Government Employee Unions – The Root Cause of California's Challenges

Spokespersons for California’s government employee unions perpetuate a myth of staggering absurdity and tragic consequences – that they are protecting working Californians from wealthy corporations and wealthy individuals.

The reality is that government employee unions are focused on one thing: Expanding government employee pay, benefits and privileges. This requires expanding government, and that priority comes in front of everything else, including the cost to society at large. Expansive environmentalist regulations have made prices in California for housing and utilities the highest in the nation. Expansive compensation packages for unionized government workers have resulted in chronic deficits and accumulating state and local government debt that by some measures already exceeds $1.0 trillion. Expansive taxes and regulation have made California consistently rank as the most inhospitable place in the nation to run a small business.

Exactly how does any of this protect the poor from the wealthy?

It doesn’t, of course. But the deeper story is how government employee unions are not only failing to “protect” California’s aspiring multitudes, but are in fact enabling the wealthy special interests they claim to protect us from. The most entrenched and massive corporate entities are not harmed by excessive regulations, because they can afford to comply. An obvious example would be California’s impending $13 per hour minimum wage. Large corporate entities like MacDonalds will simply automate a few positions, tinker with the menu and recipes, incrementally raise prices, and go forward. Large corporations can hire attorneys and lobbyists, they have access to capital, and when the smaller players go out of business they gain market share. They benefit from over-regulation, but the consumer suffers.

Less obvious is how the financial sector also benefits from an overbuilt, financially irresponsible, unionized government. When excessive rates of pay and benefits consume government budgets, financial institutions step up to extend debt. Bond underwriters collect billions each year in fees in California to issue new debt and refinance existing debt. When excessively generous pension plans are granted to unionized government employees, pension funds pour hundreds of billions into Wall Street investment firms, earning additional billions in fees. As for “carbon emissions auctions,” now in its third year of implementation in California, as that ramps up, virtually every BTU of fossil fuel energy consumed will put a commission into the hands of a financial intermediary. Trillions are on the table.

Unionized government hides behind environmentalism to justify pay and benefits over investment in infrastructure – which after all is environmentally incorrect. As the cost-of-living inevitably rises through artificial constraints on the supply of land and energy, the unionized government workers negotiate even higher pay and benefits to compensate, and the corporate monopolies that control existing supplies of land and energy get more revenue and profit. And of course the resultant asset bubble is healthy both for pension funds and wealthy investors, even as low and middle class private sector workers are priced out of owning homes – or even automobiles – and struggle to make ends meet.

The power of public employee unions starts with the fact they collect and spend more money than any other special interest. In California they collect well over $1.0 billion per year in dues and fees. About one-third of that money is reported as explicitly political spending – that’s over $600 million per two-year election cycle. The rest of it is still spent indirectly on politics, since all of their negotiating and public education campaigns concern how we manage our public institutions. The portion of this billion per year that goes to entirely nonpolitical activity is negligible.

With the best academic studies, political consultants, public relations firms, and lobbyists that money can buy, with political action committees that extend down to the most obscure local elections, government employee unions make or break candidates at every level in California.

It is crucial to perceive the irony. Government unions empower the worst elements of the capitalist system they persistently demonize. The crony capitalists and speculative financial interests benefit from an overbuilt, over-regulating, state and local government populated with overpaid unionized workers. Those virtuous capitalists who want to compete without subsidies are successfully lumped together with these robber barons, discrediting their support for reform. Those small business owners who want to grow their enterprises are harassed and marginalized.

If government employee unions were illegal, the most powerful political force in California would cease to exist. But it wouldn’t “turn California over to the corporations and billionaires.” Quite the opposite. It would take away the ability of those corporations and billionaires to collude with local and state government unions who currently control the lawmakers. It would force them instead to compete with each other, lowering the cost of living for everyone. It would restore balance to our debate over environmental policy, energy policy, and infrastructure investment.

Government unions have taken over California. Their agenda is inherently in conflict with the public interest, their rhetoric is compelling and formidable and utterly deceptive, their financial power is immense. They are turning California into a feudal state, where the anointed and compliant corporations build monopolies, government workers lead privileged lives, the rich get richer, the middle class diminishes, and the poor become dependent on government. Nobody who is serious about reversing California’s decline – or America’s potential decline – can ignore the fundamental enabling role unionized government is playing in its demise.

*   *   *

Ed Ring is the executive director of the California Policy Center.

9 replies
  1. Avatar
    Robert says:

    This was a phenomenal article. The point about “Government unions empower the worst elements of the capitalist system they persistently demonize.” is really spot on.

  2. Avatar
    Tough Love says:

    Ed, You included virtually nothing on the Public Sector pensions being MULTIPLES (most often 3x-4x) greater in value at retirement (considering BOTH the richer formulas AND the more generous “provisions” such as the very young full retirement ages, heavily subsidized early retirements, very liberal definitions of “Pensionable Compensation”, and inclusion of COLAs that almost no Private Sector Plans include) than those received by Private Sector workers retiring at the SAME age, with the SAME years of service, and with the SAME pay …. and all while the Public Sector workers RARELY pay for more than 10-20% of the total cost of these VERY generous pensions, with the Taxpayers are responsible for the 80-90% balance.

    Including THAT would have been helpful to the reader’s understanding of the issue.

  3. Avatar
    Robert Fellner says:

    That piece was going to be on OCERS but some unrelated things came up which derailed its publishing schedule. I’ll see if I can get it going again after the TransCal 2013 launch.

  4. Avatar
    Tough Love says:

    It will be interesting to read it …. but as I wish to remain anonymous, I can’t comment on OCERS.

  5. Avatar
    DERP says:

    Another article that is a hoot. I can tell you from personal experience that the vast majority of state employee union members are extremely conservative. If you had ever spent a single day in a state facility you would know that. The average government employee may come in as a liberal, but after dealing with the dregs of society (which is what most government employees do), they quickly become conservative. In fact, the vast majority that work at the facility I retired from are Tea Party members. It is the public that is mostly liberal, at least in my area.

  6. Ed Ring
    Ed Ring says:

    DERP – Did you read the article? Because the theme of the article was not whether or not state employee union members are conservative. The theme was that these unions, who control our politicians, are the unassailable arbiters of corporate power. Any business that wants to succeed in territory controlled by a unionized government goes to the union bosses first. The unions run the politicians, so why lobby individual politicians? This system leads to even more consolidation of corporate power, more monopolies, more cronyism, because instead of 120 lawmakers, there’s just the big five unions.

    This symbiosis between government unions and corporations manifests itself in ways that were explained in the article and have been explained before: Environmentalist legislation becomes a way to pour money into the public sector at the same time as it increases profits to the monopolistic corporations who control the artificially constrained supplies of resources. Public sector pay and benefits are increased instead of investing in infrastructure projects, which are environmentally incorrect. Carbon emissions trading pours money into the public sector, subsidies to crony green corporations, and commissions to financial intermediaries. Pension benefit enhancements pour money into investment firms, with losses covered by taxpayers. What part of this benefits ordinary private sector consumers and taxpayers? None of it.

    You state that the unionized state workers you know are conservative? What does that mean? Does it mean they are in favor of tough law enforcement and less entitlements and welfare spending? Does it mean they’re social conservatives? Or does it mean they are fiscal conservatives, in favor of smaller government? Because if that’s what it means, they are not conservatives. Or if they are, their union leadership certainly is not representing them.

    The policy solution that would serve all Californians, instead of just the government unions and the monopolistic corporations, is to enable land and energy development and in general loosen the regulatory burden on businesses, small and large. This would cause prices for housing and energy to drop at the same time as increased corporate competition would lower all prices. That is a win-win. It would be refreshing to see some of these government unions acknowledge and support policies that serve all Californians, instead of just their members.

  7. Avatar
    David Lee says:

    Remember, too, the indoctrination starts with the teachers, who have the largest, and most powerful union in every state. Not only do they manipulate our children, they actively lobby parents.

    I have only read your latest 2 articles, and did not see specific mention that a primary goal of a union is to grow their membership. Growth means more public employees, leading to further intrusion into private lives – whether by (over)regulation, oversight, or investment.

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply

Your email address will not be published.