The biggest challenge in the public transportation sector is that most of COTA’s workers are unionized, while its administration and supervisors are not. The problem is related to the distribution of financial benefits and job security (U.S. Transportation Department, 2002). Unions have worked hard to shift the recession burden off the shoulders of its members who resist layoffs and salary cuts. They made sure that the union workers had their wages indexed and steadily raised. Statistics proves that the “median wage for union workers is $200.00 more than non-union workers” (Keller, 2014). In a way, this protection made them insensitive to the challenges of the post-crisis economy. In turn, wages and compensations of the white- and blue-collar non-unionized staff have been linked with productivity and growth (COTA, 2014). With the sluggish business growth and deteriorating consumer budgets in 2000-2007, the compensation for non-unionized management representatives remained rather flat (COTA, 2014).
This dramatic situation in rewards and incentives distribution has created a perceived organizational conflict. The sources of this conflict are both internal and external. On the one hand, union policies resist strategic initiatives aimed at mending profitability and competitiveness. On the other hand, unionized workers are not motivated to reconsider these policies to help the organization (Shierholz & Mishel, 2013). The supervisors have a limited range of strategic instruments they can use, such as the scope of working hours, streamlining, and fare adjustments, among others. As a supervisor, the author has to make sure that each initiative has to conform to the adopted industry standards. At the same time, the workers do not care that the inflexibility of legal rules has a detrimental effect on organizational sustainability (U.S. Transportation Department, 2002). One of the current events that relate to the issue of unionized workers and job security is the dilemma of the public sector of America. This event is about union compensation with the title of the dilemma of America’s public sector union. The public sector has less much rivalry, as compared to the private sector, making all the differences.
Ever since the starting of the massive economic depression in 2008, criticism towards the unions of the public sector has been rapidly growing. This criticism reflects the concerns of the taxpayers regarding the labor compensation, as well as the liabilities of unfunded pensions (Keller, 2014). These apprehensions have resulted in the change of the public sector union policy in the proposals in very considerable manners. The author also argues that the voters in Ohio defeated a regulation that would have constrained the powers of the union by a broad margin.
Even though the polls indicated a widespread support for the portions of that rule that would have decreased the benefits of the union, the voters defeated it. Additionally, the author discusses that the governor, Walker Scott of Wisconsin, a nation with a long reputation pro-union stance, advanced a policy that would reduce employees’ wages. The policy would also noticeably hold back the collective negotiation rights of most civic division union workers (Ohanian, 2011). The state Governor, Thrasher John of Florida State, introduced a rule that would put governments off from collecting the dues of the union from the state paychecks of the union employees. The author continues that these trends are not taking place only in Florida, Wisconsin, and Ohio, that is, it is not only these states that are trying to adjust to the setting of the civic unions. Ohanian (2011) adds that the governments that are cash-strapped in many Nations have considered ways that can decrease the expenditures connected with the public unions.
According to Ohanian (2011), it is imperative to find out why the rates of the public unionization are much higher, in comparison to the private sector unionization rates. It is also significant to know whether the workers in the public union excessively raise expenditures to the taxpayers. The workers of the public sector, including the transportation industry, might have substantially higher wages that the union employees from the private sectors (COTA, 2014). Besides, the pensions plus the job security for the personnel of the civic sector unions are frequently greater, as compared to the pensions and job protection for the non-government segment staff. Factoring in the minor probabilities of the layoffs and dismissals among the workers in the civic sector, the reimbursements for the public section might be 10% greater than the market payment.
Ohanian (2011) calculates that the financial deficits need to be considerably decreased. This reduction is possible through bringing the wages of the public sector closer in proportion to the salaries of the private sector via dropping them by 5%. California State is amongst the most financially impoverished states in the country. Decreasing the wages of this state’s employees by 5% would cut down the deficits of the state by roughly 15% (Ohanian, 2011). Additionally, some employees of the public sector, such as the guards of California prison, get paid far over and above the levels of compensation. These higher wages reflect a strong union, as well as an effectual lobbying that has encouraged rapid reimbursement expansion (Keller, 2014). The author further argues that other unions, for example, the unions of teachers, do not usually escalate the reimbursement virtually. However, they instead have considerable adverse effect through protecting the poor teachers, which, consecutively, decreases the public education quality and decreases the capital of humans.
The author goes ahead to discuss the economic inferences of the unions. Here, Ohanian (2011) begins by defining an association as a type of a cartel or monopoly. Ohanian (2011) argues that the union is the sole seller of the labor services to the businesses. This definition implies that unions have the capability to elevate the compensation rates for their members beyond the point that would succeed in the competitive markets. The unions also have the skills to define the work rules that lessen efficiency for their associates. Significant research regarding the impacts of collective negotiations on wages plus consensus estimates indicate that unions lift wages by approximately 10%-15%, beyond the rates that would triumph in their absence. Moreover, moderately less study has taken place regarding the effect of the work rules upon the economic activity (Keller, 2014). However, the available statistics suggest that the work practices of the unions, chiefly in the sectors that experience little reimbursement, can significantly decrease the efficiency and productivity. For example, the work rules of the union reduced the productivity per employee by around 50% in the iron industry during the restricted competition era.
The author continues that the unions can increase the costs and prices of businesses by lifting up the wages and implementing inefficient work rules (Ohanian, 2011). These changes will diminish the employment plus productivity. From this point of view, the unions appear misplaced in the current economy, wherein there is substantial rivalry in the labor marketplace, as well as in other markets. The unions also seem to be lost in the present economy, wherein there is broad-spectrum appreciation amongst the policymakers and economists that increasing rivalry benefits the society (Keller, 2014). These advantages include enhancing the distribution of the scarce resources, improving efficiency, as well as maximizing the productivity.
The unions are mainly a carryover from countless years ago, while there was a lot less rivalry for the employees plus the unions in the economy. During this time, the unions and the workers were deemed an imperative economic force necessary to protect the well-being and security of the workers. However, both the health conditions and safety of the workers plus the labor market circumstances are a lot different today (Shierholz & Mishel, 2013). Many employees currently live in the places with their employers, rivaling for their services. This rival for employees implies that the wages match up with the productivity of the employee. Additionally, the health and safety of the workplace is largely sheltered by the state and federal laws. As a consequence of these amendments, the socially constructive function of the unions has significantly declined over time (Ohanian, 2011).
In addition, the author discusses the divergent trends in the public and private sector rates of unionization. These alterations, in the significance of the unions to the employees with time, are as well reflected in the adjustments in the rates of the unionization. According to Ohanian (2011), one of the most outstanding trends in the labor markets in the past century is the swift rise, followed by the ensuing private sector unionization rates turndown. The dramatic increase in private sector unionization in earlier periods, mirror the course of many essential pieces of the pro-union legislation which increased the negotiation powers of the unions. This increased powers in consequence raised the wages and accordingly, the charisma of the unions for the employees (Keller, 2014).
However, the private sector union representation began to cut off slowly and accelerated later. The rates of private sector unionizations have declined to roughly 6% these days. The turn down in the rates of private sector unionization mirrors many factors, including the much competitive economy (Shierholz & Mishel, 2013). Another reason for the turndown in unionization is that many workers today prefer to bargain their opportunities instead of relinquishing their individual negotiation rights to the group consultation. In addition, the turning down unionizations does not result from the waning industrial base of the country. Notably, the fading unionization characterizes the economy of many private sectors, including the industry. The rate of unionization in the construction and manufacturing, two of the very profoundly unionized sectors, has also cut down to about 15% (Shierholz & Mishel, 2013).
Many economists perceive increased rivalry as the primary factor behind the lower rates of unionizations in the private sector (Shierholz & Mishel, 2013). In a competitive trade, struggling for the employees drives the salaries up to the degree of worker’s productivity. Additionally, rivalry in the product marketplaces brings the productivity prices down to the level compatible with the market earnings on capital (Ohanian, 2011). Therefore, the endeavors of unionization to implement or compensate the inefficient rules of work in a highly competitive market would lead to unprofitable firms.
On the contrary, if the industry, for example, the transportation sector, is protected from the rivalry, then the proceeds will become higher than the industry under steep competition (Ohanian, 2011). The economists denote these surplus profits, the economic rents, and the unions can get of these profits for their affiliates through increasing the wages and changing work rules. As a result, the economic rents that emerge from excessively little rivalry are split among the assets and labor, and the comparative percentages between these two will depend upon their respective negotiation powers. The increasing competitive world and domestic economy of today show many significant restrictions to what the unions can reasonably accomplish (Keller, 2014). The employees will, thus, have modest demand for the representation by the unions when these unions cannot deliver healthier wages and workplace conditions than what the employees can get. From this point of view, a huge turn down in the unionization rates in the private sector is not startling (Keller, 2014).
The trends of unionizations amongst the workers of the public sectors differ significantly. The rates of public sector unionizations have relatively increased and became stable over time. These different inclinations show significant differences in the effect of rivalry on the employees of the public sector versus the private sector (Shierholz & Mishel, 2013). Particularly, increased competition has drastically impacted the great turn down in the private sector unionization, which has also decreased the capability of unions to adjust work rules or increase wages. However, less rivalry exists in the civic sector, implying that the unions have many chances, making the union association more attractive (Keller, 2014).
Another point discussed in this event is whether the compensation in the public sector is too. Some economists argue that the stepping up of the benefits in the public sector than those in the private sector has imposed a substantial outlay to the taxpayers (Shierholz & Mishel, 2013). Apparently, it might seem reasonable to argue that the public sector needs to provide rates of compensation that are roughly identical to those of the private sector (Shierholz & Mishel, 2013). Nonetheless, when one factors in the high pensions and job security of the civil jobs, the wages of the public sector should become lower than the private sector wages. Regarding job security, the probabilities of job loss via layoffs is thrice the private sector, compared to the public.
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Because many persons dislike this risk, the fact that civil jobs have much job security, as compared to the non-governmental jobs, raises the advantage of taking a public job. This additional benefit of job security also suggests that the civic sector might be capable of paying inferior reimbursement rates, as compared to the non-governmental sector (Shierholz & Mishel, 2013). This description follows the very similar logic as to why moderately riskless assets, for example, the U.S. Treasury securities, give lower return rates, compared to risky assets like stocks. A standard model of economics indicates that a risk-averse person faces the hazard of unemployment that is thrice the private sector, as compared to the civic sector.
To conclude, the analysis proposes that there is a chance that civil compensation might become considerably higher, compared to the competitive levels (Shierholz & Mishel, 2013). Furthermore, the civilian employees are only around one-third expected to leave their jobs voluntarily as to the non-government workers. This fact is in line with the conclusion that the standard government compensation rates are greater than the competitive levels (Keller, 2014). These higher compensation rates indicate that there are comparatively little external employment chances dominating the government employees’ jobs. The actuality that the standard state benefit is greater than the average non-government compensation suggests that the civil worker compensation might be well beyond the competitive levels. These facts also indicate that the wages for the public sector could undergo a cut down without any significant impact on the civic sector employment.
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