Why public sector workers should not have actual bargaining power

Government, desirous of provisioning itself, does it as follows:

1. It imposes nominal tax liabilities payable in it’s currency of issue.

2. This serves to create a population desirous of obtaining the funds needed to pay the tax.

3. The real tax is then paid as government transfers real resources from private to public domain by spending it’s otherwise worthless currency, hiring its employees and buying the goods and services it desires to provision itself and function as directed by the legislature.

4. Prices paid by government when it spends defines the value of the currency, and therefore the terms of the real taxation.

Therefore, the hiring and compensation of public sector employees is the real taxation, which is a legislative function.

Letting individuals negotiate the terms of their taxation other than through the legislative process makes no sense whatsoever.

This is not to say that public employees can not have representatives to make their case before the legislature, much like any tax payer or group of taxpayers might address the legislature.

And this is not to say public employees should not be treated well, well paid in real terms, or abused.

It is to suggest public employee compensation be recognized as part of the real process of taxation of the electorate and treated accordingly by all parties involved.

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145 Responses to Why public sector workers should not have actual bargaining power

  1. Pingback: MMT Defines Moral Battle Lines – Smart Taxes Network

  2. Kristjan says:

    It doesn’t have to be fiat currency right?
    The same goes when government is spending gold coins. If public sector employees are collectively negotiating their salaries they are negotiating their real taxation.


  3. Mario says:

    Beowulf…did you happen to notice that speech by Lincoln where he talks about Labor which you quoted from…was actually given in Wisconsin of all places!??!!? haha!!!


  4. beowulf says:

    From what I can tell, I think Marx is more of a Mixed-Market Capitalist, Democratic, Libertarian than anything else.

    Just as its a little known fact that Marx was baptized a Lutheran, he’s also on the record as a supporter of the Republican party.
    We congratulate the American people upon your re-election by a large majority. If resistance to the Slave Power was the reserved watchword of your first election, the triumphant war cry of your re-election is Death to Slavery.



    Mario Reply:

    very interesting indeed!!! How’s that for irony eh!?!? It’s laughable how freaking ironic it all is with Marx versus the perceptions of Marx!! Only in America eh!?!? haha!!!

    And yes that Lincoln quote is a very nice touch to Marx’s conclusions on Labor…very nice indeed. Thanks for sharing. ;)


    Peter D Reply:

    The Republican Party of Lincoln would have been denounced as something like Communists by the Repugs of today. Beowulf, you yourself said that Nixon a New-Dealer, as left as Kusinich on many issues. The center moved terribly to the right.


  5. Mario says:

    Finally, it’s also relevant to note that the argument being made against unions as an unjust handicap of the government’s ability to tax appropriately the private sector EQUALLY APPLIES to lobbying as well. In fact lobbying is really nothing more than collective bargaining at the corporate (producer) level while unions are collective bargaining at the worker’s (laborer) level. Both are the same action in terms of handicapping government ability to properly and most effectively tax the private sector, HOWEVER since the government is clearly not “blind” to the private sector in these regards as an MMT economist would hope it to be, these “institutions” will likely still exist for some time merely as self-created mechanisms for our civilization to negotiate wealth amongst itself in a balanced fashion. The existence of the one (unions) seems to originate the existence of the other (lobbying) and vice-versa. Eventually, both will be destroyed as our civilization naturally internalizes the functions of these two “institutions” making wealth more of an organic outgrowth from itself whatever that distribution may be. In fact the distribution of wealth is really immaterial to the process of that distribution of wealth. Unions and lobbying and at this time unfortunately “austerity” too are all just ways and means we are currently attempting to distribute our own wealth. In time, with more education, discussion, etc. things will work themselves out, at least imho.


    Mario Reply:

    and in fact I think Wisconsin represents a MAJOR shift in our nation’s “process” towards greater wealth. It is happening right before our eyes as we speak. Marx says, and I think history supports it, that a greater and natural wealth distribution will take place but he never said that distribution had to be from a centrally planned government!! In fact he says the opposite!!! From what I can tell, I think Marx is more of a Mixed-Market Capitalist, Democratic, Libertarian than anything else. Regardless it’s interesting times in USA and I’ll be VERY interested to see how this whole Wisconsin thing turns out in the end…already we hear/see rumblings a major political upset with Walker and what he’s doing to the tune of getting him kicked out of office. What will become of it who knows, but I think it’s clear that history, although acting slowly through time (though maybe in a compounded way?), is on the side of the aggregate of all the people.



    Tom Hickey Reply:

    Michael Moore, How I Got to Madison, Wisconsin

    Someone had sent me a link to a discussion Bill O’Reilly had had with Sarah Palin a few hours earlier about my belief that the money the 21st Century rich have absconded with really isn’t theirs — and that a vast chunk of it should be taken away from them.


    I was, after all, putting them on notice: We are coming after you, we are stopping you and we are going to return the money/jobs/homes you stole from the people. You have gone too far. It’s too bad you couldn’t have been satisfied with making millions, you had to have billions — and now you want to strip us of our ability to talk and bargain and provide. This is your tipping point, Wall Street; your come-to-Jesus moment, Corporate America.


    Mario Reply:

    cool article…another interesting passage from it that caught my eye (to no surprise):

    The scene in Madison is nothing like what they are showing you on TV or in the newspaper. First, you notice that the whole town is behind this. Yard signs and signs in store windows are everywhere supporting public workers. There are thousands of people out just randomly lining the streets for the six blocks leading to the Capitol building carrying signs, shouting and cheering and cajoling. Then there are stages and friendly competing demos on all sides of the building (yesterday’s total estimate of people was 50,000-70,000, the smallest one yet)! A big semi truck has been sent by James Hoffa of the Teamsters and is parked like a don’t-even-think-of-effing-with-us Sherman tank on the street in front of the Capitol. There is a long line — separate from these other demonstrations — of 4,000 people, waiting their turn to get through the only open door to the Capitol so they can join the occupation inside.

    beowulf Reply:

    Jamie Galbraith, keeping it real at a Senate Finance Committee hearing on tax reform…
    …as a general rule fixed assets — notably land — should be taxed more heavily than income. The tax on property is a good tax, provided it is designed to fall as heavily as possible on economic rents… Payroll taxes and profits taxes do interfere directly with current business decisions. Taxes effectively aimed at economic rent, including land rent and mineral rents, and at “absentee landlords” as Veblen called them, do not.
An important question is how best to treat the “quasi-rents” due to new technology and thus the incentives for innovation. These are presently held as long-term capital gains and they tend to escape tax to a very large degree… A sensible approach is to tax unrealized capital gains after a certain amount of time has elapsed — perhaps at fates [rates?] that rise with time…

  6. Tom Hickey says:

    Ellen Brown, How Wisconsin Can Turn Austerity into Prosperity – Own a Bank

    When a bank makes a loan, neither the bank’s own capital nor its customers’ demand deposits are actually lent to borrowers.  As observed on the Dallas Federal Reserve’s website, “Banks actually create money when they lend it.” They simply extend accounting-entry bank credit, which is extinguished when the loan is repaid. Creating this sort of credit-money is a privilege available only to banks, but states can tap into that privilege by owning a bank.


  7. ESM,

    I said:

    Adaptiveness is the ability to learn creatively. To have that in large organizations, you need distributed problem solving, transparency, inclusiveness, trust, and a modicum of honesty. And to have these you need a modicum of democracy in Government, even though the immediate interests of employees may be partly divergent from the interests of voters. The upside of this is that it is in the continuous interest of voters to have a high level of adaptiveness in Government and more democracy in our Government organizations fosters this.


    “Adaptiveness is the ability to learn creatively. To have that in large organizations, you need … [unions].”

    You’ve simply miquoted me, and used a strawman argument.

    I’ve associated adaptiveness with greater democracy in large organizations. I think there’s plenty of evidence for that. Do unions increase democracy in organizations? Well, I certainly think that Government unions make Government organizations more democratic. Do private sector unions?

    I’ll agree that there may not be a lot of evidence for that connection in this country. But I think there’s a lot of evidence for it in the Eurozone where many innovative companies have both strong unions and innovation. As you may know, unions there have co-determination, and have contributed to the increased international competitiveness of European nations.

    Why not here? Because our unions have taken a very narrow approach to collective bargaining mainly focusing on wages, fringe benefits and working conditions related to safety. Over the years, companies that have become stultified because of lack of competent management have driven their unions into a defensive crouch, and their collective bargaining strategies and tactics have become much more rigid.


    ESM Reply:

    It was not my intention to misrepresent your comment. I simply thought you were making an argument for unions and tried to simplify your statement to something that was logically equivalent. Of course, if there is another way to have a modicum of democracy in the government-labor relationship, besides allowing the formation of public sector unions, then my restatement wouldn’t be logically equivalent.

    Is there another way? I don’t know. It depends on what you mean by democracy. To the extent democracy means having certain freedoms and protections, then of course you don’t need unions for that. That can be provided by labor law or by contract. But to the extent that democracy means that labor has strong influence over management (as the people are in charge of the government in a democracy), to me that means you have a powerful union.


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