A common economic development pitch has been: 'Don’t worry about unions – we only have them in government'. Now, an entrenched public workforce is seen as leading to ever-increasing taxes. And, more profoundly, where an electorate supports public sector unions, it may be a cultural indicator – one that points to a mindset that is not consistent with the kind of workforce that many companies seek or is their idea of a business climate that fosters growth.
How the public sectors’ unions fared in the 2010 and 2011 elections will influence US direct investment location choices that executives will make in 2012. What US president Barack Obama called the "shellacking" in the 2010 mid-term elections raised expectations for a course correction. The more ambiguous results of the 2011 elections showed that at least in some places, 2010’s agenda experienced a setback and reminded us that entrenched labour unions can be formidable.
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Global companies are still attracted to opportunities in the US marketplace, but, state to state, the differences are sharpening in location comparisons.
Historically, few companies assessed the solvency of public pension funds, and fewer still considered a root cause of public sector cost escalation – public sector unions – as a condition that would lead to larger tax expense on a location comparison spreadsheet. Now, soon if not already apparent, businesses and their managers are prime targets for new revenues.
The fight to reclaim union rights has added to a climate of polarisation, leading to verbal assaults on corporations and their executives. Facility and personal security costs are rising. Business interests are dismissed as 'special interests'.
More companies will consider the strength of public sector unions as a cautionary indicator – impacting tax burdens and the overall business climate, and perhaps more importantly, pointing to the attitudes that people may bring to work each day.
Daniel Malachuk works with business and government leaders on global direct investment strategies. He has advised many of the world's leading companies and served in the public sector as director of White House operations. Email: daniel.malachuk@gmail.com