Are Private and Public Sector Unions Alike? ... Of Course Not ... And Can We Afford Public Sector Unions? ... Of Course Not

OVERVIEW

By now we're all familiar with the lousy financial condition of our federal government. What we don't focus on enough is the equally lousy condition and outloook for lots of cities, school districts and states. And in those situations, we pay too little attention to the reasons why the fiscal situation of those cities, states and school districts is go poor.

In my view, much of the problem comes down to the close relationship of public sector unions with their allies in the Democratic Party.

When local or state conditions for such a 'perfect storm' are in place, the negotiating and even legislating game is often rigged by public sector union officials and the local politicians AGAINST THE TAXPAYERS. It's an unsustainable burden that has to be addressed either in the form of (1) dramatically higher property and other taxes or (2) lower employment levels, pay and retirement benefits for public sector employees. That's because today's math simply doesn't add up. Not even close.

And unfortunately, even when taxpayers agree for their taxes to be raised, those taxes often will be committed for future projects by the government knows best gang and not to fix currently underfunded financial problems. As a result, and even though taxes are raised, the current financial hole only grows deeper.

This all has to change. Living within our means has to become standard operating procedure in governments throughout America --- at the local, state and federal levels, one and all.

PRIVATE AND PUBLIC SECTOR UNIONS OPERATE IN VASTLY DIFFERENT CONDITIONS

Let's clear up any confusion about private and public sector unions. First, taxpayers as a whole aren't impacted by the failure of private sector companies. Second, citizens as a whole aren't impacted by the strikes of private sector companies.

On the other hand, taxpayers are required to foot the bill for public sector union pay and are also required to heavily subsidize health and retirement benefits as well. Taxpayers serve as guarantors of public sector pay and benefits.

Union leaders know all these things, of course, and they factor them into their differing private and public sector bargaining tactics and negotiating strategies. To the union's bargaining team, it's still a green light go for everything approach in public sector negotiations while it's become a yellow light don't break the company approach in the private sector these days.

So with that backdrop in mind, let's go a little deeper.

Unions represent their members. Their members are employees of other entities.

For example, in the private sector, unions may represent the employees of a particular company such as Caterpillar, Boeing or GE. They negotiate with the company with respect to the company's employees who are union members with respect to wages, benefits and working conditions.

In the public sector, the employer is the government and represents all the citizens and taxpayers. In other words, the representatives of all the taxpayers sit on one side of the bargaining table and the union's negotiating team sits on the other side. The designated bargaining unit may be a city's teachers, police officers, garbage collectors, custodians or other appropriately designated groups of public sector employees.

So in public sector bargaining, it's a case of some citizens and taxpayers (those public sector workers represented by the union) bargaining with government officials who are also citizens and taxpayers, and who are supposed to be representing the best interests of all taxpayers and citizens. It's crazy, but it's true.

HOW THEY'RE DIFFERENT

Now let's discuss the fundamental difference when unions are bargaining with employers in the private and public sectors. One employer operates in a competitive marketplace while the other employer participates in a protected monopoly. And to the union officials, that difference is a very big deal indeed.

In the private sector, there is competition. A company will go out of business and be forced to lay off all its employees (and dues paying union members) unless it can earn a satisfactory profit by attracting and retaining enough customers who are willing to pay for the goods and service being offered in a competitive marketplace. Free to choose customers are the ones who decide which companies win and which lose in a competitive marketplace. It's their MOM based vote that matters. And it's all about the value of the company's offerings relative to its competition.

The company's cost of the product or service being offered for sale is of no concern to the prospective customer. As a consequence, the productivity of the company's employees isn't a customer consideration either. Nor is what the company pays its employees, the quality of its management or how or even whether the performance of its employees is evaluated properly by the company's leadership. 

The marketplace sorts all this out when customers compare the perceived value (price, quality and availability) of one company's offering to another's. In other words, what's the product, what's the price, is it available and how does it compare to what competition is offering? That's all customers need to and all they want to know.

In the public sector, there is no marketplace competition and no price shopping either. The costs are added up and to the extent the "customer" doesn't pay enough to cover the costs, the taxpayer gets stuck with the rest of the bill. That's simply how government backed monopolies work. The U.S. post office, for example.

Even more to the point, private sector companies that can't compete and make a profit doing so will go bankrupt and cease to exist. Governments don't have to compete, don't have to manage costs, don't require ongoing productivity gains, don't have to set competitive prices and don't go bankrupt. They just raise taxes. They're monopolies.

Thus, the difference between unions in the private and public sectors is straightforward and simple. In the private sector, union leaders need to be concerned with an individual company's competitiveness due to the pure self interest of the union. They want the employer to continue to exist, so they don't want the company to fail. And if a company can't compete, it loses all its customers. And a company which has no customers needs no employees or union members who will pay union dues to support the union's leadership. End of story.

On the other hand, government unions have no such existential concerns with respect to their employer. Governments don't cease to exist because they don't compete and do have taxing power.

Accordingly, in the public sector, union leaders correctly view their job as getting as much pay and benefits as possible for their members. And because government is the employer, union officials have no concerns about the financial viability of the employer.

As a result, and unlike a private company, the government won't go out of business due to a loss of customers, excessive cost levels or a lack of profits. When all else fails, the taxpayers will always be on the hook.

And that's the fundamental and crucial difference between private and public sector unions.

THE  PRIVATE SECTOR BETHLEHEM STEEL EXAMPLE

So when considering what's happened at the now defunct Bethelem Steel facility referenced below, consider the examples of the recent Chicago Teachers Union strike, the billions of dollars in losses at our U. S. Postal operations, or countless other situations where public sector employees are unionized and taxpayers are paying the bills.

Would free market competition force these unions and employees to act differently? And if the answer to that question is yes, should we continue to tolerate the existence of public sector unions? And if we should, will taxpayers ever be served by a customer friendly and cost effective government sector?

Unions Slip in Strongholds is subtitled 'Organizing Drives Fail in Labor-Friendly Regions; High Unemployment Cited:'

"JOHNSTOWN, Pa.—Unions have continued to struggle to organize workers in the past 12 months, even in industries that they formerly dominated and in regions that are still relative union strongholds, according to new government data.

Here on the site of a former Bethlehem Steel works, in a city where union membership among private-sector workers is 12.7%, almost double the national average, employees of JWF Industries Inc. recently voted 194-38 against joining the International Association of Machinists and Aerospace Workers.

Many of the welders and other workers at JWF Industries are former union members who watched unionized factories in the valley shut or relocate, and say the benefits of being in a union didn't outweigh the risks. JWF Industries' chief executive, Bill Polacek, is the son of a lifelong steelworker and union member in the city, but he said his company needs to stay nonunion to compete today.

Facing declining membership and shrinking coffers, unions are being more selective about costly organizing drives, but targeted efforts aren't helping win more workers. Unions won roughly 63% of 1,271 unionization elections in the year ended Sept. 30, according to preliminary figures from the National Labor Relations Board. That is slightly more than the 61.5% rate a decade ago, when 2,600 such elections were held. Unions represent 11.8% of all U.S. workers today, compared with 13.3% in 2002, and a peak of 28.3% in the 1950s. . . .

The United Steelworkers lost the second-biggest election in the region last year—involving 219 workers—at a company that builds trucks. In a sign of labor's broader push into the service sector, the steelworkers' biggest victory came in an election to represent 88 teachers at Duquesne University in Pittsburgh. . . .

Labor experts say high unemployment could be contributing to organizing losses, and that during economic uncertainty many workers prefer to keep the status quo. Johnstown's 9.2% jobless rate exceeds the national rate of 7.8% and is second-highest among the state's metropolitan areas.

"It's all about whether or not they want to take the risk of higher union wages and benefits, or their employer picking up and relocating, or the possibility of a strike," said Gary Chaison, a professor of industrial relations at Clark University in Worcester, Mass. . . .

Many JWF Industries workers said they had belonged to unions in the past, and some formerly worked for Bethlehem Steel before it filed for bankruptcy in 2001, shedding thousands of jobs. Some said they didn't think a union could protect them any more today than it had in the past. "A lot of these guys were in union shops. The last thing they want is to have a union in here," said Mike Rosmus, a 58-year-old welder at JWF who worked for Bethlehem Steel from 1973 to 1983.

The number of private-sector union members in the Johnstown area has plummeted 46% over the past 25 years, to just over 7,000 workers last year, while employment has dropped by one-quarter."

THE PUBLIC SECTOR CALIFORNIA EXAMPLE

Now let's look briefly at California's government and its public sector unions and ask the following question.

Will the taxpayers, teachers and other public sector workers throughout America learn the ways of government unions before more states get in the same sorry financial shape as Illinois and California are in today?

Jerry Brown's Tax Cliff is subtitled 'The second most important election next Tuesday.' Here's a sample:

"The most important single vote in America next Tuesday, after the Presidential race, is Governor Jerry Brown's attempt to stick Californians with another giant tax increase. Mr. Brown and his labor allies say Proposition 30 will fix the state's budget deficit and ward off education cuts. But the real choice before voters is whether to issue Sacramento's incorrigible spendthrifts another blank check....

Nearly everyone who has examined California's chronically unbalanced budget has recommended flattening its steeply progressive tax code to create a more stable revenue stream. Mr. Brown himself campaigned for President in 1992 as a flat-taxer. But Democrats in the legislature won't lower tax rates because they love the revenue windfalls they get when times are good and they can boost spending.

Then when markets crash, they can cry havoc and lobby for still-higher taxes. That's what the teachers unions did as recently as 2008, claiming that cuts that would have merely returned education spending to pre-bubble levels would cripple schools. Caving to the union pressure, a handful of Republican legislators in 2009 walked Governor Arnold Schwarzenegger's plank and voted for a $13 billion sales and income tax increase. Schools received less money over the next two years anyway—while spending on entitlements and union retirement benefits grew.

Democrats are now back at the same stand. Mr. Brown has threatened to "trigger" $5.9 billion in education cuts if his initiative fails, but he'd make less than $100 million in other trims. How's that for balance?. . .

Or they could restructure retirement benefits, which cost $6.5 billion this year—up from about $1.4 billion in 1999. . . .

Barring such reforms, pension costs will continue to balloon and eat up all new revenues. The California State Teachers' Retirement System has projected that it will need between $3.5 billion to $10 billion annually over the next 30 years to stay solvent. So any money allocated to schools will merely backfill the teachers' pension fund. . . .

The only thing Democrats in Sacramento have planned after November is more spending."

SUMMING UP

There's really nothing more to add to all of the above except for one thing.

 It's worth stressing that public sector unions and the Democratic Party have long been joined at the hip.

That unhealthy alliance represents a huge problem to We the People which is very much in need of a solution.

So maybe someday We the People will come to mean "We ALL the People."

Spoken like a true southerner.

Thanks. Bob.