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SQUEEZING THE PUBLIC SECTOR-LABOR NOTES MAGAZINE, JANUARY, 2008

Posted: Thursday January 3, 2008

Squeezing the Public Sector

Public sector unions, while escaping the steady erosion of density seen in the private sector, have not been immune to the squeeze at the bargaining table.

After accepting $63 million in concessions two years ago, Detroit teachers struck for more than two weeks last year rather than swallow another $88 million in givebacks. But 16 days on the picket lines wasn’t enough to fend off the tide, as their eventual settlement contained concessions on bonuses and sick time, and required veteran teachers to pay more than 10 percent of their health costs.

The 2006 showdown in Detroit’s public schools was a product of the city’s ongoing budget crisis. Since the beginning of the decade, state and local governments across the country have weathered their worst financial crisis since the Great Depression, in no small part due to the string of tax cuts implemented in the windfall years of the 1990s.

Public sector workers everywhere have faced layoffs and increased workloads. Retiree health care has come under pressure as state and local governments have been forced to change how they account for these benefits.

Public sector workers from more than a dozen states have also witnessed proposals to shift their retirement systems from defined benefit pensions—which cover approximately 90 percent of federal, state, and local government employees—to 401(k)-style plans. Such efforts have typically been met with stiff resistance. More than 20,000 public employees filled the streets of Trenton, New Jersey after lawmakers proposed changes to the state’s pension system. Legislators were forced to back away from sharp changes.

But with dwindling numbers of private sector firms still providing defined benefit pensions—only about 10 percent still do—pressure mounts on public sector workers to accept more meager wages and benefits. The challenge remains for this island of unionization in a sea of non-union private sector competitors.