Public Sector Unions and the Rising Costs of Employee Compensation

Abstract

Public sector compensation is becoming a high-profile policy issue. While private sector wages and benefits have stagnated during the recession, many governments continue to increase compensation for public sector workers. At the same time, there are growing concerns about huge underfunding in public sector retirement plans across the nation. This article examines the compensation of state and local workers, who account for 20 million of the 23 million civilian government workers in the United States. 1 State and local workers include teachers, college instructors, police officers, health care administrators, and many other occupational groups. Examining state and local compensation is important because it represents a major portion of the overall U.S. economy. In 2008, the total cost of wages and benefits for state and local workers was $1.1 trillion, which was half of the $2.2 trillion in total spending by state and local governments. 2 Compensation costs are expected to rise rapidly in coming years due to growing pension and health care costs. This study begins with a look at trends in state and local government compensation since 1950. Then it compares compensation lev-

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