June’s recall election victory for Wisconsin Governor Scott Walker has been received very differently by the two sides of the political aisle.
Those on the Right who favor smaller government and individual liberty consider it a monumental victory in the fight against runaway union power. People on the Left consider it a backbreaking strike against the middle class.
What the battle was fought over, however, was not the future of the middle class, or the rights of unionized workers, but the special interest group that is public sector unions.
Union leaders and progressives often wax rhapsodic about the days when in excess of 35 percent of private sector workers belonged to a union. In a competitive labor market, workers are paid by the amount of productivity they add to a company. Unions, with their rigid rules regarding both what tasks workers can perform and how companies can promote or compensate workers, make workers less productive. Unions in the private sector therefore reduce the benefits that employees receive by reducing their productivity.
Because workers and firms in the private sector are price takers (they have no control over the market price of labor) no peaceful action a union carries out can be beneficial to them. Workers have started to realize this, and the percentage of private sector workers belonging to a union is now at only 6.9 percent.
The union membership rate in the public sector, on the other hand, has remained high. More than 36 percent of public sector workers are members of employee unions. This is because unions still serve a purpose in representing public sector workers. Because government workers are paid based upon their ability to extract payment from the state rather than their marginal productivity, it is beneficial for the workers to devote a portion of their paycheck to people who are experts at extracting benefits from the state. This is how taxpayers are harmed by public sector unions.
At the end of the day, it really doesn’t matter whether or not public sector workers are unionized. Their wages are disconnected from their productivity because government agencies are not punished in the market by losses. Public sector unions are simply another interest group lobbying the government for more benefits, no different from the firms farmers hire to promote their interests in DC. They do not represent some larger group such as “middle class Americans,” but only the teachers who pay their bills.
The real solution isn’t anything that any mainstream political group has brought to the table, but instead the privatization of as many state services as possible. While I can see a justification for subsidizing education for a portion of the population, I have no reason to believe that a good such as education must be administered by the public rather than private sector. If schools were subject to market competition, they would go out of business if they overpaid their workers, and lose productive workers to competitors if they underpaid their workers.
Unions, like the corporations they bargain with, are soulless entities which attempt only to maximize the profits of those they represent. If you don’t like what they do, don’t blame the unions for being evil. Take a look at the incentive structures we have set up for them, or in the words of Ayn Rand, “check your premises.”
