Conservative News & Commentary

May 26, 2012 — by: T. Jefferson
Categories: Economics, Government

Klamath Falls City Unions ProtestHow much should one be paid to be an office secretary? How much should one be paid to be road maintenance worker? How much should one be paid to be a health inspector, bus driver, school teacher, building inspector, mental health counselor or an attorney? As with all organizations, government is no different in that a large portion of its cost structure is found in employee compensation. To reduce expenses often means reducing head count. A department can delay capital expenses for a year or two, but it is unrealistic to ever imagine delaying employee compensation.

In the free market, the answer to the questions above are quickly found by the laws of supply and demand. Suppose I own a coffee shop. How much should I pay my employees to make espressos for customers? I would quickly figure this out by posting my job description with a wage and benefits package. If the compensation is too low, no one will apply or those who do are likely to be less skilled than I may need. If the compensation is too high then I will have more than enough qualified applicants to chose from but it will destroy my ability to make a profit and pay myself. Over time I will find the right balance between compensation and the skill set required to serve my coffee customers well and still make a profit.

In contrast, these market forces are completely absent from pubic union employee compensation. Public unions have "negotiated" with the government what each job is worth based on the previous negotiation — plus more. Built into the public union contract is better pay for those who have worked longer in the union. Also built into the contract is a very difficult process for dismissing a public union employee unless they commit an egregious act. So when comparing which system best reflects reality, the free market wins hands down. It pays employees what they are worth based on their skill and based on the supply and demand of the surrounding marketplace. On the other hand public employee compensation is based on tables, charts and lawyers that have no idea (and no care) what a particular job should cost.

This past week a prime example of these two compensation methods were front and center with the discussion on privatizing the city school transportation department. The City Schools floated the idea of putting out a bid for private contractors to run and manage its transportation department. However, the board never managed to muster enough courage for a "second" to the motion. Therefore the motion, and the idea of learning what the real world costs for such an operation are, died in the meeting. At the meeting there were over 100 public union members who cheered, whistled and booed in accordance with union desires — keeping the current public employee union contracts. In essence the union won this battle they way they usually do, through intimidation, not through making the case their solution was best.

The worst thing that can happen for public employee unions is for the general public to see how out of align public union employee compensation is when compared to the private marketplace. If it were discovered that a safe, competent, private school bus drivers could be hired for $10/hour (including benefits) but the city is paying $20/hour for the same service because of the years of negotiated union contracts, guess how the public will react when they hear there isn't enough money in the city school system for teachers or text books?

Another rhetorical trick from the union is to parade out loyal union employees — someone who has done the same job for decades — and claim that if the job is privatized they will lose their job. At the board meeting, 25-year bus driver Jeanne Sandusky did this very thing. "Don't outsource us," she pleaded. In that statement what Ms. Sandusky is saying is that if the City School District did privatize the city school transportation department she would lose her job. This is pure folly. What would happen is that if the department were privatized and if Ms. Sandusky was a good driver (as she claims), she would very likely retain her job. The only thing that would change is that her compensation would be now driven by market forces (how many qualified drivers are available versus how many driving positions are open) instead of artificial contracts determining compensation. The City School Board and Klamath County citizens would both get what they want: a more cost-effective transportation system. The only "losers" in this new world are those who are part of the union and who are receiving compensation that no one can afford.

In summary, we need courage from government officials to stand up to the public employee unions and look for opportunities to bring market forces into the compensation discussion of all government employees. Otherwise we will see taxes increase or service decrease. There is no other alternative under the current public employee union model. Only through privatization of labor will we once again see reasonable costs to government programs and services.

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