Tallying Other Benefits

With the delivery of the budget for FY 2013-14 and the announcement of how to wrangle pension costs for state and school employees (our Brief discussed the highlights of the proposal) it should be noted that there is a lot more to the benefit puzzle.

The spring edition of Education Next documents, through the use of Bureau of Labor Statistics data, the cost of teacher health care vs. private sector health care (teachers pay less toward single coverage, more toward family coverage as a percentage share) and on union and non-union rates of contribution (teachers aren’t broken out as a sector by the BLS, but the authors did run comparisons overall to see that union health coverage costs were higher than non-union costs). Finally, the piece looked at Wisconsin, where changes to collective bargaining resulted in decreases to district costs on single and family coverage.

How does this translate locally? Let’slook at the largest district in the County, the Pittsburgh Public Schools. In 2011, the district paid $72.4 million in "employee benefits": dental insurance, life insurance, income protection insurance, social security contribution, retirement contribution, unemployment contribution, workers’ compensation, self insurance medical health (39% of the total), retiree health care, and other employee benefits. In 2013, the current fiscal year, employee benefits are totaled to come in at $85.3 million (18% higher than 2011) with the expected PSERS contribution doubled since 2011 and the self insurance medical health up $10 million from 2011 and representing 45% of the total of benefits.

Union Membership Skids and Job Growth Shifts

At the national level, union membership fell in 2012 from the 2011 reading, tumbling from 11.8 percent of the work force to 11.3 percent. Interestingly, union membership was down in both the private sector and among government employees.

 

 

Private union membership dropped from 7,202,000 to 7,037,000 pushing the percentage of workers in unions from 6.9 to 6.6 percent.  In the public sector, union membership dipped from 7,562,000 to 7,328,000 lowering the percent unionization from 37 to 35.9 percent.

 

Membership in government unions remains greater than private sector membership even though there are five times more private sector employees than public sector workers.  The bulk of public union membership is accounted for by local government where about half of government workers are employed and where over 40 percent of workers are in unions. By contrast only 27 percent of Federal and 31 percent of state employees are in unions. Local government percentage had the biggest loss in union membership, sliding from 43.2 percent in 2011 to 41.7 percent in 2012.

 

Last year’s slide in private sector unionization was a continuation of a decades’ long trend. It is important to bear in mind that the recent declines have come despite policies of the current administration and rulings by the National Labor Relations Board designed to assist in unionization efforts along with rulings extremely favorable to bargaining units.

 

Percentage unionization fell in many industries including construction, manufacturing, private education, private health care, information, retail trade and transportation and utilities. The financial sector saw a slight rise in unionization but remains below two percent of employees.   Meanwhile, the professional and technical services sector, holding at 1.2 percent union membership in 2012, ranks among the very lowest unionized sectors.

 

By occupation, the management category, production workers and the education and training categories saw significant declines in percentage union membership from 2011 to 2012.

 

How did unionization fare in Pennsylvania and other states?  Total union membership in Pennsylvania (private and public) fell from 779,000 in 2011 to 734,000 in 2012 resulting in a drop from 14.6 percent union membership to 13.5 percent.  The breakout of changes to public and private union members are not available as yet but, given the slide in local and Federal jobs over the past year, there is reason to suppose that the number of government union members in Pennsylvania was also down somewhat.

 

But the biggest drop in union membership would have been in the private count. Overall modest private sector job gains resulted from a mixture of weakness in construction and private education that was offset somewhat by strength in finance, leisure and hospitality, and professional and technical services.  Education and construction have relatively high percentages of unionization while the faster growth sectors have very low percentages of unionization. Thus the mix effect could account for some of the decline. However, there was almost certainly a slippage in unionization across many industries.

 

Meanwhile, many other traditionally strong union states also experienced major declines in the percentage of unionized workers. One of the biggest drops occurred in Wisconsin where the percentage fell from 13.3 to 11.2.  Maryland saw unionization slip from 12.4 to 10.6 percent, West Virginia was down from 13.8 to 12.1, Illinois down from 16.2 to 14.0 percent and Connecticut plunged from 16.8 to 14.0 percent. In short, the 2012 decline in union membership was widespread across industries and occupations and was quite large in some of the most heavily unionized states.

 

Thirty-four states had membership decreases, some quite substantial as noted above. Fifteen states and the District of Columbia saw unionization rise, including a small uptick in California and some significant gains in traditionally very low unionized states in the South and Midwest.

 

Moreover, the unionization decline hit all working age groups. The least unionized age group, the 16 -24 group, had the smallest drop in percentage of employees in unions, 4.4 percent to 4.2 percent. The biggest decline occurred in the 45-54 age group, 14.9 to 14.0 percent.

 

Recent data for union membership are not available for the Pittsburgh region although there are figures for 2010.  At that time, 10.8 percent of percent of private employment were union members and 50.3 percent of public workers were in unions.  The Pittsburgh Metropolitan Statistical Area (MSA) unionization percentages are significantly higher than national numbers for both the public and private sectors.

 

Noteworthy for Pennsylvania and the Pittsburgh MSA, the long term trend of private union membership is downward but in recent years has fluctuated up and down year depending on the state of the economy. Generally speaking, when there is a strengthening of job gains, unionization has notched up, and when the economy softens, the unionization percentage drops.  Nonetheless, private sector unionization in Pennsylvania has fallen from over 15 percent in 1990 to under 10 percent-almost certainly caused in large part by the enormous decline in manufacturing jobs in the state. No doubt Pittsburgh’s private unionization has followed closely the same pattern, but was made even more dramatic by the huge declines in airline employment following the loss of hub status at Pittsburgh International.

 

Assuming the general pattern of unionization by industry nationally holds to a substantial degree in the Pittsburgh region, that would mean construction, manufacturing, local, state and Federal governments, commercial airlines, utilities, and telecommunications will have well above average private sector levels of percent union membership.  At the same time, sectors such as finance, professional and technical services, food services (which represent the bulk of the leisure and hospitality sector employment) that have very low levels of unionization nationally are likely to have much lower than the Pittsburgh MSA average private sector unionization percentage.

 

As we have noted in a recent Policy Brief (Volume 13, Number 2) there has been a slowing in overall job growth in the MSA but as that has happened, the employment picture has been bolstered by strong gains in professional and technical services, finance, and the leisure and hospitality sectors.  Indeed, these three sectors all set record high employment readings in late 2012. Meanwhile, construction and local government jobs have fallen and manufacturing has flattened out after a small upturn in growth a year or so ago.  Private education and health care job gains have also slowed from their rapid pace of recent years.

 

This is an interesting development to say the least. Industries with quite low unionization have shown strong gains over the last year while some of the most heavily unionized sectors have been on a downward track or slowing.  Coincidence? Perhaps. But it is significant that sectors that are very dependent on taxpayer funding are losing steam.  And why not?  For one thing, government employment compensation, driven by union contracts, pensions, and health care along with inefficiencies created by work rules have pushed public employee spending beyond what taxpayers can afford-or wish to pay for. Prevailing wage rules lead to public construction costs that are far above those set in a free market system of construction contracts.  That means taxpayers are getting less production than they should for what they are spending.

 

One of the biggest perennial unaddressed problems in Pennsylvania is the inordinate power wielded by unions, particularly government unions, over law and policy making.  Power that has produced the right of teachers and transit workers to strike, creating enormous bargaining leverage that is allowed in very few states and that list is shrinking. This power has also produced some of the most labor favoring binding arbitration statutes in the country. 

 

The mutually beneficial relationship between elected officials and government employees is exactly the kind of problem that Madison warned against in the Federalist Papers, i.e., government taking sides with or promoting a special interest against the interests of the general public.

Union Membership Still Skidding

At the national level, union membership fell in 2012 from the 2011 reading, tumbling from11.8 percent of the work force to 11.3 percent. Interestingly, union membership was down in the private sector and among government employees. Private union membership dropped from 7,202,000 to 7,037,000, pushing the percentage of workers in unions from 6.9 to 6.6 percent. In the public sector, union membership dipped from 7,562,000 to 7,328,000 and the percent unionization declined from 37 to 35 percent.

Government union membership remains greater than the private sector membership even though there are more than five times more private sector employees than public sector workers. The bulk of public union membership is accounted for by local government where about half of government workers are employed and where over 40 percent of workers are in unions. By contrast only 27 percent of Federal and 31 percent of state employees are in unions. Of course, with the military excluded from union membership, the Federal percentage unionization is lower than state and local percentages.

How did Pennsylvania fare? Total union membership (private and public) fell from 779,000 in 2011 to 734,000 in 2012 which led to a drop from 14.6 percent unionization to 13.5 percent. The breakout of changes to public and private union members are not available as yet but, given the slide in local and Federal job over the past year, there is reason to suppose that the number of government union members was also down somewhat.

But the biggest change would have been in the private count. Overall modest private sector job gains resulted from a mixture of weakness in construction and private education and strength in finance, leisure and hospitality, and professional and technical services. Education and construction have relatively high percent unionization while the faster growth sectors have very low percentages of unionization. Thus the mix effect could account for some of the decline. However, there is almost certainly a general slippage in unionization across many industries.

Many other strong union states also experienced major declines in percent unionized workers. Among the biggest drops occurred in Wisconsin where the percentage fell from 13.3 to 11.2. Maryland saw unionization slip from 12.4 to 10.6 percentage, West Virginia down from 13.8 to 12.1, Illinois down from 16.2 to 14.0 percent and Connecticut sliding from 16.6 to 14.0 percent.

In short, the decline in union membership is widespread and is quite heavy in some of the most heavily unionized states. This has happened notwithstanding the enormous effort of the NLRB on behalf of organized labor to promote membership and union powers.

There can be little doubt that heavily unionized states, particularly those with high numbers of public sector unions, are politically blue states. Unionized workers are a major political force, especially those with government jobs. Their interests lie with politicians will support spending that protects their jobs and compensation.

Keystone Research Jobs Confusion

Parroting President Obama’s notion that job growth nationally has weakened because of the layoffs of government workers, the Keystone Research Center says that Pennsylvania’s slowdown in job growth is also due to government layoffs. Some facts might be useful. Over the last twelve months government employment fell by 10,800 in the state while private employment expanded by 48,000 jobs-not stunningly good but okay. In June of this year, government payrolls jumped by 9,000 over the May figure (seasonally adjusted so it is not due to seasonal hiring factors) while private jobs managed only a 5,400 pickup.

Several private sectors showed decrease in employment in June including construction, trade and transportation, information and education and health. The big increase in leisure and hospitality employment (7,000) kept the private monthly figure from showing a decrease. So, over a period when government jobs fell, private sector jobs were moving higher at a reasonably good pace with broad based gains led by mining and leisure employment but when government jobs jumped, private jobs were very weak except for one sector. Now how does the President’s theory explain this? It cannot.

First of all, increasing or maintaining government jobs means resources have to be taken from the private sector to cover the costs of government workers. Moreover, government workers in many categories receive higher salaries and much richer benefits than comparable private sector workers. Certainly that is true for teachers, who account for the largest single share of government jobs. And because the competition in most private sectors is absent in government, it is a virtual certainty that comparably situated employees in government jobs are less productive. Indeed, it is not clear how to measure productivity in government jobs.

Second, most government workers in non-supervisory positions are unionized in Pennsylvania. And Pennsylvania laws protect unionized government workers. Pension obligations-no matter how generous-have to be met, unlike the private sector where bankruptcy can reduce such obligations for employers. Teachers cannot be laid off for economic reasons. Unless enrollment declines or entire programs are cut, teachers’ jobs are safe and they will get any wage or benefit increases called for in a contract regardless of the financial situation in a school district.

In short, the Keystone Research Center has it exactly backward. A growing government sector, for any reason other than population growth, is detrimental to the private sector where real, measurable production takes place and is necessary to support whatever government exists. Keeping government small is the best strategy. Privatize, outsource wherever possible. It can be done if the will is there to do it.

Private Sector Foolishness in Pittsburgh

According to Mayor Ravenstahl there is unanimous agreement in his group of government, university and business leaders that Pittsburgh needs a new source of revenue to bail out its ailing financial problems. We can think of two gigantic problems with the Mayor’s assessment of the situation.

First, there is absolutely no evidence that a new source of revenue will solve Pittsburgh’s long standing tendency to spend or commit to spending all the money it gets its hands on and then some. Over the past two decades the Legislature has provided numerous additional sources of recurring revenue to the City as well enormous amounts of money to large building projects in the City.

And what has the City done to correct its well documented extravagant spending? Not very much. It is still far out of line in its spending, employment and legacy costs compared to other U.S cities. So why would we think a new revenue source would solve the problem? The City needs first to demonstrate its willingness to make the spending cuts necessary to put its house in order. Lower cost government can redound positively to the City with a lot of benefits; lower taxes, a friendlier climate for business and new residents and happier taxpayers.

Raising taxes in the current economic environment is nothing less than preposterous.

The second gigantic problem? Who are the business leaders on the Mayor’s panel who endorse a new revenue source and why are they doing it? No doubt these are the same folks who thought a new tax to fund stadiums was a good idea and that wasting $500 million on a PAT tunnel under the Allegheny River was a good use of taxpayer dollars. If these businesses are so keen to help Pittsburgh with new revenue, why do they not each volunteer a four or five million dollars per year to the City? If it is so important to find new revenue, they should take the lead and make a commitment. That they won’t ante up reveals a fair amount of hypocrisy. Those who want others to pay more should lead the way and donate voluntarily or recommend tax increases on themselves.

That won’t happen because their colleagues in the business world would go ballistic. And no doubt many shareholders in their own companies would as well.

Finally, it is worth noting that the Mayor’s request for $4 million from the tax-exempt institutions received no commitment from the university presidents in attendance at the meeting. Of course being great public spirited citizens they want to help the City by going to Harrisburg and lobbying for more taxes.

We can only hope the Legislature will give this delegation short shrift, exactly what it deserves.