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Proposed Rauner Budget Hammers Low-Income and Middle-Class Families in Illinois

Frank Manzo IV

Frank Manzo IV is the Policy Director of the Illinois Economic Policy Institute (ILEPI). Visit ILEPI at www.illinoisepi.org or follow ILEPI on Twitter @illinoisEPI.

Last week, ILEPI fact-checked claims made by Governor Rauner that were most important to his policy agenda. Governor Rauner has now put some of his untrue and misleading claims into action in his budget proposal.

This afternoon Governor Rauner proposed a $4.18 billion reduction in state spending, an 11.7 percent cut from last year (without adjusting for inflation). The budget proposal comes after Rauner paid $120,000 to consultant Donna Arduin for four months of service. Keep in mind that Rauner has (incorrectly) asserted that state employee salaries are out-of-control while increasing the salaries of his top officials by 36 percent higher than their predecessors were paid under former Governor Quinn.

Among the $4.18 billion in proposed cuts, the Rauner budget reportedly includes: Continue reading “Proposed Rauner Budget Hammers Low-Income and Middle-Class Families in Illinois”

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Fact Checking Governor Rauner

Frank Manzo IV

Frank Manzo IV is the Policy Director of the Illinois Economic Policy Institute (ILEPI). Visit ILEPI at www.illinoisepi.org or follow ILEPI on Twitter @illinoisEPI.

Today the Illinois Economic Policy Institute (ILEPI) released A Turnaround or a Turn Aground? Fact Checking Governor Rauner’s First Claims (PDF). The report evaluates statements made by new Governor Bruce Rauner during his first month in office. Governor Rauner’s ambitious policy agenda aims to fix Illinois’ fiscal crisis mainly through a constitutional amendment on public sector pensions, changes to the state’s tax code, and adjustments to the state’s labor laws– including banning political contributions from certain labor unions and implementing local right-to-work laws which reduce the power of unions. Would his proposals, if enacted, accomplish his goal of making Illinois a “competitive” and “compassionate” state? Are his policy proposals supported by evidence and fact? Of the eleven claims analyzed, ILEPI finds that:

  • Two (18.2 percent) were found to be true,
  • Three (27.3 percent) were rated as only half true, and
  • Six (54.5 percent) were deemed to be false.

A summary of the fact check is below:

ONLY HALF TRUE: Illinois Job Creation Lags Behind Neighboring States

Rauner’s numbers are misleading and may be out of date. While the Illinois labor market has lagged slightly behind the economies of neighboring states, the actual disparity is much smaller than Rauner suggests. The largest year-over-year unemployment rate decline in America occurred in Illinois, where the unemployment rate fell by 2.7 percentage points. Using correct payroll data, this claim is found to be only half true.

FALSE: Illinois is Currently a Bad Place to Do Business

Outcomes matter. Rauner uses rankings of corporate executives to suggest that Illinois is a terrible place to do business, but the claims have no predictive power of a state’s unemployment rate and are negatively correlated with average wages in a state. A good state for business should be statistically related to lower unemployment and higher worker wages. The appropriate policy is to attract high-road employers with sound infrastructure and a skilled workforce. After completing the rest of the story, the claim that Illinois is a bad state in which to do business is found to be false.

TRUE: Raising the Minimum Wage to $10.00 Will Increase Earnings

To generate full economic benefits, the minimum wage should be expanded to cover employers with 2 or more employees, indexed to the chained-Consumer Price Index, paired with an expansion of the state’s Earned Income Tax Credit, and be applicable to workers in their first 90 days of employment. Without these additions to the new minimum wage law, this claim will only be half true. With meaningful change, this claim is found to be true.

FALSE: Right-to-Work Would Help Workers in Illinois Continue reading “Fact Checking Governor Rauner”

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A Quick Comment on Government Unions in Illinois

Frank Manzo IV

Frank Manzo IV is the Policy Director of the Illinois Economic Policy Institute (ILEPI). Visit ILEPI at www.illinoisepi.org or follow ILEPI on Twitter @illinoisEPI.

Yesterday the Illinois Policy Institute (IPI) released “The Anatomy of Influence: Government Unions in Illinois,” perhaps-not-so-coincidentally on the same day that Governor Rauner passed an executive order prohibiting public sector unions from paying fair share fees to fund union activities. In usual IPI fashion, the report only tells a small component of the whole story. Below are a few thoughts on the report.

Report quote: ” At both the IEA and the Illinois Federation of Teachers or IFT, the top 20 highest-paid employees all are paid salaries of more than $100,000 annually.”

The IEA and the IFT represent about 214,000 workers in Illinois combined, according to the report. These 40 individuals’ salaries represent 0.02% of all members. By contrast, data from the American Community Survey 1-Year Estimates for 2013 reveal that the Top 10% of all workers in Illinois earned at least $100,000 in real total income and the Top 1% earns $475,000 or more [Note: See the STATA output above, which reports weighted estimates for 59,743 Illinois residents who are in the labor force and are employed]. The fact that 40 salaries in the IEA and IFT are above $100,000 is utterly meaningless when contrasted with the rest of the Illinois labor market.

There is a myth about the “overpaid” labor union leader. In a report released last month with the University of Illinois Labor Education Program, ILEPI debunked that myth (PDF) from a national perspective. The report provides a complete story by comparing and contrasting (perhaps a novel idea these days…). We concluded:

Unions raise and compress wages, and union leaders are compensated accordingly. The typical labor union is neither large nor lucrative, with average compensation packages to employees that are similar to social advocacy, community services, and worker services groups. Payroll costs are much lower in labor organizations than they are in business associations (such as chambers of commerce), in law offices, and among managers of companies and enterprises. Additionally, labor leaders and top administrative staff are not paid more than the market rate for other leaders and administrators. In fact, they tend to earn far less than comparable CEOs and executives in relevant industries. Thus, there is no evidence to support any claim of “Big” labor, with unions governed by overcompensated leaders.

Once again, here is a link to that paper.

Report quote: “The Illinois Policy Institute reviewed campaign-finance reports from 2002 to 2014 and found the five major government unions in Illinois spent a combined $46 million in political campaigns in that time.”

According to FollowTheMoney.org, $1.29 billion has been contributed to statewide political campaigns in Illinois since 2002. In the context of all campaign contributions, the $46 million influence of public sector unions represents just 3.6 percent of all campaign contributions. Furthermore, during that exact same time, Bruce Rauner contributed $39.6 million to political campaigns. Once again, that is $46 million dollars representing hundreds of thousands of public sector workers (3.6 percent) versus nearly $40 million from one businessman (3.1 percent). Let’s get real about the influence of money in politics here. Continue reading “A Quick Comment on Government Unions in Illinois”

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Right-to-Work States are Free-Rider States

Frank Manzo IV

Frank Manzo IV is the Policy Director of the Illinois Economic Policy Institute (ILEPI). Visit ILEPI at www.illinoisepi.org or follow ILEPI on Twitter @illinoisEPI.

Today, the Illinois Economic Policy Institute and the University of Illinois jointly released Free-Rider States: How Low-Wage Employment in “Right-to-Work” States is Subsidized by the Economic Benefits of Collective Bargaining [PDF]. The report has three main findings:

  1. Right-to-work laws have negative impacts on the public budget;
  2. Workers in collective-bargaining states are subsidizing the low-wage model used by employers in right-to-work states; and
  3. Illinois would have been worse off if it was a right-to-work state in 2013.

A “right-to-work” law reduces worker earnings by 3.2 percent, reduces union membership by 9.6 percentage points, reduces the share of workers covered by a health insurance plan (3.5 percentage points) and by a pension plan (3.0 percentage points), and increases the poverty rate among workers by 0.9 percentage points.

All of this has negative impacts on the public budget. Lower worker earnings decrease income tax contributions: a right-to-work law lowers the after-credit federal income tax liability of workers by 11.1 percent. Lower worker earnings also increase the chances of a worker needing to rely on government assistance programs: workers in collective-bargaining states receive 18.9 percent less in tax relief from the Earned Income Tax Credit and 14.1 percent less in food stamp value than their counterparts in right-to-work states.

Additionally, right-to-work laws have inconclusive impacts on employment. While the report finds that they are associated with a small increase in hours and weeks worked by employees, this is likely because they are forced to work more time to earn anything close to their annual income in a collective-bargaining state. Furthermore, two case-studies using data from the Bureau of Labor Statistics illustrate how right-to-work states have negligible impacts on total employment:

  1. In March 2012, Indiana enacted right-to-work. From March 2012 through July 2014, the Indiana unemployment rate fell from 8.0 percent to 5.9 percent– a 2.1 percentage point drop. At the same time, the unemployment rate of collective-bargaining Illinois fell by 2.0 percentage points. This difference is statistically insignificant.
  2. In January 2013, Michigan enacted right-to-work. From January 2013 through July 2014, the Michigan unemployment rate fell from 8.9 percent to 7.7 percent– a 1.2 percentage point drop. At the same time, the unemployment rate of collective-bargaining Illinois fell by 2.4 percentage points. This difference is significant, and shows how a right-to-work law does not lead to improved employment outcomes.

Continue reading “Right-to-Work States are Free-Rider States”

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McHenry County Should Adopt Its Prevailing Wage Ordinance

Frank Manzo IV

Frank Manzo IV is the Policy Director of the Illinois Economic Policy Institute (ILEPI). Visit ILEPI at www.illinoisepi.org or follow ILEPI on Twitter @illinoisEPI. The call by McHenry County Board Members to partner with other county governments to challenge Illinois’ prevailing wage determinations would be a waste of government resources, according to a new study by the Illinois Economic Policy Institute. The report, Building a Strong McHenry: How Prevailing Wage Works [PDF], finds that prevailing wage is necessary to prevent government bodies– such as the McHenry County Board– from using their massive purchasing power to undercut the established labor market. The policy is also … Continue reading McHenry County Should Adopt Its Prevailing Wage Ordinance

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Prevailing Wage Encourages Self-Sufficient Workers

Frank Manzo IV

Frank Manzo IV is the Policy Director of the Illinois Economic Policy Institute (ILEPI). Visit ILEPI at www.illinoisepi.org or follow ILEPI on Twitter @illinoisEPI. Taxpayers are subsidizing the low-wage, low-skill, low-quality system in states without a prevailing wage law, according to a report released jointly today by the Midwest Economic Policy Institute and Building Strong Communities. The Policy Brief, Self-Sufficient Construction Workers: Why Prevailing Wage Laws are the Best Deal for Taxpayers [PDF], finds that prevailing wage laws (PWLs) build local middle-class jobs and drive economic development through increased consumer demand. By paying a living wage and supporting apprenticeship training programs, PWLs encourage … Continue reading Prevailing Wage Encourages Self-Sufficient Workers

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Federal Income Taxes for Illinois Workers

Frank Manzo IV

Frank Manzo IV is the Policy Director of the Illinois Economic Policy Institute (ILEPI). Visit ILEPI at www.illinoisepi.org or follow ILEPI on Twitter @illinoisEPI. A July 8, 2014 Economic Commentary by the Illinois Economic Policy Institute investigates the effective tax rates paid by Illinois workers across occupations. The study– Illinois Federal Income Taxes: By Occupation, 2011-2013 [PDF]– finds five key takeaways: The majority of workers in Illinois (60 percent) pay federal income taxes; The average effective federal income tax rate for all Illinois workers is 13 percent (but 21 percent for only those workers with any federal income tax liability); The average effective … Continue reading Federal Income Taxes for Illinois Workers

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The CCW is Common Sense Construction

Frank Manzo IV

Today, the Midwest Economic Policy Institute released Common Sense Construction: The Economic Impacts of  Indiana’s Common Construction Wage with the University of Illinois School of Labor and Employment Relations and Smart Cities Prevail. The report finds that Indiana’s Common Construction Wage (CCW) promotes positive labor market outcomes for both construction workers and contractors. Full report [pdf] One-page summary [pdf] Ten facts about the Indiana CCW: 1. The Common Construction Wage keeps Hoosier jobs local. (For more, see pages 5 and 11-13) 2. The Common Construction Wage does not increase total construction costs for public projects. (Pg. 4) 3. The Common Construction Wage promotes an upwardly-mobile, high-road economy for working families. (Pg. … Continue reading The CCW is Common Sense Construction

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ICYMI: ILEPI on Chicago Tonight Discussing Minimum Wage

Frank Manzo IV

Frank Manzo IV is the Policy Director of the Illinois Economic Policy Institute (ILEPI). Visit ILEPI at www.illinoisepi.org or follow ILEPI on Twitter @illinoisEPI.

 

On May 20, 2014, ILEPI Policy Director Frank Manzo IV was a panelist on WTTW’s Chicago Tonight with Ted Dabrowski discussing the pros and cons of raising the minimum wage in Illinois. Manzo supported raising the minimum wage to $10.00 per hour while Dabrowski has endorsed abolishing Illinois’ minimum wage altogether. Here is a link to the segment, and below is additional information on the effects of raising the minimum wage in Illinois.

 

Should we raise the minimum wage to $10 an hour?

The Illinois economy is still recovering from the Great Recession. The unemployment rate is about one and a half percentage points lower today than it was one year ago. But the recovery has seen an ongoing rise in income inequality in the labor market. To partially offset the income gap– independent of any action (or nonaction) at the federal level– Illinois should raise the minimum wage to $10 an hour.

In 2012, 1 million of the state’s 6 million workers earned less than $10 an hour. Of these one million low-wage earners, 57 percent were female, 45 percent were nonwhite, and 60 percent worked full-time (35 hours a week or more). In a study co-authored with the University of Illinois, ILEPI found that raising the minimum wage to $10 would increase worker income by $2 billion for these low-wage workers and lift 60,000 to 100,000 Illinois residents above the poverty line, reducing reliance on government programs and lowering costs to taxpayers. These workers would then spend that new income back in the economy, resulting in $7 billion in new economic output, and either a very small drop or a very small gain in employment. Thus, in Illinois, a state where the cost of living is higher than the national average, a raise to $10 would be beneficial to the economy. See the full report here [pdf].

Why does the minimum wage have a stimulative impact? What about economic theory which says it reduces jobs?

We know that reality is, unfortunately, far more complex than economic theory. Research shows little to no discernible impact of the minimum wage on employment. Most estimates on the supposed reduction in jobs are between zero percent and less than a fraction of a percent— it would be a false representation of economic research to suggest otherwise. We also know that poorer Americans spend higher shares of their incomes in the economy than richer Americans. One 2009 study by the Federal Reserve Bank of Chicago found that “spending increases substantially after a minimum wage hike.” For every $1 increase in the minimum wage, families with a minimum wage earner raise spending by $744 to $869 per year.

Isn’t the minimum wage a job killer for small businesses? Continue reading “ICYMI: ILEPI on Chicago Tonight Discussing Minimum Wage”

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Union Power in 2014: Significant but Waning

Frank Manzo IV

Frank Manzo IV is the Policy Director of the Illinois Economic Policy Institute (ILEPI). Visit ILEPI at www.illinoisepi.org or follow ILEPI on Twitter @illinoisEPI.

Today, the Illinois Economic Policy Institute (ILEPI) released a new Research Report on the Illinois labor movement. Co-authored with researchers from the University of Illinois Labor Education Program (LEP) and University of Chicago School of Social Service Administration (SSA), The State of the Unions 2014: A Profile of Unionization in Chicago, in Illinois, and in America ­(PDF) analyzes the current state of labor unions and the course of unionization. The report investigates unionization rates and the impact of unions on wages across demographic, education, sector, industry, and occupation classifications.

Below are the main findings of the report, which is available online at this link (PDF):

  • There are approximately 116,000 fewer union members in Illinois today than there were in 2003 (and about 1.26 million fewer nationwide);
  • The decline in union members was primarily the result of decreases in male unionization, white unionization, and private sector unionization;
  • Despite the long-term downward trends, however, unionization increased in Illinois last year (from 14.6 percent to 15.7 percent- or by about 50,000 new members);
  • The year-over-year gains were driven by increases in the unionization of Chicago area workers, female workers, African-American workers, public sector workers, and older workers. Indeed, while union membership rates for women, African-American workers, and the public sector have trended downwards nationally, unionization for these groups has risen in Illinois since 2003;
  • Employment in the utilities industry, construction industry, or public sector raises the chances that a given Illinois worker is a union member;
  • High school dropouts, non-citizens, and residents who live in rural communities are less likely to be unionized in Illinois;
  • Unions raise worker wages by 21.4 percent on average (20.3 percent on median) in Illinois, higher than the national average of 16.7 percent;
  • Illinois ranks 8th among the 50 states plus D.C. in terms of union wage premium; and
  • Union workers work 4.8 hours longer each week than nonunion workers in Illinois.

 

Separately, ILEPI has also released another Economic Commentary jointly with the University of Illinois Labor Education Program on the socioeconomic differences between union households and nonunion households in America. Union and Nonunion Households: General Social Survey, 2000-2012 (PDF) compares and contrasts individuals in the two types of households across many characteristics– including household composition, work and income traits, religiosity, political affiliation, and institutional confidence. Continue reading “Union Power in 2014: Significant but Waning”

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Collaborative Development: The Benefits of Public-Private Partnerships

Frank Manzo IV

Frank Manzo IV is the Policy Director of the Illinois Economic Policy Institute (ILEPI). Visit ILEPI at www.illinoisepi.org or follow ILEPI on Twitter @illinoisEPI.

A new ILEPI Policy Brief, released this morning, investigates the pros and cons of public-private partnerships in the construction industry. [Update: The Monitor article].

The report, Collaborative Development: The Pros and Cons of P3s on Construction Projects (PDF), finds that public-private partnerships (P3s)– such as the proposed Illiana Expressway– offer the potential for significant cost savings for the public sector. P3s allow governments to increase internal investment, capitalize on the efficiencies and innovations of private companies, and build infrastructure slightly less expensively and slightly more quickly. For the private sector, P3s provide stable assets (infrastructure facilities) with predictable long-term returns from user fees for portfolio diversification. P3s also allow private entities, backed by the government, to borrow cheaply.

The Policy Brief utilizes case studies to demonstrate how P3s may be mutually beneficial and discusses the expected positive benefits of three potential P3 projects in the Midwest: Continue reading “Collaborative Development: The Benefits of Public-Private Partnerships”

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Briefly: The Benefits of Raising the Minimum Wage

Frank Manzo IV

Frank Manzo IV is the Policy Director of the Illinois Economic Policy Institute (ILEPI). Visit ILEPI at www.illinoisepi.org or follow ILEPI on Twitter @illinoisEPI.   For a PDF one-page (double-sided) version of this post, click: http://www.scribd.com/doc/216145979/Minimum-Wage-Maximum-Benefit-March-17-2014.   REPORT SUMMARY With the support of more than two-thirds of the American public and six-hundred labor economists, raising the minimum wage should be an economic priority in 2014. Raises in the minimum wage have been found to have virtually no impact on employment. Although classical economics predicts that minimum wages lead to unemployment, economic research predominately finds that a 10 percent increase in the minimum wage … Continue reading Briefly: The Benefits of Raising the Minimum Wage