It's Wrong to Blame Unions for States' Budget Shortfalls
Published by Omaha World Heard, Monday, February 7, 2011
By John Kretzschmar
The writer is director of the William Brennan Institute for Labor Studies at the University of Nebraska at Omaha.
There has been a lot of discussion lately about the compensation of employees represented by public-sector unions. In Nebraska, these unions fall under the purview of our Commission of Industrial Relations (CIR), the agency responsible for settling public-sector contract disputes in a fair, equitable and reasonable manner.
Most economists put the budget gaps faced by Nebraska and more than 40 other states squarely at the feet of the housing-related economic bubble and not public-sector unions. Upon closer inspection, it is important to mention that not all of those troubled states permit public-sector collective bargaining. Among those states facing cutbacks, Massachusetts, New Mexico and Montana allow unionization, and their budget shortfalls are around 10 percent of state spending.
On the other hand, Nevada, North Carolina and Arizona do not permit public-sector collective bargaining, and their budget gaps are around 30 percent. The comparison indicates that public-sector unions are neither the cause of the shortfalls, nor are unions and collective bargaining predictive of the severity of a state's budget crunch.
Another falsehood circulating widely is that public-sector employees are overpaid when compared with their private-sector counterparts. One of several studies on the subject was published in the Economic Policy Institute in late 2010, when Jeffrey Keefe of Rutgers University's School of Management and Labor Relations closely examined the issue. Dr. Keefe investigated total compensation of comparable workers in the public and private sectors.
Keefe's research didn't compare the overall average of public-sector and private-sector employees, because he did not want to err by comparing "apples and oranges." Keefe wanted to compare "apples and apples."
To do that, he matched full-time employees in both sectors with respect to their education, experience and hours of work. He weighed the employees' total compensation (wages and fringe benefits). Because education is the most important variable in determining compensation, Keefe compared education levels. He discovered that more public-sector employees earned a bachelor's degree (54 percent) than did their private-sector counterparts (35 percent).
Upon closer examination, the study concluded that public-sector workers are not overpaid. Quite the opposite, Keefe's results show that, when comparing apples and apples, public employees are slightly undercompensated when compared with workers in the private sector.
In January, we celebrated the life of Martin Luther King Jr. Dr. King spent his life fighting for social and economic justice. His efforts led to his 1968 assassination in Memphis, Tenn. Dr. King was in Memphis to support the right of city employees to form a union and collectively negotiate a labor agreement. He understood that civil rights without economic rights could not improve the lives of Americans.
Dr. King knew that, in both the private and public sectors, there is an "economic imperative" to keep employee labor costs as low as possible. He understood history. He knew it was not overly generous employers who drove the "humanization" of the employer/employee relationship. Employers did not voluntarily increase wages or improve hours and working conditions as corporate profits grew.
Dr. King appreciated the protective power of labor unions. He saw the American labor movement as our nation's first successful anti-poverty program. He wanted the Memphis sanitation workers to have the independent voice in the workplace that a union provides.
What unions have done by putting the American dream in reach of average employees should lead us to examine the anti-public-sector-union sentiment a little closer.
Today, our recovery from this recession is slow and relatively jobless. Good news on Main Street is hard to find, while on Wall Street, stocks are up, corporate profits are rising, and millions of dollars in bonuses are common. For the majority of our nation's wealthiest citizens, the effects of the economic downturn are behind them.
Contrast that with polls which reveal that fewer Americans still believe the American dream is possible to achieve. Their personal history reveals that working hard and playing by the rules will no longer ensure that their children will have it better than they did.
Attacks on public-sector unions, collective bargaining and the CIR do not address the root causes of the challenges facing the state. Nor do the attacks lead to meaningful and lasting solutions, as revealed by the examination of the crisis in other states.
Unions greatly broadened the middle class in the United States, and the challenge facing the nation is not that there are too many unions but that there are too few.
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