The Struggle for Skilled Labor: How Connecticut and New England Could Lose The Battle for Their Economic Future The Lyceum Forum Hartford, CT January 31,

The Struggle for Skilled Labor: How Connecticut and New England Could Lose The Battle for Their Economic Future

The Lyceum ForumHartford, CTJanuary 31, 2011

Barry BluestoneDean, School of Public Policy and Urban Affairs

Top 10 Challenges Facing Connecticut and the Region

Aging of the Connecticut Population The continuing Fiscal Crisis Regionalizing Local Government functions Forging a New Grand Bargain with Public Unions Maintaining a Strong Business Climate Continuing Improvement in Education and Training Reducing Income and Wealth Inequality Taking full advantage of our Diverse Population Investing in Infrastructure and Sustainability Reducing Crime in our neighborhoods

My Focus Today

Aging of our Population

A New Grand Bargain with Public Unions

# 1

An Aging Population

Connecticut projected to grow only 30% as much asU.S.

Connecticut is projected to grow slowerthan all the rest of the New England states

Only 13 states are projected to grow more slowlythan Connecticut … states like Michigan, Illinois,South Dakota, and Ohio

Over time falling further and furtherbehind the rest of the country

Baby boomers aging with smallergenerations coming behind them

Age 18-64: - 31,097Age 65+: +126,920

Small cohorts of young people …And smaller cohorts of older ones, too

93%99% 106% 113%

135%149%

530%

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Proportion of State's Household Growthaccounted for by those Age 55+

2007-2020

U.S. 99%

CT 149%

Source: U.S. Census

Proportion of State’s Projected Household Growth Aged 55+

(2010-2020)

Questions If this projection proves true, will we have a sufficient

workforce to attract new business? If this projection proves true, what will be the impact on

state and local tax revenue? Can the provision of affordable housing help retain and

attract young families? Can we continue to boost the quality of the life in

Connecticut including making our schools and neighborhoods better and safer places for families and kids

How can we be more welcoming to immigrants so they come to Connecticut and remain here as entrepreneurs, skilled workers, service providers, and taxpayers?

What attracts Young Households to a Region?

Jobs Affordable Housing Good Schools Safe Streets Cultural & Recreational Amenities Welcoming Communities

How Well is Connecticut doing on each of these?

#2

Public Sector Unions

The Glory Days of the UAW

1960s: UAW had 1.5 million members Its economic clout helped provide excellent wages and

benefits Equally important, the UAW was one the most respected

progressive forces in the nation fighting for universal health care, civil rights, workforce training, and fighting against poverty

Its political clout helped boost the national minimum wage, legislation not directly benefiting it own well-paid members

Because of its progressive stance, it enjoyed widespread popular support

Traditional Workplace Contract … first negotiated by UAW with GM in 1946

AIF/COLA Wage Formula“Fringe” BenefitsSeniority ProtectionGrievance MachineryWork Rules/Job ClassificationsUnion Security ClauseManagement Rights Clause

Traditional Contract Worked Wonders in the Post-War Period

AIF-COLA Wage Formula provided massive dose of consumer demand

Fringe Benefits provided great security Seniority, grievance machinery, work rules,

union shop did the same -- gave sense of security as well

And so, American workers went out and spent their incomes generating record GDP growth rates … and a full generation of prosperity ensued

Today ….

The UAW has fewer than 355,000 members

Its economic and political clout is a shadow of what it once was

Much of its decline is due to the extraordinary blunders made by management

Nevertheless, the union was partly to blame

Failures of the UAW

It failed to press the auto companies to build high quality, innovative vehicles that could compete with imports

Often it insisted on work rules that undermined efficiency and compromised the industry’s competitiveness

It did not listen to its customers … those who buy cars, trucks, and vans

Toyota, Honda, Nissan came to dominate the industry … and the domestic industry went into decline and then bankruptcy

Until quite recently, the UAW looked like it was doing fine

The explosion in competition began as a trickle, but it was generally ignored

The industry and the union were so arrogant that both felt their privileged status would last forever

They sure were wrong!

The Union Movement Today

The UAW was hardly alone Today, less than 14% of U.S. workers are

union members, down from 35% … and only 7.2% in the private sector

With the union movement’s membership so low, private unions have lost much of their power to protect their own members … and the nation is losing a major force for progressive change

United States: Trends in Union Membership

10

15

20

25

30

35

40

1930

1932

1934

1936

1938

1940

1942

1944

1946

1948

1952

1956

1960

1964

1968

1972

1974

1976

1978

1980

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

Year

Perc

ent o

f Em

ploy

ed L

abor

For

ce

1955: 35%

2008: 13.7%

Could the same thing happen to Public Sector

Unions?

United States: Private Union Membership v. Public Union Membership

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

Year

Perc

ent o

f Em

ploy

ed L

abor

For

ce

Public Sector

Private Sector

It looks like PublicSector Unions aredoing fine

But troubling signs ahead

State and local governments facing massive fiscal deficits

Many parents, particularly in city schools, feel their kids are not getting the education they need

Progressives and Democratic lawmakers, not reactionaries, are now in the forefront of the charter school movement … to free school systems from the unions they see as barriers to school reform

Current deficits are only the tip of the iceberg in Many States

The cost of state government services is spiraling out of control

Given the rising cost of debt service, public employee pensions, and Medicaid, states are facing massive long-term “Structural Deficits” that will destroy public services

Price Increases: Total Economy vs. Cost of State and Local Services

2000-2008:I

21.3%

26.8%

40.7%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

Total Economy Private Services State & Local Services

Nationally, the cost of providing State& Local Services is growing 1.5X PrivateServices

Compensation of Private Sector vs. State & Local Government Workers

2010:Q3

$19.68

$8.20

$27.88$26.25

$13.85

$40.10

$-

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

$35.00

$40.00

$45.00

Wages & Salary Total Benefits Total Compensation

Private Sector State & Local Gov't

Source: BLS Employer Costs for Employee Compensation

1.33 X 1.69 X

1.44 X

Total Compensation Managers, Professionals & Related Workers Private

Sector vs. State and Local Government September 2010

$49.31$46.27

$48.73 $47.90

$0.00

$10.00

$20.00

$30.00

$40.00

$50.00

$60.00

Managers, Professionals & Related Professional & Related

Private Sector State & Local Government

Source: BLS Employer Costs for Employee Compensation

Managers & Professionals Paid on Par

Source: BLS Employer Costs for Employee Compensation

Total Compensation Sales & Office Workers; Service Workers

Private Sector vs. State & Local Government September 2010

$22.00

$13.80

$27.87$30.17

$0.00

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

$35.00

Sales & Office Workers Service Workers

Private Sector State & Local Government

But Public Sector Sales, Office, and Service Staff do much better

1.2 X 2.2 X

New Collective Bargaining Environment

Municipal officials have no choice but to demand relief from public service workers or cities and towns will go bankrupt

As the public begins to recognize how well public sector workers are doing relative to other workers, and how bad the national and state economies are doing, they will increasingly side with municipal officials and against public sector unions

Some may cheer the demise of public sector unions, but many former supporters will sit on the sidelines and not come to their rescue

This poses a serious challenge for public employee unions

How will state and local governments survive the structural crisis without taking on their unions?

Can state and local governments continue to fund public services offered by union workers?

Will taxpayers be willing to continue to support public services even if this means more taxes?

How Do We Solve the Structural Deficit?

Reform inefficient government bureaucracies and government programs

Public sector union reforms Work rules and job classifications Pension & medical insurance reform

Raise more tax revenue Sales tax, gasoline tax, income tax

Regionalize public services

Lessons for Public Sector Unions

Public sector unions must help find ways to improve productivity and reduce the costs of public services

Public sector unions must make a better case to consumers … those who pay the taxes for services … and this requires union editors who can tell the story persuasively to the public (and their own members)

Unions must see taxpayers as a potential ally and work to gain their trust

It is time for a “grand new bargain” where unions play a greater role in improving service, quality, and innovation in return for greater job security and public respect

Aspects of the New Grand Bargain

Union joins in efforts to boost …

Productivity/Efficiency Quality of Services Innovation in Offering Services

Union to be a partner in serving the needs of the taxpayer

Union plays a serious role in helping shape social policy … balancing the interests of their members with the interests of the public … and explaining this to both their members and the public

A New Grand Bargain: Rebuilding Public Support for State and Local Government

Reform outmoded Work Rules and Job Classifications

Public Sector Pension Reform Advocate for Regionalism Advocate for Efficient & Effective Government

Services Advocate for School Reform Keep public services public Support for adequate taxes to support excellent

public services

Prospects for a New Union Future

Unions become part of the solution, not part of the problem

In response, Unions find greater popular support for the union agenda

Union political clout regainedAmerican democracy reaches a

new level

Questions: Can we move toward a new “Grand

Bargain” with public sector unions that would enhance efficiency and effectiveness in the provision of public services?

How can public sector unions and state and local governments work together to enhance the value of public services?