Labor unions likely losers in their policy conflicts against state lawmakers

A battle is under way between labor unions and lawmakers in various states. Union members have protested, and legislators aligned with the labor union movement have even gone so far as to not show up for work to stop legislation from moving ahead.

The issues? Basically, there are two. First is the role that public-sector unions play in pushing up the costs of government. Second is whether or not workers are forced to join a union and pay union dues.

Why should entrepreneurs and small business owners care? The size and costs of government rank as major concerns for small business owners. After all, taxes affect the bottom line of firms and the competitiveness of each state in attracting entrepreneurs, investment and workers.

The cost of government also is tied directly to the cost of the public-sector work force. The U.S. Bureau of Labor Statistics reported that in June 2010, private employers spent an average of $27.64 per hour worked for employee compensation, with wages and salaries accounting for $19.53 and benefits averaging $8.11.

However, state and local governments spend a good deal more. The state and local government average of $39.74 per hour worked for employee compensation topped the private-sector compensation level by 44 percent. Hourly wages and salaries for state and local government workers at $26.13 were

34 percent higher than private workers, with benefits at $13.62 per hour outpacing the private sector by 68 percent.

It’s no mere coincidence the level of private-sector union membership in 2010 was 6.9 percent of private workers. Meanwhile, labor union members accounted for 36.2 percent of government workers.

Look, too, at the very real consequences of a high level of public-sector labor union membership in terms of state and local government spending. Consider the states that have the highest levels of public-sector union membership: New York at 70.5 percent, Connecticut at 64.4 percent, Rhode Island at 63.7 percent, Massachusetts at 62.1 percent and New Jersey at 59 percent. Each of these states rank among the highest spenders in terms of per capita state and local government expenditures — with five of them accounting for the top six spenders, 10 ranking among the top 15 spenders and all 12 among the top-20 big spenders.

Lawmakers in various states are looking to bring balance back to the government compensation equation, including Wisconsin, but also Florida, Indiana, Ohio, Oklahoma and Tennessee. Even a Democratic governor in New York, Andrew Cuomo, has called for reduced government spending and a property tax cap — both strongly opposed by powerful government labor unions in the state.

Many changes are needed and being proposed in various states to bring taxpayer interests back into the mix in a substantive way, including the need for public-sector layoffs in many areas; increased contributions to pension and health care benefits by government workers; and the end of benefits that rarely, if ever, exist in the private sector, such as binding arbitration, step increases, excessive sick and vacation days (and the cashing out of unused sick and vacation days upon retirement) and tenure.

As for workers being forced to join a union and pay union dues, that’s not the case in right-to-work states. That’s a positive for worker freedom. It’s also a big plus for entrepreneurial firms in terms of having access to a more dynamic, flexible work force and a more amenable environment for increased productivity and improved efficiency.

Currently, 22 states have right-to-work protections. Meanwhile, right-to-work legislation has been introduced in 13 additional states.

Labor unions arguably face their greatest challenge since President Ronald Reagan fired unionized air traffic controllers who went on strike illegally in 1981. The militancy of the labor union movement declined dramatically since that historical moment. Today, labor unions have positioned themselves in defense of government spending that’s doing serious damage to small businesses, our economy, the fiscal well-being of state and local governments, competitiveness and taxpayers — both individuals and businesses.

In terms of fighting right-to-work laws, unions are arguing for less freedom for both workers and businesses.

Given public sentiment and economic realities, it looks like labor unions will come out on the losing side of these current policy conflicts. Taxpayers, entrepreneurs, businesses, consumers and workers stand to be the big winners.

Raymond Keating
Raymond Keating




Raymond Keating is chief economist for the Small Business & Entrepreneurship Council, an advocacy, research and training organization based in Washington, D.C., and established to protect small businesses and promote entrepreneurship. Reach Keating through the website at