September 8, 2010
The labor movement recently marked a historic transformation: A majority of union members now work not in the private sector, but in government. The movement that once fought to raise the wages of ordinary workers has turned into one that fights to raise their taxes.
This is quite a shift. The early trade unionists did not envision unionizing the government. They viewed unions as a way to get workers a larger share of business profits. Not until the late 1950s did unions begin organizing government employees.
The union movement has transformed since then because unions raise costs. As a result, unionized companies often fall behind their nonunion competitors. The story of Toyota rising at unionized General Motors' expense has repeated itself again and again in the private sector.
The government, however, has no competitors and covers its costs with taxes. Even as unions have shrunk in the private sector, they have flourished in government.
Last year, those paths crossed. Today, 52 percent of all union members work in government. Three times as many union members work for the U.S. Post Office as in the auto industry. The new union movement represents government employees.
Samuel Gompers, founder of the American Federation of Labor, was asked once what his union wanted. He responded honestly: "More."
Government unions have the same answer.
The average government employee earns more than he would in the private sector. Federal employees enjoy total compensation 30 percent to 40 percent above market rates. State and local government workers typically enjoy generous health coverage as well as defined-benefit pensions that enable them to retire in their 50s.
The government also provides incredible job security. Government employment has grown in this recession even as the private sector has lost 8 million net jobs. It's also next to impossible to fire a unionized government employee for underperforming.
Unfortunately, taxpayers must get less in order for government employees to get more. The government is not a normal employer. Unions cannot bargain over how to divide the government's profits because it has no profits. Rather, government unions want more tax dollars spent on them.
That takes political power instead of traditional bargaining power. Unions rarely go on strike anymore. Instead, they spend heavily on politics. The American Federation of State, County and Municipal Employees spent a third of its budget in 2008 on politics and lobbying. The AFL-CIO and Service Employees International Union just announced plans to spend $100 million on the midterm elections.
When they can elect sympathetic politicians, unions control both sides of the government bargaining table. But no one speaks for taxpayers or the recipients of government services.
This has had severe consequences for many state and local governments. They face $3 trillion in unfunded liabilities for their generous pensions - obligations that already have started pushing cities into bankruptcy. Governments must respond to union wins by raising taxes or cutting spending.
Unions prefer tax increases. Higher taxes mean even more money for their members who work in government, and they campaign for tax increases across the country.
This year in Oregon, for example, unions outspent the business community to pass two ballot initiatives that raised business and income taxes. In Kansas, unions successfully lobbied the Legislature to raise the state sales tax.
In Illinois, meanwhile, unions are pressing the General Assembly to raise the state's income tax by two-thirds. They have organized mass demonstrations outside the state Capitol, with government employees shouting, "Raise my taxes!" and "Where's the money?"
This is the new union movement: Government employees lobbying for more government.
James Sherk is a senior policy analyst in Labor Economics at the Heritage Foundation (heritage.org).
First appeared in The Indy Star