Wednesday, October 13, 2010

Sun Setting on Union Power?

Michelle Rhee is out as Washington D.C. school superintendent. I’ve had real trouble calling the twists and turns of Rhee’s tenure; this one I got right. And no mistaking the reason Rhee’s out—the teachers’ union won its struggle with Rhee and her boss, D.C. Mayor Adrian Fenty, who lost his re-election bid.

But is the D.C. teachers’ union victory Pyrrhic? Are people finally waking up to public sector union power? Charles Krauthammer, speaking on "Fox News," thinks so. He said of Rhee's forced resignation:
the major issue that is coming up in the next year or two, the next decade is going to be the power, the reach, the benefits that the public sector unions have, including the teachers union. And when people learn about that, I think it’s going to be a major issue of our time. And its coming and [Michelle Rhee's forced departure] is one example of it, the power it has and how it hurts the country.

David Brooks in the New York Times writes about “demosclerosis,” governments draining money from productive uses such as building tunnels and supporting education to fund unproductive ones instead, such as New Jersey’s benefits packages for state employees 41% more expensive than those of the average Fortune 500 company, with costs rising by 16% a year, New York City’s supporting 10,000 former cops who have retired before age 50, and California’s state cops receiving 90% of their salaries when they retire at 50. States face unfunded pension obligations that, if counted accurately, amount to $2 trillion — or $87,000 per plan participant.

Brooks says governments can’t promote prosperity or help schools adequately because of union self-indulgence. While private sector managers have to compete in the marketplace, Brooks writes, government managers possess a monopoly on their services and have little incentive to resist union demands that make them unpopular. Elected leaders raise state employee salaries in fat years and jack up future pension benefits in the lean ones. And public sector unions even buy their benefits directly: between 1989 ad 2004, the American Federation of State, County and Municipal Employees, the biggest spender in American politics, gave $40 million to federal candidates.

Brooks calls the end result “sclerotic government.” It's the Democratic Party’s “epic failure.” The Democratic Party “has become captured by the unions. Liberal activism has become paralyzed by its own special interests.” Therefore, we no longer have government “that is nimble, tough-minded and effective.”

Still, it’s possible this all might change. The Washington Post’s Steven Pearlstein describes a remarkable contract worked out between government-owned General Motors and its close ally, the United Auto Workers, that has saved 1,550 jobs in GM’s Orion plant that would have otherwise gone to South Korea to build the new GM sub-compact. The UAW has agreed to a two-tiered contract with its 60% most senior employees receiving $28 an hour, but the bottom 40% earning only $14 an hour. That enables GM to build the car in the U.S., employing American workers, producing a product that can be priced competitively. The alternative: lose your job.

And that’s exactly what’s happening at an Indianapolis GM stamping plant. It’s slated for closure next year after workers rejected a similar two-tier pay settlement, out of fear the idea would spread throughout the industry (which will in fact happen). So the Indianapolis workers lose their jobs! As Pearlstein says, “a better alternative to layoffs is to cut everyone's hours and pay and spread the pain more widely.” Instead of high unemployment, we need “creative new wage structures that will allow us to better spread the burden of getting the economy back into balance.”

Business leads the way. Government needs to follow. Employees should work for less pay and smaller benefits, giving government the resources it needs to do the work that matters most.

It’s way past high noon for union power in America. With union givebacks, we can help business and government work better while at the same time saving jobs.

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