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GDP Is Up, But Government Unions Ate Your Raise

Posted By James Sherk On January 29, 2010 @ 5:01 pm In Economics | Comments Disabled

Figures released today by the Bureau of Labor Statistics [1] provide less encouragement than today’s GDP report [2]. Total compensation increased by only 1.5 percent in 2009 (without adjusting for inflation) – the lowest increase on record. If a turnaround has begun, workers are not feeling it in their wallets.

However, this pain has not been distributed equally throughout the economy. In the private sector, total compensation grew just 1.2 percent in 2009. On the other hand the compensation paid to state and local government employees grew 2.4 percent. The average government employee got twice the raise that private sector workers did.

Why did government workers get higher raises? In the private sector workers compete to produce goods and services that others value. In a recession, production falls and employers have less money to pay raises with. On the other hand, taxes fund government paychecks. Government employees can continue getting raises no matter the health of the overall economy, so long as taxes keep coming in.

This fact has turned the labor movement into determined tax hikers. Union membership has grown in the government even as it has fallen in the private sector. Three times as many union members now work for the Post Office as in the Auto Industry. In 2009 the numbers crossed: a majority of union members now work for the government [3]. Higher pay for government employees can only come through higher taxes on private sector workers.

Unions almost never go on strike anymore [4]. Instead, they fight to get more for their members by lobbying for tax increases. Unions spent tens of millions of dollars last year campaigning for higher taxes across the country [5]: Illinois. California. Minnesota. Washington State. Arizona. In many cases they have succeeded.

The latest example comes from Oregon, where public sector unions outspent businesses 3 to 2 to pass two ballot initiatives raising taxes by $700 million [6]. The unions wanted higher taxes to prevent spending cuts. Had the taxes increases failed government employees in Oregon would have faced cost cutting measures such contributing toward the cost of their health benefits – something they currently do not do.

Government employees have done well in this recession. Few government jobs have disappeared – unlike in the private sector – and their pay rose at twice the rate of their private sector counterparts. No wonder that government employees are almost three times as likely as private sector workers to believe that the economy is in “good or excellent” shape [7]. The question for policy makers is why should private sector workers have to pay for this?


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URL to article: http://blog.heritage.org/2010/01/29/gdp-is-up-but-government-unions-ate-your-raise/

URLs in this post:

[1] released today by the Bureau of Labor Statistics: http://www.bls.gov/news.release/eci.nr0.htm

[2] today’s GDP report: http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm

[3] a majority of union members now work for the government: http://www.heritage.org/Research/Labor/wm2773.cfm

[4] Unions almost never go on strike anymore: http://blog.heritage.orgftp://ftp.bls.gov/pub/special.requests/ee/Tables/strike.txt

[5] campaigning for higher taxes across the country: http://www.heritage.org/Research/Labor/wm2773.cfm#_ftnref16

[6] public sector unions outspent businesses 3 to 2 to pass two ballot initiatives raising taxes by $700 million: http://blog.oregonlive.com/mapesonpolitics/2010/01/tax_measures_have_passed_vindi.html

[7] believe that the economy is in “good or excellent” shape: http://www.rasmussenreports.com/public_content/business/indexes/rasmussen_consumer_index2/two_economies_government_workers_optimistic_private_sector_not

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