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The Wrong Target: Public Workers, Unions Didn’t
Cause Budget Crises


In These Times, October 14, 2011

 By David Moberg

Governors like Scott Walker of Wisconsin and Chris Christie of New Jersey have justified their attacks on public workers and their unions as necessary to balance state budgets. Indeed, they and copy-cat officials, mainly Republican but frequently Democratic, and a hallelujah chorus of pundits have insinuated that a bloated, overpaid state and local government workforce caused the record string of deficits over the past four years.

It’s a good story, conveniently reinforcing right-wing hostility to government. But there’s one little problem. It’s dead wrong. The facts simply don’t support it. That shortcoming may not stop the right-wing crusade, but it’s important for anyone concerned about state and local government to know.

And they can find the research neatly, graphically summarized in “The Wrong Target: Public Sector Unions and State Budget Deficits,” by Sylvia Allegretto, Ken Jacobs and Laurel Lucia of the Center on Wage and Employment Dynamics and the Labor Center, both at the University of California, Berkeley.

Pulling together both original research and recent research of others, they show–using several measures–that state and local governments have not been growing in recent decades, that public employees are not overcompensated (counting pay and benefits) compared to similar private workers, and that public worker unions in particular are not the culprits causing state financial problems.

Taking the study point by point,

  • Public workers have been a steady share of the workforce from 1979 to 2011–averaging 14.2 percent of the entire workforce and ranging from 13.6 to 15.2 percent (slightly increasing typically following a recession simply because private workers disproportionately lost jobs).

  • State and local government employment for every thousand residents rose very slightly from 1990 to 2001 (from 60.8 to 64.2 workers for a thousand residents, virtually all in local government), then remained flat through 2009.

  • Comparing states with the highest and lowest rates of unionization, the researchers found that from 1990-2009 there were more public employees for every thousand residents in weak- or non-union states than in states densely unionized. Also, there was faster growth in weakly unionized states, especially from 2001 onwards when the ratio of public workers to the population declined in the most unionized states.

  • Ultimately, the data seem to show no correlation between union density and public sector employment. (Jacobs suggests some rural, lightly populated and big states that also have few public unions may have a higher ratio to serve a dispersed population.)

  • Public worker total compensation has not been growing as a share of state expenditures. Indeed, worker wages and benefit declined as a share of state spending from 1992 to 2002, then remained stable (according to a study from the Center for American Progress).

  • As many studies have demonstrated, state and local government workers earn less in wages and benefits than similar private sector workers. Moreover, in recent years private sector labor costs have risen faster than costs in the public sector–a remarkable record considering the widespread wage stagnation and cuts in both pay and benefits in the private sector.

So what is causing the deficit problems? It doesn’t take a genius–but it helps to be smarter and less ideological than Walker or Christie–to come up with the answer: The enormous housing bubble burst, leading to the highest unemployment and deepest downturn since the 1930s (worsened by a lot of structural problems building for decades).

Allegretto and colleagues performed statistical analyses of various potential contributors to state budget deficits. They found that a one percent increase in public sector unionism produced a statistically insignificant increase in budget deficits. But a one percent decline in housing prices was associated with a 0.56 percent increase in deficits. So if housing prices dropped 30 percent, state deficits could be expected to increase roughly 17 percent.

Even well-meaning state and local officials face a dilemma when the economy and their revenue drop so sharply. Unlike the federal government, they cannot typically run deficits, thus stimulating growth by sustaining or increasing demand. Without adequate help from the federal government, they often have an unappetizing option–cutting spending or raising taxes. They have options to increase efficiency (like energy use) but those are not equal to the budget challenge. Cutting services and employees not only hurts the public, it further depresses the economy. Raising taxes in a deep recession can also have negative effects, but most of all it requires political courage and strong progressive legislative majorities. Both are in short supply.

Jacobs and fellow researchers looked into California’s budget crisis to see how different fiscal policy alternatives would affect the state economy. In general, they found cuts in public workers and services would damage the economy much more than revenue increases, especially higher taxes on corporations and rich households. Cuts in some services, like Medi-Cal, also would lose federal aid, and most services have high multiplier effects (creating bigger ripples through the economy) in part because income losses would be concentrated among low-to moderate-income families much more likely to spend most of their earnings.

If the state cut $1 billion from home supportive services, 163,200 workers would lose their jobs, the study concludes. The same cut in child care or Medi-Cal would eliminate 27,000 jobs. But a billion dollar tax increase on upper income households would cost, Jacobs calculated, about 6,200 jobs, a billion more in corporate income tax about 2,200 jobs, and a billion more in oil severance taxes only 300 jobs.

In short, public workers and their unions are not the cause of state deficit problems. Attacking and cutting them not only fails to solve the problem but further weakens the economy, making fiscal prospects even worse.

Original Article


 
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