Thank you, Republican senators of Wisconsin!

It’s here; a new era has begun. Wisconsin public-sector workers have lost their collective bargaining rights. The narrative of how unions are hollowing out America’s fiscal stability has won.

Except, that the new era, if it lasts for long, is an unfortunate one. First, this is not a negotiation; the Wisconsin public-sector employees have simply lost their seat at the table. Such partisan measures, whether, rooted in a good public policy or not, are likely to be reversed, or at least modified significantly, if it were to survive in its impact. In the same vein, I believe that the Healthcare bill passed by the 110th Congress will also not survive in its impact as is.

Second, the narrative of supposed fiscal prudence is utterly false.  There seems to be an implied agreement in the MSM and on Wall St. that if we “privatize” the unions, whether by bringing benefits down, or opening the jobs to private sector, it will go a long way to resolve the budget issues. I would like to point out a few arguments that cut against these arguments.

First, it has been argued that the lack of contribution by the employees led to the staggering unfunded pension liabilities.  But, this is not true. The amount of unfunded pension liabilities ballooned, significantly in part, because of the recession. Pension assets are down from $3.5T–what it would have been w/o recession, to $2.5T now–a $1T difference. (http://www.cepr.net/documents/publications/pensions-2011-02.pdf)

Second, the teachers, key objects of Republicans’ scron, actually earn less, and are not exactly welfare queens. (http://www.offthechartsblog.org/five-things-you-might-not-know-about-public-employees/)

Finally, public employees in general are not over-compensated (http://epi.3cdn.net/8808ae41b085032c0b_8um6bh5ty.pdf)

“Comparisons controlling for education, experience, hours of work, organizational size, gender, race, ethnicity and disability, reveal no significant overpayment but a slight under-compensation of public employees when compared to private employee compensation costs on a per hour basis. On average, full-time state and local employees are undercompensated by 3.7%, in comparison to otherwise similar private-sector workers.”

 

It is fashionable to bash unions, but it is easy for those of us who are not in unions to forget that a lot of things that we assume to be given–40-hr workweeks, minimum wage, minimum age for work, health and other benefits were originally bargained by the unions. This doesn’t mean that we haven’t had awful unions; UAW made some egregious mistakes in its time, which had to be rolled back to keep the Detroit Big Three alive.  But, this doesn’t mean that all unions are inherently bad and have to be removed. The argument of simply cutting off a supposedly ailing limb is beyond me. My father, who was a manager at an engineering plant, was often harassed by his labor unions, and when I think of unions, it doesn’t bring up a warm and fuzzy image. But, I can still recognize that simply muzzling the unions is hardly a solution to anything. Union leaders are elected to pursue the benefit of their unions, and it is their job to push for more benefits. It is the job of the managers to be truthful and share the amount of expense that the business can realistically take on. This discussion, and give and take, is not always pleasant, but having one group simply muzzle the other is scarcely an option.

This decision will have significant implications: I believe that this will energize the fiscal conservatives and the Democratic base alike, and likely influence 2012 presidential election. My guess is that the Republican primaries, shorn of any obvious candidate, will be dominated by candidates that stand for such radical measures. This makes it easy for Obama to argue that he stands for the middle-class whereas the incumbent is a middle-class-hating fiscal zealot. Of course, this is a gross simplification, and the election is far away. But, as it stands now, it is likely that “middle-of-the-road” Obama will be pitted against a far-right fiscal conservative, which will only help his re-election chances. The latest CBS poll shows that Independents do not favor Wisconsin Republicans; it goes without saying that Independents are king-makers.

Overall, I personally believe that this is poor public policy, and poor politics. Somewhat paraphrasing what Abby Joesph Cohen of Goldman Sachs, a Cornell alum, said in a class with Johnson School students recently- as a student of a university that has a school for labor relations (Cornell ILR School), I believe that collective bargaining has a positive place in our society. Throwing it by the wayside is a very unfortunate political move.

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3 Comments

  1. This is what I was talking about Obama, in some ways. I remember that Bill Clinton had a very similar time. Right after he got elected, the only thing Republicans did was to oppose everything he did and not let him do anything. Remember how they won the 1994 congress back and Newt Gingrich was the speaker. Same exact situation. And then try to blackmail the president into accepting their budget else they wont raise the debt limit. And what does Clinton do, starts giving it back to them. And when Gingrich did the debt ceiling thing, you know what happened. I think Obama needs to talk to Clinton and just play hardball with them. Not sure why history always repeats itself!

  2. While the unions are in some ways rightly blamed for the problems at GM, I think a case you might want to do some study on why the management at GM in the 80’s gave them these huge benefits. For example the number crunchers in the 80’s, came up with this model which said healthcare costs will decline and hence give them these benefits. So is anyone blaming the foolish management for many such steps

    1. I think both are to blame (cop-out reply, I know). Management may have used rosy projections, but at the same time unions did push for these benefits. At the end, it is not the analytic ability of one party or the other, it is simply where the power lied. Power lied heavily with unions and to rise up the ranks of management, you needed support of the unions, and hence you acceded to those demands.

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