How Public Sector Unions Could Work & Why They Won’t

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How Public Sector Unions Could Work & Why They Won’t

Last week’s blog provided some history about the rise and role of public employee unions. It also covered four reasons why they could be on the verge of extinction:

  1. There is no clear majority of the public to support public employee unions.
  2. Funding formulas – especially benefits plans and pensions – are not sustainable.
  3. Worker rights can be addressed through other means than a collective bargaining agreement.
  4. Unions have been successfully labeled as the enemy of the economy.

Since that time, the Wisconsin legislature approved and Governor Scott Walker signed a bill that virtually kills collective bargaining for government workers in the state. Under the Wisconsin law, the following changes take effect at the end of current contracts:

  • Bargaining is limited to wages for most public employees
  • Contracts would be limited to one year and wages are frozen until a new contract is signed
  • Wage increases could not exceed a cap based on inflation without voter approval through a referendum
  • Employers would no longer collect union dues and bargaining unit members would no longer be required to pay dues
  • These changes exclude law enforcement and fire employees, state troopers, and inspectors.

 Meanwhile in Ohio, a bill making its way through the legislature bans public employee strikes, eliminates binding independent arbitration, and abolishes seniority for promotions in favor of merit.

These actions have severely wounded public sector unions. What is yet to be determined is whether they fully recover or simply exist in a diminished capacity.

How Public Sector Unions Could Come Back Strong

A Pew Research Center poll published on February 28, 2011 shows that the public sides with the Wisconsin public employees more than Governor Scott Walker by a 42 percent to 31 percent margin. That leaves a lot in the “undecided” category, but it does show the potential for voter backlash. If that occurs, we will see collective bargaining restored to at least close to its same level in Wisconsin.

Public employee unions could significantly increase their chances for voter support by taking the lead – or at least working together with their opponents – on the following actions:

  • Take strikes, work stoppages, and slowdowns off the table. The public has a right to expect that its public agencies continue to function even if there is a disagreement over terms of the contract. In return for this, public employee unions should receive the right for expedited arbitration over violations of the contract.
  •  Establish an “economic sustainability” model for wage and benefit negotiations. The Wisconsin law addresses that by limiting contracts to a single year. That, in my opinion, is too short a time and will only add costs for everyone to engage in continuous negotiation. Another option would be to constitutionally require a financial reserve solely dedicated to covering wages and benefits cost or, like the Wisconsin law, an inflation adjusted basis for salary increases. And, a three year contract with an agreed upon clause that triggers re-negotiation based on economic swings could work.
  •  Replace seniority with productivity as the basis for salary increases, layoffs, and reductions. In a perfect world, the most tenured employees in any organization would be the most productive. Armed with greater experience and maturity, losing your most senior team members would represent a devastating loss. It doesn’t work that way in reality.

On the other side of this debate is a legitimate fear that employers will use bogus or irrelevant productivity measures to remove higher paid employees and reduce their financial exposure for salaries, benefits, and pensions. The answer is a total reform of public employee compensation and layoff policies that make seniority the primary measure of an individual’s worth to the organization. Longevity should be recognized and considered, but it can no longer be the sole determining factor in how much you make or if you are laid off in a reduction in force.

  • Give up requiring employees to join the union. There is a valid historic argument that non-members should not receive benefits from contracts negotiated on their behalf. On the other hand, giving employees a choice about the union that negotiates on their behalf or even the right to not join a union at all introduces a much needed customer focus. The union should be willing to earn the right to represent its members just as a company earns customer loyalty.
  • Solve the potential conflict of interest created by union involvement in political campaigns. This idea is loaded with complexity and slippery slopes, but it is crucial to break the cycle of mistrust that exists today. Unions make significant contributions to candidates that support their interests. When they win, they reap the rewards. When they lose, we see retaliation.

The right of individuals and groups to support their candidate of choice is crucial to our democracy. It has been confirmed by the U.S. Supreme Court. And yet, we can’t ignore the conflict of interest that arises when elected officials make financial decisions based on campaign support. The easy answers are to accept the status quo or ban all public employee unions. Neither serves us well. A better response would be a more open and transparent contract negotiation process that requires 100 percent funding of all wage, benefit, and pension costs. It should also require bi-partisan agreement on contract specifics to ensure that costs are controlled.

Funding Public Education – The Monster We Don’t Talk About

Overcoming the previous suggestions is a walk in the park compared to how public education is funded and teacher salaries are paid.

Public education is supposed to be a local issue. If a community wants to pay its teachers more through union contract or pure benevolence, that should be within their rights. The problem comes with funding.

A report by the Center on Budget and Policy Priorities states that, on average, one-fourth of state budgets are dedicated to public education. The federal government pays less than 10 percent of public school costs. The amount your local district receives from state funding varies significantly by location, but our research on this showed a range of 35 percent to 90 percent based on funding and taxing formulas.

When it comes to teacher pay and benefits, the state has to be either all in or all out to ensure sustainable funding. A local district can’t negotiate in good faith when its revenues could be slashed by the state.  Likewise, the state can’t allow education funding to be set solely at local discretion. Otherwise, poor districts would continue to fall behind while rich districts can pay whatever the need for the best talent. One answer would be to make public education a state-level responsibility. But, do you really think that’s going to happen without a huge fight? We are left with an approach to funding public education that attempts to balance competing interests and makes it virtually impossible for districts to negotiate in good faith with its teacher unions.

Why We Are Destined for More of the Same

The battles over the life and death of public employee unions will be fought along familiar lines. You will, for instance, hear California Governor Jerry Brown talk about the need to control costs, but you won’t hear him saying that the unions need to be busted. The voice of public sector labor is too strong in California. Likewise, you won’t hear Texas Governor Rick Perry talking about public employee unions because they are a non-issue. The noise will come from the states undergoing a shift in the power of organized labor – Wisconsin, Ohio, Indiana, and a few others.

Government officials (elected and appointed) could work collaboratively with unions and employee groups to make the changes necessary for a sustainable and productive public sector workforce. The cities of Carrollton, Texas and Glenview, Illinois were mentioned in last week’s blog. There are other examples as well.

My guess is that large scale, transformational change will not happen without a crisis so large that it cannot be ignored. The political parties are too steeped in the status quo. The public employee unions are too resistant to the level of change required to transform their relevance. We don’t want to work that hard.

Here’s the thing – hidden deep in this discussion is a monster that we are just starting to sense. Our funding formulas for government employee pensions are flawed. Most states do not have a sustainable formula for public education.  Many cities cannot sustain the levels of service their citizens have grown to expect.

The monster that looms on the horizon is the fundamental question about the role of government in our lives and how we are going to pay for it. Lately, we’ve elected our representatives from the political fringes rather than the middle. We are sending people to battle who would rather have their own way than work collaboratively to find the best way.

My fear is that slaying this monster is too complex for a sound-bite solution from people who are only willing to consider a singular course of action.

About the Author:

Randy Pennington
Randy Pennington is an award-winning author and a leading authority on helping organizations deliver positive results in a world of accelerating change. To learn more or to hire Randy for your next meeting, visit www.penningtongroup.com or call 972-980-9857.
  • Chris Osborn

    Thoughtful analysis, Randy. I agree with much of what you say. I’d only like to add two points.

    One of the issues with the Wisconsin situation is that the governor did not approach the matter in an intellectually honest way. If it was really about the budget, he would have been forced to compromise to bring the Democrats back. Removing the bill from the budget revealed it for what it was. Also – he did not address ALL public employee unions. The ones he left alone – all supported his campaign. Which gets to your excellent point about conflicts of interest.

    As for school funding – what a mess nationally! I’ve worked locally on teacher pay issues, and our district ASKED the teachers to organize. Otherwise we were negotiating with a multi-headed beast with no clear voice and no true bargaining authority. A union made the whole process much more manageable and worked very well. One voice for the teachers, and the district could get a deal that – for a time anyway – served everyone pretty well.

    But the issue of local, state and federal funding requires a lot more honest and adult conversations than we seem capable of in this over heated very fractured political environment. We need real conversations about costs, taxes, excellence, methods that drive results, etc. None of these subjects is easy, and until people are faced with an end game that is so intolerable it can’t be really contemplated will we see any progress – at least that’s my fear.

    • Randy Pennington

      Great points, Chris.

      I’ve worked with numerous public and private sector unions through our clients over the years – AFSCME, Teamsters, Communication Workers, Electrical Workers, Oil Chemical & Atomic Workers – and found that organizations get the relationship with their unions that they deserve. There can be a positive aspect to the relationshp IF it is fostered from the outset. There are two problems that must be overcome with today’s teachers’ unions: (1) The national political machine doesn’t always represent the interests of the local teachers; and (2) education funding formulas that are state-investment intensive make it almost impossible for a local district to know what revenue to expect in today’s world.

      This does require an open and honest discussion – which is virtually impossible as long as people are protecting their positions rather than seeking solutions for their broader interests.