Thursday, December 05, 2013
Detroit's bankruptcy may result in a breach of promise to present and retired workers. That promise is the retirement package that the city offered for decades. One question left unasked is whether the city should have offered it in the first place. Now, unions have to appeal the court's decision and hope for the best. Left unsaid is the bargain cities and states made with employees through most of the 20th Century. That deal was lower wages than prevailed in the commercial market but better pensions. It was a form of employee relations and a way for political entities to remain competitive. Hundreds of thousands of workers took the bargain and now, thousands see it threatened. Neither cities nor citizens can afford it, so they are breaching the promise. It is the worst form of employee relations but also necessary. Detroit can't recover until it gets debt under control. The same is true for Stockton, CA and other municipalities teetering on the edge of insolvency. Perhaps authorities have learned a lesson to avoid promises that mortgage the future, but don't bet on that.