Back in 1869, the Knights of Labor was founded as America’s first organized labor union. During this time, workers were experiencing a decrease in pay along with a decrease in quality of working conditions. Meanwhile, the industrial revolution was booming making captains of industry, like John D. Rockefeller, very wealthy men. The founding of labor unions was certainly justifiable, and the right thing to do. At the beginning the union members requested reasonable things such as child labor laws, the standard 40 hour work week, and a safe working environment. Upon President John F. Kennedy’s “Executive Order 10988” in 1962, federal workers became eligible to form unions, marking the beginning of a whole new identity of unions.
Compare those modest beginnings with the typical labor unions of today: Public sector unions have been fiercely criticized over the past year. In a study by the Kellogg School of Management, public pensions have an estimated $3 trillion in unfunded liabilities. To make matters worse, in an updated study just released in October of this year, Kellogg found that cities and counties across the nation plop an additional $574 billion onto that already massive debt. How could this have happened? Studies over the past decade (like the recent one in USA Today) have consistently shown that federal public employees, when you include benefits, make more than twice the amount of private sector workers.
An enormous disparity occurs between the pensions offered to the public employees versus the typical pensions received by private sector employees. The public pensions are so out-of-line that they require 2-3 private sector workers to pay for the benefits of one public sector retiree. A further detriment to unions is how their pay scale works: Workers are given raises based upon seniority, not measured results or hard work- such a practice would never happen in a private run business or enterprise. For example, young promising teachers that have not been tenured (aka not fully protected by the teacher’s union) are the first teachers cut during a budget crisis even if their talent far exceeds that of a tenured teacher. In a time when private sector union membership is at low not seen since the 1930’s, memberships in public sector unions continue to increase. In the United States today, a mere 7% of private sector employees are unionized as compared to 37% (and growing) of public sector employees. There is a simple reason why the private industries have been decreasing in union memberships over the past few decades: The free market.
When unions continuously make excessive demands on their employers, it drives up the costs of the company which are then passed on to the consumers. Take, for example, car companies. For decades, GM and Chrysler have been unable to compete with foreign auto makers because the foreign companies can make better quality cars at lower cost due to the fact that they are not on they hook for outrageous employee benefits. In the UAW (United Auto Workers, car union) handbook, there are over 5,000 pages of rules and regulations and if just one is violated, it can shut down the whole assembly line, greatly reducing efficiency and therefore competitiveness by American auto workers. These American car companies were in such rotten financial shape that the federal government literally bailed them out. Most of the time the federal government is not going to bail a company out so typically, those companies that are no longer competitive in the marketplace go under, hence why private companies continue to decline in union membership. On the flip side, think about the government. Here, there is no competition. When public sector unions get together to negotiate for even higher salaries or increased benefits, who to they consult with? Politicians.
Consider a few inconvenient facts: Labor union dues are a huge factor in donations for an election cycle. Of the top 5 contributors to the 2010 elections, unions claimed 3 of those spots. The #1 big spender on the 2010 midterm elections happened to be: The American Federation of State, County, and Municpal Employees (AFSCME) with $87.5 million in donations to Democratic campaigns. All 3 of these powerful labor unions had a mission of electing Democrats to office with a sum total of $171.5 million to spend. The other 2 big donors were groups such as American Crossroads aimed at electing Republicans with a sum total of $140 million to spend. So, when public sector labor unions sit across the table to negotiate contracts with politicians, often times it is with politicians that they helped finance into office. These politicians are eager to help out their friends who helped them win their elections so the two sides can easily come to a mutually beneficial agreement. All the while the group that is actually footing the bill for all expenses incurred by these labor unions is never included in the actual negotiations: the taxpayers. It seems odd and certainly corrupt that the public sector unions, the so-called “public servants,” are organizing to financially screw over, well, the public.
Although the recession has cost a net loss of jobs to state and local government jobs, 198,000 new federal government jobs have been added since January of 2008 due to the stimulus package. Meanwhile, the private sector has lost close to 8 million jobs. Perhaps in securing and boosting employment by the government, the powers in charge are buying off and baiting a loyal constituency? It seem more than plausible because all the evidence certainly leads to an indictment of the corrupt and disfunctional “union” between unions and the Democrat Party.
Many states on the brink of bankruptcy (California, New York, New Jersey, Michigan, etc.) have only remained solvent because of funds from the stimulus package which will soon run out. These states will continue to hold their hands out wide, looking for more money, until they are taught a lesson in financial responsibility. What needs to happen is for the US House of Representatives to make a procedure for states to declare bankruptcy. Yes, bankruptcy. Just like when individuals or businesses over-commit and live far beyond their means, states, too, should have a process by which they can essentially “start over.” When a business declares bankruptcy, it therefore is no longer bound to union contracts and can reorganize as it sees fit. In this case, instead of having a system where a unionized public sector employee can contribute a mere $62,000 over their working lifetime to their pension fund, but then withdraw $1.6 million from the state pension fund (like in New Jersey), states could redefine pensions to be comparable with private sector pensions: What you withdraw later largely depends on what you put in over the course of your working years, with a little help from your employer. This is known as a defined contribution plan used by practically every private firm for their employees. The only segment of society who viciously refuse to switch to this model are the current public sector employees who operate on a defined benefit pension plan that completely rips off taxpayers. As Dick Morris says, “This measure will return our state and local governments to the sovereignty of the people and take them away from the “thugocracy” of public-employee unions…We may, at long last, have a way to liberate our nation from the domination of those who should be our public servants but who often are our union masters.”
Making this kind of procedure a binding law will be the first of many fights that will happen between lawmakers and labor unions. The end goal must be the dismantling of all public sector unions. Public union employees are being paid twice the going rate of labor and the average taxpayer has had enough. If this dismantling does not happen, eventually the United States will begin to look like Europe: Riots in the street about the retirement age in France, an entirely bankrupt nation like Greece, drastic government spending cuts causing protests in all countries from England to Austria. In America, there is still time to save our republic but we must act now. Otherwise the United States, along with Europe, will be destroyed from within because of squandering their wealth and not acting prudently to remedy their dire situation soon enough, much like the Roman Empire.
This is the first segment in a 10 part blog series from www.alyssakaeding.com