The Wisconsin virus: Some facts to control the spread

MIT Sloan Prof. Thomas Kochan

MIT Sloan Prof. Thomas Kochan

As the battle over public service wages, benefits, and collective bargaining rights spreads like a virus across the nation, it’s time to consider whether public sector unionism is really the evil that is being portrayed in Wisconsin and elsewhere. Are public unions really the primary cause of the financial challenges facing cities and states? Or are they a convenient scapegoat being used by opportunistic politicians to further erode worker rights and incomes already under assault for decades?

To understand this issue requires something often lacking in this Twitter-driven environment: facts.

First, despite all the hysteria, public service employees are not overpaid relative to their private sector counterparts.  Rutgers University professor Jeffrey Keefe, who has done an analysis at a national level and within states such as Wisconsin and New Jersey, found that controlling for education and other standard human capital variables, nationally public sector workers earn 11.5 percent less than their private sector counterparts in wages and salaries; with fringe benefits, the difference is still 3.7 percent.  In short, public sector workers are not overpaid, compared to the private sector, though they have better fringe benefits, especially pensions and health care.  No easy scapegoat here.

Second, my own research has shown that collective bargaining protects wages of lower paid employees more than highly paid professionals.  In doing so, it helps reduce income inequality.  As for arbitration, a recent nationwide study I did found that arbitration settlements basically mirror outcomes negotiated in states without arbitration or those settled voluntarily in collective bargaining.

I am not holding collective bargaining and arbitration blameless in the fiscal plight facing the public sector. The bargaining process at the local level is too politically constrained, too incremental, and too slow to solve the costs of rising health care costs and pension liabilities facing local and state governments.  A shock is needed for the system to change.  But that does not mean stripping employees of their rights to collective bargaining, making it essentially impossible for any union to represent its members in a stable and responsible fashion.

Rather, we need to put to work the modern tools of negotiations, problem solving, and political leadership and take a state-wide approach to negotiating solutions to the rising costs of health care, pensions, and whatever else can be shown in fact to be a problem.  We’ve started this process in Massachusetts with what was called a “Grand Bargain” when we integrated multiple transportation agencies, workers, and unions into a single agency and better aligned worker and the public’s interests.  The same approach can work elsewhere.

But let’s be clear about the stakes: Wisconsin’s governor is attacking a fundamental human right, the freedom of association and the right to have an independent voice at work.  This is not only unacceptable; I hope we will have the courage to call it un-American.

This is a teachable moment, but only if we get the lesson right.  Otherwise, the virus spreading out of Wisconsin will reach everyone’s doorstep.

One Comment

  1. Will S.
    Posted March 6, 2011 at 10:20 pm | Permalink | Reply

    What kills me is that there is really no difference between the structure & purpose of a union & a corporation. If one should no longer be allowed to negotiate government contracts or lobby for friendlier politicians, neither should the other. Just my take.

    You can read the whole thing at

2 Trackbacks

  1. […] or 2. a scapegoat demonized by politicians who want to reduce workers’ wages and rights. “The Wisconsin virus: Some facts to control the spread” offers some […]

  2. […] argument explains the degree of protest activity we are seeing in Wisconsin, I came across this quote from the MIT Sloan experts blog: Wisconsin’s governor is attacking a fundamental human […]

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