David Brooks makes the argument that public and private sector unions face different constraints and have different tactics. The advantages of public sector unions results in higher wages and more costly benefits. The argument is “logical”, but is it true?
That’s because public sector unions and private sector unions are very different creatures. Private sector unions push against the interests of shareholders and management; public sector unions push against the interests of taxpayers. Private sector union members know that their employers could go out of business, so they have an incentive to mitigate their demands; public sector union members work for state monopolies and have no such interest.
Private sector unions confront managers who have an incentive to push back against their demands. Public sector unions face managers who have an incentive to give into them for the sake of their own survival. Most important, public sector unions help choose those they negotiate with. Through gigantic campaign contributions and overall clout, they have enormous influence over who gets elected to bargain with them, especially in state and local races. via Make Everybody Hurt – NYTimes.com.
On the other hand, private sector unions have the advantage of negotiating with profit-earning companies. Public unions have the disadvantage of negotiating with state executives and agencies that must address multiple needs with scarce tax dollars.
Brooks cites studies that purportedly show that collective bargaining increases state worker salaries by about 5 percent or 6 percent. As he states, “That’s not nearly enough to explain current deficits”.
Even if public sector unions are not the “cause” of current state deficits, the assumption is that unions have contributed to the budgetary crisis in one of two ways: (1) The cost of public union worker wages and benefits are excessive, that is, union workers earn more that their private workers doing similar work. (2) Public sector unions make it difficult for state governments to modernize bureaucracy to achieve efficiencies and improve effectiveness.
Do public union workers earn more than workers in the private sector?
NYT published data that shows public workers on average earn higher wages, though the data shows considerably variation from state to state:
The clearest pattern to emerge is an educational divide: workers without college degrees tend to do better on state payrolls, while workers with college degrees tend to do worse. That divide has grown more pronounced in recent decades. Since 1990, the median wage of state workers without college degrees has come to surpass that of workers in the private sector. During the same period, though, college-educated state workers have seen their median pay lag further behind their peers in the private sector.
In Wisconsin, for example, the state wage is 22% more than in the private sector. However, 60% of state employees have college degrees, a much higher percentage than in the private sector. A recent paper that examined compared pay in the private and public sectors concluded:
In contrast to several prior studies by economists, we find little evidence that SLG (state and local government) employees are overpaid. Holding constant education, estimated work experience,occupation, location, race, and gender, SLG employees earned 4 to 6% less than comparable private sector workers in 1990, 2000, and 2005-06….
The argument in the court of public opinion is less about wage differences that about the benefits public employees receive. Benefits receive by public workers are unheard of in the private sector, or have been taken away in the private sector. Public sector job security, shorter work hours, increase vacation and holidays time, early retirement options, and generous health care benefits are the source of both envy and resentment. More on this in the next installment.