The View From 1776

The ineluctable fact is that organized labor feather-bedding and restrictive work rules reduce production efficiency and output levels per labor hour.

This always has meant reduced profits for employers and fewer jobs and lower pay for non-union workers.  There is an ultimate limit to labor union extortion in the private sector: bankruptcy of the employer, as we saw in the case of Chrysler and Government Motors.

No such limit exists in the public employees sector.  Public employees’ unions have raised the level of the game to winner-take-all stakes.  They control the election of their employers, the politicians, via election campaign contributions and free campaign work. 

Today public employees’ labor unions indirectly control the economy.  We taxpayers work for them.

That may be about to change.

Read William McGurn’s column in the January 4, 2011, edition of the Wall Street Journal.

Labor’s Coming Class War
Private-sector union workers begin to notice that their job prospects are at risk from public-employee union contracts.

Jeffrey Brown of PBS’s “NewsHour” recently summed up the year’s economic performance by invoking the most overworked chestnut of modern American punditry: “the disconnect . . . between Main Street and Wall Street.”

The notion that Wall Street and Main Street are fundamentally at odds with one another remains a popular orthodoxy. So much so that we may be missing the first stirrings of a true American class war: between workers in government unions and their union counterparts in the private sector.

In theory, of course, organized labor is all about fraternal solidarity. For many years, it is true, private-sector unions supported collective-bargaining rights and better benefits for government workers, while public-employee unions supported the private-sector unions in their opposition to legislation such as the North American Free Trade Agreement in the 1990s.

Suddenly, it’s a different world. In this recession, for example, construction workers are suffering from unemployment levels roughly double the national rate, according to a recent analysis of federal jobs data by the Associated General Contractors of America. They are relearning, the hard way, that without a growing economy, all the labor-friendly laws and regulations in the world won’t keep them working.

What’s more, “blue-collar union workers are beginning to appreciate that the generous pensions and health benefits going to their counterparts in state and local government are coming out of their pockets,” says Steven Malanga, a senior fellow at the Manhattan Institute. “Not only that, they are beginning to understand the dysfunctional relationship between collective bargaining for government employees and their own job prospects.”

The signs of this new awakening are gathering. In New Jersey, Gov. Chris Christie rightly becomes a YouTube sensation for taking on his state’s obstinate public-sector unions. The more interesting story, however, may be the president of the New Jersey Senate, Steve Sweeney—who also happens to be an organizer for the International Association of Ironworkers.

In the days of Democratic Gov. Jon Corzine, Mr. Sweeney angered state-employee unions by opposing their push to balance the budget with an increase in the sales tax. In the Christie days, he continues to anger them by pushing for reform of state-employee pay and benefits. Another way of putting it is that Mr. Sweeney knows that 40% of his fellow iron workers in New Jersey are out of work—and that unless his high-tax state gets its fiscal house in order, the only work they’ll find will be in Texas.

Over in New York, meanwhile, newly inaugurated Gov. Andrew Cuomo faces a similar battle. Mr. Cuomo campaigned on a cap on property taxes and a freeze on state salaries, both anathema to the powerful state-employee unions. As the New York Times reported last month, however, in this showdown Mr. Cuomo may have found a surprising ally in the 100,000- member Building and Construction Trades Council of Greater New York. Maybe not so surprising: The Times says unemployment for these workers is running at 20%.

Elsewhere, in 2005 Republican Govs. Mitch Daniels and Matt Blunt used executive orders to end collective bargaining with state employees in Indiana and Missouri, respectively. Now the incoming Republican governors of Ohio and Wisconsin—John Kasich and Scott Walker—are targeting collective bargaining for government workers in their states.

In some ways, this new appreciation for the private sector is simply back to the future. FDR, for example, warned in 1937 that collective bargaining “cannot be transplanted into the public service.” In the old days, unions understood economic growth. Mr. Malanga points to AFL-CIO President George Meany’s strong support for the JFK tax cuts as an example.

These days the two types of worker inhabit two very different worlds. In the private sector, union workers increasingly pay for more of their own health care, and they have defined contribution pension plans such as 401(k)s. In this they have something fundamental in common even with the fat cats on Wall Street: Both need their companies to succeed.

By contrast, government unions use their political clout to elect those who set their pay: the politicians. In exchange, these unions are rewarded with contracts whose pension and health-care provisions now threaten many municipalities and states with bankruptcy. In response to the crisis, government unions demand more and higher taxes. Which of course makes people who have money less inclined to look to those states to make the investments that create jobs for, say, iron workers, electricians and construction workers.

Some of these folks are beginning to notice.