How Unions Promote Wage Inequality
Yet two troubling questions linger. The first involves the airport workers’ specific grievances. They complained of making only $8 an hour. Why so low, you wonder, especially compared with what union workers in security-related jobs get. The guards, hired by the contractor Air Serv Corp., were so angry that one of them even expressed a warning that those in safety fields often don’t make explicit: that a labor action could compromise the public’s security. “They will be completely unsafe,” said the guard, Prince Jackson.
The second question is why the nation now confronts the prospect of more labor trouble that could inconvenience the public, or possibly jeopardize safety, whether in Camden, New Jersey, where firemen are warning of the danger of closing engine companies, or in Long Beach, California, where a clerical employees’ strike delayed the movement of goods worth $1 billion a day in a recent work stoppage.
The answer to both questions lies in the failure of an old grand bargain made in the very name of safety.
Back in the early days of the labor movement, the idea of public-sector unions seemed absurd to trade unions and governments alike. Calvin Coolidge, as Massachusetts governor, led in the firing of policemen after riots that took place during a labor walkout. The future president said, “There is no right to strike against the public safety.”
Even Franklin Roosevelt, the father of our most aggressive labor law, the Wagner Act, drew the line at public-sector unions.
“The process of collective bargaining as usually understood cannot be transplanted to public service,” Roosevelt said.
Roosevelt also made explicit why: “A strike of public employees manifests nothing less than an intent on their part to obstruct or prevent the operations of government until their demands are satisfied.” This was, Roosevelt said, “unthinkable and intolerable.”
Other political leaders identified more specifically what was out of balance about a public-sector union and a government employee negotiating at a table. The public-employee representatives were paid by the unions, and thus beholden to them. But the politicians across the table were also beholden to unions, for their campaign contributions or votes. The interests of the average non-union American, the public, were not represented.
Gradually, however, the concept of public-sector unions became accepted. As the political scientist Daniel DiSalvo notes, New York Mayor Robert Wagner Jr., the son of the senator who sponsored the first great labor law, gave city workers their own “little Wagner Act,” which permitted public-sector bargaining.
In 1962, President John F. Kennedy signed an executive order affirming the rights of federal workers to bargain collectively. Workers exercised those rights, as those who lived through the disruptive school strikes in New York or other public-sector strikes recall.
Eventually a bargain was struck, and it, too, involved safety. Public-sector employees would reduce disruption at schools, police stations and fire stations. They wouldn’t leave cities to riot. And the government employers, whether federal, state, city or town, would pay them a premium for that: a little more pay, a little extra overtime, more job security, the kind of safety we think of day to day.
This bargain appeared to work. The strikes abated. Yet the bargain eventually caused the very result the skeptical commentators had predicted years before. Politicians in office and public-sector union officials both had an interest in pushing compensation to the heavens.
Concerns that might have checked the city and state treasurers, such as the fiscal future of their town or state, paled in comparison with the immediate need of handing a packet across that table. Over and over again, public officers deluded themselves into believing that future economic growth and the attendant revenue would pay for dream packages.
The eventual result, as a Bloomberg News series has detailed, was absurdly high packages for public employees. The California state trooper with the $484,000 compensation package is only an extreme example of a national trend. The Port Authority of New York and New Jersey, which manages JFK Airport, has 13 employee unions. Some longtime officials of those unions are paid more than $200,000 a year each, as the Empire Center for New York State Policy has revealed. In the meantime, of course, the economy grew far more slowly than predicted, rendering such payments prohibitive.
One consequence has been to divide workers into two classes. First are the older workers who enjoy the sweetheart deals. The second class consists of the workers hired more recently, whether in unions or outside of them, often through contractors. Cash-poor government offices such as the Port Authority turn to companies such as Air Serv because the Air Servs will pay less, those $8-an-hour wages, and offset some of the egregious labor costs generated by top union jobs.
In short, the real opponent of the underpaid, benefit-poor newbie is not the employer. It is fellow overpaid workers. The taxpayer can “afford” to pay public-sector wages higher than $8 an hour, but not $200,000 a year. What this Christmas story tells us is that the grand bargain demands a rewrite. After all, as the furious security guard’s statement reminds us, the bargain no longer functions -- and we may not be safe.
(Amity Shlaes is a Bloomberg View columnist and the director of the Four Percent Growth Project at the Bush Institute. Her biography of Calvin Coolidge will be published in February 2013. The opinions expressed are her own.)
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