How Do Unions Affect State Budgets?

Eileen Norcross:

Many questions have arisen from recent political events about the power of unions. In a new working paper published today, Mercatus scholar Eileen Norcross, compiled research on unions and clears up some misconceptions about the difference between private and public sector unions and how they work.

"The main differences between public and private sector come from economics," said Norcross. "Private sector unions can raise their wages, but not their employment. By contrast, public sector unions can increase both wage and employment outcomes."

The result, says Norcross, is that public sector unions can grow the size of budgets, while private sector unions are constrained by the profitability of the firm.

"Unlike private sector unions, public sector unions rely not only on collective bargaining, but also leverage their political influence to achieve these gains," said Norcross. "In fact, empirical studies indicate the political activity of unions may be more effective than collective bargaining at raising employment."

Posted by Jim Zellmer at May 22, 2011 2:09 AM
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