On Wisconsin

It’s actually quite simple. Wisconsin, like nearly every other state in the union, is broke. It needs to tighten its belt. Its newly-elected Republican governor, Scott Walker, ran on a platform of restricting some public employees’ collective bargaining rights, and to the apparent astonishment of Wisconsinites who seemingly weren’t paying attention, he’s making good on his campaign promise in a manner exactly consistent with his entire career history. The focus of his attention is the largest of Wisconsin’s public employee unions,the teacher’s union. He and the Republican majority would impose higher contributions to healthcare and retirement plans for union members. The response has been massive demonstrations, strikes, and purportedly, doctors writing fake medical leave notes to cover teachers who ostensibly aren’t allowed to strike.

There are three kinds of unions: unions of skilled or scarce labor (for instance, the NFLPA), unions of semi-skilled or unskilled labor (for instance, the UFW), and unions of public employees (for instance, AFSCME). The question raised by the week of protests in Wisconsin is whether the last type of unions is a good thing or bad. There is a place for unions in our economy, but I am not at all persuaded that the protests in Mad City are the unions making their best case here.

Teacher strikes are about the most infuriating thing that unions do. I believe that teachers provide an essential service and when teachers strike, it gives  lie to the “won’t someone think of the children?” card their union always plays, by demonstrating that when it comes down to a choice between taking care of the kids and bargaining for more vacation time, it’s the children whose interests fall by the wayside. If they want their interests protected, a teacher strike says, let the kiddies pay their dues like anyone else. If they want to make the case that they are the good guys, walking out on the children is not the way to do it.

Skilled labor unions consolidate the bargaining power of a scarce resource and maximize the earning power of those capable of bringing an employer immense profit with relatively small amounts of labor. Individual members of the union likely possess sufficient bargaining strength to achieve meaningful economic successes even without the union; such unions make the most sense, however, when the elite workers still need the support of the “merely” very skilled workers.

Such a union justifies its own existence because when scabs are no substitute and labor providers are truly scarce, the union ensures that management will have access to this scarce resource labor. Yes, the labor commands a high price, but in environments where there is high profit, such an arrangement makes financial sense to both sides, and produces a good result for society as a whole.

Semi-skilled or non-skilled labor unions consolidate the bargaining power of an abundant resource, which only collectively possesses great bargaining power. Here, there is less concern that labor will take so large a piece of the pie that the industry as a whole becomes unprofitable, but there is a likelihood that management can get around the labor union with scab labor. Thus, such unions need help from the law in order to keep their power in place. Thus, they can make management bargain in good faith and ensure a livable wage and provide reasonable benefits for their members, because their labor is what makes their businesses profitable at all.

While I’m not a huge fan of unions in general, this is where they are most needed — a situation in which because labor is plentiful, the individual laborer is at real risk of being unfairly exploited (as Marx correctly observed, all management “exploits” labor in the sense that it pays labor less than the value it adds to the product or service, the marginal difference being termed “profit”). It is difficult for me to say that unions are inherently a detriment to the economy; American industry was at its strongest when unions were at their strongest. It is a harder question, however, to wonder if these unions grew so strong with legal and political support that they did effectively take over the shops — and I will repeat here that the UAW owning significant stock in GM is a perversion of the very purpose of labor unions in the first place and can ultimately result in no good outcome.

Nevertheless, semi-skilled labor unions do have a place in the economic order — they keep turnover low and experience high; they equalize bargaining power between labor and management so that people can afford to live by providing the relatively less expensive labor demanded for these sorts of jobs, and as individuals graduate to higher earning potential, they provide training and institutional memory to their newer replacements. What is notable, though, is that these unions need public support rather than raw economic leverage to survive and effect their purposes. They need labor law, which compels management to allow workers to unionize if they wish, forbids management from creating sweetheart unions, in about half the states permits unions to demand “closed shops,” requires management to submit to good-faith bargaining and imposes mediation upon management if that bargaining fails, permits peaceful strikes and protests, occasionally compels management to use its human resources department and withholding to collect union dues, and requires that grievances within the negotiated agreements ultimately include the submission to third-party binding arbitration — and imposes substantial monetary penalties on management for failing to do these things. Without that kind of muscle behind it, the abundance of semi-skilled labor would enable management to scab out nearly any union it wished to, strikes and appeals to public sentiments notwithstanding.

Public workers, however, do not work in the for-profit setting. There is no pie to divide up. Some public workers are skilled and well-educated; some are not so. One of the traditional reasons to seek out a public sector job is to trade out a portion of one’s pay for Cadillac benefits, to be sure, and historically governments have given great benefits packages to their workers. So are the teachers in Wisconsin overpaid? Even on the same blogs, some say no, and some say yes. No one can really tell; however, the trend over the past twenty years has been for the public sector to offer higher and higher wages, particularly to skilled workers. Teachers here in California can take home $50,000 a year or more after a few years in service, while working only nine to ten months out of the year, and the California Teachers’ Association can take substantial credit for that. I’ve known two-teacher families that enjoy better lifestyles than what The Wife and I do, and I’m not complaining about the money we make.

It is difficult to find good comparators in statistically significant numbers. Public service providers tend to monopolize their field, or at least nearly so. There are way more public than private school teachers. There are virtually no private police and very few private firefighters. The only significant competition for these jobs is between different government agencies. Aside from a human dignity point of view, about the only overriding public policy guideline about how much compensation (money plus benefits) should be paid I can readily identify is that we certainly don’t want public employees in positions of any real power or discretion to be susceptible to bribery and corruption due to low salaries.

The question is not whether it is a good thing that teachers are or ought to be well-paid; everyone likes teachers as a general proposition and no one ought to begrudge them good money. Wisconsin teachers don’t start out making a lot but it seems that after a few years, they do all right. They aren’t being asked to take outright pay cuts, they’re being asked to increase their contributions towards healthcare (to a total of 12% of the premium) and retirement (to a total of 5.8% of the total contribution). The question is whether in an age of extremely tight governmental budgets, public employees should be treated the same as private employees with respect to the right to collectively bargain with the same kind of legally-subsidized strength that semi-skilled unions have, and at least partially with the scarce, educated labor that skilled unions enjoy — without any quantifiable “profits” of the collective enterprise identifiable to be divvied up.

Frankly, it would take some cheek for me to turn to a private employee and say “You, who must choose between a retirement plan and a healthcare plan because your employer provides neither and you can only afford one or the other, must now pay with your tax dollars for me to have both, because I teach your kid.” At that point, if I were the private employee, I might just start asking the question, “Well, if I homeschool my kid, will I still have to pay for your generous retirement plan?” and writing my state legislator and seeing about a tax exemption for homeschoolers. Now, there’s a revenue impact.

Because we also don’t want to wind up in a situation where the public workers get so much compensation that the state can no longer afford to provide the service for which the workers are employed. Again thinking about my own state, the most prominent example of this are not teachers but rather prison guards. Correctional officers have very cushy benefits packages and make very nice pay — particularly considering that one does not need a college degree to be one. The work is certainly unpleasant. But then so is teaching, frequently, and so is firefighting or crimefighting or picking up trash in the public parks or nearly anything else the public needs done on the government dime. These are fundamentally different things than working for for-profit companies. We rely a  lot on for-profit companies but we also rely a lot on government.

By now, you’ve all read the quote from Franklin Delano Roosevelt:

The process of collective bargaining, as usually understood, cannot be transplanted into the public service. … I want to emphasize my conviction that militant tactics have no place [in the public sector]. A strike of public employees manifests nothing less than an intent on their part to prevent or obstruct the operations of Government.

That sentiment certainly resonates with the parents of schoolchildren in Wisconsin, particularly those who themselves are contributing 25%, 50%, 75%, or in many cases 100% to their healthcare and retirement funds because their employers can’t afford to make more generous matching contributions and remain profitable enough to keep the doors open. Government, lacking a profit motive, also bases its decision-making on the vicissitudes of politics. Which is why you’ve all also read these thoughts from Joe “Primary Colors” Klein, whose attempt at catchphrasing the events in Wisconsin have fortunately failed:

An election was held in Wisconsin last November. The Republicans won. In a democracy, there are consequences to elections and no one, not even the public employees unions, are exempt from that. There are no guarantees that labor contracts, including contracts governing the most basic rights of unions, can’t be renegotiated, or terminated for that matter. We hold elections to decide those basic parameters. … [¶] The events in Wisconsin are a rebalancing of power that, after decades of flush times and lax negotiating, had become imbalanced. That is also something that, from time to time, happens in a democracy.

<irony>Well, of course you would expect Joe Klein to say things like that. I mean, Clinton guys like him are practically all Republicans already.</irony>  Then there is the take that this is simply hardball politics as usual, in this case a resurgent Republican majority seeking to impose a long-term hobble on its upstart Democratic opposition:

We learn from Rachel that nothing less than the entire future of the Democratic Party is at stake in Madison, Wisconsin. Recall that the Democratic Party was characterized as a juggernaut only two short years ago, riding an unstoppable permanent demographic realignment over Republican Party roadkill with an open highway of political dominance rolling out before them. Yet now, suddenly and inexplicably, the case is made that the Democratic Party is facing political extinction in Madison.

But at the end of the day, we can’t just look at this through the lens of politics as usual. The states are broke and we do face a significant and durable need for austerity regardless of which party is in power. Even if and when the economy gets better (notice how, despite our being out of recession, no one thinks the economy is healthy?) we will face legacy debts accumulated over the past ten years at both the state and federal levels, which will take at least a generation to pay off. If this is to happen, realistically, we must return to an expanding economy and we must restrict absolute government spending to something resembling its current levels, such that revenues exceed outlays and are spent repurchasing the crushing legacy debt. Other nations have begun doing this and they have not only not collapsed but succeeded in creating environments where their economies can expand again.

That’s not an issue which ought to be politicized. It’s an imperative, unpleasant in the short term to be sure, but one which if deferred for much longer will result in the dreaded word “default.” Everyone gets to tighten their belts, people. That includes teachers in Wisconsin, who as far as I’m concerned need to get back to the classroom anyway. The teachers in Wisconsin have not articulated a good reason why they ought not to make the relatively modest benefit contributions they are being asked to; they have not articulated a good reason other than their own collective self-interest for the unions’ very existence.