A More Perfect Union?

by | In The News, The Economy, Weekly Column | 8 comments


Demonstrators shouting in the streets. Chaos in the government. Politicians leaving the capitol. No, this isn’t the Middle East. I’m talking about Wisconsin and Governor Scott Walker’s proposal to reduce the bargaining power of public employee unions.

When politicians attack “special interest groups,” we tend to think of greedy corporate fat cats, small business owners, and various types of wealthy investors all jockeying to get the best possible deal from the government on grants, loans, regulations, and taxes.

Surprisingly, the largest special interest group of all is none of these. It is those who work for the government and the unions that represent them. No single interest group gives more to politicians than their public unions.

According to the January 8, 2011, issue of The Economist, not exactly a conservative publication, over the past 30 years private union membership fell from 44% to 15% while public union membership increased from 11% to 36%. There are now more US workers in unions in the public sector than in the private sector, even though the private workforce is five times larger than the public.

As a result, The Economist notes, public sector jobs are a “haven of security and stability. The result is a paradox. The typical public worker is better off than the people he is supposed to serve and the gap has widened significantly over the past decade. In America, pay and benefits have grown twice as fast in the public sector as they have in the private sector.”

According to an August 13, 2010, article in USA Today that cited statistics from the Bureau of Economic Analysis, federal compensation is up 36.9% from 2000, adjusted for inflation, compared with an increase of just 8.8% for private workers.

Federal civil servants’ average wages are 60% higher than those of their private counterparts, and their benefits are 300% greater. In 2009 the average public sector worker earned $50,462 in wages with benefits worth $10,589. A non-military civil servant working for the federal government earned $81,258 with $41,791 in benefits. Additionally, many public workers, including state and local employees, can retire in their mid-50’s on close to full pay.

In general, lower-level public workers are paid more than their private sector counterparts, while higher-level public workers are usually paid much less than their peers in the private sector.

Only recently have workers in the private sector awoken to the disparity that has developed in private and public sector wages. It’s not surprising that private sector workers are losing sympathy for their public sector counterparts and are beginning to call for serious cuts in public sector wages and benefits.

One of the largest debts that governments have rung up over the great spending spree of the past 20 years is in public pensions. The Economist estimates that states alone have close to $5 trillion in unfunded pension liabilities.

One area of possible reform in public wages would be to bring public sector jobs into parity with the private sector. Yet changing courses will not be easy. Many left-of-center political parties in most developed countries are largely backed by public unions. In England, the Labor Party gets 80% of its funding from public-sector unions. In the US, teachers alone accounted for one-tenth of the delegates to the Democratic convention in 2008.

Major corporations have routinely slashed promised pension benefits because of financial woes (Delta and United come to mind). Yet even mentioning the possibility of freezing or reducing public benefits brings people worldwide out of their seats and into the streets. The uproar in Wisconsin may be only the first sign of things to come.

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