NCPA - National Center for Policy Analysis


May 15, 2009

Across the private sector, workers are swallowing hard as their employers freeze salaries, cancel bonuses, and institute longer work days.  America's employees can see for themselves how steeply business has fallen off, which is why many are accepting cost-saving measures with equanimity -- especially compared to workers in France, where riots and plant takeovers have become regular news.

But then there is the U.S. public sector, where the mood seems very European these days, says Steve Malanga, a senior fellow with the Manhattan Institute:

  • In New Jersey, which faces a $3.3 billion budget deficit, angry state workers have demonstrated in Trenton and taken Gov. Jon Corzine to court over his plan to require unpaid furloughs for public employees.
  • In New York, public-sector unions have hit the airwaves with caustic ads denouncing Gov. David Paterson's promise to lay off state workers if they continue refusing to forgo wage hikes as part of an effort to close a $17.7 billion deficit.
  • In Los Angeles County, where the schools face a budget deficit of nearly $600 million, school employees have balked at a salary freeze and vowed to oppose any layoffs that the board of education says it will have to pursue if workers don't agree to concessions.

Call it a tale of two economies, says Malanga: 

  • A study in 2005 by the nonpartisan Employee Benefit Research Institute estimated that the average public-sector worker earned 46 percent more in salary and benefits than comparable private-sector workers; the gap has only continued to grow.
  • For example, state and local worker pay and benefits rose 3.1 percent in the last year, compared to 1.9 percent in the private sector, according to the Bureau of Labor Statistics (BLS).
  • Some five million private-sector workers have lost their jobs in the last year alone, and their unemployment rate is above 9 percent according to the BLS.
  • By contrast, public-sector employment has grown in virtually every month of the recession, and the jobless rate for government workers is a mere 2.8 percent.

For anyone who thinks such low unemployment numbers are good news, remember that the bulging public sector must be paid for with revenues that most governments don't currently have, explains Malanga.  This is one reason for a spate of state and local tax increases, such as $5 billion in tax increases New York state passed in April, and $12 billion in tax increases California's legislature agreed to in February that will only become law if voters pass a series of ballot initiatives next week.

Source: Steve Malanga, "Unions vs. Taxpayers; Organized labor has become by far the most powerful political force in government," Wall Street Journal, May 14, 2009.

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