To learn everything you ever wanted to know about public-sector unionism, its history, and its impact on the labor market, just read this great paper by my colleague Eileen Norcross, “Public Sector Unionism: A Review.” She does a really good job of explaining the fundamental differences between private- and public-sector unions. For instance, she writes:
In the larger policy debate over the role of public sector unions, there is a tendency to blur the lines between the history and goals of the private sector union movement and those of the public sector union movement, and thereby misunderstand their unique effects. The public sector union movement shares a link to the history and institutional structure of private sector unionism, yet they are also distinct movements, differing in origins, goals, approaches to bargaining, philosophies, and effects. These two unionisms operate in different spheres. Private unionism operates as a labor cartel within the market economy and thus affects the profitability of firms, economic growth, the supply of labor, and consumer prices. Public sector unions function as a monopoly provider of labor within a bureaucratic-political realm. Public sector unionism introduces an unelected body into policy-making, thereby undermining the sovereignty of the state. Public sector employees are able to influence through political lobbying of their ―employer-sponsors‖ or politicians, who may seek to enhance union employment as a means of expanding their constituency.
To be sure, both kinds of unions operate as a labor cartel, but their effects on the labor market are quite different. In the private sector, unions are able to secure wages for their members that are often higher than the competitive market wage, but that in turn reduces the demand for labor: “While private sector unions are able to increase wages for their members, these gains come with an economic tradeoff: fewer jobs for nonunion employees, lower corporate profits, and higher prices for consumers.”
Public-sector unions, however, manage to secure higher wages through employer negotiations and manage to increase the demand for their labor through the political, legislative, and regulatory processes. As a result, they manage to increase wages more than private-sector unions can. The final impact on total employment is unclear, however, as Norcross explains.
The article contains many more interesting discussions of collective bargaining and the institutional stability of public-sector unions. A must-read.