Dueling Labor Union Statistics

In the wake of Michigan’s new Right-To-Work law, which was passed in spite of violent Tea Party – I mean union – protests, the usual suspects have been trotting out statistics that make unions look either very good or very bad. Conservatives and liberals tend to like or dislike unions for respective ideological reasons, but they both like to throw out stats to “prove” that their position also happens to be best for everyone.

Conservatives claim that RTW states have lower unemployment and create more jobs. Liberals claim that workers in RTW states have lower wages and fewer benefits. These claims actually might not be at odds; if it’s true that unions collude to raise their own wages to protect their jobs and price others out of the market, it would make sense that the more pro-union states might have higher-paying jobs, but fewer of them. So are both sides right? Or are they both wrong?

Let’s look at the conservative stats first. Mark Perry has a powerful chart showing RTW states creating more than twice as many jobs in the last three years (despite have slightly lower absolute population) with unemployment a full percentage point lower.

I dug into what appears to be the primary source of the liberal statistics (more on that in a second), and it too shows an unemployment rate 1% lower in non-RTW states (page 3). That would seem to verify those numbers. But wait – their numbers are from 2009 (9.6% vs. 8.6%), and Perry’s are from 2012. So RTW states created twice as many jobs in the last three years, but unemployment in both groups of states fell by the same amount?

For a better clue, let’s look at another conservative stat. Mark Perry has another post that shows Americans moving away from non-RTW states and into pro-RTW states. He views this as a one-two punch: there are more jobs in RTW states so more people are moving into them. But what if it’s the other way around? What if RTW states are just creating more jobs because more people are moving into them, but not so fast that it brings down the unemployment rate faster than in non-RTW states? What if jobs are just generally being created across the nation where the people are?

I suppose we can still make it work – maybe unemployment is only going down in non-RTW states because the people that can’t find jobs are leaving, and there’s a bit of a lag in the RTW states where non-RTW exiles “bring their unemployment” with them until they find a job in the growing population. Sounds like a bit of a stretch, though. I still like some of these stats, but it’s definitely less clear than it seems at first glance.

What about the liberal stats? $1500 is their big number. The top of /r/politics had a headline declaring, “The average worker — unionized or not — in a right-to-work state earns $1,500 less per year than a similar worker in a state without such a law”. Michigan protestors covered their mouths with the words “$1,500 less,” as if to indicate what would happen to their salaries under RTW.

I tracked down the source of that statistic. It comes from a 2011 study by the Economic Policy Institute based on 2009 data. You might think it was a concrete, verifiable number. Not quite. The data comes from thousands of study responses, not official statistics, and a number of adjustments were made to correct for various factors across states. The $1,500 is a calculated number, and as Sonic Charmer says, “All Large Calculations Are Wrong.”

The table on page 3 claims an average wage of $22.11/hr in non-RTW states compared to $19.06/hr in RTW states. This $3.05/hr or 13.8% difference works out to approximately $6,100 less per year for RTW, assuming 40 hours times 50 weeks a year (subtracting a couple weeks’ worth of holidays). However, after “our model controls for 42 demographic, economic, geographic, and policy factors,” (page 5), they conclude that “right-to-work laws are associated with wages – for everyone, not just union members – that are 3.2% lower,” which by my calculation works out to around $1,400-$1,500 annually. Voila – their big number!

In other words, the difference in the raw data is this high, but after we cleverly account for a bunch of factors that have nothing to do with this discussion, the difference is only that high. It sounds like they put a lot of work into their analysis, but there are two factors I don’t think they took into account.

First, by talking about “the average full-time, full-year worker,” I think they’re ignoring all the unemployed. They say they accounted for the unemployment rate when determining some economic indicators for the model, but the wording suggests they did not include the unemployed directly in determining average wages. In other words, they ignored all the $0’s bringing down the average.

If we account for that, the difference drops from this…

Population	RTW	Average
100%	$42,720	$42,720
Population	Non-RTW	Average
100%	$44,220	$44,220
	Difference	$1,500

to this…

Population	RTW	Average
91.40%	$42,720	$39,046.08
8.60%	$0	$0
100%		$39,046.08
Population	Non-RTW
90.40%	$44,220	$39,974.88
9.60%	$0	$0
		$39,974.88
	Difference	$928.80

Accounting for the extra 1% unemployed in pro-union states slashes away one-third of the wage difference.

Secondly, I don’t think the study took into account the union dues that RTW workers aren’t paying along with their lower wages. There are numbers on the Internet claiming average annual union dues vary from $200 to $800, especially around $400 to $500. Many of those numbers are a few years old, so let’s apply PostLibertarian Fudge Factor 34B and go with $500 for a reasonable average. That cuts out another half of the remaining wage difference for these union protestors!

Now let’s be fair. The union dues only apply to the estimated 18.6% (page 3) of union workers, which by my calculations brings the overall average wage down by only about $93. Maybe they actually accounted for these dues and for the higher unemployment rate in this study. There’s also still the matter of the higher percentages of health benefits and pension plans (although if the pension plan is bankrupting your local government, does it still count?).

But even with the most charitable interpretation, I’m still highly skeptical. They used a population survey, which is not a full data-set, and they plugged a bunch of factors into a model that eliminated about 80% of the original difference. They claim this conclusion is more “rigorous” than those of their ideological opponents, but how do we know they just didn’t think of some factors that would have eliminated the other 20% – such as the ones I thought of off the top of my head, or some other, more hidden qualities?

We can’t know. It’s just a calculation. But that didn’t stop hundreds of protestors from slapping the number onto their faces as if their paychecks were literally going to take a quantifiable cut on the signing of that bill!

Like most other things in life, labor union statistics are complicated. When I attempt to objectively analyze the claims of both sides through the lens of my existing biases, I still think Right-To-Work is generally better for states, but it’s not a slam dunk, and I’m always wary of those claiming to have definitive answers either way.