The
Hartland-Lakeside School District, about 30 miles west of Milwaukee
in tiny Hartland, Wis., had a problem in its collective bargaining
contract with the local teachers union.
The
contract required the school district to purchase health insurance
from a company called WEA Trust. The creation of Wisconsin's largest
teachers union -- "WEA" stands for Wisconsin Education Association
-- WEA Trust made money when union officials used collective
bargaining agreements to steer profitable business its way.
The problem
for Hartland-Lakeside was that WEA Trust was charging significantly
higher rates than the school district could find on the open market.
School officials knew that because they got a better deal from
United HealthCare for coverage of nonunion employees. On more than
one occasion, Superintendent Glenn Schilling asked WEA Trust why the
rates were so high. "I could never get a definitive answer on that,"
says Schilling.
Changing to
a different insurance company would save Hartland-Lakeside hundreds
of thousands of dollars that could be spent on key educational
priorities -- especially important since the cash-strapped state
government was cutting back on education funding. But teachers union
officials wouldn't allow it; the WEA Trust requirement was in the
contract, and union leaders refused to let Hartland-Lakeside off the
hook.
That's
where Wisconsin's new budget law came in. The law, bitterly opposed
by organized labor in the state and across the nation, limits the
collective bargaining powers of some public employees. And it just
happens that the Hartland-Lakeside teachers' collective bargaining
agreement expired on June 30. So now, freed from the expensive WEA
Trust deal, the school district has changed insurers.
"It's going
to save us about $690,000 in 2011-2012," says Schilling. Insurance
costs that had been about $2.5 million a year will now be around
$1.8 million. What union leaders said would be a catastrophe will in
fact be a boon to teachers and students.
But the
effect of weakening collective bargaining goes beyond money. It also
has the potential to reshape the adversarial culture that often
afflicts public education. In Hartland-Lakeside, there's been no war
between union-busting bureaucrats on one side and impassioned
teachers on the other; Schilling speaks with great collegiality
toward the teachers and says with pride that they've been able to
work together on big issues. But there has been a deep division
between the school district and top union executives.
In the
health insurance talks, for example, Schilling last year began
telling teachers about different insurance plans, some of which,
like United HealthCare's, required a higher deductible. "We involved
them, and they overwhelmingly endorsed the change to United
HealthCare," he says. But even with the teachers on board, when
school officials presented a change-in-coverage proposal to union
officials, it was immediately rejected. The costly WEA Trust deal
stayed in place.
Now, with
the collective bargaining agreement gone, Schilling looks forward to
working more closely with teachers. "I would say the biggest change
is we have a lot more involvement with a wider scope of teachers,"
he says. When collective bargaining was in effect, "We dealt with a
select team of teachers, a small group of three or four who were on
the bargaining team, and then the union director. Any information
that went to the teachers went through them. Now, we feel that we
will have a direct dialogue."
It's not
hard to see why union officials hate the new law so much. It not
only breaks up cherished and lucrative union monopolies like
high-cost health insurance; it also threatens to break through the
union-built wall between teachers and administrators and allow the
two sides to work together more closely. The old union go-betweens,
who controlled what their members could and could not hear, will be
left aside.
Hartland-Lakeside isn't the only school district that is pulling
free from collective bargaining agreements that mandated WEA Trust
coverage. The Milwaukee Journal Sentinel reports the Pewaukee School
District, not far from Hartland-Lakeside, will save $378,000 by next
year by leaving WEA Trust. The Menomonee Falls School District,
farther north, will reportedly save $1.3 million. Facing state
cutbacks, the districts can't afford to overpay for union-affiliated
coverage.
Look for
the unions to fight back with everything they have. If the Wisconsin
situation has shown anything, it is that organized labor views the
collective bargaining fight as a life-or-death struggle. If the
unions lose in Wisconsin, the clamor for change could spread to
other states. What happened in Hartland-Lakeside could become a
model for other schools looking for new and better ways to do
business. (Byron York is Chief Political Correspondent for
The Washington Examiner).
byork@washingtonexaminer.com.
http://washingtonexaminer.com/politics/2011/07/wisconsin-schools-buck-union-cut-health-costs
Epilogue
This
email (containing the article) got my attention and nailed it down:
"Remember the violent and disgusting demonstrations over Wisconsin
Gov. Scott Walker doing away with the collective bargaining for
teacher's unions? The results are in. Some school districts went from
a $400,000 deficit to a $1,500,000 surplus as a result. Why? It seems
that the insurance company that provided all the "so-called" benefits
to the teachers, was an insurance company owned and operated by the
teacher's union. Since they were guaranteed to get the insurance
business from the teachers and the State had to pay for it, and not
the teachers, they were increasing the annual costs every single year
to become the most expensive insurance company in the state. Then the
insurance company was donating millions and millions of dollars to
their favorite democrat politicians, who when they got elected,
guaranteed to keep funding the unions outrageous costs. In other
words, the insurance company was a "pass through" for Wisconsin
taxpayer money directly to the democrat politicians.
Nice racket, and this is the racket that is going on in every
single State that allows collective bargaining. No wonder the States
are taking it away. Now that the State of Wisconsin is free to put the
insurance contract out for bid, and lo and behold, they have saved so
much money it has turned deficits into surplus amounts. As a result,
none of the teachers had to be laid off, everyone got a raise, etc.,
etc., and the taxpayers of Wisconsin don't have to pay more taxes to
fund the union's political ambitions. If you weren't aware of the
reasons why Gov. Walker was fighting to take away
collective bargaining, it gives you an idea of the problem. The
Republican Party has. Outside of one or two, none of them know how to
speak up and explain properly what the problem was. We could sure use
a Ronald Reagan now, someone who could explain things for people to
understand, since we know that people don't like to read anymore."
Democrat President Franklin D. Roosevelt
(regarding government Labor Unions) wrote
Luther C. Steward, President, National Federation
of Federal Employees:
"The desire of Government employees for fair
and adequate pay, reasonable hours of work, safe and suitable working
conditions, development of opportunities for advancement, facilities
for fair and impartial consideration and review of grievances, and
other objectives of a proper employee relations policy, is basically
no different from that of employees in private industry. Organization
on their part to present their views on such matters is both natural
and logical, but meticulous attention should be paid to the special
relationships and obligations of public servants to the public itself
and to the Government.
All Government employees should realize that the process of
collective bargaining, as usually understood, cannot be transplanted
into the public service. It has its distinct and insurmountable
limitations when applied to public personnel management. The very
nature and purposes of Government make it impossible for
administrative officials to represent fully or to bind the employer in
mutual discussions with Government employee organizations. The
employer is the whole people, who speak by means of laws enacted by
their representatives in Congress. Accordingly, administrative
officials and employees alike are governed and guided, and in many
instances restricted, by laws which establish policies, procedures, or
rules in personnel matters.
Particularly, I want to emphasize my conviction that militant tactics
have no place in the functions of any organization of Government
employees. Upon employees in the Federal service rests the obligation
to serve the whole people, whose interests and welfare require
orderliness and continuity in the conduct of Government activities.
This obligation is paramount. Since their own services have to do with
the functioning of the Government, a strike of public employees
manifests nothing less than an intent on their part to prevent or
obstruct the operations of Government until their demands are
satisfied. Such action, looking toward the paralysis of Government by
those who have sworn to support it, is unthinkable and intolerable. It
is, therefore, with a feeling of gratification that I have noted in
the constitution of the National Federation of Federal Employees the
provision that "under no circumstances shall this Federation engage in
or support strikes against the United States Government."
The Concise Encyclopedia of Economics
concerning Labor Unions relates:
Although
labor unions have been celebrated in folk songs and stories as
fearless champions of the downtrodden working man, this is not how
economists see them. Economists who study unions—including some who
are avowedly pro-union—analyze them as
cartels that raise wages above competitive levels by
restricting the
supply of labor to various firms and industries.
Many unions have won higher wages
and better working conditions for their members. In doing so, however,
they have reduced the number of jobs available in unionized companies.
That second effect occurs because of the basic law of
demand: if unions successfully raise the price of labor,
employers will purchase less of it. Thus, unions are a major
anticompetitive force in labor markets. Their gains come at the
expense of consumers, nonunion workers, the jobless, taxpayers, and
owners of
corporations.
According to Harvard economists
Richard Freeman and James Medoff, who look favorably on unions, “Most,
if not all, unions have
monopoly power, which they can use to raise wages above
competitive levels” (1984, p. 6). Unions’ power to fix high prices for
their members’ labor rests on legal privileges and immunities that
they get from government, both by statute and by non enforcement of
other laws. The purpose of these legal privileges is to restrict
others from working for lower wages. As antiunion economist
Ludwig von Mises wrote in 1922, “The long and short of
trade union rights is in fact the right to proceed against the
strikebreaker with primitive violence.” Interestingly, those who are
expected to enforce the laws evenhandedly, the police, are themselves
heavily unionized.
U.S. unions enjoy many legal
privileges. Unions are immune from
taxation and from
antitrust laws. Companies are legally compelled to bargain
with unions in “good faith.” This innocent-sounding term is
interpreted by the National Labor Relations Board to suppress such
practices as Boulwarism, named for a former General Electric personnel
director. To shorten the collective bargaining process, Lemuel
Boulware communicated the “reasonableness” of GE’s wage offer directly
to employees, shareholders, and the public. Unions also can force
companies to make their property available for union use.
Once the government ratifies a
union’s position as representing a group of workers, it represents
them exclusively, whether or not particular employees want collective
representation. In 2002, unions represented about 1.7 million waged
and salaried employees who were not union members. Also, union
officials can force compulsory union dues from employees—members and
nonmembers alike—as a condition for keeping their jobs. Unions often
use these funds for political purposes—political campaigns and voter
registration, for example—unrelated to collective bargaining or to
employee grievances, despite the illegality of this under federal law.
Unions are relatively immune from payment of tort damages for injuries
inflicted in labor disputes, from federal court injunctions, and from
many state laws under the “federal preemption” doctrine. Nobel
laureate
Friedrich A. Hayek summed it up as follows: “We have now
reached a state where [unions] have become uniquely privileged
institutions to which the general rules of law do not apply” (1960, p.
267).
Labor unions cannot prosper in a
competitive environment. Like other successful cartels, they depend on
government patronage and
protection. Worker cartels grew in surges during the two world wars
and the
Great Depression of the 1930s. Federal laws—the Railway Act
of 1926 (amended in 1934), the Davis-Bacon Act of 1931, the
Norris-LaGuardia Act of 1932, the National Labor Relations Act of
1935, the Walsh-Healy Act of 1936, the Fair Labor Standards Act of
1938, various war labor boards, and the Kennedy administration’s
encouragement of public-sector unionism in 1962—all added to unions’
monopoly power.
Most unions in the private sector
are in crafts and industries that have few companies or that are
concentrated in one region of the country. This makes sense. Both
factors—few employers and regionally concentrated employers—make
organizing easier. Conversely, the large
number of employers and the regional dispersion of employers sharply
limit unionization in trade, services, and agriculture. A 2002
unionization rate of 37.5 percent in the government sector, more than
four times the 8.5 percent rate in the private sector, further
demonstrates that unions do best in heavily regulated, monopolistic
environments. Even within the private sector, the highest unionization
rates (23.8 percent) are in transportation (airlines, railroads,
trucking, urban transit, etc.) and public utilities (21.8 percent),
two heavily regulated industries.
What have been the economic
consequences of unions? In 2002, full-time nonunion workers had usual
weekly earnings of $587, 21 percent lower than the $740 earned by
union members. H. Gregg Lewis’s 1985 survey of two hundred economic
studies concluded that unions caused their members’ wages to be, on
average, 14–15 percent higher than wages of similarly skilled nonunion
workers. Other economists—Harvard’s Freeman and Medoff, and Peter
Linneman and Michael Wachter of the University of Pennsylvania—claimed
that the union premium was 20–30 percent or higher during the 1980s.
In a recent National Bureau of Economic Analysis study, David
Blanchflower and Alex Bryson found a union wage differential of 18
percent, a relatively stable premium from 1973 through 1995.
The wage premium varies by
industry and stage of the business cycle. Unions representing garment
workers, textile workers, white-collar government workers, and
teachers seem to have little impact on wages. But wages of unionized
mine workers, building trades people, airline pilots, merchant seamen,
postal workers, teamsters, rail workers, and auto and steel workers
exceed wages of similarly skilled nonunion employees by 25 percent or
more. During the job boom of the late 1990s, the union premium eroded,
following a historical pattern. Union wage agreements tend to be
relatively rigid for three years, so gains lag behind the more
responsive and flexible nonunion sector during a boom. The reverse
happens during an employment slump like that of the early 2000s
because nonunion wage growth slumps as hiring weakens, while union
wage gains march on.
The wage advantage enjoyed by
union members results from two factors. First, monopoly unions raise
wages above competitive levels. Second, nonunion wages fall because
workers priced out of jobs by high union wages move into the nonunion
sector and bid down wages there. Thus, some of the gains to union
members come at the expense of those who must shift to lower-paying or
less desirable jobs or go unemployed.
Despite considerable rhetoric to
the contrary, unions have blocked the economic advance of blacks,
women, and other minorities. That is because another of their
functions, once they have raised wages above competitive levels, is to
ration the jobs that remain. The union can discriminate on the basis
of blood relationships or skin color rather than auctioning off
(openly selling) the valuable jobs to the highest-bidding applicants.
Because craft unions such as the carpenters’ and railway unions have
had more monopoly control over wage rates and hiring practices than
industrial unions such as the auto and steel workers have had, craft
unions have had more opportunities to exclude minority workers.
Industrial unions have had to organize whoever was hired, and
industrial companies have hired large numbers of black workers. The
degree of racial
discrimination exercised by union officials depends on
their ability and willingness to exclude. For example, leaders at the
local shop level facing contested elections and turnover in office
cannot stray far from median membership preferences, while insulated
top union leaders have more discretion.
Economist Ray Marshall, although
a pro-union secretary of labor under President Jimmy Carter, made his
academic reputation by documenting how unions excluded blacks from
membership in the 1930s and 1940s. Marshall also wrote of incidents in
which union members assaulted black workers hired to replace them
during strikes. During the 1911 strike against the Illinois Central,
noted Marshall, whites killed two black strikebreakers and wounded
three others at McComb, Mississippi. He also noted that white strikers
killed ten black firemen in 1911 because the New Orleans and Texas
Pacific Railroad had granted them equal seniority. Not surprisingly,
therefore, black leader Booker T. Washington opposed unions all his
life, and W. E. B. DuBois called unions the greatest enemy of the
black working class. Another interesting fact: the “union label” was
started in the 1880s to proclaim that a product was made by white
rather than yellow (Chinese) hands. More generally, union wage rates,
union-backed requirements for a license to practice various
occupations, and union-backed labor regulations such as the minimum
wage law and the Davis-Bacon Act continue to reduce opportunities for
black youths, females, and other minorities.
The monopoly success of
private-sector unions, however, has brought their decline. The silent,
steady forces of the marketplace continually undermine them. Linneman
and Wachter, along with economist William Carter, found that the
rising union wage premium was responsible for up to 64 percent of the
decline in unions’ share of employment in the last twenty years. The
average union wage premium for railroad workers over similarly skilled
nonrailroad workers, for example, increased from 32 percent to 50
percent between 1973 and 1987; at the same time,
employment on railroads declined from 520,000 to 249,000. By 2002,
railroad employment had slipped to 216,000, down 13 percent since
1987, while total nonfarm employment grew 26 percent during the same
period. Increased wage premiums also caused declines in union
employment in construction, manufacturing, and communications. The
silent, steady forces of the marketplace continually undermine labor
cartels.
In recent decades, union
representation of workers has declined in all private industries in
the United States. A major reason is that employees do not like
unions. According to a Louis Harris poll commissioned by the AFLCIO in
1984, only one in three U.S. employees would vote for union
representation in a secret ballot election. The Harris poll found, as
have other surveys, that nonunion employees are more satisfied than
union workers with job security, recognition of job performance, and
participation in decisions that affect their jobs. And the U.S.
economy’s evolution toward smaller companies, the South and West,
higher-technology products, and more professional and technical
personnel continues to erode union membership.
In the United States, union
membership in the private sector peaked at 17 million in 1970 and had
fallen by nearly half—to 8.8 million—by 2002. Barring new legislation,
such as a congressional proposal to ban the hiring of nonunion
replacement workers, private-sector membership will likely fall from
8.5 percent to 5–6 percent by 2010, no higher than the percentage a
hundred years ago. While the unionization rate in government jobs may
decline slightly from 37.5 percent, public-sector unions are on
schedule to claim an absolute majority of union members within the
next few years, thereby transforming a historically private-sector
labor movement into a primarily government one. Asked in the 1920s
what organized labor wanted, union leader Samuel Gompers allegedly
answered, “More.” Today’s union leader would probably answer, “More
government.” That answer further exposes the deep, permanent conflict
between union members and workers in general that inevitably arises
when union-represented employees are paid monopoly prices for their
services...."
http://www.econlib.org/library/Enc/LaborUnions.html
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