Researcher Says ‘Raucous Showdown’ with Government Unions Is Ahead

Published September 1, 2008

To guarantee continued delivery of public services at a reasonable cost, local, state, and federal lawmakers will soon be forced to stand up to government employee unions, according to a new study by Lewis M. Andrews, Ph.D., executive director of the Connecticut-based Yankee Institute for Public Policy.

In “The Coming Showdown with Public Labor,” released in June, Andrews suggests politicians “privately know” they will have to allow more competition in public education, rely on “cost-conscious insurance companies to manage government-funded health care,” and provide for “a sweeping privatization of many other government services.”

Andrews cites New Zealand, which in 1984 initiated sweeping privatization of national and regional services to forestall government bankruptcy. The number of government workers in transportation was reduced from 5,600 to 53, in forest services from 17,000 to 17, and in the national Ministry of Works from 28,000 to 1–all with no loss of service or safety to the public.

Workers Get 50 Percent More

The major roadblock to such savings in the United States is resistance from public employee unions, which have become accustomed to extracting generous benefits from politicians without having to give much in return, Andrews’s study notes. State government workers collect nearly 50 percent more in total compensation than the average private-sector employee.

Taxpayers pay 128 percent more for health care benefits for government employees than private employers do, and 162 percent more for retirement benefits.

Some state and local governments are beginning to tackle the problem.

In Houston, after pension changes in 2001 allowed some city workers to retire in their 40s, voters took advantage of a clause in the Texas constitution allowing towns and cities to opt out of pension agreements. In Oregon, a federal appellate court in 2006 affirmed the state could stop paying a guaranteed 8 percent a year return to pensioners with individual accounts.

In Rhode Island, where state workers’ pensions take an unusually long time to vest, the legislature in 2005 eliminated planned pensions for all employees with fewer than 10 years of service–about 11,300 people.

San Diego Faces Bankruptcy

Andrews also cites the case of San Diego, which is now facing bankruptcy. In response, the citizens elected a Republican mayor who refused to impose new taxes and instead pushed for laws to require voter approval for any pension benefit increases and to allow private-sector landscapers, mechanics, and contractors to bid for municipal business.

Noting the growing number of municipalities and states challenged by longstanding, burdensome labor agreements, New York Times reporter Mary Williams Walsh recently observed, “financially troubled San Diego is the highest-profile example, but a handful of states, cities, and smaller government bodies have also found ways to scale back existing promises, and even shrink some current payments.”

Unions Dig In

Public unions continue to dig in their heels, however. “Labor officials,” said Andrews, “just don’t get it.”

Larry Dorman, spokesman for the American Federation of State, County, and Municipal Employees Council 4, the largest AFL-CIO union in Connecticut, dismissed the Yankee Institute study, saying, “I think that organization’s hatred of unions and workers clouds its ability to offer any constructive ideas for improving the economy and helping the middle class.”

Similarly, Leo V. Canty, vice president of the American Federation of Teachers Connecticut, called the report “baseless information, conjecture based on nothing we can perceive as anything factual or in the realm of fact.”

Researchers Cite Reality

But many national research organizations agree public labor unions will inevitably have to face economic reality. With enormous debts looming at all levels of government–federal, state, and local–taxpayers simply cannot afford to pay the escalating labor costs the unions have negotiated.

David Y. Denholm, president of the Public Service Research Foundation, said, “Yankee’s study is a long-overdue look at the inevitable confrontation between the public’s interest in being able to control the size, cost, and quality of government services and the public-sector unions that have become rich and powerful at the public’s expense.”

“Unions must stop blocking government labor reforms and should begin to partner with governments and taxpayers to help make public work more efficient and innovative,” said Scott Dilley, labor policy analyst at the Evergreen Freedom Foundation in Washington. “Such collaborative efforts may establish more flexibility, worker freedom, and free-market reforms in public-sector labor.”

“Although politicians are afraid to discuss it,” Andrews noted, “most know that a raucous showdown between government workers and taxpayers is but a few years away–and that economics dictates only the taxpayers can win.”

Mary F. Crean ([email protected]) is chief development officer at the Yankee Institute for Public Policy.

For more information …

“The Coming Showdown with Public Labor”: