At its core, the fierce debate waging in Wisconsin and several other states over public-sector unions can be traced to a single, false argument: that public sector workers are the cause of the budget crises states now face. In fact, the severe state budget shortfalls around the country are not the result of excessive compensation paid to the teachers, police officers, and firefighters who perform essential services, but to the economic downturn that left millions of workers unemployed while eroding property values. State and local tax revenues suffered as a result and today, more than three years after the nation plunged into the worst recession since the Great Depression, state and local governments are still trying to recover.
In the face of a budget shortfall, austerity can seem like the simplest and the best solution. But the austerity measures proposed by Wisconsin Governor Scott Walker are misguided for a number of reasons. First, they fly in the face of a large body of research that shows that public-sector workers actually earn less than their private-sector counterparts. Since Walker’s proposals do not address the real causes of the budget crisis, they cannot provide the solution. Rather, austere cuts in wages and compensation, on top of the concessions these workers have already agreed to, threaten to make the current situation worse by imposing more economic hardship on millions of families. Furthermore, Walker’s attempt to eliminate collective bargaining rights for these public-sector workers does not even address the current crisis. It is an opportunistic move to strip more workers of a basic right that has for years improved working conditions for union and non-union workers alike.
Regarding wages, the argument that public-sector workers are overpaid seems to stem from simplistic apples-to-oranges comparison that neglects to factor in multiple variables, including level of education. Across the board, public-sector jobs require a higher level of education than those in the private sector. For example, 59% of public-sector workers, but only 30% of private sector workers in Wisconsin hold four-year college degrees. These differences are explored at length in EPI’s paper Are Wisconsin Public Employees Overcompensated? which compares total compensation, adjusting for factors such as experience, citizenship, hours worked, as well as education. The paper finds that in Wisconsin, full-time state and local workers, including school employees, are under-compensated by 8.2% relative to otherwise similar private-sector workers. When accounting for differences in hours worked, the research shows that public-sector employees are undercompensated by about 4.8%.
The wage and compensation gap is particularly large among higher-educated workers. Keefe’s paper shows that public-sector workers with a bachelor’s degree receive, on average, more than $20,000 less per year than their private-sector counterparts. Those with doctorates are, on average, undercompensated by more than $36,000. Only one group of workers in Wisconsin—those with less than a high school degree—earned more in the public sector, with average annual compensation totaling $36,935, compared with $32,415 in the private sector. But such workers, Keefe stresses, comprise only about 1% of all public-sector workers in Wisconsin. Moreover, he notes that the somewhat higher public-sector wages for workers with low levels of education reflects the success of labor unions in establishing a floor for workers’ wages, while aggressive cost-cutting in the private sector has caused that floor to collapse. At a time when the national minimum wage of $7.25 per hour places a family of two below the official poverty threshold, downward pressure on wages harms working people and the overall economy and is not a good strategy for restoring state governments to fiscal health.
“Public-sector workers’ compensation is neither the cause, nor can it be the solution to, the state’s financial problems,” author Jeffrey Keefe, professor at the Rutgers University School of Management and Labor Relations, wrote in his paper on Wisconsin public employees. “Only an economic recovery can begin to plug the hole in the state’s budget.” He also cautioned that fiscal austerity may prolong the economic downturn by increasing unemployment and reducing demand for products and services.
In recent months, EPI has published similar research focused on other states, from New Jersey and Michigan to Ohio, Indiana, Minnesota, and Missouri. Wage and compensation trends vary somewhat by state, but the research consistently shows that public-sector workers are not overcompensated. Long before the current state battles in Wisconsin and elsewhere over the right of public sector workers to join unions and collectively bargain, EPI has consistently produced research on the multiple ways that Unions help all workers, whether they belong to a union or not. One benefit that is often overlooked is that unions help set a pay standard that nonunion employers often follow. Unions also play a pivotal role in securing legislated labor protections, such as workplace safety and family and medical leave. As unionization rates in the United States have fallen sharply in recent decades, the country’s middle class has declined and worker pay has increasingly failed to keep pace with their productivity and corporate profits. Attacks on unions are attacks on the middle class.