"Taxes should be continued by annual or biennial reenactments, because a constant hold, by the nation, of the strings of the public purse is a salutary restraint from which an honest government ought not wish, nor a corrupt one to be permitted, to be free. ... We must not let our rulers load us with perpetual debt. We must make our election between economy and liberty, or profusion and servitude. ... The multiplication of public offices, increase of expense beyond income, growth and entailment of a public debt, are indications soliciting the employment of the pruning knife." — Thomas Jefferson.
AP reports that the school board of Providence, Rhode Island, the state's financially troubled capital city, has voted to send termination letters to all of its nearly 2,000 teachers after city officials said the move would give them "maximum flexibility" to make budget cuts.
State law requires school departments to notify teachers by March 1 if they'll be laid off the following school year.
Providence teachers received notices of potential layoffs before the board met Thursday night and voted 4-3 on sending termination letters. The notices don't mean the teachers will lose their jobs, but the vote means some of them could at the end of the year. The vote give the city the opportunity to terminate as many teachers as it deems necessary for budgetary reasons, but the city hasn't indicated how many that could be.
Providence Teachers Union President Steve Smith had said earlier the decision was "beyond insane" and created chaos and anxiety among teachers.
More than 700 teachers packed the Providence Career and Technical Academy gymnasium Thursday to tell school officials their hearts were broken, their trust was violated and their futures as teachers were jeopardized, The Providence Journal newspaper reported.
The financial problems in Providence, the state's biggest city, have caused enough alarm at the state level that Gov. Lincoln Chafee has instructed two of his top fiscal officers to meet with city officials. A recent audit showed Providence, which has about 175,000 residents, had nearly depleted its rainy-day fund and overspent its budget last year by more than $57 million.
This is just another example of the massive deficits created by the salaries, pensions and benefits cities and states have granted public sector unions. It’s not only Wisconsin, Ohio, Indiana and New Jersey that are facing up to this problem. Other states are beginning to take their lead now that they have Republican governors and legislatures.
What do unions do? The AFL-CIO argues that unions offer a pathway to higher wages and prosperity for the middle class. Critics point to the collapse of many highly unionized domestic industries and argue that unions harm the economy. To whom should policymakers listen? What unions do has been studied extensively by economists, and a broad survey of academic studies shows that while unions can sometimes achieve benefits for their members, they harm the overall economy. (To see the Top 10 Labor Union Outrages click here)
Unions function as labor cartels. A labor cartel restricts the number of workers in a company or industry to drive up the remaining workers' wages, just as the Organization of Petroleum Exporting Countries (OPEC) attempts to cut the supply of oil to raise its price. Companies pass on those higher wages to consumers through higher prices, and often they also earn lower profits. Economic research finds that unions benefit their members but hurt consumers generally, and especially workers who are denied job opportunities. In the case of public sector unions they hurt both he employer and the consumer as both are the taxpayers.
The average union member earns more than the average non-union worker. However, that does not mean that expanding union membership will raise wages: Few workers who join a union today get a pay raise. What explains these apparently contradictory findings? The economy has become more competitive over the past generation. Companies have less power to pass price increases on to consumers without going out of business. Consequently, unions do not negotiate higher wages for many newly organized workers. These days, unions win higher wages for employees only at companies with competitive advantages that allow them to pay higher wages, such as the public sector. That’s why union membership is decreasing in the private sector and rising in the public sector.
At the engineering firm where I was a part owner we had two classes of employees. Our professional and office staff was non-union and our field surveyors were members of the Operating Engineers Union. The percentage of direct labor for our office staff was 40% while for the union staff if was 56%.We paid all of the normal benefits for our office staff including 100% of the medical insurance. We also were a employee stock ownership where the employees earned stock in the company. We also had a matching 50% program for their 401k investments.
All benefits to our union employees came from their union. Their pension, vacation and health and welfare were paid by the union. We also paid their union dues out of the 56%. In essence for every dollar in wages we paid our field personnel we contributed 56 cents to the union. What did they get for these 56 cents?
They only worked when there was work. They were not able to transfer between field and office jobs without getting out of the union and losing their union benefits. There wages were set by the union, but we could pay them over scale — something we did to retain the very best. We also invested in technology so we could reduce the number of field staff needed to do the job. Where once the standard field survey crew was three persons when I retired it was two and in some cases one. This meant less jobs for union members.
As the union negotiated for higher wages and benefits each year we became less competitive in the marketplace and would lose work to non-union firms. We were locked into the union as long as we provided services to major construction projects, which amounted to about 35% of our field work. Over the tears this had decreased from 50% as we shifted our focus to public sector clients not requiring union workers. Eventually I can see the firm abandoning all field work requiring union personnel and leaving the union. It should be noted that our other offices in Colorado and Arizona were not unionized, but we were forbidden in our union contract from using field staff from these offices in California.
What I have described above plays the same for public sector unions with he exception that the buyer of the services (client) and the provider of the services (employer) are the taxpayer. When the union negotiates a contract with the employer they are actually bargaining with the taxpayer, who has no representation at he negotiation table. So when the teachers unions demand higher wages and more benefits from a school board they are demanding it from the local property owner, who has no place in he negotiation. This is what it is a cartel.
Over the years these school boards, city councils and state legislatures have given into the demands of the unions without ever telling their partners, the taxpayers, what they are doing or the financial impact their actions will have on the financial health of the entity involved, i.e. school district, city or state. These giveaways have slipped through unnoticed for years. The unions, especially the teachers unions, have done a great job at spreading heir propaganda that states everything they do is for the children, while it is not. It’s for the unions and their members. Just look at the results. Bad schools, low graduation rates, tenure for incompetent teachers and the dumbing down of the nation’s children. Yet they demand more and more money and will fight to their death for the continuation of a system that can no longer be supported by the taxpayers.
For many years, Heritage Foundation labor economist James Sherk has analyzed the impact unions have on workers, employers, businesses, and the general economy.
Sherk explains that unionization often doesn’t have the promised benefits—and these benefits often come at a cost. “Some unions win higher wages for their members, though many do not. But with these higher wages, unions bring less investment, fewer jobs, higher prices, and smaller 401(k) plans for everyone else. On balance, labor cartels harm the economy.”
The union’s focus on wage and benefit increases can often have perverse effects, including for public employee unions. Governor Scott Walker offered this anecdote during a recent interview with Heritage:
“I saw it firsthand as a county official when I was trying to do things like ask for a little bit more for pensions or a little bit more for health care contributions. At one point in years past I even tried to do a thirty-five hour work week as a way to avoid layoffs. The union leadership basically said “forget it. Go lay off five, six hundred people off. We don’t care.” That’s where their mindset is. They know the power of collective bargaining forces local governments not to be able to make reasonable decisions to protect jobs.”
Furthermore, Sherk argues, “union contracts typically give workers group identities instead of treating them as individuals. Unions do not have the resources to monitor each worker’s performance and tailor the contract accordingly.”
For example, no matter how well (or poorly) a teacher performs or how late he or she stays to offer special help, teachers are judged as a group, not as individuals. This is the wrong way to go if we want to achieve results in education.
You can read more about unions by James Sherk for the Heritage Foundation by clicking here