Fact Checking Governor Rauner

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Rauner’s numbers are misleading and may be out of date.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”

Right-to-Work States are Free-Rider States

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”

Union Power in 2014: Significant but Waning

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”

Right-to-Work’s Broken Promises

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.

Right-to-work has not worked in Indiana.

Nationwide, the unemployment rate has steadily ticked down and is nearing 7 percent. Last year, over 40,000 more business establishments opened than closed across America. The total number of Americans with a job is up almost 2 percent since February 2012. Employers are starting to hire again and consumer demand is slowly rising.

And with the passage of a right-to-work law on February 1, 2012 (which proponents claimed would attract businesses and create jobs), the Indiana economy has been spearheading the economic recovery, right?

Wrong.

An October 16, 2013 study (LINK) by the Illinois Economic Policy Institute (ILEPI), a new research and policy nonprofit, assessed right-to-work’s economic track record in Indiana thus far. Since the law went into effect, 779 more businesses have closed than have opened in Indiana, the unemployment rate has not fallen, and the total number of Indiana residents with a job has declined by 0.4 percent.

The verdict? So far the promises made by right-to-work’s supporters in Indiana have nearly all been broken.

The problem: Right-to-work is a nonfactor as an economic development incentive.

Despite claims that right-to-work entices new businesses to open up in a particular state, survey after survey of corporate executives reports that the policy is not a prevailing factor in whether a firm will locate to a state. Additionally, by limiting collective bargaining units, right-to-work laws act to take away an effective front-end solution for small businesses to hire, train, drug-test, and provide health insurance to workers. Unions have long provided these services to businesses and absorbed the costs through dues and fees. Under right-to-work, these costs shift to small businesses. Finally, right-to-work has been found to lower worker wages by around 3 percent annually. With lower incomes, workers have less money to spend. Why would a private business want to relocate to a state where consumer demand for its product or service is diminished? Continue reading “Right-to-Work’s Broken Promises”