The Loeb Rule and pugilistic anti-unionism circa 2011

In the 1910s, the Chicago Board of Education cut the legs out from under the first successful teachers union, the Chicago Teachers Federation (AFT Local #1), by forbidding teachers from joining unions. The Board of Education fired dozens of teachers (about half of whom were CTF members), and the CTF pulled back its membership from the Chicago Federation of Labor. For decades after that defeat, teachers around the country faced arbitrary firings, harassment, unequal pay, and often humiliating working conditions without a strong collective voice. It was only in the 1960s that the modern teachers union movement had its first successes. But the Loeb Rule effectively aborted the first teachers union movement. 

That was the first thing that came to mind when I heard of the Wisconsin legislature's maneuver last night to split Scott Walker's "budget repair" bill's financials from the chunk that abrogates collective bargaining rights of teachers. Here's the Loeb Rule of 2011.

This morning, since the topic of the week for my undergraduate class is Progressive education, I had one of the very few entirely-impromptu lectures I've ever given in an undergraduate class. (This was not so much a "teachable moment" as an "oh my gosh lightning struck in my course and my students may not have realized it" moment.) I sketched the century-long history of teacher unions in various contexts — the parallel history of the NEA (which was definitely not a union in significant ways until the late 1960s or 1970s) and the broader social history and political context of unions. In the end, I ended up coming down on the side that the "budget repair bill without any budget details"  is not the Loeb Rule of 2011. It's still anti-union, but there are a number of differences, including the fact that the politics of Wisconsin today are very different from the Midwest of World War I. Support for collective bargaining has turned out to be much broader than Wisconsin Governor Scott Walker may have anticipated. Or maybe he doesn't care about the politics of the state. 

But one legacy is the impression that Walker misled the state about his intentions and has constantly fudged what the point of his proposal was. Rick Hess speaks what I have always assumed was on Scott Walker's mind:

Let's be straight: One consequence of Walker's proposal is that it would weaken his political opponents, and the protestations by Walker and other Republicans that it would not are both disingenuous and painful to watch. Moreover, by trying to justify his proposal to rein in public collective bargaining as a response to short-term budgetary pressures, Walker is both weakening his case and refusing to speak honestly. This proposal isn't about saving money in the next year or two (as the unions have said, they've already agreed to make those short-term concessions), the point is to rein in runaway pols and outsize union demands going forward. (From the Department of Feigned Indignation.)

Or at least that's the most beneficent reading I can imagine, and I appreciate Hess's openness about this, so let's work with it as far as we can. Theory of action, take 2.0: curtailing collective bargaining is intended to forestall the long-term consequences of greedy union thugs and weak-willed politicians because Wisconsin is epicenter for exactly such long-term problems. (Theory of action 1.0 comprise Walker's public rationale.)

The plain fact is Hess is just wrong on the assertion that, waiting in the wings in Wisconsin,  there is the threat of "outsize union demands" in comparison with state resources in Wisconsin. According to the last Pew Center on the States report on pensions, Wisconsin's pension fund is doing just fine, having approximately 99.7% of the resources necessary to fulfill liabilities, and the health-care and non-pension retiree benefits are also categorized as a "solid performer" in comparison with other states and with the real burdens of retiree benefits. In particular, Wisconsin was singled out for its unique "dividend" way of addressing cost of living increases:

Some of the states in which pension systems are in better fiscal shape have developed ways to share at least some of the risk of investment volatility with employees. Wisconsin, for instance, has substituted a dividend process for standard cost-of-living increases. If the investment returns are positive in a year, the system can declare a dividend that gets paid to retirees. But this is not guaranteed. If a good year is followed by a year with poor investment returns, retirees can see their pensions reduced. In fact, in May 2009, pensions were reduced by 2.1 percent in Wisconsin for all members who had received prior dividends. The only guarantee is the base benefit. “We spent a long time educating our members that they are at risk. They understand it,” said Dave Stella, secretary of the State of Wisconsin Department of Employee Trust Funds. “They understand the risk and reward feature. They’re more than happy to take the gains, and they know they also have to take the reductions.” Wisconsin’s system was nearly 100 percent funded as of fiscal year 2008. (pp. 36-37)

The date of the data is before FY 2009 (the low point for a great number of pension funds), but the Wisconsin system has rebounded in a way similar to how Florida's has. The report was written before any of the concessions public employee unions made in the last few weeks and that were ignored by Gov. Walker. This pension structure described in the Pew Center report evolved in the type of collective-bargaining environment Hess thinks is likely to lead to outrageous financial obligations, and it just hasn't. 

I'm trying to figure out if there is any additional possible theory of action here from Hess's perspective. Thus far in 2011, the larger state teachers union affiliate, WEAC, spoke openly about the need to change teacher evaluations. There's been a previous pragmatic reworking of pension funds in a state with active and deep collective bargaining. And the public employees unions gave concessions on the financial issues. So what is the value of Hess's pugilistic approach to collective bargaining? Maybe theory of action 3.0 is to intimidate unions in other states: "See what we did in union-friendly Wisconsin? Roll over now." But that won't work. Events in Wisconsin will suggest to many union activists that there is absolutely no value for a union in trying to work with state policymakers, because no matter what you do, you'll be seen as the enemy. At least in Wisconsin while Walker is governor, no good deed goes unpunished. 

In the end, I don't think eternally-pugilistic politics are a viable way forward. 

6 responses to “The Loeb Rule and pugilistic anti-unionism circa 2011”

  1. Glen McGhee

    Baumol drew attention to what he called the “cost disease of personal services” (such as education and health care) in the 1990s; but he also offered a utopian solution to the inevitability of having education gobble-up 25% of the GDP in 2040 — to be off-set by productivity gains in all the other sectors of the economy. His point was that these sectors were only growing relative to the productivity increases in the other sectors. But even with this scheme, Baumol admitted that a public choice had to be made, to accept 50% of the GDP going to health care and education. I can only make sense of this latest round of belt-tightening as a prescient response to just such a fiscal apocalypse, a Baumolian catastrophe.

  2. Brian Hirst

    OMG and LOL. Thanks for the Loeb Rule mention. Walker et. al. want to take the country back to the early 1900’s when powerful businessmen ruled all. The Koch brothers would have fit in well with them. One of your past columns on the Loeb Rule, mentions that it came about, in part, because the Chicago Teacher’s Federation was “fighting against corporate tax exemptions that were impoverishing the city (Chicago) and its schools.” Fifteen years after the dissolution of the CFT, we get the Great Depression (no, not causal). About fifteen years after letting commercial banks engage in various trading activities we get the worst down turn since (causal). Unions are one of many necessary buffers to unfettered capitalism. We see the slippery slope being prepared in Maine: secret meetings of business committees that are to advise the governor, erosion of environmental laws that moderate Republicans supported.

  3. Glen S. McGhee

    “… in any society, there will be shifts in the proportion of GDP going to different sectors, and over any interval you could argue that the sector with increasing proportions of GDP is less efficient, ipso facto.”

    True, but Baumol’s trend-lines for non-productivity-increasing services, like medicine and education are widely accepted. Just look at health care costs in FL. They are not arguing that these are “less efficient.” While it is true that these have increasing shares of the GDP because other costs shrink due to productivity gains, it is a mistake to think that this is the only reason. B pts to the lack of standardization as the key problem for NPIS. This is exactly what govs are trying now to layer-over schools with value-added metrics: in essence, they are behaving as if standardization is possible, and acting accordingly. In any case, unions become the culprit — B targets pay-increases as another cause of “cost disease.”

  4. Glen S. McGhee

    Aren’t we really talking about Parkinson’s Law?
    Isn’t this the problem?