There is another element to the growing income gap in Illinois: Public sector unions are twisting the facts to pressure their political allies to levy higher taxes on individuals and businesses for their benefit. own profit. In fact, collective bargaining in the public sector is part of the problem.
The absolute dominance of public sector unions over all facets of the Illinois government has led to a pension crisis that has cost the state hundreds of billions of dollars. This alliance drained the state government’s ability to provide basic services as state leaders appease powerful public sector union leaders who then fund the war treasures of many politicians.
While unions are correct that the bargaining power has shifted in favor of employers, they ignore the rest of the story. By increasing labor costs, stronger unions encourage companies to look for substitutes. Research shows that union density affects the location of businesses and the demand for labor.
When companies face higher costs, they employ fewer workers, especially workers at the lower end of the skill scale, while demanding that the workers they employ be more productive.
It is important to stress that private sector unions are not the problem. In 2020, only about 10% of workers in the private sector in Illinois were union members. In the private sector, the threat of unionization alone is enough to induce non-union companies to pay higher wages. Indeed, raising wages to avoid long and costly collective bargaining disputes tends to benefit everyone. Businesses could become more profitable because well-paid, happier workers are more productive while being less likely to feel the need to organize in the first place.
The same is not true of public sector unions.
Public sector unions represent virtually all public sector employees. And these unions have a mission to increase wages and benefits and protect job security, regardless of employee performance.
The average compensation of Illinois government employees exceeds that of private sector workers by 38.2%, according to data from the Bureau of Economic Analysis. This is even if the level of college education among workers in the private sector exceeds that of workers in the public sector in Illinois.
A closer look reveals that the gap is larger for similar workers in certain occupations. Public sector workers in service occupations such as health care, catering and maintenance with college degrees earned 60% more than their similar counterparts in the private sector. Those without a university degree earned 50% more than their peers.
When public sector unions increase their demands, governments face tighter budgets, forcing them to borrow more, raise taxes, or cut funding for other programs.
In Illinois, public service pension costs represent nearly 27% of the state’s general fund budget. In the last state budget, pension costs amounted to $ 10 billion. That’s more than the state spends on K-12 education or social services. In fact, spending on higher education, child and family services, social services and public health has fallen since 2010. Despite two record income tax hikes. during the same period.
While public sector unions benefit from unfair contracts, the Illinois economy grows less and most Illinois residents, especially the poorest, suffer.
It’s getting worse.
In the case of teacher unions, research shows that exposure to unionized teachers reduces future student earnings. The effect is greatest for black and Hispanic students. Collective bargaining for public school teachers directly exacerbates income inequalities and racial disparities.
Illinois residents who are concerned about inequality and want their home state to prosper must resist power games that give more authority to government unions, such as Joint Resolution Amendment 11 of the Senate. The future of our home state depends on the government’s commitment to stop bending to public sector unions.
Orphe Divounguy is chief economist at the Illinois Policy Institute.