As a Wisconsin native and a graduate of the University of Wisconsin who studied public-sector employment relations for many years, I am concerned about the rhetoric over how to address your public service pension, health care and other challenges. Wisconsin is not alone: Most states, those with and without public sector unions and collective bargaining, are experiencing a similar and in many cases worse fiscal crisis. So it is critical to take an evidence-based approach to these problems and not look for easy scapegoats.
It has to start by getting the facts right. Wisconsin’s public service employees are not overpaid relative to their private sector counterparts. Rutgers University professor Jeffrey Keefe has done the analysis. (See his complete study on our Employment Policy Research Network website: www.employmentpolicy.org.) Controlling for education and other standard human capital variables he found that Wisconsin’s public sector workers earn 8.2 percent less than their private sector counterparts in wages and salaries. Taking fringe benefits into account shrinks the difference to 4.2 percent. Thus, public sector workers have lower wages and higher fringe benefits (yes, pensions and health care benefits are the two standouts). But overall, they are not overpaid compared to the private sector. No easy scapegoat here.
A second scapegoat in play is the public sector collective bargaining and arbitration process. I have studied these processes intensively, first in Wisconsin (remember the three day 1969 Madison firefighters strike?) and then in New York state and nationally. In a recent nationwide study I found that arbitration settlements basically mirror outcomes negotiated in states without arbitration and those settled voluntarily in collective bargaining. This is not surprising because Wisconsin’s statute, like most others, requires arbitrators to use these comparisons along with cost of living, ability to pay, and other objective factors in shaping their awards. No scapegoat here either.
So how to proceed? Maybe Wisconsin can learn from two recent experiences I’ve had in public sector disputes in Massachusetts. Both examples convince me that if we apply the modern approach to negotiations -- evidence-based, transparent, problem solving (we call this “interest based negotiations”) -- the challenges you face can be addressed.
The first example involved a Boston firefighters’ arbitration award that offended the public by providing a wage increase as a reward for mandatory drug and alcohol testing. The public essentially said: “Give me a break, you mean we have to pay these guys to come to work clean and sober?” The public pressure led the Boston City Council to neither accept nor reject the award but to go back and renegotiate it with the firefighters and the mayor to make it both fiscally responsible and publicly acceptable. This was a victory for all and especially for the public. The community held the parties’ feet to the fire, so to speak, until a better outcome was negotiated. The lesson here for Wisconsin is we are in a transparent, media-intensive world. Fairness and public acceptability rule the day.
A second example involves a complex merger of the state’s different transportation agencies into a single new statewide department of transportation. This involved integrating about six different agencies with multiple union contracts and brought together employees doing the same job with very different wages and different unions. With a lot of hard work and an evidence-based approach to negotiations, a multi-union agreement was reached which provides complete management flexibility in job assignments, eliminates outmoded and expensive work rules, and, most importantly, aligns employee and agency incentives by sharing a portion of the operational savings the new integrated work force helps to achieve. The parties labeled this the “Grand Bargain” because it represented an achievement most thought was not possible. Now we are contemplating using a similar “Grand Bargaining” approach to address our state’s pension and health care problems, so stay tuned.
What might a similar approach look like in Wisconsin? Let me suggest a three step process.
1. Get the facts right and communicate them to the public. Create an expert panel to document and generate options for addressing your pension and health care issues. Have this panel report within three months.
2. Use these findings as inputs into your own “Grand Bargain” by bringing together state officials, representatives of all public sector unions, and neutral facilitators experienced in interest-based negotiations (you have some of the best in the country living in Wisconsin) and instruct them to negotiate solutions to the problems and to communicate their solutions to the public.
3. Use the lessons learned from this experience to carry out an evidence-based analysis of how to modernize the state’s public sector bargaining statute to fit the needs of today’s more transparent and financially strapped environment. That approach worked well before -- a similar expert panel provided the ideas that were enacted into Wisconsin’s public sector statute in 1962. You can do it again, and if you do Wisconsin will again lead the nation in the practical, forward-looking problem solving that us ex-Wisconsinites brag about almost as much as we brag about the Packers.
Thomas A. Kochan is the George M. Bunker professor of management at MIT’s Sloan School of Management, co-director of the MIT Institute for Work and Employment Research, and a co-founder of the Employment Policy Research Network.