Chapter Collective Bargaining in the Public Sector 13 McGraw-Hill/Irwin An Introduction to Collective Bargaining & Industrial Relations, 4e Copyright.

Chapter

Collective Bargaining in the Public Sector

13

McGraw-Hill/IrwinAn Introduction to Collective Bargaining & Industrial Relations, 4e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights reserved.

1 - 313 -3

The Evolution of Public Sector Collective Bargaining

- The percentage of government workers represented by unions grew from 12.8% in 1960 to 20.6% in 1974

- Including associations, 37.7% were members of a bargaining organization

• The 1960s and Early 1970s: The Era of Growth- What caused the rapid growth?

• Expansion of government budgets• The example of civil disobedience set by civil rights and

other groups in the 1960s• Passage of laws favorable to public sector collective

bargaining

1 - 413 -4

The Mid and Late 1970s: The Taxpayer’s Revolt

- The economic environment for public sector bargaining tightened in the mid-1970s

• Also, a conservative political tide questioned the value of government expenditures

- Following the OPEC oil embargo and the steep recession of 1974, New York City and other governmental entities were financially strained

- City workers received pay cuts of up to $4,500- California passed Proposition 13, which cut property taxes to 1%

of the market value- Despite the problems, employers did not try to remove the

unions, making them more stable than the private sector

1 - 513 -5

The Early 1980s: The PATCO Strike

• The Professional Association of Air Traffic Controllers struck on August of 1981, despite a no-strike clause

- PATCO sought higher wages and benefits- President Reagan fired the strikers and used military controllers

to keep traffic moving- The Federal Labor Relations Authority decertified PATCO, but

the new controllers voted in a new union in 1987- The PATCO strike was a watershed event for labor- The strike hurt the image of labor for nearly two decades and

legitimized hard-line bargaining by employers- During the Clinton Administration, the strikers were offered

their jobs back and a few returned

1 - 613 -6

The Mid- and Late 1980s: Institutional Stability and Some Gains

- The PATCO strike contributed to a wave of private sector concessionary bargaining in the 1980s.

- The public sector was relatively calm, with no extreme economic events

• Some politicians claimed that cutbacks in spending had gone too far

- Problems with public education and student achievement led to higher expenditures, especially in math and science

- NEA membership and bargaining power strengthened as a result

1 - 713 -7

Reinventing Government: To the Present

- In the 1990s, the public sector came under intense pressure to improve performance and shrink its size

- Some calls for reforms arose from formal reviews• These reviews often called for the reinvention of the public

employment system to address bureaucracy and inefficiency• A number of reviews suggested empowering public sector

workers through partnerships with unions• At the same time, there were calls for downsizing and

privatization of the public sector- In contrast to the private sector, there has been general stability

in public sector bargaining for the past 35 years

1 - 813 -8

The Legal Regulation of Public Sector Unionism

- Federal, state, and local government employees are excluded from coverage under the NLRA

- Separate regulations cover bargaining in these sectors- In 2006, 7.4% of the private sector employees were

unionized, while 36.2% of the public sector were covered by bargaining agreements

• 28.4% of federal and 30.2% of state employees

- 41.9% of local government workers were union members

1 - 913 -9

Federal Employees

- Federal employees received the right to unionize by Executive Order 10988 in 1961

- In 1970, Congress allowed postal workers to bargain over wages, hours, and working conditions

- In 1978, Congress replaced the Executive Orders with a comprehensive law giving bargaining rights to federal employees

• The law allowed bargaining over conditions of employment, but not pay and fringes

- Bargaining in the federal sector is now regulated by the Federal Labor Relations Authority

• Strikes are still prohibited

1 - 1013 -10

State and Local Government Employees

- As of 2006, all but nine states allowed some collective bargaining by the public sector

• States without public bargaining are primarily in the South, and include: Arizona, Arkansas, Colorado, Louisiana, Mississippi, North Carolina, South Carolina, Virginia, and West Virginia

- Of the 41 states with the laws, 24 have passed comprehensive legislation covering many occupations

- States have increased the scope of public bargaining laws in recent years, such as improved dispute resolution procedures

1 - 1113 -11

The Diffusion of State Bargaining Laws

- States with liberal political histories, high expenditures per capita on government services, and above-average growth in personal income had the earliest and most comprehensive public bargaining laws

- States with public sector laws also tend to have a relatively high percentage of private sector unionization

- Legal enactment does not appear to make up for power imbalances

• Laws were passed where government expenditures were already relatively high and where labor had influence

• The more favorable the laws were to unions, more union growth ensued

1 - 1213 -12

Legal Regulation of the Right to Strike

- No state provides a right to strike equal to the NLRA for private sector workers

- However, some states do provide a limited right to strike• Colorado, for example, permits strikes by all public sector

employees• Pennsylvania has a more limited right to strike that permits

nonuiformed employees to strike if they do not endanger public safety

- Some states impose harsh penalties for strikers in the public sector• New York punishes strikers “two for one” under the Taylor

Law, which penalizes strikers one day’s pay for each strike day, which is in addition to the day’s pay the employee loses while on strike

1 - 1313 -13

The Frequency of Strikes

- Highest strike rates occur in states allowing strikes, but they do occur in other states as well

- The failed PATCO strike slowed strikes in the 1980s- Teachers in large school districts are more likely to strike than

those in small districts

• Bargaining Rights of Supervisors- Most states do not exclude supervisors- Unlike the private sector, supervisors do not have significant

independent authority - Some require separate bargaining units for them

1 - 1413 -14

Calls for Federal Legislation affecting State and Local Employees

• Some want the federal government to mandate bargaining rights for states without such laws

- But the federal government may not have the Constitutional authority to do so

- Also, unions do not agree on the form of such laws

• As in the private sector, public sector bargaining is influenced by other state and federal statues

- Chief among them are taxation and civil service laws- A difficult issue is how to resolve conflict between public

employee bargaining statues and other laws

1 - 1513 -15

Differences in the Bargaining Process between the Public and Private Sectors

- The more public sector employees are able and willing to sustain a strike, the greater their bargaining power

- They have greater power the less employment drops over the long run in response to an increase in labor costs

- To resolve whether public sector unions have more power than private sector unions, it is necessary to consider how environmental factors influence bargaining power

• This requires analysis of Marshall’s conditions and the trade-off between wages and employment

1 - 1613 -16

How Marshall’s Conditions Operate in the Public Sector

• First condition states that employees have more bargaining power if it is difficult to substitute other factors of production

- Public employees are stronger in this regard• Second condition is the price elasticity of demand for the final good

- Here again public employees are stronger, as government is typically the sole provider

• Third condition concerns what happens to the price of substitute factors of production if the demand for them increases

- No clear difference between the public and private sectors• Fourth, the importance of being unimportant

- Public employees are worse off in the fourth condition, since labor is a large factor in total cost

- Ratio of labor to total costs varies from 60-70% for teachers to 90% for firefighters

1 - 1713 -17

Shifts in Demand for Public Services

• The bargaining power held by public employees after the mid-1970s and again in recent years was limited due to rising environmental pressures

- Tax revenues were declining and the public’s demand for services was falling

- The long-run demand for labor in the public sector is much more elastic than the short run

• It takes time for politicians to reduce employment when wages rise significantly

1 - 1813 -18

Strike Leverage - Public versus Private

• Strike leverage of public employees is influenced by their ability and willingness to sustain income losses

- The critical factor is the high penalty faced by public sector strikers

• Unlike the private sector, government continues to receive income during a strike

- Governments also don’t face competitors - But public pressure may rise for services- Few substitutes are available for the services, thus increasing

public employee bargaining power• The public’s willingness to sustain strikes seems to sway with

political and economic winds

1 - 1913 -19

Financial Sources of Governments

- Local governments have limited sources of funding• In 1993, local governments generated 55% of their revenue

from their own sources• Much of the revenue came from property taxes and fees• An additional 30% of revenues were federally funded• Many federal burdens are now being placed upon states and

local governments- Revenue-generating capacity of local government is constrained

by• The size of the tax base in the community• The willingness of the public to tax itself• Constitutional or other legal limitations on the amount of

taxes local governments raise

1 - 2013 -20

Public Sector Bargaining Structures

• The Degree of Centralization- Collective bargaining in the public sector is highly decentralized- Almost all bargaining is done on a single employer basis- The diverse financial conditions that exist in local government

make employers and unions hesitant to consolidate bargaining units

- Local governments like decision-making autonomy- But local governments do engage in informal coordination and

information sharing- There is recent movement toward greater centralization in

teacher bargaining; some pressure comes from the courts, given the current reliance on property taxes for funding

1 - 2113 -21

The Scope of Bargaining Units

• Bargaining in the public sector tends to follow occupational lines more so than in the private sector

• A city government is likely to have separate bargaining units for police, fire fighters, blue-collar workers, and various professional groups

• Public schools tend to have separate units for teachers, clerical and secretarial employees, principals, and more

• Rivalries that separate police and fire fighters in many cities limit coalition bargaining

- Nevertheless, the vast majority of municipalities tie their pay through parity or patterns

1 - 2213 -22

Management Structure in the Public Sector

- In the public sector, managerial authority and responsibility is widely shared

- As a result, bargaining in the public sector is more multilateral than bilateral

- Teacher contracts are an example, with superintendents, school boards, mayors, citizens and others involved

• When unions have considerable access to elected officials, management negotiators may find it difficult to keep a united front

- Internal conflicts within management’s ranks frequently spill over into the formal negotiations process

1 - 2313 -23

The Negotiations Process in the Face of Multilateral Bargaining

- Multilateral bargaining is a process that includes more than two distinct parties

- An “end run” occurs when union officials try to sidestep the formal management negotiating team and take their proposals to an alternative group (such as school board officials)

- Community interests can also be involved with multilateral bargaining

- Multilateral bargaining also has emerged in jurisdictions that face fiscal crises

• State, federal, and private sector business leaders usually demand some say in return for their financial support

1 - 2413 -24

A Case of Multilateral Bargaining

- AFSCME and Wisconsin engaged in a bitter multilateral dispute• The previous contract had been settled through an end run

around management and settled between the governor and the AFSCME president

• The next bargaining led to a 15 day strike in which the National Guard was called out

• Court injunction against strikers• Joint Legislative Committee on Labor rejected the back to

work settlement• Legislature approved deal• Attorney general pursued contempt proceedings against the

striking workers- The case shows how diverse political pressures can affect

collective bargaining

1 - 2513 -25

The Effects of Public Sector Bargaining on Outcomes

• Wage and Other Compensation Outcomes- Although estimates vary, the vast majority of studies have found a

wage differential between unionized and nonunionized public employees

- Wage effects are not greater than the private sector- Public sector union-nonunion wage differential range is 5-15%- Unions do not appear to exert a stronger effect on wages of public

employees than they do on the wages of private employees- Unionism leads to higher fringe benefits for public employees

• More days off, fewer hours per day worked, higher pensions and vacations

- Large pensions increases suggest the simple wage differential underestimates the compensation effects of bargaining

1 - 2613 -26

The Effects on Public Sector Budgets

- Evidence comparing employment in union and nonunion cities suggests that public sector unionism raises or at least does not lower employment

- Unions are able to lobby for greater expenditures to pay for raises

• Union Effects on Public Administration- Unionization has increased the formalization of personnel

practices and reduced management discretion- There have been a few cases of successful labor-management

committees in the public sector- The quality of public service is dependent upon the relationship

between the union and employer

1 - 2713 -27

The Use of Interest Arbitration

- Interest arbitration determines contract terms- Some form of interest arbitration is available in 22 states- Police and firefighters are the groups most covered- A wide variety of forms, including conventional, final offer, and

combinations of mediation, fact-finding, and interest arbitration

• Does Interest Arbitration Perversely Affect Collective Bargaining?

- Some argue it chills negotiations and stifles compromise • Politically, it can pass the blame to the arbitrator• May favor the party that seeks the fewest deviations from the

status quo and could stifle innovation

1 - 2813 -28

Evidence of the Effects of Interest Arbitration

- Most negotiations where interest arbitration is available are settled without its use

- One study found that it was used in 6 to 29 percent of negotiations in states where it is available

• The variance in use is a function of the different form used

• The Impact of Interest Arbitration on Contractual Outcomes- Fewer strikes in states with interest arbitration - But settlements are slightly higher and lead to more favorable

nonwage contract terms- Outcomes are less varied across municipalities

1 - 2913 -29

Participatory Programs and Work Restructuring in Public Schools

• The History of School Reforms- Many school districts began to alter the roles and responsibilities

of teachers, principals, and administrators - School reforms came in response to pressures to improve

education following “A Nation at Risk” that argued weakness in elementary and secondary schools were contributing to America's economic decline

- The perception that Japan and Germany were more competitive due to better trained workers, combined with deteriorating public schools, prompted further reforms

- Education has historically been a local matter in the U.S. - Now, national standards increased federal involvement- Schools are under pressure to improve learning and lower costs,

which parallels pressures in the private sector

1 - 3013 -30

The “Low-Cost-Hierarchical” School Reform Strategy

- There was a wide divergence of opinion over what was the appropriate way to restructure schools

- Some wanted tighter controls and stricter lines of authority• They felt this would improve productivity and discipline• Testing of teachers and merit pay were suggested• This was a counterpart to the low-cost private sector business

strategy

• A “Decentralization-Participation” School Reform Strategy- This technique was thought to improve quality & innovation- The hope was that teachers would innovate in classroom

instruction and respond to student needs quickly

1 - 3113 -31

School Improvement Teams

• Some districts introduced school improvement teams with 10 to 15 members including the principal and some teachers, parents, and support staff

• The teams were analogous to Quality Circles• Their problems and limitations were similar to those in

the private sector• Teachers became frustrated when their suggestions

were turned down• School improvement teams were constrained by the

myriad regulations that surround public education

1 - 3213 -32

Lead Teacher Programs

- Lead, or master, teacher programs were often part of the decentralization-participation strategy

- The goal was to allow experienced and committed senior teachers to serve as mentors and role models for younger teachers

- It was a way to financially reward superior teachers in a seniority-bound system

- This was a way to cope with a seniority system with no mechanism for merit raises

1 - 3313 -33

School-Based Management

• School-based management was an extreme reform adopted in some districts

• Typically included teams of teachers, administrators, parents, students, and local community leaders

• Issues included curriculum, teaching strategies, hiring of administrators, professional development, discipline, and school schedules

• This system attempted to create more flexibility in systems constrained by rules

• Some teachers unions support such reforms, yet there is much diversity in the unions’ stance

1 - 3413 -34

The Problems Inhibiting New Efforts

- Many principals are reluctant to give up control, similar to supervisors in the private sector

- The school-based management and related reforms also create a critical issue concerning the relationship between bargaining and the participatory process

• For example, the role of the grievance procedure when there is a team to solve the problem

• Accountability Programs• The pressure for closer accountability derives in part from the

public’s concern over the quality of education• It includes the monitoring of student progress• Proposed revisions of tenure are a challenge to the unions

• Effects of School Reforms on School Outcomes• Little evidence relating to the effectiveness of reforms;

complexities of the educational system make such measurement very difficult

1 - 3513 -35

Normative Premises

- Criticisms of Public Sector Bargaining• Some say that government’s primary responsibility – to

represent the public interest – makes collective bargaining inappropriate for the public sector

• Critics say that if labor unions gain exclusive representation, they will obtain undue political power

- The Virtues of Public Sector Bargaining• Others say public employees have an inherent right to

participate in the determination of their working conditions• Evidence suggests that unions have modest impact on pay and

working conditions• Representation of public employees may enhance worker

democracy

1 - 3613 -36

Summary

- There has been a diverse range of experience in public sector bargaining

• It is difficult to make generalizations, since there are wide differences in the economic power of public employees

• Unionism does not appear to warp the political process• The wage effect is not greater in the public sector than in the

private sector• Public sector unions have raised some fringe benefits

substantially and led to an increase in government expenditures• Work restructuring has emerged as a central issue in the public

sector • There are high levels of unionization in the public sector versus

the private sector