Public Versus Private Employment and Labor Unions

Public Versus Private Employment and Labor Unions

© David Burton 2010

The Constituion

     Public service employees and their unions have significant economic and political power, seemingly disproportionate relative to the private sector. Public sector unions continue to grow and exhibit astonishing power. “While fewer than 8% of private workers are organized, nearly 40% of public employees belong to unions. Their overall salaries and benefits have grown exponentially since the 1960s, ... they meaningfully exceed those of workers in the private sector. … It’s not uncommon for government workers to retire before the age of 50 with benefits in the six digits. A recent USA Today study discovered that the number of federal workers making $100,000 a year or more has rocketed during the recession - excessive pay now, which means excessive pensions years from now.” (Ref. 1)

     What is the real cost to the taxpayer of public sector jobs? Ignoring the issues of government employee inefficiencies, higher rates of sick leave, and fewer hours actually worked than their private sector counterparts, it has been estimated that “government workers, on average make more than twice as much as private-sector workers when you include the net present value of their pensions” and their “additional full health benefits.” (Ref. 2)

     “Who are America’s fastest-growing class of millionaires? They are police officers, firefighters, teachers and federal bureaucrats, who, unless things change drastically, will be paid something near their full salaries every year – until death – after retiring in their mid 50s. That is a retirement sum worth millions of dollars.” (Ref. 2) How many of us in the private sector are able to retire in our mid-50s with an annual pension in the vicinity of $80,000 and with full health-care benefits?

     “Since early 2005, public sector pay has risen by 5% in real terms. Meanwhile, private sector pay has been flat.
     “This one fact explains much of the fiscal stress at the state and local level. … State and local governments pay more than $1 trillion in compensation annually. … If compensation is 5% higher than it should be, that’s $50 billion in excess pay costs for the state.
        - - -
     “That $50 billion would roughly cover the total size of the state budget gaps. For example, in February a survey found that the combined budget gap of all 50 states was $55 billion for the 2011 budget year and $62 billion for the 2012 budget year.”
     “The arithmetic is very clear. State and local governments can’t keep funding higher wages and better benefits for their workers, while the private sector struggles. As a wise man once said, you can’t wring blood from a stone. And you can’t ask troubled taxpayers to pony up bigger pay gains for government workers than they are getting themselves.” (Ref. 3)

     Union negotiations for higher wages and benefits for public-sector employees “will be unlike those in the private sector, where there is a natural adversarial condition. In government, politicians – who are supposed to be the managers – can be very dependent for their political survival on those unions with which they bargain. This is the reason most politicians cave in during negotiations.” (Ref. 1)

     Public employee labor unions exhibit an extraordinary amount of power with elected officials. This power derives from the contributions government employee labor unions make to campaign coffers of our elected officials, the ability to provide bodies to campaign for elected officials, and the supposed ability to “turn out the vote” for candidates endorsed by the unions. There are many paybacks to the unions and their members from officials that are elected with union support. The support by government employee labor unions flows preponderantly to members of the Democratic Party.

     “Economists at George Mason University report that overall spending at the state and local level has gone up twice as fast as the private sector nationwide in the same period.”
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     “According to the Bureau of Economic Analysis, state and local workers earn more in both wages and benefits than you do. The U.S. Bureau of Labor Statistics reports that private-sector suckers worked an average of 2,050 hours in 2008, while government payrollers worked just 1,825 – 12 percent less.” (Ref. 4)

     "Government employees do make more on average than comparable private sector workers."
        - - -
     "Even accounting for their skills and education, the average federal employee earns substantially higher wages - 22 percent higher - than they would in the private sector. And that's just cash earnings. The federal government offers gold-plated health care benefits and a government pension (some can retire as young as 56 with full benefits). After three years on the job federal employees get four weeks' vacation a year, all 10 federal holidays and 14 sick days - all paid. Few Fortune 500 companies could afford to offer employees that much time off."
        - - -
     "If you include the value of these benefits the average federal employee's total compensation rises to 30 percent to 40 percent above comparable private sector workers. And federal employees enjoy near absoluute job security. Once they have put in a year on the job it becomes almost impossible to fire a civil servant."
        - - -
     "This generosity, however, costs taxpayers a bundle. If the government reduced federal compensation to private sector rates it would save $47 billion next year - more than $400 per income tax filer."
        - - -
     "Congress should go to the root of the problem and completely reform how the government pays its employees." Not a popular concept for a Democratically controlled Congress that is essentially in bed with fedral employees and their unions.
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     "Uncle Sam should move to performance-based pay based on market rates - the same system most private employers use. The government should also bring federal benefits in line with the private sector and allow managers to fire poor performers." (Ref. 5)

     Who will stand up to the public sector employees unions? State and town governments all across the country give in to public employee union demands with the promise that it’s just this once. “Over the years our authorities have said ‘just this once’ so often that our fragile economy is now hostage to these workers and the exorbitant pensions lawmakers have promised them.” Why do governments give in to public-sector union demands so often? Because, “politicians believe they have to make concessions or they won’t be reelected, So they give in again and again, telling themselves, ‘Just this once.’ … There are two Presidents who wouldn’t give in – not even once, The better known is Ronald Reagan, who fired air traffic controllers when they went on strike in 1981. … Less known is Reagan’s hero Calvin Coolidge.” (Ref. 6) In 1919, as governor of Massachusetts, he fired striking Boston Policemen. Both Reagan and Coolidge were Republicans.

     Here in Massachusetts, the bond between government employee labor unions and Democratic politicians is particularly tight. Example: In a proposed amendment to the Massachusetts state budget, Democratic governor, Deval Patrick, is attempting a “$6 million election-year give-away to a union representing trial court workers, . . . Local 6 of the Office and Professional Employees International Union (OPEIU) . . . at a time when the courts are facing a major budgetary crisis with some courts closing, others moving out of rented space and non-union workers being asked to take furloughs.” “Every dime that goes to Local 6 will have to be cut from somewhere else in the Trial Court budget, meaning more furloughs and more layoffs.” (Ref. 7) Pandering to a public employees union in an election year is obviously more important than constraining costs during an economic crisis.

     In Massachusetts, “the state work force grew by an astonishing 7,500 employees between 2004 and 2008. … Meanwhile, taxpayers shoulder untold millions in costs that could be more efficiently managed by private contractors, and yet we continue to operate under a law that limits outsourcing to the point of absurdity.” (Ref. 8) Democratic politicians, state and municipal employees, and public employee unions are too incestuously intertwined to consider the poor taxpayer. “Even though the Bay State has been experiencing an exodus of more than 40,000 people annually since 2000, over 2,000 new state government positions have been created since 2006 when Governor Patrick took office.” (Ref. 9)

     Public service employment is like The Man Who Came to Dinner. Once a public service job is created, it tends to be forever. President Obama recently signed a $26 billion bailout for the states, “nearly half of which is aimed at preserving government jobs.” (Ref. 10) On the other hand, private sector jobs are closely tied to performance. Perform poorly and the job disappears. Free enterprise does just about everything better than government entities.

     “Why? Because if private companies don’t do things efficiently, they lose money and die. Unlike government, they cannot compel payment through the power to tax.
     “Even when a company operates a public facility under contract to government, it must perform. If it doesn’t, it will be ‘fired’ – its contract won’t be renewed. Government is never fired.” (Ref. 11)

     In spite of these facts, government employment continues in many cases to grow at the expense of private sector jobs. “The Defense Department is now putting the final touches on the sweeping ‘in-sourcing’ initiative that the Obama administration launched in 2009.
     “The plan is to bring in-house 33,000 contractor jobs between 2011 and 2015. Of these, 10,000 will be acquisition workers. In addition, the Pentagon intends to create 10,000 new acquisition positions. Bottom line: the defense procurement work force will grow by 43,000.” (Ref. 12)

     Overall, “since the beginning of the recession (roughly January 2008), some 7.9 million jobs were lost in the private sector while 590,000 jobs were gained in the public one. And since the passage of the stimulus bill (February 2009), over 2.6 million private jobs were lost, but the government workforce grew by 400,000.” (Ref. 13) At this rate, America will take on the characteristics of socialistic France. In France, the labor unions effectively rule the country.

     Teachers unions have become prime examples of the unholy alliance between public service employee unions and politicians. While education costs have escalated, educational performance of our students has either failed to improve or has actually declined.

     “In the past four decades spending per pupil (adjusted for inflation) has gone up 2.6 times, but SAT scores have not budged. Despite the $661 billion a year this country puts into K-12 education, we are churning out a nation of mediocre graduates ill equipped to meet global competitors. … Reformist politicians … are confronting teachers’ unions and the sacred rights of tenure and rising compensation.” (Ref. 14)

     What can happen when incompetent teachers are fired? “Sam Houston High School used to be a dropout factory: 40% of freshmen never made it to senior year; only half of its students (93% of them Latino, 4% black, overwhelmingly poor) passéd standardized math and science tests. In 2008, the Texas Board of Education took control. … 3 out of 4 teachers – 125 of them, virtually all ineffective math and science instructors – got canned or reassigned. Texas has no teachers’ union; contracts can be terminated for ‘good cause.’” [Emphasis mine] (Ref. 14)

     ”First year results? The percentage of students passing the Texas standardized math test went from 60% to 65% and the science test from 51% to 62%.” “Sam Houston graduated 411 out of some 500 last June, 100 more than the year before.” (Ref. 14)

     Much of the blame can be placed on teachers unions. Have you known an incompetent teacher that has been fired? Have you known any teachers that have been denied pay raises or promotions when their classes have failed to improve performance? Have you noticed the hue and cry from teachers unions when proposals have been made to base teachers’ pay on performance? Have you noticed the fierce opposition to charter schools where incompetent teachers would not receive the protection of their unions? Here in Massachusetts, in spite of the opposition of the Teachers unions, “the achievements of some 60 {charter schools} now operating are commendable . . . and thousands of students remain on waiting lists.” In traditional public schools there are few rewards for success (the unions have seen to that) and virtually no penalties for failure. Which explains why parents are lining up to get their kids into public charter schools” (Ref. 15) and away from the tentacles of incompetent unionized teachers.

     Here's a recent example of teachers unions in conflict with the public good. The contract between the city of Boston and its teachers union is due for renegotiation. The Boston school superintendent "wants to scrap paying teachers based only on years of experience, and instead link their raises to performance reviews" as is done through our private industry. However, the Boston Teachers Union president has said that this proposal is a "nonstarter." He further stated that "We're opposed to pay for performance." (Ref. 16)

     France can serve as the model of what the United States might look like if President Obama and the liberal element of Democratic Party continue to implement their socialistic agenda insofar as it relates to increased government employment and stronger public-employee labor unions. In France, union membership in the public sector is three times as high as in the private sector. There is a 35-hour workweek and a minimum of five weeks of paid annual leave. The current minimum retirement age is 60. Many in France see retirement at 60 -- introduced by a Socialist government in 1983 -- as their right.

     “The American left has always cherished … the myth of the superiority of European socialism {and often French socialism}.” (Ref. 17)

     The problem with this myth is that it will also lead to a French-style standard of living as well. “Taking into account higher taxes and inflation, French per capita GDP is $32,679 versus $46,381 for the U.S. (2009 IMF figures). Ranked by purchasing power, France comes in at #21, while the United States is first among major economies. The reasons are not hard to find. It is certain that the French do not work as many hours as do Americans, and it is doubtful whether they work as hard. National workplace regulations make it difficult to fire incompetent or lazy workers. As a result of overregulation, French industry is slow to adapt and innovate. While unionized workers enjoy full benefits, early retirement, and guaranteed annual vacations of five weeks, France as a whole pays the price of significantly lower growth rates than America.
     “There is, unfortunately, one area in which the U.S. already resembles France all too closely. As in the USA, France has piled up increasing amounts of unfunded liabilities in its retirement schemes. President Sarkozy has proposed reasonable reforms that would ensure adequate funding of government-run pensions. An obvious solution for a country in which workers retire at age 60 is to gradually raise the retirement age to at least 65, a level comparable to that of other developed countries. Union response to this proposal has been to schedule a nationwide walkout on May 27. As in Greece, it appears that French workers would rather wave their little red flags and shut down the economy than negotiate a practical means of funding their own retirements.”
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     {Retiring} “at age 60, with full benefits regardless of years of service -- has bankrupted the pension funds that must support workers for an extra five to seven years beyond those in comparable economies. The result is that France's pension funding is now deeply in debt -- a debt level that is projected to reach $127 billion by 2050.”
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     “Absent real reform, the French standard of living -- and that of several other Europeans countries -- will continue to fall relative to the U.S., and it will fall even farther relative to the world's developing countries.”
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     “The damage of {French} socialist welfare schemes, bloated public-sector employment, and intransigent unions is clear. Long ago, the French made a devil's bargain that ensured a social safety net in return for a lower overall standard of living.” (Ref. 16)

     The result of the French wishing to live under the thumb of a corporatist state dominated by federal bureaucracies and powerful national unions will likely be continued high unemployment, rising national debt, and declining purchasing power. Do we Americans want a similar French-style corporatism? If so, then allow the growth of public sector employment at the expense of private sector jobs and let the politicians continue giving in to public-employee union demands.

  1. Subpar, Steve Forbes, Forbes, Page 15, 18 January 2010.
  2. The Millionaire Cop Next Door, Rich Karlgaard, Forbes, Page 21, 28 June 2010.
  3. Mandel on Innovation and Growth - Public Sector Pay Outpaces Private Pay, Mike Mandel, The Corner; 2010/05/03/public-sector-pay-outpaces-private-pay/, 3 May 2010 (Accessed 23 August 2010).
  4. Quincy collects again and again, Michael Graham, Boston Herald, Page 19, 19 August 2010.
  5. Federal pay way out of line, James Sherk, Boston Herald, Page 21, 31 August 2010.
  6. ”Just This Once”, Amity Shlaes, Forbes, Page 21, 2 November 2009.
  7. The $6 million man, Editorial, Boston Herald, Page 18, 18 August 2010.
  8. If not now, when?, Editorial, Boston Herald, Page 16, 19 October 2009.
  9. The Myth of the state budget crisis 2009, D. J. Deeb, The Valley Patriot, Page 32, June, 2009.
  10. Liberal food for thought, Editorial, Boston Herald, Page 16, 16 August 2010.
  11. A drive to privatize – Government can’t get out of slow lane, John Stossel, Boston Herald, Page 19, 5 August 2010.
  12. In-Sourcing Efforts Require Careful, Balanced Approach, Lawrence P. Farrell JR, National Defense, Page 5, January 2010.
  13. Private Sector Losses vs. Public Sector Gains, Veronique de Rugy, National Review;, 25 June 2010 (Accessed 23 August 2010).
  14. What Educators Are Learning From Money Managers, Daniel Fisher, Forbes, Page 22, 7 June 2010.
  15. A lesson even if failure, Editorial, Boston Herald, Page 22, 18 December 2009.
  16. DEAL UNLIKELY TO BE SAVED BY BELL, Edward Mason, Boston Herald, Page 5, 25 August 2010.
  17. Sugarcoating Socialism the French Way, Jeffrey Folks, American Thinker;, 22 May 2010, (Accessed 23 August 2010).

  31 August 2010 {Article 93; Govt_20}    
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