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Politicians’ Incentives to Give in to Government Union Demands

Written by Ivan Osorio

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In his column today, George Will identifies a key problem in addressing overly generous government employee compensation: incentives.

While he rightly places the blame for many jurisdictions’ dire fiscal conditions on the politicians who routinely give in to outlandish union demands, he doesn’t mention the incentives the politicians themselves face. Until those are addressed, public officials who seek to bring their jurisdictions’ finances under control will continue to face an uphill struggle.

The CTU [Chicago Teachers Union] wants a pay raise — 30 percent — proportional to [Chicago Mayor Rahm] Emanuel’s 90-minute increase in the school day and 10-day increase in the school year. He has canceled a 4 percent raise and offers only 2 percent. He says benefits the CTU has won — e.g., many teachers pay nothing toward generous pensions they can collect at age 60 — could in just three years force property taxes up 150 percent and require classes with 55 students.

Even discounting Emanuelean hyperbole, whose fault is this? Just as foggy rhetoric about corporations’ “social responsibilities” obscures the fact that a corporation’s responsibility is to maximize shareholder value, blaming unions for improvident contracts ignores the fact that a union’s principal task is to enhance members’ well-being — wages, benefits, working conditions. Unions can wound themselves by injuring their industries (e.g., steel and autos), but primary blame for improvident contracts with public employees belongs to the elected public officials who grant them.

Will is correct, but he only paints a partial picture. Many politicians eagerly give in to union demands because it is in their self-interest to do so. Political contributions give government employee unions outsize clout in negotiations. They are, after all, helping to elect their own bosses. Contributions extend beyond money. Union activists do a lot of campaign legwork for union-friendly politicians, including knocking on doors, distributing yard signs, and running get-out-the-vote efforts.

After elections, collective bargaining allows unions to negotiate with the very bosses they helped elect, enabling them to gain further perks to fill union coffers, including structural ones that help entrench and bolster union power. Among those perks are agency shops and automatic dues checkoff. In an agency shop, all employees in a bargaining unit are required to pay for union representation — under the justification of avoiding “free riders” who supposedly benefit from said representation — regardless of whether they want it or not. Dues checkoff allows unions to deduct dues (or “agency fees” paid in lieu of dues by non-members) directly from workers’ paychecks.

The rents (politically obtained benefits that are above what could be obtained in an open market) which unions extract from taxpayers can be borne for a while during good economic times, as economic growth leads to enhanced tax revenues. In addition, unions benefits are concentrated, while the costs are spread out thinly among the general population. That gives unions much greater incentive to lobby for benefits than to individual taxpayers to oppose them. In some instances union-friendly politicians will even increase union benefits during flush times– as happened in California in the 1990s – without giving a thought to the notion that the tax gravy train might stop. Indeed, it came screeching to a halt in 2008 at the onset of the financial crisis.

As a result, in many states the deck is stacked in favor of government employee unions and against taxpayers. Government employee unions depend on government for their very existence to an extent no other interest group does. That has led them to become a permanent lobby for bigger government — funded by the very government it seeks to expand. Therefore, elected officials who are serious about putting their states’ financial houses in order need to enact structural reforms to reverse the privileges that have given government unions so much political power. Such reforms include:

Wisconsin Governor Scott Walker took on this challenge boldly, and the voters of his state have rewarded him for it.

That experience shows that when it comes to taking on government union power, good policy can indeed be good politics.

For more on public sector unions, see here and here.

Ivan_Osorio

SOURCE: CEI

Ivan G. Osorio is editorial director at the Competitive Enterprise Institute. His writings focus on labor issues and the new economy.

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