GDP Is Up, But Government Unions Ate Your Raise

James Sherk / January 29, 2010

Figures released today by the Bureau of Labor Statistics provide less encouragement than today’s GDP report. Total compensation increased by only 1.5 percent in 2009 (without adjusting for inflation) – the lowest increase on record. If a turnaround has begun, workers are not feeling it in their wallets.

However, this pain has not been distributed equally throughout the economy. In the private sector, total compensation grew just 1.2 percent in 2009. On the other hand the compensation paid to state and local government employees grew 2.4 percent. The average government employee got twice the raise that private sector workers did.

Why did government workers get higher raises? In the private sector workers compete to produce goods and services that others value. In a recession, production falls and employers have less money to pay raises with. On the other hand, taxes fund government paychecks. Government employees can continue getting raises no matter the health of the overall economy, so long as taxes keep coming in. (more…)