John Edward, a resident of Chelmsford who earned his master’s degree at UMass Lowell and who teaches economics at Bentley University and UMass Lowell, contributes the following column.
The City of Lowell has a $2.7 million snow removal deficit because of an unexpectedly harsh winter. Just do not pay the bill! If the City has an outstanding loan just pay it back at whatever interest rate and payment schedule suits the budgetary constraints.
Voters in the Town of Chelmsford recently rejected a $9 million proposal for a new fire station. Perhaps voters would have been more inclined to vote yes if they knew the Town stood prepared to pay the contract winner less than the awarded bid price if money is tight.
Most people would agree these are bad ideas. Violating contracts signed in good faith is not an appropriate form of “fiscal discipline.”
Last year, both the City Council in Lowell and Town Meeting in Chelmsford approved submitting home-rule petitions to the State Legislature that would allow local officials to unilaterally impose changes to municipal health-care plans. Unilaterally means without renegotiating union contracts.
Times are tough for local governments. Health care costs are a major burden. However, as Governor Patrick recently said, “we don’t need to attack public sector workers to make changes for the people of the Commonwealth.”
The Governor, and many others, have denounced attempts in Wisconsin and Ohio to take away collective bargaining rights. Yet, Lowell City Manager Bernie Lynch, Chelmsford Town Manager Paul Cohen, and now the Massachusetts House of Representatives want to do just that. The House just passed a bill allowing local governments across the state to unilaterally dictate important benefits like co-payments and deductibles.
A properly functioning capitalist system requires a government that stands ready to enforce contracts. A properly functioning capitalist system requires collective bargaining, not a government that stands ready to violate contracts.
As John Kenneth Galbraith explained over a half century ago, capitalism requires both competition and countervailing power. Wal-Mart offers a countervailing power to manufacturers that often operate with limited competition. The court system may provide a countervailing power against retailers should they exploit or discriminate against “associates.” Health insurers are supposed to offer a countervailing power against health care providers.
In 1937, Congress passed the Wagner Act giving unions the right of collective bargaining. According to UMass-Lowell labor historian Robert Forrant, labor viewed the Wagner Act as their “Bill of Rights.” In The Economics of Collective Bargaining, the author describes what developed as a “social contract” between labor and industry.
Collective bargaining rights firmly established labor unions as a countervailing power. We should not break a social contract with unions. We should not repeal the worker’s Bill of Rights. We still need organized labor as a countervailing power.
We should also acknowledge that the proposed measures do not solve the real problem with health care costs. The home-rule petitions, and the legislation, would grant Lowell and Chelmsford the power of Plan Design. Plan Design allows municipalities to unilaterally change the health insurance benefits offered to employees, or force workers to join the state’s Group Insurance Commission (GIC). Plan Design can save cities and towns money by shifting the burden to workers and by taking advantage of economies of scale offered by a larger insurance pool such as the GIC.
The United States spends more than twice as much per capita on health care as major countries in the world. Extending economies of scale with a single-payer system would reduce costs for the entire economy. It works very well for other nations with health care systems rated superior to ours.
The government intervening to take away basic worker rights does not seem to bother people. Yet, opponents brand meaningful reform like a single-payer system as socialism.
Anti-government sentiments also fuel a bias against public service employees. Misleading statistics and unfortunate cases of abuse convince people that government workers are overpaid.
Adjusting for level of education, most public service employees in Massachusetts make much less than private sector workers. For example, Massachusetts state and local employees with a college degree earn only 85 percent as much as their private sector counterparts.
Government workers do receive some benefits that are better than those received in the private sector. Health care is an example. On the other hand, private sector workers receive dramatically better retirement benefits. According to analysis performed by the Massachusetts Budget and Policy Center, after factoring in non-wage benefits, college-educated public service employees are still paid much less than their counterparts in the private sector.
State and local governments should not default on debt or violate business contracts. The state already reduces their retirement contributions by an estimated 50 percent by denying state workers access to social security. Local governments should not be balancing their budgets by denying contractual promises to public service employees.
Labor unions should cooperate and bargain in good faith to realize savings for cities and towns. Mayor Menino and Boston’s unionized workers recently proved it is possible.
Galbraith said, “Support of countervailing power has become in modern times perhaps the major domestic peacetime function of the federal government.” That was over fifty years ago and we seem to have forgotten.
As expressed by Professor Forrant:
Absent a set of rules, which collective bargaining and the signing of a contract establishes, the employer can exhibit unrestrained tyranny at the work site should he or she so choose. And, at the same time, the employer can strip away legally negotiated benefits without any worker recourse should collective bargaining rights be compromised. And, there is scant evidence that the majority of employers would ever ‘do the right thing’ toward all of their employees on their own.
Plan Design will save cities and towns money. That does not make it right.
Many public service employees are already disadvantaged by not being allowed to strike. State and local governments should not be designing plans that further disadvantage an essential countervailing power. Tell your town officials and state representatives to do the right thing.