Teen Employment Sinking in the Ocean State

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Quick links: to download the printable PDF of this study click here.  See Media Release at end.

Related stories: Research Director Justin Katz discusses the issue on the Dan Yorke Show.

Abstract

Gainful employment is disappearing from the experience of the American teenager (ages 16 to 19), and increasing minimum wages are part of the problem. In Rhode Island, teen unemployment was 28.3% in 2011, more than double its 2007 low of 12.9%, and hours worked per week had fallen from 10.0 to 6.1.

Rhode Island’s minimum wage climb from $6.75 in 2004 to $7.75 for 2013 will have cost 597 teenage jobs. As teenagers’ employment has fallen and their average hours worked per week have decreased, the weekly working hours per 100 teens in the population has dropped 62% — and 79% for those without high school diplomas. Because 70% of working teens are in the retail or leisure/hospitality industries, a bold policy change such as eliminating the state sales tax would be especially beneficial to them.

Getting Teenagers Accustomed to Working

Chores and a lemonade stand become a newspaper route and a summer job in retail, then a professional trade following high school graduation. If college is in the picture, retail transitions to on-campus service work followed by some sort of internship, which lands the young adult at the entrance of a career path, degree in hand. Such is the classic progression of young Americans’ easing into the workforce, with the adventurous and innovative breaking off to build their own companies or invent new industries.

The United States’ extended jobs recession appears to have accelerated a disruption of this pattern. The change has been acutely felt in states that have trailed the nation’s meager recovery, such as Rhode Island. From 2003 to 2011, teenagers’ share of employment in all Ocean State industries fell from 5.7% to 4.3%, despite the fact that their overall percentage of the population held steady.

In 2011, states with minimum wages that exceeded the federal rate tended to have higher unemployment. High minimum wages disproportionately harm teenagers’ employment prospects.  So, not only are young adults in such states operating in dampened economies, but the jobs that they would typically seek are even harder to come by.

Policy Recommendation

With Rhode Island in desperate need of an economic turnaround, and because dedicated and well-rounded young adults will be critical toward that end, the state must reverse the working plight of its teenagers. The RI Center for Freedom & Prosperity recommends that the General Assembly and Governor Chafee:

  1. Set Rhode Island’s minimum wage at the federal rate of $7.25.
  2. Consider a bold economic policy, such as eliminating the state sales tax, that would jolt the overall economy forward with especially beneficial effects for the teenage population.

Minimum Wage & Teen Employment

The effect of minimum wages on unemployment rates is a contentious issue among economists. Until the 1990s, they broadly understood increased minimum wages to harm employment. Since then, various studies have muddied the waters.

Given the myriad variables involved in a modern economy, small-scale policy changes can disappear in the data, and incremental minimum wage hikes may not register. Consensus is still strong, however, that low-skill, low-pay groups like teens are adversely affected by such increases.

Of the 24 states with unemployment over 8.0% for 2011, 11 had set their minimum wages above the federal $7.25 per hour. Of the 26 states with 8.0% unemployment or lower, only six had elevated minimums.  The average unemployment rate for former was 9.0%, compared with 7.7% for those in which the federal rate applied.

That gap doubles for teenagers (16-19 years old).  In states where the $7.25 minimum applied, teens’ unemployment rate was 21.7%. In the elevated-rate states, it was 24.3%. Chart 1 illustrates the point, narrowing the focus to the eight states with minimum wages over $8.00 per hour.

United States Unemployment and Teen Unemployment by State Minimum Wage, 2011

Rhode Island

In 2011, the Ocean State’s teen unemployment was 28.3%, the worst in New England, and more than double its 2007 low of 12.9%. Meanwhile, the weekly hours of the average employed RI teen dropped from 10.0 to 6.1.

Putting Rhode Island in context requires an acknowledgment that it simultaneously has the most-sickly economy in New England and the second lowest minimum wage, in 2011. The $7.40 per hour the state mandated for the lowest-paid employees within its borders was higher than only New Hampshire’s rate, regionally. Increasing the rate to $7.75 this past legislative session pushed the Ocean State past Maine, as well.

At first glance, these comparisons would seem to contradict the notion that high minimum wages are associated with higher unemployment. As suggested above, however, minimum wage is a secondary factor and is not sufficient to save a state economy that is already failing.

In an update for the RI Center for Freedom & Prosperity of their 2010 study, “The Teen Unemployment Crisis,” economists David Macpherson (Trinity University) and William Even (Miami University) found that Rhode Island’s increase from $6.75 in 2005 to $7.40 cost the state’s teens 397 jobs in 2011. Of that total, 306 were lost to those without high school diplomas. As the Center reported in June, Macpherson and Even estimate that the additional hike, to $7.75 per hour, will cost Rhode Island’s teenagers another 200 job opportunities.

In total, that $1 raise will have cost about 2.7% of employed teens valuable work experience, increasing to about a 7.1% loss among those without high school diplomas.

Table 1 shows the dramatic drop in teen employment from 2002 to 2011. For perspective, the 2010 Census found 66,423 Rhode Islanders 16-19 years old — about 32,663 without high school diplomas.

 

Table 1
RI Teen Employment Trends by Age and High School Diploma
16-19, no diploma 16-19 18-20, diploma
Employment
2002 (%) 38 49 64.3
2011 (%) 19 32.4 49.2
Change (%) -50 -33.9 -23.5
Ave. hours/week
2002 6.7 10.7 19.3
2011 2.8 6.1 13.1
Change (%) -57.6 -43.1 -32.3
Hours/100 teens
2002 254.4 522.2 1,240.20
2011 54 196.5 642.2
Change (%) -78.8 -62.4 -48.2
Note:“Change” percentages may differ due to rounding.Source: Census Bureau & Bureau of Labor Statistics, Current Population Surve

 

Not only are fewer teens working, but those who have jobs are spending less time on them. The weekly hours worked per 100 teens in the total population captures the combined effects of these trends. Employment is evaporating from teens’ experience in Rhode Island.

Massachusetts shows that a high minimum wage doesn’t always correspond with high teen unemployment (see Chart 2). But if Rhode Island insists on imposing a high rate, it must take even more dramatic steps to improve its economy to counter-balance the downward pressure on employment.

U.S., Rhode Island, and Massachusetts Teen Unemployment, with Minimum Wage Changes, 2002-2011

One Solution: Eliminate Sales Tax

In early June, the RI Center for Freedom & Prosperity proposed its Zero.Zero plan to eliminate the state sales tax in Rhode Island.  Such a policy would be especially beneficial for teens.

The Center found that immediate elimination of Rhode Island’s sales tax would create 23,873 jobs. The data did not differentiate between industries or the demographic qualities of the newly hired workers, but it would be reasonable to predict that teenagers and other low-wage workers would benefit disproportionately and more immediately.

By far, Rhode Island teenagers are more active in the very industries that most feel the effects of the sales tax: retail and leisure and hospitality. Of teens who were working in 2011, 23.5% were in the retail industry, where they accounted for 8.8% of the workforce. Another 46.4% worked in the leisure and hospitality industry, accounting for 17.8% of all employees.

Altogether, 69.9% of working teens were in these two industries. Clearly, the healthier retail and leisure market in a zero percent sales tax environment would benefit the lowest-paid workers first, including Rhode Island’s young adults.

Conclusion

As with all of the challenges that it faces, Rhode Island has a choice between paths: the one we’ve been following and one that shifts decision-making back toward individuals working together in a less-regulated private economy. The first shifts resources under the control of government planners, and the second would allow Rhode Islanders to keep their money and make decisions in accordance with their own interests.

For all of the emphasis that the state has been placing on developing a “knowledge economy,” it has paid precious little attention to the need to foster work ethic and experience in its youth. Meanwhile, lavish public-school funding and special deals toward government-approved economic development have been requiring increasingly high tax burdens — in the form of the incrementally broadening sales tax, of ballooning property taxes, and of expanding licensing requirements and fees.

Instead, Rhode Island’s emphasis should be on getting people, especially young people, back to work, regardless of their field or pay scale.

***

MEDIA RELEASE: July 24, 2012

A 28.3% teen unemployment rate is sinking career building opportunities for Ocean State youth according to a report released today by the Rhode Island Center for Freedom and Prosperity. This unemployment rate has more than doubled in recent years to become the worst in New England, and demonstrating even further weakness in the teen sector, the report also highlights that the number of hours worked has dropped by over 40%.

“If our state is to rebound in the long term, we need our working-age youth to learn to become productive. As part of their transition into a career that fosters self-reliance, teens are looking for valuable workplace experience and resume building, in addition to a little pocket change”, said Mike Stenhouse, CEO for the Center. “Unfortunately our overly burdensome regulatory and tax structure, along with statewide minimum wage increases, are resulting in fewer opportunities for everyone and disproportionately harm our teens. This category would grade-out at yet another F for our state,” continued Stenhouse, referring to the Competitiveness Report Card published earlier this year by the Center.

According to the report, high minimum wage states had a 24.3% teen unemployment rate, compared with 21.7% for states at the federally mandated rate. Further, Rhode Island’s recent minimum wage hikes will cost almost 600 area teenagers a chance at an entry level job. Even for those young adults who were fortunate enough to find work, the average hours worked plummeted to 6.1 per week from 10.7.

As about 70% of working teens are hired in the retail or leisure/hospitality industries, the Center recommends two policy changes: lowering the state minimum wage rate to federal levels; and a phase-out the the state sales tax, which would not only reinvigorate the state’s economy, but would be especially favorable for the retail industry, creating new job opportunities for younger Rhode Islanders.

Today, July 24, is the National Day of Action to Raise the Minimum Wage. “The RI Center for Freedom & Prosperity categorically rejects this ill-informed policy push. A minimum wage hike is yet another regulation that strangles businesses; our report provides clear evidence of the negative, unintended consequences that meddling in complex economic issues can often bring about,” concluded Stenhouse.

The complete teen unemployment report can be downloaded from the Center’s website at www.RIFreedom.org .

Earlier this year, the Center published a policy brief detailing the negative effects of the state’s occupational licensing policies on opportunities for low income and entry level workers. Another report – Zero.Zero – detailed the positive economic effects of eliminating the state sales tax.

The Rhode Island Center for Freedom and Prosperity, a non-partisan public policy think tank, is the state’s leading free-enterprise advocacy organization. With a credo that freedom is indispensable to citizens’ well-being and prosperity, the Center’s mission is to stimulate a rigorous exchange of ideas with the goal of restoring competitiveness to Rhode Island through the advancement of market-based reform solutions.

Right To Work

Right To Work = Freedom for RI Workers

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Freedom of Association for Ocean State Workers

Introduction

Today, in 23 states in America, workers have the freedom under “Right-to-Work” (RTW) laws to decide whether or not to pay union dues. Indiana became the twenty-third state on that list in February of 2012, bringing the workers of the Hoosier State renewed hope in an economy that has seen few glimmers of light.

Rhode Islanders are suffering from a severely weak economy and our state needs to seek every competitive opportunity it can in order to attract and grow jobs. As demonstrated by the Report Card on Rhode Island Competitiveness[1], by many measures, Rhode Island is excessively uncompetitive in both New England and nationally, when it comes to growing and attracting business and high-paying, sustainable jobs.

One of the single most effective ways to provide the Ocean State with a new competitive edge is passing Right-To-Work legislation. Indiana earned itself a major competitive advantage by becoming the only state in the Rust Belt to enact a Right-To-Work law.

Policy Recommendation

Rhode Island should become the 24th Right-To-Work state as part of a larger agenda to re-invigorate the state economy. RTW would give the Ocean State a major advantage over its neighbors by making it the only New England state with RTW protections for its citizens–without costing the state a dime in revenue.

Rhode Island must act now – while there is still an advantage to gain. New Hampshire is actively considering RTW legislation and the debate has begun in other New England states as well.The Ocean State cannot afford to also lag behind in this vital policy area, which can be a catalyst for job growth… nor can Rhode Island workers wait.

Background

Compared to the rest of New England, notwithstanding the rest of the country, the Rhode Island economy is not competitive. According to our Center’s recently released Competitiveness Report Card, Rhode Island scores an F in five out of ten major categories, including “Tax Burden” and “Business Climate.” The Ocean State can rebound from this extended economic slump, and should begin its recovery by undoing one of the greatest impediments to both progress and liberty: compulsory unionism.

Right To Work States as of Feb. 2012

Despite the anti-worker propaganda from the union leadership who depend on mandatory dues to fund their own multi-million dollar enterprises, passing RTW legislation in Rhode Island will not suddenly ban unions or allow unsafe or exploitative business practices. On the contrary, RTW legislation is not an attack on organized labor, but rather provides a framework that restores the rights of workers to choose whether or not they wish to be in a union.

Simply stated, it allows workers the choice to either affiliate with a union and pay dues, or to opt out of the union system.

RTW legislation typically includes eliminating onerous laws and regulations that pressure workers — overtly or otherwise — to join unions whether or not they feel it is within their best interests. Under a RTW measure, workers would be protected from being fired or harassed if they choose not to pay union dues.

According to Mike Brownfield of the Heritage Foundation:

“It’s understandable that states would want the benefits that Right-to-Work brings, but it’s also understandable why unions oppose it so strongly. When Idaho and Oklahoma passed Right-to-Work laws, union membership fell 15 percent. Likewise, the forced dues payments the unions collected plummeted right along with their membership. Right-to-Work would put money directly into the pockets of private-sector workers.”[2]

RTW is only a danger to unionism as an industry of ‘political’ machinery, not to the idea of unionism itself. And in the process of restoring the basic civil liberties of Rhode Island workers and allowing them to decide for themselves about union membership …

… RTW would make Rhode Island far more economically competitive and will increase economic freedom for its citizens.

Freedom and Prosperity

Most importantly, RTW is about individual freedom. Robert Barro, a professor of economics at Harvard University and a senior fellow at Stanford University’s Hoover Institution, notes that while unions were originally subject to antitrust legislation in the late 19th century, savvy politicking by organized labor was able to obtain exemptions in the early 20th century. And subsequently, unions were able to use this exemption to negotiate “union shop” laws, which essentially forced workers to join unions.

“From the standpoint of civil liberties,” notes Barro in a Wall Street Journal Op-Ed, “the individual right to work—without being forced to join a union or pay dues—has a much better claim than collective bargaining.”[3]

Depriving workers of their right of association is both undemocratic and economically ruinous. The ability of unions to use their unique and virtually unassailable leverage in states where unionism is mandatory has — as the devastation of the automotive and railroad industries well-underline[4] — extracted such concessions from private industries (and, in some cases, the public) to handicap economic growth, raise unemployment, and stultify necessary technological innovation.

In times of massive capital investments in factories and machinery, these negative effects were small compared to the cost of factory relocation, but in this global and post-industrial economy such assets are essentially portable, and a shift to a lower cost labor environment is viewed as a sound business practice rather than an insurmountable hurdle. That means slower growth and lost jobs.

Multiple studies have confirmed the relationship between forced unionism and negative growth and, conversely, the relationship between right to work and positive economic growth:

Manufacturing Growth: One study found that “cumulative growth of employment in manufacturing (the traditional area of union strength prior to the rise of public-employee unions) in the right-to-work states was 26 percentage points greater than that in the non-right-to-work states.”[5]

New Business Growth: Another study, published by the Office of Senator Jim DeMint (R), clearly shows that despite representing only 40.3 percent of the U.S. population, Right-to-Work states can claim almost 60 percent of new business growth between 1993 and 2009.[6]

Gross State Product Growth: Arthur B. Laffer and Stephen Moore noted in the Wall Street Journal last year, “[o]ver the past decade (2000-09) the right-to-work states grew faster in nearly every respect than their union-shop counterparts: 54.6% versus 41.1% in gross state product, 53.3% versus 40.6% in personal income, 11.9% versus 6.1% in population, and 4.1% versus -0.6% in payrolls.”[7]

Job Growth: James Sherk of the Heritage Foundation found RTW is good for jobs: “Right-to-work states are much more attractive for businesses investment. Unionized firms earn lower profits, invest less, and create fewer jobs than comparable nonunion firms . . . of neighboring counties on state borders with and without right-to-work laws . . . manufacturing jobs in counties in right-to-work states is one-third higher than in adjacent counties in non–right-to-work states. Right-to-work laws attract jobs.”[8]

Migration Gains: Richard Vedder, the Edwin and Ruth Kennedy Distinguished Professor of Economics at Ohio University, examines the national movement of people and economic growth toward RTW states and concludes: “The proportion of Americans living in right-to-work states has risen noticeably over the years, and only a small part of that is driven by new states adopting such laws. People move in extraordinary numbers to right-to-work states from states where union pressure has prevented the adoption of such laws. Moreover, the greater flexibility for workers and employers offered where right-to-work exists has contributed to higher rates of economic growth rates in the right-to-work environment.”[9]

Wage Growth: W. Robert Reed have found that RTW leads to both greater employment and higher wage growth.[10] [11]

Finally, RTW creates higher wages. According to Paul Kersey at the Mackinac Institute: “Then there is the cost of living, which tends to be lower in right-to-work states. A study by the Missouri Economic Research and Information Center found that in 2009, after adjusting for the cost of living, annual per-capita disposable income was $35,543 in right-to-work states, compared to $33,389 in non-right-to-work states. That equates to a $2,154 premium each year for those living in right-to-work states.”[12]

There is no question that Rhode Island could certainly use the clear competitive advantage that RTW would bring–a much needed economic shot in the arm.

Reduces Corruption of the Political Process

Disproportionate union power is not only troubling from the standpoint of individual liberty and economic prosperity, but also when considering the integrity of the political system. Union dues, which are often collected via intrusive anti-worker forced unionization laws, are often recycled through a system that has essentially allowed Big Labor to throw its institutional and financial support to the candidates they choose: inevitably, those that endorse or at least comply with their monopolistic tendencies.[13]

For Rhode Island, which continues to suffer from the extended doldrums of the economic crisis, the business-as-usual approach to public policy needs to come to an end. Making the Ocean State a Right-To-Work state is an excellent way to begin and to improve competitiveness immediately while making great strides for civil liberty and political integrity.

A longstanding majority (in fact, a super-majority for many decades now) of Americans support a worker’s right to choose whether to join a union[14], a fact that is perhaps reinforced by the dwindling numbers of private sector unions. It is illustrative of the money and power at stake in this political debate when we consider that less than half of U.S. states are RTW despite the clear preferences of the public.

Conclusion

Rhode Island desperately needs to initiate comprehensive and fundamental public policy reform if it hopes to regain its competitive status. One of the furthest-reaching and simplest reforms that would not cost the state a dime would be to pass Right-To-Work legislation.

With Right-To-Work comes significant and demonstrable economic benefits — a shot in the arm that the Ocean State economy badly needs — but also the restoration of what is a fundamental civil right of workers … freedom of association.

By nearly every measure shown in our Report Card on Rhode Island Competitiveness, the Ocean State is not competitive nationally and within New England. However, passing RTW legislation would allow the state the chance to be immediately competitive and worthy of a strong look by businesses and investors looking at the northeast.

The positive impact of worker choice in other states has been clearly demonstrated, and 23 states now see the benefit of worker freedom to their economies. For Rhode Island, the benefits and the urgency is clear: now is the time to do the ‘right’ thing.

* * *

This Policy Brief was jointly developed and co-edited by Giovanni Cicione (Senior Policy Advisor to the Center) and J. Scott Moody (Adjunct Scholar to the Center), with research by Michael Cecire (Policy Analyst for the Center).

Download a printable version of this Policy Brief here …

End Notes

[1] RI Center for Freedom and Prosperity, “Report Card on Rhode Island Competitiveness, http://www.rifreedom.org/2012/02/rhody-fails-report-card/

[2] Brownfield, Mike, “Morning Bell: Right to Work Head to Indiana,” The Foundry, January 30, 2012. http://blog.heritage.org/2012/01/30/morning-bell-right-to-work-heads-to-indiana/?utm_source=Newsletter&utm_medium=Email&utm_campaign=Morning%2BBell

 [3] Barro, Robert, “Unions vs. the Right to Work,” The Wall Street Journal, February, 28, 2011. http://online.wsj.com/article/SB10001424052748704150604576166011983939364.html .

 [4] Holcombe, Randall G. and Gwartney, James D., “Unions, Economic Freedom, and Growth,” CATO Journal, Vol. 30, No. 1, Winter 2010. http://www.cato.org/pubs/journal/cj30n1/cj30n1-1.pdf

 [5] See: “The Location of Industry: Do States’ Policies Matter? Regulation, Vol. 23, No. 1, 2000,47-50 . http://www.cato.org/pubs/regulation/regv23n1/holmes.pdf

 [6] Report from U.S. Senator Jim DeMint, “Right-to-Work States are Winning the Future,” May 2011. http://demint.senate.gov/public/?a=Files.Serve&File_id=88760fc5-0ac6-4e6c-91b5-6ba8b17fd06e .

 [7] Laffer, Arthur B. and Moore, Stephan, “Boeing and the Union Berlin Wall,” The Wall Street Journal, May 13, 2011. http://online.wsj.com/article/SB10001424052748703730804576317140858893466.html?mod=WSJ_Opinion_LEADTop

 [8] Sherk, James, “Right to Work Increases Jobs and Choices,” WebMemo #3411, November 9, 2011. http://www.heritage.org/research/reports/2011/11/right-to-work-increases-jobs-and-choices#_ftn6

 [9] Vedder, Richard, “Right-To-Work Laws: Liberty, Prosperity, and Quality of Life,” Cato Journal, Vol. 30, No. 1, Winter 2010, pp. 171-180. http://www.cato.org/pubs/journal/cj30n1/cj30n1-9.pdf

 [10] Reed, W. Robert and Wilbanks, James R., “The Impact of Right-To-Work on State Economic Development: Evidence from Ohio,” Presented at the Western Economic Association Meetings, San Francisco, CA, 2001.

 [11] Reed, W. Robert, “How Right-To-Work Laws Affect Wages,” Journal of Labor Research. http://www.econ.canterbury.ac.nz/personal_pages/bob_reed/Papers/RTW_Wages_Paper.pdf

 [12] Kersey, Paul, “What a Right-to-Work Law Will Mean for Indiana,” Mackinac Center for Public Policy, January 19, 2012. http://www.mackinac.org/16333

 [13] “Organized Labor’s Forced Dues-Funded ‘In Kind’ Campaign Contributions Undermine Representative Government,” Fact Sheet, National Right to Work Committee, March 18, 2003. http://www.nrtwc.org/FactSheets/UnionSpendingFactSheet.pdf .

 [14] “74% Favor Right-to-Work Law Eliminating Mandatory Union Dues,” Rasmussen Reports, January 31, 2012. http://www.rasmussenreports.com/public_content/business/jobs_employment/january_2012/74_favor_right_to_work_law_eliminating_mandatory_union_dues

 

Collective Bargaining Reform could Save R.I. $252 million per year

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Collective Bargaining CostsExcessive Government Worker Compensation Doubles the State Budget Shortfall, Reform would Disrupt the Union-Policymaker quid pro quo.

A study released this week by the Goldwater Institute details the crippling financial impact of public-sector unionization. The study projects that a ban on collective bargaining and contracts could save Ocean State taxpayers $252 million per year in excessive government worker compensation. These savings are more than double the estimated state budget shortfall currently facing Rhode Island.

The Goldwater study cites information from the U.S. Bureau of Labor Statistics that shows, on average, state employee wages are 44% higher than private sector wages. Further, the study shows that unionized state employees nationwide earn 42% more than state employees that don’t belong to a union. Following the Virginia model, the first state to ban collective bargaining and collectively bargained contracts for government workers, savings for taxpayers nationwide could reach over $49 billion annually, and $252 million in Rhode Island alone.

“The ever-increasing total cost of employment for unionized government labor – annual compensation plus benefits – is a cost item we simply we may not be able to afford. The recent state pension reform crisis, along with our municipal pension disasters, make it clear that Ocean State taxpayers have been squeezed dry by public-sector unions”, said Mike Stenhouse, CEO of The Rhode Island Center for Freedom and Prosperity. “This study reinforces what Franklin Roosevelt told us more than 70 years ago – that the concept of public-sector unions is ‘unthinkable and intolerable’. It is disturbing that the very money taken from the pockets of working Rhode Islanders is used to reinforce the political power of many unions, which gives them added influence so that they can fleece even more money from taxpayers. If policymakers seek to address the long-term structural deficits in our budget, this is one area that must now be considered before we cut into social services.”

“The citizens of Rhode Island have always expressed a strong desire to help the least-fortunate among us; but do government workers fall in that category?” Stenhouse questioned. “With the threat of tax increases and cuts to our social safety net, the idea of paying bloated union wages and benefits is especially poignant. It’s time to face the facts: public-sector unions drain precious resources away from Rhode Island’s sick, elderly, and poor. We’re at the point where we cannot continue our current spending levels; as a state, we’re going to have to prioritize. Difficult decisions must be made; the possibilities from this study add compelling information to the debate.”

More than money is at stake, according to Nick Dranius from the Goldwater Institute, who went on to say that “collective bargaining for public unions is particularly problematic because government sector unions help elect their employers, and their employers often return the favor by raising taxes to pay for the benefits the unions then demand. A ban on government sector collective bargaining helps disrupt this all-too-common quid pro quo. To solve this problem, more than a ban on collective bargaining and collectively bargained contracts is needed. Statesmen must restore and enforce the ideal that the American form of government is a public trust. Reform should be rooted in a legal framework that underscores government officers and employees are public servants, who owe undivided loyalty to the public.”

The study also notes a study from the Kennedy School at Harvard University, showing an increase in interest costs to states with high public-sector union membership:

“The study’s authors note that union strength in a particular level of government…can indicate to bond markets that those governments may not be able to overcome the political pressure to implement budget-conscious measures when necessary.  “Those states with a more heavily unionized government sector tended to have higher borrowing costs relative to other states with a less unionized government sector.”

 The full study is available here: http://goldwaterinstitute.org/sites/default/files/12-01%20Collective%20Bargaining%20PDF.pdf

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