The Impact of Teachers Unions on State-Level Productivity

Using a reduced form version of a theoretical expansion of Hoxby's (1996) education production model, we investigate whether bargaining teachers unions are a boon or a bust to the economy of the state. We anticipate teachers, being in the public sector veiled from competition, are less likely to be efficient. Yet, their product, education, enhances worker productivity and total output. If teachers are successful at their task of educating society's youth, their added value could be observed in society's production function. In a given state, gross state product (GSP) measures output from the use of capital and labor resources. By using GSP per employee as a measure of productivity, we find a negative correlation between GSP per employee and the percentage of unionized teachers within states where bargaining is permitted. Furthermore, we confirm a positive wage effect of teachers unions on state productivity. In addition, we investigate whether the negative changes in state GSP per employee and the positive wage effect offset each other in states with bargaining teachers unions.