Normally Steven Landsburg is a paragon of (a certain type of narrow) rationality. I enjoy reading him for that reason, even if I often disagree with him. So it confused me to read this:
If you cut the pay of an overpaid worker, he’ll generally scream bloody murder. After all, overpaid workers like to stay overpaid. But if you cut the pay of a non-overpaid worker, you haven’t really damaged him. He just quietly leaves and gets a job elsewhere. After all, the ability to find a comparable job elsewhere is pretty much the definition of not being overpaid.
Now how are the Wisconsin public workers reacting to projected pay and/or benefit cuts? As if the rug’s been pulled out from under them, that’s how. Every time a worker says “These cuts will cause me severe pain”, that worker is saying, in effect, “I can’t get anyone else to pay me at the level I’m accustomed to”, or, in briefer words, “I am overpaid!”.
In normal economic circumstances (perfectly competitive and efficient labor markets) that might be the case. Other explanations -- some brought up by comments to his post -- emphasize that these are not normal circumstances. For one thing, the unemployment rate is near 10% despite a collapsing labor/population ratio, indicating that labor markets are neither perfectly competitive nor efficient at the moment. For another, to the extent that public education resembles a public good, it might be under-provided by the private sector relative to some social ideal, in which case public sector educators should be paid more than they would be in the private sector. So even if you accept Landsburg's premises there is plenty of econologic explaining why public sector workers are not overpaid, or at least why protests of wage and benefit cuts wouldn't necessarily be an indication that they are.
But Landsburg's premises are all wrong. The unions have agreed to wage and benefit cuts, and substantial ones. That's not what the protests are about. The protests are about legally restricting workers' rights to collectively bargain, in perpetuity. That has nothing to do with whether the workers are overpaid or underpaid. It's about a pretty basic principle concerning whether workers will be price-takers in a monopolistic system where the price is set by the state of Wisconsin, or whether they retain some bargaining power in future negotiations. . In my previous post I questioned whether the principle was really worth this sort of brinksmanship. I guess we'll find out soon enough. But to suggest that there is nothing more to the Wisconsin protests than rents being taken away is disingenuous.