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Thursday, April 15, 2010

Correlation of the day

The graph to the left relates the per-capita debt level for each state (from 2007) to the percentage of the public workforce that is unionized. Thus, a value of 50% would indicate that half of the workforce in the public sector is unionized. That positive correlation is strong and interesting. Perhaps the basis for an interesting master's thesis.

Here is another view, this time using the ratio of the percentage of the public workforce in unions to the percentage of the private workforce in unions. In this case, a value of 10 on the horizontal axis would indicate that the public workforce is unionized at 10 times the rate as the private workforce in that state:

The positive relationship is still there. I have long wondered if public employee unionization would lead to greater public debt/tax levels as it seems that the negotiation between employees and "management" lacks a clearly defined residual claimant. Rather, the "tax payer" is on the hook for increases in wages, benefits, etc., and politicians seem to be held less accountable by "share holders" than executives in the private sector - that is not confirmed by any statistical analysis, of course.

I don't have the time to write a full paper on this issue - if someone else does or knows of a literature looking into the relationship between state debt/taxes and public sector unionization, I would be interested.

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