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Friday, September 28, 2012

The usual suspects, part 3

The final member of the troika that gets blame for the public pension crisis are public sector employee unions.  Small government advocates are particularly critical of public sector employee unions.  They believe that the unions use financial and political clout to elect politicians that will maximize union members' pay and benefits.  The idea that a special interest group has a disproportionate influence in choosing its own boss is viewed by some as an egregious conflict of interest that hurts taxpayers through higher taxes and decreased services.  Before dealing with this issue, here is a little back story.

Labor unions are most associated with private sector industries since the titanic and sometimes violent struggles between workers and management occurred in the private sector.  The main problem in the private sector was that, as industrialization altered the labor market, more and more workers were forced into jobs where they had little control over their working conditions, hours, and pay.  They had dangerous and unhealthy working conditions, low wages, and long hours with no recourse except the ability to withhold labor.  Unions were formed to bring collective power to workers so they could strike, but strikes were often met with harsh responses from management and workers could often be easily replaced.  The contentious struggles between workers and management continued until the 1930's when significant legislation was enacted to give labor unions more power.

Government workers did not suffer the same hardships as private sector workers.  The main problem in the public sector was the patronage and spoils system in which political connections often determined whether someone could get or keep a job in government.  The federal civil service system was developed in 1871 to address the patronage and spoils issue by creating fairer hiring and retention policies that were based on merit and not who you knew.  State and local governments modeled their own  systems on it, and the system remains in place today.  The birth of public sector employee  unions is a relatively new phenomenon.

While labor unions ("the ones who brought you the weekend") will often take credit for every improvement in the worklives of Americans, they only affected change by becoming a political force.  Labor unions had to go to politicians to get what they wanted because the ability to withhold labor was simply not a powerful enough tool, especially in low-skill occupations, to force management to change.  However, with political power, unions were able to attack management from a side they could not defend.  Politicians and unions formed a symbiotic relationship and altered the balance between labor and management so both parties were on more equal footing.  So don't forget to thank self-interested politicians for the weekend since they are really the ones that gave Americans the 40-hour work week.

The National Labor Relations Act of 1935 (aka The Wagner Act) awarded workers significant powers in relation to management.  These included the ability to collectively bargain and certain job protections when they chose to strike.  Management's primary power, the ability to fire workers, was severely curtailed.  This placed workers on more equal footing with management.  Strikes and the threat of strikes allowed unions to extract concessions from management that were impossible before the Wagner Act.  These included concessions related to pay and benefits, as well as safety and working conditions.

Since the 1930's through the heyday of unions in the 50's and 60's and the decline in the 80's and on, much has changed in the private sector.  First, many low-skill jobs, where most union protections are needed, have moved overseas where wages are much lower.  Second, management had to change its philosophy as workers became more highly skilled.  As both management and workers have invested more in training and education, retention of skilled workers is more critical . Third, outrageous unions demands have crippled companies.  The epitome of this was the United Auto Workers (UAW) demand that General Motors (GM) create the Jobs Bank.  The Jobs Bank was a program that allowed laid-off GM workers to be paid even if they had no work to do.  These workers could sit all day and literally do nothing.  This program was discontinued after GM had to be bailed out by the federal government.  Finally, the necessity of private sector unions has been deemed unnecessary by many workers.  This is mostly because private sector unions have won all their important battles, and government agencies and courts now provide adequate protection to workers from any real or perceived sins of management.

The next posts will deal with how this history of private sector unions relates to public sector employee unions.

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