Working Paper: NBER ID: w19574
Authors: Jeffrey Clemens; David M. Cutler
Abstract: We analyze the incidence of public-employee health benefits. Because these benefits are negotiated through the political process, relevant labor market institutions deviate significantly from the competitive, private-sector benchmark. Empirically, we find that roughly 15 percent of the cost of recent benefit growth was passed onto school district employees through reductions in wages and salaries. Strong teachers' unions were associated with relatively strong linkages between benefit growth and growth in total compensation. We further find that when economic conditions are poor, straining public budgets, benefit growth is more readily shifted back to public employees. Our analysis is consistent with the view that the costs of public workers' benefits are difficult to monitor, contributing to benefit oriented, and often under-funded, compensation schemes.
Keywords: No keywords provided
JEL Codes: H22; H74; H75; I13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Benefit growth (O40) | Wage reductions (J31) |
| Benefit growth (O40) | Total compensation increase (J33) |
| Strong teachers' unions (J45) | Link between benefit growth and total compensation growth (J33) |
| Economic conditions (E66) | Shifting of costs to public employees (H22) |
| Benefit growth (O40) | Educational performance (dropout rates) (I21) |