2 million self-employed
Their interests are our interest
It's your contract: Take control of it!
We say you should control your contract. Here's how. Check for clauses that are:
Red for Stop
Amber for Caution
Green for Go
You can also make use of our Contract Template to design your contract.

Matrixes and template are available here (ICA members only). Not a member? Join here for as little as $55.
You and Your Contract
Charter of Contractual Fairness.

Debate: Suck it up?

Contract problems?
Fixing business disputes
There's lots happening for new dispute resolution services for small business people. The Small Business Commissioner (SBC) model is being rolled out across Australia. Explanation of developments.
Watching: The new world of work
We track and discuss what's happening with work.
The new Cuban revolution.
Watching: The coordinated attack against self-employed in Australia
Do unions hate the self-employed?
Federal tax attack
Sham contracting small problem
Watching: New Technology
Opportunities and new threats for self-employed people
Left versus right: the great debate
Ken Phillips (ICA) and Peter Strong (COSBOA) debate "The Future (or Death) of Employment". Vids are here.
Our Campaigning
We need unfair contract protections
Defend contractor tax laws
Watching: Your Super
We're monitoring superannuation
Watching: Work Safety Laws
Harmonised laws have big problems.
Watching: Government Contracts
Military Aircraft (JSF)

National Broadband Network
Watching: Fair Work Act
We're watching

What the AIG wants
Handy ATO Links
Filing your tax return:
A member's problem
ATO advice

Handy ATO tax links:
ATO debt collection: overview
ATO debt collection: 'Products'
Guide to managing your debt
Not-for-profit tax guide
Lodge your BAS online
PAYG withholding tax tables
New tax form: Taxpayer Statement of Account
New tax form: Notice of Assessment
Mortgage scams
Small business support
Payment arrangement calculator
Want an ATO visit?
ATO Help for small business
ABN eligibility rules
Self managing your tax debt

Handy Super links:
ATO SMSF compliance
ATO free seminars.
SMSF Admin advice
New Super clearing house
Tax on SMSF loans
Watching Global Economies
Watching Global Economies
Watching the USA
Watching China
Central Banks on Debt
Watching Housing Bubbles
Ken Phillips on the debt equation

Unions under attack

9 March 2011


Not since the 1980s has trade union viability come under such sustained attack. In developed economies, union membership peaked in the 1980s and has been on a steady decline since then. Over the last decade the decline has continued, albeit at lesser rates, and has now somewhat levelled off. What largely drove the decline in union membership was a shift in the nature of advanced economies from being largely industrial to heavily service-orientated, combined with fundamental changes in social attitudes away from an emphasis on the collective and towards the individual.

What's happened now is that union membership is heavily concentrated in public-sector jobs. The shift that's emerging is that in developed, debt-burdened economies, public-sector jobs are now under attack in an effort to rein in public debt. This public-sector financial squeeze is shaping up as a core re-alignment in the approach to government. As such, it represents a new wave of change that effectively attacks the business model upon which remaining union strength relies. Time will tell how far this unfolds, but the USA and the UK provide two early examples of a possible new trend line.

USA

Update (20 March 2011): Wisconsin voted passed.

Union membership (2010) in the USA is 11.9 per cent of the workforce (down from 12.3 per cent in 2009). In the private sector it's only 6.9 per cent, but in the public sector it's 36.2 per cent. That still gives US unions 14.7 million members with 51.8 per cent of members in the public sector. By any measure it remains a large organization with a large revenue base. However, the longstanding trend is for a gradually diminishing membership with public-sector workers being a growing majority. Part of their problem is a consistent drop in approval ratings.

But public-sector debt levels of the US are breaking the US private sector's 'back'. With the election of Obama as US President it looked as though US unions were in their strongest political position for many decades. But the rise of the Tea Party---from all reports primarily a middle America, small business movement---changed US politics last year. The Tea Party was a Republican Party takeover movement that swept big-spending Republican representatives out of power, replacing them with new 'live within your means' representatives. It's hit the Democrats hard in Congress, but the punch has penetrated right through the states and municipal government.

There's a new battleground emerging and the Governor of Wisconsin, Scott Walker, seems to be the high-profile leader of the revolt. He's slashing public-sector spending, but that has led to chaotic scenes in the state legislature as Democrat members have fled into hiding so that the legislature can't meet to pass new spending restriction bills. Walker says that if he can't cut spending, he'll be sacking public-sector workers.

The battle is mainly over pay rates and generous pension arrangements. The video on this link gives a good explanation. Unions claim that it's an attack upon union rights. It's a claim that's not surprising given that Governor Walker is taking away union rights to collective bargaining in the public sector. Walker's reasoning is that the collective bargaining processes have neutered the ability of the legislature to control the state's budget.

He says that the generous public-sector pension funds, high public-sector wages, and high numbers of public-sector employees generate the bulk of public debt. The evidence seems to be that these public-sector worker benefits greatly outstrip wages and conditions in the private sector.

The problem is recognised even in Democrat-dominated New York State. The average salary for New York's full-time state employees in 2009 (even before the last round of raises) was $63,382---well above the state's average personal income that year of $46,957. Further, New York is paying 10 times more for state employees' pensions than it did just a decade ago. The situation has come about because New York's powerful unions successfully pushed up wage and pension benefits over the last decade. The situation became worse with the recession, forcing down pension scheme earnings. New York now has to make up the difference. In 2000, employee pensions cost New York $100 million. They now cost $1.5 billion, and will amount to more than $2 billion in 2014. A large part of the problem, amongst many, is that state employees can retire at the age of 55.

New York Governor Andrew Cuomo says he's committed to working with unions to fix the wages and benefits blowout, but will have to lay off 9,800 workers if unions don't agree.

The problem appears just as large, if not larger, at the local municipal government level. One analyst is predicting mass municipal defaults in the US this year of hundreds of billions of dollars. The US has $3 trillion in loans to municipal (mostly mom-and-pop) investors through secure bonds. A large-scale municipal collapse would have a devastating impact.

Historically, defaults are unlikely to occur. What's more likely is what's happening in Wisconsin. There will be (indeed, it's already happening), a slashing and burning of local government jobs, and pay and conditions.

It's something that is spreading---and fast. In Ohio, Oklahoma and Indiana, protests have broken out over protecting public-sector jobs.

People in the private sector are looking at wages and conditions in the public sector and saying, 'hey, you guys are on benefits we could only dream of, and we (the private sector) are the ones having to pay the bill!' The response is to take back control of state and government finances, and pull the public sector into an affordable framework, even if this means reduced services. The outcome for US unions is a massive threat to the sector that has become their majority membership base. If this locks in as a long-term trend, US unions are in real trouble.

United Kingdom

Similarly, in the UK, the trend line for unions is not good. Trade union density in the UK is 24.7 per cent (2009) and it's on a slow but consistent decline. With 6.7 million members, union numbers are about half of what they were in their peak in the1980s, with the private sector at 15.1 per cent and the public sector a whopping 56.6 per cent. (See here and here for the statistics.)

This puts UK unions arguably in even a more vulnerable position than those in the USA. Any cutting back of the public sector will hit union membership hard. And that's exactly what's happening. According to the Governor of the Bank of England, the UK is not enjoying an economic recovery and sovereign debt is the great threat.

The new UK government has responded to this and is undertaking significant cuts to public spending. But it goes much further. The UK Prime Minister has announced the end of the public sector 'monopoly' over the delivery of public services. That is, the UK is looking at wholesale privatization of public services delivery, except for the security forces and the judiciary. The PM has described the public service bureaucracy as the 'enemies of enterprise'.

If the UK continues with this programme, it would near destroy the mainstay business model upon which UK unions' membership now rests.

What's significant about both the UK and the USA is that this trend is a by-product of out-of-control government debt. It's not an attack against unions per se, even given the bluster of the Wisconsin Governor, but the outcome is a challenge to unions of major proportions.

Australia

Australian unions don't face the same problem. The percentages stack up with those in the UK: 22 per cent of the workforce is unionised, with 14 per cent in the private sector and 46 per cent in the public sector. But public debt is, comparatively, under control (although rising) and therefore there are no demands to slash the public sector as there are in the UK and USA.

Nonetheless, Australian unions must be concerned, because they are trying to keep ahead of the political game. In the near future, the two biggest states (New South Wales and Victoria) will both be under conservative political control. Australian unions may indeed be worried about noises from the UK which question the efficiency of public service delivery through public sector bureaucracies. If service delivery in Australia were privatized on a large scale, unions would need the private sector to be peopled with permanent, full-time employees. This is because it's only with permanent, full-time employees that unions have historically succeeded in mobilizing. Casual, part-time and contract workers tend to be more confident in their own capacity to control their career and work arrangements, are quick to change jobs and don't feel the need to have unions to 'protect' them. It's probably one reason why Australian unions have announced a massive campaign to stop casual, temporary and contract work.

Send us a Comment

To send us a comment on this story, click here.

Submitted Comments

On 10 March 2011, Luke commented:

 Good article, but the last two paragraphs are not quite spot on. Federal unions may be OK but State unions are in a very similar position to the USA/UK.

I don't have the figures to hand (Simply look at the Treasury Reports for each state) but I believe all the states combined have about $200-300bill in debt (20-30% GDP) and states such as QLD and NSW are in serious financial trouble (although you will never hear it in our press).

Oh, and federally, Howard hid about 60bill in debt in the Federal Super but it pales in comparison to state debt.

So while the federal unions may be fine, the state unions have no such grace period. Look at the sale of QR and other Queensland assets.