Unions Need to Rethink Themselves

“We’ve lost touch with a whole generation…. The problem is that they [under-30s] don’t think we have much to offer them,” Richard Trumka, the incoming head of the 11-million-member AFL-CIO told the Wall Street Journal. He plans to rectify that by making union membership more attractive to the 30-and-under set by upping the benefits of union membership. And, of course, by eliminating the secret ballot that unions think reduces their ability to, er, persuade potential recruits of the virtues of membership.

One tool in the kit of the 1,000 organizers Trumka plans to field in support of his 56 unions is the promise of great retirement benefits. Anyone finding that promise a lure to membership would do well to read a just-released study by my Hudson Institute colleague Diana Furchtgott-Roth and economist Andrew Brown—“Comparing Union- Sponsored and Private Pension Plans.”

It seems that “collectively bargained pension plans perform poorly when compared to plans sponsored unilaterally by single employers for non-union employees.” Among plans covering more than 100 workers, only 17 percent of union plans were fully funded, compared with twice that figure for non-union plans. Perhaps more significant is the comparison of union and non-union plans’ ability to meet the test laid out in the Pension Protection Act of 2006.

That Act defines pension funds that have less than 80 percent of assets they will need to meet their obligations as “endangered.” Only 14 percent of nonunion funds are in the endangered category, while 41 percent of union funds have been so tagged. By contrast, plans that cover staff and officers of unions are probably much better funded.

None of this should come as a surprise. Unions have gone to great lengths to make sure that their finances, and the condition of their pension plans, are not obvious, even to the most dedicated researcher. And, as the report’s authors point out, “Union leaders like to achieve expanded future pension benefits for their members when they renew collective contracts. It makes their re-election more likely. But leaning on employers to ensure that the pension plan is kept well-funded takes much work for little visible effect ….It sounds much more proactive for union leaders to deliver expanded pension benefits … than to protect alreadyearned benefits.”

This explains some of the urgency Trumka feels about reversing the decline in union membership. In the early 1980s 17 percent of private-sector employees were unionized; that figure has shrunk to 7.6 percent. Dwindling membership and the accompanying decline in union dues has shriveled the AFLCIO balance sheet to a point where liabilities exceed assets by $2.3 million.

But it is not only more dues that the unions are after. They want Congress to pass the misnamed Employee Free Choice Act, which would give politically responsive government arbitrators the power to set wage and benefit levels, and would somehow enhance employee choice by depriving workers of the secret ballot. One can’t help thinking of George Orwell’s observation that “language can corrupt thought” when confronting an act that calls itself “Free Choice” while seeking to end the secret ballot, and to force workers and employers to adhere to contracts imposed by government if they are having difficulty reaching agreement through free collective bargaining.

There is worse. The union leaders know what Furchtgott-Roth and Brown know. A letter circulated by Albert Mixon and Carl Pecoraro, Secretary- Treasurer and President, respectively, of Teamsters Local Union No. 507, notes that “increased plan participation from newly organized union members” —the young recruits denied the benefit of the secret ballot—would “strengthen” pension plans. These young members would contribute to underfunded plans now, but not draw benefits for many years to come. By the time the new crop is ready to retire, 60-year-old Richard Trumka will be enjoying the benefits of the union officers’ pension, and his successor or his successor’s successor will have to wrestle with the problem.

America’s trade unions in days gone by made an enormous contribution by correcting the imbalance of bargaining power between individual workers and employers. They would do well to define their new goal as obtaining legislation to improve the training and competitiveness of their members, rather than laws that deny choice and protect poorly performing pension funds.