Vallejo Con Dios: Why Public Sector Unionism Is a Bad Deal for Taxpayers and Representative Government

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Rates of unionization in the United Statestoday are at historic lows and are unlikely to rebound.However, there is one sector in which organizedlabor is growing in strength: government.This has severe implications for the future of publicfinances for state and local governments acrossthe nation, and for the nature of organized laboritself.

High rates of unionization in the public sectorhave led to very high labor costs in the formof generous collective bargaining contracts. Nowstate and local governments are under increasingfinancial pressure, as a worsening national economyhas led to decreased revenues for states andmunicipalities—many of which remain lockedinto the generous contracts negotiated in moreflush times. Thus, as businesses retrench, governmentsfind themselves in a financial straitjacket.In addition, as government unions growstronger relative to private-sector unions, theirprevalence erodes the moderating influence ofthe market on the demands that unions make ofemployers.

Now, as an economic downturn threatens stateand local government revenues, officials whowant to keep their fiscal situations under controlwould do well to look skeptically at public-sectorbargaining—especially since the existing politicalchecks on it have proven ineffective. Public officialsshould eschew public-sector bargainingwhen possible, or at the very least, seek to limit itsscope.

As keepers of the public purse, legislators andlocal council members have an obligation to protecttaxpayers' interests. By granting monopolypower to labor unions over the supply of governmentlabor, elected officials undermine theirduty to taxpayers, because this puts unions in aprivileged position to extract political goods inthe form of high pay and benefits that are muchhigher than anything comparable in the privatesector.

This paper shows how the unionization ofgovernment employees creates a powerful, permanentconstituency for bigger government—one that is motivated, well-funded, and organized.It also makes some recommendations asto how to check this constituency's growingpower—an effort that promises to be an uphillstruggle.

Ivan G. Osorio

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.