This article is from Dollars & Sense: Real World Economics, available at http://www.dollarsandsense.org/archives/2011/1111friedman.html


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This article is from the November/December 2011 issue of Dollars & Sense magazine.

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Public-Sector Workers Under Attack

It’s not about their pay and benefits—it’s about what they do.

BY GERALD FRIEDMAN

From California to Massachusetts, from Texas to Wisconsin, whether by fiat or through bargaining, state governments would balance their budgets by taking a meat ax to public employee wages, benefits, and jobs. Behind the headlines, the relative strength of public-sector unions has long made them a target for economists and conservatives hostile to all forms of working-class collective action and any regulation of the capitalist marketplace. Labor economist Leo Troy set the tone for many when he warned in 1994 of “A New Society” that was emerging, dominated by unions of public employees and a redistributive state. While market competition had beaten back the threat of private-sector unionism, public employee unions, in his view, had renewed the socialist challenge to free enterprise.

Ideologues like Troy inspired an ongoing attack on public-sector unions to defend America from socialism. When he accepted the Republican presidential nomination in 1996, for example, Bob Dole singled out the teachers’ unions for attack. While this was a great applause line, Dole lost the election. This has been the outcome of most of the right’s attack on public-sector workers and unions: applause from the far right and some of the media but little resonance among a public that generally supports public services and those who provide them.

It may be that those who would attack public employees and their unions as sponsors of incipient socialism have learned to conceal their real motives. Instead of attacking public services, they present themselves as advocates for private-sector workers and insist that they only seek to eliminate inequities between private- and public-sector workers. New Jersey Gov. Chris Christie denounces public-sector unions as creating “two classes of citizens: one that receives rich health and pension benefits, and all the rest who are left to pay for them.”

It is odd to find such touching concern for equity among those who have campaigned relentlessly to widen disparities between rich and poor and between managers and workers. In any case, such equity concerns should be relieved by the growing body of empirical studies showing that public-sector workers are not overpaid compared with private-sector workers. Nor is there evidence that public-sector unions have been diverting national income towards their exorbitant salaries and staffing. State and local taxes took 9% of income in 1990 and 9% in 2007. As a share of national income, state and local employee compensation has fallen since the 1990s despite rising demands on the public sector—to improve education, repair infrastructure, clean up the environment, and provide health care to growing numbers left out of our private health care system.

When neither evidence nor popular opinion can deflect political attacks on public-sector workers, then we should look for some deeper ideological hostility rather than rational explanation. Public-sector workers and their unions are not under attack because their salaries have grown, because of a groundswell of popular hostility, nor because their pay and employment benefits are swamping the capacity of the public. They are under attack because their very existence and the commitment of public-sector workers to provide services without regard to ability to pay or the market distribution of income challenges the legitimacy of markets. Public schools, public health services, public roads and parks, even public police and fire protection offend those who would restrict such services to those who can pay for them, denying them to the poor, the young, and the disabled. Their view may be shaped by racial and gender animosity: not only are a disproportionate share of public employees women and people of color, but so are their young and low-income clientele.

If the reactionaries are now winning where Dole had earlier failed, it may be because they have new allies, enablers who have turned against public employees in a misguided attempt to protect public services and liberal values. Republicans have been the face of the attack on public employees but Democrats, even liberals, have been right there with them. New York’s Governor Andrew Cuomo, Massachusetts’s Deval Patrick and California’s Jerry Brown have all found political advantage in attacking public employee unions. Indeed, in his 2011 state of the state address, Christie found support for his anti-worker stance in the words of Cuomo and Brown, whose calls for austerity and wage cuts, Christie declared, were inspired by New Jersey’s example. By lending credibility to reactionaries like Christie, liberals like Brown and Cuomo provide political cover for attacks on public-sector workers.

But there is more here than simple political opportunism. The anti-public employee rhetoric from Cuomo, Patrick, and other liberals reflects the frustration of pro-government liberals five years into the worst economic recession since the 1930s. Years of falling revenues and rising state and local deficits have forced liberal politicians to make agonizing choices among competing needs. After cutting schools to save road repair and cutting Medicaid to save drug rehabilitation programs, liberal politicians have come to look covetously at public employee salaries and benefits. In the labor-intensive work of education and providing social services, everything liberals want to do comes up against the cost of paying workers; and a chance to reduce those costs means a chance to save services in times of austerity. As Assemblyman Angel Fuentes, a Camden Democrat who represents one of the neediest cities in the United States, said in endorsing Governor Christie’s program, “These reforms are unquestionably bitter pills for us to swallow, but they are reasonable and they are necessary” because “towns across this state” are laying off workers to pay for health benefits for their employees.

One can understand how these liberal enablers would try to protect spending even by cutting public employee pay. The problem is that they have accepted a false choice that pits public services against each other rather than against other uses of the public’s money, including private consumption. There is no economic logic in taking the pool of government revenue as fixed rather than considering whether public services should be preserved by reducing private expenditure by raising taxes. But if we are to argue that liberals are wrong to accept the need to cut government spending, then we need to develop alternatives to austerity. We need to articulate not only a defense of the work of the public sector, but also a coherent way to fund it. Here’s how:

“Flip” the state and federal tax systems. A recent report by United for a Fair Economy demonstrates how shifting the tax burden so that the wealthiest would pay the rates currently borne by the poorest would eliminate state budget deficits; under such a plan, for example, New Jersey would raise some $12 billion in additional revenue, more than enough to restore all of Governor Christie’s spending cuts while dramatically increasing state support for communities like Camden. Since 1979, federal tax cuts have saved households in the top 0.1% nearly $90 billion a year. Reversing those cuts would supply enough revenue to balance state budget deficits for the current fiscal year.

Federal revenue sharing. This program was established during the Nixon administration, repealed under Reagan and brought back briefly and under a different name under Obama. It could eliminate the need for state and local spending cuts by sharing with these governments the abundant revenues of the national government and its capacity to borrow.

Upgrade Social Security and establish universal, single-payer health coverage. By dramatically reducing their labor costs, improved national pensions and health insurance would immediately solve the fiscal problems of states and localities. Even enacted on a state level, universal pensions and single-payer health systems would realize huge savings. For example, a single-payer health insurance program on the state level, such as Vermont is currently establishing, could save between 15% and 30% of the current cost of health care, savings of between 3% and 6% of state income. In addition to being a boon for business and consumers, this would produce huge savings throughout state and local governments. In Massachusetts, for example, cities and towns could save over $320 million on their current health care spending and the state government would save over $2 billion, more than this year’s budget deficit.

It is time to stop playing defense against the often absurd and always misguided attacks on public employees. There are alternatives to austerity. All that we need is the political will to demand them.

GERALD FRIEDMAN is a professor of economics at the University of Massachusetts-Amherst.

SOURCES: Michael Cooper and Megan Thee-Brenan, “Majority in Poll Back Employees in Public Sector Unions,” New York Times, February 28, 2011; David M. Halbfinger, “Gov. Chris Christie of New Jersey Lays Out Tight Budget,” New York Times, February 22, 2011; Jeffrey Keefe, “Debunking the Myth of the Overcompensated Public Employee: The Evidence,” Economic Policy Institute, September 15, 2010; Karen Kraut, Shannon Moriarty, and Dave Shreve, “Flip it to Fix it: An Immediate, Fair Solution to State Budget Shortfalls,” United for a Fair Economy, May 25, 2011; Elizabeth McNichol, Phil Oliff, and Nicholas Johnson, “States Continue to Feel Recession’s Impact,” Center on Budget and Policy Priorities, June 17, 2011; Richard Pérez-Peña, “N.J. Legislature Moves to Cut Benefits for Public Workers,” New York Times, June 23, 2011; Jeffrey Thompson and John Schmitt, “The Wage Penalty for State and Local Government Employees in New England,” Political Economy Research Institute and CEPR, September 2010; Leo Troy, The New Unionism in the New Society: Public Sector Unions in the Redistributive State, Fairfax, Va.: George Mason University Press, 1994.

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