Unions: Private Sector and Public Sector

This entry was a letter to the editor in July 2011, before public awareness of the problem of unfunded pensions in many US cities.

All workers employed by private corporations and by state, local, and federal governments should have the right to form unions and to bargain collectively with their employers. The question is whether both groups of workers should have collective bargaining rights on the same matters, such as wages, benefits, and work rules. Should there be a difference and why?

At present, there 7.4 million private sector unionized workers. They typically work for corporations that are owned by a small number of persons or a large number of stockholders. These corporations must make a profit for their owners or stockholders, and they do this by providing a product or service that appeals to customers, who may be other corporations or individual consumers. One of the things that corporations do to be competitive and profitable is to keep their labor costs as low as possible; this may be done with labor-replacing technology, by getting workers to be more productive, or by getting them to work for lower wages and benefits. One source of profits for corporations comes from the labor power of workers that is embodied in their product or service, and which has greater value when the product or service is delivered than the wages paid to create the product or service. The greater value can be viewed as the basis of exploitation of workers, because it motivates owners  to maximize their profits  by paying the least amount of wages and benefits. Profit maximization is also the source of the fundamental dispute between workers and owners.

In the case of workers and private corporations it is therefore essential that workers form unions to serve as a form of countervailing power in their relations with employers. It is also essential that workers have the right to bargain collectively concerning their wages, benefits, and job security. Also important for collective bargaining--but not as essential as wages benefits and security--are work rules governing such things as job assignments, work breaks, and safety conditions. In collective bargaining agreements workers often "give up" control over work rules in order to get more favorable wages and benefits, or they may do the reverse.

Workers in the public sector are employed in jobs that deliver "public goods" such as public education, police and fire protection, and infrastructure maintenance. Public sector organizations are not "owned" and therefore have no need to deliver a profit to owners or stockholders. Managers of public sector organizations must demonstrate cost-effective delivery of services, which may be determined by citizen satisfaction and student achievements.

In the case of public sector organizations it is essential that workers have union representation to collectively bargain over work rules and job security. But the right to collectively bargain wages and benefits is a problem for two reasons. First, public sector workers cannot point to the "profits" earned by their organizations and therefore their right to a greater share of those profits in the form of increased wages and benefits. There are no owners or stockholders who are "greedy" because they want to keep a larger share of profits. Second, the ultimate source of money for wages and benefits is taxpayers who have little opportunity to influence how wages and benefits are established. This is often done by elected officials at the local, state, or federal level, and unlike owners or stockholders,
they do not bear the cost of the wages or benefits that are approved. Public officials create an  "exchange" with public sector unions, and they provide the pensions in the hope of receiving votes or campaign contributions. This cannot be considered exploitation because both parties benefit.  But it can be considered exploitation of the third-party taxpayer whose voice is not heard but who bears the cost of the exchange. This exchange may be unethical but it is not illegal. Union advocates also point out that it is possible that the politician-union exchange may benefit third party taxpayers in the form of better wages and benefits for most workers, but that is difficult to demonstrate.

When elected officials provide better wages and benefits for public sector union workers than are enjoyed by private sector unions or non-union workers, they create division, mistrust, and anger among working Americans that is directed at other workers rather than at the elected officials responsible for the inequities. The disparities in the wages and benefits of union and non-union workers and the disparities in the wages and benefits of private sector unions and public sector unions must be addressed and remedied.

What can be done? We must begin by focusing on pensions. First, we propose that each state, or cluster of states, create a commission to develop proposals to establish pension equity between public and private sector union workers in their state or region. The goal would be to have all workers in a state under the same pension plan, meaning that they would contribute the same percentage of their earnings to their pension plan. The commission would present their proposal for discussion in  a variety of public venues around the state seeking citizen involvement and response. The commission would also report to the public the pension plan currently enjoyed by elected state and local officials; this would provide the public with a basis for comparison of plans for workers and officials. Building upon what is learned form citizen involvement, the commission would develop a revised proposal which would be submitted to voters in the form of a referendum. Second, we propose the formation of a national commission to examine the pensions enjoyed by all federal employees, elected or appointed, with he goal of establishing an equitable pension plan across all local, state, and federal employees. The focus should be on the percentage of income that is contributed by all employees/officials, the expected benefit to be received, and the start time and duration of the expected pension benefit.

After establishing guidelines for pension benefits for public and private sector workers, appointed government employees, and elected government officials, it will be possible to speak of pension plans as being fair. Perhaps this public effort at transparency and fairness in the rules of the game regarding pensions will spread by giving Congress and the administration in Washington the courage to raise taxes and means-test benefits for all those earning more than $100,000 a year. And who knows what might be next: a wealth tax, a new tax on companies that shift jobs abroad, and a tax on corporate earnings from overseas operations. This could be the beginning of an effort to reduce the levels of income and wealth inequality created over the last 40 years and recreating hope for all Americans.