LET BALTIMORE BURN? AN ANAYLSIS OF PUBLIC SECTOR UNIONISM

Abstract

In 2011, Wisconsin governor Scott Walker set off a national debate about public sector unionism in times of fiscal strain. By eliminating collective bargaining rights for most state and local workers, Walker closed Wisconsin’s multi-billion dollar deficit. Union leaders decried his plan as an unprecedented attack on organized labor, ignoring the fact that collective bargaining is fairly new to the public sector. Yet despite their late start, public sector unions have become the most powerful interest group in American politics, able to shape policy from within and without government. This thesis explores the fiscal and non-fiscal effects of their influence. It builds upon the existing literature with a multivariate regression analysis of 108 public pension funds over 10 years. The results confirm that politicians reward their union allies in ways that evade taxpayer scrutiny. Unlike wages, fringe benefits such as pensions need not be funded immediately. I find that on average, giving all public workers the right to bargain collectively is associated with a four percent decrease in a given pension’s funded ratio. Granting only some government employees collective bargaining rights, however, is associated with an even larger decrease. Public sector unions in labor-friendly states, it seems, are more successful at keeping pensions solvent. Their members, after all, depend on those funds to retire. Overall though, public sector unions do increase the costs of government. More importantly, they impact the allocation of taxpayer money and the quality of public services. That is especially evident in the nation’s education and prison systems, where public sector unions have stifled competition and promoted outdated policies. Lowincome and minority families, this thesis argues, have disproportionately suffered. Given the sorry state of government finances, reform is urgently needed