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Mitt Romney thinks we can afford to cut jobs for teachers, firefighters, and police officers—so let’s help him see why our communities and our economy can’t afford that.
Share a story about how a teacher, firefighter, or police officer has made a difference in your life.
My wife and I have college degrees. Our fathers, now in their sixties, have advanced degrees. We’re all working year-round in for-profit endeavors to maintain a secure middle-class lifestyle, and to build savings to support us in a future in which we may not be able to work to provide for our needs.
Teachers in our public school district get annual salary and benefits totaling well into six figures for working 35-hour weeks 8 months a year. They “retire” as early as age 55 and collect government-guaranteed pension and health benefits for the rest of their life. Our local police officers can retire in their forties with full pensions and benefits.
Watching these “public servants” gorging at the public trough has made me hate government and the union cartels that exploit it. As you might say: Our communities and our economy can’t afford teachers and police on these terms.
On the plus side: My community is served by volunteer fire companies. Just goes to show that you don’t need government to do everything — even to provide public services.
The Reality of Public Sector Unions March 1, 2011Posted by federalist in Government, Unions.
Collective bargaining in the public sector is less a negotiation than a conspiracy to steal money from taxpayers.
The public sector is not a free market, it is a government-imposed monopoly. The final “customer” has no choice or alternative. There is no outside competition, and we all must buy the product.
There cannot be a legitimate collective bargaining negotiation without the discipline of a free customer able to say no. If we must have public-sector monopolies, we should require that they provide maximum value to the taxpayer at minimum cost. They may always join us in the private sector if they wish to freely negotiate a better alternative.
Indeed, private unions can drive their business into bankruptcy. (Or at least they could before the federal government got into the business of bailing out private companies.) Public unions, no matter how greedy, only drive their employers to raise taxes.
QOTD: Public Unions December 13, 2010Posted by federalist in Government, Pensions, Unions.
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The moral case for unions—protecting working families from exploitation—does not apply to public employment. Government employees today are among the most protected, well-paid employees in the country. Ironically, public-sector unions have become the exploiters, and working families once again need someone to stand up for them.
Twelve states including North Carolina and Virginia don’t allow government workers collective bargaining rights, and another 12 allow it only for some unions. These states by and large have managed to hold down their pension liabilities better than have those where public employee unions essentially run the government—see Illinois, New Jersey and California.
Another Pension Problem: Portability September 7, 2010Posted by federalist in Education, Pensions, Unions.
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Pensions can create enormous employment frictions when they are structured as unvested deferred compensation. This friction is often a bad thing, which is why the private employment sector generally sticks to 401k pensions, which are both fully portable and mostly vested throughout an individual’s employment.
The public sector, on the other hand, has preserved the worst characteristics of old-school pensions. Perhaps the best example comes from the persistently parochial public teacher unions, which bizarrely insist on defined-benefit pensions that do not vest at all for 20-30 years and do not port to any other employers. Bill McGurn expands on this today:
Because their pensions are not portable, teachers lose big if they move to another school system, switch careers, or try to cash out. [A recent report, Better Benefits: Reforming Teacher Pensions for a Changing Work Force,] cites a 2008 survey in which nearly four out of five teachers agreed with the statement that “too many veteran teachers who are burned out stay because they do not want to walk away from the benefits and service time they have accrued.”
QOTD: Teacher Unions Against Teachers July 10, 2010Posted by federalist in Education, Unions.
Oddly, [one] obstacle is finding districts that will take the teachers. Why wouldn’t any superintendent trip over himself to hire young people with these qualifications?
The answer lies in the opposition to TFA by teachers unions and education schools. If TFA corps members can do a better job in two years than many longtime veterans, what do public-school systems need with job protections like tenure? And if they can do it without education school courses, why do we need those institutions?
Are Government and Union Employees Overpaid? May 12, 2010Posted by federalist in Government Spending, Human Markets, Special Interests, Uncategorized, Unions.
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In a free market the concept of an “overpaid employee” is not a serious concern: If employment contracts are voluntary, and employers pay wages from their own resources, then it is hard to argue that any employee is overpaid, since evidently his employer believes he is worth his cost.
Union and government employees break this link. Unionized government employees seem to be a double-whammy! Updating a trend that has been increasingly evident, Gary Shilling explains:
Years ago, there was an informal “social contract”—public employees generally received lower wages than private-sector workers, and in return they got earlier retirement and generous pensions, allowing them to catch up. That arrangement has long since gone by the boards. The result is a remarkable trend. State and local government employees for years have received pay increases in excess of inflation, and BLS figures show they now have wages that are 34% higher on average than in the private sector.
Of course, unions vociferously deny any such assessments. But I don’t think we need to get into comparative statistical arguments to prove that union employees are overpaid. The labor market itself gives us two simple tests:
- Do union employees voluntarily quit their jobs at rates significantly lower than similar non-union employees?
- Are there significantly more qualified applicants for new union jobs than for similar private-sector jobs?
If the answer to either or these questions is yes (and it does appear to be so), then the market has spoken: Union employees are relatively overcompensated. Their excess rents come at the expense of employers, customers, and labor market competitors.
The Cartel April 26, 2010Posted by federalist in Education, Uncategorized, Unions.
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I simply couldn’t believe how in modern America someone would, by the age of 25, be guaranteed a job for life unless they killed someone.
Put Unions in the Chain of Liability March 12, 2010Posted by federalist in Judiciary, Open Questions, Unions.
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Unions negotiate the conditions of employment and work performance for their members, typically in an adversarial relationship with an employer. If unions truly represent their members, then why don’t they accrue any liability for their members’ work behavior?
After all, if an employee causes some injury or damage in the course of employment, tort law generally puts the employer right near the head of the chain of liability. But when a union has negotiated the circumstances and rules of employment and work, why aren’t they more liable than the employer? (Assuming, of course, that the employer is in compliance with the labor contract.)
I raised the question in response to a strange and unfortunate case mentioned in the Independent blog.
But I am truly confused: For union shops in general why isn’t the chain of accountability — and hence, liability — Employee -> Union -> Managers -> Corporation -> Shareholders?
Government Workers Increasingly Overpaid March 10, 2010Posted by federalist in Government, Unions.
It used to be that government workers earned lower salaries that were offset by more generous non-salary compensation, job security, working conditions, and other benefits. Now they have actually pulled ahead in nominal salary terms, while still enjoying non-salary compensation (like healthcare and pensions) that is on average quadruple that of comparable private sector workers!
Not that this should surprise us, given the extraordinary power public employee unions and bureaucrats have accrued….
Intrinsic Inefficiencies in Executive Pay October 25, 2009Posted by federalist in Human Markets, Markets, Unions.
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Can every CEO be above average? Obviously not, but when a shareholder’s board is responsible for hiring and compensating an employee there is a structural defect, perhaps best summarized by Jonathan Macey:
No self-respecting board of directors is willing to admit that their company’s CEO is below average. So anytime the new disclosures indicate that an executive’s pay is below average in any way, a pay increase is ordered.
The board is responsible for representing shareholders’ interests. They would be abdicating their duties if they retained a substandard executive, so unless they’re either resigning their seat or firing a CEO they practically have no choice but to assert that he is above average, and to pay him accordingly. This leads to an “arms race” of sorts with respect to executive compensation, and the race can become completely detached from efficient labor markets.
If labor markets were efficient then executive pay would be set based on the supply of competent executive candidates and the demand for their labor. Demand would be limited by the marginal value that a “good” versus “not-as-good” executive could create in a business.
However, the dynamics of a representative board can overwhelm this microeconomic model. As Rick Bookstaber suggested in a recent post: the board may not be able to quantify or predict the marginal value of an executive. But that’s their job, so whether they have actually quantified the value of an executive — whether it is even theoretically possible — they behave (perhaps subconsciously) as if they are doing their job, which means they have retained exceptional executive talent. And the only way to confirm that — to themselves, to the executive, and to their shareholders — is to give their executives above-average compensation! So every board has to look at what every other board has chosen to pay comparable executives, and then they have to raise it. The only escape valve for this cycle is for compensations to get so clearly out of line with fundamental supply and demand of executive labor that a majority of shareholders not only see the disconnect but also become sufficiently energized to shake up the board. And as we know the threshold for large-scale shareholder activism is a high one indeed!
Note that this dynamic is not unique to executives or public companies. Governmental boards — e.g., school boards — often fall into the same compensation arms races with neighboring districts. Unions also exploit the arms race dynamic to inflate their wages by negotiating contracts, not on the basis of supply and demand for their labor, but on the basis of keeping up with some reference group (ideally one also engaged in the same arms race).
Unions only serve the unskilled and incompetent October 24, 2009Posted by federalist in Unions.
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Why would a worker in an open and mobile labor market support a labor union? In response to union agitation at the University of Wisconson Dana Hermanson comments:
I fail to see why any competent professor would want to be part of a union. Competent professors have the research and teaching accomplishments to make them[selves] marketable and mobile, and thus protected from bad administrators or misguided universities. With the protection of mobility already in place, why would competent professors want or need a union…?
Indeed, in practice unions reward seniority (at best), patronage, and corruption (at worst). A competent worker would be foolish to voluntarily bargain with incompetent workers, since his compensation would be dragged down when pooled with their lack of diligence, and they would unfairly benefit from his skill.
And what do we get when we share the production of diligent workers with lazy and unskilled ones? (Hint: More of the latter, and less of the former.)
Teacher Unions Imitate Anthem World Council June 18, 2009Posted by federalist in Education, Unions.
Teachers unions, of course, are appalled. They know that “the new computer-based approaches to learning simply require far fewer teachers per student — perhaps half as many, and possibly fewer than that,” Messrs. Moe and Chubb write. … Technology also disperses teachers geographically (making them elusive for union organizers); lets in private-sector players who aren’t members of the guild; and enables outsourcing to foreign countries. For unions, technology is poison.
Public Pension Scam Update March 4, 2009Posted by federalist in Pensions, Unions.
I’ve previously explained how unions and politicians conspire to surreptitiously rob taxpayers using the obfuscation of pension costs. Indeed, as one blogger said, “Government employees live in a different world,” something that becomes more evident during an economic downtorun. Richard Epstein rehearses the intricate details of this ongoing scam:
So what happens in bad times? First, no public employee loses either a job or a dollar in pension benefits. Ordinary citizens lose two ways: jobs are cut–unemployment in California just hit 10%–and taxes are raised. What makes this pill all the more bitter is that unions happily wave the libertarian banner of freedom of contract to lock in the status quo. Public unions point to court cases that require the state to honor its employment contracts just like other agreements. Translation: The downturn is everyone else’s problem.
This seductive plea of contractual probity ignores the dubious mechanisms that put these obligations into place. State collective bargaining agreements give unions monopoly power; state legislative maneuvers, often backed by pro-union legislators, sweeten the deals already made. These pension deals are never negotiated at arm’s length in competitive markets between parties who are free to go elsewhere. Instead, a monopoly union extracts its compensation packages from government officials, many of whom depend on union support to hold public office. These contracts are the kind of self-dealing arrangements that would never be tolerated between a corporation and its key officials. And the subsequent sweeteners simply take property from the majority of citizens who can neither block the transaction nor withhold their tax dollars.
Unfortunately, there is today no mechanism in place that allows frustrated citizens to challenge the validity of these agreements either before or after they are put into effect.
Put the Free Market in Government Employment December 26, 2008Posted by federalist in Unions.
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Public employees, unionized or not, have a miraculous tendency to accrue above-market wages and benefits. Well, perhaps not so surprising, as Everett Chamberlain points out in a recent WSJ letter:
Think about it. Where is the competition in the public sector? Uncompetitive wage and benefit packages for public-sector employees are simply funded through the increase in taxation on the public at large. Uncompetitive wage and benefit packages in the private sector cause companies to close their doors or move offshore. In business, when your costs no longer allow you to sell your product at the market price, you are finished.
“Ho hum,” you may say, “You’re surprised to discover yet another dimension in which government is less efficient than private markets?” Well here is a proposal that could put a prompt and proper end to this problem:
Government should implement the following rule without exception: Any non-elected public job should be open to continuous bids. This means that if a qualified individual comes along and offers to sign a contract to do a public job for a lower cost than the existing employee, then the incumbent must either agree to work under the conditions of the cheaper contract or else relinquish the job to the cheaper contractor!
There is no justification in a non-socialist society for government employees to enjoy tenure or excess rents on their job. In a recession like this it becomes even easier to see that public employees are being granted job security and compensation starkly in excess of what can be found in the private sector.
Deficits: The Best Restraint on Government December 16, 2008Posted by federalist in Government Spending, Unions.
Is your government running a deficit? Perhaps you should be grateful. After all, representative government only knows two regimes: Deficit, and surplus. And in only one of those regimes is the taxpayer’s interest a serious consideration.
When government has a surplus of revenue it cannot say no to more spending. When money is sitting on the ledger:
- Government employees know it. Anyone who has worked with government knows that the first rule of budgeting is to spend all your money. Bureaucrats don’t make a lot of friends by returning unneeded funds to the treasury. Government employees are the first to see a surplus coming and so they are also the first to try to expand their obligations and cook their books to soak it up in advance.
- Unions know it. It is practically impossible to turn down a raise to public employees during a surplus: No administrator will piss off a union unless taxpayers are threatening his livelihood. And since the surplus has already been taken from the taxpayers, the cost to the administrator of giving it away is nothing.
- Lobbyists know it. They inundate politicians with lists of things to which they can’t possibly say no. Again, taxpayers already handed over the money, so politicians can now placate special interests for free.
Only facing a deficit can politicians even begin to question government spending. Only then do they have to choose between raising the burden on their constituents and the cost of buying peace with the pigs feeding at the public trough.
For taxpayers government surpluses are like rainbows: Only occasionally seen, and never able to be grasped. Perhaps this is ultimately the fault of the taxpayers, who tolerate constant tax rates and only seem to notice their burden when it is increased.
QOTD: Ban Union Monopolies August 15, 2008Posted by federalist in Unions.
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The “Employee Free Choice Act” is a legislative proposal that would allow unions to monopolize a workforce through intimidation or coercion of workers, since it would remove the final refuge of an anonymous ballot. George Leef in today’s WSJ explains that even without the EFCA,
Current [labor relations] law is an authoritarian assault on the liberty of workers who do not want union representation at all.
The National Labor Relations Act makes a certified union the exclusive representative of all the workers. Those who think that the union costs too much, fails to represent their workplace interests, or engages in political activities they don’t support must nevertheless accept its dominion over them. The Right to Work laws of 23 states permit disaffected workers to stop paying dues without being fired, but that is only a second-best remedy.
There is no reason why labor unions must be given monopoly status. Both Democrats and Republicans ought to support reform of the law so that individuals are free to join or quit unions, just as they are free to join or quit churches, clubs, or any other organization.
If unions are beneficial, they will survive without coercing workers who prefer independence.
Neither will allow benefits to reach their supposed constituents unless they exercise complete control over the resources. Both realize that their power is secured only through a stranglehold on the livelihood of their subjects.
Even though many foreign nations and agencies stand ready to bring disaster aid to Myanmar following a devastating cyclone, the military junta that controls the country has refused all aid that is not explicitly channeled through its agents.
Some Asean diplomats say Myanmar’s demand is designed to prevent the country’s citizens from associating increased inflows of aid with help from the U.S. and other Western countries critical of Myanmar’s government.
The Washington Education Assocation, the state teachers union, refused to allow Washington schools to accept a $13.2MM grant from the non-profit National Math and Science Initiative (NMSI). Turn down free money for teachers and students? Yes: Part of the NMSI’s grant involves direct merit bonuses to exceptional teachers. The union demands that it have exclusive control over compensation of teachers. If higher-performing teachers were rewarded for performance why would they support a union based on seniority and patronage? More importantly, why do the citizens of Washington allow a union junta to control the public education system?
Dead-Weight Government February 24, 2008Posted by federalist in Economic Policy, Government, Pensions, Retirement, Taxation, Unions.
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When you drive from Delaware into New Jersey, you don’t really see any differences. If you move from New Jersey to Delaware you don’t experience a significant decline in government services. But New Jersey has among the highest tax burdens in the nation, while next-door Delware has among the lowest.
If higher taxes aren’t buying better government services, then what do high-tax governments like New Jersey do with all of their extra tax revenue? Apparently the answer is that they buy votes. More specifically, public union votes:
Public workers and teachers can retire at age 55 after 25 years with a pension of 60% of salary — indexed to inflation. Police and firefighters can retire at 65% of salary at any age after 25 years of service and 70% after 30 years.
Not that we should be surprised at American democracies degenerating into this sort of patronage government. But isn’t it depressing to think of all those public resources going to bankroll lives of leisure for union members instead of something virtuous?
Are Teacher Unions Our Most Destructive Lawful Organizations? January 31, 2008Posted by federalist in Education, Government Regulation, Unions.
Labor unions are often justified as analogs to corporations. Whereas corporations concentrate capital to produce profit for shareholders, unions concentrate labor to produce benefits for their members. But profit and labor benefits are not necessarily analogous. Under the constraints of our current regulatory regime profit is an absolute good. Are unions, as currently allowed, net producers of anything good?
For-profit corporations selfishly seek to maximize the profits of their shareholders. But our government does not allow them to profit through anticompetitive or destructive practices. Under these conditions shareholders benefit from profits, but every market participant also potentially benefits because the very fact that a corporation is earning a profit indicates that it is providing useful goods and services at competitive prices. Profit-seeking in this regime is thus absolutely constructive behavior.
Unions likewise exist to selfishly maximize the benefits of their “shareholders” (members). But is that a net social good? In a theoretical framework selfish actors may all be equally virtuous. However the reality of our regulatory regime for organized labor has turned unions into nothing more than rent-seeking organizations. I.e., unions exist only to exploit regulatory advantages at the expense of others. They do not produce anything good for anyone other than their members. This is not unjustifiable per se — after all, corporations explicitly exist only to produce profit for their shareholders. The fact that profit in a free market has positive externalities is ancillary to their purpose. Thus we can’t fault unions for acting selfishly anymore than we can fault individuals or corporations for acting selfishly. The problem is that our government has accorded unions unilateral privileges to capture rents. In contrast to corporations, whose destructive tendencies (e.g., abusive monopolies or cartels) are restrained by regulation, government has turned organized labor law into a license to engage in destructive behavior. As a result destructive behavior is all we get from unions.
We must disabuse ourselves of the notion that legally-advantaged unions have any redeeming characteristics. A union in theory should enjoy the same rights as a corporation. I.e., it should be allowed to act collectively on behalf of its members. However, it should not be allowed to secure and abuse a position of monopoly power.
The unions we face today are always monopolies or cartels. None seems more privileged than public school teacher unions. Consider these characteristics: (more…)