Granite State sets a course to become the new South for employers

Battling public sector unions has proved to be so much fun for Republicans that Democrats in the Northeast want in on the party: Last month Democrats in the Democrat-controlled Massachusetts House adopted a bill limiting public union bargaining rights.

In New York, Democrat Governor Andrew Cuomo’s budget will force all governmental units statewide to pare back bloated payrolls and/or run-away union compensation.

And, of course, here in Connecticut, the bluest state in Blue England, the governor has demanded $2 billion, and claims to have obtained about $1.6 billion, in concessions from about 45,000 unionized state workers over the next two years.

That’s what happens when reality impinges upon ideology (“standing up for union workers”) – when state fiscal problems become so dire that sacred cows (generous public sector union contracts) can no longer be protected.

But regional Republicans (the few that there are) are upset–the Democrats are stealing their thunder. Undaunted, they are determined to stay out front and have moved to the next frontier: battling private sector unions. In New Hampshire, the GOP-controlled legislature (the only one in the region) has just passed right-to-work legislation, which makes union membership and dues voluntary – even when working under a union contract. The Democratic governor has vetoed it, but odds-makers expect the legislature to override him.

The point is to weaken union bargaining power, with the aim of attracting employers with the resulting lower wages and less restrictive work rules.

Now, you may dismiss New Hampshire as that tiny state with the stark motto, “Live Free or Die,” but New Hampshire is attacking the severe economic illness underlying the region’s long-term economic problems and its current fiscal woes: failure to generate meaningful private sector job growth. Connecticut, in fact, is one of only two states without any private sector job growth in over twenty years (the other being Michigan, with its recently-bankrupt and now-shrunken auto industry).

Northeastern politicians have been mouthing the words, “Jobs, jobs, jobs,” and the mantra about their states “being open for business,” but they have only been treating the symptoms of this private sector illness, not the disease, and treating the symptoms has exacerbated the disease itself.

As the private sector, which bears the cost of the social safety net, has strained under that cost and contracted, casting off more and more workers, the net has expanded. Not only does the net cost more and more as a result, but it requires more and more state workers as “net tenders,” until, ultimately, public sector spending and employment come under fire, as we see now. It’s a vicious cycle.

The problem in the Northeastern is that jobs, especially well-paid manufacturing jobs, have been migrating to very low-wage labor markets overseas and to moderately lower-wage domestic labor markets. For example, United Technologies is laying off 200 skilled machinists at its Hamilton Sundstrand subsidiary in Connecticut, officially moving these high-paying union jobs ($30+/hour) to “other U.S. and international locations,” including, reportedly, Poland, where workers will earn about $5/hour.

Obviously, American workers can’t work for one-sixth their current wages, nor can corporations pay six times as much as necessary. But the more important reality is that companies are not demanding such drastic wage reductions in all cases, because some jobs are staying on-shore, i.e. they are going to “other U.S. locations.”

The problem for the Northeast is that it never seems to be the “other U.S. location.”

Why? Primarily because, even though private unions shrunken nationwide, they have held up the best in the Northeast. In the process, though, the region has seen many good jobs go to the twenty-two, primarily Southern, right-to-work states with their lower non-union wages and much less restrictive work rules.

So, New Hampshire Republicans have awakened and decided “If you can’t lick em, join em.”

Other Northeastern states face a similar dilemma: take New Hampshire as a model or as a new threat. Pass right-to-work laws and join New Hampshire in stanching the region’s steady outflow of jobs to the South and, hopefully, ignite an inflow of sorely needed jobs; or stand pat and see even greater job losses as a new cluster of jobs moves in the opposite direction -north–making the very short and easy trip to the Granite State.

 

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