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Manhattan Institute

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Comparing The Impact: Public Sector Labor Reform in Wisconsin and Indiana

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Comparing The Impact: Public Sector Labor Reform in Wisconsin and Indiana

May 15, 2012

Indiana’s experience with reform of collective bargaining rules for government employees suggests that similar changes adopted by the administration of Wisconsin Governor Scott Walker, although uneven in their impact to date, hold the potential to control costs and limit public sector workforce layoffs over time.

Indiana abolished collective bargaining for state employees six years ago. According to the most recent data, Indiana has succeeded in limiting cutbacks in public employment, while not raising state taxes. The Indiana experience also contrasts with that of another Wisconsin neighbor, Illinois, which, although it also limited public employment cutbacks, did so only after a significant state tax increase. By contrast, Wisconsin enacted a sharp reduction in aid to municipalities that was effective immediately and led to significant layoffs and other reductions in headcount.

Over the next few years, as municipalities are able to take advantage of the bargaining reforms, they will, like Indiana, be better able to afford to retain and hire employees.

This paper concludes:

  • The compensation and bargaining reforms in the budget repair law are more essential than ever. Over the next few years, these reforms will allow other Wisconsin municipalities to achieve savings similar to the ones seen in Milwaukee.
  • States shouldn’t wait for a recession to reform public labor. Indiana’s fiscal preparations—including but not limited to public labor reform— positioned it unusually well for a downturn.
  • Wisconsin has seen such a sharp reduction in public employment because it made sharper budget cuts than many of its neighbors. Public labor reform cannot immediately compensate for sharp local aid cuts.

Over the next few years, as municipalities are able to take advantage of the bargaining reforms, Wisconsin will, like Indiana, be better able to afford to retain and hire employees.

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