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Unions and Collective Bargaining

The views expressed are those of the author and do not necessarily reflect the views of ASPA as an organization.

By Zachary Dyba
November 20, 2015

The State of Illinois is quickly closing in on yet another month without having a budget in place. Republican Governor Bruce Rauner is locked in a battle with the Democrat-controlled General Assembly. Much of the fighting revolves around Gov. Rauner’s “Turnaround Agenda,” which was inspired in part by Wisconsin Governor Scott Walker’s successful passage of Act 10.

Act 10 limited the collective bargaining powers of teachers in Wisconsin. The decision to avoid proposing changes to the collective bargaining rights of other unions in local government, and instead, focus only on teacher’s unions allowed Gov. Walker and his Republican allies to argue his actions were about education reform and not a direct attack on public sector unionization.

Gov. Rauner has stated his disapproval of public sector unions more directly, for example, referring to American Federation of State (AFSCME) as “Af-scammy.”  Illinois Democrats have consistently pushed back against Gov. Rauner, using the common refrain that an attack on public-sector unions is an attack on the working class.

fist-41490_640Politicking aside, having a discussion about unions that moves beyond any party’s talking points is worthwhile. Collective bargaining can significantly affect the operations of public sector institutions. In local government, in which I work, 41.9 percent of all employees are unionized according to the Bureau of Labor Statistics. While a sizable portion of those employees are teachers, many others work in fire, police and public works departments.

During my time as a graduate student, I spent a significant amount of time researching unions in local government for my master’s thesis. There are three major takeaways from my research:

  • Unions cause wages and salaries to increase. This effect is not surprising as unions state this explicitly as a goal for the individuals they represent in collective bargaining. The rate of increase has varied from decade to decade throughout the past half-century with other legal and socio-economic factors also having some influence. Economist Jeffrey Zax and the late economist Casey Ichniowski, who have conducted numerous studies on the impact of unionization on local governments, have found an average increase of about 4.8 percent for wages in all municipal departments compared to nonunion departments. Other studies show the fire department unions are the most successful at achieving higher wage levels, followed closely by police. Researchers Russell Smith and Williams Lyons found union firefighters have a 12 percent higher wage than nonunion firefighters and other studies have found similar rate increases. Union police departments achieve a more modest, but still significant increase, in the mid- to high-single digits, according to a study done by Peter Feuille and John Thomas Delaney. 
  • Unions cause fringe benefits to increase. A recent study by Sarah Anzia of Berkeley and Terry Moe of Stanford contends there has been a strategic shift away from wage increases toward fringe benefit compensation by public-sector unions. They found fire departments with a bargaining unit spend 25 percent more on fringe benefits than fire departments without a bargaining unit. For police departments, the amount was 21 percent. Anzia and Moe argue that these increases in fringe benefits are advantageous for public-sector administrators because they can hide the benefit increases in unspecified budget categories.
  • Unions cause the allocation of resources to change. Research on how unions influence the financial decisions on organizational and departmental allocation have been contradictory at times, with studies arriving at different conclusions about employment levels and total expenditures. However, there is consistency that, at a very minimum, the department with a union causes an increase in departmental expenditures. Economist Robert Valletta found that departments with collective bargaining unions had their expenditures rise 17 percent while overall expenditures for the organization remained the same. The finding suggests that non-union departments may be getting financially shorthanded because of departments with collective bargaining representation. 

The significance of these three points is clear: unions do significantly affect the finances, and subsequently, the operations of a local government. At issue for many city managers and other local government chief administrators is how to devise a strategy to handle collective bargaining for their organization.

In their famous book, What Do Unions Do?, Richard Freeman and James Medoff argue that unions can create a net benefit to an organization by professionalizing the workforce. The workers then can exercise their “collective voice” to communicate inefficiencies in operations. If management has a positive “institutional response” and cooperates with the union in good faith, then management can make necessary adjustments to improve productivity.

To put Freeman and Medoff’s ideas in simple terms, if both organizational leaders and unions are reasonable and make accommodations for others’ concerns, the organization can benefit in spite of higher costs. However, in places like Illinois and elsewhere, it has yet to be seen if reasonable people can prevail in policy matters related to collective bargaining.

Author: Zachary Dyba, MPA, is the assistant to the township manager of the Township of Brighton, Mich. Dyba is a graduate of Northern Illinois University.

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