Commentary Magazine

The Supreme Court to the Rescue

AP Photo/Andrew Harnik

The Supreme Court struck a grievous blow to union power on Wednesday by ruling that public service workers who do not wish to join a union cannot be compelled to pay “agency fees” in lieu of dues. The court, ruling 5-4, said that agency fees are a form of compelled speech, especially given the highly political nature of public service unions.

Because of this ruling, union income is bound to diminish. Thus, union influence over government will diminish as well. This is a very good thing for the country.

Allowing government workers to unionize was one of the worst ideas this country ever had. Analogizing public sector unionization to its private sector counterpart is a classic case of apples and oranges.

When a profit-seeking corporation sits down with a union to negotiate a contract, the two sides are essentially deciding how to divide the profits between capital and labor. After all, both capital and labor are necessary to create the profits in the first place. You can’t build automobiles without a factory, and you can’t build automobiles without labor.

And both sides have an incentive to get the ratio right. If capital gets too much, the company will have sullen, unhappy workers and the best ones will leave to go work for the competition. If labor gets too much, the company will have to raise prices and, thus, will lose market share, diminishing profits.

But in the public sector, there are no profits. Both sides are negotiating over how to spend other people’s money (which is to say the taxpayers’ money). As Milton Friedman famously observed, no one spends other people’s money as carefully as they spend their own.

Worse, in the private sector, neither side has any influence over who sits across the table, so the negotiations are inherently arm’s length. In the public sector, however, unions spend heavily to elect people to office who will then give them a good deal at the negotiating table.

The result over the last 50 plus years of the existence of public service unions has been a revolution in the wages and benefits of government workers. It used to be that public- sector workers got paid less but had much greater job security than those in the private sector. Today, however, it is the reverse and public-sector workers, who enjoy near-total job security, now get paid more than their private-sector counterparts and have far better benefits.

Defined-benefit retirement plans, for instance, are practically extinct in the private sector, replaced by defined-contribution plans. But defined-benefit plans are still the norm in the public sector and often have very generous rules. Many public-sector pension plans, for instance, allow unused sick days to accumulate until the worker retires. Then he gets paid for those unused sick days in his final year, greatly boosting his pension. Health care plans are equally generous for government workers, often continuing past retirement.

One reason these benefits are so generous is that both the politicians and the unions know that if they raise wages too much, there will be blowback from the taxpayers. So, instead, they increase the benefits that will only have to be paid down the road sometime.

And those once future costs have now become present costs. And the cost of pensions and health care for public workers and retirees are eating the budgets of many states and cities alive, crowding out other demands on the public fisc, such as the maintenance of infrastructure.

The Supreme Court may have ridden to the rescue in the nick of time.

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