Ballots and business: Why the recall vote mattered

Raymond Keating
Raymond Keating

Why should small business owners and their employees care about the recall election in Wisconsin or local elections in California?

The key reason: The failure to remove Gov. Scott Walker constitutes a significant failure for government labor unions. Those labor unions didn’t like the fact that Walker carried through on his campaign promises to limit public employee collective bargaining  or have government employees chip in more to cover their pension and health care benefits. Moreover, two measures passed in California to reduce retirement benefits for city workers.

Why should the entrepreneurial sector worry about government labor unions? The most obvious reason is that public-sector labor unions drive up the cost of government and therefore raise costs for and taxes paid by businesses, their customers and investors.

In California, voters in San Diego and San Jose overwhelmingly supported measures to cut city workers retirement benefits.

As the Associated Press reported: “San Diego’s payments to the city’s retirement fund soared from $43 million in 1999 to $231.2 million this year, equal to 20 percent of the city’s general fund budget, which pays for day-to-day operations … . San Jose’s pension payments jumped from $73 million in 2001 to $245 million this year, equal to 27 percent of its general fund budget.”

As a result, San Diego voters favored Proposition B — which imposes a six-year freeze on pay used to determine pension benefits and puts new workers in 401(k)-type plans — by a 66 percent to 34 percent margin. San Jose voters approved Measure B — which has workers pay up to 16 percent of their pay for benefits or accept reduced benefits, while providing less generous benefits for new hires — by a margin of 70 percent to 30 percent.

Beyond these direct costs, consider a broader role labor unions play today.

In the private sector, they have become nearly inconsequential. As noted by, labor union members comprised 24.2 percent of private-sector employment in 1973. As of 2011, that share had plummeted to a mere 6.9 percent.

But where labor unions have maintained their presence is in government. From 1983 to 2011, the share of public-sector employees that were union members remained in the range of 35.7 percent to 38.7 percent, coming in at 37 percent in 2011.

It turns out that both private- and public- sector unions have dumped enormous amounts of resources into a political agenda focused on high levels of government spending, burdensome taxes and onerous regulation. The power that private-sector unions have lost at the bargaining table, they’ve sought to gain, partnering with powerful public-sector unions, through politics and in the halls of government.

Indeed, labor unions have become one of the most powerful voices for anti-entrepreneur, anti-growth public policies. Barring certain issues, such as various unions correctly and forcefully arguing for expanded domestic energy production, the labor union movement usually leads the charge for policies that jack up the costs of running a business, investing, innovating and, ironically, creating jobs.

It was labor’s big government agenda that drove the attempt to recall Gov. Walker. Interestingly, this was only the third recall election for a governor in U.S. history. Walker is the first to survive a recall, as North Dakota Gov. Lynn Frazier lost in 1921 and California Gov. Gray Davis was defeated in 2003.

Walker’s victory, along with the votes in San Diego and San Jose, amount to major defeats for labor unions and their agenda. That’s welcome news for the small business community.