a drilling boom – for groundwater. The problem is that, at current rates of consumption, some believe California could run nearly dry of groundwater within two decades.
Unlike his father Edmund G. Brown, Sr., who focused on water, Jerry Brown would rather see $68 billion spent on high-speed rail – a project for which there is no significant consumer demand and, like most every rail system, will likely require endless public subsidies and therefore add to the debt crisis. Brown recently killed a proposed water bond of $11.4 billion because he said it would “break the bank.” Apparently $68 billion won’t break the bank, but $11.4 billion would.
Instead, after California Republicans fought for a greater emphasis on water storage, Brown agreed to a bond that spends $2.5 billion on water storage – a figure woefully short of what is needed. Obviously, Brown thinks high-speed rail is 27 times more important than water storage.
Neither that water bond nor any other state level effort currently underway will sufficiently add to the amount of available water now or in the future. Water equals jobs, however, and without a far-reaching effort such as building 60 desalination plants at the same cost as the high-speed rail project – plants that won’t need future subsidies, the California economy is on an economic collision course with immigration.
California’s debt crisis will hobble its economy as well. Even Chicago’s Rahm Emanuel was honest enough to say that pension debts were deterring businesses from locating in Illinois. In California, despite what some say could be more than half a trillion dollars of public employment retirement-related debt, there is literally no concerted plan for addressing the issue – tinkering yes, real reform no.
Unless California addresses its long-term water needs and debt crisis, the already overburdened private sector will not be able to handle the coming population influx. Instead, California’s welfare rolls will swell, adding to its debt crisis.
In 2009, California sent out IOUs to creditors when hard pressed for cash and borrowed billions from the federal government. A decade from now it could be much worse. Rather than leading the national economy, California could well be holding down America’s economic growth.
California has more than 38 million residents. Despite net losses of millions of residents to other states, California continues to grow through immigration. Latinos now equal the number of non-Hispanic whites in California. With projections that show California’s population reaching 45 to 50 million within 20 years, you would think job creation would be job one for Jerry Brown.
This image was selected as a picture of the week on the Malay
Wikipedia for the 1st week, 2010. (Photo credit: Wikipedia)
The cause for those bad statistics is bad government policy. California is the most regulated, highest-taxed, most in-debt state in America. According to government data, from the municipal to the state level, California governments have more than $1.1 trillion in debt – much of that tied to pensions.
Beyond debt, Governor Brown recently signed a huge tax increase featuring a top rate of 13.3%. Overall, California taxes are 42% higher than Texas. California also has the most extreme/job-threatening global warming law in the world, which includes a 15-cent gas tax increase slated to take effect in 2015 – on top of the already record gas prices.
High debt, high taxes, high regulations and high poverty are not exactly the foundation on which to add 7 to 12 million people. California’s private sector needs an economic recovery far more robust and broad-based to absorb those new people. Unfortunately, California continues to make bad decisions with long-term implications.
Perhaps worst among them is Brown’s decision to make high-speed rail a higher priority than water. Over the last 7,000 years, California has endured droughts that have lasted up to 20 years, according to Scott Stine, a professor of geography and environmental studies at Cal State East Bay. California is in year three of its current drought, which is projected to result in economic losses of $2.2 billion to California agriculture in 2014 alone according to a UC Davis study – not to mention the loss of over 17,000 jobs.
To combat the lack of water brought on by drought and environmental policies that favor fish over people, California farmers are behind a drilling boom – for groundwater. The problem is that, at current rates of consumption, some believe California could run nearly dry of groundwater within two decades.
Unlike his father Edmund G. Brown, Sr., who focused on water, Jerry Brown would rather see $68 billion spent on high-speed rail – a project for which there is no significant consumer demand and, like most every rail system, will likely require endless public subsidies and therefore add to the debt crisis. Brown recently killed a proposed water bond of $11.4 billion because he said it would “break the bank.” Apparently $68 billion won’t break the bank, but $11.4 billion would.
Instead, after California Republicans fought for a greater emphasis on water storage, Brown agreed to a bond that spends $2.5 billion on water storage – a figure woefully short of what is needed. Obviously, Brown thinks high-speed rail is 27 times more important than water storage.
Neither that water bond nor any other state level effort currently underway will sufficiently add to the amount of available water now or in the future. Water equals jobs, however, and without a far-reaching effort such as building 60 desalination plants at the same cost as the high-speed rail project – plants that won’t need future subsidies, the California economy is on an economic collision course with immigration.
California’s debt crisis will hobble its economy as well. Even Chicago’s Rahm Emanuel was honest enough to say that pension debts were deterring businesses from locating in Illinois. In California, despite what some say could be more than half a trillion dollars of public employment retirement-related debt, there is literally no concerted plan for addressing the issue – tinkering yes, real reform no.
Unless California addresses its long-term water needs and debt crisis, the already overburdened private sector will not be able to handle the coming population influx. Instead, California’s welfare rolls will swell, adding to its debt crisis.
In 2009, California sent out IOUs to creditors when hard pressed for cash and borrowed billions from the federal government. A decade from now it could be much worse. Rather than leading the national economy, California could well be holding down America’s economic growth.
Tuesday, May 20, 2014
Korea, India And Japan, Not Just China, Are Looking To Russia For Energy
Chinese President Xi Jinping (L) and his Russian counterpart
Vladimir Putin attend the opening ceremony of the "Year of Chinese
Tourism in Russia" at the State Kremlin Palace in Moscow on March 22,
2013.
Reuters
When Russian President Vladimir Putin visits Beijing
on Tuesday, he’s expected to sign a multibillion-dollar deal with China
to build a natural gas pipeline after more than a decade of negotiations
and over U.S. objections that China is undermining Western sanctions
against Russia stemming from the Ukraine crisis.
It may be the first of many such energy deals in the region
as Putin looks to the East to bypass the sanctions. Already the
sanctions have led some American oil and gas executives to skip an
upcoming economic conference in Russia. The deal between Russia’s state
gas company, Gazprom, and China’s state oil and gas company, CNPC,
allows Russia to diversify its customer base, which is heavily dependent
on sales to Europe.
Aware that it could lose market share in Europe -- within
10 years, North American natural gas could ship to Europe -- Russia has
been looking to Asian and East Asian markets, where demand for energy
imports is rapidly growing.
“Japanese, Indian and Korean companies are increasing their
interest and involvement in Russia’s energy sector,” Kyle Davis, an
energy expert at international law firm Goltsblat BLP, said.
“Strategically it makes sense, whether things are going well with the
West or not.”
In late April, Russia's parliament voted to forgive North
Korea 90 percent of its debt to Russia, which dated back to the Soviet
era when the two nations were allies during the Cold War. Instead, it
voted to invest $1 billion in the world’s most-secretive country for
health care, educational and energy projects. The planned energy project
is a major natural gas pipeline through North Korea.
Russia has planned to build a gas pipeline and accompanying
railroad from its offshore Sakhalin Island fields, north of Japan,
through North Korea to South Korea.
“Obviously the greatest variable in this project is the
North Korean risk, which must be handled effectively,” Chris Faulkner,
CEO of Texas-based Breitling Energy and adviser to the Energy China
Forum’s Asia Shale Gas Committee, said. “North Korea is not trustworthy
enough to entrust with an energy supply line, and inter-Korean relations
are not healthy enough at present to carry out this project.”
ExxonMobil operates one of the Sakhalin fields with a 30
percent stake, partnering with companies from Japan (30 percent stake),
India (20 percent) and two Russian companies (20 percent combined).
Subsidiaries of Gazprom, Netherlands-based Royal Dutch Shell, Japanese
corporate group Mitsui and Japanese auto manufacturer Mitsubishi operate
the other field. The project is expected to supply South Korea with 10
billion cubic meters of gas each year. It's expected to make North Korea
into a sort of Ukraine, and it's expected to make South Korea akin to
Europe with its present dependence on Russian gas.
South Korea relies on imports to meet about 97 percent of its energy needs, making it the world’s second-largest natural gas importer behind Japan.
Russia and India have been negotiating to build a $30
billion oil pipeline, which would be the world's most expensive due to
its proposed route through rugged terrain. The so-called Silk Road
pipeline would link Russia’s Altai Mountain region to the Xinjiang
province of China and northern India. Russia exports 70 percent of its
oil, compared to 30 percent of its gas production, and its oil revenues
are nearly seven times its gas revenues, the U.S. Energy Information
Administration (EIA) said.
India is the third-largest oil importer in the world after
the U.S. and China, as it relies on imports from the Middle East, and
it's projected to become the world’s largest oil importer by 2020,
according to the EIA. China and India’s economies have been among the
world’s fastest-growing for the past two decades, and like China,
India’s energy consumption has more than doubled since 1990.
Unsurprisingly, India is aiming to secure additional energy imports and
to diversify its energy supply.
As the Asian Development Bank pointed out in an October 2013 report,
energy pricing in India is a core hindrance to foreign investment, as
oil prices are government-controlled and do not fully reflect the
procurement prices.
Nonetheless, Russia has not called off the project, which
it began planning around the same time that China and Russia began
discussing a gas pipeline. Indian Prime Minister Manmohan Singh and
Putin issued a joint statement from Moscow on Oct. 21, 2013, that
confirmed that the two nations are collaborating “to study the
possibility of direct ground transportation of hydrocarbons.”
The statement basically reaffirmed a joint commitment made
in 2010. A year earlier, foreign ministers from Russia, India and China
agreed to enhance energy cooperation among the two countries, and at the
end of last year, India’s biggest oil and gas company, Oil and Natural
Gas Corp. (ONGC), confirmed its interest in the pipeline from Russia,
calling it “appropriate.”
Talks about the pipeline construction are expected to
conclude by the middle of this year, with a completion date of
2020-2022, according to the Center for Research on Globalization, a
Montreal-based non-profit.
Still, China remains Russia’s most promising customer, with
oil and gas consumption expected to increase by nearly 90 percent in
2011-2020, while India’s is expected to rise by about 50 percent,
according to The Economist’s Intelligence Unit.
“Until a China pipeline is built, Russia has few export
markets for gas outside of Europe, leaving it vulnerable to sanctions
and competition from U.S. exports of shale gas, and Putin knows this,”
Faulkner said.
Sunday, March 9, 2014
The Totalitarian Ethics of California’s Public Sector Unions
The latest scam to keep pension reform off of the ballot
Steven Greenhut | February 24, 2012
http://reason.com/
In my
last column, I documented how California’s pro-union Attorney
General Kamala Harris provided an unfair and dishonest title and
summary to a pair of pension reform initiatives submitted to her
office, thus effectively killing the measures. Last week the unions
tried—and almost succeeded—with an even nastier stunt designed to
undermine democracy.
In San Diego, unions are fearful of a new pension reform measure
referred to by supporters as Comprehensive Pension Reform, or CPR,
that has qualified for the June 2012 ballot. Instead of simply
gearing up to fight this political battle, the unions petitioned
one of those ridiculous commissions that most Californians have
never even heard of, the Public Employment Relations Board, which
is unfriendly turf for taxpayers. The union said placing the
initiative on the ballot amounted to an unfair labor practice, and
PERB called for an injunction to stop the election until it could
complete its sham proceedings.
In essence, the unions and this unelected board insist that the people of San Diego have no right to vote on pension reform. This is just the latest reminder of the totalitarian ethics of a public-sector union movement that doesn’t care about anything other than protecting its benefits.
“Never in the history of this state ... has there ever been a requirement to meet and confer over a citizens’ initiative placed on the ballot by voter signatures,” wrote city attorney Jan Goldsmith in a toughly worded letter to PERB. Pension reform advocate Carl DeMaio, a councilman and mayoral candidate, criticized PERB's assault on Californians' constitutional rights. Fortunately, a judge agreed with the city, but expect the unions to head back to court if their campaign against CPR fails.
The unions that dominate Sacramento are not about to let any serious reform take place given that real reform—especially in light of frightening new unfunded pension liability numbers—means that the days of millionaires’ pensions (one would need millions in the bank to receive the amounts commonly received by recent California government retirees) eventually have to end. Unions don't mind undermining the public's right to vote. They don't care if our taxes go through the roof and businesses flee the state. They don't care if services are slashed. They want their money.
Even Gov. Jerry Brown’s modest pension reform proposals are going nowhere in a Democratic-controlled Legislature that continues to promote expanded benefits for public employees, including a recently introduced Public Employees Bill of Rights. That leaves few other choices than a continuing gallop toward the brink.
While other liberal states such as Rhode Island are addressing their pension problems, and some Midwestern states such as Wisconsin, Ohio, and Indiana are fighting battles over union power, California does basically nothing. I appreciate the governor’s pension proposals, but he continues to view hefty tax increases as the only real solution to the state’s budget problems. The deficit has shrunk a bit, and Standard & Poor’s pushed up the state’s credit rating a tad, but the fundamentals have not improved here very much.
Where does that leave us?
Economist Allan Meltzer once quipped that “Capitalism without failure is like religion without sin. It doesn’t work.” Americans have been witnessing this axiom on a broad scale, as government efforts to prop up industries, bail out the financial sector, and protect select private businesses from failure have only caused a prolonged financial crisis. Without failure, there is no day of reckoning and no effort by the failed party to make the fundamental changes needed to avert future crisis.
The problem in the public sector is that government never is allowed to fail. There never is a day of reckoning no matter how poorly a government agency may provide its so-called services. Often, the worst agencies are rewarded for their failure by being granted additional public dollars. California governments have continually ramped up pension promises, but governments can’t go out of business, so they just keep piling up the debt.
When there’s no money left, officials play games with the numbers or—as Gov. Brown continues to do—make it their main objective to raise taxes.
Since reform can't take place because of union control, some have proposed wider use of the bankruptcy option so municipalities can reorganize their debt. The main critics of the bankruptcy option are the unions. They know that bankruptcy would enable governments to abrogate these unaffordable contracts. The public-employee unions championed a bill, signed into law by Brown in October that makes municipal bankruptcy more cumbersome by forcing localities to get approval for such actions by additional committees.
Some even see the bankruptcy option as something that should be allowed for states. In January 2011 GOP pols Jeb Bush and Newt Gingrich ignited this debate with a Los Angeles Times op-ed titled, “Better Off Bankrupt” that argued that an organized bankruptcy process might help states overcome staggering budget deficits. But other conservatives, concerned about the impact of bankruptcy on bond markets, have been campaigning against this idea. They note that the highly publicized Vallejo bankruptcy ultimately did little to reform that city’s super-sized pensions for public employees.
I’m not advocating for bankruptcy per se, but what happens when all other reform options are taken off the table? What happens when the politics of a state won't allow the reforms necessary to save that state? In other words, what happens when failure is not an option? If the likes of Harris and PERB and the unions continue to get their way, we very well may get to see the answer here in California.
Steven Greenhut is vice president of the Franklin Center for Government and Public Integrity. He is based in Sacramento.
In essence, the unions and this unelected board insist that the people of San Diego have no right to vote on pension reform. This is just the latest reminder of the totalitarian ethics of a public-sector union movement that doesn’t care about anything other than protecting its benefits.
“Never in the history of this state ... has there ever been a requirement to meet and confer over a citizens’ initiative placed on the ballot by voter signatures,” wrote city attorney Jan Goldsmith in a toughly worded letter to PERB. Pension reform advocate Carl DeMaio, a councilman and mayoral candidate, criticized PERB's assault on Californians' constitutional rights. Fortunately, a judge agreed with the city, but expect the unions to head back to court if their campaign against CPR fails.
The unions that dominate Sacramento are not about to let any serious reform take place given that real reform—especially in light of frightening new unfunded pension liability numbers—means that the days of millionaires’ pensions (one would need millions in the bank to receive the amounts commonly received by recent California government retirees) eventually have to end. Unions don't mind undermining the public's right to vote. They don't care if our taxes go through the roof and businesses flee the state. They don't care if services are slashed. They want their money.
Even Gov. Jerry Brown’s modest pension reform proposals are going nowhere in a Democratic-controlled Legislature that continues to promote expanded benefits for public employees, including a recently introduced Public Employees Bill of Rights. That leaves few other choices than a continuing gallop toward the brink.
While other liberal states such as Rhode Island are addressing their pension problems, and some Midwestern states such as Wisconsin, Ohio, and Indiana are fighting battles over union power, California does basically nothing. I appreciate the governor’s pension proposals, but he continues to view hefty tax increases as the only real solution to the state’s budget problems. The deficit has shrunk a bit, and Standard & Poor’s pushed up the state’s credit rating a tad, but the fundamentals have not improved here very much.
Where does that leave us?
Economist Allan Meltzer once quipped that “Capitalism without failure is like religion without sin. It doesn’t work.” Americans have been witnessing this axiom on a broad scale, as government efforts to prop up industries, bail out the financial sector, and protect select private businesses from failure have only caused a prolonged financial crisis. Without failure, there is no day of reckoning and no effort by the failed party to make the fundamental changes needed to avert future crisis.
The problem in the public sector is that government never is allowed to fail. There never is a day of reckoning no matter how poorly a government agency may provide its so-called services. Often, the worst agencies are rewarded for their failure by being granted additional public dollars. California governments have continually ramped up pension promises, but governments can’t go out of business, so they just keep piling up the debt.
When there’s no money left, officials play games with the numbers or—as Gov. Brown continues to do—make it their main objective to raise taxes.
Since reform can't take place because of union control, some have proposed wider use of the bankruptcy option so municipalities can reorganize their debt. The main critics of the bankruptcy option are the unions. They know that bankruptcy would enable governments to abrogate these unaffordable contracts. The public-employee unions championed a bill, signed into law by Brown in October that makes municipal bankruptcy more cumbersome by forcing localities to get approval for such actions by additional committees.
Some even see the bankruptcy option as something that should be allowed for states. In January 2011 GOP pols Jeb Bush and Newt Gingrich ignited this debate with a Los Angeles Times op-ed titled, “Better Off Bankrupt” that argued that an organized bankruptcy process might help states overcome staggering budget deficits. But other conservatives, concerned about the impact of bankruptcy on bond markets, have been campaigning against this idea. They note that the highly publicized Vallejo bankruptcy ultimately did little to reform that city’s super-sized pensions for public employees.
I’m not advocating for bankruptcy per se, but what happens when all other reform options are taken off the table? What happens when the politics of a state won't allow the reforms necessary to save that state? In other words, what happens when failure is not an option? If the likes of Harris and PERB and the unions continue to get their way, we very well may get to see the answer here in California.
Steven Greenhut is vice president of the Franklin Center for Government and Public Integrity. He is based in Sacramento.
The Trouble with Public Sector Unions
http://www.nationalaffairs.com
FROM ISSUE NUMBER 5 ~ FALL 2010
When Chris Christie became New Jersey's governor in January, he wasted no time in identifying the chief perpetrators of his state's fiscal catastrophe. Facing a nearly $11 billion budget gap — as well as voters fed up with the sky-high taxes imposed on them to finance the state government's profligacy — Christie moved swiftly to take on the unions representing New Jersey's roughly 400,000 public employees.
On his first day in office, the governor signed an executive order preventing state-workers' unions from making political contributions — subjecting them to the same limits that had long applied to corporations. More recently, he has waged a protracted battle against state teachers' unions, which are seeking pay increases and free lifetime health care for their members. Recognizing the burden that such benefits would place on New Jersey's long-term finances, Christie has sought instead to impose a one-year wage freeze, to change pension rules to limit future benefits, and to require that teachers contribute a tiny fraction of their salaries to cover the costs of their health insurance — measures that, for private-sector workers, would be mostly uncontroversial.
The firestorm that these proposals have sparked demonstrates the political clout of state-workers' unions. Christie's executive order met with vicious condemnation from union leaders and the politicians aligned with them; his fight with the public-school teachers prompted the New Jersey Education Association to spend $6 million (drawn from members' dues) on anti-Christie attack ads over a two-month period. Clearly, the lesson for reform-minded politicians has been: Confront public-sector unions at your peril.
Yet confront them policymakers must. As Christie said about the duel with the NJEA, "If we don't win this fight, there's no other fight left." Melodramatic as this may sound, for many states, it is simply reality. The cost of public-sector pay and benefits (which in many cases far exceed what comparable workers earn in the private sector), combined with hundreds of billions of dollars in unfunded pension liabilities for retired government workers, are weighing down state and city budgets. And staggering as these burdens seem now, they are actually poised to grow exponentially in the years ahead. If policymakers fail to rein in this growth, a fiscal crack-up will be the inevitable result.
New Jersey has drawn national attention as a case study, but the same scenario is playing out in state capitals from coast to coast. New York, Michigan, California, Washington, and many other states also find themselves heavily indebted, with public-sector unions at the root of their problems. In exchange, taxpayers in these states are rewarded with larger and more expensive, yet less effective, government, and with elected officials who are afraid to cross the politically powerful unions. As the Wall Street Journal put it recently, public-sector unions "may be the single biggest problem...for the U.S. economy and small-d democratic governance." They may also be the biggest challenge facing state and local officials — a challenge that, unless economic conditions dramatically improve, will dominate the politics of the decade to come.
THE STATE OF THE UNION
Since the middle of the 20th century, organized labor in
America has undergone two transformations with major implications for
the nation's politics. The first is the dramatic decline in overall
union membership. In 1955, organized labor represented one-third of the
non-agricultural work force; today, it represents just 12.3%. The second
transformation, however, is even more significant: the change in the
composition of the unionized work force.As private-sector unions have withered, public-sector unions have grown dramatically. The Bureau of Labor Statistics reports that, in 2009, for the first time ever, more public-sector employees (7.9 million) than private-sector employees (7.4 million) belonged to unions. Today, unionized workers are more likely to be teachers, librarians, trash collectors, policemen, or firefighters than they are to be carpenters, electricians, plumbers, auto workers, or coal miners.
This shift has produced a noticeable change in the demographic profile of union members; gone is the image of a union man as a beefy laborer in a hard hat and steel-toed boots. According to data from the University of Michigan's American National Election Study, in 1952, about 80% of union members were blue-collar workers, while 20% were white-collar workers; by the mid-1990s, those classified as white-collar workers gained majority status. Nor do men dominate unions any longer: In the 1950s, more than 80% of union members were men, but today there is near gender parity. Union members also have much more schooling than they once did. In 1960, more than 35% of union members had not finished high school and barely 2% had college degrees. Today, almost every union member has completed high school, and more than 25% have college degrees. The typical union member no longer lives in a major city center close to the factory; by the 1990s, union members were more likely to live in suburban than urban areas. Unions have also become multi-racial: Nearly a quarter of union members are now non-white. Unions today represent a vastly different slice of America than they did at the height of the country's manufacturing prowess.
The rise of government-worker unionism has also combined with the broader transformation of the American economy to produce a sharp divergence between public- and private-sector employment. In today's public sector, good pay, generous benefits, and job security make possible a stable middle-class existence for nearly everyone from janitors to jailors. In the private economy, meanwhile, cutthroat competition, increased income inequality, and layoffs squeeze the middle class. This discrepancy indicates how poorly the middle class has fared in recent decades in the private economy, which is home to 80% of American jobs. But it also highlights the increased benefits of government work, and shines a spotlight on the gains public-sector unions have secured for their members. Perhaps this success helps explain why, on average, 39% of state- and local-government employees belong to unions. (Differences in state and local laws of course mean that the percentage varies from state to state; New York tops the chart with roughly 70% of state employees in unions, while many Southern right-to-work states hover in the single digits.)
The emergence of powerful public-sector unions was by no means inevitable. Prior to the 1950s, as labor lawyer Ida Klaus remarked in 1965, "the subject of labor relations in public employment could not have meant less to more people, both in and out of government." To the extent that people thought about it, most politicians, labor leaders, economists, and judges opposed collective bargaining in the public sector. Even President Franklin Roosevelt, a friend of private-sector unionism, drew a line when it came to government workers: "Meticulous attention," the president insisted in 1937, "should be paid to the special relations and obligations of public servants to the public itself and to the Government....The process of collective bargaining, as usually understood, cannot be transplanted into the public service." The reason? F.D.R. believed that "[a] strike of public employees manifests nothing less than an intent on their part to obstruct the operations of government until their demands are satisfied. Such action looking toward the paralysis of government by those who have sworn to support it is unthinkable and intolerable." Roosevelt was hardly alone in holding these views, even among the champions of organized labor. Indeed, the first president of the AFL-CIO, George Meany, believed it was "impossible to bargain collectively with the government."
Courts across the nation also generally held that collective bargaining by government workers should be forbidden on the legal grounds of sovereign immunity and unconstitutional delegation of government powers. In 1943, a New York Supreme Court judge held:
To tolerate or recognize any combination of civil service employees of the government as a labor organization or union is not only incompatible with the spirit of democracy, but inconsistent with every principle upon which our government is founded. Nothing is more dangerous to public welfare than to admit that hired servants of the State can dictate to the government the hours, the wages and conditions under which they will carry on essential services vital to the welfare, safety, and security of the citizen. To admit as true that government employees have power to halt or check the functions of government unless their demands are satisfied, is to transfer to them all legislative, executive and judicial power. Nothing would be more ridiculous.
The very nature of many public services — such as policing the streets and putting out fires — gives government a monopoly or near monopoly; striking public employees could therefore hold the public hostage. As long-time New York Times labor reporter A. H. Raskin wrote in 1968: "The community cannot tolerate the notion that it is defenseless at the hands of organized workers to whom it has entrusted responsibility for essential services."
Another common objection to collective bargaining with public-employee unions was that it would mean taking some of the decision-making authority over government functions away from the people's elected representatives and transferring it to union officials, with whom the public had vested no such authority. In this view, democracy would be compromised when elected officials began sharing with union leaders the power to determine government employees' wages, benefits, and working conditions. Furthermore, collectively bargained work rules could alter what public servants did day to day in ways not condoned by either elected officials or the voting public.
Given the forces and arguments aligned against public-sector unions, what led to their enormous growth? Three conditions prepared the ground for the legal reforms that facilitated collective bargaining in the public sector (and the subsequent swelling of the ranks of unionized government employees).
The first was the weakening of party machines at the state and (especially) local levels. In many of America's large cities, the responsibility for filling government jobs fell to the party machines; turnover in government employment was therefore high, connected as it was to election results. In New York during the 1930s and '40s, for instance, the average tenure of a cop or garbage collector was five years. Another effect of the machines' influence over government hiring was political: People in patronage jobs inevitably devoted a portion of their nominal working hours to party affairs. Because government employment under the machine system was both relatively brief and partisan in nature, a culture of professionalism was never really able to take hold.
Reformers' chief weapon in the war against the machines was the enactment of civil-service laws. Such laws sought to deprive ward bosses of control over patronage, which was their lifeblood. Civic groups, the press, and public-employees' associations believed that greater professionalization of the government work force would draw in talent, increase efficiency, and reduce corruption. In the 1950s, according to historian Leo Kramer, the leadership of the American Federation of State, County, and Municipal Employees (AFSCME) "saw itself as part of a great movement to reform government," one of whose principal aims was "the extension of the merit system to all nonpolicy determining positions in all government jurisdictions."
By the end of the 1950s, reformers had put the old machines on the defensive. And professionalization had had its intended effect: In their 1963 book City Politics, Edward Banfield and James Q. Wilson found that, by 1961, 52% of cities with populations over 500,000 had placed nearly all government employees under civil-service protections.
One important consequence of civil-service reform was that, with the end of election-based turnover — and with protections against undue political interference in hiring and firing — public employees gained nearly lifetime job security. This gave workers a long-term interest in their jobs and increased their capacity to express themselves collectively, thereby helping to make the unionization of public employees possible.
The second precondition for public-sector unionization was economic and demographic change. In the post-war period, the number of government jobs grew rapidly: Between 1950 and 1976, state- and local-government employment increased from 9.1% to 15.3% of the non-agricultural work force (an increase from roughly 4 million workers to about 12 million). A large part of this spike was the result of increased demand for government services caused by the Baby Boom. Huge numbers of young people meant a greater need for workers in schools in particular; the number of Americans working as teachers, principals, and administrators thus increased dramatically. It is hardly surprising, then, that some of the first public employees to unionize (and some of the most militant) were teachers. In the 1970s in New York state alone, there were, on average, 20 teacher strikes a year.
Finally, the third precondition was the solidification of the alliance between organized labor and the Democratic Party. Franklin Roosevelt's signing of the Wagner Act (which protected the rights of private-sector workers to organize and bargain collectively) in 1935 fully bonded labor to the Democrats; their partnership was reinforced during the fight over the Taft-Hartley Act of 1947, which was a Republican initiative to rein in union power. By mid-century, Democrats began to rely on labor unions for both funding and on-the-ground campaign organizing. In the 1950s and '60s, according to political scientist J. David Greenstone, "labor functioned as the most important nation-wide electoral organization for the Democratic Party." As a political tag team, both Democrats and labor had an incentive to broaden the base of the labor movement — and they came to see public-sector workers as the most promising new hunting ground, especially as private-sector union membership began to decline.
Democrats began to mobilize this new constituency in the late 1950s. In 1958, New York City mayor Robert Wagner, Jr., issued Executive Order 49, known as "the little Wagner Act." It gave city employees bargaining rights, and provided their unions with exclusive representation (meaning that the unions alone were legally authorized to speak for city workers, regardless of whether those workers belonged to the unions or supported them). And in 1962, President John Kennedy issued Executive Order 10988, reaffirming the right of federal workers to organize and codifying their right to bargain collectively.
From the mid-1960s through the early '70s, states and cities followed with a plethora of laws providing public-employee unions with collective-bargaining rights. In many cases, the consequences were almost immediate. In New York state, one year after the passage of the so-called Taylor Law in 1967, 360,000 state- and local-government employees became unionized; the New York Times described the law as having an "almost revolutionary effect." Other states and cities experienced similar expansions in the number of public-sector union members. For example, in 1968, California passed the Meyers-Milias-Brown Act — a law granting local-government workers bargaining rights — and then extended those rights to teachers a few years later; in the 1970s and '80s, both membership in public-sector unions and the number of strikes in California skyrocketed. Nationwide, by 1970, the AFSCME had negotiated more than 1,000 collective-bargaining agreements, nearly twice the number in place in 1964. And by 1972, nearly half of the states had public-employee collective-bargaining laws in place at either the state or local level.
Collective-bargaining laws gave government workers powerful incentives to join unions. Between 1960 and 1980, the portion of full-time unionized public employees jumped from 10% to 36% of the public-sector work force. The AFSCME grew from 99,000 members in 1955 to just under 1 million members in 1980. Over the same period, the American Federation of Teachers grew from 40,000 to more than half a million members. Today, its membership stands at more than 1.5 million — which makes the AFT larger than the largest exclusively private-sector union, the United Food and Commercial Workers (1.3 million members). But even the AFT is dwarfed by the largest labor union in the United States: the National Education Association, which claims 3.2 million members.
Organized labor in America thus increasingly consists of government employees, and government employees increasingly belong to unions. This shift has clearly reshaped the country's labor movement. Far more important to most Americans, though, is the way it has transformed the relationships between public employees, the governments they work for, and the public they serve — often with less than salutary results.
THE PUBLIC-SECTOR DIFFERENCE
When it comes to advancing their interests, public-sector unions have
significant advantages over traditional unions. For one thing, using
the political process, they can exert far greater influence over their
members' employers — that is, government — than private-sector unions
can. Through their extensive political activity, these
government-workers' unions help elect the very politicians who will act
as "management" in their contract negotiations — in effect handpicking
those who will sit across the bargaining table from them, in a way that
workers in a private corporation (like, say, American Airlines or the
Washington Post Company) cannot. Such power led Victor Gotbaum, the
leader of District Council 37 of the AFSCME in New York City, to brag in
1975: "We have the ability, in a sense, to elect our own boss."Since public-sector unions began to develop in earnest, their importance in political campaigns has grown by leaps and bounds. Starting from almost nothing in the 1960s, government-workers' unions now far exceed private-sector unions in political contributions. According to the Center for Responsive Politics, from 1989 to 2004, the AFSCME was the biggest spender in America, giving nearly $40 million to candidates in federal elections (98.5% of it to Democrats). It is important to stress that this was spending on federal elections; the union represents mostly state and local workers. But given the magnitude of federal contributions to state budgets, the AFSCME is heavily involved in electioneering to shape Washington's spending in ways that protect public workers and the supply of government services. And so over that 15-year period, the AFSCME was willing and able to outspend any other organization in the country.
The political influence of public-sector unions is probably greatest, however, in low-turnout elections to school boards and state and local offices, and in votes to decide ballot initiatives and referenda. For example, two of the top five biggest spenders in Wisconsin's 2003 and 2004 state elections were the Wisconsin Education Association Council and the AFSCME-affiliated Wisconsin PEOPLE Conference. Only the state Republican Party and two other political action committees — those belonging to the National Association of Realtors and SBC / Ameritech — spent more. The same is true in state after state, as unions work to exert control over the very governments that employs their members.
This political dimension of public-sector unionism also changes the substantive priorities and demands of the unions themselves. Although private-sector unions in the United States have engaged in leftist "social activism," they have mostly concentrated their efforts on securing the best wages, benefits, pensions, and working conditions for their members: "pure and simple unionism," as longtime American Federation of Labor president Samuel Gompers used to call it. Rarely do they demand more hiring, since — given the constant private-sector imperative to keep operating costs minimal — increasing the number of a company's employees can limit wage and benefit increases for the workers already on the company's payroll.
By contrast, as economist Richard Freeman has written, "public sector unions can be viewed as using their political power to raise demand for public services, as well as using their bargaining power to fight for higher wages." The millions spent by public-employee unions on ballot measures in states like California and Oregon, for instance, almost always support the options that would lead to higher taxes and more government spending. The California Teachers Association, for example, spent $57 million in 2005 to defeat referenda that would have reduced union power and checked government growth. And the political influence of such massive spending is of course only amplified by the get-out-the-vote efforts of the unions and their members. This power of government-workers' unions to increase (and then sustain) levels of employment through the political process helps explain why, for instance, the city of Buffalo, New York, had the same number of public workers in 2006 as it did in 1950 — despite having lost half of its population (and thus a significant amount of the demand for public services).
For a case study in how public-sector unions manipulate both supply and demand, consider the example of the California Correctional Peace Officers Association. Throughout the 1980s and '90s, the CCPOA lobbied the state government to increase California's prison facilities — since more prisons would obviously mean more jobs for corrections officers. And between 1980 and 2000, the Golden State constructed 22 new prisons for adults (before 1980, California had only 12 such facilities). The CCPOA also pushed for the 1994 "three strikes" sentencing law, which imposed stiff penalties on repeat offenders. The prison population exploded — and, as intended, the new prisoners required more guards. The CCPOA has been no less successful in increasing members' compensation: In 2006, the average union member made $70,000 a year, and more than $100,000 with overtime. Corrections officers can also retire with 90% of their salaries as early as age 50. Today, an amazing 11% of the state budget — more than what is spent on higher education — goes to the penal system.[Correction appended] Governor Arnold Schwarzenegger now proposes privatizing portions of the prison system to escape the unions' grip — though his proposal has so far met with predictable (union supported) political opposition.
A further important advantage that public-sector unions have over their private-sector counterparts is their relative freedom from market forces. In the private sector, the wage demands of union workers cannot exceed a certain threshold: If they do, they can render their employers uncompetitive, threatening workers' long-term job security. In the public sector, though, government is the monopoly provider of many services, eliminating any market pressures that might keep unions' demands in check. Moreover, unlike in the private sector, contract negotiations in the public sector are usually not highly adversarial; most government-agency mangers have little personal stake in such negotiations. Unlike executives accountable to shareholders and corporate boards, government managers generally get paid the same — and have the same likelihood of keeping their jobs — regardless of whether their operations are run efficiently. They therefore rarely play hardball with unions like business owners and managers do; there is little history of "union busting" in government.
Additionally, the rise and fall of businesses in the private sector means that unions must constantly engage in organizing efforts, reaching out to employees of newly created companies. In government agencies, on the other hand, once a union organizes workers, they usually remain organized — because the government doesn't go out of business. Public-employee unions can thus maintain membership levels with much less effort than can private-sector unions.
Finally, public-sector unions enjoy a privileged position in relation not only to their private-sector counterparts but also to other interest groups. Public-sector unions have automatic access to politicians through the collective-bargaining process, while other interest groups must fight for such entrée. Government unions can also more easily mobilize their members for electoral participation than other interest groups can — since they are able to apply pressure at the workplace and, in many cases, can even arrange for time off and other benefits to make members' political activism easier. Furthermore, most interest groups must devote a great deal of time and effort to fundraising; public-sector unions, on the other hand, enjoy a steady, reliable revenue stream, as union dues are deducted directly from members' paychecks (often by government, which drastically reduces the unions' administrative costs).
Taken together, the intrinsic advantages that public-sector unions enjoy over private-sector advocacy groups (including private-sector unions) have given organized government laborers enormous power over government at the local, state, and federal levels; to shape public finances and fiscal policy; and to influence the very spirit of our democracy. The results, unfortunately, have not always been pretty.
A UNIONIZED GOVERNMENT
The effects of public-sector unionism can be grouped under three
broad headings. The first centers on compensation, which includes wages,
pensions, health care, and other benefits easily valued in monetary
terms — the core issues at stake in collective-bargaining negotiations.
The second involves the amount of government employment, or the size of
government, as reflected in the number of workers and in public budgets.
The third involves the productivity and efficiency of government
services. Insofar as unions negotiate detailed work rules, they share
the power to shape the day-to-day responsibilities of public servants —
which influences what government does, and how well it does it.These are complex matters that are hard for social scientists to measure, and on which scholars disagree. Nevertheless, the evidence supports a few broad conclusions.
Most economists agree that public-sector unions' political power leads to more government spending. And recently, Chris Edwards of the Cato Institute documented how government unionism has abetted growth in public-sector compensation. Generally speaking, the public sector pays more than the private sector for jobs at the low end of the labor market, while the private sector pays more for jobs at the high end. For janitors and secretaries, for instance, the public sector offers an appreciably better deal than the private economy: According to the Bureau of Labor Statistics, the average annual salary for the roughly 330,000 office clerks who work in government was almost $27,000 in 2005, while the 2.7 million in the private sector received an average pay of just under $23,000. Nationwide, among the 108,000 janitors who work in government, the average salary was $23,700; the average salary of the 2 million janitors working in the private sector, meanwhile, was $19,800.
For workers with advanced degrees, however, the public-sector pay scale is likely to be slightly below the private-sector benchmark. Private-sector economists, for instance, earn an average of $99,000 a year, compared to the $69,000 earned by their government colleagues. And accountants in the corporate world earn average annual salaries of $52,000, compared to $48,000 for their public-sector counterparts.
Not as easily captured is the comparable worth of those government workers who lack counterparts in the private sector, such as policemen, firefighters, and corrections officers. But that very monopoly status has given the union representatives of these workers enormous leverage, which they have converted into major gains. For example, in New York state, county police officers were paid an average salary of $121,000 a year in 2006. In that same year, according to the Boston Globe, 225 of the 2,338 Massachusetts State Police officers made more than the $140,535 annual salary earned by the state's governor. Four state troopers received more than $200,000, and 123 others were paid more than $150,000. While people whose jobs entail greater risk of life and limb certainly deserve higher pay, union power has clearly added a substantial premium.
When all jobs are considered, state and local public-sector workers today earn, on average, $14 more per hour in total compensation (wages and benefits) than their private-sector counterparts. The New York Times has reported that public-sector wages and benefits over the past decade have grown twice as fast as those in the private sector. These aggregate pay differentials stem partly from the fact that government work tends to be more white-collar, and that public employees tend to be better educated and more experienced, and to live in urban areas. Another factor is the hollowing out of the middle of the income distribution in the private sector. But union influence still plays a major role.
When unions have not been able to secure increases in wages and salaries, they have turned their attention to benefits. USA Today journalist Dennis Cauchon notes that, since 2002, for every $1-an-hour pay increase, public employees have gotten $1.17 in new benefits; private-sector workers, meanwhile, have received just 58 cents in added benefits. Of special interest to the unions has been health care: Across the nation, 86% of state- and local-government workers have access to employer-provided health insurance, while only 45% of private-sector workers do. In many cases, these plans involve meager contributions from employees, or none at all — in New Jersey, for instance, 88% of public-school teachers pay nothing toward their insurance premiums.
The unions' other cherished benefit is public-employee pensions. In California, for example, state workers often retire at 55 years of age with pensions that exceed what they were paid during most of their working years. In New York City, firefighters and police officers may retire after 20 years of service at half pay — which means that, at a time when life expectancy is nearly 80 years, New York City is paying benefits to 10,000 retired cops who are less than 50 years old. Those benefits quickly add up: In 2006, the annual pension benefit for a new retiree averaged just under $73,000 (and the full amount is exempt from state and local taxes).
How, one might ask, were policymakers ever convinced to agree to such generous terms? As it turns out, many lawmakers found that increasing pensions was very good politics. They placated unions with future pension commitments, and then turned around, borrowed the money appropriated for the pensions, and spent it paying for public services in the here and now. Politicians liked this scheme because they could satisfy the unions, provide generous public services without raising taxes to pay for them, and even sometimes get around balanced-budget requirements.
Unfortunately, the hit pension funds took recently in the stock market has exposed the massive underfunding that results from states' and municipalities' not paying for the public services they consume. In Illinois, for example, public-sector unions have helped create a situation in which the state's pension funds report a liability of more than $100 billion, at least 50% of it unfunded. Yet many analysts believe the figure is much higher; without a steep economic recovery, the Prairie State is looking at insolvency. Indeed, Northwestern University finance professor Joshua Rauh puts the date of collapse at 2018; he also predicts that six other states — Connecticut, Indiana, New Jersey, Hawaii, Louisiana, and Oklahoma — will see their pension funds dry up before the end of fiscal year 2020. What's more, according to the Pew Center on the States, 18 states face long-term pension liabilities in excess of $10 billion. In the case of California, like that of Illinois, the unfunded pension liability exceeds $50 billion. In fact, Pew estimates that, when retiree health-care costs are added to pension obligations, the unfunded liabilities of the states total an astounding $1 trillion.
The skyrocketing costs of public employees' pensions now present a huge challenge to state and local governments. If allowed to persist, such massive obligations will inevitably force a fundamental re-ordering of government priorities. After all, if government must spend more on pensions, it cannot spend more on schools, roads, and relief for the poor — in other words, the basic functions people expect their governments to perform. But because many states' pension commitments are constitutionally guaranteed, there is no easy way out of this financial sink hole. Recent court decisions indicate that pension obligations will have to be fulfilled even if governments declare bankruptcy — because while federal law allows bankruptcy judges to change pension and health-care packages in the private sector, it forbids such changes in public employees' agreements.
Yet as skilled as the unions may be in drawing on taxpayer dollars, many observers argue that their greater influence is felt in the quality of the government services taxpayers receive in return. In his book The Warping of Government Work, Harvard public-policy scholar John Donahue explains how public-employee unions have reduced government efficiency and responsiveness. With poor prospects in the ultra-competitive private sector, government work is increasingly desirable for those with limited skills; at the opposite end of the spectrum, the wage compression imposed by unions and civil-service rules makes government employment less attractive to those whose abilities are in high demand. Consequently, there is a "brain drain" at the top end of the government work force, as many of the country's most talented people opt for jobs in the private sector where they can be richly rewarded for their skills (and avoid the intricate work rules, and glacial advancement through big bureaucracies, that are part and parcel of government work).
Thus, as New York University professor Paul Light argues, government employment "caters more to the security-craver than the risk-taker." And because government employs more of the former and fewer of the latter, it is less flexible, less responsive, and less innovative. It is also more expensive: Northeastern University economist Barry Bluestone has shown that, between 2000 and 2008, the price of state and local public services has increased by 41% nationally, compared with 27% for private services.
Finally, insofar as government collective-bargaining agreements touch on a wide range of economic decisions, public-sector unions have extraordinary influence over government policies. In the classic model of democratic accountability, citizens vote in competitive elections for candidates offering distinct policy agendas; once in office, the winners implement their programs through public agencies. But when public-employee unions bargain collectively with the government, elected officials partially cede control of public agencies to unelected labor leaders. Many policy choices are then settled in the course of negotiations between office holders and unions, rather than originating with the people's duly elected representatives. Over the long term, these negotiated work rules can drive public policy in directions that neither elected officials nor voters desire. And once enacted, these policies can prove very hard to reverse, even through elections: A new mayor or governor — no matter how hard-charging a reformer — will often find his hands tied by the iron-clad agreements unions managed to extract from his predecessors.
Stanford University political scientist Terry Moe has made exactly this argument with respect to the education sector. "Teachers unions have more influence on the public schools than any other group in American society," Moe argues. "Their massive memberships and awesome resources give them unrivaled power in the politics of education, allowing them to affect which policies are imposed on the schools by government — and to block reforms they don't like." One need only look at the debates over charter-school caps or merit-pay proposals to see Moe's point.
Public-sector unions thus distort the labor market, weaken public finances, and diminish the responsiveness of government and the quality of public services. Many of the concerns that initially led policymakers to oppose collective bargaining by government employees have, over the years, been vindicated.
As a result, it is difficult for defenders of public-sector unions today to make a convincing case that such unions benefit the public at large. Their argument has basically been reduced to three assertions. One is that most public employees live modest lives, and so criticizing efforts to improve their lot distracts attention from wealthy CEOs and Wall Street bankers who are the real culprits behind today's economic woes. Another is that the unions defend the dignity of public service, thereby preserving a middle class that would otherwise be plunged — through conservatives' efforts to privatize such work — into the vicious race to the bottom that now plagues the private sector. Finally, government-workers' unions help advance leftist politics by keeping the labor movement hobbling along.
To be sure, there is some merit to each of these arguments, though none is especially convincing. But even if these claims were completely true and obvious, they would not offer sufficient reason to put up with the other, manifestly negative consequences of public-sector unionism.
GOVERNING IN THE REAL WORLD
"At some point," New Jersey governor Chris Christie said in a
February speech to his state's mayors, "there has to be parity between
what is happening in the real world and what is happening in the
public-sector world."Achieving such parity will not be easy, as some early attempts to curtail the power of public-sector unions have shown. Some state and local officials (like California governor Arnold Schwarzenegger) have sought to appeal directly to the people through referenda, only to be thwarted by the unions' electoral clout. Others have pursued stop-gap measures like wage freezes and furloughs of public employees, which inevitably draw some public backlash. There have even been calls for some cities to follow the example of Vallejo, California, and declare bankruptcy so that they can renegotiate employment contracts with the unions.
A few places are attempting more serious long-term solutions. As the Wall Street Journal reported in June, public-employee unions in Vermont, Iowa, Minnesota, and Wyoming have recently agreed to modest reductions in pension benefits — though none of the cuts is large enough to bring the finances of that state's pension funds fully into balance. In the Garden State, Governor Christie succeeded in getting the state legislature to approve a 2% annual growth cap on property taxes in order to limit local spending — thereby indirectly curtailing the power of teachers' unions to demand more public dollars. Yet even well-designed tax caps can unleash unpleasant consequences, including more crowded classrooms, layoffs of state workers, and increases in pension debt. Few politicians will want to suffer those consequences, and the unions will fiercely oppose all policies that even hint at reform.
All of these efforts are, of course, attempts to deal only with the symptoms of the looming state fiscal crisis — not with its underlying causes. To address those causes, policymakers may even need to re-open the question of whether government workers should enjoy the privilege of collective bargaining.
After all, even without collective bargaining, government workers would still benefit from far-reaching protections under existing civil-service statutes — more protections than most private-sector workers enjoy. And they would retain their full rights as citizens to petition the government for changes in policy. Public-sector workers' ability to unionize is hardly sacrosanct; it is by no means a fundamental civil or constitutional right. It has been permitted by most states and localities for only about half a century, and, so far, it is not clear that this experiment has served the public interest.
It is true that ending government workers' ability to organize is politically inconceivable today in the states where it exists. But if states' and cities' fiscal ills grow painful enough, the unthinkable could someday become political necessity. For all Americans — including public-sector employees — it would of course be better if the situation did not reach that point of catastrophe. We can all hope that a robust economic revival will take the pressure off of states and cities and give policymakers more room to maneuver. If such a rapid recovery is not forthcoming, though, the most appealing solution will be for everyone to re-enter the real world — if only public officials and public-sector unions can be sensible enough to try.
*Correction Appended: The text originally stated that California's penal system received more funds than its public education system. It in fact receives more funds than the state's higher education system. (Return to text)
Daniel DiSalvo is an assistant professor of political science at the City College of New York.
Thursday, December 26, 2013
Only 150 of 3500 U.S. Colleges Are Worth the Investment: Former Secretary of Education
The U.S. is home to some of the greatest colleges and universities in the world. But with the student debt load at more than $1 trillion and youth unemployment elevated, when assessing the value of a college education, that’s only one part of the story.
Former Secretary of Education William Bennett, author of Is College Worth It, sat down with The Daily Ticker on the sidelines of the Milken Institute's 2013 Global Conference to talk about whether college is worth it.
“We have about 21 million people in higher education, and about half the people who start four year colleges don’t finish,” Bennett tells The Daily Ticker. “Those who do finish, who graduated in 2011 - half were either unemployed or radically underemployed and in debt.”
Related: The One Skill Every American Needs to Learn
That average student loan balance for a 25-year-old is $20,326, according to the Federal Reserve of New York. Student debt is second largest source of U.S. household debt, after only mortgages.
Bennett assessed the “return on investment” for the 3500 colleges and universities in the country. He found that returns were positive for only 150 institutions. The top 10 schools ranked by Bennett as having the best "ROI" are below (for the full list he used, click here, and for the latest figures, click here):
- Harvey Mudd College
- California Institute of Technology
- Massachusetts Institute of Technology (MIT)
- Stanford University
- Princeton University
- Harvard University
- Dartmouth College
- Duke University
- University of Pennsylvania
- University of Notre Dame
Related: Are Millennials a “Lost Generation”?
The problem, Bennett says, is people going to second-tier schools, majoring in less-marketable liberal arts fields, and taking on debt to do so.
Alternatives to a traditional four-year college include entering the workforce prior to college, joining the military, or going to a 2-year community college.
Bennet discovered, for example, graduates of Jefferson College of Health Science and Nursing in Virginia make more after two years than those from the prestigious University of Virginia in Charlottesville.
Also the rise in massive online offerings has lowered costs for taking a course to as little as $150.
As for what could turn around what some have called a student debt “bubble” in this country, Bennett has some ideas. They don’t involve changes to government policy or a massive overhaul of how colleges do business. They may involve tears and parents’ basements. You can watch the interview to find out.
Sunday, December 1, 2013
The Boomer Bust
Here we are in the baby boom cosmos. What have we wrought?
By
P.J. O'Rourke
Updated Dec. 1, 2013 12:42 a.m. ET
The Baby Boom generation spans eighteen years. Already,
the earliest boomers have reached retirement age. Many are getting more
conservative as they get older. WSJ's Jason Bellini reports.
We are the generation that changed
everything. Of all the eras and epochs of Americans, ours is the one
that made the biggest impression—on ourselves. That's an important
accomplishment, because we're the generation that created the self, made
the firmament of the self, divided the light of the self from the
darkness of the self, and said, "Let there be self." If you were born
between 1946 and 1964, you may have noticed this yourself.
That's
not to say we're a selfish generation. Selfish means "too concerned
with the self," and we're not. Self isn't something we're just, you
know, concerned with. We are self.
Before
us, self was without form and void, like our parents in their dumpy
clothes and vague ideas. Then we came along. Now the personal is the
political. The personal is the socioeconomic. The personal is the
religious and the secular, science and the arts. The personal is
everything that creepeth upon the earth after his (and, let us hasten to
add, her) kind. If the baby boom has done one thing, it's to beget a
personal universe. (Our apologies for anyone who personally happens to
be a jerk.)
Self is like fish,
proverbially speaking. Give a man a fish and you've fed him for a day.
Teach a man to fish and, if he turns into a dry-fly catch-and-release
angling fanatic up to his liver in icy water wearing ridiculous waders
and an absurd hat, pestering trout with 3-pound test line on a $1,000
graphite rod, and going on endlessly about Royal Coachman lures that he
tied himself using muskrat fur and partridge feathers…well, at least his
life partner is glad to have him out of the house.
So
here we are in the baby-boom cosmos, formed in our image, personally
tailored to our individual needs, and predetermined to be eternally
fresh and novel. And we saw that it was good. Or pretty good.
We should have had a cooler name, the
way the Lost Generation did. Except good luck to anybody who tries to
tell us to get lost. Anyway, it's too late now. We're stuck with being
forever described as exploding infants. And maybe it's time, now that
we've splattered ourselves all over the place, for the baby boom to look
back and think. "What made us who we are?" "And what caused us to act
the way we do?" "And WTF?" Because the truth is, if we hadn't decided to
be young forever, we'd be old.
The
youngest baby boomers, born in the last year when anybody thought it was
hip to like
Lyndon Johnson,
are turning 50. We'd be sad about getting old if we weren't too
busy remarrying younger wives, reviving careers that hit glass ceilings
when children arrived and renewing prescriptions for drugs that keep us
from being sad. And we'll never retire. We can't. The mortgage is
underwater. We're in debt up to the Rogaine for the kids' college
education. And it serves us right—we're the generation who insisted that
a passion for living should replace working for one.
Still,
it's an appropriate moment for us to weigh what we've wrought and tally
what we've added to and subtracted from existence. We've reached the
age of accountability. The world is our fault. We are the generation
that has an excuse for everything—one of our greatest contributions to
modern life—but the world is still our fault.
This
is every generation's fate. It's a matter of power and privilege and
demography. Whenever anything happens anywhere, somebody over 50 signs
the bill for it. And the baby boom, seated as we are at the head of
life's table, is hearing Generation X, Generation Y and the Millennials
all saying, "Check, please!"
To address
America's baby boom is to face big, broad problems. We number more than
75 million, and we're not only diverse but take a thorny pride in our
every deviation from the norm (even though we're in therapy for it). We
are all alike in that each of us thinks we're unusual.
Fortunately, we are all alike in our
approach to big, broad problems too. We won't face them. There's a
website for that, a support group to join, a class to take, alternative
medicine, regular exercise, a book that explains it all, a celebrity on
TV who's been through the same thing, or we can eliminate gluten from
our diet. History is full of generations that had too many problems. We
are the first generation to have too many answers.
Not
a problem. Consider the people who have faced up squarely to the
deepest and most perplexing conundrums of existence.
Leo Tolstoy,
for example. He tackled every one of them. Why are we here? What
kind of life should we lead? The nature of evil. The character of love.
The essence of identity. Salvation. Suffering. Death.
What
did it make him? Dead, for one thing. And off his rocker for the last
30 years of his life. Plus he was saddled with a thousand-page novel
about war, peace and everything else you can think of, which he couldn't
even look up on Wikipedia to get the skinny on because he hadn't
written it yet. What a life. If Leo Tolstoy had been one of us he could
have entered a triathlon, a baby-boom innovation of the middle 1970s. By
then we knew we couldn't run away from our problems. But if we added
cycling and swimming…
So, to the
problems of talking about the baby boom, let us turn our big, broad (yet
soon to be firmed up, thanks to the triathlon for seniors that we're
planning to enter) generational backsides.
But
a difficulty remains. Most groups of people who get tagged by history
as a "generation" can be described in an easy, offhand way: as folks
sort of the same age experiencing sort of the same things in sort of the
same place, like the cast of "Cheers" or "Seinfeld" or "Friends." I'm
pretty sure—as a result of taking Modern Literature in college—that
Ernest Hemingway,
F. Scott and
Zelda Fitzgerald,
James Joyce,
Gertrude Stein,
Ford Madox Ford,
Henry Miller
and
Ezra Pound
were roommates in a big apartment on the Left Bank in Paris in
the 1920s. (If not, I give this idea for a sitcom away for free to the
reader.)
But the baby boom has an exact
definition, a precise demography. We are the children who were born
during a period after World War II when the long-term trend in fertility
among American women was exceeded.
Still,
distinctions among varieties of baby boomers need to be made.
Geographical distinctions are peripatetically moot for us. Distinctions
according to race, class, gender or sexual orientation would be
offensive to baby-boom sensitivities. Furthermore, they'd be beside the
point, because the author—much as he endeavors to be as different from
everyone else as a member of the baby boom should be—finds himself to be
hopelessly ordinary in matters of race, class, gender identification
and which section of Playboy he turned to first when he was 16. But time
is a distinction we all have to endure. And there are temporal
variations in the baby boom.
The seniors
of this generation were born in the late 1940s. The author is of that
ilk. The seniors were on the bow wave of the baby boom's voyage of
exploration. But they were also closely tethered in the wake of
preceding generations. In effect the seniors were keelhauled by the
baby-boom experience and left a bit soggy and shaken. If we wound up as
financial advisers trying to wear tongue studs or Trotskyites trying to
organize Tea Party protests, or both, we are to be forgiven.
Hillary Clinton
and
Cheech Marin
are seniors.
The juniors were
born in the early 1950s. They were often younger siblings of the seniors
and came of age when parents were throwing in the towel during the
"What's the Matter with Kids These Days" feature match. The juniors
pursued the notions, whims and fancies of the baby boom with a greater
intensity. For them, drugs were no longer experimental; drugs were
proven. From the juniors we got the teeny-boppers, the groupies and the
more ragamuffin barefoot urchins of Haight-Ashbury. They hunted up some
shoes when they eventually made their way to Silicon Valley. (
Bill Gates
and
Steve Jobs
were both born in 1955.) But they never did find their neckties.
The
sophomores were born in the late 1950s. By the time they reached
adolescence, the baby-boom ethos had permeated society. Sophomores
gladly accepted sex, drugs, rock 'n' roll and the deep philosophical
underpinning thereof. But they'd seen enough of the baby boom in action
to realize that what works in general terms doesn't always work when the
bong sets fire to the beanbag chair. Circumstances had changed. In
college, many of the sophomores attended classes. Some even sneaked off
and got M.B.A.s.
The freshmen were born
in the early 1960s. They felt no visceral effects from the events that
formed the baby boom. To freshmen, the Vietnam War was just something
that was inexplicably on TV all the time, like
Ed McMahon.
Feminism had gone from a pressing social issue to a
Bea Arthur
comedy show that their parents liked, and, by the time the
freshmen were in college, feminism was an essay topic for the "Reading
Shakespeare in Cultural Context" course. Hint: Lady Macbeth hit that
glass ceiling hard.
Now the American
baby boom is the world's future. Everyone on the planet will turn into
us eventually, as soon as families get excessively happy and start
feeling too much affection for their kids. Unless, of course,
extravagant freedom, scant responsibility, plenty of money and a modicum
of peace lead to such a high rate of carbon emissions that we all fry
or drown. But you can't have everything. And you can have a profusion of
opportunity and, at the same time, a collapse of traditional social
standards.
Just look at Western Europe
and the wealthiest parts of Asia and Latin America. They're almost as
useless as we are—with abundant disposable income and ample leisure time
to devote to pointless activities that don't harm anybody much except
ourselves.
Baby-boom-like places all
seem to be engaged in bellicose national political deadlock the way we
are in America. There's much tut-tutting about bellicose national
political deadlock. But it's an improvement on bellicose national
political purpose.
It will take a while
to turn the whole world into baby boomers. For one thing, due to
declining birthrates, the rising generation won't be a boom like we were
with the same weight of numbers on their side. On the other hand, aging
populations in places such as Russia and China will let these babies
speak in booming voices.
Noxious
politics will disappear as all the world's political science classes
happily degenerate into hourlong shouting matches the way our old
Constitutional Law classes did. It's hard to remain truly noxious when
you like being obnoxious better.
Stupid
notions of central planning, nationalization and protectionist trade
barriers will fall by the wayside when everyone is paying as little
attention in Economics as I was.
And
sooner or later, the 1.29 billion people making $1.25 a day, the way we
were, selling "underground" newspapers on the street in Baltimore, are
going to figure out there's a better way. I just received an email from
Nigeria about a rather large amount of money needing to be transferred
to an American bank and requiring only modest assistance on my part.
There
will be no religious fanaticism. We're not a generation who listens to
anybody, God included. In our defense, I doubt God minds us not
bothering about Him. Very few of the people we've bothered—parents,
college deans, the police, LBJ, the psychiatrist at my draft physical,
supervisors, bosses, attractive types in bars—have minded when we quit
bothering them.
World peace is probably
too much to ask. But it will be hard to assemble those huge conscripted
armies that used to fight wars. We'll all have a letter from our doctor
about our deep-seated psychiatric problems and drug use.
Besides,
war is about power. Baby boomers aren't power hungry. Power comes with
that kicker, responsibility. We're greedy for love, happiness,
experience, sensation, thrills, praise, fame, adulation, inner peace,
and, as it turns out, money. Health and fitness too. But we're not
greedy for power. Observe the baby boomers who have climbed to its
ascendancy in Washington. The best and the brightest? They're over at
And all of you tyrannical,
despotic, overbearing squares and wet smacks with your two-bit
autocracies in the butt ends of the world? You shall gather in finished
basements while your revered elders stand at the top of the basement
stairs yelling, "I think something's on fire down there!" Your offices
shall be liberated by raving peaceniks. You shall spend your treasure on
cocaine and rehab. Your junk bonds shall default. You shall form
overage garage bands and try to play "Margaritaville." Your third spouse
shall acquire an
Black Card with a credit limit higher than the U.S. national
debt. Your daughters shall wear nose rings. Your sons shall have pagan
symbols indelibly marked upon their necks. (Unless you belong to one of
those cultures where daughters wear nose rings and sons have pagan
symbols indelibly marked upon their necks, in which case they shall
not.) You shall be perplexed by the Internet. You shall grow old and
addled enough to vote for
Ron Paul
in a presidential primary.
There
is no escape from happiness, attention, affection, freedom,
irresponsibility, money, peace, opportunity and finding out that
everything you were ever told is wrong.
Behold the baby boom, ye mighty, and despair.
http://online.wsj.com/
http://online.wsj.com/
Monday, October 21, 2013
The Trouble with Public Sector Unions
When Chris Christie became New Jersey's governor in January, he wasted no time in identifying the chief perpetrators of his state's fiscal catastrophe. Facing a nearly $11 billion budget gap — as well as voters fed up with the sky-high taxes imposed on them to finance the state government's profligacy — Christie moved swiftly to take on the unions representing New Jersey's roughly 400,000 public employees.
On his first day in office, the governor signed an executive order preventing state-workers' unions from making political contributions — subjecting them to the same limits that had long applied to corporations. More recently, he has waged a protracted battle against state teachers' unions, which are seeking pay increases and free lifetime health care for their members. Recognizing the burden that such benefits would place on New Jersey's long-term finances, Christie has sought instead to impose a one-year wage freeze, to change pension rules to limit future benefits, and to require that teachers contribute a tiny fraction of their salaries to cover the costs of their health insurance — measures that, for private-sector workers, would be mostly uncontroversial.
The firestorm that these proposals have sparked demonstrates the political clout of state-workers' unions. Christie's executive order met with vicious condemnation from union leaders and the politicians aligned with them; his fight with the public-school teachers prompted the New Jersey Education Association to spend $6 million (drawn from members' dues) on anti-Christie attack ads over a two-month period. Clearly, the lesson for reform-minded politicians has been: Confront public-sector unions at your peril.
Yet confront them policymakers must. As Christie said about the duel with the NJEA, "If we don't win this fight, there's no other fight left." Melodramatic as this may sound, for many states, it is simply reality. The cost of public-sector pay and benefits (which in many cases far exceed what comparable workers earn in the private sector), combined with hundreds of billions of dollars in unfunded pension liabilities for retired government workers, are weighing down state and city budgets. And staggering as these burdens seem now, they are actually poised to grow exponentially in the years ahead. If policymakers fail to rein in this growth, a fiscal crack-up will be the inevitable result.
New Jersey has drawn national attention as a case study, but the same scenario is playing out in state capitals from coast to coast. New York, Michigan, California, Washington, and many other states also find themselves heavily indebted, with public-sector unions at the root of their problems. In exchange, taxpayers in these states are rewarded with larger and more expensive, yet less effective, government, and with elected officials who are afraid to cross the politically powerful unions. As the Wall Street Journal put it recently, public-sector unions "may be the single biggest problem...for the U.S. economy and small-d democratic governance." They may also be the biggest challenge facing state and local officials — a challenge that, unless economic conditions dramatically improve, will dominate the politics of the decade to come.
THE STATE OF THE UNION
Since the middle of the 20th century, organized labor in
America has undergone two transformations with major implications for
the nation's politics. The first is the dramatic decline in overall
union membership. In 1955, organized labor represented one-third of the
non-agricultural work force; today, it represents just 12.3%. The second
transformation, however, is even more significant: the change in the
composition of the unionized work force.As private-sector unions have withered, public-sector unions have grown dramatically. The Bureau of Labor Statistics reports that, in 2009, for the first time ever, more public-sector employees (7.9 million) than private-sector employees (7.4 million) belonged to unions. Today, unionized workers are more likely to be teachers, librarians, trash collectors, policemen, or firefighters than they are to be carpenters, electricians, plumbers, auto workers, or coal miners.
This shift has produced a noticeable change in the demographic profile of union members; gone is the image of a union man as a beefy laborer in a hard hat and steel-toed boots. According to data from the University of Michigan's American National Election Study, in 1952, about 80% of union members were blue-collar workers, while 20% were white-collar workers; by the mid-1990s, those classified as white-collar workers gained majority status. Nor do men dominate unions any longer: In the 1950s, more than 80% of union members were men, but today there is near gender parity. Union members also have much more schooling than they once did. In 1960, more than 35% of union members had not finished high school and barely 2% had college degrees. Today, almost every union member has completed high school, and more than 25% have college degrees. The typical union member no longer lives in a major city center close to the factory; by the 1990s, union members were more likely to live in suburban than urban areas. Unions have also become multi-racial: Nearly a quarter of union members are now non-white. Unions today represent a vastly different slice of America than they did at the height of the country's manufacturing prowess.
The rise of government-worker unionism has also combined with the broader transformation of the American economy to produce a sharp divergence between public- and private-sector employment. In today's public sector, good pay, generous benefits, and job security make possible a stable middle-class existence for nearly everyone from janitors to jailors. In the private economy, meanwhile, cutthroat competition, increased income inequality, and layoffs squeeze the middle class. This discrepancy indicates how poorly the middle class has fared in recent decades in the private economy, which is home to 80% of American jobs. But it also highlights the increased benefits of government work, and shines a spotlight on the gains public-sector unions have secured for their members. Perhaps this success helps explain why, on average, 39% of state- and local-government employees belong to unions. (Differences in state and local laws of course mean that the percentage varies from state to state; New York tops the chart with roughly 70% of state employees in unions, while many Southern right-to-work states hover in the single digits.)
The emergence of powerful public-sector unions was by no means inevitable. Prior to the 1950s, as labor lawyer Ida Klaus remarked in 1965, "the subject of labor relations in public employment could not have meant less to more people, both in and out of government." To the extent that people thought about it, most politicians, labor leaders, economists, and judges opposed collective bargaining in the public sector. Even President Franklin Roosevelt, a friend of private-sector unionism, drew a line when it came to government workers: "Meticulous attention," the president insisted in 1937, "should be paid to the special relations and obligations of public servants to the public itself and to the Government....The process of collective bargaining, as usually understood, cannot be transplanted into the public service." The reason? F.D.R. believed that "[a] strike of public employees manifests nothing less than an intent on their part to obstruct the operations of government until their demands are satisfied. Such action looking toward the paralysis of government by those who have sworn to support it is unthinkable and intolerable." Roosevelt was hardly alone in holding these views, even among the champions of organized labor. Indeed, the first president of the AFL-CIO, George Meany, believed it was "impossible to bargain collectively with the government."
Courts across the nation also generally held that collective bargaining by government workers should be forbidden on the legal grounds of sovereign immunity and unconstitutional delegation of government powers. In 1943, a New York Supreme Court judge held:
The very nature of many public services — such as policing the streets and putting out fires — gives government a monopoly or near monopoly; striking public employees could therefore hold the public hostage. As long-time New York Times labor reporter A. H. Raskin wrote in 1968: "The community cannot tolerate the notion that it is defenseless at the hands of organized workers to whom it has entrusted responsibility for essential services."To tolerate or recognize any combination of civil service employees of the government as a labor organization or union is not only incompatible with the spirit of democracy, but inconsistent with every principle upon which our government is founded. Nothing is more dangerous to public welfare than to admit that hired servants of the State can dictate to the government the hours, the wages and conditions under which they will carry on essential services vital to the welfare, safety, and security of the citizen. To admit as true that government employees have power to halt or check the functions of government unless their demands are satisfied, is to transfer to them all legislative, executive and judicial power. Nothing would be more ridiculous.
Another common objection to collective bargaining with public-employee unions was that it would mean taking some of the decision-making authority over government functions away from the people's elected representatives and transferring it to union officials, with whom the public had vested no such authority. In this view, democracy would be compromised when elected officials began sharing with union leaders the power to determine government employees' wages, benefits, and working conditions. Furthermore, collectively bargained work rules could alter what public servants did day to day in ways not condoned by either elected officials or the voting public.
Given the forces and arguments aligned against public-sector unions, what led to their enormous growth? Three conditions prepared the ground for the legal reforms that facilitated collective bargaining in the public sector (and the subsequent swelling of the ranks of unionized government employees).
The first was the weakening of party machines at the state and (especially) local levels. In many of America's large cities, the responsibility for filling government jobs fell to the party machines; turnover in government employment was therefore high, connected as it was to election results. In New York during the 1930s and '40s, for instance, the average tenure of a cop or garbage collector was five years. Another effect of the machines' influence over government hiring was political: People in patronage jobs inevitably devoted a portion of their nominal working hours to party affairs. Because government employment under the machine system was both relatively brief and partisan in nature, a culture of professionalism was never really able to take hold.
Reformers' chief weapon in the war against the machines was the enactment of civil-service laws. Such laws sought to deprive ward bosses of control over patronage, which was their lifeblood. Civic groups, the press, and public-employees' associations believed that greater professionalization of the government work force would draw in talent, increase efficiency, and reduce corruption. In the 1950s, according to historian Leo Kramer, the leadership of the American Federation of State, County, and Municipal Employees (AFSCME) "saw itself as part of a great movement to reform government," one of whose principal aims was "the extension of the merit system to all nonpolicy determining positions in all government jurisdictions."
By the end of the 1950s, reformers had put the old machines on the defensive. And professionalization had had its intended effect: In their 1963 book City Politics, Edward Banfield and James Q. Wilson found that, by 1961, 52% of cities with populations over 500,000 had placed nearly all government employees under civil-service protections.
One important consequence of civil-service reform was that, with the end of election-based turnover — and with protections against undue political interference in hiring and firing — public employees gained nearly lifetime job security. This gave workers a long-term interest in their jobs and increased their capacity to express themselves collectively, thereby helping to make the unionization of public employees possible.
The second precondition for public-sector unionization was economic and demographic change. In the post-war period, the number of government jobs grew rapidly: Between 1950 and 1976, state- and local-government employment increased from 9.1% to 15.3% of the non-agricultural work force (an increase from roughly 4 million workers to about 12 million). A large part of this spike was the result of increased demand for government services caused by the Baby Boom. Huge numbers of young people meant a greater need for workers in schools in particular; the number of Americans working as teachers, principals, and administrators thus increased dramatically. It is hardly surprising, then, that some of the first public employees to unionize (and some of the most militant) were teachers. In the 1970s in New York state alone, there were, on average, 20 teacher strikes a year.
Finally, the third precondition was the solidification of the alliance between organized labor and the Democratic Party. Franklin Roosevelt's signing of the Wagner Act (which protected the rights of private-sector workers to organize and bargain collectively) in 1935 fully bonded labor to the Democrats; their partnership was reinforced during the fight over the Taft-Hartley Act of 1947, which was a Republican initiative to rein in union power. By mid-century, Democrats began to rely on labor unions for both funding and on-the-ground campaign organizing. In the 1950s and '60s, according to political scientist J. David Greenstone, "labor functioned as the most important nation-wide electoral organization for the Democratic Party." As a political tag team, both Democrats and labor had an incentive to broaden the base of the labor movement — and they came to see public-sector workers as the most promising new hunting ground, especially as private-sector union membership began to decline.
Democrats began to mobilize this new constituency in the late 1950s. In 1958, New York City mayor Robert Wagner, Jr., issued Executive Order 49, known as "the little Wagner Act." It gave city employees bargaining rights, and provided their unions with exclusive representation (meaning that the unions alone were legally authorized to speak for city workers, regardless of whether those workers belonged to the unions or supported them). And in 1962, President John Kennedy issued Executive Order 10988, reaffirming the right of federal workers to organize and codifying their right to bargain collectively.
From the mid-1960s through the early '70s, states and cities followed with a plethora of laws providing public-employee unions with collective-bargaining rights. In many cases, the consequences were almost immediate. In New York state, one year after the passage of the so-called Taylor Law in 1967, 360,000 state- and local-government employees became unionized; the New York Times described the law as having an "almost revolutionary effect." Other states and cities experienced similar expansions in the number of public-sector union members. For example, in 1968, California passed the Meyers-Milias-Brown Act — a law granting local-government workers bargaining rights — and then extended those rights to teachers a few years later; in the 1970s and '80s, both membership in public-sector unions and the number of strikes in California skyrocketed. Nationwide, by 1970, the AFSCME had negotiated more than 1,000 collective-bargaining agreements, nearly twice the number in place in 1964. And by 1972, nearly half of the states had public-employee collective-bargaining laws in place at either the state or local level.
Collective-bargaining laws gave government workers powerful incentives to join unions. Between 1960 and 1980, the portion of full-time unionized public employees jumped from 10% to 36% of the public-sector work force. The AFSCME grew from 99,000 members in 1955 to just under 1 million members in 1980. Over the same period, the American Federation of Teachers grew from 40,000 to more than half a million members. Today, its membership stands at more than 1.5 million — which makes the AFT larger than the largest exclusively private-sector union, the United Food and Commercial Workers (1.3 million members). But even the AFT is dwarfed by the largest labor union in the United States: the National Education Association, which claims 3.2 million members.
Organized labor in America thus increasingly consists of government employees, and government employees increasingly belong to unions. This shift has clearly reshaped the country's labor movement. Far more important to most Americans, though, is the way it has transformed the relationships between public employees, the governments they work for, and the public they serve — often with less than salutary results.
THE PUBLIC-SECTOR DIFFERENCE
When it comes to advancing their interests, public-sector unions have
significant advantages over traditional unions. For one thing, using
the political process, they can exert far greater influence over their
members' employers — that is, government — than private-sector unions
can. Through their extensive political activity, these
government-workers' unions help elect the very politicians who will act
as "management" in their contract negotiations — in effect handpicking
those who will sit across the bargaining table from them, in a way that
workers in a private corporation (like, say, American Airlines or the
Washington Post Company) cannot. Such power led Victor Gotbaum, the
leader of District Council 37 of the AFSCME in New York City, to brag in
1975: "We have the ability, in a sense, to elect our own boss."Since public-sector unions began to develop in earnest, their importance in political campaigns has grown by leaps and bounds. Starting from almost nothing in the 1960s, government-workers' unions now far exceed private-sector unions in political contributions. According to the Center for Responsive Politics, from 1989 to 2004, the AFSCME was the biggest spender in America, giving nearly $40 million to candidates in federal elections (98.5% of it to Democrats). It is important to stress that this was spending on federal elections; the union represents mostly state and local workers. But given the magnitude of federal contributions to state budgets, the AFSCME is heavily involved in electioneering to shape Washington's spending in ways that protect public workers and the supply of government services. And so over that 15-year period, the AFSCME was willing and able to outspend any other organization in the country.
The political influence of public-sector unions is probably greatest, however, in low-turnout elections to school boards and state and local offices, and in votes to decide ballot initiatives and referenda. For example, two of the top five biggest spenders in Wisconsin's 2003 and 2004 state elections were the Wisconsin Education Association Council and the AFSCME-affiliated Wisconsin PEOPLE Conference. Only the state Republican Party and two other political action committees — those belonging to the National Association of Realtors and SBC / Ameritech — spent more. The same is true in state after state, as unions work to exert control over the very governments that employs their members.
This political dimension of public-sector unionism also changes the substantive priorities and demands of the unions themselves. Although private-sector unions in the United States have engaged in leftist "social activism," they have mostly concentrated their efforts on securing the best wages, benefits, pensions, and working conditions for their members: "pure and simple unionism," as longtime American Federation of Labor president Samuel Gompers used to call it. Rarely do they demand more hiring, since — given the constant private-sector imperative to keep operating costs minimal — increasing the number of a company's employees can limit wage and benefit increases for the workers already on the company's payroll.
By contrast, as economist Richard Freeman has written, "public sector unions can be viewed as using their political power to raise demand for public services, as well as using their bargaining power to fight for higher wages." The millions spent by public-employee unions on ballot measures in states like California and Oregon, for instance, almost always support the options that would lead to higher taxes and more government spending. The California Teachers Association, for example, spent $57 million in 2005 to defeat referenda that would have reduced union power and checked government growth. And the political influence of such massive spending is of course only amplified by the get-out-the-vote efforts of the unions and their members. This power of government-workers' unions to increase (and then sustain) levels of employment through the political process helps explain why, for instance, the city of Buffalo, New York, had the same number of public workers in 2006 as it did in 1950 — despite having lost half of its population (and thus a significant amount of the demand for public services).
For a case study in how public-sector unions manipulate both supply and demand, consider the example of the California Correctional Peace Officers Association. Throughout the 1980s and '90s, the CCPOA lobbied the state government to increase California's prison facilities — since more prisons would obviously mean more jobs for corrections officers. And between 1980 and 2000, the Golden State constructed 22 new prisons for adults (before 1980, California had only 12 such facilities). The CCPOA also pushed for the 1994 "three strikes" sentencing law, which imposed stiff penalties on repeat offenders. The prison population exploded — and, as intended, the new prisoners required more guards. The CCPOA has been no less successful in increasing members' compensation: In 2006, the average union member made $70,000 a year, and more than $100,000 with overtime. Corrections officers can also retire with 90% of their salaries as early as age 50. Today, an amazing 11% of the state budget — more than what is spent on higher education — goes to the penal system.[Correction appended] Governor Arnold Schwarzenegger now proposes privatizing portions of the prison system to escape the unions' grip — though his proposal has so far met with predictable (union supported) political opposition.
A further important advantage that public-sector unions have over their private-sector counterparts is their relative freedom from market forces. In the private sector, the wage demands of union workers cannot exceed a certain threshold: If they do, they can render their employers uncompetitive, threatening workers' long-term job security. In the public sector, though, government is the monopoly provider of many services, eliminating any market pressures that might keep unions' demands in check. Moreover, unlike in the private sector, contract negotiations in the public sector are usually not highly adversarial; most government-agency mangers have little personal stake in such negotiations. Unlike executives accountable to shareholders and corporate boards, government managers generally get paid the same — and have the same likelihood of keeping their jobs — regardless of whether their operations are run efficiently. They therefore rarely play hardball with unions like business owners and managers do; there is little history of "union busting" in government.
Additionally, the rise and fall of businesses in the private sector means that unions must constantly engage in organizing efforts, reaching out to employees of newly created companies. In government agencies, on the other hand, once a union organizes workers, they usually remain organized — because the government doesn't go out of business. Public-employee unions can thus maintain membership levels with much less effort than can private-sector unions.
Finally, public-sector unions enjoy a privileged position in relation not only to their private-sector counterparts but also to other interest groups. Public-sector unions have automatic access to politicians through the collective-bargaining process, while other interest groups must fight for such entrée. Government unions can also more easily mobilize their members for electoral participation than other interest groups can — since they are able to apply pressure at the workplace and, in many cases, can even arrange for time off and other benefits to make members' political activism easier. Furthermore, most interest groups must devote a great deal of time and effort to fundraising; public-sector unions, on the other hand, enjoy a steady, reliable revenue stream, as union dues are deducted directly from members' paychecks (often by government, which drastically reduces the unions' administrative costs).
Taken together, the intrinsic advantages that public-sector unions enjoy over private-sector advocacy groups (including private-sector unions) have given organized government laborers enormous power over government at the local, state, and federal levels; to shape public finances and fiscal policy; and to influence the very spirit of our democracy. The results, unfortunately, have not always been pretty.
A UNIONIZED GOVERNMENT
The effects of public-sector unionism can be grouped under three
broad headings. The first centers on compensation, which includes wages,
pensions, health care, and other benefits easily valued in monetary
terms — the core issues at stake in collective-bargaining negotiations.
The second involves the amount of government employment, or the size of
government, as reflected in the number of workers and in public budgets.
The third involves the productivity and efficiency of government
services. Insofar as unions negotiate detailed work rules, they share
the power to shape the day-to-day responsibilities of public servants —
which influences what government does, and how well it does it.These are complex matters that are hard for social scientists to measure, and on which scholars disagree. Nevertheless, the evidence supports a few broad conclusions.
Most economists agree that public-sector unions' political power leads to more government spending. And recently, Chris Edwards of the Cato Institute documented how government unionism has abetted growth in public-sector compensation. Generally speaking, the public sector pays more than the private sector for jobs at the low end of the labor market, while the private sector pays more for jobs at the high end. For janitors and secretaries, for instance, the public sector offers an appreciably better deal than the private economy: According to the Bureau of Labor Statistics, the average annual salary for the roughly 330,000 office clerks who work in government was almost $27,000 in 2005, while the 2.7 million in the private sector received an average pay of just under $23,000. Nationwide, among the 108,000 janitors who work in government, the average salary was $23,700; the average salary of the 2 million janitors working in the private sector, meanwhile, was $19,800.
For workers with advanced degrees, however, the public-sector pay scale is likely to be slightly below the private-sector benchmark. Private-sector economists, for instance, earn an average of $99,000 a year, compared to the $69,000 earned by their government colleagues. And accountants in the corporate world earn average annual salaries of $52,000, compared to $48,000 for their public-sector counterparts.
Not as easily captured is the comparable worth of those government workers who lack counterparts in the private sector, such as policemen, firefighters, and corrections officers. But that very monopoly status has given the union representatives of these workers enormous leverage, which they have converted into major gains. For example, in New York state, county police officers were paid an average salary of $121,000 a year in 2006. In that same year, according to the Boston Globe, 225 of the 2,338 Massachusetts State Police officers made more than the $140,535 annual salary earned by the state's governor. Four state troopers received more than $200,000, and 123 others were paid more than $150,000. While people whose jobs entail greater risk of life and limb certainly deserve higher pay, union power has clearly added a substantial premium.
When all jobs are considered, state and local public-sector workers today earn, on average, $14 more per hour in total compensation (wages and benefits) than their private-sector counterparts. The New York Times has reported that public-sector wages and benefits over the past decade have grown twice as fast as those in the private sector. These aggregate pay differentials stem partly from the fact that government work tends to be more white-collar, and that public employees tend to be better educated and more experienced, and to live in urban areas. Another factor is the hollowing out of the middle of the income distribution in the private sector. But union influence still plays a major role.
When unions have not been able to secure increases in wages and salaries, they have turned their attention to benefits. USA Today journalist Dennis Cauchon notes that, since 2002, for every $1-an-hour pay increase, public employees have gotten $1.17 in new benefits; private-sector workers, meanwhile, have received just 58 cents in added benefits. Of special interest to the unions has been health care: Across the nation, 86% of state- and local-government workers have access to employer-provided health insurance, while only 45% of private-sector workers do. In many cases, these plans involve meager contributions from employees, or none at all — in New Jersey, for instance, 88% of public-school teachers pay nothing toward their insurance premiums.
The unions' other cherished benefit is public-employee pensions. In California, for example, state workers often retire at 55 years of age with pensions that exceed what they were paid during most of their working years. In New York City, firefighters and police officers may retire after 20 years of service at half pay — which means that, at a time when life expectancy is nearly 80 years, New York City is paying benefits to 10,000 retired cops who are less than 50 years old. Those benefits quickly add up: In 2006, the annual pension benefit for a new retiree averaged just under $73,000 (and the full amount is exempt from state and local taxes).
How, one might ask, were policymakers ever convinced to agree to such generous terms? As it turns out, many lawmakers found that increasing pensions was very good politics. They placated unions with future pension commitments, and then turned around, borrowed the money appropriated for the pensions, and spent it paying for public services in the here and now. Politicians liked this scheme because they could satisfy the unions, provide generous public services without raising taxes to pay for them, and even sometimes get around balanced-budget requirements.
Unfortunately, the hit pension funds took recently in the stock market has exposed the massive underfunding that results from states' and municipalities' not paying for the public services they consume. In Illinois, for example, public-sector unions have helped create a situation in which the state's pension funds report a liability of more than $100 billion, at least 50% of it unfunded. Yet many analysts believe the figure is much higher; without a steep economic recovery, the Prairie State is looking at insolvency. Indeed, Northwestern University finance professor Joshua Rauh puts the date of collapse at 2018; he also predicts that six other states — Connecticut, Indiana, New Jersey, Hawaii, Louisiana, and Oklahoma — will see their pension funds dry up before the end of fiscal year 2020. What's more, according to the Pew Center on the States, 18 states face long-term pension liabilities in excess of $10 billion. In the case of California, like that of Illinois, the unfunded pension liability exceeds $50 billion. In fact, Pew estimates that, when retiree health-care costs are added to pension obligations, the unfunded liabilities of the states total an astounding $1 trillion.
The skyrocketing costs of public employees' pensions now present a huge challenge to state and local governments. If allowed to persist, such massive obligations will inevitably force a fundamental re-ordering of government priorities. After all, if government must spend more on pensions, it cannot spend more on schools, roads, and relief for the poor — in other words, the basic functions people expect their governments to perform. But because many states' pension commitments are constitutionally guaranteed, there is no easy way out of this financial sink hole. Recent court decisions indicate that pension obligations will have to be fulfilled even if governments declare bankruptcy — because while federal law allows bankruptcy judges to change pension and health-care packages in the private sector, it forbids such changes in public employees' agreements.
Yet as skilled as the unions may be in drawing on taxpayer dollars, many observers argue that their greater influence is felt in the quality of the government services taxpayers receive in return. In his book The Warping of Government Work, Harvard public-policy scholar John Donahue explains how public-employee unions have reduced government efficiency and responsiveness. With poor prospects in the ultra-competitive private sector, government work is increasingly desirable for those with limited skills; at the opposite end of the spectrum, the wage compression imposed by unions and civil-service rules makes government employment less attractive to those whose abilities are in high demand. Consequently, there is a "brain drain" at the top end of the government work force, as many of the country's most talented people opt for jobs in the private sector where they can be richly rewarded for their skills (and avoid the intricate work rules, and glacial advancement through big bureaucracies, that are part and parcel of government work).
Thus, as New York University professor Paul Light argues, government employment "caters more to the security-craver than the risk-taker." And because government employs more of the former and fewer of the latter, it is less flexible, less responsive, and less innovative. It is also more expensive: Northeastern University economist Barry Bluestone has shown that, between 2000 and 2008, the price of state and local public services has increased by 41% nationally, compared with 27% for private services.
Finally, insofar as government collective-bargaining agreements touch on a wide range of economic decisions, public-sector unions have extraordinary influence over government policies. In the classic model of democratic accountability, citizens vote in competitive elections for candidates offering distinct policy agendas; once in office, the winners implement their programs through public agencies. But when public-employee unions bargain collectively with the government, elected officials partially cede control of public agencies to unelected labor leaders. Many policy choices are then settled in the course of negotiations between office holders and unions, rather than originating with the people's duly elected representatives. Over the long term, these negotiated work rules can drive public policy in directions that neither elected officials nor voters desire. And once enacted, these policies can prove very hard to reverse, even through elections: A new mayor or governor — no matter how hard-charging a reformer — will often find his hands tied by the iron-clad agreements unions managed to extract from his predecessors.
Stanford University political scientist Terry Moe has made exactly this argument with respect to the education sector. "Teachers unions have more influence on the public schools than any other group in American society," Moe argues. "Their massive memberships and awesome resources give them unrivaled power in the politics of education, allowing them to affect which policies are imposed on the schools by government — and to block reforms they don't like." One need only look at the debates over charter-school caps or merit-pay proposals to see Moe's point.
Public-sector unions thus distort the labor market, weaken public finances, and diminish the responsiveness of government and the quality of public services. Many of the concerns that initially led policymakers to oppose collective bargaining by government employees have, over the years, been vindicated.
As a result, it is difficult for defenders of public-sector unions today to make a convincing case that such unions benefit the public at large. Their argument has basically been reduced to three assertions. One is that most public employees live modest lives, and so criticizing efforts to improve their lot distracts attention from wealthy CEOs and Wall Street bankers who are the real culprits behind today's economic woes. Another is that the unions defend the dignity of public service, thereby preserving a middle class that would otherwise be plunged — through conservatives' efforts to privatize such work — into the vicious race to the bottom that now plagues the private sector. Finally, government-workers' unions help advance leftist politics by keeping the labor movement hobbling along.
To be sure, there is some merit to each of these arguments, though none is especially convincing. But even if these claims were completely true and obvious, they would not offer sufficient reason to put up with the other, manifestly negative consequences of public-sector unionism.
GOVERNING IN THE REAL WORLD
"At some point," New Jersey governor Chris Christie said in a
February speech to his state's mayors, "there has to be parity between
what is happening in the real world and what is happening in the
public-sector world."Achieving such parity will not be easy, as some early attempts to curtail the power of public-sector unions have shown. Some state and local officials (like California governor Arnold Schwarzenegger) have sought to appeal directly to the people through referenda, only to be thwarted by the unions' electoral clout. Others have pursued stop-gap measures like wage freezes and furloughs of public employees, which inevitably draw some public backlash. There have even been calls for some cities to follow the example of Vallejo, California, and declare bankruptcy so that they can renegotiate employment contracts with the unions.
A few places are attempting more serious long-term solutions. As the Wall Street Journal reported in June, public-employee unions in Vermont, Iowa, Minnesota, and Wyoming have recently agreed to modest reductions in pension benefits — though none of the cuts is large enough to bring the finances of that state's pension funds fully into balance. In the Garden State, Governor Christie succeeded in getting the state legislature to approve a 2% annual growth cap on property taxes in order to limit local spending — thereby indirectly curtailing the power of teachers' unions to demand more public dollars. Yet even well-designed tax caps can unleash unpleasant consequences, including more crowded classrooms, layoffs of state workers, and increases in pension debt. Few politicians will want to suffer those consequences, and the unions will fiercely oppose all policies that even hint at reform.
All of these efforts are, of course, attempts to deal only with the symptoms of the looming state fiscal crisis — not with its underlying causes. To address those causes, policymakers may even need to re-open the question of whether government workers should enjoy the privilege of collective bargaining.
After all, even without collective bargaining, government workers would still benefit from far-reaching protections under existing civil-service statutes — more protections than most private-sector workers enjoy. And they would retain their full rights as citizens to petition the government for changes in policy. Public-sector workers' ability to unionize is hardly sacrosanct; it is by no means a fundamental civil or constitutional right. It has been permitted by most states and localities for only about half a century, and, so far, it is not clear that this experiment has served the public interest.
It is true that ending government workers' ability to organize is politically inconceivable today in the states where it exists. But if states' and cities' fiscal ills grow painful enough, the unthinkable could someday become political necessity. For all Americans — including public-sector employees — it would of course be better if the situation did not reach that point of catastrophe. We can all hope that a robust economic revival will take the pressure off of states and cities and give policymakers more room to maneuver. If such a rapid recovery is not forthcoming, though, the most appealing solution will be for everyone to re-enter the real world — if only public officials and public-sector unions can be sensible enough to try.
*Correction Appended: The text originally stated that California's penal system received more funds than its public education system. It in fact receives more funds than the state's higher education system. (Return to text)
Daniel DiSalvo is an assistant professor of political science at the City College of New York.
http://www.nationalaffairs.com/
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