The Anit-Market Feature of Governor Walker's Budget Repair Bill

Essentially all of the furor over Governor Scott Walker's budget repair bill has focused on the anti-union portions of the bill, namely the elimination of the right to bargain collectively. Coupled with this item, however, is another that might initially get categorized as anti-union, but is really anti-market. I am talking about the provision limiting wage increases of public employees to the rate of inflation (CPI).

Wages, after all, are a price for labor. Limiting a price by government fiat, any price, is inherently anti-market. I am skeptical that ObamaCare can contain the Medicare growth rate by decree, and by the same token I doubt Walker can hold the wages of public sector workers to the rate of inflation during times when market conditions are pushing them higher.

When the government is engaged in production (say, of enforcing prison sentences) and has need of individuals to carry out the actual work, it draws those workers from the pool of private labor. When deciding whether or not to join the public sector, those workers are going to compare the opportunities offered by the government to those available in the private sector. The government hires people to do many different types of jobs, there will inevitably be some times when the demand for certain skills outstrips supply, and wages may need to rise faster than inflation in order to fill the related positions. At the same time, the supply of some types of labor will be relatively plentiful and the state can offer wages that grow at or even below the rate of inflation.

I suspect that if the CPI limit is allowed to stand within a matter of a few years we will still have enough teachers to staff our classrooms (and that the quality of the median teacher will be lower), but that we won't have enough corrections officers to staff our prisons.

It is true that Walker's proposal allows for an increase larger than the CPI if approved through a referendum. I suspect that this provision is more of a token offer of hope rather than a serious proposal, but either way it's a bad idea. We have a representative form of government, not a direct democracy. If a vote on wages is appropriate, why not let collective bargaining stand and we can vote on working condition and vacation time policies as well? Because this would quickly become unworkable, and I suspect Walker would acknowledge this.

If you believe, like I do, and like Governor Walker says he does, that markets are the best way to determine prices, then the proposed limit on wages is nothing more than a price ceiling. Government meddling with market prices was certainly popular with the GOP during the Nixon administration, but I thought we had moved past that.