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Austerity Gets Local: An Exploration of Connections Between Public Sector Debt and Wages


The regression models of this study show a negative correlation between municipal debt burden and public

sector expenditures on salaries for cities in Southern California in the period before, during, and after the

Great Recession. The association appears across various ways of measuring debt burden. Other models also

show a negative relationship between starting wages for low-wage workers and increased debt burden,

though this relationship disappears for higher-wage job classifications. Interviews with union negotiators

indicate that unions do not generally pay attention to the effects of debt service on collective bargaining

outcomes, and may be missing this negative relationship. I close with a recommendation that unions take a

closer look at how cities finance their operations, and their relationships with bondholders. In particular,

public sector unions may wish to rethink their position on some debt-financed development since they may

be see a long-term loss in compensation across their membership.

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