organized labor

Public Pensions Fuel Government Growth

by Ivan Osorio on January 4, 2012 · 1 comment

in Bailout Watch, Economy, Employment, Labor

The straitened finances afflicting state and local governments across the nation have brought unprecedented scrutiny to government employees’ compensation, particularly pensions. As pro-market critics have pointed out how generous many public pensions are, government union representatives have pleaded poverty in response.

Today in The Wall Street Journal, Andrew Biggs of the American Enterprise Institute and Jason Richwine of The Heritage Foundation, say, “Not so” to such pleas of poverty. They do so by comparing defined benefit pensions to defined contribution retirement plans, such as 401(k) accounts.

Complex formulas obscure the fact that public pensions typically are much more generous than 401(k)s, making the situation ripe for misleading claims.

A case in point is the Illinois Teachers Retirement System (TRS), which insists that, because Illinois teachers don’t participate in Social Security, the average teacher’s pension of almost $43,000 “cannot qualify as ‘too generous.’” One might assume from such a statement that the typical Illinois teacher who retires this year after a full career will collect $43,000 per year. Not so. That average figure reflects the pensions of employees who retired years or decades ago, as well as individuals who worked only part of their careers in public schools.

The 2010 annual report for the TRS actually shows that the average teacher who retires today after 30 to 34 years of service had final earnings of $84,466 and collects a pension of $60,756 a year, plus annual cost-of-living adjustments, providing an income higher than 95% of retirees in Illinois.

These sums — and the strain they put on government finances — need to inform the debate over public pensions. But reformers need also to keep in mind the political implications of overly generous government pensions.

Generous pensions allow union-friendly politicians to satisfy their labor supporters’ demands while pushing those demands’ costs well into the future. Taxpayer resistance to increased spending is less powerful when politicians hide the spending through years-long delay. And that delay is one of the tools that have allowed government employee unions to become the permanent lobby for ever expanding government that they are today.

For more on pensions, see here.

Barone is Right: Appeasing Protectionists Is a Bad Idea

by Ivan Osorio on October 5, 2011

in Deregulate to Stimulate, Economy, Labor, Politics as Usual, Trade

President Obama is finally sending three pending trade agreements — with South Korea, Colombia, and Panama — to Congress for a vote. The three trade deals were ready for this moment before Obama entered the White House. So what’s taken so long?

Quite simply, as Michael Barone notes in his Washington Examiner column today, the president wanted to avoid angering his political allies in organized labor.

[Obama] could have sent [the treaties] 985 days earlier; negotiations were completed in 2006 and 2007. Or, if he were concerned they’d be deep-sixed when his fellow Democrats controlled Congress, he could have sent them 274 days earlier when Republicans took over the House.

To be sure, they are opposed by many labor union leaders and congressional Democrats. There is a nostalgia among many union and party old-timers for the days, more than 30 years distant, when the auto and steel workers’ unions had nearly 2 million members.

Now each has less than half a million. But the old-timers seem to feel that somehow something like those olden days can be brought back if they oppose FTAs.

Indeed. In the new CEI OnPoint, “Free Trade without Apology,” CEI Adjunct Fellow Fran Smith and former CEI Research Associate Nick DeLong document how  efforts at appeasing organized labor — in the hopes of blunting union opposition to trade deals — have been not only ineffective, but harmful.

Union leaders have taken all concessions they’ve been offered only to ask for more. This has led to trade agreements becoming weighted down with provisions governing labor and environmental issues (to appease environmentalists) which have nothing to do with trade. And those provisions have only gotten longer and more onerous in each subsequent agreement.

Organized labor’s success in getting labor issues included in trade negotiations is a relatively recent phenomenon. The 1985 U.S.-Israel free trade agreement was the last American trade deal that did not include labor and environmental provisions. Since that time, the U.S. has entered into 10 free trade agreements covering 17 countries.

Eight years after the Israel agreement, the Clinton administration, as part of a deal to ratify the North American Free Trade Agreement (NAFTA), pushed Mexico and Canada to sign the North American Agreement on Labor Cooperation (NAALC) and North American Agreement on Environmental Cooperation (NAAEC) as side letters to the trade pact. That was the first time that labor and environmental objectives were directly linked to international trade negotiations. From that point onward, interest groups of various stripes have lobbied hard to include a host of irrelevant political agendas in trade negotiations. Organized labor and environmental groups have been especially active in this effort.

The NAFTA labor provisions were still not enough to satisfy Big Labor. Four years after the labor cooperation agreement was passed, the AFL-CIO stated in a public comment that the agreement had been “ineffective in promoting the concerns of workers beset by stagnant wages and job insecurity.” Rather than appease, the NAFTA labor provisions only whetted the union leaders’ appetites. To this day, unions continue to pressure Congress for more stringent labor obligations in current and future agreements.

It’s time to end this game, which only advantages protectionist lobbies.

For more on trade, see here and here.

Union vs. Union Fight

by Ivan Osorio on September 8, 2011

in Economy, Employment, Labor

A band I was in years ago had a song titled, “Sheet Rockers vs. Aluminum Siders,” about a fight our singer saw at work on a construction site.

I was reminded of it earlier today, when members of the International Longshore and Warehouse Union (ILWU) stormed the Port of Longview, Washington, where they held security guards hostage, blocked a train, and destroyed property, damaging railroad cars and dumping grain. They were protesting the hiring at a grain terminal by the employer, EGT, of a contractor employing workers belonging to a different union, the Operating Engineers.

Such union turf battles are not novel. What is unusual about this one is that it doesn’t involve the ubiquitous Service Employees International Union (SEIU), which in recent years has picked fights with UNITE-HERE, the California Nurses Association, and its former affiliate, National Union of Healthcare Workers. And now members of a health care workers local in Michigan are trying to disaffiliate from SEIU, which a local spokesman said, “seem to only be interested in collecting dues from us.”

While SEIU’s unusually large number of fights with other unions is largely due to the efforts of its recent former president, Andy Stern, to centralize his authority, inter-union fights are still nasty in a way rarely seen between market competitors. That’s probably because for unions, the stakes are higher. (Current SEIU head May Kay Henry has largely continued Stern’s policies.)

Under current labor law, unions enjoy the privilege of monopoly representation of all workers in a bargaining unit, which makes representation an all-or-nothing proposition — you can’t fight for market share when the market is indivisible.

For more on SEIU’s fights with other unions, see here.

NLRB to Businesses: Tell Employees they Can Unionize

by Ivan Osorio on August 25, 2011 · 2 comments

in Deregulate to Stimulate, Economy, Employment, Labor, Politics as Usual, Regulation

The National Labor Relations Board has issued a new rule “requiring most private-sector employers to notify employees of their rights under the National Labor Relations Act by posting a notice.” The NLRB’s new rule, in its background section, suggests which right the Board considers paramount:

The NLRA, enacted in 1935, is the Federal statute that regulates most private sector labor-management relations in the United States.1 Section 7 of the NLRA, 29 U.S.C 157, guarantees that

Employees shall have the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection, and shall also have the right to refrain from any or all such activities[.]

In short, the ruling is part of the NLRB’s ongoing efforts to enact policy changes favorable to organized labor.

While the posting of a notice is hardly assured to send a flood of new members into union ranks, the new notice rule clearly fits into a pattern of pro-union activism by the NLRB — including proposals to shorten election periods and to allow unions to organize by remote electronic voting (essentially electronic card check), as well as the Board’s campaign against Boeing for opening a factory in a right to work state.

The notice rule’s impact may pale in comparison to those other actions, but it does suggest that the NLRB is throwing everything at the wall in the hope that something sticks well enough to keep Big Labor happy and on board, for political reasons. The Obama administration failed to enact pro-union legislation like the so-called Employee Free Choice Act when Democrats controlled the House, so now it is trying its hardest to get the unions something to keep them fully on board and engaged for the 2012 election.

The rule is scheduled to be posted in the Federal Register on August 30 and then to go into effect 75 days later, on November 14.

For more on the NLRB, see here.

For more on labor policy, see workplacechoice.org.

In Wisconsin Recall, Unions Run to Stay in Place

by Vincent Vernuccio on August 9, 2011 · 3 comments

in Economy, Employment, Labor

No matter what the outcome of today’s recall election, nothing substantive will change in Wisconsin. Even if organized labor were to sweep all six recall elections of Republican state senators, the unions would still not have the votes in the Assembly to pass any legislation. They will not be able to restore the government union’s lavish benefits, which were brought down to Earth this spring. And even if they were somehow able to muster legislation through both the Senate and the Republican-controlled Assembly, they still will not have enough votes to overturn a veto by Governor Scott Walker.

According to the John K. MacIver Institute for Public Policy, a Wisconsin think tank, Big Labor and its allies have funneled over $14 million into the recall effort.

The Washington Post reports that much of the money (on both sides) comes from groups outside of Wisconsin.

Outside groups — led by national unions on the Democratic side and limited government groups such as the Wisconsin Club for Growth on the Republican side — have shoveled more than $25 million into the recall effort, with both sides spending about the same amount. The candidates, meanwhile, have raised more than $5 million.

The staggering dollar amounts being showered on the eight recall campaigns — which after a July 19 election and Tuesday’s six contests will conclude with two elections on Aug. 16 — are shattering state records. In 2010, when the 99-member assembly and half the 33-member state Senate was up for election, outside organizations spent $3.75 million in Wisconsin — 15 percent of this year’s total.

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In Wisconsin, Smaller Class Sizes through Fiscal Restraint

by Ivan Osorio on June 30, 2011

in Economy, Employment, Labor

Of the various hyperbolic leftist talking points against the recently enacted Wisconsin collective bargaining law, the “war on teachers” was easily the most shrill, dumb, and tiresome. It was also flat wrong.

Now a similar collective bargaining reform by the Kaukauna Area School District (part of the Appleton metro area) is projected to shift the District’s budget from a substantial deficit to a large surplus. The Appleton Post Crescent reports:

As changes to collective bargaining powers for public workers take effect today, the Kaukauna Area School District is poised to swing from a projected $400,000 budget shortfall next year to a $1.5 million surplus due to health care and retirement savings.

The Kaukauna School Board approved changes Monday to its employee handbook that require staff to cover 12.6 percent of their health insurance and to contribute 5.8 percent of their wages to the state’s pension system, in accordance with the new collective bargaining law, commonly known as Act 10.

“These impacts will allow the district to hire additional teachers (and) reduce projected class sizes,” School Board President Todd Arnoldussen wrote in a statement Monday.

Teachers unions have been advocating reduced class sizes for years. Whatever the merit of smaller classes — and there is no universally accepted definition of what constitutes an “ideal” classroom headcount — they would require the hiring of more teachers, resulting in more dues-paying union members.

Now Kaukauna is poised to give the unions that, in exchange for some modest increases to their health insurance and pensions. Yet I  doubt the state’s NEA affiliate will be celebrating (hat tip: Iain Murray).

For more on public sector unions, see here and here.

Trumka’s Empty Threat to Democrats

by Ivan Osorio on May 20, 2011

in Economy, Employment, Labor, Politics as Usual, Regulation

AFL-CIO President Richard Trumka is warning Democratic politicians today: Push our agenda, or we won’t support you in the 2012 election. It’s hard to imagine those Democrats quaking in their boots. As The Huffington Post’s Sam Stein notes,

The labor community — the AFL-CIO especially — has been taking steps towards greater independence from the Democratic Party as its disappointments with the Obama administration and congressional Democrats have mounted. The typical response from party insiders has been dismissive assumptions that labor has nowhere else to go.

Indeed, Trumka’s threats ring hollow. It’s not like the Obama administration hasn’t been trying to advance Big Labor’s agenda. It’s been Republican opposition in Congress that has thwarted card check legislation and the confirmation of some pro-union executive branch nominees. Yet it seems that Trumka still had to find some reason to throw a public tantrum. The HuffPo’s Stein reports:

Trumka also says in the prepared remarks that party affiliation alone won’t determine how the federation allocates its resources in 2012. If Republican lawmakers embrace parts of the AFL-CIO’s agenda, the union federation will respond in kind.

The likelihood of a rush of Republican politicians (beyond perhaps a couple of rust belt outliers) seeking union endorsements by supporting Obamacare, card check, foreign trade barriers, more spending, and higher taxes  is, to put it mildly, nil.

Today, government employees make up a majority of all union members, so it is in public sector employment where the future of organized labor will be decided. So far, the unions aren’t doing well.

At the state and local level, a growing number of Democrat elected officials are taking on public employee unions for the simple reason that their jurisdictions are broke. Facing a decision between angering either the general public through increased taxes and service cuts or their union supporters through spending cuts, many are choosing the latter.

The taxpaying public will put up with the diffuse costs they bear to pay for public sector unions’ concentrated benefits only as long they remain relatively low enough per payee. When those costs start rising and government employee compensation starts to drain resources from essential public services, public resistance will tend to rise with it.

By the same token, voters aware of their states’ and cities’ deep financial problems will likely reward elected officials who seriously address those problems. Thus, Democrats for whom losing union endorsements was once a worrying prospect may now find taxpayer ire a bigger concern.

For more on labor see here and here.

Who’s Afraid of Walmart?

by Ivan Osorio on May 11, 2011

in Economy, Employment, Labor, Regulation

As surely as summer follows spring, it seems like every new Walmart store opening announcement in a major city is now followed by protests.  The nation’s capital is no exception.

Walmart announced late last year that it plans to open four stores in the District of Columbia. Predictably, the local union of the United Food and Commercial Workers was not enthused. UFCW Local 400 President Thomas McNutt went so far as to call Walmart “a wolf in sheep’s clothing,” because it’s nonunion. In reality, UFCW doesn’t want greater competition for its own employers.

However, union self-interest isn’t the only motivation that animates some Walmart critics. Self-styled community activists decry Walmart for … well, changing things. A typical such critique is a Washington Post letter to the editor by D.C. restaurateur Andy Shallal, who raises the alarm that Walmart would change the “character” of neighborhoods and add to a pattern of “destroying” local businesses, while preemptively dismissing “any academic research” that would contradict his assertions.

Try as Shallal might, he cannot dismiss research that contradict his opinions so easily. As a CEI study that analyzes the history and economics behind the anti-Walmart hysteria notes, the cant about Walmart killing downtowns is just that. Its author, Zachary Courses, says:

A handful of academic studies have analyzed the impact of Wal-Mart and other large discount retailers’ effects on the communities they enter. One of the ? rst studies, by John Ozment of the University of Arkansas and Greg Martin of the University of Wisconsin, used U.S. Economic Census data to determine the effects of what they called discount retail chains (DRCs) on rural business environments in three southern states. Looking at the period 1977–1982, and looking at county level data, they determined that overall DRCs bene?ted the communities they entered by increasing wages and employment, and strengthening other businesses that did not compete directly with the new DRC. Counties that did not have a DRC experienced an overall decline in per capita retail sales and payroll. And while counties with DRCs experiences a 3.5 percent reduction in the number of retail establishments over five years, counties without a DRC experienced a much greater loss of 10.9 percent. The authors conclude that the presence of DRCs “may create alternative opportunities for businesses that are unable to compete with large discount retail chains,” and “new businesses emerge that provide either services or products that complement the DRC’s offerings.” The picture of rural business implied by their research is a much more adaptable one, in which rather than shutting down retail activity, the presence of DRCs actually stimulates dynamic local retail growth.

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Political Bailouts for Underfunded Union Pensions

by Ivan Osorio on April 28, 2011

in Bailout Watch, Economy, Employment, Labor

While the nation’s attention has focused on government employee unions’ fight to retain their collective bargaining privileges, unions in the private sector are in an even bigger fight for their own survival.

Many major private sector unions’ pension funds are severely underfunded to the the extent that they threaten the unions’ own solvency, as well as their biggest selling point for attracting new members: a stable and secure retirement. At The Weekly Standard, Mark Hemingway explains just how bad things could get.

[T]he problem of bankrupt union pension plans is not going away. It’s more than likely a number of big union pension plans will go bankrupt. All of a sudden, union employees who were expecting generous pension plans will be dumped onto the Pension Benefit Guaranty Corporation, the government-sponsored enterprise that backstops pension plans. The maximum payout is just under $13,000 a year, or “dog-food money,” notes McMahon.

That’s when things are likely to get really ugly. Multi-employer pension plans are by law governed by boards equally divided between employer and union representatives. There’s already no love lost between rank-and-file union members and the class of political consultants and executives that has come to dominate union leadership. Both of the SEIU’s national pension plans issued “critical status letters” to their members in 2009?—?the Pension Protection Act requires such letters to be issued when funds can cover less than 65 percent of their obligations. The SEIU, however, maintains a separate pension plan for its national officers that was funded at 98.3 percent, according to the latest data.

Expect waves of class action lawsuits over pension mismanagement aimed at recouping money from the employers and unions responsible. This could well bankrupt unions. And when union pension plans begin failing, unions will be deprived of perhaps their biggest selling point — job stability with unrivaled retirement benefits.

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Faulty Public Pension Accounting: A Problem too Big to Ignore

by Ivan Osorio on April 28, 2011

in Economy, Employment, Labor, Regulation

One reason the ongoing debate over collective bargaining for government employees has been so loud is that the stakes are so high — for unionized government employees on one side and for taxpayers on the other.

For years, public sector collective bargaining enabled government employee unions, especially at the state and local level, to aggressively lobby for generous compensation in exchange for political support for the politicians who grant such largess.

Those politicians, seeking to avoid taxpayer wrath today, deferred many of the costlier elements of that compensation well into the future, including pensions. To make matters worse, states underfunded those pensions for years, and the accounting methods they used hid the funding gaps.

Today, however, much as the budget crises affecting state government around the country has brought public attention to the bad bargain for taxpayers that is public sector collective bargaining, state pension accounting standards face considerable public scrutiny, from across the ideological spectrum.

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