Who has the “skin in the game?” That question defines the stakeholders in any confrontation or negotiation. It is the greatest problem or issue with public sector bargaining. “Skin’ is also germane for huge corporations and their labor negotiating processes. Does the negotiator or arbitrator who represents the government or the company have a stake in the outcome? A reasonable bargaining process must involve two parties who can either gain or lose in order for an equitable solution that does not drastically favor one side more than the other.
Although I have problems with national and international labor organizations, I am not opposed to local organizing per se. If workers are dissatisfied with their conditions or pay, they inherently and constitutionally have the right to organize (1st Amendment, peaceable assembly). If their grievances are legitimate, and management/ownership fears losing their knowledge, experience and expertise, then they’ll work out a solution. On the other hand, management may conclude that they can replace the entire workforce with others and therefore fire all of the former employees. In this scenario both parties have “skin in the game.” The owners or managers want to continue production at a profitable level while the workers wish to retain their jobs but under improved circumstances.
There are private sector negotiations where the corporate leadership assumes the same role as do public sector officials. When bargaining takes place in huge corporate environments, the representatives for the company are employees or consultants who have limited personal stakes in the outcome. Just like their political brethren, they are more likely to “give away the candy store” in order to maintain peace and goodwill. Except for the highly skilled trades, there is no obvious reason for large corporations or government entities to succumb to the demands of the unions. Some negotiators, however, have minimal financial or emotional investment in the company or governmental entity, and thus, seek the fastest means for resolving the issues. Other negotiators may have the public interest as their paramount concern, but could be undermined by politicians who would rather “cave.” The corporate officers who may be engaged in the negotiating process are aware that if they fail to protect the interests of the company, they’ll receive their golden parachute and surface with another corporation or retire to Aruba. The people responsible for the political bargaining process trust that their citizens will have short memories. They believe that irresponsible concessions are less damaging for them politically than a strike, shutdown or slowdown might be.
While collective bargaining for public employees does have potential for fiscal abuse, the more onerous element is the “binding arbitration” requirement. Arbitrators are people too. They want to be liked. They want to be employed. If negotiations stall and either side requests arbitration, then the process calls for both sides to agree on an arbitrator. The arbitrator goes through a “fact finding” process and makes a determination that is binding for both sides. The arbitrator is generally limited to the two proposals submitted by the competing sides. It becomes an “either or” situation. Again, the only “skin” in the game for the arbitrator is the desire to be gainfully employed to arbitrate a future dispute. The arbitrator’s motives may be pure, but self-interest can be an unintended persuader.
Who does have the “skin in the game?” Clearly for public sector bargaining the taxpayers are the ones whose well-being should be weighed against the benefits for the union members. The current mess that exists for so many states and local governments came about because concern for the taxpayers was a secondary consideration. The political class and the arbitrators (when used) were more focused on avoiding discord and strife than they were as stewards of the public treasury. Consequently, benefit and wage packages have grown to the point that the state and local governments are in perilous financial circumstances. Understandably, public employees become irate when efforts are made to bring their packages into sync with financial reality. As the public employees grouse and protest, the taxpayers become more aggravated and hostile. The tension will continue to build all across the nation as those who do have “skin in the game” draw their lines in the sand in a hostile environment.
In Ohio as in most states, our present circumstances can be laid at the feet of previous legislators who lacked the courage and the wisdom to say “no.” They passed the legislation that gave public sector unions a stranglehold on state and local budgets. No such “negotiated contract rights” exist at the federal level. Former legislatures took the easy route by granting extraordinary powers to public sector unions, and now their lousy decisions have caused the fiscal situations to reach critical mass. It’s the same old story. Our state and federal elected officials have no real skin in the game, and the taxpayers lose their shirts.
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