It's Time to End Rigged System

The governors in Wisconsin and other states trying to reform the system within which public-sector employees negotiate their salaries and benefits are doing the nation a great favor.

At some point the country's political class was going to have face fiscal realities. The governors are the first to do so and for that they deserve deep and abiding support.

Public employee unions are unlike private sector unions. In the private sector some of the interests of employees and employers aren't aligned. Employers want to keep costs low; but employees want to maximize their pay and benefits, thus raising costs to employers. In order to strengthen their hand, employees unite to collectively bargain over wages and benefits.

Now consider the case of public sector unions. Public sector employees want to maximize their wages and benefits, too. But unlike their private sector counterparts, they have a very big role to play in choosing the employers on the other side of the negotiating table. They do this by taking funds earned through collective bargaining and sending them right back to the people they bargain with in the form of political contributions.

It sends an important message that no one is above the required sacrifices and changes.

If that sounds like a rigged system; well, that's because it is.

Opposing collective bargaining rights for public employees does not make one anti-union. After all, many of the great champions of the American labor movement-including George Meany, the first president of the AFL-CIO-sensibly opposed public sector unions. Franklin Roosevelt, another friend of labor, put it well: "The process of collective bargaining, as usually understood, cannot be transplanted into the public service." But for the past half century it has been transplanted into the public service, and while the results have been great for public employees, they've been a disaster for taxpayers.

Andrew Biggs, my colleague at the American Enterprise Institute, and Jason Richwine of the Heritage Foundation have been researching the total compensation for public employees at the federal and state levels for the last two years. Their results should raise an eyebrow or two.

In California, for example, they found public employees "are compensated up to 30 percent more generously than are similar employees in large private firms." In other words, taxpayers are overpaying relative to the market price for the services they are receiving.

"And the California experience," they say, "is similar to that of other large states with powerful public unions."

You can't blame teachers, cops, firefighters and other public employees for wanting the best deal they can get. They're no different than you and I. To a certain extent, it's impressive they've gamed the system to their advantage as well and as long as they have.

But as the economist Herb Stein once said, "If something cannot go on forever, it will stop." Recognizing the status quo in public employee compensation is untenable, governors are putting a stop to it.

Teachers, cops and firefighters remain popular with the public, and rightfully so. But the American people elected reform-minded governors in part because they knew that while the public employees themselves were wonderful, the system they were operating within had become rotten.

Of course, reforming public employee compensation will only get states so far. Other spending cuts and reforms will be needed as well.

That's all the more reason to reinvent the system of compensation for the politically well-connected unions. It sends an important message that no one is above the required sacrifices and changes.

Public employees do essential work for their communities and the country. They deserve to be compensated fairly and justly. But they do not deserve rights and privileges that the vast majority of Americans don't enjoy.

Nick Schulz is Editor-in-Chief of American.com and the DeWitt Wallace Fellow at AEI.

Photo Credit: Justin Ormont Wikipedia Commons

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About the Author

 

Nick
Schulz

  • Nick Schulz was the DeWitt Wallace Fellow at AEI and editor-in-chief of American.com, AEI's online magazine focusing on business, economics, and public affairs. He writes the “Economics 2.0” column for Forbes.com where he analyzes technology, innovation, entrepreneurship, and economic growth. He is the co-author with Arnold Kling of From Poverty to Prosperity: Intangible Assets, Hidden Liabilities, and the Lasting Triumph Over Scarcity. He has been published widely in newspapers and magazines around the country, including The Washington Post, The Wall Street Journal, the Los Angeles Times, USA Today, and Slate.


  • Phone: 202-862-5911
    Email: nick.schulz@aei.org

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