The Government Union Stronghold on California

Monday March 7th, 2011   •   Posted by Emily Skarbek at 2:26pm PST   •  

San Jose City Councilman Pete Constant wants to answer his office phone but the City Hall employees’ union says he should not be allowed to do so. The union has taken the Councilman to court, attempting to force him to hire someone else to be his administrative assistant and answer phones for $70,000 a year.

Constant already has four council aides working for him full-time and has chosen not to hire another assistant. The city’s 214-member Confidential Employees Organization contends that the city was required to gain permission from the union before Constant decided to eliminate the position.

California faces an $110 million budget deficit with the public sector unions as the most powerful interest groups influencing the politicians. According to one story, even the “apocalyptic scenarios presented at preliminary budget sessions this week are based on the assumption that the city won’t extract concessions from public employee unions.”

This case illustrates the deeply entrenched problem of public-sector unionization. The absurdity of this particular case is not an outlier, but rather a logical consequence of a system in which employment decisions are based on anything other than profit maximization.

Gordon Tullock identified these problems as “transitional gains traps.” Special-interest groups like the unions have used the political process to secure themselves a stream of “rents” they earn only as a result of government privileges that restrict competition. These groups will be very successful in blocking reform efforts as they expend resources to protect the goodies they are extracting from the public through transfers embedded in prior public policy decisions.

Deregulation is much more difficult than regulation. “Transitional gains traps” help make sense out of why in places like Greece and Ireland go belly up despite being well informed of the sheer unsustainability of their public accounts long before the crisis hits. Diana Thomas’s research examines a historical case whereby “transitional gains traps” have been overcome by changes in entrepreneurial opportunities over time.

Unfortunately, California’s taxpayers are unlikely to see these same forces working to mitigate the fiscal sociology of the present. California’s fiscal woes include numerous “transitional gains traps” with strong special-interest groups at the state and local level. The public bears much of the cost of such inefficiencies by way of forgone gains in the productive powers of commerce. Politicians might sooner press for a bailout and remain popular than succeed in overturning these entrenched interests and lose office.

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March 2011