If there’s a day of the year to notice the paradox of organized labor, Labor Day is it. The paradox is this: even as private sector unionism has declined, public sector unionism is in some ways more influential than ever.

The numbers tell the story. Among private sector employees — the ones who work for for-profit companies or non-profit organizations that are not part of the government — the percentage who belong to labor unions plummeted to a mere 7.5% last year, from 23.3% in 1977, according to UnionStats.com. By the federal Bureau of Labor Statistics’ more restrictive accounting, a mere 6.7% of private sector workers were in unions in 2013.

Among government workers, it’s a whole different story: 40.8% of local government workers — teachers, police, firefighters, librarians — belong to unions, according to the BLS numbers. The public sector rate drops to 35.3% (38.7% by the UnionStats.com numbers) if you include state and federal employees — postal workers, corrections officers. That’s so much higher than the private sector that it’s almost a tale of two labor movements — one, in the private sector, that is diminishing to irrelevance, and another, in the public sector, that retains substantial clout.

Public sector unions are so important that it’s impossible to tell the story of the big city and state governments without accounting for their influence. It’d be impossible to understand public education in America, for example, without knowing about the American Federation of Teachers and the National Education Association and the roles they play in electing local government officials and in negotiating contracts with detailed work rules and protections for teachers. Likewise, one can’t understand the California state budget without understanding the enormous power of the union that represents that state’s prison guards. The power of public sector unions also explains why retired city bus drivers and teachers have generous, guaranteed, taxpayer-funded defined-benefit pensions, while private sector workers and entrepreneurs must save for their own retirements.

Private sector unions, meanwhile, have been reduced from their past role of collecting union dues from workers and negotiating contracts for them to a new and less significant role as minor irritants. Even with a sympathetic press corps and an Obama administration National Labor Relations Board determined to help, for example, the labor campaigns against Walmart and in favor of workers at McDonald’s and other fast food restaurants haven’t actually resulted in negotiated raises for workers or significant increases in union membership rolls.

The unions, having more or less despaired of winning pay or benefit increases for workers via the old fashioned methods of winning union organizing elections and negotiating contracts, have instead aimed to short-circuit that process by using government as an ally, mandating health insurance coverage via ObamaCare and wage hikes via increases in minimum wages.

There’s an element of the conservative movement that traditionally has been friendly, or at least not hostile, to private sector unions. Like churches, soup kitchens or the Heritage Foundation, unions are mediating institutions between the individual and the state. The AFL-CIO and its free trade union allies like Lech Walesa’s Solidarity movement, born in the Gdansk shipyard, helped win the Cold War and defeat the Soviet Union, which wouldn’t allow unions that weren’t controlled by the government.

A similar policy of government-controlled unions obtains in today’s Communist China. In the United States, particularly at the local level, we are seeing something that approaches the flip side of that — government that is controlled by the unions. So in Boston, for example, the new mayor, Martin Walsh, had previously been serving as a Massachusetts State Representative while simultaneously earning $175,000 a year as head of the Boston Building Trades Council. Bill de Blasio’s signature initiative as mayor of New York, expanding public pre-kindergarten, not so coincidentally expands the roster of unionized public school teachers.

Ultimately, that’s unsustainable, as the more far-sighted municipal leaders realize. In another big Northern city, a Democratic mayor is clashing with unions; the American Prospect reported earlier this year that the mayor of Chicago, Rahm Emanuel, “has a favorite four-letter word for members of the labor movement.”

It’s a reminder, for any corporate shareholders tempted to take satisfaction in the diminishing role of private sector unions, that for taxpayers and public school parents, every day is Labor Day.

Mr. Stoll is editor of FutureOfCapitalism.com.