Teachers’ Unions Are Associated with Higher Student Test Scores

Educators are the backbone of a strong, well-educated society. High quality and productive educators improve the economic prospects of future generations. It is critically important that students are provided the best environment for learning. Teachers’ unions are an institution that can have … Continue reading Teachers’ Unions Are Associated with Higher Student Test Scores

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

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”

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”

A Quick Comment on Government Unions in Illinois

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”

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”