Political Power and State Bill 5 in Ohio

April 5, 2011 § Leave a comment

Last week, Ohio Governor John Kasich signed Ohio State Bill 5 into law. The bill, along with similar bills in Indiana and Wisconsin, is part of a recent push by Republicans to strictly limit the collective bargaining rights of public employee unions. These restrictions have been sold by Kasich and other governors as a necessary step to close state budget shortfalls and resolve the state’s long term pension crisis. Despite these claims, the bill is less about fiscal issues than it is about furthering the long term erosion of union political power and, by extension, the power of the lower and middle classes they fight for.

Collective bargaining, the process by which employees band together to negotiate with employers for wages, benefits, and working conditions, is a central component of union power because it allows the union to act as a counterweight to more powerful employers. S.B. 5 weakens public employee unions by significantly eroding collective bargaining: while it would allow them to continue to bargain for wages, it would eliminate their ability to collectively bargain for benefits. Other restrictions in the bill would negate even these limited rights, resulting in the elimination of collective bargaining in practice, if not in fact.

Normally, when contract negotiations stall, the dispute can be referred to a neutral third party who can judge the facts of the case and make a final decision through a process called binding arbitration. S.B. 5 would eliminate this process, replacing it by first referring the case to the legislature – who can impose either side’s last best offer – and subsequently, if the legislature fails to act, simply implementing managements last offer. This change, combined with S.B. 5’s ban on public employee strikes, allows management to impose whatever contract they wish on union members, essentially nullifying the major source of union bargaining power and leaving unfairly treated public employees with no recourse.

Obviously, these changes will save the State of Ohio some money. If S.B. 5 had been in place for 2010, The Dispatch estimates the state would have saved $216.9 million, but $76 million of this is in pay freezes that Unions had already agreed to. Adjusting for these pay freezes, the total savings is closer to $140 million. Additionally, $1.12 billion would be saved by local governments. However, these governments have differing levels of fiscal health and can easily negotiate new contracts without state government interference. In fact, some did so before S.B. 5 ever passed.

State budget shortfalls are largely temporary, having been brought on by an economic downturn following a financial crisis largely caused by wealthy investors on Wall Street. These individuals, far from paying the price for the crisis that they caused are being taxed at the lowest rate in over half a century. Instead of shifting this mostly temporary burden to those most able to bear it, Kasich is closing revenue shortfalls by implementing what will amount to a permanent tax (in the form of reduced wages) on middle class public workers. He has even gone so far as to suggest a tax break for wealthy investors in Ohio. Clearly, Kasich has made a deliberate choice to squeeze the middle class while sparing the wealthy.

The other reason often given to restrict collective bargaining rights is to allow the State to close its pension shortfall. Indeed, Ohio has among the largest pension shortfalls in the country at upwards of sixty billion dollars. However, as Dean Baker demonstrated recently, these shortfalls are almost entirely caused by the financial crisis and the ensuing drop in the stock market. And, given a return to normal rates of return, these shortfalls will be almost entirely solved. It is clear, then, that S.B. 5 would have minimal budgetary impacts and that the strength of its Republican support rests more firmly on the impact it would have on Union political power.

Shifts in political power are a long term phenomenon, made evident by the highest levels of income inequality in decades, with far reaching consequences. As the top income earners take an ever larger share of the national income, they provide a greater share of funding for political campaigns and thereby gain more power over the political process. It is well known, for example, that Unions generally provide financial support for Democratic candidates. Less well known, however, is that in recent years neither party has been terribly receptive to the concerns of the middle and lower classes for which Unions advocate. A recent Larry Bartels study on political representation had the following chart comparing Democrats and Republicans:

So, while Democrats are slightly more responsive to the concerns of the lower class, and slightly less to the middle class, both parties (and Republicans in particular) are incredibly responsive to the upper class. That this group also provides the lion’s share of campaign funds is surely no coincidence.

It wasn’t always this way. Increases in income inequality and disparities in political power have increased at the same time as declining Union membership and influence on the political process. This is not to say that the decline of Unions alone can explain these deep problems, but unions have always served as a center of political power for the middle and lower classes. Unions are an organizing base through which these groups can exert some influence on the political process. They have fought for laws that benefit all workers – the minimum wage, an end to child labor, and innumerable health and safety protections – and their presence in the market alone raises wages for non-Union workers.

That income inequality is rising and taxes on the wealthy are falling amid the worst economic downturn since the Great Depression is no accident.  It is, instead, the result of a long term campaign to crowd out the voices of the middle and lower classes from the political debate, leaving our government responsive only to those with the means to fund multi-million dollar campaigns. Republican attempts to pass anti-Union bills in Ohio, Wisconsin, Indiana and other states is best understood as a continuation of this campaign. If our political system is going to address the needs of all Americans, rather than just the few at the very top, nothing less than a systemic reorganization will be required. Repealing S.B. 5 and bills like it would make a good start, but we cannot imagine that the struggle will end there.


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