Proposal 2 offers a public sector history lesson

Firefighters by Patricia Marks /

Article Highlights

  • Detroit can't afford to go back to the days when unions called the shots and a shrinking base of taxpayers picked up the tab

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  • Detroit narrowly avoided bankruptcy earlier this year, and public unions now feel a wall rather than a wind at their backs @mark_j_perry

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  • Union bosses are trying to overturn provisions that let Michigan renegotiate labor contracts for cities facing bankruptcy

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Michigan's labor unions are counting on your memory failing, come Nov. 6. They want voters to forget the state's grim history with public sector unions and vote in favor of Proposal 2, a ballot initiative that would create a constitutional right for these unions to bargain collectively. As such, a brief history lesson is in order.

After a decade of bad economic headlines, Michigan has recently had much better news to report. In July of this year, Comerica Bank's Michigan Economic Activity Index hit its highest level since 2002. And as a result of a rebound in auto sales and increased hiring incentives from a two-tier wage system, employment in the state's auto industry has increased almost 40 percent since the recession ended. Given this optimistic outlook, past confrontations with organized labor — in the auto industry and elsewhere — seem more like a footnote in a broader story of a state on the move again. But the state's largest city still bears the scars of past labor battles. 

Detroit's union troubles stem from two state laws, the first of which abolished penalties for public employees who went on strike. Though public sector strikes were so rare prior to the law that no one kept track of them, 11 occurred in the year after the law's passage in 1965. According to the Michigan-based Citizen's Research Council, public sector employees had gone on strike 820 times by 1988 — an average of more than 34 strikes per year throughout the state.

It was in Detroit that these strikes were felt most acutely. The city's municipal employees went on strike four times between 1971 and 1986, culminating in a three-week strike in the summer of 1986 that idled 12,000 employees, allowed 76,000 tons of uncollected garbage to pile up on city streets, and stranded 200,000 daily bus riders. The price tag for Detroit taxpayers to settle the strike was an 8 percent raise over three years for the city's municipal workers, plus annual bonuses.

But the most militant union members in Detroit weren't the garbage collectors, but the public school teachers. After receiving an 8.5 percent pay raise following a 44-day strike in 1973 that defied a judge's order, Detroit teachers again walked out for 17 days in 1979 to secure a 25 percent wage hike. Subsequent strikes followed in 1982 and 1987, but the icing on the cake was a bitter four-week strike in 1992 that forced as much as $20 million in offsetting cuts from the school district's budget.

Unfortunately, offsetting budget cuts and layoffs were part of life in Detroit, as a consequence of another state law — passed four years after the state put its seal of approval on public sector strikes — that established binding arbitration for public safety employees (e.g. police and firefighters).

In the 10 years following passage of that law, public safety employees in Detroit negotiated wage increases that were 40 percent greater than pay increases for other city employees. The unions eagerly referred salary and benefit disputes to arbitrators, who — then-Mayor Coleman Young's words — "seem to believe there is no limit to how much of our money they should spend." Not all public employees benefitted from unions' bargaining excesses; when the city couldn't afford a $50 million arbitration award to its police officers in 1980, Young was forced to issue them nearly 700 layoff notices.

Today, Detroit Mayor Dave Bing is fighting a similar battle, trying to square the city's financial commitments with its revenue stream. The city narrowly avoided bankruptcy earlier this year, and public unions now feel a wall rather than a wind at their backs. The city's police department complains that its officers are paid the lowest among all big cities; sewage workers recently struck over a plan to outsource their jobs to private companies. And union bosses are pushing Proposal 2 and another referendum to overturn "emergency manager" provisions that allow the state to renegotiate burdensome union contracts for cities facing bankruptcy.

Yet avoiding bankruptcy is exactly the point: A city on the brink can't afford to go back to the bad old days when unions called all the shots and a shrinking base of taxpayers picked up the tab.

At a time when the Michigan economy is finally moving forward again, the last thing the state needs is new legislation that would bolster its unions at the expense of its cities and its citizens.

Mark J. Perry is a professor of economics at the University of Michigan-Flint and a scholar at The American Enterprise Institute.

Michael Saltsman is a research fellow at the Employment Policies Institute.


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Mark J.
  • Mark J. Perry is concurrently a scholar at AEI and a professor of economics and finance at the University of Michigan's Flint campus. He is best known as the creator and editor of the popular economics blog Carpe Diem. At AEI, Perry writes about economic and financial issues for and the AEIdeas blog.

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