The Effect of Changes in Legal Institutions Weakening Teachers' Unions on Districts' Spending on Teacher Compensation

Purpose: The unanticipated changes in state legislation in Idaho, Indiana, Michigan, Tennessee, and Wisconsin in 2011-12 significantly restricted or entirely prohibited the collective bargaining rights of teachers. Considering these institutional changes as a natural experiment, we examine the causal impact of weakening teacher unionization on districts' spending on teacher compensation. Research Methods/Approach: We merge two nationally representative data sets from the United States: the Local Education Agency (School Districts) Finance Survey (F-33) and the Stanford Education Data Archive (SEDA) in 2009-16. We identify the effect of the institutional changes regarding teachers' unions by employing a difference-in-difference estimation and synthetic control method, exploiting district-level national data on spending on teacher compensation. Findings: We find that the antiunion institutional changes substantially reduced districts' spending on both teacher salaries and benefits. The negative impact is larger for the districts located at the bottom of the distribution of spending than for districts at the top. Implications: Our study suggests that the antiunion legal changes will raise income inequality among teachers, and the increased inequality in compensation among teachers may translate into greater performance gaps between students, if teachers receiving lower compensation are more likely to quit teaching or to move to districts that pay more. Therefore, the negative effects of the antiunion legal changes be even greater in the long run if the current trends persist.