December 16, 2005
The New York City transit strike Posted by John Steele Gordon at 01:50 PM EST The possibility of a New York City transit strike continues even though strikes by public employees are against the law everywhere. One President, Calvin Coolidge, got to the White House because as governor of Massachusetts he took a hard line on the Boston Police Strike of 1919, famously saying that “there is no right to strike against the public safety by anybody, anywhere, any time.” Another President, Ronald Reagan, made his reputation as a man who meant what he said (a very useful reputation for a President to have) when he fired the illegally striking air traffic controllers early in his first term. And yet strikes by public employees are not uncommon, even when the employees in question are not underpaid, which the transit workers certainly are not. The New York Times (not exactly an anti-union rag) ran an op-ed piece the other day showing that transit workers earn well above what other blue-collar workers in New York City earn and pay not one penny for their excellent health insurance. More, they can retire on half pay when they are only 55, if they have worked for the MTA for 25 years or more. So what does the Transit Workers Union want? Eight percent raises for each of the three years of the contract and retirement at 50. There is something fundamentally wrong here. And that, I think, is that the collective bargaining model, taken almost unchanged from the private sector, doesn’t work in the public sector. A corporation is a wealth-creating machine, in which people—both employees and investors—voluntarily come together in hopes of creating more wealth collectively than they could create individually. The bargaining between unions and management in the private sector, then, is really a negotiation about divvying up the wealth created. Both sides know that there are practical limits on how much of the pie they can have. Management knows that a sullen and resentful workforce is a much less productive one and that the best workers will leave for better opportunities in other wealth-creating machines if they are not paid a just sum. Further they know that the stockholders will fire them if they give away the candy store. Meanwhile labor knows that a company must be profitable or it won’t be in business long and all their members will be out of a job. None of that obtains in the public sector. An urban transit system doesn’t create wealth (although, hopefully, it facilitates the creation of wealth by others), and it can’t go out of business. Where corporate managers measure their success by how much profit their departments make, a function, in part, of keeping down labor costs, bureaucrats measure their status by how big their budget is and how many people report to them. So cutting costs is not a high priority with public-service management. Further they are spending other people’s money—the public’s. As Milton Friedman has often pointed out, people are always notably generous when they are not spending out of their own pocket or with their own self-interest directly involved. So it is a lot easier to accede to labor demands in exchange for fig-leaf concessions than to engage in extended knock-down-drag-out negotiations. Meanwhile, public-service labor unions have every incentive to demand the sun and the moon and the stars, because they are likely to get much of what they want. The results over the long term, inevitably, are contracts that would be laughed off the negotiating table in the private sector. I don’t have a tidy solution to this problem, and given the clout of public-service unions in the political system these days, I doubt there is one that could be enacted into law. But the current model is the problem and needs to go.
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