Archive for September, 2012

Unions in the Public Sector

I’ve been thinking quite a bit about the prevalence of unions in the Canadian public sphere and the relative absence in the private one, something that I detailed about in previous post. My comments were unsatisfying and left me wondering if I were simply advocating the usual neoclassical economic ideals of free markets in all parts of life including labour.

See, I think that unions do lots of good in the economy. They are the only way for the majority of the workforce to extract anything from their employers. Economic theory normally gets around this by assuming that firms are owned by the same population of agents that live in the economy and so if the firms make money then it is a plus as that will be distributed via a dividend. Of course the reality is much more complex with most stock owned by the wealthy who benefit from any dividends while there are many companies that refuse to either give out all or any of their profits to their shareholders. In these cases its much more difficult to show that the general good is done by seeing the firms make higher profits by lowering the wages of their employees.

My concern is that because the private sector workers are going to be making less in both wages and benefits that they will turn against their public sector brethren. If they aren’t able to form their own unions and make their own wage increases then it becomes an entrenched two-tier system with the winners working for the government. It may seem extreme, but that route is like India where parents dream of seeing their children work for the government because it pays well and is a steady job while the private sector that has the potential to make the economy grow is starved of talent and productivity. Or a more likely scenario is where a government comes into power with the support of the private workers and a mandate to tear apart public workers like several right wing provincial governments have already done in this country.

I’m not sure the solution but it’s a problem that’s only going to get worse.