Deep Pocket Bargaining

This week Wisconsin school teachers have been joined by many other public sector union workers in their protest of Governor Walker’s attempts to severely limit the scope of their collective bargaining rights.  The fate of public sector unions is now becoming a hot issue in many states, where public sector worker salaries and benefits now eclipse those of private sector workers.

The Milwaukee Public School Numbers

According to Robert Costrell, who wrote an article in Friday’s Wall Street Journal, “The average Milwaukee public-school teacher salary is $56,500, but with benefits the total package is $100,005, according to the manager of financial planning for Milwaukee public schools.”

Why are the fringe benefits so high for Milwaukee public school teachers?

Regular State Pension: Milwaukee public school teachers receive the regular state pension which requires a 6.8% employer contribution and a 6.2% contribution from the teachers.  BUT, according to the collective bargaining agreement, the Milwaukee school district pays the entire 13 percent and the teachers pay nothing.

Teacher’s Supplemental Pension: Milwaukee Teachers get an additional pension under the 1982 bargaining agreement, for which the district pays 4.2% of the teacher salaries and the teachers pay nothing.

Health Insurance for Retirees: Many teachers retire in their 50’s, but MPSD pays their health insurance premiums (with employees paying only the growth of those premiums) until they are eligible to receive Medicare at age 65.  This is a huge benefit that is almost never found in the private sector.

According to the WSJ Article, “Overall, the (Milwaukee) school district’s contributions to health insurance for employees and retirees total about 50.9 cents on top of every dollar paid in wages. Together with pension and Social Security contributions, plus a few small items, one can see how the total cost of fringe benefits reaches 74.2%.”

Private Sector Bargaining vs. Deep Pocket Bargaining

There was a day when private sector workers made more money than public sector workers but government workers traded reduced wages for job security.  Today government workers have incredible job security and also receive better wages and benefits than private sector workers.  Public employee unions have achieved this because they can engage in “Deep Pocket Bargaining.”

Private Sector Bargaining: When union workers bargain with a private business they face formidable resistance.  The firms that they work for face local, regional, and global competition.  If the employer gives up too much in wages and benefits, increased costs will drive the firm out of business and the union members will be unemployed.  In the private sector, competition brings management to the bargaining table with both shallow pockets and a resolve to stay in business.  The result is a reasonable settlement.

Deep Pocket Bargaining: When union workers bargain in the public sector, the process is more political than economic.  Governments are monopolies by definition and face no prospect of going out of business if they give too much away in wages and benefits.  Government workers support legislators with votes in exchange for higher salaries and benefits.  Taxes are raised to pay for this largesse at the expense of private sector businesses and workers.  Deep Pocket Bargaining always pays better than private sector bargaining.

Last November ordinary workers and taxpayers told the Wisconsin legislators that they’ve had enough.  They elected a republican governor, a republican senate, and a republican house (assembly).  Now the script is playing out in Madison and it won’t be pretty for public sector unions.  The fourteen cowards in the democratic senate that have fled Wisconsin to intentionally leave their body without a quorum are indicative of the same spoiled, overpaid, entitled government workers that have voted them into office.  I’d be surprised if any of these fourteen get re-elected.  The shill is exposed and Wisconsin workers and taxpayers are getting smarter every day.

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