Public employee unions vs. the rest of us
Many liberals still profess confusion about the distinction between collective bargaining in the public sector and that in the private sector. Really, it's not that hard, unless the intention is to ignore the obvious differences between public employee unions (which negotiate against friendly politicians to whom the unions give huge campaign donations) and private unions (which negotiate at arm's length against employers that don't enjoy a monopoly in the market). David Brooks provides a helpful guide to the perplexed:
In Wisconsin and elsewhere, state-union relations are structurally out of whack.
That's because public sector unions and private sector unions are very different creatures. Private sector unions push against the interests of shareholders and management; public sector unions push against the interests of taxpayers. Private sector union members know that their employers could go out of business, so they have an incentive to mitigate their demands; public sector union members work for state monopolies and have no such interest.
Private sectors unions confront managers who have an incentive to push back against their demands. Public sector unions face managers who have an incentive to give into them for the sake of their own survival. Most important, public sector unions help choose those they negotiate with. Through gigantic campaign contributions and overall clout, they have enormous influence over who gets elected to bargain with them, especially in state and local races.
There isn't much doubt, as Richard Cohen explains, that this imbalance has resulted in some grotesque outcomes. He writes:
In New York City, the No. 2 guy in the fire department retired on a pension worth $242,000 a year. In New York State, a single official holding two jobs and one pension took in $641,000. A lieutenant with the Port Authority police retired with an annual pension of $196,767, and 738 of the city's teachers, principals and such have pensions worth more than $100,000 a year. Their former employer, it goes almost without saying, is steamed. Their former employer is me.
These examples of pension obesity were culled from the local newspapers, which never fail to shock with revelations of how good life is for those who once worked for the city, the state or any one of several public agencies. In some cases, retirement came a mere 20 or so years after first reporting to HR and, if you were lucky enough to fake a disability - oh, my aching back! - the sky is virtually the limit. Fully one-third of all New York City cops who retired during a recent 17-month period did so on disability. They have dangerous jobs, we all know - but not nearly as dangerous as Long Island Rail Road workers. Almost all of them retired on disability. All aboard!
Is it any wonder that even private-sector union members have had it with their public union comrades?
Last night I spoke with Diana Furchtgott-Roth, a senior fellow at Hudson Institute who heads the Center for Employment Policy. She explained that the extent of the unfunded liabilities is huge, but actually uncertain. She told me, "Unfunded pension liabilities are estimated at $2 trillion or $3 trillion. But no one really knows because pensions depend on salaries at retirement and numbers of public sector workers. Both can change." Moreover, she observed that the problem isn't simply the extent of the liabilities, but what it means for residents whose taxes are going up and whose services are being pared back to pay for extraordinary benefits and salaries for public employee unions.
On this point, Tim Cavanaugh has a superb analysis in Reason Magazine of the degree to which California's indebtedness to public-employee unions has crowded out the progressive agenda of a liberal governor and an overwhelmingly liberal legislature. He explains:
[Orange County Supervisor John] Moorlach alludes to a striking feature of the current pension reform movement: It is a revolt led by the supporters of big government. At every level, Californians want assertive government. Republican farmers demand cheap water and more than $2 billion a year in subsidies. Unionized TV and movie productions command incentives such as $500 million in tax credits. In popular referenda during the last five years, California voters have voted themselves nearly $100 billion in bonded debt. The acceptable question is no longer whether to spend but what to spend it on.
This is why the most aggressive lobbying for pension reform is coming not from fiscal conservatives but from progressives, who see the logarithmic cascade of pension liability as a threat to public parks, environmental programs, and rail transit.
There is no doubt that public employees have successfully gamed the system. As Andrew Biggs of the American Enterprise Institute has found, public-employee unions have done much better than their private sector counterparts. Biggs writes:
Is the overpaid federal worker really just a myth? Not according to academic research. Economists have studied federal pay since the 1970s, and their methods and conclusions differ markedly from those of the government. Economists use statistical techniques that account for differences in workers' age, education, experience, gender, race, marital status and other characteristics.
Those studies generally have found a federal pay premium in the range of 10 percent to 20 percent, according to the 1999 Handbook of Labor Economics. A private sector worker earning $50,000 per year, for example, might receive $55,000 to $60,000 per year as a federal employee. The largest premiums are for lower-skilled employees, with smaller benefits as education increases. Interestingly, foreign studies also have found pay premiums for their government employees, suggesting government's weaker budget constraints allow public sector pay to rise above market levels. . . .
In addition, feds quit their jobs at much lower rates than private sector workers, implying that civil service positions offer better compensation, job security and benefits. These retention rates persist even with the federal retirement program's shift away from a defined benefit pension structure, which was believed to account for low quit rates.
In sum, one must try really hard to ignore the distinctions between public and private unions. It is those disparities that produce disproportionately rich salaries and benefits for public-sector employees and that burden state budgets. You would think that more politicians and pundits on the left, who have so many creative ideas for spending the taxpayers' money, would recognize that it's their agenda as well as the country's political health that is imperiled by the public employee union racket.
| February 22, 2011; 10:00 AM ET
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