The Best Things in Workplaces Aren't Free

The comment threads on Wisconsin are filled with union supporters making some version of the argument that this fight isn't about money because unions have already made wage concessions; rather, the fight is about "power" or some similarly non-monetary issue because what the workers really want is to be able to collectively bargain


  • Pension benefits
  • Health care
  • Grievance procedures
  • Work rules
  • Tenure
  • Sick days and vacation
The people making this argument seem oblivious to the fact that all these things cost employers money.  I think they understand that pensions and health care are expensive, but they seem to view the last four as freebies.  Yet they obviously have monetary value to employees (who tout their willingness to give up pay in order to secure these things).  They also have monetary value to employers. 

To start with, there is really no such thing as "paid" vacation; your employer is paying you for the work you've done, not for spending a week on the beach in Cabo.  You're just spreading a slightly higher average hourly wage over a longer period, so it seems like you're taking a lower wage in exchange for more days off.  Moreover, these days off often have an additional cost to employers--there are efficiency losses because you're not around to coordinate with other employees, and they may have to hire a substitute, who is unlikely to be as productive as the worker that they are temporarily replacing.

Similarly, work rules that reduce productivity mean that more employees must be hired at extra cost.  Grievance procedures require costly prophylactic administration (extensively documenting potential complaints), very costly mediation procedures, and often mean keeping workers on at full pay, while also paying a replacement, while the dispute is resolved.  As Steven Brill has documented, in the case of teachers, this can be very lengthy and expensive.  Making teachers hard to discipline or fire is emphatically not free.

We know this, of course, in our own lives.  Imagine that your auto mechanic, handyman, or landscaper proposed to work for you under the same kind of elaborate rules as Wisconsin teachers.  Would you assume that your costs for repairs and maintenance would remain the same after you signed onto the new system?  Of course not.  You'd have to take days off work to deal with the handyman every time there was a dispute about his hours, hire a substitute mechanic while also paying the Toyota dealership in cases of incompetence, and one imagines that productivity might suffer in at least some areas once your employees realized how hard it was to terminate their services--or do without them.

That's not an argument for or against the unions, it's just to note that many of these things ultimately are about money.  The failure to recognize that is a common management problem with non-wage bargaining.  You see it in the private sector where workers complain that their pay has stagnated, without realizing that their pay has actually risen quite a bit--but they're taking it in the form of health insurance.

This is actually a pretty big issue in labor relations.  You have a situation where employers are paying much more for compensation, but it isn't making workers feel better compensated.  Probably the best argument against allowing collective bargaining for non-wage benefits is this: it reduces the transparency of the employer-employee bargain.  When your employer gives you an extra $1,000 in your paycheck, you understand (almost) exactly what this has cost them.  When they change the formula for calculating pension benefits fifteen years hence, give you a work rule change that makes your life more pleasant but will cost them an aggregate $100,000 in lost productivity, or add chiropractic care to your health insurance, you have at best a hazy idea of the cost on the other side.  Of course, the employer may tell you, but these things are often hard to quantify precisely, and collective bargaining tends to take place in a fairly mistrustful atmosphere.  This leads to worker pressure for "small concessions" that aren't small--and the asymmetry between the employee and the employer perception can further poison the negotiations.

Ironically, unions with multiemployer programs actually suffer from this problem somewhat less than other classes of workers.  Workers with union-run benefits plans generally seem to understand that they're negotiating a lump sum for their compensation, which then gets distributed between pension, wages, health care, and so forth by the union management.  It doesn't eliminate the problem, of course--there are still lots of "non monetary" issues like work rules.  But it does mitigate the disconnect considerably.  But this is entirely a private sector phenomenon, as far as I know, and these sorts of plans are declining along with private sector unionization.
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Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

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