Wages and Unionism in the Public Sector: The Case of Police

Abstract

ONE of the most important developments in government during the last two decades has been the growth of public employee unions. Because personnel expenditures comprise a substantial portion of the cost of providing public services, there has been considerable concern that unionization has severely exacerbated budgetary problems of governments, especially local governments. Consequently, a large literature on the wage effects of public employee unionism has developed in recent years. 1 In general, these studies have found rather modest union wage impacts in the public sector, with unions raising the wages of municipal employees by about 5%, on average. There are several reasons, however, why these estimates may be misleading. First, much public sector union wage impact research has focused on teachers and the demand for teacher services is considerably more elastic than the demand for other public services such as police protection, fire protection and medical care. Second, previous studies have treated public employee unionism as an exogenous variable, and studies of private sector unionization have shown that the estimated wage impacts of unions change substantially when unionism is treated as an endogenous variable.2 Finally, the earlier studies have not considered how public employee unionism has affected fringe benefits, which represent a substantial and growing component of governmental compensation. This paper attempts to deal with each of these problems. First, we focus on the effects of unionism on the wages of municipal police officers.3 Because police services are commonly thought to be among the most essential of all public services, organized police should be in an especially powerful position when bargaining with local governments. Second, we estimate a system of equations in which wages and unionism are simultaneously determined and compare these results to the estimated wage impacts from a single equation model. Finally, some estimates of the effects of unionism on police fringe benefits are presented.

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