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An Interstate Analysis of Right to Work Laws

Issue Analysis

Title

An Interstate Analysis of Right to Work Laws

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The compelling preponderance of evidence suggests there is a substantial, significant, and positive relationship between economic growth in a state and the presence of a right to work (RTW) law. 

This paper presents a labor economics analysis of the effect of right to work laws on state economies, and ranks states’ per capita income loss from not having an RTW law. People have been migrating in large numbers from non- RTW states to RTW ones. The evidence suggests that economic growth is greater in RTW states.

Currently, 24 states have RTW laws, which give workers the right to not join unions as a condition of employment and which prohibit the coercive collection of dues from workers who choose not to join.

RTW laws tend to lower union presence, reduce the adversarial relationship between workers and employers, and make investment more attractive. One would expect this scenario to have a positive effect on measures of economic performance such as job creation and, ultimately, on the population’s standard of living.

Conversely, without an RTW law, the lack of complete worker freedom to contract individually may be a factor in the out-migration of labor from a state. More importantly, legislation favoring labor unions raises labor costs and makes employers less likely to invest. This perception, in turn, reduces  the capital resources available for workers, lowers productivity growth and wealth creation, and makes people less well off than they would be in a fully free labor market.

Incomes rise following the passage of RTW laws, even after adjusting for the substantial population growth that those laws also induce. RTW states tend to be vibrant and growing; non-RTW states tend to be stagnant and aging.

To be sure, there are exceptions to every rule, and many other factors affect economic growth. Thus, much of New England is relatively prosperous despite the absence of RTW laws— though much of that growth is in industries where unions never gained a foothold, such as high technology.  nonetheless, even those areas likely would have benefited from RTW legislation. The evidence suggests that if non-RTW states had adopted RTW laws 35 years ago or so, income levels would be on the order of $3,000 per person higher today, with the overall effect varying somewhat from state to state.

The top 10 states most negatively affected by failure to adopt an RTW law are Alaska, Connecticut, California, New Jersey, Illinois, Hawaii, Maryland, Wisconsin, New York and Michigan.

For all states, the median income loss per capita is $3,278, or more than $13,000 for a family of four. The total estimated income loss in 2012 from the lack of RTW laws in a majority of U.S. states was an extraordinary $647.8 billion—more than $2,000 for every American, including those in RTW states.

The application of right to work laws in all states would greatly benefit America.

Note: The study analyses the period from 1964 – 2011, before Michigan and Indiana enacted their right-to-work laws, so these two states faced full economic losses associated with the absence of a law allowing work place choice.