Our Economic Pain Is Coming from Big Industry CEOs, Not Public Employees’ Unions

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by John Schmitt,  

Center for Economic and Policy Research, Washington, D.C. 

February 23, 2011

           Conservative think-tanks and politicians like New Jersey Governor Chris Christie and Wisconsin Governor Scott Walker have been leading an attack on public-sector workers. The crux of their argument is that the economy is a mess and a large part of the reason is that public employees are overpaid. 

          On closer inspection, the evidence suggests a different culprit: private-sector employers. The problem is not that public-sector pay and benefits are out of control. The problem is that pay in the private sector has been stagnant or falling, health insurance coverage has been dropping, and traditional pensions have all but disappeared.  

          Back in the late 1970s, public- and private-sector jobs were not that different. About 70 percent of private-sector workers had health insurance through their jobs. Public-sector workers were a bit more likely to have coverage than private-sector workers –about 75 percent at the local level, 80 percent at the state level, and 85 percent at the federal level. Then, as now, this largely reflected that, on average, public employees were older and more likely to be college-educated than private-sector workers.  

          Health-coverage rates today are little changed in the public sector. But, coverage is down almost 15 percentage points for private-sector workers. 

          Over the last three decades, in our role as “employers” of public-sector workers, we taxpayers did the right thing. We generally kept our commitment to public-sector workers and their families. Coverage hasn’t slipped, even if most public workers now pay a larger share of premiums, and have seen increases in deductibles and co-pays. In our other role, however, as employees in the private sector, we didn’t get the same treatment from our own employers.  

          Public-sector workers were more successful in holding onto their health care and other benefits for two reasons. First, taxpayers generally value the work performed by public school teachers, police, food inspectors, medical researchers, air-traffic controllers, and other public workers. We also know what it takes to maintain a middle-class standard of living and want to ensure that our neighbors meet that standard. 

          Second, public-sector workers are better organized than their private-sector counterparts. As private-sector unionization rates fell from about 20 percent at the end of the 1970s to just 7 percent in 2010, the share of public-sector workers in a union held steady at over 35 percent. Public-sector unions played an important role in protecting their members against declines in health and pension benefits seen in the private sector. 

          Meanwhile, the four-fifths of the U.S. workforce in the private sector got hammered. As the Economic Policy Institute has documented so well in its report, the State of Working America, private employers did not do the right thing on health, pensions or pay. Private-sector workers — and unions — were too weak to resist the employer assault. 

          If the country were getting poorer, then it would be understandable that workers would have to share the sacrifice. But, in fact, we are on average much better off now than three decades ago. The hitch is “on average.” The last 30 years have seen an unprecedented upward redistribution of national income. The richest 1 percent have seen their share of national income rise from 8.6 percent in 1979 to 15.9 percent in 2008.  

          Virtually no public employee falls in this privileged top 1 percent. In 2008, it took a family income of $368,000 to make the top 1 percent. The president crosses this threshold, with a salary of $400,000, but even the vice president, at $221,000, falls short. 

          The real problem facing America is not that we don’t have enough to go around. The problem is that we have redistributed from the middle-class to the wealthy. Public-sector workers played no role whatsoever in that process.

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