Rhode Island news
Experts say unions hobbling Rhode Island’s economy
01:00 AM EDT on Wednesday, June 10, 2009
That Rhode Island is a hotbed of union activity is not exactly a secret.
In 1824, the nation’s first strike by female factory workers was organized in Pawtucket. Today, Rhode Island has the 12th-highest level of union membership, as a percentage of the work force, in the United States.
But the controversy over the threatened picket by Providence firefighters at this week’s meeting of the U.S. Conference of Mayors is cementing the perceived association between labor unions and the Ocean State.
As the state tries mightily to create jobs, that is not the ideal image for Rhode Island to project, according to experts who help businesses choose where to expand.
Historically, some business owners have been wary of heavily unionized states because collective bargaining yields higher wages and more generous pension and health-care benefits.
Union contracts also make it tough to lower wages, a disadvantage that is “most severe” in a recession, according to Peter Howitt, an economics professor at Brown University.
Labor leaders say unions created the state’s middle class and keep wages high enough to make consumer spending possible.
But in recent years, advancing technologies have prompted concerns about the perceived lack of flexibility of a unionized work force, says John M. Rhodes, who advises growing companies for Florida-based Moran, Stahl & Boyer.
Industrial clients often cross off their list anywhere “New Jersey or north,” said Rhodes, who is helping the Rhode Island Economic Development Corporation prepare real estate to attract businesses.
“They need to have a work force that is extremely adaptable to change,” Rhodes said. “The way people perceive unionization is that it freeze-frames a company in a world that is rapidly changing.”
The Providence firefighters, of course, are members of a public-sector union. In fact, state and municipal workers make up the bulk of the 78,000 unionized workers here and push up the state average.
Sixty-two percent of the state’s public employees are in unions, compared with 37 percent of public-sector workers nationwide. At private companies, 8.7 percent of workers have union cards, compared with 7.6 percent nationally, according to unpublished estimates from the U.S. Bureau of Labor Statistics.
Not every business owner, however, makes that distinction. That’s why the high-profile head-butting between Providence Mayor David Cicilline and the firefighters is so worrying, says Michael McMahon, a former head of the state Economic Development Corporation.
“People don’t take the time to understand that just as there are different types of companies, there are different types of unions,” said McMahon, now a managing director of a private equity firm in New York. “It’s very unfortunate. It just perpetuates the unfair image that Rhode Island is a tough place to do business.”
The strength of unions is by no means the only criteria companies weigh as they decide where to expand.
In a presentation to Governor Carcieri’s economic advisers in May, Rhodes said companies are primarily concerned with finding sites ready for construction. That means no long delays in identifying the owners of a site, securing building permits or testing soil. Executives also look for access to utilities and public transportation.
In competing against other New England states, meanwhile, the strength of unions rarely comes up. That’s because union membership is common throughout the region, according to Laurie White, president of the Greater Providence Chamber of Commerce, who called taxes a bigger factor. “If you drew an 800-mile radius,” she said, “you’d likely encounter the same demographics.”
In Massachusetts, for example, 15.7 percent of workers are unionized, not far behind Rhode Island’s rate of 16.5 percent.
Despite its unions, the average salary in Rhode Island is below the national average.
But as word gets out that a union protest chased away the vice president and attorney general –– the Daily Kos has blogged about the “long-standing contract” battle and The Washington Times has reported on the “messy labor dispute” –– Rhode Island’s reputation will suffer, according to Kate McEnroe, whose Atlanta consultancy has helped business select sites for expansion since 1993.
“If that gets pick up and enters the zeitgeist, is that going to give people a positive impression? No,” McEnroe said.
George H. Nee is the secretary-treasurer of the Rhode Island AFL-CIO and a member of the state Economic Policy Council, which advises the governor on economic issues. He says the state’s unions prop up the Ocean State economy, making sure workers, after covering basic needs, have enough money left to afford a dinner out or a shopping trip to the Providence Place mall.
“It’s a different perspective on the economy. If workers have disposable income, that benefits the whole business community,” Nee said. “We don’t benefit as a country or a state with a race to the bottom.”
A pamphlet promoting unions in Rhode Island says the states with the highest levels of unionization have higher hourly wages, lower rates of poverty and fewer residents without medical insurance.
That is no doubt attractive to workers. But it is perhaps less appealing to business owners, according to the U.S. Chamber of Commerce.
In 2008, the Chamber started a campaign –– the Workforce Freedom Initiative –– to slow the growth of unions. It says states with the highest levels of unionization have lower levels of economic growth and higher levels of unemployment than areas where unions are weak.
“Job growth has been sluggish over the past 10 years in most of these high union density states,” Glenn Spencer, executive director of the initiative, said. “Economic growth is not as robust.”
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