What we suffer is a ruinously expensive collaboration between elected officials and unionized state and local workers, purchased with taxpayer money. “Scratch my back and I’ll scratch yours.”
No wonder the Service Employees International Union has become the nation’s fastest-growing union: It represents government and health-care workers. Half of its 700,000 California members are government employees. More and more, it wins not on the picket line but at the negotiating table, where it backs up traditional strong-arming with political power. It spends vast amounts of money on initiatives that keep the government growing and the gravy flowing.
The state’s teachers unions operate in a similar fashion—with the result that California’s various municipalities, especially Los Angeles, face budget shortfalls in the hundreds of millions of dollars. California can no longer rely on a strong economy to support this munificence. Its unemployment rate of 12.5% runs several points higher than the national rate and its high-tech companies are choosing to expand elsewhere. Why stay in a state with such higher taxes and a cumbersome regulatory environment?
California is a horrible warning of how dreams can turn to dust. In most states, politicians face a contracting local economy and shortfalls in tax receipts. Naturally, they look to cut expenses but run into obstruction from politically powerful unions that represent state and local government employees, teachers and health-care workers who have themselves caused pension and health-care insurance costs to soar. It is not an accident that in framing the national stimulus program in 2009 Congress directed a stunning $275 billion of the $787 billion as grants to the states to support public-service employees in health care, education, etc.
The lopsided subsidies for pension and health costs are a large part of the fiscal crises at the state and local levels. The subsequent squeeze on education and infrastructure investment is undermining the very programs that have made it possible for our economy to grow.
When tax revenues rise, so does the total compensation paid to government employees whether in the form of increased pay, increased benefits, more employees, or all three. When tax revenues fall, total compensation paid to government employees remains roughly the same. It’s a ratchet—a mechanism that allows effective motion in one direction only. Fiscal sanity is impossible under such conditions.
Right, and there is nothing you can do to correct the problem, at least not any time soon. We’ve been working up to this for 80+ years. To think you can stop something with that much inertia….I know!!!
Change you can believe in!
Maybe we should just be bipartisan, that’ll fix it. ;-(
I thought that wages are generally considered to be fairly sticky. If true, it would be difficult to cut wages. While I think that we should go to defined contribution plans for public employees, eliminating most of our pension issues, that does leave a temporary problem. If we assume, as we did in the health care debate, that people respond to total compensation, would we need to increase salaries to retain workers if we went to such a plan?
Steve
Steve,
Wages are sticky downwards which prevents markets from clearing in a down market, just a point of clarification.
No, these are government jobs Dave is talking about. Of course, they’d complain, but then again they also, pretty much have life time employment. That was the way things were initially. Government jobs didn’t pay as well as private sector jobs, but you had considerably more job security. Now government jobs are rivalling or even exceeding private sector jobs when you look at compensation.
Of course, as States teeter on the edge of fiscal disaster some government employees are finding that the job security thing isn’t what it used to be either.