The Magazine

The New Tammany Hall

Public sector unions have become a labor aristocracy--and they are bankrupting states and municipalities.

Oct 12, 2009, Vol. 15, No. 04 • By DANIEL DISALVO and FRED SIEGEL
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Ever since the 1972 Democratic convention nominated George McGovern over the objections of the AFL-CIO, the standard wisdom has been that organized labor's power in American politics has declined dramatically. The failure of the current Democrat-dominated Congress to pass labor's highest legislative priority, the Employee Free Choice Act ("card check"), is taken as indicative of unions' political incapacity. But the picture looks very different on the state and local level where public sector employee unions have gone from one victory to another. Indeed, they are the one group, besides Goldman Sachs executives, that's done well during the current Great Recession. Public sector unions have become political powerhouses in New York, New Jersey, Washington, California, and a host of other states. They have become so powerful as to threaten the Madisonian system set up to constrain any one faction from overwhelming the public interest.

Once upon a time public sector workers received less pay than their private sector counterparts in return for better benefits and greater job security. But that bargain has been breached. Public sector wages have more than caught up, while the differential between public and private sector benefits has increased so much that public sector work, particularly for the unskilled, is greatly coveted. To protect such benefits, the unions have tenaciously opposed Senator Max Baucus's plan to tax expensive health insurance plans to finance an extension of coverage. Supporters of public sector union power have developed a rationale for the government employees' gold-plated perks. The argument is that public employees are the vanguard of the working class. As such, the benefits they achieve will eventually have to be matched by private sector employers. As Carla Katz, the leader of New Jersey's Communications Workers of America, explained to Paul Mulshine of the Newark Star-Ledger, reformers embrace "the progressive theory that unless you create a substantial wage and benefits package that reflects good jobs and the ability to have a middle-class life style, there will be a perpetual race to the bottom."

Katz not only represents thousands of state employees, she is also the richly rewarded former girlfriend of New Jersey governor Jon Corzine. Katz's influence on Corzine became clear in 2006 when the impassioned governor spoke to a Trenton rally of roughly 10,000 public workers and shouted out: "We will fight for a fair contract." Corzine was of course management in that situation, not labor. But with the power of the public sector unions to drive election outcomes, they now sit on both sides of the bargaining table. Unlike private sector unions, the sheer number of workers represented is not the linchpin of their influence. Private sector unions have a natural adversary in the owners of the companies with whom they negotiate. But public sector unions have no such natural counterweight. They are a classic case of "client politics," where an interest group's concentrated efforts to secure rewards impose diffused costs on the mass of unorganized taxpayers. Also unlike private sector unions, those in the public sector can achieve influence on both sides of the bargaining table by making campaign contributions and organizing get-out-the-vote drives to elect politicians who then control the negotiations over their pay, benefits, and work rules. The result is a nefarious cycle: Politicians agree to generous government worker contracts; those workers then pay higher union dues a portion of which are funneled back into those same politicians' campaign war chests. It is a cycle that has driven California and New York to the edge of bankruptcy.