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The signs of autumn are all around us. The breezes grow cooler; the leaves become more radiant; and school teachers head for the picket lines — or at least threaten to.
Kentwood teachers in West Michigan voted to authorize their leaders to strike in late September, though a settlement has now been reached with the school board. Across Lake Michigan, in Illinois, suburban Chicago public school teachers have already struck and returned to work, while work stoppages still loom in Ohio, Kentucky and Pennsylvania.
But note that teacher unionization and strikes are mostly the prerogative of the public sector — a pattern reflected throughout the economy. Over the past half-century, unionism has thrived among government employees, but has suffered a relentless decline among nongovernment workers.
Why?
Libraries full of books have been written on unionism, but the short answer is this: Private businesses have genuine competitors, and government agencies do not.
When workers strike in the private sector, they know that they can demand only so much from their employers before their demands become counterproductive. If striking workers demand salaries that are too far above prevailing market wages, they risk pricing themselves out of work. To pay for excessive salary hikes, companies are forced to raise prices significantly, and this drives consumers to other, lower-cost suppliers. An eroding customer base then results in layoffs and even the outright failure of the company.
The UPS strike of 1997 is a case in point. Dissatisfied with the company’s compensation offer and use of part-time employees, UPS Teamsters members took to the picket lines. The strike lasted two weeks and was widely hailed as a victory for the union when a deal was finally reached.
Was it? Due to lost business during and immediately following the strike, 10,000 workers were laid off. A year later, package volume was still below prestrike levels, and those workers had not been rehired. The agreement that settled the strike called for UPS to add 2,000 new full-time jobs by the end of July 1998, a year after the strike, but only if package levels had returned to prestrike levels. Since they hadn’t, those jobs were not added.
So the strike action cost 10,000 jobs and failed to create the new jobs the union was striking for. A post-mortem economic analysis of the settlement has called its merits into question even for the workers who kept their jobs.
Finally, while it cannot be said for certain whether the strike permanently damaged UPS’ business and its workers’ welfare, it certainly doesn’t seem to have helped. UPS’ share of the ground shipping market went from 83 percent in 1996 to 78 percent in 2000 to 45 percent in 2003. FedEx’s share of that market grew from 8 percent to 11 percent to 16 percent over that same period. On air-shipping there was less movement, with FedEx rising from 38 percent to 40 percent, and UPS squeaking up from 33 percent to 34 percent. Overall, UPS’ dominant position in the shipping industry has eroded dramatically in the years since the strike.
As the UPS example shows, strikes are self-regulating in the private sector. Unrealistic demands have very real costs, and workers know this (or learn it the hard way). On the flip side, companies that offer below-market wages without some compensating benefit are likely to lose employees to their competitors, or even to other sectors of the economy. Business owners know that, too (or learn it the hard way).
This self-regulating nature of private-sector labor agreements has marginalized the role of unions in direct proportion to the increasing mobility of the American labor force and to the rise in domestic and global competition. As market pressures have risen, the need for union action to ensure that employers at least match market compensation packages has diminished, and the ability of unions to win major concessions over and above market compensation rates has also diminished.
The numbers are irrefutable. Private-sector union membership has dropped like a rock, from 39 percent in 1958 to 8.5 percent in 2002.
None of this applies to the public sector. If the government starts charging you too much for running schools, you can’t just go to another, competing government school system for relief, unless you are willing to move. Within a given district, there is no competing public school system to which you can divert your tax payments. You’re stuck with the system you’ve got, and you must pay whatever it asks, no matter how high the cost — unless of course you would like to sample the public prison system as well.
School boards ostensibly represent the general public in negotiations with the teachers unions, but they are no substitute for the competitive pressures that exist in the private sector. According to the most recent available data, public schools on average spend twice as much per pupil as private schools. Public school teachers earn 50 percent more on average than private school teachers and have vastly more generous retirement and health benefits, as well.
With results like that, the rapid growth in public school teachers union membership should come as no surprise. Membership in the National Education Association rose from 766,000 in 19611 to 2.7 million today. The American Federation of Teachers has grown from 71,000 members in 1961 to 1.3 million members today. As a whole, public school employees are more than six times as likely as private-sector workers to be union members.
Unionism is thriving in the public schools and in the public sector generally because it is not self-regulating. Public school workers can continue to increase their demands year after year with little risk of putting their jobs in jeopardy, and with little need to justify their growing compensation.
Though they operate at twice the cost per pupil of the private sector, public schools perform no better and in fact often perform worse. Though they cost American taxpayers roughly $10,000 per pupil every year (and much more in large cities), nearly a quarter of young Americans are functionally illiterate.
Interestingly, the National Labor Relations Act of 1935 expressly excluded government agencies from being forced into collective bargaining with their employees. Back then, enough people realized that without the self-regulatory incentives of the marketplace, union demands could grow unchecked by reason or reality.
How high will the cost of public schooling have to rise before we rediscover that early 20th century wisdom?
1 Myron Lieberman, "The Teacher Unions" (New York: Free Press, 1997), 1-2.
Andrew J. Coulson is senior fellow in education policy at the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, Mich. Permission to reprint in whole or in part is hereby granted, provided that the author and the Center are properly cited.
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