RELEASE: The Wrong Target: Public Sector Unions and State Budget Deficits

Research Finds Recession and Housing Bubble Responsible for Shortfalls

Berkeley — A new report finds that budget woes in states across the United States are due to bursting of the housing bubble and the great recession, and not public sector workers and their unions. The report from the University of California, Berkeley’s Center for Labor Research and Education and Center for Wage and Employment Dynamics analyzes the relationship between public sector workers, their unions, and state budget deficits.

Ohio voters will decide “Issue 2” on Tuesday, Nov.8, a referendum on a law which limits collective bargaining for government unions in that state. As many as 12 other states have already enacted anti-union legislation. Proponents have justified the measures by pointing to the state deficits. The research shows, however, that “no matter how you measure it, public sector employees and unions are not the cause of state budget deficits” said report co-author Ken Jacobs.

The Wrong Target: Public Sector Unions and State Budget Deficits” by Sylvia Allegretto, Ken Jacobs and Laurel Lucia disproves myths about the role of public sector unions in state budgets by analyzing data from the Census Bureau, the Bureau of Labor Statistics and the Federal Housing Finance Agency.

The researchers find that:

  • The share of state and local government jobs has remained relatively steady, whether measured per thousand residents or as a percentage of all jobs.
  • States with the lowest union density averaged 74.6 state and local employees per thousand residents in 2009, while the highest union density states averaged 68.3. This study shows that the number of state and local employees per thousand actually fell in the high union density states between 2001 and 2009.
  • There is no correlation between union density and the size of state budget deficits.
  • State budget deficits were due, in large part, to the decline in house prices and ensuing recession.

These findings reinforce previous research that shows that public sector compensation is not the problem. A study by David Madland and Nick Bunker found that public sector compensation including wages, salaries, and benefits has actually declined as a share of state expenditures, from 23 percent in 1992 to 20 percent in 2009. Numerous studies have also found that public sector worker compensation is the same or less than that of similar private sector workers, after taking into account level of education, experience and other important factors.

“Solutions that focus on cutting state and local budgets can be expected to further weaken the economy,” finds researcher Allegretto, “because ‘austerity’ measures serve to reduce demand.”