A union is a workers’ cartel. Its goal is, by threatening to shut down the employer’s production by the workers’ refusing to work, to increase the workers’ full income, where “full” signifies that a worker’s income in economic terms consists not just of wages and benefits but also of the length of the workday, how dangerous and strenuous the work is, and job security. Unions in the private sector are most effective in industries in which competition is weak and in industries that do not produce a storable commodity. A good example of the latter is the airline industry; an airline cannot continue operating by selling from inventory produced before its workers went on strike. A union can sometimes be of benefit to an employer by providing a check on abuse of power by supervisors, but the net effect of unionization on most employers is negative: unionization raises labor costs both directly and, by reducing the employer’s control over working conditions and job tenure, indirectly. Unionization reduces, in short, the efficiency of labor markets, and exists only because of political pressures. Between 1945 and 2009, the rate of unionization in the private sector fell from 45 percent to 7 percent, which is telling evidence of the inefficiency of unionization.
Historically, government employees were not permitted to unionize. No more than any other employer did governments want their employees to be unionized, especially because governments provide mainly services rather than goods and so are highly vulnerable to work stoppages, particularly where essential services such as police protection are concerned. When government was small, its employees were not numerous enough to obtain through the political process the right to unionize, but as the government sector grew, public employees became a more powerful interest group (they are a key constituency of the Democratic Party) and were able to obtain in many states and cities, and in many parts of the federal government, the right to unionize. From very low levels in the 1950s, public-sector unionization grew by 2011 to encompass 36 percent of all public workers in the United States, prominently including teachers, police officers, firefighters, and postal workers.
Some public employees, such as police officers and firefighters, do not have the right to strike, and some states forbid strikes by other public employees as well, such as teachers, although in states that recognize teachers’ unions teachers generally do have the right to strike. Even when public employees have no right to strike, the employer is required to bargain over wages and other terms and working conditions with the public employees’ union if there is one, and the employer’s duty to bargain provides some leverage to the unions in extracting favorable terms.
The net effect of public employee unions is difficult to gauge, however, because most public employees have considerable economic leverage, even without unionization, simply as a result of their status as voters—imagine if the workers in a private company could vote in elections for the board of directors. And, partly to minimize political considerations in government staffing, government workers have long enjoyed a high degree of job security—more than most private-sector unions are able to negotiate for their constituents.
Nevertheless the recent political turmoil in Indiana, Ohio, and Wisconsin concerning the rights of public-employee unions suggests that such unions do make a difference: that they are a factor in the extraordinarily generous health and pension benefits that public employees receive, which are placing an immense debt burden on states and cities. Moreover, the combination of the virtual disppearance of unions in the private sector with their attaining in the private sector a rate of unionization comparable to that of the heyday of unionization during the New Deal and World War II poses a political threat to public-sector unionization: workers in the private sector, who are the vast majority of all workers, ask themselves why their taxes should be supporting unionized public workers in jobs that confer job security, health benefits, and pension benefits unavailable in most private-sector jobs. There is no good answer to that question except the raw political power of public employees magnified by their union rights.
The public-sector unions have overreached in much the same way that the United Auto Workers overreached in its dealings with the Detroit automakers. The UAW concentrated on negotiating for generous health and pension benefits, which the automakers preferred to big wage increases because the benefits were deferred. When the Detroit auto industry got into serious economic trouble because of foreign competition and the economic crisis that began in 2008, its benefits obligations became unsustainable and crushed the industry—and the union, which has become a mere shadow of its former self. History may be repeating itself in the public sector, as taxpayers wake up to the fact that state and local governments are raising taxes and reducing services to pay for union-exacted benefits for public employees.