Public Sector Union

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Richard B. Freenan


Paper No. 1452

NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA 02138 September 1984

The research reported here is part of the NBER's research program in Labor Studies and project in Government Budget. Any opinions expressed are those of the author and not those of the National Bureau of Economic Research.

NBER Working Paper #1452 September 1984

Unionism Comes to the Public Sector
This paper argues that public sector labor relations is best understood in a framework that focuses on unions' ability to shift demand curves rather than

to raise wages, as is the case in the private sector. It reviews the public sector labor relations literature and finds that: (i) public sector unionism has flourished as a result of changes in laws; (2) the effects of public sector unions on wages are likely to have been underestimated; (3) public sector unions have a somewhat different effect on wage structures than do private sector

unions; () compulsory arbitration reduces strikes with no clearcut impact on the level of wage settlements; (5) public sector unions have diverse effects on non—wage outcomes as do private sector unions.

In terms of evaluating public sector unionism, the paper argues that by raising both the cost of'


services (taxes) and the amount of services


sector unionism involves a different welfare calculus than private sector


Richard B. Freeman National Bureau of Economic Research 1050 Massachusetts Avenue Cambridge, MA 02138



the 1950s only a small minority of public sector workers were

organized and even AFL—CIO President George Meany believed "It is impossible to

bargain collectively with the government."1vjrtually no states had laws permitting collective bargaining for public employees. Strikes were prohibited. Analysts of unionism regarded most public sector employees as unorganizable. In 1980 about 13 per cent of government employees were represented by labor organizations and 32 per cent were covered by contractual agreements.'

Over three—quarters of the states had legislation authorizing collective

bargaining by public employees. Eight states permitted strikes by some public

workers. According to the Current Population Survey (oPs) 3% of government employees compared to 22 %


private sector employees were "represented by

labor organizations" in May 198O.
What caused the sudden surge in public sector unionism in the United

States? What are its economic consequences? How have various states and localities dealt with the organization of their employees? Which laws and procedures have proven more/less successful in coping with the unionism of public

employees? In what ways does labor relations in the public sector parallel labor relations in the private sector? In what ways has the public sector been unique? To answer these questions, I review the results of the past two or so

decades of research on public sector labor relations. The research represents a significant and expanding effort by labor specialists. In 1960 relatively few labor relations articles in the leading journals dealt with the public sector; in 1983 not only were there numerous public sector articles in the labor jour—


nals but the field had grown sufficiently to produce two specialized journals,

as well as numerous books and research treatises.5
The review shows that while we have amassed considerable knowledge about the nature of public sector labor relations, there are noticeable gaps in our

understanding of what public sector unions actually do. The following seven propositions provide a general overview of the major findings and issues in public sector labor relations:

1. A fundamental difference between public sector and private sector collective...
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