The great collusion
Among the most frequent questions we receive at NPRI are those coming from individuals who have reviewed the organization’s public compensation database available at Transparent Nevada. They wonder how government workers in Nevada are able to receive compensation packages that — compared to private-sector earnings — are often extravagant.
The answer is invariably the same: Union contracts allow for workers to receive compensation through a wide variety of pay categories, many of which are foreign to the private sector. When all of these various forms of compensation are summed — including base pay along with dozens of premium pays, certification pays, allowances and deferred compensation benefits — the total compensation package frequently well exceeds not only private-sector earnings for comparable jobs but also the compensation level of government workers in other states.
It’s easy to blame local politicians for the growing earning disparity between private and government workers. After all, the politicians signed off on the contracts that are now placing severe financial strain on cities like North Las Vegas. Unfortunately, the problem isn’t quite that simple.
The institution of public-sector unionism itself drastically alters the incentives facing state and local politicians. Although they are elected to act as stewards of public resources and manage money responsibly, unionization often motivates politicians to spend profligately on union contracts. That’s because of the outsized influence that unions exert on state- and local-level elections — through campaign contributions, volunteer hours and other in-kind contributions. Government workers are also two to seven times more likely to vote than other citizens — maximizing their importance as a voting bloc.
For all these reasons, notes Stanford labor economist Terry Moe, union endorsement can be the single most important factor in influencing the outcome of local elections. Moe looked at the impact of a teacher-union endorsement on local school board elections in California and found that union endorsement had a stronger impact on outcomes than even incumbency.
Politicians have long recognized the ways in which government unions are able to influence or control electoral outcomes, leading many to embrace overly generous union contracts even when they know the public’s obligations under those contracts will be unsustainable. Labor economists Joseph Reid and Michael Kurth have concluded that public-sector unionism corrupts the political process and that “politician-directors” are the biggest winners because union support allows them to remain in power indefinitely, so long as they continue to give unions what they want.
Politicians’ motives then change to doing the unions’ bidding regardless of the future strain that might be placed on public finances. To avoid provoking widespread public ire, however, politicians and union leaders work to hide the commitments they’ve made from the public’s understanding, They do this by breaking those pay packages up into dozens of different pay categories and —because it’s easy to paper over these liabilities in the short term — beefing up deferred compensation.
As former Clark County manager Thom Reilly says in Rethinking Public Sector Compensation, “…politicians, union officials, and public managers have chosen to provide compensation via deferred benefits because it is less transparent and because the cost can be spread out over time.”
Thus, where government unions are most powerful, they are more able to control electoral outcomes and, thereby, collude with politicians to create generous compensation packages. Princeton economist Henry Farber has ranked the legal environment for public-sector unionism in all 50 states and found that Nevada’s public-sector bargaining laws are among the strongest nationwide — earning the top score on Farber’s scale because of the state’s compulsory-bargaining and binding-arbitration provisions.
Thus, it’s not surprising to find that, when it comes to compensation, government workers in Nevada top their peers in other states and the private sector. Accordingly, yet another analysis — a new one from labor economists William Even and David Macpherson — finds that the compensation premiums collected by unionized government workers in Nevada are higher than the national average. Public safety workers have the largest premium, followed by management professionals and education workers. In each case, the premium is substantially higher in Nevada than nationwide — and that’s after accounting for differences in education levels and other demographic factors.
If more accountable and fiscally sustainable government is ever to be achieved in Nevada, it will require drastic changes to the aggressive powers awarded by the state’s collective-bargaining law to government unions.
That change will not come easily, however. Union leaders and the politicians they control will use their outsized influence to keep themselves on top.
Without major changes, taxpayers face a future of hefty tax hikes, or a hollowing-out of vital services, or both — just to pay for the accruing obligations to government unions.
Geoffrey Lawrence is deputy policy director at the Nevada Policy Research Institute.