Detroit’s auto companies, chastened by the bankruptcy of Delphi Corp., have finally begun to chip away at the industrial welfare state. But our welfare cities, if not the broader welfare state itself, remain stubbornly resistant to change. Case in point: Detroit, which the Census Bureau this year called America’s most impoverished major city.

Impoverished, that is, from the standpoint of its citizenry. But still rich in wages and benefits for its public sector employees – prominently including its mayor, Kwame Kilpatrick, whose expense-account lifestyle stands in sharp contrast to the mounting deficits that make the American automakers look like models of fiscal rectitude by contrast. Detroit’s own auditor general, Joseph Harris, predicts that receivership is only a question of when, not whether.

Autoworkers, with a rare burst of good leadership from their union, have at long last grasped the fact that the good old days are … the good old days. They are coming to understand that failure to adjust to the new realities of global competition will mean continued erosion of union jobs, now down to about 8 percent of the manufacturing workforce. From California to New York, however, unionized public sector workers, who represent 37 percent of government employees (and 53 percent in Michigan), are still living in a dream world, insulated from reality by their stranglehold on vital municipal services.

Hurricane Katrina may have provided a tragic if useful laboratory for how to rebuild a city, but don’t count on it. Mayor Bloomberg early on caved in to the unions, agreeing to raise taxes sharply in an already-overtaxed city. In California, the “governator,” Arnold Schwarzenegger, appears to be fighting losing battles to modestly weaken the teachers union’s stranglehold over the public schools and to give union members somewhat more control over how their dues are used.

Detroit, meanwhile, careens towards insolvency with an accumulated operating deficit of about $300 million in a budget of $1.3 billion. And that’s before any honest accounting for Detroit’s rapidly accumulating health care liability to workers and retirees of $5-6 billion, which by 2008, if fully recognized, would require a tripling of the nearly $150 million a year in cash now going out the door for health care.

There are a few rays of hope. One is that Mayor Kilpatrick has cut payrolls modestly, though even City Council has criticized it as too little, too late. As of 2002, the latest year for which comparable data is available, Detroit had 19.35 workers per 10,000 of population, compared to 14.13 for Chicago and 10.16 for Phoenix, according to the Citizens Research Council of Michigan, a watchdog group. (New York led the pack with 37.25.)

Another is that Detroit voters may be about to dump Mayor Kilpatrick in favor of a former deputy mayor, Freman Hendrix, who has made improved management of the city a central issue. But a poll last week seemed to show Kilpatrick making a rapid comeback. Hendrix, despite warning of a looming “receivership” in the last debate, talks mostly about the need to retrain the workforce, as if lack of education for workers, rather than lack of incentive, were the problem.

Unlike the auto unions, which face direct competition from hustling work forces in America’s right-to-work states, not to mention Mexico or Asia, public sector workers face only the silent pressure of people voting with their feet. Detroit’s population has slipped below 900,000 from its high of 1.6 million in 1950. Talk about loss of market share! Yet the municipal welfare state rolls merrily on.

Mr. Bray is a Detroit News columnist.