Wisconsin Labor Brouhaha
Do libertarians have a dog in the fight?
That’s quite a row going on in Wisconsin. The new governor, elected without the support of most government-employee unions, has proposed to cut back the scope of collective bargaining for most state workers. Scott Walker says the budget measure is needed to save money as well as government jobs for the debt-ridden state. (Details here.)
The governor stands accused of leading a nationwide conservative movement to crush unions, but union officials are not shy about acknowledging their own narrow political interest. The Wall Street Journal reports:
Proposals in Wisconsin and other states have “great ramifications” beyond the damage to union coffers and membership, said Gerald McEntee, president of American Federation of State, County and Municipal Employees, the nation’s biggest public-sector union.
Unions have told the Obama administration that the state fights could affect the 2012 presidential election by draining unions’ political resources, especially in states like Wisconsin and Ohio. “I think it can put him in some [political] danger,” Mr. McEntee said of the president.
But let’s forget narrow partisan politics and look at bigger issues. Is the governor’s proposal really an assault on human rights, as advocates of the Wisconsin state employees allege? (Their raucous protests at the state Capitol are compared to rebellions in the Middle East.)
The Freed Market
A few basics: In a freed market – meaning no privileges, no bailouts, no legal barriers to competition (domestic or foreign), no patents, no protected banking cartel, no regulatory impediments to self-employment, no vast tracts of government-held land – workers would be free to form voluntary associations called unions and business owners would be free to deal with them or not. If not, workers would be free to use nonviolent methods to gain recognition for their unions, including strike threats, boycotts, and sympathy strikes, as well as lesser measures. Violence by any party against any peaceful person would be illegitimate. Freedom of association would be complete, and coerced association would be beyond the pale.
Under such circumstances, everyone’s demands would be tempered by two powerful factors: freedom and competition. Pay workers too little, and they would be bid away by rivals or take up self-employment. Pay them too much, and rivals would attract customers with lower prices. Demand too high a wage, and risk losing out to someone else willing to work for less. Market rivalry would protect everyone from abuse, which is why competition — endless hosannas to it notwithstanding — is usually the target of government intervention.
But we don’t live in a freed market. We live in an economy where the market has, from the beginning, been fundamentally compromised by pro-business intervention at all levels of government: contracting, debt, subsidies, guarantees, eminent domain, tariffs, patents, land policies, banking cartelization, and so on. (See this.) The pro-business nature of intervention is often obscured by the window dressing of labor, consumer, or environmental rhetoric, but in fact most intervention either was backed by some significant element of the business elite or the regulatory apparatus was captured by it. In contrast to others, business lobbyists have had superior access to power (some of them used to be legislators or regulators), and their firms (unlike smaller or yet-to-be launched businesses) have legal and accounting departments capable of handling the hassles.
Under these circumstances, employees suffer disadvantages that would not exist in a freed market: among them, fewer firms bidding for their services and formidable (though not insurmountable) barriers to self-employment or to worker-owned firms. Add to this the myriad ways the system raises the price of decent subsistence (taxes, building codes, zoning that separates residences from commercial areas, and other land-use restrictions that subsidize sprawl, for example), and you end up with a mass of people dependent on the employer class, mortgages, car loans, and more. Their lives are made all the more susceptible to disruption by the manipulations of the Federal Reserve and other branches of the government that create bubbles and booms followed by busts and jobless “recoveries.”
Most of us were taught in public school that the labor legislation of the New Deal and beyond shifted power from business to labor. Some rejoice while others despair over this. But on closer look labor legislation appears far more like a program to tame worker organizations, bringing their leaders to the corporatist table as junior partners. (The National Civic Federation and the American Association for Labor Legislation, groups filled with the business elite, had long sought similar laws.) These laws set rules for the formation of unions and the tactics they can use. When the Taft-Hartley amendments to the National Labor Relations Act came along, the wildcat strike, sympathy strike, and secondary boycott became illegal or contractually prohibited. Less formal kinds of pressure, such as work-to-rule, fell by the wayside. Things had to be done by the book or else — and the book was enforced by the union officials themselves. (The Wobblies were consequently hampered.)
More Bargaining Power
The upshot is that repeal of labor legislation – much to be desired – wouldn’t reduce workers’ bargaining power but increase it. True, no law would stop employers from hiring strike replacements, but strikes were not previously, and need not be, the only or most effective form of labor activism. (See more here.) Of course, along with the labor legislation must go all corporate welfare, guarantees, and other privileges.
Finally we get to government workers and the row in Wisconsin. It is a grave mistake to treat so-called public employment like other employment. Governments are monopolies that get their revenue by force, not through voluntary exchange. Thus they don’t face the market test of free competition, and they lack key price information with which to engage in economic calculation. The consequences of this difference are considerable.
As Freeman columnist Charles Baird notes, when government negotiates terms with employees, the parties are coconspirators in the looting of captive taxpayers. (Government employees aren’t taxpayers; they are tax-consumers.) Moreover, government-union bureaucrats and government administrators alike want to build up their fiefdoms. Fundamentally they are not rivals but rather accomplices with a harmony of interests contrary to those of the taxpayers. This is aggravated by the fact that those unions are powerful political actors and rich sources of campaign contributions (the ultimate source of which is the taxpayers) and manpower. A politician negotiating with a government union whose election support he seeks is unlikely to have the taxpayers’ interest uppermost in mind.
Government Education?
Thus even free-market advocates with a natural sympathy for labor in the corporate state find it hard to side with government employees. How can one sympathize with state school teachers when the government should have nothing to do with education? This doesn’t mean teachers are bad people, but they do the work of a bad system, and their unions are among the most powerful lobbies in any state capital.
Would the working conditions of state workers become intolerable if their unions were restricted? Not likely. But if they did, would it really be so bad if state governments had trouble finding employees?
So, does this mean that free-market advocates should side with the governor of Wisconsin? Actually, no. State governments are in trouble because they spent profligately when revenues were rolling in and now can’t meet the pension and other obligations they’ve imposed on the taxpayers. As a result, they face a crisis in legitimacy. Some governors realize this and are trying to save the discredited system by trimming spending (for now) and making political hay by reining in the unions. The fiscal hawks even tout cutbacks as ways to produce more revenue in the future. Rarely do you hear a governor call for the shedding and demonopolization of functions like education. (I don’t mean the phony privatization of contracting out or tax-funded vouchers.) So this is largely a fight over how to preserve and divide the tax spoils.
Taxpayers may breathe a sigh of relief if the governor of Wisconsin prevails. But they should have plenty of issues to fight with him over tomorrow.
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Comment by George Leef on 25 February 2011:
Excellent piece, nailing down the real issues and avoiding the many red herrings that have been strewn about.
I will add just one additional point regarding our authoritarian labor law. The National Labor Relations Act makes it illegal for businesses and workers to form voluntary associations or unions that don’t conform to the adversarial model of unions that the New Deal planners liked. The law thus forced labor relations to follow either of two tracks: governmentally approved unionism, or no union. Firms were forbidden to try different approaches and workers who didn’t like the collectivism of unions were forbidden to opt out and deal with the company on their own. Just as the corporate state takes care of incumbent businesses, it also takes care of incumbent unions.
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Comment by pdh on 25 February 2011:
Government employees, who consistently have outrageously plush pension plans and who consistently make a ton more than their private counterparts, love to cry: “We pay our taxes, too!”, but what’s lost in that is the indisputable fact that they don’t pay their taxes; WE DO! Every single penny spent or paid by every single public employee must be earned by some producer of some good or service in the private sector, and is paid for by the sweat of his brow. Thus, the private sector wage earner or business person not only pays his own taxes, but every public employee’s as well. It’s all part of the smoke and mirrors that evoke the illusion that public employees are not a drain on the private sector, but just workers like everybody else.
Comment by Sheldon Richman on 25 February 2011:
PDH, aren’t you double counting? Private-sector earners pay their own taxes, but they don’t pay the government workers’ taxes, because those workers have no taxes to pay. As I wrote, government employees consume tax revenues; they don’t produce (pay) them. When they appear to pay taxes, they are really just getting a lower tax-financed income. It’s typical of government that it gives them the money and takes some of it back rather than just giving them less to begin with.
Comment by Les on 25 February 2011:
With unemployment running at more than 9%, and underemployment at about 20%, Wisconsin can easily hire all the employees it may need. So I say fire any state employee who is absent from work without a verified excuse.
Comment by Fedup23 on 25 February 2011:
Sheldon, I agree with you in principle and I don’t doubt private individuals or firms would be able to fill in the void within a freed market, but as you point out we clearly don’t have one and Governor Walker does not seem intent on doing as much as he can to establish one in Wisconsin.
From what I’ve read Wisconsin’s public pension is in relatively good shape: http://pensionpulse.blogspot.com/2011/02/wisconsins-public-pension-problems.html
Given that Governor Walker’s proposal is primarily politically-motivated and I do think like the repeal of Glass-Steagall such bills while appealing in isolation may lead to undesirable consequences in the wider context of our corporatist economy.
I believe Erik Vanderhoff’s contribution to The League of Ordinary Gentleman’s labor roundtable at the very least hints at what these could be: http://ordinary-gentlemen.com/blog/2011/02/24/labor-roundtable-erik-vanderhoff/
Let me know what you think
Comment by Tom Insko on 25 February 2011:
@Fedup23: Given the maelstrom in Madison for Walker taking an incremental step in defusing the debt bomb inherent in defined benefit pensions and collectively bargained health care for government workers, I’d say he is doing the Lord’s work in starting to free the taxpayers from the tyranny of union teachers that teach union doctrine exclusively. Walker takes Sumner’s “Forgotten Man” and elevates him to the table; that’s not enough of a start for you?
Comment by Darian Worden on 25 February 2011:
Sheldon, this article is correct but I think it only shows part of the picture. The other part is that Walker is likely a tool to keep the system profitable for elites by adding more burdens onto working and middle class people (thus becoming another example of government acting as a mechanism by which some get wealthy off others). The fact that government employee unions are being targeted, that even these people are no longer off limits, points to some extreme fissures in the system. To me, figuring out how to take advantage of these fissures and increasing the divisions between government workers and union bosses/politicians would be useful.
It is also worth considering that, for example, government priorities and market distortions could mean that less is being spent on the actual task of educating (as opposed to administration and crony-enriching infrastructure projects) than would be the case in a free market. I’m not sure this is the case, but if one developed a strong argument along these lines it could be valuable in cultivating defections from state allegiance.
Comment by Fedup23 on 25 February 2011:
Tom, at least in Wisconsin these pensions are as far as I can tell not primarily responsible for the poor fiscal outlook. Whether the public unions cause other problems is another question, but it seems to me Governor Walker is being disingenuous and in that way he is like the vast majority of politicians: http://yglesias.thinkprogress.org/2011/02/contractortopia/9
Comment by TD on 25 February 2011:
“When they appear to pay taxes, they are really just getting a lower tax-financed income. It’s typical of government that it gives them the money and takes some of it back rather than just giving them less to begin with.”
Is my brain just misfiring, or do I recall some (fairly recent) rumblings about eliminating tax filing for federal workers, based on this very premise? The idea — again, if I’m correctly recalling this in the first place — was that it could shave a significant chunk of IRS time and resources.
Comment by Sheldon Richman on 26 February 2011:
TD, I hadn’t heard that. The people running things have a good reason not to do it: It would make it clear to everyone that government personnel are tax-eaters not tax-payers, and they don’t want to be so obvious. It would save money to make the change, but I’m sure the people in charge won’t think it’s worth the price.
Comment by Sheldon Richman on 26 February 2011:
Darian, I agree that Republicans have a different set of priorities from Democrats when it comes to government spending and other activities. At the state level Republicans tend to favor “economic development,” which consists of various subsidies and tax preferences for favored businesses. This development often requires modification of infrastructure, so middle-class and working-class taxpayers make up the lost revenue to pay for those projects. As I noted, Republicans brag that their programs produce additional revenues. Why is that a good thing?
In other matters, most occupational licensing, which is special-interest protectionism at its root, is under state jurisdiction. Has there been a Republican governor who has gone after these barriers to self-employment? I believe that most Republicans are as statist Democrats. But the statism is directed at different ends.
Comment by Chris on 26 February 2011:
As a member of a union who has also been fired for no reason at all, I do not trust businesses to have my best interests at heart. When I could be let go for the crime of being ill with out union protection- then yes unions are necessary. I dislike many things about the union- one being that I have to work with idiots who cannot get fired (easily). BUT being able to speak my mind to my boss (within reason of course
and having an almost living wage and health insurance is important wouldn’t you say? And yes- I am right to not trust my employer as the part of the company I work for is the only part that is unionized AND is also the only part of their business that gets health insurance (except management) and over minimum wages paid out.
Comment by Michael on 26 February 2011:
If men want to organize into a union and bargain collectively with their employer, that is their right, provided they don’t force anyone to join, or force their employer to negotiate with them. Today’s labor legislation, however, is a violation of rights, because men are forced to join unions and employers are forced to negotiate with unions.
It is this power of force the unions don’t want to lose.
Comment by Dr. T on 26 February 2011:
Les said: “With unemployment running at more than 9%, and underemployment at about 20%, Wisconsin can easily hire all the employees it may need. So I say fire any state employee who is absent from work without a verified excuse.”
Except that the teachers unions and state and local governments pushed for laws that require public school teachers to have masters degrees in education (despite a complete lack of evidence that such training is needed or helpful). I’m a chemist and a pathologist who has taught undergraduate students, graduate students, medical students, and resident physicians, but there’s not a single state in the USA where I can teach biology or chemistry in a public high school (or reading and writing to younger pupils). That’s one of the reasons why public union-government employer cooperation puts a huge burden on taxpayers.
Comment by Fareed on 26 February 2011:
the right here lies on both sides: employees have the right to free association, therefore to organize into unions (or fraternal orders or glee clubs or whatever they choose). But employers have the right to make whatever offers of employment they want to whomever they want to, and not to deal with people or groups they don’t want to deal with.
There’s no such thing as “forced bargaining.” The real word for that is: extortion.
Comment by Ivan on 27 February 2011:
Collective solutions are problematic, an attempt to monopolize and even dare I say usurp the individual natural rights we have. There is an element of usurpation in every collective approach. Without freedom to act, this power is an abuse and an attempt to stifle competition. It’s destructive of innovation and progress.
Comment by N. Joseph Potts on 27 February 2011:
I used to think of public education as a two-edged sword: the taxpayers have to pay for it, and the pupils have to attend school (and perform in it).
I’m now challenging my metaphorical abilities with the notion of a THREE-edged sword: taxpayers have to pay, pupils have to attend, AND teachers have to join the union and pay its dues.
Are things getting a bit coercive in here? Maybe we just govern each other a bit too much.
Comment by Richard on 27 February 2011:
I don’t view the various pieces of federal legislation discussed in this article (and in the readers comments) as necessarily pro-business or pro or anti-labor. Instead, I view the government legislation mentioned by Sheldon as pro-government authority legislation. The government, above all else, needs to be needed. It desperately seeks to interpose itself between individuals, businesses, labor unions, and those who seek to do business with one another such that nothing can be done without the sanction of government officials. It is all about power and control, and just as in Hitler’s Germany, big business, big labor, and federal officials form a symbiotic relationship at the expense of the rest of the populace.
Comment by michael a metz on 27 February 2011:
An honest member of a union admits that during the humble beginnings of collective solidarity the union member preferred to focus on exclusively the three simple issues of hours, wages, and working conditions. Once unions made gains on these three issues, the union member continues to raise a new issue after another issue after another new issue and so on forever. A union member is now perpetually wanting only what he wants without giving in for the larger collective of his own community.
A union member is not different than any other human in wanting to meet his selfish wants. A union member like any other human prefers having his own power and authority however out of balance it is with the larger collective of his own community. A union member prefers greedily increasing his own monetary benefits without sacrifice to the larger collective of his own community he claims to serve.
A union member prefers power through government action providing him special legal authority like collective bargaining. A union member paid with taxpayers’ monies overreaches the larger collective of his own community when demanding special collective bargaining legal authority. A union member paid with taxpayers’ monies already has enough power with his access to an infinite resource of money through taxes. A union member having both access to an infinite resource of money through taxes and the legal authority of collective bargaining is way out of balance with a worker in the private sector who has only a finite resource of money.
A union member paid with taxpayers’ monies, compared to a worker in the private sector, does not have to perform with production to gain money. A union member paid with taxes has no concern about making money for his employer – such employer can always go to private producers with the requirement of taxes to fill coffers of the union member’s employer who pays the union member with the collected tax money. A union member paid his wage with taxes does not need an extra legal authority of collective bargaining, compared to a worker in the private sector, because he has an employer who can always raise interest free money to pay his wages through taxes.
A public union member prefers having the other people in his community pay his pension, with taxes, without him paying any of his money from his government paycheck. A public union member prefers having an employer who can always go to his neighbors to collect taxes for his pension perpetually. The public union member dying does not stop others from paying for his family. A public union member prefers having others take care of his own. A public union member prefers his form of elite entitlements and he wants the government, who is supposed to be of the people, to cater to his every whim. A public union member willingly uses any tactic of leverage to get his way regardless whether his tactic is in the best interests of the community he claims to serve.
A public union member prefers having the other people in his community pay his health insurance premiums, without him paying any of his money from his government paycheck. A union member wants everything his own way, regardless whether his benefits are much better the worker in the private sector (even a unionized private sector worker) who pays for the entire lifestyle of the public union member through taxes.
Comment by Greg Bennett on 27 February 2011:
When the Titanic sunk, why were only the 1st class passengers allowed to get into the lifeboats? Why were 3rd class passengers locked down and kept there almost until the end? And how is it that the families of the people who died, mostly 3rd class passengers, did not receive any compensation from the owners of the Titanic who had overbook the ship and under stocked lifeboats? Throughout history ruling elites have rarely given any thought to the conditions of the people, and have viewed them as little more than work animals. A lot of the responses on this blog seem to believe that this is the natural order of things. If’s funny how elites never see the revolution coming!
Comment by Ed on 28 February 2011:
Surely, some gov’t workers must “pay” taxes in the sense that the value that some of them add to the economy is greater than the income they receive. Suppose there is a business that turns a profit and is suddenly nationalized. Suppose, also, that nothing else changes – same employees, same wages, benefits, etc. Would the taxes paid portion of the employees’ W-2 be meaningless after nationalization? I don’t think so. It would still represent a real loss of income that was consumed by the gov’t instead of the employee. What’s different is that the consumer (i.e. taxpayer) no longer has a choice about whether or not to purchase the product. Prior to nationalization consumers sent funds to the business and gov’t took a piece afterwards. Now, taxpayers send funds to the gov’t which “returns” funds to the employees less what the employees would have sent to the gov’t before nationalization. So long as the individual employees add more value than is paid to them they must be “paying” taxes regardless of the accounting.
I’m cetainly not arguing that this is true in general. On average, gov’t is most likely a net loss for the economy. It’s certainly a loss for freedom if not income. But certainly there must be some teacher or other gov’t worker whose product is valued by consumers (i.e. taxpayers) and whose total compensation is comparable to what would be received without force in the free market for the same product. Part of the difference between value added and total compensation must be “taxation.”
Comment by Sheldon Richman on 4 March 2011:
Ed, I don’t think that addresses my point. I’m simply saying that the incomes of government employees originate in taxation. So when they “pay taxes,” they are simply returning some of the money whence it came (after the tax collectors obtained it). That money was already paid once as taxes. It can’t happen a second time. I’m not saying government employees produce nothing that consumers would willingly buy if given the chance.
Pingback by Blagnet.net » Hierarchy, authority, authoritarianism, left-libertarianism on 9 April 2011:
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