Thursday, February 17, 2011

Days of Rage? Why?

On Monday, I decided to write a column on Governor Walkers's proposal to restrict the collective bargaining rights of public employees. My point was to highlight the historic critique of pubic employee unionization and the insights into collective bargaining in the public sector provided by public choice theory.

The column ran in Tuesday's Milwaukee Journal Sentinel. I'll be discussing it tomorrow on Joy Cardin's show on Wisconsin Public Radio (in either the 7:00 or 7:30 segment). The basic point is that the traditional rationale for unions doesn't work well in the public sector.

Unions are supposed to empower workers in unequal bargaining situations. In economic terms, they are intended to move the supply curve for labor so that the equilibrium wage is higher than it otherwise would be.

But in the public sector, unions tend to, if not capture the employer, exert significant influence on it. This is because the interest of, say, a teacher's union on the composition of a school board and district policy - at least with respect to compensation - is far greater than that of the rest of us. Public choice theory suggests that this will result in unions having disproportionate influence on the public bodies that employ them - quite apart from labor negotiations. To put it bluntly, the officials who employ them may well owe their jobs to union support (or fear their ability to keep them without union support).

Given the absence of competititon in the public sector, this moves the demand curve as well. The distinction between management and labor which supposedly creates the unequal bargaining situation that justifies unions becomes blurred. The result is a tendency for public bodies to reward their union constituents in ways that aren't readily apparent to taxpayers. This is why collective bargaining agreements in the public sector tend to be heavy on fringe benefits and emoluments at retirement.

The response to Walker's proposal is making my point. The "uprising" at the Capitol is unlike the Tea Party. It is the yelp of a large special interest. The alarm with which Democrats are greeting the proposal is, in large part, fueled by concern over losing a large base of organizational and financial support. Walker's proposal is radical not because it is "mean" or will impoverish public workers. It will do neither. What it will do is reduce the influence of unions on public bodies and their ability to serve as political sponsors.

That's what these "days of rage" are about. The Walker proposal may be fiscally necessary but it is potentially a political game changer.


Anonymous said...

Political game changer is right. We'll need to get 540,208 signatures starting January 3 of next year. Scott Walker will be the first Wisconsin governor to be recalled from office. Public employee pensions need reform and we need to fix the budget, but the way Walker tried to railroad this through was wrong. And the way Walker exempted those public employees, cops and firefighters, that endorsed him is of a piece with his favor to campaign contributor Bergstrom. It stinks to high heaven. (Neat little example of the insights of public choice theory, though.)

Farewell, Scotty! This is the beginning of the end for you.

Anonymous said...

This is why collective bargaining agreements in the public sector tend to be heavy on fringe benefits and emoluments at retirement.

This is where the argument runs off the tracks (when it leaves theory...big surprise). Heavy on fringe benefits, but how about total compensation? This study says no, in fact, according to it, compensation is comparatively lower than the private sector. You may not like its conclusions, but its analysis surely carries more weight in a practical discussion than public choice theory. And the bigger point is that it's about total compensation, not fringe benefits. Unless public theory also tells us that public sector unions lose the ability to do math to add in the salary/wages their getting after dominating their employer into providing the benefits.

Anonymous said...

Different Anon here. The first Anon's study, like all studies purporting to show that public employees are underpaid, is flawed. No matter how much one tries to calculate total comp, does it include putting a premium on being immune from firing and layoffs? Or on having an "8-hour day" consist of some fairly light tasks and much socializing?

Also, does it just look at "level of education," and equate all bachelors' degrees, and all masters, and all PhDs? Physics and physical education are not the same.

Here's a shortcut: rational actors are able to incorporate all of those things when deciding to take job X or Y. How many public employees voluntarily leave for the private sector each year? (The protected ones in unions, not the political appointees who come and go). How many people jump at the chance to get a "safe" public job when they can?

I suspect that the net flow is 10-1 or better in favor of getting into the government. Why would that be so, if it's such a lesser scenario? Whatever it is that people are valuing, it must not be getting counted in some studies.

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