Americans support public employee unions

It would not have occurred to me that Americans would actually want to pay higher taxes so that the Department of Motor Vehicles clerk could earn more than they do, or to work until age 75 to support a policeman who retired at 42 and moved to the Philippines, telling New York City to send his checks there (one of my helicopter students! He was up from NYC for a year or two while the taxpayers paid him to attend the Kennedy School of Government at Harvard). Yet this is the conclusion of a New York Times poll (story).

I wonder if the methodology of the poll had something to do with the outcome. About 25 percent of those surveyed said that the salaries and benefits of public employees were “too low.” As this is a practical impossibility without indentured servitude (a worker whose salaries and benefits were “too low” would quit and find a better job, something that public employees very seldom do), I think there are two explanations for this answer. One is that citizens are dissatisfied with the quality and energy of public employees and believe that, by raising salaries, better workers would be found and 20-30 years from now, after the current batch of mediocre workers has retired, public services would be improved. The second explanation is that 25 percent of the people surveyed either are public employees or are financially dependent upon public employees (the wife, children, and grandchildren of Robert W. Healy, Jr. probably would not say that his $5 million pension is excessive or that his $336,317 annual salary (84% of President Obama’s!) to manage a small town was excessive).

Now that over 40 percent of the U.S. economy is government spending (chart), I wonder what would happen if one were to conduct a poll of only those who work in private industry and don’t have a spouse, child, or parent who works for the government.

Finally there is the art of question wording (good video example). The New York Times told poll respondents “Collective bargaining refers to negotiations between an employer and a labor union’s members to determine the conditions of employment.” (all questions) The word “conditions” in my mind generates an image in my mind of working hours, task assignments, etc. The word “employer” makes me think of a private tax-paying company. What if the question had started out “Collective bargaining refers to the ability of a labor union to negotiate with politicians the delivery of pension and health care benefits to be paid for by future taxpayers”? I think the answer might have been very different.

Finally, we could apply Occam’s Razor to explain the poll result. We live in a democracy (“rule of the people”). The current system of government, including the fact that public employees are permitted to unionize and then bargain with the politicians whose election they financed and supported, is the result of citizens voting. So if the voting system works, we should expect our government to be exactly what most people want. It may seem alarming that people voted for a system in which the U.S. would owe 500 percent of GDP (see this nytimes article), but on the other hand the voters are also the same folks who refinanced their mortgages every two years and spent all of the (fake) equity in their homes.

What do readers think? Do Americans with private jobs really, as the NY Times poll seems to indicate, want to work until they are elderly and infirm so that public employees can spend their 50s on the golf course?

24 Comments

  1. Alex in Texas

    March 1, 2011 @ 12:06 pm

    1

    I saw the same headline on the stack of NYT papers in Starbucks this morning and had similar thoughts. I think what it boils down to is that a majority of people do not have an economic or market view of wage expectations, but rather just have a gut feeling that certain jobs are more deserving of high wages than others. I hear people all the time saying “teachers are so underpaid” and everybody around them nodding in agreement. If teachers are underpaid, why do they need to be unionized? Why can’t we let the market decide what teachers should be paid? Very few people seem to be comfortable with that idea. Many people seem to be more or less okay with doctors being well-compensated (although I know a guy married to a PCP who works for a clinic who would argue they are anything but), but they feel that way because “being a doctor is hard” and “it’s important” and “doctors are nice smart people and they deserve it”, not because they are okay with the AMA’s licensing system very controlling the supply of people who are allowed to practice medicine in this country.

    I recently had a conversation with a friend who I went to college with who is now a teacher in the NYC public school system (at a magnet high school for science). He started out by saying that he thought that everybody needed to be in a union. I did my best to convince him that he would be better off in a non-union teaching system, since he is well-educated and teaches an in-demand subject (biology), and should be free to choose which school to work for and at what salary, just as parents should be free to choose which school to pay to send their children to. He said it was the first time anybody had been able to explain that the benefit of a voucher system to him in a way that made sense.

  2. Fazal Majid

    March 1, 2011 @ 1:15 pm

    2

    In other news, a (slim) majority of Brits approves of their even more parasitical royal family. Never underestimate the power of propaganda and conditioning.

  3. John

    March 1, 2011 @ 1:23 pm

    3

    Phil,

    If public sectors employees have such better compensation than their private sector counterparts why doesn’t market forces dictate that these jobs are filled whenever they become available (especially when we are in an economic slump like we are now)? The Massachusetts website https://jobs.hrd.state.ma.us/recruit/public/3111/index.do lists over 220 jobs that are vacant. If being a NYC police officer is as great of a gig as you claim, why do they need to advertise (when I lived in NYC, I saw adds for NYC police department jobs in the subway frequently). If being a teacher is such a great gig, why aren’t our classrooms filled with our best and brightest? Why are US test scores so abysmal? None of my young, bright ivy league classmates, most of whom are whizzes at arbitraging inefficiencies, went to the public sector. For that matter have you ever taken advantage of these great opportunities and worked for the public sector?

    You can’t argue both that markets are efficient and that state/federal jobs are filled with unqualified employees, who are paid more than the market demands of their job.

  4. philg

    March 1, 2011 @ 1:51 pm

    4

    John: That’s a great question. http://www.jsonline.com/blogs/news/98425449.html says that only 18 percent of Harvard graduates in 2010 applied to Teach for America. Until teacher salaries are high enough that 100 percent of college graduates from all schools apply for the job, we cannot be sure we are getting the best and brightest.

    http://www.voicenews.com/articles/2010/07/26/news/doc4c4757a70248f049157344.txt says that the folks in Chippewa Valley School District had only 18,771 applicants for 71 open teaching positions. Perhaps they should raise the salary and pension offered until all 15 million unemployed Americans apply.

    For Massachusetts in particular, one of the healthier states economically, does it make sense to have 220 open government jobs? The government says that there were 2.757 million private workers in Massachusetts in December 2010 supporting 448.6 thousand government workers (383.6 thousand state and local).

    Is it surprising that there are 220 jobs open and 383,600 filled? The fact that not every job is filled within a few minutes could be evidence that the government isn’t paying enough. But on the other hand, it could simply be that government workers are too lazy to review the applications and delete the listings within minutes of posting. Remember that when workers can retire after 20-25 years with a full inflation-indexed pension there are vacancies being created constantly.

    [For comparison, I checked IBM. They have 3578 job openings yet to be filled in the Americas. Their total headcount (426,000) is comparable to the state/local government payroll in Massachusetts, but the company employs only about 120,000 people in the U.S. (source).]

  5. Dan Weber

    March 1, 2011 @ 1:54 pm

    5

    Having a job opening doesn’t mean you want it filled. Remember back a decade ago when Oracle (was it them?) who said they had open positions for 10,000 engineers they couldn’t fill?

    More likely, though, I expect some public sector jobs are underpaid, and some are overpaid.

  6. John Rothlisberger

    March 1, 2011 @ 1:55 pm

    6

    We accept a series of behaviours or circumstances as normal simply because (many/most) others in our society or regional or local group also accept them as normal. For example, spitting in public is deemed offensive in Western culture, but in other cultures there’s a lot of spitting involved — and then in Singapore you can get caned for doing it! Another example would be Sarah Palin: her popularity defies belief, and yet…

    So, if you’re inside a system that provides these perks (i.e. you are one of the public employees getting the great retirement and health benefits), then not only do you think it’s normal (see point above), but you come to believe you are entitled to it. You can’t really blame someone who isn’t actively involved with the union –much less the negotiation itself– from enjoying a series of perks.

    How to change this collective behaviour? As soon as you start messing with people’s livelihood you run into deep trouble. It seems unfixable.

  7. Fazal Majid

    March 1, 2011 @ 2:38 pm

    7

    I would expect most of those jobs would be filled on the basis of patronage, and the ads a mere sham for compliance purposes. Perhaps no sufficiently connected candidates presented themselves (yet).

  8. philg

    March 1, 2011 @ 2:48 pm

    8

    Fazal: I was kidding with the idea that the state is underpaying if it can’t fill all open jobs within minutes or that we should seriously consider the state to be desperate for employees if they have a few hundred openings out of nearly 400,000 jobs. I did a quick scan of some of the jobs and they seem legit. Yesterday the state posted a few ads for registered nurses, for example. Surely it will take them a while to collect applications, select folks to interview, and finally hire someone? This morning a couple of agencies posted ads for summer interns (one of them an unpaid legal internship; one a $13-16/hour job walking around state parks). The posting would have to remain open for a few weeks at least, simply in order to give students a chance to find out about the internship, no?

    Anyway, this debate is off-topic! With the low quit rates of public employees and the undeniable fact that they earn more than private workers (some clever folks have tried to paper this over by adjusting for education level, but they failed simultaneously to adjust for working hours, job security, pressure to produce, and the fact that a bachelor’s degree in education or criminology is not as valuable in private industry as a bachelor’s in engineering), there is no question that the DMV clerk is earning more than the private industry clerk who comes in for a license. Nor is there any question that state employees can retire much younger and with a much more secure pension. So let’s get back to the original question of whether the NY Times poll is accurate in gauging voter sentiment. Can it really be the case that Americans want to work this much harder in order to benefit DMV clerks, MBTA bus drivers, and LIRR train conductors? If not, how come the poll numbers say that they do?

    [I do think that it is possible that the poll is correct. After all, we saw young Greeks rioting in the streets to demand their rights to work until age 85 to pay for the pensions of current civil servants retiring at 50.]

  9. Jesse

    March 1, 2011 @ 5:01 pm

    9

    Phil,

    I will throw a theory out there that basically parallel’s your re-wording of the question. People support these positions because they (and ultimately everyone) has no fathomable clue on what it actually means. They seem to accept the propaganda and hype of the unions and socialists.

    Let’s figure your intelligent private sector employee that has the time, knowledge and capacity to not only do the research but crunch the numbers on what public sector people are getting paid. I imagine this person is likely in a position where he is in high demand and therefore getting paid well at his job. So when they looks at the numbers, they seem low or fair to him/her.

    Now consider your more average person who is making 30-60k/yr. They don’t care one lick about any of this. If you can drag him away from his football or her away from her episodes of “Sex and the City” long enough to have the conversation with them they won’t seem to mind. Obviously they have no problem donating large percentages of their disposable income to enrich others who work few hours and few years (see football salaries) and the left does quite an excellent job of headlining articles decrying how low public workers are paid. So to them it simply looks like the evil, corporate masters are trying to claw back money from the poor.

    In addition, it is arguably logical for them. Since the $8-$10/hr Walmart cashier is inevitably a net benefitter from government programs in one form or another, and the people who create, vote for and put those programs in place are public employees and their family members. Why wouldn’t they support them in turn, they get programs and pay little to no taxes.

    I am actually surprised it was only 25%. Given your numbers for Mass above, approximately 14% of the working population is publicly employed, add in their spouses and family members who hold them in high esteem, I would figure it would be closer to 30%.

    Also, in regards to that 14%. I assume that those are directly employed by the government? I have wondered a few times what the actual government dependancy is. You have Public employees, welfare and disability, employment insurance, old age, retired former public employees and finally (and I suspect largest) private companies providing goods and services for public employees and/or government(roads, bridges,consultants, scientists, designers, ect).

  10. Richard Gibbs

    March 1, 2011 @ 9:11 pm

    10

    In “The Sovereign Individual”, Davidson/Rees-Mogg summary of the megapolitical change that is befalling the world, they classify Government employees as those people who receive more income from the Government than they pay in taxes, whether it be working for the DMV or from welfare payments. These employees all justify excessive taxation on those taxpayers who are actually carrying the freight by demonizing them, insisting that they are not paying their share of taxes, even when the statistics show that, in the US, the top 1% pay well over 27% of the total tax bill.

    The future is pretty predictable for the US, in the Davidson/Rees-Mogg universe. In the 20th century, US unskilled labor was paid far more than it was actually worth, simply to keep the violence and sabotage within acceptable limits. Those days are gone, and with them, the taxes that those workers paid on their inflated salaries. Under President Clinton, new wealth taxes were levied to prevent the wealthy from leaving the US and taking their money with them, which trigger as a result of a wealthy American choosing a foreign domicile. But this won’t stop the exodus of business, or wealthy tax-payers, in a globalizing world.

    Add to this mix the fact that most Americans are abysmally out of touch with reality, having substituted it with Belief. (This is well illustrated by the overwhelming numbers of Americans who believe in the Garden of Eden myth.)

    Now add in the lack of education, and Confirmation Bias, and lack of awareness in their own incompetence, and the picture is complete.

    You can always tell an American, but you can’t tell them much. They want to learn the hard way.

    (Oh, and the hard way is by crashing the economy of Government at Federal, State, County, and City level.)

  11. philg

    March 1, 2011 @ 9:35 pm

    11

    Richard: I would love to disagree with you, but I was listening to the radio this evening and I heard the results of a public opinion poll. Most Americans agreed that the government was too big and expensive for the economy to support. But when asked if they would support cutting any particular program, e.g., federal government subsidies for college education, support was at most 12 percent (i.e., there is roughly 90 percent support for nearly every kind of government spending at current levels, but less than 50 percent support for overall government spending remaining this high).

  12. Murali

    March 1, 2011 @ 11:34 pm

  13. philg

    March 2, 2011 @ 12:07 am

    13

    Thanks, Murali. I looked briefly at the paper Krugman references. On the top of Page 5 the author says “This implies a dividend yield of 4.0 percent” (for 2010 and on stocks that the pension funds would be investing in). http://www.multpl.com/s-p-500-dividend-yield/ shows that, contrary to the author’s assertion, the dividend yield on the S&P 500 is 1.74 percent right now and has not been above 4 percent at any time in the last 25 years.

    The rest of the paper says, basically, “given a few trillion dollars injected into the funds, we won’t have a problem paying promised pensions if the stock market in the next 100 years does what it did during the preceding 100 years.” I don’t think that this is news.

    In fact, I could solve all of America’s pension issues, without having to make up the multi-trillion-dollar shortfall, by asserting that stocks in the future will return 12%/year while inflation falls to 1%/year. For most of the 20th Century, the U.S. did not have widespread Internet, a Nobel Peace laureate as president, or the wide dissemination of the wisdom of Paul Krugman. In the 21st Century, we have all of those things. Plus all of the Arab and North African countries will become parliamentary democracies with great education systems and, once their citizens learn a bunch of new stuff, will decide not to wage Jihad against the West anymore. Therefore GDP growth and U.S. stock market performance will be much better in the 21st Century than in the 20th Century and 15% (real) is probably a more realistic estimate of stock market returns.

    Happy now?

  14. DeAngelo Lampkin

    March 2, 2011 @ 12:09 am

    14

    “Do Americans with private jobs really, as the NY Times poll seems to indicate, want to work until they are elderly and infirm so that public employees can spend their 50s on the golf course?”

    Yes. Of course the real answer is why do they believe this? And the answer to THAT is because they believe that without proper education funding our kids will grow up to be ignoramus living in burlap sacks and flip flops. Without proper police funding, we’ll be unable to go to our mailboxes without being mugged by crack heads.

    Of course the problem with all this is that sometimes the government runs out of money (as is the case in many states these days). The answer to this is to present *viable alternatives* rather than just complain about the current system. (I know you’ve attempted this on some level in the past).

  15. Jesse

    March 2, 2011 @ 9:33 am

    15

    I thought about this more and I am actually really amazed it was only 25%. The general lack of knowledge of basical financial and economic information in our societies is astound. I live in Canada and work as a project manager, my educational background is engineering. So arguably, my colleague should be the best and brightest our country has to offer. Basically, only the top 10% of people from our high schools are allowed admittance to the engineering programs and from there only approximately 30-40% graduate. So arguably, these people are the top 3% of intelligence in our society.

    I have often tried to have political or economic conversations with them. Most of the time their eyes just glaze over with disinterest and sometimes they will say “What do you care?” or “What does it matter?”. I actually distinctly remember a conversation with about 6 of them where all of them basically declared me a nutty conspiracy theorist when I informed them that their taxes were higher because the government was offering tax rebates to people who invested in certain funds that supported the province. For some reason they couldn’t quite understand that it was a zero sum game(provinces cannot print money only issue debt) and that even if they contributed maximum to the program and got the full amount back that they could not benefit because their relative tax contribution to the program was higher than the max rebate. I showed them the math with actual numbers and they still couldn’t understand

    In brief, if program A costs $1 million dollars in a 1000 person society and the total tax revenue is $10 million ($10,000 average per person), then if you pay $30,000 in taxes, your net contribution to program A is $3,000 and therefore even if you get $1,000 back you are still net losing on the exchange.

    I even took it to the extreme and tried to explain to them if 999 people made $1per year and 1 person made $9,999,001 of the whole economy. How can the person making the $9,999,001 net benefit from the program. Then they just thought I must be crazy.

    So, in summary. There is no hope for the average person to be able to even grasp what is truly going on around them if the best and brightest can’t even understand it on a mathematical level.

  16. philg

    March 2, 2011 @ 10:49 am

    16

    I thought of one more possible explanation for why a guy earning the median wage of $16/hour might rationally support a group of unionized public workers earning $50-100/hour (including pension and retiree health care obligations). He could believe that most or all of the $50-100/hour paid to the public workers was coming from taxing the wealthy rather than from his hide. He could simultaneously believe that the high wages paid by the government for low-skill labor would generate wage inflation for all workers in his region and therefore yield a pay raise for himself.

    Thus the more that the average person polled or voting believes taxes will fall disproportionately on the wealthy, the more likely he or she would be to support above market-clearing wages for public employees.

  17. Burton Hanson

    March 2, 2011 @ 10:50 am

    17

    When one makes such wild generalizations about “public employees,” using extreme examples of some employees in some of the fifty states to “prove” the wild overly-broad generalizations, one loses me. In any state there may be hundreds of categories of employees, some overpaid, some underpaid, when compared with the “private [errr, not-so-private-but-heavily-subsidized] sector.” The workers in some categories (e.g., judicial secretaries), may or may not be making more than they’d make in various-sized law firms. Judges, on the other hand, may or may not be making less. With respect to judges, see, e.g., my analyses at, inter alia, a) “Are judges paid too much?”
    http://www.thedailyjudge.com/id246.htm#are_judges_paid_too_much__federal
    and b) “‘I could be making lots more if I were Michael Jordan….’”
    http://www.lawandeverythingelse.com/id34.htm#commenting_on_the_fact_that_michael

  18. philg

    March 2, 2011 @ 11:14 am

    18

    Thanks, Burton. I’m not sure your analysis needs to be as complex as it is. If an employee is “underpaid”, considering all factors including working hours, benefits, interest level of the job, he or she will quit. As you note the judges who say that they are underpaid aren’t quitting and there are plenty of qualified candidates ready to take their place.

    I think some of the best data comes from John’s comment above. He found that there were only 220 vacancies for Massachusetts government jobs. Out of hundreds of thousands of positions, all but 220 were filled (and some of those 220 openings had only opened up earlier in the day). This is in a state with one of the stronger economies in the nation (unemployment rate 8.3%, compared to the national average of 9.2%, so that makes us a dwarf among midgets when it comes to economic vibrancy).

    So it really doesn’t make sense for the Wisconsin union workers to riot. If their total compensation (monetary and non-monetary) right now is about the same as in the private sector, in the event that working for the state becomes less lucrative, they can simply quit and get a better job.

    [Separately, http://www.nytimes.com/2011/03/02/us/02volunteers.html shows that for some of the stuff police departments were paying people $100-200k/year, the market-clearing wage was actually $0.]

  19. Jesse

    March 2, 2011 @ 11:50 am

    19

    Hey Phil,

    I am not as familiar with the benefit programs and values of them offered in the US. But as you stated above, the $16/hr person doesn’t think he is paying for it? Is he not right? What does your old age pay? What about EI, ect? They all have a monetary value. The cumulative value of all those programs in Canada is surely higher than the paltry amount of taxes a person making $16/hr is paying and therefore any wages paid to government employees to implement these programs arguably doesn’t matter to the worker.

  20. Alex in Texas

    March 2, 2011 @ 12:30 pm

    20

    “He could believe that most or all of the $50-100/hour paid to the public workers was coming from taxing the wealthy rather than from his hide. He could simultaneously believe that the high wages paid by the government for low-skill labor would generate wage inflation for all workers in his region and therefore yield a pay raise for himself.”

    If you change that to “he could believe that most or all of the $50-100/hour paid to the public workers SHOULD come from taxing the wealthy”, I think you’ve hit the nail right on the head, particularly for well-educated private sector workers who should be upset that people with less valuable job skills are being more highly compensated than they are, but nevertheless support public employee unions. I believe they also buy into the idea that private sector workers have a 40-hour workweek, paid vacation and health benefits, even if they are not unionized, because unions forced these working conditions to become the de facto standard.

    I had this conversation with somebody on Facebook and his main argument was that “we can’t allow the market to set wages for these jobs because there is always somebody out there who is starving who will be willing to do the job, badly, for almost nothing”. The only legitimate part of that argument, I guess, is that as opposed in the private sector where you can’t hire somebody who is too terrible at the job you want them to do without risking losing customers, there really is no alternative to the government for government services (barring moving out of a particular jurisdiction) under our current arrangement.

  21. philg

    March 2, 2011 @ 12:59 pm

    21

    Jesse: Does the $16/hour median-wage worker pay taxes that vary with public worker salaries? Depends on your perspective. A small percentage of high-income Americans pay the majority of income taxes. But if you broaden your perspective to payroll, sales, property, excise, and other taxes, the total percentage of income collected is about the same at most income levels. If that were to continue, higher government spending will result in higher taxes on the $16/hour worker.

    [There is a lot of confusion created by the American political process. Politicians will noisily create "soak the rich" high tax rates. Then they will quietly create special deductions and exceptions to benefit primarily the wealthy (actually the biggest beneficiaries are accountants and lawyers!). So you end up needing to wait a few years to see what people are actually paying in tax.]

  22. Jesse

    March 2, 2011 @ 1:30 pm

    22

    Phil,

    Maybe I am not articulating my point well enough. The percentage of income paid is completely irrelevant. For an extreme example, if the government initiates a program to give everyone in the country $10,000 cash, this money is pulled from tax revenue and debt. If you are working at $16 an hour and only paying a total income tax of lets say $6,500. There is no way that this can actually be a bad program for you as long as your taxes don’t go up. Since people seem to accept that government debt is basically completely acceptable, then they should have no problem with this program.

    So my question to you is. Have you seen any studies that provide an annual Net Present Value calculation for all services provided within your state. Then, any citizen could easily figure out which services they support and tally up the actual annual value of services provided them. If this is less than their tax burden then they should support the actions of the government.

    Property tax, excise tax and others don’t factor in to this particular calculation because wealthy people also pay those taxes (and on total higher) than low income people. To properly study this phenomenom a person would have to identify and isolate the government revenue and expenditures and also quantify current value of future promises. I suppose it would be extremely complicated now that I think about the logistics of doing it.

  23. David

    March 2, 2011 @ 5:12 pm

    23

    But in 1981-1982, workers in the private sector, roughly 25 percent of whom belonged to unions compared to just 7 percent today, had more power to defend their pay levels than they do now. The same goes for health-care costs.

    http://www.prospect.org/cs/articles?article=business_is_booming

  24. philg

    March 2, 2011 @ 5:23 pm

    24

    Jesse: My point was that a person making $16/hour can tell the difference between paying 20 percent total tax and 25 percent total tax. Your example of the government handing out $10,000 to all citizens doesn’t look like any significant part of the U.S. government. Mostly money is handed out to powerful voting blocs or cronies. So the $16/hour private sector worker (actually the median wage includes public employees, so really the median private sector worker is probably closer to $14/hour) knows that a larger government is unlikely to give him or her anything extra.

    David: Thanks for the link. I’m not sure what the point of the article is, other than “if we got rid of container ships, Internet, and China, American workers would have more leverage”. That’s like me saying that if I were the only computer programmer on Earth I could charge higher prices and insist on using Common Lisp for every project. The author doesn’t get around to any suggested changes until the last two full paragraphs. One of his ideas is to invest in infrastructure. The U.S. already has more infrastructure than any other country. We aren’t using it very effectively in some cases (e.g., in Los Angeles where it is hard to do business because you don’t know if it will take 20 minutes or 3 hours to get somewhere), but we have a lot more than the countries where multinationals are hiring. His second idea is yet another tweak to our already Byzantine tax code. Does he really think that multinational companies are so dumb that they can’t work around the government’s latest tax? Especially when nearly all of their growth is coming from overseas.

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