Taxpayers Suffer Dearly, But Most Public Servants Benefit Little
(Click here to download the July 2014 National Right To Work Committee Newsletter)
It undoubtedly comes as no surprise to most regular readers of the National Right to Work Newsletter that state and local tax burdens are on average significantly more onerous in states where compulsory union dues are permitted than in states where they are prohibited.
In fact, data published in a report issued this April by the Washington, D.C.-based Tax Foundation, taken in conjunction with U.S. Census Bureau data, show that in 2011 state and local taxes combined consumed 10.7% of all personal income in the 28 states that then lacked Right to Work laws.
That same year, state and local taxes acounted for just 8.6% of personal income in the 22 states that protected employees Right to Work at the time. (Indiana’s and Michigan’s Right to Work laws took effect in 2012 and 2013, respectively.)
The 11 states with the heaviest state and local tax burdens in 2011 (New York, New Jersey, Connecticut, California, Wisconsin, Minnesota, Maryland, Rhode Island, Vermont, Pennsylvania and Massachusetts) are all forced-unionism.
Meanwhile, 10 of the 12 states with the least burdensome state and local taxes are Right to Work. On average, state and local taxes consumed a 25% higher share of personal income in forced-unionism states than in Right to Work states in 2011.
Above-Market Government Compensation Largely Accounts For States’ Higher Spending
The primary reason for the heavier average tax burden in Big Labor-controlled states is that state and local government spending per capita is substantially higher in those states.
And a recent study (“Overpaid or Underpaid? A State-by-State Ranking of Public-Employee Compensation”) by American Enterprise Institute scholars Andrew Biggs and Jason Richwine furnishes evidence indicating that above-market government compensation largely accounts for forced-unionism states’ higher spending.
According to the Biggs-Richwine study, state government employees across the country typically “receive greater compensation than similarly educated and experienced private-sector employees who work for large employers.”
However, the “compensation premium” for state government employees “is not uniform across the nation.”
In the average state, state government employees “receive a total compensation premium of around 10 percent relative to private-sector employment.”
In the seven states with the largest premiums — California, Connecticut, Illinois, New Jersey, New York, Pennsylvania, and Rhode Island — state government employees take in between 23% and 42% more in total salaries/wages and fringe benefits than comparable private-sector employees.
Forced Unionism Exacerbates Damage to Taxpayers
Not one of these states has a Right to Work law on the books protecting employees from termination for refusal to pay forced union dues or fees.
On the other hand, 13 out of the 20 states where state government and private-sector compensation of comparable employees are roughly the same (within six percentage points, one way or the other), have Right to Work laws.
National Right to Work Committee President Mark Mix commented: “Even absent compulsory unionism, the data show there is a strong tendency for government compensation to exceed the market rate.
“As the Biggs-Richwine study shows, there are zero states where private-sector compensation exceeds state government compensation of comparable employees by more than six percentage points. But there are 30 states where the reverse is true.
“Forced unionism exacerbates the damage to taxpayers. Roughly 40% of state and local government employees were subject to union monopoly bargaining in 2013, compared to just 7.5% of private-sector employees.
“To perpetuate and even tighten their control over the public-sector workforce, government union bosses routinely seek to divert as high a share as possible of compensation into fringe benefits rather than wages or salaries.
“In fact, as many observers have suggested and the Briggs-Richwine study confirms, in the U.S. as a whole cash compensation of public employees is somewhat lower than cash compensation of comparable private-sector employees.”
Union Boss-Negotiated Pension Plans a Bad Deal For Most Teachers
Mr. Mix continued: “Extraordinarily expensive public-sector pensions, health insurance, retiree health insurance, paid time off, and other fringe benefits more than make up for the difference.
“Government union bosses who seek and obtain such ‘perks’ publicly insist that they do so for the sake of public servants. But researchers who have examined such benefit plans carefully have found again and again that what is bad for taxpayers isn’t necessarily good for government workers.”
Mr. Mix specifically cited a 2013 study (“Better Pay, Fairer Pensions: Reforming Teacher Compensation”) by Marcus Winters and Josh McGee of the Manhattan Institute (MI).
The MI analysis showed that under the “defined-benefit” pension schemes almost always promoted by teacher union officials wielding monopoly-bargaining privileges, educators “accumulate relatively little retirement wealth for their first couple of decades” in the profession.
And this means the vast majority of teachers accrue only very small pensions over the course of their entire teaching career, because 70% of teachers leave the profession before they reach 20 years of service.
On the other hand, teachers who remain in the profession for 30 years or more receive pensions that are extremely generous by comparison with those obtained by private-sector employees whose cash salaries are comparable.
National Right to Work Legislation Needed To Restore Balance
“The insightful September 2013 Winters-McGee study for MI,” said Mr. Mix, “is just one of many pieces of evidence showing that government union officials who purport to wield their monopoly-bargaining power in ways that benefit all employees are either deluding themselves or lying.
“In the public and private sectors alike, monopoly-bargaining privileges are routinely wielded to benefit some employees at the expense of others. And Big Labor benefits most of all by keeping all employees dependent on the union for their future job security and potential improvements in their pay and benefits.”
An important step towards preventing union bosses from distorting government-sector labor markets to the detriment of taxpayers and many other citizens would be enactment of S.204 and H.R.946, the National Right to Work Act.
S.204 and H.R.946, respectively sponsored by Sen. Rand Paul (R-Ky.) and Congressman Steve King (R-Iowa), would revoke Big Labor’s license to force private-sector employees to pay union dues or fees, or be fired, in all 50 states.
“By requiring union bosses and their political machine to rely exclusively on voluntary contributions, the National Right to Work Act would go a long way towards ending the abusive practices that have resulted in a 25% higher average state and local tax burden in states where unionism is currently compulsory,” said Mr. Mix.