Forbes Scapegoats Public Sector Unions For Private Sector Problems

Forbes Op-Ed Claimed Public Unions Hurt Upward Mobility For Private Sector Workers. In a September 29 op-ed published by Forbes, conservative writer and Competitive Enterprise Institute (CEI) fellow Carrie Sheffield blamed public sector unions for reducing upward socio-economic mobility for private sector workers and threatening the “fiscal solvency of future generations.” Sheffield claimed that public sector union members are “materially better off and have higher levels of formal education than private sector union members,” and that government unions have the capacity to collectively bargain for better pay and benefits through the threat of work stoppages. Her solution to these alleged problems was to strip collective bargaining rights from public sector employees while cutting their pay and benefits, which she claimed contributes to “the widening wealth gap between well-connected government workers and the rest of America”:

Unions of yesteryear were predominantly in the private sector. But since 2009, government union membership surpassed private membership, and their membership looks very different from when it comprised Joe Sixpack and his pals. Government unions, on average, represent skilled, white-collar workers who enjoy generous benefits, sans accountability, courtesy of the hardworking taxpayer.

This has profound implications for the upward mobility and fiscal solvency of future generations. It also presents troubling challenges to democracy and sovereignty at all levels of government.

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Today's government sector workers are generally materially better off and have higher levels of formal education than private sector union members of years past. For example, in 1960, more than 35 percent of all union members had not finished high school and only 2 percent had college degrees. Flash forward to 2013, when 53.6 percent of public sector workers had a bachelor's, advanced, or professional degree, compared to 34.9 percent of private sector workers, according to the nonpartisan Congressional Research Service (CRS).

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Fortunately, there are solutions to help mitigate the power asymmetry between the public and the people hired to serve them. This includes removing pensions, health care benefits, and raises from the collective bargaining table and instead indexing them to inflation. Other reforms include increasing the retirement age for public sector benefits and restricting use of government-collected union dues for collective bargaining only, not politics. [Forbes, 9/29/15]

CEI: Public Employee Unions Hurt Public Services, Threaten Private Workforce. In a CEI paper published September 29, Sheffield offered more details on her plan to undermine public employee unions -- an idea apparently inspired by Gov. Scott Walker's (R-WI) union-busting reforms. Sheffield reiterated her claim that public unions are responsible for widening economic inequality and attacked the organizations for having “interests [that] run counter to those of taxpayers”:

Government employee unions create a more expensive and protected class of workers at the expense of nonunion workers, students, and taxpayers. They engage in politics to expand and protect the perks of government employees who are more likely to have attended college and garner salary and benefit packages more generous than the average private sector worker.

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Conclusion. Public sector unions are inherently political institutions, funded at taxpayer expense, whose core mission is to advance the interests of a protected class of workers. They rely on the growth of government for members. Those who believe government can and should do more to create greater opportunity for the poor should take a serious look at the costs and inefficiencies imposed by government unions -- costs that crowd out basic public services all residents rely on, from garbage collection to fire protection. Thus, government unions' interests run counter to those of taxpayers, who end up paying more for less in terms of public services. [Competitive Enterprise Institute, 9/29/15]

Unions Are A Solution To Economic Inequality, Lack Of Mobility

Inequality Comes From Union Decline And Education Disparities. According to a study of the relationship between union membership and income inequality from 1973 through 2007 performed by sociologists Bruce Western and Jake Rosenfeld of Harvard University and the University of Washington, declining union membership, coupled with an increasing demand for college-educated workers, drove most of the growth of wage inequalities experienced by working American men and women over the past several decades. According to Western and Rosenfeld's findings, unions had a “powerful” impact on the wages of non-union workers and their declining membership contributed to unequal pay “for union members and nonunionized workers alike”:

More pay for college-educated people and the decline of labor unions have worked together to spur wage gaps since the 1970s. Together, these key factors account for about three-quarters of the rise in private sector wage inequality among men, and two-thirds of the rise for women. Our research teases out the relative effects and explains how union decline has mattered.

• The educational compensation gap accounts for about a third of the increased wage inequality for men and about two-fifths of the increased wage inequality for women.

• Declining unionization was associated with about a third of the increase in wage inequality for men from 1973 to 2007 and about a fifth of the increase for women. For male workers, therefore, the impact of declining unions has been roughly equal to the impact of the growing wage gap between college and high school-educated workers.

• Union decline powerfully affected wage inequality among nonunion workers in highly unionized regions and industries. When unions went into a tailspin, the entire surrounding labor market was affected. Worker leverage suffered and prevailing wages faltered. Pay at work grew more unequal for union members and nonunionized workers alike. [Scholars Strategy Network, March 2012]

EPI: Decline Of Collective Bargaining Widens Gap Between Wages And Productivity. According to a January 6 report from the Economic Policy Institute (EPI), the erosion of collective bargaining for American workers has “widened the gap between productivity and pay” and significantly contributed to stagnating wages and growing economic inequality:

A key factor undermining pay growth for middle-wage workers over the last few decades has been the erosion of collective bargaining. When unions are able to set strong pay standards in particular occupations or industries through collective bargaining, the employers in those settings also raise the wages and benefits of nonunion workers toward the standards set through collective bargaining. Thus, the weakening of the collective bargaining system has had an adverse impact on the compensation of both union and nonunion workers.

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Any effort to reestablish a link between pay and productivity growth will need to promote policies that enable workers to once again join unions and bargain collectively. This conclusion is central to any debate about how to address ongoing income inequality or limited income mobility. It is only once workers have the ability to bargain for higher wages that we will see the broad-based wage growth necessary to remedy these problems. [Economic Policy Institute, 1/6/15]

Union Membership Lifts Wages, Driving Upward Economic Mobility

CAP: Children Of Union Families Have Greater Upward Mobility. According to a September 2015 report from the Center for American Progress (CAP), children in union families and children in non-union families in areas with higher levels of worker unionization were better off than children in non-union families in areas with lower rates of unionization. According to CAP, unionization has contributed to positive “intergenerational” effects for families, whose children attain higher levels of education and achieve more economically:

In this report, we have shown that parents' union membership has a significant and positive relationship with their children's well-being. The adult offspring of unionized parents earn higher labor incomes compared to the offspring of nonunionized parents. They also attain higher levels of education, which can help them achieve better economic standings. This intergenerational union effect is stronger for less-educated and less-skilled parents, making it a positive force for intergenerational mobility. An association also appears on the area level: Localities with higher union membership are also areas where children of poor parents end up higher in the national income distribution and children throughout the income distribution earn more in these areas. [Center for American Progress, 9/9/15]

EPI: Strong Unionization Benefits All Workers Wages. According to an April report from the Economic Policy Institute (EPI), which compared states that have enacted so-called “right-to-work” laws, such as Wisconsin, to states without similar restrictions on unions and collective bargaining. The report found that union and non-union workers in right-to-work states tended to have lower wages, while workers in states without such laws tended to see more wage growth:

Under federal law, no one can be forced to join a union as a condition of employment, and the Supreme Court has made clear that workers cannot be forced to pay dues used for political purposes. So-called right-to-work (RTW) legislation goes one step further and entitles employees to the benefits of a union contract--including the right to have the union take up their grievance if their employer abuses them--without paying any of the cost.

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• Wages in RTW states are 3.1 percent lower than those in non-RTW states, after controlling for a full complement of individual demographic and socioeconomic factors as well as state macroeconomic indicators. This translates into RTW being associated with $1,558 lower annual wages for a typical full-time, full-year worker.

• The relationship between RTW status and wages remains economically and statistically significant under alternative specifications of our econometric model

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This paper updates and confirms the findings of Gould and Shierholz (2011). No matter how you slice the data, wages in RTW states are lower, on average, than wages in non-RTW states.

As shown in great detail in Gould and Shierholz (2011), these results do not just apply to union members, but to all employees in a state. Where unions are strong, compensation increases even for workers not covered by any union contract, as nonunion employers face competitive pressure to match union standards. Likewise, when unions are weakened by RTW laws, all of a state's workers feel the impact. [Economic Policy Institute, 4/22/15]