When unions saved New York City from bankruptcy

The death of Richard Ravitch of New York, a legendary civic and economic expert and problem solver, sparked the Guinea Bellafante from the New York Times to recall the city’s brush with bankruptcy in the 1970s. Pointing to Ravitch’s role in leading the unions to the city’s financial bailout, Bellafante wonders “could such an alliance happen today?” Unfortunately, probably not.

In fact, the fiscal crisis may have been the peak of union influence. Although investments by union pension funds (especially the American Federation of Teachers [AFT] led by the combative Albert Shanker) kept the city from formal bankruptcy, subsequent mayors attacked unions as the root cause of New York’s financial and operational challenges.

In October 1975, New York was literally one day away from formal bankruptcy. But in frantic last-minute negotiations, detailed by Bellafante, Ravitch persuaded Shanker to invest the union’s pension funds in city bonds, avoiding bankruptcy.

This was the famous “summit matzah” in Ravitch’s apartment (so called because there was no other food in the house). Shanker and the AFT were taking a big risk, since there were no state or federal guarantees on the bonds.

But it was not just altruism. The AFT had won substantial benefits for its members, and Shanker feared that formal bankruptcy could reverse those gains, as well as add restrictions to future collective bargaining.

As I discuss in my book unequal citiesunions in the public and private sectors of New York had pushed the city to become what it was. historian Joshua Freeman called “the standard bearer of urban liberalism and the idea of ​​a welfare state”. His political power led Victor Gotbaum, leader of the DC 37 municipal workers union, to say that “we (the unions) have the ability, in a sense, to choose our own boss.”

But structural economic and political changes undermine union power. Two national recessions hit the city hard, especially its manufacturing sector. Between 1969 and 1976 there were a loss of “a sixth of the city’s employment base,” including 300,000 manufacturing jobs.

The city was also affected by the postwar growth of independent suburbs, fueled by federally subsidized mortgages, the construction of automobile highways that undermined public transportation, and structural racism that prevented blacks and other minorities from They will buy houses in the new suburbs. Levittownthe epitome of these suburbs, he grew up in a Long Island potato field 32 miles from Times Square, but housing contracts excluded blacks from ownership.

All of this led to the “white fugue”; between 1950 and 1976, the white population of New York City fell from 90.2% to 76.6%. And wealthy whites took their income with them, supporting better schools through their growing suburban property tax base as the city came under financial pressure.

Instead of a tripartite relationship between unions, business, and government, the unions received much of the blame for the city’s financial problems. Ed Koch, a liberal from Greenwich Village, built his successful career as mayor in part by attacking unions and exploiting the racial divide.

Political scientist John Mollenkopf notes that Koch deliberately broke up old liberal coalitions by attacking unions and exacerbating “long-standing racial divisions.” Koch also worked hard to control budgets and gain approval from private capital markets and empowered state and federal financial supervisors after the fiscal crisis.

Subsequent mayors did not work closely with the unions. Both Rudy Giuliani and Michael Bloomberg had contentious employment relationships during their combined 20 years in office. Only David Dinkins, the city’s black mayor for one term, tried to work with the unions, but financial difficulties undermined his efforts, weakened his political coalition and helped Giuliani oust him.

Of course, anti-union sentiment in this period was not limited to New York. President Ronald Reagan fired striking air traffic controllers in 1981, and deindustrialization and national anti-labor policies fueled sharp declines in union membership nationwide.

The drop in private sector unionization also meant that unions in New York and other cities were increasingly employed in the public sector, or in sectors like health care that depended on public spending for wages and benefits. Between 1950 and 1992, unionized industrial jobs fell from 33% of city employment to 9%.

The rise of finance as New York’s key economic engine further alienated the city from any job-based politics. When Michael Bloomberg left office, “all 153 of the city’s bargaining contracts had expired before the end of his term.” An unrecognized achievement of Bill de Blasio was negotiating new labor contracts, and current mayor Eric Adams has good relations with municipal unions.

But without strong private sector unions, New York and other cities mostly bargain with unions over wages and benefits. The days when Ravitch and other elites worked effectively with unions and saw them as active and necessary partners in economic growth and equity are long gone.

Faced with structural economic change, declining federal and state support, and ongoing structural racism, cities are struggling to enact pro-equity policies. Battered by structural economic change and decades of federal union busting, unions have been weakened in the fight for their members and in the fight for greater economic equity, yet they remain essential to any serious movement toward greater equality.

Cities like New York, or our country, cannot pursue economic justice without stronger unions. Bellafante reminds us that Ravitch was just one of the economic and political elite who saw the need for unions, a stance largely absent among today’s financial and technological elites. She quotes Betsy Gotbaum, wife of union leader Victor, reflecting on the 1970s union-business-government partnership that avoided bankruptcy: “I really can’t imagine now.”