The effects of public unions on compensation

I can’t say I followed this debate very closely, still this paper may settle some of the outstanding questions about public sector unions and wages and bargaining power.

The Effects of Public Unions on Compensation: Evidence from Wisconsin (Job Market Paper)

This paper seeks identify the effect that public sector unions have on compensation. Specifically, I look at the compensation premium associated with teachers’ unions in Wisconsin. In 2011, Wisconsin passed a landmark law (Act 10) which significantly lowered the bargaining power of all public sector unions in the state. Using an event study framework, I exploit plausibly exogenous timing differences based on contract renewal dates, which caused districts to be first exposed to the new regulations in different years. I find that the reduction in union power associated with Act 10 reduced total teacher compensation by 8%, or $6,500. Roughly two-thirds of this decline is driven through reduced fringe benefits. The analysis shows that the most experienced and highest paid teachers benefit most from unionization. I supplement the event study approach with synthetic control and regression discontinuity methods to find that regulatory limits on contract terms, rather than other mechanisms such as state financial aid cuts or union decertification, are driving the results.

That is from Andrew Littten, job market candidate at the University of Michigan (p.s.: Michigan, your job market candidate web site is the very hardest to use and browse, please improve it!)

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