Based on Demographics Alone, Poverty Should Be Higher in Right to Work States — But It’s Lower

If Right to Work laws had no economic impact whatsoever, the share of people residing in Right to Work states who are poor would surely be higher by roughly a percentage point than the share of people residing in states where compulsory union dues and fees are permitted.

The reason is simple demographics.  As a U.S. Census Bureau analysis published this month confirms (see the first link below), members of some demographic groups are far more likely to be poor than members of others, regardless of where they live.  And several demographic groups that are disproportionately poor are over-represented in states with Right to Work laws on the books.

The October 16 Census Bureau report furnishes estimates for nationwide and regional poverty according to both the standard measure and a special supplemental measure.  The Census Bureau began calculating poverty according to the alternative method as well as the traditional one a few years ago in response to rising criticism about the inadequacy of the latter.  In an October 17 contribution to George Mason University’s EconLog site that draws from the report (see the second link below), Scott Sumner, an economist who teaches at Bentley University in Waltham, Mass., and regularly shares his thoughts with academics and laymen across the world in his own Money Illusion blog, explained:

The traditional definition of poverty in America has been criticized for ignoring factors such as government benefit programs and regional variation in the cost of living.  Now the Census Bureau has released new estimates of poverty, which account for various types of benefit programs and cost of living differences.

Nationwide, the supplemental poverty measure (SPM) shows that in 2013 an average of 16.4% of people under 18 and living in the U.S. were poor, compared to 15.3% of people aged 18 and over.  In Right to Work states, this disproportionately poor group constituted 24.o% of the population, compared to just 22.7% for forced-unionism states.

Nationwide, the SPM shows that last year 24.7% of black Americans nationwide were in poverty, compared to just 14.2% of Americans of other races.  But as of 2013, 16.3% of residents of Right to Work states were black, compared to just 10.4% of residents of forced-unionism states.

A substantially larger share of Right to Work state residents aged 25 and over never graduated from high school, compared to the forced-unionism average.  (This remains true today, even though Right to Work states have far outpaced forced-unionism states in high school- and college-educated population growth for more than a decade.)  Though the SPM does not publish a cross-tab of poverty based on education level, surely this group as well is disproportionately poor.

Knowing nothing else, then, one would surely predict the average poverty rate in Right to Work states would be higher. In reality, though, the Census’s SPM shows that the average poverty rate for Right to Work states for the years 2011-2013 was slightly lower than the average for forced-unionism states: 15.9% vs. 16.0%.

In his October 17 commentary, Sumner noted that the SPM poverty rate for the largest-population Right to Work state, Texas, was equal to the U.S. average of 15.9%.  But “just looking at demographics you’d predict Texas to have more poverty” than California, the largest-population forced-unionism state.  Instead, Texas’s SPM poverty is far lower than California’s 23.4%, the highest rate in the nation.  After adjusting for demographics, Texas’s poverty rate is significantly lower than the national average.  And what is true of the Lone Star State in particular is also true of Right to Work states generally.

Moreover, though the SPM is clearly superior to the traditional measure for comparing and contrasting poverty rates in different states, it undoubtedly fails to adjust sufficiently for higher living costs in forced-unionism states.  Regional cost-of-living indices calculated and published by the nonpartisan Missouri Economic Research and Information Center show that, on average, not just housing, but also food, energy, and other necessities cost significantly more in forced-unionism states than in Right to Work states.  Yet the SPM attempts to account only for interstate differences in housing costs.

In short, once key variables such as population composition with regard to age, race, and education level as well as interstate differences in the overall cost of living are factored in, it’s obvious that the aggregate poverty rate for forced-unionism states is substantially higher than the aggregate poverty rate for Right to Work states.

As Massachusetts economist Scott Sumner noted last week, “just looking at demographics you’d predict” Right to Work Texas “to have more poverty” than forced-unionism California. Instead, “it has far less.” (The image, supplied by Sumner, previously appeared on the DailyFinance web site.)

[PDF]The Supplemental Poverty Measure: 2013 –

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