The Real Cost of Collective Bargaining

About three years ago, Geoffrey Lawrence was working on a brief piece about collective bargaining for his local newspaper.

It was a typical column on the issue. Lawrence, who currently serves as assistant state controller of Nevada, wrote about how public-employee unions aim to increase taxes and government spending in order to pay for higher worker wages, pensions and health care.

But that’s when a question arose. Everyone seemed to agree that collective bargaining increased state and local government spending. But by how much?

“I was fairly certain I would find this information after maybe fifteen minutes of Googling,” Lawrence told an audience at the Heritage Foundation last week. “Then after a few days of nothing, I began to doubt whether this information existed at all.”

Spoiler alert: The information did not exist.

“Honestly, given the importance collective bargaining plays in the public policy debate, this was a big gap in the research that’s out there,” Lawrence said.

So Lawrence and his colleagues spent the past three years compiling data and crunching numbers. They used three different economic methods — synthetic control, regression analysis and Bayesian analysis — to determine the extent to which unionization has increased the cost of state and local governments.

The resulting study found collective bargaining adds $600 in taxes per person per year. For an average family of four, this represents an additional $2,300 in taxes each year. Using a statistical estimation based on all available data, the report found an even greater financial impact, with collective bargaining boosting the cost of government operation by more than $750 per person per year, or $3,000 for a family of four.

The study found collective bargaining adds $600 in taxes per person per year, or an extra $2,300 per family of four each year

Overall, collective bargaining added an estimated $127-$164 billion in costs to state and local governments in 2014, the study found.

Their report, recently published by the Nevada Policy Research Institute in partnership with Heritage, includes a review of collective bargaining statutes across all 50 states stretching back six decades.

Not surprisingly, the study found that cost increases are higher in states with the most expansive collective bargaining laws.

Back in the 1950s, when the study’s data begins, “the American labor movement was concentrated in factories, mills and other sites of private commerce,” the study notes. “Today, half of American union members are government employees, not skilled tradesmen or factory workers.”

This shift, the study continues, reflects a major decline in union participation among private-sector workers. At the same time, public-employee union membership began to surge in the 1980s. Today, about 40 percent of government employees belong to a union.

Government unions operate differently from private-sector unions. Unlike unions that live and breathe within the private sector, which face risks if they demand too much, government unions rely on the taxpayers to pay for their services.

Indeed, public-sector unions often most resemble lobbying firms intent upon spreading their aims through political engagement and campaigning, with like-minded politicians providing higher compensation and additional staffing regardless of the strain on public finances. Either way, taxpayers are on the hook.

As Lawrence noted, the study marks the first time that the actual cost of collective bargaining has been analyzed. Given how important the issue is in the national dialogue, and how much time has been spent debating it, that it took so long to understand the true financial implications may be the most troubling aspect of all.

Evan Smith is a Staff Writer for Opportunity Lives. You can follow him on Twitter @Evansmithreport.