The Hypocrisy of Public Sector Unions

During the industrial age, labor unions played a vital role in protecting the rights of workers. Skeptics may argue that enlightened management played an equally if not greater role, such as when Henry Ford famously raised the wages of his workers so they could afford to buy the cars they made, but few would argue that labor unions were of no benefit. Today, in the private sector, the labor movement still has a vital role to play. There may be vigorous debate regarding how private sector unions should be regulated and what restrictions should be placed on their activity, but again, few people would argue they should not exist.

Public sector unions are a completely different story.

The differences between public and private sector unions are well documented. They operate in monopolistic environments, in organizations that are funded through compulsory taxes. They elect their bosses. They operate the machinery of government and can use that power to intimidate their political opponents.

Despite these fundamental differences in how they operate, public unions benefit from the still common perception that they are indistinguishable from private unions, that they make common cause with all workers, that they are looking out for us. This is hypocrisy on an epic scale.

Hypocrites regarding the welfare of our children

The most obvious example of public sector union hypocrisy is in education, where the teachers unions almost invariably put the interests of the union ahead of the interests of teachers, and put the interests of students last. This was brought to light during the Vergara case, which the California Teachers Association (CTA) claimed was a “meritless lawsuit.” What did the plaintiffs ask for? They wanted to (1) modify hiring policies so excellence rather than seniority would be the criteria for dismissal during layoffs, (2) they wanted to extend the period before granting tenure which in its current form permits less than two years of actual classroom observation, and (3) they wanted to make it easier to dismiss teachers who were incompetents or criminals.

When the Vergara case was argued in court, as can be seen in this mesmerizing video of the attorney for the plaintiffs’ closing arguments, the expert testimony he referred to again and again was from the witnesses called by the defense! When the plaintiffs can rely on the testimony of defense witnesses, the defendants have no case. But in their appeal, the defense attorneys are fighting on. Using your money and mine.

The teachers unions oppose reforms like Vergara, they oppose free speech lawsuits like Friedrichs vs. the CTA, they oppose charter schools, they fight any attempts to invoke the Parent Trigger Law, and they are continually agitating for more taxes “for the children,” when in reality virtually all new tax revenue for education is poured into the insatiable maw of Wall Street to shore up public sector pension funds. No wonder education reform, which inevitably requires fighting the teachers unions, has become an utterly nonpartisan issue.

Hypocrites regarding the management of our economy

Less obvious but more profound are the many examples of public union hypocrisy on the issue of pensions. To wit:

(1)  Public pension systems don’t have to comply with ERISA, which means they are able to use much higher rate-of-return assumptions. Private sector pensions are required to make conservative investments and offer modest but financially sustainable pensions. Public pensions operate under a double standard. They make aggressive investment assumptions in order to reduce required contributions by their members, then hit up taxpayers to cover the difference.

(2)  One of the reasons you haven’t seen the much ballyhooed extension of pension opportunities to all workers in California is because the chances they’ll offer a plan where the fund promises a return of 7.0% per year are ZERO. Once they’re forced to disclose the actual rate-of-return assumptions they’re prepared to offer, and why, the naked hypocrisy of the public sector pension plans using higher rate-of-return assumptions will be revealed in terms everyone can understand.

(3)  When the internet bubble was still inflating back in the late 1990’s, and stock values were soaring, public sector unions didn’t just agitate for, and receive, enhancements to pension benefit formulas. They received benefit enhancements that were applied retroactively. Public pensions are calculated by multiplying the number of years someone worked by a “multiplier,” and that product is then multiplied by their final salary (or average of the last few years salary) to calculate their pension. Retroactive enhancements meant that this multiplier, which was increased by 50% in most cases, was applied to past years worked, increasing pensions for imminent retirees by 50%. Now, with pension funds struggling financially, reformers want to decrease the multiplier, but not retroactively, which would be fair per the example set by the unions, but only for years still to be worked – only prospectively. And even that is off the table according to the unions and their attorneys. This is obscenely hypocritical.

(4)  Take a look at this CTA webpage that supports the “Occupy Wall Street” movement. What the CTA conveniently ignores is that the pension systems they defend are themselves the biggest players on Wall Street. In an era of negative interest rates and global deleveraging, public employee pension funds rampage across the globe, investing over $4.0 trillion in assets with the expectation of earning 7.0% per year. To do this they condone what Elias Isquith, writing for Salon, describes as “shameless financial strip-mining.” These funds benefit from corporate stock buy backs, which is inevitably paid for by workers. They invest with hedge funds and private equity funds, they speculate in real estate – more generally, pension systems with unrealistic rate-of-return expectations require asset bubbles to continue to expand even though that is killing the middle class in the United States. This gives them common cause with the global financial elites who they claim they are protecting us from.

(5)  In America today most workers are required to pay into Social Security, a system that is progressive whereby high income people get less back as a percentage of what they put in, a system that is adjustable whereby benefits can be reduced to ensure solvency, a system that never speculates on the global investment market. You may hate it or love it, but as long as private citizens are required to participate in Social Security, public servants should also be required to participate. That they have negotiated for themselves a far more generous level of retirement security is hypocritical.

The hypocrisy of public sector unions isn’t just deplorable, it’s dangerous. Because public unions have used the unfair advantages that accrue when they operate in the public sector to acquire power that is almost impossible to counter. Large corporations and wealthy individuals are the natural allies of public sector unions, especially at the state and local level, where these unions will rubber-stamp any legislation these elite special interests ask for, in return for support for their wage and benefit demands. Public unions both impel and enable corporatism and financialization. They are inherently authoritarian. They are inherently inclined to support bigger government, no matter what the cost or benefit may be, because that increases their membership and their power. They are a threat to our democratic institutions, our economic health, and our freedom.

And they are monstrous hypocrites.

 *   *   *

Ed Ring is the president of the California Policy Center.

19 replies
  1. S Moderation Douglas says:

    ” Retroactive enhancements meant that this multiplier, which was increased by 50% in most cases,”

    Wrong. Even Surfpuppy understands this, finally. The only 50% increases went to safety employees*, and then ONLY to those who actually retired at age 50, a relatively small percentage.

    The prior safety formula, 2%@50, was a graduated formula that increased to 2.7%@55. The 3%@50 formula is constant ..still 3%@55 and older.

    *There is one exception, I have learned. Sonoma County went from 2%@60 to 3%@60 for miscellaneous employees …a true 50% increase. Even with that increase, the average service retirement in Sonoma County was less than the statewide average.

    ” In 2009-2010, the average service retirement benefit
    for SCERA miscellaneous employees was $28,680, slightly
    below the 20-system average ($31,912). The average
    service retirement benefit for SCERA safety employees was
    $48,768, well below the 20-system average ($64,581) and
    second lowest among the state’s 20 largest independent
    pension systems.”

    (Stanford Institute for Economic Policy Research, 2012)

  2. talltalk says:

    blah blah blah…..one excuse after another…more and more whining from people who got paid to help wreck the country and now they want a pension too…..whaaaa

  3. talltalk says:

    Thank you so much for coming out against the majority of teachers. they are bullies, they are thugs. i wanted to be a teacher but i didn’t “fit in”. they are mean.

    i don’t mean all teachers. i mean there is a clique of teachers across all schools that are like this and they stick together, cover for each other, lie for each other. they are in the junior high mentality and you and i grew out of.

    they want what they want they are mean. and you can’t fire them. they are only there for the pension. its so obvious they care not about teaching or children.

    thank you so much for having the courage to write what is scary to address. that clique of teachers are horrible. they are the problem.

    they have no empathy, no compasion at all. how can you be around children and be that way? i guess if you are just waiting for the pension, its easier. they go the classes to learn behavior, always in some seminar. why? because they don’t know how to behave. they have to be told every little thing. why? their heart is not in it. they are counting the hours to retirement.

    if i could have been a teacher, i would have been awesome. i wanted to do it, for little pay. i wanted to see kids learn and grow, just for the joy of it. but because the teacher clique bully has totally ruined the spirit of learning, schools feel more like hospitals and hospitals make me want to vomit.

  4. SeeSaw says:

    The 2%@60 formula was also a graduated formula that increased to 2.5% from ages 60 to age 63 for state employees and from 2% to 2.418% for local miscellaneous employees at those ages. I don’t think the 3% at age 60 formula was ever extended to state employees.

  5. Tough Love says:

    For a brief moment (via the “*” exception noted), a breadth of fresh air …. could it really be (a disclosed FACT that doesn’t support his agenda), coming from SMD no less, the unwavering supporter of current grossly excessive Public Sector pensions?

    Was I dreaming ?

    But them my bubble was burst, with SMD quickly reverting to his misleading the readers ….. by quoting “average” pensions FAR FAR lower than what RECENT-Year Full-Time, Full-Career retirees get, because the averages he quotes assuredly include:

    (a) the pensions of part-time workers
    (b) the pensions of Short Career workers
    (c) the pensions of those who retire LONG AGO on lower wages and under lower pension formulas, and
    (d) the 50% survivor pensions of spouses of now deceased workers.
    ————–

    Oh but to dream ….. of honest non-misleading commentary.

  6. S Moderation Douglas says:

    It’s a comparison, Love. The average pension in Sonora is 10.1 percent lower than the average pensions in the other counties. (Or the average pensions in all counties is 11.3% higher, whichever you prefer). For safety workers, the pensions in other counties are 32 percent higher than Sonora.

    We all know that the pensions for full career recent retirees are higher than the average of …all… pensions, but if you are suggesting the full career pensions in Sonoma are higher than the full career average in other counties, then show me the data.

    SeeSaw,
    Sonoma is one of the ’37 counties and I believe the 3%@60 is one of a kind. It is also a graduated formula starting at 2%@50, with a max of 100 percent.

    The lower average pensions may be partly because the average wage in Sonoma County is about 6% lower than the all-counties average. (According to the State Controllers data.)

  7. Tough Love says:

    Oh, so in YOUR MIND what’s the APPROPRIATE COMPARISON is to compare ONE GROUP of over-compensated PUBLIC Sector workers to ANOTHER group of over-compensated PUBLIC Sector workers …. not to what PRIVATE Sector workers in reasonably comparable jobs are compensated ?

    Really ?

    Really ?

    Really ?

    —————

    SMD, Always “smoothing” and always looking to mislead.

  8. SeeSaw says:

    The retroactive pension enhancements were nothing new in CA where the public DB pension systems are concerned. It was standard procedure since the beginning, one-hundred years ago. The procedure was abolished for members hired after January 01, 2013, under PEPRA of CA. Formulas were also downgraded, and caps were placed on pensionable income. Why not move on, unless you want to keep beating a dead horse on that issue. You have used a wide brush to characterize hard working public employees and teachers as leeches. Most have high standards and do their best to provide the services with which they are charged.

  9. Tough Love says:

    Quoting ….”Why not move on”?

    Not until the pension accrual rate is VERY materially reduced for the FUTURE Service of all CURRENT workers …… “California Rule” not withstanding.

  10. SeeSaw says:

    Well, TL, that is not going to happen, so guess you choose to keep foaming at the mouth. The “CA Rule” applies to every pension member who was legally vested prior to January 01, 2013, unless changes are bargained legally in the future. Unlawful changes were the cause of both pension reform initiatives in SJ and SD being partly overturned. If those entities had bargained with the, respective, members in good faith, according to the rules, neither would be in court now.

  11. talltalk says:

    tough love trolls the pension blogs, pushing the actuarial agenda, which is really really dishonest. actuaries are a big part of the problem. they always want to drill down to specifics instead of staying at the big picture level, where none of it makes any sense at all. the proof is that all this money has been handled by actuaries and bankers and it has not worked. get over it. time for some new thinking.

  12. Tough Love says:

    talltalk,

    I don’t know how you are coming to that conclusion, as I don’t support any of the actuarial crap (leading to understated liabilities and far lower than appropriate Plan contributions).

    As these Plans fail, the actuarial consultants, along with others, will be dragged into Court in the search for money and those to “blame” (the politicians refusing to acknowledge that THEY were the MOST at fault …. by trading their favorable votes on Public Sector pay, pensions, and benefits, for Public Sector union campaign contributions and election support).

    —————————————-
    P.S. there is nothing wrong with drilling into the “details” …… lots of interesting “stuff” there.

  13. talltalk says:

    would most current teachers keep teaching without a pension? i doubt it. if they are teaching just for the pension, they shouldn’t be there. they should not be offered pensions, 401k for all.

  14. talltalk says:

    your comments are almost always out of context and in that way you attempt to commendeer the conversation. that’s why i object to your comments. for instance, this article is very high-level, very general in scope, yet again, you make all these drilled down comments, way out of line with what the article is about. its rude, its distracting and its not fair to people who want to comment about the article, not about your topic of the day.

  15. Tough Love says:

    talltalk,

    I couldn’t agree more with today’s topic ….. “The Hypocrisy of Public Sector Unions” …….. and Ed Ring’s commentary thereon.

    A careful reading clearly shows that underlying that hypocrisy IS the grossly excessive nature of Public Sector pensions ….. yes my pet peeve, and something I will continue to strongly advocate against (with the need for VERY material reform).

    Curiously (re your comments to me and others) you appear to support the same goals. I’m not a novice in the field of pension design & funding, and the “details” help explain the magnitude of the problem.

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