The State of the Unions

Last week Conor linked to this Reason piece on California’s pension crisis and that state’s looming budget crisis.

Now, I’ve done a lot of thinking about this over the past couple of weeks – especially after Freddie’s post, and this post from Kevin Drum (and this one, too) – and it occurs to me that perhaps I haven’t been tackling this question properly, that I haven’t been looking at a broad enough picture of events. That I haven’t taken history into account.

A lot of anti-public-sector-pension arguments go something like this: “The taxpayers are on the hook for these generous pensions and benefits, while private sector workers aren’t getting pensions and are paying way more for their healthcare. It isn’t fair that these public employees are doing so well, while their counterparts in the private sector are not only barely scraping by, they’re footing the bill!” The conclusion to this argument is often “We need to bring government retirement and benefits packages more in line with private sector compensation. Austerity for all.” Which makes sense on one level; it’s like upside-down egalitarianism. I’ve made this argument before myself actually.

But what if this is exactly the wrong conclusion? Maybe we should be trying to bring the private sector more in line with the public sector. Maybe the logical conclusion is that private sector workers are getting screwed – and that comparisons with public sector unions simply makes this glaringly obvious. Nobody but public sector employees receive pensions anymore. And maybe this is an argument to move back to the pension model rather than an argument to get rid of public pensions. Maybe leveling the playing field is the right idea, but we should level it up rather than level it down.

I always thought a thriving middle class was good for business, that the corporate world would want to pay people well and keep them happy so that they kept buying things. But it turns out that you don’t need a middle class to buy things, to keep the engines of commerce humming and whirring and piling up vast stores of cash. These days anyone can buy things, all it takes is a little credit card debt, maybe a second mortgage. For the truly committed consumer there’s always payday loans.

In a deep recession, workers are even more at the mercy of their employer, with the threat of high unemployment always looming over them. This is what lies at the other end of all these converging events: the collapse of labor; the coming public/private sector middle-class class war; the bank bailouts; the lopsided deregulation of finance; a globalization trend tilted heavily to favor the rich and well-connected, toward the developed world and not the developing; the never-ending Wars on Terror and Drugs.

I’ve focused a lot on the need for a safety net, and haven’t written or really thought a ton about organized labor. Now that I’ve undertaken that task, I think it’s pretty apparent that the one can’t survive without the other, at least not for long. Here’s Mike Konczal:

Without a strong middle and working class you don’t have natural constituencies ready to fight and defend the implementation and maintenance of a safety net and public goods.  The welfare state is one part, complimenting full employment, of empowering people and balancing power in a financial capitalist society.

This is collapsing in real-time.  One working definition of an approach to liberalism is “It’s best to just maximize growth rates, pre-tax distribution be damned, and then fund wicked-good social insurance with huge revenues from an optimal tax scheme” (Karl Smith, Wilkinson). I’d ask where are all these increasingly wickedly-well funded programs? We just had to bribe the top 3% with massive tax cuts for the next two years in order to keep unemployment insurance extensions in place for another year. Unemployment benefit extension are a net job creator and should have been a no-brainer, but it couldn’t pass without a massive bribe.   This doesn’t include the brutal battle for extending health care to an additional 30 million+ people.  This is even after the Federal Reserve created an alphabet soup of wicked-good safety net for the top 3% of the financial system, it’s difficult to get extra benefits for working-people in the largest post-war downturn.

Public universities are being defunded at exactly the moment when people are most focused on a “polarized” job market and a lack of supply of high-skills. Jeffrey Williams asks us to consider student debt as a modern equivalent of indentured servitude, and I think the comparison is correct.

– To me, the end result of having a safety net without giving workers stronger bargaining power is that what you end up with is a kind of pity-charity liberal capitalism. That’s better than nothing, but at the end it can be a dead-end, if the government doesn’t step in to fight for full employment.  Particularly if you think of unemployment as a particularly scarring state of existence and, like me, think that the next major battlegrounds already are closer looks at production and the experience and conditions under which people work.

Kevin Drum follows up. For me it’s all about the middle class. Without a strong middle class you’ve got a crumbling empire.

Anyways, a lot of this is just intuition and reaction at this point. I’ve been reading a bit about the demise of the labor movement – I’m going to have a lot more to say about it in future posts. It’s not a pretty picture.

My inclination is toward something closer to the Swedish model of social democracy – free markets plus strong safety nets plus a strong middle class; it just doesn’t seem viable or likely without a resurgence of organized labor. The Swedes have done a remarkable job getting business and labor to work cooperatively toward full employment, efficient production, and high living standards. Is this something we can achieve in the US? I don’t know. But I see no reason why not or why we shouldn’t try. Yes, we will likely have to pay higher taxes. But we can do that while still maintaining a high degree of economic freedom.

There’s room for liberal markets, pro-growth policies, and a vibrant public sector in our culture, and for a strong labor movement and a strong safety net. These aren’t economy-busters. If they were, Europe wouldn’t be the economic power it is. Even Germany is heavily unionized. Whether we can get the good policies and good people into elected office is another question. Economic mobility is much higher across most of the developed world than in it is America. Unemployment is ridiculously high still in America, and not because of the stimulus or the debt. Trickle-down policies are failing Americans. As the financial collapse has taught us, the people at the top have gotten very good at keeping that trickle to a bare minimum.