Sunday, February 20, 2011

First Tunisia, then Egypt, now Wisconsin

Government workers are the last bastion of union strength in the US.  In a previous post I noted that this was likely to be a challenging year for public employees and this week's events in Madison are probably just the tip of the proverbial iceberg.  I never would have guessed that the first confrontation would happen in Wisconsin, which was the first state to allow public employees the right to bargain collectively in 1959.  But the scenario in Wisconsin mirrors what we are likely to see in many other states: a governor who is serious about the state budget and newly elected legislators who owe their support to the various Tea Parties. 

The situation in Wisconsin is not without irony.  Historically, unions organized low to middle income workers in production occupations and often had to take extreme steps such as strikes or sit-ins to obtain company recognition.  In this case we see mostly upper middle income types (according to one blogger, the average Wisconsin teacher makes $78k in salary and benefits for 9 months work whereas the average Wisconsin household makes $52k in money income excluding benefits) conducting sickouts and sit-ins to maintain their relatively privileged position.  Somehow I do not think this is going to play well with the median independent voter.

Another tasty tidbit: WSJ and other outlets report that President Obama has called the proposed changes in pay, benefits and collective bargaining rights an "assault on unions."  However, federal employees have very limited collective bargaining rights; they cannot bargain over pay and benefits.

Economic research (including a paper I wrote with NCSU colleague Bob Clark years ago on pensions) has shown that unions put a premium on seniority because they are politically dominated by their most senior members.  When bad budget times hit, unions resist pay and benefit cuts and (by default) encourage layoffs because this insulates the most senior members from any economic adjustment.  This is exactly what is happening in Wisconsin right now.  Governor Walker has said repeatedly that massive layoffs are the only alternative to pay and benefit cuts.  Problem is in the public sector, most workers are in education and public safety, so layoffs mean degraded service in those two areas.   

Some of Walker's proposals are a bit over the top (e.g., annual certification elections for unions), but these may be bargaining chips for a final showdown.

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