The Department of Labor recently reported that most union members these days are government employees. According to the new study, in 2009 7.9 million public-sector workers belonged to unions, compared to 7.4 million private-sector workers.
The public sector has been more highly unionized than the private sector for years, and the gap has steadily widened. In 1983, the first year the Bureau of Labor Statistics collected comparable data, 34 percent of public sector workers were in unions, compared to 18 percent in the private sector. By 2009, 37 percent of government workers were unionized, but the rate for private-sector workers was down to just over 7 percent. However, because there are about five times as many workers in the private sector, 2009 marks the first time the public sector has employed the majority of union members.
The turning point came as highly unionized industries such as manufacturing and construction lost jobs in the recent recession. In a period when 1.3 million factory jobs were lost, the public sector actually gained 16,000 jobs.
The long-term decline in private sector union membership, however, is the product of competition, not recession. When unionized and non-unionized companies have faced off against one another, the non-unionized companies repeatedly have prospered while their unionized competitors stagnated or failed. Industry after industry - from airlines to steel to autos - has followed this pattern. But the same has not been true in the public sector, where economic competition is all but nonexistent.
Union workers are not necessarily less efficient or competent than their non-union counterparts. The enterprises that employ them tend to be less competitive, however, in large part because union leaders are motivated to obtain maximum benefits for workers today, without regard to the future condition either of the employer or of the workers who might join the union years from now. Private-sector unions typically see their mission as providing benefits to today’s workers, not tomorrow’s.
The same dynamic is at play in the public sector, but in the absence of competition, it yields different results. Public officials may be less inclined to push back against union demands than are private managers whose own compensation is tied to the bottom line. Elected officials respond to voters, and voters expect services, preferably without interruptions from strikes.
Voters are particularly unlikely to reward public officials for keeping costs down when the costs will come far in the future, such as in the form of pensions paid to union workers. More than 80 percent of state and local workers have pensions, while just 50 percent of private-sector workers do.
Labor unions’ increasing stake in the public sector has important consequences for everyone. Unions seeking more for their members will find themselves going to taxpayers, rather than CEOs. Unions already are aggressively advocating tax and service increases. The Heritage Foundation has compiled a state by state list of examples.
Now, unions are pressuring Congress to pass the Employee Free Choice Act, which would establish a signature-based system to unionize private-sector workplaces, rather than the existing secret-ballot elections. Though I believe the legislation is a bad idea, in the end I do not think it will make much of a difference.
Union membership in the private sector is not declining because employees face too many obstacles to joining unions. Workers who really want unions can get them under current law. But workers who have seen one unionized company after another struggle to survive are in no hurry to join that club.
State and local governments can go on longer with uneconomic employment structures than can private enterprises, but taxpayers have financial limits, too. The question is whether public officials and public employee unions will be able to reach sustainable arrangements on their own before governments at every level crash into an economic brick wall.
Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s recently updated book,
The High Achiever’s Guide To Wealth. His contributions include Chapter 1, “Anyone Can Achieve Wealth,” and Chapter 19, “Assisting Aging Parents.” Larry was also among the authors of the firm’s previous book
Looking Ahead: Life, Family, Wealth and Business After 55.
Posted by Larry M. Elkin, CPA, CFP®
The Department of Labor recently reported that most union members these days are government employees. According to the new study, in 2009 7.9 million public-sector workers belonged to unions, compared to 7.4 million private-sector workers.
The public sector has been more highly unionized than the private sector for years, and the gap has steadily widened. In 1983, the first year the Bureau of Labor Statistics collected comparable data, 34 percent of public sector workers were in unions, compared to 18 percent in the private sector. By 2009, 37 percent of government workers were unionized, but the rate for private-sector workers was down to just over 7 percent. However, because there are about five times as many workers in the private sector, 2009 marks the first time the public sector has employed the majority of union members.
The turning point came as highly unionized industries such as manufacturing and construction lost jobs in the recent recession. In a period when 1.3 million factory jobs were lost, the public sector actually gained 16,000 jobs.
The long-term decline in private sector union membership, however, is the product of competition, not recession. When unionized and non-unionized companies have faced off against one another, the non-unionized companies repeatedly have prospered while their unionized competitors stagnated or failed. Industry after industry - from airlines to steel to autos - has followed this pattern. But the same has not been true in the public sector, where economic competition is all but nonexistent.
Union workers are not necessarily less efficient or competent than their non-union counterparts. The enterprises that employ them tend to be less competitive, however, in large part because union leaders are motivated to obtain maximum benefits for workers today, without regard to the future condition either of the employer or of the workers who might join the union years from now. Private-sector unions typically see their mission as providing benefits to today’s workers, not tomorrow’s.
The same dynamic is at play in the public sector, but in the absence of competition, it yields different results. Public officials may be less inclined to push back against union demands than are private managers whose own compensation is tied to the bottom line. Elected officials respond to voters, and voters expect services, preferably without interruptions from strikes.
Voters are particularly unlikely to reward public officials for keeping costs down when the costs will come far in the future, such as in the form of pensions paid to union workers. More than 80 percent of state and local workers have pensions, while just 50 percent of private-sector workers do.
Labor unions’ increasing stake in the public sector has important consequences for everyone. Unions seeking more for their members will find themselves going to taxpayers, rather than CEOs. Unions already are aggressively advocating tax and service increases. The Heritage Foundation has compiled a state by state list of examples.
Now, unions are pressuring Congress to pass the Employee Free Choice Act, which would establish a signature-based system to unionize private-sector workplaces, rather than the existing secret-ballot elections. Though I believe the legislation is a bad idea, in the end I do not think it will make much of a difference.
Union membership in the private sector is not declining because employees face too many obstacles to joining unions. Workers who really want unions can get them under current law. But workers who have seen one unionized company after another struggle to survive are in no hurry to join that club.
State and local governments can go on longer with uneconomic employment structures than can private enterprises, but taxpayers have financial limits, too. The question is whether public officials and public employee unions will be able to reach sustainable arrangements on their own before governments at every level crash into an economic brick wall.
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