Will Wisconsin's chill on labour move north?

In late 2009, Wisconsin became the first state to require schools to include "the history of organized labour in America and the collective-bargaining process" in social-studies curricula. That was when Democrats ran the state.

Now, with Republicans in charge, the state where public-sector bargaining was born is writing its obituary. It truly is one for the history books.

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For nearly a month, thousands of public-sector workers and their supporters have protested daily outside - and even inside - the Wisconsin Capitol. Democratic senators took refuge across the state line in Illinois to deny Governor Scott Walker the quorum needed to put his "budget-repair bill" to a vote.

By Wednesday night, Mr. Walker had had enough. He reintroduced the bill's most controversial provisions in a separate piece of non-budgetary legislation to get around the quorum rule. It sailed through the Senate in, literally, five seconds, and through the Assembly on Thursday.

For the American labour movement, this could be its Battle of Gettysburg. Already a spent force in the private sector, unions now face a fight for survival in the public sector as legislators in Wisconsin, Ohio and elsewhere - even Michigan - move to impose new labour laws.

If Canadian unions think that they are immune from the Tea Party politics that have triggered this radical shift, they may be in for a shock. Public-sector unionization rates are 71 per cent here, compared with 37 per cent there, but as the labour fortress of the U.S. North falls, the once-formidable unions of the Great White North may follow.

That great explainer of the differences between the U.S. and Canada, Seymour Martin Lipset, once posited that higher unionization rates simply reflected this country's collectivist mores.

"Canada, by retaining British institutions and Tory values, created a society and a culture that are more statist, group-oriented, communitarian, less individualistic and, ironically, social democratic," the American scholar wrote a decade before his death in 2006. South of the border, by contrast, laissez-faireism, individualism and populism created a hostile climate for unions.

But that analysis fails to account for regional differences within the U.S. After all, union density - the percentage of workers belonging to unions - was and is essentially the same in New York State as in Ontario. But, Norma Rae notwithstanding, the union movement never made inroads into the South.

Barely 4 per cent of all workers in North Carolina - the setting of that 1979 Oscar-honoured movie - belong to unions. In Texas, it's about 5 per cent. It's below 7 per cent in South Carolina, Virginia, Georgia, Arkansas, Louisiana, Mississippi and Florida.

So it's the South that explains the Canada-U.S. differential. The real divide on unionization historically is not the Canadian border but the Mason-Dixon Line.

In the private sector, that metaphorical line has long been creeping north. Union density among private companies has plummeted to 7 per cent in the U.S. and 16 per cent in Canada.

Now, the demarcation appears about to be erased altogether.

The new Wisconsin law, for example, is sweeping. It ends collective bargaining for state workers, except on base wages. It makes negotiated pay raises above inflation subject to approval by voters in a statewide referendum. It requires unions to hold recertification votes annually and ends the practice of withholding union dues on employee paycheques.

It sounds draconian, heavy-handed and, to some, just plain mean. It smacks more of politics than economics (organized labour remains the biggest source of Democratic funding).

Yet what seems revolutionary in Wisconsin has long been the norm in most of the South. The North is only playing catch-up.

The golden era of private-sector unions lasted from the Depression until the 1970s. The corporate sector in both Canada and the U.S. then was organized along largely oligopolistic lines.

Sure, there was only one phone company and it cost a day's pay to call Mom in Kapuskasing, Ont. But price regulation and the absence of competition allowed for fat bottom lines that enabled companies to provide rising wages and benefits. Their workers unionized in droves to increase their share of the pie (in part to pay that phone bill).

Both sides of the bargaining table would have been content to see this arrangement endure. Why it broke down is the subject of much debate. But Walter Russell Mead of the journal The American Interest offers as compelling explanation as any: Simply put, the forces of deregulation were too strong.

It was not Ronald Reagan who set them in motion. The 1982 breakup of AT&T was the culmination of a process that began a decade earlier. Jimmy Carter, for instance, unshackled the U.S. airline sector in 1978, urged on by Democratic senator Ted Kennedy.

"Anti-corporate liberals rebelled at the way government power and regulation was being used to allow corporations to give their consumers the shaft," Mr. Mead asserts. "The collapse of the regulated economy (plus the rise of foreign competition from developing countries) made unionization unsustainably expensive in many industries."

North American unions, meanwhile, ignored the writing on the wall. They continued to demand ironclad job security, rigid workplace rules and ever-fatter health and pension benefits. Employers gave in until they went bankrupt, or pushed paying the piper far enough off into future to survive a few more years.

While this painful reckoning was playing out among old-guard corporations in the airline, auto, steel and other sectors, a new generation of non-unionized upstarts and foreign transplants thrived. Occasionally, they located in the North. But mostly they set up shop where unions didn't.

"Right-to-work" laws, which prohibit closed union shops, lured foreign and domestic employers alike to the South. While Detroit and Oshawa burned, Hyundai, Honda, Mercedes and Toyota opened auto-assembly or engine plants in Alabama. BMW began building SUVs in South Carolina. Hyundai's sister company, Kia, cut the ribbon on a factory in Georgia.

Southern states were also among those most likely to ban or strictly constrain collective bargaining in the public sector. Indeed, only a tiny percentage of state and municipal employees in the Carolinas, Georgia, Texas and Virginia were ever organized in the first place.

It's a bailout for governments

Not long ago, it would have been unthinkable for a northern governor, even a Republican one, to publicly endorse withdrawing or curtailing the collective-bargaining rights of public employees. Now, many of them sound just like their Southern counterparts - only without the drawl.

Union rights "didn't come down on tablets from the top of a mountain," New Jersey Governor Chris Christie insists. "The union, they protect the worst of the worst. That's what they're there for."

Even in states with Democratic-controlled legislatures, such as New Jersey and California, the conversation has shifted dramatically and public employees have been forced onto the defensive.

The reason is that state and local governments have become the equivalent of a pre-bailout General Motors, spending more and more of their shrinking revenues on concessions to workers while facing back-breaking tabs for future retirees.

Whether public employees deserve the pay and benefits they have wrested from governments is beside the point. States can't pay for them. Estimates of their unfunded health and pension liabilities range from $1-trillion (U.S.) to $3-trillion, depending on the projected returns on pension investments.

It hardly seems fair that public workers are being forced to surrender rights and benefits negotiated in good faith. They are not solely responsible for pushing state and local governments to the verge of bankruptcy.

Unfunded liabilities surged after the 2008 stock-market crash that was brought on, according to Barack Obama and many others, by recklessness on Wall Street. And, for years, states shirked their legal obligations to contribute their share to worker pension funds.

But, fair or not, public employees must give up benefits or pay more themselves to keep them. They have agreed to do that in Wisconsin. But Mr. Walker either doesn't trust them to hold the line or sees an opportunity to eviscerate a political foe. (Likely, it's both.)

Why not raise revenue instead?

Nearly absent from this debate is any discussion of tax increases. Why is that? Governments still have a monopoly on the provision of most public services, so why can't they charge what they like for them?

It's politics. As Mr. Mead puts it: "Voters with insecure job tenure and [weak] pensions will simply not pay higher taxes so that bureaucrats can enjoy lifetime tenure and secure pensions."

Polls show there is considerable public sympathy for the Wisconsin unions. After all, Americans believe in fair play and usually side with the underdog.

But the longer-term polling trends reveal an unwillingness among voters to foot the bill for benefits the average taxpayer cannot dream of.

"Unions are an alien and strange creature to most people," explains David Kettler, a political studies professor at Bard College in Annandale-on-Hudson, N.Y. "American workers do want some kind of representation. It's the union design that has lost its legitimacy."

Facing declining membership, the AFL-CIO, the largest U.S. trade-union federation, is slowly morphing into a lobby group for non-unionized workers. Its Working America unit brings together "millions of workers without the benefit of a workplace union" to negotiate discounts on health and legal benefits. It could be the shape of things to come.

Whether this is to be welcomed is another matter. For the first half of the 20th century, the labour movement was the impetus for progressive legislation whose benefits we now take for granted. The movement's descent has closely tracked the rise in income inequality in the United States and Canada.

But North American labour has played its hand poorly. Instead of adapting to change, it simply turned a blind eye to it. Just as unions often stifled innovation in the private sector - hello, GM - their loss of clout in the public sector could pave the way for better and cheaper public services.

Bringing the great fight north

Canada's laws are vastly more favourable to unions than those in the United States. As it stands, no Canadian government could probably go as far as Wisconsin's Mr. Walker or his Southern counterparts.

But as the political fallout from the introduction of harmonized sales taxes in British Columbia and Ontario illustrates, Canadians' comparatively higher tolerance for taxes is certainly not as high as it used to be. Public-sector unions here should prepare for the coming onslaught.

Listen to Toronto Mayor Rob Ford, who is moving to privatize the garbage collection in the city: "We are doing this so we are not going to go through another 40-day garbage strike. ... We're going to save millions of dollars, we're going to reduce the size of government. That's what people elected us to do, that's exactly what we're going to deliver on."

How many Torontonians and other Canadians agree with that?

In many ways, the impetus for rewriting of the social contract with labour in Canada is greater than in the United States. Most provincial governments are deeper in debt and their citizens more heavily taxed than their counterparts south of the border.

And as Prof. Lipset noted years ago, public antipathy toward unions has often been higher in Canada, presumably because they are perceived to be more powerful than in the United States.

Almost a decade ago, the British Columbia government sought to throw out the collective agreement of thousands of health workers to permit contracting out and end job-security provisions, all in an effort to curb spiralling health-care costs.

This led the Supreme Court, in 2007, to overturn decades of precedent to rule that the B.C. legislation constituted "a virtual denial of the right to a process of good-faith bargaining and consultation." The decision had the effect of establishing a constitutional right to collective bargaining in the public sector.

This might seem like an insurmountable obstacle to Wisconsin-like measures in Canada. But it's more of a technical hurdle than an impenetrable barrier to change. The balance of power has shifted on both sides of the border - not to management or government, but to taxpayers, to consumers and to the politicians who claim to fight on their behalf.

It may not be a permanent state of affairs. The Rob Fords and Chris Christies of this world will not be popular forever.

But when future editions of Wisconsin schoolbooks recount the great labour battle of 2011, they may portray it as the moment the political mores of the South won out over those of the North.

Should we start practising our "y'alls" now?

Globe and Mail, Fri Mar 11 2011
Byline: Konrad Yakabuski

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