Great analysis piece by Steven Landsburg about the reactions of the public sector union employees in various states like Wisconsin recently in response to the threat to lose collective bargaining for pensions and similar benefits. He explains that when you’re underpaid and undercompensated and someone tries to take away what you have, you go somewhere else because the thing you’re losing isn’t all that great and it’s possible to find something comparable or better elsewhere, which is pretty much the definition in a free market of being “undercompensated.” But, when you’re overpaid and overcompensated and someone threatens to turn your golden goose into a silver one, you pitch a fit precisely because you can’t find a similarly cushy scenario ANYWHERE ELSE. The hyperbolic reaction of these public sector union employees is strong evidence (though not proof) of how much better they have it than private sector union employees, most of whom would love to have any pension at all, let alone the excellent one these have. (The other interpretation is that they are so miserable in what they do and this seems like the final indignity about to be foisted upon them.)
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Private sector unions have at least a legitimate premise (and a very real use historically) in that they negotiate against the owners of a company so as to get the employees their fair share of profits their labor generates. Because labor is a cost from within (just as competition is a sort of cost from without), this natural adversarial relationship develops. And in a sense, it makes sense because there’s a natural upper limit on what the bosses can afford to pay (something which the unions know and therefore keep in mind whenever they are asking for things because a company driven out of business employs no one) But in the public sector, there are no profits. It’s just government. This means that the public sector unions are negotiating essentially against you and me, the public who pays taxes. Also, there’s no built in upper limit beyond the political ability to raise the taxes to pay for the benefits and there’s certainly no sense in the union members that they could ask for too much and thus lose everything. This basic asymmetry explains why government jobs are currently so much more secure than private ones (though both are at risk, they are not equally at risk) and generally so much better compensated. As one cartoon expressed it, while public sector unions are complaining about their pensions, most private sector people are asking, “What’s a pension?”
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Finally, public sector unions have a basic (and major) conceptual flaw. In a company, the union doesn’t elect the owners. Nor do they get to contribute to campaign funds to elect the owners. But in the public sector, it is precisely this relationship. And given the fact that they constitute such a massive and influential voting block and financial contributor, public sector unions are thus in the incredibly nepotistic position of hiring the very people who are then tasked with negotiating against them on our behalf. Since politicians know what side their bread is buttered on and are always eyeing reelection, how can this be anything but a terrific conflict of interest? This is the conceptual reason that public sector benefits have spiraled out of control (even moreso than private sectors have). Public sector unions have really had to bite the bullet in recent years, and it’s time their public sector counterparts did the same.
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