Precursors of Unemployment

A forum entitled "A Budget that Reflects East Providence and Pawtucket's Priorities" and sponsored by

the Campaign for Rhode Island's Priorities, the Rhode Island Foster Parents Association, the Unitarian Universalist Legislative Ministry-RI, the Rhode Island Chapter of the National Organization for Women, the Service Employees International Union, and the RI Federation of Teachers and Health Professionals

will take place this Monday in East Providence. The flyer announcing the event asks

How will the [state] budget affect our schools, our health care, our elderly care, and higher education? Funding for essential programs and services has been drastically cut over the past several years, including cuts to nursing homes, child care, hospitals, Head Start, and even our schools. Costs for health care and higher education have been skyrocketing. Can the residents of East Providence and Pawtucket expect this to continue? Will our State Representatives and Senators advocate for the right tax and budget choices that will help strengthen the economy in Rhode Island?

Well, I couldn't agree more about the importance of the last item. But inasmuch as a prior sentence deplores the cuts to various services, it is difficult to believe that the forum will not come to the conclusion that the "right tax and budget choices" means, regretfully, raising taxes, with other considerations such as the impact on the economy of such a course of action a distant second.

The timing is propitious, therefore, of an analysis by Jim Lindgren at the Volokh Conspiracy about the correlation between states with high unemployment and the level of their unionization and income tax rates.

With sincere apologies to my union friends (but not my tax-raising aquaintances), here goes.

As the nation considers increasing marginal tax rates and facilitating greater union membership, I thought it might make sense to look at the states with the highest and lowest unemployment rates to see if there might be any relevant patterns. The six states with the highest unemployment rates are:

12.6% Michigan

12.1% Oregon

11.4% South Carolina

11.2% California

10.8% North Carolina

10.5% Rhode Island

And the result?

Putting this together, 3 of the 6 states with the highest unemployment (California, Oregon, and Rhode Island) have both high marginal income tax rates and high union representation. Michigan has high unionization but moderate marginal income tax rates, and the Carolinas have high marginal income taxes, but low unionization rates.