Public Employee Unions and Pensions

Source: Posted on January 22, 2016 by Catherine Fisk and Brian Olney, OnLabor blog, January 22, 2016

Advocates of weakening public sector unions, both some who have filed briefs in the Friedrichs case and others who support anti-union legislation in Wisconsin and other states, assert that public sector unions contribute to state budget deficits and that public employee pensions are a main culprit. The truth is more complicated. Unionization doesn’t cause either budget deficits or unfunded pension liabilities. Bad governance does. Some unions may contribute to bad governance but they are not the sole cause, and unions can help solve the problem.

Although labor costs consume a relatively larger share of revenues in the public sector than in the private sector, studies show this is because government tends to provide more labor-intensive services, and also services that require a higher level of education and training (e.g., teachers and public health workers). Collective bargaining, in the states that allow it, is only one aspect of a complex web of law that, in every state, regulates compensation and working conditions for public employees. A bewildering array of state and local constitutional or charter provisions, statutes, and administrative rules specify pay, benefits, and pensions for government workers by job category. Elimination of collective bargaining will not eliminate the budget or pension funding deficits that exist. But it may eliminate the last defined benefit pension plans, which would be bad for workers and bad for the economy as a whole…..