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EYE ON THE PIE: Are unions really that important?

December 10, 2007

Uncle Uriah Marcus visited us on Thanksgiving. It took over a week to recover. He blames "the @#%$# unions" for most of our state's woes. Uncle Uriah asserts "them big unions scares businesses away from Indiannie."

A sample of his views:

High property taxes: It's the teachers' union's fault because teachers keep pushing up their earnings and reducing their responsibility.

Congestion in cities: Bus workers' unions keep fares too high for anyone to ride the bus.

The battle between the Big Ten network and the cable companies: Professional athletes' unions don't want us watching amateur sports and possibly reducing the ratings for the pro games.

Health care costs: Unions push hospitals to build fancy palaces to keep construction workers employed.

Government: Union members vote as they are told to, as a bloc, and thus can destroy or make any candidate in any election, anywhere in the state.

The "curse of the unions" is a popular myth in our state. The idea that our economic condition might be much worse without major unions is not considered. Why do we have major unions in Indiana? Because we have the remains of the industrial structure that expanded rapidly between 1940 and 1957. Mainly, we have the steel and auto firms of the past that have continued to invest in Indiana.

Unions grew up with those firms. The wage and benefit gains made by those unions have made Hoosier communities prosperous the past 50 years.

Just how important are unions in Indiana? According to the U.S. Bureau of Labor Statistics, 334,000 of our 2.8 million workers were union members in 2006. That is, 12 percent of Hoosier workers belong to unions. The national figure is-drum roll-12 percent. Of the 50 states, we rank 21st, lower than Michigan (sixth), Illinois (seventh) and Ohio (16th), but higher than Kentucky (28th).

Where are unions most prevalent? Hawaii leads the list, followed by New Jersey, Alaska, New York and Washington. What do all those states have in common? They are on the coasts and sustain major port facilities. Unions are strongest in transportation and utilities.

Where are unions weakest? North Carolina, followed by South Carolina, Virginia and Georgia. They are part of the old, unindustrialized South, more dependent on military bases than on military contractors.

What do unions bring with them? Union members earn more than their nonunionized comrades. In 2006, the premium earned by union members was 30 percent over those not in unions. But that might not be comparing comparable jobs.

It might be that the specific industry is more important than the presence or absence of unions in determining wages. For a fair comparison, we'd have to have data for union and non-union workers doing the same jobs, in the same places. Rather than unions scaring businesses from Indiana, maybe the firms already here that pay high wages discourage new entrants.

A similar argument can be made about health care spending in Indiana. Our spending per capita was $5,295, or 27th in the United States, according to Kaiser Family Foundation data for 2004. But an examination of the data reveals no statistically significant correlation between union membership and health care spending. Again, the real issue may be our industry mix, rather than union membership.

Uncle Uriah might not like it, but we can't continue living by our myths rather than our realities.



Marcus taught economics for more than 30 years at Indiana University and is the former director of IU's Business Research Center. His column appears weekly. He can be reached at mmarcus@ibj.com.
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