Are cities and states ready to take on unions?

Most state and local governments are facing a ticking time bomb: labor costs that are out of line with reality, often because of collective bargaining agreements. Yesterday's WSJ points out that employees of state and local governments make $39.60 per hour in wages and benefits versus $27.42 for the private sector. (Aside: My NC State colleague Lee Craig is quoted in the article.) Such raw figures need to be adjusted for differences in education, training, and experience. Most studies that make such adjustments find the wage difference to be fairly narrow but the benefit difference remains quite substantial. Cities are now facing hard choices: scale back medical care and pension promises or cut back employment and public services. Will public employee unions renegotiate their contracts so that they can avoid layoffs, or will they follow the model of their private sector counterparts (e.g., UAW, USW) and price themselves out of existence? Stay tuned.