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03/27/2011

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ElGreco

Both the backer and Posner posts deal primarily with compensation whether direct or indirect. However compensation is only one part of the economic efficiency equation. The other part is productivity, or value added to the economy. Because government work is not a free market, it is very difficult to judge what the real productivity of government workers is and their overall value added to the economy compared to cost. However as anyone who has dealt with public workers can probably attest, overall productivity of typically complacent, job secure, public workers is fairly low. In some cases this productivity is even negative as the net effect of work performed by not few public employees is to essentially hamper business activity in the private sector. This is often the case when regulatory public sector positions are created by politicians to purposely increase the number of voters more directly dependent on their decisions. If you are a new employee at a regulatory agency that was just created by politician X, you will probably vote for X, or politicians with similar agendas.

But America may be reaching the tipping point. Once unionized public sector workers become a significant enough proportion of the population to able to form majorities, they become able to command the political system. Then, the attractiveness of becoming a public employee causes private sector workers to abandon the increasingly squeezed private sector, leading to an unstoppable vicious cycle. If you want some real life insight to the end stages of this cycle look at Greece where the public unions have become an impossible to unseat majority keeping the entire country trapped into low production – a vicious cycle that keeps deepening with every new election.

America already faces formidable international challenges, mainly from Asia, in its probably futile attempt to remain the most prosperous country in the world. Public sector unionization is not the only factor holding America back in its competition with the now many vibrant emerging world economies, but it is a significant one. Any concessions to sub-par productivity (i.e. unions) will only seal America’s fate of decline. Personally, I think, that America has gone past the tipping point. Having grown up in Europe, I have seen this movie many times before. The fact that Americans, in response to loss of competitiveness, swapped the mostly reversible mistakes of the Bush administration for the structural, permanent, and irreversible mistakes of the Obama administration is to me the greatest demonstration of the beginning of an ever deepening self-inflicted vicious cycle of decline.

I think, finally, Americans are going down. The current American drive to create a European-style more complacent welfare supported population, is starting a vicious cycle that will seal America’s fate of decline.

Jack

"Then, the attractiveness of becoming a public employee causes private sector workers to abandon the increasingly squeezed private sector, leading to an unstoppable vicious cycle."

........... Hmmmm, amidst the teabagger vs labor fray are we experiencing a shortage of labor? and the attendant wage inflation?

Jack

Prof Becker: "For example, in January 2011, turnover rates among private sector workers were about 2 1/2 times those among government workers. Clearly, workers in any sector are less likely to quit if they are doing better than what they expect to get in alternative jobs."


......... It seem the nature of many private sector jobs to have high turnover as various economic waves turn many out of jobs or tech displaces the job entirely. Such economic booms and busts aren't likely to reduce or rapidly increase the number of teachers, fire, police, and other public employees required.

Pepe Fenjul Jr.

Once unionized public sector workers become a significant enough proportion of the population to able to form majorities, they become able to command the political system. Then, the attractiveness of becoming a public employee causes private sector workers to abandon the increasingly squeezed private sector, leading to an unstoppable vicious cycle.

Jack

Pepe: Great! IF public sector employees are able to claw back some of the income lost to the top 1% over the last 40 years, and the private sector (of stagnant and declining wages) does have to compete, that's surely preferable to the agenda of the wage race to the bottom and ALL including the trillion per decade, unaffordable tax breaks irrationally implemented as the Bush Admin took over a nation with a balanced budget.

BTW.... have you noted any bidding wars resulting in an upward tick in the long stagnant wages of the "squeezed private sector?"

NEH

And so... "The Right of Free Association and the Right to organize to petition the Government or whomever for redress of grievances", is to be eliminated in the interest "Economic Efficiency"? Ok?!

Does this also apply to Corporate Associations and the forming of Interest and Pressure Groups; aka "K" Street?

There is a lot more to this than just locking Unions out of the Public Service Sector and Government or even Economic Efficiency and budgetary control...

Jack

Is not the proof of the pudding that of working folks wages stagnating and in decline while the income and wealth of the "owner" class soars beyond imagination? And is further enhanced by having purchased (with political power) unaffordable, debt amassing tax benefits?

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The attractiveness of becoming a public employee causes private sector workers to abandon the increasingly squeezed private sector, leading to an unstoppable vicious cycle.

Mark Donohue

Amazing, but no longer surprising, the dishonesty endemic to Prof. Becker's posts. Yes, unionization declined because of all the factors he enumerates (decline of manufacturing, competition from imports), but a leading factor, entirely unmentioned by Becker, was a transformation in the political environment. Unionization depends on favorable labor laws, and on enforcement of those laws. The decline of unionization among the private workforce was connected to the capture of government by corporate interests, which led to the weakening of labor law and the abandonment of enforcement of existing law (look up the history of the NLRB in the Reagan presidency). One may, as Becker does, applaud the takeover of government by anti-worker interests, or one may deplore it, but it's simply dishonest to pretend that transformations in the relation between labor and government were not part of the story of the decline of organized labor.

Pepe Fanjul

Deferred compensation has sometimes been excessive in the private sector as well- demonstrated by General Motors’ financial difficulties- but for the most part the private sector has avoided very early retirements and other extremes of deferred compensation received by public employees.

Jack

Structural unemployment? Are the economists and pundits finally "getting it?"

Today's news and a good article:

http://www.mcclatchydc.com/2011/03/27/111113/strong-corporate-profits-amid.html#storylink=misearch

Pepe Fenjul Jr.

This is often the case when regulatory public sector positions are created by politicians to purposely increase the number of voters more directly dependent on their decisions.

ElGreco

The number of public employees in the United Sates has increased from around 9 million in 1960 to over 20 million today. Count those amongst the voters who will overwhelmingly vote for more government, and by consequence, more taxes, more regulatory agencies, more innovation stifling central planning, more incentive muting redistribution, thus bringing the United States ever closer to the tipping point where a declining economy causes ever more people to seek government jobs, vote accordingly for their creation, and thus set a once prosperous country in an economic tailspin of decline. Military decline will follow, since America’s military might is a result of its economic might, might acquired at a time when the correlation between ingenuity, productivity and reward in this country was the strongest in the world.

But the rest of the world has woken up now, ironically, partially awakened by America, pulled back from collectivism, mandatory redistribution and central planning, and is now growing gangbusters while, in an comical turn of events Americans seem to be adopting these very same policies of collectivism, mandatory redistribution, and central planning, that have kept so many countries with smart populations well behind “dumb” Americans for most of recent history.

The US private sector, the sector that produces the wealth that the public sector uses, faces formidable challenges from emerging economies. These economies represent three plus billion people who, having recently being granted economic liberties (which though still sub-par by western standards, are many-fold what they were confined to just a couple of decades ago by their collectivist societies) are now springing towards their new / equilibrium ratio at alarming growth rates. The burden that unions, especially the monopolistic public unions, put on American competitiveness, will doom American prosperity already facing formidable competition from the emerging world and will doom the electorate into a suicidal political tailspin.

Watch how Europe, already ahead of the US on the road to economic decline, has started crumbling at the margin. Greece, Ireland and Portugal are now directly weighing down on the already heavily burdened productivity incentives of the Northern Europeans. At the margin, more and more Northern Europeans, already heavily burdened by taxation and a low correlation between ingenuity, competence, productivity and reward are choosing mediocrity in increasing numbers, deepening the systemic decline of the Old Continent. The real European crisis will come when Germans and other Northern Europeans at the margin start saying “enough is enough, I’m withdrawing to the comforts of mediocrity” deepening the already well under way European economic marginalization. The fact that the superbly educated average Northern European barely manages to keep up with the productivity of the dumb average American, is a shame for the old continent. The fundamental reason: Lack of incentives and the relative, albeit suicidal in the end, comfort of mediocrity and low aspirations in the European welfare state environment. If Americans, poorly educated as they are, had the same incentives to produce as Europeans, they would be at prosperity levels similar to Greece, not Germany.

But Americans have, more or less voted to follow Europe on its way to Western decline. After a deep recession, the US economy should be rebounding at accelerated growth rates. Yet, the recovery is anemic by historical standards - because it is happening against a backdrop of a weaker correlation between ingenuity, competence, productivity and reward. Being on the receiving side of various government subsidies, which doom overall competitiveness, seems to be an increasingly important endeavor for an ever increasing number of Americans. The vicious cycle has started.

Americans think that their economy is now recovering but, alas, they have already set the foundations for their painful steady decline. In an ironic twist of events, the rest of the world copied America while at the same time Americans are adopting the failed policies of the rest of the world. Unless Americans pull the regulatory, redistributionist and central planning stops they have already signed up to, and already take for granted, and as a consequence, resume growing at a rate comparable to the world average (4-5%), their unique prosperity as they know it is doomed. In the mid-long term (5-10-20 year timeframe) it’s just as simple as that. Do I think enough Americans will it wake up to this fact? No. That is why civilizations decline. By the time enough of their people realize what was their competitive advantage compared to the rest of the world, they only do too little too late. The sirens of prosperity through lower incentives to produce and homogenized uniform central planning are too strong for the average voter to let go. So down the road to decline the American voter will go holding aspirations of the welfare state in his hands.

For now creditors seem convinced that the bonds they sell to government throughout the US will come due before the US reaches the tipping point towards default. However, a very likely scenario is that once the first doubts about the ability of the American people to repay start emerging, the situation will destabilize quickly triggering a crisis that will make 2008 look like a walk in the park. There is no nation in the world that can bail out a US economy in a tailspin, where a desperate electorate in a once most prosperous but now declining country, keeps voting for more and more redistribution and central planning, thus setting off a vicious cycle of self-destruction. Even if the Chinese did the unthinkable and entirely donated to America their much ballyhooed 2-3 trillion reserves accumulated over many years, it would still be pocket change when it comes to bailing out a 15 trillion economy in a tailspin.

ElGreco

...sorry,

...[Emerging economies] are now springing towards their new / equilibrium ratio at alarming growth rates.

should read:

...[Emerging economies]are now springing towards their new (economic freedom)/(prosperity) equilibrium ratio at alarming growth rates.

...(Browser mistook brackets for XML..)

Jack

ElGreco -- I know how emotionally tied to "America's decline" you've become, but! perhaps a few suggestions and economic corrections to the contrary?

First, if you compare (honest) figures of public employees from 1960 to the present, I think you'll find they've NOT risen on a per capita basis. Considering the complexity of governing and the irrational size of our military holding the line on a per capita basis is doing pretty good. And Ha! Had we One thousand MORE overseeing the corrupt antics of our "private sector" Wall Street thieves we'd have a TREMENDOUS windfall to show for it!

"The US private sector, the sector that produces the wealth that the public sector uses, faces formidable challenges from emerging economies."

......... Indeed they do! Corporate and employee life will not be as easy as it was when the US was about the only industrial/food power left standing after WWII. Yep! NO room for WS scammers to cream off their billions buying, selling, and repackaging stagnant corporations. Surely a time for wise management and INVESTING in productive opportunities and getting a LOT better at selling our products to the 95% of the world's population that do not live in the USA.

You mistakenly dismiss the public sector as burdensome parasites. A huge mistake! Do you see our teachers, about as numerous as Walmart "associates" as .......... dead wood? The police and fire who protect our lives and tremendous assets? both public and private? The military? National Guard? Coast Guard? Border patrol? In short IF you can identify some "do nothing" parasites in your town, or even nationally, I'll surely do my best to help get rid of them.

As for "redistributionist????" that took place over the last 40 years and bodes ILL for working folk.

Here, the top two graphs, will give you a quick view of how much working folk have lost to the topmost 1% who also gained the most over the last 10 years from the unaffordable Bush tax cuts that ADDED over a TRILLION to our D E B T.

http://webcache.googleusercontent.com/search?q=cache:bB64joVfJsYJ:lanekenworthy.net/2008/03/09/the-best-inequality-graph/+best+inequality+graph&cd=1&hl=en&ct=clnk&gl=us&source=www.google.com

Please let us know what you think after considering these facts and graphs.

Pepe Fenjul Jr.

The real European crisis will come when Germans and other Northern Europeans at the margin start saying “enough is enough, I’m withdrawing to the comforts of mediocrity” deepening the already well under way European economic marginalization.

Barack

A trillion dollars over ten years? I did it in one without breaking a sweat!

Ken

"Unfunded retirement liabilities of many state and local governments are so large that it is highly unlikely that they will ever be paid."

The question that I don't see being asked is why state and local governments that are required to have balanced budgets can incur unfunded retirement liabilities year after year.

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Finally! the truth and pettiness of the public officials is stated! i am amazed that the city can continue to claim the pension cost as part of the budget to the citizens, it was (before this year) a seperate cost. i wonder if the pension cost for any other department in the city is being included in their budgets? and how much was the % of budget in the 80's? i bet it was similar if not more. and what effect on the numbers did the court order to pay have? i doubt this is sudden nor new, these cost are probably pretty constant short of the 3 years of nonpayment by the city.

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Very Right, Even the attractiveness of becoming a public employee causes private sector workers to abandon the increasingly squeezed private sector, leading to an unstoppable vicious cycle.

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The police and fire who protect our lives and tremendous assets? both public and private? The military? National Guard? Coast Guard? Border patrol? In short IF you can identify some "do nothing" parasites in your town, or even nationally, I'll surely do my best to help get rid of them.

Clocks All Around

Considering the complexity of governing and the irrational size of our military holding the line on a per capita basis is doing pretty good.

Condo Target

Excessive union power in turns results in an unfair redistribution of wealth from the public at large to public sector employees. However, it's a far cry from this to arguing that collective bargaining power is also to be remembered.

carrie

just pass here,wow,so many coments,,this must be a good article

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