Report:  Public Sector Unions Not to Blame for Deficits

Tuesday, November 22, 2011

UCS News Service - November 2011

A new report seriously undermines the rationale for balancing state budgets by going after public sector workers.

Budget crises in states across the country are being used to justify attacks on public employees, their unions, wages and benefits. But the new report, from the University of California Berkeley Labor Center, finds that the growing state budget squeeze is mainly the result of the bursting of the housing bubble and the ensuing decline in real estate prices—not public sector wages and benefits.

The report—The Wrong Target: Public Sector Unions and State Budget Deficits, by Sylvia A. Allegretto, Ken Jacobs and Laurel Lucia—finds that strong public sector unions don’t add up to higher deficits or bloated pay and compensation packages. According to the study, almost every argument against public sector workers is demonstrably false.

In the 10 most highly unionized states, for example, the report found the average share of the budget spent on compensation was 19.6 percent, just slightly higher than the 18.7 percent in the 10 least unionized states. “The claim that public sector unionization leads to greater deficits does not withstand scrutiny,” the study concludes.

And despite oft-repeated attacks on “bloated” government, the report showed that “The public sector workforce has not been growing relative to the population” in union and non-union states alike. “There is no correlation between the share of public workers in unions and the size of the public sector workforce,” says the report. “This belies the notion that public sector unions are increasing the demand for their product.”

For states to address their budget deficits, “the most important factors are national economic growth and a resolution to the housing crisis,” the report concludes. “Solutions that focus on cutting state and local budgets can be expected to further weaken the economy. Federal aid to the states is essential to maintain the public infrastructure while the economy rebounds. Federal action is also needed to address the housing crisis, which continues to provide a drag on the economy and on state and local revenues.”