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Wisconsin’s Troubles Caused by Power, Not Pay

The demonstrations in Wisconsin by public unions are strikingly similar to the United Auto Workers union’s battle’s with management in the mid-1970s. According to author Paul Ingrassia, the UAW caused the decline of the auto industry in the US. He warns that the same could happen today.

I went to graduate school in the early 1970s at the University of Wisconsin in Madison and studied labor relations. One day in class a fellow grad student talked about his summer job at the General Motors assembly plant in Lordstown, Ohio, then infamous for the worker alienation known as the “blue-collar blues.”

When the line stopped one day over a labor dispute, the student said, the workers erupted into cheers.

Lordstown then is like Madison today, judging from the scenes of protesting public workers at Wisconsin’s state capitol. The dispute there is about far more than wages and benefits for public employees. It’s about power. Specifically, about the monopoly power that public-sector unions wield, which is not unlike the power that the United Auto Workers union once had.

Just as the UAW’s monopoly power helped nearly to destroy Detroit, so the monopoly power of unionized teachers has helped to destroy the public schools in many places. And the monopoly power of other unionized public employees, from social workers to firemen, has plunged states and cities around the country into budgetary crisis.

The parallels are remarkable and instructive. So are the lessons to be learned in the public sector from what happened to the UAW and to Detroit’s car companies, and why. Today’s public-employee unions are yesterday’s UAW, and the results are equally devastating.

The UAW organized the Detroit companies in violent confrontations between the mid 1930s and early 1940s. It had to happen. Work on assembly lines was demanding and demeaning. Even Henry Ford’s famous $5 day, established in 1914, was accompanied by the creation of Ford’s Sociological Department, whose staffers visited workers’ homes to make sure they were spending their wages properly.

By the end of World War II the UAW represented every worker in every car factory in America. Every three or four years, in the national contract negotiations, the union would choose one of the Big Three companies to set the contract pattern, and then strike it while the other two companies kept producing cars. It wasn’t long before the target company capitulated, fearing a permanent loss of market share or even bankruptcy. The other two companies quickly adopted the pattern.

Strikes generally were forbidden during the duration of contracts. But when the union wanted something it would gin up safety grievances at one or two key components plants, and then strike them. The resulting parts shortage could shut down an entire company, as happened at GM in 1998, when a “local” strike in Flint, Mich. cost General Motors some $2 billion.

Detroit’s managements capitulated time and again. That was easier than confronting the union, even though it saddled future management teams with unsustainable benefits and crippling work rules. One was “30-and-out,” which allowed workers to retire after 30 years with full pension and benefits, regardless of age. Another was the infamous Jobs Bank, in which laid-off workers were paid 95% of their wages indefinitely.

It was such a sweet deal that senior workers won the right to opt for layoffs, and send junior workers back to the assembly line. The practice even had a name: “inverse layoffs.” Wages were never really the problem in Detroit. It was paying people not to work, in myriad ways.

The UAW’s labor monopoly was broken when Honda opened its first car factory in Ohio in 1982, and workers there rejected the union a few years later. Honda and other foreign car companies, all of which still remain non-union, steadily expanded their U.S. operations while the unionized Big Three dwindled. All this ended in the bankruptcies of GM and Chrysler in 2009.

For decades politicians in Wisconsin and other states caved to their public-employee unions for the same reason Detroit’s executives did: it was easier, even though it passed problems onto somebody else. Capitulation also brought the politicians a windfall of campaign contributions and electoral support from the very unions with whom they negotiated contracts. As bad as things got in Detroit, at least the UAW never got to pick the bosses on the other side of negotiating tables.

As the UAW was losing its monopoly in the 1980s and 1990s, public-employee unions were cementing theirs. There is rarely competition to provide public services with the limited exception of schools, which is why teachers unions resist vouchers and charter schools so staunchly. Indefensibly, the New York public schools still have a program under which underperforming teachers are paid for not teaching. Call it Jobs Bank II.

Last week Illinois’ state senate majority leader, John Cullerton, scolded Wisconsin Governor Scott Walker on Chicago television for causing the chaos in Madison. This was rich. Senator Cullerton, a Democrat and the scion of a Chicago political dynasty older than the Daleys, has sat in the Illinois legislature since 1979. During that time Illinois has “achieved” the worst credit rating of any state thanks to rich public pension plans that are only 45% funded. The state just raised income taxes 75%, and now wants to borrow more money to fund pensions. You’d think the senator would avoid lecturing other states on their financial affairs.

The suggestion that Governor Walker should now “negotiate” with Wisconsin’s public unions is a sure sign the governor will win if he keeps his resolve. GM sued the UAW over the 1998 Flint strike and appeared poised to prevail, but management got cold feet and decided to settle. The UAW won its key demands, and GM plant managers were told that henceforth, part of their bonuses would depend on getting along with the union. Guess what that did to productivity?

The dispute in Madison isn’t about next year’s wages and benefits. It’s about redressing and reforming a balance of power that has gotten out of whack, just as it did in Detroit. Ironically, the power imbalance there almost destroyed not only the companies but also the UAW itself, where membership now stands at just one-third the level of 40 years ago. The time for Gov. Walker to negotiate will come after a better balance of power has been restored.

The final irony here is that the new president of the UAW, Bob King, is billing the auto workers as a chastened “union for the 21st century,” with a new commitment to responsible behavior. Mr. King is launching a fresh campaign to organize the foreign car factories in America, saying that the UAW can offer advantages to both the companies and their workers.

That’s a tough argument to make, given the UAW’s history. The spectacle of state workers running amok on Capitol Square in Madison doesn’t make it any easier.

Paul Ingrassia, a Pulitzer Prize winner, is the author, most recently, of “Crash Course: the American Automobile Industry’s Road from Glory to Disaster,” published by Random House.

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