Organized Crime
37. The Political Economy of Government Employee Unions
An important reason why so many state and local governments in the U.S. seem to be in a perpetual state of financial crisis with their politicians constantly scheming to raise hidden (and not-so-hidden) taxes is that they provide most of their so-called “services” through unionized government-run monopolies.
Government employee unions have vastly more power than do private-sector unions because the entities they work for are mostly monopolies. When the employees of a grocery store, for example, go on strike and shut down the store or grocery chain, consumers can shop elsewhere, and the grocery store management is perfectly free to hire replacement workers. In contrast, when a city teachers’ or garbage truck drivers union goes on strike, there is no school or garbage collection as long as the strike goes on. This gives the government union enormous bargaining power as elected officials must then deal with the rabid complaints of voters about the absence of schools or garbage collection and are pressured to quickly give in to the union’s demands.
In addition, government school teachers often are tenured after only two or three years and civil service regulations make it extremely costly, if not impossible, to hire replacement workers. Thus, when government bureaucrats go on strike they have the ability to completely shut down the entire “industry” that they work in indefinitely. This is the primary reason why the expenses of state and local governments have skyrocketed in recent decades.
For decades, researchers have noted that the more money that is spent per pupil in the government schools, the worse is the performance of the students. Similar outcomes are prevalent in all other areas of government. As economist Milton Friedman once wrote, government bureaucracies—especially unionized ones—are like economic black holes where increased “inputs” (i.e., money spent on government programs) lead to declining “outputs” (i.e., student performance, poverty, etc.). The more that is spent on government schools, the less educated are the students. The more that is spent on welfare, the more poverty there is, and so on. This is the exact opposite of normal economic life in the free market whereby increased inputs lead to more and better products and services, not less.
There is no market feedback mechanism in government that rewards product improvement (with profits) and cost cutting while punishing (with losses) cost over-runs and declining product or service quality, for there are no profits and losses in an accounting sense in government. In fact, the incentives are perverse in government: The worse government bureaucracies perform, the more money they typically get for their budgets after having made the excuse that their poor performance is not inherent, but only caused by not enough money.
There are many studies in the economics literature showing that government bureaucrats are paid higher salaries and benefits than are their equally-educated private-sector counterparts. The enormous power of government employee unions effectively transfers the power to tax from voters to the unions and is therefore patently undemocratic. Because government employee unions can so easily force elected officials to raise taxes to meet their “demands,” it is they, and not the voters, who control the rate of taxation. They are the beneficiaries of a particular form of taxation without representation (not that taxation with representation is any better). This is why some states have laws prohibiting strikes by government employee unions.
Politicians are caught in a political bind by government employee unions: If they cave in to their wage demands and raise taxes to finance the demands, then they increase the chance of being kicked out of office in the next election by angry taxpayers. The “solution” to this dilemma has long been to offer government employee unions moderate wage increases but spectacular pension promises. This allows the politicians to pander to the unions while deferring the costs to the future, long after they have moved on to higher office or retired from politics.
Government employee unions are not even primarily interested in the well-being of union members but of the union itself as an organization. The union bosses run the unions for their own personal benefit, primarily. Consequently, they use civil service regulations as a tool to protect the job of every last government bureaucrat no matter how incompetent or derelict he is. Fewer government bureaucrats means lower union dues and diminished prospects for extravagant salaries and perks for the union bosses. This is why government employee unions always challenge in court (or threaten to) the attempted dismissal of all bureaucrats, sometimes even ones who are accused of criminal behavior.
Firing an incompetent government school teacher, for example, can take months or years of legal wrangling. Politicians discovered many years ago that the more convenient strategy is to actually reward the incompetent bureaucrat with a higher-paying administrative job that the incompetent employee will gladly accept. That solves the problem of parents who complain that their childrens’ math teacher cannot do math while eliminating the possibility of a lawsuit by the union. That is why government school administrative offices are bloated bureaucratic monstrosities filled with teachers who can’t teach but who are given the responsibilities of “administering” the entire school system instead. No private school could survive under such a perverse system.
Government employee unions are also champions of “featherbed-ding”—the hoary union practice of forcing employers to hire more than the number of people necessary to do the job. If this occurs in the private sector, the higher wage costs will make the firm less profitable or cause it to go bankrupt because there is competition. No such thing happens in government monopolies. Featherbedding is a “win-win” strategy for politicians and bureaucrats but a source of plunder of the taxpayers. The unions collect even more union dues while the politicians get to take credit for handing out more patronage jobs. The taxpayers get higher tax bills.
Every government employee union is a political machine that lobbies relentlessly for higher taxes, increased government spending, more featherbedding, and more pension promises while demonizing hesitant taxpayers as uncaring enemies of children, the elderly, widows and orphans, the poor, etc. It is the old socialist trick that Frédéric Bastiat wrote about in his famous book, The Law. The unions portray advocates of school privatization not as legitimate critics of a failed system, for example, but as haters of children. They treat critics of the welfare state not as people who are concerned about how the welfare state has destroyed work incentives and decimated families, but as haters of the poor.
Unionized, government-run monopolies have turned Americans into the servants rather than the masters of their governments. They have provided shoddier and shoddier “services” for more and more money, year in and year out. They are textbook examples of the failures of socialism and should be abolished. Any services that they provide for which there is an actual demand can be provided with superior quality and lower costs by private, competitive markets.
