Experts Argue Public Sector Needs More Investment, Not Less

Academics claim public unions have too much power, but data shows public sector compensation has shrunk over time.

Published on Mar. 2, 2026

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In a recent essay, academics Nicholas Bagley and Robert Gordon argue that the underperformance of the public sector is due to the excessive power of public-sector unions, and that the solution is to rein in unions and invest less in government. However, the author of this article contends that this view is economically incoherent, as the central constraint on public-sector performance is chronic underinvestment, not union power. The data shows that public-sector compensation has actually shrunk as a share of national income over the past 25 years, contrary to Bagley and Gordon's claims. The author argues that if we want a high-functioning public sector, it requires sustained investment in the people and capacity that make government work.

Why it matters

This debate highlights the ongoing tension between those who believe the public sector is overfunded and inefficient, and those who argue that chronic underinvestment is the root cause of public sector underperformance. The outcome of this debate has major implications for the future of public services, infrastructure, and the ability of governments to attract and retain talented workers.

The details

Bagley and Gordon claim that public-sector unions have extracted excessive compensation and resisted efficiencies, but the data shows the opposite - the combined compensation of public employees has actually shrunk as a share of national income over the last 25 years. They also argue that public-sector pay is higher in "blue" states compared to "red" states, but this ignores the fact that public-sector pay has to rise in line with private-sector pay in the local economy to attract and retain qualified workers. The author argues that the real problem is chronic underinvestment in the public sector, which has led to staffing shortages, uneven service quality, and degraded state capacity.

  • Over the past 25 years, public-sector compensation has shrunk as a share of national income.

The players

Nicholas Bagley

An academic who co-authored an essay arguing that public-sector unions have too much power and are the root cause of public sector underperformance.

Robert Gordon

An academic who co-authored an essay with Nicholas Bagley arguing that public-sector unions have too much power and are the root cause of public sector underperformance.

Karen Bass

The mayor of Los Angeles who gave larger-than-normal raises to public-sector employees in 2024 to keep up with high inflation and rising private-sector wages.

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What they’re saying

“If we want a truly excellent public sector—and we should—we need to pay for it.”

— Josh Bivens (afscme.org)

The takeaway

This debate highlights the need for policymakers to recognize that chronic underinvestment, not union power, is the central constraint on public sector performance. Sustained investment in public sector workers and capacity is required to deliver high-quality public services and infrastructure.