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Morning Bell: How Radical Were Wisconsin's Reforms?

Posted By Mike Brownfield On May 31, 2012 @ 9:42 am In Economics | Comments Disabled

One year ago, the state of Wisconsin adopted sweeping reforms that curbed collective bargaining rights among government workers, brought the state’s pension system into line, and empowered those workers to choose whether or not to pay union dues. A firestorm of opposition erupted among public sector unions. But despite all the rhetoric, the reforms did not spell doomsday for government workers.

In a new paper [1], The Heritage Foundation’s Jason Richwine and the American Enterprise Institute’s Andrew Biggs analyzed Wisconsin’s reforms and their impacts on the state’s government workers. They found that even after requiring them to make larger contributions to their pensions and health benefits, Wisconsin government workers are still overpaid when compared to private-sector workers with similar levels of education and experience. Richwine explains [2]:

  • Before the reforms, Wisconsin state workers received health benefits about 2.3 times as valuable and pension benefits about 5.7 times as valuable as what workers in large private firms receive. After the reforms, Wisconsin state workers still receive health benefits nearly twice as valuable and pension benefits more than 4.5 times as valuable.
  • Before the reforms, Wisconsin state employees received total compensation (salary and benefits) about 29 percent higher than comparable private-sector workers. After the reforms, the compensation premium is about 22 percent.
  • In dollar terms, the average Wisconsin state worker after the reforms receives total compensation including benefits equal to $81,637, versus $67,068 for a similarly skilled private worker.

In short, even after being asked to contribute a modest 5.8 percent of their salaries to their pensions and at least 12.6 percent of their health-care premiums, things are still really good for government workers in Wisconsin.

Wisconsin faced serious problems before these reforms were enacted. The state was saddled with a $3 billion structural deficit, massive overspending, and the fourth highest tax burden [3] in the country. Like so many other states in the union, Wisconsin’s government workers were enjoying excellent pay and benefits, funded by taxpayers, and disconnected from the realities of the state’s economic woes.

Those workers paid only 6 percent of their health care premiums and next to nothing for generous pensions. Meanwhile, union-negotiated contracts require layoffs to occur on the basis of seniority, meaning that long-time government employees have iron-clad job  security.

None of those benefits are free, and they come at a high price to a state’s taxpayers. After modest reforms to help bring the state’s budget back into line were introduced, thousands of protesters stormed the capitol, state senators fled to Illinois in hopes of forcing a legislative stalemate, lawsuits were filed to block the reforms, and liberal organizations and unions from across the country descended on the state.

None of this opposition should be surprising given what’s at stake for public sector unions. They benefit from a veritable monopoly [4] on labor services provided to government, allowing them to secure unmatched benefits. But as Richwine and Biggs show, even with the reforms, those workers still enjoy excellent pay when compared to their private sector counterparts. But nevertheless, the debate will continue.

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Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2012/05/31/morning-bell-how-radical-were-wisconsins-reforms/

URLs in this post:

[1] In a new paper: http://www.aei.org/papers/economics/the-impact-of-act-10-on-public-sector-compensation-in-wisconsin/

[2] Richwine explains: http://blog.heritage.org/2012/05/30/even-after-walker-reforms-wisconsin-public-workers-still-overpaid/

[3] the fourth highest tax burden: http://www.taxfoundation.org/taxdata/show/488.html

[4] monopoly: http://blog.heritage.org/2011/06/16/2011/03/04/new-video-collective-bargaining-101/

[5] warning Congress about an effort led by China, Russia and some Arab states to give the United Nations more control of the Internet: http://www.washingtonpost.com/business/economy/tech-giants-warn-of-threats-to-free-and-profitable-internet/2012/05/30/gJQAkuxx2U_story.html?hpid=z2

[6] President Obama is threatening to veto an effort by House Republicans to increase defense spending: http://thehill.com/blogs/on-the-money/appropriations/230141-white-house-threats-to-veto-military-spending-bill

[7] 16-ounce limit on the size of sweetened drinks sold at restaurants, movie theaters, sports venues and street carts: http://www.usatoday.com/news/health/story/2012-05-31/soda-ban-new-york-city/55296248/1?loc=interstitialskip

[8] Syria’s government forces are continuing their assault on the region of Houla, Syria: http://www.google.com/hostednews/ap/article/ALeqM5iFpH4Nx-eMTCGPa6EeF2Jbom40Jw?docId=cf7758a80bdf4b31b456d2f386a797e8

[9] Read the story on The Foundry.: http://blog.heritage.org/2012/05/30/cuban-dictators-daughter-predictably-bashes-u-s-endorses-obama/

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