Labor On

There is an element of poignancy surrounding this holiday weekend. Labor Day was first celebrated as a national holiday in 1894 after President Grover Cleveland signed legislation designating the first Monday of September as “dedicated to the social and economic achievements of American workers.” The painful reality is that roughly 20% of our nation’s workforce is either unemployed or working part-time while seeking full-time employment. One out of 5 of our country’s workers are suffering from this devastating economy. An impact so grave and massive must radiate throughout the economy and negatively influence the lives and livelihoods of most of our citizens. Thus, even many enterprises that haven’t been directly impacted by the sputtering economy are experiencing lost business and revenues because of the huge number of workers who are not receiving their typical pay check.

Given the agenda of the Obama administration and the historic taxation and spending policies of Congress, maybe we should rename this day as Former Labor Day. A nation that works will prosper and a country “at ease” will falter. The regulatory and taxation environments in the United States are the antithesis of good policy for economic growth and by extension, job opportunities for willing workers. When everyone is working, the nation prospers. Oh yes, there are always pockets of the economy that may be in transition or decline, but active enterprise encourages innovation and development. When the government over-controls and over-regulates, the pace of the nation’s economy slows as manufacturers, distributors and retailers attempt to discern the impact of the government’s latest intervention. Rules, laws and regulations have direct influences on the producing sector, but many economists fail to detect or acknowledge the indirect aspects …. uncertainty, apprehension and frustration which, in turn, lead to a tentative approach.

It has often been stated that Government does not produce anything. I disagree. Government does produce chaos and confusion. In my rare moments of clarity I have wondered how a nation so rich, so vibrant and so innovative could allow its wealth-creation mechanism to be controlled by elected career politicians and appointed bureaucrats. They are not creators or generators of wealth and value. They are parasitic blood-sucking consumers of the labor and inspiration of others. In Atlas Shrugged the producers withdraw from the distorted market created by the insatiable government and its sycophantic corporate enablers. Scarily, we find ourselves in a similar environment today.

The ideological underpinnings of the United States’ labor movement are rooted in the “proletarian rights” movement of the late 19^th and early 20^th Centuries. These socialist/communist efforts capitalized on the glaring inequities in labor-management encounters. Local disputes were expanded to company-wide and sector-wide negotiating (demanding) units. As a result, entire sectors of the economy could be brought to a screeching halt because of some real or imaginary slight or rule violation in some plant in Peoria. The powerless worker of the 19^th Century has become the surly tail that wags the dog.

Although the increased power of organized labor has had a powerful influence in the private sector, the greatest and most ominous element is in the public sector of the United States. As the private enterprise union membership has been dwindling in market share throughout the country because of many corporations moving offshore or relying on hi-tech automation systems to control costs and enhance productivity, the public sector organizing has gained momentum. Even though fewer than one in six workers in the nation belong to either a private or public sector union or bargaining unit, their power and potential far exceed their true numerical proportion.

Their real power is based on the fact that they are organized and generally sympathetic with one another plus they have penetrated critical sectors of the economy and the government. If unions were dogs, I would compare them to Yorkies……with rabies. Certainly, organized labor has in many respects benefited workers and the nation by assuring safety and reasonable wages in the workplace. Too much of a good thing can topple the pyramid of prosperity, however as corporations are forced to downsize or move, and governments are trapped by unreasonable contractual commitments. The never-ending gravy train has run out of gravy.

Finally, this little Labor Day diatribe will conclude with my puzzled query. This is the United States of America….a nation founded on liberty and individual rights….how is it that so many of our work force have become dedicated to the collective control of our country while risking everything? At the risk of appearing calloused or insensitive, I suggest that those among you who are absolutely committed to your union under any and all circumstances are not worthy of liberty. True freedom requires responsibility, and anyone who voluntarily transfers your freedom to a union or the government deserves to be perpetually shackled in serfdom to your chosen master….and it seems that you are.

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Shirts and Skins

Who has the “skin in the game?” That question defines the stakeholders in any confrontation or negotiation. It is the greatest problem or issue with public sector bargaining. “Skin’ is also germane for huge corporations and their labor negotiating processes. Does the negotiator or arbitrator who represents the government or the company have a stake in the outcome? A reasonable bargaining process must involve two parties who can either gain or lose in order for an equitable solution that does not drastically favor one side more than the other.

Although I have problems with national and international labor organizations, I am not opposed to local organizing per se. If workers are dissatisfied with their conditions or pay, they inherently and constitutionally have the right to organize (1^st Amendment, peaceable assembly). If their grievances are legitimate, and management/ownership fears losing their knowledge, experience and expertise, then they’ll work out a solution. On the other hand, management may conclude that they can replace the entire workforce with others and therefore fire all of the former employees. In this scenario both parties have “skin in the game.” The owners or managers want to continue production at a profitable level while the workers wish to retain their jobs but under improved circumstances.

There are private sector negotiations where the corporate leadership assumes the same role as do public sector officials. When bargaining takes place in huge corporate environments, the representatives for the company are employees or consultants who have limited personal stakes in the outcome. Just like their political brethren, they are more likely to “give away the candy store” in order to maintain peace and goodwill. Except for the highly skilled trades, there is no obvious reason for large corporations or government entities to succumb to the demands of the unions. Some negotiators, however, have minimal financial or emotional investment in the company or governmental entity, and thus, seek the fastest means for resolving the issues. Other negotiators may have the public interest as their paramount concern, but could be undermined by politicians who would rather “cave.” The corporate officers who may be engaged in the negotiating process are aware that if they fail to protect the interests of the company, they’ll receive their golden parachute and surface with another corporation or retire to Aruba. The people responsible for the political bargaining process trust that their citizens will have short memories. They believe that irresponsible concessions are less damaging for them politically than a strike, shutdown or slowdown might be.

While collective bargaining for public employees does have potential for fiscal abuse, the more onerous element is the “binding arbitration” requirement. Arbitrators are people too. They want to be liked. They want to be employed. If negotiations stall and either side requests arbitration, then the process calls for both sides to agree on an arbitrator. The arbitrator goes through a “fact finding” process and makes a determination that is binding for both sides. The arbitrator is generally limited to the two proposals submitted by the competing sides. It becomes an “either or” situation.  Again, the only “skin” in the game for the arbitrator is the desire to be gainfully employed to arbitrate a future dispute. The arbitrator’s motives may be pure, but self-interest can be an unintended persuader.

Who does have the “skin in the game?” Clearly for public sector bargaining the taxpayers are the ones whose well-being should be weighed against the benefits for the union members. The current mess that exists for so many states and local governments came about because concern for the taxpayers was a secondary consideration. The political class and the arbitrators (when used) were more focused on avoiding discord and strife than they were as stewards of the public treasury. Consequently, benefit and wage packages have grown to the point that the state and local governments are in perilous financial circumstances. Understandably, public employees become irate when efforts are made to bring their packages into sync with financial reality. As the public employees grouse and protest, the taxpayers become more aggravated and hostile.  The tension will continue to build all across the nation as those who do have “skin in the game” draw their lines in the sand in a hostile environment.

In Ohio as in most states, our present circumstances can be laid at the feet of previous legislators who lacked the courage and the wisdom to say “no.” They passed the legislation that gave public sector unions a stranglehold on state and local budgets. No such “negotiated contract rights” exist at the federal level. Former legislatures took the easy route by granting extraordinary powers to public sector unions, and now their lousy decisions have caused the fiscal situations to reach critical mass. It’s the same old story. Our state and federal elected officials have no real skin in the game, and the taxpayers lose their shirts.

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