American Sociological Review Finds that Right-to-Work States are Better for Business

The June publication of the American Sociological Review contained research on right-to-work states. The research in “Laws of Attraction: Regulatory Arbitrage in the Face of Activism in Right-to-Work States” reaffirms what many have known for years: that right-to-work (RTW) laws attract business. This is an assertion that labor unions have dismissed for years.

“The American Sociological Review is the American Sociological Association’s flagship journal.” The Association has nearly 15,000 members and is the national association for professional sociologists. The three researchers are widely published professors at Stanford University, University of Southern California, and Columbia University.

The research sheds light on the way Wal-Mart uses “regulatory variations to their advantage.” Translation: Wal-Mart looks for right-to-work states because they are generally better places to do business than forced-union states. The research focuses on how Wal-Mart places stores in relation to RTW/forced-unionization state borders and the effect of protesters. Wal-Mart has unique characteristics that make it an interesting case study. First, it is “arguably the most consequential firm in the U.S. economy.” Second, “[g]iven the gravity of a Walmart, it is possible to reach the same customers from any number of potential locations.” Wal-Mart is also afflicted by frequent protests to the opening of their stores, usually led by labor unions (who are disgruntled that Wal-Mart remains union-free).

The researchers find that Wal-Mart is more likely to open a store on the RTW side of a state border even in the face of protesters. Wal-Mart is able to do this because it can reach the same clientele from a more business-friendly location. After looking at other variables such as minimum wage and strict workplace regulations, they concluded “that RTW laws are the best indicator of Walmart’s regulatory arbitrage opportunities.” An even broader conclusion finds that RTW laws are used by companies such as Wal-Mart as a gauge of a state’s pro-business climate. The laws are a “broad-based signal of a state’s pro-business ideology” and a signal of low future regulatory costs, especially in relation to anti-Wal-Mart protesters.

The research shows how one company uses right-to-work laws as an indicator of a business friendly environment. However the researchers end on a more foreboding note. The implication of “state–corporate interaction go beyond the boundaries of a nation-state,” they can offer insight to the relationship of international regulation and economic distribution. In other words, if Wal-Mart places its stores in different states based on regulation, what is stopping onerous federal regulation from driving corporations out of America?