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California Needs Infrastructure, and Unions Should be Helping

“Infrastructure” is a perennial topic that enters and leaves California’s public consciousness in the following manner: A politician says “we must rebuild our crumbling infrastructure,” journalists report it, almost nothing is done, and the infrastructure continues to crumble. The talking point is made. Check the box. Repeat. Decades pass.

If you’ve driven west on Interstate 580 from California’s central valley into the San Francisco Bay Area, “infrastructure” becomes more than a hard-to-pronounce, sort of awkward sounding four syllable word that emanates from the mouths of politicians every election cycle. Because the divots, pot-holes, fissures and bumps on Interstate 580 west are impossible to ignore. The road is literally falling apart.

It isn’t enough to marvel at how Californians tolerate this negligence. Because it harms our quality of life. Today the failure is measured in terms of how many cars and trucks require far more frequent maintenance to repair their battered suspensions because we can’t fix our roads. Today it’s short showers and annoying light switches that turn off automatically because we won’t build new water and power infrastructure. But tomorrow it could be a catastrophe, as entire regions are potentially denied water, power or transportation, because over time, less and less viable infrastructure became critical to supporting more and more people.

Why? Why have California’s policymakers paid lip service to infrastructure for the last 20-30 years, all the while watching it crumble? Here are three reasons:

(1) Environmentalists provide the moral cover for neglect. There isn’t a road, a bridge, a power plant, a port upgrade, new housing, a water treatment plant – not one scratch in the ground that isn’t bitterly contested by the environmentalist lobby. Powerful environmentalist organizations, often receiving government funds, with opportunistic trial lawyers populating their boards of directors, have an incentive to tie every possible infrastructure investment up in knots. While some environmental oversight is necessary, the challenge of complying with every environmentalist objection deters all but the wealthiest corporations, and creates costly delays that last for decades.

(2) Many corporate special interests benefit from neglect. Corporations who own existing sources of supply can charge higher prices and generate higher profits. Utilities are the obvious examples of this – ever since “decoupling” legislation was passed in California, the only way utilities can generate higher profits is to raise unit costs, since unit output and profit percentages are fixed by law. So if water costs $2.00 per CCU instead of $0.25, or if electricity costs $0.50 per KWH instead of $0.05, utility companies make a killing for their shareholders. Similarly, owners of land that has finally been approved for development, or quarries that got operating permits before the regulations made them prohibitive, are able to sell their inventory at fantastic markups.

(3) Public sector unions also benefit from infrastructure neglect. Taxpayer funds that ought to be paying to construct and upgrade roads and bridges end up being allocated instead to pay government workers higher salaries and fund generous pensions. These unions also benefit from the legislated and entirely artificial scarcity that drives up prices for land and homes, because it increases property tax revenue. And of course, every additional environmentalist inspired regulation and code means more unionized government inspectors and enforcement officers can be hired. Government over-management and mismanagement always benefits public sector unions.

So where is California’s private sector labor movement when it comes to infrastructure? Here is a quote from the California Labor Federation’s website, under “Advocacy / Key Issues.” Revealingly, this is number ten of ten on their “issues” page:

“Invest in California’s Infrastructure: We must have a comprehensive strategy for making investments in infrastructure and a sustainable, equitable way to finance them. We need to restore our public transportation systems, modernize our rail system and rebuild our roads and waterways. We must double our efforts to build high speed rail in California.”

Apart from “high speed rail,” a project that fails to justify itself under any rational cost/benefit analysis, this all sounds good. But where’s the follow up?

When scoping meetings are held to approve infrastructure projects, whether it is widening a highway, approving a new subdivision, repairing a bridge, or building the Temperance Flat or Sites reservoirs, where are the unions? Why aren’t hundreds of them showing up two hours early to these meetings, elbowing the environmentalist trial lawyers and their zealous puppets out of the room? Why aren’t they packing the out-of-control California Air Resources Board meetings to show solidarity with the workers in dairies, agriculture, manufacturing, mining and timber, trucking, and countless other industries who employ hundreds of thousands of Californians?

Instead California’s labor unions typically resort to “greenmail,” a tactic that goes as follows: Pick a project that the environmentalist lobby doesn’t actually object to, then sue the developer on environmentalist grounds until they concede to enact a project labor agreement, than drop the lawsuit.

Is this the best they can do?

California’s private sector labor movement should consider how environmentalism, married with the special interests of monopolistic corporations, allied with government labor whose agenda is utterly different than their own, have destroyed literally millions of good jobs in this state. They should consider how close California is to becoming an authoritarian wasteland, where land, water, energy, housing and transportation are cynically rationed by this alliance of oligarchs and elitists. They need to wake up and fight for their core principles – the welfare of workers and their families.

An essential point that union leaders and their members ought to understand is the cost of building infrastructure in California is prohibitive for reasons that go far beyond paying a prevailing wage, or even the cost of hiring a few extra employees on a project to comply with union work rules. The costs are prohibitive because oligarchs and elitists have colluded to make every element of a project more expensive – the land, power, materials, transportation, staging, permits, and time-delays. The compounding effect of these pernicious barriers have enriched oligarchs, government workers, and the trial lawyers representing the environmentalists. They’ve made the rest of us poorer, and they’re the real reason we don’t have more good jobs.

To take one dramatic example, consider the Carlsbad desalination plant, which – not even including distribution pipes to move the water into the municipal supply – was built at at a capital cost of $12,733 per acre foot of annual capacity. Compare that to the Sorek desalination plant, completed in Israel in 2013 at a capital cost of $4,111 per acre foot of annual capacity, less than one-third as much! This was accomplished in a nation where labor is not cheap, nor is the government a paragon of free market deregulation. This is not an isolated case.

It is a crime against all Californians that other developed nations can build infrastructure for less than one-third what it costs here, and that other states in the U.S. can build infrastructure for less than half what it costs in California. Labor costs occupy a dwindling percentage of what infrastructure projects cost, which means that unions should start lobbying aggressively for infrastructure investment, instead of playing petty greenmail games. They may not win every project labor agreement battle. But they will win the war to create millions of good new jobs, and change California from a land of authoritarian scarcity back into a land of opportunity and abundance.

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Ed Ring is the president of the California Policy Center.

RELATED ARTICLES

California’s Misguided Water Conservation Priorities, August 17, 2016

Government Unions Benefit from the Asset Bubble that Harms Workers, July 19, 2016

How Gov’t Unions and Crony Capitalists Exploit Global Warming Concerns, June 21, 2016

The Alternative to Crony Capitalism and Phony Shortages, June 15, 2016

Government Unions and the Financialization of America, May 24, 2016

California’s Economically Illiterate Legislature, April 5, 2016

Practical Reforms to “Right-Size” Government Unions, March 29, 2016

Investing in Infrastructure to Lower the Cost of Living, March 14, 2016

The Future of Unions in the Post-Scalia Era, February 16, 2016

In Search of a Legitimate Labor Movement, January 19, 2016

The Alliance Between Wall Street and Public Unions, December 1, 2015

Why Aren’t Unions Fighting California’s Bullet Train Boondoggle?, November 24, 2015

When Will Unions Fight to Lower the Cost of Living?, October 27, 2015

Why Pension Reform is Inevitable, and How Reforms Can Benefit the Economy, July 21, 2015

Libertarians, Government Unions, and Infrastructure Development, May 5, 2015

Desalination Plants vs. Bullet Trains and Pensions, April 7, 2015

Raise the Minimum Wage, or Lower the Cost of Living?, March 31, 2015

The Abundance Choice, December 24, 2014

An Economic Win-Win For California – Lower the Cost of Living, December 3, 2014

How to Create Affordable Abundance in California, July 1, 2014

California’s Green Bantustans, May 21, 2014

Public Unions ARE the Political "Establishment"

The successes of anti-establishment presidential candidates are a powerful reminder that mainstream politicians are not managing America’s political economy or cultural evolution in a way that satisfies most of the electorate. That’s no surprise – it’s a tough job these days, with few historical precedents to offer guidance.

Earlier this week an essay published in the Asia Times, “A Millennial conundrum: Communism and youth,” offered a concise set of reasons why so many millennials are supporting democratic socialist candidate Bernie Sanders. The author, Chan Akya, didn’t chastise these youth for their selfish naivete, caused by receiving too many participation trophies during their sheltered childhoods. Instead he gave the following reasons:

(1)  Sharing economy: Technology has propelled sharing into new markets, from cars and vacation homes after opening up personal space on platforms such as Facebook, Twitter and Instagram. For people with itinerant lifestyles driven by mobility in jobs, such a sharing economy may end up shaking the very foundations of property rights – everyone is essentially a tenant at prevailing market rates for everything, and everyone is a target for advertisers based on their data profiles. The sense of one’s privacy and private property diminishes as a result of these technologies.

(2)  Inflated asset values: Incipient asset bubbles across most markets have driven affordability to absurd heights on the back of concerted and global central bank easing. It used to be something of an expectation that one earned and saved money while in their twenties, and got married and bought a house in their thirties. Youth who do not have such expectations are likely to see themselves as tenants for life, driving the sharing economy whilst despising the property owning classes.

(3)  Lack of jobs: it appears that there are now only two types of jobs. The first kind is entrepreneurial, Silicon Valley type jobs with low wages and high equity payoffs in the event that one’s company gets ‘funded’. Then there is the second type of job which offers low wages and no equity upside at all – this would be otherwise referred to as ‘flipping burgers’. All the other jobs, be it in services such as banking or government or manufacturing such as in assembly and production, have simply evaporated from Western societies.

(4)  Student loans: The core issue is that a social ‘contract’ of sorts has been broken – you go to college and end up with a nice job whereas now you go to college and are addled with debt but no job with which to pay it off.

(5)  No prosecution: The lack of prosecutions for bad behaviour at banks, mortgage advisors and investment funds has only helped to create broader appeal for anti-establishment candidates.

Clearly some of these reasons for dissent are legitimate. And herein lies an educational opportunity. Because neither of the anti-establishment candidates have secured a political endorsement from any major public sector union. Nearly all of those unions back Hillary Clinton. And while Sanders, and even Trump, have had some support from private sector unions, it is arguable that if those private unions made endorsements that reflected the sentiments of their members, Sanders and Trump would get them all.

This political season of disaffection presents an opportunity to explain differences between public and private unions that go beyond the obvious ones – that public unions elect their own bosses, that public unions don’t rely on the profitability of a company to get funding, that public unions operate the machinery of government and can use it to intimidate their opponents. The less obvious but more profound difference between public and private unions is that public union power is enhanced when more people are destitute, divided, and dependent on government, and when more activities are criminalized. Private unions have no such perverse incentives.

There’s more.

If you review Chan Akya’s five reasons for America’s disaffected, anti-establishment youth, the worst and most credible have the fingerprints of public union interests all over them. The most glaring example of this are the inflated asset values which have made home ownership almost impossible, especially in California. Using low interest rates to create an “asset economy” is unsustainable. But in the meantime it shores up public employee pension funds, increases property tax revenues to local governments, and of course, wealthy individuals watch their well-hedged portfolios yield excellent returns, while the average American has no chance to earn a decent risk free return on their savings. Who else benefits? Unionized public university faculty, whose pay and benefits skyrocketed on the backs of student loans. As for job creation – once prices for land, utilities and regulatory compliance became too expensive, business who could took their work offshore. But public unions prospered.

If you step back and examine everything the average private sector American worker has to pay for – along with their overpriced homes and exorbitant college tuition – it’s pretty easy to see why politicians like Sanders and Trump are popular. The American taxpayer doesn’t just pay for a bloated, overpaid, inefficient and totally self-interested unionized pubic sector. They pay for global military security, medical and pharmaceutical research and development, and bleeding edge environmental mitigation and clean energy technologies. As a percentage of GDP, no other nation imposes nearly such a burden onto their citizens in these three areas. On top of that, Americans are now being asked to turn their nation into a “multicultural” petri dish, so that internally as well as externally, this country will midwife the emergence of a global civilization. Much of this is inspiring. But it’s a lot to ask.

Millennials in particular, and Americans in general, need to understand that unionized government is the enabling heart and soul of the “establishment” that has let them down, and that an honest search for solutions to the challenges of this age will only begin when government workers get the same deal as the citizens they serve.

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Ed Ring is the president of the California Policy Center.

RELATED POSTS

The Future of Unions in the Post-Scalia Era, February 16, 2016

In Search of a Legitimate Labor Movement, January 19, 2016

The Alliance Between Wall Street and Public Unions, December 1, 2015

When Will Unions Fight to Lower the Cost of Living?, October 27, 2015

Moral Values That Underlie Opposition to Government Unions, October 13, 2015

The Abundance Choice, December 23, 2014

An Economic Win-Win For California – Lower the Cost of Living, December 3, 2014

How Government Unions Are Destroying America, September 22, 2015

The Challenge Libertarians Face to Win American Hearts, October 14, 2014

Reinventing America’s Unions for the 21st Century, September 2, 2014

California’s Green Bantustans, May 21, 2014

A “Left-Right Alliance” Against Public Sector Unions?. May 20, 2014

The Unholy Trinity of Public Sector Unions, Environmentalists, and Wall Street, May 6, 2014

Construction Unions Should Fight for Infrastructure that Helps the Economy, April 1, 2014

Forming a Bipartisan Consensus for Public Sector Union Reform, January 28, 2014

A Policy Agenda for Union Reformers Stuck Inside Unions, November 5, 2013

Why the Democratic Party Cannot Embrace Public Sector Union Reform, October 15, 2013

Exponential Technological Advances and the Role of Unions, July 23, 2013

The Prosperity Agenda, April 2, 2013

Calling for Public Sector Union Reform is Not Anti-Union, January 29, 2013

America’s Atlas Generation – The Forgotten 33%, January 9, 2012

 

In Search of a Legitimate Labor Movement

Sarah has worked for a major grocery store chain for the past 25 years. Adjusting for inflation, she makes less now than she did over a decade ago, especially since her hours were cut in order for her employer to avoid being required to offer her health insurance. Even more difficult, she is “on call” most of the week, without a reliable schedule, which makes it impossible for her to take on a 2nd part time job to help make ends meet. Including benefits, Sarah is lucky to make $30,000 per year. Now in her early fifties, she will need to work for as long as there is strength left in her body to do the job.

George works for a fire department serving an affluent suburb on the California coast. Taking into account the vacation time he earns as a 25 year veteran, he works less than two 24 hour shifts per week before qualifying for overtime. Since five day weekends are overkill, he often works one or two extra shifts a week, doubling his pay. When he goes on calls, 98% of the time they are medical emergencies, not fires. Including moderate amounts of overtime and the employer’s payments for his benefits, George makes about $250,000 per year. Now in his early fifties, he will retire in a year or two and collect a pension and health benefits package worth well over $100,000 per year.

Both of these individuals are hard working, honest and conscientious. Both of them perform jobs that have a vital role to play in our society. Both of them deserve to be treated with dignity and respect. Neither of them wrote the rules. And both of them are represented by unions.

While these individuals and the work they do is beyond reproach, the unions that represent them leave much to be desired. In Sarah’s case, typical of tens of millions of private sector workers, the unions who represent her have ignored economic reality in pursuit of ideological fantasies. Almost universally, to cite a particularly wounding example, these private sector unions have supported immigration policies that increase the supply of semi-skilled workers who compete with Sarah for work hours. Also common are the pragmatic alliances these unions form with extreme environmentalist organizations who have bottled up development of land and energy, driving the cost of living beyond the reach of an ordinary worker. One may cogitate endlessly over what constitutes optimal and humane policies with respect to immigration and the environment. But to agitate for higher wages and benefits in a society awash in cheap labor and artificially inflated costs for basic necessities is a fool’s errand.

In George’s case, which is equally typical, at least in California, the unions that represent him should not even be permitted to exist. Associations of government workers who engage in collective bargaining are not unions in any traditional sense of the word. They elect their own bosses, they take money from taxpayers instead of competing for consumer spending, and they operate the machinery of government which lets them intimidate or co-opt any special interest that might oppose them. They have priced normal government services beyond the capacity of ordinary taxpayers, and bred cynicism about government into the heart of any financially literate American. And government unions have even less interest than private unions in acknowledging the complexity of issues such as immigration or environmentalist overreach. In both cases, policies that harm the aspirations of private workers have the opposite effect on them, enhancing their job security.

A legitimate labor movement is easy to justify in the abstract. If not unions, what sort of movement will speak for ordinary workers in an era when jobs are being relentlessly automated, global competition is tougher than ever, and the cost of living is punitive? What sort of movement can speak for ordinary workers if, along with these challenges, the nation is gripped by a deep recession brought on because interest rates can’t go any lower and stimulative debt can’t go any higher?

The reality today is that much of America’s labor movement has gone astray. Private sector unions often put ideological goals ahead of the economic interests of their members. And public sector unions, which are not unions in any traditional sense of the word, and which represent the economic interests of their members all too well, are an abomination. They have corrupted our democracy, they are a corrupting influence on government workers because they have exempted them from the economic challenges facing private American workers, they are driving our governments at all levels towards authoritarianism, they are bankrupting our cities and counties and states, and the pension funds they control epitomize the most corrupt elements of America’s grotesquely overbuilt financial sector. Maybe what would remain after abolition, still very powerful voluntary associations, could start fighting for CEQA reform, for example, to benefit all workers instead of just themselves. Before unions infested our governments, that’s what public service meant.

Envisioning exactly how the labor movement might best operate in the interests of the American worker is difficult but necessary. It requires balancing libertarian and mixed-capitalist economic world views. But two reforms would be a very good start. First, outlaw collective bargaining in the public sector. Second, the leaders of the private sector labor movement need to starting caring more about American workers, and less about their elitist ideological fantasies.

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

Libertarians, Government Unions, and Infrastructure Development

“Alright, but apart from the sanitation, the medicine, education, wine, public order, irrigation, roads, the fresh water system and public health, what have the Romans ever done for us?”
–  John Cleese, Monty Python’s Life of Brian, 1979

Any discussion of California’s neglected infrastructure has to recognize the three factors most responsible, libertarians, environmentalists, and government unions. Picking libertarians as the first example is not by accident, because libertarians are perhaps the most unwitting participants in the squelching of public infrastructure investment. By resisting government involvement in any massive public works project, libertarians provide cover to public sector unions who know that public works funding competes for tax revenues with their own pay and benefits.

When it comes to squelching public infrastructure investment, however, nobody can compete with California’s environmentalist lobby. Their lawsuits have stalled infrastructure development for decades. And the identity of interests between government unions and environmentalists is multi-faceted. The most obvious is that when there is no money for infrastructure there is more money for government worker pay and benefits. And of course, the more environmentalist regulations are passed, the more need to hire more unionized government workers.

Then there are the unintended and largely unnoticed financial consequences of environmentalism abetting the government union agenda. As California’s carbon emission auction collections slowly grow into billions per year, government jobs are redefined to incorporate “climate change mitigation.” Code inspectors and planning dept. personnel become climate change enforcers ala revised building codes and zoning laws. Bus drivers become mass transit workers mitigating climate change. Firefighters combat lengthier fire seasons, and even police are called into action because hotter weather is correlated to higher crime rates. And as they work to mitigate the impact of climate change, all of them quietly qualify for a share of the carbon emission auction proceeds.

The unintended economic consequences of environmentalism abetting the government union agenda are among the hardest to explain. Of course environmentalism can slow down economic growth. At some reasonable level – which we’re well beyond – that’s even desirable. But the environmentalist squelching of public infrastructure development, along with competitive private sector development of land, energy and water resources, has created artificial scarcity. In turn, this drives up asset values which helps government pension funds two ways (1) directly through appreciation of their invested assets, and (2) indirectly, by creating new real estate collateral for consumer borrowing which stimulates consumer spending which creates corporate profits and stock appreciation. In short, the economic consequences of artificial scarcity are asset bubbles that, for a time, keep unionized government worker pension funds solvent. When you can’t afford to own a modest home, or run an energy intensive business, remember this.

What libertarians and environmentalists both need to understand is that massive public works are one of the prerequisites for broadly distributed prosperity. And the environmentalist bias against massive civil engineering projects is two-faced. For example, managing delta salinity, the flow of the San Joaquin River, and the very existence of one of the largest refuges for waterfowl in the American southwest, the Salton Sea, are all dependent on dams, aqueducts and irrigation. But no more?

If you search for interest groups that favor massive civil engineering projects, you’ll look far and wide and find nothing of significance. Private sector unions ought to be leading the charge, but in recognition of the power of environmentalists and government unions, they settle for politically correct projects of marginal productive value – high speed rail, delta tunnels, and the occasional stadium. The Silicon Valley lobby is even worse – rather than support abundance through innovation, they embrace conservation through surveillance. If Californians recovered an additional 10 million acre feet per year of fresh water through civil engineering projects such as desalination, dam storage, and sewage reuse, there would be no need to embed internet devices into “smart” (and mandatory) side loading washers, low flow toilets, water meters, dish washers, and irrigation systems.

The biggest challenge ideologically however confronts libertarians. Because in the real world, we need to build civil infrastructure within a financial and legal framework that relies to some significant degree on government. If libertarians can reconcile their ideals with the needs of Californians, they might rally private sector union leadership, practical environmentalists, and altruistic members of the public sector. Massive infrastructure development in California on all fronts is long overdue. The revenue producing elements of this infrastructure could be financed through the pension funds – only consuming a fraction of their assets – and give truth to their currently preposterous assertion that they’re helping our economy.

Imagine if California’s government, with help from private and federal sources, was truly committed to creating abundance again through massive civil engineering projects across all areas of critical infrastructure. Can libertarians find a formula that would enable them to urgently support this without violating their core ideals? Can they support development while also being the watchdog against corruption? It could make all the difference in the world.

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

The Growing Rift Between Public and Private Sector Unions

New York Gov. Andrew Cuomo, a Democrat, is coasting to reelection with only partial support from organized labor. While many private unions remain in his corner, the state’s major government unions are either declining to support Cuomo’s bid for a second term or have endorsed a challenger. In this respect, Cuomo 2014 resembles New Jersey Gov. Chris Christie’s hugely successful reelection campaign last year. As Steve Malanga detailed here, Christie received enthusiastic support from building trades unions, whereas public sector unions never forgave him for his first term initiatives on pension and K-12 reform.

Any news about a private v. public split in the labor movement is encouraging, because influence peddling by government unions is far more troubling than when it’s done by private sector unions. Market forces keep corporations, and thus their unions, in check, but cities are monopolies and never go out of business. Government unionization thwarts the will of the voters, by forcing politicians to implement policy through the collective bargaining process instead of legislation. Taxpayers should not have to pay workers extra for administrative changes such as drug testing or a new teacher evaluation system.

But will the trend continue?  Many political coalitions don’t outlive their standard bearers. Bridgegate certainly seems to be testing Christie’s hold over his. And Cuomo is a uniquely talented politician, as attested by the polls, his warchest, his strong support on the left and right, and his ability to make the New York State legislature look effective or at least less dysfunctional.

Here are four factors to consider in considering the potential that other blue state politicians might split the labor movement, to the detriment of public sector unions.

First, recessions are helpful, because they stimulate more conflict between government unions and Democrats than private sector unions and Democrats. Most priorities of private labor—minimum wage, paid leave, making it easier to organize—can be pushed regardless of economic conditions. The arguments may change (“…now more than ever…”) but the goals and their chances at becoming reality probably do not.

As employers, governments must balance their budgets, and so, as policymakers, they simply can’t be as generous with teachers and police unions during recessions. An austerity budgeting regime puts unions on the defensive and sows distrust between them and Democrats. (“Is he doing this pension reform to shore up the retirement system, which is what he told us, or so that he can brag to the business community?”)

Second, the private/public distinction breaks down in the case of private unions that seek rents that effectively transform them into public employee unions. Project Labor Agreements and other union-friendly bidding restrictions on public construction projects make government workers out of employees of unionized construction firms. To regard 1199 SEIU, the most powerful union in New York State, as a private union like the steel or autoworkers would be to overlook the government’s outsized role in healthcare finance.

Third, the Cuomo model is more threatening to unions than the Christie model. Though statistically normal, Republican governorships in New York, Massachusetts, Connecticut and New Jersey are still hard not to interpret as aberrations, more the result of Democrats’ bungling than a political paradigm shift. The party remains weak. A blue state Democrat proving he can win and govern without unions provides a model for others to replicate whereas Republican success always seems sui generis.

Fourth, government unions have benefited from the weakness of private unions, which has made them more indispensable. Until private unions can do more for Democrats in the way of money and ground troops, politicians who care about being tagged as anti-worker will be wary of alienating AFSCME, NEA and  AFT.

About the Author:  Stephen Eide is a senior fellow at the Manhattan Institute’s Center for State and Local Leadership. Steve received his doctorate in political science in Boston College and previously was a Senior Research Associate at the Worcester Regional Research Bureau. His research focuses on public employee unions, retirement benefits, public finance, and urban policy.

Forming a Bipartisan Consensus for Public Sector Union Reform

Across the United States there is an escalating political conflict over the role of labor unions in society. But it is inaccurate to characterize this conflict as one between Republicans and Democrats. There are members of both major political parties, as well as independents of widely diverse ideologies, who are concerned about civil liberties, the growth of authoritarian government, inadequate investment in infrastructure, and poorly funded social programs. Explaining to these diverse groups that public sector unions are a threat to civil liberties, impel authoritarian government, and preclude investment in infrastructure and social programs – and that by and large, private sector unions do not – is the key to successful public sector union reform.

While reformers who are immersed in the topic may consider this obvious, the fact that public sector unions are fundamentally different from private sector unions is still a relatively new concept to the general public. Some of these differences might be summarized as follows:

(1) Public unions elect their own bosses, private unions have minimal role in selecting their management.

(2) Unlike private unions, public union members run government agencies, which gives them the ability to intimidate their opponents with state-sanctioned force.

(3) Public unions derive their revenue from compulsory taxation, private unions depend on consumers voluntarily purchasing products and services.

(4) There is a trade-off between infrastructure spending that benefits private unions, vs. more pay and benefits for unionized government workers.

(5) Public unions and Wall Street financial interests benefit when public entities borrow money and enhance pension benefits, since financial firms underwrite the bonds and invest the pension funds. Private unions have no similar conflict of interests.

(6) Unlike private unions, public unions have an incentive to enact more laws even at the expense of civil liberties and economic growth, because it grows their organizations.

Recognition of differences between public and private sector unions can come from unlikely places. Last month the Boston Globe published a guest editorial entitled “Martin Walsh’s [Boston mayoral candidate] sensible kind of unionism.” The author, Hugh Kelleher, is executive director of the Plumbing-Heating-Cooling Contractors Association of Greater Boston. He writes:

“Construction unions in Boston and elsewhere are cognizant of the bottom line in these key ways:

  • Unlike public unions representing teachers, police, and firefighters — construction unions provide no job guarantees. There is no tenure or seniority.
  • Our layoff process rarely involves any subsequent arbitration. Workers understand that their jobs depend upon performance and the availability of work.
  • How much notice must the employer give a union construction worker before layoff? Fifteen minutes.

The construction industry’s emphasis on reliability and performance offers lessons for city government.”

Imagine if public sector unions had to work under these rules. Job security would be based on job performance rather than seniority. And as for retirement security, why should members of construction unions oppose public sector pension reform? The retirement plans that benefit unionized private sector workers must conform to ERISA (ref. “Actuarial Assumptions and Methods), meaning their pensions are modest but sustainable, because they have to use conservative rates of return when calculating the present value of their future pension payment liabilities.

It’s not just more efficient work rules and sustainable pensions that differentiate unionized government workers from private union workers, however. It is the profound difference in overall incentives that drive each of them. Public sector unions want more tax revenue for themselves. Private sector unions want that money for infrastructure. And funding infrastructure remains a pipe dream as long as public sector unions successfully resist streamlining and modernizing government, and prioritize allocating tax revenue to more compensation and benefits.

The agenda of private unions for infrastructure – real infrastructure, by the way, not environmentally correct useless monstrosities such as California’s “bullet train” and delta tunnels – is matched by the agenda of liberal Democrats for social programs. There will never be adequate money for either, as long as every spare dime goes to pay public employees literally twice as much, on average, as private sector workers earn.

Where the interests of liberal Democrats and libertarian Republicans may intersect is depicted on the table below. As shown, the “left” may oppose a union reform such as Right-to-Work (RTW) in the private sector, but for the public sector, they may view it as the only way to rescue their ambitious agenda for infrastructure projects and social programs. The “right” may support Right-to-Work for all unions, but will recognize that the most egregious threat to economic health and property rights comes from the government unions, who might be diminished if they were subjected to Right-to-Work laws.

FORMING A BIPARTISAN CONSENSUS FOR PUBLIC SECTOR UNION REFORM

PublicSectorUnionReformParadigm_400pxAnother area of intersection between liberal Democrats and libertarian Republicans would concern the special case of public safety unions. Despite troubling nationwide examples of how public safety unions use their immense power at the local level to negotiate unaffordable compensation and intimidate political opponents (ref. “Battle over police pensions in U.S. cities takes ugly turn,” Reuters, January 2014), Republicans have exempted public safety unions from public sector union reform legislation. Their omission, from Wisconsin to Pennsylvania and elsewhere, not only leaves intact what are perhaps the most inappropriate types of public sector unions, but precludes an alliance with reform-minded liberal Democrats.

Finally, a coalition of liberal Democrats and libertarian Republicans may jointly recognize that public sector unions are partners with Wall Street speculators and middlemen; entities who contribute nothing to the productive economy. For years, bond underwriters and hedge funds alike have had union controlled cities and states – and their public employee pension funds – as their biggest customers, and both reap short-term gain from accumulation of bond debt and unfunded pension liabilities that will eventually wreak financial catastrophe – that process has already begun.

Liberal Democrats and libertarian Republicans will never agree on the optimal size of government. But they can recognize together that public sector unions are the force behind an inefficient, over-built, over-compensated, increasingly authoritarian government that violates the spirit and diminishes the potential of the American dream, in all of its diversity.

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

Related Posts:

Avoiding the Oversimplifications of ‘Right Wing’ vs. ‘Left Wing’, December 16, 2013

How Unions and Bankers Work Together to Protect Unsustainable Pensions, November 26, 2013

Bipartisan Solutions for California, October 27, 2013

Exponential Technological Advances and the Role of Unions, July 23, 2013

How Public Sector Unions Skew America’s Public Safety and National Security Agenda, June 18, 2013

Why Public Sector Unions are “Special” Special Interests, June 11, 2013

The Prosperity Agenda, April 2, 2013

Should Police and Firefighters be Exempted from Union Reforms?, March 12, 2013

Would ANY Public Sector Union Reform Appeal to California’s Democrats?, February 12, 2013

The Ideology of Public Sector Unions vs. Private Sector Unions, February 20, 2012

The Differences Between Public and Private Sector Unions, May 13, 2011