Over the past two weeks, public sector unions in Wisconsin and other states have staged protests against some legislators’ attempts to restrict collective bargaining power — in effect, taking away a union’s right to negotiate over salary, seniority, pensions, health care and other work-related issues. The clash has brought out supporters on both sides of the aisle and it has set off debates about budget shortfalls, political posturing and most of all, the role of unions in today’s economy.
Knowledge at Wharton asked Janice Bellace, professor of legal studies and business ethics, and Peter Cappelli, director of Wharton’s Center for Human Resources, to talk about what has been headlined “Crunch Time for Organized Labor.”
An edited version of the transcript follows.
Knowledge at Wharton: Janice and Peter, thank you for joining us. So why is this issue so important? Peter, do you want to start?
Peter Cappelli: I think it reminds us that elections have consequences, as they say. And it reveals, in this case, a rather huge divide in public opinion between a model that said unions are an accepted part of the American context and a view that says they are not. The latter [view] has become more popular over time, obviously on the Republican side. We are seeing that play out. One of the reasons why it is such a big issue is that it is such a change in the status quo. It is not about bargaining for better terms and conditions on the management side. It is about getting rid of the unions altogether with a stroke of the pen, which is something that a generation ago would have never even been thought about.
Knowledge at Wharton: Janice?
Janice Bellace: I think it is also reflective about elections — about a certain tension right now in the United States over the idea that … we just have to cut the budget, and about how, if you cut a budget, who suffers those consequences? And about how the middle class [is wondering] why they are the ones feeling the pain.
Knowledge at Wharton: Speaking of public opinion, Peter, there is the latest New York Times/CBS poll that came out this morning that said actually a majority of Americans are opposed to cutting collective bargaining rights, and they are also opposed to cutting salary and pension benefits, etc., for the unions. Would this poll have any effect on a Republican governor’s attempts to curtail collective bargaining? Should it have an effect?
Cappelli: I think it should if they are smart politicians. You know, there is a lot of political intrigue behind these cases, right? Because the unions — particularly in the public sector — are politically very important, very powerful. If you were opposed to the Democratic party — whom they mainly support — and you got rid of unions you would get rid of a lot of your opposition. Interestingly, in Wisconsin, two unions that supported the Governor — the police and fire unions — are not the ones that he is thinking about cutting, which is pretty transparent. So I think there is a lot of interesting political intrigue behind this as well. I think what is interesting about this poll is that part of the rhetoric from the governor and from those in favor of getting rid of the unions’ right to exist and bargain in this context is the sense that public sectors now have more than the private sector does, and that it is not fair. It’s interesting that the poll suggests it does not play that well — as least as of yet.
Knowledge at Wharton: Talking about politics, the Iowa Senate is voting on a bill on Thursday to eliminate collective bargaining for everyone, including police and firemen.
Bellace: … Some Republicans have calculated that the public does not have sympathy with unions. So unions are bad. What is surprising is that the public seems to have sympathy with the average working person and seems to be fearful that we don’t want to pull down [that person]. This is a surprise because that’s not the way it has been depicted.
Knowledge at Wharton: There is also the perception among many that union wages and benefits are much better than non-union wages and benefits. Is there evidence that this is true or not true?
Cappelli: That is certainly true. That’s one of the reasons why you would want to join a union. I think what’s interesting in this case is that the story about public sector employees, and unionized ones in particular, always was that, look, they don’t get the upside. When the economy is booming, they don’t get big wage increases. They don’t get bonuses. They don’t get opportunities to hop from company to company. But they have job security that is very good. And they get pensions, which are at least good for the salaries they make. So the interesting thing now is when the downside actually hits, there is this effort to pull the plug on that. So [now some are saying] it’s not fair that you get these pensions and job security. You ought to pay something for it. Whereas I think the view was they were paying something for it. They didn’t get the upside that private sector employees do.
Knowledge at Wharton: But the downside really has hit now — at least according to what we are reading in the papers. So Scott Walker’s argument is that there is absolutely nothing else they can do to lower their huge state deficit. And this is true across every state, except maybe for Indiana.
Cappelli: Right. I think one of the things that they might do is … say to the unions: Here is what we have to do. We have no choice. Let’s talk about it — let’s negotiate over this and see what’s possible, rather than saying, “I have no choice; therefore, I’m going to get rid of the opposition here so that I can do it the way that I want to.” If you were really just interested in cutting the costs, you would start with, “Let’s see if we could cut the costs.” You might say if we are making no progress on this I have got to do things unilaterally. But you wouldn’t start by getting rid of your partner if you thought the whole issue was simply to try to work out something that would cut costs.
Bellace: That’s the important part, because there are two sides to this and sometimes they get merged. One is so people have a right to join together to seek better terms and conditions of employment. Essentially the governor is saying, “No, you don’t have that right.” The second part is, “Well, do we have to sit down now and see what the deal is?” And is the deal going to be worse for you than it was? Those are very different. One is a fundamental right. The other is what I call hardcore dollars and cents.
Knowledge at Wharton: A compromise position in all of this would be for the unions to say, “Let us keep our collective bargaining rights and we will start talking about some concessions on wages and salaries.” And, in fact, the Wisconsin unions are already doing that as are some other unions. Is this a viable negotiating strategy or is it the case where Republicans are going to say, “A-ha! We’ve got them on the run. Now let’s really hit them hard.”
Cappelli: I think if you were cynical, you would say this was really clever on the part of the governor of Wisconsin to come out with an extremely aggressive position that says we are going to get rid of you altogether — and then back off from that and negotiate very tough concessions from the unions. That would be — at least in the sense of hardball bargaining — a pretty clever thing to do. It is not clear to me that this is really the goal here. It would be like the equivalent in the private sector of saying to your employees — which I think is illegal, Janice; you can tell me whether it is –“Look, we are going to close the plant.” And then coming back and saying, “Alright, well, maybe not, if you can do X, Y or Z.” Maybe it is a clever bargaining tactic.
Bellace: We’ll know in a few weeks whether that was their bargaining position because, as Peter noted, right now the unions have already said we will probably make concessions. The AFL-CIO has said the point is to keep bargaining rights. So if the governor doesn’t respond now, it is going to be pretty evident that he is out to destroy the union and to destroy people’s ability to join together. He just wants to be able to dictate.
Knowledge at Wharton: So that raises the whole question about just how politically motivated these actions are. The unions are big donors and big voters for the Democrats. Republicans are being accused of, as you say, just wanting to kill the unions. Does one have to be cynical to think that’s what is going on?
Cappelli: Well, I would say that you could be ideological as well. I think on the Republican side — particularly in the what is now more mainstream Republican view but a generation ago was on the far right of the Republican view — was the idea that it was improper to allow public sector employees as government servants to have this sort of right. That you couldn’t, you shouldn’t, be able to negotiate with the government because the government has the ultimate authority, and a collective bargaining agreement shouldn’t bind the legislature as to how they spend their money. So you might say that this is a principled ideological argument. It was something that all these states dealt with. Everybody heard that argument when they passed the laws in the first place, and they decided that, in fact, this public sector was not that different than the private sector, and that the public sector management had their own advantages that the private sector doesn’t have. For example, if you go on strike in the public sector, the government actually makes money because it doesn’t have to spend things, and the tax revenue continues to come in. So I think what has changed is the relative importance of those positions as politics have changed. The people who said bargaining is an important right to have — people in power now say no it’s not. And the argument about tying the hands of the legislature becomes, as a result, even more powerful.
Bellace: I’d say also that there is a big difference. We can take two Republican governors — of Pennsylvania and New Jersey — who were just elected [beating out two Democrats]. One governor is very tough talking — Governor Christie of New Jersey, and he certainly wants concessions. But he hasn’t said that he [will try] to get back bargaining rights. And in Pennsylvania, the governor hasn’t even done that. He’s just [indicating] that “Life is going to go on. We’re going to bargain as usual.”
So I think when you look at the Republican party, one also has to look at state level politics and perhaps national level. But I think national interests are looking at particular states as vulnerable, if I can put it that way…. Wisconsin is essentially rural, which is what people forget.
Knowledge at Wharton: Janice, do you think that Governor Walker’s stance could backfire on him and in fact create more sympathy for public unions in his state and in the country?
Bellace: Oh, I do. Because I think when he got elected in November, he didn’t say anything about removing collective bargaining rights. So some people might think, “Wait a moment. Within three months? This was a secret agenda you had.” So that looks false right there. But, secondly, [there is] this idea that your teachers and your people who collect the rubbish — these are average people who do have benefits and you are trying to pull them down. It is unfair that the middle class is getting attacked again. And the middle class obviously feels very vulnerable now since our recent financial crisis. [Walker’s stance] could backfire.
Knowledge at Wharton: Let me just read you a couple of figures. In 1981, as we remember, Ronald Reagan fired 11,000 striking air traffic controllers. That year, according to The New York Times, 20% of U.S. workers belonged to a union. By last year, that figure had dropped to 11.9%. But more than half of those union members work in the public sector, which as of last year was 36% unionized. In the private sector, The Times says, unionization has fallen below 7%. So, Peter, what do those numbers suggest to you?
Cappelli: It is a very different story in the two sectors of the economy, and I think the difference has to do with what management does. So in the public sector, management, for the most part, has not tried to resist union organizing. And part of the reason for that is the unions have more political power. As a result, management hasn’t resisted. In the private sector, they obviously have resisted, and have become much more aggressive in terms of resisting unions. I think also the political balance of power changes the rights of management versus labor through court decisions, through National Labor Relations Board decisions. Over time, it has gotten easier in the private sector for management to resist unions. I mean, they can close a plant down and move it some place else and start it up non-union, which they couldn’t have done a generation ago.
So, you know, I’d say that what these figures tell us has a lot to do with the success of management practices in keeping unions out in the private sector. You see very different experiences in the public sector and in the private sector.
Bellace: It also shows — and this is quite in line with what Peter said — but one reason why the percentage in the private sector has gone down is the loss of manufacturing jobs. Manufacturing has left the United States — not just unionized jobs but non-union, too. So as the country becomes more of a non-manufacturing labor force, that explains a lot of it.
Cappelli: I think it is fair to say, though, that the the union movement in the U.S. over the last generation or two really has kind of lost its leverage with the public. Some of that is it got outmaneuvered in terms of public relations by the business community. And I think also, frankly, unions were not as good at offering what workers wanted as they had been in the past. They got some complacency. They didn’t spend as much time or energy on organizing. They didn’t focus on the sections of the economy that were growing. They stayed in manufacturing, which was shrinking. So a lot of this — in fairness to the management side — wasn’t all about management tactics. A lot of it is stumbling on the union side as well.
Knowledge at Wharton: Janice, some Republican governors say their states cannot compete as well for jobs as those states with right to work laws. Is this a big factor in the debate?
Bellace: They say it, but actually the thing that attracts jobs is the cost of doing business in a state. And there are other items in the state budget that have nothing to do with unionization. For instance, ask what percentage of the state budget is Medicaid. It is a huge portion of most state budgets. And the states have some ability to set the level of Medicaid payments.
There are other costs of doing business, and they are much more influential usually than the fact of whether states are right to work or not. Because as Peter mentioned, companies already have gotten much better at resisting unionization — first, by improving their own human resources practices and second, because the law has made it easier. So that’s not really how they are choosing states.
Cappelli: But we might just back up and explain a little bit about what right to work laws means. Maybe you could do that. Because we now are into the private sector.
Bellace: You could go into a very long discussion. Right to work means that you cannot have a union shop. But it doesn’t mean that you can’t have unions that sign collective bargaining agreements with a company. So can you “compel” people to be in a union? When a union organizes, 50% plus 1 of the workers must vote for the union to be certified. So it says that they can’t compel everyone in that grouping to join the union or pay union dues.
It does weaken a union — no doubt. But there are many examples of unionized companies in right to work states. The real point about [not being able to] attract jobs [is related to] costs.
Cappelli: But what is interesting about right to work laws is that they are really about gutting the union’s leverage. Because a union is compelled by law to negotiate on behalf of everybody in the bargaining unit, whether you are paying union dues or not. So you think about what the idea of a union — a right to work state means — it means allowing me as an employee to get the benefits of unionization without paying for them. And so the idea of that is really to weaken the unions financially. I mean, there’s no other particularly good reason for that, right? It is a political tactic for poking at the unions.
Bellace: Unions call it free riders. It allows free riders.
Knowledge at Wharton: Peter, to get back a comment you made about unions having become somewhat complacent, can we say that they have become antiquated? And if that’s true, how do you bring them up? How do you update them for the 21st century?
Cappelli: Well, if you were a worker thinking about joining a union now — is it in your interest to do it? Would you get enough out of it? And I think the answer to that might very well be ‘no’ right now. Because the risks of joining a union — campaigning for a union — are pretty big. [One is] the risk of being fired. It is illegal to fire people for this, but it hasn’t been very well enforced and the penalties are trivial. It is pretty well known that a lot of organizations do this.
So, you know, I might get fired for this if the plant that I’m working at gets organized — there is a pretty good chance I’ll never get an agreement from the union and the employer because the employers have various ways of making that difficult to do. So there is a pretty good chance that I might get in trouble on my job security. I might pay dues. I might never get an agreement. And if I get an agreement and the plant is organized, there is a pretty good chance the company might try to eventually move it someplace else. So if you think about it in an up and down way — is it in my interest to vote for a union these days? The answer is probably no. But I would say a lot of that has to do with the fact that management now has so much more power than they had a generation ago. And the unions haven’t really found any way to counter that. So are they able to offer a compelling story to possible members? I’d say the answer at the moment is probably not. In that sense, they are in some trouble and they are kind of antiquated.
Bellace: I agree. And I think one of the difficulties is that a way for them to modernize is foreclosed to them. During a lunchtime talk, I was proposing that employees can have consultative counsels. You are a stakeholder like a shareholder. You invest your human capital. You should have rights to consult. You should be given information. But companies wouldn’t be happy to do that just like they didn’t give shareholders any information in 1928. So you need legislation. And the issue is, as Peter said, why would companies do that? So if the legislation would change, I would see more employees willing to opt for what I call this more cooperative view of representation. But we as a country haven’t changed our legislation. The basic framework is 1935, which really is antiquated.
Cappelli: And it is illegal to do that, right?
Bellace: That’s right.
Cappelli: You couldn’t do it even if you wanted to.
Knowledge at Wharton: My last question is, what do you think is going to happen in Wisconsin? What will be the end of this?
Cappelli: Well, I think it is going to turn on the political calculations of the governor, frankly. I think his approach certainly has rallied a Republican base — a particular section of the Republican party. And that’s probably helped him a lot in terms of the internal politics. I think in the broader community, as you reported from the poll today, it may actually get him into some trouble. So I think he’s probably making a political calculation. “Are my concerns primarily inside my party? Or are my concerns primarily in the broader voting group?” My guess is, that if it is the former, he will plunge ahead with this and figures even if he ultimately can’t get it through, he wins by taking a hard-line. If it is the latter, I think he will back off, negotiate some compromises and get back to work.
Knowledge at Wharton: Janice?
Bellace: I don’t know what will happen in Wisconsin because I don’t know Wisconsin well enough. I agree with Peter’s analysis. But it will be an interesting signal for the rest of the country. I do think already some governors in certain states have said, “No way am I going to walk that path. I don’t want to start a war in my state.” That’s looking at the voters as a whole. So Pennsylvania might be one state where it just isn’t worth it. But in any one individual state, perhaps it is worth it.