New Report Demolishes Compulsory-Unionism Apologists’ Economic ‘Broken Kettle Logic’

American Legislative Exchange Council Releases New Rich States …

Exercising “broken kettle logic,” the pro-forced unionism Institute on Taxation and Economic Policy tacitly claims, on the one hand, that massive net out-migration of young adults and their children is a desirable outcome for a state. Alternatively, the ITEP claims Big Labor excesses aren’t responsible for millions of people fleeing union strongholds in the Northeast and Midwest and on the Pacific Coast! Image: Scarecrow Horror (Facebook page)

A very old joke, apparently first put in writing by Sigmund Freud, tells the story of a man accused by his neighbor of braking the latter’s kettle while borrowing it.

In response, the man offers three arguments.  First of all, the kettle was undamaged when he returned it. Second, the kettle was already broken when he borrowed it.  And finally, he never borrowed the kettle at all.

As the noted economist Arthur Laffer and economic writers Stephen Moore and Jonathan Williams show in Chapter 3 of  the just-published 6th edition of their ongoing survey of policymaking successes and failures across the country, “Rich States, Poor States” (see the link above), the pro-Tax & Spend and pro-forced unionism Institute on Taxation and Economic Policy (ITEP) uses a form of what might be called “broken kettle logic” to defend the economic performance of Big Labor strongholds.

It is an obvious, albeit under-reported, economic fact that there is a strong positive correlation between many “per capita” indices of economic growth in the 50 states and net out-migration of young adults aged 25-34 and their children. Data measuring state income growth per capita, for example, measure income growth adjusted for the total number of people in the state.  But children under the age of 18 collectively earn very little income (that is not normally considered an economic detriment).  Therefore, if a state’s population aged 17 and under is shrinking relative to the national average, its per capita income will grow relative to the national average, other things being equal.  The same is true of per capita Gross State Product (GSP).  Since people aged 17 and other contribute very little to a state’s GSP, if this contingent is declining in a state, relative to the national average, the state’s GSP per capita will grow by a more than average amount, other things being equal.

The phenomenon described in the paragraph above is very relevant for economic comparisons of Right to Work states and compulsory unionism states, because they respectively are experiencing, in aggregate terms, substantial net in-migration and out-migration of young adults and their children.  Other age groups also tend to migrate from forced-unionism to Right to Work states, but to a much lesser extent.

Massive net migration from forced-unionism to Right to Work states is the only plausible explanation why the aggregate population of forced-unionism states, age 18 and older,  grew by a full 11.7 percentage points more than their aggregate population, age 17 and younger, from 2000 to 2010.  Meanwhile, the aggregate adult population of 22 states that had Right to Work laws at that time grew by just 7.3 percentage points more than their aggregate population of children.

Looking at adults alone over this period, Right to Work states experienced far faster relative growth among young people in their career-building years (aged 25-34) compared to middle-aged people in their peak earning years (45-60).  In forced-unionism states, growth was concentrated much more heavily among the middle-aged.

ITEP propaganda makes much of the fact that several forced-unionism states in New England and along the Pacific Coast experienced strong per capita personal income and per capita GSP growth from 2000 to 2010.    As “Rich States, Poor States'” 6th edition suggests, however, this strength appears to be entirely a product of net domestic out-migration of young people and their children.  None of the states highlighted by the ITEP experienced particularly strong growth in personal income or GSP, not adjusting for population growth.  By implication, then, the ITEP has contended that net out-migration consisting disproportionately of people under 35 is a major positive for a state, since it accelerates per capita income growth, per capita GSP growth, and even household income growth (households headed by people under 35 tend to have significantly lower incomes than households headed by adults 35 and over).

This is  a strange and counterintuitive claim to make, even tacitly.   What is even stranger is that the very ITEP study that makes it (“‘High-Rate’ Income Tax States Are Outperforming No-Tax States,” February 2012) also argues that public policies such as compulsory unionism and high marginal tax rates are not at all responsible for the massive net out-migration from the states maintaining those policies.

If that were true, then public policies couldn’t be responsible for the economic “success” of forced-unionism states like California, Massachusetts and Connecticut in fostering rapid per capita income and GSP growth, as we have seen.

Ultimately, the ITEP and like-minded organizations need to decide whether or not they want to claim the “credit” for out-migration and its effects.  As Chapter 3 of “Rich States, Poor States” concludes,  the evidence suggests forced-unionism proponents should indeed take the “credit.”  A scientific poll of people making out-of-town moves conducted by the Pew Research Center, and cited by the authors of “Rich States, Poor States,” shows that a locality’s job environment is more important than either weather or family considerations in determining its attractiveness to potential in-migrants and out-migrants.  Polling by the Census Bureau tends in the same direction.  Laffer, Moore and Williams conclude:

[W]hen citizens are polled on their reasons for moving, the most frequently cited reasons are jobs and economic opportunity.