Teacher Salaries, State Collective Bargaining Laws, and Union Coverage

What are the causal effects of collective bargaining (CB) on teacher salaries? This seemingly simple question is difficult to answer because (a) national data measuring school district salaries and collective bargaining is limited in scope, while individual teacher data from the CPS mismeasure CB coverage; (b) union wage effects depend not only on coverage but also on an array of CB law provisions difficult to quantify; (c) union coverage and state CB laws are endogenous since each has been influenced by union sentiment among workers and voters; and (d) OLS estimates of the wage effect of CB coverage and laws may be biased by measurement error and endogeneity. We attempt to address these issues using measures of historical labor sentiment, by creating indices of CB law strength, and by using alternative national data sets containing information on teacher salaries and coverage. As in prior studies, we find modest union salary effects for teachers using standard methods, albeit smaller than found for the private sector. A union benefits premium estimated from SASS substantially exceeds the salary premium. Estimates of CB law and coverage effects using IV (with historical data measuring labor sentiment as instruments) are unrealistically large. We then examine historical data on teacher salaries from 1949 through 2009. We find that in 1959 (the 1960 Census), prior to adoption of state CB laws and subsequent coverage, teacher salaries were higher in states that would eventually adopt CB laws and bargaining. By 1979 all but a few of the states that would pass CB laws had done so. The union salary advantage for teachers increased between 1959 and 1979. Our tentative assessment is that roughly half the 10 percent OLS salary advantage seen for union teachers is causally due to CB laws and coverage, while the other half is not caused by collective bargaining, resulting instead from pre-existing sentiment or other factors correlated with coverage. JEL Codes: I21, J31, J45, J5 Prepared for the “Public Sector Collective Bargaining” session at the American Economic Association Meetings, San Diego, January 6, 2013. We appreciate helpful comments on our earlier draft from William Boal and Gregory Gilpin.