Collective bargaining means less-affordable services for taxpayers

moneybagDo you think paying 12 percent more for a house than you need to is a good idea? What about when it comes to services provided by state and local government employees?

Economists at Miami (Ohio) University and Trinity University[i] analyzed a sample of 847 public employees for Sutherland Institute. Their analysis found that a state or local government employee in Utah working under a union-negotiated collective bargaining contract means taxpayers pay 11.6 percent more in wages and salary – the “union premium” – for services that they could be getting more affordably from a similarly situated nonunion employee.

The economists controlled for work experience, education, type of occupation, hours worked, other income, and demographics.[ii] If all compensation (including benefits) is considered, the union premium rises slightly to 12.7 percent. For comparison, the national union premium for public employees was 6.8 percent for wages and salary, and 7.4 percent for total compensation. All estimates were statistically significant (p<.05).

 

Wage and Salary

Total Compensation (including benefits)

Sample Size

 

Union Premium

t-statistic

Union Premium

t-statistic

Total

Union

Utah

11.6%

3.87

12.7%

5.31

847

220

U.S.

6.8%

8.37

7.4%

11.76

69,339

33,528

 

Bold = statistically significant at .05 level (t-state > 1.96)

 

The difference in the affordability of total compensation associated with collective bargaining varied by education level. The union premium was greatest and statistically significant (p<.05) for college graduates and for those with a high school education or less, at 8.4 percent and 11.6 percent, respectively.

 

Wage and Salary

Total Compensation (including benefits)

Sample Size

Education Level

Union Premium

t-statistic

Union Premium

t-statistic

Total

Union

High School or Less

9.3%

1.48

11.6%

2.42

200

41

Some College

4.4%

.73

7.3%

1.55

319

56

College Graduate

6.6%

1.54

8.4%

2.41

561

165

Bold = statistically significant at .05 level (t-state > 1.96)

 

The data further suggests that much of the union premium may be due to collective bargaining agreements in public education. Of the 220 union employees in the sample, 116 of them (52.7 percent) were K-12 school teachers (preschool, kindergarten, elementary, middle, secondary, and special education). For all employees in education-related occupations (e.g., teachers, professors, and librarians) the premium associated with collective bargaining in total compensation was 7.5 percent and was statistically significant (p<.05). Public employees in positions of office and administrative support, protective services, and management also had positive union premiums, but these estimates were not statistically significant, which may be due to small union sample sizes in these occupations. All other occupations had a union premium of 8.3 percent, which was statistically significant (p<.05).[iii]

 

Wage and Salary

Total Compensation (including benefits)

Sample Size

Occupation

Union Premium

t-statistic

Union Premium

t-statistic

Total

Union

Education

5.1%

1.23

7.5%

2.26

292

129

Office/Admin Support

5.3%

.62

8.1%

1.18

151

19

Protective Services

6.1%

.61

8%

1.01

85

25

Management

15.8%

.92

16.1%

1.09

92

17

All Other

5.2%

1.02

8.3%

2.02

460

72

Bold = statistically significant at .05 level (t-state > 1.96)

 

The data and statistical analysis suggest that Utah taxpayers are in the situation described at the beginning of this post: paying government employees under collective bargaining agreements for the same services that they could get more affordably from nonunion public employees with similar qualifications and experience. Is this a good situation for Utah, or a bad one?

The answer to that question has significant implications for how state and local governments provide services to Utahns.


[i] William Even, Raymond E. Glos Professor of Economics, Miami University (OH) and David Macpherson, E.M. Stephens Professor of Economics, Trinity University. For the full statistical results for Utah, click here. For the economists’ methodology, click here.

[ii] Demographics include sex, race, marital status, and urban/rural residence. The economists note that these controls match those used in several other studies of the union differential in compensation. See the methodology for more information.

[iii] Census occupation codes were used to group government employees with similar occupations based on the following methodology: management (codes 10-430), education (codes 2200-2550), protective services (codes 3700-3950), office and administrative support (codes 5000-5930). All other codes were grouped as “all other.”

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2 Responses to Collective bargaining means less-affordable services for taxpayers

  1. Harvey1950 says:

    Do you think selling your house for 12 percent more is good? How about earning 11.6 percent more in wages? There are two sides to these equations.

    Are you really suggesting our teachers are overpaid? I’m not a teacher, but I sure get tired of all the teacher bashing I hear in this state.

  2. Pingback: Sutherland Institute » Collective bargaining means less-affordable services for taxpayers

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