Wednesday, April 6, 2011

I am pleased to reprint an op-ed piece by Prof. Hans Despain who teaches economics at  Nichols College in Dudley, MA.

The Battle of Wisconsin and for the Nation

Governor Scott Walker of Wisconsin put forth a bill to repair his state’s budget.  This budget included cuts to public employees’ salaries, pensions, and benefits.  The collective bargaining process achieved these concessions.  Neither Governor Walker, nor his state’s public employees caused the state’s budget crisis, but both agreed public employees must sacrifice income, retirement, and benefits to help close the budget gap.  On February 11 Governor Scoot announced these sacrifices are not enough.  Attached to budget bill was a proposal to strip the right of public employees and teachers from collectively bargaining and organizing in their workplace.

Some have claimed this as a declaration of war on unions.  The conflict in Wisconsin is merely a recent battle of a war declared 40 years ago by various governors such as Ronald Reagan in California.  Wisconsin is a battle labor is destined to lose.  Not only because anti-unionism dominates Wisconsin politics, but nationally the political pulse is anti-union.  According to a Gallup poll, 48 percent of Americans approve labor unions today, down from nearly 60 percent in 2008 and a high of 75 percent in the 1950s.

There are many reasons unions have become unpopular.  Two important reasons are, first, unions have too often been politically and economically ineffective.  Why pay unions dues and go to meetings when workers lose.  Second, since 1990s workers are 9 times more likely to be fired when they participate in union votes then in the 1950s.  According to Harvard labor economist Richard B. Freeman this is because U.S. “labor laws are broken” and penalties for businesses violating the National Labor Relations Act are too weak.

The battle in Wisconsin is about more than the popularity of labor unions.  It quickly moves beyond the budget crises facing every state in the nation.  The battle in Wisconsin underscores two main issues.  First, the causes of the budget crises; second the inability of American workers to pay their bills, stay-out of credit card debt, pay for their children’s education, secure a retirement, and pay for health-care.

The economic crisis was not caused by the nation’s governors, or its public employees.  A financial collapse and real estate ponzi-fiasco has devastated the nation’s economy and the ability of cities and towns across the nation to generate property taxes to pay for essential public personal.  Thus, the first crucial point to make is the budget crises across the nation must be placed in the context of the great financial crisis.

Second, the current debate is most often put in a context comparing public employees with private employees.  The consensus of honest economists is private employees on average are paid marginally better than public employees, while public employees on average receive benefits significantly better than private employees.

That is correct, the typical public employee has benefits such as pensions, health-care, and vacation, far superior to the typical private employee.  The popular conclusion from this fact is that public employees are over-compensated with respect to their benefits.  This conclusion widely misses the mark.

Rather, private employees in the United States are grossly under-compensated.

American workers average 8 days a year of vacation, compared to several weeks for most Northern Europeans.  Pensions for private sector workers have all but disappeared and been replaced by 401(k)s, health-care costs are soaring, and college tuition is well beyond the income streams of most Americans.

Today 50 percent of American retirees receive 90 percent of their income from Social Security.  With pensions being replaced by 401(k)s retirement economist Teresa Ghilarducci of the New School for Social Research in New York predicts the next generation of retires will do far worse.

According to the U.S. Department of Education average college debt held by graduates has almost doubled since 1996 (from $12,750 to $23,200 in 2008).  Obamacare places millions more Americans under the coverage of Medicaid, it does far too little toward health-care costs and insurance premiums.  The ability of private or public employers to pay health insurance will become more and more difficult, while the bill to the public sector for Medicaid will soar.

While the projection of benefits for American workers is dismal, income is worse.  47 percent of working Americans have an annual income less than $25,000.  67 percent make less than $40,000.

Governor Walker calls public employees “haves” and private employees “have-nots.”  His solution is to make public and private employees alike “have-nots.”  This is a curious solution.  The nation has never been richer, productivity never higher, the labor-force never more skilled, and the population never more educated.  The proper question is not why public employees have decent benefits, but why the recent of us lack them?  And why so many hardworking Americans both private and public have such lousy incomes, while the profits for American corporations have never been higher?