Did Act 10 Improve Wisconsin’s Economy?

The recent circuit court decision that Act 10 violates the Wisconsin Constitution invites a reconsideration of whether that law benefited Wisconsin as it was intended or at least promoted to do.

In his successful campaign for Wisconsin governor, Scott Walker promised that, if elected, Wisconsin would create 250,00 new private sector jobs by the end of his first term in office. One of the beliefs apparently underlying the actions of the Walker administration was that unions, particularly unions representing government employees, had grown too powerful and were holding back the state’s economy.

Thus Act 10 was passed to diminish the power of public employee unions and save money. It was expected that the changes would make Wisconsin more attractive to employers and help grow the economy.

Act 10 was followed four years later by a right-to-work law aimed at weakening unions in the private sector.

Act 10 stripped collective bargaining rights from general employees and limited employees’ ability to bargain solely to wage increases. Under the act, wage increases could not exceed inflation.

The law also included a number of provisions aimed at making life more difficult for public employee unions. For example, these unions were required to hold annual recertification elections. To win recertification elections, the unions were required to have a majority of all members, not just those voting in the election. In addition, Act 10 shifted some retirement and benefit costs from employers to employees, effectively cutting compensation.

For some employees in public safety jobs the story was very different. Act 10 exempted some of these and their unions from these restrictions. In a recent decision, Dane County Circuit Court Judge Jacob Frost ruled that Act 10 violates the Wisconsin Constitution because it lacked any rationale behind deciding which positions qualified a person as a “public safety employee.”

Of a total of 23 “protective occupation participant” positions listed in sections 40.06(1)(d) and (dm) of the state constitution, only seven were included in Act 10’s list of positions that qualified as public safety employee. Judge Frost declared that these employees were “treated unequally with no rational basis for that difference” because they were not included in the exemption that Act 10 had created for other law enforcement employees, notably police and fire fighters.

As a result, in Abbotsford Education Association et al vs. Wisconsin Employment Relations Commission et al, Judge Frost declared that the parts of Act 10 that created the public safety employee exemption are unconstitutional.

The graph below plots the number of new private sector Wisconsin jobs during Walker’s two terms as governor, between the start of 2011, when the nation was recovering from the recession of 2008, and the end of 2018. By the beginning of Walker’s second term, around 192,000 new jobs had been created, slightly more than half Walker’s promise.

If Wisconsin’s job growth fell well below Walker’s promised number, did it still exceed job growth in neighboring states that don’t have the same restrictions on employee unionizing? The next graph compares job growth in Wisconsin compared to the three states that touch both Wisconsin and the Great Lakes. Wisconsin jobs are shown in green, Minnesota’s in red, Michigan’s in yellow, and Illinois’ in blue.

To eliminate the differences in the starting number jobs of the four states, I set the starting jobs at January 2011 at 100.

Of the four states, Wisconsin joins Illinois as having the weakest job growth over the eight years that Walker was governor of Wisconsin. It is exceeded by both Michigan and Minnesota.

It is worth noting that factors other than the lack of an Act 10 equivalent may have contributed to the differences between state results. For example, Michigan and its auto industry was particularly hit by the Great Recession of 2008. Thus, it may have been particularly benefited by the recovery from that recession.

Conversely, Illinois’ job growth may have been negatively affected by its internal conflicts. On November 4, 2014, Republican Bruce Rauner was elected Governor of Illinois with widespread support. He carried every county in the state except for Cook, home to the city of Chicago.

That widespread initial support soon disappeared as Rauner battled the state legislature over how to fix the state budget over his insistence that the budget should be balanced by massive layoffs and cuts to state programs. As a result, Rauner was defeated in the 2018 election.

The next graph shows the same four states’ growth in real gross domestic product (GDP). “Real” means growth is adjusted to eliminate the effect of inflation. Minnesota’s GDP growth takes the lead among the four states, followed by Michigan. Perhaps reflecting the battle between Illinois’ governor and its legislature, described earlier, Illinois fell below Wisconsin’s growth.

Finally, the next graph plots the path of the average wage in the four states. Michigan is consistently at the bottom, perhaps reflecting that troubles in the auto industry left many of its former workers accepting jobs in industries that paid more poorly.

The data suggest that, at best, the policies pushed by the Scott Walker administration, including Act 10, failed to lead to better economic outcomes in job growth, GDP growth and pay.

At worst, they may point to a conclusion that this approach hurt the state’s economy. Despite the lack of evidence in support of these policies, they will likely continue to be the go-to policies of many on the right.