There has been a lot of complaining about how Wisconsin’s Governor Walker is using a short-term crisis to justify achieving a long-term goal in his battles with unions. Here is how Ezra describes it:
That’s how you keep a crisis from going to waste: You take a complicated problem that requires the apparent need for bold action and use it to achieve a longtime ideological objective. In this case, permanently weakening public-employee unions, a group much-loathed by Republicans in general and by the Republican legislators who have to battle them in elections in particular.
Taking a crisis and using it to serve a “longtime ideological objective” is a pretty good description of a lot of what went into the ARRA, including a lot of the infrastructure investments and Race to the Top. You might argue that “well those are just good policy!” and with some of it I might agree, but they are long-term goals and not the best use of short-term stimulus, and they certainly had ideological detractors on both the left and the right. These parts of the ARRA strike me as fairly comparable to what Governor Walker is doing, so I’m not sure why anyone who didn’t complain about that aspect of the ARRA is complaining about this if they object to this type of policymaking per se. My guess is that most people are fine with this when the long-term ideological goals being met are their own.
Another complaint is that the unions are willing to make many of the concessions that the Governor is asking for that will directly affect the budget, so going after collective bargaining rights is unnecessary. But liberals should understand very well that short-term concessions aren’t a long-term fix if structural issues ensure that in the long-run those concessions can and likely will be undone.
I want to quote Ezra at length here writing about the financial sector, because it’s the kind of long-term political and institutional analysis that liberals are ignoring in this debate when they point to the concessions unions are offering as sufficient:
….I don’t believe you can effectively regulate the financial industry so long as it’s sucking up about a third of domestic profits. The incentives to take massive risks will just be too great. The power to bribe Washington to dismantle regulations and legislation will be irresistible over time.
The situation is worsened because the financial sector doesn’t face the countervailing political pressures that other industries face… Once the memory of this crisis fades a bit, they’re basically alone in the issue space… Few legislators have strong, preexisting interest and understanding of the issue. There’s no real advocacy community. Maybe there’ll be somewhat more of all this after this crisis finishes. But I doubt there’ll be that much. And that makes me very skeptical that regulatory solutions will survive for very long. There’s money, expertise and interest on one side of the ledger, and the other side is likely to be spending its time on other things. How long till one party or the other needs to fund a tough reelection campaign and cuts a quiet deal with the financial sector? Particularly in a post-Citizens United election environment? It’s probably more than five years, but is it more than 15?
The point is that you can put the public sector on a sound financial setting today with the concessions from the unions, but that doesn’t address the power they have to claw back any concessions once they find themselves with in a situation where “one party or the other needs to fund a tough reelection campaign and cuts a quiet deal” with them. Now any attempt to curtail long-term institutionalized power must look at costs and benefits, but it’s important to have that discussion and not simply pretend that short-term concessions will stick. Importantly, if we mostly agree to the desirability of the immediate concessions, then the long-term sustainability of them becomes the issue.
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Sunday ~ February 20th, 2011 at 11:17 am
BSE
This is just lazy reasoning. The old “well, both sides do it”. In all fairness, both sides SHOULD do more of it, so I want to be clear that this is more a criticism of the democrats.
First of all, Infrastructure and Education are both issues which Republicans claim to care about. More important, Race to the Top is a more nominally conservative approach than others that have been tried recently (i.e. No Child Left Behind), since it uses a more de-centralized competition approach to education reform. Not to mention that much of the rest of the ARRA was tax cuts, which again is a more conservative (nominally).
The long-term issue is just a distraction. Frankly, in the long run there is no budget crisis, since the budget issue here is almost entire a cyclical problem. Just as it is in the rest of the country. In the short term as you should well know as a trained economist, collective bargaining HELPS to meet short-term adjustment requirements. And if you believe in the Coase Thm (I won’t go into the problems with that here, but most libertarians do), then you ought to recognize that collective bargaining would be the efficient way to meet budget shortfalls. That is what is being stripped out. The ability in the future to meet a similar challenge.
When the economy recovers and these unions bargain for higher benefits again… well, what’s the problem with that? Wisconsin was healthy fiscally before the recession. It will be healthy after.
Now, from a philosophical level, I think that its all well and good for Republicans to ‘not let a crisis go to waste’, and the Democrats should rue the day that didn’t try to do the same in the first stages of the crisis. Let’s not pretend however that this good policy. As you should know, the data is mixed on the question, there are some benefits and some costs, to having strong unions.
Sunday ~ February 20th, 2011 at 10:53 pm
Adam Ozimek
If you’re talking about unions as an efficient way to supply voice to workers, I’d be more than happy to reform the NLRA so that it doesn’t provide unions with a monopoly on labor voice so that more efficient institutions could arise.
But I don’t see any evidence that states with public sector unions are responding to budget shortfalls any better than those without. In many instances what I see is young teachers being laid off, and whole departments like music and art being shuttered, e.g. closing budget gaps in the most inefficient way possible, because unions make other budget savings impossible. Can you provide me with some examples where unions were instrumental in having budget shortfalls closed more efficiently then they otherwise would have been?
Sunday ~ February 20th, 2011 at 1:34 pm
jason
Comparing public unions in Wisconsin to the financial sector leads to terrible conclusions. If there was good evidence that union compensation was the single driving force behind the state budget crisis, then this would be a great comparison. Without that its just lazy disingenuous comparison.
Sunday ~ February 20th, 2011 at 10:49 pm
Adam Ozimek
Union compensation is not the single driving force behind the state budget crisis, just as infrastructure spending and state education policies in the ARRA were addressing problems that weren’t driving forces whatsoever behind the financial crisis. This is precisely my point.
Sunday ~ February 20th, 2011 at 5:06 pm
Zaq
Not to pile on this post, but I had thought that unions offered a one time increase in wages (around 10-15% ?) but had almost no effect on wage *growth*. If this is the case, then your comparison would not work, the budget problems (like usual) would be driven by healthcare and the recession. But I have not done a thorough search by any means (mostly I remember studies linked on Marginal Revolution), so if anyone has data to the contrary this critique would be accurate.
Sunday ~ February 20th, 2011 at 10:46 pm
Adam Ozimek
I don’t think union wages are a primary driver of budget problems. But I do think they’re a huge driver of a lot of other long-term problems with effective public service, and I think their pensions are a serious long-term budget problem.
Sunday ~ February 20th, 2011 at 9:50 pm
Hal
So, easy comparison Adam. How many trillions of dollars in wealth evaporated because of the financial meltdown? And how many trillions of dollars are evaporating due to over compensation of employees due to collective bargaining? It’s pretty darn clear that the reason why we’re even talking about unions is only because of the former issue of wealth destruction. That you can so casually place these two as peers is a rather interesting quirk in your framing.
Also, to your point that ARRA has long term goals “just like” the conservative’s use of budget woes to bust unions….
Um, isn’t the point that on the one hand you had the biggest financial crisis in our lifetime and maybe you’d like to use that horrific event as leverage to prevent such a horrific event from happening again? The use of the horrific event to pursue partisan goals and crush your enemies doesn’t even seem to be in the same category.
Seriously, dude. Unless you actually believe that financial regulation is “just like” union busting, and collective bargaining is “just like” a financial system completely out of control, I think you’ll likely want to rethink this argument.
Good try, though. It does sound like a decent argument if you don’t think about it too much.
Sunday ~ February 20th, 2011 at 10:44 pm
Adam Ozimek
Yeah, I do think monopolies in labor markets and the inefficient public policies they push through are serious problems causing lots of wealth destruction. Unions demanded and defended damaging policies in public education for a long time now, they’ve been so bad that we’re to the point now where the most their defenders will say is “Union A is cooperating with reform in City X now!” This is argument is shocking to you?
It also sounds like you are trying to claim that the ARRA was structured to prevent future financial crisis, which obviously wasn’t the case. I think you’re confusing it with financial regulation. This is not the comparison I’m trying to make.
Monday ~ February 21st, 2011 at 12:26 am
Hal
My error. I was just following the abrupt transition you made from the ARRA to Ezra’s piece on financial regulation. I thought you were just making a jazz transition and was trying to follow along. My apologies.
But the point seems to remain that you’re making a direct comparison to public unions and the breaking of them to the financial disaster and the regulatory attempts to rein that it. It’s fairly clear that one is a disaster and another is largely political interpretation.
But let’s say that it is objective fact. My point is that the magnitude isn’t even close. So it’s a bit like worrying about the wolf at the edge of the woods and completely ignoring the wolf in your cart. Granted, they’re both wolves. Granted, they’re both intrinsically dangerous. However, one’s at your throat. The other isn’t even a concrete threat – although it may perhaps be a theoretical one.
So, as far as I can tell, you want to lecture the liberals on how they should be worrying about that distant, hardly a threat even if it may be a threat, while seemingly diminishing the very real and nasty threat that we are already trying to deal with by equating the two.
Bizarre.
Monday ~ February 21st, 2011 at 8:21 am
Adam Ozimek
The point of the financial regulation comparison was not to say “here are two things of exactly equal importance”, but to point out that when passing reforms it’s obvious that we should consider whether they are sustainable and what can be done to make them sustainable. Liberals did that for financial regulation, but not are acknowledging the legitimacy (or even acknowledging that it is whats happening) of republicans doing it now. This requires no equivocation between the two reforms. It’s just to say that sustainability of reforms is something that is important to consider. Is this something we should only consider for really, really, super important policies like preventing financial panics and stopping asteroids? I see no reason why that should be, do you?
Monday ~ February 21st, 2011 at 12:58 pm
Hal
Appreciate your patience.
Surely sustainability of reforms is important to consider. But in the particular case we’re discussing – i.e. union busting – this isn’t about sustainability. At the foundation, we’re talking about an issue which simply wouldn’t exist if the financial sector hadn’t imploded on a global scale. No one would be talking about pensions and no one would be talking about public sector pay if it weren’t for the fact that our economy lost a couple of limbs and is just starting to limp along.
State budgets are not out of whack because public employee collective bargaining suddenly created a situation where state budgets could no longer afford them. The reason why we’re in this shit hole, desperately trying to dig ourselves out, is because of a financial sector out of control.
So when you say – with all sincerity, I’m sure – that the republican efforts to break up public unions are merely an honest attempt at sustainability of the reforms they’re trying to make, I am unable to grok how you can say that with a straight face.
The whole point of “not letting a crisis go to waste” is that, certainly from my POV, the republicans are simply using an overwhelming crisis to push through a political agenda that they have been pushing continuously, in good times and in not so good times. It seems impossible to decouple their policy from politics, given that it literally is unswayed by any external conditions. It’s fairly clear that unions are antagonistic to big business interests, and that means that republicans don’t like them. I mean, maybe there is some deeper policy point that the republicans are trying to make, but given the last thirty years of relentless, non stop union busting, it seems pretty hard to make that case.
And so, this post of yours comes off as more of an apology for union busting; an attempt to find some rational that makes it a bit more palatable to those who have to swallow the bitter pill – or at least those lucky enough to be financially secure progressives that have the luxury of arguing about such things.
It’s one thing to start from a theory and pursue policies based on it. Regardless of whether one agrees with the theories, or agrees with the policies that result from them, at least there’s a point of common ground to argue from and to hope that things can get better through discussion.
But union busting is a religious belief among republicans – by and large. They have no theory other than it stands in the way of extracting the highest profit possible – it’s why sweat shops exist, after all.
To attempt to cobble a theory after the fact is simply to become an apologist for a depraved policy that has no theory. We can create endless arguments and theories about what republicans might be doing if they were actually doing it, but since all available data shows us that they aren’t, the only real use of doing it is to provide comfort to the comfortable.
Sunday ~ February 20th, 2011 at 10:49 pm
Johnnie Linn
Health care is the issue. Financial institutions blew a lot of wealth and some regs were thrown in their path but it was health care on which the dems played long and deep. It’s health care on which they have to play defense now.
Monday ~ February 21st, 2011 at 1:39 am
lark
Union busting is a violation of human rights. What goes on with labor in this country is a disgrace and we have the inequality stats and dismal public health that display for the world our degraded polity.
It is spurious and even offensive to compare fighting these violations of human rights with regulating the financial sector. The first takes bread from the mouths of babes and pushes families into the street and the elderly into destitution. The second takes a thin slice of earnings from the most over paid scum bags to walk the planet.
Your argument does more to expose who you are than put forward a legitimate comparison.
Monday ~ February 21st, 2011 at 8:16 am
Adam Ozimek
You’re appealing to rights, but at the same time arguing that those rights are important because the individuals are in “destitution”. First off, most public employees are surely not destitute. Secondly, if collective bargaining is a right then it should be universal and not dependent on wealth. So tell me, should doctors have the right to form a statewide union and collectively fix prices? You can argue that there are many ways in which doctors do form anti-competitive groups, but are you okay with all of that? Because if it is a right, then there should be much more cartelization among doctors, with all out price setting and monopolization. A right is not contingent on wealth. If you’re arguing for a redistributive policy this is the absolute worst way to do it, as low-income people should not be alloted welfare based on their ability to get a public sector job, but based on their needs.
Monday ~ February 21st, 2011 at 2:46 am
purple
The states with the lowest test scores are non-collective bargaining states.
It’s not complicated. You get what you pay for. That’s market economics 101.
Tuesday ~ February 22nd, 2011 at 1:43 am
Jeff
That’s right. The correlation between the percentage of school districts in a state that have collective bargaining agreements with teachers unions and the quality of educational outcomes is r=0.42, p<0.05. Moreover, the correlation between the strength of unions (indexed by the percentage of teachers who are in the union) and educational quality is r=0.38, p<0.05, although this relationship is mediated by/accounted for by the former.
Data:
Collective bargaining
http://nces.ed.gov/surveys/sass/tables/sass0708_2009320_d1s_07.asp
Educational outcomes
http://nces.ed.gov/nationsreportcard/naepdata/
Percent of teachers unionized
http://teachersunionexposed.com/state.cfm
In addition to being irrelevant to both the short and long term budget outlook, weakening the unions may lead to worse educational outcomes for Wisconsin's schoolchildren.
Tuesday ~ February 22nd, 2011 at 7:23 pm
govt_mule
You’re correct that both sides use crises to pursue partisan goals, although the right is much more prone to do so to the detriment of the common good, IMO.
But you are wrong that teacher’s unions hold a monopoly on labor. Unions do not control the supply of teachers, do not control licensing, do not choose who to hire and do not set uniform statewide or nationwide salaries. There may be a statewide union, but each district negotiates a price for labor independently (salaries vary by 30% or more in my area), and they are free to hire non-union teachers once the current contract runs out. The fact that all public school teachers belong to a union is no more monopolistic that the fact that all doctors are members of the AMA.
Nor do tunions have a thing to do with music and art being eliminated first when cuts are needed. Schools are obligated to meet standards in math and reading, not art, and firing reading teachers while keeping art going would not be acceptable.
Tuesday ~ February 22nd, 2011 at 9:33 pm
Adam Ozimek
I don’t think you understand what a monopoly is. It’s not a platonic ideal wherein it’s perfectly impossible to acquire some good or service except from one source. It starts with a market definition, which can actually be quite narrow, and is related to practical availability. If I have the only ice cream cone on the planet, and there is another one on mars, the possible availability of that one on mars doesn’t weaken my monopoly with respect to the markets on earth. I have a monopoly. From the perspective of a school district, you may say that not signing a contract is possible, but it’s a practical impossibility. Ask a principal whether they can say “No, I’m not going to sign a contract with this union, bring me another one” and I’m sure you will be met with laughs almost every time.
Wednesday ~ February 23rd, 2011 at 7:00 pm
govt_mule
I think you are confusing difficulty with impossibility. Your superintendent can’t say “No, I’m not going to use this lousy PC anymore, I want an iBook” when the rest of the district uses PCs – that would be laughable. He would have to replace all the computers and software in the system, retrain everyone, etc. It would be a long, difficult process. But that doesn’t mean Microsoft has a monopoly on computer operating systems or software. Busting the union would also be a long, difficult process, but if it was supported by the community, particularly in a small district, it could certainly be accomplished.
Wednesday ~ February 23rd, 2011 at 7:42 pm
Adam Ozimek
The price of computers is set in the open market. The worst a school can do is the price you and I pay. That’s why you wouldn’t call them a monopoly.
Thursday ~ February 24th, 2011 at 10:21 am
govt_mule
Apparently you completely missed the point I was trying to make. It has nothing to do with the price of computers – it is that “practical availability” for a school district (as opposed to an individual) does not mean being able to obtain product or service X whenever one feels like it. Principals can not decide on a whim to change the supplier of legal services, accounting services, computer and internet services, computers, software, fuel, electricity, paper, etc. These are all supplied under multi-year contracts that are “practically impossible” to break or alter. Under your definition these suppliers hold a monopoly, because the principal can not at a whim change accounting firms (e.g.) and one who tried to do so would be laughed at. In that (restricted) sense every supplier of goods and services to the district is a monopoly.
So long as districts are free to solicit new suppliers at the end of the current contract, there is no monopoly. So long as districts are free to hire non-union teachers at the end the union contract and pay and promote them as desired (with some restrictions) there is no UNION monopoly on labor. It may be difficult to recruit a new teaching force willing to work for less than the prevailing wage established by the union, but that is a market limitation, not a union limitation (since teachers unions, unlike plumbers and electricians unions, do not control the supply of labor).
Thursday ~ February 24th, 2011 at 10:59 am
Adam Ozimek
You’re talking about switching costs, which can indeed create market power. The question is a matter of degree. Large enough switching costs can could create an effective monopoly. I think you’re dancing around something like the correct framework to think about these problems, but you’re getting the matter of degree wrong. Think about it like an anti-trust issue. The two questions most important questions are: 1) does the existence of collective bargain constitute an efficient contract or is it an unavoidable product of technology, or is it an avoidable cost? and 2) how much market power do the switching costs convey? There may be some school districts where the district could get rid of the union with a surmountable level of costs. The next question is can they continue without another union, or will they be forced to negotiate with another? I think districts which can take no contract and continue during renegotiations are the exceptions rather than the rule, and in most places the switching costs amount to a lot of market power and an effective monopoly. I don’t know the exact laws, but I’m pretty sure in some states the school district has a legal obligation to negotiate a contract with a particular union and if an agreement can’t be met arbitration will be assigned.
Thursday ~ February 24th, 2011 at 12:26 pm
Hal
I think the fundamental issue from my POV, is simply that an “efficient contract” doesn’t seem to capture the actual issues. It’s like looking at a 2D image of a 4D feature, while using a very narrow bandpass filter on the colors presented. This filter might indeed show you some interesting things, but it seems that if this is the _only_ criteria used to judge the entirety of the system you’re optimizing, then it seems like it’s missing a large piece of the picture.
Happiness, health and sanity of our teachers is a huge issue. Stressed out, unhealthy people are poor teachers. So where is that counted in the efficiency of the contract? Job security is a huge issue with stress, given the health benefit issue and a zillion other little things involved in doing time on this planet. Where is that counted in the efficiency of the contract? Being able to actually afford a house and enjoy relative parity in the economic zone you’re teaching to is another huge issue that teachers face, considering even with this massive power of collective bargaining they’re only able to make far below median prevailing wages.
I know these are touchy-feely issues that apparently only liberals care about politically, but there’s a host of other such squishy issues that that economists can’t simply model. And that’s actually the point. There’s a whole lot of things that we know we need to do but simply cannot put into an economic model so – at least from my observations – economists simply throw them out of the picture because they can’t possibly model them. This leaves you – again from my POV – looking for your keys under the light post rather than down the dark alley where you think you dropped them.
People care about this squishy crap a whole lot. And it’s been fairly clear that the issues that we want to optimize – not merely the issues you can model – have gotten better precisely because of collective bargaining. Without it, I seriously doubt we’d have a middle class of super consumers that actually drive this economy that y’all love to optimize so well.
Thursday ~ February 24th, 2011 at 11:00 pm
govt_mule
I’m not talking about switching costs. They would be significant for computer systems, or to switch to solar power, but there are little to no switching costs for most goods and services a school requires, including labor. The district will switch from Accountant A to Accountant B if the latter is cheaper, and any minor costs like reprinting the stationary will be offset by those savings. Similarly, the district will only switch from Union A to Union B or to non-union teachers if the overall cost of labor is lowered (otherwise why do it?). There may be some up-front expenses associated with r the HR functions the union takes care of (pensions, health insurance, etc), but overall the switching costs will be negative.
Friday ~ February 25th, 2011 at 8:14 am
Adam Ozimek
The district will switch if benefits minus costs are positive, not just if net costs are lower.
And you said “Your superintendent can’t say “No, I’m not going to use this lousy PC anymore, I want an iBook” when the rest of the district uses PCs – that would be laughable. He would have to replace all the computers and software in the system, retrain everyone, etc.”
You may not intend to be discussing switching costs, but that’s exactly what you’re talking about here.
Saturday ~ February 26th, 2011 at 4:20 pm
govt_mule
I didn’t really think it was necessary to point out in a brief blog post that benefit as well as cost must drive any rational decision making, but you’re right.
Switching costs came up tangentially in one post, aimed simply at showing that principals don’t even have the ability pick a desktop computer at will, let alone a supplier of labor. Let it go.
How about defining what you mean by a monopoly (generally thought to be an entity controlling the supply of a good or service and using that control to appropriate a price premium), and supplying a data-supported argument that teachers unions, which don’t control the supply of teachers, constitute a monopoly?
Saturday ~ February 26th, 2011 at 4:39 pm
Adam Ozimek
If there’s one water company in town but regulators force them to offer an unlimited amount of water so long as a customer pays, and they say to you “take as much water as you want, but you’re paying $10 a gallon”, then is that a monopoly? The answer is yes, it is. And yet they don’t control supply in the sense that they can prevent you from buying as much as you want. But they do set price, just as the union sets the price for teachers but does not tell the school how many they can hire.
Saturday ~ February 26th, 2011 at 6:52 pm
govt_mule
Really? That’s your explanation?
Saturday ~ February 26th, 2011 at 8:07 pm
Adam Ozimek
Really? That’s your objection?
Saturday ~ February 26th, 2011 at 11:33 pm
govt_mule
How about a somewhat realistic model of how the teachers union in your town constitutes a monopoly, and by what specific mechanism (actual control of supply, practical control of supply through switching costs, regulations, etc., multi-year contracts) monopoly is achieved. Explain the how the union monopoly is only able to earn members a ~5-10% salary premium and how this relates to supply and demand for teachers locally and nationally.