More on Unions and State Budgets

by John Sides on February 22, 2011 · 12 comments

in Political Economy

Thanks to some useful comments to my earlier post, I am following up with several more graphs depicting the relationship between union membership and fiscal outcomes in the states.

First, here is a graph similar to my earlier one, except with FY2011 deficits plotted against the percent of the public-sector workforce that is unionized (data from unionstats, specifically this Excel file—thanks to commenter Jon).

unionsanddeficits2.png

The plot resembles the earlier one, except that the bivariate correlation is larger (0.33) and statistically significant (p=.03). In a bivariate linear regression model, a 5 percentage point increase in public sector union membership is associated with a 1 percentage point increase in the FY2011 deficit as a percent of the budget.

Second, per Frank Cross’s comment, here is a graph plotting state and local government spending per capita against public-sector unionization. The spending data are from usgovernmentspending.com.

unionsspending.png

There are three big outliers, obviously: DC, Alaska, and Wyoming. If we include those cases, there is no significant correlation (0.22; p=.11). If we exclude those cases, there is a larger and significant correlation (0.70; p< .001). In a bivariate linear model that excludes these 2 states and DC, a 25 percentage point increase in public sector union membership—roughly the difference between Wisconsin and Idaho—is associated with an addition $1,500 of spending per capita.

Third, following on this post by Chris Edwards at Cato that was suggested by commenter Matt, here is a graph of state and local debt as a percent of gross state product, again plotted against public sector union membership.

unionsdebt.png

This shows the same relationship as did the post at Cato. The bivariate correlation is 0.39 (p=.006). In a bivariate model, a 25 point increase in public sector union membership is associated with a 2.7 percentage point increase in state and local debt relative to gross state product.

Fourth, see this comment by Mark:

I just coded the data “TheRef” posted to distinguish between states with no collective bargaining law and states with some sort of law (0=no law, 1=anything else) and used this to predict the 2011 shortfall as a percentage of budget. I have no idea if this coding is appropriate, but it should provide a rough estimate.
While the relationship was positive (like the r coefficient in the post) it explained less than 2% of the variance (R^2 = .017). This is actually less explained variance than that explained in the above post (.19*.19 = .04), though this could be due entirely to the linear compared to categorical nature of the predictors. Just to note, the unstandardized beta was 3.08.

In sum, I have made the graphs in these two posts—and solicited some feedback—because it seemed valuable to have some data to look at when debating the fiscal impact of unions. But note that my claims in both posts are descriptive (“is associated with”) and not causal. The associations that I document here may not reflect causation and may instead be spurious, given that I have controlled for nothing else. In other words, I agree with how Reihan Salam summarized my first post.

As before, I welcome further suggestions and feedback.

{ 12 comments }

Thomas J Leeper February 22, 2011 at 5:34 pm

Getting at any causal relationship here is really critical for yielding policy implications. A couple of ways to start:
1) Are more heavily unionized state governments more expensive? Compare the unionized proportion of public sector employees to the cost of government per employee (rather than per capita). This still isn’t causal because there are clear regional trends in public sector unionization.
2) Does higher unionization increase public deficits? Construct a datset similar to what you have presented here, but with panel data for state-years. Look at law changes regarding collective bargaining as shocks and analyze using interrupted time-series. Could swap deficit with total cost of government or budget per capita to answer the question in (1).
3) Similar to 2, classify states as high or low on public sector unionization, match state-years on various other traits (population, total budget, region, etc.) and look for mean differences in any of the outcomes.

The broader point here is that while social scientists are always quick to remind that correlation is not causation, I think it’s really quite important (particularly when statistical commentary is about ongoing events) that we offer (near-)causal evidence whenever possible and make sure that research questions are stated clearly. In this case, the question is clearly whether higher rates of unionization cause states to run budget deficits or make state governments more expensive, so the correlation between unionization and anything does not answer the underlying questions of interest.

That said, the descriptive evidence does quite strongly suggest no relationship.

frankcross February 22, 2011 at 9:43 pm

The results are certainly intuitive. One would expect an increase in spending, but that it would be pretty small — studies show unions increase public sector pay 5-10%.

But it might not be if unionized workers were superior enough that you needed fewer of them or they reduced other costs. Or it might be worse if unions used politics to increase public employment. Still looks pretty plausible.

Neal February 22, 2011 at 10:09 pm

I would bet that it is better to think of state unionization as either/or, not as a proportion. In the 11(?) states that do not recognize the right of state employees to organization, the union rate is 0% among state and local government workers. In the other states, wages and benefits likely reflect the fact that workers are organized, or could be organized.

The “public sector” numbers above likely include organized federal government workers who live in the state.

Using the link in the previous post to teacher union data, and the usgovernmentspending.com data, it looks to me like the two groups are actually quite comparable in spending. The 11 states (Alabama, Arizona, Arkansas, Colorado, Georgia, Kentucky, Louisiana, Mississippi, New Mexico, North Carolina, South Carolina, Texas, Utah, Virginia, West Virginia, and Wyoming) that don’t have collective bargaining with state employees had an average (median) 23.9% in state and local “Total Spending as percent GDP”, while the rest averaged 22.3%.

Amy Ruckes February 23, 2011 at 3:52 am

Thank you so much for the information. I posted the link to your website on Facebook. Thank you again!

Amy Ruckes February 23, 2011 at 4:00 am

Further thought from a none scientist…
Have you tried correlations between high union membership in a state and poverty rate. Or high union membership and overall income rate. It probably has already been done. Would you have a link?

Dana Houle February 23, 2011 at 8:50 am

Seems to me the second graph is mostly a reflection on cost of living and family income by state: state and local governments in the poorer states spend less per capita than do state and local governments in wealthier states.

Of course, the correlation between a state being poor and having a low rate of public AND private-sector unionization (and almost all other indices of social and economic well-being) is pretty damn important to consider.

Econ Teacher February 23, 2011 at 8:55 pm

Seems that it was just a coincidence, but just FYI: this same analysis – scatterplot with the same data and significance tests – was posted here on February 9th:

http://shankerblog.org/?p=1850

Kim February 23, 2011 at 10:31 pm

Hi there: I posted your chart on a political community, and was curious about the comments in this thread: http://community.livejournal.com/talk_politics/908417.html?thread=69301121#t69301121

Zach February 24, 2011 at 1:37 pm

Of course, there are other things that correlate quite well with strong public unions. The 1st, 2nd, 5th, 9th, and 10th best scoring states in an 8th grade math exam (randomly chosen from available statistics) look to be in the top 10 unionized states. I suspect the correlation there would be stronger than the correlation with debt.

zach February 24, 2011 at 4:10 pm

“state and local governments in the poorer states spend less per capita than do state and local governments in wealthier states”

Also relevant to the last graph in this respect, rich states are facing worse debt problems than poor states because of less stable revenue streams (more dependent upon income taxes of rich people). A notable exception here is my (very rich) state of Maryland, which modestly raised revenue via income and sales tax increases ahead of the crisis and avoided the worst of it. To be fair, a lot of Maryland’s success also owes to DC being somewhat less exposed to the financial crisis.

Mike February 24, 2011 at 7:39 pm

State & Local Spending as a percentage of state GDP vs unionization percentage would seem to me to be the comparison to see if unionization affects spending levels.

Spending per capita not a good comparison. High cost of living states (CA, NY) are going to always have absolute spending that’s higher per capita because bother public and private sector wages are higher.

Looking at debt % also is not that informative because debt levels are financing decision and not indicative of state spending levels. High taxes and high spending would result in zero debt.

Drew Tyre February 28, 2011 at 7:52 pm

Although the “correlation is not causation” argument is true, it is hard to imagine obtaining anything other than correlation at the scale of state budgets. An experiment of sorts could be conducted by asking all states to sort themselves into 2 groups, paired by e.g. population size, area, etc, and then having one group ban public sector unions, and the other group encourage them. Wait 10 years. Collect the data and test the hypothesis.

If we wait until we have causal evidence of a relationship before making policy decisions, nothing will happen. Ever.

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