Friday, January 15, 2016

Public-sector compensation and compulsory union dues

Earlier this week I wrote a blog post for NR on the correlation between compulsory union dues and excessive pay in the public sector. The centerpiece of the post was a chart showing the compensation premium in each state. Unfortunately, the editors removed some of the state labels in order to squeeze the chart on to the blog. Below I've reposted the entire piece, with the full version of the chart available by clicking on it.
Public Employees May Soon Be Less Overpaid

As James Sherk, Mark Pulliam, and others have already noted here, the Supreme Court appears poised to strike down all compulsory union dues for government workers. I have no legal analysis of my own to offer, but as a policy matter it is important to point out the correlation between compulsory dues and the degree to which public employees are “overpaid.”

A couple of years ago, Andrew Biggs and I compared state workers’ total compensation – meaning wages plus benefits – with the compensation of similarly-skilled private workers. We found that most states pay their workers a premium over private-sector levels. The chart below orders the states from the largest premiums to the smallest. Union dues are compulsory for public workers in the states colored blue, while dues are not compulsory in the states colored red. (Categorizing each state by its treatment of public union dues can be tricky, but the website appears to have done the most thorough job.)

Click for a readable version.
Compulsory dues are clearly associated with larger premiums for public employment. State workers in compulsory states are paid 17.0 percent more on average than comparable private workers, while state workers in non-compulsory states are paid just 5.6 percent more. And note that Michigan and Wisconsin only recently switched to voluntary dues, so most of the impact has yet to be felt in two of the higher-paying voluntary states.
The usual caveat about correlation and causation applies, but the data are consistent with the view that union strength really does matter. When dues are compulsory, unions have more money to lobby public officials for generous pay packages. If the Supreme Court limits union funding to voluntary donations, public-employee compensation will probably still be excessive, but less so. It’s a start!

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