David Lewin

March 17, 2011

LOS ANGELES -- UCLA Anderson School of Management Professor David Lewin and MIT Sloan School of Management Professor Thomas Kochan have released a paper this week that compares the compensation of public-sector employees with that of private sector workers. The paper, entitled "Getting It Right: Empirical Evidence and Policy Implications from Research on Public-Sector Unionism and Collective Bargaining," proposes "grand bargains" to address state budget problems, provide better services to the general public and treat employees fairly. The paper includes research contributions from various Employment Policy Researcher Network professors.

"Our research says unequivocally that public-sector workers accept a lower total wage and benefit package than their private-sector counterparts," said lead author David Lewin, who has deep research experience with public-sector collective bargaining, including a classic paper on New York City municipal labor negotiations. The tradeoff is that public-sector jobs are more secure, and health and pension benefits are generally greater than in the private sector.

Rutgers University Professor Jeffrey Keefe's research showed that nationally public-sector employees had 11.5 percent lower pay than their comparably educated private-sector counterparts. When health and pension benefits are included, public-sector employees still earned 3.7 percent less than those in the private sector. (See: http://www.employmentpolicy.org/topic/402/research/are-wisconsin-public-employees-over-compensated.)

University of Illinois Professor Craig Olson found that between 1995 and 2009, private-sector employees in Wisconsin saw their pay rise by an average of 10 percent (not including fringe benefits but accounting for inflation). During the same time period, the Wisconsin public school teacher pay declined by an average of 10 percent. (See: http://www.employmentpolicy.org/topic/402/op-ed/battle-over-public-sector-collective-bargaining-wisconsin-and-elsewhere.)

Public-sector union-management relations have changed notably, according to Joel Cutcher-Gershenfeld, dean of the School of Labor and Employment Relations at the University of Illinois, Urbana-Champaign. "Dispute-resolution procedures, such as fact-finding, mediation and arbitration have proven themselves as alternatives to strikes and served as a foundation for the alternative dispute resolution (ADR) movement in society," said Cutcher-Gershenfeld. He goes on to say that given states' budget problems, negotiations present opportunities for public employers and employees to work together in ways that provide better, more efficient service to the public while also recognizing and respecting employee rights.

Two major issues facing state and local governments are rising health care and pension costs. These issues need to be addressed state-by-state on a coalition bargaining, problem-solving basis. New-style collective bargaining provides an ideal venue for tackling these issues, when approached by management and labor as a mutually beneficial process, Cutcher-Gershenfeld said.

Professor Kochan said he and the other researchers envision a three-step state-by-state process to come to terms with budget deficits while still respecting public-employee rights:

  • Do an evidence-based analysis of wages, benefit costs and funding arrangements for state employees.
  • Use the findings for state public-sector summit meetings to clarify and define the issues and problems that need immediate attention. Use problem-solving tools such as interest-based negotiations and mediation/arbitration to agree on statewide "Grand Bargains" that addresses the most critical budget problems and is fair to both taxpayers and employees.
  • Charge a broadly representative group to carry out evidence-based analysis to modernize public-sector collective-bargaining practices.

"We need nothing less than a transformation of labor-management relationships in the public sector," Kochan says. "Public employees want to do a good job and provide service at a high level, and they deserve to have good jobs and effective work systems."

According to Professor Lewin, "citizens have a right to expect accountability and high performance from public employees and those who manage them."

The EPRN was formed in 2010 under the auspices of the Labor and Employment Relations Association (LERA) with grants from the Rockefeller and Russell Sage Foundations. EPRN presently has 120 affiliated researchers in economics, law, sociology, psychology, and labor-management relations. Founded in 1947, the LERA is a national not-for-profit, non-partisan organization whose members are drawn from the ranks of academia, management, labor and "neutrals."

About UCLA Anderson School of Management
Celebrating 75 years of Business Beyond Usual, UCLA Anderson School of Management is regarded among the leading business schools in the world. UCLA Anderson faculty members are globally renowned for their teaching excellence and research in advancing management thinking. Each year, UCLA Anderson provides a distinctive approach to management education to more than 1,800 students enrolled in its MBA, Fully-Employed MBA, Executive MBA, UCLA-NUS Global Executive MBA, Master of Financial Engineering, doctoral and executive education programs. Combining highly selective admissions, varied and innovative learning programs, and a world-wide network of 37,000 alumni, UCLA Anderson develops and prepares global leaders.

Media Relations