Figures released today by the Bureau of Labor Statistics provide less encouragement than today’s GDP report. Total compensation increased by only 1.5 percent in 2009 (without adjusting for inflation) – the lowest increase on record. If a turnaround has begun, workers are not feeling it in their wallets.
However, this pain has not been distributed equally throughout the economy. In the private sector, total compensation grew just 1.2 percent in 2009. On the other hand the compensation paid to state and local government employees grew 2.4 percent. The average government employee got twice the raise that private sector workers did.
Why did government workers get higher raises? In the private sector workers compete to produce goods and services that others value. In a recession, production falls and employers have less money to pay raises with. On the other hand, taxes fund government paychecks. Government employees can continue getting raises no matter the health of the overall economy, so long as taxes keep coming in.
This fact has turned the labor movement into determined tax hikers. Union membership has grown in the government even as it has fallen in the private sector. Three times as many union members now work for the Post Office as in the Auto Industry. In 2009 the numbers crossed: a majority of union members now work for the government. Higher pay for government employees can only come through higher taxes on private sector workers.
Unions almost never go on strike anymore. Instead, they fight to get more for their members by lobbying for tax increases. Unions spent tens of millions of dollars last year campaigning for higher taxes across the country: Illinois. California. Minnesota. Washington State. Arizona. In many cases they have succeeded.
The latest example comes from Oregon, where public sector unions outspent businesses 3 to 2 to pass two ballot initiatives raising taxes by $700 million. The unions wanted higher taxes to prevent spending cuts. Had the taxes increases failed government employees in Oregon would have faced cost cutting measures such contributing toward the cost of their health benefits – something they currently do not do.
Government employees have done well in this recession. Few government jobs have disappeared – unlike in the private sector – and their pay rose at twice the rate of their private sector counterparts. No wonder that government employees are almost three times as likely as private sector workers to believe that the economy is in “good or excellent” shape. The question for policy makers is why should private sector workers have to pay for this?
Last month when the White House released its visitor log for the first six months of the Obama presidency, one name appeared far more often than any other: Service Employee International Union (SEIU) President Andrew Stern. Stern has every right to expect to be welcome in the Obama White House. He has repeatedly bragged about the fact that under his leadership, the SEIU spent $60.7 million to elect Barack Obama president. Stern and Obama collectively support ever expanding federal government programs and state government bailouts which are rapidly bankrupting our country.
Unlike his predecessor, John Sweeney, who came up the ranks after starting with the International Ladies Garment Workers Union, Stern entered the labor movement when the SEIU organized his shop when he was working as a welfare case worker for the State of Pennsylvania. Stern’s public sector entrance into labor is by no means an anomaly. In fact, for the first time ever in American history, preliminary estimates of union membership for 2009 show that most union members now work for either the local, state, or federal government.
Heritage scholar James Sherk has the numbers: “The overall unionization rate between January and September 2009 stood at 12.4%, unchanged from last year. However, this difference masks a large difference between unions in the private and public sectors. Union membership has fallen to 7.3% of private sector workers – the lowest rate since Roosevelt signed the National Labor Relations Act into law. But it is a completely different story in the public sector: 37.6% of government employees belong to unions, up almost a percentage point since last year. Those 7.9 million unionized government employees are 51% of all union members nationwide.”
The days when “union member” meant an American working in a steel plant, or coal mine, or auto factory are gone. Today, unions are dependent on government, not the private sector, for their livelihood. Therefore, unions like the SEIU have little interest in private sector job growth. Private sector jobs don’t help fund $60.7 million political campaigns. But government jobs do. The change in incentives has been devastating to American taxpayers. Manhattan Institute senior fellow Steven Malanga explains why:
In the private sector … employers who are too generous with pay and benefits will be punished. In the public sector, however, more union members means more voters. And more voters means more dollars for political campaigns to elect sympathetic politicians who will enact higher taxes to foot the bill for the upward arc of government spending on workers.
Heritage’s Sherk details just some of the ways we have already witnessed this:
- In Oregon, the labor movement is donating hundreds of thousands of dollars to fund two ballot initiatives to raise personal income and business taxes. The unions want tax hikes instead of cuts in the gold-plated medical benefits for state workers.
- In California, the SEIU spent $1 million on a television ad campaign pressing for higher oil, gas, and liquor taxes instead of spending reductions.
- However, in Washington, state Democrats have so far resisted the labor movement’s call for higher taxes. In response labor unions are threatening to fund primary campaigns against the Democrats who oppose the tax hikes.
The United Auto Workers already made General Motors and Chrysler so uncompetitive they had to be bailed out by President Obama. But who will Obama turn to when Stern’s SEIU has bankrupted us?
Quick Hits:
- After announcing that the deficit for the 2009 budget year, which ended on Sept. 30, set an all-time record in dollar terms of $1.42 trillion, the Treasury Department said Thursday that the deficit for October totaled $176.4 billion, even higher than the $150 billion imbalance that economists expected.
- After spending more money on new programs in his first nine months than Bill Clinton did in his entire eight years, President Barack Obama plans to announce in next year’s State of the Union address that he wants to focus extensively on cutting the federal deficit.
- Following last week’s announcement that the nation’s unemployment rate hit 10.2%, President Obama will hold a “jobs summit” next month.
- According to Gallup, more Americans now say it is not the federal government’s responsibility to make sure all Americans have health care coverage (50%) than say it is (47%).
- Speaker Nancy Pelosi (D-CA) told KOMO News in Seattle it is “very fair” to send people to jail for not buying health insurance.