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The public sector disunion

A student encourages others at a demonstration in Paris last fall during protests about the retirement age in France. Expect more of this in wealthy nations.

Associated Press

A student encourages others at a demonstration in Paris last fall during protests about the retirement age in France. Expect more of this in wealthy nations.

Look around the world and the forces are massing. On one side are California prison guards, British police officers, French rail workers, Greek civil servants, and teachers just about everywhere. On the other stand the cash-strapped governments of the rich world.

Even the mere mention of cuts has brought public sector workers onto the streets across Europe. When those plans are put into action, expect much worse.

People in the private sector are only just beginning to understand how much of a banquet public sector unions have been having at everybody else's expense. In many rich countries wages are on average higher in the state sector, pensions hugely better and jobs far more secure. Even if many individual state workers do magnificent jobs, their unions have blocked reform at every turn.

While union membership has collapsed in the private sector over the past 30 years (from 33 percent to 15 percent in America), it has remained buoyant in the public sector. In Britain over half the workers are unionized. In America the figure is now 36 percent (compared with just 11 percent in 1960).

Politicians have repeatedly given in, usually sneakily — by swelling pensions, adding yet more vacation or dropping reforms, rather than by increasing pay. This time they have to fight because they are so short of money. But it is crucial that the war with the public sector unions is won in the right way. For amid all the pain ahead sits a huge opportunity — to redesign government. That means focusing on productivity and improving services, not just cutting costs. (Indeed, in some cases it may entail paying good people more; one reason why Singapore has arguably the best civil service in the world is that it pays some of them more than $2 million a year.)

The real issue is pensions. Too many government workers can retire in their mid 50s on close to full pay. America's states have as much as $5 trillion in unfunded pension liabilities. Historic liabilities have to be honored. But there is no excuse for continuing them. Sixty-five should be a minimum age for retirement for people who spend their lives in classrooms and offices; and new civil servants should be switched to defined-contribution pensions.

Another battleground will be the unions' legal privileges. It is not that long since politicians of all persuasions were uncomfortable with the idea of government workers joining unions. It would be perverse to ban public sector unions outright at a time when governments are trying to make public services more like private ones. But their right to strike should be more tightly limited; and the rules governing political donations and even unionization itself should be changed to "opt-in" ones, in which a member decides whether to give or join.

Fixing the public sector must not be allowed to degenerate into demonizing it. Its health is vital to the health of society as a whole, not least because of its impact on economic growth. The coming battle should be about delivering better services, not about cutting resources. Focusing on productivity should help politicians redefine the debate. The imminent retirement of the baby boomers is a chance to hire a new generation of workers with different contracts. Politicians face a choice: push ahead, reform and create jobs in the long term; or give in again, and cut more services and raise more taxes.

The public sector disunion 01/15/11 [Last modified: Saturday, January 15, 2011 3:31am]
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