In Honor of the Workers of Wisconsin: Classic TRP – In Defense of Public Sector Unionism II

In Budget Politics, California, Democratic Governance, Economic Planning, Economics, Education Reform, Industrial Policy, Inequality, Liberalism, Living Wage, Political Ideology, Politics, Politics of Policy, Progressivism, Public Policy, Public Sector, Social Democracy, Taxes, Unions, Welfare State, Wisconsin on February 23, 2011 at 11:08 am

Introduction:

Continuing our re-posting of The Realignment Project’s series on public sector unions, here’s part 2, in which we learn that that public sector workers are not overpaid, but that private sector workers are underpaid.

Introduction:

In part 1 of “In Defense of Public Sector Unions,” I concentrated mostly on the ideological side of public sector unions – both why the existence of public sector unions is troubling to some progressives, and why ideologically progressives should support public sector unions.

However, in the comments on the various sites where part 1 was cross-posted, one of the frequent themes of discussion was a request for some hard numbers to prove that public sector union workers aren’t the goldbricking, featherbedding “thugs” they’re made out to be.

So let’s talk numbers.

A Correction on “Overpaid”:

The strange thing about the economic security of public sector workers is that it’s raised an unhealthy amount of envy in the public discourse. News stories about budget deficits abound with scare stories about “over-paid bureaucrats” – which fuels a right-wing anti-union politics and the mistaken belief that tax increases are unnecessary because eliminating “waste, fraud, and abuse” will solve our fiscal problems without reducing public services. This is turn hides the reality that cutting public sector wages and benefits, forcing state employees to take unpaid furloughs, and firing thousands of teachers and other public servants is a major reduction in public services.

But the problem with stories like that is they overwhelmingly rely on broad comparisons between average public sector and private sector workers – which often has the effect of hiding a more complex statistical reality than the simple comparisons describe. Public sector workers are overwhelmingly likely to be full-time, whereas the private sector has many more low-wage part-time, temporary, and “contingent” workers – which distorts comparisons. Similarly, averages don’t always show us the reality of the situation if you have heavy concentrations at the low or the high-end of the income scale pulling the average up or down.*

* For example, let’s take education, where you can see a substantial gap between the highest and lowest paid. The median pay for elementary and secondary school teachers is $49,000 and $51,000 respectively – and the lowest paid teachers earn $33,000 and 34,000 respectively. The median pay for elementary and secondary school administrators is $83,880 – and the lowest paid administrators still earn $55,000 a year, more than the median for the workers they manage. And yet when the reports go out on public sector pay levels, workers and management are bundled together, which makes it look like the average wage in public education (and by extension in the public sector) is higher than it actually is.

If we compare apples to apples though, the difference largely disappears. The median weekly pay for public sector workers is $842 and the median weekly pay for private-sector unionized workers is $839 – in other words, the difference is about unions, since public and private-sector union workers earn essentially the same wage. When we look at the private sector, the union differential is clear: private-sector workers in the service sector earn 57% more if they’re union than if they’re not; union workers in sales earn 22% more than non-union workers; and union workers in construction earn 57% more than their non-union peers.

But what happens when we compare union public-sector to union private-sector, to compensate for the fact that public-sector workers are more likely to be union (37.4% unionization rate) than private-sector workers (a paltry 7.2%)? To continue using education as an example, the median weekly earnings for union private-sector workers in “educational services” are 18% higher than their non-union brethren, and median weekly earnings for union private-sector “education, training, and library” professionals (i.e, teachers, librarians, and the like) are 23% higher than their non-union brethren. And when we compare our unionized private-sector professionals with our unionized public-sector teachers (which isn’t the neatest comparison, but it was the best I could do), the total public vs. private sector differential is a whopping 8.2%. That’s not nothing – but it’s not the “61% more” than the conservative Manhattan Institute trumpets as the difference between public school teachers and private school teachers, and it’s not anything like the 23% gap between union and non-union.

It couldn’t be clearer: the major difference is union vs. non-union, not public vs. private. Because they lack union organization, too many private-sector workers are being under-paid.

Let’s take pensions, another sore spot. We hear a lot about over-funded, overly-generous public sector pensions, but if you actually burrow down in the stats, it gets more complicated. The median income of “aged units” (i.e, retirees) with only Social Security pensions is a paltry $16,527. The median income for “aged units” with a private pension and Social Security is $31,227, which shows how important pensions are to preventing old age poverty, and why the dismantling of private sector pensions is so troubling. The median income for “aged units” with Social Security and a Federal pension is a whopping $33,918 – a whole .8% difference. Even in the case of “aged units” with Social Security and state, local, or military pensions, the median income is $39,364. That’s a more substantial 26% difference, but even then the spread would get smaller if you subtract out military pensions and account for the higher percentage of defined-benefit plans and higher contribution rates in the public sector.

But a median state or local public sector pension of $22.8k a year isn’t anything like the horror stories of $100k public sector pensions that get trumpeted in the media – and the reason is that, while those pensions do exist, they are a statistical blip. The number of public sector employees who receive affluent pensions is a mere 1.3% of the workforce. Moreover, the gaps between public sector workers and public sector managers make it very clear that the runaway pensions and overly generous wages are happening within the ranks of management, not the unions. If we look back at the asterisked section above, we see that elementary and secondary school teachers’ salaries top out at $78-80,000 (in the top 10% of teachers), which mean that they’re not within the 15,000 California public employees making more than $100,000 a year, and they’re not within the 1,000 making more than $200,000 a year. And since pensions are based on wages, they’re not going to be among those drawing $100,000 a year pensions either. Their bosses, however, are more likely suspects: the top 25% of education administrators make more than $100,000 a year.

However, it remains the case that even public sector management golden parachutes still represent a statistical blip – and that you can’t solve California’s (or any other state’s) budget crisis by attacking “waste, fraud and abuse.” Even if you stripped out every last overpaid manager and got rid of that 1.3% of the public workforce who’re receiving affluent pensions, you’d still be left with massive budget deficits – because the problem isn’t overly-generous pensions, but a structural revenue gap between what the cost of the services we demand and the taxes we’ve been willing to pay.

UPDATE:

I’m not a professional statistician, but luckily the EPI (for my money, one of the best think-tanks out there) has studied this in detail, and if anything they have an even stronger position than I do – they argue that public sector workers actually get less than private-sector workers if you compare the two by education levels instead of sector to sector.

Conclusion:

All of this should raise a major point for progressives – given the more modest reality of public sector pay and benefits, why are public sector workers considered a “problem”? Progressives are supposed to be in favor of a living wage for all workers, so why hesitate when it comes to public sector workers? Progressives also are supposed to believe that a decent pension is a basic right for all workers, so why shy away when it comes to public sector retirees?

Are progressives really in favor of a public sector run on the Wal-Mart model?

I hope not. And in part 3 of this series, I will outline an alternative model for progressive public sector labor relations.

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