Janus ruling could affect wages for 5 million workers and shrink U.S. economy by up to $33 billion

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Chicago, IL:  The U.S. Supreme Court’s ruling in the case of Janus v. American Federation of State County and Municipal Employees, Council 31 could have devastating effects on paychecks and the national economy, according to a new study by the Illinois Economic Policy Institute and Project for Middle Class Renewal at the University of Illinois at Urbana-Champaign.

Read the report, “After Janus:  The Impending Effects on Public Sector Workers from a Decision Against Fair Share,” here.

Read an Executive Summary of the report here.

The Janus case is a challenge to an Illinois state law—supported by a 41-year Supreme Court precedent—that requires public sector workers represented by unions to pay fees (called “fair share fees”) that help cover the cost of the collective bargaining services that they receive from the union.  Twenty-three states and the District of Columbia have “fair share” laws on the books that affect more than five million teachers, firefighters, police officers, nurses, and other public sector workers.

Many are already bracing for the Court to strike down these fee requirements, which would significantly weaken unions by requiring them to represent workers for free.

“Twenty-seven U.S. states have already imposed the so-called ‘right to work’ regulations on public sector employees that could be nationalized by the Janus case,” said study co-author and ILEPI Policy Director Frank Manzo IV. “Those rules have already resulted in lower wages and weaker economies, so the data shows that their expansion could have extremely negative consequences for workers and the nation as a whole.”

Using Bureau of Labor Statistics and Census data and regression analyses to control for observable economic factors, the study concludes that imposing “right-to-work” in the public sector would have the following impacts:

• Declines in Union Membership: The U.S. labor movement would lose 726,000 dues-paying members from the public sector, resulting in weakened collective bargaining power.
• Declines in Wages: With weaker unions, public sector workers would see an average wage cut of $1,810 per year. Annual wages for state and local government employees would drop by an average of 3.6% and annual wages for public school teachers would drop by an average of 5.4%.
• A Shrinking Economy: The wage cuts would have a negative effect on consumer spending that would ripple across the economy, reducing output by as much as $33 billion. Even if public sector labor cost savings are redirected into tax cuts, Janus would still contract the economy by at least $11 billion.

Researchers note that Janus would have the biggest economic impact in the nation’s largest states—including California, New York, and Illinois. African Americans would be disproportionately impacted because they are more likely to work in state and local government and are more likely to be union members.

“There is a clear link between rates of public sector unionization, wages, and the strength of America’s middle class,” Manzo added. “The evidence unambiguously shows that so-called ‘right to work’ regulations erode all three.”

Beyond the immediate effects on unions and the economy, researchers also point to the effect that declining wages could have on the public service occupations that once served as ladders into the American middle class.

“With public school teachers marching on state capitols to address already low wages and difficult working conditions, it’s hard to overstate the potential impact of a Janus ruling that further weakens public sector collective bargaining,” added University of Illinois Professor and Project for Middle Class Renewal Director Dr. Robert Bruno. “A decision that invalidates four decades of Supreme Court precedent on fair share fees would not only erode the livelihoods of five million public sector workers and shrink the economy, it would make it harder to recruit top talent to become teachers or perform other vital public services.”

The U.S. Supreme Court is expected to issue its ruling in the Janus case sometime this summer.

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The Illinois Economic Policy Institute (ILEPI) is a nonprofit organization which uses advanced statistics, reliable surveying techniques, and the latest forecasting models to develop timely and dynamic analysis of policy issues affecting the Illinois economy.

The Project for Middle Class Renewal (PMCR) at the University of Illinois investigates the working conditions of workers in today’s economy and elevates public discourse on issues affecting workers with research, analysis and education in order to develop and propose public policies that will reduce poverty, provide forms of representation to all workers, prevent gender, race, and LGBTQ+ discrimination, create more stable forms of employment, and promote middle-class jobs.