March 3 2011

Whines from Wisconsin vs. Basic Economics

Hadley Heath

Who's paying you?  Why?  What valuable good or service are you providing by going to work every day?  These are easy questions for private sector workers.  Although our modern, complex economic system may make answers more complicated than "I sell widgets," there is still a voluntary exchange involved in the private sector.

At IWF, even though we are a nonprofit entity, we can still explain that our public policy analysis and commentary is valuable to our donors, and that is why they support us.

These questions - "Who is paying you" and "Why" - may be difficult for some public sector workers.  For some, the answers will be legitimate.  "Taxpayers are paying me to be a police officer to protect public safety."  For others, the truth is "Taxpayers are paying me to be a bureaucrat... because they have to."  Taxes are not a voluntary exchange.  See the contrast?

Now consider how the value of work is determined in dollars.  For salesmen who work on commission, this is an easy equation.  The more widgets one sells, the higher his pay.  Private businesses offer salaries based on how much they value the contributions of a worker, and what they need to pay in order to compete with other employers.

What about public sector workers?  Their salaries are not affected by the private sector market.  In fact, their salaries aren't even affected by how much tax revenues are available for their budget.  Their salaries are determined by other bureaucrats and politicians, many of whom are easily swayed by lobbying efforts.  This might explain why the salaries and benefits packages of public sector workers are better than in the private sector.  (Not to mention job security - Private sector workers are four times more likely to lose their jobs than public sector workers.)

The situation in Wisconsin paints a clear picture.  "Collective bargaining" in the private sector, as Charlotte has pointed out, is different from the "negotiating" that goes on between public sector workers and their employers.  Most Americans are sympathetic to the idea of "collective bargaining" and appreciate the role that unions have played in the history of the American labor market.  In fact, one of my favorite movies is Disney's "Newsies," about the newsboys' strike of 1899.

But the Wisconsin situation is not about collective bargaining.  It's not about unions.   It's about the price of overpaid government employees.  They are not "bargaining" with the state of Wisconsin or its taxpayers.  These protesters are out to keep what they have: money and power.  When they whine that Scott Walker's budget proposal isn't "fair," we should consider the real unfairness in the labor market today: public sector jobs that face no economic realities. 

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