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No. 645

September 28, 2009

Vallejo Con Dios

Why Public Sector Unionism Is a Bad Deal for

Taxpayers and Representative Government

by Don Bellante, David Denholm, and Ivan Osorio

Executive Summary

want to keep their fiscal situations under control

Rates of unionization in the United States

would do well to look skeptically at public-sector

today are at historic lows and are unlikely to re-

bargaining--especially since the existing political

bound. However, there is one sector in which orga-

checks on it have proven ineffective. Public offi-

nized labor is growing in strength: government.

cials should eschew public-sector bargaining

This has severe implications for the future of pub-

when possible, or at the very least, seek to limit its

lic finances for state and local governments across

scope.

the nation, and for the nature of organized labor

As keepers of the public purse, legislators and

itself.

local council members have an obligation to pro-

High rates of unionization in the public sec-

tect taxpayers' interests. By granting monopoly

tor have led to very high labor costs in the form

power to labor unions over the supply of govern-

of generous collective bargaining contracts. Now

ment labor, elected officials undermine their

state and local governments are under increasing

duty to taxpayers, because this puts unions in a

financial pressure, as a worsening national econ-

privileged position to extract political goods in

omy has led to decreased revenues for states and

the form of high pay and benefits that are much

municipalities--many of which remain locked

higher than anything comparable in the private

into the generous contracts negotiated in more

sector.

flush times. Thus, as businesses retrench, gov-

This paper shows how the unionization of

ernments find themselves in a financial strait-

government employees creates a powerful, per-

jacket. In addition, as government unions grow

manent constituency for bigger government--

stronger relative to private-sector unions, their

one that is motivated, well-funded, and orga-

prevalence erodes the moderating influence of

nized. It also makes some recommendations as

the market on the demands that unions make of

employers.

to how to check this constituency's growing

Now, as an economic downturn threatens state

power--an effort that promises to be an uphill

and local government revenues, officials who

struggle.

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Don Bellante is professor of economics at the University of South Florida. David Denholm is the president of the

Public Service Research Foundation, a nonprofit organization that studies unions and union influence on public

policy. Ivan Osorio is editorial director and a labor policy researcher at the Competitive Enterprise Institute.