Unions Improve Public Budgets and Increase Voter Turnout

Two January 2018 working papers find that unions have important social impacts in America. The first finds that union members individually contribute about $1,300 more per year to public budgets than non-union workers. The second finds that so-called “right-to-work” laws reduce voter turnout by 2-3 percentage points because working-class Americans are less likely to be contacted through union get-out-the-vote efforts. These studies have important policy implications.

Two new academic studies show that unions have far-reaching impacts on the fabric of American society. While the impact of unions on the economy is generally well understood, their impact on public sector budgets and on U.S. elections has received less attention from policy researchers. Two January 2018 working papers provide new analysis on the social impact of unions.

Unions play an important role in the U.S. economy. It is widely accepted that union membership increases worker incomes. Estimates generally find that unions raise worker wages by between 10% and 17% for the average worker– with more recent studies showing impacts of about 11% or 12%. By benefiting working-class Americans most, unions reduce income inequality. The decline of unionization accounts for up to one-third of the rise in inequality in America. Moreover, unions reduce employee turnover and improve productivity by incentivizing or even investing in worker training– for example, joint union-employer programs account for the vast majority of apprenticeship training in the construction industry.

If unions raise wages and reduce inequality, then it logically follows that union members are likely to pay more in taxes and rely less on government assistance programs. Two economists at the University of Minnesota have now shed light on this idea in The Relationship between Union Membership and Net Fiscal Impact. How does union membership affect a workers’ “net fiscal impact” to public budgets, or the difference between taxes they pay and the cost of public benefits they receive? The authors look at federal income taxes, state income taxes, annual property taxes, the earned income tax credit (EITC), the child tax credit, welfare payments, food stamps, Medicaid, Medicare, and other taxes and programs.

“Union membership,” they find, “has a large, positive net fiscal impact. … Union members appear to pay more every year in federal, state, and local taxes than do similar non-union workers… [and] receive less in public benefits on average.”

The Table below shows the reported effect of union membership on incomes and “net fiscal impact” for five different types of workers– after controlling for other factors.

  • On average, union membership raises a worker’s annual income by nearly $4,700 per year. With higher incomes, union members contribute approximately $1,110 more in taxes and receive about $180 less in social safety net benefits than non-union workers– for a net fiscal impact of $1,290 per year.
  • Private-sector union members improve public budgets by about $1,700 more than non-union workers in the private sector.
  • Union members without bachelor’s degrees contribute nearly $1,600 more per year than comparable non-union workers.

NFI_Unions_Jan18

The estimates suggest that the 14.8 million union members across the United States in 2017 improved public balance sheets by $19.1 billion more than they would have if they did not have union cards. However, this impact could have been much larger. As unionization has declined, tax payments have decreased and more working families have relied on government assistance programs.

A second study, From the Bargaining Table to the Ballot Box: Political Effects of Right to Work Laws, was authored by researchers at Boston University, Columbia University, and the Brookings Institution. The report sought to assess the impact of curtailing unions (through so-called “right-to-work” laws) on elections, candidates for office, and public policy. The researchers compared counties in collective-bargaining states that border counties in “right-to-work” states.

The authors find that “right-to-work” laws have political and policy consequences. Right-to-work:

  • Reduces turnout in federal and state elections by 2-3%;
  • Reduces union political contributions by 2-3%;
  • Reduces “get-out-the-vote” (GOTV) contact to working-class Americans by 11%; and
  • Reduces the share of Congressmen and Congresswomen who come from blue-collar occupations by 1-3%.

The takeaway is that unions increase political engagement and involvement among working-class Americans. By weakening unions, “right-to-work” laws force unions to allocate more of their resources to one-to-one education on the benefits of union contracts and to internal organizing rather than political activities. The long-run effect is that fewer working-class Americans are contacted during campaigns– resulting in lower turnout– and fewer working-class Americans are elected to serve the public.

There are policy implications to both studies.

  • The impact on public budgets demonstrates that efforts to reduce union membership through “right-to-work” laws cause state, federal, and local tax revenues to fall while increasing reliance on government assistance programs. Collective-bargaining states are therefore “donor states” while right-to-work states are “free-rider” states.
  • The impact on voter turnout reveals that these efforts to weaken unions result in other legislation that reduces working-class incomes and increases economic inequality. The authors find, for example, that “right-to-work” laws make states less likely to raise their minimum wage rates, which support low-income workers, and more likely to repeal prevailing wage laws, which support blue-collar construction trades workers on publicly-funded projects.

Unions helped build America’s middle class. Unions raised worker incomes and reduced inequality. This new research shows that unions also positively contributed to public budgets– allowing governments to spend more on public services that combat poverty and invest more in public infrastructure and public education that grow the economy– and to voter turnout– electing officials with similar working-class backgrounds and enacting legislation that supports working-class families.

The decline of unions, should it continue, will have far-reaching consequences– both for the economy and for public policy.

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