Budget / Labor

California’s Failure a Lesson for Other States

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In a previous blog post we noted that public-sector unions impose higher labor costs, increase public debt, and lower the state’s management quality. The end result of the growth of public sector unions can be seen in California.

A member of California’s Service Employees International Union (SEIU) was recorded saying “We helped to get you into office, and we got a good memory.” Too often, this is the attitude of public sector unions. The state of California is in critical financial condition. While the Great Recession has worsened the state’s situation, the power of these unions has done more long-term damage than this temporary economic downturn.

What has happened in California is the subject of an outstanding City Journal article by Steven Malanga. In California government workers enjoy better conditions than private sector workers. This privilege is not the result of free market interactions where above-average skills and productivity would be rewarded; contrarily, this benefit is due to unions pulling political strings:

“The state’s public school teachers are the highest-paid in the nation. Its prison guards can easily earn six-figure salaries. State workers routinely retire at 55 with pensions higher than their base pay for most of their working life. […] This toxic combination—high public-sector employee costs and sagging economic fortunes—has produced recurring budget crises in Sacramento and in virtually every municipality in the state.”

California is currently suffering from an unemployment rate well above the national average, and a 2008 survey by Development Counsellors International concluded that “business executives rated California the state where they were least likely to locate new operations.” More and more companies are expanding outside the state because of higher taxes and extensive regulations following union pressures on local governments.

City Journal reports the California Organization of Police and Sheriffs, using “controversial soliciting campaigns,” was able to achieve for California cops a retirement age of 50 and a pension equal to 90 percent of the working salary, while cops in the rest of the country retire at the same age but get only half of their original pay. COPS is only one of many large lobbying groups that successfully exert pressure on politicians.

The gains of modern unions are too often achieved at the expense of other workers. On a broader scale, the US witnessed unions’ political pressure in 2008 when the United Auto Workers exercised its pressure in order to have the federal government bail out the US auto industry.

The unions’ political pressure ultimately pushes unemployment rates upward, increases costs for taxpayers, and distorts market forces. Until states like California get serious about reform, the crisis will only get worse.

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