The Effects of Public Unions on Compensation: Evidence From Wisconsin Andrew Litten , University of Michigan View Abstract Abstract This paper seeks to 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 signicantly 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. Subgroup 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.

Unions, Salaries, and the Market for Teachers: Evidence From Wisconsin Barbara Biasi , Princeton University View Abstract Abstract A careful study of teachers' labor demand and supply, while extremely relevant for policy, is challenging due to a lack of variation in pay, as teacher salaries are usually set using steps-and-lanes schedules based entirely on seniority and academic credentials. This paper exploits the passage of Act 10 in Wisconsin in 2011, which changed the scope of collective bargaining on teacher salaries, to study the effects of changes in pay on teachers' labor market, and on the composition of the teaching workforce. As a result of this law some districts started to individually negotiate salaries with each teacher, whereas other districts continued setting salaries using seniority-based schedules. I first document an increase in salary dispersion in individual-salaries districts, and show that it is correlated with teacher value-added. Teachers responded to changes in pay by sorting across districts or by exiting: I find a 34 percent increase in quality of teachers moving from salary-schedule to individual-salary districts, and a 17 percent decrease in quality of teachers exiting individual-salary districts. Building from this reduced-form evidence, I estimate the parameters of teachers' labor supply and demand using a two-sided choice model. Simulating the model on different salary schemes shows that an increase in the quality component of salaries in one district is associated with an improvement in average quality of the teaching workforce, driven by both in-movements of higher-quality teachers and out-movements and exits of lower-quality teachers. An increase in all districts is, however, associated with a smaller improvement, entirely attributable to exits of lower-quality teachers.

School Finance Reforms, Teachers' Unions, and the Allocation of School Resources Eric Brunner , University of Connecticut Joshua Hyman , University of Connecticut Andrew Ju , University of Connecticut View Abstract

Download Preview (PDF, 1.72 MB) Abstract School finance reforms led to some of the largest intergovernmental transfers from states to local school districts in U.S. history. This paper shows that the strength of local teacher unions had a dramatic impact on both the fraction of these transfers that passed through to education funding and on the allocation of these funds. Our identification strategy exploits plausibly exogenous timing of reforms across states, and compares how reform effects differ across various measures of state teacher union power. In states with the strongest teacher unions, school districts increased education expenditures nearly one-for-one with increases in state aid, and spent the funds primarily on teacher compensation. In states with the weakest teacher unions, districts reduced local taxing effort by about 75 cents for every dollar increase in state aid, and spent the remaining funds primarily on hiring new teachers. While our methodology is similar to recent papers exploiting the plausibly exogenous timing of school finance reforms across states, an additional threat to the validity of our analysis is the potential endogeneity of state teacher union power. We show that our results are robust to two alternative identification strategies that address this potential endogeneity: 1) directly controlling for heterogeneity in the effects of school finance reforms by key state-level predictors of union power, such as share voting for the Democratic presidential candidate and median income; and 2) a border discontinuity analysis where we restrict our sample to districts along state borders where there are differences in teacher union power but not in observed population characteristics. The robustness of our results to these alternative strategies suggests that we are identifying the effects of the teachers’ unions, and not unobserved differences across states correlated with teacher union power.