NCPA - National Center for Policy Analysis

WELCOME TO THE REAL WORLD

December 15, 2009

Most cities and states will collect only meager revenues for at least the next year.  While politicians mull tax increases and service cuts, public-sector workers continue to gobble up money -- in Philadelphia, they account for 61 percent of spending.  The crisis, however, at least illuminates a simple fact.  The status quo is unaffordable, says the Economist.

For years, public-sector workers have basked in an alternative reality.  Nevertheless, as private-sector unions have faded, public-sector ones have thrived, says the Economist:

  • In 2008 some 37 percent of government workers were unionized, nearly five times the share in the private sector, and the same share that was unionized 25 years earlier.
  • Over that period, the share of unionized private-sector jobs collapsed from 17 percent to 8 percent.
  • In 2009, for the first time, public workers comprised more than half of America's union members.

Democrats in particular have little incentive to anger workers, who are often their electoral foot-soldiers, and neither party wants to prod them to strike, since they hold monopolies, says the Economist.  Those who defy unions do so at their peril.  In 2005 California Gov. Arnold Schwarzenegger tried to curb the unions' power and his effort was quickly terminated.

As a result, public-sector workers are spoiled rotten, says the Economist:

  • Government employees earn 21 percent more than private ones and are 24 percent more likely to have access to health care.
  • Only 21 percent of private workers enjoy a defined-benefit (DB) pension, which guarantees retirement income based on years of service and final salary, but 84 percent of state and local workers still receive DB plans.

All this might be grand if states and cities could afford it, but they cannot and frustration is beginning to boil over, says the Economist:

  • Last year Vallejo, in California's San Francisco Bay Area, sank into bankruptcy under the weight of its labor costs.
  • In California itself, the unfunded liabilities of retirement programs are expected to exceed $100 billion through 2015.
  • One local blog tracks coddled public-sector pensioners: a former police chief in Newport Beach scrapes by on $221,554.56 a year.

Source: Observers, "Welcome to the real world," The Economist, December 10, 2009.

For text:

http://www.economist.com/world/unitedstates/displaystory.cfm?story_id=15065693 

 

Browse more articles on Economic Issues