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Collective bargaining, private-public sector differences

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The differences between collective bargaining in the public and private sectors are well understood by students of the subject but often ignored by legislators and the public. Laws governing public employee unions and collective bargaining in the public sector (all levels of government, including local school districts) are often modeled on similar legislation governing collective bargaining between unions and private companies, which were legalized in 1935.[1]


Collective bargaining started to be used in the 1950s by public employees, with Wisconsin being the first state to adopt it. Between 1955 and 1965 10 states adopted collective bargaining. New York Mayor Robert Wagner was the first public official to promise legalize public sector unions in return for their vote for office.[1]

In 1962, President John F. kennedy signed Executive Order 10988 granting public sector union membership. Since this Executive Order, public employee membership has risen significantly, while private sector union membership greatly decreased.[1] Currently, 26 states have collective bargaining rights for all state and local workers, twelve have portions of their workers unionized, and 12 other states have no collective bargaining in the public sector.[1]

Arguments and claims

  • Public sector managers have almost none of the financial incentives of private-sector management to minimize labor costs. Private sector managers are likely either to own stock in their firm or know that their own paychecks depend on negotiating a cost-effective deal. If anything, public sector administrators (e.g., school superintendents) have incentives to see their subordinate employees paid as highly as possible because their own and their immediate staff's salaries tend to rise in tandem with those of their unionized employees.[2]
  • In public sector bargaining unions may have advocates on both sides of the table. That is, elected officials may owe their own positions to support from unions.[3] They themselves or members of their immediate family may be union members. For example, Pennsylvania laws bar school board members who are also union members from participating directly in union contract negotiations, but does not bar them from voting on any resulting contract.
  • Unlike private firms, public agencies cannot move or threaten to move their operations to areas with lower labor costs. For example, a school board cannot outsource its operations to a neighboring school district, much less to a non-union state or offshore. In states like Pennsylvania, where public employee strikes are legal, teacher unions can strike without having to fear anything like a manufacturing plant closure. On the contrary, teacher unions can point to higher levels of salaries and benefits in any nearby area as a reason why their own employees should be paid more, not less.
  • Few substitutes are available for public goods like education. If brewery employees strike, consumers may switch brands or substitute some other beverage for beer. Parents of school age children, who are the consumers of educational services, can switch to private schools only with difficulty, if at all.
  • Unions are better organized and more likely to rely on full-time professional negotiators than are many of the public entities with which they bargain, notably small school districts. At the local level, turnover among school board membership is high with the result that union negotiators often have training and experience that their board counterparts lack.
  • Because public agencies must conduct much of their business in public, and because their budgets are matters of public record, negotiators for public employee unions are likely to have accurate information about their employee's ability to pay and can fine-tune demands to maximize their members' share of school or municipal budgets.
  • In the case of teachers and public safety personnel, the high respect with which the public regards individual teachers, police officers and firemen may create good will during contract negotiations. Members of the National Education Association and its state and local affiliates systematically avoid referring to themselves as a "union" in public statements.

For reasons of this kind, negotiations between public employee unions and their employers bear less resemblance to private-sector bargaining than to lobbying. Like any private interest seeking benefits from public funds, unions prefer to negotiate with only whatever minimum level of transparency may be required by law. That is, they would prefer to avoid drawing taxpayer attention to the cost of whatever pay or benefit package they may be seeking. They contend that all adversarial negotiations may lead a general lack of public support for education and other needed public services.


Advocates of greater transparency concede that face-to-face negotiations may appropriately be conducted behind closed doors to facilitate frank communication and suggestions for compromise. They argue, however, that the formal proposals of each side should be released to the public in timely fashion, just as would be the case for any large, long-term agreement (e.g., a major construction project).[1]

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