The Unionization of State Government Employees and the Cost of State Government: Re-Evaluating an Evolving Relationship

Abstract

Government labor unions frequently secure wage premiums for their members, leading many to assume that higher unionization increases aggregate payroll spending and, by extension, the overall cost of government. Because wages make up a large share of state expenditures, and accurate forecasting of these costs is essential, it is important to periodically reassess whether this assumption still holds. Using 5-year moving average estimates of state government employee unionization rates derived from the Merged Outgoing Rotation Group files in the Current Population Survey, this article re-examines the relationship between state government employee unionization and aggregate state wage spending among the 49 states with partisan legislatures from 1992 to 2018. Across all specifications, including models using cost-of-living–adjusted payroll spending, unionization rates are not significantly associated with higher state payroll expenditures or with changes in full-time or part-time staffing. The findings suggest that although unions continue to secure wage premiums for members at the bargaining unit-level, these gains do not translate into higher aggregate payroll spending. Tests of potential offsetting mechanisms, including inflation and wage–staffing substitution, produce null results, indicating that these channels do not explain the aggregate patterns observed. Instead, the findings point toward broader compensatory dynamics, such as sectoral dilution or shifts toward contracted service delivery, that allow states to absorb union wage gains without increasing total payroll costs.