On the wage pay and outside earnings of state legislators

Abstract

In his work on legislative size Stigler presents the following prologue, "The central task of representation is to give efficient representation to the collection of group interests that express the desires of the citizens who compose the state". This dissertation addresses a related issue, "what is the legal payoff to the representative for performing those tasks". Throughout the fifty United States two distinct methods of paying state legislators prevail. Some states allow the legislature to set their own wage while others reserve this right for the constitution. The constitutional wage provision is assumed the analog to competition while the statutory wage setting capability is modeled as a union. This latter method of pay determination currently results in an average wage increase of over 200% when compared with constitutional states. Several deductive consequences of the union pay hypothesis are also examined. One might expect that where one coalition (party) in the union dominates then the union might have more power. This hypothesis is rejected as political parties are found to have no significant effect on pay. This suggests that the relevant model of analysis is among political ins and outs rather than among parties. Governors are found to share in the rents that accrue to legislators with wage setting cap abilities, but to a minor degree. Furthermore, the pay of state legislators is highly influential in the occupational composition of state legislatures. Lawyers especially and business types in general are attracted to low pay settings because of their ability to receive outside earnings while serving in the legislature, thus clearing the market for legislative services. Empirical results from a 1974 cross-section of the state legislatures of the United States offer rather convincing support for these conclusions.