Culture & the Family

Labor's Day Is Over

October 5, 2009

Don Bellante, David Denholm, Ivan Osorio

ates 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 sector.

In a new paper published by the Cato Institute, we show how the unionization of government employees creates a powerful, permanent constituency for bigger government-one that is motivated, well funded, and organized. We also make some recommendations as to how to check this constituency's growing power-an effort that promises to be an uphill struggle.

Don Bellante is a professor of economics at the University of South Florida.

David Denholm is the president of the Public Service Research Foundation.

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