Data says: Don't ignore how public unions slyly boost benefits
In a 2015 Journal of Politics article, UC Berkeley's Sarah Anzia and Stanford's Terry Moe find that increasing gov't workers' wages snags public attention (case in point: SJ's still-ongoing kerfuffle), as many residents are unwilling to shell out more taxes or see services cut. But an overlooked target of public unions is “fringe benefits.” They appease Labor while quietly ruining City budgets for future pols.
First, there is a political asymmetry between wages and benefits. Wages come out of current operating budgets that are often highly constrained at the state and local levels, and citizens are averse to raising taxes—making it difficult for unions to win large wage increases. Also, wage settlements are very visible, easily understood by the public, attract media scrutiny—and threaten to be intensely controversial, setting off political shock waves that even friendly politicians may be eager to avoid.
Fringe benefits are much more attractive politically. In past decades, they were relatively inexpensive and thus easier for politicians to afford and unions to win. This advantage has faded as health insurance costs have soared, but another advantage remains. Health and pension benefits are extremely complicated, difficult for the public to understand, difficult for the media to convey—and thus nearly invisible politically. Politicians can boost health and pension benefits without citizens or journalists having any sense of the true costs, all the more so because many of these costs involve legally binding promises that will be paid in the future by other politicians and taxpayers, with little impact on current budgets. This is precisely the kind of policy, then, that falls into what Bawn et al. (2012) refer to as the “electoral blind spot” of ordinary voters—allowing politicians and parties to respond to interest groups without voters understanding what is going on. Voters understand wages, they have trouble understanding benefits, and this stacks the political deck in favor of benefits....
We start with an analysis of city fire departments, with results set out in Table 2. In column 1, we estimate the effect of collective bargaining on salary spending per employee, and the effect proves to be larger here than the union effect (due to the simple presence of a union) we estimated for the 1970s and 1980s: on average, fire departments with collective bargaining spend about 9% more per employee on salaries and wages. Notably, however, the impact is far greater on per-employee benefit spending on health, dental, disability, and life insurance. As we show in column 2, fire departments with collective bargaining spend an average of 25% more on those benefits for the typical employee.... These results clearly indicate that collective bargaining has a sizeable effect on the amount municipal fire departments spend on employee compensation. Moreover, they show that it is imperative to take fringe benefits into account when estimating the effect of collective bargaining on public employee compensation, for this is where unions have secured the greatest gains....
The typical city police department with collective bargaining spends about 21% more on health benefits per employee than the typical city without collective bargaining....
Finally, we want to emphasize the broader importance of one of our basic findings: that public sector unions have much greater influence over benefits than they do over wages. This finding provides empirical support for the theoretical argument that, because benefits are far more complex, technical, and difficult to understand than wages, they fall into an “electoral blind spot” (Bawn et al. 2012) that makes these policies especially attractive to politicians and parties as a means of satisfying interest group demands— while ordinary voters are kept in the dark.
This article originally appeared in the Journal of Politics. Read the whole thing here (subscriber paywall).
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