Kimberly Strassel at the Wall Street Journal considers the Democrat-led initiative to reduce collective bargaining powers in negotiating health care benefits. Massachusetts, Ms. Strassel, writes, "is being crushed by its rich public worker pay and benefits...Municipal health care costs have averaged near 11 percent annual growth over the last decade..." These costs are essentially consuming municipal budgets with 75 percent of spending going to personnel costs.
As I discuss in a forthcoming paper, economics views public and private unions differently. Private unions have the ability to increase their wages but not their employment. Driving up wages makes hiring more expensive and thus leads private employers who are constrained by the profitability of the company to purchase less labor.
As I discuss in a forthcoming paper, economics views public and private unions differently. Private unions have the ability to increase their wages but not their employment. Driving up wages makes hiring more expensive and thus leads private employers who are constrained by the profitability of the company to purchase less labor.
The abscence of profits in the public sector and existance of union political power means that public unions may increase both their wages and employment, growing the size of government.This can continue for awhile if the costs are not readily apparent to taxpayers.However, in many municipalities the costs are running up against a hard budget constraint, (which in addition to Tiebout competition), are the checks on excessive public sector spending.
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