The Injustice of Public Employee Labor Unions

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2003.07.21

No.03

1. Background and Focus

The Ministry of Labor announced that it would enact a law permitting the establishment and operation of labor unions for all public officials except those holding special status or engaged in special duties. In the “Advance Legislative Notice of the Bill on the Establishment and Operation of Public Officials’ Labor Unions, etc. (June 2003)” (hereinafter, the “bill”), the Ministry stated that, since public officials are also workers, it would enact the law in order to guarantee basic labor rights, albeit in a limited form, in accordance with the basic spirit of the Constitution.

In “Ministry of Labor Notice No. 2003-64,” the Ministry explains the reason for enacting a law allowing public officials to establish and operate labor unions as follows: “In accordance with the Constitution, the purpose is to guarantee basic labor rights for workers who are public officials so as to promote the maintenance and improvement of working conditions and the enhancement of their other economic and social status, while separately prescribing matters concerning the establishment and operation of public officials’ labor unions, collective bargaining, and dispute adjustment procedures so that the substance of those guaranteed basic labor rights may be harmonized with the status of public officials as servants of the people as a whole, and with the special characteristics of their status and duties arising therefrom.”

Article 33, Paragraph 1 of the current Constitution provides that workers have the right to organize, the right to collective bargaining, and the right to collective action. However, the bill announces that public officials will be granted the right to organize and the right to collective bargaining, excluding the right to collective action. In other words, the bill explicitly states that, given the nature of public service, the right to collective action will not be recognized for public officials.

Rather than examining the specific provisions contained in the bill, this article seeks to review the legitimacy of the bill as a whole from the perspectives of government action, productivity, and the special nature of public officials. Section 2 shows that government action infringes on private property rights, that the government’s contribution to the economy is negative, and that the productivity of public officials cannot be measured. Public officials’ labor unions further aggravate these three problems associated with government action. It also argues that public officials’ labor unions, established by compulsion, violate the freedom of assembly and association guaranteed by the Constitution. The final section summarizes the main points of the article and concludes that public officials’ labor unions should not be allowed because they are an institutional device that increases the interests of public officials at the expense of the people.

2. Review of the Issues

1)

(1) Government Action and Productivity

To discuss the validity of establishing labor unions for public officials, it is necessary to examine government productivity or the extent of the government’s contribution to the economy. First, let us consider how government action infringes upon private property rights. Assume first a situation in which no labor union exists. Public officials differ from workers in private firms. The most essential difference concerns the source of their income and its relation to taxation. Workers in private firms provide their labor services to employers or users and receive wages in return. Public officials likewise provide their labor services to the people, who are the ultimate users and consumers, and receive wages in return.

Up to this point, public officials and private-sector workers may appear not to differ greatly. The problem is that private-sector workers receive their compensation purely “voluntarily” from their employers, whereas in the case of public officials, that compensation is collected in the form of “taxes.”

2)

Under the current tax laws, taxes are collected compulsorily. If taxes are not paid, compulsory collection is immediately enforced. This is because tax-related laws are backed by coercive power. However, even if taxes were not forcibly collected and were instead paid purely voluntarily, there could still be people who would voluntarily pay taxes in consideration of matters such as the importance of national defense.

3)

If even one person pays taxes voluntarily rather than under compulsion, then the amount paid by that person is voluntary. The extent to which taxation consists of coercively collected payments versus voluntarily paid payments can be known only when taxes are not forcibly collected but are paid voluntarily, and when the services provided by the government are also allowed to be sold by the private sector for compensation. What is clear, however, is that taxes must legally be paid by force, and as efforts at tax evasion and tax avoidance show, there is indeed a coercive component in taxation.

This coercive nature of taxation means that some public officials provide services the people do not want, or provide no service at all. Otherwise, there would be no reason to collect taxes by force. A representative example of collecting taxes while providing services the people do not want, or no service at all, would be the government’s building and operating an arts center. If someone does not particularly like music or art, or cannot enjoy art at all due to lack of time or resources, then a government-run arts center is providing a service that the people do not want, or no service at all. Or there may be cases where people simply do not enjoy the various forms of art provided at a government-run arts center. In such a case, the forcible collection of taxes means that the government is infringing upon the people’s property rights. Moreover, only after taxes are made voluntary rather than compulsory, and the services provided by the government are also allowed to be sold by the private sector for compensation, can we know the extent of that infringement of property rights. Now, if public officials form labor unions and raise wages, the portion involving the forcible collection of taxes while providing services the people do not want, or no service at all, becomes larger than it would be without such unions. In other words, permitting public officials to form labor unions results in a further infringement of the people’s already-infringed property rights in order to improve public officials’ working conditions.

Second, we must ask whether government action makes a productive contribution to the economy. To state the conclusion first, the government’s contribution to the economy is negative. The famous French economic commentator Bastiat argued that in order to assess government action accurately, one must look not only at what is seen, but also at what is unseen yet exists.

4)

For example, suppose the government builds a dam for hydroelectric power generation. The dam is visible. What is not visible, but does exist, are the resources that the private sector gave up in order for the dam to be built. Because each private individual gives up only a part, this is not readily visible, but it unquestionably exists. If the government forcibly collects taxes to build the dam, this means that the private sector has given up something more productive, more valuable, and more necessary than the dam that it itself might have built. For example, it could be automobiles or computers. If the dam were more productive, more valuable, and more necessary than whatever else the private sector gave up, then the private sector would have built the dam first, before the government’s tax-funded construction of it. But the fact that the private sector did not do so means that something else was more productive, more valuable, and more necessary than the dam. We can now see that the government’s contribution to the economy is “negative.” And the larger government action becomes, the greater this negative contribution becomes. Public officials’ labor unions lead to increases in public officials’ wages, which in turn expand government action. As a result, public officials’ labor unions have a more negative impact on the economy than would be the case without them.

Third, how should the productivity of public officials be measured? In the private sphere of the economy, the value of goods or services produced is measured by the amount of money consumers are willing to spend “voluntarily.” The value of goods or services produced by the government is measured not by the amount consumers—the people—spend on them, but by how much the government itself “spends.” In other words, the method of measuring goods produced by the government is not a method of measuring their contribution to the economy, but merely a method of measuring how much the government spends. This leads to the question of what method can be used to measure the contribution of government output to the economy, and how large that contribution is. Unlike the private sector, where consumer demand is reflected in the price of goods, there is no quantitative method for measuring the contribution of government output to the economy. As mentioned above, the reason is that consumer demand is not reflected in the prices of goods produced by the government. Instead, the government uses coercive power to take from the private sector the resources it needs for its own use. As a result, there is no way to measure the productivity of public officials and determine wages accordingly.

5)

This point holds regardless of whether public officials form labor unions.

(2) Public Officials’ Labor Unions and the Freedom of Assembly and Association

Article 21 of the Constitution guarantees freedom of assembly and association. If labor unions are formed purely voluntarily, they create no conflict whatsoever with the freedom of assembly and association guaranteed by the Constitution. However, if their formation is guaranteed by the Constitution or by law, that means such labor unions are not formed purely voluntarily, but are formed compulsorily by the Constitution and the law. Under the current Constitution, all labor unions are organizations formed compulsorily by the Constitution and the law. This includes labor unions for private-sector workers, labor unions for workers in public enterprises, and labor unions for public officials—in short, all labor unions. If one wishes to see labor unions formed purely voluntarily, that would be possible only if the three labor rights guaranteed by the Constitution and the labor-related laws that give them concrete form were completely eliminated. In other words, under a constitutional and legal framework that protects labor unions, the formation of labor unions may appear voluntary outwardly, but in substance it is coercive. However, under the current system, there is also the freedom not to form a labor union, so even though there is compulsion, it is not of the same nature as taxation. Labor unions compulsorily formed under the current system are incompatible with the freedom of assembly and association guaranteed by the Constitution. In that respect, public officials’ labor unions announced in the bill are no exception.

3. Summary and Conclusion

The standard for evaluating the role and function of labor unions in the private sector is wages and working conditions in the absence of labor unions—that is, wages and working conditions in the free market. Unfortunately, however, there is no such standard for examining the validity of public officials’ labor unions. That is why there is no economic theory of public officials’ labor unions. This article has examined the problem of evaluating government action and productivity, which can serve as the basis for assessing public officials’ labor unions. On that basis, it has reviewed the problems associated with public officials’ labor unions.

Some public officials provide services the people do not want, or no service at all. Nevertheless, the government forcibly collects taxes to support public officials. This compulsory collection infringes upon the people’s property rights. Only when the services provided by the government can also be sold by the private sector for compensation, and when taxes are made purely voluntary, can the extent of this infringement of property rights through taxation be known. Now, if public officials form labor unions and raise wages, the extent to which services the people do not want, or no service at all, are provided becomes greater than in the absence of such unions. In other words, public officials’ labor unions result in a further infringement of the people’s already-infringed property rights in order to improve public officials’ working conditions. However, the degree of infringement would be smaller if public officials’ labor unions did not possess the right to collective action than if they did.

Government action makes a negative contribution to the economy. Public officials’ labor unions enlarge government action through improved working conditions, including higher wages, and as a result, the government’s contribution to the economy becomes even more negative because of such unions.

Unlike the private sector, where consumer demand is reflected in the prices of goods, there is no way to measure the contribution of government output to the economy. This is because consumer demand is not reflected in the prices of goods or services produced by the government. Instead, the government uses coercive power to take from the private sector the resources it needs for its own use. As a result, there is no way to measure the productivity of public officials and determine wages accordingly. This point holds regardless of whether labor unions are formed.

Public officials’ labor unions violate the freedom of assembly and association guaranteed by the Constitution. This is because public officials’ labor unions are not voluntary organizations but are established through the compulsion of the Constitution and the law.

For a free-market economy, it is desirable to keep the size of government as small as possible. Given a fixed size of government, it is better to have no public officials’ labor unions than to have them. In conclusion, it is desirable not to permit public officials’ labor unions.

Yongduk Jeon (Professor, Division of Economics and Trade, Daegu University)

1)

Private-sector labor unions are not organizations for workers in general, but organizations concerned only with the interests of incumbent union members; they force the adoption of labor practices favorable not to employers but to workers; and they determine wages through collective bargaining rather than individual negotiation. As a result, labor unions cause distortions in production, low productivity, artificially low wages or rates of return for non-union workers, unemployment, and a decline in the general standard of living. Although the foregoing results occur in private-sector labor unions, they also occur to a considerable extent in public officials’ labor unions. This is because government is generally more inefficient than the private sector, and because the objectives and means pursued by private-sector labor unions and public officials’ labor unions are almost identical. For the role and function of private-sector labor unions, see Yongduk Jeon, “Labor Unions and Political Fund Contributions,” Center for Free Enterprise (CFE) website, BP-53 (2002. 12. 27.).

2)

Taxes distort private production and consumption. If one were to address all aspects of government action, one would have to include the negative effects of taxation on production and consumption. However, since this article deals only with the important and basic aspects of government action, the effects of taxation on the economy are omitted here.

3)

In this case, educating people about what results government policies produce and what the goods and services produced by the government are like would determine the number of people who voluntarily pay taxes and the size of such taxes. This is where sound economic education becomes important.

4)

See Claude Frédéric Bastiat, The Law, translated by Jungho Kim, Center for Free Enterprise, 1997.

5)

In practice, public officials’ wages and working conditions are determined by analogy to private-sector wages and working conditions, but this is not a theoretically valid method. Moreover, many public officials’ duties have no counterpart in the private sector.

Wiki:

https://www.cfe.org/w/bbsDetail.php?idx=64

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Original title: 공무원 노동조합의 부당성

Author: Yong-deok Jeon

Date: 2003-07-21

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=bill&pn=4&idx=25821