Public Sector Unions vs Private Sector Unions

Governors seeking to eliminate contracts of public sector unions are accused of being hostile to the working man. Their response is that contracts won by the unions are more than what private sector workers can bear.

Let's look at this more closely. Private sector workers negotiate with private companies. Whether it's for more pay, or better working conditions, or healthcare, or retirement benefits, etc., they know that, at the end of the day, the costs of their demands must not exceed what the company can carry. Of course, it's not always that rational. The demands of unions have indeed seen companies trying to move their operations out of high labor cost states over to states where labor costs will be lower.

And, indeed, companies have been broken by unions. Companies know this. They also know that enough corporate earnings must be available as profits so that investors can get an appropriate rate of return.

Public sector unions negotiate with the government, not with private entities. "Government" includes local government, state government, and federal government. Gains for public unions are paid out of government coffers. Governments must also balance their books. But, they have an advantage that private companies do not. They can tax.

The federal government can not only tax; they can actually create money.

Of course there are downsides to this.  Print money to excess and inflation becomes inevitable. Tax too heavily and the economy begins to go into reverse.

In other words, those negotiating with workers must keep an eye on the viability of their organizations. However, the outcomes for government is very different than for companies. If a company goes broke,  it rarely will bring down the country. However, governments that fail fail all of its citizens.

Corporate leaders work hard to improve the profitability of their companies. They are judged as to how well they succeed. The politicians who negotiate with public sector unions are in a very position. If they can push the financial problems into the future they will do it. They seem to tackle their financial problems in a responsible way only when they have to. However, the time has come when they have no choice but to confront their financial problems.  It matters to all of us.