Is There Really A Relationship Between Public Union Contracts And States’ Fiscal Messes?

March 2011

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The recent political standoff in Wisconsin over the collective bargaining rights and benefits of public union employees received significant national attention and will likely be repeated in other states. Some newly-elected governors, such as Governor Walker of Wisconsin and Governor Kasich of Ohio, are attempting to balance their budgets in part by altering public unions’ rights and benefits. They claim that current public employee union contracts are a large contributor to the states’ fiscal crises. Is this really true?

Historical Background

The following map shows the current 22 states that have Right to Work laws and the 28 states that do not (aka Forced Unionism state). For decades, this mix has not changed much. Most southern and central Midwestern states are Right to Work states, while New England, the Pacific coast and northern Midwest comprise non Right to Work states.

The current controversy in Wisconsin involves a change to the blue color. In addition to recent newsworthy states like Wisconsin and Ohio, research by the National Conference of State Legislatures shows that several states in New England and in the northern Midwest are also considering right-to-work laws.

map

In 1935, the passage of the Wagner Act gave and still gives unions the power of exclusive representation, allowing them to act as the voice of all of a company’s employees if the union can get more than fifty percent of the employees to vote for a union. A commonly used practical example of what this means is,

“If 100 employees are in the collective bargaining unit and only ten decide to vote, then the union only needs to get six votes in order to represent all 100 employees.”

After a union gains exclusive representation, they often persuade employers to include union security clauses in their collective bargaining agreements. In response to the belief that the Wagner Act of 1935 gave unions too much power, the Taft-Hartley Act passed in 1947, allowing states to make Right to Work laws. After the Taft-Hartley Act passed, most of the 22 Right to Work states quickly adopted these provisions in the 1940s and 1950s.

If you live in a non Right to Work state, and your employer is unionized, you are (i) represented by the union, (ii) bound by the union’s contract, and (iii) required to join the union and/or pay union dues. On the other hand, if you live in a Right to Work state, and your employer is unionized, you are (i) still represented by the union, (ii) bound by the union’s contract, but (iii) NOT required to join the union or pay union dues. The following table summarizes the similarities and differences.

	Right to Work State	Non Right To Work State
Union required to represent employee?	Yes	Yes
Employee bound by union contract?	Yes	Yes
Union is the employee’s exclusive bargaining agent?	Yes	Yes
Employee required to join union or pay union dues?	No	Yes

Statistical Testing

A recent article describes the Fisher Exact test and the Chi-square test, and uses these same tests to disprove the notion that there is a relationship between states in the largest fiscal messes and states’ political tendency. Similarly, there is a general notion that states in the biggest fiscal messes are non Right to Work states because these states (i) have a higher union density and thus have more significant unfunded (or underfunded) state employee pensions, and (ii) are more generous with social programs. Another general notion is that non Right to Work states are generally “blue” democratic states.

Both the Fisher Exact test and the Chi-square test were used to test the following two hypotheses:

States in the largest fiscal messes are NOT related to whether or not a state is a Right to Work state, and
States’ political tendency (i.e., whether it is a blue, red or purple (battleground) state) are NOT related to related to whether or not a state is a Right to Work state.

The following table lists the 10 (actually 11, since position 10 is a tie) states that are projecting the largest dollar shortfalls for fiscal year 2012, each state’s political tendency based on average victory margins of the last 5 presidential elections, and whether it is a Right to Work state. The classification of red, blue and purple states was determined by compiling average margins of victory in the last five presidential elections. Three of these past elections were won by Democrats, Bill Clinton in 1992 and 1996, and Barack Obama in 2008; two were won by Republican George W. Bush in 2000 and 2004.

State	Projected FY 2012 shortfall (in millions of dollars)	Red Blue or Purple State?	Right to Work State?
California	$21,300	Blue	No
Illinois	17,000	Blue	No
New Jersey	10,500	Blue	No
Texas	10,000	Red	Yes
New York	8,200	Blue	No
Connecticut	3,800	Blue	No
Minnesota	3,800	Blue	No
North Carolina	3,000	Red	Yes
Ohio	3,000	Purple	No
Florida (tie)	2,500	Purple	Yes
Oregon (tie)	2,500	Blue	No

The following table lists the 10 states with the largest 2012 percentage projected shortfall relative to their most recent budget, states’ political tendency based on average victory margins of the last 5 presidential elections, and whether it is a Right to Work state.

State	Shortfall as Percentage of FY 2011 Budget	Red Blue or Purple State?	Right to Work State?
Illinois	52.3	Blue	No
New Jersey	37.5	Blue	No
Nevada	36.7	Purple	Yes
Mississippi	27.6	Red	Yes
South Carolina	26.1	Red	Yes
California	25.7	Blue	No
Minnesota	25	Blue	No
Texas	22.3	Red	Yes
Connecticut	21.6	Blue	No
Louisiana	21.2	Red	Yes

Although the Fisher Exact and the Chi-square essentially test the same thing (i.e., whether or not a relationship exists between two categorical variables), both tests were used because the data in two of the following three tables violates one of the chi-square reliability criteria (i.e., a cell contain less than 5 observations). To perform these two tests of whether the largest fiscal messes are NOT related to whether or not a state is a Right to Work state, the above data is summarized in the following tables:

Largest 2012 fiscal budget shortfall		Right to Work State	Not Right to Work State
	Top 10 state	3	8
	Not top 10 state	19	20

Largest 2012 fiscal budget shortfall relative to 2011 budget		Right to Work State	Not Right to Work State
	Top 10 state	5	5
	Not top 10 state	17	23

The following table was created to test the hypothesis that states’ political tendency (i.e., whether it is a blue, red or purple (battleground) state) are NOT related to whether or not a state is a Right to Work state:

	Political Tendency
	Red	Blue	Purple
Right to Work State	18	1	3
Not Right to Work State	4	20	4

Statistical Results

The data and statistical tests described above resulted in the following:

Contrary to the general notion that states in the biggest fiscal messes are related to non Right to Work states, both the Fisher Exact and the Chi-square test support the contention (or hypothesis) that the largest fiscal messes are NOT related to whether or not a state is a Right to Work state, at the 95% confidence level. Put simply, one can successfully assert with 95 percent confidence, that there is no relationship between those states in the biggest fiscal messes and whether a state is a Right to Work state.
In contrast to the statistical results testing the first hypothesis above, both the Fisher Exact and the Chi-square tests support the contention (or hypothesis) that a states’ political tendency (i.e., whether it is a blue, red or purple (battleground) state) is related to whether or not a state is a Right to Work state, at the 95% confidence level. Put simply, one can successfully assert with 95 percent confidence, that there is in fact a relationship between states’ political tendency and whether or not a state is a Right to Work state.

Another article uses these same tests in the litigation-related application of whether employment discrimination is occurring (or not occurring). Additionally, here is our online interactive chi-square calculator.

Fulcrum Inquiry performs consulting services involving economic and statistical analysis.