Labor Regroups After Drubbing in Wisconsin
Business + Economy

Labor Regroups After Drubbing in Wisconsin

Reuters/Jessica Rinaldi

The same day that organized labor took a drubbing from Republican Gov. Scott Walker in Tuesday’s Wisconsin recall election, voters in San Diego and San Jose were providing added misery by passing resolutions slashing the pension benefits of municipal workers.

Nearly two-thirds of the Californians who turned out for those two municipal elections voted to rein in payments to the cities’ retirement funds, which have steadily risen to more than 20 percent of the cities’ budgets. The pensions have eaten into revenues available for libraries and recreation centers and to road maintenance. "We believe people are tired of having services cut back because of big pensions," San Diego Mayor Jerry Sanders, a Republican, said recently.

These are troubled times for the country’s 14.8 million-member labor movement. Apart from the shocking upsets at the polls this week, budget-minded politicians and voters are targeting federal, state and local workers for layoffs, pay freezes and sharp reductions in often generous union retirement programs.

Teachers, police officers and government bureaucrats frequently complain of being treated like punching bags as critics charge they are being paid more than their counterparts in the private sector and are enjoying gold-plated retirement programs. While some studies show that the wages of state and local workers lag nearly 10 percent behind the wages of workers in the private sector, the comparability of government versus private sector pay has become a major issue in the wake of the financial crisis. One reason is that wages alone do not tell the full compensation story. When generous health care and pension benefits, early retirement options, and other perks are included, the picture changes.

"There’s no question this is a major crisis, and it’s going to require a redoubling of effort – and a new approach by the unions – to convince the public that unions can be a partner in solving our problems, not the source of the problems," said Thomas Kochan of the MIT Sloan School of Management. "Until the unions can demonstrate that, they’re going to continue to get a lack of public support and significant backlash. The Wisconsin election just highlights it."

Walker and the Republican majority in the legislature enraged state employees shortly after taking office in 2011 by using ham-handed tactics to rescind collective bargaining rights for most public employees and impose higher health care and pension co-pays as a way to help eliminate a $3.6 billion deficit. Labor members and their Democratic allies stormed the Wisconsin state Capitol in Madison on a wintry day to register their protests and later collected more than 900,000 signatures to force Walker to stand for election again.

On Tuesday, however, Walker crushed his Democratic challenger, Milwaukee Mayor Tom Barrett, thanks largely to a massive campaign war chest and overwhelming media drive. The governor also won because he was able to convince 54 percent of the voters who turned out that his policies were working to balance the budget, lower state taxes, and put the state pension and health insurance programs on a sounder footing. Surprisingly, 37 percent of the people who voted for Walker said they were from labor families, according to exit polls.

"The encouraging thing is that . . . at the end of the day, once voters saw the results, they rewarded Gov. Walker for making the difficult choices and putting Wisconsin in a much better fiscal position than it was at the beginning of his term," said Mike Schrimpf, a spokesman for the Republican Governors Association.

AFL-CIO President Richard Trumka defended the "courageous" recall campaign effort by rank-and-file labor members, but added that labor was overwhelmed by the "flood of secret corporate cash distorting our democracy." "We wanted a different outcome, but Wisconsin forced the governor to answer for his efforts to divide the state and punish hard-working people," he said. "We hope Scott Walker heard Wisconsin: Nobody wants divisive policies. It’s time to work together to forge a new path forward. The challenge to solve a generation of economic policies and create an economy that celebrates hard work over a partisan agenda gained momentum today."

Just how this major setback in Wisconsin will affect the political and economic fortunes of the labor movement remains to be seen. For sure, state and national labor officials must rethink their ground game for the November election in light of their relatively disappointing voter turnout tactics in the Badger State on Tuesday. For example, if President Obama hopes to win again in Wisconsin and other important industrial states in November, his campaign organization may have to invest more in television and other media buys and rely less on organized labor’s plans for a massive, grass-roots, get-out-the-vote effort.

Walker, aided by a massive ground and air operation funded by right wing SuperPacs, was able to turn out virtually every potential Republican voter in the state, while organized labor’s vaunted ground game failed miserably in mobilizing voters. Apart from these more practical political concerns, Walker’s big win after a year long battle with labor unions and Democrats over issues ranging from collective bargaining and pension programs to the size of government and taxes is certain to galvanize GOP efforts to cut spending and take on entrenched labor interests at both the federal and state levels.

"I think it is certainly encouraging to every governor who was watching the election who is considering making fairly tough choices that impact unfunded [pension] liabilities that really haven’t been addressed for decades," said Schrimpf of the Republican Governors Association. "You see governors from Michigan, New Jersey and Virginia who have all addressed or begun to address pension issues and the cost of health care for state employees. It’s fairly simple arithmetic to figure out the current path is unsustainable."

States and local governments have struggled with the mounting cost of their workers’ retirement programs for years, especially those providing costly defined benefit plans with generous cost of living adjustments. But all of that began to change after the historic financial meltdown on Wall Street in 2008 and a surge in the number of states struggling with underfunded retirement programs.

Between 2009 and 2011, 43 states enacted major changes in state retirement plans for broad categories of public employees and teachers to address long-term funding issues, according to a report by the National Conference of State Legislatures.Those changes reduced pension fund obligations by increasing employee contributions or age and service requirements for retirement, and making various other adjustments to benefit provisions.

Last June, the New Jersey legislature enacted Republican Gov. Chris Christie’s sweeping plan to cut public worker benefits to help close a massive hole in the state budget. Christie said the legislation would save $3 billion in health benefits over the next 10 years and $120 billion in pension costs over 30 years. Much of the pension savings would come from the controversial elimination of the cost-of-living adjustments for retirees, which unions have threatened to challenge in court.

Angry union leaders blasted the bill, which ended collective bargaining over medical benefits. Instead, a new state panel comprised of union workers and state managers, would set health care plans for 500,000 public workers. A sunset provision would allow unions to resume collective bargaining after increased health care contributions are phased in over four years. In addition, police officers, firefighters, teachers and rank-and-file public workers would all pay more for their pensions and health benefits.

Ohio Gov. John Kasich’s effort to overturn collective bargaining rights is a cautionary tale of the political risk of taking on organized labor. The former House Republican Budget Committee chairman took office vowing to shake things up to balance the budget and generate jobs.

Last November, Ohioans overturned a divisive anti-union law proposed by Kasich, handing an important victor to labor unions. Voters rejected Issue 2, a ballot referendum on a measure that would have restricted collective bargaining rights for more than 360,000 public employees, among other provisions.

Kasich was stunned by the setback and saw his popularity plummet. "Those who spend their time scapegoating workers and pushing a partisan agenda will only strengthen the resolve of working people," Trumka, the AFL-CIO chief, said the night of the Ohio vote. "From the very beginning, it's been clear that Gov. Kasich, and indeed many politicians, were pushing an agenda that was about politics, not about solving our nation's problems or creating jobs."

After all the dramatic cutbacks and layoffs in the private sector, some voters don’t want public union workers to have special protections. "The unions are weak and getting weaker," says Todd Gitlin, social historian at Columbia University and author of 15 books about politics and culture, including last month’s Occupy Nation. "It’s no secret they’ve been steadily shedding members for years, from 20.1 percent of the workforce in 1983 to 11.9 percent in 2010," he writes in the book. "The unions are embroiled in self-maintenance and ensnarled in jurisdictional disputes and administrative battles. Visionaries are scarce."

Walker’s win on Tuesday night is sure to be "very deflating for organized labor," says Joshua Freeman, a noted labor historian at Queens College in New York City. "Unions and their allies mounted an extremely impressive campaign against the governor, but failing to finish the job will be disheartening."