Study Co-Authored by: Don Bellante and David Denholm
Rates of unionization in the
United States today are at historic lows and are unlikely to rebound.
However, there is one sector in which organized labor is growing in
strength: government. This has severe implications for the future of
public finances for state and local governments across the nation, and
for the nature of organized labor itself.
High rates of
unionization in the public sector have led to very high labor costs in
the form of generous collective bargaining contracts. Now state and
local governments are under increasing financial pressure, as a
worsening national economy has led to decreased revenues for states and
municipalities—many of which remain locked into the generous contracts
negotiated in more flush times. Thus, as businesses retrench,
governments find themselves in a financial straitjacket. In addition,
as government unions grow stronger relative to private-sector unions,
their prevalence erodes the moderating influence of the market on the
demands that unions make of employers.
Now, as an economic
downturn threatens state and local government revenues, officials who
want to keep their fiscal situations under control would do well to
look skeptically at public-sector bargaining—especially since the
existing political checks on it have proven ineffective. Public
officials should eschew public-sector bargaining when possible, or at
the very least, seek to limit its scope.
As keepers of the
public purse, legislators and local council members have an obligation
to protect taxpayers’ interests. By granting monopoly power to labor
unions over the supply of government labor, elected officials undermine
their duty to taxpayers, because this puts unions in a privileged
position to extract political goods in the form of high pay and
benefits that are much higher than anything comparable in the private
This paper shows how the unionization of government
employees creates a powerful, permanent constituency for bigger
government— one that is motivated, well-funded, and organized. It also
makes some recommendations as to how to check this constituency’s
growing power—an effort that promises to be an uphill struggle.
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.