MENU

POLICY BRIEF

POLICY BRIEF

Differences between private sector unions and government unions

State Budget SolutionsMarch 23, 2011

Liberal icons New York Mayor Fiorella LaGuardia and President Franklin D. Roosevelt strongly supported industrial unions, but both opposed collective bargaining by government employees because government employees enjoy market advantages too easily exploited. President Roosevelt once said, "The process of collective bargaining, as usually understood, cannot be transplanted in the public service." Former AFL-CIO President George Meany also viewed government unions as unthinkable.  All three recognized the fundamental differences between private-sector unions and government unions.

One key distinction between the two unions is that private sector unions must respect their employer's bottom line, whereas government unions do not have that same obligation. Private sector union leaders bargain for more benefits while at the same time recognizing that excesses will force the company to lay off employees or go bankrupt.  Those unions bargain face-to-face with those who pay the bills.  In addition, private sector union members on strike lose their wages. Both private sector management and owners have an incentive to resist unreasonable union demands, particularly in regard to pension and retiree health care. If private sector managers make unwise concessions impairing the long-term profitability of their company, it is reflected immediately in the value of the company.  In contrast, government unions are not confined by an employer's bottom line. For public employees, the bottom line is the bottom of the taxpayers' pockets. 

When the government entity bargaining with government employees cannot afford the cost of the union demands, the government increases the fringe benefits, i.e. pensions, and pushes the costs off to the future. The heavily unionized government worker states, including California, Illinois, New Jersey and New York, have the largest unfunded pension and retiree health care liabilities.  In Wisconsin, public employers from 2000 to 2009 contributed $12.6 billion to public employee pensions while the employees contributed only $55.4 million.  

State Budget Solutions examined the Bureau of Labor Statistics Databases and found dramatic evidence of the increases in fringe benefits by state and local governments.  The revelation that public employees receive pension and retirement benefits that were worth 337% more than private sector employees is shocking, and illustrates the lengths to which governments will go in bargaining. 

Overall, state and local government employees receive total benefits worth 171% more than what public sector employees earn.  On an hourly basis, state and local government employees earn an average of $40.28 per hour in total compensation, whereas private sector employees average only $27.75 per hour. 

In Milwaukee the average teacher will earn this year $59,500 in salary and $41,591 in benefit for $101,091 in total compensation. The average Milwaukee teacher has a $23,820 health insurance plan with no premium. Contrast that with a private sector employee in Wisconsin, who has a $14,656 insurance plan with a 20% premium. Despite this, last July the teachers union sued when the Milwaukee Public Schools stopped giving free Viagra because it cost the district nearly $800,000 per year and district was facing a deficit. The union just dropped this lawsuit on March 7, 2011.

Just as public sector unions are not concerned with the bottom line, performance is also not valued as it would be in the private sector.  For example, Milwaukee School teacher Megan Sampson was laid off less than one week after being named Outstanding First Year Teacher by the Wisconsin Council of Teachers.  She was laid off because the collective bargaining agreement requires layoffs to be made based on seniority rather than merit. 

Government unions don't bargain with the taxpayers who pay the bills. When teachers go on strike, they pay no penalty when their absence forces schools to close. Adding insult to injury to taxpayers, their actions force parents to either take time off work or quickly find someone else to care for their children.  Also, unlike private sector unions, a government union has a natural monopoly over government services. This monopoly gives government union leaders extraordinary power over elected officials.

Most government unions would not exist without forced union dues.  One of the first things government union leaders bargain for is a "union security" clause, which forces all government employees in the unit to pay for union services as a condition of employment. If a government employee works in a state with a "union security" clause, the individual must pay tribute to the union or they will be fired.

The money the government unions collect in dues helps to elect politicians who support the unions' objectives. Government unions play a major role in electing their management team!  In essence, government unions have a seat on both sides of the bargaining table. The U.S. Supreme Court made it clear that there is no "right" to collective bargaining. Collective bargaining for government employees makes them "super citizens" and the rest of the taxpayers are relegated to second-class status.

Today, the number of unionized government workers surpasses the number of unionized private sector workers. As a result, national unions have become advocates for higher taxes and government expansion, despite the fact that many of their private sector members oppose these efforts.

In the last election at the national level, government unions spent more than $200 million to defeat Republican candidates. The American Federation of State, County, and Municipal Employees -the main union of state government employees- spent over $90 million during the campaign, and it was the top donor to the Democrats' efforts to win gubernatorial and state legislative races.

As a result, the Democratic Party is now heavily reliant on unions and forced political contributions from their members. Unions help elect Democrats who repay the unions with more pay and benefits, many of which are unfunded. In effect, government unions elect their "management," who in turn can forcibly extract more money from taxpayers to increase wages and benefits. Government officials can promise pensions and retiree health care benefits that future taxpayers will have to fund. This, in turn, sucks jobs from the private sector by forcing businesses to pay higher taxes.

Today, government union leaders want it all - high pay, stability, and a growing work force. They lobby every level of government for increased spending and higher taxes.  There are no studies that show government workers in unionized states provide better service than those in nonunionized states.

The issue facing states around the nation is not a traditional private sector dispute between labor and management. It is a question of important public policy and whether states can afford agreements for government employees' salaries and benefits.  The numbers from State Budget Solutions below clearly show that the salaries and benefits are unsustainable and the states cannot afford these agreements.

The data below illustrates the stark differences between private compensation and state and local government compensation.  While the Bureau of Labor Statistics did not include what percentage of each group is represented by a union in this publication, in January 2011 it published "Union Members Summary", finding that the union membership rate for public sector workers at 36.2 percent was substantially higher than the rate for private sector workers at 6.9 percent. Within the public sector, local government workers had the highest union membership rate of 42.3 percent.

Cost of Employee Compensation Chart

Employer Cost of Employee Compensation

Filed Under : Union Issues & Employee Benefits

More in PUBLICATIONS ( 1 OF 46 ARTICLES )