Wisconsin was the first of the states, in 1959, to guarantee collective bargaining for public-sector workers. In granting workers the right to join closed-shop unions, the state essentially surrendered its right (or its ability) to manage its own tasks. Perceptive people – among them, Nobel laureate economist Friedrich von Hayek – could already anticipate the consequences. Once unions acquire special privileges, Hayek wrote in the following year's The Constitution of Liberty, these privileges become the law of the land – "and can be removed only by special legislation." Fifty years later, Wisconsin Governor Scott Walker proved Hayek right.
With the Republican Governor's decisive victory in last week's Democrat-driven recall election, Wisconsin can now proceed to manage its own affairs again. Although Mr. Walker is best known for the limits he imposed on the state's public-sector unions, his labour reforms were, in fact, a full-scale purge of the "special privileges" these workers had come to possess.
In Wisconsin, schools can now hire and fire people on merit. They can pay for performance. They can assign teachers to classrooms as they see fit. They can change school insurance companies – a freedom that will save hundreds of millions of dollars a year. In the past, Wisconsin schools were obliged to buy insurance coverage through WEA Trust, an agency created by the Wisconsin teachers' union (WEAC) in 1970. By this reform alone, schools are already saving, on average, $211.45 per student, per year.
As for the public-sector workers themselves, they are now free to opt out of mandatory union dues, one of the freedoms found in America's 23 right-to-work states. (Workers who do so will save $1,100 a year.) These RTW states are mostly in the south and west but Wisconsin's example could well pull northern and eastern states into the ranks, too. Other states will almost certainly do so as well – if only to control runaway pension costs.
Note especially California, where municipalities report accumulated shortfalls of $500-billion in pension funding and where, last week, voters widely approved cutting back on pension promises that can't be kept. (The World Bank says only 18 countries have GDPs as large as California's pension shortfall.)
Mr. Walker's reforms required – how radical is this? – that public-sector workers pay a part of their pensions (5.8 per cent of salary). In 2010, retired public-sector workers collected $1.5-billion in pension benefits; they had themselves contributed only $12-million. Naturally, as in any bureau-cracy, "special privileges" extended to the ludicrous. Correctional workers were entitled to book off sick and collect overtime pay for the next shift that they worked.
All together, Mr. Walker's reforms turned a $3.5-billion deficit into a small surplus within a single year – the state's first surplus in 15 years.
Who did in the public-sector unions? The public-sector unions did. They demanded too much and got too much. They won extraordinary benefits for their members – but only by making the essential services they provide too expensive for taxpayers to pay. "There is a reason why South Carolina is the new 'it' state," Governor Nikki Haley asserted last year. "It's because we're a union buster." Just 3 per cent of South Carolina's labour force is unionized.
Workers have indeed done the math – which explains the huge southward migration, millions strong, of the past decade. Yes, union workers earn more than non-union workers. The U.S. Bureau of Labor Statistics reports that the average pay in Collective Bargaining States exceeds the average pay in RTW states by $1.58 an hour – $3,386 a year. But the cost of living in a CBS state (index: 117.03) exceeds the cost of living in a RTW state (index: 94.46) by 20 per cent. The non-union worker finishes far ahead.
Wisconsin was one of the most progressive states in the union. It still commemorates the massacre (May 5, 1886) of strikers at an iron mill in Milwaukee – the shoot-to-kill order given by a Republican governor named Jeremiah Rusk. Somewhere along the line, though, Wisconsin's public-sector unions turned reactionary. Forty per cent of union households voted for the counterrevolution.
Editor's Note: The Wisconsin teachers' union (WEAC) created the WEA Trust insurance company in 1970. The union does not run the insurance company. Incorrect information appeared in the original newspaper version and an earlier online version of this article. This online version has been corrected.
After calling in sick for a shift, correctional workers in Wisconsin were allowed to collect overtime for the following shift, not for the shift for which they called in sick. Incorrect information appeared in the earlier versions of this column. This online version has been corrected.